Annual Report
LATAM 2015
UMAYO LAKE, PERU.
ANNUAL REPORT 2015
Annual Report LATAM 2015
| OUR cOMPANY
| cORPORATE GOVERNANcE
| OPERATIONS
Message from the chairman of the Board
Message from the cEO of LATAM Airlines Group
Business Strategy
Our History
Fleet
Destinations
4
4
8
10
15
21
30 Our People
32
company Information
Board of Directors
Senior Management
corporate Governance Practices
35
39
47
55 Ownership Structure and Principal Shareholders
75
Financial Policy
International Passenger Operations
80
Brazil
83
Argentina
85
87
chile
89 colombia
91
93
95
97
99
Ecuador
Peru
cargo operation
customer Loyalty Programs
Property, Plant and Equipment
| 2015 RESULTS
| SUSTAINABILITY
| FINANcIAL STATEMENTS
102
Industry Overview
104 Regulatory Framework
110
Financial Results
115 Awards and Recognitions
117 Material Facts
120 Stock Market information
125 Risk factors
140 Additional information
Investment Plan
141
144 Sustainability Vision
146 Sustainability Governance
147 climate change
149 corporate citizenship
155 Relation with Groups of Interest
157 Financial Statements
225 Subsidiaries and Affiliated companies
261 Análisis Razonado
269 Sworn Statement
2
| OUR cOMPANY
MESSAGE FROM
THE CHAIRMAN OF
THE BOARD & CEO
DESTINATIONS
FLEET
OUR
HISTORY
OUR
PEOPLE
COMPANY
INFORMATION
BUSINESS
STRATEGY
3
ANNUAL REPORT 2015 | OUR cOMPANY · MESSAGE FROM THE cHAIRMAN OF THE BOARD
Focusing on
customer
experience
Dear shareholders,
2015 was the most challenging year in the
history of LATAM. In virtually every market
we operate, local currencies depreciated;
thus impacting our revenues and costs rela-
ted to the import of goods and services. Mo-
reover, we faced a huge economic and politi-
cal crisis in Brazil, our largest market; which
strongly impacted the civil aviation sector.
The country faced the largest recession of
its modern history; resulting in a contrac-
tion of GDP, increased unemployment and
a fall in real wages. This has had a signifi-
cant impact on the wealth of individuals and
companies, with the troubles in the political
environment affecting expectations, thus
exacerbating the damage to the macroeco-
nomic scenario.
Not withstanding the above, we retained our
leadership in the main markets in which we
operate, such as chile and Peru. In 2015 we
reduced our seat capacity (ASKs) by 2.5%
in Brazil’s domestic operation and renego-
tiated our aircraft deliveries, which resul-
ted in the cancellation of nearly 40% of
our fleet commitments through 2018 and an
investment reduction of 2.9 billion dollars.
We are aware of future challenges, and in
2016 we will continue to adapt our network
with an important additional reduction of
8% to 10% in seat capacity in the Brazilian
domestic market as well as downsizing the
international market from Brazil, especially
to the United States. Therefore, 2015 will be
remembered as the year where LATAM de-
monstrated its ability to respond to challen-
ging economic scenarios.
This highly challenging scenario in our lar-
gest market explains the 219 million dollars
loss that LATAM reported in 2015, which
could have been worse if it wasn’t mitigated
by the strong performance of our Spanish
speaking markets. It’s worth highlighting
that LATAM met its operating margin fore-
cast of 5%, with the most adverse impact on
currency depreciation, mainly in Brazil.
We continue to consolidate our leadership
in our main hubs – Guarulhos, Brasilia, Lima
and Santiago – which will enable us to deve-
lop our network and offer the broader range
of destinations to our passengers. Proof of
this is the thirteen regional and internatio-
nal routes that were announced during the
year, including connections between Brasi-
lia and Montevideo, Punta cana and Buenos
4
WELcOME
MESSAGE
ANNUAL REPORT 2015 | OUR cOMPANY · MESSAGE FROM THE cHAIRMAN OF THE BOARD
Aires and Lima to Montevideo, Antofagasta
and Washington D.c.
I would like to highlight the ‘joint business
agreements’ negotiated in 2015 between LA-
TAM and IAG (controlling holding company
of British Airways and Iberia) and American
Airlines (AA), one of the leading airlines in
the United States. Once approved by the
corresponding authorities, we will have ac-
cess to a broad network of connections in
important hubs in the United States and
Europe. With these agreements, we have
the possibility to open a large network of
destinations and offer further advantages
to our customers, such as the unique ticket
sales and improved travel experiences. This
was only possible because of our unrivalled
flight network and connections within South
America.
Finally, I wouldn’t like to end this message
with announcing our new brand, LATAM Air-
lines. Since the beginning we knew that the
best way to merge the different hispanic
and Brazilian cultures would be through a
new brand, a decision that we have arrived
to after long discussions and breaking of
paradigms, because a new brand has never
been created from a merger or associa-
tion of airlines in the history of aviation. It
wasn’t an easy decision, because the re-
placement of powerful and historic brands
such as LAN and TAM required courage.
It was also a logical decision, because the
merger will generate economies of scale in
the long run with the process simplification
in virtually every area.
In 2016, our plan is to expand our leading
position in Latin America, flying to new des-
tinations with our unique identity and the
same strength to overcome problems and
grow in a profitable way.
Mauricio Amaro
chairman of the Board
LATAM Airlines Group
5
WELcOME
MESSAGE
ANNUAL REPORT 2015 | OUR cOMPANY · MESSAGE FROM THE cEO OF LATAM
Focusing on
customer
experience
WELcOME
MESSAGE
Dear shareholders,
The consolidation of LATAM as one of the
leading airlines in Latin America in terms of
quality and service has been a priority over
the last few years. We believe that the only
way to be successful is to offer a distincti-
ve offering to our passengers. Being only
a step away from a huge accomplishment
– the launch of our new brand – we are still
convinced that we have the right strategy
to achieve our goal of positioning LATAM
among the best airlines in the world.
I would like to take this opportunity to in-
form you about all the work we’ve done over
the last year. Introducing LATAM has meant
change; changes that have opened a world
of possibilities and allowed us to reestabli-
sh a new culture with the customerand place
them at the center of every strategic plan.
LATAM has not only brought together the
best of LAN and TAM stories, but also it has
amplified them on a large scale to deliver
our clients much more than the sum of their
parts.
We have made these changes in a highly
complex and challenging regional scenario,
which encourages us to be efficient, take
care of our cost structure and to prioritse
our strategies. We have focused on initiati-
ves that allow us to build a distinctive offer.
We offer the best network of destinations,
a state-of-the-art digital experience and a
team that directs its efforts towards satisf-
ying our customers; which will guarantee our
future growth.
In this vein, we continue working to enhance
our flight network and connections within
South America, thus offering our passen-
gers a unparalled connectivity in the re-
gion. The company will continue to focus on
strengthening our main hubs, allowing us to
reinforce the group’s connectivity in Latin
America, North America, the caribbean, Eu-
rope and now Africa.
During 2015, we invested more than US$50
million in the implementation of digital ad-
vances that have allowed us to improve the
passenger flight experience, offer better
service before and after the flight and im-
6
ANNUAL REPORT 2015 | OUR cOMPANY · MESSAGE FROM THE cEO OF LATAM
WELcOME
MESSAGE
We have worked with conviction and pas-
sion, giving our best to get to this stage.
Along with thanking our shareholders, I
would like to acknowledge over 50,000 peo-
ple from different nationalities that work
for the company, whose effort and dedi-
cation has been crucial for this unique and
historic project. LATAM is a global operator
and is preparing to compete in the major
leagues of the airline business worldwide,
therefore generating value for our share-
holders, stakeholders and the society as a
whole.
Enrique cueto
cEO of LATAM Airlines Group
prove our how our employees work. Through
this investment we look forward to creating
a unique flight experience and a competiti-
ve advantage for the company. Some of the
innovations that stood out during the year
were: the implementation of a new onboard
wireless entertainment system that ena-
bles passengers to watch movies, series and
videos through their own mobile devices; as
well as a new smartphone application, offe-
ring electronic boarding passes. Additiona-
lly, three thousand tablets were delivered to
LATAM employees; to help improve our ser-
vice quality, whether directly or indirectly.
I also want to highlight our daily commit-
ment to be a transparent and responsible
company to our customers and investors
and at the same time provides a valuable
contribution to Latin America. For the se-
cond consecutive year, we were one of only
two airlines worldwide to be listed in the
Dow Jones World Sustainability Index, pla-
cing us among a select group of companies
for sustainability based on long-term eco-
nomic, social and environmental criteria.
7
ANNUAL REPORT 2015 | OUR cOMPANY · BUSINESS STRATEGY
The largest airline
group in the region
BUSINESS
STRATEGY
LATAM Airlines Group S.A. (from now on
“LATAM”, “LATAM Group” or “the company”) in
the largest air transport group in Latina America,
with domestic operations
in six countries
in South America – Argentina, Brazil, chile,
colombia, Ecuador and Peru – which together
represents nearly 90% of the total traffic in the
region. This diversification represents a unique
competitive advantage in the region, being
able to provide the best connectivity within the
subcontinent, and to the world and vice versa,
providing services to nearly 137 destinations in
25 countries in the world.
During 2015, the company announced that
LATAM is the only corporate identity brand
under which all the airlines that belong to the
company will operate, which means that the
brands LAN and TAM will disappear. Starting
from the first semester of 2016 and gradually,
the new corporate image will be displayed in
physical spaces, aircrafts, commercial offices,
web pages and uniforms, among others, and the
estimation is that the brand unification process
will be completed in 2018. This decision seeks to
combine the best of the two brands and to have
one team that identifies with one single airline
to face the customers and also internally within
the company.
The goal of LATAM is to be positioned among the
three most important airline groups worldwide
in 2018, and for this purpose it has a clear an
defined strategy, based on five critical factors,
within which we highlight the network leadership,
leader brand and customer experience, and cost
competitiveness, pillars that the company has
defined as non-negotiable. As such, despite
the challenging economic scenario observed
in the last year, which has been reflected in the
weakening of regional air transport demand,
LATAM maintained its strategic plans, thus
convinced of the solid and long-term vision of
the strategy.
Through the permanent growth of its flight
network and connections within South America,
to and from the rest of the world, LATAM seeks to
provide the best connectivity for its customers.
Key in this process is the strengthening of its
main hubs in the Spanish speaking countries,
with special emphasis on the Guarulhos
airport in Brazil, which stands as the main
entry point in the region. Additionally, there are
multiple alliances and commercial agreements
subscribed with the main operators of the
industry worldwide, which enables the company
to offer more destinations, better schedules,
connections and prices to passengers, reaching
nearly
121 additional destinations though
these agreements. Worth is to highlight that
every passenger airlines that belong to LATAM
are member of oneworld, the global alliance
comprised by the most prestigious airlines in
the world.
In terms of service, the focus is to offer
passengers the best travel experience and to
consolidate its brand leadership in the region.
LATAM commitment is to continue investing on
mobile technologies and service digitalization,
to offer a differentiated value proposal and
to position LATAM as the preferred airline in
South America, where 2/3 of the passengers in
8
ANNUAL REPORT 2015 | OUR cOMPANY · BUSINESS STRATEGY
the region will choose as their preferred airline
in 2018 (today, one out of two South American
passengers chooses one of the Group’s airlines).
Other important aspect of LATAM’s strategy
is to have a competitive cost strategy, which is
considered a critical factor in this industry to
compete profitably. At present, the company is
committed to follow its savings plan, in order to
obtain savings equivalent to 5% of operational
costs of the company in 2018. These savings are
in addition to the costs optimization related to
the fleet optimization plan.
As of December 2015, for its operations LATAM
has a fleet of 331 aircrafts, being among the most
modern and young fleets worldwide. During this
period, the company continued moving forward
with the fleet renovation program started in
2012, which consists on the gradual phase out of
older aircrafts and their replacement with more
efficient and largest aircrafts, and allocating
the most adequate ones for each market. This
allows the company to open new routes in a
profitable way, and to optimize the fleet and
network yields.
Additionally, it’s important to highlight that
LATAM carries out a unique business model,
based on the successful combination of
passengers and cargo operations, which enables
the company to maximize the passengers
aircrafts occupancy using the storage space
(bellies) to transport cargo, together with the
use of specially dedicated freighters, thus
diversifying the sources of revenues. The
flexibility of this model enables the company
to make their routes profitable, decrease
seasonal effects and increase load factors. As of
December 2015, 83% of its business came from
passengers’ business and the remaining 13%
from cargo operations, among others.
A sustainable business model supports all the
work carried out by the LATAM GROUP with
their different stakeholders. This vision is based
on its relationships’ dynamics and businesses
that last over time and generates value for
the society as a whole. For LATAM, this is the
only possible way to move forward to build its
commitment for the future, and is expressed in
their daily work.
In this line, LATAM is constantly identifying
relevant topics that may impact the company
as well as its stakeholders, which enables it to
manage critical issues and establishes action
plans in due time to mitigate the main impacts
and/ or risks, including their monitoring and
yearly follow up, and the dissemination of the
results through the sustainability report.
In 2015 different elements were taken into
account, such as eco-efficiency management,
climate change mitigation, noise reduction,
connectivity and relationship with the customer,
health and safety on air and ground, talent
retention, rotation control, relationship with
the government and regulatory specificities,
economic and financial sustainability, promotion
of sustainable
tourism and sustainable
management of suppliers.
BUSINESS
STRATEGY
9
ANNUAL REPORT 2015 ANNUAL REPORT 2015
| OUR cOMPANY · HISTORY
Our story is about
coming together
1975
1976
1983
1985
1986
1989
Foundation of
TAMTransportes Aéreos
Regionais by capitan
Rolim Adolfo Amaro.
Launch of TAM services in
Brazilian cities, especially
Mato Grosso and São Paulo.
constitution of Linea
Aerea Nacional – chile
Limitada, through
cORFO.
LAN becomes a joint
stock company.
Acquisition by TAM of
VOTEc-Brasil central Linhas
Aéreas, another regional
airline operating in the north
and center of the country.
Start of privatization
of LAN: the chilean
government sells a 51%
stake to local
investors and
Scandinavian
Airlines System (SAS).
10
ANNUAL REPORT 2015
| OUR cOMPANY · HISTORY
Our story is about
coming together
1990
1993
1994
1996
1997
1998
Brasil central renamed
TAM-Transportes
Aéreos Meridonais.
Launch by TAM of TAM
Fidelidade, Brazil’s first
frequent flyer program.
Privatization of LAN
completed with the
acquisition of a 98.7%
stake by its current
controllers and other
shareholders.
Acquisition by TAM of
Lapsa airline from the
Paraguayan government
and creation of TAM
Mercosur; start of São
Paulo-Asunción flights.
Acquisition by TAM of
Lapsa airline from the
Paraguayan government
and creation of TAM
Mercosur; start of São
Paulo-Asunción flights.
Arrival of first
A330; first TAM
international flight
from São Paulo to
Miami.
11
ANNUAL REPORT 2015
| OUR cOMPANY · HISTORY
Our story is about
coming together
1999
2000
2001
2002
2003
2004
LAN joins the
oneworld®
alliance.
LAN’s expansion
begins: start of
operations of
LAN Perú.
Start of TAM services
to Europe through
a code sharing
agreement with
Air France to Paris
charles de Gaulle.
LAN Alliance with Iberia
and inauguration of Miami
cargo terminal / creation
of TAM Technology
center and Service
Academy in São Paulo.
creation of TAM
Technology center and
Service Academy in São
Paulo.
LAN Alliance with Qantas
and Lufthansa cargo.
LAN continues its
expansion plan: start of
operations of LAN Ecuador.
Launch of new corporate
image
as LAN Airlines S.A.
Start of TAM flights to
Santiago.
12
ANNUAL REPORT 2015
| OUR cOMPANY · HISTORY
Our story is about
coming together
2005
2006
2007
2008
2009
2010
Further step in LAN’s
regional expansion plan:
start of operations of
LAN Argentina.
TAM S.A. lists on the
BOVESPA stock market;
start of flights to New
York and Buenos Aires.
Launch of new LAN
Premium Business class.
TAM S.A. lists on the
NYSE / Start of flights to
London and, through
agreement with Air
France, to Zurich and
Geneva.
Implementation of low-
cost model in domestic
markets; capital increase
of US$320 million;
purchase orders for 32
Boeing 787 Dreamliners.
Lanzamiento ruta Milán
y córdoba. Autoriza-
ción de ANAc para em-
pezar vuelos a Madrid y
Frankfurt.
completion of renewal of
LAN’s short-haul fleet
with aircraft from the
Airbus A320 family.
TAM receives its first
Boeing 777-300ER.
Start of cargo operations
in colombia and
domestic passenger
operations in Ecuador.
Launch of Multiplus
Fidelidade;
Acquisition of Pantanal
Linhas Aéreas.
Acquisition of colom-
bia’s Aires airline.
TAM officially joins
Star Alliance.
13
ANNUAL REPORT 2015
| OUR cOMPANY · HISTORY
Our story is about
coming together
2011
2012
2013
2014
2015
LAN and TAM sign binding
agreements related to
the business combination
of the two airlines.
LATAM Airlines Group is
born as a result of the
business combination
between LAN and TAM.
capital increase for
US$ 940.5 million.
LATAM is Born: The New
Brand for LAN Airlines, TAM
Airlines and Affiliates.
Issuance of structured
EETc's totaling US $1bn: A
first in Latin America.
TAM joins oneworld
alliance, which
becomes LATAM
Airlines Group global
alliance.
LATAM launches its
2015-2018 Strategic
Plan aiming to become
one of the 3 most
important ailrine
groups in the world.
14
| OUR cOMPANY · FLEET
New fleet
to provide the
best service
FLEET
LATAM’s fleet plan main objective is to main-
tain leadership in terms of efficiency throu-
ghout the constant aircraft renovation and the
incorporation of high performance technolo-
gies, thus improving the product and contribu-
ting to care for the environment.
In 2015 the company operated a fleet compo-
sed of 327 aircrafts, with an average age of less
than 7 years, being among the most modern
and youngest fleets globally. In this period the
company incorporated 23 larger and more effi-
cient aircrafts, the most prominent being the
Airbus A321, Boeing 787-9 and the first Airbus
A350. In parallel, the phase out plan for older
models continued, with the phase out of 19 air-
crafts, being among them the last seven Dash
Q200 aircrafts, three A340 aircrafts and three
A330 aircrafts, the latter also will be complete-
ly phased out from the fleet in 2016.
Looking forward to develop its short-haul pas-
senger operations – flights on domestic routes
and regional routes within South America –, in
2015 LATAM utilized a fleet of 240 aircrafts,
mainly from the Airbus A320 family. In this pe-
riod, LATAM received 15 models A321, the lar-
gest version of the family, thus summing up 36
aircrafts by the end of the period.
LATAM’s medium-term plan on short haul rou-
tes is to have a fleet comprised exclusively
by aircrafts from the A320 family, with focus
on A321neos and A320neos, whose use repre-
sents cost savings of 5.4% in comparison to
the A320s. Additionally, the A320neo is a new
option within the A320 family with a more effi-
cient engine and new sharklets (advanced te-
chnology devices installed in the wings of the
aircraft to reduce its aerodynamic resistance),
therefore providing fuel savings of nearly 15%
and reduction in emissions of 3,600 tons per
aircraft per year. LATAM has placed orders for
67 modern aircrafts from the A320 family, and
delivery will start from 2016 onwards.
In relation to its long-haul passenger opera-
tions, in this period the company utilized a
fleet of 76 aircrafts, two less than in 2014. This
is defined by the LATAM’s fleet plan that seeks
to unify its aircraft fleet and increase capacity
through the incorporation of larger and more
modern models, with the purpose of maintai-
ning leadership in efficiency. As such, in 2015 se-
ven B787-9 aircrafts were incorporated to LA-
TAM’s fleet –medium-size equipment and wide
fuselage, whose technology provides substan-
tial improvement to the passenger’s flight ex-
perience. Set up for 313 passengers (283 seats
in Economy class and 30 seats in Premium Bu-
siness class), the B787-9 model has 28% higher
passenger capacity and 51% more capacity in
cargo volume than the B767 model. Besides, its
fuel consumption is 20% lower than similar air-
crafts, and its cO2 emissions are reduced in up
to 20%. Worth is to mention that LATAM is the
only airline that operates the 8 and 9 versions
of the B787 Dreamliner in Latin America.
Additionally, in this period, the LATAM Fuel
Efficiency Program was carried out, whose
purpose is to reduce costs related to fuel
consumption, improve efficiency and mitigate
greenhouse gas emissions. Resulting from the
implementation of various operational and te-
15
ANNUAL REPORT 2015 | OUR cOMPANY · FLEET
FLEET
chnological projects, the company decreased
fuel consumption in 38 million gallons, which
is equivalent to 360,000 tons of c02 reduc-
tion, thus saving of US$70 million for this con-
cept only.
del is designed for 348 passengers, 318 in Eco-
nomy class and 30 in Premium Business class,
and offers new comfort level on-board, an extra
wide cabin that provides more space to pass-
engers for both categories.
In its permanent concern for innovation and
looking forward to offer the best passengers’
flight experience, in 2015 the company also an-
nounced the launching of new cabins for long-
haul airplanes, thus being the 787-9 fleet the
first one to incorporate it. The unified cabins
from LAN and TAM are a concrete consequen-
ce of the merger of both companies. The new
proposal was inspired on the colors and textu-
res of the region, and pretends to show a balan-
ce between the passion of our cultures and the
elegance of natural shades.
Likewise, one of the main achievements of the
year was the arrival of the first Airbus A350,
out of a total of 27 aircrafts of this model that
LATAM has ordered. This aircraft was incorpo-
rated to TAM’s fleet in December, setting a pre-
cedent for the incorporation of a new long-haul
aircrafts to the company’s fleet, thus becoming
the first airline in Latin America to operate
with this equipment and fourth worldwide. The
A350 model of TAM will start its commercial
operation in April 2016 in the Sao Paulo-Ma-
drid route, in addition to the Sao Paulo-Orlando
route, in the second half of the year. The A350
model is a medium-haul aircraft that incorpo-
rates high technology, whose advantage is to
have up to 24% less cASK when compared to
similar size planes, such as the Airbus A330,
and similar cO2 emissions reduction. The mo-
With regards to the cargo business, the focus
of the company is to optimize the bellies usa-
ge of passengers’ aircrafts. This plan considers
the gradual reduction of the number of fully de-
dicated freighters. As such, LATAM finishes the
year with an operational fleet comprised by 11
aircrafts, two less than the previous year, com-
prised by eight Boeing 767F and three Boeing
777F, the latter is the most modern fully dedica-
ted freighter of its kind in the industry.
Worth is to mention that by the end of 2014 the
company signed a leasing contract for three
B767F aircrafts to a cargo operator outside the
region, which was in place in 2015, allowing the
company to better use its assets. Additionally,
in this period LATAM signed a leasing contract
for one of its B777 aircrafts, also with a cargo
operator outside South America.
| MAINTENANcE
With facilities in Brazil and in chile, the Main-
tenance, Repair and Revision unit of LATAM
(MRO) is the unit responsible for heavy main-
tenance of the LATAM’s aircraft and occasio-
nally also provides services to third parties.
In Brazil, the facilities are located in the São
carlos (SP/Brazil) Technological center, in an
area of 100,000-m² and its own 1,720-meter
runway while the chilean facility, at the San-
16
ANNUAL REPORT 2015 | OUR cOMPANY · FLEET
tiago International Airport, in a 10,000-m²
area. Both facilities provide 75% of the heavy
maintenance required by the airline group.
Services not provided by this unit are out-
sourced to some of MRO’s partners around
the world, such as Mexicana, coopesa Eithad
Airways and Tap Brasil.
LATAM’s MRO unit is audited and certified by
major international aviation authorities from
the United States, Europe, Brazil, chile, Argen-
tina, Ecuador, Paraguay and canada, among
others, for Heavy Maintenance and compo-
nents Repair and Overhaul for the Airbus A320
and A330 families, Boeing 767s and 787s, ATR-
42/72s and Embraer E-Jet 170/190s. The com-
pany also has minor resources for repair and
revision of Airbus A340 and Boeing 777 aircraft
components.
In 2015, the MRO unit effectively used 1.23 mi-
llion man-hours, which represented a 2.7% va-
riation in relation to 2014, serviced 158 aircrafts
of LATAM’s fleet and repaired approximately
60 thousand components that were delivered
for maintenance operation. In addition, the ex-
ternal suppliers network of MRO expanded,
thus obtaining the successful first heavy main-
tenance of the B787 fleet at Eithad, Abu Dhabi’s
MRO, in the United Arab Emirates.
Additionally, in this period new repair capacity
was generated for the components repair of
the new A350 fleet in San carlos, Brazil, which
will be part of LATAM fleet in the next years to
come. Likewise, the MRO unit of LATAM insta-
lled the new onboard wireless entertainment
system–LATAM Entertainment–, which is alre-
ady available in 73% of the short-haul fleet of
LAN y TAM, process carried out in chile, Brazil
and also in external MROs.
tructure (workshop, warehouses and offices),
required an investment of US$ 16.4 million, be-
ing the first of the Group in the United States.
Worth is to highlight that for over 5 years,
LATAM’s maintenance has production and su-
pport processes transformed through LEAN
methodology, which from 2014 leaded to a new
automation and integration of procedures pha-
se through integrated information systems.
This allows to improve the productivity levels
of technical equipment as well as the response
times against contingencies, besides providing
simplification and robustness to the mainte-
nance processes, thus making them more sca-
lable y visible to the organization.
Together with the development of these com-
puter systems, in 2015 the use of tablets was
deepened in the maintenance network, and
coverage reached all of the stations in the Spa-
nish speaking countries where the company
operates. In 2015, 308 iPads were deployed in
the maintenance network in these countries,
covering a population of 1,195 technicians. The
plan for 2016 is to deploy 322 additional iPads
in Brazil, with the involvement of 1,282 additio-
nal technicians.
Among the highlights of the period, in July 2015,
the completion of the new and modern mainte-
nance hangar of the company in the Miami in-
ternational airport stands out, who strengthen
Miami as a strategic facility in the northern
hemisphere, thus complementing the facilities
offer in chile, Peru and Brazil. Built in a 6,140-
m2 area, the hangar and the adjacent infras-
17
ANNUAL REPORT 2015
| OUR cOMPANY · FLEET
As of December 31, 2015
off-balance
on-balance
Total
|Passenger aircraft
Airbus A319-100
Airbus A320-200
Airbus A321-200
Airbus A330-200
Airbus A350-900
Boeing 767-300
Boeing 777-300 ER
Boeing 787-8
Boeing 787-9
TOTAL
|cargo aircraft
Boeing 777-200F
Boeing 767-300F
TOTAL
12
59
10
2
-
4
6
4
4
38
95
26
8
1
34
4
6
3
101
215
2
3
5
2
8
10
50
154
36
10
1
38
10
10
7
316
4
11
15
FLEET
TOTAL FLEET
106
225
331
Note: This table does include three B767-300F and on B777-200F that Latam is currently leasing
to a third party.
18
ANNUAL REPORT 2015 ANNUAL REPORT 2015
| OUR cOMPANY · FLEET
| NARROW BODY
airBUs a319-100
LENGTH
WIDTH
SEATS
33.8 mts
34.1 mts
144
cRUISING SPEED
830 km/h
MAXIMUM WEIGHT AT TAKEN-OFF
70,000 kg
airBUs a320-200
LENGTH
WIDTH
SEATS
cRUISING SPEED
MAXIMUM WEIGHT AT TAKEN-OFF
airBUs a321-200
LENGTH
WIDTH
SEATS
cRUISING SPEED
37.6 mts
34.1 mts
156-168–174
830 km/h
77,000 kg
44.5 mts
34.1 mts
220
830 km/h
| WIDE BODY
airBUs a330-200
LENGTH
WIDTH
SEATS
cRUISING SPEED
58.8 mts
60.3 mts
223
872 km/h
MAXIMUM WEIGHT AT TAKEN-OFF
230,000 kg
airBUs a350-900
LENGTH
WIDTH
SEATS
cRUISING SPEED
MAXIMUM WEIGHT AT TAKEN-OFF
Boeing 767-300
LENGTH
WIDTH
SEATS
cRUISING SPEED
66.8 mts
64.8 mts
348
903 km/h
186,880 kg
54.9 mts
47.6 mts
221 – 238 5
851 km/h
MAXIMUM WEIGHT AT TAKEN-OFF
89,000 kg
MAXIMUM WEIGHT AT TAKEN-OFF
186,880 kg
19
ANNUAL REPORT 2015
| OUR cOMPANY · FLEET
WIDE BODY
Boeing 777-300 er
LENGTH
WIDTH
SEATS
73.9 mts
64.8 mts
379
cRUISING SPEED
894 km/h
MAXIMUM WEIGHT AT TAKEN-OFF
346,500 kg
Boeing 787-8
LENGTH
WIDTH
SEATS
56.7 mts
60.2 mts
247
cRUISING SPEED
903 km/h
MAXIMUM WEIGHT AT TAKEN-OFF
227,900 kg
Boeing 787-9
LENGTH
WIDTH
SEATS
62.8 mts
60.2 mts
313
cRUISING SPEED
903 km/hr
MAXIMUM WEIGHT AT TAKEN-OFF
252,650 kg
| FREIGHTER
Boeing 777-200f
LENGTH
WIDTH
LOAD TIME
cRUISING SPEED
63.7 mts
64.8 mts
652.7 m3
894 km/h
MAXIMUM WEIGHT AT TAKEN-OFF
347,450 kg
Boeing 767-300f
LENGTH
WIDTH
LOAD TIME
cRUISING SPEED
54.9 mts
47.6 mts
445,3 m3
851 km/h
MAXIMUM WEIGHT AT TAKEN-OFF
186,880 kg
20
| OUR cOMPANY · DESTINATIONS
27 International Destinations
LONDRES
PARIS
MADRID
FRANKFURT
MILÁN
BARCELONA
WASHINGTON
LOS ÁNGELES
TORONTO
NUEVA YORK
ORLANDO
MIAMI
CANCÚN
LA HABANA
CIUDAD
DE MÉXICO
PUNTA CANA
ARUBA
PAPETEE
LA PAZ
LA PAZ
SANTA CRUZ
ASUNCIÓN
CIUDAD
DEL ESTE
MONTEVIDEO
MOUNT
PLEASANT
DESTINATIONS
SIDNEY
AUCKLAND
21
ANNUAL REPORT 2015 | OUR cOMPANY · DESTINATIONS
14 Domestic Destinations Argentina
IGUAZÚ
SALTA
TUCUMÁN
SAN JUAN
CÓRDOBA
MENDOZA
BUENOS AIRES
NEUQUÉN
BAHIA BLANCA
BARILOCHE
COMODORO RIVADAVIA
DESTINATIONS
EL CALAFATE
RIO GALLEGOS
USHUAIA
22
ANNUAL REPORT 2015 | OUR cOMPANY · DESTINATIONS
44 Domestic Destinations brazil
BOA VISTA
MACAPÁ
BELEM
MANAUS
SANTARÉM
IMPERATRIZ
RIO BRANCO
PORTO VELHO
SÃO LUIZ
MARABÁ
FORTALEZA
TERESINA
PALMAS
CUIABÁ
UBERLÂNDIA
CAMPO GRANDE
BRASILIA
GOIÂNIA
BELO HORIZONTE
RIBEIRÃO PRETO
NATAL
JOÃO PESSOA
RECIFE
MACEIÓ
ARACAJU
SALVADOR BAHÍA
ILHEUS
PORTO SEGURO
FOZ DO IGUAÇU
LONDRINA
JOINVILLE
DESTINATIONS
SÃO JOSÉ DO RIO PRETO
CAMPINAS
SÃO PAULO
VITORIA
RIO DE JANEIRO
SÃO JOSÉ DOS CAMPOS
BAURU
CURITIBA
JUAREIRO DO NORTE
NAVEGANTES
FLORIANÓPOLIS
JAGUARUNA
PORTO ALEGRE
23
ANNUAL REPORT 2015 | OUR cOMPANY · DESTINATIONS
15 Domestics Destinations chile + easter Island
CALAMA
ARICA
IQUIQUE
ANTOFAGASTA
COPIAPÓ
LA SERENA
ISLA DE PASCUA
SANTIAGO
CONCEPCIÓN
TEMUCO
VALDIVIA
OSORNO
PUERTO MONTT
CASTRO
BALMACEDA
PUNTA ARENAS
DESTINATIONS
24
ANNUAL REPORT 2015 | OUR cOMPANY · DESTINATIONS
14 Domestic Destinations colombia
SAN ANDRÉS ISLA
SANTA MARTA
BARRANQUILLA
CARTAGENA
VALLEDUPAR
MONTERIA
APARTADO
CÚCUTA
BUCARAMANGA
QUIBDO
MEDELLIN
EL YOPAL
VILLAVICENCIO
BOGOTA
PEREIRA
IBAGUE
NEIVA
CALI
PUERTO ASIS
DESTINATIONS
LETICIA
25
ANNUAL REPORT 2015 | OUR cOMPANY · DESTINATIONS
5 Domestic Destinations ecuador
GALÁPAGOS BALTRA
GALÁPAGOS SAN CRISTÓBAL
QUITO
GUAYAQUIL
CUENCA
DESTINATIONS
26
ANNUAL REPORT 2015 | OUR cOMPANY · DESTINATIONS
16 Domestic Destinations Peru
TUMBES
TALARA
IQUITOS
PIURA
TARAPOTO
CHICLAYO
CAJAMARCA
PUCALPA
TRUJILLO
PUERTO MALDONADO
LIMA
CUZCO
AYACUCHO
JULIACA
AREQUIPA
TACNA
DESTINATIONS
27
ANNUAL REPORT 2015 | OUR cOMPANY · DESTINATIONS
11 cargo only (International)
VALENTIA
AMSTERDAM
BASEL
SAN JOSÉ
MÉRIDA
GUADALAJARA
CIUDAD DE GUATEMALA
PORTO SPAIN
MARACAIBO
CIUDAD DE PANAMÁ
CABO FRÍO
DESTINATIONS
28
ANNUAL REPORT 2015 | OUR cOMPANY · DESTINATIONS
121 codeshares
57
NORTH AMERICA
DESTIONATIONS
31
EUROPE
DESTIONATIONS
05
AFRICA
DESTINATIONS
8
ASIA
DESTINATIONS
AUSTRALIA20
DESTINATIONS
DESTINATIONS
29
ANNUAL REPORT 2015 | OUR cOMPANY · OUR PEOPLE
We have over
50 thousand
employees
OUR PEOPLE
LATAM is a multinational and multicultural
airline. As of December 2015 the company’s
team was composed of 50,413 employees from
62 different nationalities across 26 different
countries.
field. Thanks to these measures, the subsidiary
Andes –which operates every ground service
for the aircrafts– in chile reduced injury rate
in 27%, thus generating direct savings for the
company of nearly US$ 660 thousand per year.
In this context, its important to highlight the
important role that the Human Resources area
has played in the last three years, in terms of
the mitigation of the impact that any organi-
zational change might have on people’s lives,
specially taking into account the multicultural
nature of the company’s employees.
During 2015, LATAM announced a new corpora-
te culture, which defined the central values that
inspire the job of the staff, thus establishing a
common identity within the organization and
facing the client. This corporate culture is fun-
ded in four key pillars, being the first one the
“passion for security” (security is the main prio-
rity). Likewise, LATAM allocates special rele-
vance to customer care, which requires a cons-
tant awareness of the customers’ needs and to
provide the best service. Within this context is
the search of the excellence and constant im-
provement; and the fourth pillar is the passion
for the team (“we work as one team only”), whe-
re each and every one of the members of the
company are recognized as one entity only in
order to pursue the common goals.
With regards to the work force’s security, in this
period the company implemented manage-
ment tools designed to remove potential risks
using rules, standards and procedures and its
concern was to have the best indicators for this
Among the milestones of the period in terms
of training, it should be noted the implementa-
tion of a new work model that centralizes the
design of the training courses, both on-site and
e-learning trainings, and the coordination and
logistics tasks for the execution of every tra-
ining for the LATAM Group. For this purpose,
LATAM created the School of Excellence and
the Shared Services Management.
In the first case, the objective of the centrali-
zation is to ensure quality and consistency of
the company’s trainings, also to standardize
the study programs and obtain efficiencies of
the resources invested in the employees and
additional costs related to the design of the
training courses to solve common issues. In this
context, 159 e-learning courses and 57 on-site
courses were completed in the operational and
commercial areas.
For its part, in the first stage the coordination
and logistics for chile and Brazil was centrali-
zed in the Shared Service Management. The
objective of this initiative is to generate effi-
ciencies trough the standardization of tasks.
Once the system in fully implemented, the se-
cond stage will be carried out, which consists
on spreading out the coverage of the service
to the rest of the countries where the holding
operates.
30
ANNUAL REPORT 2015 | OUR cOMPANY · OUR PEOPLE
Additionally, in this period the company de-
signed and implemented workshops of cor-
porate culture “Building LATAM: Our Purpose”,
targeted to people that work at the call center
areas, sales, airport and onboard service–over
30,000 employees–, as well as introductory
courses for new employees from these areas.
The most important and innovative aspect of
this program is that speakers were executives
from the company.
In a complementary way, e-learning workshops
were designed and carried out, whose objecti-
ve was to provide basic management tools for
leaders, in the topics related to recruitment in-
terviews and feedback.
Additionally, with the support of LATAM’s Legal
area, in 2015 it continued with the development
of the code of conduct course, transversal wi-
thin the organization, which pursued to intro-
duce to its over 50,000 collaborators with the
framework within which they must carry out
their tasks, avoiding potentially illegal actions
or situations that would compromise LATAM
Airlines Group as a whole. As of December
2015 the degree of achievement was 84%.
OUR PEOPLE
| EMPLOYEES BY cOUNTRY
Argentina
Brazil
Chile
Colombia
2.703
Argentina
5%
26.231
52%
Brazil
12.413
25%
Chile
1.747
3%
2.703
5%
26.231
52%
12.413
25%
Ecuador
1.605
Colombia
3%
1.747
Perú
USA
otros
Otros
Total
otros
3.896
8%
Ecuador
1%
436
Perú
1.382
3%
USA
50.413
100%
Otros
1.605
3.896
436
1.382
3%
3%
8%
1%
3%
| TOTAL EMPLOYEES BY FUNcTION
Total
50.413
100%
Nota: Total employees by function.
5.022
SALES
5.022
SALES
4.022
COCKPIT
CREW
4.022
COCKPIT
CREW
9.383
9.383
CABIN CREW
CABIN CREW
9.118
9.118
ADMINISTRATIVE
ADMINISTRATIVE
5.990
5.990
MAINTENANCE
MAINTENANCE
16.878
16.878
OPERATIONS
OPERATIONS
18%
18%
12%
12%
33%
33%
19%
19%
8%
8%
10%
10%
Administrative
Administrative
Maintenance
Maintenance
Operations
Operations
Cabin crew
Cabin crew
Cockpit crew
Cockpit crew
Sales
Sales
26 countries
62 nacionalities
Distribution of people according to country,highlighting quantity by home market and “other” for employees in the rest of the world.
31
ANNUAL REPORT 2015 | OUR cOMPANY · OUR PEOPLE
cOMPANY
INFORMATION
| LATAM AirLines Group s.A.
cHILEAN TAX N° (RUT): 89.862.200-2
Incorporation: Established as a limited liabi-
lity company by public deed of 30 December
1983, extended by Public Notary Eduardo Ave-
llo Arellano, an extract of which was recorded
at Folio 20,341 Nº 11,248 of 1983 of the San-
tiago Business Register and published in the
Official Gazette of 31 December 1983.
By public deed of 20 August 1985, extended
by Public Notary Miguel Garay Figueroa, the
company became a joint stock company under
the name of Línea Aérea Nacional de chile S.A.
(now LATAM Airlines Group S.A.). As regards
aeronautical and radio communication con-
cessions, traffic rights and other administra-
tive concessions, this company was express-
ly designated by Law N°18.400 as the legal
continuation of the state company created in
1929 under the name of Línea Aérea Nacional
de chile.
The Extraordinary Shareholders’ Meeting of
LAN chile S.A. held on 23 July 2004 agreed to
change the company’s name to “LAN Airlines
S.A.”. An extract of the public deed correspon-
ding to the Meeting’s minutes was recorded
on the Business Register of the Real Estate
Registry Office at Folio 25,128 Nº 18,764 of
2004 and was published in the Official Gazette
of 21 August 2004. The change of name came
into force on 8 September 2004.
The Extraordinary Shareholders’ Meeting of
LAN Airlines S.A. held on 21 December 2011
agreed to change the company’s name to
“LATAM Airlines Group S.A.” An extract of the
public deed corresponding to the Meeting’s
minutes was recorded on the Business Regis-
ter of the Real Estate Registry Office at Folio
4,238 Nº 2,921 of 2012 and was published in
the Official Gazette of 14 January 2012. The
change of name came into force on 22 June
2012.
LATAM Airlines Group S.A. is subject to the
regulation applicable to listed joint stock
companies and is registered with the Superin-
tendencia de Valores y Seguros (SVS), chile’s
stock market regulator, under Inscription N°
0306 of 22 January 1987.
32
ANNUAL REPORT 2015 OUR cOMPANY · LATAM AIRLINES GROUP INFORMATION
WeBsiTes
complete information about LATAM Airlines:
www.LATAMairlinesgroup.net
www.lan.com
www.tam.com.br
CorporATe HeADQu ArTers
Avenida Presidente Riesco 5711, 19th Floor
Las condes, Santiago, chile
Tel: (56) (2) 2565 2525
MAinTenAnCe CenTer
Arturo Merino Benítez Airport
Santiago, chile
Tel: (56) (2) 25652525
TIcKER SYMBOL
LAN – Santiago Stock Exchange
LFL – New York Stock Exchange
LATM33 – Sao Paulo Stock Exchange
FinAnCiAL inForMATion
Investor Relations
LATAM Airlines Group S.A.
Avenida Presidente Riesco 5711, 20th Floor
Las condes, Santiago, chile
Tel: (56) (2) 2565 8785
Email: Investor.Relations@lan.com
sHAreHoLDer enQuiries
Depósito central de Valores
Huérfanos 770, 22nd Floor
Santiago, chile
Tel: (56) (2) 2393 9003
Email: atencionaccionistas@dcv.cl
DeposiTArY BAnK ADrs
JPMorgan chase Bank, N.A.
P.O. Box 64504
St. Paul, MN 55164-0504
Tel: General (800) 990-1135
Tel: From outside US (651) 453-2128
Tel: Global Invest Direct (800) 428-4237
Email: jpmorgan.adr@wellsfargo.com
CusToDiAn BAnK ADrs
Banco Santander chile
Bandera 140, Santiago
custody Department
Tel: (56) (2) 2320 3320
CusToDiAn/DeposiTAr Y BAnK BDrs
Itaú corretora de Valores S.A.
Rua Ururaí, 111 – Prédio II – Piso Térreo
Tatuapé – São Paulo/SP
cEP: 03084-010
Attention: Unidade Dedicada Produto ADR/BDR
Tel.: 55 11 2797 3411
Email: dr.itau@itau-unibanco.com.br
eXTernAL AuDiTors
Pricewaterhouse coopers
Avenida Andrés Bello 2711, Piso 5
Santiago, chile
Tel: (56) (2) 2940 0000
33
cOMPANY
INFORMATION
ANNUAL REPORT 2015
| cORPORATE GOVERNANcE
BOARD OF
DIRECTORS
SENIOR
MANAGEMENT
CORPORATE
GOVERNANCE PRACTICES
OWNERSHIP STRUCTURE
AND PRINCIPAL
SHAREHOLDERS
FINANCIAL
POLICY
34
ANNUAL REPORT 2015 | cORPORATE GOVERNANcE · BOARD OF DIREcTORS
The Board of
Directors was
elected during
the Shareholder's
Meeting on April 28,
2015 for a period of
two years.
BOARD OF
DIREcTORS
| MAURIcIO ROLIM AMARO
Chairman of the Board
RUT: 48.143.165-4
| HENRI PHILIPPE REIcHSTUL
Director
RUT: 48.175.668-5
Mr. Mauricio Rolim Amaro has served as
member of LATAM Airlines Group’s board of
directors since June 2012. He was reelected to
the board of directors of LATAM in April 2015
and has served as chairman since September
2012. Mr. Amaro has previously held various
positions in the TAM Group and served as a
professional pilot at TAM Linhas Aéreas S.A.
and TAM Aviação Executiva S.A. Mr. Amaro
has been a member of the Board of TAM S.A.
since 2004, and vice-chairman of the Board
since April 2007. He is also an executive officer
at TAM Empreendimentos e Participações
S.A. and chairman of the boards of Multiplus
S.A. (subsidiary of TAM S.A.) and of TAM
AviaçãoExecutiva e Taxi Aéreo S.A.
Mr. Henri Philippe Reichstul joined LATAM´s
board of directors in April 2014 and was ree-
lected to the board of directors of LATAM in
April 2015. Mr. Reichstul has served as Presi-
dent of Petrobras and the IPEA-Institute for
Economic and Social Planning and Executive
Vice President of Banco Inter American Ex-
press S.A. currently, in addition to Adminis-
trative Board member of TAM and LATAM
group, he is also a member of the Board of
Directors of Repsol YPF, Peugeot citroen
and SEMcO Partners, among others. Mr. Rei-
chstul is an economist with an undergradua-
te degree from the Faculty of Economics and
Administration, University of São Paulo, and
postgraduate work degrees in the same dis-
cipline - Hertford college - Oxford University.
35
ANNUAL REPORT 2015 | cORPORATE GOVERNANcE · BOARD OF DIREcTORS
| GEORGES DE BOURGUIGNON
Director
RUT: 7.269.147-4
| RIcARDO J cABALLERO
Director
RUT: 7.758.557-5
Mr. Georges de Bourguignon, has served on
LATAM Airlines Group’s board of directors
since September 2012 and was reelected to
the board of directors of LATAM in April 2015.
He is co-founder of Asset chile S.A., a chilean
investment bank, where he works since 1993
as its Executive Director. He is currently
also director of K+S chile S.A. and Salmo-
nes Austral Spa. In the past, has participated
in various directories of public and private
companies, and non-profit organizations. Be-
tween 1990 and 1993 he worked as Manager
of citibank N.A. of financial institutions in
chile and was also Professor of Economics
at the Pontifical catholic University of chi-
le. The Lord of Bourguignon is an economist
at this last University and has a graduate
degree in business administration from the
Harvard University Business School.
Mr. Ricardo J. caballero joined LATAM’s
board of directors in April 2014. Mr. caba-
llero is the Ford International Professor of
Economics and Director of the World Eco-
nomic Laboratory at the Massachusetts
Institute of Technology, an NBER Research
Associate, and an advisor of QFR capital
Management LP. Mr. caballero was the
chairman of MIT’s Economics Department
(2008-2011) and has been a visiting scholar
and consultant at many major central banks
and international financial institutions. His
teaching and research fields are macro-
international economics, and
economics,
finance. His current research looks at global
capital markets, speculative episodes and
financial bubbles, systemic crises preven-
tion mechanisms, and dynamic restructu-
ring. His policy work focuses on aggregate
risk management and insurance arrange-
ments for emerging markets and developed
economies. He has also written about ag-
gregate consumption and investment, ex-
change rates, externalities, growth, price
rigidity, dynamic aggregation, networks and
complexity. Mr.caballero has served on the
editorial board of several academic journals
and has a very extensive list of publications
in all major academic journals. In April 1998
caballero was elected a Fellow of the Eco-
nometric Society and subsequently of the
American Academy of Arts and Sciences in
April 2010.
36
ANNUAL REPORT 2015 | cORPORATE GOVERNANcE · BOARD OF DIREcTORS
| RAMóN EBLEN KADIS
Director
RUT: 4.346.062-5
| cARLOS HELLER SOLARI
Director
RUT: 8.717.000-4
| GERARDO JOFRé MIRANDA
Director
RUT: 5.672.444-3
Mr. Ramón Eblen Kadis has served on LAN’s
board of directors since June 1994 and was
reelected to the board of directors of LATAM
in April 2015. Mr. Eblen has served as President
of comercial Los Lagos Ltda., Inversiones San-
ta Blanca S.A., Inversiones Andes SpA, Granja
Marina Tornagaleones S.A. and TJc chile S.A.
Mr. Eblen is a member of the Eblen Group (a
major shareholder of LATAM Airlines Group).
Mr. carlos Heller Solar, entrepreneur, joined
the board of LAN in May 2010 and was re-elec-
ted to the Board of Directors of LATAM in
April 2015. Mr Heller has extensive experien-
ce in the sectors of retail, communications,
transport and agriculture. He is President of
Grupo Bethia, who in turn owns Axxion S.A.
and Betlán two S.A., companies with signifi-
cant share in LATAM Airlines. In turn presides
over the directories of network television Me-
gavision S.A., club Hipico de Santiago, Fala-
bella Retail S.A., Sotraser S.A., Viña Indómita
S.A., Viña Santa Alicia S.A., Blue Express S.A.
and Aero Andina S.A. In addition, it is the ma-
jority shareholder and President of Azul Azul
S.A. dealership of the corporation of profes-
sional football from the University of chile.
Mr. Gerardo Jofré Miranda, economist and business
manager, joined LATAM Airlines’s Board of directors
on May 2010 and was reelected to the board of direc-
tors of LATAM in April 2015. Member of the board of
Directors of codelco, Enersis chile and member of
the Board of investment of property funds is roots
of Banco Santander. Between 2010 and 2014 was
chairman of codelco and between 2005 and 2010, he
was member of the boards of Endesa chile S.A., Viña
San Pedro Tarapacá S.A., D&S S.A., construmart S.A.,
Inmobiliaria Titanium S.A., Inmobiliaria Playa Amarilla
S.A and Inmobiliaria Parque del Sendero S.A. He was
also President of Foundation know more. Between
2004 and 2005, was the director of insurance for the
Americas of the Santander group in Spain. From 1989
to 2004, he was Vice President of the Santander
group in chile, and worked as a Director and chairman
of several companies of that group.
37
ANNUAL REPORT 2015 | cORPORATE GOVERNANcE · BOARD OF DIREcTORS
| JUAN JOSé cUETO PLAZA
Director
RUT: 6.694.240-6
Mr. Juan José cueto Plaza has served on
LAN’s board of directors since 1994 and
was reelected to the board of directors of
LATAM in April 2015. Mr. cueto is the Vice
President Executive of investment costa
Verde S.A., position he has held since 1990,
and also serves on the boards of consorcio
logger S.A., Inversiones del Buen Retiro S.A.,
costa Verde Aeronáutica S.A., synergy real
estate S.A., Valle Escondido S.A., Foundation
colunga and Universidad San Sebastián.
| FRANcIScO LUZóN LóPEZ
Director
RUT: 48.171.119-3
Mr. Francisco Luzón López has served on LA-
TAM Airlines Group’s board of directors sin-
ce September 2012 and was reelected to the
board of directors of LATAM in April 2015. He
has served as a consultant of the Inter-Ameri-
can Development Bank (BID) and he has been
Teacher “Visiting Leader” of the School of Bu-
siness china-Europe (cEIBS) in Shanghai. He
is currently a member of the board of La Haya
and an Independent Director at Willis Group.
Between 1999 and 2012, Mr. Luzon served as
Executive Vice President for Latin America of
Banco Santander. In this period, he was also
Worldwide Vice President of Universia SA. Be-
tween 1991 and 1996 he was chairman and cEO
of Argentaria Bank Group. Previously, in 1987,
he was appointed Director and General Mana-
ger of Banco de Vizcaya and in 1988 counselor
and General Director of Banking Group at BBV.
During his career Mr. Luzon has held positions
on the boards of several companies, most re-
cently participating in the council of the global
textile company Inditex-Zara from 1997 until
2012.
38
ANNUAL REPORT 2015 | cORPORATE GOVERNANcE · SENIOR MANAGEMENT
Our experience
makes us
unique
SENIOR MANAGEMENT
| ENRIQUE cUETO PLAZA
Ceo LATAM Airlines Group
RUT: 6.694.239-2
| IGNAcIO cUETO PLAZA
Ceo LAn
RUT: 7.040.324-2
Mr. Enrique cueto Plaza is the cEO of LATAM
Airlines Group and has served in this posi-
tion since the merger of LAN Airlines and the
Brazilian TAM Linhas Aereas from June 2012.
Between 1983 and 1993 was chief Executive
Officer of Fast Air, a chilean cargo airline. Mr.
cueto has extensive knowledge in the manage-
ment of airline passengers and cargo, both in
commercial and operational aspects, acquired
during his 30 years in the airline industry. It is
an active member of the Board of Directors
of the Alliance Oneworld® and of the Board
of Directors of the International Association
of air transport (IATA). It is also a member of
the Board of the Fundación Endeavor, an orga-
nization dedicated to the promotion of entre-
preneurship in chile and President of the Latin
American Association and the caribbean air
transport (ALTA).
Mr. Ignacio cueto is the cEO of LAN. His career in
the airline industry extends more than 25 years. In
1985 he became Vice President of sales at Fast Air
carrier, the largest company in domestic cargo at
the time. He led the area shopping and services of
that company in the North American market. Sub-
sequently he served on the board of directors of
LAN (from 1995 to 1997) and Ladeco (from 1994 to
1997). In addition, he took over as General Manager
of LAN cARGO between 1995 and 1998. In 1999 he
had under his responsibility the General manage-
ment of passengers of LAN and in 2005 took over
the General management of the company, position
that held until the partnership with TAM. In addition,
he led the creation of subsidiaries of LAN Airlines
in different countries of South America, as well as
the implementation of key alliances with other airli-
nes. Mr. cueto is also a member of the cueto Group
which is a controlling shareholder of LATAM.
39
ANNUAL REPORT 2015 | cORPORATE GOVERNANcE · SENIOR MANAGEMENT
| cLAUDIA SENDER
TAM president
FOREIGN
| ARMANDO VALDIVIESO
senior Vp Commercial of LATAM
RUT: 8.321.934-3
| cRISTIAN URETA
Cargo- executive Vice-president
RUT: 9.488.819-0
Mr. Armando Valdivieso Montes is the Senior
Vice President commercial, position that he
took in the year 2015. Mr Valdivieso was pre-
viously the General Manager of LAN after the
association between LAN and TAM. Previously,
Mr. Valdivieso was General Manager of LAN
passenger since 2006. Between 1997 and 2005
he served as General Manager of carga of Lan
Airlines. From 1995 to 1997, he was General Ma-
nager de Fast Air. From 1991 to 1994, he served
as Vice President at United States of Fast Air
with residence in Miami. Mr. Valdivieso is a civil
Engineer and received an Executive MBA from
Harvard University.
Mr. cristian Ureta, is LATAM’s cargo Executive
Vice-President, position that he took in 2005.
From 2002 to 2005 he served as Vice President
of production at LAN cargo. Between 1998 and
2002, he served as Vice President of Planning
and Development of LAN cargo. Previously
served as General Manager and commercial Di-
rector of MAS Air, and Manager of Fast Air Ser-
vices. Mr. Ureta is engineer and graduate of the
catholic University and Executive expertise at
Stanford University program.
Mrs. claudia Sender, is the President of TAM, a
position she assumed in May 2013. Mrs. Sender
joined the company in December 2011, as com-
mercial and Marketing Vice-President. After
June 2012, with the conclusion of TAM-LAN mer-
ger and the creation of LATAM Airlines Group,
she became the head of Brazil Domestic Busi-
ness Unit, and her functions were expanded in
order to include TAM’s entire customer Service
structure. Before joining LATAM Airlines, she
developed an extensive career in Whirlpool La-
tin America where she was the Vice President of
Marketing for 7 years. She also worked as a con-
sultant at Bain&company, developing projects
for large companies in various industries, inclu-
ding TAM Airlines and other players of the glo-
bal aviation sector. She has a bachelor degree
in chemical Engineering from the Polytechnic
School at the University of São Paulo (USP) and
a MBA from Harvard Business School.
40
ANNUAL REPORT 2015
| cORPORATE GOVERNANcE · SENIOR MANAGEMENT
| ROBERTO ALVO
senior Vp international and Alliances LATAM
RUT: 8.823.367-0
| JEROME cADIER
Chief Marketing officer
RUT: 24.363.805-4
| JUAN cARLOS MENcIó
senior Vp Legal
RUT: 24.725.433-1
Mr. Roberto Alvo Milosawlewitsch, is LATAM’s Senior
VP International and Alliances, since 2015. Mr Alvo is
in charge of the results of the international passenger
business unit and the negotiations on fleet related
negotiations. He assumed the position of Senior
Vice President Strategic Planning and Development
in 2008. Mr. Alvo joined LAN Airlines on November
2001, and has served in various roles within LAN, in-
cluding as cFO of LAN Argentina, as Vice-president
of Development of LAN Airlines and Vice-President
of Treasury of LAN Airlines. Before 2001 Mr. Alvo held
various positions at Sociedad Química y Minera de
chile S.A., a leading non-metallic chilean mining com-
pany. Mr. Alvo is a civil engineer and obtained an MBA
from IMD in Lausanne, Switzerland.
Mr. Jerome cadier, is chief Marketing Officer, a
position he assumed in March 2013. Prior to joi-
ning LATAM, he worked between 2003 and 2013
in Whirlpool Home Appliances in Brazil where
he held the National Sales Manager and Vice
President of Marketing . During this period, Je-
rome also served for two years as President of
Whirlpool in Australia and New Zealand. Finally
between 1995 and 2002, Jerome was a consul-
tant for McKinsey and company in Brazil. Mr.
Jerome cadier Industrial Engineering from Es-
cola Politecnica of Sao Paulo (1994) and has a
Masters from the Kellogg Graduate School of
Management (1999).
Mr. Juan carlos Mencio is Senior Vice President
of Legal Affairs and compliance for LATAM Air-
lines Group since June 1, 2014. Mr. Mencio had
previously held the position of General counsel
for North America for LATAM Airlines Group
and its related companies, as well as General
counsel for its worldwide cargo Operations,
both since 1998. Prior to joining LAN, he was in
private practice in New York and Florida repre-
senting various international airlines. Mr. Men-
cio obtained his Bachelor’s Degree in Interna-
tional Finance and Marketing from the School
of Business at the University of Miami and his
Juris Doctor Degree from Loyola University.
41
ANNUAL REPORT 2015 | cORPORATE GOVERNANcE · SENIOR MANAGEMENT
| EMILIO DEL REAL
senior Vp of Human resources
RUT: 9.908.112-0
| ANDRéS OSORIO
Chief Financial officer
RUT: 7.035.559-0
| HERNAN PASMAN
Chief operating officer
RUT: 21.828.810-3
| ENRIQUE ELSAcA
senior Vp spanish speaking countries
RUT: 8.732.095-2
Mr. Emilio del Real Sota, is LATAM’s HR Execu-
tive Vice-President, a position he assumed (with
LAN) in August 2005. Between 2003 and 2005,
Mr. del Real was the Human Resource Manager
of D&S, a chilean retail company. Between 1997
and 2003 Mr. del Real served in various positions
in Unilever, including Human Resource Manager
for chile, Manager of Development of customer
Management in Latin America and Recruitment
Manager. Mr. del Real has a Psychology degree
from Universidad Gabriela Mistral.
Mr. Andrés Osorio, is LATAM’s chief Financial
Officer (“cFO”), and has held this position since
August, 2013.He holds a Business degree from
the catholic University of chile and has over
20 years of experience leading financial areas
in companies such as cencosud, where he was
cFO for 7 years, and Metrogas, among others.
He has also been cEO of Empresas Indumo-
tora, a chilean automobile conglomerate, and
was a partner at Pwc in chile.
Mr. Hernan Pasman has been the chief Opera-
ting Officer of LATAM airlines group since Oc-
tober, 2015. He joined LAN Airlines in 2005 as a
head of strategic planning and financial analy-
sis of the technical areas. Between 2007 and
2010, Mr. Pasman was the chief operating offi-
cer of LAN Argentina, then, in 2011 he served
as chief Executive Officer for LAN colombia.
Prior to joining the company, between 2001
and 2005, Mr. Pasman was a consultant at Mc-
Kinsey & company in chicago. Between 1995
and 2001, Hernan held positions at citicorp
Equity Investments, Telephonic de Argentina
and Argentina Motorola. Mr. Pasman is a civil
engineer from ITBA (1995) and obtained an
MBA from Kellogg Graduate School of Mana-
gement (2001).
Mr. Enrique Elsaca Hirmas has been the Senior
Vice President for Spanish Speaking coun-
tries (Scc) at LATAM Airlines since October
2015. Mr. Elsaca joined LAN Airlines in 2004,
as Vice-President of Planning. Then, in 2008,
he assumed the Vice Presidency of Opera-
tions and Services in LAN. In 2012 Mr. Elsaca
became chief Executive of LAN in chile. Prior
to joining the company, Mr. Elsaca worked in
Santa Isabel- cencosud (2000-2004), a chi-
lean retail company. Between 1997 and 1999,
he served as strategic consulting in Booz,
Allen & Hamilton, and between 1991 and 1995,
he worked in Esso chile. Mr. Elsaca is a civil
engineer from catholic University of chile and
obtained an MBA from the MTI Sloan School
of Management (1997).
42
ANNUAL REPORT 2015 | cORPORATE GOVERNANcE · YEAR 2015 AND cOMPENSATIONS
| 2015
Board Members
Mauricio Amaro
Francisco Luzón López
Juan José cueto Plaza
Ramón Eblen Kadis
Juan Gerardo Jofré Miranda
carlos Heller Solari
Georges Antoine de Bourguignon covarrubias
Director
Position
Director’s
Comitte of
Sub-Comitte fee
remuneration (US$)
Directors’ fee (US$)
(US$)
Total (US$)
Presidente
38.315
Director
Director
Director
Director
Director
Director
Director
15.333
21.106
21.106
21.106
15.349
21.106
15.360
21.106
0
0
0
23.150
28.282
0
28.282
0
0
9.224
10.735
13.839
12.261
15.344
1.527
12.252
9.233
10.804
47.539
26.068
34.944
56.516
64.731
16.876
61.639
24.593
31.909
Ricardo J. caballero
Henri Philippe Reichstul
| 2014
Board Members
Mauricio Rolim Amaro
María claudia Amaro
Henri Philippe Reichstul
Ricardo J. caballero
Juan José cueto Plaza
Ramón Eblen Kadis
Georges Bourguignon
José María Eyzaguirre Baeza
carlos Heller Solari
Juan Gerardo Jofré Miranda
Francisco Luzón López
SENIOR MANAGEMENT
Position
Director’s
remuneration (US$)
Comitte of
Directors’ fee (US$)
Sub-Comitte fee
(US$)
Total (US$)
Presidente
44.096
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
8.221
6.157
16.147
22.065
22.072
21.523
4.694
16.592
22.053
9.992
0
0
0
0
0
26.887
28.841
0
0
29.551
0
9.621
3.289
1.642
11.303
14.443
14.447
12.523
1.252
1.475
14.435
9.593
53.717
11.510
7.799
27.450
36.508
36.519
34.046
5.946
18.067
36.488
19.585
43
ANNUAL REPORT 2015 | cORPORATE GOVERNANcE · YEAR 2015 AND cOMPENSATIONS
· The remunerations of the exercise
2015 were converted to the average
exchange rate of $ 654.25US.
· The reported earnings correspond to
the remunerations for monthly as-
sistance directory and committees
of the Board, in accordance with
what was approved at the ordinary
general meeting of shareholders of
the company held on date April 28,
2015.
· During the year 2015 both the Board
and the committee of directors not
incurred additional expenses for
concept of consultant.
For the purposes of its management struc-
ture, LATAM Airlines Group S.A. uses na-
mes or terms that are standard in local and,
particularly, international companies and
serve to indicate the seniority of the diffe-
rent executives who comprise its adminis-
tration as well as their respective salary
levels.
In accordance with the above, the internal
terms used in LATAM Airlines Group for the
purposes of seniority, supervision and sa-
lary scales are as follows:
1. Senior Vice-President. Term indicating
the company’s principal executives.
2. Vice-President. Term indicating senior
executives who report to the Executive Vi-
ce-President, a Senior Vice-President or a
General Manager.
3. Senior Director. Term indicating executi-
ves who report to a Senior VicePresident
or a Vice-President.
4. Director. Term indicating executives who
report to a Senior Vice-President or a Vi-
ce-President.
5. Senior Manager. Term indicating executi-
ves who report to a VicePresident, a Senior
Director or a Director.
6. Manager. Term indicating an executive
who reports to a Senior Director, a Direc-
tor or a Senior Manager.
7. Assistant Manager or coordinator. Term
indicating an executive who reports to a
Senior Manager or a Manager..
The term “Directors”, used to report the re-
munerations of the company’s executives, is
used in the sense of these posts or internal
terms and not the legal sense envisaged in
Section IV of chile’s Law No. 18.046 on cor-
porations. The remunerations or fees of the
members of the company’s Board of Direc-
tors are reported in the corresponding sec-
tion of this Annual Report.
In addition, for the purposes of this Annual
Report, all reference to “principal executives”
is understood to be to the internal posts or
levels of Vice-President, General Manager,
Senior Director and Director as set out above.
During the year 2015, LATAM Airlines Group
paid the whole of
its senior executives
(considering the levels of Vice Presidents,
general managers, Senior managers and di-
rectors, according the markings explained
above) a total of US$ 40,404,395 and US$
13,789,916 corresponding to performance in-
centives, paid in March 2016. Accordingly, the
company paid to its senior executives a gross
remuneration total of US$ 54,194,311.
44
SENIOR MANAGEMENT
ANNUAL REPORT 2015 | cORPORATE GOVERNANcE · YEAR 2015 AND cOMPENSATIONS
During the 2014 LATAM Airlines Group paid a
total of US$ 44,133,566 to the whole of their
chief executives. Incentives are paid for per-
formance in 2014, so company paid to its se-
nior executives gross remuneration total up
to US $44,133,566.
| cOMPENSATION PLANS
At the Extraordinary Shareholders’ Meeting
held on 21 December 2011, the company’s sha-
reholders approved the issue of 4,800,000
shares for compensation plans for the em-
ployees of the company and its subsidiaries
(the “2011compensation Plan”).
The principal conditions of the 2011 compen-
sation Plan are as follows:
cise the options, once accrued, will expire
on 21 December 2016.
4. The price to be paid for each share allo-
cated to the compensation Plan, if the
respective options are exercised, will be
US$17.22. As from the date of its setting,
this price expressed in US dollars will be
adjusted for the variation in the consu-
mer Price Index (cPI), published monthly
by the US Department of Labor, between
the date of setting the price and the date
of subscribing and paying the options. The
options will be paid in chilean pesos at the
exchange rate for the Dólar Observado
(Observed Dollar) published in the Diario
Oficial (Official Gazette) at the same date
on which they are subscribed and paid.
1. The options assigned to each employee
will accrue in stages on the following three
occasions: (1) 30% on 21 December 2014,
(2) 30% on 21 December 2015, and (3) 40%
on 21 June 2016, subject to the employee
remaining with the company.
2. Once the options have accrued in the
stages indicated above, employees may
exercise them totally or partially in which
case they must subscribe and pay the res-
pective options at the moment of subscri-
bing them. If exercised partially, this may
not be for less than 10% of the total op-
tions allocated to the employee.
3. The period in which employees may exer-
As of 31 December 2015, a total of 4,518,000
shares from the 2011 compensation Plan
had been assigned to company employees,
corresponding almost exclusively to senior
executives in the corporate posts indicated
above. There remained, therefore, a balance
of 282,000 shares that had not been alloca-
ted. To date, none of the options has accrued
or been exercised in line with point 1 above.
At the Extraordinary Shareholders’ Meeting
which took place on 11 June 2013, the com-
pany’s shareholders approved, among other
decisions, the issue of 1,500,000 shares for
compensation plans for the employees of the
company and its subsidiaries (the “2013 com-
pensation Plan”).
45
SENIOR MANAGEMENT
ANNUAL REPORT 2015
| cORPORATE GOVERNANcE · YEAR 2015 AND cOMPENSATIONS
The 2013 compensation Plan has the following
general characteristics:
1. The options assigned to each employee will
all accrue on 15 November 2017, subject to
the employee remaining with the company.
2. Once the options have accrued at the date
indicated, employees may exercise them
totally or partially in which case they must
subscribe and pay the respective options at
the moment of subscribing them in cash or
by check, bank check, electronic transfer or
any other instrument representing money
payable on sight. If exercised partially, this
may not be for less than 10% of the total
options allocated to the employee.
3. The period in which employees may exer-
cise the options, once accrued as indica-
ted in point 3 above, will expire on 11 June
2018. If the employee has not exercised or
waived the options by this date, it will be
understood for all purposes that the em-
ployee has waived the options and that, as
a result, all right, power, promise or offer
related to subscription of the company’s
shares has ceased to exist and the emplo-
yee has irrevocably renounced all right or
power in relation to the shares, freeing the
company from any obligation.
4. The price to be paid for each share allo-
cated to the 2013 compensation Plan, if
the respective options are exercised, will
be US$16.40. As from the first day of the
preferential option period through to the
date of subscription and payment of the
shares, this price expressed in US dollars
will be adjusted for the variation in the
consumer Price
Index (cPI), published
monthly by the US Department of Labor.
The options will be paid in chilean pesos at
the exchange rate for the Dólar Observado
(Observed Dollar) published in the Diario
Oficial (Official Gazette) at the same date
on which they are subscribed and paid.
A date for implementation of the 2013 com-
pensation Plan has yet to be set and no shares
corresponding to the Plan have, therefore, so
far been allocated.
46
SENIOR MANAGEMENT
ANNUAL REPORT 2015 | cORPORATE GOVERNANcE · cORPORATE GOVERNANcE PRAcTIcES
LATAM Airlines Group S.A. is a listed joint stock
company registered with the Superintenden-
cia de Valores y Seguros (SVS), chile’s stock
market regulator, under Inscription N°306. Its
shares trade on the Santiago Stock Exchange,
chile’s Electronic Stock Exchange and the Val-
paraíso Stock Exchange as well as on the New
York Stock Exchange (NYSE) as American De-
positary Receipts (ADRs) and on Brazil’s Stock,
commodity and Futures Exchange (BM&FBO-
VESPA S.A.) in the form of Brazilian Depositary
Receipts (BDRs).
LATAM Airlines Group’s corporate governance
practices are regulated by chile’s Securities
Market Law (Nº 18.045) and its corporations
Law Nº 18.046 (“LSA”), including their asso-
ciated norms, as well as other norms issued
by the SVS. In addition, it is subject to the le-
gislation and regulation of the United States
and that country’s Securities and Exchange
commission (SEc) as they apply to the issue
of ADRs and the laws and regulation of the
Federal Republic of Brazil and the comissão
de Valores Mobiliários (cVM), the country’s
stock market regulator, as they apply to the
issue of BDRs.
The corporate governance practices of LATAM
Airlines Group are subject to constant review in
order to ensure that its internal self-regulation
processes are totally aligned with the regula-
tion in force and the LATAM’s values.
The main bodies responsible for LATAM Air-
lines Group’s corporate governance are its
Board of Directors and the Directors’ com-
mittee (which also fulfills the functions of the
Audit committee required under the Sarba-
nes-Oxley Act of the United States), together
with the Strategy, Finance, Leadership and Pro-
duct, Brand and Frequent Flyer Program com-
mittees created after the association between
LAN Airlines and TAM. The main functions of
these bodies are set out below.
| BOARD OF DIREcTORS OF LATAM AIRLINES
GROUP
LATAM Airlines Group’s Board of Directors
has nine members and is the body responsible
for analyzing and defining LATAM’s strategic
vision, thereby playing a fundamental role in
its corporate governance. All the Board seats
come up for election every two years and, un-
der LATAM Airlines Group’s statutes, directors
are elected through cumulative voting.
Each shareholder has one vote per share and
can use all his or her votes to support one can-
didate or divide them among any number of
candidates. This arrangement ensures that a
shareholder with more than a 10% stake can
elect at least one director. The present Board
of Directors was elected by the Ordinary Sha-
reholders’ Meeting which took place on April
28th, 2015.
LATAM Airlines Group’s decisions and commercial
activities are underpinned by the ethical principles
established in LATAM’s code of conduct.
LATAM Airlines Group’s Board holds ordinary
monthly meetings and extraordinary meetings
whenever the company’s affairs so require. Di-
rectors’ fees must be approved by vote at the
Ordinary Shareholders’ Meeting. The Directors’
committee usually meets monthly and its func-
tions and powers are those established by the
applicable legislation and regulation.
| DIREcTORS’ cOMMITTEE OF LATAM AIRLI-
NES GROUP
Under chilean law, listed joint stock companies
must appoint at least one independent direc-
tor and a Directors’ committee when they have
a market capitalization of at least 1,500,000
unidades de fomento (an inflation-indexed
currency unit) and at least 12.5% of the voting
shares are held by shareholders who individua-
lly control or possess less than 10% of these
shares. Three of the nine Board members form
a Directors’ committee, which fulfills both the
functions required under chile’s corporations
Law and those of the Audit committee requi-
red under the Sarbanes-Oxley Act of the Uni-
ted States and the corresponding SEc norms.
The Directors’ and Audit committee has the
functions established in Article 50 bis of chile’s
corporations Law (Nº 18.046) and the other
applicable regulation. These include:
To examine the reports of LATAM Airlines
Group’s external auditors, general balance
sheets and other financial statements that LA-
TAM Airlines Group’s administrators provide to
shareholders and to express an opinion about
these reports prior to their presentation for
approval by shareholders.
47
cORPORATE
GOVERNANcE PRAcTIcES
ANNUAL REPORT 2015 | cORPORATE GOVERNANcE · cORPORATE GOVERNANcE PRAcTIcES
· To put to the Board proposals as to the exter-
nal auditors and credit rating agencies to be
used.
· To examine internal control reports and any
related complaints.
· To examine and report on all matters regar-
ding related-party transactions.
Audit committee, were independent directors
as defined under Rule 10A of the Exchange Act.
At that date, its members were Messrs. Ramón
Eblen Kadis, Georges de Bourguignon Arndt and
Juan Gerardo Jofré Miranda (chairman of the
committee). For the purposes of chile’s corpora-
tions Law (Nº 18.046), Ramón Eblen Kadis is not
considered an independent director. committee
members have not changed in the last two years.
functions and fulfill its obligations pursuant
to article 50 Bis under the corporations Law
No. 18,046, and also to undertake those other
issues that the Directors’ committee decided
to review, revise or evaluate. Please find below
the main topics covered.
Test and review of the Balance sheet and Fi-
nancial statements
· To examine the pay scale of LATAM’s senior
management.
| DIREcTORS’ cOMMITTEE ANNUAL REPORT
The requirements for directors’ independen-
ce are set out in chile’s corporations Law (Nº
18.046) and its subsequent modifications under
Law Nº 19.705 on the relationship between di-
rectors and LATAM’s controlling shareholders.
A director is considered independent when he
or she does not, in general, have ties, interests
or economic, professional, credit or commer-
cial dependence of a significant nature or size
with or on the company, the other companies in
the group of which it forms part, its controller
or principal executives or a family relationship
with the latter or any of the other types of ties
specified in Law Nº 18.046.
Under US regulation, it is necessary to have
an Audit committee, comprising at least three
Board members, that fulfills the independence
requirements established under Rule 10A of
the Exchange Act.
In accordance with article 5°, subsection 8° of
article 50 bis under the corporations Law No.
18,046, the Directors’ committee of LATAM
Airlines Group S.A. (the “company” or “LA-
TAM”), issues the annual management for 2015.
I. Integration of the Directors’ committee
and Sessions
The members of the Directors’ committee of the
company are Messrs. Gerardo Jofré Miranda, Geor-
ges de Bourguignon Arndt and Ramón Eblen Kadis.
Messrs. Jofré and De Bourguignon are considered
independent directors of the company. Gerardo Jo-
fré Miranda chairs the Directors’ committee.
The directors were appointed in the Ordinary
Shareholders’ Meeting held on April 28, 2015,
for a two-year period pursuant the bylaws of
the company.
II. Report of the committee’s Activities
As of 31 December 2015, all the members of the
Directors’ committee, who also act as part of the
During 2015, the Directors’ committee held
twenty-one sessions, in order to exercise its
The Directors’ committee tested and reviewed
the financial statements of the company as
of December 31, 2014, as well as the quarterly
statements as of March 31, June 30 and Sep-
tember 30, understanding the tests of the
respective reports of external auditors of the
company. The External Auditor of the company
participated in their respective sessions of the
committee, for the purpose of providing the
opinion related to the audit and to inform the
relevant issues of the review, the main aspects
of internal control and communications requi-
red by the regulators of External Auditor, and
including in every occasion the confirmation
of (i) didn’t experience any difficulties to carry
out the audit, (ii) didn’t have any difference of
opinion with the Management, and (iii) didn’t
came up any facts that represented a threat to
its independence.
Likewise, KPMG in its capacity as external audi-
tor of TAM S.A. and subsidiaries participated in
two sessions of the Directors’ committee, with
the purpose of presenting the main aspects of
the external audit of TAM, the main focuses of
its review process and internal control aspects.
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review of the Cash Generating units impair-
ment reports
Control of operations with related parties
Contracting of Additional services from ex-
ternal Auditors.
In the session held on March 16, 2015, the Di-
rectors’ committee examined and analyzed
the impairment reports of the cash genera-
ting units of the company, in accordance with
the reports issued by the management of the
company and by Deloitte, acting as the consul-
ting firm, hired for the purpose, being present
at the session. The external audit company
updated the report and was reviewed by the
management in the session held on August 12,
2015, where the External Auditor of the com-
pany was present.
In the sessions held on June 30, November 6
and December 4, 2015, the Directors’ commit-
tee reviewed the Policy on Regular Operations
of the company and the compliance with the
legal and accounting regulations related to the
control and report of operations with related
parties, and carried out a review process of
such policy and the controls associated, which
will be completed in 2016. In these meetings,
the transactions that pursuant to the legal and
accounting regulation applicable to the com-
pany were reviewed, which are considered ope-
rations with related parties, and was approved
by the committee.
systems of Compensation for executives and
employees
Corporate Governance practices
In the sessions held on April 6 and December
4, 2015, the Directors’ committee examined
the systems of remunerations and compen-
sation plans for managers, main executives
and employees of the company. In those ses-
sions the committee examined the plans pro-
posed by the management and the reports
of external consultants hired by the Vice
Presidency of Employees of the company.
Other matters related to the human resour-
ces area of the company incudes topics such
as (i) performance review of main executives
(ii) approval of variable compensation pay-
ments (iii) organizational environment and
(iv) succession plans, who were evaluated
and reviewed in the Leadership committee
of the company.
In order to comply with General Rule No. 385
of the Superintendence of Securities and In-
surance (“NcG 385”), in the sessions held on
September 10, November 20 and December 14,
2015, the Directors’ committee, analyzed and
examined the corporate governance practices
of LATAM for 2015, according to the question-
naire provided in Addendum I of General Rule
No. 385. In those sessions the committee eva-
luated corporate improvements to corporate
governance practices of the company, some
of which were recommended to the Board of
Directors for their implementation, such as the
approval of the Integrated Risk Management
Policy, the contracting of Additional Services
from External Auditors Policy and the Induc-
tion for New Directors Policy.
In the sessions held on January 26, June 1st and
June 30, 2015, the Directors’ committee exami-
ned and evaluated the rules and guidelines for
the control of additional services from external
auditors, including the fulfillment of legal regu-
lations in chile and abroad, thus approving a
contracting of Additional Services from Exter-
nal Auditors Policy, which was recommended
and approved ultimately by the Board of Direc-
tors of the company.
evaluation and implementation of Corporate
policies
In 2015, during several sessions of the Direc-
tors’ committee, the analysis of the need to
carry out corporate policies in matters of risk
and tax management continued, with the pur-
pose to implement a management model for
those risks that might impact sustainability,
the operational continuity or that might have
an impact on customers, people or the envi-
ronment, in one part, and compliance with the
obligations of the company and the adoption
of tax criteria, which resulted in the approval
of the Integrated Risk Management Policy of
LATAM and the Tax Policy of LATAM, which
were recommended and approved ultimately
by the Board of Directors of the company.
In accordance with the Integrated Risk Mana-
gement Policy of LATAM, the Directors’ com-
mittee is committed to supervise, analyze and
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evaluate the development and the manage-
ment of the Risk Management System of LA-
TAM Airlines Group, along with reporting and
to inform the Board of Directors of the results
of the supervision, analysis and evaluation.
In several sessions the committee analyzed
deeply certain risks of the company together
with the Risk Manager.
ties mentioned below, where we present a sum-
mary of the matters discussed in each session.
1) Ordinary Session N°151 26/01/15
Tender process for external auditor’s servi-
ces.
Progress of the internal audit plan.
Hiring policy of additional services from ex-
ternal auditors.
7) Extraordinary Session N°34 14/05/15
Election of the committee´s President.
Review of financial statements
at 31 March 2015.
8) Extraordinary Session N°35 19/05/15
Agenda of the committee’s outstanding
issues.
Progress of the internal audit plan.
internal Audit
In five sessions the Directors’ committee exa-
mined and reviewed the audit and control re-
ports issued by the external auditor of LATAM.
In these sessions the audit work performed in
2015 was approved, and throughout the year
informed of its main results.
Likewise, the complaints received from the
established channels of the company for that
purpose were informed.
recommendations of the Directors’ Committee
On the other hand, the Directors’ committee
made the recommendations mentioned below
to this annual management report, with the
occasion of the appointment of external audi-
tors of the company and the private risk rating
agencies for 2015.
cORPORATE
GOVERNANcE PRAcTIcES
Activities by session of the Directors’ Commi-
ttee report
Notwithstanding the above, the Directors’ com-
mittee met and held sessions in the opportuni-
2) Extraordinary Session N°32 16/03/15
Review of calculation of impairment of cer-
tain assets included in financial statements
as of December 31.
Fees for external auditors.
9) Ordinary Session N°155 01/06/15
Review of the hiring policy of additional
services from external auditors.
corporate risk Management system.
Introduction of KMPG.
3) Ordinary Session N°152 17/03/15
Review of financial statements at 31 De-
cember 2014.
4) Extraordinary Session N°33 20/03/15
Presentation of proposals for external audit
services.
5) Ordinary Session N°153 06/04/15
Proposal for external auditors and private
credit rating agencies for 2015
System of remunerations and compensa-
tion plan for executives
Annual report of Directors’ committee.
Fees for services of external auditors
6) Ordinary Session N°154 04/05/15
Election of the board of directors
Improvements initiatives of internal control
Agenda of the committee’s pending issues.
External auditors’ fees.
10) Ordinary Session N°156 30/06/15
Review of the hiring policy of additional
services from external auditors.
Analysis of the policy for related party’s
transactions.
Migration to LATAM structure of the funded
and leased fleet of TAM.
11) Extraordinary Session N°36 02/07/15
Tax reform– implementation plan
corporate risk Management
12) Ordinary Session N°157 03/08/15
TAM audit reports
13) Extraordinary Session N°37 13/08/15
Review of Financial Statements at 30
June 2015.
14) Ordinary Session N°158 28/08/15
2015 external audit plan
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ANNUAL REPORT 2015
| cORPORATE GOVERNANcE · cORPORATE GOVERNANcE PRAcTIcES
Functional segregation.
Tender process of external auditors
for 2016
21) Extraordinary Session N°41 14/12/15
Analysis of the document required by the
general rule 385.
LATAM Airlines Group S.A. (the “company”
or “LATAM”), issues the annual management
for 2015.
15) Extraordinary Session N°38 10/09/15
Analysis of the document required by
the general rule 385.
2015 Internal Audit Plan.
16) Ordinary Session N°159 01/10/15
Internal audit reports.
corporate taxation policy.
TAM S.A. Financial Statements
17) Ordinary Session N°160 06/11/15
Presentation of KMPG.
Analysis of the policy for related
party’s transactions.
18) Extraordinary Session N°39 12/11/15
Review of Financial Statements at
30 September 2015.
19) Extraordinary Session N°40 20/11/15
Analysis of the document required by
the general rule 385.
20) Ordinary Session N°161 4/12/15
Taxation policy: Relevant issues.
corporate risk Management: update
on the project progress
Regulatory issues
Analysis of the policy for related
party’s transactions.
Letter received from external auditors
System of remunerations and
compensation plan for executives
III. Remunerations and Expenses of the
Directors’ committee
The Ordinary Shareholders Meeting of the
company, held on April 28, 2015, agreed that
every member of the committee receives a
monthly allowance of the equivalent to 67 Uni-
dades de Fomento for attending the Directors’
committee sessions.
For the operation of the Directors’ committee
and its advisors, corporations Law established
that the expense budget has to be at least the
same as the annual remuneration of the com-
mittees’ members, and therefore in the afore-
mentioned Ordinary Shareholders Meeting a
budget of 2,412 Unidades de Fomento for 2015
was approved.
Therefore, the expenses of the Directors’ com-
mittee are related with the monthly allowances
for attendance to the sessions, without having
any other expenses or outflows to inform.
IV. Recommendations of
committee.
the Directors’
IV.1 Proposal of External Auditors’
Appointment.
In accordance with article 5°, subsection 8°
of article 50 bis under the corporations Law
No. 18,046, the Directors’ committee of
At the Directors’ committee session held
on April 6, 2015 and in accordance to article
2) of subsection eight of article 50 bis
under corporations Law No. 18.046, the
Directors’ committee agreed to propose
the External Auditors to the Board of
Directors to be suggested at the Ordinary
Shareholders Meeting to be held on April
28, 2015. In this regard, the committee
proposed to the Board of Directors the
appointment of PriceWaterhousecoopers
consultores, Auditores y cía. Limitada
(“PWc”) and KPMG Auditores consultores
Ltda (“KPMG”) as Auditors of the company,
in this order of priority, but notwithstanding
the recommendation to maintain PWc as
the Audit company for 2015.
The Director’s committee recommendation
to maintain PWc as the external auditor
of the company for 2015 is based on the
following reasons and fundamentals:
(i) concerning fees and hours and resources
available, there are no important differences
between the two auditors proposed to the
shareholders of the company. Likewise, it
is considered that the professional level
of the auditors of the two firms would be
equivalent.
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(ii) Both audit companies have internal
control systems that make us assume an
adequate and equivalent level of indepen-
dence when providing an audit service. Due
to the above, even though PWc has been
the external auditor of LATAM Airlines
Group S.A. for the last twenty-three years,
the independence of this audit company is
guaranteed through the policy defined by
PriceWaterhousecoopers worldwide, with
the change of the partner in charge each
five years, which is in line with section f) of
article 243 under the Securities Law No.
18,045. The current partner in charge of
LATAM’s audit has been in the role for four
years.
(iii) The quality of services provided by
PWc to LATAM Airlines Group, doesn’t have
had any observations or objections from
the company’s management or its Board of
Directors.
(iv) The knowledge that PWc has of the
businesses and activities of LATAM makes
us assume that the audit process would
be faster and more efficient than the one
carried out by a new auditor, matter who is
considered very important for 2015.
(v) Since 2014, the external auditor of TAM
S.A. and its subsidiaries is KPMG Auditores
Independentes, being part of the KPMG
global network. In this regard, TAM S.A.
and subsidiaries represent an important
portion of the balance sheet and financial
statements of LATAM Airlines Group S.A.,
cORPORATE
GOVERNANcE PRAcTIcES
so there’s a second external audit firm, also
among the most important worldwide, and
in addition to PWc, would participate in the
delivery of external audit services.
(vi) The interaction and coordination be-
tween the two external audit companies
PWc and KPMG for the period 2014, as
external auditors of LATAM Airlines Group
and TAM S.A., respectively, has been evalua-
ted as positive, so there are two audit firms
totally enabled to perform the external
audit of LATAM in the future.
IV.2 Proposal of Private Risk Rating Agen-
cies.
The Directors’ committee in session held
on April 6, 2015 and in accordance with
article 2) subsection 8° of article 50 bis
under the corporations Law No. 18,046,
agreed to propose the Board of Directors
the risk rating agencies to be suggested
at the Ordinary Shareholders Meeting to
be held on April 28, 2015. In this regard, the
committee agreed to propose the Board
of Directors of the company the appoint-
ment of Fitch chile clasificadora de Riesgo
Limitada and Feller-Rate clasificadora de
Riesgo Limitada.
| cOMMITTEES OF THE BOARD OF DIREc-
TORS OF LATAM AIRLINES GROUP
accordance with
In
shareholders’
agreement of 25 January 2012 between LATAM
Airlines Group S.A. (previously LAN Airlines
the
S.A.) and TEP chile S.A., the Ordinary Board
Session of 3 August 2012 established the
following four committees to review, discuss
and make recommendations to the Board
about the issues related to their respective
areas of responsibility:
(i) Strategy committee, (ii) Leadership com-
mittee, (iii) Finance committee, and (iv) Brand,
Product and Frequent Flyer Program commit-
tee. In accordance with the said shareholders’
agreement, each subcommittee will comprise
two or more directors of LATAM Airlines Group
and at least one of their members must be a di-
rector elected by TEP chile S.A.
The Strategy committee will focus on corpo-
rate strategy, current strategic affairs and the
three-year plans and budgets of the main busi-
ness units and functional areas and high-level
review strategies. The Leadership committee
will focus on areas that include group culture,
high-level organizational structure, appoint-
ment of the executive vice-president of LATAM
Airlines Group (henceforth, “cEO of LATAM”)
and those who report to this person, the philo-
sophy of corporate remunerations, structures
and levels of remunerations and objectives
for the cEO of LATAM and other key staff, the
succession or contingency plan for the cEO of
LATAM and evaluation of the performance of
the cEO of LATAM.
The Finance committee will focus on financial
policies and strategy, capital structure, control
of compliance policies, tax optimization stra-
tegy and the quality and reliability of financial
52
ANNUAL REPORT 2015 | cORPORATE GOVERNANcE · cORPORATE GOVERNANcE PRAcTIcES
information. Finally, the Brand, Product and
Frequent Flyer Program committee will focus
on brand strategies and brand construction
initiatives for corporate brands and those of
the principal business units, the principal cha-
racteristics of products and services for each
of the principal business units, the strategy of
the Frequent Flyer Program and its key cha-
racteristics and regular auditing of the brand’s
performance.
In addition, by agreement of the Board of LA-
TAM Airlines Group S.A., during the board of
directors’ meeting No. 389 on 10 June 2014, a
Risk committee was formed with the purpose
of supervising the implementation of the Risk
management success factor, included in LA-
TAM’s Strategic Plan, and particularly to over-
see LATAM Airlines Group’s risk management
of risks of LATAM Airlines Group and ensure a
corporate risk matrix structuring.
| RELATED-PARTY TRANSAcTIONS
Under chile’s corporations Law, a listed com-
pany’s operations with a related party must
take place in market conditions and comply
with certain authorization and disclosure re-
quirements that are different from those appl-
ying to a non-listed company. This applies to
listed companies and their subsidiaries.
LATAM Airlines Group has carried out different
transactions with its subsidiaries, including
entities owned or controlled by some of its
majority shareholders. In the normal course of
LATAM’s business, different types of services
have been provided to or received from related
companies, including the rental and exchange
of aircraft and cargo transport and booking
services.
LATAM Airlines Group’s policy is not to carry
out transactions with or for the benefit of any
shareholder or Board member or with any enti-
ty controlled by these persons or in which they
have a significant economic interest, except
when the transaction is related to LATAM and
the price and other terms are at least as favo-
rable for the LATAM as those which could be
obtained from a third party under market con-
ditions.
These transactions are summarized in the audi-
ted consolidated financial statements for the
year ending on 31 December 2015.
Finally, and along with the rules laid down in
the code of conduct of LATAM Airlines Group
on this matter, for the purposes of letter b) of
the last point of Article 147 of Law No. 18.046
on corporations, LATAM Airlines Group has
a general policy on habitual operations which
was approved by its Board of Directors in its
Session of 29 December 2009 and reported
as material news to the Superintendencia de
Valores y Seguros on that same date. The ope-
rations indicated in this general policy on habi-
tual operations may be carried out without the
requirements envisaged in the said Article 147.
cORPORATE
GOVERNANcE PRAcTIcES
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ANNUAL REPORT 2015 | cORPORATE GOVERNANcE · cORPORATE GOVERNANcE PRAcTIcES
| PRINcIPLES OF GOOD cORPORATE
GOVERNANcE
LATAM Airlines Group’s good corporate gover-
nance is the result of the interaction of diffe-
rent individuals and stakeholders.
Although all employees share responsibility for
compliance with the high standards of ethics
and adherence to regulation established by
LATAM Airlines Group’s Board of Directors, it
is the Board, the Directors’ committee and the
company’s principal executives who are pri-
marily responsible for LATAM Airlines Group’s
good corporate governance. In line with the
above, LATAM Airlines Group is committed to
transparency and compliance with the ethical
and regulatory standards established for this
purpose by its Board of Directors.
| PILLARS OF LATAM AIRLINES GROUP’S
cORPORATE GOVERNANcE
Notwithstanding the responsibilities of the
company’s Board of Directors and its Direc-
tors’ committee, LATAM Airlines Group’s admi-
nistration has also taken a number of measures
to ensure due corporate governance. These
include principally:
1. Publication of the new code of conduct for
LATAM, unique for all of the company’s em-
ployees, which seeks to ensure that all emplo-
yees adhere to the highest standards of ethics,
transparency and compliance with regulation
required by LATAM Airlines Group.
The LATAM Group has an Ethics complaints
(www.etica-grupolatam.com). This
channel
facility provide employees with a direct and
private online channel through which to report
any concerns in the knowledge that these will
be properly processed or investigated without
any risk of reprisal against the person repor-
ting them.
2. code of Ethics for Senior Financial Executi-
ves. This fosters honest and ethical conduct in
the disclosure of financial information, com-
pliance with regulation and avoidance of con-
flicts of interest.
3. Manual for Management of Market-Sensiti-
ve Information. This is required by the Superin-
tendencia de Valores y Seguros and, since Law
Nº 20.382 on corporate Governance came into
force, also by chilean securities market legisla-
tion. LATAM Airlines Group, however, seeks to
go further than these norms and regulates the
criteria for disclosure of operations, periods
of voluntary abstinence from the purchase
and sale of LATAM’s shares, mechanisms for
continuous disclosure of market-sensitive in-
formation and mechanisms for the protection
of confidential information by the company’s
employees and executives.
4. compliance Program. Managed by LATAM’s
compliance Area, which forms part of the Le-
gal Vice-Presidency, in coordination with and
under the supervision of the Board of Directors
and its Directors’ committee, this Program su-
pervises compliance with the laws and regula-
tion applicable to LATAM Airlines Group’s busi-
nesses and activities in the different countries
in which it operates.
| cORPORATE GOVERNANcE PRAcTIcES
On March 31, 2015, the Report on LATAM’s cor-
porate Practices which was approved by LA-
TAM Airlines Group’s Board of Directors and
prepared in accordance with General Norm N°
341 issued by the Superintendencia de Valores
y Seguros (SVS) on 29 November 2012., was
dispatched to this same organism.The informa-
tion required under this norm is as of Decem-
ber 31 of each year and must be presented by
March 31 of the subsequent year.
• The information filed annually with the SVS
must refer to the following matters:
• The functioning of the Board of Directors.
• The relation between LATAM, its sharehol-
ders and the general public.
• The replacement and remuneration of LA-
TAM’s principal executives.
• The definition, implementation and supervi-
sion of LATAM’s internal control policies and
procedures and risk management.
54
cORPORATE
GOVERNANcE PRAcTIcES
ANNUAL REPORT 2015 | cORPORATE GOVERNANcE · OWNERSHIP STRUcTURE AND PRINcIPAL SHAREHOLDERS
As of December 31, 2015, LATAM Airlines Group had a total of 1,563 shareholders in its register
and is controlled by the cueto group.
| DEcEMBER 31 OF 2015
Shareholder
Nº Offshares
2015/12/31
%
1
2
3
4
5
6
7
8
9
cOSTA VERDE AERONAUTIcA SA
90.427.620
16.6%
TEP cHILE SA
65,554,075
12.0%
INVERSIONES NUEVA cOSTA VERDE AERONAUTIcA LTDA
23,578,077
4.3%
BANcO DE cHILE POR cUENTA DE TERcEROS NO RESIDENTES
22,557,207
4.1%
J P MORGAN cHASE BANK
21,339,756
3.9%
cOSTA VERDE AERONAUTIcA SPA
20,000,000
3.7%
BANcO ITAU POR cUENTA DE INVERSIONISTAS EXTRANJEROS
18,653,574
3.4%
AXXION S A
18,473,333
3.4%
INVERSIONES ANDES SPA
17,146,529
3.1%
10
INVERSIONES HS SPA
14,894,024
2.7%
11
LARRAIN VIAL S A cORREDORA DE BOLSA
12,986,050
2.4%
12
BANcHILE c DE B S A
12,416,588
2.3%
OWNERSHIP
STRUcTURE
AND PRINcIPAL
SHAREHOLDERS
55
ANNUAL REPORT 2015 | cORPORATE GOVERNANcE · OWNERSHIP STRUcTURE AND PRINcIPAL SHAREHOLDERS
| DEcEMBER 31 OF 2014
Shareholder
Nº Offshares
2014/12/31
%
1
2
3
4
5
6
7
8
9
cOSTA VERDE AERONAUTIcA SA
85,772,914
15.7%
TEP cHILE SA
65,554,075
12.0%
J P MORGAN cHASE BANK
41,936,775
7.7%
INVERSIONES NUEVA cOSTA VERDE AERONAUTIcA LTDA
22,928,277
4.2%
BANcO DE cHILE POR cUENTA DE TERcEROS NO RESIDENTES
21,904,156
4.0%
cOSTA VERDE AERONAUTIcA SPA
20,000,000
3.7%
BANcO ITAU POR cUENTA DE INVERSIONISTAS
19,744,217
3.6%
AXXION S A
18,473,333
3.4%
INVERSIONES ANDES SPA
17,146,529
3.1%
10
INVERSIONES HS SPA
14,894,024
2.7%
11
LARRAIN VIAL S A cORREDORA DE BOLSA
12,361,609
2.3%
12
BANcO SANTANDER POR cUENTA DE INV EXTRANJEROS
11,174,043
2.0%
OWNERSHIP
STRUcTURE
AND PRINcIPAL
SHAREHOLDERS
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ANNUAL REPORT 2015 | cORPORATE GOVERNANcE · OWNERSHIP STRUcTURE AND PRINcIPAL SHAREHOLDERS
| 2015
| 2014
25,0%
Cueto Group
12,0%
Amaro Group
5,6%
6,1%
18,7%
3,9%
Eblen Group
Bethia Group
AFPs
ADRs
0,44%
BDRs
9,5%
Foreig Investors
18,6%
Otthers
25,5%
Cueto Group
12,0%
Amaro Group
4,1%
Eblen Group
6,1%
Bethia Group
17,4%
AFPs
7,7%
ADRs
0,5%
BDRs
9,8%
Foreig Investors
16,8%
Otthers
OWNERSHIP
STRUcTURE
AND PRINcIPAL
SHAREHOLDERS
57
ANNUAL REPORT 2015 | cORPORATE GOVERNANcE · OWNERSHIP STRUcTURE AND PRINcIPAL SHAREHOLDERS
please find below the beneficial ownership of LATAM, both directly and indirectly, the major
shareholder groups and the identification of individuals that control the investment entities.
1. The cueto Group is LATAM’s controlling shareholder, who is comprised by Mr. Juan José cueto
Plaza (one of the members of the Board), Ignacio cueto Plaza (cEO of LAN), Enrique cueto Pla-
za (cEO of LATAM) and some other members of the family. As of December 31, 2015 the cueto
Group owned 25.0% of LATAM’s common shares through the following companies:
Name or Social reason
Chilean Tax N°
Percentage
costa Verde Aeronáutica S.A.
81.062.300-4
16,58%
Inversiones Nueva costa Verde Aeronáutica Ltda.
76.116.741-3
costa Verde Aeronáutica SpA
Inversiones Priesca Dos y cía. Ltda.
Inversiones caravia Dos y cía. Ltda.
Inversiones El Fano Dos y cía. Ltda.
Inversiones La Espasa Dos y cía. Ltda.
Inv. Puerto claro Dos y cía. Ltda.
Inversiones La Espasa Dos S.A.
Inversiones Puerto claro Dos Limitada
Inversiones Mineras del cantábrico S.A.
Total
76.213.859-K
76.237.354-8
76.237.329-7
76.237.343-2
76.327.426-8
76.327.422-5
76.809.110-2
76.809.120-K
96.625.340-1
4,32%
2,20%
0,65%
0,65%
0,50%
0,05%
0,04%
0,01%
0,01%
0,00%
25,0%
OWNERSHIP
STRUcTURE
AND PRINcIPAL
SHAREHOLDERS
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ANNUAL REPORT 2015 | cORPORATE GOVERNANcE · OWNERSHIP STRUcTURE AND PRINcIPAL SHAREHOLDERS
2. Shareholders of cOSTA VERDE AERONÁUTIcA S.A. are the following:
Shareholders
Inversiones costa Verde Aeronáutica Limitada
Inversiones costa Verde Aeronáutica Ltda. y cía. En comandita por Acciones
Larraín Vial S.A. c. de B.
Inversiones Mineras del cantábrico S.A.
Santander S.A. c. de B.
Percentage
99,81%
0,17%
0,02%
0.0001%
0,000008%
3. In turn, the controlling entity of costa Verde Aeronáutica S.A. detailed above,
INVERSIONES cOSTA VERDE AERONÁUTIcA LIMITADA (A in Table 2), holds the following
shareholders:
Members
Inversiones costa Verde Limitada y compañía en comandita por Acciones
Inversiones costa Verde y cía. Ltda. 1
Inversiones costa Verde Ltda.2
Percentage
99,%
0,9%
0,1%
A.
B.
c.
D.
E.
A.
B.
c.
OWNERSHIP
STRUcTURE
AND PRINcIPAL
SHAREHOLDERS
1 The members of this society are the five brothers cueto square (Enrique, Juan José, Ignacio, hope and succession of
Philip), with 14% each and the children of every one of them who jointly hold the remaining 30%. All individualized in the
number 5 below.
2 Members of this society are the brothers Enrique cueto Plaza, Juan Jose cueto Plaza, Ignacio cueto Plaza, each with a
33.3% ownership.
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ANNUAL REPORT 2015 | cORPORATE GOVERNANcE · OWNERSHIP STRUcTURE AND PRINcIPAL SHAREHOLDERS
4. INVERSIONES cOSTA VERDE LIMITADA and cOMPAÑÍA EN cOMANDITA POR
AccIONES detailed above, (A in Table 3), holds the following shareholders (“Table 4”):
Members
Main Member - 99,9%
Percentage
A.
B.
c.
D.
E.
F.
Inmobiliaria e Inversiones El Fano Limitada
Enrique cueto Plaza
Inmobiliaria e Inversiones caravia Limitada
Juan José cueto Plaza
Inmobiliaria e Inversiones Priesca Limitada
Ignacio cueto Plaza
Inmobiliaria e Inversiones La Espasa Limitada
Esperanza cueto Plaza
Inmobiliaria e Inversiones Puerto claro Limitada
Sucesión Felipe cueto Plaza
Inmobiliaria e Inversiones colunga Limitada
**
**
G.
Inversiones del cantábrico Limitada
OWNERSHIP
STRUcTURE
AND PRINcIPAL
SHAREHOLDERS
8%
8%
8%
8%
8%
30%
30%
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ANNUAL REPORT 2015 | cORPORATE GOVERNANcE · OWNERSHIP STRUcTURE AND PRINcIPAL SHAREHOLDERS
5. INMOBILIARIA E INVERSIONES cOLUNGA LIMITADA and INVERSIONES DEL
cANTÁBRIcO LTDA., are 100% owned by the cueto Group, and its main shareholders are:
Members
ID Number
Members
ID Number
A.
B.
c.
Juan José cueto Plaza
6.694.240-6 N. Manuela cueto Sarquis
19.078.071-6
Ignacio Javier cueto Plaza
7.040.324-2
O.
Pedro cueto Sarquis
19.246.907-4
Enrique Miguel cueto Plaza
6.694.239-2
P.
Juan cueto Sarquis
19.639.220-3
D. María Esperanza cueto Plaza
7.040.325-0
Isidora cueto cazes
18.391.071-k
Q.
R.
Antonia cueto Sarquis
20.826.769-8
Fernanda cueto Délano
18.395.657-4
E.
F.
G.
H.
I.
J.
K.
L.
M.
OWNERSHIP
STRUcTURE
AND PRINcIPAL
SHAREHOLDERS
Felipe Jaime cueto Ruiz-Tagle
20.164.894-7
S.
Ignacio cueto Délano
19.077.273-k
María Emilia cueto Ruiz-Tagle
20.694.332-7
T.
Javier cueto Délano
20.086.836-6
Andrea Raquel cueto Ventura
16.098.115-6
U.
Pablo cueto Délano
20.086.837-4
Daniela Esperanza cueto Ventura
16.369.342-9 V.
José cueto Délano,
20.963.574-7
Valentina Sara cueto Ventura
16.369.343-7 W. Nieves Isabel Alcaíno cueto
18.636.911-4
Alejandra Sonia cueto Ventura
17.700.406-5
X. María Elisa Alcaíno cueto
19.567.835-9
Francisca María cueto Ventura
18.637.286-7
Y. María Esperanza Alcaíno cueto
17.701.730-2
Juan José cueto Ventura
18.637.287-5
Y. María Esperanza Alcaíno cueto
17.701.730-2
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| cORPORATE GOVERNANcE · OWNERSHIP STRUcTURE AND PRINcIPAL SHAREHOLDERS
6. Shareholders of INVERSIONES NUEVA cOSTA VERDE AERONÁUTIcA LIMITADA are the
following:
Members
A.
B.
costa Verde Aeronáutica S.A.
Inversiones costa Verde Limitada
7. Shareholders of cOSTA VERDE AERONÁUTIcA SpA are the following:
Shareholders
A.
Inversiones Nueva costa Verde Aeronáutica Dos S.A.
Percentage
99,99%
0,01%
Percentage
100%
8. Shareholders of INVERSIONES PRIEScA DOS Y cIA. LTDA. are the following:
Members
Inversiones Priesca Dos S.A.
Fernanda cueto Délano Uno y cía. Ltda.
A.
B.
Percentage
99%
1%
9. Shareholders of INVERSIONES cARAVIA DOS Y cIA. LTDA. are the following:
Members
A.
Inversiones caravia Dos S.A.
B. Manuela cueto Sarquis Uno y cía. Ltda.
Percentage
99%
1%
OWNERSHIP
STRUcTURE
AND PRINcIPAL
SHAREHOLDERS
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ANNUAL REPORT 2015 | cORPORATE GOVERNANcE · OWNERSHIP STRUcTURE AND PRINcIPAL SHAREHOLDERS
10. Shareholders of INVERSIONES EL FANO DOS Y cIA. LTDA. are the following:
Members
Inversiones El Fano Dos S.A.
Andrea Raquel cueto Ventura Uno y cía. Ltda.
A.
B.
Percentage
99%
1%
11. Shareholders of INVERSIONES LA ESPASA DOS Y cIA. LTDA. are the following:
Members
A.
Inversiones La Espasa Dos S.A.
B. María Esperanza Alcaíno cueto Uno y cía. Ltda.
Percentage
99%
1%
12. Shareholders of INVERSIONES PUERTO cLARO DOS Y cIA. LTDA. are the following:
Members
A.
B.
Inversiones Puerto claro Dos Limitada
Isidora cueto cazes y cía. Ltda.
OWNERSHIP
STRUcTURE
AND PRINcIPAL
SHAREHOLDERS
13. Shareholders of INVERSIONES LA ESPASA DOS S.A. are the following:
Members
A.
Inmobiliaria e Inversiones La Espasa Limitada
B. María Esperanza Alcaíno cueto Uno y compañía Limitada
Percentage
99%
1%
Percentage
99%
1%
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ANNUAL REPORT 2015 | cORPORATE GOVERNANcE · OWNERSHIP STRUcTURE AND PRINcIPAL SHAREHOLDERS
14. Shareholders of INVERSIONES PUERTO cLARO DOS LTDA. are the following:
Members
Isidora cueto cazes
Emilia cueto Ruiz Tagle
Felipe cueto Ruiz Tagle
Inversiones colunga Limitada
A.
B.
c.
D.
Percentage
33,33%
33,33%
33,33%
0,01%
INVERSIONES MINERAS DEL cANTÁBRIcO LIMITADA is a company wholly owned by the cueto
Group, and its controlling shareholders are the individuals mentioned in number 5 above.
The remaining shareholders are a variety of institutional investors, legal entities and individuals. As
of December 31, 2015, ADRs held a 3.9% LATAM’s property and 0.4% share were in the form of BDRs.
OWNERSHIP
STRUcTURE
AND PRINcIPAL
SHAREHOLDERS
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ANNUAL REPORT 2015 | cORPORATE GOVERNANcE · OWNERSHIP STRUcTURE AND PRINcIPAL SHAREHOLDERS
Please find below the controlling shareholders,
other major shareholders and minority
is
shareholders of LATAM, whose control
held alone or jointly (though a shareholder
agreement), that are enabled to appoint at
least one of the company’s management
member, or holds 10% or more of controlling
voting shares.
PROPERTY
(AS OF DEcEMBER 31, 2015)
Shareholders
Grupo cueto3
costa Verde Aeronáutica S.A.
Ownership of
common shares
Ownership
Percentage of
common shares
136,394,023
88,759,650
Inversiones Nueva costa Verde Aeronáutica Ltda.
23,578,077
costa Verde Aeronáutica SpA
Otros
Grupo Amaro4
TEP chile S.A.
Grupo Eblen.
Inversiones Andes S.A.
Inversiones PIA SpA
Inversiones Andes II S.A
Grupo Bethia
Axxion S.A.
Inversiones HS SpA
12,000,000
12,056,296
65.554.075
65.554.075
30.550.333
17.146.529
5.403.804
8.000.000
33.367.357
18.473.333
14.894.024
25,00%
16.27%
4,32%
2,20%
2,21%
12,02%
12,02%
5,60%
3,14%
0,99%
1,47%
6,12%
3,39%
2,73%
Otros accionistas minoritarios
274.297.439
50,28%
Total
545.558.101
100,00%
65
OWNERSHIP
STRUcTURE
AND PRINcIPAL
SHAREHOLDERS
3 cueto Group which we also refer as "LATAM shareholders
controllers", has entered into a shareholders agreement
with drivers shareholders of LATAM, TEP chile and TAM,
whose terms are detailed below.
4 The Amaro group, to which we also refer as "TAM
shareholders controllers", has signed a Pact of
shareholders with LATAM and drivers shareholders of
LATAM, the terms listed below.
ANNUAL REPORT 2015 ANNUAL REPORT 2015
| CORPORATE GOVERNANC
CTURE AND PRINCIPAL SHAREHOLDERS
Following the business combination with
TAM in 2012, the Amaro Group became also
a controlling shareholder of LATAM Airlines
Group, holding 100% of TEP Chile S.A. (Rut N°
76,152,798-3) ownership and the controlling
property of Holdco I, which owns 100% of
TAM’s common shares. Members of the Ama-
ro Group are our Chairman Mauricio Rolim
Amaro and our former Director María Claudia
Amaro. As of December 31, 2015, the Amaro
Group held 12.01% of LATAM Airlines Group’s
common shares.
Finally, we point out that as of the date of this
report, our shareholders haven’t formulated
any comments or proposals regarding the de-
velopment of the Company’s business.
The table below sets forth LATAM’s beneficial
ownership of its main executives and mem-
bers of the Board:
Total Shares Board of Directors
N° shares
Percentage
Georges de Bourguignon Amdt
3.153
Juan José Cueto Plaza5
Ramón Ebien Kadis5
Carlos Heller Solari5
Juan Gerardo Jofré
Mauricio Rolim Amaro5
Total
136.394.023
30.550.333
33.367.357
106.843
65.554.075
265.975.784
0,00%
25,00%
5,60%
6,12%
0,02%
12,02%
48,75%
Total Shares Senior Management
N° shares
Percentage
Enrique Cueto Plaza5
e Ignacio Cueto Plaza
Armando Valdivieso Montes
Andrés Osorio
Enrique Elsaca
Total
136.394.023
67.359
23.824
22.450
136.507.656
25,00%
0,01%
0,00%
0,00%
25,02%
5 References to Juan José Cueto Plaza Enrique Cueto Plaza and Ignacio Cueto Plaza are part of group Cueto, Ramon Eblen
Kadis of the Group Eblen, Carlos Heller Solari of the Bethia group and Mauricio Rolim Amaro of the Amaro group, since
none of them has the number of shares mentioned above by itself, but rather through the Group involving.
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OWNERSHIP
STRUCTURE
AND PRINCIPAL
SHAREHOLDERS
| cORPORATE GOVERNANcE · OWNERSHIP STRUcTURE AND PRINcIPAL SHAREHOLDERS
| SHAREHOLDERS' AGREEMENTS
After the combination of LAN and TAM in June
2012, LAN Airlines S.A. was transformed into
"LATAM Airlines Group S.A." and TAM remains
subsidiary Holdco I and LATAM. To implement
this combination, controller shareholders of
TAM formed four new corporations closed
under chilean law: TEP chile, Holdco I, Holdco
II and Sister Holdco. After carrying out the
transaction, Holdco II and Sister Holdco
ceased to exist.
Prior to the consummation of the business
combination, LATAM Airlines Group and the
LATAM controlling shareholders entered
into several shareholders’ agreements with
TAM, the TAM controlling shareholders
(acting through TEP chile) and Holdco I,
establishing agreements and restrictions
relating to corporate governance in an
attempt to balance LATAM Airlines Group’s
interests, as the owner of substantially all
of the economic rights in TAM, and those
of the TAM controlling shareholders, as the
continuing controlling shareholders of TAM
under Brazilian law, by prohibiting the taking of
certain specified material corporate actions
and decisions without prior supermajority
approval of the shareholders and/or the
board of directors of Holdco I or TAM. These
shareholders’ agreements also set forth the
parties’ agreement regarding the governance
and management of the LATAM Airlines Group
following the consummation of the business
combination of LAN and TAM.
| GOVERNANcE AND MANAGEMENT OF
LATAM AIRLINES GROUP
Regarding the Government and administration
of the LATAM group, there are different
shareholders agreements:
1. controller Group Shareholder agreements:
between shareholders drivers LATAM and
TEP chile, which establishes agreements
concerning corporate governance, control
and operation of LATAM, Holdco I, TAM, and
their respective subsidiaries, and regulates
transfers of the common shares of LATAM
Airlines Group and the voting shares of
Holdco I, property of TEP chile.
2. Shareholder agreements between
LATAM Airlines and TEP Group: LATAM-TEP
chile, which, in other matters, establishes
agreements concerning corporate governance,
management and operation of LATAM, and
regulates relations between LATAM and other
members of the Group LATAM.
3. Shareholder agreements of Holdco I:
between LATAM, I Holdco and TEP chile,
which establishes corporate governance
arrangements, administration and operation
of Holdco I, and the votes and transfers of the
voting shares of shareholders of Holdco I.
4. Shareholder agreements of TAM::
between LATAM, Holdco I, TAM and TEP
chile, which establishes agreements related
to corporate governance, management and
operation of TAM and its subsidiaries.
After the combination of LAN and TAM
business, the shareholders agreements of
TAM and Holdco I establish agreements
between the parties with respect to the
Government and administration of Holdco
I, TAM and its subsidiaries (collectively, the
"TAM group").
The following are the key provisions of the
Shareholder agreements referred to in
paragraphs 1 and 2 above. It is important
to recall that the rights and obligations
of the members of the group controller
are regulated by the terms and conditions
of such agreements of shareholders and
not by the summary of any information
contained in this annual report.
| cOMPOSITION OF THE LATAM AIRLINES
GROUP BOARD
Mr. Mauricio Rolim Amaro was reelected
to the LATAM Airlines Group board of
directors in April 2015. If Mr. Amaro vacates
this position for any reason within that
two-year period, TEP chile has the right
to select a replacement to complete his
term. Thereafter, LATAM Airlines Group’s
board of directors will appoint any of
its members as the chairman of LATAM
Airlines Group’s board of directors, from
time to time, in accordance with the LATAM
Airlines Group’s by-laws. Mrs. Maria
claudia Oliveira Amaro was elected to the
LATAM Airlines Group board of directors
in June 2012, and resigned this position in
September 2014. Also in September 2014,
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STRUcTURE
AND PRINcIPAL
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ANNUAL REPORT 2015 | cORPORATE GOVERNANcE · OWNERSHIP STRUcTURE AND PRINcIPAL SHAREHOLDERS
pursuant to chilean law, Mr. Henri Philippe
Reichstul was appointed by the board to fill
her seat until the next general shareholders
meeting. Mr. Reichstul will serve in this
position until the next ordinary meeting of
shareholders that took place in Santiago,
chile on April 28, 2015, in which was also
appointed member of the Board.
| MANAGEMENT OF THE LATAM AIRLINES
GROUP
Mr. Enrique cueto Plaza has served as cEO
of LATAM (“cEO LATAM”) since June 2012.
The cEO LATAM is the highest ranked officer
of the LATAM Airlines Group and reports
directly to the LATAM Board of directors.
The cEO LATAM is charged with the general
supervision, direction and control of the
business of the LATAM Airlines Group and
certain other responsibilities set forth in the
LATAM Airlines Group-TEP shareholders’
agreement. After any departure of the
current cEO LATAM, our board of directors
will select his or her successor after
receiving the recommendation of the
Leadership committee.
Mr. Ignacio cueto Plaza has served as
cEO of LAN (“cEO LAN”) since June 2012.
The cEO LAN reports directly to the
cEO LATAM and has general supervision,
direction and control of the passenger and
cargo operations of the LATAM Airlines
Group, excluding those conducted by
Holdco I, TAM and its subsidiaries, and
the international passenger business of
the LATAM Airlines Group. The cEO LAN,
together with Mr. Marco Antonia Bologna,
the current cEO of TAM (“cEO TAM”), are
responsible for recommending a candidate
to the cEO LATAM to serve as the head of
the international passenger business of
the LATAM Airlines Group (including both
long haul and regional operations), who
shall report jointly to the cEO LAN and
the cEO TAM. The key executives of the
LATAM Airlines Group (other than the cEO
LATAM and those in the TAM Group) will
be appointed by, and will report, directly or
indirectly, to the cEO LATAM.
The head office of the LATAM Airlines Group
continues to be located in Santiago, chile.
The following are the key provisions of the
in
Shareholder agreements referred to
paragraphs 3 and 4 above. It is important
to recall that the rights and obligations of
the members of the group controller are
regulated by the terms and conditions of
such agreements of shareholders and not by
the summary of any information contained
in this annual report.
| cOMPOSITION OF THE HOLDcO I AND
TAM BOARDS
The Holdco I shareholders’ agreement and
TAM shareholders’ agreement generally
provide for identical boards of directors
and the same chief executive officer at
Holdco I and TAM, with LATAM appointing
two directors and TEP chile appointing
four directors (including the chairman of
the board of directors). On April 30, 2014
Mr. Marco Antonio Bologna was named
President of the Board of Directors of TAM
S.A. replacing Mrs. Maria claudia Oliveira
Amaro and on September 8, 2014 Mrs.
Maria claudia Oliveira Amaro resigned her
position as director of Holdco I. In her place,
the board of directors appointed Mr. Henri
Philippe Reichstul as a member of the board
until the next general ordinary meeting of
shareholders. A full renovation of the Board
of Directors took place on April 28, 2015.
The control group shareholders’ agreement
provides that the persons elected by
or on behalf of the LATAM controlling
shareholders or
the TAM controlling
shareholders to our board of directors must
also serve on the boards of directors of both
Holdco I and TAM.
| MANAGEMENT OF HOLDcO I AND TAM
The day-to-day business and affairs of
Holdco I will be managed by the TAM Group
cEO under the oversight of the board
of directors of Holdco I. The day-to-day
business and affairs of TAM will be managed
by the TAM Diretoria under the oversight
of the board of directors of TAM. The TAM
Diretoria will be comprised of the TAM
Group cEO, the TAM cFO, the TAM cOO and
the TAM ccO. Marco Bologna, was the cEO
of TAM, will be the initial cEO of Holdco I and
TAM, or the “TAM Group cEO”. This role is
currently played by claudia Sender. The TAM
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Group cEO will have general supervision,
direction and control of the business and
operations of the TAM Group (other than
the international passenger business of the
LATAM Airlines Group) and will carry out
all orders and resolutions of the board of
directors of TAM. The initial chief financial
officer of TAM, or the “TAM cFO,” has been
jointly selected by LATAM and TEP chile and
any successor cFO will be selected by TEP
chile from three candidates proposed by
LATAM. The chief operating officer of TAM,
or the “TAM cOO,” and chief commercial
officer of TAM, or the “TAM ccO,” will be
jointly selected and recommended to the
TAM board of directors by the TAM Group
cEO and TAM cFO and approved by the TAM
board of directors. These shareholders’
agreements also regulate the composition
of the boards of directors of subsidiaries of
TAM.
Following the combination, TAM continues
to be headquartered in São Paulo, Brazil.
| SUPERMAJORITY AcTIONS
certain actions by Holdco I or TAM require
supermajority approval by the board of
directors or the shareholders of Holdco I or
TAM which effectively require the approval
of both LATAM and TEP chile before the
specified actions can be taken. Actions
that require supermajority approval of
the Holdco I board of directors or the TAM
board of directors include, as applicable:
• to approve the annual budget and business
plan and the multi-year business (which we
refer to collectively as the “approved plans”),
as well as any amendments to these plans;
• to take or agree to take any action which
causes, or will reasonably cause, individually,
or in the aggregate, any capital, operating or
other expense of any TAM company and its
subsidiaries to be greater than (i) the lesser
of 1% of revenue or 10% of profit under the
approved plans, with respect to actions
affecting the profit and loss statement, or
(ii) the lesser of 2% of assets or 10% of cash
and cash equivalents (as defined by IFRS) as
set forth in the approved plan then in effect,
with respect to actions affecting the cash
flow statement;
• to create, dispose of or admit new
shareholders to any subsidiary of the
relevant company, except to the extent
expressly contemplated in the approved
plans;
• to approve the acquisition, disposal,
modification or encumbrance by any
TAM company of any asset greater than
$15 million or of any equity securities
or securities convertible
into equity
securities of any TAM company or other
company, except to the extent expressly
contemplated in the approved plans;
• to approve any investment in assets not
related to the corporate purpose of any TAM
company, except to the extent expressly
contemplated in the approved plans;
• to enter into any agreement in an amount
greater than $15 million, except to the extent
expressly contemplated in the approved plans;
• to enter into any agreement related to
profit sharing,
joint ventures, business
collaborations, alliance memberships, code
sharing arrangements, except as approved
by the business plans and budget then
in effect, except to the extent expressly
contemplated in the approved plans;
• to terminate, modify or waive any rights
or claims of a relevant company or its
subsidiaries under any arrangement in any
amount greater than $15 million, except to
the extent expressly contemplated in the
approved plans;
• to commence, participate in, compromise
or settle any material action with respect
to any litigation or proceeding in an amount
greater than $15 million, relating to the
relevant company, except to the extent
expressly permitted in the approved plans;
• to approve the execution, amendment,
termination or ratification of agreements with
related parties, except to the extent expressly
contemplated in the approved plans;
• to approve any financial statements,
amendments, or any accounting, dividend or
tax policy of the relevant company;
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| cORPORATE GOVERNANcE · OWNERSHIP STRUcTURE AND PRINcIPAL SHAREHOLDERS
• to approve the grant of any security
interest or guarantee to secure obligations
of third parties;
• to appoint executives other than the
Holdco I cEO or the TAM Diretoria or to
re-elect the then current TAM cEO or TAM
cFO; and
• to approve any vote to be cast by the
relevant company or its subsidiaries in its
capacity as a shareholder.
Actions
shareholder approval include:
requiring
supermajority
• to approve any amendments to the by-laws
of any relevant company or its subsidiaries
in respect to the following matters: (i)
corporate purpose; (ii) corporate capital; (iii)
the rights inherent to each class of shares
and its shareholders; (iv) the attributions of
shareholder regular meetings or limitations
to attributions of the board of directors;
(v) changes in the number of directors or
officers; (vi) the term; (vii) the change in
the corporate headquarters of a relevant
company; (viii) the composition, attributions
liabilities of management of any
and
relevant company; and (ix) dividends and
other distributions;
• to approve the dissolution, liquidation, or
winding up of a relevant company;
• to approve the transformation, merger,
spin-up or any kind of corporate re-
organization of a relevant company;
OWNERSHIP
STRUcTURE
AND PRINcIPAL
SHAREHOLDERS
• to pay or distribute dividends or any other
kind of distribution to the shareholders;
• to approve the issuance, redemption or
amortization of any debt securities, equity
securities or convertible securities;
• to approve a plan or the disposal by sale,
encumbrance or otherwise of 50% or more
of the assets, as determined by the balance
sheet of the previous year, of Holdco I;
to approve
•
the disposal by sale,
encumbrance of otherwise of 50% or more
of the assets of a subsidiary of Holdco
I representing at least 20% of Holdco I
or to approve the sale, encumbrance or
disposition of equity securities such that
Holdco I loses control;
• to approve the grant of any security
interest or guarantee to secure obligations
in excess of 50% of the assets of the
relevant company; and
• to approve the execution, amendment,
termination or ratification of acts or
agreement with related parties but only if
applicable law requires approval of such
matters.
| VOTING AGREEMENTS, TRANSFERS
AND OTHER ARRANGEMENTS VOTING
AGREEMENTS
The LATAM controlling shareholders and
TEP chile have agreed in the control group
shareholders agreement to vote their
respective LATAM Airlines Group common
shares as follows:
• until such time as TEP Chile sells any of
its LAN common shares (other than the
exempted shares as defined below held
by TEP chile), the LATAM Airlines Group
controlling shareholders will vote their
LATAM Airlines Group common shares to
elect to the LATAM Airlines Group board of
directors any individual designated by TEP
chile unless TEP chile beneficially owns
enough LATAM Airlines Group common
shares to directly elect two directors to the
LATAM Airlines Group board of directors;
• the parties agree to vote their LATAM
Airlines Group common shares to assist the
other parties in removing and replacing the
directors such other parties elected to the
LATAM Airlines Group board of directors;
• the parties agree to consult with one
another and use their good faith efforts
to reach an agreement and act jointly on
all actions (other than actions requiring
supermajority approval under chilean law) to
be taken by the LATAM Airlines Group board
of directors or the LATAM Airlines Group
shareholders;
• the parties agree to maintain the size
of the LATAM Airlines Group board of
directors at a total of nine directors and to
maintain the quorum required for action
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by the LATAM Airlines Group board of
directors at a majority of the total number
of directors of the LATAM Airlines Group
board of directors; and
• if, after good faith efforts to reach an
agreement with respect to any action that
requires supermajority approval under
chilean law and a mediation period, the
parties do not reach such an agreement
then TEP chile has agreed to vote its shares
on such supermajority matter as directed
by the LATAM Airlines Group controlling
shareholders, which we refer to as a
“directed vote.”
The number of “exempted shares” of TEP
chile means that number of LATAM Airlines
Group common shares which TEP chile
owns immediately after the effective time in
excess of 12.5% of the outstanding LATAM
Airlines Group common shares at such time
as determined on a fully diluted basis.
and
TAM
The parties to the Holdco I shareholders
agreement
shareholders
agreement have agreed to vote their voting
shares of Holdco I and shares of TAM so
as to give effect to the agreements with
respect to representation on the TAM board
of directors discussed above.
| TRANSFER RESTRIcTIONS
Pursuant to the control group shareholders’
agreement, the LATAM Airlines Group
controlling shareholders and TEP chile
are subject to certain restrictions on
sales, transfers and pledges of the LATAM
Airlines Group common shares and (in the
case of TEP chile only) the voting shares of
Holdco I beneficially owned by them. Except
for a limited amount of LATAM Airlines
Group common shares, neither the LATAM
Airlines Group controlling shareholders
nor TEP chile were permitted to sell any
of their LATAM Airlines Group common
shares, and TEP chile was not permitted to
sell its voting shares of Holdco I, until June
2015. Since then, sales of LATAM Airlines
Group common shares by either party are
permitted, subject to (i) certain limitations
on the volume and frequency of such sales
and (ii) in the case of TEP chile only, TEP
chile satisfying certain minimum ownership
requirements. After June 2022, TEP chile
may sell all of its LATAM Airlines Group
common shares and voting shares of
Holdco I as a block, subject to (x) approval
of the transferee by the LATAM board of
directors, (y) the condition that the sale not
have an adverse effect and (z) a right of first
offer in favor of the LATAM Airlines Group
controlling shareholders, which we refer to
collectively as “block sale provisions.” An
“adverse effect” is defined in the control
group shareholders agreement to mean a
material adverse effect on our and Holdco
I’s ability to own or receive the full benefits
of ownership of TAM and its subsidiaries
or the ability of TAM and its subsidiaries to
operate their airline businesses worldwide.
The LATAM Airlines Group controlling
shareholders have agreed to transfer any
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voting shares of Holdco I acquired pursuant
to such right of first offer to LATAM for the
same consideration paid for such shares.
In addition, TEP chile may sell all LATAM
Airlines Group common shares and voting
shares of Holdco I beneficially owned by
it as a block, subject to satisfaction of the
block sale provisions, after June 2015 if a
release event (as described below) occurs
or if TEP chile is required to make two or
more directed votes during any 24-month
period at two meetings (consecutive or
not) of the shareholders of LATAM Airlines
Group held at least 12 months apart and
LATAM Airlines Group has not yet fully
exercised its conversion option described
below. A “release event” will occur if (i) a
capital increase of LATAM Airlines Group
occurs, (ii) TEP chile does not fully exercise
the preemptive rights granted to it under
applicable law in chile with respect to
such capital increase in respect of all of its
restricted LATAM Airlines Group common
shares, and (iii) after such capital increase
is completed, the
individual designated
by TEP chile for election to the board of
directors of LATAM Airlines Group with the
assistance of the LATAM Airlines Group
controlling shareholders is not elected to
the board of directors of LATAM Airlines
Group.
In addition, after June 2022 and after the
occurrence of the full ownership trigger
date (as described below under the “—
conversion Option” section), TEP chile may
sell all or any portion of its LATAM Airlines
Group common shares, subject to (x) a right
of first offer in favor of the LATAM Airlines
Group controlling shareholders and (y) the
restrictions on sales of LATAM Airlines
Group common shares more than once in a
12-month period.
The control group shareholders agreement
provides certain exceptions to these
restrictions on transfer for certain pledges
of LATAM Airlines Group common shares
made by the parties and for transfers to
affiliates, in each case under certain limited
circumstances.
In addition, TEP chile agreed in the Holdco
I shareholders agreement not to vote its
voting shares of Holdco I, or to take any
other action, in support of any transfer
by Holdco I of any equity securities or
convertible securities issued by it or by any
of TAM or its subsidiaries without our prior
written consent.
| RESTRIcTION ON TRANSFER OF TAM
SHARES
LATAM agreed in the Holdco I shareholders’
agreement not to sell or transfer any shares
of TAM stock to any person (other than our
affiliates) at any time when TEP chile owns
any voting shares of Holdco I. However,
LATAM will have the right to effect such a
sale or transfer if, at the same time as such
sale or transfer, LATAM (or its assignee)
acquires all the voting shares of Holdco
I beneficially owned by TEP chile for an
amount equal to TEP chile’s then current tax
basis in such shares and any costs TEP chile
is required to incur to effect such sale or
transfer. TEP chile has irrevocably granted
us the assignable right to purchase all of
the voting shares of Holdco I beneficially
owned by TEP chile in connection with any
such sale.
Conversion option
Pursuant to the control group shareholders’
agreement and the Holdco I shareholders’
agreement, we have the unilateral right to
convert our shares of non-voting stock of
Holdco I into shares of voting stock of Holdco
I to the maximum extent allowed under law
and to increase our representation on the
TAM and Holdco I boards of directors if and
when permitted in accordance with foreign
ownership control laws in Brazil and other
applicable laws if the conversion would not
have an adverse effect (as defined above
under the “—Transfer Restrictions” section).
On or after June 2022, and after we have
fully converted all of our shares of non-
voting stock of Holdco I into shares of voting
stock of Holdco I as permitted by Brazilian
law and other applicable laws, we will
have the right to purchase all of the voting
shares of Holdco I held by the controlling
shareholders of TAM for an amount equal
to their then current tax basis in such
shares and any costs incurred by them to
effect such sale, which amount we refer
to as the “sale consideration.” If we do not
timely exercise our right to purchase these
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shares or if, after June 2022, we have the
right under applicable law in Brazil and other
applicable law to fully convert all the shares
of non-voting stock of Holdco I beneficially
owned by us into shares of voting stock of
Holdco I and such conversion would not
have an adverse effect but we have not
fully exercised such right within a specified
period, then the controlling shareholders of
TAM will have the right to put their shares of
voting stock of Holdco I to us for an amount
equal to the sale consideration.
Acquisitions of Tam stock
The parties have agreed that all acquisitions
of TAM common shares by LATAM Airlines
Group, Holdco I, TAM or any of their
respective subsidiaries from and after the
effective time of the business combination
will be made by Holdco I.
OWNERSHIP
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AND PRINcIPAL
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ANNUAL REPORT 2015 | cORPORATE GOVERNANcE · DIVIDENDS
LATAM Airlines Group’s policy is to pay the
minimum dividends required by law or, in
other words, 30% of profits in accordance
with the regulation
in force. This does
not, however, preclude the distribution of
dividends above this obligatory minimum
level depending on the particular events and
circumstances that may arise during the year.
No dividends were distributed in years 2013,
2014 and 2015 since LATAM reported net
losses.
Going forward the company does not expect
changes in dividend policy. En materia de
dividendos, la compañía ha establecido que
éstos sean iguales al mínimo exigido por la ley,
es decir un 30% de las utilidades de acuerdo a
la normativa vigente.
OWNERSHIP
STRUcTURE
AND PRINcIPAL
SHAREHOLDERS
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ANNUAL REPORT 2015 | cORPORATE GOVERNANcE · FINANcIAL POLIcY
| FINANcIAL POLIcY
is
The Directorate of corporate Finance
responsible for managing the company’s
Financial Policy. This Policy enables LATAM to
respond effectively to external conditions for
the normal operation of the business, and thus
maintain and anticipate a stable flow of funds
to ensure continuity of its operations.
the
Finance
committee,
Additionally,
formed by the Executive Vice-President
and Members of the Board of Directors of
LATAM, meets periodically to review and make
recommendations to the Board about matters
not regulated by the Financial Policy.
LATAM Airlines Group’s Financial Policy seeks
the following objectives:
Ensure a minimum level of liquidity for the
operation. Preserve and maintain adequate
cash
levels to ensure the needs of the
operation and growth. Maintain adequate level
of lines of credit with local and foreign banks to
be prepared to react to contingencies.
leverage
in a
Maintain optimum
reasonable proportion in relation to the growth
of operations and taking into account the
objective of minimizing financing costs.
level,
FINANcIAL
POLIcY
capitalize cash surpluses, through financial
investments that guarantee a risk
level
and liquidity consistent with the Financial
Investment Policy.
Reduce the impacts of market risks such as
variations in the price of fuel, exchange rates
and interest rates on the company’s net margin.
counterparty
Reduce
diversification
counterparty operations limits.
Risk
investments
and
through
and
in the international markets, and interest rate
at 7.25%, and also made full payment of the
US$300 million bond issued by the company
TAM capital 2, Inc., interest rate at 9.50%.
These operations pursued liquidity growth and
to reduce the group’s leverage rate levels at the
same time.
Maintain visibility of the long-term forecasted
financial situation of the company, so as to
anticipate situations such as non-compliance
with covenants, low liquidity, worsening of
the financial ratios committed with rating
agencies, etc.
In 2015, LATAM maintained adequate liquidity
levels, which is consistent with the objective of
safeguard the company from potential external
shocks and volatility and cycles inherent of the
industry. The long-term objective is to maintain
liquidity ratio around 15%.
The Financial Policy establishes guidelines and
restrictions for managing operations related to
Liquidity and Financial Investments, Financing
Activities and Market Risk Management.
| LIQUIDITY AND FINANcIAL INVESTMENT
POLIcY
In 2015 LATAM Airlines Group carried out
market operations to maintain adequate
liquidity levels, ending December 2015 with a
liquidity ratio of approximately 13,4% of total
sales.
In this context, short-term debt of LATAM
was approximately US$387 million at the end
of 2015, slightly higher than December 2014.
Additionally, in 2015 the company increased
debt in approximately US$324,6 million, which
is mainly explained by the liability management
transaction carried out in June 2015, in which
LATAM issued a US$500 million long term bond
Additionally, LATAM accounted at the end of
2015 committed credit facilities of US$105
million with financial institutions, both local
and international, which at the end of the
period has not been used. On March 29, 2016,
these facilities were replaced by a revolving
committed line of credit, which is secured by
airplanes, engines and parts for a total amount
of up to US$375 million.
Additionally, in 2015 the company continued
to finance an important part of the fleet pre-
delivery payments with its own resources,
those related to the aircrafts that LATAM
will receive in the future, for the Boeing and
Airbus aircrafts. As of December 31, 2015,
LATAM Airlines Group accounted US$1,361
million in cash and easily convertible securities
and US$409.6 million in advances on aircraft
financed with its own funds.
The objective of the company’s Financial
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to centralize
Investment Policy
the
is
investment decisions, in order to optimize
profitability, adjusted by currency risk, and
maintain adequate security and liquidity levels.
Additionally, the company manages
risk
through counterpart diversification, terms,
currencies and instruments.
| FINANcING POLIcY
The scope of LATAM’s Financing Policy is to
centralize financing activities and balance the
useful life of assets with debt maturities.
The vast majority of LATAM Airlines Group’s
investments are fleet acquisition programs,
which are generally financed through the
combination of own resources and long-term
structured financial debt. Usually, LATAM
finances between 80% and 85% through
bank loans or bonds guaranteed by export
promotion agencies, and the rest through
commercial loans or its own funds.
Payment maturities of the different financing
structures vary from 12 to 16 years, being
the vast majority at 12 years. Additionally,
important portion of LATAM’s fleet acquisition
undertakings take the form of operational
leasing arrangements as additional financing
measure.
forward
Looking
to diversify financing
alternatives for airplanes, LATAM carried out
on May 29, 2015 a private placement of debt
certificated named Enhanced Equipment Trust
certificates (“EETc”) for an aggregate amount
of US$ 1.020,8 million. The execution of this
operation allows the company to broaden our
aircrafts financing alternatives and mainly
allowed the financing of the acquisition of
eleven new Airbus A321-200 airplanes, two
Airbus A350-900 airplanes and four Boeing
787-9 airplanes, whose deliveries were
scheduled between July 2015 and March 2016.
The acknowledgement of the debt is against
the delivery of the planes, thus as of December
31, 2015 it was US$675.7 million.
In the case of short-term financing, LATAM held
as of December 31, 2015, approximately 4%
of its total debt in the form of exporter and
importer loans, looking forward to finance
working capital needs.
leasing commitments,
A further objective of the Financing Policy is
to ensure a stable profile of debt maturity
and
including debt
service and fleet rental services, which has to
be consistent with the operational cash flow
generation of LATAM.
| MARKET RISK POLIcY
Due to the nature of its operations, LATAM
Airlines Group is exposed to market risks
such: (i) fuel-price risk, (ii) interest rate risk
and y (iii) exchange rate risk. Looking forward
to the total or partial hedging against these
risks, LATAM uses derivatives to fix or cap the
increases of underlying assets. Market Risk
management is carried out on a comprehensive
manner and takes into account the correlation
FINANcIAL
POLIcY
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between each exposure. In order to operate
with counterparties, the company must have
a line and an ISDA or LFc contract signed with
the chosen counterpart. counterparts must
have a Risk Rating equivalent to “A-“ issued by
an International Rating Agency.
i. Fuel-price risk:
Variations in fuel prices depend on an important
extent on the oil demand and supply worldwide,
the decisions taken by the Organization of
Petroleum Exporting countries
(“OPEP”),
the refining capacity worldwide, the stock
levels available, the occurrence of weather
phenomena and geopolitical factors. LATAM
buys aircraft fuel known as Jet Fuel 54. There
is an international reference index for this
underlying asset – the US Gulf coast Jet 54,
which was used by LATAM Airlines Group for
hedging purposes in 2015.
The Fuel Hedging Policy limits the minimum
and maximum range of fuel to hedge, according
to the capacity to transfer cost variations
and market scenarios
in fuel
prices. Additionally, the Policy narrows the
hedging maximum term and allows portfolio
restructuring.
reflected
In relation to the fuel hedging instruments, the
Policy allows the use of Swaps and Options
combined.
ii. interest-rate risk of cash flows:
The variation of interest rates is strongly
linked to the international economic situation.
An improvement in the long-term economic
FINANcIAL
POLIcY
outlook leads to an increase in long-term
interest rates, while a decline causes a
decrease due to market effect. However, taking
into account the government
intervention,
in economic contraction periods, benchmark
interest rates tend to decrease in order to
boost domestic demand to make credit more
accessible to everyone and raise production
(likewise, there are benchmark interest rate
hikes in economic growth periods).
impact
interest
Uncertainty on market and governments
behaviors, which
rates
variations, creates debt risk on LATAM
debt, which is linked to floating-rate and
its investments. Debt interest-rate risk is
equivalent to future cash-flows risk of financial
instruments, due to fluctuations of the markets
interest-rates.
LATAM’s exposure to market interest-rate
changes is mainly related to long-term floating-
rate liabilities.
In order to reduce the risk related interest
rates growth, LATAM Airlines Group has
interest-rate swaps and call options contracts
outstanding. The instruments approved by the
Interest-Rate Hedging Policy are Swaps and
Options on interest rates.
iii. exchange rate risk:
The US dollar is the functional currency used
by the company to determine the prices of
its services, the structure of its classified
statement of financial position and the effects
on its operating results. There are two types
of exchange-rate risk: flow risk and balance
sheet risk. Flow risk arises as a result of the net
position of revenues and costs in currencies
other than US dollar.
its services
LATAM sells most of
in US
dollars, in prices equivalent to the US dollar
or in Brazilian reais. Approximately 60% of its
revenues are denominated in US dollars, while
approximately 25% is in Brazilian reais
A large part of costs are denominated in
US dollars or equivalents to the US dollar,
especially fuel costs, airport charges, aircraft
insurance and aircraft parts and
rentals,
accessories. Salaries on the other hand, are
denominated in local currencies. The total
percentage of costs denominated
in US
dollars is around 67%, while the approximate
percentage of costs denominated in Brazilian
reais is 19%.
in US dollars.
LATAM Airlines Group’s cargo and international
passenger businesses prices are mostly
defined
In the domestic
businesses, there is a mix: sales in Peru
are mainly denominated in local currency;
nonetheless prices are indexed to the US dollar.
In Brazil, chile, Argentina and colombia, prices
are denominated in local currency without any
form of indexation. In Ecuador, in relation to
prices for the domestic business, both prices
and sales are denominated in US dollars. As
a result of the above, LATAM is exposed to
fluctuations in different currencies including,
principally, the Brazilian reais, the chilean peso
and the euro.
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LATAM Airlines Group has hedged against
exchange-rate risk by acquiring currency
forwards. As of December 31, 2015, LATAM
accounted hedging mainly for the Brazilian
reais for US$270 million for the period January-
June 2016.
On the other hand, balance sheet risk occurs
when items included in the balance sheet
are exposed to variations of exchange rates,
because these items are denominated in a
currency different than the functional currency.
LATAM’s policy allows it to acquire derivatives
for protection against the appreciation or
in relation to
depreciation of currencies
the functional currency used by the parent
company. In 2015, LATAM didn’t contract any
hedging for balance sheet risk coverage.
The main mismatch factor is in TAM S.A.,
whose functional currency is the Brazilian
reais, meanwhile a large part of its liabilities
are denominated in US dollars. By the end
of 2015, this mismatch accounted less than
US$700 million.
FINANcIAL
POLIcY
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INTERNATIONAL
PASSENGER
OPERATIONS
CARGO
OPERATION
PROPERTY,
PLANT AND
EQUIPMENT
BRAZIL
ARGENTINA - CHILE
COLOMBIA
ECUADOR - PERU
CUSTOMER
LOYALTY
PROGRAMS
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ANNUAL REPORT 2015 | OPERATIONS · INTERNATIONAL OPERATIONS
We are
connected
worldwide
INTERNATIONAL
OPERATIONS
is the main
LATAM
international flight
operator in the region, offering its passengers
the broader connectivity network of the
industry, serving 45 international destinations
(in addition to the domestic network) in 23
countries, using an average total fleet of 112
aircrafts during the period. LATAM’s passenger
operations include both regional flights in
South America and the caribbean and long-
haul flights connecting the region with the rest
of the world.
During 2015 LATAM carried
14.2 million
passengers, increasing 3.9% compared to the
previous year. Out of these passengers, 8.5
million flew domestic routes, and 5.7 million
flew long-haul routes.
In this period, the international passengers
operation developed in a complex environment
in South America, with low economic growth
in the Spanish speaking countries in which
LATAM operates, and negative growth and
high inflation mainly in Brazil, in addition to
important devaluations of Latin American
currencies, in particular the Brazilian reais and
the colombian peso. Additionally, the company
faced important imbalances of supply and
demand, mainly in the routes from Brazil to the
United States, which prompted a substantial
decline in average prices.
impact of this
In order to mitigate the
challenging scenario, LATAM reduced
its
capacity offer in the Brazil to United States
routes, thus promoting the more demanded
routes, such as The caribbean and Europe.
this
Strengthening its main international hub at the
Guarulhos Airport, Sao Pablo, the company
strategy. Therefore,
complemented
the consolidated
international passengers
traffic transported by LATAM (RPK) increased
5.4% compared to the previous year, while
its capacity measured in ASK grew 6.4%,
resulting in a load factor of 84.6%, showing a
0.8% decrease over 2014.
At a regional level, every airline of LATAM
Group served 28 destinations, including four
destinations
in the caribbean, for whose
purpose the company used a fleet mainly
comprised by aircrafts from the Airbus 320
family. Its broad network coverage allowed
LATAM to maintain its leading position in
the domestic routes market, with 42.9%
market share measured in (ASK). The main
in these routes are Avianca,
competitors
Aerolíneas Argentinas, Gol and Tame, reaching
market shares of 22.1%, 10.5%, 9.4% and 4.2%,
respectively in the period.
As part of the objective of the company to
provide the best connectivity to its passengers
in the region, LATAM increased 75% its offer to
the caribbean, mainly through the new routes
to Punta cana (Dominican Republic) from
Buenos Aires, Brasilia and Bogota. Additionally,
during the year LATAM opened new routes
Buenos Aires-Brasilia and Buenos Aires-Recife,
and also the new Sao Paulo (Guarulhos)-Punta
del Este route.
One of the milestones of the period was the
opening of the Antofagasta-Lima route in
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ANNUAL REPORT 2015 | OPERATIONS · INTERNATIONAL OPERATIONS
December, with three weekly frequencies;
therefore the Antofagasta airport became
the second international terminal in chile
with scheduled flights. In addition, in the new
route Montevideo-Lima will be inaugurated in
January 2016, while promoting the Lima hub,
which connects South America with central
America, United States and Europe.
its
With regards to the
long-haul routes, as
of December 2015 the company covered
27 destinations, being the Unites States
and Europe the most relevant markets and
important strategic markets for
therefore
long-haul
LATAM. In order to develop
operations, the company uses mainly Boeing
B767 and B787-8/9 aircrafts. Worth is to
mention that in this period the phase out of
the Airbus A340 fleet was completed, model
that LAN used for almost 15 years to serve
the Santiago-Auckland-Sydney route, this
model was replaced by the Boeing 787-8 and
afterwards by the B787-9. These aircrafts
are more modern, more efficient and have
greater capacity, and its incorporation in 2015
is also meant to reinforce the operations for
the Santiago-Madrid and Santiago-Lima-Los
Angeles routes.
Furthermore, in December the first Airbus
A350 aircraft was incorporated to the fleet of
TAM, with the mission of becoming one of the
main aircrafts to operate long-haul flights to
United Stated and Europe. This aircraft will
begin operating in the Sao Paulo (Guarulhos)-
Madrid route in April 2016, and will operate in
the second semester in the Sao Paulo-Orlando
route, becoming the first airline in the Americas
to operate this state of the art aircraft.
With regards to North America, LATAM’s
market share reached 24.3% (22.8% in 2014)
measured in ASK, being American Airlines,
its main
United continental and Delta
competitors with 27.7%, 10.4% and 9.4%
share of capacity respectively. In this period
the company opened the new Lima- Orlando
and Brasilia-Orlando routes, and the Sao
Paulo-Nueva York route was enhanced with
the extension to Toronto. Additionally, the
company announced its plans to open new
international routes from 2016, such as the
first direct and nonstop of LAN Peru between
Lima and Washington Dc, starting from May,
with which LATAM will be the only airline in
the region with direct connection 4 times
per week of the capital cities of Peru and the
United States.
Regarding the European routes, LATAM’s
market share grew to 11.9% (10.8% in 2014)
measured in ASK, where it mainly competes
with Air France-KLM and Iberia-British Airways
groups, with 22.1% and 20.2% share of capacity
respectively, in addition to TAP and Lufthansa
airlines, with 10.7% and 9.1% share of capacity
respectively. Among the milestones of the
period, worth is to highlight the growth rate
of flights’ offer to Europe from Brazil and
chile (7.0% and 6.0% growth respectively),
being a profitable operation and oriented to
strengthen the connectivity in the region. As
such, TAM inaugurated direct flights from Sao
Paulo (Guarulhos) to Barcelona with three
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OPERATIONS
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| OPERATIONS · INTERNATIONAL OPERATIONS
short-haul aircrafts and also in more than
3,000 short-haul flights. Additionally, in 2015
LATAM launched two new services in its web
page: “Manage my booking” and “Flight Status”,
services that help clients to be informed
in every moment and make the best travel
decision. Likewise, the company continued
with the unification process of the check-in
desks of LAN and TAM, and at the same time
begun to test the Self-Bag Tag service at
the Guarulhos and Brasilia airports, looking
forward to make boarding times faster.
weekly frequencies, thus being the first new
destination that opens from Brazil to Europe in
the last 5 years, and the sixth destination of the
company to Europe and the second in Spain.
Additionally, TAM is waiting for the authorities’
approval to open flights from San Pablo to
Johannesburg; therefore LATAM Group will be
the only operator in Latin America to operate
to the African continent on a regular basis.
With regards to the routes to Oceania, LATAM
reached 42.8% market share in terms of
traffic (39% in 2014). In these operations its
main competitors are the Australian airline
Qantas, with 43.3% market share, Emirates
Airlines with 5.2% market share and Etihad
Airways (the second airline of the United
Arab Emirates), with 3.6% market share,
among others.
Thanks to the permanent promotion of
commercial alliances with other airlines–
such as the inter airlines agreements, codes
sharing and its participation in the oneworld
alliance–, in addition to the 140 airports part
of existent network of the company, LATAM in
enabled today to carry its passengers to every
destination worldwide, therefore its service
offer provides the best connectivity of the
industry worldwide.
its efforts
in this period LATAM
Regarding service,
continued
the
to maintain
preference of its clients, thus providing the
best flight experience. Likewise, the company
implemented wireless entertainment in 131
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OPERATIONS
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ANNUAL REPORT 2015 | OPERATIONS · BRAZIL
We are leaders
in the region´s
largest country
With a population of over 200 million people,
Brazil is by far the largest domestic market in
South America and the third worldwide. In 2015,
98 million passengers flew domestic routes in
Brazil. This market is still an opportunity for
LATAM, a market with low penetration of air
transportation and high growth potential.
2015 was a particularly complex year for
passenger transportation in Brazil, because
of to the challenging economic scenario, with
GDP declining 3,8%, inflation reaching 10.7%
(the highest rate since 2002) and depreciation
of the currency in relation to the dollar was
49% compared to 2014 (the largest decline in
thirteen years).
of
the
demand
This recession had a direct impact on the
commercial aviation sector, thus impacting
business
particularly
passengers. The domestic operation of
LATAM represents approximately one third
of its global passengers business, more than
the aggregate of all of its local operations in
the Spanish speaking countries where the
company operates.
BRAZIL
A key to mitigate the impact of the economic
slowdown of the country and especially the
weakness of the reais, has been the discipline
in the offer of the company, which has been
in place since its entry to Brazil in 2012, in a
market who still has overcapacity. Worth is to
highlight that during 2015 LATAM was the only
company to reduce capacity in the domestic
market in Brazil.
In 2015 the company reduced its offer in 2.5%
measured in ASK (seats per kilometer), which
followed a reduction of 1.4% in 2014 and 8.4%
in 2013. On the other hand, demand decreased
2.6% (measured in RPK), resulting in a healthy
load factor of 81.6% for the year –above the
average industry level–, representing a 0.1%
fall compared to 2014.
It’s expected that the situation in Brazil will
continue to pressure the economy in 2016; and
right in the middle of a new slowdown of the
economy, LATAM announced a reduction of
ASK in between 8% to 10%, with the objective
of being more efficient in domestic routes,
without affecting the connectivity of
its
passengers.
As of December 2015, TAM served 44 domestic
in 46 airports, operating
destinations
approximately 650 flights daily. With 32
million passengers carried, which represented
a decline of 4.0% compared to 2014, the
company maintained its leading position in
domestic flights measured in RPK, with 37%
market share, followed by the airlines GOL
and Azul, with market shares of 36% and
17% respectively, being its main competitors.
Additionally, in 2015 TAM remained as the
preferred airline in the business passengers
segment, reaching a market share of 32% in
December 2015.
In order to serve its domestic operations, TAM
used a fleet composed by 120 aircrafts from
the Airbus A320 family, including the 27 Airbus
83
ANNUAL REPORT 2015 | OPERATIONS · BRAZIL
BRAZIL
A321 –9 aircrafts more than 2014– fleet that
allows the company to cover more efficiently
the busiest domestic routes.
in Brazil,
Additionally, during 2015
the company
continued to focus on maintaining its strategic
improving connectivity
position
from its main hubs, such as the Guarulhos and
Brasilia terminals, being the latter the most
important for domestic flights in Brazil. In line
with the objective of strengthening the hub in
Brasilia, TAM opened four new destinations
in the country: Bauru, Juazerio Do Norte, São
José Dos campos and Jaguaruna, the latter in
connection to congonhas, seeking to bolster
the operations in the most profitable markets
and reaching 8% growth in the number of
passengers with connections on domestic
flights compared to 2014.
Worth is to mention that in this period, and for
seventh consecutive year, TAM lead the “Top
of Mind” ranking in Brazil, and increased the
gap with the second place, thus consolidating
its leading position in the Brazilian market,
despite the capacity reductions in the domestic
network.
BRAZIL
PASSENGERS
AIRcRAFT
31,9 MILLION
120
44
37%
MARKET
SHARE
DOMESTIc
DESTINATIONS
GOL
AZUL
AVIANcA BRASIL
36%
17%
10%
84
ANNUAL REPORT 2015 | OPERATIONS · ARGENTINA
We operate in six
domestic markets
in the region
ARGENTINA - cHILE
cOLOMBIA
EcUADOR - PERU
In 2015, LAN Argentina in its 10th year in the
country, where the airline has positioned as the
second largest operator in domestic flights,
where the market is dominated by Aerolíneas
Argentinas, the government-owned company,
with near 75% market share.
To keep this market position, the company
had been able to maintain its unwavering
commitment to provide the highest safety,
quality and service standards, which has been
showed through the highest satisfaction
scores and passengers’
recommendation
obtained during the year.
LAN accounted 2.4 million passengers
transported in domestic routes, and ended the
year with 25% market share, showing a 2.0%
decrease over 2014. Its consolidated traffic
measured in passenger-kilometers (RPK) grew
4.0%, while the capacity (ASK) increased in the
same percentage; these gave a load factor of
76%, which represented a 0.2% increase over
the previous year.
In 2015, the company served 14 domestic
destinations, connecting from and to Buenos
Aires the following cities: Bahía Blanca,
Bariloche, comodoro Rivadavia, córdoba,
El calafate,
Iguazú, Mendoza, Neuquén,
Río Gallegos, Salta, San Juan, Tucumán and
Ushuaia.
LAN Argentina used 13 Airbus aircrafts from
the A320 family to operate the domestic
flights, one more than the previous year,
and after the addition of extra equipment of
this model to the fleet. The addition of this
85
ANNUAL REPORT 2015 | OPERATIONS · ARGENTINA
new aircraft, as well as the perspectives of
renovation and fleet growth in the future, is a
critical factor to improve the value proposal
of the company, whose priority is to continue
the product and service improvement. This
aircrafts are considered the most efficient of
the industry for this type of operations, and
at the same time they have the broader and
comfortable passenger cabin of its kind.
In the context of the corporate strategy, which
is focused to provide the best travel experience
to passengers, in this period LAN added a new
service IFE (In-Flight Entertainment) in every
airplane, allowing the passenger to have access
to movies, music, games and information in
their own tablet or laptop.
Along the same line, in 2015 LAN inaugurated
two new lines of sales in shopping centers in
the city of Avellaneda (province of Buenos
Aires) and
in Rosario (province of Santa
Fe), accounting three island shops and 17
in the country as of
commercial offices
December 2015.
LAN Argentina operates from Buenos Aires
(Ezeiza) and
at Ministro Pistarini airport
at Aeroparque Jorge Newbery airport, the
country’s most important domestic passenger
terminal. LAN Argentina has a hangar at this
airport, which was inaugurated on November
2009.
ARGENTINA - cHILE
cOLOMBIA
EcUADOR - PERU
ARGENTINA
MILLION
PASSENGERS
2,4
13
14
25%
AIRcRAFT
A 320
DOMESTIc
DESTINATIONS
MARKET
SHARE
AEROLINEAS
ARGENTINAS
75%
86
ANNUAL REPORT 2015 | OPERATIONS · cHILE
We operate in six
domestic markets
in the region
ARGENTINA - cHILE
cOLOMBIA
EcUADOR - PERU
| chile
Accounting 7.2 million passengers trans-
ported in chile in 2015 (easter island is not
included), similar volume to the previous
year, lAN maintained its leadership in the
industry, reaching 75% market share and
considering that the market didn’t expe-
rience any growth of demand and capacity
due to de economic slowdown in the coun-
try. On domestic routes, the company com-
petes mainly with SKY Airlines, which as of
December 2015 accounted 24.3% market
share. Total passengers carried in chile in
the period January-December was nearly
9,7 million, and represented a 0.6% growth
when compared to the same period 2014,
according to the statistics provided by the
Junta Aeronáutica civil (JAc chile).
The company
serves 15 domestic
destinations (easter island is not included),
thus covering the main cities
in the
countries from north to south. The copa
América de Fútbol (America Football cup)
that took place in chile during June and
July, lAN operated 30 extra flights, with
13 reinforcement flights to la Serena
and 7 flights to Temuco, in addition to 10
charter flights to the regional airports in
Antofagasta, la Serena, concepción and
Temuco.
in this period, the consolidated passenger
traffic (RPK) increased 1.3% and capacity
(ASK) grew 0.6% (ASK) compared to the
previous year, and as a result, the average
load factor was a solid 82.8%, representing
0.8% increase over 2014, reaching the
highest level in the last five years.
To serve domestic routes, lAN uses a
fleet of 27 aircrafts from the Airbus A320
family, one less than the previous year.
This was consequence of the incorporation
of 6 new Airbus A321, whose capacity is
220 passengers –46 extra passengers per
flight–, accounting a total of 7 units of this
model by the end of the year. The aircraft
Airbus A321 is the largest and most modern
plane of the family, whose technology,
materials and aerodynamics allows a more
efficient operation of domestic flights and a
significant reduction of cO2 emissions due
to lower fuel consumption, thus contributing
for the caring of the environment. For the
flights to easter island, lAN started this
year the operation of this route with the
Boeing B787 Dreamliner.
Among the developments of the period,
worth is to highlight the opening of the
new Vip lounge at the Santiago airport,
being the largest in South America, whose
entrance is located near the Preferred
check-in at Arturo Merino Benítez airport,
right after police control. The new proposal
consists on a high-end service, consistent
and memorable, and a world-class design.
One of the challenges that the company
had to face in the period in chile, worth
87
ANNUAL REPORT 2015 | OPERATIONS · cHILE
is to mention the strike of workers of the
Dirección General de Aeronáutica civil,
that took place on September 16 –right
before the
long weekend of National
holidays–, where lAN and TAM arranged
additional flights thus providing more
flight alternatives in chile and also to the
international flights starting from or arriving
to Santiago. in such way, the company was
able to solve the contingency and also avoid
any complication in its operations.
With regards to airport infrastructure, the
Santiago airport provided 15 new additional
spaces for aircraft parking on a remote
platform. in addition, the works of the first
phase for the mayor conservation of the
main airport runway and the restoration
of the ilS cAT iii system were finished,
which allows the landing of planes under
conditions of low visibility (fog). in turn,
in the provinces other than Santiago, the
improvement works in calama, iquique and
la Serena were completed.
Additionally, during 2015, the concession
for Arturo Merino Benítez Airport was
to Sociedad concesionaria
awarded
Nuevo Pudahuel for a 20-year term. This
is an international consortium with large
experience worldwide, and responsible for
the operations of airports such as charles
de Gaulle and Orly in Paris. The new project
considers a capacity increase of 29 million
passengers in 2020, as well as investments
in distinctive elements such as service and
technology.
cHILE
PASSENGERS
AIRcRAFT
7,2 MILLION
27
15
75%
MARKET
SHARE
DOMESTIc
DESTINATIONS
SKY
OTHERS
24%
1%
88
ANNUAL REPORT 2015
| OPERATIONS · cOLOMBIA
We operate in six
domestic markets
in the region
ARGENTINA - cHILE
cOLOMBIA
EcUADOR - PERU
| cOLOMBIA
LAN colombia has operated for four years,
and in 2015 the company transported 4.6 mi-
llion domestic passengers, 4.0% increase over
2014, thus consolidating its position as the
largest operator in the country, accounting a
22% market share, in a market that is conside-
red the most competitive in Latin America. In
domestic routes, LAN competes with Avianca
(58.0%), Viva colombia (12.0%), Satena (3.0%),
copa and EasyFly, with 2.0% market share
each, among the main ones.
As of December 2015, LAN colombia flew
to 14 cities in the country with 17 routes, and
offers broad connectivity alternatives from
Bogotá and Medellín. The consolidated traffic
per passenger (RPK) grew 15% and capacity
increased in the same percentage, and as a
result occupation load factor remained flat
in 79%, similar to the previous period. This
happened in a market that also got impacted
by de regional economic slowdown.
Among the developments of the period, worth
is to mention the inauguration of flights cali-
Medellín and Medellín-cartagena, with 13 and
7 weekly frequencies respectively, allowing
the company to continue to deepen
its
decentralization plan of domestic operation,
local
having a competitive offer to the
market without having to go through Bogotá.
Additionally, during 2015 LAN colombia
strengthened its local service with the growth
of seven weekly frequencies for the route
Bogotá-cúcuta, thus doubling the flights
per week. Likewise, the company increased
the offer for the route Medellín-San Andrés,
reaching four weekly frequencies, therefore
leveraging one of the touristic destinations
more demanded in the country.
In order to develop its domestic short-haul
operations, the company ended the year
with 15 Airbus aircrafts from the A320 family,
with capacity for 174 passengers, and these
airplanes are used also to serve the flights to
Aruba, cancún and Punta cana in El caribe.
in August LAN colombia
client-facing,
launched its onboard wireless entertainment
system “LAN Entertainment” in every airplane
of its fleet A320, and this technology innovation
allows it to offer a much competitive onboard
service offer and also differentiate from the
domestic airlines, thus allowing passengers to
have access to movies, series and news, among
others, from their own portable devises.
Worth is to highlight that in the second half
of the year, the company completed the total
refund of the last Dash 8-200 equipment of the
fleet (turboprop airplanes inherited from the
former Aires, with capacity for 37 passengers
and with an average age of 17 years), which
operated in the cities of Neiva and Villavicencio,
thus complying with the fleet renovation plan
started in 2012.
With regards to service standards, one of
the highlights of the year is the consolidation
of LAN colombia –for the third year in a
89
ANNUAL REPORT 2015 | OPERATIONS · cOLOMBIA
row– as the country’s most punctual airline in
domestic routes, with 95.2% of compliance,
according to the latest report of the airlines
compliance report issued by the colombian
aviation authority as of September 2015. This
acknowledgement is due to the big effort
carried out by the company to continue
encouraging the punctuality culture, investing
in training, technology and modern fleet. LAN
colombia considers punctuality as an attribute
that differentiates the airline when facing the
client.
Among other initiatives created to enhance
the value proposal for passengers, the launch
of the program “LAN Events and conventions”
stands out, whose purpose is to offer to every
company in the country an alternative to make
business activities in different cities. Since its
launch until December, 50 companies signed
the program, with more than 1,700 passengers
carried.
cOLOMBIA
4,6 MILLION
PASSANGERS
15
14
21%
AIRcRAFT
A320
DOMESTIc
DESTINATIONS
MARKET
SHARE
AVIANcA
VIVA cOLOMBIA
SATENA
EASYFLY
cOPA
60%
11%
3%
2%
2%
90
ANNUAL REPORT 2015 | OPERATIONS · EcUADOR
We operate in six
domestic markets
in the region
ARGENTINA - cHILE
cOLOMBIA
EcUADOR - PERU
| EcUADOR
its domestic
LAN Ecuador started up
operations
in 2009 and ever since has
gradually positioned as a relevant operator in
domestic routes. This has been possible due
to the company’s constant efforts to offer
passengers the best value proposal in terms of
safety, reliability and service.
The company serves five destinations through
the Quito-Guayaquil
and Quito-cuenca
routes and the Quito/Guayaquil route to
the San cristóbal and Baltra Islands in the
Galápagos, offering connectivity that seeks to
promote tourism and the country’s economic
development. In this direction, LAN Ecuador
announced that starting from January 2016, it
would operate a new direct flight in the Quito-
Baltra route.
During 2015, the flight operations developed
in a difficult economic scenario, just as most
of the countries in the region. Ecuador is a
small market, with approximately 16 million
customers, whose economy was severely
impacted by the sharp decline of oil prices
-being the main export commodity - and also
was impacted by the appreciation of the dollar,
official currency in Ecuador since 2000.
managed together with the Dirección General
de Aviación civil del Ecuador (DGAc) and the
Fuerza Aérea Ecuatoriana the creation of an
alternative route in a military area, in order to
avoid the cloud of ashes that remained in the
commercial flight route.
LAN Ecuador carried 1.1 million passengers on
domestic routes, showing a 1.0% increase over
2014, and maintained its position as the second
largest domestic operator in the country, with
33% market share, 2.2% higher than in the
previous year. Its main competitors are the
local airlines Tame, which holds 43% market
share, and Avianca, with 25% market share.
The cancellation in January of the operation
of Avianca in the Quito-cuenca route, had a
positive impact on LAN, thus increasing its
market share in 11% for this route and the
average rate grew 27%. For its part, Tame
reduced its offer for the Guayaquil-Quito route
since May, which prompted a 12% fall of the
total seats capacity when compared to the
previous year. Nonetheless, this didn’t generate
a huge impact in market share, allowing LAN to
increase load factor by 1.7% when compared to
2014, reaching 74.9%.
In addition to the above, the reactivation of
the cotopaxi Vulcano’s activity, whose ashes
impacted the operations of the Guayaquil-
Quito and Quito-cuenca routes from the
second week of August until the end of
In this context, the company
November.
During 2015, LAN Ecuador’s consolidated
passenger traffic grew 7.0%, measured in
terms of RPK, while capacity measured in
terms of ASK increased 8.0%. As a result, the
average load factor reached 81.2%, falling
0.5% when compared to 2014.
91
ANNUAL REPORT 2015 | OPERATIONS · EcUADOR
In order to serve domestic routes, LAN Ecuador
holds a fleet of three Airbus A319 airplanes,
with no variation with respect to the previous
year. These are airplanes have lower capacity in
relation to the A320, which allows the company
to adapt to the market’s demand.
EcUADOR
1,1
3
5
33%
MILLION
PASSENGERS
AIRcRAFT
DOMESTIc
DESTINATIONS
MARKET
SHARE
TAME
AVIANcA
43%
25%
92
ANNUAL REPORT 2015
| OPERATIONS · PERú
We operate in six
domestic markets
in the region
ARGENTINA - cHILE
cOLOMBIA
EcUADOR - PERU
| PERU
Taking into account the slowdown of Latin
American economies in 2015, Peru stands out
among the economies that showed better per-
formance during the year, accounting a GDP
growth of 3.3%.
During 2015, the airline industry accounted
11.3% growth in terms of domestic passengers
transported in Peru compared to the previous
year, with over 9.9 million people carried. LAN
Peru remained as the main operator in these
routes, accounting 6.2 million passengers ca-
rried in 2015, a 9.9% increase over the previous
year. The consolidated passenger traffic (RPK)
of the company grew 8.3% and capacity (ASK)
increased 8.0%. Likewise, the load factor was
81.6%, over the industry average, with 0.2%
growth over the previous year.
LAN Peru flights to 16 destinations in the coun-
try –reaching up to 110 flights per day–, thus
offering the best connectivity of the industry,
with the greater variety of destinations and
frequencies and with a clear approach to pro-
vide the best service to its clients. This has
contributed to the consolidation of LAN Peru
as the leader in the domestic market, reaching
a market share of 62.1% in the passenger seg-
ment. Its main competitors are Peruvian Air-
lines, Avianca, Star Peru and Lc, which in this
period obtained market shares of 13.1%, 12.7%,
6.0% and 4.8% respectively.
The domestic operations use a fleet of 17 air-
crafts, one less than in 2014, and comprises
nine Airbus A319 aircrafts and eight Airbus
A320 aircrafts.
Among the major milestones of the year, worth
is to highlight the recognition obtained by LAN
Peru as the “Most Admired company in Peru”,
award granted by the ranking made by the in-
ternational consultant Pwc Peru and Revista G
de Gestión. This acknowledgement is granted
to those companies that stand out for its stra-
tegic vision, financial management, innovation
capacity, commercial strategy, senior mana-
gement quality, good corporate governance
practices and corporate social responsibility
initiatives. The nomination of the 10 awarded
companies was the product of a survey made
to 4,500 executives from the 1,500 largest
companies in Peru in terms of billings.
Likewise, for the second year in a row, LAN Peru
was awarded with the first place in the MERcO
2015 ranking, in the air transportation category,
ranking also in the 11thposition of the general
ranking of companies, an improvement compa-
red to the place number 27 of 2014.
Additionally, LAN Peru was awarded with the
corporate creativity Award, granted by Uni-
versidad Peruana de ciencias Aplicadas (UPc),
in the categories Tourism & Entertainment and
Technology & computing, for the project “Ni-
ght Flights to cusco” with RNP (Required Na-
vigation Performance) technology, which has
satellite navigation. The RNP system present
in the Lima-cusco route (starting from Sep-
93
ANNUAL REPORT 2015 | OPERAcIONES · PERú
tember 2013) represents a successful example
of the revenue generation practices carried out
by the company. This technology uses avionics
advanced capacity (discipline that studies the
electronic techniques applied to air navigation)
and supported by a satellite guide, allowing
more accurate flights and to operate safely in
low visibility conditions, avoiding delays and fli-
ght cancellations. In addition to this, the flight
time reduction is 6.3 minutes, due to the route
reduction of 35 nautical miles. All these advan-
tages are translated in lower fuel consumption
–with savings of 67.5 gallons– and a reduction
of 644 kilos of cO2 per flight. Furthermore, the
implementation of aero satellite navigation te-
chnology to this route allowed the expansion of
the cusco Airport working hours to night hours,
thus increasing revenues for the company.
Finally, during the year LAN Peru continued
making progress in its objective of being a so-
cially responsible company. In this sense, worth
is to mention that LAN Peru was able to com-
pensate, for the fourth year in a row, its carbon
footprint of land operations and workers’ acti-
vities, equivalent to 6,500 tons of cO2, plus a
total of 25,390 tons compensated in 2015.
PERU
PASSENGERS
AIRcRAFT
6,2 MILLON
17
16
62%
MARKET
SHARE
DOMESTIc
DESTINATIONS
PERUVIAN
AIRLINES
AVIANcA
STAR PERú
13%
13%
6%
94
ANNUAL REPORT 2015 | OPERATIONS · cARGO OPERATION
We are the best
cargo operator
in the region
cARGO
OPERATION
LATAM is the largest air cargo operator in Latin
America, which offers its clients the widest
connectivity within the region and worldwide,
with over 140 destinations in 29 countries. The
company transports cargo in the bellies of 315
passenger aircrafts and also in 11 fully dedicated
freighters (three B777-200F aircrafts and eight
B767-300F aircrafts, excluding aircrafts that has
been leased to other operators).
In 2015 LATAM transported 1 million tons of cargo,
9.0% down from 2014. The offer measured in
ATKs decreased 1.9%, and as a result the load
factor reached 53.6%, being 6.2% lower than the
previous year. These reductions resulted from the
complex scenario for air cargo demand worldwide,
which has showed low growth rates in the recent
years. In 2015, cargo demand showed a slight
decrease of 3% compared to the previous year.
The situation of cargo markets in the region
has been even more difficult due to the weak
development of the economies, the strong
depreciation of currencies against the dollar
and the
instability. This
environment mainly impacted the cargo traffic
for imports, which decreased 17% in the routes
from the United States to Latin America, being
Brazil the country most impacted, with a 25%
decline compared to the previous year.
important political
Export markets in Latin America remained stable,
despite the circumstantial effects caused by
the weather problems that impacted seasonal
demands, such as the fruit coming from Argentina
and the lower production of seeds in chile, being
60% lower than 2014. Isolating these one-time
effects, we foresee healthy growth of the main
commodities such as salmon in chile and flowers
in colombia and in Ecuador, whose growth rates
were 10% and 3% respectively compared to 2014.
With regards to the cargo domestic markets, it
was also impacted by the complex environment
in the region, being again Brazil the country most
affected, with 9.0% decrease in tons transported.
It’s important to highlight in this challenging
environment, that TAM cargo maintained its
leadership in the market with a market share of
nearly 47%.
In addition to the challenging demand scenario
observed in the period, worth is to consider
the oversupply triggered by the cargo capacity
growth of passenger’s aircrafts and
the
increasing operations of freighters in the region.
The stronger competition, together with the
sharp decline of fuel prices, pressured down the
fees of the industry. As such, globally these fees
were 18% lower than 2014.
Looking forward to face this scenario, the
company continued working on the initiative
started in 2014 to adjust its fleet of fully dedicated
freighters. This way, during 2015 two aircrafts
with low capacity use were phased-out, one
B767-300F aircraft and one B777-200F aircraft,
who were leased to other operator. Therefore, at
the end of the period, the cargo fleet of LATAM
and subsidiaries was comprised by three B777-
200F aircrafts and eight B767-300F aircrafts,
thus decreasing its potential offer in 30% with
respect to 2013. This has allowed the company
not only to improve the assets profitability, but
95
ANNUAL REPORT 2015 | OPERATIONS · cARGO OPERATION
cARGO
OPERATION
also to focus its efforts to optimize the cargo
capacity of its passenger’s aircrafts.
However, the focus of LATAM in 2015 was not
only to face challenges, but also to strengthen
its capacities and its long-term competitive
position. Accordingly, efforts were concentrated
on cost optimization, reinforcement on network
development and improvement of service and
the value proposal for the client.
With regards to competitiveness, the company
continued its cost savings measures, thanks
to simpler and more efficient processes, which
were carried out under the LEAN methodology. In
addition, the operational and support areas were
integrated with the corporate areas in LATAM,
thus simplifying the structure of business areas
with regards to long-term challenges.
Regarding the international network, on one
side stands out the higher connectivity capacity
generated by a better planning and optimization
of operations in the main hubs of the company,
and also the commercial agreements subscribed
with other operators that allow the company
to continue expanding coverage towards other
regions. Therefore, its important to mention the
deepening of certain agreements with Asian
airlines who will allow LATAM to better connect
its network in that continent.
In relation to the value proposal improvements
for the client, in 2015 the efforts consisted on the
design and standardization of processes that
will allow the delivery of greater consistency
and clear promises to the market. The first
achievement was the implementation of Pharma
product, which is oriented to the pharmaceutical
cargo market, which allows the optimization
of the transportation process of this type of
product using strict temperature controls and
specialized handling.
With all this, 2015 was a challenging year for
the cargo unit of the LATAM Group, who faced
a complex foreign context and also made
progresses in consolidating an integrated the
cargo and passenger networks, strengthening
connectivity, enhancing the value proposal and
the portfolio of products for its customers,
besides the continuity of processes and costs
optimization, in a way to ensure the future
competitiveness of the company.
cARGO
OPERATION
1M
11
140
MILLION
TONS
FREIGHTERS
DESTINATIONS IN
29 countrieS
96
ANNUAL REPORT 2015
| OPERATIONS · LOYALTY PROGRAMS
More benefits for
our customers
LOYALTY
PROGRAMS
LAN and TAM operate their own “loyalty
programs”–LANPASS and TAM Fidelidade,
respectively– whose objective is to recognize
the loyalty of frequent flyer passengers and
reward them with different benefits and
awards. During 2015 the plans for these airlines
independently,
was to continue operating
nonetheless the company continued working
in order to standardize the two programs in
line with the process of homogenization facing
the customer, to whom LATAM is committed
across all areas of its operations.
At the moment, passengers registered on each
program may earn and redeem kilometers or
points on any flight in the network administered
by the two airlines and their associated
airlines. Likewise, the other program already
recognizes top tier members of each program
so, for example, LANPASS members can obtain
upgrades on TAM flights and members of TAM
Fidelidade on LAN flights. In addition, both may
have access to the same airport services, such
as preferred check-in, among other benefits.
LANPASS is the frequent flyer program created
by LAN in 1984. Members of the program earn
kilometers every time they fly with LAN, TAM or
any other other airline member of oneworld, as
well as when shopping with or using the services
of companies around the world which have an
agreement with LANPASS. Members of the
program can exchange LANPASS kilometers for
free tickets as well as different products from the
program’s catalogue or other options such as gift
cards from certain retail stores, among others.
The program includes four “elite” categories:
Premium, Premium Silver, comodoro and Black.
These categories have their equivalents
in
this alliance where Ruby corresponds to the
Premium category, Sapphire to Premium Silver
and Emerald to comodoro and Black.
LOYALTY
PROGRAMS
UPGRADE AND
SERVICE ACCESS
97
13%
THAN 2014
9%
THAN 2014
10,9 MILLON
MEMBERS
12,8 MILLON
MEMBERS
ANNUAL REPORT 2015 | OPERATIONS · LOYALTY PROGRAMS
As of December 2015 LANPASS had 10.9 million
members, a 13% growth over 2014, mainly
distributed in chile, Peru, Argentina, colombia,
Ecuador and the United States.
For its part, the frequent flyer program of
TAM was created in 1993, with the purpose
to reward those passengers who fly regularly
with the airline, through different benefits and
exclusive offers. In this case, members earn
points each time they fly with TAM, LAN or
any other airline that belongs to the oneworld
alliance. As of December 2015, TAM Fidelidade
had 12.8 million members, all of them in Brazil,
reaching 8,0% growth over 2014. The program
includes four Elite categories - Azul, Vermelho,
Vermelho Plus and Black - which now have their
equivalent categories in the oneworld alliance
- Ruby for Azul, Sapphire for Vermelho and
Emerald for Vermelho Plus and Black - giving
members access to more benefits, including
that of priority on the waiting list of any airline
in the oneworld alliance.
TAM Fidelidade is administrated by Multiplus,
a company listed on the Sao Paulo stock
exchange in which LATAM Airlines Group is the
main shareholder with a 73% stake. Multiplus
is Brazil’s largest and best loyalty network
and allows members to accumulate Multiplus
points in a single account at more than 13.000
stores affiliated to the program, and allows to
exchange their points in over 550.000 different
products and services. As of December 2015
the Multiplus network comprised over 465
partners and nearly 13.0 million members.
countries where the company operates. For
instance, in the past a member needed 150,000
LANPASS KILOMETERS to become comodoro
partner
is
140,000 kilometers.
in chile, now the requirement
By mid-2015, TAM and Multiplus modified the
points exchange program, which was in place
for approximately 10 years; with the purpose
of improving the long-term relationship of both
companies. The new contract considers a 3%
reduction for each 10,000 points exchanged in
TAM tickets, and also modified the exchange
system, from a fixed rate by seat to a dynamic
LOYALTY
prices formula related to the type of seat.
PROGRAMS
Among the achievements of the period, we
highlight the
implementation of the “Fly
Higher” campaign, both in LAN and TAM,
whose purpose is to rewards the passengers’
preference with additional benefits. Among
these benefits, the access to free preferred
seats in Economy class domestic flights, extra
bonuses for the kilometers/ points accrued for
Business class flights and access to the best
network of VIP lounges in South America with
a guest.
UPGRADE AND
SERVICE ACCESS
Moreover, the qualification rules for the four
Elite categories were reduced in most of the
10,9 MILLON
MEMBERS
12,8 MILLON
MEMBERS
13%
THAN 2014
9%
THAN 2014
98
LOYALTY
PROGRAMS
ANNUAL REPORT 2015 | OPERATIONS · PROPERTY, PLANT AND EQUIPMENT
PROPERTY,
PLANT AND
EQUIPMENT
| HEADQUARTES
located near the
Our main facilities are
comodoro Arturo Merino Benítez International
Airport. The complex includes office space,
conference space and training facilities dining
facilities and mock-up cabins used for crew
instruction.
Our corporate offices are located in a more
central location in Santiago, chile.
| MAINTENANcE BASE
Our maintenance base is located on a site
inside the grounds of the comodoro Arturo
Merino Benítez
International Airport.
This facility contains our aircraft hangar,
warehouses, workshops
offices,
as well aircraft parking area capable of
accommodating up to 30 short-haul aircraft or
10 long-haul aircraft.
and
| MIAMI FAcILITIES
We occupy site at the Miami International
Airport that has been leased to us by the airport
under a concession agreement. Our facilities
include corporate building of around 4,450m2,
a cargo warehouse (including meter cooling
area) of around 35,000m2 and aircraft-parking
platform of around 72,000m2, apart from
totally equipped offices. In addition, during
2015, LATAM opened the first maintenance
hangar of the company in Miami, with a
surface of 6,200m2 for aircraft maintenance
and adjacent infrastructure (workshop, stores
and offices). The project required a final
investment of US$ 16.4 million, fully funded by
the company.
| OTHER FAcILITIES
We own a flight-training center on the side
of the comodoro Arturo Merino Benítez
International Airport. We have also developed
a recreational facility for our employees with
Airbus’ support. The facility, denominated
“Parque LAN,” is located on land that we own
near the comodoro Arturo Merino Benítez
International Airport.
| LAN PERU’S PROPERTY, PLANT AND
EQUIPMENT
LAN Peru has approximately 19,000 m2 built.
All facilities are leased and are distributed as
follows:
· Administrative Offices: 7,000 m2
· Sales Offices: 2,000 m2
· concessions airports: 10,000 m2
| LAN cOLOMBIA’S PROPERTY, PLANT AND
EQUIPMENT
LAN colombia has approximately 27,500 m2
built. All facilities are leased and are distributed
as follows:
· Administrative Offices: 4,500 m2
· Sales Offices: 1,700 m2
· concessions airports: 21,300 m2
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ANNUAL REPORT 2015 | OPERATIONS · PROPERTY, PLANT AND EQUIPMENT
| LAN EcUADOR’S PROPERTY, PLANT AND
EQUIPMENT
| MAINTENANcE BASE
At Hangars II and V in congonhas Airport,
which TAM has offices and hangars. This site
also houses the areas of Aircraft Maintenance,
Procurement and Logistics of Aeronautical
Materials.
| OTHER FAcILITIES
In São Paulo, TAM has other facilities such as:
commercial Headquarters, Uniform Building,
Morumbi Office Tower and a call center
Building. Besides, in São Paulo, TAM has the
offices belonging to the Group as: Multiplus
Office, TAM Viagens Office, one store of
TAM Viagens and Bahia state. In Guarulhos,
TAM has a Passenger Terminal, Operational
Areas such as check-in, Ticket Sales,
check Out, Operations Areas, VIP Lounges,
Aircraft Maintenance, GSE, cargo Terminal,
Distribution centers, etc.
LAN Ecuador has approximately 14,500 m2
built. All facilities are leased and are distributed
as follows:
· Administrative Offices: 1,600 m2
· Sales Offices: 1,000 m2
· concessions airports: 11,900 m2
| LAN ARGENTINA’S PROPERTY, PLANT AND
EQUIPMENT
LAN Argentina has approximately 18,000 m2
built. All facilities are leased and are distributed
as follows:
· Administrative Offices: 6,600 m2
· Sales Offices: 2,600 m2
· concessions airports: 8,700 m2
| TAM ’S PROPERTY, PLANT AND EQUIPMENT
| HEADQUARTES
TAM’s main facilities are located in São Paulo,
in hangars within the congonhas Airport and
nearby. At congonhas Airport, TAM leases
hangars belonging to INFRAERO (the Local
Administrator Airport): Hangar VII, Hangar
VIII, Hangar III. The Service Academy is located
about 2.5 km from congonhas Airport, is a
separate property which TAM owns, exclusively
for the areas of Selection, Medical Service,
Training, and Mock-ups.
PROPERTY,
PLANT AND
EQUIPMENT
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ANNUAL REPORT 2015 | 2015 RESULTS
INDUSTRY
OVERVIEW
REGULATORY
FRAMEWORK
FINANCIAL
RESULTS
AWARDS AND
RECOGNITIONS
MATERIAL
FACTS
STOCK MARKET
INFORMATION
RISK
FACTORS
ADDITIONAL
INFORMATION
INVESTMENT
PLAN
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ANNUAL REPORT 2015 | 2015 RESULTS · INDUSTRY OVERVIEW
Emerging
economies boost
the industry
INDUSTRY
OVERVIEW
During 2015, the global airline industry was
challenged by different macroeconomic
factors. Among the positive factors we can
highlight the sharp fall of fuel prices to an
average of US$52.3/ barrel, a 47% drop
compared to 2014. Among the negative factors,
the strong depreciation of local currencies
against the dollar stands out, in addition to
the lower growth of the main economies of the
region, specially Brazil.
In general, 2015 was a good year for the industry,
which was reflected in the 6,5% increase in
passengers’ traffic, above the average for the
last ten years and with increases in demand
in every region worldwide, where the growth
of Middle East, Asia Pacific and Latin America
stands out, thus prompting a substantial
improvement of the operational result and
the profits of the global industry, which are
estimated to be US$33.0 billion (US$17.3 billion
in 2014).
At a domestic and regional level, the trend
towards the low-cost model is still in place,
which has shown a significant expansion, and
greater passengers’ segmentation according
to their travel needs.
the
trend
towards
Additionally,
the
strengthening of alliances and cooperation
the world’s airlines
agreements among
continues, being a key factor the better
performance of these alliances lately, thus
improving connectivity for passengers.
With regards to the different geographic
markets, the North American airlines had an
outstanding year in terms of profits, mainly
explained by low fuel costs, and the strong
domestic demand, partially compensated by
lower revenues resulting from the strength
of the dollar in relation to other currencies.
Additionally, we observe a less fragmented
and more disciplined industry, with better labor
relations and supported by the creation of
increased ancillary revenues.
In Europe, the growth of traffic was driven
by the recovery of consumer spending in the
Eurozone, in addition to the slight growth of
the frequencies within the region. Despite
improved
that the economic environment
from the previous years, challenges remained,
mainly caused by the strike of Lufhtansa and
Air France-KLM employees after their efforts
to restructure its operations towards a low
cost model, looking forward to compete with
the increasingly popular Ryanair and EasyJet,
besides the closing of operations of the
Russian airline Transaereo.
In the Asia-Pacific region, operators showed
the second fastest growth within regions,
prompted by an increase in the number of
airports with direct connections within the
region, which stimulated passengers’ demand,
and
times
therefore decreased waiting
for customers, partly offsetting the lower
economic growth of the region.
In Latin America, the economic slowdown and
the strong depreciation of local currencies
pressured unit revenues of operators in 2015.
Particularly Brazil, country that represents
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ANNUAL REPORT 2015 | 2015 RESULTS · INDUSTRY OVERVIEW
Given the industry’s current structure and
the fuel price outlook, the International Air
(IATA) expects an
Transport Association
increase in global returns in 2016, with the
industry’s profits reaching US$36,3 billion and
operating margin of 5.1%, being a record result
for the industry. This growth is partly driven
by the lower fuel average price forecasted for
2016, as well as the efficiencies improvements
achieved by the industry in general. It’s worth
to highlight that the growth drivers for global
traffic in 2016 will continue to be the emerging
economies, mainly Asia-Pacific, Middle East
and Latin America. Due to their economic
growth outlook and the still low penetration
of air travel in these countries, this trend is
expected to persist over the next 20 years.
approximately 50% of the traffic in the region,
experienced a strong economic slowdown, thus
impacting the business passengers’ demand,
where capacity discipline was a key factor to
reach healthy load factors. Despite the latter,
international passengers traffic within the
region still shows solid growth rates (9.3%),
while domestic markets traffic were weaker,
mainly in Brazil.
Regarding the cargo business, traffic showed
a slight slowdown on its growth rate, growth
reached 2.2% in 2015 compared to the 4.5%
expansion achieved in 2014. Growth in this
period was driven by the Middle East (+11.3%),
while cargo in Latin America (-6,0%) remained
weak mainly due to lower imports from Brazil.
In addition, the lower growth of the Asian
markets explains in large part the weakening of
the cargo business worldwide.
One of the main issues of 2015 was the drop in
fuel prices. The average price of jet fuel was
US$52.3/ barrel in 2015. The impact of this
drop, although positive for the airline industry
as a whole, had a different impact by region
depending on the strength/ weakness of their
economies and currencies, and also on the level
of competition. In some cases, hedging also
meant that much of the benefit of lower fuel
prices was not captured. In 2016, fuel prices are
expected to remain low, benefiting airlines.
INDUSTRY
OVERVIEW
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ANNUAL REPORT 2015
| 2015 RESULTS · REGULATORY FRAMEWORK
Airlines regulation
can have important
effects on indutry
competition and
doing business
in Chile.
REGULATORY
FRAMEWORK
| cHILE´S AERONAUTIcAL REGULATION
Both the DGAc and the JAc oversee and
regulate the chilean aviation industry. The
DGAc reports directly to the chilean Air Force
and is responsible for supervising compliance
with chilean laws and regulations relating
to air navigation. The JAc is the chilean civil
aviation authority.
Primarily on the basis of Decree Law No. 2,564,
which regulates commercial aviation, the JAc
establishes the main commercial policies
for the aviation industry in chile, regulates
international routes,
the assignment of
and the compliance with certain insurance
requirements, and the DGAc regulates flight
operations, including personnel, aircraft and
security standards, air traffic control and
airport management.
We have obtained and maintain the necessary
authority from the chilean government
including
to conduct flight operations,
authorization certificates from the JAc and
technical operative certificates from the
DGAc, the continuation of which is subject
to the ongoing compliance with applicable
statutes, rules and regulations pertaining to
the airline industry, including any rules and
regulations that may be adopted in the future.
chile is a contracting state, as well as a
permanent member, of the IcAO, an agency
of the United Nations established in 1947 to
assist in the planning and development of
international air transport.
The IcAO establishes technical standards
for the international aviation industry, which
chilean authorities have incorporated into
chilean laws and regulations.
In the absence of an applicable chilean
regulation concerning safety or maintenance,
the DGAc has incorporated by reference the
majority of the IcAO’s technical standards.
We believe that we are in material compliance
with all relevant technical standards.
| ROUTE RIGHTS
in
connection with
Domestic routes.
chilean airlines are not required to obtain
permits
carrying
passengers or cargo on any domestic
routes, but only to comply with the technical
insurance requirements established
and
respectively by the DGAc and the JAc. There
are no regulatory barriers that would prevent
a foreign airline from creating a chilean
subsidiary and entering the chilean domestic
market using that subsidiary. On January 18,
2012
the Secretary of Transportation
and the Secretary of Economics of chile
announced the unilateral opening of the
chilean domestic skies. This was confirmed
in November 2013 and is valid as of today.
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international routes.
As an airline providing services on
international routes, LAN is also subject
to a variety of bilateral civil air transport
agreements that provide for the exchange of
air traffic rights between chile and various
other countries. There can be no assurance
that existing bilateral agreements between
chile and
foreign governments will
continue, and a modification, suspension or
revocation of one or more bilateral treaties
could have a material adverse effect on our
operations and financial results.
such
International route rights, as well as the
corresponding
landing rights, are derived
from a variety of air transport agreements
foreign
negotiated between chile and
governments. Under
agreements,
the government of one country grants the
government of another country the right to
designate one or more of its domestic airlines
to operate scheduled services to certain
destinations of the former and, in certain
cases, to further connect to third-country
destinations.
In chile, when additional route frequencies to
and from foreign cities become available, any
eligible airline may apply to obtain them. If there
is more than one applicant for a route frequency
the JAc awards it through a public auction for
a period of five years. The JAc grants route
frequencies subject to the condition that the
REGULATORY
FRAMEWORK
recipient airline operate them on a permanent
basis. If an airline fails to operate a route for
a period of six months or more, the JAc may
terminate its rights to that route. International
route frequencies are freely transferable. In
the past, we have generally paid only nominal
amounts for international route frequencies
obtained in uncontested auctions.
| AIRFARE PRIcING POLIcY
chilean airlines are permitted to establish
their own domestic and international fares
without government regulation. For more
“—Antitrust Regulation”
information, see
below.
In 1997, the Antitrust commission approved
and imposed a specific self-regulatory fare
plan for our domestic operations in chile
consistent with the Antitrust commission’s
directive
competitive
environment.
to maintain
a
According to this plan, we must file notice
with the JAc of any increase or decrease
in standard fares on routes deemed “non-
competitive” by the JAc and any decrease in
fares on “competitive” routes at least twenty
days in advance. We must file notice with the
JAc of any increase in fares on “competitive”
routes at least ten days in advance.
In addition, the chilean authorities now
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ANNUAL REPORT 2015 | 2015 RESULTS · REGULATORY FRAMEWORK
require that we justify any modification that
we make to our fares on non-competitive
routes. We must also ensure that our average
yields on a non-competitive route are not
higher than those on competitive routes of
similar distance.
| REGISTRATION OF AIRcRAFT
Aircraft registration in chile is governed by
the chilean Aeronautical code (“cAc”). In
order to register or continue to be registered
in chile, an aircraft must be wholly owned by
either:
a natural person who is a chilean citizen; or
a legal entity incorporated in and having its
domicile and principal place of business in
chile and a majority of the capital stock of
which is owned by chilean nationals, among
other requirements established in article 38
of the cAc.
to non-chilean
The Aeronautical code expressly allows
the DGAc to permit registration of aircraft
belonging
individuals or
entities with a permanent place of business
in chile. Aircraft owned by non-chileans, but
operated by chileans or by an airline which
is affiliated with a chilean aviation entity,
may also be registered in chile. Registration
of any aircraft can be cancelled if it is not
in compliance with the requirements for
registration and, in particular, if:
the ownership requirements are not met;
or the aircraft does not comply with any
applicable safety requirements specified by
the DGAc.
| SAFETY
The DGAc requires that all aircraft operated
by chilean airlines be registered either with
the DGAc or with an equivalent supervisory
body in a country other than chile. All aircraft
must have a valid certificate of airworthiness
issued by either the DGAc or an equivalent
non-chilean supervisory entity. In addition,
issue maintenance
the DGAc will not
permits to a chilean airline until the DGAc
has assessed the airline’s maintenance
capabilities.
The DGAc renews maintenance permits
annually, and has approved our maintenance
operations. Only DGAc-certified maintenance
facilities or facilities certified by an equivalent
non-chilean supervisory body in the country
where the aircraft is registered may maintain
and repair the aircraft operated by chilean
airlines.
Aircraft maintenance personnel at such
facilities must also be certified either by
the DGAc or an equivalent non-chilean
supervisory body before assuming any
aircraft maintenance positions.
| SEcURITY
The DGAc establishes and supervises the
implementation of security standards and
regulations for the chilean commercial
aviation industry.
Such standards and regulations are based
on standards developed by
international
commercial aviation organizations. Each
airline and airport in chile must submit an
aviation security handbook to the DGAc
describing its security procedures for the
day-to-day operations of commercial aviation
and procedures for staff security training.
LAN has submitted
its aviation security
handbook to the DGAc. chilean airlines
that operate international routes must also
adopt security measures in accordance with
the requirements of applicable bilateral
international agreements.
| AIRPORT POLIcY
The DGAc supervises and manages airports
in chile, including the supervision of take-
off and landing charges. The DGAc proposes
airport charges, which are approved by the
JAc and are the same at all airports.
Since the mid-90s, a number of chilean
including
airports have been privatized,
the comodoro Arturo Merino Benítez
in Santiago. At the
International Airport
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ANNUAL REPORT 2015 | 2015 RESULTS · REGULATORY FRAMEWORK
privatized airports, the airport administration
manages the facilities under the supervision
of the DGAc and JAc.
| ENVIRONMENTAL AND NOISE REGULATION
There are no material environmental
regulations or controls imposed upon airlines,
applicable to aircraft, or that otherwise affect
us in chile, except for environmental laws and
regulations of general applicability. There
is no noise restriction regulation currently
applicable to aircraft
in chile. However,
chilean authorities are planning to pass a
noise-related regulation governing aircraft
that fly to and within chile.
The proposed regulation will require all
such aircraft to comply with certain noise
restrictions, referred to in the market as
Stage 3 standards.
LAN’s fleet already complies with the
proposed restrictions so we do not believe
that enactment of the proposed standards
would impose a material burden on us.
| ANTITRUST REGULATION
The chilean antitrust authority, which we
refer to as the Antitrust court (previously the
Antitrust commission), oversees antitrust
matters, which are governed by Decree Law No.
211 of 1973, as amended, or the Antitrust Law.
The Antitrust Law prohibits any entity
from preventing, restricting or distorting
competition in any market or any part of any
market. The Antitrust Law also prohibits any
business or businesses that have a dominant
position in any market or a substantial part
of any market from abusing that dominant
position.
An aggrieved person may sue for damages
arising from a breach of Antitrust Law and/
or file a complaint with the Antitrust court
requesting an order to enjoin the violation of
the Antitrust Law.
The Antitrust court has the authority to
impose a variety of sanctions for violations
of the Antitrust Law, including termination
of contracts contrary to the Antitrust Law,
dissolution of a company and imposition of
fines and daily penalties on businesses. courts
may award damages and other remedies (such
as an injunction) in appropriate circumstances.
As described above under “—Route Rights—
Airfare Pricing Policy,” in October 1997, the
Antitrust court approved a specific self-
regulatory fare plan for us consistent with
the Antitrust court’s directive to maintain a
competitive environment within the domestic
market.
Since October 1997, LAN Airlines S.A. and LAN
Express follow a self-regulatory plan, which
was modified and approved by the Tribunal de
REGULATORY
FRAMEWORK
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la Libre competencia (the competition court)
in July 2005, and further in September, 2011.
(the
National
In February 2010, the Fiscalía Nacional
Económica
Economic
Prosecutor’s Office) finalized the investigation
initiated in 2007 regarding our compliance
with this self-regulatory plan and no further
observations were made.
By means of Resolution No. 37/2011, issued
on September 21, 2011 (the “Resolution”), the
Tribunal de Defensa de la Libre competencia
(“TDLc”) approved the merger
de chile
imposed 14
between LAN and TAM and
mitigation measures on LATAM, which scope
and details are set out in said Resolution
and which, for convenience only, are briefly
described below:
1. To exchange 4 pairs of daily slots at
the Guarulhos Airport of São Paulo to be
exclusively operated in non-stopflights
servicing the ScL – GRU route
2. To extend its frequent flyer program
for a term of 5 years in favor of airlines
operating (or expressing their intention
to operate) the Santiago – São Paulo,
Santiago – Río de Janeiro, Santiago –
Montevideo, and Santiago – Asunción
routes, in the event that the airlines ask for
LATAM to extend the referred program in
connection with the above-stated routes.
REGULATORY
FRAMEWORK
into
3. To enter
interline agreements
covering the Santiago – São Paulo,
Santiago – Río de Janeiro and/or Santiago
– Asunción routes with interested airlines
operating those routes which approach
LATAM for that purpose.
the
9. To express
relevant air
to
transportation authorities its favorable
opinion to the unilateral opening of the
sky for domestic flights within chile,
operated by airlines based
in foreign
States, without reciprocity requirements.
4. To observe certain temporary capacity
and offer restrictions on the Santiago –
São Paulo route.
5. To
implement certain amendments
to LATAM’s Self-Regulatory Fare Plan
applicable to its domestic business.
6. To renounce before June 22, 2014, from
either of the two global alliances to which
LAN and TAM belonged as of the date of
the Resolution.
7. To comply with certain restrictions in
signing and maintain some code-sharing
agreements, without prior consultation
with the TDLc, for specific routes with
carriers which are members or partners
of an alliance other than that to which
LATAM belongs.
8. To abide by certain restrictions to
participate in future allocations of third,
fourth and fifth freedom traffic rights
between Santiago and Lima, and to
abandon 4 fifth freedom frequencies to
Lima.
10. To commit, to the extent applicable,
to promoting the growth and regular
operation of the Guarulhos airport in
São Paulo and the Arturo Merino Benítez
airport in Santiago.
11. To comply with certain directives in
granting incentives to travel agencies.
12. To temporarily maintain, except upon
the occurrence of a force majeure event:
i) at least 12 weekly non-stop round-trip
flights directly operated by LATAM and
covering the routes between chile and
the U.S.; and ii) at least 7 weekly non-stop
round-trip flights directly operated by
LATAM and covering the routes between
chile and Europe.
13. To comply with certain restrictions
on average revenues from air tickets for
passenger transport on the Santiago
– São Paulo and Santiago – Río de
Janeiro routes; and on published airfares
effective as of the date of the Resolution
for cargo transport on each of the routes
between chile and Brazil.
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14. To hire an independent consultant
for a term of 3 years to provide advisory
the Federal Economic
to
services
Prosecutor’s Office
overseeing
LATAM’s compliance with the Resolution.
in
The Brazilian council for Economic Defense
– cADE has approved the LAN/TAM merger
by unanimous decision during the hearing
session of December 14, 2011, subject to
the conditions: (1) the new combined group
(LATAM) should leave one of the two global
alliances to which it was part (Star Alliance
or oneworld); and (2) the new combined group
(LATAM) should offer to swap two pairs of
slots in Guarulhos International Airport, to be
used by an occasional third party interested
in offering direct non-stop flights between
São Paulo and Santiago do chile. These
impositions are in line with the mitigation
measures adopted by the TDLc, in chile.
Furthermore, the association was submitted
to the antitrust authorities in Germany, Italy
jurisdictions granted
and Spain. All these
unconditional clearances for this transaction. The
merger was filed with the Argentinean antitrust
authorities, which approval is still pending.
REGULATORY
FRAMEWORK
109
ANNUAL REPORT 2015 | 2015 RESULTS · FINANcIAL RESULTS
Latam had an
operating result
of US$513,9 million
in 2015.
accounted
income of US$ 513.9 million
an
LATAM Airlines Group
operating
in
2015, representing a 0.1% increase over 2014.
Operating margin reached 5.1%, increasing
1.0% compared to the previous year. The
results
is mainly
explained by lower operational costs due to
lower fuel prices, and also due to the constant
efforts made by the company with regards to
costs control, and also due to the effect of the
devaluation of local currencies in the region.
improvement of LATAM
Total revenues in 2015 reached US$ 10,125.8
million, compared to US$ 12,471.1 million
in 2014. The 18.8% fall is explained by the
19.0% decrease in passengers’ revenues and
the 22.4% fall in cargo revenues, which was
partially compensated by a 2.2% increase in
other revenues. The drop in revenues resulted
from the complex macroeconomic scenario in
South America and the important currencies
devaluation
in Latin America during the
period, especially the 42% depreciation of the
Brazilian reais. In 2015, passengers and cargo
revenues represented 83.1% and 13.1% of total
operational revenues, respectively.
The 19.0% decrease in passengers’ revenues in
the year reflected the 3.1% increase in offer, which
was offset by the 20.5% reduction in consolidated
revenues per passenger (RASK), compared to
2014. This fall resulted from the 21.4% decrease
in yields and a slight reduction of 0.3% in load
factor, reaching 83.0%. The weak economic
scenario in South America and the devaluation of
local currencies, mainly the Brazilian reais, is still
impacting yields performance.
FINANcIAL
RESULTS
The growth of capacity of 3.1% during 2015
was mainly explained by the 6.4% growth of
the international business capacity, whose
strategy was focused on the strengthening
of LATAM’s international hubs and the routes
to the caribbean, which was compensated by
the reduction in less demanded such as the
operations between Brazil and the United
States. capacity
in the Spanish-speaking
domestic markets grew 4.8%, and was mainly
driven by the colombian and Peruvian markets.
Regarding domestic operations in Brazil, with
the ongoing discipline in capacity of domestic
flights, the company reduced the offer for the
fourth consecutive year, thus ended up the year
with 2.5% lower capacity than 2014, leading the
capacity reductions in the country.
cargo revenues decreased 22.4% during 2015,
resulting from the 12.0% drop in cargo traffic,
and the 11.8% fall in yields. During the year,
the cargo services demand was still weak,
especially in the local market and also in the
international market of Brazil, as a result of the
slowdown of economic activity in the country,
which directly impacted imports. Likewise,
the oversupply of the airline industry resulted
from the increasing competition of regional
and international airlines in South America.
The latter, together with the substantial drop in
fuel prices, largely explains the drop in yields of
cargo business.
In 2015 operational costs reached US$ 9,611.9
million, 19.6% decrease from 2014, prompting a
20.1% reduction of the cost per ASK equivalent
(including net financial costs). cost reduction
110
ANNUAL REPORT 2015 | 2015 RESULTS · FINANcIAL RESULTS
is mainly explained by the 47,1% drop in fuel
prices, and also an outcome of the cost reduction
program prompted by the company, in addition
to the positive effect of the currency devaluation
over costs denominated in local currencies.
Fuel expenditure decreased 36.4% reaching
US$2,651.1 million, compared to US$4,167.0
million in 2014. This drop in explained by the
fall of fuel prices, as well as the 1.2% decrease
in fuel consumption per ASK-equivalent, as a
result of the fuel efficiency programs and also
due to an increasingly efficient fleet.
Additionally, the company recognized in 2015
a hedging loss of US$239.4 million compared
to the hedging loss of US$108.7 million in 2014.
With regards to exchange rate hedging, the
company reported a gain of US$19.2 million on
currency hedging in 2015 compared to a gain of
US$3.8 million in 2014.
Wages and benefits decreased 11.8% in 2015,
mainly due to the impact of local currency
depreciation over wages, especially the 41.7%
depreciation of the Brazilian reais, and 14.7%
depreciation of the chilean peso compared to
2014. Additionally, during the fourth quarter
of the year, LATAM reported a US$37 million
reversal of performance bonuses for the year.
With regards to the non-operating income,
the company accounted a non-cash exchange
rate difference of US$467.9 million, mainly
explained by the devaluation of the Brazilian
reais during the year.
At the end of the year, LATAM reported a net
loss of US$ 219.3 million, compared to a net
loss of US$ 109.8 million in 2014. This result
implied a negative net margin of 2.2%, thus
representing a 1.3% fall over 2014.
FINANcIAL
RESULTS
111
ANNUAL REPORT 2015 | 2015 RESULTS · FINANcIAL RESULTS
For the 12 months period ended December 31
2015
2014
% Change
For the 12 months period ended December 31
2015
2014
% Change
| REVENUE
Passenger
cargo
Other
8.410.614
10.380.122
-19,0%
1.329.431
1.713.379
-22,4%
| INcOME BEFORE TAXES AND MINORITY
INTEREST
Income Taxes
-357.115
65.233
-647,4%
178.383
-142.194
-225,5%
385.781
377.645
2,2%
| INcOME BEFORE MINORITY INTEREST
-178.732
-76.961
132,2%
TOTAL OPERATING REVENUE
10.125.826
12.471.146
-18,8%
| EXPENSES
Wages and Benefits
Aircraft Fuel
comissions to Agents
-2.072.805
-2.350.102
-11,8%
-2.651.067
-4.167.030
-36,4%
-302.774
-365.508
-17,2%
-5,7%
Depreciation and Amortization
-934.406
-991.264
Other Rental and Landing Fees
-1.109.826
-1.327.238
-16,4%
Passenger Services
Aircraft Rentals
Aircraft Maintenance
-295.439
-300.325
-525.134
-521.384
-437.235
-452.731
-1,6%
0,7%
-3,4%
Attributable to:
Shareholders
Minority Interest
NET INCOME
Net Margin
Effective Tax Rate
EBITDA
EBITDA Margin
EBITDAR
-219.274
-109.790
99,7%
40.452
32.829
23,2%
-219.274
-109.790
99,7%
-2,2%
-0,9%
-1,3 pp
44,9%
438,8%
-394,0 pp
1.448.325
1.504.630
-3,7%
14,3%
12,1%
2,2 pp.
1.973.459
2.026.014
-2,6%
Other Operating Expenses
-1.283.221
-1.482.198
-13,4%
EBITDAR Margin
19,5%
16,2%
3,2 pp.
TOTAL OPERATING EXPENSES
-9.611.907
-11.957.780
-19,6%
OPERATING INCOME
Operating Margin
Interest Income
Interest Expense
513.919
513.366
5,1%
4,1%
75.080
90.500
-413.357
-430.034
0,1%
1,0 pp
-17,0%
-3,9%
Other Income (Expense)
-532.757
-108.599
390,6%
112
ANNUAL REPORT 2015 | 2015 RESULTS · FINANcIAL RESULTS
FOR ThE yEAR ENDED DECEMBER
2015
2014
%
Change
| SYSTEM
ASKs-equivalent (millions)
RPKs-equivalent (millions)
208,857
206,198
1.3%
151,478
153,978
-1.6%
Overall Load Factor (based on ASK-equivalent)%
72.5%
74.7%
-2.1 pp
Break-Even Load Factor (based on ASK-equivalent)%
73.9%
70.6%
3.3 pp
Yield based on RPK-equiv (US cent)
Operating Revenues per ASK-equiv (US cent)
costs per ASK-equivalent (US cent)
costs per ASK-equivalent ex fuel (US cents)
6.4
4.7
4.8
3.6
7.9
5.9
6.1
4.0
-18.1%
-20.5%
-20.1%
-11.5%
Fuel Gallons consumed (millions)
1,221
1,220
0.1%
Fuel Gallons consumed per 1,000 ASKs-equivalent
Average Trip Length (thousands km)
6
1.6
6
1.6
-1.2%
2.7%
Total Number of Employees (average)
52,697
53,300
-1.1%
Total Number of Employees (end of the period)
| PASSENGER
ASKs (millions)
RPKs (millions)
134,302
130,201
3.1%
111,510
108,534
2.7%
FINANcIAL
RESULTS
Passengers Transported (thousands)
67,835
67,833
0.0%
Load Factor (based on ASKs) %
83.0%
83.4%
-0.3 pp
Yield based on RPKs (US cents)
Revenues per ASK (US cents)
7.5
6.3
9.6
8.0
-21.1%
-21.4%
113
ANNUAL REPORT 2015 | 2015 RESULTS · FINANcIAL RESULTS
FOR ThE yEAR ENDED DECEMBER
2015
2014
% Change
| cARGO
ATKs (millions)
RTKs (millions)
Tons Transported (thousands)
7,083
3,797
1,009
7,220
4,317
1,102
-1.9%
-12.0%
-8.5%
Load Factor (based on ATKs) %
53.6%
59.8%
-6.2 pp
Yield based on RTKs (US cents)
Revenues per ATK (US cents)
35.0
18.8
39.7
23.7
-11.8%
-20.9%
* Fuel Gallons consumed per 1,000 ASKs-equivalent
Note: ASK-equivalent is the sum of passenger ASKs and the quotient of cargo ATK and 0.095 (including LAN and TAM cargo operations)
INGRESOS DE PASAjEROS y CARGA POR áREA GEOGRáFICA
2015
2014
% Change
Perú
Argentina
EEUU
Europa
colombia
Brasil
Ecuador
chile
681,340
660,057
3.2%
979,324
813,472
20.4%
1,025,475
1,224,264
-16.2%
723,062
935,893
-22.7%
353,007
391,678
-9.9%
3,464,297
5,361,594
-35.4%
238,500
248,585
-4.1%
1,575,519
1,589,202
-0.9%
FINANcIAL
RESULTS
Pacif Asia and rest of Latin America
699,521
868,756
-19.5%
Operating revenues
9,740,045
12,093,501
-19.5%
Other operating revenues
385,781
377,645
114
ANNUAL REPORT 2015 | 2015 RESULTS · AWARDS AND REcOGNITIONS
Our most prominent
acknowledgements
AWARDS AND
REcOGNITIONS
The companies that belong to the LATAM
Airlines Group received nearly 25 recognitions
in different areas: Services, Sustainability and
Onboard Entertainment, among others. Below
we highlight the most important recognitions
that LATAM Airlines Group received during
2015:
| SERVIcES AWARDS
World Line Airline Awards- skytrax 2015:
the most prestigious award of the industry.
· LAN: First place in the “Best Airline in South
America” category.
· TAM: Third place in the “Best Airline in South
America” category.
· LAN: First place in the “Best Service in South
America” category.
· TAM: Third place in the “Best Service in South
America” category.
Airline of the Year Awards 2015:
Acknowledgement granted by AirlineRatings
to the best airlines whose purpose is to help
passengers to choose with whom to travel.
· LAN: Winner of the Long Haul Americas
category.
CDp (Carbon Disclosure programme):
· “Best company in Latin America” Award.
ienvA registered Airline (iATA):
· Stage 2 IEnvA certification.
Award empresa Alas20 (sustainable leaders):
· Award “Best of the Best”.
· Second place in the “company Leader in
corporate Governance” category.
· First place in the “company Leader in Investor
Relations” category.
· General Manager Leader in Sustainability:
Enrique cueto.
Aviation Climate solutions:
· Recognition “Efficiency in the air: RNP”.
· Recognition “Efficiency in the air: Ultra-Light
containers”.
· Recognition “carbon Management: Smart
Fuel Program”.
Bureau Veritas Certification:
· certification ISO 14.001 in MIA.
Aenor environment:
· Measurement and external verification of
carbon footprint.
| SUSTAINABILITY AWARDS
revista CApiTAL and The note:
· company Leader in climate change.
Dow Jones sustainability index 2014:
· Fourth year in the “DJSI Emerging Markets”
category.
Second year in the “DJSI World” category.
115
ANNUAL REPORT 2015 | 2015 RESULTS · AWARDS AND REcOGNITIONS
ethical Boardroom Corporate Governance
Awards 2015:
LAN: Winner in the “Best corporate Governance
– Airlines – South America - 2015” category.
e Commerce Awards 2015:
The most important award of the electronic
commerce sector. LAN cL: Lan.com “Leader in
ecommerce in the Tourist Industry”.
· LAN PE: Lan.com “Leader in ecommerce in the
Tourist Industry”.
· LAN Ec: Lan.com
its
contribution to the digital economy in the
country.
recognized for
Cellars in the sky Award – Business Traveller:
· LAN and TAM: Silver Medal in the “Best
Fortified After Dinner Wine in First class”
category (for the wine croft Port LVB safra
2007).
· TAM: Bronze Medal for the white wine Dr
Bürkin-Wolf Gasbohl 2009, Pfalz.
Fohla Top of Mind 2015 Award (Br):
· TAM: The most remembered brand in the
“Airline company” category.
| ONBOARD ENTERTAINMENT AWARDS
Folio: eddie & ozzie Awards 2015:
One of the main awards of the print and digital
magazines industry globally.
· IN Magazine: Golden Award for “Best Use of
Illustration” for the report “Kings of Speed”,
June 2015.
· IN Magazine: Golden Award for “Best General
Design” for the report “Gastronomy Special”,
November 2014.
· Local newspaper in Peru: Golden Award for
“Best New Publication of the Year”.
| OTHER AWARDS
structured Financing of the Year –Latin
Finance Magazine
· Award for the EETc financial transaction, in
recognition of size, legal complexity and for
being pioneers in this type of transaction and
innovative in the market.
Corporate Transparency report 2015 – uDD,
KpMG Y Chile Transparente
· LATAM: Second Place in the “Best Practices
2015” category for public traded companies.
Award for the most admired companies in
Brazil – revista Carta Capital (Br):
· TAM: Winner
category (for the seventh consecutive year).
in the “Airline companies”
AWARDS AND
REcOGNITIONS
116
ANNUAL REPORT 2015 | 2015 RESULTS · MATERIAL FAcTS
LATAM:
Our new brand
MATERIAL
FAcTS
AuGusT 6 /
oTTHer
As provided in Sections 9 and 10 of the
Securities Markets Act and in General Rule
#30, under due authorization, I hereby inform
as MATERIAL DIScLOSURE of LATAM Airlines
Group S.A., Securities Registration #306 (“
LATAM ”), the following:
integration process
After an extensive
following the association of LAN and TAM—
during which the Group made great advances
in achieving synergies for internal processes,
network optimization, and fleet restructuring
and modernization, the Board of Directors of
LATAM Airlines Group has decided to adopt a
single name and identity and announces that
the new brand for the largest airline group in
Latin America and its affiliates will be LATAM .
of 2016 with a gradual roll-out for airports,
aircraft, commercial offices, web pages, and
uniforms.
June 9 /
issuAnCe
As provided in Articles 9 and 10 of the
Securities Market Law and in General Rule #30,
under due authorization, please be advised
as MATERIAL DIScLOSURE that on this
date LATAM Airlines Group S.A., Securities
Registration #306 (“ LATAM ”), has issued and
placed in international markets, pursuant to the
Rule 144-A and Regulation S of the securities
regulations of the United States of America,
senior unsecured notes in the principle amount
of US$500.000.000, due in 2020, at an annual
initial interest rate of 7,25% (the “ 144-A Bond ”
or the “ Issuance ”); and
The brand LATAM, which is the result of the
consolidation of LAN and TAM, will unite all the
passenger and cargo airlines for LATAM Airlines
Group: LAN Airlines and its affiliates in Peru,
Argentina, colombia and Ecuador; in addition
to TAM Linhas Aéreas S.A., and its subsidiary
TAM Air Transport Mercosur S.A. (TAM Airlines
(Paraguay), and the cargo carriers comprised
of LAN cARGO, LAN cARGO colombia, ABSA
(TAM cargo) and Mas Air.
As informed under Material Disclosure of
May 20, 2015 and June 5, 2015, the Issuance
and placement of the 144-A Bond will have the
purpose of (i) financing the repurchase of the
senior guaranteed bonds due in 2020, issued
by TAM capital 2 Inc., pursuant to Rule 144-A
and Regulation S of the securities regulations
of the United States of America (“ TAM 2020
Bond ”); and (ii) with any remaining funds, to
finance other corporate general matters.
LATAM Airlines Group is currently working on
the new corporate brand, a process that will
take approximately three years to complete
and will begin to be visible in the first half
Finally, please find enclosed the form regarding
Regulation 1.072 of the chilean Securities and
Insurance commission.
117
ANNUAL REPORT 2015
| 2015 RESULTS · MATERIAL FAcTS
June 5 /
issuAnCe
As provided in Articles 9 and 10 of the
Securities Market Law and in General Rule #30,
under due authorization, please be advised of
the following MATERIAL DIScLOSURE:
As informed under Material Disclosure of May
20, 2015, LATAM Airlines Group S.A. (“LATAM)
on June 4th, 2015, has agreed to issue and place
in the international markets, pursuant to the
Rule 144-A and Regulation S of the securities
regulations of the United States of America,
senior unsecured notes in the principle amount
of US$500.000.000, due in 2020, at an annual
initial interest rate of 7,25% (the “ 144-A Bond ”
or the “ Issuance ”); and
As also informed under Material Disclosure
of May 20, 2015, the Issuance and placement
of the 144-A Bond will have the purpose of
(i) financing the repurchase of the senior
guaranteed bonds due in 2020, issued by TAM
capital 2 Inc., pursuant to Rule 144-A and
Regulation S of the securities regulations of
the United States of America (“ TAM 2020
Bond ”); and (ii) with any remaining funds, to
finance other corporate general matters.
In accordance with circular No. 988 of the
chilean Securities and Insurance commission,
LATAM informs that in this stage it is not
possible to quantify the effects of this
transaction in LATAM’s results, in case it is
materialized.
Finally, it is stated that LATAM will release as
information of interest for the markets, the
communications attached to this Material
in order to provide further
Disclosure,
information in connection with the operations
related to the Issuance of the 144-A Bonds,
and regarding the repurchase of the TAM 2020
Bonds, and which will be distributed in the
relevant markets in which those operations will
take place.
MAY 29 /
issuAnCe
As provided in Articles 9 and 10 of the
Securities Market Law and in General Rule #30,
under due authorization by LATAM Airlines
Group S.A., Securities Registration #306
(“LATAM Airlines Group”), please be advised as
MATERIAL DIScLOSURE, that on this date the
issuance and private offering of two tranches of
enhanced equipment trust certificates (“ EETc
”) has taken place, which has been upsized to an
aggregate face amount of U.S. $1,020,823,000
(the “ certificates ”), in accordance with the
following:
The certificates were issued and privately
offered, by trusts or pass-through trusts
(“Trusts”).
The private offering is comprised of class A
certificates which will have an interest rate
of is 4.200% per annum with a final expected
distribution date of November 15, 2027 and the
class B certificates which will have an interest
rate of 4.500% per annum with a final expected
distribution date of November 15, 2023.
The Trusts will use proceeds from the offering,
which will be held in custody (“escrow”) with a
first class bank, to acquire “ Equipment Notes
” issued by four separate special purpose
vehicles, fully owned by LATAM (each one, an “
Issuer ”).
Each Issuer will use the proceeds from the
sale of the Equipment Notes and the initial
rent under each Lease (as defined below) to
finance the acquisition of eleven Airbus A321-
200 aircraft, two Airbus A350-900 aircraft and
four Boeing 787-9 aircraft, which are currently
scheduled for delivery between July 2015 and
March 2016 (the “Aircraft”).
Each Issuer will lease the aircraft they own to
the company under a separate finance lease
(the “Lease”), being able at the same time to
also sublease the aircraft under operational
leases.
MAY 21 /
issuAnCe
As provided in Articles 9 and 10 of the
Securities Market Law and in General Rule #30,
under due authorization, please be advised
of the following MATERIAL DIScLOSURE by
LATAM Airlines Group S.A. (“LATAM Airlines
Group”), Securities Registration #306:
LATAM Airlines Group S.A. (“LATAM”) has
announced its intention to issue and place in the
international markets, senior unsecured notes
pursuant to the Rule 144-A and Regulation S of
the securities regulations of the United States
118
MATERIAL
FAcTS
ANNUAL REPORT 2015
| 2015 RESULTS · MATERIAL FAcTS
of America (the “144-A Bond” or the “Issuance”);
and
citigroup Global Markets Inc. (the “Offeror”),
in accordance with the offer to purchase and
consent solicitation statement (the “Offer”)
and, acting on behalf of LATAM and TAM capital
2 Inc. – the latter a subsidiary of TAM S.A., duly
organized under the laws of the cayman Islands
– has announced the offer to repurchase the
senior guaranteed bonds due in 2020 issued
by TAM capital 2 Inc. in the principal amount of
US$300,000,000, pursuant to the Rule 144-A
and Regulation S of the securities regulations
of the United States of America (the “TAM
2020 Bonds”).
ApriL 28 /
CHAnGes in THe ADMinisTrATion
As provided in Articles 9 and 10 of Securities
Market Law 18045 and in General Rule #30 of
the commission of 1989, please be advised that
at an Ordinary Shareholders Meeting ( Meeting
) of LATAM Airlines Group S.A. ( LATAM ) held on
April 28, 2015, LATAM’s shareholders elected
the members of LATAM’s Board of Directors,
who will hold office for two years.
The
Directors at the Meeting:
individuals were elected
following
MATERIAL
FAcTS
· Mauricio Rolim Amaro.
· Juan José cueto Plaza.
· Henri Philippe Reichstul.
· Ramón Eblen Kadis.
· carlos Heller Solari.
· Francisco Luzón López.
· Ricardo J. caballero.
· Juan Gerardo Jofré Miranda.
· Georges de Bourguignon Arndt.
The Directors named in numbers 7, 8 and 9
above were elected as independent directors,
according to article 50-bis of companies Law
No. 18.046 of the Republic of chile.
MArCH 17 /
eXTrAorDinArY sHAreHoLDers Mee-
TinG, CiTATions, AGreeMenTs AnD pro-
posiTions
As provided in Articles 9 and 10 of the
Securities Market Law and in General Rule #30,
under due authorization, please be advised
that at an Extraordinary Meeting held March
17th, 2015, the Board of Directors of LATAM
Airlines Group S.A. (hereinafter the “company”)
resolved to convene a Regular Shareholders
Meeting at 10:00 a.m. on April 28, 2015 at
Marina de las condes, Best Western Premier
Hotel, located at 5727 Alonso de córdova
Avenue, Las condes, Santiago, chile, to discuss
the following matters:
a) approval of the annual report, balan-
ce sheet and financial statements of
the company for the fiscal year ending
December 31, 2014;
b) election of the members of the com-
pany’s Board of Directors;
c) the compensation to be paid to the
company’s Board of Directors;
d) the compensation to be paid to the
company’s Audit committee;
e) the appointment of the external au-
diting firm and risk rating agencies for
the company; and the reports on the
matters indicated in Section XVI of
companies Law 18,046;
f) information on the cost of proces-
sing, printing and sending the informa-
tion indicated in circular 1816 of the
Securities and Insurance commission;
g) designation of the newspaper
in
which the company will make publica-
tions; and
h) other matters of corporate interest
within the purview of a Regular Share-
holders Meeting of the company.
119
ANNUAL REPORT 2015
| 2015 RESULTS · STOcK MARKET INFORMATION
During 2015, LATAM Airlines Group’s share
price showed a loss of 47.3% while LAN’s ADR
and BDR showed losses of 55.0% and 25.2%,
respectively. As of 31 December 2015, LATAM
had a market capitalization of US$ 2,897
million. In 2015, LATAM Airlines Group’s shares
performed below chile’s IPSA share price
index, which showed an annual loss of 4.4%.
Regarding the movements of the stock, this
year LATAM Airlines Group stock had a 100%
of market presence in the Santiago Stock
Exchange.
QUARTERLY VOLUME OF SHARE TRADING
(SANTIAGO STOcK EXcHANGE)
2013
Nº of shares traded
Average price (CLP)
Total value (CLP)
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2014
45.824.242
66.209.581
94.212.031
97.328.542
First Quarter
105.975.361
Second Quarter
49.562.708
Third Quarter
48.588.109
Fourth Quarter
58.938.484
2015
First Quarter
47.381.218
Second Quarter
70.656.700
Third Quarter
Fourth Quarter
55.159.498
41.229.003
11.187
9.205
7.054
8.178
8.216
8.142
7.185
6.944
6.427
5.317
3.956
3.787
512.631.523.416
609.426.139.245
664.535.231.195
795.928.230.440
870.703.928.011
403.544.960.523
349.114.118.897
409.287.411.331
304.500.240.890
375.650.771.299
218.193.406.987
156.150.008.936
STOcK MARKET
INFORMATION
120
ANNUAL REPORT 2015 | 2015 RESULTS · STOcK MARKET INFORMATION
| QUARTERLY VOLUME OF ADR TRADING (NYSE)
2013
Nº of shares traded
Average price (CLP)
Total value (CLP)
First Quarter
36.049.549
Second Quarter
Third Quarter
Fourth Quarter
2014
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2015
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
48.815.517
58.233.292
73.916.615
57.623.444
48.612.920
53.971.810
51.527.871
71.826.622
84.752.685
56.545.265
40.270.138
23,6
19,0
13,9
15,9
14,9
14,7
12,4
11,6
10,2
8,6
5,8
5
850.767.594
927.668.038
809.046.393
1.178.817.436
861.131.150
713.771.218
669.402.973
597.454.463
735.991.434
725.268.774
329.437.631
221.441.987
STOcK MARKET
INFORMATION
121
ANNUAL REPORT 2015 | 2015 RESULTS · STOcK MARKET INFORMATION
| QUARTERLY VOLUME OF BDR TRADING (BOVESPA)
2013
Nº of shares traded
Average price (CLP)
Total value (CLP)
First Quarter
4.405.443
Second Quarter
1.750.147
Third Quarter
1.588.164
Fourth Quarter
457.913
2014
First Quarter
1.685.200
Second Quarter
681.600
Third Quarter
973.200
Fourth Quarter
444.700
2015
First Quarter
953.800
Second Quarter
1.204.000
Third Quarter
1.000.500
Fourth Quarter
322.000
45,8
37,5
30,6
15,9
34,7
33,2
28,2
29,0
28,4
25,9
20,3
22,4
201.746.038
65.595.608
48.624.696
7.302.767
58.492.169
22.598.036
27.405.206
12.889.775
27.109.116
31.142.320
20.261.756
7.218.470
STOcK MARKET
INFORMATION
122
ANNUAL REPORT 2015 | 2015 RESULTS · STOcK MARKET INFORMATION
| LAN IPSA
| LAN IPSA
IPSA INDEX
6.000
5.000
4.000
3.000
LAN CI EQUITY
IPSA INDEX
STOCK PRICE (CLP$)
8.000
6.750
5.500
4.250
3.000
01/20 15
04/20 15
07/20 15
11/20 15
| LAN LFL
| LAN LFL
ADR PRICE (US$)
15
10
5
0
STOcK MARKET
INFORMATION
LAN CI EQUITY
LFL US EQUITY
STOCK PRICE (CLP$)
8.000
6.000
4.000
2.000
0
01/01/15
05/05/15
07/06/15
10/07/15
12/08/15
123
ANNUAL REPORT 2015 | 2015 RESULTS · STOcK MARKET INFORMATION
| LAN TAM
| LAN IPSA
STOCK PRICE (CLP$)
8.000
7.000
6.000
5.000
4.000
3.000
LAN CI EQUITY
LATMM33 BZ EQUITY
BDR PRICE (BRL)
32
24
16
8
0
01/01/15
05/05/15
09/06/15
12/08/15
STOcK MARKET
INFORMATION
124
ANNUAL REPORT 2015 | 2015 RESULTS · RISK FAcTORS
LATAM does not
control the voting
shares or board of
directors of TAM
RISK
FAcTORS
| RISK FAcTORS RELATING TO OUR cOMPANY
LATAm does not control the voting shares or
board of directors of TAm
Following the combination of LAN and TAM:
• Holdco I owns 100% of the TAM common
shares previously outstanding;
• the TAM Controlling Shareholders own
approximately 80.58% of the outstanding
Holdco I voting shares through TEP chile
(a wholly owned chilean entity) and LAN
owns the remainder of the voting shares;
• LATAM owns 100% of the outstanding
Holdco I non-voting shares, entitling it to
substantially all of the economic rights in
respect of the TAM common shares held
by Holdco I; and
• LATAM owns 100% of the TAM preferred
shares previously outstanding.
As a result of this ownership structure:
• The TAM Controlling Shareholders retain
voting and board control of TAM and each
airline subsidiary of TAM; and
interests,
actions require supermajority approval, which
in turn means they require the prior approval of
both LATAM and TEP chile. Examples of actions
requiring supermajority approval by the board
of directors of Holdco I or TAM include, among
others, entering into acquisitions or business
collaborations, amending or approving budgets,
business plans, financial statements and
accounting policies, incurring indebtedness,
into certain
encumbering assets, entering
investments,
agreements, making certain
modifying rights or claims, entering
into
settlements, appointing executives, creating
security
issuing, redeeming or
repurchasing securities and voting on matters
as a shareholder of subsidiaries of TAM. Actions
requiring supermajority shareholder approval
of Holdco I or TAM include, among others,
certain changes to the by-laws of Holdco I,
TAM or TAM’s subsidiaries or any dissolution/
liquidation, corporate reorganization, payment
of dividends, issuance of securities, disposal
or encumbrance of certain assets, creation of
security interests or entering into guarantees
and agreements with related parties. For more
information on the shareholders’ agreements,
see “Item 7. controlling Shareholders and
Related Party Transactions—Shareholders’
Agreements.”
• LATAM is entitled to all of the economic
rights in TAM.
our assets include a significant amount of
goodwill.
LATAM and TEP chile and other parties have
entered into shareholders’ agreements that
establish agreements and restrictions relating
to corporate governance. certain specified
Our assets
included US$2,281 million of
goodwill as of December 31, 2015, US$2,155
million of which results from the merger
between LAN and TAM. Under IFRS, goodwill
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ANNUAL REPORT 2015
| 2015 RESULTS · RISK FAcTORS
is subject to an annual impairment test and
may be required to be tested more frequently
if events or circumstances indicate a potential
impairment. Any
impairment could result
in the recognition of a significant charge to
earnings in our statement of income, which
could materially and adversely impact our
consolidated results for the period in which the
impairment occurs.
A failure to successfully implement our
strategy or a failure adjusting the strategy
to the current economic situation would
harm our business and the market value of
our ADss and common shares.
We have developed a new strategic plan with
the goal of becoming one of the best airlines
in the world and renewing our commitment to
sustained profitability and superior returns to
shareholders. Our new strategy requires us to
identify value propositions that are attractive
to our clients, to find efficiencies in our daily
operations, and to transform ourselves into a
stronger and more risk resilient company. Our
strategic plan also anticipates strengthening
our network and expanding operations
in
the Brazilian regional market. Our strategy
requires us to identify cities with adequate
infrastructure and sufficient demand. There
can be no assurances, however, that we will be
able to correctly identify cities and regions in
which to expand our operations, or that we will
be able to attract sufficient passengers and
cargo traffic to make our operations profitable.
Difficulties in implementing our strategy and
expanding our operations may adversely affect
our business, results of operation and the
market value of our ADSs and common shares.
A failure to successfully transfer the value
proposition of the LAN and TAm brands to a
new single brand, may adversely affect our
business and the market value of our ADss
and common shares.
Following the merger in 2012, LAN and TAM
have continued to operate with their original
brands. In 2016, we will begin the transition of
LAN and TAM into a single brand. LAN and TAM
currently have different value propositions,
and there can be no assurances that we will be
able to fully transfer the value of the original
LAN and TAM brands to the new single brand.
Difficulties in implementing our single brand
may prevent us from consolidating as a
customer preferred carrier and may adversely
affect our business and results of operations
and the market value of our ADSs and common
shares.
It may take time to combine the frequent
flyer programs of LAN and TAm.
prefer frequent flyer programs offered by
other airlines, which may adversely affect our
business.
our financial results are exposed to foreign
currency fluctuations.
We prepare and present our consolidated
financial statements in U.S. dollars. Because of
our presence in several Latin American markets,
a portion of our consolidated net assets,
revenues and income is denominated in non-
U.S. dollar currencies, primarily chilean pesos
and Brazilian reais. In particular, the majority of
TAM’s revenues are denominated in Brazilian
reais, while a significant portion of its operating
expenses are denominated in, or linked to,
the U.S. dollar or other foreign currencies.
Our consolidated financial condition and
results of operations are therefore sensitive
to movements in exchange rates between the
U.S. dollar and other currencies. Other factors
being neutral, a depreciation of non-U.S. dollar
currencies relative to the U.S. dollar could have
an adverse impact on our financial condition,
results of operations and prospects.
We have integrated the separate frequent flyer
programs of LAN and TAM so that passengers
can use frequent flyer miles earned with either
LAN or TAM interchangeably. However, there
is no guarantee that full integration of the two
plans will be completed in the near term or at all.
Even if the integration occurs, the successful
integration of these programs will involve
some time and expense. Until we effectively
combine these programs, passengers may
We operate in numerous countries and face the
risk of variation in foreign currency exchange
rates against the U.S. dollar or between the
currencies of these various countries. changes
in the exchange rate between the U.S. dollar
and the currencies in the countries in which we
operate could adversely affect our business,
financial condition and results of operations.
indebtedness
Approximately 100% of our
at December 31, 2015 was denominated in
126
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U.S. dollars, and approximately 43% of our
revenues and 39% of our operating expenses
in 2015 were denominated in currencies other
than the U.S. dollar, mainly the Brazilian real and
the chilean peso. If the value of the Brazilian
real, chilean peso or other currencies in which
revenues are denominated declines against
the U.S. dollar, our results of operations and
financial condition will be adversely affected.
The Brazilian real and the chilean peso,
respectively, experienced average nominal
depreciations against the U.S. dollar of 10.5%
and 1.8% in 2013, 9.1% and 15.2% in 2014, and
41.7% and 14.7% in 2015. The exchange rate
of the chilean peso, Brazilian real and other
currencies against the U.S. dollar may fluctuate
significantly in the future.
changes
in chilean, Brazilian and other
governmental economic policies affecting
foreign exchange rates could also adversely
affect our business, financial condition, results of
operations and the return to our shareholders on
their common shares or ADSs. Exchange controls
in Venezuela delay our ability to repatriate
cash generated from operations in Venezuela.
They also increase our exposure to exchange
rate losses due to potential devaluations of
the Venezuelan bolivar vis à vis the U.S. dollar
between the time we are paid in Venezuelan
bolivares and the time we are able to repatriate
such revenues in U.S. dollars. As of December 31,
2015, the devaluation of the Venezuelan bolivar
had a cash impact of US$41 million on our results.
countries in which we operate, and our
business may suffer if any of our strategic
relationships
alliances or commercial
terminates.
In many of the jurisdictions in which we operate,
we have found it in our interest to maintain
a number of alliances and other commercial
relationships. These alliances or commercial
relationships allow us to enhance our network
and, in some cases, to offer our customers
services that we could not otherwise offer. If
any of our strategic alliances or commercial
relationships, in particular those with American
Airlines, Iberia, Qantas, Britsh Airways, Interjet,
Japan Airlines, Korean Airlines, cathay Pacific,
Jetstar Airways or Alaska Airlines,deteriorates,
or any of these agreements are terminated,
our business, financial condition and results of
operations could be negatively affected.
our business and results of operation may
suffer if we fail to obtain and maintain
routes, suitable airport access, slots and
other operating permits.
Our business depends upon our access to
key routes and airports. Bilateral aviation
agreements as well as local aviation approvals
frequently
and other
involve political
considerations outside of our control. Our
operations could be constrained by any delay
or inability to gain access to key routes or
airports, including:
• the imposition of flight capacity restrictions;
• the inability to secure or maintain route rights
in local markets or under bilateral agreements;
or
• the inability to maintain our existing slots and
obtain additional slots.
We operate numerous international routes,
subject to bilateral agreements, and also
internal flights within chile, Peru, Brazil,
Argentina, Ecuador, colombia and other
countries, subject to local route and airport
access approvals. See “Item 4. Information
on
the company—Business Overview—
Regulation.”
There can be no assurance that existing
bilateral agreements with the countries in
which our companies are based and permits
from foreign governments will continue. A
modification, suspension or revocation of
one or more bilateral agreements could have
a material adverse effect on our business,
financial condition and results of operations.
The suspension of our permission to operate
in certain airports, destinations or slots or
the imposition of other sanctions could also
have a material adverse effect. A change in the
administration of current laws and regulations
or the adoption of new laws and regulations in
any of the countries in which we operate that
restricts our route, airport or other access may
have a material adverse effect on our business,
financial condition and results of operations.
We depend on strategic alliances or
commercial relationships in many of the
• limitations on our ability to process more
passengers;
A significant portion of our cargo revenues
come from relatively few product types
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RISK
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ANNUAL REPORT 2015 | 2015 RESULTS · RISK FAcTORS
and may be impacted by events affecting
their production, trade or demand.
Our cargo demand, especially from Latin
American exporters, is concentrated in a small
number of product categories, such as exports
of fish, sea products and fruits from chile and
asparagus from Peru, and exports of fresh
flowers from Ecuador and colombia. Events
that negatively affect the production, trade or
demand for these goods may adversely affect
the volume of goods that we transport and
may have a significant impact on our results
of operations. Some of our cargo products
are sensitive to foreign exchange rates and,
therefore, traffic volumes could be impacted
by the appreciation or depreciation of local
currencies.
our operations are subject to fluctuations
in the supply and cost of jet fuel, which
could negatively impact our business.
Higher jet fuel prices could have a materially
negative effect on our business, financial
condition and results of operations. Jet
fuel costs have historically accounted for a
significant amount of our operating expenses,
and accounted for approximately 28% of our
operating expenses in 2015. Both the cost
and availability of fuel are subject to many
economic and political factors and events
that we can neither control nor predict. We
have entered into fuel hedging arrangements,
but there can be no assurance that such
arrangements will be adequate to protect us
from a significant increase in fuel prices in
the near future or in the long term. Also, while
these hedging arrangements are designed to
limit the effect of an increase in fuel prices,
our hedging activities methods may also limit
our ability to take advantage of any decrease
in fuel prices, as was the case in 2015. Although
implemented measures to pass
we have
a portion of incremental fuel costs to our
customers, our ability to lessen the impact of
any increase using these types of mechanisms
may be limited.
We rely on maintaining a high daily aircraft
utilization rate to increase our revenues,
which makes us especially vulnerable to
delays.
One of the key elements of our business
strategy is to maintain a high daily aircraft
utilization rate, which measures the number
of flight hours we use our aircraft per day. High
daily aircraft utilization allows us to maximize
the amount of revenue we generate from our
aircraft and is achieved, in part, by reducing
turnaround times at airports and developing
schedules that enable us to increase the
average hours flown per day. Our rate of aircraft
utilization could be adversely affected by a
number of different factors that are beyond
our control, including air traffic and airport
congestion, adverse weather conditions and
delays by third-party service providers relating
to matters such as fueling and ground handling.
If an aircraft falls behind schedule, the resulting
delays could cause a disruption in our operating
performance.
We fly and depend upon Airbus and boeing
aircraft, and our business could suffer if we
do not receive timely deliveries of aircraft,
if aircraft from these companies becomes
unavailable or if the public negatively
perceives our aircraft.
As our fleet has grown, our reliance on Airbus
and Boeing has also grown. As of December
31, 2015, we operated a fleet of 249 Airbus and
77 Boeing. Risks relating to Airbus and Boeing
include:
• our failure or inability to obtain Airbus or
Boeing aircraft, parts or related support
services on a timely basis because of high
demand or other factors;
• the interruption of fleet service as a
result of unscheduled or unanticipated
maintenance
these
requirements
aircraft;
for
• the issuance by Chilean or other aviation
authorities of other directives restricting
or prohibiting the use of Airbus or Boeing
aircraft, or
time-consuming
inspections and maintenance;
requiring
• the adverse public perception of a
manufacturer as a result of an accident or
other negative publicity; or
• delays between the time we realize the
need for new aircraft and the time it takes
us to arrange for Airbus and Boeing or from
a third-party provider to deliver this aircraft.
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FAcTORS
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The occurrence of any one or more of these
factors could restrict our ability to use aircraft
to generate profits, respond to increased
demands, or could otherwise
limit our
operations and adversely affect our business.
Any delays in future deliveries of Airbus
A350 aircraft could disrupt our fleet plan.
During 2015 we received our first Airbus
A350 aircraft out of an order of 27 aircraft
of this model, and became the first airline in
Latin America to operate this modern new
technology aircraft. However, there can be no
assurance that the remaining aircraft will be
delivered and received on schedule or at all.
Any delays in the reception of the Airbus A350
aircraft or unanticipated operational issues on
the remaining order could adversely affect our
fleet plan.
If we are unable to incorporate leased
aircraft into our fleet at acceptable rates
and terms in the future, our business could
be adversely affected.
A large portion of our aircraft is subject to
leases. Our operating
long-term operating
leases typically run from three to 12 years
from the date of delivery. We may face more
competition for, or a limited supply of, leased
aircraft, making it difficult for us to negotiate
on competitive terms upon expiration of our
current operating leases or to lease additional
capacity required for our targeted level of
operations. If we are forced to pay higher lease
rates in the future to maintain our capacity
and the number of aircraft in our fleet, our
profitability could be adversely affected.
our business may be adversely affected
if we are unable to meet our significant
future financing requirements.
liens securing our indebtedness. In the event
that we fail to make payments on the secured
indebtedness, creditors’ enforcement of
liens could limit or end our ability to use the
affected property and equipment to fulfill our
operational needs and thus generate revenue.
We require significant amounts of financing
to meet our aircraft capital requirements and
may require additional financing to fund our
other business needs. We cannot guarantee
that we will have access to or be able to arrange
for financing in the future on favorable terms.
Following the combination of LAN and TAM,
Fitch Ratings Inc. and Standard and Poor’s
downgraded LATAM Airline Group S.A.’s credit
rating to levels that are below investment
grade. These downgrades and any further
securities rating agencies downgrades could
increase our financing costs. If we are unable
to obtain financing for a significant portion of
our capital requirements, our ability to acquire
new aircraft or to expand operations could be
impaired and our business negatively affected.
our business may be adversely affected by
our high degree of debt and aircraft lease
obligations compared to our equity capital.
We have a high degree of debt and payment
obligations under our aircraft operating
leases compared to equity capital. In order to
finance our debt, we depend in part on our cash
flow from operations. We cannot assure you
that in the future we will be able to meet our
payment obligations. In addition, the majority
of our property and equipment is subject to
We have significant exposure to LIbor and
other floating interest rates; increases in
interest rates will increasee our financing
costs and may have adverse effects on
our financial condition and results of
operations.
We are exposed to the risk of interest rate
variations, principally in relation to the U.S.
dollar London Interbank Offer Rate (“LIBOR”).
Many of our operating and financial leases
are denominated in U.S. dollars and bear
interest at a floating rate. Approximately
29% of our outstanding consolidated debt
as of December 31, 2015 bears interest at a
floating rate after giving effect to interest rate
hedging agreements.Volatility in LIBOR or the
TJLP could increase our periodic interest and
lease payments and have an adverse effect
on our total financing costs. We may be unable
to adequately adjust our prices to offset any
increased financing costs, which would have an
adverse effect on our revenues and our results
of operations.
in
Increases
insurance costs and/or
significant reductions in coverage could
harm our financial condition and results of
operations.
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RISK
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ANNUAL REPORT 2015 | 2015 RESULTS · RISK FAcTORS
in significant decreases of
Major events affecting the aviation insurance
industry (such as terrorist attacks, hijackings
or airline crashes) may result in significant
increases of the airlines’ insurance premium
or
insurance
coverage, as occurred after the September 11,
2001 terrorist attacks. Increases in insurance
costs and/or significant reductions in coverage
could harm our financial condition and results
of operations and increases the risk that we
experience uncovered losses.
Problems with air traffic control systems
or other technical failures could interrupt
our operations and have a material adverse
effect on our business.
Our operations,
including our ability to
deliver customer service, are dependent on
the effective operation of our equipment,
including our aircraft, maintenance systems
and reservation systems. Our operations are
also dependent on the effective operation
international air traffic
of domestic and
control systems and the air traffic control
infrastructure in the markets in which we
operate. Equipment
personnel
shortages, air traffic control problems and
other factors that could interrupt operations
could adversely affect our operations and
financial results as well as our reputation.
failures,
our business relies extensively on third-
party service providers. failure of these
to perform as expected, or
parties
in our relationships with
interruptions
these providers or their provision of
RISK
FAcTORS
services to us, could have an adverse effect
on our financial position and results of
operations.
of
information
We have engaged an increasing number of
third-party service providers to perform a
large number of functions that are integral to
our business, including regional operations,
operation of customer service call centers,
distribution and sale of airline seat inventory,
technology
provision
infrastructure and services, provision of
aircraft maintenance and repairs, provision of
various utilities and performance of aircraft
fueling operations, among other vital functions
and services. We do not directly control these
third-party service providers, although we
do enter into agreements with many of them
that define expected service performance.
Any of these third-party service providers,
however, may materially fail to meet their
service performance commitments, may
suffer disruptions to their systems that could
impact their services, or the agreements
with such providers may be terminated.
For example, flight reservations booked by
customers and/or travel agencies via third-
party GDSs (Global Distribution Systems) may
be adversely affected by disruptions in our
business relationships with GDS operators.
Such disruptions,
including a failure to
agree upon acceptable contract terms when
contracts expire or otherwise become subject
to renegotiation, may cause the carriers’ flight
information to be limited or unavailable for
display, significantly increase fees for both us
and GDS users, and impair our relationships
130
ANNUAL REPORT 2015 | 2015 RESULTS · RISK FAcTORS
with customers and travel agencies. The failure
of any of our third-party service providers to
adequately perform their service obligations,
or other interruptions of services, may reduce
our revenues and increase our expenses or
prevent us from operating our flights and
providing other services to our customers. In
addition, our business, financial performance
and reputation could be materially harmed if
our customers believe that our services are
unreliable or unsatisfactory.
technology
Disruptions or security breaches of our
information
infrastructure
interfere with our operations,
could
compromise passenger
employee
information and expose us to liability,
possibly
causing our business and
reputation to suffer.
or
A serious internal technology error or failure
impacting systems hosted internally at our
data centers or externally at third-party
locations, or large-scale external interruption
in technology infrastructure we depend on,
such as power, telecommunications or the
internet, may disrupt our technology network.
Our technology systems and related data
may also be vulnerable to a variety of sources
of interruption, including natural disasters,
terrorist attacks, telecommunications failures,
computer viruses, hackers and other security
issues. While we have in place, and continue to
invest in, technology security initiatives and
disaster recovery plans, these measures may
not be adequate or implemented properly to
prevent a business disruption and its adverse
RISK
FAcTORS
financial and reputational consequences to our
business.
information
In addition, as a part of our ordinary business
operations, we collect and store sensitive
data, including personal information of our
passengers and employees and information
of our business partners. The secure operation
of the networks and systems on which this
type of
is stored, processed
and maintained is critical to our business
operations and strategy. Unauthorized parties
may attempt to gain access to our systems
or information through fraud or other means
of deception. Hardware or software we
develop or acquire may contain defects that
could unexpectedly compromise information
security. The compromise of our technology
systems resulting
loss, disclosure,
in the
misappropriation of, or access to, customers’,
employees’ or business partners’ information
could result in legal claims or proceedings,
liability or regulatory penalties under laws
protecting the privacy of personal information,
disruption to our operations and damage to our
reputation, any or all of which could adversely
affect our business.
our business may experience adverse
consequences if we are unable to reach
satisfactory
bargaining
collective
agreements with our unionized employees.
As of December 31, 2015 approximately 68%
of our employees, including administrative
personnel, cabin crews, flight attendants, pilots
and maintenance technicians are members
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ANNUAL REPORT 2015 | 2015 RESULTS · RISK FAcTORS
of unions and have contracts and collective
bargaining agreements which expire on a
regular basis. Our business, financial condition
and results of operations could be materially
adversely affected by a failure to reach
agreement with any labor union representing
such employees or by an agreement with a
labor union that contains terms that are not in
line with our expectations or that prevent us
from competing effectively with other airlines.
collective action by employees could cause
operating disruptions and negatively
impact our business.
certain employee groups such as pilots,
flight attendants, mechanics and our airport
personnel have highly specialized skills. As a
consequence, actions by these groups, such as
strikes, walk-outs or stoppages, could severely
disrupt our operations and negatively impact
our operating and financial performance, as
well as our image.
Increases in our labor costs, which constitute
a substantial portion of our total operating
expenses, could directly impact our earnings.
Labor costs constitute a significant percentage
of our total operating expenses (22% in 2015)
and at times in our operating history we have
experienced pressure to increase wages and
benefits for our employees. A significant increase
in our labor costs above the assumed costs could
result in a material reduction in our earnings.
We may experience difficulty finding,
training and retaining employees.
technicians.
Our business is labor intensive. We employ
a large number of pilots, flight attendants,
maintenance technicians and other operating
and administrative personnel. The airline
industry has, from time to time, experienced
a shortage of qualified personnel, specifically
In
pilots and maintenance
addition, as is common with most of our
competitors, we may, from time to time, face
considerable turnover of our employees.
Should the turnover of employees, particularly
pilots and maintenance technicians, sharply
increase, our training costs will be significantly
higher. A failure to recruit, train and retain
qualified employees at a reasonable cost
could materially adversely affect our business,
financial condition and results of operations.
| RISKS RELATED TO THE AIRLINE
INDUSTRY AND THE cOUNTRIES IN WHIcH
WE OPERATE
our performance is heavily dependent on
economic conditions in the countries in
which we do business. Negative economic
conditions in those countries could have an
adverse impact on our business.
Passenger and cargo demand is heavily cyclical
and highly dependent on global and local
economic growth, economic expectations
and foreign exchange rate variations, among
other things. In the past, our business has
been negatively affected by global economic
recessionary conditions, weak economic
growth in chile, recent economic conditions
in Brazil, recession in Argentina and poor
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economic performance in certain emerging
market countries in which we operate. The
occurrence of similar events in the future
could adversely affect our business. We plan
to continue to expand our operations based
in Latin America and our performance will,
therefore, continue to depend heavily on
economic conditions in the region.
Any of the following factors could adversely
affect our business, financial condition and
results of operations in the countries in which
we operate:
• changes in economic or other governmental
policies;
• weak economic performance, including,
but not limited to, low economic growth, low
consumption and/or investment rates, and
increased inflation rates; or
• other political or economic developments
over which we have no control.
In 2015, Brazil suffered
from a weak
macroeconomic environment, resulting in a
GDP decrease of 3.8, reducing the passenger
in the domestic Brazil by 2.6%.
demand
Economic forecasts for Brazil
in 2016 a
drecrease by 3.5% in GDP, according to the
(IMF) as of
International Monetary Fund
January 2016.Weak macroeconomic conditions
in Brazil are expected to continue in 2016 and,
according to many economic forecasters,
into 2017 as well. Because of the significance
of the Brazilian market to our business and
operations, continued recessionary conditions
in Brazil may materially and adversely affect
our business and results of operations.
No assurance can be given that capacity
reductions or other steps we may take in
response to weakened demand will be adequate
to offset any future reduction in our cargo and/
or air travel demand. Sustained weakened
demand may adversely impact our revenues,
results of operations or financial condition.
our business
is highly regulated and
changes in the regulatory environment in
which we operate may adversely affect our
business and results of operations.
Our business is highly regulated and depends
substantially upon the regulatory environment
in the countries in which we operate or intend
to operate. For example, price controls on
fares may limit our ability to effectively apply
customer segmentation profit maximization
techniques (“passenger revenue management”)
and adjust prices to reflect cost pressures. High
levels of government regulation may limit the
scope of our operations and our growth plans,
and the possible failure of aviation authorities
to maintain
required governmental
authorizations or our failure to comply with
applicable regulations, may adversely affect
our business and results of operations.
the
Losses and liabilities in the event of an
accident involving one or more of our aircraft
could materially affect our business.
RISK
FAcTORS
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We are exposed to potential catastrophic
losses in the event of an aircraft accident,
terrorist incident or any other similar event.
There can be no assurance that, as a result of
an aircraft accident or significant incident:
• we will not need to increase our insurance
coverage;
• our insurance premiums will not increase
significantly;
• our insurance coverage will fully cover all of
our liability; or
• we will not be forced to bear substantial
losses.
Substantial claims resulting from an accident
or significant incident in excess of our related
insurance coverage could have a material
adverse effect on our business, financial
condition and results of operations. Moreover,
any aircraft accident, even if fully insured,
could cause the negative public perception
that our aircraft are less safe or reliable than
those operated by other airlines, which could
have a material adverse effect on our business,
financial condition and results of operations.
Insurance premiums may also increase due
to an accident or incident affecting one of our
alliance partners or other airlines.
High levels of competition in the airline
industry may adversely affect our level of
operations.
Our business, financial condition and results
of operations could be adversely affected by
RISK
FAcTORS
high levels of competition within the industry,
particularly the entrance of new competitors
into the markets in which we operate. Airlines
compete primarily over fare levels, frequency
and dependability of service, brand recognition,
passenger amenities (such as frequent flyer
programs) and the availability and convenience
of other passenger or cargo services. New
and existing airlines (and companies providing
ground cargo transportation) could enter our
markets and compete with us on any of these
bases, including by offering lower prices, more
attractive services or increasing their route
capacities in an effort to gain greater market
share.
to
chile has opened its domestic aviation
foreign airlines without
industry
restrictions, which may
the
competitive landscape of the domestic
chilean aviation sector and affect our
business and results of operations.
change
laws and
Since November 2013, chilean
regulations have permitted foreign airlines
to operate domestic flights in chile without
necessarily setting up a chilean subsidiary first.
The chilean Domestic Unilateral Open Skies
Rule may change the competitive landscape of
the Domestic chilean Aviation Sector, as it will
be easier in the future for foreign companies
to freely operate in the chilean territory,
which may subject us to further competition.
competition from international carriers in the
chilean market may affect the competitive
dynamics of our industry by reducing our
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ANNUAL REPORT 2015 | 2015 RESULTS · RISK FAcTORS
passenger traffic and cargo demands, forcing
us to reduce our fare levels, which could have
a material adverse effect on our revenues and
level of operations.
financial results. In addition, failure to comply
with these regulations could adversely affect
us in a variety of ways, including adverse
effects on our reputation.
some of our competitors may receive
external support, which could negatively
impact our competitive position.
Some of our competitors may receive support
from external sources, such as their national
governments, which may be unavailable to us.
Support may include, among others, subsidies,
financial aid or tax waivers. This support could
place us at a competitive disadvantage and
adversely affect our operations and financial
performance.
our operations are subject to
local,
national and international environmental
regulations; costs of compliance with
applicable regulations, or the consequences
of noncompliance, could adversely affect
our results, our business or our reputation.
Our operations are covered by environmental
regulations at local, national and international
levels. These regulations cover, among other
things, emissions to the atmosphere, disposal
of solid waste and aqueous effluents, aircraft
noise and other activities incident to our
business. Future operations and financial
results may vary as a result of such regulations.
compliance with these regulations and new
or existing regulations that may be applicable
to us in the future could increase our cost
base and adversely affect our operations and
The European Union (“EU”) had proposed a
directive under which the existing emissions
trading scheme (the “ETS”) in each EU member
state was to be extended to all airlines. This
directive would require us to submit annual
emission allowances in order to operate routes
to and from EU member states. As of the date
of this Annual Report, this proposal has been
postponed for evaluation in 2016 and the
directive affects only intra-European flights
(which are not material to our business) but
there is a possibility that the directive could be
extended to all flights in the future. currently,
we operate six routes to and from Europe,
and service additional destinations through
our code-sharing agreements. Although it is
uncertain if this directive will be approved in
2016, it is increasingly likely that we will be
required to participate in some form of an
international aircraft emissions program in the
future, which may involve significant costs.
our business may be adversely affected by
a downturn in the airline industry caused
by exogenous events that affect travel
behavior or increase costs, such as outbreak
of disease, weather conditions and natural
disasters, war or terrorist attacks.
Demand for air transportation may be
adversely impacted by exogenous events, such
as adverse weather conditions and natural
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disasters, epidemics (such as Ebola and Zika),
terrorist attacks, war or political and social
instability. Situations such as these in one
or more of the markets in which we operate
could have a material impact on our business,
financial condition and results of operations.
Furthermore, these types of situations could
have a prolonged effect on air transportation
demand and on certain cost items.
Revenues for airlines depend on the number
of passengers carried, the fare paid by each
passenger and service factors, such as the
timeliness of flight departures and arrivals. During
periods of fog, ice, low temperatures, storms or
other adverse weather conditions, some or all
of our flights may be cancelled or significantly
delayed, reducing our revenues. In addition, fuel
prices and supplies, which constitute a significant
cost for us, may increase as a result of any future
terrorist attacks, a general increase in hostilities
or a reduction in output of fuel, voluntary or
otherwise, by oil-producing countries. Such
increases may result in both higher airline ticket
prices and decreased demand for air travel
generally, which could have an adverse effect on
our revenues and results of operations.
The 2016 summer olympics taking place
in brazil, one of our principal markets,
may create operational challenges and
decrease corporate traffic, either of which
may adversely affect our our business.
Rio de Janeiro was elected as the host of the
2016 Summer Olympics taking place between
August 5 and 21. Increasing traffic to Brazil
during the period of the event will create
operational challenges and could result in
increased delays. In addition, during the month
of the event, we expect a strong decrease
in corporate traffic, although we expect this
decrease to be offset by an increase in leisure
traffic, the net effect on our revenues and yields
could be negative. Our LATAM Airlines brand
could be damaged if we do not fully comply
with our passenger’s requirements during that
month or if infrastructure deficits at some of
Brazil’s main airports that hinder our normal
operations are associated with our brands.
Developments in Latin American countries
and other emerging market countries may
adversely affect the chilean and brazilian
economies, negatively impact our business
and results of operations and cause the
market price of our common shares and
ADss to decrease.
We conduct a significant portion of our
in emerging market countries,
operations
particularly in Latin America. As a result,
economic and political developments in these
countries, including future economic crises and
political instability, could impact the chilean
or Brazilian economies and have a material
adverse effect on our business, financial
condition and results of operations and the
market value of our securities. Although
economic conditions
in other emerging
market countries may differ significantly from
economic conditions in chile and Brazil, we
cannot assure that events in other countries,
particularly other emerging market countries,
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FAcTORS
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ANNUAL REPORT 2015 | 2015 RESULTS · RISK FAcTORS
will not adversely affect the market value of, or
market for, our common shares or ADSs.
The Brazilian government has exercised, and
may continue to exercise, significant influence
over the Brazilian economy, which may have
an adverse impact on our business, financial
condition and results of operations.
The Brazilian economy has been characterized
by the significant involvement of the Brazilian
government, which often changes monetary,
credit, fiscal and other policies to influence
Brazil’s economy. The Brazilian government’s
actions to control inflation and implement
other policies have involved wage and price
controls, depreciation of the real, controls over
remittance of funds abroad, intervention by the
central Bank to affect base interest rates and
other measures. We have no control over, and
cannot predict what measures or policies the
Brazilian government may take in the future.
An open issue is the political instability due to
the potential impeachment of President Dilma
Rousseff.
| RISKS RELATED TO OUR cOMMON SHARES
AND ADSS
our controlling shareholders may have
interests that differ from those of our
other shareholders.
We have two groups of major shareholders—
the cueto Group (the “LATAM controlling
Shareholders”) and the Amaro Group (the “TAM
controlling Shareholders”). As of January 31,
2015, the LATAM controlling Shareholders,
in the aggregate, beneficially owned 25.5%
of our voting common shares, and the TAM
controlling Shareholders, in the aggregate,
beneficially owned 12.0% of our voting common
shares. The LATAM controlling Shareholders
are in a position to elect three of the nine
members of our board of directors and are in a
position to direct our management. In addition,
the LATAM controlling Shareholders have
entered into a shareholders agreement with
the TAM controlling Shareholders, pursuant
to which these controlling shareholders have
agreed to vote together to elect individuals
the TAM controlling Shareholders
that
nominate to our board of directors. See “Item
7. controlling Shareholders and Related Party
Transactions—Major Shareholders.”
Under the terms of the deposit agreement
governing the ADSs, if holders of ADSs do
not provide JP Morgan chase Bank, N.A., in
its capacity as depositary for the ADSs, with
timely instructions on the voting of the common
shares underlying their ADRs, the depositary
will be deemed to have been instructed to give
a person designated by the board of directors
the discretionary right to vote those common
shares. The person designated by the board
of directors to exercise this discretionary
voting right may have interests that are aligned
with our controlling shareholders, which may
differ from those of our other shareholders.
Historically, our board of directors has
designated
is
Mauricio Amaro, to serve in this role.
its chairman, who currently
RISK
FAcTORS
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ANNUAL REPORT 2015 | 2015 RESULTS · RISK FAcTORS
Trading of our ADss and common shares in
the securities markets is limited and could
illiquidity and price
experience further
volatility.
chilean securities markets are substantially
smaller, less liquid and more volatile than
major securities markets in the United States.
In addition, chilean securities markets may be
materially affected by developments in other
emerging markets, particularly other countries
in Latin America. Accordingly, although you
are entitled to withdraw the common shares
underlying the ADSs from the depositary at
any time, your ability to sell the common shares
underlying ADSs in the amount and at the price
and time of your choice may be substantially
limited. This limited trading market may also
increase the price volatility of the ADSs or the
common shares underlying the ADSs.
Holders of ADss may be adversely affected
by currency devaluations and foreign
exchange fluctuations.
If the chilean peso exchange rate falls relative
to the U.S. dollar, the value of the ADSs and
any distributions made thereon from the
depositary could be adversely affected. cash
distributions made in respect of the ADSs
are received by the depositary (represented
by the custodian bank in chile) in pesos,
converted by the custodian bank into U.S.
dollars at the then-prevailing exchange rate
and distributed by the depositary to the
holders of the ADRs evidencing those ADSs.
In addition, the depositary will incur foreign
RISK
FAcTORS
currency conversion costs (to be borne by the
holders of the ADRs) in connection with the
foreign currency conversion and subsequent
distribution of dividends or other payments
with respect to the ADSs.
changes
in chilean
foreign
future
investment
controls and withholding
taxes could negatively affect non-chilean
residents that invest in our shares.
Equity investments in chile by non-chilean
residents have been subject in the past to
various exchange control regulations that
govern investment repatriation and earnings
thereon. Although not currently
in effect,
regulations of the central Bank of chile have
in the past required, and could again require,
foreign investors acquiring securities in the
secondary market in chile to maintain a cash
reserve or to pay a fee upon conversion of
foreign currency to purchase such securities.
Furthermore, future changes in withholding
taxes could negatively affect non-chilean
residents that invest in our shares.
We cannot assure you that additional chilean
restrictions applicable to the holders of
ADRs, the disposition of the common shares
underlying ADSs or the repatriation of the
proceeds from an acquisition, a disposition
or a dividend payment, will not be imposed or
required in the future, nor could we make an
assessment as to the duration or impact, were
any such restrictions to be imposed or required.
For further information, see “Item 10. Additional
controls—Foreign
Information—Exchange
Investment and Exchange controls in chile.”
our ADs holders may not be able to exercise
preemptive rights in certain circumstances.
The chilean corporation Law provides that
preemptive rights shall be granted to all
shareholders whenever a company issues
new shares for cash, giving such holders
the right to purchase a sufficient number of
shares to maintain their existing ownership
percentage. We will not be able to offer
shares to holders of ADSs and shareholders
located in the United States pursuant to the
preemptive rights granted to shareholders in
connection with any future issuance of shares
unless a registration statement under the
U.S. Securities Act of 1933, as amended, (the
“Securities Act”), is effective with respect
to such rights and shares, or an exemption
from the registration requirements of the
Securities Act is available. At the time of any
rights offering, we will evaluate the potential
costs and liabilities associated with any such
registration statement in light of any indirect
benefit to us of enabling U.S. holders of ADRs
evidencing ADSs and shareholders located
in the United States to exercise preemptive
rights, as well as any other factors that may
be considered appropriate at that time, and
we will then make a decision as to whether
we will file a registration statement. We
cannot assure you that we will decide to file a
registration statement or that such rights will
be available to ADS holders and shareholders
located in the United States.
We are not required to disclose as much
information to investors as a U.s. issuer
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ANNUAL REPORT 2015 | 2015 RESULTS · RISK FAcTORS
is required to disclose and, as a result, you
may receive less information about us than
you would receive from a comparable U.s.
company.
The corporate disclosure requirements that
apply to us may not be equivalent to the
disclosure requirements that apply to a U.S.
company and, as a result, you may receive
less information about us than you would
receive from a comparable U.S. company. We
are subject to the reporting requirements
of the Securities Exchange Act of 1934, as
amended, or the Exchange Act. The disclosure
requirements applicable to foreign issuers
under the Exchange Act are more limited than
the disclosure requirements applicable to
U.S. issuers. Publicly available information
about issuers of securities listed on chilean or
Brazilian stock exchanges also provides less
detail in certain respects than the information
regularly published by listed companies in the
United States or in certain other countries.
Furthermore, there is a lower level of regulation
of the chilean and Brazilian securities markets
and of the activities of investors in such markets
as compared with the level of regulation of the
securities markets in the United States and in
certain other developed countries.
RISK
FAcTORS
139
ANNUAL REPORT 2015 | 2015 RESULTS · ADDITIONAL INFORMATION
ADDITIONAL
INFORMATION
| SUPPLIERS
In 2014, as in previous years, the main suppliers
of LATAM Airlines Group were the Airbus
and Boeing aircraft manufacturers. Its other
suppliers consist mainly of companies that
produce aircraft accessories, spares and
components such as: Pratt & Whitney, IAE
International Aero Engines AG, Rolls-Royce
plc, General Electric comercial Aviation
Services Ltd., MTU Hannover, Snecma, cFMI,
Air France/KLM, Pratt and Whitney canada,
Honeywell, Hamilton (motores y APU); Zodiac
Seats US, Recaro, BE Aerospace, Zodiac
Seats UK (asientos); Teledyne (TcS B787-9);
Honeywell y Rockwell collins (Avionics); Air
France, LUFTHANSA Technik (componentes
MRO); Panasonic, Thales
(Entretenimiento
Abordo); Messier Bugatti (Trenes y Frenos);
UTc Aerospace (Nacelas). In addition, the
company has a number of fuel suppliers such
as Raizen, World Fuel Services, YPF, Petrobras,
Terpel, Repsol, Shell, copex, among others.
| INSURANcE
that
involve potential
Taking into account all those areas of its
risks,
operations
LATAM Airlines Group carries insurance that
can be divided into three main categories:
aviation, hull and liability insurance. These
types of insurance cover all the risks inherent
to commercial aviation such as aircraft,
engines, spare parts and third-party liability
for passengers, cargo, baggage, merchandise
and airports, etc. Since the merger of LAN with
TAM, insurance for both companies has been
acquired by LATAM Airlines Group and the
increased volumes negotiated have resulted in
lower operational costs.
| GENERAL INSURANcE
Insurance of this type provides coverage
against all those risks that could affect the
company’s assets, particularly its physical
goods and financial assets. These are
protected through multi-risk policies (including
fire, theft, computer equipment, transport of
securities, window breakage and other all-
risk coverage) as well as traditional coverage
of motor vehicles, air and sea transport,
corporate civil liability, etc. In addition, LATAM
holds life and accident insurance on behalf of
all its personnel including executives, staff in
general and flight crews.
| TRADEMARKS AND PATENTS
LATAM and its subsidiaries use a number of
trademarks. These are duly registered with the
corresponding bodies in the different countries
in which they operate or are the origin and/or
destination of their operations in order to be
able to differentiate and market their products
and services in these countries.
140
ANNUAL REPORT 2015 | 2015 RESULTS · LATAM’S FLEET PLAN
Constantly
renovating
LATAM Airlines Group announced in 2012 the
implementation of a fleet restructuring plan
with the purpose of reducing the variety of
aircrafts that currently operates and gra-
dually phase out the less efficient ones. As
of December 2015, the company’s plan is ma-
king progress, after phasing out 19 aircrafts
in 2015, such as the last seven Dash Q200
aircrafts, three A340 aircrafts and three
A330 aircrafts, the latter will be completely
phased out from the fleet during 2016. Addi-
tionally, LATAM incorporated 23 larger, most
modern and efficient aircrafts such as A321,
Boeing 787-9 and the first Airbus A350.
At the same time, LATAM reviewed its fleet
delivery schedule for the period 2016-2018,
achieving a reduction of US$ 2.8 billion, or
36% of the fleet committed for that period,
through the deferral and sale of long and
short-haul aircrafts. The restructuring plan
main objective is to adjust capacity to the
current conditions of he market in Latin Ame-
rica, being in line with the goal of maintaining
a healthy balance and adequate liquidity level
through the decrease in investments (capex).
The fleet plan showed below reflects the cu-
rrent commitments of the Group’s fleet:
LATAM’S
FLEET PLAN
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ANNUAL REPORT 2015 | 2015 RESULTS · LATAM’S FLEET PLAN
AT yEAR END
| PASSENGER AIRcRAFT
2015
2016
2017
2018
Note: This table does include three B767-
300F and on B777-200F that LATAM is cu-
rrently leasing to a third party.
NARROW BODY
AIRBUS A319 - 100
AIRBUS A320 - 200
AIRBUS A320 NEO
AIRBUS A321 - 200
AIRBUS A321 NEO
TOTAL
WIDE BODY
AIRBUS A330 - 200
BOEING 767 - 300
AIRBUS A350 - 900
BOEING 777 - 300 ER
BOEING 787 - 8
BOEING 787 - 9
TOTAL
| cARGO AIRcRAFT
BOEING 777 - 200F
BOEING 767 300F
TOTAL
TOTAL FLEET
50
154
0
36
0
48
146
2
47
0
48
136
16
47
0
48
130
24
47
6
240
243
247
255
10
38
1
10
10
7
76
3
8
11
0
37
7
10
10
12
76
3
7
10
0
36
11
10
10
14
81
2
6
8
0
34
13
7
10
18
82
2
6
8
327
329
336
345
LATAM’S
FLEET PLAN
FLEET COMMITMENT (US$ MILLIONS)
1,689
1,952
1,409
1,486
142
ANNUAL REPORT 2015 | SUSTAINABILITY
SUSTAINABILITY
VISION
SUSTAINABILITY
GOVERNANCE
CLIMATE
CHANGE
CORPORATE
CITIZENSHIP
RELATION WITH
GROUPS OF INTEREST
143
ANNUAL REPORT 2015 | SUSTAINABILITY · SUSTAINABILITY VISION
Our ambition to be
among the best
LATAM Airlines Group aims to be among
the three best airlines in the world, which
means much more than to make progress in
the economic performance only, but also to
obtain the customers’ preference, improve
connectivity in the region and to consolidate
an internal culture of work. The vision of
the company is based on relationships and
business dynamics that endure over time,
under which the creation of value is shared
by the shareholders, investors, employees,
customers, suppliers and the community as a
whole, under which the commitment with the
future is built everyday at present.
Looking forward to materialize this vision,
LATAM Airlines Group is oriented by the
corporate Sustainability Strategy 2015-2018,
strategy that answers the most relevant
issues identified by the company, which were
defined in 2013 and are revalidated each
year to maintain the leadership of LATAM in
the
industry. The corporate Sustainability
Strategy is in line with the strategic pillars
of the business– network leadership, leader
brand
cost
competitiveness, operational strength and
risk management– and is comprised by three
dimensions:
customer experience,
and
SUSTAINABILITY
VISION
• Sustainability Governance: the Company
adopts a clear and transparent positioning in
relation to its commitments and objectives;
the internal structure of decision making,
execution and monitoring of results support
the execution of the strategy;
144
ANNUAL REPORT 2015 | SUSTAINABILITY · SUSTAINABILITY VISION
• Climate Change: to balance a risk mitigation
vision and to look for new opportunities, to
manage real and potential environmental
impact of the business, emphasizing the carbon
footprint reduction, the use of alternative
sources of energy and eco-efficiency actions;
• Corporate Community: make the business
and the relationships of LATAM within its value
chain a socioeconomic catalyst that provides
environmental balance in the region through
professional development actions, private
social investment, incentive to good practices
and tourism promotion.
three dimensions determine
These
the
behavior of the company and helps to face
responsibly the different stakeholder groups
of the company in its leading role in the region.
In the day-to-day operation, the strategy of
LATAM Airlines Group implements initiatives
carried out jointly by different areas of the
company and monitors material issues, in
other words those important for the company
and the sector in which it operates. The
definition of these topics allows managing
critical issues, defining and following up the
goals, to establish action plans for the main
impacts and to communicate commitment of
the company in line with the expectations and
needs of its stakeholders.
Finally, 2015 was a year of accomplishments
and new projects for LATAM Airlines Group. For
the second year in a row, it was incorporated
into the Dow Jones World Sustainability
Index, which chooses 319 companies that hold
the best evaluation in economic, social and
environmental issues among the 2,500 largest
companies worldwide. Worth is to highlight the
project carried out by the Vice Presidency of
corporate Affairs, who carried out a mapping
process de of the company’s stakeholders to
identify critical topics, prioritize and establish
communication channels and ultimately create
jointly actions together with the stakeholders.
SUSTAINABILITY
VISION
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ANNUAL REPORT 2015 | SUSTAINABILITY · SUSTAINABILITY GOVERNANcE
Our sustainability
management
integrates
important dimensions
We define governance as the system that
mobilize, monitors and
the
sustainability of the business. The structure
of the decision making process is one of the
most
in managing
a company, and becomes more relevant if
the company wants to leave the traditional
business and move towards and organization
that aims to deeply contribute to sustainable
development, thus broadening the business
vision and incorporating other stakeholders
to the decision making process. consequently,
in LATAM Airlines Group we are committed to
incorporate sustainability starting from the
senior management of the company, which is
materialized in a broad range of recognitions
that we have received lately, such as being part
of the Dow Jones World Sustainability Index,
the Sustainability Index of the Santiago Stock
Exchange, among others.
SUSTAINABILITY
GOVERNANcE
As part of the
implementation of the
sustainability strategy, the management report
for these subjects was transferred directly
to the executive committee of LATAM Group,
where in addition they review the company’s
sustainability strategy objectives and goals.
The company’s corporate governance practices
are subject to a new revision, thus ensuring the
fulfillment of internal policies and codes such
as the regulations in the markets where we
operate. The decision-making process and the
commercial activities must include the ethical
principles and behavior defined in the code of
conduct of LATAM Group.
The code of conduct was published in 2014 and
every employee was trained on its knowledge
and implementation, thus providing orientation
and unique guidelines for the relationships with
the different stakeholders.
Looking forward to guarantee the proper
relationship with the representatives of
governments and associations, we have
LATAM’s code of conduct as the activity
framework, its Anti-corruption Policies, Gifts
Policies, Entertainment and Trips for Public
Employees and Third Representatives, and
also Gifts, Entertainment and Hospitality
for customers and Suppliers, besides the
unrestricted adherence to the applicable law
in the different countries where we operate.
With regards to the agreements or financial
contributions on behalf of the Group for
charity, socials or politics, the code of conduct
determines that the approval of the Board of
Directors is needed.
Specifically in terms of Sustainability, the
LATAM Airlines Group has signed the Global
Pact and therefore is governed by the ISO
26,000 principles. The company reports
annually its results in a Sustainability Report
with GRI guidelines, and is parte of the Dow
Jones World Sustainability Index and of the
carbon Disclosure Project.
146
ANNUAL REPORT 2015 | SUSTAINABILITY · cLIMATE cHANGE
Our commitment to
the enviroment
cLIMATE
cHANGE
The United Nations Framework convention
on climate change (UNFccc) defines this
phenomenon as a change in climate that alters
the world’s atmosphere, causing significant
harmful effects to the composition, resilience
or productivity of natural ecosystems. The key
objective in order to combat climate change
is to stabilize and control greenhouse gas
emissions.
LATAM Airlines Group is aware of the impacts
generated by the airline industry (which is
responsible for 2% of the greenhouse gas
emissions that can be attributed to human
activity), and developed a climate change
strategy which allows the company to
address initiatives in two fields: impact and
profitability, with actions directly related to
the impacts of our operations, being handled
from the risk management point of view, and
are also controlled and mitigated through our
management system; and also the involvement
and acknowledgement, whose
is
centered in awareness-raising initiatives and
training of our employees and the promotion
of actions and good environmental practices.
focus
LATAM Airlines Group’s Environmental
Management System, which is aligned with
ISO 14,001 requirements for ground operations
and the Environmental Assessment (IEnvA)
IATA for
system developed
flight operations, establishes controls on
significant environmental aspects, efficiency
programs, the optimization of processes and
jointly with
risk management related to the operations’
emissions. During 2015 there were two
important milestones: LAN cARGO became
the first cargo airline operating at the
International Miami Airport that received the
international certification
ISO 14001:2004,
and also we reached the certification for the
second stage of IEnvA, the highest possible,
for the international flights operated by LAN
from chile.
incorporates
imply environmental
Most of our greenhouse gas emissions are a
result of the burning of fuel, making efficiency
gains, consumption reductions and good
management key issues in this field. For this
purpose we have set in motion a fleet renovation
plan with the acquisition of modern aircrafts
that
latest-generation
the
engines and the adoption of efficiency criteria
improvements
that
in decisions related to the fleet, therefore
we have become one of the most efficient
airlines in terms of emissions per kilometer-
industry
passenger carried
worldwide. During 2015, the fuel efficiency
programs of LAN and TAM were unified in one
program named LATAM Fuel, which manages
every fuel savings initiatives, and includes
operational en technological projects going
from the efficiency
improvement of our
operations to the air traffic management and
the incorporation of structural development
on aircrafts. The results of the implementation
of these initiatives during 2015 generated fuel
savings equivalent to more than 38 million
in the airline
147
ANNUAL REPORT 2015 | SUSTAINABILITY · cLIMATE cHANGE
gallons and reduction of its cO2 emissions by
360 thousand tons, and also reduced noise and
improved local air quality.
We are committed with the goal of the industry
to achieve carbon-neutral growth by 2020,
for this purpose we accomplished different
initiatives to reduce our carbon footprint.
The development of sustainable alternative
energies is a key issue for the air transport
industry, and LATAM Airlines Group is aligned
with these efforts and will continue working
to develop and in the future to incorporate
sustainable alternative fuels. Besides the in-
flight fuel efficiency, we have energy efficiency
initiatives on
In addition, starting
from 2012 in Peru and 2014 in colombia, we
neutralized ground emissions through local
reforestation programs.
land.
The strategic challenge of LATAM Airlines
Group is to become a leader and worldwide
referent in climate change, thus contributing
to the efficiency and competitiveness of the
company.
cLIMATE
cHANGE
148
ANNUAL REPORT 2015 | SUSTAINABILITY · cORPORATE cITIZENSHIP
Our commitment
to the region
cORPORATE
cITIZENSHIP
corporate citizenship seeks to fortify the
relationships with customers, employees,
communities, governments and suppliers, thus
helping to build positive relationships that
contribute to the company, to the society and
to the destinations where we operate. This
enables the company to get “Social License”
to operate, namely the vote of confidence of
stakeholders. corporate citizenship includes
philanthropy, but expands the framework to
include actions that improves social impact.
The Sustainability corporate Strategy for
2015-2018 defines four focuses of action that
involve the communities in the destinations we
operate and our people:
results and also over people and customers. To
ensure that this distinguishing experience that
LATAM wants to bring to its customers to be
consistent over time –independently from the
country where it operates– the company has
a common purpose to address, that motivates
and mobilizes the actions of over 51 thousand
people that belongs to the company’s team.
Looking forward to meet this objective,
LATAM has three guidelines or pillars that
guide the behavior to offer a memorable and
differentiating service:
security: we guarantee our security at all
times, also the security of our team and our
customers.
1. Support the internal culture of the com-
pany and the well being of our employees.
Be Kind: we care for the needs and emotions
of people and we resolve with kindness.
2. Integrate the social and environmental va-
riables in products and services that improve
the customers’ experience.
efficiency: we strive to do better all the time
and focus on what’s important for the custo-
mer.
3. contribute to the economic development
of the destinations where it operates.
4. contribute to the preservation of cultural
and environmental heritage in Latin America.
A key issue for LATAM Group’s business is to
offer a service of excellence and to provide a
unique experience for customers, for both the
passenger and cargo businesses. In this regard,
the projects related to the Brand and customers’
Experience pillar are very important.
This strategy is in line with the two strategic
pillars of the company: “Brand and clients’
Experience” and “Organizational Strength”,
crucial elements to promote a culture where
each and every one of our actions and decisions
considers in a balanced manner its impact over
improve our processes from
We seek to
the perspective of a culture of continuous
improvement, working to conquer the trust
and loyalty of our customers; starting with
the planning, flight offer, check-in or boarding,
to continue with the end of the trip or the
149
ANNUAL REPORT 2015 | SUSTAINABILITY · cORPORATE cITIZENSHIP
delivery of the merchandise transported. We
are working with the belief that we are enabled
to transform the experience of a traditional
trip into an agile, fast, with less waiting times
at the airport, less period of time between
connections, more options on onboard
entertainment and higher information in the
case of a contingency.
The most
important project related to
customers’ experience is the “Twist” project,
which establishes
transversally a new
organizational culture. During 2015 the first
stages of this project were implemented at
the Brasilia Airport and in the contact center
in Santiago.
The first step was to identify how the teams
are organized, the demand flow, the customers’
profiles and the needs of the units. The
proposal is to create a global strategy, with
specifications, and that adapts to the local
requirements and realities.
cORPORATE
cITIZENSHIP
changes
implemented
to
routines and monitored
During three months, the transformation
the
teams
operational
the
results. More than 40 initiatives were carried
out, covering activities such as the ways to
apply the company’s policies, the distribution
of roles and responsibilities, and also to adopt
monitoring tools for the client’s satisfaction
in real time. A key element was the stronger
commitment of employees due to the higher
autonomy in the decision making process.
Results were positive in the three monitored
satisfaction,
customers’
dimensions:
commitment and productivity of employees.
The initiative will expand to the rest of the
services’ network during 2016 and 2017.
The scope of the impact is broad, due to the
fact that we operate en different countries;
and we have an impact in every community
where we operate through the connectivity
and the
local effect of our operations.
consequently, in relation to our relationship
with the communities, we have defined that
our concern is to contribute to the economic
development and the conservation of the
cultural and environmental heritage of Latin
America.
With regards to the suppliers management, 2015
was a year in which the priority was the internal
alignment, where policies and procedures
of acquisitions of product and services and
implemented;
suppliers management were
thus consolidating the acquisition policies of
LATAM, which is based on the code of Ethics
and Anti-corruption of LATAM Group, besides
the specific regulations in the countries where
the company operates. The document results
from an extended process developed by the
Acquisitions, compliance and Legal teams.
This new policy defines the relationship with
suppliers, particularly with regards to risk
management, codes of ethics, legal compliance
and social and environmental criteria.
We aim to contribute to the development of the
region through the promotion of sustainable
in
tourism, thus positioning as
sustainability in the region.
leaders
150
ANNUAL REPORT 2015 | SUSTAINABILITY · cORPORATE cITIZENSHIP
With regards to sustainable tourism, in 2015
the program I care for my Destiny (cuido
mi Destino, cMD) has existed for 6 years in
Argentina, chile, colombia, Ecuador and Peru,
and for the first time in Brazil. In this program,
students and community members jointly work
in the recovery of public spaces with a touristic
value, such as monuments and/ or important
constructions in each city. As part of the cMD
program, students and authorities have talks
about touristic awareness, the environment
and local culture, thus promoting responsible
tourism and historic and cultural heritage care
cultural in Latin America. Since its creation
in 2009, the program has been developed
59 times in 24 sites in Latin America, where
over 3,000 students and volunteers from the
LATAM Airlines Group has participated.
Finally, through our operations we aim to
support Social Investment, where we have
focused on the contribution that we can
provide to non-governmental organizations,
which with their work they intend to contribute
to the development of the continent to fight
against poverty, caring for the conservation of
the environmental, citizens and human rights
protection. We support these initiatives with
the transportation of volunteers or through
direct donations. During 2015 LATAM donated
3,537 tickets and transported over 120 tons of
goods and articles to aid in catastrophes.
cORPORATE
cITIZENSHIP
151
ANNUAL REPORT 2015 EMPLOYEES PER COUNTRY AND GENDER
17.300
8.931
7.382
5.031
1.494
1.209
881
866
1034
571
1.855
2.041
247
189
| SUSTAINABILITY · cORPORATE cITIZENSHIP
otros
737
645
| DIVERSITY OF THE ORGANIZATION
EMPLOYEES PER COUNTRY AND GENDER
NUMBER OF PEOPLE BY AGE
total
30.930
19.483
18.081
20.444
8.391
2.980
482
35
50.413
17.300
8.931
up to 30
years
31 to 40
years
41 to 50
years
51 to 60
years
61 to 70
years
70+
years
total
NUMBER OF PEOPLE BY WORKING LIFE
18.290 10.960 10.726 4.265
6.172
50.413
up to
3 years
4 - 6
years
7 - 9
years
10 - 12
years
12+
years
total
7.382
5.031
1.494
1.209
881
866
1034
571
1.855
2.041
247
189
otros
737
645
total
30.930
19.483
cORPORATE
cITIZENSHIP
NUMBER OF PEOPLE BY AGE
18.081
20.444
8.391
2.980
482
35
50.413
up to 30
years
31 to 40
years
41 to 50
years
51 to 60
years
61 to 70
years
70+
years
total
NUMBER OF PEOPLE BY WORKING LIFE
18.290 10.960 10.726 4.265
6.172
50.413
up to
3 years
4 - 6
years
7 - 9
years
10 - 12
years
12+
years
total
152
ANNUAL REPORT 2015 NUMBER OF PEOPLE BY CITIZENSHIP AND GENDER
441
364
38
38
35
15
63
51
169
149
16
10
14
8
11
14
| SUSTAINABILITY · cORPORATE cITIZENSHIP
otros
| DIVERSITY OF MANAGEMENT
NUMBER OF PEOPLE BY CITIZENSHIP AND GENDER
NUMBER OF PEOPLE BY AGE
total
1.045
391
119
727
407
163
20
1.436
up to 30
years
31 to 40
years
41 to50
years
51 to 60
years
61 to 70
years
total
NUMBER OF PEOPLE BY WORKING LIFE
334
296
243
191
372
1.436
up to
3 years
4 - 6
years
7 - 9
years
10 - 12
years
12+
years
total
441
364
38
38
35
15
63
51
169
149
16
10
14
8
11
14
otros
total
1.045
391
NUMBER OF PEOPLE BY AGE
119
727
407
163
20
1.436
up to 30
years
31 to 40
years
41 to50
years
51 to 60
years
61 to 70
years
total
NUMBER OF PEOPLE BY WORKING LIFE
334
296
243
191
372
1.436
up to
3 years
4 - 6
years
7 - 9
years
10 - 12
years
12+
years
total
153
cORPORATE
cITIZENSHIP
ANNUAL REPORT 2015 NUMBER OF PEOPLE BY CITIZENSHIP AND GENDER
NUMBER OF PEOPLE BY CITIZENSHIP AND GENDER
5
| SUSTAINABILITY · cORPORATE cITIZENSHIP
2
1
0
0
0
0
| cORPORATE DIVERSITY
1
total
5
2
1
1
9
0
0
0
0
0
NUMBER OF PEOPLE BY CITIZENSHIP AND GENDER
total
9
0
NUMBER OF PEOPLE BY AGE
0
1
4
3
1
NUMBER OF PEOPLE BY AGE
0
31 to 40
years
5
1
2
41 to50
years
1
0
0
0
4
3
1
31 to 40
years
9
41 to50
years
51 to60
years
61 to70
years
70+
years
51 to60
years
61 to70
years
70+
years
total
NUMBER OFPEOPLE BY WORKING LIFE
1
NUMBER OFPEOPLE BY WORKING LIFE
0
2
5
-
-
2
total
2
9
5
0
-
-
2
up to
3 years
9
4 - 6
years
7 - 9
years
10 - 12
years
12+
years
9
total
9
total
NUMBER OF PEOPLE BY AGE
up to
3 years
4 - 6
years
7 - 9
years
10 - 12
years
12+
years
1
| SALARY MULTIPLE BY MANAGEMENT LEVEL
4
0
3
1
31 to 40
years
41 to50
years
51 to60
years
61 to70
years
70+
years
total
9
total
EXECUTIVE
LEVEL
1,36 times
MEDIUM
LEVEL
GENERAL
ROLE
1,07 times
0,96 times
EXECUTIVE
LEVEL
1,36 times
NUMBER OFPEOPLE BY WORKING LIFE
cORPORATE
cITIZENSHIP
MEDIUM
LEVEL
2
GENERAL
ROLE
up to
3 years
5
1,07 times
-
0,96 times
4 - 6
7 - 9
years
years
EXECUTIVE
LEVEL
1,36 times
MEDIUM
LEVEL
GENERAL
ROLE
1,07 times
0,96 times
-
2
10 - 12
years
12+
years
9
total
154
ANNUAL REPORT 2015 | SUSTAINABILITY · RELATIONSHIP WITH GROUPS OF INTEREST
In 2015, the Vice Presidency of corporate
Affairs leaded a process whose main objectives
were the following: identify LATAM Airlines
Group’s stakeholders and define their critical
issues; determine those groups of priority
interest and map its importance; establish
and systematize a management model to
determine the corporate relationships with
stakeholders; identify areas of bundling with
each stakeholder using follow-up indicators;
establish permanent communication and
bundling channels, coordinated, transparent
and defined, with the purpose to achieve
articulated and reliable relationships; and
finally generate joint actions that enables the
company to identify gaps and opportunities.
revision of
The fieldwork was based on the analysis of
the most recent Materiality Process and
internal documentation,
the
such as: code of conduct, annual report and
sustainability report, among others. One
criterion was established with this information,
which considered two variables: relevance
and influence. The analysis of the information
available and the variable crossing resulted
on the identification of 19 representative and
generic stakeholder groups:
· Academy
· Shareholders
· Trade Associations
· Risk rating agencies and market analysts
· cargo clients
· Passenger clients
· collaborators
· Local communities
· Airport Dealers
· Public and regulatory entities
· Sector Specialists
· Industry
· Investors
· Media
· ONG / Foundations
· International Organizations
· Primary Suppliers
· Secondary Suppliers
· Unions
· Third parties and subcontractors
These stakeholder groups were divided into
four categories:
crucial: stakeholders that may establish the
terms of a resolution. Their influence has
high impact on the company.
Optional: stakeholders that possess high
level of influence. Their mobility depends on
the impact that their action might have.
Vigilant: they have a strong ability to
influence the company; nonetheless their
level of influence is medium or low.
Inactive: the
lack of action of these
stakeholders determines their observant
category; they hold a medium or low level of
influence and impact.
Thanks to the relationships that the company
maintains with the governmental institutions and
the sector entities in the different markets where
it operates, LATAM has an active voice facing
issues that influence direct or indirectly on its
business strategy, which is always carried out in full
compliance with the applicable law and the rules
contained in the code of conduct of LATAM and
its internal policies. Over time, we have sought to
strengthen our participation in trade or industrial
associations that represent the airline industry.
Globally, we act through IATA, which is a
key discussion space of new technologies,
operational security and current and future
challenges of the airline sector. At a regional
level, we also participate in the Latin American
and caribbean Air Transport Association
(ALTA), where Enrique cueto, cEO of LATAM
Airlines Group, became chairman in 2015, fact
that reinforces the commitment of the LATAM
Airlines Group with the airline industry.
With the intention to stand always for the
rightful and transparent dialogue, we seek to
obtain joint solutions and focus on efficiency
and profitability. LATAM has teams responsible
for monitoring and to participate in those
debates. In chile and in other markets, we also
work to study routes and flights that allow the
creation of tourism, jobs and profitability for
the communities where we didn’t operate in
the past, including the coordination required
with communities and local governments.
155
RELATIONSHIP WITH
GROUPS OF INTEREST
ANNUAL REPORT 2015
| FINANcIAL STATEMENT
UMAYO LAKE, PERU.
156
ANNUAL REPORT 2015 LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
PREPARED IN ACCORDANCE WITH STANDARDS ESTABLISHED
BY THE CHILEAN SUPERINTENDENCY OF SECURITIES AND INSURANCE
DECEMBER 31, 2015
CONTENTS
Consolidated Statement of Financial Position
Consolidated Statement of Income by Function
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows - Direct Method
Notes to the Consolidated Financial Statements
-
CHILEAN PESO
- ARGENTINE PESO
- UNITED STATES DOLLAR
THOUSANDS OF UNITED STATES DOLLARS
COLOMBIAN PESO
BRAZILIAN REAL
CLP
ARS
US$
THUS$ -
COP
-
BRL/R$ -
THR$
MXN - MEXICAN PESO
VEF
Contents of the notes to the interim consolidated financial statements of LATAM Airlines Group S.A.
and Subsidiaries.
- THOUSANDS OF BRAZILIAN REAL
- STRONG BOLIVAR
Notes
Page
1 - General information
2 - Summary of significant accounting policies
2.1. Basis of Preparation
2.2. Basis of Consolidation
2.3. Foreign currency transactions
2.4. Property, plant and equipment
2.5. Intangible assets other than goodwill
2.6. Goodwill
2.7. Borrowing costs
2.8. Losses for impairment of non-financial assets
2.9. Financial assets
2.10. Derivative financial instruments and hedging activities
2.11. Inventories
2.12. Trade and other accounts receivable
2.13. Cash and cash equivalents
2.14. Capital
2.15. Trade and other accounts payables
2.16. Interest-bearing loans
2.17. Current and deferred taxes
2.18. Employee benefits
2.19. Provisions
2.20. Revenue recognition
2.21. Leases
2.22. Non-current assets (or disposal groups) classified as held for sale
2.23. Maintenance
2.24. Environmental costs
3 - Financial risk management
3.1. Financial risk factors
3.2. Capital risk management
3.3. Estimates of fair value
........................................................................................................................
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8 - Trade, other accounts receivable and non-current accounts receivable
9 - Accounts receivable from/payable to related entities
10 - Inventories
11 - Other financial assets
12 - Other non-financial assets
13 - Investments in subsidiaries
14 - Intangible assets other than goodwill
15 - Goodwill
16 - Property, plant and equipment
17 - Current and deferred tax
18 - Other financial liabilities
19 - Trade and other accounts payables
20 - Other provisions
21 - Other non-financial liabilities
22 - Employee benefits
23 - Accounts payable, non-current
4 - Accounting estimates and judgments
5 - Segmental information
6 - Cash and cash equivalents
7 - Financial instruments
7.1. Financial instruments by category
7.2. Financial instruments by currency
1
4
4
7
8
9
9
10
10
10
11
12
13
13
13
14
14
14
14
15
15
16
16
17
17
17
18
18
32
32
36
39
41
44
44
46
47
50
51
51
52
53
56
57
59
65
71
79
81
84
84
86
157
MEMORIA ANUAL 2015| FINANcIAL stAtEMENt
..........................................................................................................................................
.......................................................................................................................................
......................................................................................................
..........................................................................................................
.........................................................................
24 - Equity
25 - Revenue
26 - Costs and expenses by nature
27 - Other income, by function
28 - Foreign currency and exchange rate differences
29 - Earnings per share
30 - Contingencies
31 - Commitments
32 - Transactions with related parties
33 - Share based payments
34 - The environment
35 - Events subsequent to the date of the financial statements
.....................................................................................................................
............................................................................................................................
............................................................................................................................
...............................................................................................
...............................................................................................................
.......................................................................................................................
........................................................
86
91
92
93
94
102
103
112
117
118
122
123
158
MEMORIA ANUAL 2015| FINANcIAL stAtEMENt
LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
ASSETS
Note
6 - 7
7 - 11
12
7 - 8
7 - 9
10
17
As of
As of
December 31,
December 31,
2015
ThUS$
2014
ThUS$
753,497
651,348
330,016
796,974
183
224,908
64,015
989,396
650,401
247,871
1,378,835
308
266,039
100,708
2,820,941
3,633,558
Current assets
Cash and cash equivalents
Other financial assets
Other non-financial assets
Trade and other accounts receivable
Accounts receivable from related entities
Inventories
Tax assets
Total current assets other than non-current assets
(or disposal groups) classified as held for sale or as held
for distribution to owners
Non-current assets (or disposal groups) classified as
held for sale or as held for distribution to owners
1,960
1,064
Total current assets
Non-current assets
Other financial assets
Other non-financial assets
Accounts receivable
Intangible assets other than goodwill
Goodwill
Property, plant and equipment
Tax assets
Deferred tax assets
Total non-current assets
Total assets
7 - 11
12
7 - 8
14
15
16
17
17
2,822,901
3,634,622
89,458
235,463
10,715
1,321,425
2,280,575
84,986
342,813
30,465
1,880,079
3,313,401
10,938,657
10,773,076
25,629
376,595
17,663
407,323
15,278,517
16,849,806
18,101,418
20,484,428
LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
LIABILITIES AND EQUITY
LIABILITIES
Current liabilities
Other financial liabilities
Trade and other accounts payables
Accounts payable to related entities
Other provisions
Tax liabilities
Other non-financial liabilities
Total current liabilities
Non-current liabilities
Other financial liabilities
Accounts payable
Other provisions
Deferred tax liabilities
Employee benefits
Other non-financial liabilities
Total non-current liabilities
Total liabilities
EQUITY
Share capital
Retained earnings
Treasury Shares
Other reserves
Parent's ownership interest
Non-controlling interest
Total equity
Total liabilities and equity
Note
7 - 18
7 - 19
7 - 9
20
17
21
7 - 18
7 - 23
20
17
22
21
24
24
24
13
As of
As of
December 31,
December 31,
2015
ThUS$
2014
ThUS$
1,644,235
1,483,957
447
2,922
19,378
2,490,033
5,640,972
7,532,385
417,050
424,497
811,565
65,271
272,130
9,522,898
15,163,870
2,545,705
317,950
(178)
(6,942)
2,856,535
81,013
2,937,548
1,624,615
1,489,373
56
12,411
17,889
2,685,386
5,829,730
7,389,012
577,454
703,140
1,051,894
74,102
355,401
10,151,003
15,980,733
2,545,705
536,190
(178)
1,320,179
4,401,896
101,799
4,503,695
18,101,418
20,484,428
The accompanying Notes 1 to 35 form an integral part of these consolidated financial statements.
The accompanying Notes 1 to 35 form an integral part of these consolidated financial statements.
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LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME BY FUNCTION
For the period ended
December 31,
Note
2015
ThUS$
2014
ThUS$
Revenue
Cost of sales
Gross margin
Other income
Distribution costs
Administrative expenses
Other expenses
Other gains/(losses)
Income from operation activities
Financial income
Financial costs
Share of profit of investments accounted
for using the equity method
Foreign exchange gains/(losses)
Result of indexation units
Income (loss) before taxes
Income (loss) tax expense / benefit
NET INCOM E (LOSS) FOR THE PERIOD
Income (loss) attributable to owners
of the parent
Income (loss) attributable to
non-controlling interest
Net income (loss) for the year
EARNINGS PER SHARE
Basic earnings (losses) per share (US$)
Diluted earnings (losses) per share (US$)
25
27
26
28
17
13
29
29
9,740,045
(7,636,709)
12,093,501
(9,624,501)
2,103,336
385,781
(783,304)
(878,006)
(323,987)
(55,280)
448,540
75,080
(413,357)
37
(467,896)
481
(357,115)
178,383
(178,732)
2,469,000
377,645
(957,072)
(980,660)
(401,021)
33,524
541,416
90,500
(430,034)
(6,455)
(130,201)
7
65,233
(142,194)
(76,961)
(219,274)
(109,790)
40,542
32,829
(178,732)
(76,961)
(0.40193)
(0.40193)
(0.20125)
(0.20125)
The accompanying Notes 1 to 35 form an integral part of these consolidated financial statements.
LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period ended
December 31,
Note
2015
T hUS$
(178,732)
2014
T hUS$
(76,961)
NET INCOME (LOSS)
Components of other comprehensive income
that will not be reclassified to income before taxes
Other comprehensive income, before taxes,
gains (losses) by new measurements
on defined benefit plans
T otal other comprehensive income
that will not be reclassified to income before taxes
(14,631)
Components of other comprehensive income
that will be reclassified to income before taxes
Currency translation differences
24
(14,631)
-
-
Gains (losses) on currency translation, before tax
28
(1,409,439)
(650,439)
Other comprehensive income, before taxes,
currency translation differences
Cash flow hedges
(1,409,439)
(650,439)
Gains (losses) on cash flow hedges before taxes
18
80,387
(163,993)
Other comprehensive income (losses),
before taxes, cash flow hedges
T otal other comprehensive income
that will be reclassified to income before taxes
Other components of other comprehensive
income (loss), before taxes
Income tax relating to other comprehensive income
that will not be reclassified to income
Income tax relating to new measurements
on defined benefit plans
Accumulate income tax relating
to other comprehensive income
that will not be reclassified to income
Income tax relating to other comprehensive income
that will be reclassified to income
Income tax related to cash flow hedges in other
comprehensive income
Income taxes related to components of other
comprehensive incomethat will be reclassified to income
T otal Other comprehensive income
T otal comprehensive income (loss)
Comprehensive income (loss) attributable to
owners of the parent
Comprehensive income (loss) attributable to
non-controlling interests
T OT AL COMPREHENSIVE INCOME (LOSS)
80,387
(163,993)
(1,329,052)
(814,432)
(1,343,683)
(814,432)
17
3,911
3,911
-
-
(21,103)
47,979
(21,103)
(1,360,875)
(1,539,607)
47,979
(766,453)
(843,414)
(1,551,331)
(830,502)
11,724
(12,912)
(1,539,607)
(843,414)
The accompanying Notes 1 to 35 form an integral part of these consolidated financial statements.
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LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to owners of the parent
Change in other reserves
N o t e
Share
capital
ThUS$
Treasury
s h a r e s
Currency
translation
reserve
Cash flow
hedging
reserve
ThUS$
ThUS$
ThUS$
Actuarial gains or
losses on defined
benefit plans
reserve
ThUS$
Shares based
payments
reserve
ThUS$
Other
sundry
reserve
ThUS$
Total
other
reserve
Retained
earnings
P a r e n t ' s
ownership
interest
Non-
controlling
interest
Total
equity
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
-
-
(10,717)
(10,717)
29,642
2,635,748
1,320,179
536,190
4,401,896
101,799
4,503,695
-
-
-
-
-
-
(219,274)
(219,274)
40,542
(178,732)
(1,332,057)
-
(1,332,057)
(28,818)
(1,360,875)
(1,332,057)
(219,274)
(1,551,331)
11,724
(1,539,607)
-
-
-
-
-
-
6,005
6,005
(1,069)
(1,069)
4,936
4,936
1,034
1,034
5,970
(32,510)
(26,540)
5,970
(32,510)
(26,540)
2,545,705
(178)
(2,576,041)
(90,510)
(10,717)
35,647
2,634,679
(6,942)
317,950
2,856,535
81,013
2,937,548
Equity as of January 1, 2015
2,545,705
(178)
(1,193,871)
(151,340)
Total increase (decrease) in equity
Comprehensive income
Gain (losses)
2 4
Other comprehensive income
Total comprehensive income
Transactions with shareholders
Increase (decrease) through
transfers and other changes, equity
24-33
Total transactions with shareholders
Closing balance as of
December 31, 2015
-
(1,382,170)
(1,382,170)
-
60,830
60,830
-
-
-
-
-
-
-
-
-
-
LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to owners of the parent
Change in other reserves
Share
Treasury
translation
hedging
payments
sundry
Currency
Cash flow
Shares based
Other
Total
other
P a r e n t ' s
Non-
Retained
ownership
controlling
Total
N o t e
capital
s h a r e s
reserve
reserve
reserve
reserve
reserve
earnings
interest
interest
equity
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
Equity as of January 1, 2014
2,389,384
(178)
(589,991)
(34,508)
21,011
2,657,800
2,054,312
795,303
5,238,821
87,638
5,326,459
Total increase (decrease) in equity
Comprehensive income
Gain (losses)
2 4
Other comprehensive income
Total comprehensive income
Transactions with shareholders
-
-
-
Equity issuance
24-33
156,321
Increase (decrease) through
transfers and other changes, equity
24-33
-
Total transactions with shareholders
156,321
Closing balance as of
-
-
-
-
-
-
-
-
(603,880)
(116,832)
(603,880)
(116,832)
-
-
-
-
-
-
-
-
-
-
8,631
8,631
-
-
-
-
-
(109,790)
(109,790)
32,829
(76,961)
(720,712)
-
(720,712)
(45,741)
(766,453)
(720,712)
(109,790)
(830,502)
(12,912)
(843,414)
-
-
156,321
-
156,321
(22,052)
(13,421)
(149,323)
(162,744)
27,073
(135,671)
(22,052)
(13,421)
(149,323)
(6,423)
27,073
20,650
The accompanying Notes 1 to 35 form an integral part of these consolidated financial statements.
September 30, 2014 (Unaudited)
2,545,705
(178)
(1,193,871)
(151,340)
29,642
2,635,748
1,320,179
536,190
4,401,896
101,799
4,503,695
The accompanying Notes 1 to 35 form an integral part of these consolidated financial statements.
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LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS DIRECT – METHOD
Cash flows from operating activities
Cash collection from operating activities
Proceeds from sales of goods and services
Other cash receipts from operating activities
Payments for operating activities
Payments to suppliers for goods and services
Payments to and on behalf of employees
Other payments for operating activities
Interest received
Income taxes refunded (paid)
Other cash inflows (outflows)
Net cash flows from operating activities
Cash flows used in investing activities
Cash flows used to obtain control of subsidiaries or other businesses
Other cash receipts from sales of equity or debt
instruments of other entities
Other payments to acquire equity
or debt instruments of other entities
Amounts raised from sale of property, plant and equipment
Purchases of property, plant and equipment
Amounts raised from sale of intangible assets
Purchases of intangible assets
Other cash inflows (outflows)
Net cash flow from (used in) investing activities
Cash flows from (used in) financing activities
Amounts raised from issuance of shares
Payments to acquire or redeem the shares of the entity
Amounts raised from long-term loans
Amounts raised from short-term loans
Loans repayments
Payments of finance lease liabilities
Dividends paid
Interest paid
Other cash inflows (outflows)
Net cash flows from (used in) financing activities
Net increase (decrease) in cash and cash equivalents
before effect of exchanges rate change
Effects of variation in the exchange rate on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
CASH AND CASH EQUIVALENT S AT BEGINNING OF PERIOD
CASH AND CASH EQUIVALENT S AT END OF PERIOD
For the periods ended
December 31,
Note
2015
2014
T hUS$
T hUS$
11,372,397
88,237
13,367,838
96,931
(7,029,582)
(2,165,184)
(351,177)
43,374
(57,963)
(184,627)
(8,823,007)
(2,433,652)
(528,214)
11,589
(108,389)
(251,657)
1,715,475
1,331,439
-
518
519,460
524,370
(704,115)
57,117
(1,569,749)
91
(52,449)
10,576
(474,656)
564,266
(1,440,445)
-
(55,759)
(17,399)
(1,739,069)
(899,105)
-
-
1,791,484
205,000
(1,263,793)
(342,614)
(35,032)
(383,648)
(99,757)
156,321
4,661
1,042,820
603,151
(2,315,120)
(394,131)
(35,362)
(368,789)
(13,777)
(128,360)
(1,320,226)
(151,954)
(83,945)
(235,899)
989,396
753,497
(887,892)
(107,615)
(995,507)
1,984,903
989,396
6
6
6
6
6
The accompanying Notes 1 to 35 form an integral part of these consolidated financial statements.
LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2015
NOTE 1 - GENERAL INFORMATION
LATAM Airlines Group S.A. (the “Company”) is a public company registered with the Chilean
Superintendency of Securities and Insurance (SVS), under No.306, whose shares are quoted in
Chile on the Stock Brokers - Stock Exchange (Valparaíso) - the Chilean Electronic Stock Exchange
and the Santiago Stock Exchange; it is also quoted in the United States of America on the New York
Stock Exchange (“NYSE”) in New York in the form of American Depositary Receipts (“ADRs”)
and in Brazil BM & FBOVESPA S.A. – Stock Exchange, Mercadorias e Futuros, in the form of
Brazilian Depositary Receipts (“BDRs”).
Its principal business is passenger and cargo air transportation, both in the domestic markets of
Chile, Peru, Argentina, Colombia, Ecuador and Brazil and in a developed series of regional and
international routes in America, Europe and Oceania. These businesses are performed directly or
through its subsidiaries in different countries. In addition, the Company has subsidiaries operating
in the freight business in Mexico, Brazil and Colombia.
The Company is located in Santiago, Chile, at Avenida Américo Vespucio Sur No. 901, commune of
Renca.
Corporate Governance practices of the Company are set in accordance with Securities Market Law
the Corporations Law and its regulations, and the regulations of the SVS and the laws and
regulations of the United States of America and the U.S. Securities and Exchange Commission
(“SEC”) of that country, with respect to the issuance of ADRs, and the Federal Republic of Brazil
and the Comissão de Valores Mobiliarios (“CVM”) of that country, as it pertains to the issuance of
BDRs.
The Board of the Company is composed of nine members who are elected every two years by the
ordinary shareholders' meeting. The Board meets in regular monthly sessions and in extraordinary
sessions as the corporate needs demand. Of the nine board members, three form part of its
Directors’ Committee which fulfills both the role foreseen in the Corporations Law and the
functions of the Audit Committee required by the Sarbanes Oxley Law of the United States of
America and the respective regulations of the SEC.
The majority shareholder of the Company is the Cueto Group, which through Costa Verde
Aeronáutica S.A., Costa Verde Aeronáutica SpA, Inversiones Nueva Costa Verde Aeronáutica
Limitada, Inversiones Priesca Dos y Cía. Ltda., Inversiones Caravia Dos y Cía. Ltda., Inversiones
El Fano Dos y Cía. Ltda., Inversiones La Espasa Dos S.A., Inversiones Puerto Claro Dos Limitada,
Inversiones La Espasa Dos y Cía. Ltda., Inversiones Puerto Claro Dos y Cía. Limitada and
Inversiones Mineras del Cantábrico S.A. owns 25.00% of the shares issued by the Company, and
therefore is the controlling shareholder of the Company in accordance with the provisions of the
letter b) of Article 97 and Article 99 of the Securities Market Law, given that there is a decisive
influence on its administration.
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As of December 31, 2015, the Company had a total of 1,563 registered shareholders. At that date
approximately 3.91 % of the Company’s share capital was in the form of ADRs and approximately
0.44% in the form of BDRs.
For the period ended December 31, 2015, the Company had an average of 51,466 employees,
ending this period with a total of 50,413 employees, spread over 9,118 Administrative employees,
5,990 in Maintenance, 16,878 in Operations, 9,383 in Cabin Crew, 4,022 in Controls Crew, and
5,022 in Sales.
b)
Statement of financial position
Statement of financial position
Net Income
As of December 31, 2015
As of December 31, 2014
For the periods ended
December 31,
2015
2014
Tax No.
Company
A s s e t s
Liabilities
Equity
A s s e t s
Liabilities
Equity
Gain /(loss)
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
The main subsidiaries included in these consolidated financial statements are as follows:
96.518.860-6 Lantours Division Servicios
a)
Participation rate
Tax No.
Company
96.518.860-6 Lantours Division Servicios
Terrestres S.A. and Subsidary
96.763.900-1
Inmobiliaria Aeronáutica S.A.
9 6 . 9 6 9 . 6 8 0 - 0 Lan Pax Group S.A. and Subsidiaries
Country
of origin
Chile
Chile
Chile
Peru
Foreign
Foreign
Lan Perú S.A.
Lan Chile Investments Limited and Subsidiary
Cayman Insland
9 3 . 3 8 3 . 0 0 0 - 4 Lan Cargo S.A.
Foreign
Foreign
Connecta Corporation
Prime Airport Services Inc. and Subsidary
96.951.280-7 Transporte Aéreo S.A.
Foreign
Aircraft International Leasing Limited
96.631.520-2 Fast Air Almacenes de Carga S.A.
96.631.410-9 Ladeco Cargo S.A.
Chile
U.S.A.
U.S.A.
Chile
U.S.A.
Chile
Chile
Foreign
Foreign
Laser Cargo S.R.L.
Argentina
Lan Cargo Overseas Limited and Subsidiaries
Bahamas
9 6 . 9 6 9 . 6 9 0 - 8 Lan Cargo Inversiones S.A. and Subsidary
96.575.810-0
Inversiones Lan S.A. and Subsidiaries
59.068.920-3 Technical Trainning LATAM S.A.
Foreign
TAM S.A. and Subsidiaries (*)
Chile
Chile
Chile
Brazil
As December 31, 2015
As December 31, 2014
Functional
Currency
Direct
Indirect
Total
Direct
Indirect
Total
%
%
%
%
%
%
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
CLP
CLP
ARS
US$
CLP
CLP
CLP
BRL
9 9 . 9 9 0 0
0.0100
100.0000
9 9 . 9 9 0 0
0.0100
100.0000
99.0100
0 . 9 9 0 0
100.0000
99.0100
0 . 9 9 0 0
100.0000
99.8361
0.1639
100.0000
99.8361
0.1639
100.0000
4 9 . 0 0 0 0
21.0000
7 0 . 0 0 0 0
4 9 . 0 0 0 0
21.0000
7 0 . 0 0 0 0
9 9 . 9 9 0 0
0.0100
100.0000
9 9 . 9 9 0 0
0.0100
100.0000
9 9 . 8 9 3 9
0.0041
9 9 . 8 9 8 0
9 9 . 8 9 3 9
0.0041
9 9 . 8 9 8 0
0 . 0 0 0 0
100.0000
100.0000
0 . 0 0 0 0
100.0000
100.0000
0 . 0 0 0 0
100.0000
100.0000
0 . 0 0 0 0
100.0000
100.0000
0 . 0 0 0 0
100.0000
100.0000
0 . 0 0 0 0
100.0000
100.0000
0 . 0 0 0 0
100.0000
100.0000
0 . 0 0 0 0
100.0000
100.0000
0 . 0 0 0 0
100.0000
100.0000
0 . 0 0 0 0
100.0000
100.0000
0 . 0 0 0 0
100.0000
100.0000
0 . 0 0 0 0
100.0000
100.0000
0 . 0 0 0 0
100.0000
100.0000
0 . 0 0 0 0
100.0000
100.0000
0 . 0 0 0 0
100.0000
100.0000
0 . 0 0 0 0
100.0000
100.0000
0 . 0 0 0 0
100.0000
100.0000
0 . 0 0 0 0
100.0000
100.0000
99.7100
0 . 2 9 0 0
100.0000
99.7100
0 . 2 9 0 0
100.0000
9 9 . 8 3 0 0
0.1700
100.0000
9 9 . 8 3 0 0
0.1700
100.0000
63.0901
3 6 . 9 0 9 9
100.0000
63.0901
3 6 . 9 0 9 9
100.0000
(*)
The indirect participation percentage over TAM S.A. and Subsidiaries comes from Holdco I
S.A., entity for which LATAM Airlines Group S.A. holds a 99.9983% participation on the
economic rights. Additionally LATAM Airlines Group S.A. owns 226 voting shares of
Holdco I S.A., equivalent to 19.42% of total voting shares of that company.
Terrestres S.A. and Subsidary
96.763.900-1 Inmobiliaria Aeronáutica S.A.
5,613
39,302
5,522
14,832
91
24,470
3,229
39,920
2,289
16,854
940
23,066
2,341
1,404
2,074
1,906
96.969.680-0 Lan Pax Group S.A. and Subsidiaries (*)
519,588
1,049,232
(521,907)
640,020
1,065,157
(426,016)
(35,187)
(114,511)
Lan Perú S.A.
255,691
240,938
14,753
239,470
228,395
11,075
5,068
1,058
Lan Chile Investments Limited
and Subsidiary (*)
2,015
13
2,002
2,015
-
2,015
(13)
93.383.000-4 Lan Cargo S.A.
483,033
217,037
265,966
575,979
234,772
341,207
(74,408)
Foreign
Foreign
Connecta Corporation
37,070
38,298
Prime Airport Services Inc. and Subsidary (*) 6,683
11,180
(1,228)
(4,497)
27,431
18,120
28,853
22,897
(1,422)
(4,777)
194
279
2,844
(9,966)
740
107
Foreign
Foreign
Foreign
96.951.280-7 Transporte Aéreo S.A.
331,117
122,666
208,451
367,570
147,278
220,292
5,878
(8,983)
96.634.020-7 Ediciones ladeco América S.A.
Foreign
Aircraft International Leasing Limited
-
-
-
4
-
(4)
96.631.520-2 Fast Air Almacenes de Carga S.A.
8,985
4,641
4,344
96.631.410-9 Ladeco Cargo S.A.
Foreign
Foreign
Laser Cargo S.R.L.
Lan Cargo Overseas Limited
and Subsidiaries (*)
297
2 7
62,406
96.969.690-8 Lan Cargo Inversiones S.A. and Subsidary (*) 54,179
96.575.810-0 Inversiones Lan S.A. and Subsidiaries (*)
59.068.920-3 Technical Trainning LATAM S.A.
16,512
1,527
13
3 9
284
(12)
43,759
68,220
14,676
266
15,563
(12,601)
1,828
1,261
-
-
9,601
346
41
60,634
45,589
16,035
1,660
484
-
3,912
13
138
46,686
59,768
14,746
263
(484)
-
5,689
333
(97)
12,218
(12,711)
1,272
1,397
-
(4)
1,811
(1)
6 9
-
2,805
923
6
12
3,344
(84,603)
113
2,772
(72)
(4,276)
(4,546)
-
Foreign
TAM S.A. and Subsidiaries (*) (**)
4,711,316
4,199,223
437,953
6,817,698
5,809,529
912,634
(183,912)
171,655
(*)
The Equity reported corresponds to Equity attributable to owners of the parent, does not
include Non-controlling interest.
(**) During 2014 LATAM Airlines Group S.A. made a capital increase in TAM S.A. for the total
amount of ThUS$ 250,000.
Additionally, we have proceeded to consolidate the following special purpose entities: 1) JOL
(Japanese Operating Lease) created in order to finance the purchase of certain aircraft; 2) Chercán
Leasing Limited created to finance the pre-delivery payments on aircraft; 3) Guanay Finance
Limited created to issue a bond collateralized with future credit card receivables; 4) Private
investment funds and 5) Avoceta Leasing Limited created to finance the pre-delivery payments on
aircraft. These companies have been consolidated as required by IFRS 10.
All the entities controlled have been included in the consolidation.
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Changes in the scope of consolidation between January 1, 2014 and December 31, 2015, are
detailed below:
greater degree of judgment or complexity or the areas where the assumptions and estimates are
significant to the consolidated financial statements..
(1)
Incorporation or acquisition of companies
-
Lan Pax Group S.A., a subisidiary of Latam Airlines Group S. A., was the direct owner of
55% of Aerolane Líneas Aéreas Nacionales del Ecuador S.A.. During 2014, Lan Pax Group
S.A. obtained 100% of the economic rights in Aerolane, through its participation in the
company Holdco Ecuador S.A., who is the owner of the 45% remaining of Aerolane. By
this Lan Pax Group S.A. is the owner of 20% of shares with voting rights and is owner of
100% with the economic rights of Holdco Ecuador S.A.. As Latam Airlines Group S. A.
was controlled Aerolane Líneas Aéreas Nacionales del Ecuador S.A. through Lan Pax
Group S.A. for accounting purposes, this transaction was recorded as a transaction with
non-controlling interests.
-
In November 2014, LATAM Airlines Group S.A. acquires the remaining 50% shares of
Lufthansa Lan Technical Training S.A. becoming in subsidiary. Subsequently it changed the
business name to Technical Training LATAM S.A.
(2)
Dissolution of companies
-
In December 2014, the Company Ediciones Ladeco América S.A. subsidiary of
Lan Cargo S.A. was dissolved.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following describes the principal accounting policies adopted in the preparation of these
consolidated financial statements.
2.1.
Basis of Preparation
The consolidated financial statements of LATAM Airlines Group S.A. are for the period ended
December 31, 2015, and have been prepared in accordance with Standards an Instructions by
Chilean Superintendency of Securities and Insurance (“SVS”), which, except as provided by its
Office Circular No. 856, as detailed in the following paragraph are in accordance with International
Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board
(“IASB”) incorporated therein and with the interpretations issued by the International Financial
Reporting Standards Interpretations Committee (IFRIC).
On September 26, 2014 the law No. 20,780 was promulgated, and on September 29, 2014 was
published in the Official Journal of the Republic of Chile, which introduces modifications to the tax
system in Chile concerning income tax, among other matters. In relation to the Law,
on October 17, 2014 the SVS issued Office Circular No. 856, in which it decided that the
restatement of assets and liabilities by deferred income taxes that occur as a direct effect of the
First- Category Tax rate increase introduced by Law No. 20,780 (Tax reform) will be held in equity
and not as indicates the IAS 12. In notes 2.17 and 17 the criteria and impacts related to the
registration of the effects of the reform and the implementation of the Circular cited are detailed.
The consolidated financial statements have been prepared under the historic-cost criterion, although
modified by the valuation at fair value of certain financial instruments.
The preparation of the consolidated financial statements in accordance with described above
requires the use of certain critical accounting estimates. It also requires management to use its
judgment in applying the Company’s accounting policies. Note 4 shows the areas that imply a
The preparation of the consolidated financial statements in accordance with described above
requires the use of certain critical accounting estimates. It also requires management to use its
judgment in applying the Company’s accounting policies. Note 4 shows the areas that imply a
greater degree of judgment or complexity or the areas where the assumptions and estimates are
significant to the consolidated financial statements.
In order to facilitate the comparison, there have been some minor reclassifications to the
consolidated financial statements corresponding to the previous year.
(a)
Accounting pronouncements with implementation effective from January 1, 2015:
(i)
Standards and amendments
Date of issue
Mandatory
Application:
Annual periods
beginning on or
after
Amendment to IAS 19: Employee Benefits
November 2013
07/01/2014
(ii)
Improvements
Date of issue
Mandatory
Application:
Annual periods
beginning on or
after
Improvements to the International Financial Reporting
Standards (2012): IFRS 2: Share-based Payment; IFRS 3:
Business Combinations Therefore, IFRS 9, IAS 37, and
IAS 39 are also modified; IFRS 8: Operating Segments,
IFRS 13: Fair Value Measurement, IFRS 9 and IAS 39
were consequently changed; IAS 16: Property, Plant and
Equipment, and IAS 38: Intangible Assets; and IAS 24:
Related Party Disclosures.
Improvements to the International Financial Reporting
Standards (2013): IFRS 1: First-time Adoption of
International Financial Reporting Standards; IFRS 3:
Business Combinations; IFRS 13: Fair Value
Measurement; and IAS 40: Investment Property.
December 2013
07/01/2014
December 2013
07/01/2014
The application of standards, amendments, interpretations and improvements had no material
impact on the consolidated financial statements of the Company.
(b)
on January 1, 2015 and which has not been effected early adoption
Accounting pronouncements not yet in force for financial years beginning
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IFRS 9: Financial instruments.
December 2009
01/01/2018
IFRS 15: Revenue from contracts with customers.
May 2014
01/01/2018
Amendment to IFRS 9: Financial instruments.
November 2013
01/01/2018
Amendment to IFRS 11: Joint arrangements.
May 2014
01/01/2016
Amendment to IAS 16: Property, plant and equipment,
and IAS 38: Intangible assets.
May 2014
01/01/2016
Amendment to IAS 27: Separate financial statements.
August 2014
01/01/2016
Amendment to IFRS 10: Consolidated financial
statements and IAS 28 Investments in associates and
joint ventures.
September 2014
To be determined
Amendment IAS 1: Presentation of Financial Statements
December 2014
01/01/2016
December 2014
01/01/2016
Amendment to IFRS 10: Consolidated financial
statements, IFRS 12: Disclosure of Interests in other
entities and IAS 28: Investments in associates and joint
ventures.
(i)
Improvements
Improvements to International Financial Reporting
Standards (2012-2014 cycle): IFRS 5 Non-current assets
held for sale and discontinued operations; IFRS 7
Financial instruments: Disclosures; IAS 19 Employee
benefits and IAS 34 Interim financial reporting.
The Company’s management believes that the adoption of the standards, amendments and
interpretations described above but not yet effective would not have had a significant impact on the
Company’s consolidated financial statements in the year of their first application, except for
IFRS 15 it is still under evaluation.
On January 2016 was issued the International Financial Reporting Standard 16 Leases (IFRS 16)
which sets out the principles for the recognition, measurement, presentation and disclosure of leases
agreements by the lessor and the lessee. This standard is effective for annual periods beginning on
or after 1 January 2019. Earlier application is permitted for entities that apply IFRS 15 Revenue
from Contracts with Customers.
The IFRS 16 Leases add important changes in the accounting for lessees by introducing a similar
treatment to financial leases for all operating leases with a term of more than 12 months. This mean,
in general terms, that an asset should be recognized for the right to use the underlying leased assets
and a liability representing its present value of payments associate to the agreement. Monthly leases
payments will be replace by the asset depreciation and a financial cost in the income statement.
LATAM Airlines Group S.A. and subsidiaries are still assessing this standard to determinate the
effect on their Financial Statements, covenants and other financial indicators.
September 2014
01/01/2016
(c)
Sales of subsidiaries
2.2.
Basis of Consolidation
(a)
Subsidiaries
Subsidiaries are all the entities (including special-purpose entities) over which the Company has the
power to control the financial and operating policies, which are generally accompanied by a holding
of more than half of the voting rights. In evaluating whether the Company controls another entity,
the existence and effect of potential voting rights that are currently exercisable or convertible at the
date of the consolidated financial statements are considered. The subsidiaries are consolidated from
the date on which control is passed to the Company and they are excluded from the consolidation
on the date they cease to be so controlled. The results and flows are incorporated from the date of
acquisition.
Inter-company transactions, balances and unrealized gains on transactions between the Company’s
entities are eliminated. Unrealized losses are also eliminated unless the transaction provides
evidence of an impairment loss of the asset transferred. When necessary in order to ensure
uniformity with the policies adopted by the Company, the accounting policies of the subsidiaries are
modified.
To account for and identify the financial information to be revealed when carrying out a business
combination, such as the acquisition of an entity by the Company, shall apply the acquisition
method provided for in IFRS 3: Business combination.
(b)
Transactions with non-controlling interests
The Company applies the policy of considering transactions with non-controlling interests, when
not related to loss of control, as equity transactions without an effect on income.
When a subsidiary is sold and a percentage of participation is not retained, the Company
derecognizes assets and liabilities of the subsidiary, the non-controlling and other components of
equity related to the subsidiary. Any gain or loss resulting from the loss of control is recognized in
the consolidated income statement in Other gains (losses).
If LATAM Airlines Group S.A. and Subsidiaries retain an ownership of participation in the sold
subsidiary, and does not represent control, this is recognized at fair value on the date that control is
lost, the amounts previously recognized in Other comprehensive income are accounted as if the
Company had disposed directly from the assets and related liabilities, which can cause these
amounts are reclassified to profit or loss. The percentage retained valued at fair value is
subsequently accounted using the equity method.
(d)
Investees or associates
Investees or associates are all entities over which LATAM Airlines Group S.A. and Subsidiaries
have significant influence but have no control. This usually arises from holding between 20% and
50% of the voting rights. Investments in associates are booked using the equity method and are
initially recognized at their cost.
2.3.
Foreign currency transactions
(a)
Presentation and functional currencies
The items included in the financial statements of each of the entities of LATAM Airlines Group
S.A. and Subsidiaries are valued using the currency of the main economic environment in which the
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entity operates (the functional currency). The functional currency of LATAM Airlines Group S.A. is
the United States dollar which is also the presentation currency of the consolidated financial
statements of LATAM Airlines Group S.A. and Subsidiaries.
(b)
Transactions and balances
Foreign currency transactions are translated to the functional currency using the exchange rates on
the transaction dates. Foreign currency gains and losses resulting from the liquidation of these
transactions and from the translation at the closing exchange rates of the monetary assets and
liabilities denominated in foreign currency are shown in the consolidated statement of income by
function except when deferred in Other comprehensive income as qualifying cash flow hedges.
(c)
Group entities
The results and financial position of all the Group entities (none of which has the currency of a
hyper-inflationary economy) that have a functional currency other than the presentation currency
are translated to the presentation currency as follows:
Assets and liabilities of each consolidated statement of financial position presented are
(i)
translated at the closing exchange rate on the consolidated statement of financial position date;
The revenues and expenses of each income statement account are translated at the exchange
(ii)
rates prevailing on the transaction dates, and
All the resultant exchange differences by conversion are shown as a separate component in
(iii)
Other comprehensive income.
The exchange rates used correspond to those fixed in the country where the subsidiary is located,
whose functional currency is different to the U.S. dollar.
Adjustments to the Goodwill and fair value arising from the acquisition of a foreign entity are
treated as assets and liabilities of the foreign entity and are translated at the closing exchange rate or
period informed.
2.4.
Property, plant and equipment
The land of LATAM Airlines Group S.A. and Subsidiaries is recognized at cost less any
accumulated impairment loss. The rest of the Property, plant and equipment are registered, initially
and subsequently, at historic cost less the corresponding depreciation and any impairment loss.
The amounts of advance payments to aircraft manufacturers are capitalized by the Company under
Construction in progress until receipt of the aircraft.
Subsequent costs (replacement of components, improvements, extensions, etc.) are included in the
value of the initial asset or shown as a separate asset only when it is probable that the future
economic benefits associated with the elements of Property, plant and equipment are going to flow
to the Company and the cost of the element can be determined reliably. The value of the component
replaced is written off in the books at the time of replacement. The rest of the repairs and
maintenance are charged to the results of the year in which they are incurred.
Depreciation of Property, plant and equipment is calculated using the straight-line method over
their estimated technical useful lives; except in the case of certain technical components which are
depreciated on the basis of cycles and hours flown.
The residual value and useful life of assets are reviewed, and adjusted if necessary, once per year.
When the carrying amount of an asset is higher than its estimated recoverable amount, its value is
reduced immediately to its recoverable amount (Note 2.8).
Losses and gains on the sale of Property, plant and equipment are calculated by comparing the
compensation with the book value and are included in the consolidated statement of income.
2.5.
Intangible assets other than goodwill
(a)
Brands, Airport slots and Loyalty program
Brands, Airport slots and Coalition and Loyalty program are intangible assets of indefinite useful
life and are subject to impairment tests annually as an integral part of each CGU, in accordance with
the premises that are applicable, included as follows:
Airport slots – Air transport CGU
Loyalty program – Coalition and loyalty program Multiplus CGU
Brand – Air transport CGU
(See Note 15)
The airport slots correspond to an administrative authorization to carry out operations of arrival and
departure of aircraft at a specific airport, within a specified period.
The Loyalty program corresponds to the system of accumulation and redemption of points that has
developed Multiplus S.A., subsidiary of TAM S.A.
The Brands, airport Slots and Loyalty program were recognized in fair values determined in
accordance with IFRS 3, as a consequence of the business combination with TAM and Subsidiaries.
(b)
Computer software
Licenses for computer software acquired are capitalized on the basis of the costs incurred in
acquiring them and preparing them for using the specific software. These costs are amortized over
their estimated useful lives, for which the Company has been defined useful lives
between 3 and 10 years.
Expenses related to the development or maintenance of computer software which do not qualify for
capitalization, are shown as an expense when incurred. The personnel costs and others costs
directly related to the production of unique and identifiable computer software controlled by the
Company, are shown as intangible Assets others than Goodwill when they have met all the criteria
for capitalization.
2.6.
Goodwill
Goodwill represents the excess of acquisition cost over the fair value of the Company’s
participation in the net identifiable assets of the subsidiary or associate on the acquisition date.
Goodwill related to acquisition of subsidiaries is not amortized but tested for impairment annually.
Gains and losses on the sale of an entity include the book amount of the goodwill related to the
entity sold.
2.7.
Borrowing costs
Interest costs incurred for the construction of any qualified asset are capitalized over the time
necessary for completing and preparing the asset for its intended use. Other interest costs are
recognized in the consolidated income statement when they are accrued.
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2.8.
Losses for impairment of non-financial assets
Intangible assets that have an indefinite useful life, and developing IT projects, are not subject to
amortization and are subject to annual testing for impairment. Assets subject to amortization are
subjected to impairment tests whenever any event or change in circumstances indicates that the
book value of the assets may not be recoverable. An impairment loss is recorded when the book
value is greater than the recoverable amount. The recoverable amount of an asset is the higher of its
fair value less costs to sell and its value in use. In evaluating the impairment, the assets are grouped
at the lowest level for which cash flows are separately identifiable (CGUs). Non-financial assets
other than goodwill that have suffered an impairment loss are reviewed if there are indicators of
reverse losses at each reporting date.
2.9.
Financial assets
The Company classifies its financial instruments in the following categories: financial assets at fair
value through profit and loss and loans and receivables. The classification depends on the purpose
for which the financial instruments were acquired. Management determines the classification of its
financial instruments at the time of initial recognition, which occurs on the date of transaction.
(a)
Financial assets at fair value through profit and loss
Financial assets at fair value through profit and loss are financial instruments held for trading and
those which have been designated at fair value through profit or loss in their initial classification. A
financial asset is classified in this category if acquired mainly for the purpose of being sold in the
near future or when these assets are managed and measured using fair value. Derivatives are also
classified as held for trading unless they are designated as hedges. The financial assets in this
category and have been designated initial recognition through profit or loss, are classified as Cash
and cash equivalents and Other current financial assets and those designated as instruments held for
trading are classified as Other current and non-current financial assets.
(b)
Loans and receivables
Loans and receivables are non-derivative financial instruments with fixed or determinable payments
not traded on an active market. These items are classified in current assets except for those with
maturity over 12 months from the date of the consolidated statement of financial position, which are
classified as non-current assets. Loans and receivables are included in trade and other accounts
receivable in the consolidated statement of financial position (Note 2.12).
The regular purchases and sales of financial assets are recognized on the trade date – the date on
which the Group commits to purchase or sell the asset. Investments are initially recognized at fair
value plus transaction costs for all financial assets not carried at fair value through profit or loss.
Financial assets carried at fair value through profit or losses are initially recognized at fair value,
and transaction costs are expensed in the income statement. Financial assets are derecognized when
the rights to receive cash flows from the investments have expired or have been transferred and the
Group has transferred substantially all risks and rewards of ownership.
The financial assets at fair value through profit or loss are subsequently carried at fair value. Loans
and receivables are subsequently carried at amortized cost using the effective interest rate method.
At the date of each consolidated statement of financial position, the Company assesses if there is
objective evidence that a financial asset or group of financial assets may have suffered an
impairment loss.
2.10. Derivative financial instruments and hedging activities
Derivatives are booked initially at fair value on the date the derivative contracts are signed and later
they continue to be valued at their fair value. The method for booking the resultant loss or gain
depends on whether the derivative has been designated as a hedging instrument and if so, the nature
of the item hedged. The Company designates certain derivatives as:
(a)
Hedge of the fair value of recognized assets (fair value hedge);
Hedge of an identified risk associated with a recognized liability or an expected
(b)
highly- Probable transaction (cash-flow hedge), or
(c)
Derivatives that do not qualify for hedge accounting.
The Company documents, at the inception of each transaction, the relationship between the hedging
instrument and the hedged item, as well as its objectives for managing risk and the strategy for
carrying out various hedging transactions. The Company also documents its assessment, both at the
beginning and on an ongoing basis, as to whether the derivatives used in the hedging transactions
are highly effective in offsetting the changes in the fair value or cash flows of the items being
hedged.
The total fair value of the hedging derivatives is booked as Other non-current financial asset or
liability if the remaining maturity of the item hedged is over 12 months, and as an other current
financial asset or liability if the remaining term of the item hedged is less than 12 months.
Derivatives not booked as hedges are classified as Other financial assets or liabilities.
(a)
Fair value hedges
Changes in the fair value of designated derivatives that qualify as fair value hedges are shown in the
consolidated statement of income, together with any change in the fair value of the asset or liability
hedged that is attributable to the risk being hedged.
(b)
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as
cash flow hedges is shown in the statement of other comprehensive income. The loss or gain
relating to the ineffective portion is recognized immediately in the consolidated statement of income
under Other gains (losses). Amounts accumulated in equity are reclassified to profit or loss in the
periods when the hedged item affects profit or loss.
In case of variable interest-rate hedges, the amounts recognized in the statement of Other
comprehensive income are reclassified to results within financial costs at the same time the
associated debts accrue interest.
For fuel price hedges, the amounts shown in the statement of Other comprehensive income are
reclassified to results under the line item Cost of sales to the extent that the fuel subject to the hedge
is used.
For foreign currency hedges, the amounts recognized in the statement of Other comprehensive
income are reclassified to income as deferred revenue resulting from the use of points, are
recognized as Income.
When hedging instruments mature or are sold or when they do not meet the requirements to be
accounted for as hedges, any gain or loss accumulated in the statement of Other comprehensive
income until that moment remains in the statement of other comprehensive income and is
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reclassified to the consolidated statement of income when the hedged transaction is finally
recognized. When it is expected that the hedged transaction is no longer going to occur, the gain or
loss accumulated in the statement of other comprehensive income is taken immediately to the
consolidated statement of income as “Other gains (losses)”.
(c) Derivatives not booked as a hedge
2.14. Capital
The common shares are classified as net equity.
Incremental costs directly attributable to the issuance of new shares or options are shown in net
equity as a deduction from the proceeds received from the placement of shares.
The changes in fair value of any derivative instrument that is not booked as a hedge are shown
immediately in the consolidated statement of income in “Other gains (losses)”.
2.15. Trade and other accounts payables
2.11.
Inventories
Inventories, detailed in Note 10, are shown at the lower of cost and their net realizable value. The
cost is determined on the basis of the weighted average cost method (WAC). The net realizable
value is the estimated selling price in the normal course of business, less estimated costs necessary
to make the sale.
2.12. Trade and other accounts receivable
Trade accounts receivable are shown initially at their fair value and later at their amortized cost in
accordance with the effective interest rate method, less the allowance for impairment losses. An
allowance for impairment loss of trade accounts receivable is made when there is objective
evidence that the Company will not be able to recover all the amounts due according to the original
terms of the accounts receivable.
The existence of significant financial difficulties on the part of the debtor, the probability that the
debtor is entering bankruptcy or financial reorganization and the default or delay in making
payments are considered indicators that the receivable has been impaired. The amount of the
provision is the difference between the book value of the assets and the present value of the
estimated future cash flows, discounted at the original effective interest rate. The book value of the
asset is reduced by the amount of the allowance and the loss is shown in the consolidated statement
of income in Cost of sales. When an account receivable is written off, it is charged to the allowance
account for accounts receivable.
2.13. Cash and cash equivalents
Cash and cash equivalents include cash and bank balances, time deposits in financial institutions,
and other short-term and highly liquid investments.
Trade payables and other accounts payable are initially recognized at fair value and subsequently at
amortized cost.
2.16.
Interest-bearing loans
Financial liabilities are shown initially at their fair value, net of the costs incurred in the transaction.
Later, these financial liabilities are valued at their amortized cost; any difference between the
proceeds obtained (net of the necessary arrangement| costs) and the repayment value, is shown in
the consolidated statement of income during the term of the debt, according to the effective interest
rate method.
Financial liabilities are classified in current and non-current liabilities according to the contractual
payment dates of the nominal principal.
2.17. Current and deferred taxes
The expense by current tax is comprised of income and deferred taxes.
The charge for current tax is calculated based on tax laws in force on the date of statement of
financial position, in the countries in which the subsidiaries and associates operate and generate
taxable income.
Deferred taxes are calculated using the liability method, on the temporary differences arising
between the tax bases of assets and liabilities and their book values. However, if the temporary
differences arise from the initial recognition of a liability or an asset in a transaction different from a
business combination that at the time of the transaction does not affect the accounting result or the
tax gain or loss, they are not booked. The deferred tax is determined using the tax rates (and laws)
that have been enacted or substantially enacted at the consolidated financial statements close, and
are expected to apply when the related deferred tax asset is realized or the deferred tax liability
discharged.
Deferred tax assets are recognized when it is probable that there will be sufficient future tax
earnings with which to compensate the temporary differences.
According to the instructions of Chilean Superintendency of Securities and Insurance in his Office
Circular No. 856 of October 17, 2014, the effects on assets and liabilities by deferred tax as a result
of the rate increase of the First Category Tax approved by Law No. 20,780 (tax reform) about
deferred income tax, according to IAS 12 should be imputed to income (loss) of period, have been
classified as Retained earnings, under Retained earnings. The subsequent amendments shall be
recognized in income (loss) of period according to IAS 12.
Except as mentioned in the previous subparagraph, the tax (current and deferred) is recognized in
income by function, unless it relates to an item recognized in Other comprehensive income, directly
in equity or from business combination. In that case the tax is also recognized in Other
comprehensive income, directly in income by function or goodwill, respectively.
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2.18. Employee benefits
(a)
Personnel vacations
Consistent with the foregoing, the Company presents the deferred revenues, generated by
anticipated sale of flight tickets and freight services, in heading Other non - financial liabilities in
the Statement of Financial Position.
The Company recognizes the expense for personnel vacations on an accrual basis.
(ii)
Frequent flyer program
(b)
Share-based compensation
The compensation plans implemented by the granting of options for the subscription and payment
of shares are shown in the consolidated financial statements in accordance with IFRS 2: Share
based payments, showing the effect of the fair value of the options granted as a charge to
remuneration on a straight-line basis between the date of granting such options and the date on
which these become vested.
(c) Post-employment and other long-term benefits
Provisions are made for these obligations by applying the method of the projected unit credit
method, and taking into account estimates of future permanence, mortality rates and future wage
increases determined on the basis of actuarial calculations. The discount rates are determined by
reference to market interest-rate curves. Actuarial gains or losses are shown in other comprehensive
income.
(d)
Incentives
The Company has an annual incentives plan for its personnel for compliance with objectives and
individual contribution to the results. The incentives eventually granted consist of a given number
or portion of monthly remuneration and the provision is made on the basis of the amount estimated
for distribution.
2.19. Provisions
Provisions are recognized when:
(i)
The Company has a present legal or implicit obligation as a result of past events;
(ii)
It is probable that payment is going to be necessary to settle an obligation; and
(iii)
The amount has been reliably estimated.
2.20. Revenue recognition
Revenues include the fair value of the proceeds received or to be received on sales of goods and
rendering services in the ordinary course of the Company’s business. Revenues are shown net of
refunds, rebates and discounts.
(a)
(i)
Rendering of services
Passenger and cargo transport
The Company shows revenue from the transportation of passengers and cargo once the service has
been provided.
The Company currently has a frequent flyer programs, whose objective is customer loyalty through
the delivery of kilometers or points fly whenever the programs holders make certain flights, use the
services of entities registered with the program or make purchases with an associated credit card.
The kilometers or points earned can be exchanged for flight tickets or other services of associated
entities.
The consolidated financial statements include liabilities for this concept (deferred income),
according to the estimate of the valuation established for the kilometers or points accumulated
pending use at that date, in accordance with IFRIC 13: Customer loyalty programs.
(iii) Other revenues
The Company records revenues for other services when these have been provided.
(b)
Interest income
Interest income is booked using the effective interest rate method.
(c) Dividend income
Dividend income is booked when the right to receive the payment is established.
2.21. Leases
(a) When the Company is the lessee – financial lease
The Company leases certain Property, plant and equipment in which it has substantially all the risk
and benefits deriving from the ownership; they are therefore classified as financial leases. Financial
leases are initially recorded at the lower of the fair value of the asset leased and the present value of
the minimum lease payments.
Every lease payment is separated between the liability component and the financial expenses so as
to obtain a constant interest rate over the outstanding amount of the debt. The corresponding
leasing obligations, net of financial charges, are included in Other financial liabilities. The element
of interest in the financial cost is charged to the consolidated statement of income over the lease
period so that it produces a constant periodic rate of interest on the remaining balance of the
liability for each year. The asset acquired under a financial lease is depreciated over its useful life
and is included in Property, plant and equipment.
(b) When the Company is the lessee – operating lease
Leases, in which the lessor retains an important part of the risks and benefits deriving from
ownership, are classified as operating leases. Payments with respect to operating leases (net of any
incentive received from the lessor) are charged in the consolidated statement of income on a
straight-line basis over the term of the lease.
2.22. Non-current assets or disposal groups classified as held for sale
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Non-current assets (or disposal groups) classified as assets held for sale are shown at the lesser of
their book value and the fair value less costs to sell.
Exposition:
2.23. Maintenance
The costs incurred for scheduled heavy maintenance of the aircraft’s fuselage and engines are
capitalized and depreciated until the next maintenance. The depreciation rate is determined on
technical grounds, according to the use of the aircraft expressed in terms of cycles and flight hours.
In case of own aircraft or under financial leases, these maintenance cost are capitalized as Property,
plant and equipment, while in the case of aircraft under operating leases, a liability is accrued based
on the use of the main components is recognized, since a contractual obligation with the lessor to
return the aircraft on agreed terms of maintenance levels exists. These are recognized as Cost of
sales.
Additionally, some leases establish the obligation of the lessee to make deposits to the lessor as a
guarantee of compliance with the maintenance and return conditions. These deposits, often called
maintenance reserves, accumulate until a major maintenance is performed, once made, the recovery
is requested to the lessor. At the end of the contract period, there is comparison between the reserves
that have been paid and required return conditions, and compensation between the parties are made
if applicable.
The unscheduled maintenance of aircraft and engines, as well as minor maintenance, are charged to
results as incurred.
2.24. Environmental costs
Disbursements related to environmental protection are charged to results when incurred.
NOTE 3 - FINANCIAL RISK MANAGEMENT
3.1.
Financial risk factors
The Company is exposed to different financial risks: (a) market risk, (b) credit risk, and
(c) liquidity risk. The program overall risk management of the Company aims to minimize the
adverse effects of financial risks affecting the company.
(a) Market risk
Due to the nature of its operations, the Company is exposed to market factors such as: (i) fuel-price
risk, (ii) exchange -rate risk, and (iii) interest -rate risk
The Company has developed policies and procedures for managing market risk, which aim to
identify, quantify, monitor and mitigate the adverse effects of changes in market factors mentioned
above.
For this, the Administration monitors the evolution of price levels and rates, and quantifies their risk
exposures (Value at Risk), and develops and implements hedging strategies.
(i)
Fuel-price risk:
For the execution of its operations the Company purchases a fuel called Jet Fuel grade 54 USGC,
which is subject to the fluctuations of international fuel prices.
Mitigation:
To cover the risk exposure fuel, the Company operates with derivative instruments (swaps and
options) whose underlying assets may be different from Jet Fuel, being possible use West Texas
Intermediate (“WTI”) crude, Brent (“BRENT”) crude and distillate Heating Oil (“HO”), which have
a high correlation with Jet Fuel and are highly liquid.
Fuel Hedging Results:
During the period ended at December 31, 2015, the Company recognized losses
of US$ 239.4 million on fuel derivative. During the same period of 2014, the Company recognized
losses of US$ 108.7 million for the same reason.
At December 31, 2015, the market value of its fuel positions amounted to US$ 56.4 million
(negative). At December 31, 2014, this market value was US$ 157.2 million (negative).
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The following tables show the level of hedge for different periods:
Positions as of December 31, 2015 (*)
Maturities
Q116
Q216
Q316
Q416
Total
Percentage of the hedge of expected consumption
value
63%
27%
27%
11%
32%
(*) The volume shown in the table considers all the hedging instruments (swaps and options).
Positions as of December 31, 2014 (*)
Maturities
Q115
Q215
Q315
Q415
Total
Percentage of the hedge of expected consumption value
30%
15%
30%
20%
24%
(*) The volume shown in the table considers all the hedging instruments (swaps and options).
Sensitivity analysis
A drop in fuel price positively affects the Company through a reduction in costs. However, also
negatively affects contracted positions as these are acquired to protect the Company against the risk
of a rise in price. The policy therefore is to maintain a hedge-free percentage in order to be
competitive in the event of a drop in price.
-5
- 2.78
-25.06
Given the fuel hedge structure during the year 2015, which considers a hedge-free portion, a
vertical fall by 5 dollars in the BRENT and JET benchmark price (the monthly daily average),
would have meant an impact of approximately US$ 125.61 million in the cost of total fuel
consumption for the same period. For the first half of 2015, a vertical rise by 5 dollars in the
BRENT and JET benchmark price (the monthly daily average) would have meant an impact of
approximately US$ 116.83 million of increased fuel costs.
(ii)
Foreign exchange rate risk:
Exposition:
The functional and presentation currency of the Financial Statements of the Parent Company is the
United States dollar, so the risk of Transactional exchange rate and Conversion arises mainly from
its own operating activities of the business, strategic and accounting of the Company are
denominated in a different currency than the functional currency.
LATAM Subsidiaries are also exposed to currency risk that impacts the consolidated results of the
Company.
Most currency exposure of LATAM comes from the concentration of business in Brazil, which are
mostly denominated in Brazilian Real (BRL), being actively managed by the company.
Additionally, the company manages the economic exposure to operating revenues in Euro (EUR)
and Pound Sterling (GBP).
In lower concentrations the Company is therefore exposed to fluctuations in others currencies, such
as: Chilean peso, Argentine peso, Paraguayan guaraní, Mexican peso, Peruvian sol, Colombian
peso, Australian dollar and New Zealand dollar.
The current hedge positions they are booked as cash flow hedge contracts, so a variation in the fuel
price has an impact on the Company’s net equity.
Mitigation:
The following table shows the sensitivity analysis of the financial instruments according to
reasonable changes in the fuel price and their effect on equity. The term of the projection was
defined until the end of the last current fuel hedge contract, being the last business day of the last
quarter of 2016.
The calculations were made considering a parallel movement of US$ 5 per barrel in the curve of the
BRENT and JET crude futures benchmark price at the end of December, 2015 and the end of
December, 2014.
Positions as of December 31, 2015
Positions as of December 31, 2014
Benchmark price
effect on equity
(US$ per barrel)
(millions of US$)
effect on equity
(millions of US$)
+5
+5.41
+24.90
The Company mitigates currency risk exposures by contracting derivative instruments or through
natural hedges or execution of internal operations.
FX Hedging Results:
With the aim of reducing exposure to exchange rate risk on operating cash flows in 2015 and 2016,
and secure the operating margin, LATAM and TAM conduct hedging through FX derivatives.
At December 31, 2015, the market value of its FX positions amounted to US$ 8.0 million (positive).
At end of December 2014 the market value was of US$ 0.1 million (negative).
During the period ended at December 31, 2015 the Company recognized gains of US$ 19.0 million
on hedging FX. During the same period of 2014 the Company recognized gains of US$ 3.8 million
on hedging FX.
At end of December 2015, the Company has contracted FX derivatives for US$ 270 million
to BRL, US$ 30 million to EUR and US$ 15 million to GBP. At end of December 2014,
the Company had contracted derivatives for US$ 100 million to BRL, while for EUR and GBP there
were no current positions.
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21
Sensitivity analysis:
A depreciation of exchange rate R$/ US$, US$/EUR and US$/GBP affects negatively the Company
for a rise of its costs in US$, however, it also affects positively the value of contracted derivate
positions.
The FX derivatives are registered for as hedges of cash flow, therefore, a variation in the exchange
rate has an impact on the market value of derivatives, whose changes impact on the Company’s net
equity.
The following table presents the sensitivity of derivative FX Forward instruments agrees with
reasonable changes to exchange rate and its effect on equity. The projection term was defined until
the end of the last current contract hedge, being the last business day of the second quarter of 2016:
Appreciation (depreciation)*
Effect at December 31, 2015
Effect at December 31, 2014
The profit or losses caused by changes in the fair value of hedging instruments are segregated
between intrinsic value and temporary value. The intrinsic value is the actual percentage of cash
flow covered, initially shown in equity and later transferred to income, while the hedge transaction
is recorded in income. The temporary value corresponds to the ineffective portion of cash flow
hedge which is recognized in the financial results of the Company (Note 18).
Due to the functional currency of TAM S.A. and Subsidiaries is the Brazilian real, the Company
presents the effects of the exchange rate fluctuations in Other comprehensive income by converting
the Statement of financial position and Income statement of TAM S.A. and Subsidiaries from their
functional currency to the U.S. dollar, which is the presentation currency of the consolidated
financial statement of LATAM Airlines Group S.A. and Subsidiaries. The Goodwill generated in the
Business combination is recognized as an asset of TAM S.A. and Subsidiaries in Brazilian real
whose conversion to U.S. dollar also produces effects in Other comprehensive income.
The following table shows the change in Other comprehensive income recognized in Total equity in
the case of appreciate or depreciate 10% the exchange rate R$/US$:
of R$/US$ / US$/EUR / US$/GBP
Millions of US$
Millions of US$
Appreciation (depreciation)
Effect at December 31, 2015
Effect at December 31, 2014
-10%
+10%
-21.28
+16.71
-9.98
+9.98
In the case of TAM S.A, which operates with the Brazilian Real as its functional currency, a large
proportion of the company’s assets liabilities are expressed in United States Dollars. Therefore, this
subsidiary’s profit and loss varies when its financial assets and liabilities, and its accounts
receivable listed in dollars are converted to Brazilian Reals. This impact on profit and loss is
consolidated in the Company.
In order to reduce the volatility on the financial statements of the Company caused by rises and falls
in the R$/US$ exchange rate, the Company has conducted transactions for to reduce the net US$
liabilities held by TAM S.A.
The following table shows the variation of financial performance to appreciate or depreciate 10%
exchange rate R$/US$:
Appreciation (depreciation)*
Effect at December 31, 2015
Effect at December 31, 2014
of R$/US$
Millons of US$
Millons of US$
-10%
+10%
+67.6
-67.6
+69.8
-69.8
(*) Appreciation (depreciation) of US$
Effects of exchange rate derivatives in the Financial Statements
of R$/US$
Millions of US$
Millions of US$
-10%
+10%
+296.41
-242.52
+464.01
-379.69
(iii)
Interest -rate risk:
Exposition:
The Company is exposed to fluctuations in interest rates affecting the markets future cash flows of
the assets, and current and future financial liabilities.
The Company is exposed in one portion to the variations of London Inter-Bank Offer Rate
(“LIBOR”) and other interest rates of less relevance are Brazilian Interbank Deposit Certificate
("ILC"), and the Interest Rate Term of Brazil ("TJLP").
Mitigation:
In order to reduce the risk of an eventual rise in interest rates, the Company has signed interest-rate
swap and call option contracts. Currently a 71% (69% at December 31, 2014) of the debt is fixed to
fluctuations in interest rate.
Rate Hedging Results:
At December 31, 2015, the market value of the positions of interest rate derivatives amounted to
US$ 39.8 million (negative). At end of December 2014 this market value was
US$ 60.7 million (negative).
Sensitivity analysis:
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23
The following table shows the sensitivity of changes in financial obligations that are not hedged
against interest-rate variations. These changes are considered reasonably possible, based on current
market conditions.
Increase (decrease)
Positions as of December 31,
2015
Positions as of December 31, 2014
futures curve
effect on profit or loss before tax
effect on profit or loss before tax
in libor 3 months
(millions of US$)
(millions of US$)
+100 basis points
-100 basis points
-26.7
+26.7
-27.53
+27.53
Much of the current rate derivatives are registered for as hedges of cash flow, therefore, a variation
in the exchange rate has an impact on the market value of derivatives, whose changes impact on the
Company’s net equity.
The calculations were made increasing (decreasing) vertically 100 basis points of the three-month
Libor futures curve, being both reasonably possible scenarios according to historical market
conditions.
Increase (decrease)
Positions as of December 31,
2015
Positions as of December 31, 2014
futures curve
effect on equity
in libor 3 months
(millions of US$)
effect on equity
(millions of US$)
+100 basis points
-100 basis points
+8.71
-9.02
+15.33
-15.95
The assumptions of sensitivity calculation must assume that forward curves of interest rates do not
necessarily reflect the real value of the compensation flows. Moreover, the structure of interest rates
is dynamic over time.
During the periods presented, the Company has no registered amounts by ineffectiveness in
consolidated statement of income for this kind of hedging.
(b)
Credit risk
Credit risk occurs when the counterparty to a financial agreement or instrument fails to discharge an
obligation due or financial instrument, leading to a loss in market value of a financial instrument
(only financial assets, not liabilities).
The Company is exposed to credit risk due to its operative and financial activities, including
deposits with banks and financial institutions, investments in other kinds of instruments, exchange-
rate transactions and the contracting of derivative instruments or options.
To reduce the credit risk associated with operational activities, the Company has established credit
limits to abridge the exposure of their debtors which are monitored permanently (mainly in case of
operational activities in Brazil with travel agents).
As a way to mitigate credit risk related to financial activities, the Company requires that the
counterparty to the financial activities remain at least investment grade by major Risk Assessment
Agencies. Additionally the company has established maximum limits for investments which are
monitored regularly.
(i)
Financial activities
Cash surpluses that remain after the financing of assets necessary for the operation are invested
according to credit limits approved by the Company’s Board, mainly in time deposits with different
financial institutions, private investment funds, short-term mutual funds, and easily-liquidated
corporate and sovereign bonds with short remaining maturities. These investments are booked as
Cash and cash equivalents and Other current financial assets.
In order to reduce counterparty risk and to ensure that the risk assumed is known and managed by
the Company, investments are diversified among different banking institutions (both local and
international). The Company evaluates the credit standing of each counterparty and the levels of
investment, based on (i) their credit rating, (ii) the equity size of the counterparty, and
(iii) investment limits according to the Company’s level of liquidity. According to these three
parameters, the Company chooses the most restrictive parameter of the previous three and based on
this, establishes limits for operations with each counterparty.
The Company has no guarantees to mitigate this exposure.
(ii) Operational activities
The Company has four large sales “clusters”: travel agencies, cargo agents, airlines and credit-card
administrators. The first three are governed by International Air Transport Association, international
(“IATA”) organization comprising most of the airlines that represent over 90% of scheduled
commercial traffic and one of its main objectives is to regulate the financial transactions between
airlines and travel agents and cargo. When an agency or airline does not pay their debt, they are
excluded from operating with IATA’s member airlines. In the case of credit-card administrators,
they are fully guaranteed by 100% by the issuing institutions.
The exposure consists of the term granted, which fluctuates between 1 and 45 days.
One of the tools the Company uses for reducing credit risk is to participate in global entities related
to the industry, such as IATA, Business Sales Processing (“BSP”), Cargo Account Settlement
Systems (“CASS”), IATA Clearing House (“ICH”) and banks (credit cards). These institutions
fulfill the role of collectors and distributors between airlines and travel and cargo agencies. In the
case of the Clearing House, it acts as an offsetting entity between airlines for the services provided
between them. A reduction in term and implementation of guarantees has been achieved through
these entities. Currently the sales invoicing of TAM Linhas Aéreas S.A. related with travel agents
and cargo agents for domestic transportation in Brazil is done directly by TAM Linhas Aéreas S.A.
Credit quality of financial assets
The external credit evaluation system used by the Company is provided by IATA. Internal systems
are also used for particular evaluations or specific markets based on trade reports available on the
local market. The internal classification system is complementary to the external one, i.e. for
agencies or airlines not members of IATA, the internal demands are greater.
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25
To reduce the credit risk associated with operational activities, the Company has established credit
limits to abridge the exposure of their debtors which are monitored permanently (mainly in case of
operational activities of TAM Linhas Aéreas S.A. with travel agents).The bad-debt rate in the
principal countries where the Company has a presence is insignificant.
(c)
Liquidity risk
Liquidity risk represents the risk that the Company has no sufficient funds to meet its obligations.
Because of the cyclical nature of the business, the operation, and its investment and financing needs
related to the acquisition of new aircraft and renewal of its fleet, plus the financing needs, the
Company requires liquid funds, defined as cash and cash equivalents plus other short term financial
assets, to meet its payment obligations.
The liquid funds, the future cash generation and the capacity to obtain additional funding, through
bond issuance and banking loans, will allow the Company to obtain sufficient alternatives to face its
investment and financing future commitments.
The liquid funds balance as of December 31, 2015 is US$1,361 million, invested in short term
instruments through financial high credit rating levels entities.
In addition to the liquid funds, the Company has access to short term credit line. As of
December 31, 2015, LATAM has working capital credit lines with multiple banks and additionally
has a US$130 million undrawn committed credit line.
Class of liability for the analysis of liquidity risk ordered by date of maturity as of December 31, 2015
Debtor: LATAM Airlines Group S.A. and Subsidiaries, Tax No. 89.862.200-2 Chile.
Tax No.
Creditor
Loans to exporters
Creditor
country
Currency
U p t o
9 0
d a y s
ThUS$
More than
9 0 d a y s
to one
year
ThUS$
More than
one to
three
years
ThUS$
More than
three to
five
years
ThUS$
More than
five
years
ThUS$
BBVA
9 7 . 0 3 2 . 0 0 0 - 8
97.036.000-K SANTANDER
97.030.000-7
97.004.000-5
97.003.000-K BANCO DO BRASIL
97.951.000-4
ESTADO
BANCO DE CHILE
HSBC
Bank loans
9 7 . 0 2 3 . 0 0 0 - 9
0 - E
0 - E
97.036.000-K SANTANDER
CORPBANCA
BANCO BLADEX
DVB BANK SE
Obligations with the public
0 - E
BANK OF NEW YORK
Guaranteed obligations
CREDIT AGRICOLE
BNP PARIBAS
WELLS FARGO
WILMINGTON TRUST
CITIBANK
0 - E
0 - E
0 - E
0 - E
0 - E
97.036.000-K SANTANDER
0 - E
0 - E
0 - E
0 - E
0 - E
0 - E
0 - E
0 - E
BTMU
APPLE BANK
US BANK
DEUTSCHE BANK
NATIXIS
HSBC
PK AirFinance
KFW IPEX-BANK
Other guaranteed obligations
0 - E
DVB BANK SE
Financial leases
0 - E
0 - E
0 - E
0 - E
0 - E
0 - E
0 - E
0 - E
ING
CREDIT AGRICOLE
CITIBANK
PEFCO
BNP PARIBAS
WELLS FARGO
DVB BANK SE
BANC OF AMERICA
Other loans
0 - E
0 - E
BOEING
CITIBANK (*)
Hedging derivatives
-
OTROS
Total
Chile
Chile
Chile
Chile
Chile
Chile
Chile
U.S.A.
U.S.A.
Chile
U.S.A.
Francia
U.S.A.
U.S.A.
U.S.A.
U.S.A.
Chile
U.S.A.
U.S.A.
U.S.A.
U.S.A.
France
U.S.A.
U.S.A.
Germany
U.S.A.
U.S.A.
France
U.S.A.
U.S.A.
U.S.A.
U.S.A.
U.S.A.
U.S.A.
U.S.A.
U.S.A.
-
US$
US$
US$
US$
US$
US$
U F
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
100,253
100,363
55,172
50,059
70,133
12,020
19,873
-
146
1,053
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
58,407
9 , 7 0 2
4 3 0
-
112,252
3 0 , 5 2 6
154,061
226,712
35,953
15,514
-
-
-
3 6 , 2 5 0
72,500
554,375
-
-
-
-
-
-
-
-
-
-
-
Total
ThUS$
100,253
100,363
55,172
50,059
70,133
12,020
2 2 6 , 4 8 5
55,742
154,637
227,765
Nominal
value
ThUS$
100,000
100,000
55,000
5 0 , 0 0 0
7 0 , 0 0 0
12,000
211,135
5 0 , 0 0 0
153,514
226,712
Amortization
At Expiration
At Expiration
At Expiration
At Expiration
At Expiration
At Expiration
Quarterly
Semiannual
Quarterly
Quarterly
Effective
rate
%
Nominal
rate
%
1.00
1.44
1.05
1.42
1.18
0 . 6 6
4.18
4.58
1.67
2 . 2 4
1.00
1.44
1.05
1.42
1.18
0 . 6 6
4.18
4.58
1.67
2 . 2 4
663,125
5 0 0 , 0 0 0
At Expiration
7.77
7.25
31,813
9 , 8 9 9
3 5 , 6 3 6
6,110
19,478
5,585
2 , 9 9 2
1,471
18,643
5 , 9 2 3
13,740
1,590
2,172
7 2 8
92,167
29,975
106,990
6 9 , 2 3 2
58,741
16,848
9 , 0 3 5
4 , 4 4 5
55,824
17,881
41,730
4 , 7 9 0
6,675
2 , 2 3 2
210,541
8 2 , 0 9 4
285,967
135,334
158,957
45,653
24,541
12,079
147,994
39,185
115,026
12,908
18,928
5 , 6 8 4
55,381
8 3 , 4 2 7
2 8 6 , 9 5 9
133,363
162,459
4 6 , 7 4 0
25,214
12,431
146,709
3 0 , 7 2 9
100,617
13,112
20,812
4,131
12,677
148,904
554,616
539,019
2 6 6 , 2 7 3
50,124
3 9 , 9 3 0
2 0 , 0 9 9
3 0 3 , 6 0 0
6 3 , 2 6 8
249,194
25,175
18,104
1,658
402,579
3 5 4 , 2 9 9
1,270,168
8 8 3 , 0 5 8
6 6 5 , 9 0 8
164,950
101,712
50,525
672,770
156,986
520,307
57,575
66,691
14,433
3 8 9 , 0 2 7
319,397
1,180,751
675,696
617,002
159,669
9 6 , 9 5 4
48,142
591,039
136,698
4 6 9 , 4 2 3
53,583
62,514
13,593
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Monthly
Quarterly
1.83
2 . 2 9
2.27
4.25
2 . 4 0
1.47
1.82
1.72
3 . 9 9
3 . 4 0
2 . 0 8
2 . 4 0
2 . 0 4
2.45
1.66
2 . 2 2
1.57
4.25
1.64
0 . 9 3
1.22
1.12
2.81
3 . 4 0
2.05
1.59
2 . 0 4
2.45
8 , 2 2 5
2 4 , 6 9 5
-
-
-
3 2 , 9 2 0
3 2 , 4 9 2
Quarterly
2 . 3 2
2 . 3 2
9,214
1,711
6 , 0 8 3
17,556
11,368
5,594
4 , 7 3 2
7 0 3
2 6 , 0 5 4
5 , 2 3 6
18,250
52,674
3 4 , 2 9 2
16,768
14,225
2,756
41,527
7,216
4 8 , 6 6 7
115,934
8 6 , 2 0 6
4 4 , 6 6 3
14,269
-
2 8 , 2 3 4
-
3 8 , 5 9 6
23,211
31,782
44,565
-
-
655
2 5 , 8 2 0
5 3 3
77,850
151,362
207,190
-
2 0 6 , 7 4 9
12,232
33,061
4 0 , 9 8 6
3 , 6 8 8
-
-
-
-
-
24,125
-
-
-
-
16
105,029
14,163
111,596
209,375
163,648
135,715
3 3 , 2 2 6
3 , 4 5 9
152,550
517,609
9 4 , 9 9 8
13,955
9 7 , 3 8 3
192,914
153,107
121,628
32,567
2,770
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Monthly
151,362
4 5 0 , 0 0 0
At Expiration
Quarterly
5.13
1.28
6 . 4 0
5.37
4 . 0 8
3 . 9 8
2 . 0 6
1.41
1.80
6 . 0 0
4.57
1.28
5.67
4.77
3 . 6 4
3.54
2 . 0 6
1.41
1.80
6 . 0 0
8 9 , 9 8 3
85,653
-
-
-
668,745
927,748
2 , 6 4 8 , 9 6 2
2,104,751
2,316,782
8 , 6 6 6 , 9 8 8
7,770,678
(*) Securitized bond with the future flows from the sales with credit card in United States and Canada.
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Class of liability for the analysis of liquidity risk ordered by date of maturity as of December 31, 2015
Debtor: TAM S.A. and Subsidiaries, Tax No. 02.012.862/0001-60, Brazil.
Class of liability for the analysis of liquidity risk ordered by date of maturity as of December 31, 2015
Debtor: LATAM Airlines Group S.A. and Subsidiaries, Tax No. 89.862.200-2, Chile.
26
27
Tax No.
Creditor
Bank loans
0-E
NEDERLANDSCHE
CREDIETVERZEKERING MAATSCHAPPIJ
Obligation with the public
0-E
BANK OF NEW YORK
Financial leases
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
AFS INVESTMENT IX LLC
AIRBUS FINANCIAL
CREDIT AGRICOLE -CIB
DVB BANK SE
GENERAL ELECTRIC CAPITAL
CORPORATION
KFW IPEX-BANK
NATIXIS
PK AIRFINANCE US, INC.
WACAPOU LEASING S.A.
SOCIÉTÉ GÉNÉRALE MILAN BRANCH
BANCO IBM S.A
HP FINANCIAL SERVICE
SOCIÉTÉ GÉNÉRALE
Total
Creditor
country
Currency
Up to
9 0
days
ThUS$
More than
90 days
to one
year
ThUS$
More than
one to
three
years
ThUS$
More than
three to
five
years
ThUS$
More than
five
years
ThUS$
Total
ThUS$
Nominal
value
ThUS$
Amortization
Effective
rate
%
Nominal
rate
%
Holland
U.S.A.
U.S.A.
U.S.A.
France
U.S.A.
U.S.A.
Germany
France
U.S.A.
Luxemburg
Italy
Brazil
Brazil
France
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
BRL
BRL
BRL
181
4 9 3
1,315
1,314
712
4,015
3,353
Monthly
6.01
6.01
4 4 0
65,321
397,785
8 6 , 5 9 0
521,727
1,071,863
8 0 0 , 0 0 0
At Expiration
8.17
8 . 0 0
2,771
3,715
4,542
123
3 , 8 3 4
3,345
4 , 3 3 8
1,428
5 2 0
11,993
2 6 7
188
104
7,700
11,054
-
361
11,437
6,879
7,812
21,992
1,386
31,874
8 4 6
5 6 4
3 3 0
20,527
21,830
-
2 8 4
9,050
15,973
2 2 , 6 3 5
-
3,198
85,695
1,230
188
6 2 6
18,808
15,730
-
-
-
12,429
2 3 , 0 3 0
-
14,567
214,612
-
-
-
-
-
-
-
-
-
70,925
-
-
-
-
-
-
4 9 , 8 0 6
5 2 , 3 2 9
4,542
7 6 8
24,321
3 8 , 6 2 6
128,740
2 3 , 4 2 0
19,671
344,174
2 , 3 4 3
9 4 0
1,060
43,505
4 9 , 9 9 5
Monthly
Monthly
4,500 Quarterly/Semiannual
755
Monthly
Monthly
23,761
3 6 , 8 9 9
Monthly/Quarterly
115,020 Quarterly/Semiannual
2 3 , 0 4 5
18,368
312,486
1,728
8 8 2
775
Monthly
Quarterly
Quarterly
Monthly
Monthly
Monthly
1.25
1.43
3.25
1.64
1.25
1.72
3.85
1.75
2 . 0 0
3 . 6 3
14.14
10.02
14.14
1.25
1.43
3.25
1.64
1.25
1.72
3.85
1.75
2 . 0 0
3.55
14.14
10.02
14.14
37,789
168,049
5 8 0 , 3 3 6
3 8 7 , 0 8 0
5 9 3 , 3 6 4
1,766,618
1,435,072
Tax No.
Creditor
Trade and other accounts payables
-
OTHERS
Accounts payable to related parties currents
65.216.000-K COMUNIDAD MUJER
78.591.370-1
78.997.060-2 Viajes Falabella Ltda.
0-E
0-E
BETHIA S.A. Y FILIALES
Consultoría Administrativa Profesional
INVERSORA AERONÁUTICA ARGENTINA
Total
Total consolidado
Creditor
country
Currency
Up to
9 0
days
ThUS$
More than
90 days
to one
year
ThUS$
More than
one to
three
years
ThUS$
More than
three to
five
years
ThUS$
More than
five
years
ThUS$
OTHERS
US$
CLP
BRL
Others currencies
4 4 2 , 3 2 0
3 9 , 8 2 3
301,569
218,347
14,369
114
16
9,016
Chile
Chile
Chile
Mexico
Argentina
CLP
CLP
CLP
MXN
US$
10
5
6 8
3 4 2
2 2
-
-
-
-
1,002,506
23,515
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
ThUS$
4 5 6 , 6 8 9
3 9 , 9 3 7
301,585
2 2 7 , 3 6 3
10
5
6 8
3 4 2
2 2
Nominal
value
ThUS$
4 5 6 , 6 8 9
3 9 , 9 3 7
301,585
2 2 7 , 3 6 3
10
5
6 8
3 4 2
2 2
1,026,021
1,026,021
Amortization
Effective Nominal
rate
%
rate
%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,709,040
1,119,312
3 , 2 2 9 , 2 9 8
2,491,831
2,910,146
11,459,627
10,231,771
175
MEMORIA ANUAL 2015| FINANcIAL stAtEMENt!
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!
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28
29
Class of liability for the analysis of liquidity risk ordered by date of maturity as of December 31, 2014
Debtor: LATAM Airlines Group S.A. and Subsidiaries, Tax No. 89.862.200-2 Chile.
Tax No.
Creditor
c o u n t r y
C u r r e n c y
Creditor
Up to
9 0
d a y s
ThUS$
More than
90 days
to one
y e a r
ThUS$
More than
one to
t h r e e
y e a r s
ThUS$
More than
three to
f i v e
y e a r s
ThUS$
More than
f i v e
y e a r s
ThUS$
Total
ThUS$
Nominal
v a l u e
ThUS$
Loans to exporters
97.032.000-8
97.036.000-K
97.006.000-6
97.030.000-7
76.645.030-K
97.951.000-4
Bank loans
97.023.000-9
0-E
0-E
97.036.000-K
BBVA
SANTANDER
ESTADO
BCI
ITAU
HSBC
CORPBANCA
CITIBANK
BBVA
SANTANDER
Guaranteed obligations
0-E
0-E
0-E
0-E
97.036.000-K
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
CREDIT AGRICOLE
BNP PARIBAS
WELLS FARGO
CITIBANK
SANTANDER
BTMU
APPLE BANK
US BANK
DEUTSCHE BANK
NATIXIS
HSBC
PK AirFinance US, Inc.
KFW IPEX-BANK
Other guaranteed obligations
0-E
0-E
DVB BANK SE
CREDIT AGRICOLE
Financial leases
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
ING
CREDIT AGRICOLE
CITIBANK
PEFCO
BNP PARIBAS
WELLS FARGO
DVB BANK S E
US BANK
BANC OF AMERICA
Other loans
0-E
0-E
BOEING
CITIBANK (*)
Hedging derivatives
-
OTHERS
Non - hedging derivatives
-
OTHERS
Total
Chile
Chile
Chile
Chile
Chile
Chile
Chile
Argentina
Argentina
U.S.A.
F r a n c e
U.S.A.
U.S.A.
U.S.A.
Chile
U.S.A.
U.S.A.
U.S.A.
U.S.A.
F r a n c e
U.S.A.
U.S.A.
Germany
U.S.A.
U.S.A.
U.S.A.
F r a n c e
U.S.A.
U.S.A.
U.S.A.
U.S.A.
U.S.A.
U.S.A.
U.S.A.
U.S.A.
U.S.A.
-
-
U S $
U S $
U S $
U S $
U S $
U S $
UF
ARS
ARS
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
-
-
-
-
-
-
121,945
-
-
283,438
109,536
80,097
285,218
156,757
44,925
24,091
11,849
148,622
47,600
99,012
12,738
18,091
6,048
32,904
62,540
58,821
14,152
48,667
138,380
91,743
44,705
33,201
5,455
2,912
-
-
-
-
-
-
17,621
-
-
-
64,101
83,020
286,264
160,323
46,047
24,778
12,206
147,357
30,300
98,632
12,956
19,836
4,587
-
-
34,067
-
48,667
67,095
60,834
44,615
-
-
-
100,102
45,044
55,076
100,157
15,025
12,010
16,575
1,298
1,713
1,610
18,670
9,634
35,533
19,149
5,482
2,931
1,437
18,713
5,834
11,783
1,564
2,074
6 9 6
8,199
7,864
9,137
1,643
6,083
17,555
11,240
5,604
4,701
3 2 6
7 2 0
-
6,825
-
-
-
-
-
-
48,581
18,700
23,403
3,476
55,089
29,259
106,692
57,915
16,572
8,863
4,358
56,052
17,621
35,803
4,725
6,378
2,124
24,623
23,394
27,520
5,036
18,250
52,678
33,917
16,784
14,145
6,247
2,118
4,994
20,175
-
-
-
-
-
-
-
-
-
-
36,625
190,070
698,052
347,710
73,544
52,541
26,318
376,792
78,509
259,912
31,701
28,763
3,771
100,102
45,044
55,076
100,157
15,025
12,010
204,722
19,998
25,116
288,524
284,021
392,080
1,411,759
741,854
186,570
113,204
56,168
747,536
179,864
505,142
63,684
75,142
17,226
-
-
65,726
93,798
12,134
-
14,262
3,899
10,974
46,394
-
-
-
141,679
20,831
135,929
279,607
208,708
158,102
52,047
12,028
5,750
185,577
551,360
100,000
45,000
55,000
100,000
15,000
12,000
188,268
17,542
21,050
282,967
273,569
351,217
1,302,968
684,114
180,341
107,645
53,390
648,158
155,279
454,230
59,005
69,721
16,088
64,246
91,337
126,528
20,413
115,449
252,205
191,672
139,325
50,569
11,981
5,462
179,507
450,000
180,583
209,730
-
-
209,778
104,852
11,702
30,761
48,667
7,311
2 4 5
98,686
93,513
1,002
574,711
6 2 8
-
-
-
1,630
7 3 0
776,881
2,422,427
1,480,395
2,397,068
7,651,482
6,985,489
(*) Securitized bond with the future flows from the sales with credit card in United States and Canada.
Amortization
At expiration
At expiration
At expiration
At expiration
At expiration
At expiration
Quarterly
Monthly
Monthly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Monthly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Monthly
Monthly
At expiration
Quarterly
-
-
Effective
Nominal
r a t e
%
r a t e
%
0.40
0.34
0.52
0.47
0.65
0.50
-
-
4.85
31.00
33.00
2.33
-
-
1.68
2.13
2.26
2.24
1.32
1.64
1.63
3.99
3.25
1.86
2.29
1.86
2.10
-
-
2.00
1.73
-
-
4.84
1.20
6.40
5.35
4.14
3.98
1.89
-
1.41
1.74
6.00
-
-
-
0.40
0.34
0.52
0.47
0.65
0.50
-
-
4.85
31.00
33.00
2.33
-
-
1.43
2.04
1.57
1.49
0.78
1.04
1.03
2.81
3.25
1.81
1.48
1.86
2.10
-
-
2.00
1.73
-
-
4.33
1.20
5.67
4.76
3.68
3.53
1.89
-
1.41
1.74
6.00
-
-
Class of liability for the analysis of liquidity risk ordered by date of maturity as of December 31, 2014
Debtor: TAM S.A. and Subsidiaries, Tax No. 02.012.862/0001-60, Brazil.
Tax No.
Creditor
Bank loans
0-E
NEDERLANDSCHE
CREDIETVERZEKERING MAATSCHAPPIJ
Obligation with the public
Creditor
country
Currency
Up to
9 0
days
ThUS$
More than More than More than
o n e t o
three
years
ThUS$
90 days
t o o n e
year
ThUS$
five
years
ThUS$
three to More than
five
years
ThUS$
Total
ThUS$
Nominal
value
ThUS$
Amortization
Effective Nominal
rate
%
rate
%
Holland
U S $
184
493
1,315
1,315
1,369
4,676
3,796
Monthly
6.01
6.01
0-E
THE BANK OF NEW YORK
U.S.A.
U S $
14,639
82,006
481,920
148,037
880,604
1,607,206
1,100,000
At Expiration
7.99
7.19
Financial leases
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
AFS INVESTMENT IX LLC
AIRBUS FINANCIAL
CREDIT AGRICOLE-CIB
CREDIT AGRICOLE -CIB
DVB BANK SE
DVB BANK SE
GENERAL ELECTRIC CAPITAL
CORPORATION
KFW IPEX-BANK
NATIXIS
PK AIRFINANCE US, INC.
WACAPOU LEASING S.A.
SOCIÉTÉ GÉNÉRALE MILAN BRANCH
BANCO DE LAGE LANDEN BRASIL S.A
BANCO IBM S.A
HP FINANCIAL SERVICE
SOCIETE AIR FRANCE
SOCIÉTÉ GÉNÉRALE
U.S.A.
U.S.A.
U.S.A.
France
Germany
U.S.A.
U.S.A.
Germany
France
U.S.A.
Luxemburg
Italy
Brazil
Brazil
Brazil
France
France
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
BRL
BRL
BRL
EUR
BRL
2,808
3,623
2,897
1,653
3,247
206
2,512
3,596
5,121
1,392
573
9,777
8
356
276
547
155
7,701
10,709
32,805
4,683
9,470
554
11,229
11,209
9,778
4,103
1,528
27,207
-
1,118
829
-
446
20,531
28,593
-
4,514
-
767
24,278
19,167
27,874
20,694
3,559
75,066
-
3,405
1,381
-
1,351
20,522
15,908
-
-
-
-
-
14,028
28,520
-
2,852
78,964
-
4 0
-
-
206
8,548
7,736
-
-
-
-
-
5,365
87,769
-
13,226
170,509
-
-
-
-
-
60,110
66,569
35,702
10,850
12,717
1,527
38,019
53,365
159,062
26,189
21,738
361,523
8
4,919
2,486
547
2,158
51,120
63,021
35,170
10,500
12,500
1,492
36,848
50,687
139,693
25,293
19,982
344,106
-
3,817
2,229
114
1,643
Monthly
Monthly
Quarterly
Quarterly/Semiannual
Quarterly
Monthly
Monthly
Monthly/Quarterly
Quarterly/Semiannual
Monthly
Quarterly
Quarterly
Monthly
Monthly
Monthly
Monthly
Monthly
1.25
1.42
1.10
3.25
2.50
1.68
1.25
1.72
3.87
1.75
2.00
3.06
11.70
10.58
9.90
6.82
11.60
1.25
1.42
1.10
3.25
2.50
1.68
1.25
1.72
3.87
1.75
2.00
3.58
11.70
10.58
9.90
6.82
11.60
Other loans
0-E
COMPANHIA BRASILEIRA
DE MEIOS DE PAGAMENTO
Total
Brazil
BRL
30,281
15,576
-
-
-
45,857
45,857
Monthly
4.23
4.23
83,851
231,444
714,415
310,392
1,175,126
2,515,228
1,947,868
176
MEMORIA ANUAL 2015| FINANcIAL stAtEMENt!
!
!
!
30
31
Class of liability for the analysis of liquidity risk ordered by date of maturity as of December 31, 2014
Debtor: LATAM Airlines Group S.A. and Subsidiaries, Tax No. 89.862.200-2, Chile.
Tax No.
Creditor
Trade and other accounts payables
-
OTHERS
Creditor
country
Currency
Up to
9 0
days
ThUS$
More than More than More than
one to
three
years
ThUS$
90 days
to one
year
ThUS$
three to
five
years
ThUS$
OTHERS
US$
USD
CLP
BRL
Others currencies
5 2 9 , 0 4 3
1,107
23,878
3 8 0 , 7 6 6
2 2 4 , 0 4 0
2 6 , 4 8 3
10,449
241
13
2 2 8
More than
five
years
ThUS$
-
-
-
-
-
-
-
-
-
Total
ThUS$
555,526
11,556
24,119
380,779
2 2 4 , 2 6 8
2
6
2 7
Nominal
value
ThUS$
Amortization
Effective Nominal
rate
%
rate
%
555,526
11,431
24,119
380,779
2 2 4 , 2 6 8
-
Quarterly
-
-
-
2
6
2 7
-
-
-
-
2.11
-
-
-
-
-
-
-
2.11
-
-
-
-
-
-
1,196,283
1,196,158
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,817,431
1,045,739
3,136,842
1,790,787
3,572,194 11,362,993
10,129,515
Accounts payable to related parties currents
65.216.000-1 COMUNIDAD MUJER
78.591.370-1
0-E
BETHIA S.A. AND SUBSIDIARIES
INVERSORA AERONÁUTICA ARGENTINA
Chile
Chile
Argentina
CLP
CLP
US$
Total
Total consolidated
2
6
2 7
-
-
-
1,158,869
37,414
The Company has fuel, interest rate and exchange rate hedging strategies involving derivatives
contracts with different financial institutions. The Company has margin facilities with each financial
institution in order to regulate the mutual exposure produced by changes in the market valuation of
the derivatives.
At the end of 2014, the Company provided US$ 91.8 million in derivative margin guarantees, for
cash and stand-by letters of credit. At December 31, 2015, the Company had provided
US$ 49.6 million in guarantees for Cash and cash equivalent and stand-by letters of credit. The fall
was due at i) maturity of hedge contracts, ii) acquire of new fuel purchase contracts, and iii)
changes in fuel prices, exchange rate and interest rates.
3.2.
Capital risk management
The Company’s objectives, with respect to the management of capital, are (i) to comply with the
restrictions of minimum equity and (ii) to maintain an optimal capital structure.
The Company monitors its contractual obligations and the regulatory limitations in the different
countries where the entities of the group are domiciled to assure they meet the limit of minimum net
equity, where the most restrictive limitation is to maintain a positive net equity.
Additionally, the Company periodically monitors the short and long term cash flow projections to
assure the Company has adequate sources of funding to generate the cash requirement to face its
investment and funding future commitments.
The Company international credit rating is the consequence of the Company capacity to face its
long terms financing commitments. As of December 31, 2015 the Company has an international
long term credit rating of BB with negative outlook by Standard & Poor’s, a BB- rating with stable
outlook by Fitch Ratings and a Ba2 rating with stable outlook by Moody’s.
3.3.
Estimates of fair value.
At December 31, 2015, the Company maintained financial instruments that should be recorded at
fair value. These are grouped into two categories:
1.
Hedge Instruments:
This category includes the following instruments:
-
-
-
Interest rate derivative contracts,
Fuel derivative contracts,
Currency derivative contracts
177
MEMORIA ANUAL 2015| FINANcIAL stAtEMENt!
!
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32
33
2.
Financial Investments:
This category includes the following instruments:
-
-
-
Investments in short-term Mutual Funds (cash equivalent),
Bank certificate of deposit – CBD,
Private investment funds
The Company has classified the fair value measurement using a hierarchy that reflects the level of
information used in the assessment. This hierarchy consists of 3 levels (I) fair value based on quoted
prices in active markets for identical assets or liabilities, (II) fair value calculated through valuation
methods based on inputs other than quoted prices included within level 1 that are observable for the
asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) and (III)
fair value based on inputs for the asset or liability that are not based on observable market data.
The fair value of financial instruments traded in active markets, such as investments acquired for
trading, is based on quoted market prices at the close of the period using the current price of the
buyer. The fair value of financial assets not traded in active markets (derivative contracts) is
determined using valuation techniques that maximize use of available market information.
Valuation techniques generally used by the Company are quoted market prices of similar
instruments and / or estimating the present value of future cash flows using forward price curves of
the market at period end.
The following table shows the classification of financial instruments at fair value, depending on the
level of information used in the assessment:
As of December 31, 2015
As of December 31, 2014
Fair value measurements using values
Fair value measurements using values
considered as
considered as
Fair value
Level I
Level II
Level III
Fair value Level I
Level II
Level III
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
A s s e t s
Cash and cash equivalents
Short-term mutual funds
Other financial assets, current
Fair value of interest rate derivatives
Fair value of fuel derivatives
Fair value of foreign currency derivatives
Interest accrued since the last payment
date of Cross Currency Swap
Private investment funds
Certificate of deposit CDB
Domestic and foreign bonds
Other investments
Liabilities
Other financial liabilities, current
Fair value of interest rate derivatives
Fair value of fuel derivatives
Fair value of foreign currency derivatives
Interest accrued since the last payment
date of Currency Swap
Interest rate derivatives not recognized
as a hedge
Other financial liabilities, non current
Fair value of interest rate derivatives
26,600
26,600
624,200
-
6,293
9,888
397
448,810
-
158,812
-
134,089
33,518
39,818
56,424
4,329
-
16,128
16,128
26,600
26,600
607,622
-
-
-
-
448,810
-
158,812
-
-
-
-
-
-
-
-
-
200,753
200,753
-
-
16,578
-
6,293
9,888
397
-
-
-
-
134,089
33,518
39,818
56,424
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
200,753
546,535
1
1,783
-
377
480,777
18,293
41,111
4,193
227,233
26,395
157,233
37,242
4,329
-
5,173
-
16,128
16,128
-
-
-
1,190
28,327
28,327
200,753
526,081
-
-
-
-
480,777
-
41,111
4,193
-
-
-
-
-
-
-
-
20,454
1
1,783
-
377
-
18,293
-
-
227,233
26,395
157,233
37,242
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,173
-
1,190
28,327
28,327
-
-
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Additionally, at December 31, 2015, the Company has financial instruments which are not recorded
at fair value. In order to meet the disclosure requirements of fair values, the Company has valued
these instruments as shown in the table below:
Cash and cash equivalents
Cash on hand
Bank balance
Overnight
Time deposits
Other financial assets, current
Other financial assets
As of December 31, 2015
As of December 31, 2014
Book
value
Fair
value
ThUS$
ThUS$
726,897
10,656
302,696
267,764
145,781
27,148
27,148
726,897
10,656
302,696
267,764
145,781
27,148
27,148
Book
value
ThUS$
788,643
11,568
239,514
154,666
382,895
103,866
103,866
Fair
value
ThUS$
788,643
11,568
239,514
154,666
382,895
103,866
103,866
Trade and other accounts receivable current
796,974
796,974
1,378,835
1,378,835
Accounts receivable from related entities
Other financial assets, non current
Accounts receivable
Other financial liabilities, current (*)
Trade and other accounts payables
Accounts payable to related entities
Other financial liabilities, non current (*)
Accounts payable, non-current
(*) Fair value Level II
183
89,458
10,715
1,510,146
1,483,957
447
183
89,458
10,715
1,873,552
1,483,957
447
7,516,257
7,382,221
417,050
417,050
308
84,986
30,465
1,397,382
1,489,373
56
7,360,685
577,454
308
84,986
30,465
1,446,100
1,489,373
56
8,319,022
577,454
The book values of accounts receivable and payable are assumed to approximate their fair values,
due to their short-term nature. In the case of cash on hand, bank balances, overnight, time deposits
and accounts payable, non-current, fair value approximates their carrying values.
The fair value of Other financial liabilities is estimated by discounting the future contractual cash
flows at the current market interest rate for similar financial instruments. In the case of Other
financial assets, the valuation was performed according to market prices at period end.
NOTE 4 - ACCOUNTING ESTIMATES AND JUDGMENTS
The Company has used estimates to value and record certain assets, liabilities, revenue,
expenditure, and commitments. Basically, these estimates relate to:
(a) Evaluation of possible losses through impairment of goodwill and intangible assets with an
indefinite useful life
As of December 31, 2015 and 2014, goodwill amounted to ThUS$ 2,280,575 and ThUS
$ 3,313,401, respectively, while intangible assets with an indefinite useful life comprised airport
slots for ThUS$ 816,987 and ThUS$ 1,201,028, and Trademarks and Loyalty Program for ThUS$
325,293 and ThUS$ 478,204, respectively.
At least once per year the Company verifies whether goodwill and intangible assets with an
indefinite useful life have suffered any losses through impairment. For the purposes of this
evaluation, the Company has identified two cash-generating units (CGUs): “Air transport” and
“Multiplus loyalty and coalition program.” The book value of goodwill assigned to each CGU as of
December 31, 2015, amounted to ThUS$ 1,835,088 and ThUS$ 445,487 (ThUS$ 2,658,503 and
ThUS$ 654,898 as of December 31, 2014).
The recoverable value of these cash-generating units (CGUs) has been determined based on
calculations of their value in use. The principal assumptions used by the management include:
growth rate, exchange rate, discount rate, fuel prices, and other economic assumptions. The
estimation of these assumptions requires significant administrative judgment, as these variables
feature inherent uncertainty; however, the assumptions used are consistent with Company’s internal
planning. Therefore, management evaluates and updates the estimates on an annual basis, in light of
conditions that affect these variables. The mainly assumptions used as well as, the corresponding
sensitivity analyses are showed in Note 15.
(b) Useful life, residual value, and impairment of property, plant, and equipment
The depreciation of assets is calculated based on the linear model, except for certain technical
components depreciated on cycles and hours flown. These useful lives are reviewed on an annual
basis according with the Company’s future economic benefits associated with them.
Changes in circumstances such as: technological advances, business model, planned use of assets or
capital strategy may render the useful life different to the lifespan estimated. When it is determined
that the useful life of property, plant, and equipment must be reduced, as may occur in line with
changes in planned usage of assets, the difference between the net book value and estimated
recoverable value is depreciated, in accordance with the revised remaining useful life.
Residual values are estimated in accordance with the market value that these assets will have at the
end of their useful life. The assets’ residual values and useful lives are reviewed, and adjusted if
appropriate, once a year. An asset’s carrying amount is written down immediately to its recoverable
amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 2.8).
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(c) Recoverability of deferred tax assets
Deferred taxes are calculated in accordance with the liability method, applied over temporary
differences that arise between the fiscal based of assets and liabilities, and their book value.
Deferred tax assets for tax losses are recognized to the extent that the realization of the related tax
benefit through future taxable profits is probable. The Company makes tax and financial
projections to evaluate the realization of deferred tax asset over the course of time. Additionally,
these projections are ensured to be consistent with those used to measure other long term assets. As
of December 31, 2015 and 2014, the company recognized deferred tax assets amounting to ThUS$
376,595 and ThUS$ 407,393, respectively, and had ceased to recognize deferred tax assets for tax
losses amounting to ThUS$ 15,513 and ThUS$ 2,781, respectively (Note 17).
(d) Air tickets sold that are not actually used.
The Company advance sales of tickets as deferred revenue. Revenue from ticket sales is recognized
in the income statement when the service is provided or when the tickets expires unused, reducing
the corresponding deferred revenue. The Company evaluates monthly the probability that tickets
expiry unused, based on the history of used tickets. Changes in the exchange probability would
have an impact our revenue in the year in which the change occurs and in future years. As of
December 31, 2015 and 2014, deferred revenue associated with air tickets sold amounted to
ThUS$ 1,223,886 and ThUS$ 1,392,717, respectively. An hypothetical change of 1% in passenger
behavior regarding to the ticket usage, - that is, if during the next 6 months after sells probability of
used were 89% rather than 90%, as we consider, it would lead to a change in the expiry period from
6 to 7 months, which, as of December 31, 2015, would have an impact of up to ThUS$ 25,000.
(e) Valuation of loyalty points and kilometers granted to loyalty program members, pending
usage.
As of December 31, 2015 and 2014, the Company operated the following loyalty programs:
LANPASS, TAM Fidelidade and Multiplus, with the objective of enhancing customer loyalty by
offering points or kilometers (see Note 21).
When kilometers and points are redeemed for products and services other than the services
provided by the Company, revenue is recognized immediately; when they are redeemed for air
tickets on airlines from to LATAM Airlines Group S.A. and subsidiaries, revenue is deferred until
the transport service is provided or the corresponding tickets expired.
Deferred revenue from loyalty programs at the closing date corresponds to the valuation of points
and kilometers granted to loyalty program members, pending of use, and the probability to be
redeemed.
According to IFRIC-13, kilometers and points value that the Company estimate are not likely to be
redeemed (“breakage”), they recognize the associated value proportionally during the period in
which the remaining kilometers or points are expected to be redeemed. The Company uses
statistical models to estimate the breakage, based on historical redemption patterns Changes in the
breakage would have a significant impact on our revenue in the year in which the change occurs
and in future years.
As of December 31, 2015 and 2014, deferred revenue associated with the LANPASS loyalty
program amounted to ThUS$ 973,264 and ThUS$ 860,835, respectively. As of December 31, 2015
a hypothetical change of 1% in the probability of usage would result in an impact of approximately
ThUS$ 30,000. Meanwhile, deferred revenue associated with the TAM Fidelidade and Multiplus
loyalty programs amounted to ThUS$ 452,264 and ThUS$ 590,342, respectively. As of December
31, 2015 a hypothetical change of 2% in the probability of usage would result in an impact of
approximately ThUS$ 11,755.
The fair value of kilometers is determined by the Company based in its best estimate of the price at
which they have been sold in the past. A hypothetical change of 1% in the fair value of the unused
kilometers would result in an impact of approximately ThUS$ 6,396, as of December 31, 2015.
(f) Provisions needs, and their valuation when required.
Known contingencies are recognized when: the Company has a present legal or constructive
obligation as a result of past events; it is probable that an outflow of resources will be required to
settle the obligation and the amount has been reliably estimated. The Company applies professional
judgment, experience, and knowledge to use available information to determine these values, in
light of the specific characteristics of known risks. This process facilitates the early assessment and
valuation of potential risks in individual cases or in the development of contingent eventualities.
(g)
Investment in subsidiary (TAM)
The management has applied its judgment in determining that LATAM Airlines Group S.A.
controls TAM S.A. and Subsidiaries, for accounting purposes, and has therefore consolidated the
financial statements.
The grounds for this decision are that LATAM issued ordinary shares in exchange for the majority
of circulating ordinary and preferential shares in TAM, except for those TAM shareholders who did
not accept the exchange, which were subject to a squeeze out, entitling LATAM to substantially all
economic benefits generated by the LATAM Group, and thus exposing it to substantially all risks
relating to the operations of TAM. This exchange aligns the economic interests of LATAM and all
of its shareholders, including the controlling shareholders of TAM, thus insuring that the
shareholders and directors of TAM shall have no incentive to exercise their rights in a manner that
would be beneficial to TAM but detrimental to LATAM. Furthermore, all significant actions
necessary of the operation of the airlines require votes in favor by the controlling shareholders of
both LATAM and TAM.
Since the integration of LAN and TAM operations, the most critical airline operations in Brazil
have been managed by the CEO of TAM while global activities have been managed by the CEO of
LATAM, who is in charge of the operation of the LATAM Group as a whole and reports to the
LATAM Board.
The CEO of LATAM also evaluates the performance of LATAM Group executives and, together
with the LATAM Board, determines compensation. Although Brazilian law currently imposes
restrictions on the percentages of voting rights that may be held by foreign investors, LATAM
believes that the economic basis of these agreements meets the requirements of accounting
standards in force, and that the consolidation of the operations of LAN and LATAM is appropriate.
These estimates were made based on the best information available relating to the matters analyzed.
In any case, it is possible that events that may take place in the future could lead to their
modification in future reporting periods, which would be made in a prospective manner.
NOTE 5 - SEGMENTAL INFORMATION
The Company has determined that it has two operating segments: the air transportation business and
the coalition and loyalty program Multiplus.
The Air transport segment corresponds to the route network for air transport and it is based on the
way that the business is run and managed, according to the centralized nature of its operations, the
ability to open and close routes and reallocate resources (aircraft, crew, staff, etc..) within the
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network, which is a functional relationship between all of them, making them inseparable. This
segment definition is the most common level used by the global airline industry.
The segment of loyalty coalition called Multiplus, unlike LanPass and TAM Fidelidade, is a
frequent flyer programs which operate as a unilateral system of loyalty that offers a flexible
coalition system, interrelated among its members, with 14.2 million of members, along with being a
regulated entity with a separately business and not directly related to air transport.
(a) For the periods ended
Income from ordinary activities from
external customers (*)
LAN passenger
TAM passenger
Freight
Income from ordinary activities from
Air
transportation
At December 31,
Coalition and
loyalty program
Multiplus
At December 31,
Eliminations
At December 31,
Consolidated
At December 31,
2015
2014
2015
2014
2015
2014
2015
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
2014
ThUS$
9,278,041
11,587,224
462,004
506,277
4,241,918
3,706,692
1,329,431
4,464,761
5,409,084
1,713,379
-
462,004
-
-
506,277
-
-
-
-
-
-
-
-
-
transactions with other operating segments
462,004
506,277
67,826
106,030
(529,830)
(612,307)
-
Other operating income
230,823
217,390
154,958
160,255
-
Interest income
Interest expense
Total net interest expense
21,818
(423,742)
32,390
(430,030)
(401,924)
(397,640)
63,647
-
63,647
58,110
(4)
58,106
Depreciation and amortization
(923,311)
(983,847)
(11,095)
(7,417)
Material non-cash items other than
depreciation and amortization
Disposal of fixed assets and inventory losses
Doubtful accounts
Exchange differences
Result of indexation units
(507,921)
(168,573)
(20,932)
(18,292)
(469,178)
481
(28,756)
(9,637)
(130,187)
7
1,893
-
611
1,282
-
(2,350)
(814)
(1,522)
(14)
-
Income (loss) atributable to owners of the parents
(356,039)
(254,151)
136,765
144,361
(10,385)
10,385
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Participation of the entity in
the income of associates
Expenses for income tax
Segment profit / (loss)
A s s e t s o f s e g m e n t
3 7
249,090
(315,497)
16,924,200
(2,175)
(68,293)
(182,077)
18,759,848
-
(70,707)
136,765
1,182,111
(4,280)
(73,901)
105,116
1,773,584
-
-
-
(4,893)
-
-
-
(49,002)
Amount of non-current asset additions
1,492,281
1,522,298
1,439,057
53,224
1,444,402
77,896
-
-
-
-
-
-
-
-
-
-
-
-
Property, plant and equipment
Intangibles other than goodwill
Segment liabilities
Purchase of non-monetary assets
o f s e g m e n t
14,700,072
15,293,668
490,076
723,438
(26,278)
(36,371)
15,163,870
15,980,735
1,622,198
1,496,204
-
-
-
-
1,622,198
1,496,204
9,740,045
12,093,501
4,241,918
4,168,696
1,329,431
385,781
75,080
(413,357)
(338,277)
4,464,761
5,915,361
1,713,379
-
377,645
90,500
(430,034)
(339,534)
(934,406)
(991,264)
(506,028)
(20,932)
(17,681)
(467,896)
481
(219,274)
3 7
178,383
(178,732)
18,101,418
1,492,281
1,439,057
53,224
(170,923)
(29,570)
(11,159)
(130,201)
7
(109,790)
(6,455)
(142,194)
(76,961)
20,484,430
1,522,298
1,444,402
77,896
(*) The Company does not have any interest revenue that should be recognized as income from
ordinary activities by interest.
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The Company’s revenues by geographic area are as follows:
Cash and cash equivalents are denominated in the following currencies:
40
41
For the period ended
At December 31,
2015
ThUS$
681,340
979,324
2014
ThUS$
660,057
813,472
1,025,475
1,224,264
723,062
353,007
3,464,297
238,500
1,575,519
699,521
935,893
391,678
5,361,594
248,585
1,589,202
868,756
Peru
Argentina
U.S.A.
Europe
Colombia
Brazil
Ecuador
Chili
Asia Pacific and rest of Latin America
Income from ordinary activities
9,740,045
12,093,501
Other operating income
385,781
377,645
The Company allocates revenues by geographic area based on the point of sale of the passenger
ticket or cargo. Assets are composed primarily of aircraft and aeronautical equipment, which are
used throughout the different countries, so it is not possible to assign a geographic area.
The Company has no customers that individually represent more than 10% of sales.
NOTE 6 - CASH AND CASH EQUIVALENTS
Cash on hand
Bank balances
Overnight
T otal Cash
Cash equivalents
T ime deposits
Mutual funds
T otal cash equivalents
T otal cash and cash equivalents
As of
December 31,
2015
T hUS$
As of
December 31,
2014
T hUS$
10,656
302,696
267,764
581,116
145,781
26,600
172,381
753,497
11,568
239,514
154,666
405,748
382,895
200,753
583,648
989,396
Currency
Argentine peso
Brazilian real
Chilean peso (*)
Colombian peso
Euro
US Dollar
Strong bolivar (**)
Other currencies
T otal
As of
December 31,
2015
T hUS$
As of
December 31,
2014
T hUS$
18,733
106,219
17,978
14,601
10,663
564,214
2,986
18,103
753,497
44,697
45,591
30,758
17,188
9,639
745,214
63,236
33,073
989,396
(*) At December 31, 2015 and at December 31, 2014, the Company not maintains currency
derivative contracts (forward)), for conversion into dollars of investments in pesos.
(**) At December 31, 2015, the Company has decided reflect an exchange rate loss of ThUS
$ 40,968 consequence change in the SICAD rate of Venezuela (13.5 VEF/US$) at the SIMADI rate
equivalent to 198.70 VEF/US$ of 2015. Assets that are held by the Company at December 31, 2015
is equivalent to ThUS$ 2.986.
During 2014, the Company has modified the exchange rate used in determining equivalence of
United States Dollar in cash and cash equivalents held in Strong Bolivar, from 6.3 VEF/US$
to 12.0 VEF/US$, which represented a charge in results for the period 2014 by foreign exchange,
equivalent amount of ThUS$ 61,021.
The Company has done significant non-cash transactions mainly with financial leases, which are
detailed in Note 16 letter (d), additional information in numeral (iv) Financial leases.
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Other inflows (outflows) of cash:
Hedging margin guarantees
Change reservation sy stems
Currency hedge
Bank commissions, taxes p aid and other
Tax p aid on bank transaction
Guarantees
Fuel derivatives p remiums
Fuel hedge
For the p eriods ended
December 31,
2015
ThUS$
87,842
11,000
1,802
(5,137)
(7,176)
(8,439)
(20,932)
(243,587)
2014
ThUS$
(64,334)
-
(1,153)
(47,724)
-
(86,006)
(7,075)
(45,365)
Total Other inflows (outflows) Op eration flow
(184,627)
(251,657)
Recovery loans convertible into shares
Certificate of bank dep osits
Tax p aid on bank transaction
Total Other inflows (outflows) Investment flow
Credit card loan manager
Early redemp tion of bonds TAM 2020
Guarantees bonds emission
Aircraft Financing advances
Settlement of derivative contracts
Breakage
Others
Total Other inflows (outflows) Financing flow
20,000
3,497
(12,921)
10,576
3,227
(15,328)
(26,111)
(28,144)
(35,891)
-
2,490
(99,757)
-
(17,399)
-
(17,399)
23,864
-
-
8,669
(42,962)
-
(3,348)
(13,777)
NOTE 7 - FINANCIAL INSTRUMENTS
7.1.
Financial instruments by category
As of December 31, 2015
Assets
Cash and cash equivalents
Other financial assets, current (*)
Trade and others
accounts receivable, current
Accounts receivable from
related entities, current
Other financial assets,
non current (*)
Accounts receivable, non current
Total
Liabilities
Other liabilities, current
Trade and others accounts payable, current
Accounts payable to related entities, current
Other financial liabilities, non-current
Accounts payable, non-current
Total
Loans
and
receivables
ThUS$
726,897
27,148
796,974
183
88,820
10,715
Hedge
derivatives
ThUS$
-
16,578
-
-
-
-
Held
for
trading
ThUS$
-
158,812
-
-
638
-
Initial designation
as fair value
through
profit and loss
ThUS$
26,600
448,810
-
-
-
-
Total
ThUS$
753,497
651,348
796,974
183
89,458
10,715
1,650,737
16,578
159,450
475,410
2,302,175
Other
financial
liabilities
ThUS$
1,510,146
1,483,957
447
7,516,257
417,050
10,927,857
Held
Hedge
derivatives
ThUS$
134,089
-
-
16,128
-
150,217
Total
ThUS$
1,644,235
1,483,957
447
7,532,385
417,050
11,078,074
(*) The value presented as initial designation as fair value through profit and loss, corresponds
mainly to private investment funds; and loans and receivables corresponds to guarantees given.
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As of December 31, 2014
Assets
Cash and cash equivalents
Other financial assets, current (*)
Trade and others
Loans
and
receivables
ThUS$
788,643
103,866
accounts receivable, current
1,378,835
Accounts receivable from
related entities, current
Other financial assets,
non current (*)
Accounts receivable, non current
Total
Liabilities
308
84,495
30,465
2,386,612
Other liabilities, current
Trade and others
accounts payable, current
Accounts payable to
related entities, current
Other financial liabilities, non-current
Accounts payable, non-current
Total
44
Hedge
derivatives
ThUS$
-
2,161
-
-
-
-
2,161
Held
for
trading
ThUS$
-
41,111
-
-
491
-
41,602
Other
financial
liabilities
ThUS$
1,397,382
Hedge
derivatives
ThUS$
226,043
1,489,373
-
56
7,360,685
577,454
10,824,950
-
28,327
-
254,370
Initial designation
as fair value
through
profit and loss
ThUS$
200,753
503,263
-
-
-
-
704,016
Held
for
trading
ThUS$
1,190
-
-
-
-
Total
ThUS$
989,396
650,401
1,378,835
308
84,986
30,465
3,134,391
Total
ThUS$
1,624,615
1,489,373
56
7,389,012
577,454
1,190
11,080,510
(*) The value presented as initial designation as fair value through profit and loss, corresponds
mainly to private investment funds; and loans and receivables corresponds to guarantees given.
7.2.
Financial instruments by currency
45
a) Assets
Cash and cash equivalents
Argentine peso
Brazilian real
Chilean peso
Colombian peso
Euro
US Dollar
Strong bolivar
Other currencies
Other financial assets (current and non-current)
Argentine peso
Brazilian real
Chilean peso
Colombian peso
Euro
US Dollar
Strong bolivar
Other currencies
Trade and other accounts receivable, current
Argentine peso
Brazilian real
Chilean peso
Colombian peso
Euro
US Dollar
Strong bolivar
Other currencies (*)
Accounts receivable, non-current
Brazilian real
Chilean peso
US Dollar
Other currencies (*)
Accounts receivable from related entities, current
Brazilian real
Chilean peso
Total assets
Argentine peso
Brazilian real
Chilean peso
Colombian peso
Euro
US Dollar
Strong bolivar
Other currencies
As of
December 31,
2015
T hUS$
As of
December 31,
2014
ThUS$
753,497
18,733
106,219
17,978
14,601
10,663
564,214
2,986
18,103
740,806
157,281
449,934
640
1,670
615
128,620
2 2
2,024
796,974
71,438
191,037
57,755
13,208
53,200
320,959
7,225
82,152
10,715
521
5,041
5,000
153
183
-
183
2,302,175
247,452
747,711
81,597
29,479
64,478
1,018,793
10,233
102,432
989,396
44,697
45,591
30,758
17,188
9,639
745,214
63,236
33,073
735,387
45,169
500,875
26,881
406
4,244
156,687
4 3
1,082
1,378,835
100,798
528,404
131,189
9,021
38,764
369,774
4,895
195,990
30,465
761
5,814
23,734
156
308
9
299
3,134,391
190,664
1,075,640
194,941
26,615
52,647
1,295,409
68,174
230,301
See the composition of the others currencies in Note 8 Trade, other accounts receivable and
(*)
non-current accounts receivable.
b) Liabilities
Liabilities information is detailed in the table within Note 3 Financial risk management.
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47
NOTE 8 - TRADE AND OTHER ACCOUNTS RECEIVABLE CURRENT, AND
NON-CURRENT ACCOUNTS RECEIVABLE
Currency balances that make up the Trade and other accounts receivable and non-current accounts
receivable:
Trade accounts receivable
Other accounts receivable
Total trade and other accounts receivable
Less: Allowance for impairment loss
Total net trade and accounts receivable
Less: non-current portion – accounts receivable
Trade and other accounts receivable, current
As of
As of
December 31,
December 31,
2015
ThUS$
685,733
182,028
867,761
(60,072)
807,689
(10,715)
796,974
2014
ThUS$
1,269,433
210,909
1,480,342
(71,042)
1,409,300
(30,465)
1,378,835
7.2.
Instrumentos financieros por monedas
!47
(a) Activos
Al 31 de
diciembre de
2015
Al 31 de
diciembre de
2014
M U S $
M U S $
Efectivo y equivalentes al efectivo
Peso argentino
Real brasileño
Peso chileno
P e s o c o l o m b i a n o
Euro
Dólar estadounidense
Bolívar fuerte
Otras monedas
Otros activos financieros (corriente y no corriente)
Peso argentino
Real brasileño
Peso chileno
P e s o c o l o m b i a n o
Euro
Dólar estadounidense
Bolívar fuerte
Otras monedas
Deudores comerciales y otras cuentas por cobrar, corrientes
Peso argentino
Real brasileño
Peso chileno
P e s o c o l o m b i a n o
Euro
Dólar estadounidense
Bolívar fuerte
Otras monedas (*)
Cuentas por cobrar, no corrientes
Real brasileño
Peso chileno
Dólar estadounidense
Otras monedas (*)
Cuentas por cobrar a entidades relacionadas, corrientes
Real brasileño
Peso chileno
Total activos
Peso argentino
Real brasileño
Peso chileno
P e s o c o l o m b i a n o
Euro
Dólar estadounidense
Bolívar fuerte
Otras monedas
753.497
18.733
106.219
17.978
14.601
10.663
564.214
2.986
18.103
740.806
157.281
449.934
640
1.670
615
128.620
2 2
2.024
796.974
71.438
191.037
57.755
13.208
53.200
320.959
7.225
82.152
10.715
521
5.041
5.000
153
183
-
183
2.302.175
247.452
747.711
81.597
29.479
64.478
1.018.793
10.233
102.432
989.396
44.697
45.591
30.758
17.188
9.639
745.214
63.236
33.073
735.387
45.169
500.875
26.881
406
4.244
156.687
4 3
1.082
1.378.835
100.798
528.404
131.189
9.021
38.764
369.774
4.895
195.990
30.465
761
5.814
23.734
156
308
9
299
3.134.391
190.664
1.075.640
194.941
26.615
52.647
1.295.409
68.174
230.301
Ver la composición del grupo otras monedas, en Nota 8 Deudores comerciales, otras
(*)
cuentas por cobrar y cuentas por cobrar no corrientes.
(b)
Pasivos
La información de pasivos se encuentra revelada en Nota 3 Gestión del riesgo financiero.
The fair value of trade and other accounts receivable does not differ significantly from the book
value.
The maturity of these accounts at the end of each period is as follows:
Fully performing
M atured accounts receivable, but not impaired
Expired from 1 to 90 days
Expired from 91 to 180 days
M ore than 180 days overdue (*)
Total matured accounts receivable, but not impaired
M atured accounts receivable and impaired
As of
As of
December 31,
2015
December 31,
2014
ThUS$
577,902
28,717
10,995
8,047
47,759
ThUS$
1,088,362
83,599
11,521
14,909
110,029
Judicial, pre-judicial collection and protested documents
24,304
53,956
Debtor under pre-judicial collection process and
portfolio sensitization
Total matured accounts receivable and impaired
Total
35,768
60,072
685,733
17,086
71,042
1,269,433
(*) Value of this segment corresponds primarily to accounts receivable that were evaluated in their
ability to recover, therefore not requiring a provision.
Currency
Argentine Peso
Brazilian Real
Chilean Peso
Colombian peso
Euro
US Dollar
Strong bolivar
Other currency (*)
Total
(*) Other currencies
Australian Dollar
Chinese Yuan
Danish Krone
Pound Sterling
Indian Rupee
Japanese Yen
Norwegian Kroner
Swiss Franc
Korean Won
New Taiwanese Dollar
Other currencies
Total
As of
December 31,
2015
ThUS$
As of
December 31,
2014
ThUS$
71,438
191,558
62,796
13,208
53,200
325,959
7,225
82,305
807,689
26,185
4,282
164
7,228
3,070
4,343
221
1,919
4,462
3,690
26,741
82,305
100,798
529,165
137,003
9,021
38,764
393,508
4,895
196,146
1,409,300
15,243
35,626
8,814
33,624
1,887
4,635
16,516
5,701
25,203
10,323
38,574
196,146
The Company records allowances when there is evidence of impairment of trade receivables. The
criteria used to determine that there is objective evidence of impairment losses are the maturity of
the portfolio, specific acts of damage (default) and specific market signals.
Maturity
Judicial and pre-judicial collection assets
Over 1 year
Between 6 and 12 months
Impairment
100%
100%
50%
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Movement in the allowance for impairment loss of Trade and other accounts receivables:
NOTE 9 - ACCOUNTS RECEIVABLE FROM/PAYABLE TO RELATED ENTITIES
48
49
Periods
From January 1 to December 31, 2014
From January 1 to December 31, 2015
Opening
balance
T hUS$
(70,602)
(71,042)
Write-offs
T hUS$
6,864
10,120
(Increase)
Decrease
T hUS$
(7,304)
850
Closing
balance
T hUS$
(71,042)
(60,072)
Once pre-judicial and judicial collection efforts are exhausted, the assets are written off against the
allowance. The Company only uses the allowance method rather than direct write-off, to ensure
control.
Historic and current re-negotiations are not relevant and the policy is to analyze case by case in
order to classify them according to the existence of risk, determining whether it is appropriate to re-
classify accounts to pre-judicial recovery. If such re-classification is justified, an allowance is made
for the account, whether overdue or falling due.
The maximum credit-risk exposure at the date of presentation of the information is the fair value of
each one of the categories of accounts receivable indicated above.
As of December 31, 2015
As of December 31, 2014
Gross exposure
according to
balance
T hUS$
Gross
impaired
exposure
T hUS$
Exposure net
of risk
concentrations
Gross exposure
according to
balance
T hUS$
T hUS$
Gross
Impaired
exposure
T hUS$
Exposure net
of risk
concentrations
T hUS$
T rade accounts receivable
Other accounts
receivable
685,733
(60,072)
625,661
1,269,433
(71,042) 1,198,391
182,028
-
182,028
210,909
-
210,909
There are no relevant guarantees covering credit risk and these are valued when they are settled; no
materially significant direct guarantees exist. Existing guarantees, if appropriate, are made through
IATA.
(a)
Accounts Receivable
T ax No.
Related party
Relationship
of origin
Currency
2015
2014
Country
As of
December 31,
As of
December 31,
78.591.370-1 Bethia S.A. and Subsidiaries
Related director
87.752.000-5 Granja Marina T ornagaleones S.A.
Common shareholder
Foreign
T AM Aviação Executiva
e T axi Aéreo S.A.
Foreign
Prisma Fidelidade S.A.
T otal current assets
(b)
Accounts payable
Related director
Joint Venture
T hUS$
T hUS$
Chile
Chile
Brazil
Brazil
CLP
CLP
BRL
BRL
167
14
2
-
183
284
15
-
9
308
Country
of
As of
As of
December 31,
December 31,
T ax No.
Related party
Relationship
origin
Currency
2015
2014
Foreign
Consultoría Administrativa
Profesional S.A. de C.V.
Common matrix
Mexico
MXN
65.216.000-K Viajes Falabella Ltda.
Foreign
Inversora Aeronaútica Argentina
65.216.000-K Comunidad Mujer
78.591.370-1 Bethia S.A. and Subsidiaries
Related director
Related director
Related director
Related director
Chile
CLP
Argentina
US$
Chile
Chile
CLP
CLP
T otal current liabilities
T hUS$
T hUS$
342
68
22
10
5
447
-
21
27
2
6
56
Transactions between related parties have been carried out on free-trade conditions between
interested and duly-informed parties. The transaction times are between 30 and 45 days, and the
nature of settlement of the transactions is monetary.
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51
NOTE 10 -INVENTORIES
Technical stock
Non-technical stock
Total production suppliers
As of
As of
December 31,
December 31,
2015
ThUS$
192,930
31,978
224,908
2014
ThUS$
229,313
36,726
266,039
The items included in this heading are spare parts and materials that will be used mainly in
consumption in in-flight and maintenance services provided to the Company and third parties,
which are valued at average cost, net of provision for obsolescence that as of December 31, 2015
amounts to ThUS$ 15,892 (ThUS$ 2,982 as of December 31, 2014). The resulting amounts do not
exceed the respective net realizable values.
As of December 31, 2015, the Company recorded ThUS$ 160,030 (ThUS$ 189,864 as of
December 31, 2014) within the income statement, mainly due to in-flight consumption and
maintenance, which forms part of Cost of sales.
NOTE 11 - OTHER FINANCIAL ASSETS
The composition of Other financial assets is as follows:
Current Assets
Non-current assets
Total Assets
As of
As of
As of
As of
As of
As of
December 31,
2015
December 31,
2014
December 31,
2015
December 31,
2014
December 31,
2015
December 31,
2014
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
(a) Other financial assets
Private investment funds
Deposits in guarantee (aircraft)
Certificate of deposit (CBD)
Guarantees for margins of derivatives
Other investments
Domestic and foreign bonds
Other guarantees given
448,810
16,532
-
4,456
-
158,812
6,160
Subtotal of other financial assets
634,770
(b) Hedging assets
Interest accrued since the last payment date
of Cross currency swap
Fair value of interest rate derivatives
Fair value of foreign currency derivatives (*)
Fair value of fuel price derivatives
Subtotal of hedging assets
Total Other Financial Assets
397
-
9,888
6,293
16,578
651,348
480,777
8,458
18,293
92,556
4,193
41,111
2,852
648,240
377
1
-
1,783
2,161
-
58,483
-
-
638
-
30,337
89,458
-
-
-
-
-
-
70,155
-
-
491
-
14,340
84,986
-
-
-
-
-
650,401
89,458
84,986
448,810
75,015
-
4,456
638
158,812
36,497
724,228
397
-
9,888
6,293
16,578
740,806
480,777
78,613
18,293
92,556
4,684
41,111
17,192
733,226
377
1
-
1,783
2,161
735,387
NOTE 12 - OTHER NON-FINANCIAL ASSETS
The composition of Other non-financial assets is as follows:
Current assets
As of
As of
Non-current assets
As of
As of
December 31, December 31,
December 31, December 31,
2015
2014
2015
2014
Total Assets
As of
December 31,
2015
As of
December 31,
2014
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
(a) Advance payments
Aircraft leases
Aircraft insurance and other
Others
Subtotal advance payments
(b) Other assets
Aircraft maintenance reserve (*)
Sales tax
Other taxes
Contributions to Société Internationale
de Télécommunications Aéronautiques ("SITA")
Judicial deposits
Others
Subtotal other assets
Total Other Non - Financial Assets
33,305
12,408
16,256
61,969
99,112
158,134
4,295
505
-
6,001
268,047
330,016
26,039
12,160
17,970
56,169
31,108
155,795
3,513
599
-
687
191,702
247,871
22,569
-
33,781
56,350
64,366
45,061
-
547
67,980
1,159
179,113
235,463
26,201
-
36,450
62,651
123,588
64,652
-
453
90,450
1,019
280,162
342,813
55,874
12,408
50,037
52,240
12,160
54,420
118,319
118,820
163,478
203,195
4,295
1,052
67,980
7,160
447,160
565,479
154,696
220,447
3,513
1,052
90,450
1,706
471,864
590,684
(*) Aircraft maintenance reserves reflect prepayment deposits made by the group to lessors of
certain aircraft under operating lease agreements in order to ensure that funds are available to
support the scheduled heavy maintenance of the aircraft.
These amounts are calculated based on performance measures, such as flight hours or cycles, are
paid periodically (usually monthly) and are contractually required to be repaid to the lessee upon
the completion of the required maintenance of the leased aircraft. At the end of the lease term, any
unused maintenance reserves are either returned to the Company in cash or used to offset amounts
that we may owe the lessor as a maintenance adjustment.
In some cases (5 lease agreements), if the maintenance cost incurred by LATAM is less than the
corresponding maintenance reserves, the lessor is entitled to retain those excess amounts at the time
the heavy maintenance is performed. The Company periodically reviews its maintenance reserves
for each of its leased aircraft to ensure that they will be recovered, and recognizes an expense if any
such amounts are less than probable of being returned. Since the acquisition of TAM in June 2012,
the cost of aircraft maintenance has been higher than the related maintenance reserves for all
aircraft.
As of December 31, 2015, LATAM had ThUS$ 163,478 in maintenance reserves (ThUS$ 154,696
at December 31, 2014), corresponding to 9 aircraft out of a total fleet of 328 (12 aircraft out of a
total fleet of 327 at December 31, 2014). All of the Company’s aircraft leases containing provisions
for maintenance reserves will expire fully by 2023.
Aircraft maintenance reserves are classified as current or non-current depending on the dates when
the related maintenance is expected to be performed (Note 2.23)
(*) The foreign currency derivatives correspond to forward and combination of options.
NOTE 13 - INVESTMENTS IN SUBSIDIARIES
The types of derivative hedging contracts maintained by the Company at the end of each period are
presented in Note 18.
(a)
Investments in subsidiaries
The Company has investments in companies recognized as investments in subsidiaries. All the
companies defined as subsidiaries have been consolidated within the financial statements of
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53
LATAM Airlines Group S.A. and Subsidiaries. The consolidation also includes special-purpose
entities.
Detail of significant subsidiaries and summarized financial information:
Name of significant subsidiary
Country
of
incorporation
Functional
currency
Ownership
As of
December 31,
2015
%
As of
December 31,
2014
%
Lan Perú S.A.
Lan Cargo S.A.
Lan Argentina S.A.
T ransporte Aéreo S.A.
Aerolane Líneas Aéreas Nacionales del Ecuador S.A.
Aerovías de Integración Regional, AIRES S.A.
T AM S.A.
Peru
Chile
Argentina
Chile
Ecuador
Colombia
Brazil
US$
US$
ARS
US$
US$
COP
BRL
69.97858
99.89803
94.99055
99.89804
100.00000
99.01646
99.99938
69.97858
99.89803
94.99055
99.89804
100.00000
99.01646
99.99938
The consolidated subsidiaries do not have significant restrictions for transferring funds to controller.
Summary financial information of significant subsidiaries
Name of significant subsidiary
Lan Perú S.A.
Lan Cargo S.A.
Lan Argentina S.A.
T ransporte Aéreo S.A.
Aerolane Líneas Aéreas Nacionales
del Ecuador S.A.
Aerovías de Integración Regional,
AIRES S.A.
T AM S.A. (*)
Name of significant subsidiary
Lan Perú S.A.
Lan Cargo S.A.
Lan Argentina S.A.
T ransporte Aéreo S.A.
Aerolane Líneas Aéreas Nacionales
del Ecuador S.A.
Aerovías de Integración Regional,
AIRES S.A.
T AM S.A. (*)
Statement of financial position as of December 31, 2015
T otal
Assets
T hUS$
255,691
483,033
195,756
331,117
Current
Assets
T hUS$
232,547
159,294
180,558
41,756
Non-current
Assets
T otal
Liabilities
T hUS$
T hUS$
Current
Liabilities
T hUS$
Non-current
Liabilities
T hUS$
23,144
323,739
15,198
289,361
240,938
217,037
170,384
122,666
239,521
147,423
168,126
44,495
1,417
69,614
2,258
78,171
Results for the period
ended December 31, 2015
Revenue
T hUS$
1,078,992
278,117
443,317
324,464
Net
Income
T hUS$
5,068
(74,408)
9,432
5,878
126,001
80,641
45,360
116,153
111,245
4,908
246,402
(1,278)
130,039
4,711,316
62,937
1,350,377
67,102
3,360,939
75,003
4,199,223
64,829
1,963,400
10,174
2,235,823
291,354
4,597,611
(34,079)
(183,812)
Statement of financial position as of December 31, 2014
T otal
Assets
T hUS$
239,470
575,979
233,142
367,570
Current
Assets
T hUS$
214,245
250,174
206,503
80,090
Non-current
Assets
T otal
Liabilities
T hUS$
T hUS$
Current
Liabilities
T hUS$
Non-current
Liabilities
T hUS$
25,225
325,805
26,639
287,480
228,395
234,772
201,168
147,278
226,784
119,111
198,593
59,805
1,611
115,661
2,575
87,473
Results for the period
ended December 31, 2014
Revenue
T hUS$
1,134,289
267,578
439,929
364,580
Net
Income
T hUS$
1,058
(9,966)
(17,864)
(8,983)
126,472
78,306
48,166
116,040
111,718
4,322
256,925
(20,193)
131,324
6,817,698
38,751
1,921,316
92,573
4,896,382
61,736
5,809,529
49,577
2,279,110
12,159
3,530,419
392,433
6,628,432
(81,033)
171,655
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55
(b) Non-controlling interest
Equity
Tax No.
Country
of origin
As of
December 31,
2015
As of
December 31,
2014
As of
December 31,
2015
As of
December 31,
2014
%
%
ThUS$
ThUS$
Lan Perú S.A
Lan Cargo S.A. and Subsidiaries
Inversiones Lan S.A. and Subsidiaries
Promotora Aérea Latinoamericana S.A. and Subsidiaries
Inversora Cordillera S.A. and Subsidiaries
Lan Argentina S.A.
Americonsult de Guatemala S.A.
Americonsult Costa Rica S.A.
Linea Aérea Carguera de Colombiana S.A.
Aerolíneas Regionales de Integración Aires S.A.
Transportes Aereos del Mercosur S.A.
Multiplus S.A.
0 - E
9 3 . 3 8 3 . 0 0 0 - 4
96.575.810-0
0 - E
0 - E
0 - E
0 - E
0 - E
0 - E
0 - E
0 - E
0 - E
P e r u
Chile
Chile
Mexico
Argentina
Argentina
Guatemala
Costa Rica
Colombia
Colombia
P a r a g u a y
Brazil
3 0 . 0 0 0 0 0
0.10605
0 . 0 0 0 0 0
51.00000
4 . 2 2 0 0 0
1.00000
1.00000
1.00000
10.00000
0 . 9 8 3 0 7
5 . 0 2 0 0 0
2 7 . 2 6 0 0 0
3 0 . 0 0 0 0 0
0.10605
0 . 2 9 0 0 0
51.00000
4 . 2 2 0 0 0
1.00000
1.00000
1.00000
10.00000
0 . 9 8 3 0 7
5 . 0 2 0 0 0
2 7 . 2 6 0 0 0
Total
Incomes
Tax No.
Country
of origin
As of
December 31,
2015
%
As of
December 31,
2014
%
Lan Perú S.A
Lan Cargo S.A. and Subsidiaries
Inversiones Lan S.A. and Subsidiaries
Promotora Aerea Latinoamericana S.A. and Subsidiaries
Aerolinheas Brasileiras S.A. and Subsidiaries
Aerolane, Lineas Aéreas Nacionales del Ecuador S.A.
Inversora Cordillera S.A. and Subsidiaries
Lan Argentina S.A.
Americonsult de Guatemala S.A.
Americonsult Costa Rica S.A.
Linea Aérea Carguera de Colombiana S.A.
Aerolíneas Regionales de Integración Aires S.A.
Transportes Aereos del Mercosur S.A.
Multiplus S.A.
0 - E
9 3 . 3 8 3 . 0 0 0 - 4
96.575.810-0
0 - E
0 - E
0 - E
0 - E
0 - E
0 - E
0 - E
0 - E
0 - E
0 - E
0 - E
P e r u
Chile
Chile
Mexico
Brazil
Ecuador
Argentina
Argentina
Guatemala
Costa Rica
Colombia
Colombia
P a r a g u a y
Brazil
3 0 . 0 0 0 0 0
0.10605
0 . 0 0 0 0 0
51.00000
0 . 0 0 0 0 0
0 . 0 0 0 0 0
4 . 2 2 0 0 0
1.00000
1.00000
1.00000
10.00000
0 . 9 8 3 0 7
5 . 0 2 0 0 0
2 7 . 2 6 0 0 0
3 0 . 0 0 0 0 0
0.10605
0 . 2 9 0 0 0
51.00000
0 . 0 0 0 0 0
0 . 0 0 0 0 0
4 . 2 2 0 0 0
1.00000
1.00000
1.00000
10.00000
0 . 9 8 3 0 7
5 . 0 2 0 0 0
2 7 . 2 6 0 0 0
Total
4 , 4 2 6
9 7 4
-
3 , 0 8 4
(1,386)
2 9
5
12
(811)
5 4 0
1,256
7 2 , 8 8 4
81,013
3 , 3 2 3
9 2 5
5
1,730
195
217
5
6
(826)
6 8 4
8 2 5
94,710
101,799
For the period ended
December 31,
2015
ThUS$
1,521
(69)
-
1,349
-
-
281
61
1
5
14
(335)
431
3 7 , 2 8 3
4 0 , 5 4 2
2014
ThUS$
317
(109)
(14)
3 9 6
-
(5,671)
2 6 9
5 8
4
6
(495)
(797)
(389)
3 9 , 2 5 4
3 2 , 8 2 9
NOTE 14 - INTANGIBLE ASSETS OTHER THAN GOODWILL
The details of intangible assets are as follows:
Classes of intangible assets
Classes of intangible assets
(net)
(gross)
As of
As of
As of
As of
December 31,
December 31,
December 31,
December 31,
2015
T hUS$
816,987
272,312
104,258
74,887
52,981
-
2014
T hUS$
1,201,028
400,317
126,797
74,050
77,887
-
2015
T hUS$
816,987
272,312
324,043
74,887
52,981
808
2014
T hUS$
1,201,028
400,317
309,846
74,050
77,887
808
1,321,425
1,880,079
1,542,018
2,063,936
Airport slots
Loyalty program
Computer software
Developing software
T rademarks
Other assets
T otal
Movement in Intangible assets other than goodwill:
Opening balance as of January 1, 2014
Additions
Withdrawals
Transfer software
Foreing exchange
Amortization
Closing balance as of
December 31, 2014
Opening balance as of January 1, 2015
Additions
Withdrawals
Transfer software
Foreing exchange
Amortization
Closing balance as of
December 31, 2015
Computer
software
N e t
Developing
software
Airport
slots (*)
Trademarks
and loyalty
program (*)
Other
a s s e t s
N e t
Total
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
143,124
16,902
(1,365)
22,351
(6,763)
(47,452)
46,075
60,994
(3,576)
(24,539)
(4,904)
-
1,361,807
-
-
-
(160,779)
-
542,221
-
-
-
(64,017)
-
126,797
74,050
1,201,028
478,204
126,797
4,954
(4,612)
28,726
(14,871)
(36,736)
74,050
48,270
(162)
(30,426)
(16,845)
-
1,201,028
-
-
-
(384,041)
-
478,204
-
(1)
-
(152,910)
-
104,258
74,887
816,987
325,293
81
-
-
-
-
(81)
-
-
-
-
-
-
-
-
2,093,308
77,896
(4,941)
(2,188)
(236,463)
(47,533)
1,880,079
1,880,079
53,224
(4,775)
(1,700)
(568,667)
(36,736)
1,321,425
The amortization of the period is shown in the consolidated statement of income in administrative
expenses. The accumulated amortization of computer programs as of December 31, 2015 amounts
to ThUS$ 219,785 (ThUS$ 183,049 as of December 31, 2014). The accumulated amortization of
other identifiable intangible assets as of December 31, 2015 amounts to ThUS$ 808 (ThUS$ 808 as
of December 31, 2014).
(*) See Note 2.5
NOTE 15 – GOODWILL
The Goodwill amount at December 31, 2015 is ThUS$ 2,280,575 (ThUS$ 3,313,401 at
December 31, 2014). Movement of Goodwill, separated by CGU:
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Opening balance as of January 1, 2013
Increase (decrease) due to exchange rate differences
Others
Closing balance as of December 31, 2013
Opening balance as of January 1, 2014
Increase (decrease) due to exchange rate differences
Others
Closing balance as of December 31, 2014
Opening balance as of January 1, 2015
Increase (decrease) due to exchange rate differences
Closing balance as of December 31, 2015
Air
T ransport
T hUS$
3,361,906
(421,729)
44,860
2,985,037
2,985,037
(360,371)
33,837
2,658,503
2,658,503
(823,415)
1,835,088
Coalition
and loyalty
program
Multiplus
T hUS$
851,254
(108,686)
-
742,568
742,568
(87,670)
-
654,898
654,898
(209,411)
445,487
T otal
T hUS$
4,213,160
(530,415)
44,860
3,727,605
3,727,605
(448,041)
33,837
3,313,401
3,313,401
(1,032,826)
2,280,575
The Company has two cash- generating units (CGUs), confirming the existence of two cash-
generating units: “Air transportation” and, “Coalition and loyalty program Multiplus”. The CGU
"Air transport" considers the transport of passengers and cargo, both in the domestic markets of
Chile, Peru, Argentina, Colombia, Ecuador and Brazil, and in a developed series of regional and
international routes in America, Europe and Oceania, while the CGU "Coalition and loyalty
program Multiplus” works with an integrated network associated companies in Brazil.
The recoverable amounts of cash-generating units have been determined based on value-in-use
calculations. These calculations require the use of expected cash flows, before tax, which are based
on the budget approved by the Board. Cash flows beyond the budget period are extrapolated using
the estimated growth rates, which do not exceed the average rates of long-term growth. Base on
growth expectation and long-term investment cycles, usually in the industry, these calculations use
a pre-tax cash flow projections or ten years.
Management establish rates for annual growth, discount, inflation and exchange for each cash
generating, as well as fuel prices, based on their key assumptions. The annual growth rate is based
on past performance and management's expectations over market developments in each country
where it operates. The discount rates used are in American Dollars for the CGU "Air transportation"
and Brazilian Reals for CGU "Program coalition loyalty Multiplus", both of them before tax and
reflect specific risks related to each country where the Company operates. Inflation and exchange
rates are based on available data for each country and the information provided by the Central Bank
of each country, and the fuel price is determined based on estimated production levels, competitive
environment market in which they operate and its business strategy.
The main assumptions used in the calculations as of December 31, 2015 and 2014 are discussed as
follows:
Annual growth rate (T erminal)
Exchange rate (1)
Discount rate based on the weighted average
cost of capital (WACC)
Discount rate based on cost of equity (CoE)
Fuel Price from futures price curves
Air transportation
CGU
Coalition and loyalty
program Multiplus CGU (2)
%
R$/US$
1.5 and 2.5
4.15 and 5.21
%
%
10.5 and 11.5
-
4.7 and 6.4
4.15 and 5.21
-
19.0 and 23.0
commodities markets
US$/barril
60-70
-
(1) In line with the expectations of the Central Bank of Brazil
The result of the impairment test, which includes a sensitivity analysis of the main variables,
showed that the estimated recoverable amount is higher than carrying value of the book value of net
assets allocated to the cash generating unit, and therefore impairment was not detected.
CGU´s are sensitive to rates for annual growth, discount and exchanges. The sensitivity analysis
included the individual impact of changes in estimates critical in determining the recoverable
amounts, namely:
Air transportation CGU
Coalition and loyalty program M ultiplus CGU
Increase
M aximum
WACC
%
11.5
-
Increase
M aximum
CoE
%
-
23.0
In none of the previous cases impairment in the cash- generating unit was presented.
Decrease
M inimum
terminal
growth rate
%
1.5
4.4
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NOTE 16 - PROPERTY, PLANT AND EQUIPMENT
The composition by category of Property, plant and equipment is as follows:
Gross Book Value
Acumulated depreciation
Net Book Value
As of
As of
As of
As of
As of
As of
December 31,
December 31,
December 31,
December 31,
December 31,
December 31,
2015
ThUS$
1,142,812
45,313
131,816
9,683,764
9,118,396
565,368
36,569
154,093
179,026
99,997
124,307
3,279,902
3,151,405
128,497
2014
ThUS$
937,279
57,988
249,361
8,660,352
7,531,526
1,128,826
65,832
188,208
97,090
95,981
144,230
4,522,589
4,365,247
157,342
2015
ThUS$
-
-
(40,325)
(2,392,463)
(2,198,682)
(193,781)
(21,220)
(110,204)
(90,068)
(64,047)
(70,219)
(1,150,396)
(1,120,682)
(29,714)
2014
ThUS$
-
-
(82,355)
(1,770,560)
(1,407,704)
(362,856)
(42,099)
(137,199)
(53,307)
(53,452)
(87,707)
(2,019,155)
(1,985,458)
(33,697)
2015
ThUS$
1,142,812
45,313
91,491
7,291,301
6,919,714
371,587
15,349
43,889
88,958
35,950
54,088
2,129,506
2,030,723
98,783
2014
ThUS$
937,279
57,988
167,006
6,889,792
6,123,822
765,970
23,733
51,009
43,783
42,529
56,523
2,503,434
2,379,789
123,645
Construction in progress
Land
Buildings
Plant and equipment
Own aircraft
Other
M achinery
Information technology equipment
Fixed installations and accessories
M otor vehicles
Leasehold improvements
Other property, plants and equipment
Financial leasing aircraft
Other
(a)
The movement in the different categories of Property, plant and equipment from January 1, 2014 to
December 31, 2015 is shown below:
Opening balance as of January 1, 2014
Additions
Disposals
Retirements
Depreciation expenses
Foreing exchange
Other increases (decreases)
Changes, total
Closing balance as of December 31, 2014
Opening balance as of January 1, 2015
Additions
Disposals
Retirements
Depreciation expenses
Foreing exchange
Other increases (decreases)
Changes, total
Construction
in progress
Land
Buildings
n e t
Plant and
equipment
n e t
Information
technology
equipment
n e t
Fixed
installations
& accessories
n e t
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
M o t o r
vehicles
n e t
ThUS$
Leasehold
improvements
n e t
ThUS$
Other
property,
plant and
equipment
n e t
ThUS$
Property,
Plant and
equipment
n e t
ThUS$
858,650
29,980
-
(705)
-
733
48,621
78,629
937,279
937,279
39,711
-
(1,262)
-
(932)
168,016
205,533
1,142,812
59,352
3,440
-
-
-
(4,804)
-
(1,364)
57,988
57,988
-
-
-
-
(11,786)
(889)
(12,675)
(*)
(**)
171,785
16,636
-
(403)
(13,980)
(12,341)
5,309
(4,779)
6,807,118
1,214,282
(660,129)
(39,463)
(431,967)
(59,957)
124,205
146,971
167,006
6,954,089
167,006
6,954,089
439
(500)
(956)
(7,161)
(18,248)
(49,089)
(75,515)
1,304,199
(76,675)
(38,240)
(521,688)
(129,933)
(150,677)
386,986
45,313
91,491
7,341,075
46,219
22,239
(57)
(205)
(16,889)
(3,595)
3,297
4,790
51,009
51,009
15,322
(27)
(104)
(16,196)
(6,126)
11
(7,120)
43,889
50,592
2,190
-
(230)
(8,899)
(1,509)
1,639
(6,809)
43,783
43,783
1,692
-
(476)
(11,649)
(13,269)
68,877
45,175
88,958
1,744
1,586
(4)
(53)
(1,041)
330
(597)
221
1,965
1,965
280
(8)
(4)
(378)
(638)
308
(440)
1,525
16,769
-
-
(50)
(19,127)
-
58,931
39,754
56,523
56,523
13,188
-
-
(13,973)
(1,659)
9
(2,435)
54,088
2,970,557
154,049
(328)
(34,282)
(286,033)
(110,727)
(189,802)
(467,123)
2,503,434
2,503,434
64,226
(11)
(8,902)
(174,474)
(252,709)
(2,058)
(373,928)
2,129,506
10,982,786
1,444,402
(660,518)
(75,391)
(777,936)
(191,870)
51,603
(209,710)
10,773,076
10,773,076
1,439,057
(77,221)
(49,944)
(745,519)
(435,300)
34,508
165,581
10,938,657
Total
14,877,599
15,018,910
(3,938,942)
(4,245,834)
10,938,657
10,773,076
Closing balance as of December 31, 2015
(*) It includes pre-delivery payments to aircraft manufacturers for ThUS$ 944,582 (ThUS$ 816,324
as of December 31, 2014)
(**) Mainly considers rotable and tools.
(*)
During the first half of 2014 four Boeing 777-300ER aircraft were sold and subsequently leased.
(**) During the first half of 2015 three Airbus A340 aircraft were sold.
During the second half of 2015 seven Dash-200 aircraft were sold.
During the second half of 2015 two Airbus A319 aircraft were sold.
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(b)
Composition of the fleet:
Aircraft included
in the Company´s Property,
plant and equipment
Operating
l e a s e s
Total
fleet
Aircraft
Model
December 31, December 31,
December 31, December 31,
December 31, December 31,
As of
As of
As of
As of
As of
As of
2015
2014
2015
2014
2015
2014
Boeing 767
Boeing 767
Boeing 777
Boeing 777
Boeing 787
Boeing 787
Airbus A319
Airbus A320
Airbus A321
Airbus A330
Airbus A340
Airbus A350
Bombardier
Total
300ER
300F
300ER
Freighter
8 0 0
9 0 0
100
2 0 0
2 0 0
2 0 0
3 0 0
9 0 0
D h c 8 - 2 0 0
(1) Two aircraft leased to FEDEX
(2) Three aircraft leased to FEDEX
(3) One aircraft leased to DHL
(2)
(3)
3 4
8
4
2
6
3
3 8
9 5
2 6
8
-
1
-
(1)
3 4
8
4
2
6
-
4 0
9 5
18
8
3
-
2
4
3
6
2
4
4
12
5 9
10
2
-
-
-
4
3
6
2
4
-
12
6 3
3
5
-
-
5
2 2 5
2 2 0
106
107
(2)
(3)
3 8
11
10
4
10
7
5 0
154
3 6
10
-
1
-
331
(1)
3 8
11
10
4
10
-
5 2
158
21
13
3
-
7
3 2 7
(c)
Method used for the depreciation of Property, plant and equipment:
Method
Useful life
minimum maximum
Buildings
Plant and equipment
Information technology
equipment
Fixed installations and accessories
Motor vehicle
Leasehold improvements
Other property, plant
and equipment
Straight line without residual value
Straight line with residual value of 20% in the
short-haul fleet and 36% in the long-haul fleet. (*)
Straight line without residual value
Straight line without residual value
Straight line without residual value
Straight line without residual value
Straight line with residual value of 20% in the
short-haul fleet and 36% in the long-haul fleet. (*)
20
5
5
10
10
5
10
50
20
10
10
10
5
20
(*) Except for certain technical components, which are depreciated on the basis of cycles and
flight hours.
The aircraft with remarketing clause (**) under modality of financial leasing, which are depreciated
according to the duration of their contracts, between 12 and 18 years. Its residual values are
estimated according to market value at the end of such contracts.
(**) Aircraft with remarketing clause are those that are required to sell at the end of the contract.
The depreciation charged to income in the period, which is included in the consolidated statement
of income, amounts to ThUS$ 745,519 (ThUS$ 777,936 at December 31, 2014). Depreciation
charges for the year are recognized in Cost of sales and administrative expenses in the consolidated
statement of income.
(d) Additional information regarding Property, plant and equipment:
(i) Property, plant and equipment pledged as guarantee:
In the period ended December 31, 2015, direct guarantees by eight Airbus A321-200 aircraft, three
Boeing 787-9 aircraft and one Airbus A350 aircraft were added. Additionally, as a result of the
transfer plan fleet of TAM Linhas Aéreas S.A. to LATAM Airlines Group S.A.. the direct guarantee
of one Airbus A320-200 aircraft was added.
Description of Property, plant and equipment pledged as guarantee:
As of
December 31,
2015
As of
December 31,
2014
Creditor of
guarantee
A s s e t s
committed
Fleet
Wilmington
Trust Company
Aircraft and engines
Airbus A321 / A350
Boeing 767
Boeing 777 / 787
Banco Santander S.A.
Aircraft and engines
BNP Paribas
Aircraft and engines
Credit Agricole
Aircraft and engines
J P M o r g a n
Wells Fargo
Bank of Utah
Natixis
Aircraft and engines
Aircraft and engines
Aircraft and engines
Aircraft and engines
Citibank N. A.
Aircraft and engines
H S B C
Aircraft and engines
KfW IPEX-Bank
Aircraft and engines
PK AirFinance US, Inc. Aircraft and engines
Airbus A319
Airbus A320
Airbus A321
Airbus A319
Airbus A320
Airbus A319
Airbus A320
Airbus A321
Boeing 777
Airbus A320
Airbus A320
Airbus A320
Airbus A321
Airbus A320
Airbus A321
Airbus A320
Airbus A320
Airbus A320
Existing
Debt
ThUS$
374,619
907,356
712,059
58,527
524,682
36,334
154,828
145,506
37,755
115,339
50,591
215,265
279,478
240,094
56,223
413,201
127,135
49,464
53,583
13,593
62,514
B o o k
Value
ThUS$
478,667
1,220,541
834,567
95,387
749,192
45,380
229,798
192,957
84,129
214,726
97,257
-
263,366
348,271
312,573
81,355
722,876
172,918
73,122
64,241
16,838
48,691
Existing
Debt
ThUS$
-
1,001,311
452,622
66,318
585,008
39,739
174,714
162,304
55,797
157,514
60,288
237,463
305,949
259,260
48,814
405,416
142,591
55,836
59,005
16,088
69,721
B o o k
Value
ThUS$
-
1,277,357
518,788
100,485
788,706
45,161
238,103
207,881
121,038
219,460
63,939
278,169
-
360,064
327,094
55,946
488,198
146,535
59,452
59,342
17,516
70,102
Total direct guarantee
4,628,146
6,346,852
4,355,758
5,443,336
The amounts of existing debt are presented at nominal value. Book value corresponds to the
carrying value of the goods provided as guarantees.
Additionally, there are indirect guarantees related to assets recorded in Property, plant and
equipment whose total debt at December 31, 2015 amounted to ThUS$ 1,311,088
(ThUS$ 1,626,257 at December 31, 2014). The book value of assets with indirect guarantees as of
December 31, 2015 amounts to ThUS$ 2,001,605 (ThUS$ 2,335,135 as of December 31, 2014).
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(ii)
Commitments and others
Fully depreciated assets and commitments for future purchases are as follows:
As of
December 31,
2015
ThUS$
As of
December 31,
2014
ThUS$
Gross book value of fully depreciated property,
129,766
138,960
plant and equipment still in use
Commitments for the acquisition of aircraft (*)
19,800,000
21,500,000
(*) Acording to the manufacturer’s price list.
Purchase commitment of aircraft
Manufacturer
2016
2017
Year of delivery
2019
2018
2020
Airbus S.A.S.
A320-NEO
A321
A321-NEO
A350
T he Boeing Company
B777
B787-8
B787-9
T otal
23
2
15
-
6
4
-
-
4
27
24
18
-
-
6
1
-
-
1
25
24
16
-
6
2
4
-
-
4
28
10
8
-
-
2
6
2
4
-
16
14
8
-
4
2
-
-
-
-
14
2021
T otal
13
-
-
5
8
-
-
-
-
13
108
52
15
15
26
15
2
4
9
123
In July 2014 the cancellation of 4 Airbus A320 was signed and changing 12 Airbus A320 aircraft for
12 Airbus A320 NEO aircraft. In December 2014 a contract was signed changing 4 Airbus A320
aircraft for 4 Airbus A320 NEO aircraft and changing 9 Airbus A321 aircraft for 9 Airbus A321
NEO aircraft. In September 2015 the change of 6 Airbus A350-900 aircraft for 6 Airbus
A350-1000 aircraft was signed. Additionally, in November 2015 the change of 6 Airbus A350-900
aircraft to 6 Airbus A350-1000 aircraft was signed.
At December 31, 2015, as a result of the different aircraft purchase agreements signed with Airbus
S.A.S., 82 aircraft Airbus A320 family, with deliveries between 2016 and 2021, and 26 Airbus
aircraft A350 family with delivery dates starting from 2016 remain to be received.
The approximate amount is ThUS$ 16,300,000, according to the manufacturer’s price list.
Additionally, the Company has valid purchase options for 5 Airbus A350 aircraft.
In April 2015 the change of 8 Boeing 787-8 aircraft for 8 Boeing 787-8 aircraft was signed.
As of December 31, 2015, and as a result of different aircraft purchase contracts signed with The
Boeing Company, a total of 13 787 Dreamliner aircraft, with delivery dates between 2016 and 2019,
and two 777 with delivery expected for 2019 remain to be received.
The approximate amount, according to the manufacturer's price list, is ThUS$ 3,500,000.
(iii)
Capitalized interest costs with respect to Property, plant and equipment.
For the periods ended
December 31,
2015
2014
Average rate of capitalization of
capitalized interest costs
Costs of capitalized interest
%
ThUS$
2.79
22,551
2.84
18,426
(iv)
Financial leases
The detail of the main financial leases is as follows:
Lessor
Aircraft
Model
As of
As of
December 31,
2015
December 31,
2014
Agonandra Statutory Trust
Agonandra Statutory Trust
Becacina Leasing LLC
Caiquen Leasing LLC
Cernicalo Leasing LLC
Chirihue Leasing Trust
Cisne Leasing LLC
Codorniz Leasing Limited
Conure Leasing Limited
Flamenco Leasing LLC
FLYAFI 1 S.R.L.
FLYAFI 2 S.R.L.
FLYAFI 3 S.R.L.
Forderum Holding B.V. (GECAS)
Garza Leasing LLC
General Electric Capital Corporation
Intraelo BETA Corpotation (KFW)
Juliana Leasing Limited
Linnet Leasing Limited
Loica Leasing Limited
Loica Leasing Limited
Mirlo Leasing LLC
NBB Rio de Janeiro Lease CO and Brasilia Lease LLC (BBAM)
NBB São Paulo Lease CO. Limited (BBAM)
Osprey Leasing Limited
Petrel Leasing LLC
Pilpilen Leasing Limited
Pochard Leasing LLC
Quetro Leasing LLC
SG Infraestructure Italia S.R.L.
SL Alcyone LTD (Showa)
TMF Interlease Aviation B.V.
TMF Interlease Aviation B.V.
TMF Interlease Aviation II B.V.
TMF Interlease Aviation II B.V.
Tricahue Leasing LLC
Wacapou Leasing S.A
Airbus A319
Airbus A320
Boeing 767
Boeing 767
Boeing 767
Boeing 767
Boeing 767
Airbus A319
Airbus A320
Boeing 767
Boeing 777
Boeing 777
Boeing 777
Airbus A320
Boeing 767
Airbus A330
Airbus A320
Airbus A320
Airbus A320
Airbus A319
Airbus A320
Boeing 767
Airbus A320
Airbus A321
Airbus A319
Boeing 767
Airbus A320
Boeing 767
Boeing 767
Boeing 777
Airbus A320
Airbus A320
Airbus A330
Airbus A319
Airbus A320
Boeing 767
Airbus A320
100
2 0 0
300ER
3 0 0 F
3 0 0 F
3 0 0 F
300ER
100
2 0 0
300ER
300ER
300ER
300ER
2 0 0
300ER
2 0 0
2 0 0
2 0 0
2 0 0
100
2 0 0
300ER
2 0 0
2 0 0
100
300ER
2 0 0
300ER
300ER
300ER
2 0 0
2 0 0
2 0 0
100
2 0 0
300ER
2 0 0
-
2
1
1
2
2
2
2
2
1
1
1
1
2
1
3
1
2
-
2
2
1
1
1
8
1
4
2
3
1
1
-
1
5
2
3
1
4
2
1
1
2
2
2
2
2
1
1
1
1
2
1
3
1
2
4
2
2
1
1
1
8
1
-
2
3
1
1
1
1
5
2
3
1
Total
6 6
71
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Financial leasing contracts where the Company acts as the lessee of aircrafts establish duration
between 12 and 18 year terms and semi-annual, quarterly and monthly payments of obligations.
Additionally, the lessee will have the obligation to contract and maintain active the insurance
coverage for the aircraft, perform maintenance on the aircraft and update the airworthiness
certificates at their own cost.
Fixed assets acquired under financial leases are classified as Other property, plant and equipment.
As of December 31, 2015 the Company had sixty six aircraft (seventy one aircraft as of
December 31, 2014).
As of December 31, 2015, as a result of the transfer plan fleet of TAM Linhas Aéreas S.A. to
LATAM Airlines Group S.A., the Company reduces its number of aircraft leasing in four Airbus
A319-100 and one Airbus A320-200 aircraft.
The book value of assets under financial leases as of December 31, 2015 amounts to
ThUS$ 2,030,723 (ThUS$ 2,379,789 as of December 31, 2014).
The minimum payments under financial leases are as follows:
As of December 31, 2015
As of December 31, 2014
G r o s s
Value
ThUS$
Interest
ThUS$
P r e s e n t
Value
ThUS$
G r o s s
Value
ThUS$
Interest
ThUS$
P r e s e n t
Value
ThUS$
No later than one year
Between one and five years
Over five years
360,862
(47,492)
313,370
403,840
(48,197)
355,643
1,003,237
(75,363)
927,874
1,121,190
(97,909)
1,023,281
95,050
(1,406)
93,644
261,877
(6,409)
255,468
Total
1,459,149
(124,261)
1,334,888
1,786,907
(152,515)
1,634,392
NOTE 17 - CURRENT AND DEFERRED TAXES
In the period ended December 31, 2015, the income tax provision was calculated at the rate of
22.5% for the business year 2015, in accordance with the recently enacted Law No. 20,780
published in the Official Journal of the Republic of Chile on September 29, 2014.
Among the main changes is the progressive increase of the First Category Tax which will reach
27% in 2018 if the "Partially Integrated Taxation System"(*) is chosen. Alternatively, if the
Company chooses the "Attributed Income Taxation System"(*) the top rate would reach 25% in
2017.
As LATAM Airlines Group S.A. is a public company, by default it must choose the "Partially
Integrated Taxation System", unless a future Extraordinary Meeting of Shareholders of the
Company agrees, by a minimum of 2/3 of the votes, to choose the "Attributed Income Taxation
System". This decision must be taken at the latest in the last quarter of 2016.
On February 8, 2016, an amendment to the abovementioned Law was issued (as Law 20,899)
stating, as its main amendments, that Companies such Latam Airlines Group S.A. had to
mandatorily choose the "Partially Integrated Taxation System"(*) and could not elect to use the
other system.
The effects of the updating of deferred tax assets and liabilities according to rates changes
introduced by Law No. 20,780 depending on their period back were recorded equity in accordance
with the instructions of Chilean Superintendency of Securities and Insurance in his Office Circular
No. 856 of October 17, 2014. The total effect in equity was ThUS $ 150,210, which is explained by
an increase in deferred tax assets of ThUS$ 87 and an increase in deferred tax liabilities of
ThUS$ 145,253 and an increase in equity by deferred tax of ThUS$ 5,044. The net effect on the
assets and liabilities by deferred tax was an increase on liabilities for ThUS$ 145,166.
Deferred tax assets and liabilities are offset if there is a legal right to offset assets and liabilities for
income taxes relating to the same entity and tax authority.
(*) The Partially Integrated Taxation System is one of the tax regimes approved through the Tax
Reform previously mentioned, which is based on the taxation by the perception of profits and the
Attributed Income Taxation System is based on the taxation by the accrual of profits.
(a)
Current taxes
(a.1) The composition of the current tax assets is the following:
Current assets
Non-current assets
Total assets
As of
December 31,
2015
As of
December 31,
2014
As of
December 31,
2015
As of
December 31,
2014
As of
December 31,
2015
As of
December 31,
2014
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
Provisional monthly
payments (advances)
Other recoverable credits
Total current tax assets
4 3 , 9 3 5
2 0 , 0 8 0
64,015
6 8 , 7 5 2
31,956
100,708
-
2 5 , 6 2 9
2 5 , 6 2 9
-
17,663
17,663
4 3 , 9 3 5
4 5 , 7 0 9
8 9 , 6 4 4
6 8 , 7 5 2
49,619
118,371
(a.2) The composition of the current tax liabilities are as follows:
Current liabilities
As of
December 31,
2015
As of
December 31,
2014
Non-current liabilities
As of
December 31,
2015
As of
December 31,
2014
Total liabilities
As of
December 31,
2015
As of
December 31,
2014
Income tax provision
Additional tax provision
Total current tax liabilities
ThUS$
19,001
3 7 7
19,378
ThUS$
16,712
1,177
17,889
ThUS$
ThUS$
-
-
-
-
-
-
ThUS$
19,001
3 7 7
19,378
ThUS$
16,712
1,177
17,889
(b) Deferred taxes
The balances of deferred tax are the following:
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C o n c e p t
Depreciation
L e a s e d a s s e t s
Amortization
Provisions
Revaluation of financial instruments
Tax losses
Revaluation property, plant and equipment
Intangibles
Others
Total
A s s e t s
Liabilities
As of
As of
As of
As of
December 31,
December 31,
December 31,
December 31,
2015
ThUS$
(14,243)
(25,299)
(5,748)
210,992
709
212,067
-
-
(1,883)
376,595
2014
ThUS$
(23,675)
(102,457)
(31,750)
416,153
270
151,569
-
-
(2,787)
407,323
2015
ThUS$
1,103,017
137,741
92,313
(70,028)
(7,575)
(797,715)
(4,081)
355,952
1,941
811,565
2014
ThUS$
847,965
83,318
128,350
65,076
(12,536)
(571,180)
(5,999)
523,275
(6,375)
1,051,894
The balance of deferred tax assets and liabilities are composed primarily of temporary differences to
be reversed in the long term.
Movements of Deferred tax assets and liabilities
(a)
From January 1 to December 31, 2014
Opening
Recognized in
Recognized in
Exchange
Efect from
balance
consolidated
comprehensive
rate
change in
Ending
balance
Assets/(liabilities)
i n c o m e
ThUS$
(574,997)
(193,762)
(124,357)
525,241
16,070
551,528
18,544
(593,325)
10,792
ThUS$
(74,623)
47,749
(21,621)
(99,262)
(53,675)
147,798
(6,384)
-
13,455
i n c o m e
ThUS$
variation
tax rate
Others
Asset (liability)
ThUS$
ThUS$
ThUS$
ThUS$
-
-
-
-
47,979
-
-
-
-
3,575
3,267
1,928
(53,090)
(1,331)
(13,968)
(6,161)
70,050
(26,200)
(225,595)
(43,029)
(16,050)
(21,812)
3,763
163,596
-
-
(6,039)
-
-
-
-
-
(126,205)
-
-
11,580
(871,640)
(185,775)
(160,100)
351,077
12,806
722,749
5,999
(523,275)
3,588
Depreciation
L e a s e d a s s e t s
Amortization
Provisions
Revaluation of financial instruments
Tax losses (*)
Revaluation propety, plant and equipment
Intangibles
Others
Total
(364,266)
(46,563)
47,979
(21,930)
(145,166)
(114,625)
(644,571)
(b)
From January 1 to December 31, 2015
Opening
Recognized in
Recognized in
Exchange
balance
consolidated
comprehensive
rate
Ending
balance
Assets/(liabilities)
income
ThUS$
ThUS$
income
ThUS$
variation
Others
Asset (liability)
ThUS$
ThUS$
ThUS$
Depreciation
L e a s e d a s s e t s
Amortization
Provisions
Revaluation of financial instruments
Tax losses (*)
Revaluation propety, plant and equipment
Intangibles
Others
(871,640)
(185,775)
(160,100)
351,077
12,806
722,749
5,999
(523,275)
3,588
(254,160)
14,932
57,433
52,845
19,760
320,397
12,799
-
46,898
-
-
-
3,911
(21,103)
-
-
-
-
8,540
7,803
4,606
(126,813)
(3,179)
(33,364)
(14,717)
167,323
(47,465)
-
-
-
-
-
-
-
-
(6,845)
(1,117,260)
(163,040)
(98,061)
281,020
8,284
1,009,782
4,081
(355,952)
(3,824)
Total
(644,571)
270,904
(17,192)
(37,266)
(6,845)
(434,970)
(*) In relation to the Tax Recovery Program (REFIS), established in Law No. 11,941/09, the
Provisional Measure No. 651/2014 approved by the Brazilian National Congress and signed into
Law No. 13,043/14, in its Section VIII, Article 33, establishes that taxpayers that have tax debts can
anticipate paying their tax debt by using tax credits related to tax loss carryforwards up to an
amount of 70% of the total debt if they pay the other 30% in cash. The Company adhered to the
program and paid its debt through this mechanism.
Therefore, during the business year 2014 the company TAM Linhas Aéreas S.A. decreased its
liability associated with the REFIS program using its deferred tax assets related to its tax loss of
ThUS $ 126,205 at December 31, 2015, generating no effect on the outcome of tax.
Deferred tax assets not recognized:
Tax losses
Total Deferred tax assets not recognized
As of
December 31,
2015
As of
December 31,
2014
ThUS$
15,513
15,513
ThUS$
2,781
2,781
Deferred tax assets on tax loss carry-forwards, are recognized to the extent that it is likely to
provide relevant tax benefit through future taxable profits. During the business year 2015, the
Company has not recognized deferred tax assets of ThUS$ 15,513
(ThUS$ 2,781 at
December 31, 2014) according with a loss of ThUS$ 45,628 (ThUS$ 11,620 at December 31,
2014) to offset against future years tax benefits.
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Deferred tax expense and current income taxes:
Current tax expense
Current tax expense
Adjustment to previous period’s current tax
Total current tax expense, net
Deferred tax expense
Deferred expense for taxes related to the
creation and reversal of temporary differences
Reduction (increase) in value of deferred tax assets
during the evaluation of its usefulness
Total deferred tax expense, net
Income tax expense
Composition of income tax expense (income):
Current tax exp ense, net, foreign
Current tax exp ense, net, Chile
Total current tax exp ense, net
Deferred tax exp ense, net, foreign
Deferred tax exp ense, net, Chile
Deferred tax exp ense, net, total
Income tax exp ense
For the period ended
December 31,
2015
ThUS$
2014
ThUS$
92,916
(395)
97,782
(2,151)
92,521
95,631
(270,904)
46,466
-
97
(270,904)
46,563
(178,383)
142,194
For the p eriod ended
December 31,
2015
ThUS$
2014
ThUS$
89,460
3,061
92,521
(280,445)
9,541
(270,904)
(178,383)
92,272
3,359
95,631
168,049
(121,486)
46,563
142,194
Profit before tax by the legal tax rate in Chile (22.5% and 21% at December 31, 2015 and 2014,
respectively)
For the period ended
December 31,
2015
ThUS$
2014
ThUS$
For the period ended
December 31,
2014
2015
%
%
Tax expense using the legal rate (*)
(89,472)
6 , 8 0 5
2 2 . 5 0
21.00
Tax effect of rates in other jurisdictions
(21,803)
112,563
5 . 4 8
3 4 7 . 3 7
Tax effect of non-taxable operating revenues
(106,381)
(60,960)
2 6 . 7 5
(188.12)
Tax effect of disallowable expenses
3 8 , 6 7 7
8 8 , 6 4 3
(9.73)
2 7 3 . 5 5
Other increases (decreases) in legal tax charge
5 9 6
(4,857)
(0.15)
(14.99)
Total adjustments to tax expense using the legal rate
(88,911)
135,389
2 2 . 3 5
417.81
Tax expense using the effective rate
(178,383)
142,194
4 4 . 8 5
438.81
(*) On September 29, 2014, Law No. 20,780 "Amendment to the system of income taxation and
introduces various adjustments in the tax system." was published in the Official Journal of the
Republic of Chile. Within major tax reforms that this law contains, the First- Category Tax rate is
gradually modified from 2014 to 2018 and should be declared and paid in tax year 2015.
Thus, at December 31, 2014, the Company recognized a loss ThUS$ 150,210 as a result of the rate
increase.
Deferred taxes related to items charged to net equity:
For the period ended
December 31,
2015
ThUS$
2014
ThUS$
(17,192)
40,227
-
7,752
(992)
(3,389)
-
(2,708)
Aggregate deferred taxation of components
of other comprehensive income
Tax effect by change legal tax rate
in other comprehensive income (*)
Aggregate deferred taxation related to
items charged to net equity
Tax effect by change legal tax rate
in net equity (*)
(*) Correspond to the tax by tax rate increases Law No. 20,780, tax reform, published in the Official
Journal of the Republic of Chile on September 29, 2014.
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NOTE 18 - OTHER FINANCIAL LIABILITIES
The composition of Other financial liabilities is as follows:
Current
(a) Interest bearing loans
(b) Derivatives not recognized as a hedge
(c) Hedge derivatives
Total current
Non-current
(a) Interest bearing loans
(c) Hedge derivatives
Total non-current
(a)
Interest bearing loans
Obligations with credit institutions and debt instruments:
Subtotal bank loans
Current
Loans to exporters
Bank loans
Guaranteed obligations
Other guaranteed obligations
Obligation with the public
Financial leases
Other loans
T otal current
Non-current
Bank loans
Guaranteed obligations
Other guaranteed obligations
Subtotal bank loans
Obligation with the public (1)
Financial leases
Other loans
T otal non-current
T otal obligations with financial institutions
As of
December 31,
2015
ThUS$
As of
December 31,
2014
ThUS$
1,510,146
-
134,089
1,644,235
7,516,257
16,128
7,532,385
1,397,382
1,190
226,043
1,624,615
7,360,685
28,327
7,389,012
As of
December 31,
2015
T hUS$
As of
December 31,
2014
T hUS$
387,409
80,188
591,148
32,513
1,091,258
10,999
324,859
83,030
327,278
98,711
502,938
31,798
960,725
21,206
364,514
50,937
1,510,146
1,397,382
564,128
4,122,995
-
4,687,123
1,294,882
1,015,779
518,473
7,516,257
9,026,403
415,667
3,827,018
32,492
4,275,177
1,111,481
1,344,520
629,507
7,360,685
8,758,067
(1) On June 9, 2015 LATAM Airlines Group S.A. has issued and placed on the international market
under Rule 144-A and Regulation S of the securities laws of the United States of America,
unsecured long-term bonds in the amount of US$ 500,000,000, maturing 2020, interest rate of
7.25% per annum.
As reported in the Essential Matter of May 20 and June 5, 2015, the Issuance and placement of the
Bonds 144-A shall be: (i) finance the repurchase, conversion and redemption of secured long-term
bonds issued by the company TAM Capital 2 Inc., under Rule 144-A and Regulation S of the
securities laws of the United States of America, maturing 2020; (ii) in the event there is any remnant
fund other general corporate purposes. The aforementioned bonds TAM Capital 2 Inc. were
redeemed in whole (US$ 300,000,000) through a process of exchange for new bonds
dated June 9, 2015 and then the remaining bonds were redeemed by running the prepay dated
June 18, 2015.
All interest-bearing liabilities are recorded using the effective interest rate method. Under IFRS, the
effective interest rate for loans with a fixed interest rate does not vary throughout the loan, while in
the case of loans with variable interest rates, the effective rate changes on each date of reprising of
the loan.
Currency balances that make the interest bearing loans:
Currency
Argentine peso
Brazilian real
Chilean peso (U.F.)
Euro
US Dollar
Total
As of
December 31,
2015
As of
December 31,
2014
ThUS$
-
3,387
210,423
-
8,812,593
9,026,403
ThUS$
39,053
53,410
187,614
547
8,477,443
8,758,067
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Préstamos que devengan intereses por tramos de vencimiento al 31 de diciembre de 2015
Nombre empresa deudora: LATAM Airlines Group S.A. y Filiales, Rut 89.862.200-2, Chile.
Interest-bearing loans due in installments to December 31, 2015
Debtor: TAM S.A. and Subsidiaries, Tax No. 02.012.862/0001-60, Brazil.
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73
Tax No.
Creditor
Creditor
country
Currency
Loans to exporters
97.032.000-8
97.036.000-K
97.030.000-7
97.004.000-5
97,003,000-K
97.951.000-4
BBVA
SANTANDER
ESTADO
CHILE
BANCO DO BRASIL
HSBC
Bank loans
97.023.000-9
0-E
0-E
97.036.000-K
CORPBANCA
BLADEX
DVB BANK SE
SANTANDER
Obligations with the public
0-E
BANK OF YORK
Guaranteed obligations
0-E
0-E
0-E
0-E
0-E
97.036.000-K
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
-
CREDIT AGRICOLE
BNP PARIBAS
WELLS FARGO
WILMINGTON TRUST
CITIBANK
SANTANDER
BTMU
APPLE BANK
US BANK
DEUTSCHE BANK
NATIXIS
HSBC
PK AIRFINANCE
KFW IPEX-BANK
SWAP Aviones llegados
Other guaranteed obligations
0-E
DVB BANK SE
Financial leases
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
Other loans
0-E
0-E
ING
CREDIT AGRICOLE
CITIBANK
PEFCO
BNP PARIBAS
WELLS FARGO
DVB BANK SE
BANC OF AMERICA
BOEING
CITIBANK (*)
Total
Chile
Chile
Chile
Chile
Chile
Chile
Chile
U.S.A.
U.S.A.
Chile
U.S.A.
France
U.S.A.
U.S.A.
U.S.A.
U.S.A.
Chile
U.S.A.
U.S.A.
U.S.A.
U.S.A.
France
U.S.A.
U.S.A.
Germany
-
U.S.A.
U.S.A.
France
U.S.A.
U.S.A.
U.S.A.
U.S.A.
U.S.A.
U.S.A.
U.S.A.
U.S.A.
U S $
U S $
U S $
U S $
U S $
U S $
UF
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
Nominal values
Accounting values
More than More than More than
one to
three
years
ThUS$
90 days
to one
year
ThUS$
five
years
ThUS$
three to More than
More than More than More than
one to
three
years
ThUS$
90 days
to one
year
ThUS$
five
years
ThUS$
three to More than
five
years
ThUS$
Total
accounting
value
ThUS$
Amortization
Effective Nominal
rate
%
rate
%
Up to
9 0
days
ThUS$
100,000
100,000
55,000
50,000
70,000
12,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Up to
9 0
days
ThUS$
100,183
100,067
55,088
50,006
70,051
12,014
Total
nominal
value
ThUS$
100,000
100,000
55,000
50,000
70,000
12,000
211,135
50,000
153,514
226,712
five
years
ThUS$
-
-
-
-
-
-
-
-
-
-
-
17,631
-
-
-
52,893
7,500
-
-
105,837
27,500
153,514
226,712
34,774
15,000
-
-
-
-
-
500,000
18,510
134
14
6 5 0
52,892
7,500
-
-
104,385
27,125
153,514
226,712
34,635
14,875
-
-
500,000
2,383
-
-
486,962
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100,183
100,067
55,088
50,006
70,051
12,014
210,422
49,634
153,528
227,362
At Expiration
At Expiration
At Expiration
At Expiration
At Expiration
At Expiration
Quarterly
Semiannual
Quarterly
Quarterly
1.00
1.44
1.05
1.42
1.18
0.66
4.18
4.58
1.67
2.24
1.00
1.44
1.05
1.42
1.18
0.66
4.18
4.58
1.67
2.24
489,345
At Expiration
7.77
7.25
29,633
8,162
30,895
-
17,042
5,233
2,714
1,333
14,483
4,767
11,698
1,374
1,882
6 5 3
5 0 2
88,188
25,012
93,511
48,264
51,792
15,862
8,250
4,055
43,948
14,667
35,914
4,180
5,846
2,028
1,360
204,722
70,785
255,536
85,183
143,168
43,552
22,801
11,211
120,924
32,449
97,434
11,533
17,171
5,314
2,521
54,074
75,028
264,770
90,694
150,792
45,416
24,007
11,828
126,550
25,826
83,289
12,112
19,744
3,958
7 6 5
12,410
140,410
536,039
451,555
254,208
49,606
39,182
19,715
285,134
58,989
241,088
24,384
17,871
1,640
-
389,027
319,397
1,180,751
675,696
617,002
159,669
96,954
48,142
591,039
136,698
469,423
53,583
62,514
13,593
5,148
30,447
9,243
34,933
5,691
18,545
5,514
2,897
1,478
17,232
5,342
12,351
1,504
1,937
6 5 5
5 0 2
88,189
25,012
93,511
48,263
51,792
15,862
8,250
4,056
43,948
14,666
35,914
4,180
5,846
2,028
1,360
203,286
70,335
227,704
81,867
133,740
41,434
21,336
10,483
102,607
32,448
97,434
11,533
17,171
5,314
2,521
54,074
74,917
252,054
88,977
146,362
44,599
23,376
11,513
117,968
25,826
83,289
12,112
19,744
3,958
7 6 5
12,410
140,407
525,257
448,016
249,406
49,281
38,789
19,515
277,195
58,989
241,088
24,384
17,871
1,640
-
388,406
319,914
1,133,459
672,814
599,845
156,690
94,648
47,045
558,950
137,271
470,076
53,713
62,569
13,595
5,148
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Monthly
Quarterly
Quarterly
1.83
2.29
2.27
4.25
2.40
1.47
1.82
1.72
3.99
3.40
2.08
2.40
2.04
2.45
-
1.66
2.22
1.57
4.25
1.64
0.93
1.22
1.12
2.81
3.40
2.05
1.59
2.04
2.45
-
8,054
24,438
-
-
-
32,492
8,075
24,438
-
-
-
32,513
Quarterly
2.32
2.32
8,108
1,666
4,687
15,246
9,956
4,519
4,567
6 7 4
23,191
5,131
14,447
46,858
30,678
13,784
13,873
2,096
36,868
7,158
41,726
108,403
81,373
38,531
14,127
-
26,831
-
36,523
22,407
31,100
41,238
-
-
-
-
-
-
-
23,556
-
-
94,998
13,955
97,383
192,914
153,107
121,628
32,567
2,770
8,894
1,700
5,509
16,536
10,494
4,919
4,625
6 7 6
23,191
5,131
14,447
46,858
30,678
13,784
13,873
2,096
36,066
7,158
40,684
106,757
79,983
37,247
14,127
-
26,682
-
36,330
22,324
30,958
40,819
-
-
-
-
-
-
-
23,486
-
-
94,833
13,989
96,970
192,475
152,113
120,255
32,625
2,772
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Monthly
-
19,361
-
60,251
151,362
174,178
-
196,210
-
-
151,362
450,000
2,294
20,485
-
60,251
151,363
174,178
-
192,932
-
-
153,657
447,846
At Expiration
Quarterly
611,840
738,017
2,291,593
1,892,936
2,155,787
7,690,173
641,578
738,016
2,218,512
1,846,051
2,127,734
7,571,891
5.13
1.28
6.40
5.37
4.08
3.98
2.06
1.41
1.80
6.00
4.57
1.28
5.67
4.77
3.64
3.54
2.06
1.41
1.80
6.00
(*) Securitized bond with the future flows from the sales with credit card in United States and Canada.
Tax No.
Creditor
Préstamos bancarios
0-E
NEDERLANDSCHE
CREDIETVERZEKERING MAATSCHAPPIJ
Obligaciones con el público
Nominal values
Accounting values
Creditor
c o u n t r y
C u r r e n c y
Up to
9 0
d a y s
ThUS$
More than More than More than
three to
one to
f i v e
t h r e e
y e a r s
y e a r s
ThUS$
ThUS$
90 days
to one
y e a r
ThUS$
More than
f i v e
y e a r s
ThUS$
Total
nominal
v a l u e
ThUS$
Up to
9 0
d a y s
ThUS$
More than More than More than
three to
one to
f i v e
t h r e e
y e a r s
y e a r s
ThUS$
ThUS$
90 days
to one
y e a r
ThUS$
More than
f i v e
y e a r s
ThUS$
Total
accounting
v a l u e
ThUS$
Amortization
Effective Nominal
r a t e
%
r a t e
%
Holland
U S $
115
3 5 6
1,031
1,162
6 8 9
3,353
132
3 5 6
1,031
1,162
6 8 9
3,370
Monthly
6.01
6.01
0-E
THE BANK OF NEW YORK
U.S.A.
U S $
-
-
300,000
-
500,000
800,000
7,506
1,110
301,722
5,171
501,027
816,536
At Expiration
8.17
8.00
Arrendamientos financieros
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
AFS INVESTMENT IX LLC
U.S.A.
U S $
AIRBUS FINANCIAL
U.S.A.
CREDIT AGRICOLE-CIB
U.S.A.
U.S.A.
DVB BANK SE
GENERAL ELECTRIC CAPITAL CORPORATION U.S.A.
KFW IPEX-BANK
NATIXIS
PK AIRFINANCE US, INC.
WACAPOU LEASING S.A.
SOCIÉTÉ GÉNÉRALE MILAN BRANCH
BANCO IBM S.A
HP FINANCIAL SERVICE
SOCIETE GENERALE
U S $
U S $
U S $
U S $
U S $
Germany
U S $
F r a n c e
U.S.A.
U S $
Luxemburg U S $
U S $
Italy
BRL
Brazil
BRL
Brazil
BRL
F r a n c e
1,972
3,370
4,500
118
3,654
3,097
2,505
1,276
3 8 3
8,148
217
168
8 5
6,085
10,397
-
3 5 5
11,137
6,401
5,387
21,769
1,101
25,003
651
5 2 9
2 5 6
17,540
20,812
-
2 8 2
8,970
15,186
17,359
-
2,617
71,311
8 6 0
185
4 3 4
17,908
15,416
-
-
-
12,215
19,682
-
14,267
208,024
-
-
-
-
-
-
-
-
-
70,087
-
-
-
-
-
-
43,505
49,995
4,500
7 5 5
23,761
36,899
115,020
23,045
18,368
312,486
1,728
8 8 2
7 7 5
2,176
3,461
4,528
120
3,697
3,163
3,476
1,316
418
9,552
217
169
8 5
6,085
10,396
-
3 5 5
11,137
6,401
5,387
21,769
1,101
25,003
651
5 2 9
2 5 6
17,540
20,813
-
2 8 2
8,970
15,186
17,360
-
2,617
71,311
8 6 0
185
4 3 4
17,908
15,416
-
-
-
12,215
19,682
-
14,267
208,024
-
-
-
-
43,709
Monthly
-
-
-
-
-
70,088
-
-
-
-
-
-
Monthly
Quarterly
Monthly
Monthly
Monthly/Quarterly
50,086
4,528
7 5 7
23,804
36,965
115,993 Quarterly/Semiannual
23,085
18,403
313,890
1,728
8 8 3
7 7 5
Monthly
Quarterly
Quarterly
Monthly
Monthly
Monthly
Total
Total consolidado
29,608
89,427
456,587
288,674
570,776
1,435,072
40,016
90,536
458,311
293,845
571,804
1,454,512
641,448
827,444
2,748,180
2,181,610
2,726,563
9,125,245
681,594
828,552
2,676,823
2,139,896
2,699,538
9,026,403
1.25
1.43
3.25
1.64
1.25
1.72
3.85
1.75
2.00
3.63
14.14
10.02
14.14
1.25
1.43
3.25
1.64
1.25
1.72
3.85
1.75
2.00
3.55
14.14
10.02
14.14
198
MEMORIA ANUAL 2015| FINANcIAL stAtEMENt!
!
!
!
74
75
Interest-bearing loans due in installments to December 31, 2014
Debtor: LATAM Airlines Group S.A. and Subsidiaries, Tax No. 89.862.200-2, Chile.
Interest-bearing loans due in installments to December 31, 2014
Debtor: TAM S.A. and Subsidiaries, Tax No. 02.012.862/0001-60, Brazil.
Nominal values
Accounting values
Nominal values
Accounting values
Tax No.
Creditor
Loans to exporters
97.032.000-8 BBVA
97.036.000-K SANTANDER
97.030.000-7 ESTADO
97.006.000-6 BCI
76.645.030-K ITAU
97.951.000-4 HSBC
Bank loans
97.023.000-9 CORPBANCA
0-E
CITIBANK
BBVA
0-E
97.036.000-K BBVA
Guaranteed obligations
CREDIT AGRICOLE
BNP PARIBAS
WELLS FARGO
CITIBANK
0-E
0-E
0-E
0-E
97.036.000-K SANTANDER
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
-
BTMU
APPLE BANK
US BANK
DEUTSCHE BANK
NATIXIS
HSBC
PK AirFinance
KFW IPEX-BANK
SWAP Aircraft arrivals
Chile
Chile
Chile
Chile
Chile
Chile
Chile
Argentina
Argentina
Chile
France
U.S.A.
U.S.A.
U.S.A.
Chile
U.S.A.
U.S.A.
U.S.A.
U.S.A.
France
U.S.A.
U.S.A.
U.S.A.
-
Other guaranteed obligations
0-E
0-E
DVB BANK SE
CREDIT AGRICOLE
U.S.A.
U.S.A.
Financial leases
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
ING
CREDIT AGRICOLE
CITIBANK
PEFCO
BNP PARIBAS
WELLS FARGO
DVB BANK SE
US BANK
BANC OF AMERICA
Other loans
0-E
0-E
BOEING
CITIBANK (*)
Total
U.S.A.
France
U.S.A.
U.S.A.
U.S.A.
U.S.A.
U.S.A.
U.S.A.
U.S.A.
U.S.A.
U.S.A.
US$
US$
US$
US$
US$
US$
UF
ARS
ARS
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
Creditor
country
Currency
More than More than More than
one to
three
years
ThUS$
90 days
to one
year
ThUS$
five
years
ThUS$
three to More than
Up to
9 0
days
ThUS$
100,000
45,000
55,000
100,000
15,000
12,000
14,242
-
-
-
17,225
7,815
30,351
16,624
5,127
2 , 6 4 9
1,296
14,158
4,552
9,739
1,340
1,755
611
595
five
years
ThUS$
-
-
-
-
-
-
-
-
-
-
35,883
178,116
6 6 9 , 5 9 9
330,579
72,551
51,340
25,707
349,129
72,180
2 4 2 , 4 9 6
30,514
2 8 , 0 8 8
3 , 6 9 0
157
Total
nominal
value
ThUS$
100,000
45,000
55,000
100,000
15,000
12,000
188,268
17,542
21,050
2 8 2 , 9 6 7
273,569
351,217
1,302,968
684,114
180,341
107,645
53,390
648,158
155,279
4 5 4 , 2 3 0
59,005
69,721
16,088
7,390
Up to
9 0
days
ThUS$
100,058
45,040
55,022
100,140
15,018
12,000
15,542
122
3 3 9
9 2 8
17,745
8 , 9 4 0
34,771
18,154
5,418
2 , 8 3 8
1,448
17,169
5,190
10,278
1,474
1,810
613
595
-
-
-
-
-
-
-
-
-
-
-
-
42,725
17,542
21,050
-
113,934
-
-
2 8 2 , 9 6 7
52,658
24,005
91,866
50,489
15,545
8 , 0 4 2
3,952
4 2 , 9 6 0
14,031
29,807
4 , 0 8 2
5,452
1,885
1,647
105,594
67,806
251,040
139,491
4 2 , 6 4 6
22,221
10,919
118,206
39,791
8 4 , 8 8 4
11,249
16,014
5,568
3 , 3 3 3
-
-
-
-
-
-
17,367
-
-
-
6 2 , 2 0 9
73,475
260,112
146,931
44,472
2 3 , 3 9 3
11,516
123,705
24,725
87,304
11,820
18,412
4 , 3 3 4
1,658
More than More than More than
one to
90 days
three
to one
years
year
ThUS$
ThUS$
five
years
ThUS$
three to More than
five
years
ThUS$
Total
accounting
value
ThUS$
Amortization
Effective Nominal
rate
%
rate
%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
42,725
17,542
21,050
-
112,160
-
-
2 8 2 , 9 6 7
17,187
-
-
-
-
-
-
-
-
-
-
-
-
-
100,058 At expiration
45,040 At expiration
55,022 At expiration
100,140 At expiration
15,018 At expiration
12,000 At expiration
0 . 4 0
0 . 3 4
0.52
0.47
0.65
0.50
0 . 4 0
0 . 3 4
0.52
0.47
0.65
0.50
187,614
17,664
21,389
2 8 3 , 8 9 5
Quarterly
Monthly
Monthly
Quarterly
4.85
31.00
3 3 . 0 0
2 . 3 3
4.85
31.00
3 3 . 0 0
2 . 3 3
52,658
24,005
91,866
50,489
15,545
8 , 0 4 2
3,952
4 2 , 9 6 0
14,031
29,807
4 , 0 8 2
5,452
1,885
1,647
105,594
67,248
219,808
128,993
40,183
20,557
10,094
97,791
39,791
8 4 , 8 8 4
11,249
16,014
5,568
3 , 3 3 3
6 2 , 2 0 9
73,287
2 4 5 , 0 2 6
141,745
43,413
22,621
11,131
113,644
24,726
87,304
11,820
18,412
4 , 3 3 4
1,658
35,883
178,078
653,056
323,754
71,879
50,668
25,366
337,272
72,180
2 4 2 , 4 9 6
30,514
2 8 , 0 8 8
3 , 6 9 0
157
2 7 4 , 0 8 9
351,558
1,244,527
663,135
176,438
104,726
51,991
6 0 8 , 8 3 6
155,918
454,769
59,139
69,776
16,090
7,390
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Monthly
Quarterly
Quarterly
7,877
7,459
23,877
22,378
3 2 , 4 9 2
61,500
-
-
-
-
6 4 , 2 4 6
91,337
7,920
7,696
23,878
22,378
3 2 , 4 9 2
61,500
-
-
-
-
6 4 , 2 9 0
91,574
Quarterly
Quarterly
7,744
1,581
4 , 4 0 9
14,549
9,457
4,373
4,457
2 8 0
6 4 3
23,786
4,877
13,657
44,742
29,109
13,323
13,545
11,701
2 , 0 4 9
52,041
13,955
3 9 , 4 0 2
125,130
8 3 , 4 6 6
37,242
32,567
-
2,770
31,151
-
44,177
63,957
58,792
3 9 , 8 6 2
-
-
-
11,806
-
13,804
3,827
10,848
44,525
-
-
-
126,528
20,413
115,449
252,205
191,672
139,325
50,569
11,981
5,462
-
-
-
-
179,507
164,108
-
184,866
-
101,026
179,507
4 5 0 , 0 0 0
8,754
1,628
5,384
16,216
10,125
4 , 8 3 0
4,545
2 8 0
6 6 4
3,580
1,500
23,786
4,877
13,657
44,742
29,109
13,323
13,545
11,701
2 , 0 4 9
50,985
13,955
38,125
122,596
81,505
35,710
32,567
-
2,770
30,853
-
43,767
6 3 , 6 2 0
58,421
3 9 , 2 6 4
-
-
-
11,771
-
13,762
3,819
10,820
4 4 , 2 9 0
-
-
-
126,149
2 0 , 4 6 0
114,695
2 5 0 , 9 9 3
189,980
137,417
50,657
11,981
5,483
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Monthly
Monthly
-
-
179,507
164,108
-
184,866
-
101,026
183,087 At expiration
451,500
Quarterly
517,908
6 3 0 , 7 8 2
2,139,843
1,334,238
2,275,865 6 , 8 9 8 , 6 3 6
543,774
6 3 0 , 7 8 3
2,062,054
1,299,308
2,238,569
6,774,488
1.68
2.13
2 . 2 6
2 . 2 4
1.32
1.64
1.63
3 . 9 9
3.25
1.86
2 . 2 9
1.86
2.10
-
2 . 0 0
1.73
4 . 8 4
1.20
6 . 4 0
5.35
4.14
3 . 9 8
1.89
-
1.41
1.74
6 . 0 0
1.43
2 . 0 4
1.57
1.49
0.78
1.04
1.03
2.81
3.25
1.81
1.48
1.86
2.10
-
2 . 0 0
1.73
4 . 3 3
1.20
5.67
4.76
3 . 6 8
3.53
1.89
-
1.41
1.74
6 . 0 0
(*) Securitized bond with the future flows from the sales with credit card in United States and Canada.
Tax No.
Creditor
Bank loans
0-E
NEDERLANDSCHE
Creditor
c o u n t r y
C u r r e n c y
Up to
9 0
d a y s
ThUS$
More than More than More than
one to
t h r e e
y e a r s
ThUS$
90 days
to one
y e a r
ThUS$
f i v e
y e a r s
ThUS$
three to More than
f i v e
y e a r s
ThUS$
Total
nominal
v a l u e
ThUS$
Up to
9 0
d a y s
ThUS$
More than More than More than
one to
t h r e e
y e a r s
ThUS$
90 days
to one
y e a r
ThUS$
f i v e
y e a r s
ThUS$
three to More than
f i v e
y e a r s
ThUS$
Total
accounting
v a l u e
ThUS$
Amortization
Effective Nominal
r a t e
%
r a t e
%
CREDIETVERZEKERING MAATSCHAPPIJ
Holland
U S $
108
3 3 5
971
1,094
1,288
3,796
127
3 3 6
971
1,094
1,288
3,816
Monthly
6.01
6.01
Obligation with the public
0-E
THE BANK OF NEW YORK
Financial leases
U.S.A.
U S $
-
-
300,000
-
800,000
1,100,000
12,178
9,028
304,377
4,583
802,521
1,132,687
At Expiration
7.99
7.19
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
0-E
AFS INVESTMENT IX LLC
AIRBUS FINANCIAL
CREDIT AGRICOLE-CIB
CREDIT AGRICOLE -CIB
DVB BANK SE
DVB BANK SE
U.S.A.
U.S.A.
U.S.A.
F r a n c e
Germany
U.S.A.
GENERAL ELECTRIC CAPITAL CORPORATION
U.S.A.
KFW IPEX-BANK
NATIXIS
PK AIRFINANCE US, INC.
WACAPOU LEASING S.A.
SOCIÉTÉ GÉNÉRALE MILAN BRANCH
BANCO DE LAGE LANDEN BRASIL S.A
BANCO IBM S.A
HP FINANCIAL SERVICE
SOCIETE AIR FRANCE
SOCIETE GENERALE
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
U S $
Germany
F r a n c e
U.S.A.
Luxemburg U S $
Italy
Brazil
Brazil
Brazil
F r a n c e
F r a n c e
U S $
BRL
BRL
BRL
EUR
BRL
1,864
3,189
2,704
1,500
3,125
197
2,296
3,246
2,887
1,208
416
7,761
-
319
2 2 5
114
126
5,752
9,836
32,466
4,500
9,375
5 4 0
10,791
10,541
6,705
3,725
1,198
23,859
-
9 5 7
7 0 7
-
3 7 7
16,580
27,070
-
4,500
-
7 5 5
23,761
18,037
20,987
20,360
2,847
67,973
-
2,514
1,297
-
1,005
51,120
63,021
35,170
10,500
12,500
1,492
36,848
50,687
25,293
19,982
18,555
15,262
8,369
7,664
-
-
-
-
-
13,535
23,723
-
-
-
-
-
-
5,328
-
85,391
139,693
2,406
13,115
74,783
169,730
344,106
-
2 7
-
-
135
-
-
-
-
-
-
3,817
2,229
114
1,643
2,104
3,303
2,752
1,566
3,160
199
2,346
3,339
4,044
1,256
4 5 6
8,574
8
91
143
5 4 7
8 2
5,752
9,836
32,466
4,500
9,375
5 4 0
10,791
10,541
6,705
3,725
1,198
23,859
-
9 5 7
7 0 7
-
3 7 7
16,580
27,070
-
4,500
-
7 5 5
23,761
18,037
20,987
20,360
2,847
67,973
-
2,604
1,379
-
1,044
18,555
15,262
8,369
7,664
-
-
-
-
-
-
-
-
-
-
13,535
23,723
-
5,328
85,391
-
2,406
13,115
51,360
63,135
35,218
Monthly
Monthly
Quarterly
10,566 Quarterly/Semiannual
12,535
1,494
36,898
50,780
Quarterly
Monthly
Monthly
Monthly/Quarterly
140,850 Quarterly/Semiannual
25,341
20,022
74,783
169,730
344,919
-
2 7
-
-
135
-
-
-
-
-
8
3,679
2,229
5 4 7
1,638
Monthly
Quarterly
Quarterly
Monthly
Monthly
Monthly
Monthly
Monthly
1.25
1.42
1.10
3.25
2.50
1.68
1.25
1.72
3.87
1.75
2.00
3.06
11.70
10.58
9.90
6.82
11.60
1.25
1.42
1.10
3.25
2.50
1.68
1.25
1.72
3.87
1.75
2.00
3.58
11.70
10.58
9.90
6.82
11.60
Other loans
0-E
COMPANHIA BRASILEIRA DE
MEIOS DE PAGAMENTO
Brazil
BRL
30,281
15,576
-
-
-
45,857
30,281
15,576
-
-
-
45,857
Monthly
4.23
4.23
Total
Total consolidated
61,566
137,240
508,657
149,520
1,090,885
1,947,868
76,556
146,269
513,245
154,103
1,093,406
1,983,579
579,474
768,022
2,648,500
1,483,758
3,366,750
8,846,504
620,330
777,052
2,575,299
1,453,411
3,331,975
8,758,067
199
MEMORIA ANUAL 2015| FINANcIAL stAtEMENt!
!
!
!
76
77
(b)
Derivatives not recognized as a hedge
Current liabilities
Non-current liabilities
not recognized as a hedge
As of
As of
As of
As of
As of
As of
December 31,
December 31,
December 31,
December 31,
December 31,
December 31,
2015
T hUS$
2014
T hUS$
2015
T hUS$
2014
T hUS$
2015
T hUS$
2014
T hUS$
T otal derivative
-
-
1,190
1,190
-
-
-
-
-
-
1,190
1,190
Interest rate derivative
not recognized as a hedge
T otal derivatives
not recognized as a hedge
(c) Hedge derivatives
Current liabilities
Non-current liabilities
Total hedge
derivatives
As of
As of
As of
As of
As of
As of
December 31, December 31,
December 31, December 31,
2015
ThUS$
2014
ThUS$
2015
ThUS$
2014
ThUS$
December 31,
2015
ThUS$
December 31,
2014
ThUS$
Accrued interest from the last date
of interest rate swap
Fair value of interest rate derivatives
Fair value of fuel derivatives
Fair value of foreign currency derivatives
4 , 3 2 9
33,518
5 6 , 4 2 4
39,818
5,173
2 6 , 3 9 5
157,233
3 7 , 2 4 2
-
16,128
-
-
-
2 8 , 3 2 7
-
-
4 , 3 2 9
4 9 , 6 4 6
5 6 , 4 2 4
39,818
5,173
5 4 , 7 2 2
157,233
3 7 , 2 4 2
Total hedge derivatives
134,089
2 2 6 , 0 4 3
16,128
2 8 , 3 2 7
150,217
2 5 4 , 3 7 0
The foreign currency derivatives exchanges are FX forward and cross currency swap.
Hedging operation
The fair values of assets/ (liabilities), by type of derivative, of the contracts held as hedging
instruments are presented below:
Cross currency swaps (CCS) (1)
Interest rate options (2)
Interest rate swaps (3)
Fuel collars (4)
Fuel swap (5)
Currency forward US$/GBP$ (6)
Currency options US$/EUR$ (6)
Currency options R$/US$ (6)
Currency options CLP$/US$ (6)
As of
December 31,
2015
As of
December 31,
2014
T hUS$
(49,311)
-
(44,085)
6,293
(56,424)
7,432
1,438
933
85
T hUS$
(38,802)
1
(58,758)
(32,772)
(122,678)
-
-
-
-
(1) Covers the significant variations in cash flows associated with market risk implicit in the
changes in the 3-month LIBOR interest rate and the exchange rate dollar-UF of bank loans.
These contracts are recorded as cash flow hedges and fair value.
(2) Covers the significant variations in cash flows associated with market risk implicit in the
changes in the 3-month LIBOR interest rate for long-term loans incurred in the acquisition of
aircraft. These contracts are recorded as cash flow hedges.
(3) Covers the significant variations in cash flows associated with market risk implicit in the
increases in the 3 months LIBOR interest rates for long-term loans incurred in the acquisition
of aircraft and bank loans. These contracts are recorded as cash flow hedges.
(4) Covers significant variations in cash flows associated with market risk implicit in the changes
in the price of future fuel purchases. These contracts are recorded as cash flow hedges.
(5) Covers the significant variations in cash flows associated with market risk implicit in the
changes in the price of future fuel purchases. These contracts are recorded as cash flow
hedges.
(6) Covers the foreign exchange risk exposure of operating cash flows caused mainly by
fluctuations in the exchange rate US$/GBP, US$/EUR, R$/US$ and CLP$/US$. These
contracts are recorded as cash flow hedges.
During the periods presented, the Company only maintains cash flow hedges and fair value (in the
case of CCS). In the case of fuel hedges, the cash flows subject to such hedges will impact results in
the next 12 months from the consolidated statement of financial position date, meanwhile in the
case of interest rate hedging, the hedges will impact results over the life of the related loans, which
are valid initially for 12 years. The hedges on investments will impact results continuously
throughout the life of the investment, while the cash flows occur at the maturity of the investment.
In the case of currency hedges through a CCS, are generated two types of hedge accounting, a cash
flow component by UF, and other fair value by US$ floating rate component.
During the periods presented, no hedging operations of future highly probable transaction that have
not been realized have occurred.
Since none of the coverage resulted in the recognition of a non-financial asset, no portion of the
result of the derivatives recognized in equity was transferred to the initial value of such assets.
The amounts recognized in comprehensive income during the period and transferred from net
equity to income are as follows:
Debit (credit) recognized in comprehensive
income during the period
Debit (credit) transferred from net equity to
income during the period
For the period ended
December 31,
2015
T hUS$
2014
T hUS$
80,387
(163,993)
(151,244)
(151,520)
200
MEMORIA ANUAL 2015| FINANcIAL stAtEMENt!
!
!
!
!
!
NOTE 19 - TRADE AND OTHER ACCOUNTS PAYABLES
The details of Trade and other accounts payables are as follows:
78
79
The composition of Trade and other accounts payables is as follows:
Current
(a) Trade and other accounts payables
(b) Accrued liabilities at the reporting date
Total trade and other accounts payables
(a)
Trade and other accounts payable:
Trade creditors
Leasing obligation
Other accounts payable
Total
As of
As of
December 31,
December 31,
2015
ThUS$
1,025,574
458,383
1,483,957
2014
ThUS$
1,196,100
293,273
1,489,373
As of
As of
December 31,
December 31,
2015
ThUS$
758,783
18,784
248,007
2014
ThUS$
924,105
37,322
234,673
1,025,574
1,196,100
Boarding Fee
Aircraft Fuel
Airport charges and overflight
Handling and ground handling
Land services
Other personnel expenses
Professional services and advisory
Suppliers' technical purchases
Marketing
Services on board
Leases, maintenance and IT services
Crew
Aircraft and engines leasing
Distribution system
Achievement of goals
Maintenance
Aviation insurance
Communications
Others
As of
As of
December 31,
December 31,
2015
T hUS$
175,900
148,612
94,139
88,629
80,387
72,591
63,302
52,160
45,997
32,993
25,558
23,834
19,146
17,531
15,386
18,573
7,655
6,731
36,450
2014
T hUS$
193,263
290,109
102,111
55,503
47,103
114,245
65,445
64,799
54,885
24,642
34,029
12,403
37,322
3,293
12,197
14,757
4,749
6,447
58,798
T otal trade and other accounts payables
1,025,574
1,196,100
(b) Liabilities accrued:
Aircraft and engine maintenance
Accrued personnel expenses
Accounts payable to personnel (*)
Others accrued liabilities
T otal accrued liabilities
(*) Profits and bonds participation (Note 22 letter b)
As of
December 31,
2015
As of
December 31,
2014
T hUS$
246,454
108,058
81,368
22,503
458,383
T hUS$
121,946
130,382
16,407
24,538
293,273
201
MEMORIA ANUAL 2015| FINANcIAL stAtEMENt!
!
!
!
!
!
80
81
NOTE 20 - OTHER PROVISIONS
Other provisions:
Current liabilities
Non-current liabilities
T otal Liabilities
As of
As of
As of
As of
December 31, December 31,
December 31, December 31,
2015
T hUS$
2014
T hUS$
2015
T hUS$
2014
T hUS$
As of
December 31,
2015
As of
December 31,
2014
T hUS$
T hUS$
1,297
1,476
149
-
-
2,922
320
11,870
221
-
350,418
37,555
15,648
11,910
607,371
47,355
23,064
15,351
351,715
39,031
15,797
11,910
607,691
59,225
23,285
15,351
-
8,966
9,999
8,966
9,999
12,411
424,497
703,140
427,419
715,551
Provision for contingencies (1)
T ax contingencies
Civil contingencies
Labor contingencies
Other
Provision for European
Commision investigation (2)
T otal other provisions (3)
(1) Provisions for contingencies:
The tax contingencies correspond to litigation and tax criteria related to the tax treatment
applicable to direct and indirect taxes, which are found in both administrative and judicial
stage.
The civil contingencies correspond to different demands of civil order filed against the
company.
The labor contingencies correspond to different demands of labor order filed against the
company.
The Provisions are recognized in the consolidated income statement in administrative expenses
or tax expenses, as appropriate.
(2) Provision made for proceedings brought by the European Commission for possible breaches of
free competition in the freight market.
(3) Total other provision at December 31, 2015, and at December 31, 2014, include the fair value
correspond to those contingencies from the business combination with TAM S.A and
subsidiaries, with a probability of loss under 50%, which are not provided for the normal
application of IFRS enforcement and that only must be recognized in the context of a business
combination in accordance with IFRS 3.
Movement of provisions:
European
Commission
Investigation(*)
T otal
Legal
claims
T hUS$
T hUS$
T hUS$
Opening balance as of January 1, 2014
1,138,754
11,349
1,150,103
Increase in provisions
Provision used
Difference by subsidiaries conversion
Reversal of provision
Exchange difference
42,792
(27,597)
(132,092)
(315,288)
(1,017)
-
-
-
-
(1,350)
42,792
(27,597)
(132,092)
(315,288)
(2,367)
Closing balance as of December 31, 2014
705,552
9,999
715,551
Opening balance as of January 1, 2015
Increase in provisions
Provision used
Difference by subsidiaries conversion
Reversal of provision
Exchange difference
705,552
54,675
(19,522)
(220,266)
(100,740)
9,999
-
-
-
-
715,551
54,675
(19,522)
(220,266)
(100,740)
(1,246)
(1,033)
(2,279)
Closing balance as of December 31, 2015
418,453
8,966
427,419
Accumulated balance includes the judicial deposit in guarantee, related to the “Fundo
Aeroviário” (FA), in the amount of US$ 61 million, done in order to suspend the enforceability of
the tax credit. The company is discussing over the Tribunal the constitutionality of the requirement
made by FA in a legal suit. Initially it was covered by the effects of a provisional remedy, meaning
that, the company was not obligated to collect the tax while there was not a judicial decision in this
regard. However, the decision taken by a judge in the first instance was publicized in an unfavorable
way, revoking the provisional remedy relief. As the legal suit is still in progress (TAM appealed
from this first decision), the company needed to do the deposit judicial in guarantee to suspend the
enforceability of such tax credit; deposit classified in this category deducting the existing provision.
Finally, if the final decision is favorable to the company, the deposit already made is going to come
back to TAM. On the other hand, if the tribunal confirms the first decision, such deposit will be
converted in a definitive payment in favor of the Brazilian Government. The procedural stage at
December 31, 2015 is disclosed in Note 30, at case No. 2001.51.01.012530-0.
202
MEMORIA ANUAL 2015| FINANcIAL stAtEMENt!
!
!
!
(*) European Commission Provision:
NOTE 21 - OTHER NON-FINANCIAL LIABILITIES
82
83
(a) This provision was established because of the investigation brought by the Directorate General
for Competition of the European Commission against more than 25 cargo airlines, including
Lan Cargo S.A., as part of a global investigation that begun in 2006 regarding possible unfair
competition on the air cargo market. This was a joint investigation done by the European and
U.S.A. authorities. The start of the investigation was disclosed through an Essential Matter
report dated December 27, 2007. The U.S.A. portion of the global investigation concluded
when Lan Cargo S.A. and its subsidiary, Aerolíneas Brasileiras S.A. (“ABSA”) signed a Plea
Agreement with the U.S.A. Department of Justice, as disclosed in an Essential Matter report
notice on January 21, 2009.
(b) A Essential Matter report dated November 9, 2010, reported that the General Direction of
Competition had issued its decision on this case (the "decision"), under which it imposed fines
totaling € 799,445,000 (seven hundred and ninety nine million four hundred and forty-five
thousand Euros) for infringement of European Union regulations on free competition against
eleven (11) airlines, among which you can find LATAM A irlines Group S.A. and Lan Cargo
S.A., Air Canada, Air France, KLM, British Airways, Cargolux, Cathay Pacific, Japan Airlines,
Qantas Airways, S.A.S. and Singapore Airlines.
(c) Jointly, LATAM Airlines Group S.A. and Lan Cargo S.A., have been fined in the amount of
€ 8,220,000 (eight million two hundred twenty thousand Euros) for said infractions, which was
provisioned in the financial statements of LATAM Airlines Group S.A.. This is a minor fine in
comparison to the original decision, as there was a significant reduction in fine because
LATAM Airlines Group S.A. cooperated during the investigation.
(d) On January 24, 2011, LATAM Airlines Group S.A. and Lan Cargo S.A. appealed the decision
before the Court of Justice of the European Union. On December 16, 2015 the Court European
resolved the appeal and annulled the European Commission. This ruling may be appealed by
the European Commission.The procedural stage at December 31, 2015 is disclosed in Note 30,
in (ii) lawsuits received by Latam Airlines Group S.A. and Subsidiaries in European
Commission Court.
Current liabilities
As of
December 31,
2015
As of
December 31,
2014
Non-current liabilities
As of
As of
December 31,
December 31,
2014
2015
Total Liabilities
As of
December 31,
2015
As of
December 31,
2014
(*)
Deferred revenues
Sales tax
Retentions
Others taxes
Other sundry liabilities
ThUS$
2,423,703
10,379
33,125
11,211
11,615
ThUS$
2,565,391
38,160
5 2 , 5 6 7
18,880
10,388
Total other non-financial liabilities
2,490,033
2,685,386
ThUS$
272,130
-
-
-
-
272,130
ThUS$
3 5 5 , 3 5 3
-
-
-
4 8
355,401
ThUS$
2,695,833
10,379
33,125
11,211
11,615
2,762,163
ThUS$
2,920,744
38,160
5 2 , 5 6 7
18,880
10,436
3,040,787
(*)
Note 2.20.
The balance comprises, mainly, deferred income by services not yet rendered and programs
such as: LANPASS, TAM Fidelidade y Multiplus:
LANPASS is the frequent flyer program created by LAN to reward the preference and
loyalty of its customers with many benefits and privileges, by the accumulation of
kilometers that can be exchanged for free flying tickets or a wide range of products and
services. Customers accumulate LANPASS kilometers every time they fly with LAN, TAM,
in companies that are members of oneworld® and other airlines associated with the
program, as well as when they buy on the stores or use the services of a vast network of
companies that have an agreement with the program around the world.
Thinking on people who travel constantly, TAM created the program TAM Fidelidade, in
order to improve the passenger attention and give recognition to those who choose the
company. By using this program, customers accumulate points in a variety of programs
loyalty in a single account and can redeem them at all TAM destinations and related airline
companies, and even more, participate in the Red Multiplus Fidelidade.
Multiplus is a coalition of loyalty programs, aiming to operate activities of accumulation
and redemption of points. This program has an integrated network by associates including
hotels, financial institutions, retail companies, supermarkets, vehicle rentals and magazines,
among many other partners from different segments.
NOTE 22 - EMPLOYEE BENEFITS
Retirements payments
Resignation payments
Other obligations
T otal liability for employee benefits
As of
December 31,
2015
As of
December 31,
2014
T hUS$
42,117
8,858
14,296
65,271
T hUS$
36,523
5,556
32,023
74,102
(a)
The movement in retirements and resignation payments and other obligations:
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Opening
balance
T hUS$
Increase (decrease)
current service
provision
Benefits
paid
Change
of model
Actuarial
(gains)
losses
Currency
translation
T hUS$
T hUS$
T hUS$
T hUS$
T hUS$
Closing
balance
T hUS$
From January 1 to
December 31, 2014
45,666
1,507
(2,466)
29,395
-
-
74,102
From January 1 to
December 31, 2015
74,102
(13,609)
(3,824)
-
14,631
(6,029)
65,271
(b) The liability for short-term:
Profit-sharing and bonuses (*)
As of
As of
December 31,
December 31,
2015
T hUS$
81,368
2014
T hUS$
16,407
The principal assumptions used in the calculation to the provision in Chile are presented below:
(*) Accounts payables to employees (Note 19 letter b)
Assumptions
2015
2014
As of
December 31,
Discount rate
Expected rate of salary increase
Rate of turnover
M ortality rate
Inflation rate
Retirement age of women
Retirement age of men
4.84%
4.50%
6.16%
RV-2009
2.92%
60
65
4.49%
4.50%
6.16%
RV-2009
2.92%
60
65
The discount rate is determined by reference to free risk 20 years Central Bank of Chile BCP bond.
Mortality table RV – 2009, established by Chilean Superintendency of Securities and Insurance and
inflation rate performance curve of Central Bank of Chile instruments long term BCU and BCP.
The obligation is determined based on the actuarial value of the accrued cost of the benefit and it is
sensibility to main actuarial assumptions used for the calculation. The Following is a sensitivity
analysis based on increased (decreased) on the discount rate, increased wages, rotation and
inflation:
Effect on the liability
As of
December 31,
2015
T hUS$
Discount rate
Change in the accrued liability an closing for increase in 100 p.b.
Change in the accrued liability an closing for decrease of 100 p.b.
(4,669)
5,345
Rate of wage growth
Change in the accrued liability an closing for increase in 100 p.b.
Change in the accrued liability an closing for decrease of 100 p.b.
5,309
(4,725)
The participation in profits and bonuses correspond to an annual incentives plan for achievement of
objectives.
(c)
Employment expenses are detailed below:
Salaries and wages
Short-term employee benefits
T ermination benefits
Other personnel expenses
T otal
For the periods ended
December 31,
2015
T hUS$
2014
T hUS$
1,631,320
1,656,565
171,366
361,328
51,684
84,179
218,435
248,030
2,072,805
2,350,102
NOTE 23 - ACCOUNTS PAYABLE, NON-CURRENT
Aircraft and engine maintenance
Fleet financing (JOL)
Provision for vacations and bonuses
Other accounts payable
Other sundry liabilities
As of
As of
December 31,
December 31,
2015
ThUS$
371,419
35,042
10,365
-
224
2014
ThUS$
506,312
59,148
9,595
1,945
454
Total accounts payable, non-current
417,050
577,454
NOTE 24 - EQUITY
(a)
Capital
The Company’s objective is to maintain an appropriate level of capitalization that enables it to
ensure access to the financial markets for carrying out its medium and long-term objectives,
optimizing the return for its shareholders and maintaining a solid financial position.
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The Capital of the Company is managed and composed in the following form:
The capital of the Company at December 31, 2015 amounts to ThUS$ 2,545,705 divided into
545,547,819 common stock of a same series (ThUS$ 2,545,705, divided into 545,547,819 shares as
of December 31, 2014), no par value. There are no special series of shares and no privileges. The
form of its stock certificates and their issuance, exchange, disablement, loss, replacement and other
similar circumstances, as well as the transfer of the shares, is governed by the provisions of
Corporations Law and its regulations.
(b)
Subscribed and paid shares
The following table shows the movement of the authorized and fully paid shares described above:
Movement of authorized shares
Autorized shares as of January 1, 2014
No movement of autorized shares at December 31, 2014
Authorized shares as of December 31, 2014
Autorized shares as of January 1, 2015
No movement of autorized shares at December 31, 2015
Authorized shares as of December 31, 2015
Movement fully paid shares
Nro. Of
shares
551,847,819
-
551,847,819
551,847,819
-
551,847,819
Paid shares as of January 1, 2014
Preferential placement capital increase
approved at Extraordinary Shareholders
meeting dated June 11, 2013
Paid shares as of December 31, 2014
Paid shares as of January 1, 2015
No movement of autorized shares
at December 31, 2015
Movement
value
of shares
(1)
T hUS$
Cost of issuance
and placement
of shares (2)
T hUS$
Paid- in
Capital
T hUS$
N° of
shares
535,243,229
2,395,745
(6,361)
2,389,384
10,304,590
545,547,819
156,321
2,552,066
-
(6,361)
156,321
2,545,705
545,547,819
2,552,066
(6,361)
2,545,705
-
-
-
-
Paid shares as of December 31, 2015
545,547,819
(3)
2,552,066
(6,361)
2,545,705
(1)
Amounts reported represent only those arising from the payment of the shares subscribed.
(2)
Decrease of capital by capitalization of reserves for cost of issuance and placement of
shares established according to Extraordinary Shareholder´s Meetings, where such decreases were
authorized.
(3)
At December 31, 2015, the difference between authorized shares and fully paid shares are
6,300,000 shares allocated to compensation plans for executives of LATAM Airlines Group S.A.
and subsidiaries (see Note 33(a)).
(c)
Treasury stock
87
At December 31, 2015, the Company held no treasury stock, the remaining of ThUS$ (178)
corresponds to the difference between the amount paid for the shares and their book value, at the
time of the full right decrease of the shares.
At the Extraordinary Shareholder´s Meeting held on June 11, 2013, the company relinquished all
right to 7,972 stocks of its portfolio, this date the Company does not maintain treasury stock.
(d)
Reserve of share- based payments
Movement of Reserves of share- based payments:
Periods
From January 1 to December 31, 2014
From January 1 to December 31, 2015
Opening
balance
T hUS$
21,011
29,642
Stock
option
plan
T hUS$
14,728
8,924
Deferred
tax
T hUS$
(3,389)
(2,919)
Deferred tax
by tax effect
of change in legal rate
(T ax reform) (*)
T hUS$
(2,708)
-
Closing
balance
T hUS$
29,642
35,647
(*) On September 29, 2014, Law No. 20,780 "Amendment to the system of income taxation and
introduces various adjustments in the tax system." was published in the Official Journal of the
Republic of Chile. Within major tax reforms that law contains is modified gradually from 2014 to
2018 the First- Category Tax rate to be declared and paid starting in tax year 2015.
These reserves are related to the “Share-based payments” explained in Note 33.
(e)
Other sundry reserves
Movement of Other sundry reserves:
Periods
Opening
b a l a n c e
ThUS$
From January 1 to December 31, 2014
From January 1 to December 31, 2015
2 , 6 5 7 , 8 0 0
2 , 6 3 5 , 7 4 8
Transactions
with
non-controlling
interest
ThUS$
(21,526)
-
Legal
reserves
ThUS$
(526)
(1,069)
Closing
b a l a n c e
ThUS$
2 , 6 3 5 , 7 4 8
2 , 6 3 4 , 6 7 9
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Balance of Other sundry reserves comprises the following:
Higher value for TAM S.A. share exchange (1)
Reserve for the adjustment to the value of fixed assets (2)
Transactions with non-controlling interest (3)
Cost of issuance and placement of shares
Others
Total
As of
As of
December 31,
2015
December 31,
2014
ThUS$
ThUS$
2,665,692
2,620
(25,891)
(5,264)
(2,478)
2,634,679
2,665,692
2,620
(25,891)
(5,264)
(1,409)
2,635,748
(1)
(2)
(3)
Corresponds to the difference in the shares value of TAM S.A. acquired (under subscriptions)
by Sister Holdco S.A. and Holdco II S.A. (under the Exchange Offer), as stipulated in the
Declaration of Posting of Merger by Absorption and the fair value of these exchange shares
of LATAM Airlines Group S.A. at June 22, 2012.
Corresponds to the technical revaluation of fixed assets authorized by the Superintendence of
Securities and Insurance in 1979, in Circular No. 1,529. The revaluation was optional and
could be taken only once, the reserve is not distributable and can only be capitalized.
The balance at December 31, 2015, correspond to the loss generated by the participation of
Lan Pax Group S.A. in the acquisition of shares of Aerovías de Integración Regional Aires of
ThUS$ (3,480), the acquisition of TAM S.A. of the minority holding of Aerolinhas
Brasileiras S.A. of ThUS$ (885) and the acquisition of minority interest of Aerolane S.A. by
Lan Pax group S.A. through Holdco Ecuador S.A. for US$ (21,526).
(f)
Reserves with effect in other comprehensive income.
Movement of Reserves with effect in other comprehensive income:
Currency
translation
reserve
ThUS$
Opening balance as of January 1, 2014
(589,991)
Derivatives valuation gains (losses)
Deferred tax
Tax effect on deferred tax
by change legal tax rate (Tax reform)(*)
-
-
-
Difference by subsidiaries conversion
(603,880)
Cash flow
hedging
reserve
ThUS$
(34,508)
(165,231)
40,647
7,752
-
Closing balance as of December 31, 2014
(1,193,871)
(151,340)
Opening balance as of January 1, 2015
(1,193,871)
Derivatives valuation gains (losses)
Deferred tax
Actuarial reserves
by employee benefit plans
Deferred tax actuarial IAS
by employee benefit plans
-
-
-
-
Difference by subsidiaries conversion
(1,382,170)
(151,340)
82,730
(21,900)
-
-
-
Actuarial gain
or loss on defined
benefit plans
reserve
ThUS$
-
-
-
-
-
-
-
-
-
Total
ThUS$
(624,499)
(165,231)
40,647
7,752
(603,880)
(1,345,211)
(1,345,211)
82,730
(21,900)
(14,627)
(14,627)
3,910
-
3,910
(1,382,170)
Closing balance as of December 31, 2015
(2,576,041)
(90,510)
(10,717)
(2,677,268)
(*) On September 29, 2014, Law No. 20,780 "Amendment to the system of income taxation and
introduces various adjustments in the tax system." was published in the Official Journal of the
Republic of Chile. Within major tax reforms that law contains is modified gradually from 2014 to
2018 the First- Category Tax rate to be declared and paid starting in tax year 2015.
(f.1) Currency translation reserve
These originate from exchange differences arising from the translation of any investment in foreign
entities (or Chilean investment with a functional currency different to that of the parent), and from
loans and other instruments in foreign currency designated as hedges for such investments. When
the investment (all or part) is sold or disposed and loss of control occurs, these reserves are shown
in the consolidated statement of income as part of the loss or gain on the sale or disposal. If the sale
does not involve loss of control, these reserves are transferred to non-controlling interests.
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(f.2) Cash flow hedging reserve
These originate from the fair value valuation at the end of each period of the outstanding derivative
contracts that have been defined as cash flow hedges. When these contracts expire, these reserves
should be adjusted and the corresponding results recognized.
(f.3) Actuarial gain or loss on defined benefit plans reserve
These originate from the actuarial calculation Company has developed from December 31, 2015,
the effect of a negative reserve amounting to ThUS$ 10,717 net of deferred taxes.
(g)
Retained earnings
Movement of Retained earnings:
Periods
Opening
balance
T hUS$
Result
for the
period
T hUS$
From January 1 to December 31, 2014
From January 1 to December 31, 2015
795,303
536,190
(109,790)
(219,274)
Other
increase
(decreases)
T hUS$
872
1,034
Deferred tax
by tax effect
of change in legal tax rate
(T ax reform) (*)
T hUS$
(150,195)
-
Closing
balance
T hUS$
536,190
317,950
(*) According to the instructions of Chilean Superintendency of Securities and Insurance in his
Office Circular No. 856 of October 17, 2014, the Company recognized a loss on their retained
earnings as a result of the rate increase.
(h)
Dividends per share
As of December 31, 2015 and December 31, 2014, have not been paid dividends and have not been
provisioned minimum mandatory dividends.
NOTE 26 - COSTS AND EXPENSES BY NATURE
(a) Costs and operating expenses
The main operating costs and administrative expenses are detailed below:
Aircraft fuel
Other rentals and landing fees
Aircraft rentals
Aircraft maintenance
Comissions
Passenger services
Other operating expenses
Total
For the periods ended
December 31,
2015
2014
ThUS$
ThUS$
2,651,067
4,167,030
1,109,826
1,327,238
525,134
437,235
302,774
295,439
521,384
452,731
365,508
300,325
1,293,320
1,487,672
6,614,795
8,621,888
(b) Depreciation and amortization
Depreciation and amortization are detailed below:
For the period ended
December 31,
2015
ThUS$
897,670
36,736
934,406
2014
ThUS$
943,731
47,533
991,264
NOTE 25 - REVENUE
The detail of revenues is as follows:
Depreciation (*)
Amortization
Total
For the periods ended
December 31,
2015
ThUS$
2014
ThUS$
4,241,918
4,168,696
1,329,431
4,464,761
5,915,361
1,713,379
9,740,045
12,093,501
Passengers LAN
Passengers TAM
Cargo
Total
(*) Include the depreciation of Property, plant and equipment and the maintenance cost of aircraft
held under operating leases. The amount of maintenance cost included within the depreciation line
item at December 31, 2015 is ThUS$ 345,192 and ThUS$ 373,183 for the period of 2014.
(c) Personnel expenses
The costs for personnel expenses are disclosed in Note 22 liability for employee benefits.
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(d) Financial costs
The detail of financial costs is as follows:
Bank loan interest
Financial leases
Other financial instruments
Total
92
For the period ended
December 31,
2015
ThUS$
331,511
42,855
38,991
413,357
2014
ThUS$
330,298
72,242
27,494
430,034
Costs and expenses by nature presented in this note plus the Employee expenses disclosed in
Note 22, are equivalent to the sum of cost of sales, distribution costs, administrative expenses, other
expenses and financing costs presented in the consolidated statement of income by function.
(e) Restructuring Costs
As part of the ongoing process of reviewing its fleet plan, the company decided to implement a
broad restructuring plan in order to reduce the variety of aircraft currently in operation and
gradually withdrawing the less efficient. According with this plan, during the first quarter of 2014
were formalized contracts and commitments having as a result a negative impact on the results of
such period of US$ 112 million before tax that are associated with exit costs of seven A330, six
A340, five B737, three Q400, five A319 and three B767-33A aircraft. These exit costs are
associated with penalties related to early repayment and maintenance costs for returning.
Additionally, in December 2015 a negative impact on results of US$ 80 million before tax
associated with the output of the rest of the A330 fleet, including engines and technical materials is
recognized. These expenses are recognized at “Other Gain and Loses” of the Consolidated
Statement of Income by Function.
NOTE 27 - OTHER INCOME, BY FUNCTION
Other income by function is as follows:
Tours
Aircraft leasing
Customs and warehousing
Duty free
M aintenance
Other miscellaneous income
Total
For the period ended
December 31,
2015
ThUS$
113,225
46,547
25,457
16,408
11,669
172,475
385,781
2014
ThUS$
109,788
31,104
22,368
18,076
15,421
180,888
377,645
NOTE 28 - FOREIGN CURRENCY AND EXCHANGE RATE DIFFERENCES
93
The functional currency of LATAM Airlines Group S.A. is the US dollar, also it has subsidiaries
whose functional currency is different to the US dollar, such as the Chilean peso, Argentine peso,
Colombian peso and Brazilian real.
The functional currency is defined as the currency of the primary economic environment in which
an entity operates and in each entity and all other currencies are defined as foreign currency.
Considering the above, the balances by currency mentioned in this note correspond to the sum of
foreign currency of each of the entities that make LATAM Airlines Group S.A. and Subsidiaries.
(a) Foreign currency
The foreign currency detail of balances of monetary items in current and non-current assets is as
follows:
Current assets
Cash and cash equivalents
Argentine peso
Brazilian real
Chilean peso
Colombian peso
Euro
U.S. dollar
Strong bolivar
Other currency
Other financial assets, current
Argentine peso
Brazilian real
Chilean peso
Colombian peso
Euro
U.S. dollar
Strong bolivar
Other currency
As of
As of
December 31,
December 31,
2015
ThUS$
182,089
11,611
8,810
17,739
1,829
10,663
112,422
2,986
16,029
124,042
108,592
1,263
563
1,167
1
12,128
22
306
2014
ThUS$
213,161
22,121
2,365
30,453
1,622
9,639
50,652
63,236
33,073
73,030
40,939
-
25,781
-
1
6,008
43
258
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Current assets
Other non - financial assets, current
Argentine peso
Brazilian real
Chilean peso
Colombian peso
Euro
U.S. dollar
Strong bolivar
Other currency
Trade and other accounts receivable, current
Argentine peso
Brazilian real
Chilean peso
Colombian peso
Euro
U.S. dollar
Strong bolivar
Other currency
Accounts receivable from related entities, current
Chilean peso
Tax current assets
Argentine peso
Brazilian real
Chilean peso
Colombian peso
Euro
U.S. dollar
Other currency
Total current assets
Argentine peso
Brazilian real
Chilean peso
Colombian peso
Euro
U.S. Dollar
Strong bolivar
Other currency
As of
As of
December 31,
December 31,
2015
ThUS$
126,130
14,719
15,387
10,265
486
1,983
61,577
-
21,713
247,229
30,563
11,136
55,169
1,195
53,200
6,743
7,225
81,998
183
183
22,717
2,371
5
3,615
1,275
14
1,394
14,043
702,390
167,856
36,601
87,534
5,952
65,861
194,264
10,233
134,089
2014
ThUS$
59,700
7,326
148
18,073
1,415
2,523
5,751
330
24,134
543,257
61,291
33,267
128,780
4,394
38,764
75,876
4,895
195,990
299
299
21,605
2,300
2
5,773
1,995
21
467
11,047
911,052
133,977
35,782
209,159
9,426
50,948
138,754
68,504
264,502
Non-current assets
Other financial assets, non-current
Argentine peso
Brazilian real
Chilean peso
Colombian peso
Euro
U.S. dollar
Other currency
Other non - financial assets, non-current
Argentine peso
Brazilian real
U.S. dollar
Other currency
Accounts receivable, non-current
Chilean peso
U.S. dollar
Other currency
Deferred tax assets
Colombian peso
U.S. dollar
Other currency
Total non-current assets
Argentine peso
Brazilian real
Chilean peso
Colombian peso
Euro
U.S. dollar
Other currency
As of
December 31,
2015
ThUS$
As of
December 31,
2014
ThUS$
20,767
22
1,478
77
162
614
16,696
1,718
60,215
169
4,454
50,108
5,484
9,404
4,251
5,000
153
2,632
336
-
2,296
93,018
191
5,932
4,328
498
614
71,804
9,651
36,715
57
1,050
1,100
203
4,243
29,238
824
18,803
45
-
1
18,757
10,569
5,413
5,000
156
2,613
256
3
2,354
68,700
102
1,050
6,513
459
4,243
34,242
22,091
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The foreign currency detail of balances of monetary items in current liabilities and non-current is as
follows:
Current liabilities
December 31,
December 31,
December 31,
December 31,
Up to 90 days
91 days to 1 year
As of
As of
As of
As of
Other financial liabilities, current
Chilean peso
Euro
U.S. dollar
Trade and other accounts
payables, current
Argentine peso
Brazilian real
Chilean peso
Colombian peso
Euro
U.S. dollar
Strong bolivar
Other currency
Accounts payable to related entities, current
Chilean peso
U.S. dollar
Other currency
Other provisions, current
Chilean peso
Other currency
Tax liabilities, current
Argentine peso
Chilean peso
U.S. dollar
Other currency
2015
ThUS$
94,199
54,655
-
39,544
2014
ThUS$
71,436
15,542
547
55,347
2015
ThUS$
141,992
52,892
-
89,100
575,967
421,165
20,772
37,572
40,219
5,271
5,275
310,565
2,627
153,666
447
83
22
342
-
-
-
36
-
-
27
9
38,740
14,330
25,017
13,652
35,937
175,298
5,261
112,930
56
29
27
-
-
-
-
268
-
268
-
-
19,261
2,072
16
10,951
155
618
839
-
4,610
-
-
-
-
460
24
436
9,037
9,036
-
-
1
2014
ThUS$
173,416
42,725
-
130,691
20,875
-
13
11,502
187
8,266
827
-
80
-
-
-
-
-
-
-
-
-
-
-
-
Current liabilities
December 31,
December 31,
December 31,
December 31,
Up to 90 days
91 days to 1 year
As of
As of
As of
As of
2015
ThUS$
2014
ThUS$
2015
ThUS$
2014
ThUS$
Other non-financial
liabilities, current
Argentine peso
Brazilian real
Chilean peso
Colombian peso
Euro
U.S. dollar
Strong bolivar
Other currency
Total current liabilities
Argentine peso
Brazilian real
Chilean peso
Colombian peso
Euro
U.S. dollar
Strong bolivar
Other currency
40,431
(2,387)
4,292
32,228
145
2,706
(3,233)
2,490
4,190
711,080
18,385
41,864
127,185
5,416
7,981
346,925
5,117
158,207
126,953
5,698
959
18,798
4,670
6,400
44,728
227
45,473
619,878
44,438
15,289
59,654
18,322
42,884
275,400
5,488
158,403
1
-
5
-
-
-
(5)
-
1
170,751
11,108
21
63,867
155
618
89,934
-
5,048
158
-
46
-
-
-
111
-
1
194,449
-
59
54,227
187
8,266
131,629
-
81
210
MEMORIA ANUAL 2015| FINANcIAL stAtEMENt!
!
!
!
98
99
Non-current liabilities
December 31,
December 31,
December 31,
December 31,
December 31,
December 31,
More than 1 to 3 years
More than 3 to 5 years
More than 5 years
As of
As of
As of
As of
As of
As of
General summary of foreign currency:
As of
As of
December 31,
December 31,
Other financial liabilities, non-current
Chilean peso
U.S. dollar
Accounts payable, non-current
Chilean peso
U.S. dollar
Other currency
Other provisions, non-current
Argentine peso
Brazillian real
Chilean peso
Colombian peso
Euro
U.S. dollar
Provisions for
employees benefits, non-current
Chilean peso
U.S. dollar
T otal non-current liabilities
Argentine peso
Brazilian real
Chilean peso
Colombian peso
Euro
U.S. dollar
Other currency
2015
T hUS$
561,217
104,385
456,832
239,029
8,058
229,005
1,966
27,712
797
11,009
-
198
8,966
6,742
56,306
56,306
-
884,264
797
11,009
168,749
198
8,966
692,579
1,966
2014
T hUS$
625,406
112,161
513,245
474,955
4,938
468,184
1,833
16,660
454
146
36
-
9,999
6,025
822
-
822
1,117,843
454
146
117,135
-
9,999
988,276
1,833
2015
T hUS$
328,480
34,635
293,845
168
168
-
-
-
-
-
-
-
-
-
-
-
-
328,648
-
-
34,803
-
-
293,845
-
2014
T hUS$
171,288
17,186
154,102
2,316
2,316
-
-
-
-
-
-
-
-
-
-
-
-
2015
T hUS$
571,804
-
571,804
2014
T hUS$
1,088,218
-
1,088,218
8
8
-
-
68
-
-
-
-
-
68
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
173,604
-
-
19,502
-
-
154,102
-
571,880
-
-
8
-
-
571,872
-
1,088,218
-
-
-
-
-
1,088,218
-
Total assets
Argentine peso
Brazilian real
Chilean peso
Colombian peso
Euro
U.S. dollar
Strong bolivar
Other currency
2015
ThUS$
795,408
168,047
42,533
91,862
6,450
66,475
266,068
10,233
143,740
2014
ThUS$
979,752
134,079
36,832
215,672
9,885
55,191
172,996
68,504
286,593
Total liabilities
2,666,623
3,193,994
Argentine peso
Brazilian real
Chilean peso
Colombian peso
Euro
U.S. dollar
Strong bolivar
Other currency
Net position
Argentine peso
Brazilian real
Chilean peso
Colombian peso
Euro
U.S. dollar
Strong bolivar
Other currency
30,290
52,894
394,612
5,769
17,565
1,995,155
5,117
165,221
137,757
(10,361)
(302,750)
681
48,910
44,892
15,494
250,520
18,509
61,149
2,637,625
5,488
160,317
89,187
21,338
(34,848)
(8,624)
(5,958)
(1,729,087)
(2,464,629)
5,116
(21,481)
63,016
126,276
211
MEMORIA ANUAL 2015| FINANcIAL stAtEMENt!
!
!
!
100
101
(b)
Exchange differences
NOTE 29 - EARNINGS / (LOSS) PER SHARE
Exchange differences recognized in the income statement, except for financial instruments
measured at fair value through profit or loss, for the period ended December 31, 2015 and 2014,
generated a debit of ThUS$ 467,896 and ThUS$ 130,201, respectively.
Exchange differences recognized in equity as reserves for currency translation differences for the
period ended December 31, 2015 and 2014, represented a debit of ThUS$ 1,409,439 and
ThUS$ 650,439, respectively.
The following shows the current exchange rates for the U.S. dollar, on the dates indicated:
Argentine peso
Brazilian real
Chilean peso
Colombian peso
Euro
Strong bolivar
Australian dollar
Boliviano
Mexican peso
New Zealand dollar
Peruvian Sol
Uruguayan peso
As of
As of
December 31,
December 31,
2015
12.97
3.98
710.16
3,183.00
0.92
198.70
1.37
6.85
17.34
1.46
3.41
29.88
2014
8.55
2.66
606.75
2,389.50
0.82
12.00
1.22
6.86
14.74
1.28
2.99
24.25
Basic earnings / (loss) per share
Earnings / (loss) attributable to
For the period ended
December 31,
2015
2014
owners of the parent (ThUS$)
(219,274)
(109,790)
Weighted average number
of shares, basic
545,547,819
545,547,819
Basic earnings / (loss) per share (US$)
(0.40193)
(0.20125)
Diluted earnings / (loss) per share
Earnings / (loss) attributable to
For the period ended
December 31,
2015
2014
owners of the parent (ThUS$)
(219,274)
(109,790)
Weighted average number
of shares, basic
Weighted average number
of shares, diluted
545,547,819
545,547,819
545,547,819
545,547,819
Diluted earnings / (loss) per share (US$)
(0.40193)
(0.20125)
In the calculation of diluted earnings per share have not been considered the compensation plan
disclosed in Note 33 (a.1), because the average market price is lower than the price of options and
these have an effect antidilutive.
212
MEMORIA ANUAL 2015| FINANcIAL stAtEMENt!
!
!
!
!102
NOTE 30 – CONTINGENCIES
Lawsuits
(i)
Lawsuits filed by LATAM Airlines Group S.A. and Subsidiaries
Company
Court
Case Number
Origin
Stage of trial
Atlantic
Aviation
Investments
LLC (AAI).
Supreme Court
of the State of
New York
County of New
York.
07-6022920
Atlantic Aviation Investments
LLC. ("AAI"), an indirect
subsidiary LATAM Airlines
Group S.A., incorporated under
the laws of the State of
Delaware, sued in August 29th ,
2007
Varig Logistics S.A.
("Variglog") for non-payment
of four documented loans in
credit agreements governed by
New York law. These contracts
establish the acceleration of the
loans in the event of sale of the
original debtor, VRG Linhas
Aéreas S.A.
In implementation stage in
Switzerland, the conviction
stated that Variglog should
pay the principal, interest and
costs in favor of AAI. It keeps
the embargo of Variglog
funds in Switzerland with
AAI. Variglog is in the
process of judicial recovery in
B r a z i l a n d h a s a s k e d
Switzerland to recognize the
judgment that declared the
state of judicial recovery and
s u b s e q u e n t b a n k r u p t c y.
Conversations have begun
with the representatives in the
Variglog liquidation process
to work towards a settlement
i n
r e g a r d i n g
Switzerland.
t h e f u n d s
Lan
Argentina
S.A.
National
Administrative
Court.
36337/13
ORSNA Resolution No. 123
which directs Lan Argentina to
vacate the hangar located in the
Airport named Aeroparque
Metropolitano Jorge Newberry,
Argentina.
-0-
The 2nd Room of the Federal
Appellate Court confirmed
another extension of the
precautionary measure that
will expire March 16, 2016.
ORSNA did not file an
extraordinary remedy, so the
measure is in effect through
that date.
(ii)
Lawsuits received by LATAM Airlines Group S.A. and Subsidiaries
!103
Company
Court
Case Number
Origin
Stage of trial
LATAM
Airlines Group
S.A. y Lan
Cargo S.A.
European
Commission.
-
Amounts
Committed
(*)
MUS$
17,100
Plus
interests
and costs
Amounts
Committed
(*)
MUS$
8,966
I n v e s t i g a t i o n o f a l l e g e d
infringements to free competition of
cargo airlines, especially fuel
surcharge. On December 26th , 2007,
the General Directorate
for
Competition of the European
Commission notified Lan Cargo S.A.
and LATAM Airlines Group S.A. the
instruction process against twenty
five cargo airlines, including Lan
Cargo S.A., for alleged breaches of
competition in the air cargo market in
Europe, especially the alleged fixed
fuel surcharge and freight. On
November 9th, 2010, the General
Directorate for Competition of the
European Commission notified Lan
Cargo S.A. and LATAM Airlines
Group S.A. the imposition of a fine
in the amount of MUS$ 8.966.
This fine is being appealed by Lan
Cargo S.A. and LATAM Airlines
Group S.A. The European Court
d e c i d e d o n t h e a p p e a l i n
December 2015 and overturned
the Commission’s Decision. It is
l i k e l y
t h e E u r o p e a n
Commission will appeal that
decision.
t h a t
On April 14th, 2008, the
n o t i f i c a t i o n o f
t h e
European Commission
w a s
r e p l i e d .
The appeal was filed on
January 24, 2011.
On May 11, 2015, we
attended a hearing at
which we petitioned for
the vacation of the
Decision based on
discrepancies in the
Decision between the
o p e r a t i n g s e c t i o n ,
which mentions four
i n f r i n g e m e n t s
( d e p e n d i n g o n t h e
routes involved) but
refers to Lan in only
o n e o f
t h o s e f o u r
routes; and the ruling
s e c t i o n ( w h i c h
mentions one single
conjoint infraction).
The European Court
of Justice overturned
t h e C o m m i s s i o n ’s
D e c i s i o n
o n
December 16, 2015
o f
b e c a u s e
discrepancies.
The
E u r o p e a n
C o m m i s s i o n c a n
appeal this decision.
We are waiting to see
how the Commission
reacts.
Lan Cargo
S.A. y
LATAM
Airlines Group
S.A.
-
In the High Court
J u s t i c e
o f
Chancery División
(England) Ovre
Romerike District
Court (Norway) y
Directie Juridische
Zaken Afdeling
C e v e i l R e c h t
,
( N e t h e r l a n d s )
Cologne Regional
Court (Landgerich
Köln Germany).
i n
C a s e s a r e
t h e
uncovering evidence
stage.
-0-
Lawsuits filed against European
airlines by users of freight services in
private lawsuits as a result of the
investigation into alleged breaches of
competition of cargo airlines,
especially fuel surcharge. Lan Cargo
S.A. and LATAM Airlines Group
S.A., have been sued in court
proceedings directly and/or in third
party, based in England, Norway, the
Netherlands and Germany.
213
MEMORIA ANUAL 2015| FINANcIAL stAtEMENt !104
!105
Company
Court
Case Number
Origin
Stage of trial
Amounts
Committed
(*)
MUS$
8,712
Tam Linhas
Aéreas S.A.
Court of the
Second Region.
2001.51.01.012530
-0
Ordinary judicial action brought
for the purpose of declaring the
n o n e x i s t e n c e o f
l e g a l
relationship obligating the
company to collect the Air
Fund.
U n f a v o r a b l e c o u r t
decision in first instance.
Currently expecting the
ruling of the appeal filed
by the company.
In order to suspend
chargeability of Tax
C r e d i t a G u a r a n t y
Deposit to the Court was
delivered by MMU$ 61
T h e
d i s c l o s u r e
p r o h i b i t i o n m o t i o n s
entered by the parties
against the ruling that
overturned the decision
did not suffice.
The
lawsuit was returned by
the Brazilian Department
of Justice (MPF) on
November 23, 2015.
Company
Court
Case Number
Origin
Stage of trial
Aerolinhas
Brasileiras
S.A.
Federal Justice.
0008285-53.2015.
403.6105
An action seeking to quash a
decision and petioning for early
protection in order to obgain a
revocation of the penalty imposed
by the Brazilian Competition
A u t h o r i t y ( C A D E )
t h e
investigation of cargo airlines
alleged fair trade violations, in
particular the fuel surcharge.
i n
This action was filed by
presenting a guaranty –
policy – in order to
suspend the effects of
the CADE’s decision
regarding the payment
of the following fines:
(i) ABSA: MUS$8,712;
(ii) Norberto Jochmann:
MUS$ 167; (iii) Hernan
Merino: MUS$ 84; (iv)
Felipe Meyer :MUS$
84. The action also
d e a l s w i t h
t h e
affirmative obligation
required by the CADE
consisting of the duty to
p u b l i s h
t h e
c o n d e m n a t i o n i n a
w i d e l y c i r c u l a t i n g
n e w s p a p e r.
T h i s
obligation had also been
stayed by the court of
federal justice in this
process.
Awaiting
CADE’s statement.
Aerolinhas
Brasileiras
S.A.
Federal Justice. 0001872-58.2014.
4.03.6105
An annulment action with a
motion for preliminary injunction,
was filed on 28/2014, in order to
c a n c e l
t a x d e b t s o f P I S ,
CONFINS, IPI and II, connected
with the administrative process
10831.005704/2006.43.
We have been waiting
since August 21, 2015
for a statement by
Serasa on TAM’s letter
of indemnity and a
statement by the Union.
9,298
Tam Linhas
Aéreas S.A.
Department of
Federal
Revenue of
Brazil
19515.721155/201
4-15
Alleged irregularities in the SAT
payments for the periods 01/2009
to 12/2009, 01/2010 to 12/2010
and 01/2011 to 12/2012.
We filed a voluntary
remedy on which a
judgment is pending
since June 30, 2015.
21,212
Tam Linhas
Aéreas S.A.
Internal
Revenue
Service of
Brazil.
16643.000087/2009
-36
This is an administrative
proceeding arising from an
infraction notice issued on
15.12.2009, by which the
authority aims to request social
contribution on net income
(CSL) on base periods 2004 to
2007, due to the deduction of
expenses related to suspended
taxes.
The appeal filed by the
company was dismissed
in 2010. In 2012 the
voluntary appeal was
a l s o d i s m i s s e d .
Consequently, the special
a p p e a l f i l e d b y t h e
c o m p a n y a w a i t s
j u d g m e n t
o f
admissibility, since 2012.
Tam Linhas
Aéreas S.A.
Internal
Revenue
Service of
Brazil.
10880.725950/2011
-05
Compensation credits of the
Social Integration Program
(PIS) and Contribution for
Social Security Financing
( C O F I N S ) D e c l a r e d o n
DCOMPs.
T h e
o b j e c t i o n
( m a n i f e s t a ç ã o d e
inconformidade) filed by
t h e c o m p a n y w a s
rejected, which is why
the voluntary appeal was
filed.
The case was
a s s i g n e d t o t h e 1 s t
O r d i n a r y G r o u p o f
Brazil’s Administrative
Council of Tax Appeals
(CARF)
June 8,
on
2015. We are awaiting a
judgment.
Amounts
Committed
(*)
MUS$
75,514
18,550
36,174
214
MEMORIA ANUAL 2015| FINANcIAL stAtEMENt !106
!107
Company
Court
Case Number
Origin
Stage of trial
Tam Linhas
Aéreas S.A.
6th Rod
Treasury of
San Pablo.
0012938-14.2013.8.
26.0053
It is an annulment action filed
against the municipality of São
Paulo seeking to annul the tax
credit constituted by the non-
p a y m e n t o f I S S d u e b y
INFRAERO for the provision
of airport services.
Tam Linhas
Aéreas S.A.
Internal
Revenue
Service of
Brazil.
16643.000085/2009
-47
File demanding the recovery of
i n c o m e
t a x a n d s o c i a l
contribution on net profits
(CSL) derived from royalties
and costs of using the TAM
brand.
The case proceedings
were referred to the
Superior Courts for a
judgment on the complaint
filed against the decision
not allowing the Union’s
extraordinary remedy and
for a judgment on the
special remedy in relation
to fees.
A judgment is
pending since December
1, 2015.
W e a r e a w a i t i n g
n o t i f i c a t i o n o f
t h e
judgment on admissibility
of the special remedy filed
by the Prosecutor General
of the Department of the
Treasury, in addition to the
notification regarding the
decision rendered by
CARF.
Amounts
Committed
(*)
MUS$
8,514
8,210
Tam Linhas
Aéreas S.A.
Internal
Revenue
Service of
Brazil.
10831.012344/2005
-55
Auto infringement presented to
demand the import tax (II), the
Social Integration Program
(PIS) Contribution for Social
Security Financing (COFINS)
arising from the loss of
international unidentified
cargo.
6,604
Adverse administrative
decision to the interests of
t h e c o m p a n y . C a s e
pending before the Court
of Tax Appeals (CARF)
awaiting decision.
Tam Linhas
Aéreas S.A.
Department of
Finance of the
State of Sao
Paulo.
3.123.785-0
Infringement notice to demand
payment of the tax on the
circulation of goods and
services (ICMS) regulating the
import of aircraft.
Currently awaiting the
decision on the appeal
filed by the company in
STF.
6,857
Company
Court
Case Number
Origin
Stage of trial
2013-20319 CA 01
Aerovías de
Integración
Regional,
AIRES S.A.
United States
Court of
Appeals for
the Eleventh
Circuit,
Florida,
U.S.A.
from
The July 30th , 2012 LAN
C O L O M B I A A I R L I N E S
initiated a legal process in
Colombia against Regional
One INC and Volvo Aero
Services LLC, to declare that
these companies are civilly
liable for moral and material
damages caused to LAN
C O L O M B I A A I R L I N E S
arising
breach of
contractual obligations of the
aircraft HK-4107.
The June 20th , 2013 AIRES
SA And / Or LAN AIRLINES
COLOMBIA was notified of
the lawsuit filed in U.S. for
Regional One INC and Dash
224 LLC for damages caused
by the aircraft HK-4107
a rg u i n g f a i l u r e o f L A N
C O L O M B I A A I R L I N E S
customs duty to obtain import
declaration when the aircraft in
April 2010 entered Colombia
for maintenance required by
Regional One.
i n
Through
proceedings
dated June 5, 2014, the
First Civil Overflow Court
Room became aware of
the process in Colombia
and sent a copy of prior
pleas submitted to the
plaintiffs by the defendant.
In December 2015, the 1st
C i v i l C o u r t
t h e
Provisional Circuit was
t h e 4 5 t h
d e s i g n a t e d
Permanent Civil Court in
t h e C i r c u i t a n d
t h e
p r o c e e d i n g s w e r e
presented to the Judge’s
chambers on December 7,
2015.The Federal Court
ruled on March 26th, 2014
and approved the request
from LAN AIRLINES
COLOMBIA to suspend
the process in the U.S. as
the demand in Colombia is
underway. Additionally,
the U.S. judge closed the
case administratively. the
Federal Court of Appeals,
confirmed the end of the
case in the U.S. on April
1st, 2015. On October 13,
2 0 1 5 , R e g i o n a l O n e
petitioned that the Court
reopen the case.
Lan
C o l o m b i a A i r l i n e s
presented its arguments
against this petition and a
decision by the Court is
pending.
Amounts
Committed
(*)
MUS$
12,443
215
MEMORIA ANUAL 2015| FINANcIAL stAtEMENt
Company
Court
Case Number
Origin
Stage of trial
!108
Tam Linhas
Aéreas S.A.
Department of
Finance of the
State of Rio de
Janeiro.
03.43129-0
Tam Linhas
Aéreas S.A.
Internal
Revenue
Service of
Brazil
10880.722.355/2014
-52
The State of Rio de Janeiro
requires VAT tax credit for the
purchase of kerosene (jet fuel).
According to a report, the
auditor noted that none of the
l a w s o f R i o d e J a n e i r o
authorizes the appropriation of
credit, so the credit was
refused and demanded tribute.
On August 19th , 2014 the
Federal Tax Service issued a
notice of violation stating that
compensation credits Program
(PIS) and the Contribution for
the Financing of Social
Security COFINS by TAM are
not directly related to the
activity of air transport.
Tam Linhas
Aéreas S.A.
Department of
Finance of the
State of Sao
Paulo.
4.037.054
t h a t
On September 20th, 2014 we
w e r e n o t i f i e d
t h e
Department of Finance of the
State of São Paulo filed an
infringement lawsuit for non-
t h e
p a y m e n t o f
circulation of goods and
s e r v i c e s r e l a t i n g
t o
telecommunications services
ICMS.
t a x o n
The Treasury remedy was
denied on November 11,
2015. Publication of the
ruling is pending.
45,044
A n a d m i n i s t r a t i v e
objection was filed on
September 17th, 2014. A
judgment is pending in the
case before the Curitiba/
P R Ta x C o u r t s i n c e
December 9, 2015.
6,632
Defense presented. First
Instance court decision
maintained the infraction
notice in its entirety. We
filed ordinary appeal,
which is a waiting for
judgment of the TIT / SP.
Tam Viagens
S.A.
Department of
Finance to the
municipality
of São Paulo.
6 7 . 1 6 8 . 7 9 5
6 7 . 1 6 8 . 8 3 3
6 7 . 1 6 8 . 8 8 4
6 7 . 1 6 8 . 9 0 6
6 7 . 1 6 8 . 9 1 4
67.168.965
/
/
/
/
/
A claim was filed alleging
infraction and seeking a fine
because of a deficient basis for
calculation of the service tax
(ISS) because the company
supposedly made incorrect
deductions.
We received notice of the
petition on December 22,
2015.
A record of our
objection is pending.
44,561
Tam Linhas
Aéreas S.A.
Labor Court of
São Paulo.
0001734-78.2014.5.
02.0045
Action filed by the Ministry of
L a b o r , w h i c h r e q u i r e s
compliance with legislation on
breaks, extra hours and others.
Eventually
Early stage.
could affect the operations
and control of working
hours of employees.
-0-
Company
Court
Case Number
Origin
Stage of trial
Amounts
Committed
(*)
MUS$
Amounts
Committed
(*)
MUS$
58,300
TAM S.A.
Conselho
Administrativo
de Recursos
Fiscais.
13855.720077/2014-
02
!109
87,156
N o t i c e o f a n a l l e g e d
infringement presented by
Secretaria da Receita Federal
d o B r a s i l r e q u i r i n g t h e
payment of IRPJ and CSLL,
taxes related to the income
earned by TAM on March,
2011, in relation of the
reduction of the statute capital
of Multiplus S.A.
On January 12, 2014, it
was filed an appeal against
the object of the notice of
infringement. Currently,
the company is waiting for
t h e c o u r t
j u d g m e n t
regarding the appeal filed
i n
t h e C o n s e l h o
A d m i n i s t r a t i v o d e
Recursos Fiscais.
Tam Linhas
Aereas S.A.
1° Civil Court
of Comarca of
Bauru/SP.
0049304-37.2009.8.
26.0071/1
Aerolinhas
Brasileiras
S.A.
Labor Court of
Campinas.
0010498-37.2014.5.
15.0095
Aerolinhas
Brasileiras
S.A.
Labor Court of
Manaus.
0002037-67.2013.5.
11.0016
That action is filed by the
current complainants against
the defendant, TAM Linhas
Aéreas S / A, for receiving
compensation for material and
moral damages suffered as a
result of an accident with one
of its aircraft, which landed on
adjacent lands to the Bauru
airport, impacting the vehicle
of Ms. Savi Gisele Marie de
Seixas Pinto and William Savi
de Seixas Pinto, causing their
death. The first was the wife
a n d m o t h e r o f
t h e
complainants and the second,
son and brother, respectively.
Lawsuit filed by the National
Union of aeronauts, requiring
weekly rest payment (DSR)
s c h e d u l e d s t o p o v e r s ,
d i s p l a c e m e n t a n d m o r a l
damage.
Lawsuit filed by the
o f M a n a u s
U n i o n
Aeroviarios
requiring
assignment of hazard to
g r o u n d
w o r k e r s
(AEROVIARIOS).
C u r r e n t l y u n d e r
t h e
enforcement phase of the
sentence.
9,563
Trial in initial stage and in
negotiation process with
the Union.
16,164
Process in the initial
phase. The value is in the
calculation stage by the
external auditor.
-0-
Company
Court
Case Number
Origin
Stage of trial
Amounts
Committed
(*)
MUS$
216
MEMORIA ANUAL 2015| FINANcIAL stAtEMENt
17502-2012-0082
Internal
Revenue
Service.
Aerolane,
Líneas
Aéreas
Nacionales
del Ecuador
S.A.
!110
Certificate of 2006 Income
Tax, items where CEDT is
disregarded.
They are
requesting certification of
branch expenses, ARC fees for
w h i c h n o
t a x
withholding was made by the
payer, etc. These proceedings
began in 2012.
i n c o m e
TAM Linhas
Aéreas S.A.
Recife Labor
Court.
0000070-22.2013.5.
06.0017
An action filed by the Public
Ministry of Labor seeking that
the Company refrain from
practicing moral harassment,
religious, social, sexual and
other discrimination.
12,505
A decision was rendered
on the appeal for a review
and payment was made to
avoid interest accrual.
This payment was also
contested before the Court.
An accounting analysis
was made on October 18,
2015 before the Court with
experts on behalf of SRI
and the Company.
The
expert opinions were
issued. We are awaiting a
final decision by the
Court.
The case is just now
beginning.
-0-
TAM Linhas
Aéreas S.A.
S ã o C a r l o s
Labor Court.
0010476-12.2015.5.
15.0008
Action filed by the union
seeking additional hazard pay
for maintenance (MRO)
employees (São Carlos).
The case is just now
beginning and calculations
are being prepared.
-0-
- Governmental Investigations. The investigation by the authorities of Chile and the United States of America
continues, related to payments carried out by LATAM Airlines Group S.A. (before called LAN Airlines S.A.)
in 2006-2007, to a consultant that advised it in the resolution of labor matters in Argentina. Mr. Ignacio Cueto
has reached an agreement with the Securities and Exchange Commission (“SEC”), which includes the consent
to pay a penalty in the amount of US$75.000 and to a cease-and-desist order concerning the books and records
and internal control provisions of the U.S. Securities Exchange Act of 1934.The Company, on its part,
continues cooperating with the respective authorities in the aforementioned investigation. Presently the
Company cannot predict the results in the matter; nor estimate or range the potential losses or risks that may
eventually come resulting from the way in which this matter is finally resolved.
-
-
In order to deal with any financial obligations arising from legal proceedings in effect at December 31, 2015,
whether civil, tax, or labor, LATAM Airlines Group S.A. and Subsidiaries, has made provisions, which are
included in Other non-current provisions that are disclosed in Note 20.
The Company has not disclosed the individual probability of success for each contingency in order to not
negatively affect its outcome.
(*) The Company has reported the amounts involved only for the lawsuits for which a reliable estimation can be made
of the financial impacts and of the possibility of any recovery, pursuant to Paragraph 87 of IAS 37 Provisions,
Contingent Liabilities and Contingent Assets.
NOTE 31 - COMMITMENTS
(a.1) Loan covenants
With respect to various loans signed by the Company for the financing of Boeing 767, 767F, 777F
and 787 aircraft, which carry the guarantee of the United States Export–Import Bank, limits have
!111
been set on some of the Company’s financial indicators on a consolidated basis. Moreover, and
related to these same contracts, restrictions are also in place on the Company’s management in
terms of its ownership and disposal of assets.
The Company and its subsidiaries do not maintain financial credit contracts with banks in Chile that
indicate some limits on financial indicators of the Company or its subsidiaries.
At December 31, 2015, the Company is in compliance with all indicators detailed above.
(a.2)
Fleet financing commitments to receive
On May 29, 2015, The Company has issued and placed debt securities denominated Enhanced
Equipment Trust Certificates ("EETC") for an aggregate amount of US $ 1,020,823,000 (the
"Certificates") in accordance with the following:
• The Certificates were issued and placed in the international market under Rule 144-A and
Regulation S of the securities laws of the United States of America by pass-through trusts
("Trusts").
• This offer consists of class A Certificates that will have an interest rate of 4.2% per annum,
with an estimated distribution date of November 15, 2027, while the Class B Certificates
will have an interest rate of 4.5% per annum, with an estimated distribution date of
November 15, 2023.
• Trusts will use the proceeds of the placement, which will initially remain in escrow with a
first class bank, to acquire "Equipment Notes" to be issued by four separate special
purpose entities, each of which is wholly owned by LATAM (each an "Issuer").
• Each Issuer will use the proceeds from the sale of the Equipment Notes and the initial
payment under each Lease (as such term is defined below) to finance the acquisition of
eleven new Airbus A321-200, two Airbus A350-900s and four Boeing 787 -9, whose
deliveries are scheduled between July 2015 and March 2016 (the "Aircrafts").
• Each of the Issuers will lease the acquired Aircrats to LATAM according to a finance lease
("Lease"), who may in turn sublease the Aircraft under operating sub-lease agreements.
• Based on the above, LATAM will recognise these Equipment Notes as debt upon delivery of
each Aircraft.
• The Certificates have not been registered under the United Stated Securities Act of 1933 or
under applicable securities laws in any other jurisdiction. Consequently, the Certificates
have been offered and sold to persons reasonably believed to qualify as institutional
investors in accordance with Rule 144-A under the Securities Act of the United States, and
other non-residents of the United States in transactions outside the United States under
Regulation S of the normative body.
At December 31, 2015 the escrow of EETC is ThUS$ 345,127 corresponding to 6 aircraft
by receive.
(b)
Commitments under operating leases as lessee
Details of the main operating leases are as follows:
217
MEMORIA ANUAL 2015| FINANcIAL stAtEMENt !112
!113
Lessor
Aircraft
As of
December 31,
2015
As of
December 31,
2014
Aircraft 76B-26329 Inc.
Aircraft 76B-27615 Inc.
Aircraft 76B-28206 Inc.
Aviación Centaurus, A.I.E.
Aviación Centaurus, A.I.E.
Aviación Real A.I.E.
Aviación Real A.I.E.
Aviación T ritón A.I.E.
Avolon Aerospace AOE 19 Limited
Avolon Aerospace AOE 20 Limited
Avolon Aerospace AOE 6 Limited
Avolon Aerospace AOE 62 Limited
Avolon Aerospace AOE 63 Limited
AWAS 4839 T rust
AWAS 5125 T rust
AWAS 5178 Limited
AWAS 5234 T rust
Baker & Spice Aviation Limited
Bank Of America
BOC Aviation Pte. Ltd.
CIT Aerospace International
Delaware T rust Company, National Association
ECAF I 1215 DAC
ECAF I 2838 DAC
ECAF I 40589 DAC
Eden Irish Aircr Leasing MSN 1459
GECAS Sverige Aircraft Leasing Worldwide AB
GFL Aircraft Leasing Netherlands B.V.
International Lease Finance Corporation
JSA Aircraft 38484, LLC
Magix Airlease Limited
Boeing 767
Boeing 767
Boeing 767
Airbus A319
Airbus A321
Airbus A319
Airbus A320
Airbus A319
Airbus A320
Airbus A320
Airbus A320
Boeing 777
Boeing 787
Airbus A320
Airbus A320
Airbus A320
Airbus A320
Airbus A320
Airbus A321
Airbus A320
Airbus A320
Bombardier Dhc8-200
Airbus A320
Airbus A320
Boeing 777
Airbus A320
Airbus A320
Airbus A320
Boeing 767
Boeing 787
Airbus A320
1
1
1
3
1
1
1
3
1
1
1
1
-
-
1
1
1
1
3
-
2
-
1
1
1
1
3
1
1
1
2
1
1
1
3
1
1
1
3
1
1
1
1
1
1
1
1
1
2
-
1
2
5
-
-
-
1
6
1
1
-
2
Lessor
MASL Sweden (1) AB
MASL Sweden (2) AB
MASL Sweden (7) AB
MASL Sweden (8) AB
NBB Cuckoo Co., Ltd
NBB Grosbeak Co., Ltd
NBB-6658 Lease Partnership
NBB-6670 Lease Partnership
Orix Aviation Systems Limited
RBS Aerospace Limited
SASOF II (J) Aviation Ireland Limited
Shenton Aircraft Leasing Limited
SKY HIGH V LEASING COMPANY LIMIT ED
Sky High XXIV Leasing Company Limited
Sky High XXV Leasing Company Limited
SMBC Aviation Capital Limited
SMBC Aviation Capital Limited
Sunflower Aircraft Leasing Limited
T C-CIT Aviation Ireland Limited
Volito Aviation August 2007 AB
Volito Aviation November 2006 AB
Volito November 2006 AB
Wells Fargo Bank North National Association
Wells Fargo Bank North National Association
Wells Fargo Bank Northwest National Association
Wells Fargo Bank Northwest National Association
Wells Fargo Bank Northwest National Association
Wells Fargo Bank Northwest National Association
Wells Fargo Bank Northwest National Association
Wilmington T rust Company
Zipdell Limited
T otal
Aircraft
Airbus A320
Airbus A320
Airbus A320
Airbus A320
Airbus A321
Airbus A321
Airbus A321
Airbus A321
Airbus A320
Airbus A320
Airbus A319
Airbus A320
Airbus A320
Airbus A320
Airbus A320
Airbus A320
Airbus A321
Airbus A320
Airbus A320
Airbus A320
Airbus A320
Airbus A320
Airbus A319
Airbus A320
Airbus A320
Airbus A330
Boeing 767
Boeing 777
Boeing 787
Airbus A319
Airbus A320
As of
December 31,
2015
As of
December 31,
2014
1
1
1
1
1
1
1
1
2
-
1
1
1
5
2
7
2
2
1
2
2
2
3
2
7
2
3
6
7
1
-
1
1
1
1
-
-
-
-
2
6
1
-
1
5
2
2
2
2
1
2
2
2
3
2
6
5
3
7
3
1
1
106
107
The rentals are shown in results for the period for which they are incurred.
The minimum future lease payments not yet payable are the following:
No later than one year
Between one and five years
Over five years
T otal
As of
As of
December 31,
December 31,
2015
T hUS$
513,748
1,281,454
858,095
2014
T hUS$
511,624
1,202,440
441,419
2,653,297
2,155,483
218
MEMORIA ANUAL 2015| FINANcIAL stAtEMENt!
!
!
The minimum lease payments charged to income are the following:
!114
For the period ended
December 31,
2015
ThUS$
525,134
525,134
2014
ThUS$
521,384
521,384
M inimum operating lease payments
Total
In the first quarter of 2014, two Airbus A320-200 aircraft were acquired and two Airbus A321-200
aircraft were leased for a period of 8 years each. Moreover, two Boeing 737-700 aircraft, one
Boeing B767-300F aircraft, one Boeing 767-300F aircraft, one Airbus A340-300 aircraft and one
Bombardier Dhc8-400 aircraft were returned. Additionally, as a result of its sale and subsequent
lease, during March 2014 four Boeing 777-300ER aircraft were added as operative leasing, with
each aircraft being leased for periods between four and six years each. During the second quarter of
2014, one Airbus A320-200 aircraft and one Boeing 787-800 aircraft were added by leasing them
for a period of 8 and 12 years, respectively. On the other hand, one Bombardier Dhc8-400 aircraft,
four Airbus A320-200 aircraft, seven Airbus A330-200 aircraft and three Boeing 737-700 aircraft
were returned. In the third quarter of 2014, one Airbus A320-200 aircraft and one Boeing 787-800
aircraft were added by leasing them for a period of 8 and 12 years, respectively. On the other hand,
one Bombardier Dhc8-400 aircraft, two Airbus A319-100 aircraft and one Boeing 767-300ER
aircraft were returned. In the fourth quarter of 2014, two Airbus A320-200 aircraft and one Boeing
767-300ER aircraft were returned. On the other hand, three A340-300 aircraft and one A319-100
aircraft were bought. Additionally it was reported that the purchase option will be exercised by 2
Bombardier Dhc8-200 aircraft. Therefore, these aircraft were reclassified to the category Property,
plant and equipment.
In the first quarter of 2015, two Boeing 787-9 aircraft were leased for a period of twelve years each.
On the other hand, two Airbus A320-200 aircraft were returned.
In the second quarter of 2015, two Airbus A321-200 aircraft and one Boeing 787-9 aircraft were
leased for a period of twelve years each. On the other hand, one Airbus A320-200 aircraft and two
Airbus A330-200 aircraft were returned.
In the third quarter of 2015, five Airbus A321-200 aircraft and one Boeing 787-9 aircraft were
leased for a period of twelve years each. On the other hand, one Airbus A330-200 aircraft was
returned.
In the fourth quarter of 2015, one Airbus A330-200 aircraft was returned.
The operating lease agreements signed by the Company and its subsidiaries state that maintenance
of the aircraft should be done according to the manufacturer’s technical instructions and within the
margins agreed in the leasing agreements, a cost that must be assumed by the lessee. The lessee
should also contract insurance for each aircraft to cover associated risks and the amounts of these
assets. Regarding rental payments, these are unrestricted and may not be netted against other
accounts receivable or payable between the lessor and lessee.
At December 31, 2015 the Company has existing letters of credit related to operating leasing as
follows:
!115
Creditor Guarantee
Debtor
T ype
GE Capital Aviation Services Limited
GE Capital Aviation Services Limited
International Lease Finance Corp
ORIX Aviation System Limited
SMBC Aviation Capital Ltd.
Engine Lease Finance Corporation
Banc of America
Wells Fargo Bank
Wells Fargo Bank
CIT Aerospace International
RBS Aerospace Limited
Lan Cargo S.A.
LAT AM Airlines Group S.A.
LAT AM Airlines Group S.A.
LAT AM Airlines Group S.A.
LAT AM Airlines Group S.A.
LAT AM Airlines Group S.A.
LAT AM Airlines Group S.A.
LAT AM Airlines Group S.A.
T am Linhas Aéreas S.A.
T am Linhas Aéreas S.A.
T am Linhas Aéreas S.A.
T wo letter of credit
Nine letter of credit
Four letter of credit
One letter of credit
T wo letter of credit
One letter of credit
T hree letter of credit
Eight letter of credit
One letter of credit
T hree letter of credit
One letter of credit
Value
T hUS$
7,530
37,178
1,700
3,255
11,133
4,750
1,044
13,160
5,500
12,375
12,357
109,982
Release
date
Aug 17, 2016
Jan 10, 2016
Feb 4, 2016
Aug 31, 2016
Aug 14, 2016
Dec 8, 2016
Sep 6, 2016
Feb 9, 2016
Jul 14, 2016
Oct 6, 2016
Oct 2, 2016
(c) Other commitments
At December 31, 2015 the Company has existing letters of credit, certificates of deposits and
warranty insurance policies as follows:
Creditor Guarantee
Debtor
Type
Value
ThUS$
R e l e a s e
d a t e
Aena Aeropuertos S.A.
American Alternative Insurance
Corporation
Citibank N.A.
Comisión Europea
Deutsche Bank A.G.
Dirección General de Aeronáutica Civil
Empresa Pública de Hidrocarburos
del Ecuador EP Petroecuador
Metropolitan Dade County
The Royal Bank of Scotland plc
Washington International Insurance
8ª Vara Federal da Subseção
LATAM Airlines Group S.A.
Four letter of credit
2 , 0 5 0
Nov 14, 2016
LATAM Airlines Group S.A.
LATAM Airlines Group S.A.
Four letter of credit
One letter of credit
LATAM Airlines Group S.A.
LATAM Airlines Group S.A.
LATAM Airlines Group S.A.
One letter of credit
Three letter of credit
Sixty six letter of credit
LATAM Airlines Group S.A.
One letter of credit
LATAM Airlines Group S.A.
LATAM Airlines Group S.A.
LATAM Airlines Group S.A.
Ten letter of credit
Two letter of credit
Four letter of credit
3,140
16,400
8 , 8 6 2
4 0 , 0 0 0
15,687
5 , 5 0 0
3,108
2 3 , 0 0 0
2,810
Apr 5, 2016
Jan 31, 2016
Feb 11, 2016
Mar 31, 2016
Jan 31, 2016
Jun 17, 2016
Mar 13, 2016
Jan 8, 2016
Apr 5, 2016
de Campinas SP
Tam Linhas Aéreas S.A.
One insurance policies guarantee
10,762
May 19, 2016
Conselho Administrativo de Conselhos
Federais
Tam Linhas Aéreas S.A.
One insurance policies guarantee
5 , 5 9 5
Oct 20, 2021
Fundação de Proteão de Defesa do
Consumidor Procon
Tam Linhas Aéreas S.A.
Two insurance policies guarantee
2 , 4 6 5
May 16, 2016
Juizo da 6ª Vara de Execuções Fiscais
Federal de Campo Grande/MS
União Federal Vara Comarca de DF
Tam Linhas Aéreas S.A.
Tam Linhas Aéreas S.A.
Two insurance policies guarantee
Two insurance policies guarantee
19,402
2 , 2 5 0
161,031
Jan 4, 2016
Nov 9, 2020
219
MEMORIA ANUAL 2015| FINANcIAL stAtEMENt!
!
!
!116
!117
NOTE 32 - TRANSACTIONS WITH RELATED PARTIES
(a) Details of transactions with related parties as follows:
Tax No.
Related party
Nature of
relationship with
related parties
Country
of origin
Nature of
related parties
transactions
Currency
Transaction amount
with related parties
As of December 31,
2014
2015
ThUS$
ThUS$
96.810.370-9
Inversiones Costa Verde
96.847.880-K
Technical Training Latam S.A.
Associate (*)
Ltda. y CPA.
Related director
65.216.000-K
Comunidad Mujer
Related director
78.591.370-1
Bethia S.A and subsidiaries
Related director
Chile
Chile
Chile
Chile
79.773.440-3
Transportes San Felipe S.A
Related director
Chile
Tickets sales
Leases as lessor
Training services received
Training services received
Tickets sales
Services provided for advertising
Services received of cargo transport
Other revenue
Services received from National and International
Courier
Other services received
Settlement of Property, plant and equipment (1)
Commitments made on behalf of the entity
Tickets sales
Services received of transfer of passengers
Commitments made on behalf of the entity
87.752.000-5
Granja Marina Tornagaleones S.A.
Common shareholder
65.216.000-K
Viajes Falabella Ltda.
Related director
Chile
Chile
Tickets sales
Sales commissions
Foreign
Inversora Aeronáutica Argentina
Related director
Argentina
Revenue billboard advertising maintaining
Leases as lessor
Foreign
Made In Everywhere
Repr. Com. Distr. Ltda.
Related director
Brazil
Services received of transport
Foreign
TAM Aviação Executiva
e Taxi Aéreo S/A
Principal shareholder
of the common matrix
Brazil
Foreign
Foreign
Foreign
Prismah Fidelidade S.A.
Joint Venture
Jochmann Participacoes Ltda.
Other related parties
Brazil
Brazil
Consultoría Administrativa
Revenue from services provided
Services received
Commitments made on behalf of the entity
Professional counseling services received
Services received
C L P
C L P
C L P
U S $
C L P
C L P
C L P
C L P
C L P
C L P
C L P
C L P
C L P
C L P
C L P
C L P
C L P
A R S
U S $
BRL
BRL
BRL
BRL
BRL
BRL
15
-
-
-
2
(10)
(259)
3 0
(227)
-
-
-
7
(127)
-
117
(50)
1
(269)
-
-
(56)
-
-
-
Profesional S.A. de C.V.
A s s o c i a t e
Mexico
Professional counseling services received
MXN
(1,191)
(*) Subsidiary from October, 2014
31
209
(785)
(743)
9
(11)
(646)
-
(496)
(10)
-
-
2 6
(70)
-
155
-
12
(334)
(2)
-
(12)
-
(119)
-
-
The balances of Accounts receivable and accounts payable to related parties are disclosed in Note 9.
Transactions between related parties have been carried out on free-trade conditions between
interested and duly-informed parties.
(b)
Compensation of key management
The Company has defined for these purposes that key management personnel are the executives
who define the Company’s policies and major guidelines and who directly affect the results of the
business, considering the levels of Vice-Presidents, Chief Executives and Directors.
For the period ended
December 31,
2015
ThUS$
2014
ThUS$
17,185
547
864
19,814
10,811
49,221
19,507
1,213
990
-
16,086
37,796
Remuneration
M anagement fees
Non-monetary benefits
Short-term benefits
Share-based payments
Total
NOTE 33 - SHARE-BASED PAYMENTS
(a)
Compensation plan for increase of capital in LATAM Airlines Group S.A.
Compensation plans implemented by providing options for the subscription and payment of shares
that have been granted by LATAM Airlines Group S.A. to employees of the Company and its
subsidiaries, are recognized in the financial statements in accordance with the provisions of IFRS 2
"Share-based Payment”, showing the effect of the fair value of the options granted under
compensation in linear between the date of grant of such options and the date on which these
irrevocable.
(a.1) Compensation plan 2011
At a Special Shareholders Meeting held on December 21, 2011, the Company’s shareholders
approved, among other matters, an increase of capital of which 4,800,000 shares were allocated to
compensation plans for employees of the Company and its subsidiaries, pursuant to Article 24 of the
Companies Law. In this compensation plan no member of the controlling group would be benefited.
The granting of options for the subscription and payment of shares has been formalized through
conclusion of contracts of options to subscribe for shares, according to the proportions shown in the
following schedule of accrual and is related to the permanence condition of the executive as
employee of the Company at these dates for the exercise of the options:
220
MEMORIA ANUAL 2015| FINANcIAL stAtEMENt!
!
Percentage
!118
Period
30%
30%
40%
From December 21, 2014 and until December 21, 2016.
From December 21, 2015 and until December 21, 2016.
From June 21, 2016 and until December 21, 2016.
Share options in agreements of share- based payments,
as of January 1, 2014
Share options granted
Share options cancelled
Share options in agreements of share- based payments,
as of December 31, 2014
Share options in agreements of share- based payments,
as of January 1, 2015
Share options granted
Share options cancelled
Share options in agreements of share- based payments,
as of December 31, 2015
Number
of share
options
4,497,000
160,000
(455,000)
4,202,000
4,202,000
406,000
(90,000)
4,518,000
These options have been valued and recorded at fair value at the grant date, determined by the
"Black-Scholes-Merton”. The effect on income to December 2015 corresponds to ThUS$ 10,811
(ThUS$ 12,900 at December 31, 2014).
The input data of option pricing model used for share options granted are as follows:
Weighted average
share price
As of December 31, 2014
As of December 31, 2015
US$ 15,47
US$ 15,47
Exercise
price
US$ 18,29
US$ 18,29
Expected
volatility
34.74%
34.74%
Life of
option
3.6 years
3.6 years
Dividends
expected
0%
0%
Risk-free
interest
0.00696
0.00696
(a.2) Compensation plan 2013
At the Extraordinary Shareholders’ Meeting held on June 11, 2013, the Company’s shareholders
approved motions including increasing corporate equity, of which 1,500,000 shares were allocated
to compensation plans for employees of the Company and its subsidiaries, in conformity with the
stipulations established in Article 24 of the Corporations Law. With regard to this compensation, a
defined date for implementation does not exist. The granting of options for the subscription and
payment of shares has been formalized through conclusion of contracts of options to subscribe for
shares, according to the proportions shown in the following schedule of accrual and is related to the
permanence condition of the executive at these dates for the exercise of the options:
Percentage
Period
100%
From November 15, 2017 and until June 11, 2018.
(b) Subsidiaries compensation plans
(b.1) Stock Options
!119
TAM Linhas Aereas S.A. and Multiplus S.A., both subsidiaries of TAM S.A., have outstanding
stock options at December 31, 2015, which amounted to 96,675 shares and 518,507 shares,
respectively (at December 31, 2014, the distribution of outstanding stock options amounted to
637,400 for Multiplus S.A. and 96,675 shares TAM Linhas Aéreas S.A.).
T AM Linhas Aéreas S.A.
Description
4th Grant
Date
05-28-2010
T otal
Outstanding option number
As December 31, 2014
Outstanding option number
As December 31, 2015
Multiplus S.A.
96,675
96,675
96,675
96,675
Description
1st Grant
3rd Grant
4th Grant
4nd Extraordinary
Grant
Date
10-04-2010
03-21-2012 04-03-2013
11-20-2013
T otal
Outstanding option number
As December 31, 2014
Outstanding option number
As December 31, 2015
7,760
129,371
294,694
205,575
637,400
-
102,621
255,995
159,891
518,507
The Options of TAM Linhas Aéreas S.A., under the plan's terms, are divided into three equal parts
and employees can run a third of its options after three, four and five years respectively, as long as
they remain employees of the company. The agreed term of the options is seven years.
For Multiplus S.A., the plan's terms provide that the options granted to the usual prizes are divided
into three equal parts and employees may exercise one-third of their two, three and four, options
respectively, as long as they keep being employees of the company. The agreed term of the options
is seven years after the grant of the option. The first extraordinary granting was divided into two
equal parts, and only half of the options may be exercised after three years and half after four years.
The second extraordinary granting was also divided into two equal parts, which may be exercised
after one and two years respectively.
Both companies have an option that contains a "service condition" in which the exercise of options
depends exclusively on the delivery services by employees during a predetermined period.
Terminated employees will be required to meet certain preconditions in order to maintain their right
to the options.
The acquisition of the share's rights, in both companies is as follows:
Number of shares
Accrued options
Number of shares
Non accrued options
Company
As of
December 31,
2015
As of
December 31,
2014
As of
December 31,
2015
As of
December 31,
2014
T AM Linhas Aéreas S.A.
Multiplus S.A.
-
-
-
-
96,675
518,507
96,675
637,400
In accordance with IFRS 2 - Share-based payments, the fair value of the option must be recalculated
and recorded as a liability of the Company once payment is made in cash (cash-settled). The fair
value of these options was calculated using the “Black-Scholes-Merton” method, where the cases
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!
!
!
!
!120
were updated with information LATAM Airlines Group S.A.. There is no value recorded in
liabilities and in income at December 31, 2015 (at December 31, 2014 not exist value recorded in
liabilities and the amount recognized in in incomes was ThUS$ 191).
(b.2) Payments based on restricted stock
In May of 2014 the Management Council of Multiplus S.A. approved a plan to grant restricted
stock, a total of 91,103 ordinary, registered, book entry securities with no face value, issued by the
Company to beneficiaries.
The quantity of restricted stock units was calculated based on employees’ expected remunerations
divided by the average price of shares in Multiplus S.A. traded on the BM&F Bovespa exchange in
the month prior to issue, April of 2014. This benefits plan will only grant beneficiaries the right to
the restricted stock when the following conditions have been met:
Compliance with the performance goal defined by this Council as return on Capital
a.
Invested.
b.
The Beneficiary must remain as an administrator or employee of the Company for the
period running from the date of issue to the following dates described, in order to obtain rights over
the following fractions: (i) 1/3 (one third) after the 2nd year from the issue date; (ii) 1/3 (one third)
after the 3rd year from the issue date; (iii) 1/3 (one third) after the 4th year from the issue date.
As of January 1, 2014
Granted
As of December 31, 2014
As of January 1, 2015
Granted
Not acquired due to breach of employment
retention conditions
As of December 31, 2015
NOTE 34 - THE ENVIRONMENT
Number
shares in
circulation
-
91,103
91,103
91,103
119,731
(34,924)
175,910
LATAM Airlines Group S.A. manages environmental issues at the corporate level, centralized in
Environmental Management. There is a commitment to the highest level to monitor the company
and minimize their impact on the environment, where continuous improvement and contribute to
the solution of global climate change problems, generating added value to the company and the
region, are the pillars of his administration.
One function of Environmental Management, in conjunction with the various areas of the Company,
is to ensure environmental compliance, implementing a management system and environmental
programs that meet the increasingly demanding requirements globally; well as continuous
improvement programs in their internal processes that generate environmental and economic
benefits and to join the currently completed.
The Environment Strategy LATAM Airlines Group S.A. is called Climate Change Strategy and it is
based on the aim of being a world leader in Climate Change and Eco-efficiency, which is
implemented on the following objectives:
i.
Impact and Profitability:
-
-
-
-
Environmental Management System
Risk Management
Eco-efficiency
Sustainable Alternative Energy
!121
ii. Commitment and Recognition:
-
Internal Capacity Development
-
Transparency
- Value Chain
-
-
Emissions Offsets
Recognition and Communications Projects
For 2015, were established and worked the following topics:
1. Advance in the implementation of an Environmental Management System;
2. Manage the Carbon Footprint by measuring, external verification and compensation of our
emissions by ground operations;
3. Corporate Risk Management;
4. Establishment of corporate strategy to meet the global target of aviation to have a carbon
neutral growth by 2020.
Thus, during 2015, we have worked in the following initiatives:
-
-
-
Advance in the implementation of an Environmental Management System for main operations,
with an emphasis on Santiago and Miami. Achieving certification Environmental Management
System ISO 14001 at its facility in Miami.
Certification of stage 2, the most advanced IATA Environmental Assestment (IEnvA), been the
third airline in the world to achieve this certification.
Preparation of the environmental chapter for reporting sustainability of the Company, to
measure progress on environmental issues.
The preparation of the second report supporting environmental management of the Company.
-
- Measurement and external verification of the Corporate Carbon Footprint.
It is highlighted that in the 2015 LATAM Airlines Group maintained its selection in the index Dow
Jones Sustainability in the global category, being the only two airlines that belong to this select
group.
As of December 31, 2015, the Environment Management spent US$ 150,700 (US$ 370,160 at
December 31, 2014). The budget of the Environment Management for 2015 was US$ 324,460
(US$ 520,000 for 2014).
NOTE 35 – EVENTS SUBSEQUENT TO THE DATE OF THE FINANCIAL STATEMENTS
The Company announced on February 4, 2016 that Ignacio Cueto Plaza, CEO of LAN Airlines, has
consented to the entry of a cease-and-desist order by the Securities and Exchange Commission
(SEC) concerning the books and records and internal controls provisions of the U.S. Securities
Exchange Act of 1934.
• The allegations set forth in the Order relate to an isolated matter which occurred in 2006 –
2007. As previously disclosed in LATAM’s public filings, the issue is related to consultant
fee payments made by LAN Airlines S.A. to a consultant on labor matters in Argentina
which were not accurately recorded in the Company’s accounting records. Ignacio Cueto
consented to the Order and agreed to pay a $75,000 penalty to the SEC and to remain in
compliance with LATAM’s compliance structure and internal accounting controls.
• Over the past decade, since the occurrence of this event, the Company has implemented
significant enhancements to its compliance structure and internal accounting controls.
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!122
The Company and its senior executives maintain a strong commitment to complying with all laws
and regulations in all countries where the company operates. The Company has been cooperating
with the investigation of the U.S. regulatory authorities and will continue to do so as necessary.
Subsequent to the closing date of the annual financial statements, at December 31, 2015, has
occurred an important variation in the exchange rate (Central Bank of Brazil) R$/US$, from R$3.90
per US$ to R$ 3.62 per US$ at March 21, 2016, which represents a 7.22% appreciation of the
Brazilian currency.
At the date of issuance of these financial statements, given the complexity of this matter, the
administration has not yet concluded the analysis and determination of the financial effects of this
situation.
LATAM Airlines Group S.A. and Subsidiaries’ consolidated financial statements as at
December 31, 2015, have been approved by the Board of Director’s in an extraordinary meeting
held on March 21, 2016.
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MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs t h a t s u m m a r i z e s
The Extraordinary Board of Directors of Lan
Airlines S.A. held on December 21, 2011 agreed
to change the name of the company to “LATAM
Airlines Group S.A.” An extract of the public
t h e
d e e d
aforementioned Board Meeting was registered in
the Register of Commerce of the Property
Register pages 4,238 number 2,921 of 2012 and
published in the Official Journal on January 14,
2012. The effective date of the name change was
June 22, 2012.
t h e A c t o f
LATAM Airlines Group S.A. is governed by the
regulations applicable for publicly traded
companies, and is registered under Nº 0306, as of
May 22, 1987, in the Securities Registry of the
Superintendence of Securities and Insurance.
Note: The Financial Statements of the
subsidiaries are included in the form of summary
in this report. The complete information is
available for the public in our offices and in the
Superintendence of Securities and Insurance.
Subsidiaries and Affiliates Information
LATAM AIRLINES GROUP S.A
Name: LATAM Airlines Group S.A., R.U.T.
89,862,200-2
Constitution: It was incorporated as a limited
liability company, by public deed on December
30, 1983, granted in the Notary of Eduardo Avello
Arellano, whose excerpt was registered in the
Registry of Commerce of Santiago in page
20,341, number 11,248 of 1983 and published in
the Official Journal on December 31, 1983.
Constituted by public deed issued on August 20,
1985, granted in the Notary Miguel Garay
Figueroa, the company became a publicly traded
company, under the name Línea Aérea Nacional
Chile S.A. (today LATAM Airlines Group S.A.),
which by express provision of the Law N°18,400
is the legal continuation of the public state-owned
company funded in 1929 under the name Línea
Aérea Nacional de Chile, related to aviation and
radio communications concessions, traffic rights
and other administrative concessions.
The Extraordinary Board of Directors of Lan
Chile S.A. held on July 23, 2004 agreed to change
the name of the company to “Lan Airlines S.A.”
An extract of the public deed that summarizes the
Act of the aforementioned Board Meeting was
registered in the Register of Commerce of the
Property Register 25,128 number 18,764 of 2004
and published in the Official Journal on August
21, 2004. The effective date of the name change
was September 8, 2004.
TAM S.A. AND SUBSIDIARIES
Constitution: Publicly held company formed in
Brazil in May 1997.
Purpose: Participate as shareholder in other
companies, especially in companies that operate
domestic and international air transport service in
a regular basis and other related activities, related
or supplementary to the regular air transport.
Subscribed and paid- in capital: MUS$
2,304,021
Net Income: MUS$ (146,198)
Stake: 100.00%
Change YoY: 0.00%
% of consolidated assets: 2.75%
Chairman of the Board:
Claudia Sender Ramirez
Directors:
Ruy Antonio Mendes Amparo
Federico Herman Germani
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-
ABSA: Aerolinhas Brasileiras S.A. y
filial
- Multiplus S.A.
Type of Entity: Publicly held company formed in
Brazil.
Purpose: (a) the operation of scheduled air
transport services of passengers, cargo and mail
bags, domestic or international, in accordance
with current legislation; (b) the operation of air
transport auxiliary activities, such as care,
cleaning and towing aircraft, monitoring of cargo,
operational dispatch flight, check in and check
out and other services provided for in legislation;
(c) Commercial and Operational leasing and
chartering of aircraft; (d) Operation of
maintenance services and marketing parts, aircraft
parts and equipment; and (e) Development and
implementation of other related, similar or
complementary activities to air transport in
addition to those expressly listed.
Subscribed and paid- in capital: MUS$ 3,314
Stake: 100.00%
Change YoY: 0.00%
% of consolidated assets: 0.21801%
Chairman of the Board:
Luis Quintiliano
Directors:
Dario Matsuguma
Daniel Levy
Type of Entity: Publicly held company formed in
Brazil.
Purpose: i. the development and management of
customer loyalty program because of consumer
goods and services offered by the Company's
partners; ii. the sale of reward redemption rights
under customer loyalty program; iii. creating
database of individuals and legal entities; iv.
o b t a i n i n g a n d p r o c e s s i n g t r a n s a c t i o n a l
information related to consumption habits; v. the
representation of other companies, Brazilian or
foreign; and vi. providing ancillary services to the
trade of goods and products, including, but not
limited to, the import and export, in addition to
the purchase of items and products, directly and
indirectly, the achievement of the above activities
Subscribed and paid- in capital: MUS$31,616
Stake: 72.40%
Change YoY: 0.00%
% of consolidated assets: 0.99075%
Chairman of the Board:
Roberto José Maris DE Medeiros
Directors:
Ronald Domingues
Ricardo Gazetta
Ricardo Birtel Mendes de Freitas
Subsidiaries of TAM S.A.
-
TAM Linhas Aereas S.A. and
subsidiaries
Type of Entity: Publicly held company formed in
Brazil.
Purpose: (a) Operation of scheduled air transport
services of passengers, cargo and mail bags in
accordance with current legislation; (b)
Exploration of complementary activities of air
transport services for passengers freight, cargo
and mail; (c) Provision of maintenance services,
aircraft repair, own or third parties, engines, parts
and pieces; (d) hangar services Provision of
aircraft; (e) Provision of yard care services and
track flight attendant supply and cleaning of
aircraft; (f) Provision of engineering services,
technical assistance and other activities related to
the aviation industry; (g) the performance of
education and training, related to aeronautical
activities; (h) Analysis and development of
systems and programs; (i) buying and selling
p a r t s , a c c e s s o r i e s a n d a p p l i a n c e s ; ( j )
Development and implementation of other related
activities, related or complementary to air
transport. Besides the above listed specifically;
(k) Import and export of finished lubricating oil;
and (i) Exploration of correspondent banking
service.
Subscribed and paid- in capital: MUS$ 1,289,676
Stake: 100.00%
Change YoY: 0.00%
% of consolidated assets: 2.54497%
Chairman of the Board:
Claudia Sender Ramirez
Directors:
Ruy Antonio Mendes Amparo
Daniel Levy
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Transportes Aereos del Mercosur S.A.
-
Corsair Participações Ltda
-
TP Franchising Limited
Type of Entity: Publicly held company formed in
Paraguay.
Type of Entity: Publicly held company formed in
Brazil.
Type of Entity: Limited liability company
formed in Brazil.
Purpose: This entity has a broad company
purpose including aviation activities, commercial,
tourism, services, financial, representations, and
investments, thus emphasizing aeronautical
activities of regular and non-regular transport,
domestic and international transport of
individuals, e international de personas, objects
and/ or mail, among others, commercials and
maintenance service delivery and technical
assistance of all kind of aircrafts, equipment, parts
and materials for aviation, among others.
Subscribed and paid- in capital: MUS$ 17,219
Stake: 94.98%
Change YoY: 0.00%
% of consolidated assets: 0,11039%
Purpose: (I) participation in other civil or
commercial companies as a shareholder or
partner; and (ii) the management of own assets.
Subscribed and Paid Capital: MUS$49
Participation 2015: 100.00%
Variation y/y: 0.00%
% of consolidated assets: -0.00238%
Chairman of the Board:
Ruy Antonio Mendes Amparo
Directors:
Euzébio Angelotti Neto
Chairman of the Board:
Gustavo Lopegui
Directors:
Enrique Alcaide Hidalgo
Darío Maciel Martínez
Hernán Pablo Morosuk (Suplente)
Senior Management:
Enrique Alcaide Hidalgo
Esteban Burt Artaza
Hernan Pablo Morosuk
Gabriela Terrazas Domaniczky
Maria Emiliana Duarte León
CEO:
Rosario Altgelt
Purpose: (a) franchising (b) temporary, free or
onerous assignment, to its franchisees, of using
trademarks rights, systems, knowledge, methods,
patents, performance technology and any other
rights, interests or property, movable or
immovable, tangible or intangible, that the
Company is or may be the owner or licensee
related to the development, implementation,
operation or management of franchises that may
be granted;(c) the development of any activities
necessary to ensure as far as possible, the
maintenance and continuous improvement of
standards of performance of its franchise
network;(d) the development of deployment
models, operation and management of the
franchise network and its transmission to
franchisees; and (e) the distribution, sale and
marketing of air tickets and related products, as
well as any related business or accessories to its
main purpose, and may also participate in other
companies as partner or shareholder, in Brazil or
abroad, or in consortia as well as undertake their
own projects, or join the third-party projects,
including for purposes of tax incentives,
according to the legislation.
Subscribed and paid- in capital: MUS$8
Stake: 100.00%
Change YoY: 0.00%
% of consolidated assets: 0.00447%
Senior Management:
Cláudia Sender Ramirez
Marcelo Eduardo Guzzi Dezem
Daniel Levy
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TAM Capital Inc
-
TAM Capital 3 Inc.
Type of Entity: Publicly held company formed in
Brazil.
Type of Entity: Publicly held company formed in
Brazil.
Purpose: The Company is enabled to perform
any activity not forbidden by law.
Purpose: The Company is enabled to perform
any activity not forbidden by law.
Subscribed and paid- in capital: MUS$ 111,123
Stake: 100.00%
Change YoY: 0.00%
% of consolidated assets: 0.08937%
Subscribed and paid- in capital: MUS$ 178,391
Stake: 100.00%
Change YoY: 0.00%
% of consolidated assets: 1.02135%
Directors:
José Zaidan Maluf.
Bruno Macarenco Aléssio
Euzébio Angelotti Neto
Directors:
José Zaidan Maluf.
Bruno Macarenco Aléssio
Euzébio Angelotti Neto
-
TAM Capital 2 Inc.
Type of Entity: Publicly held company formed in
Brazil.
Purpose: The Company is enabled to perform
any activity not forbidden by law.
Subscribed and paid- in capital: MUS$ 78,969
Stake: 100.00%
Change YoY: 0.00%
% of consolidated assets: 0.10581%
Directors:
José Zaidan Maluf.
Bruno Macarenco Aléssio
Euzébio Angelotti Neto
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LAN CARGO S.A AND SUBSIDIARIES
Constitution: It was incorporated as a limited
liability company by public deed on May 22,
1970, granted in the Notary Sergio Rodríguez
Garcés, incorporation that was materialized with
the contribution of assets and liabilities of the
company Línea Aérea del Cobre Limitada
(Ladeco Limitada), incorporated on September 3,
1958 in the Notary Jaime García Palazuelos. The
Company has experienced a series of reforms,
being the last one registered by public deed as of
November 20, 1998, whose excerpt was
registered in pages 30,091 number 24,117 in the
Registry of Commerce of Santiago 1983 and
published in the Official Journal on December 3,
1998, whereby Ladeco S.A. merged with the
incorporation of Lan Chile S.A. subsidiary Fast
Air Carrier S.A.
By public deed of October 22, 2001, as of the
same date the Act of the Extraordinary
Shareholders Meeting of Ladeco S.A., the
company name was modified to “Lan Chile Cargo
S.A.” An excerpt of that public deed was
registered in the Registry of Commerce of the
Registry of Property of Santiago pages 27,746
number 22,624 of 2001 and published in the
Official Journal on November 5, 2001. The name
change was effective starting from December 10,
2001.
By public deed of August 23, 2004, as stated in
the Act of the Extraordinary Shareholders
Meeting of Lan Chile Cargo S.A. of August 17,
2004, the company name was modified to “Lan
Cargo S.A.” An excerpt of that public deed was
registered in the Registry of Commerce of the
Registry of Property of Santiago pages 26,994
number 20,082 of 2004 and published in the
Official Journal on august 30, 2004.
Purpose: Perform and develop, on its own
account or on behalf of third parties, the
following: transport in general in any of its forms,
and, in particular, air transport of passengers,
cargo and mail, in or outside the country; tourism,
hotels and other supplementary activities, in any
of its forms, in or outside the country; the
acquisition or sale, manufacturing, maintenance,
leasing or any other way of use and enjoyment,
on its own account or on behalf of third parties, of
aircrafts, parts and aeronautic equipment, and its
operation; delivery of every type of service and
consultancy related to transport in general and, in
particular, with air transport in any of its forms,
being ground support, maintenance, technical or
any other type of advisory, in or outside the
country, and every type of activities and services
related linked to tourism, hotels and other
activities and aforementioned goods, in or outside
the country. In order to comply with the
aforementioned objectives, the Company may
make investments or participate as partner in
other companies, either acquiring stocks or rights
or interests in any other type of partnership, being
so for the existing ones and the ones to be created
in the future and, in general, to execute every act
and conclude the contracts needed and relevant
for the purposes specified.
Subscribed and paid- in capital: MUS$ 83,226
Net Income: MUS$ (61,332)
Stake: 99.898%
Change YoY: 0.00%
% of consolidated assets: 2.05%
Chairman of the Board:
José Cox Donoso
Directors:
Juan José Cueto Plaza (LATAM Director)
Ramón Eblen Kadis (LATAM Director)
Ignacio Cueto Plaza (LATAM Senior
Management)
Enrique Cueto Plaza (LATAM Senior
Management)
Andrés Osorio Hermansen (LATAM Senior
Management)
CEO:
Alvaro Carril Muñoz
LAN CARGO S.A AND SUBSIDIARIES
-
Laser Cargo S.R.L.
Type of Entity: Limited liability company
formed in Argentina.
Purpose: On its own account or on behalf of third
parties the service delivery as air and ocean cargo
services, operation of air and ocean containers,
loading or unloading cargo control of traditional
aircrafts, freighters, traditional ships and
c o n t a i n e r s h i p s , c o n s o l i d a t i o n a n d
deconsolidation, operations and contracts with
transport companies, of distribution and
promotion of air, ocean, river and ground cargo,
and related services, import and export: these
operations will be performed in accordance with
the applicable laws of the country, and the
regulations applicable to these occupations and
activities, the legal and customs dispositions and
regulations of the Argentine Naval Prefecture, and
also assign to third parties to perform the tasks
assigned by current legislation for customs
brokers; also deposit and transport on its own
account and/ or on behalf of third parties of fruits,
products, raw materials, goods in general and all
kinds of documentation: packaging of goods, on
its own account or on behalf of third parties. In
the performance of these tasks the company may
register as air or shipping agent, importer and
exporter, ocean and air contractor and supplier
before the competent authorities. At the same
time, will develop mail activities intended to the
admission, classification, transport, classification,
mail, packages of up to 50 kilos, made in the
Republic of Argentina from and to the exterior.
This activity includes the one developed by the
couriers, or courier companies and every other
activity and every other activity assimilated
according to Art. 4 of Decree 1187/93. The
company is also enabled to develop the logistic
process consistent with the transport, storage,
assembly, fractioning, packaging, refurbishment
of merchandise in general for its transport an
distribution to the final customer together with the
management of the relevant information to
comply with this objective, meaning: the logistic
process of taking the raw material from the
supplier to the delivery of the finished to the
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information that ensures the efficiency of the
activity.
-
Fast Air Almacenes de Carga S.A.
-
Prime Airport Services Inc. y filial
Type of Entity: Publicly held company formed in
Chile.
Type of Entity: Corporation formed in the United
States.
Purpose: Perform and develop the operation and
management of warehouses or venues of customs
storage, places where its possible to store any
good or merchandise until its withdrawal, for
import, export or any other customs destination,
according to the terms contained in the Customs
Ordinance, its regulation and applicable rules.
Purpose: Perform and develop the operation and
management of warehouses or venues of customs
storage, places where it’s possible to store any
good or merchandise until its withdrawal, for
import, export or any other customs destination,
according to the terms contained in the Customs
Ordinance, its regulation and applicable rules.
Subscribed and paid- in capital: MUS$6,741
Stake: 99.89%
Change YoY: 0.00%
% of consolidated assets: 0.02400%
Directors:
Juan José Cueto Plaza (LATAM Director)
Alvaro Carril Muñoz (LATAM Senior
Management)
Andrés Osorio Hermansen (LATAM Senior
Management)
Andrés del Valle Eitel (LATAM Senior
Management)
Enrique Elsaca Hirmas (LATAM Senior
Management)
CEO:
Javier Cáceres Celia
Subscribed and paid- in capital: MUS$2
Stake: 100.00%
Change YoY: 0,00%
% of consolidated assets: -0.02484%
Directors:
Carlos Larraín
CEO:
Rene Pascua
Subscribed and paid- in capital: MUS$68
Stake: 99.99%
Change YoY: 0.00%
% of consolidated assets: -0.00007%
Directors:
Esteban Bojanich
Senior Management:
Esteban Bojanich.
Rosario Altgelt
María Marta Forcada.
Facundo Rocha
Gonzalo Perez Corral
Nicolás Obejero
Norberto Díaz
-
Aircraft Internacional Leasing Limited
Type of Entity: Limited liability company
formed in Bahamas.
Purpose: Acquisition and financing of aircrafts.
Subscribed and paid- in capital: MUS$5
Stake: 99.98%
Change YoY: 0.00%
% of consolidated assets: -0.00002%
Directors:
Richard Evans
Carlton Mortimer
Charlene Y. Wells
Geoffrey D. Andrews
231
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs
-
Lan Cargo Overseas Limited and
subsidiaries
-
Transporte Aéreo S.A.
-
Lan Cargo Inversiones S.A and
subsidiary
Type of Entity: Limited liability company
formed in Bahamas.
Purpose: Participate in any act or activity not
forbidden by any existing law in Bahamas.
Subscribed and paid- in capital: MUS$1,183
Stake: 100.00%
Change YoY: 0,00%
% of consolidated assets: 0.08598%
Directors:
Andres del Valle Eitel (LATAM Senior
Management)
Cristian Toro (LATAM Senior Management)
Pilar Duarte
Senior Management:
Andres del Valle Eitel (LATAM Senior
Management)
Cristian Toro (LATAM Senior Management)
Type of Entity: Publicly held company formed in
Chile.
Purpose: a) Trading of air transport in any of its
forms, of passengers, mail and/ or cargo, and
every activity related directly or indirectly with
such activity, in or outside the country, on its own
account or on behalf of third parties; b) the
service delivery related to maintenance and repair
of aircrafts, of its own property or belonging to
third parties; c) trade and development of
activities related with travel, tourism and hotels;
d) Development and/ or participation in every
type of investments, in Chile and abroad, in
matters related directly or indirectly with
aeronautic matters and/ or other corporate
objectives; and e) Development and operation of
every activity derived from the company purpose
and/ or linked or complementary.
Subscribed and paid- in capital: MUS$125
Stake: 100.00%
Change YoY: 0.00%
% of consolidated assets: -0.07309%
Directors:
Ignacio Cueto Plaza (LATAM Senior
Management)
Andrés Osorio Hermansen (LATAM Senior
Management)
Roberto Alvo Milosawlewitsch (LATAM Senior
Management)
Type of Entity: Publicly held company formed in
Chile.
Purpose: Participate in any act or activity not
forbidden by any existing law in Bahamas.
Subscribed and paid- in capital: MUS$11,800
Stake: 99.99%
Change YoY: 0.00%
% of consolidated assets: 1.15157%
Directors:
Andrés Osorio Hermansen
Roberto Alvo Milosawlewitsch
Enrique Elsaca Hirmas
Senior Management:
Andrés Osorio Hermansen
Roberto Alvo Milosawlewitsch
Enrique Elsaca Hirmas
CEO:
Enrique Elsaca Hirmas
-
Consorcio Fast Air Almacenes de
Carga S.A. - Laser Cargo S.R.L.
Type of Entity: Transitory consortium of
Companies constituted in Argentina.
Purpose: Submission to a National and
International Public Tender N° 11/2000 for
granting the Permit for the Use of the Installation
and Operation of a Fiscal Deposit in the
International Airport of Rosario.
Subscribed and paid- in capital: MUS$132
Stake: 100.00%
Change YoY: 0.00%
% of consolidated assets: 0.00039%
Directors:
Esteban Bojanich
Senior Management:
Esteban Bojanich
232
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs -
Connecta Corporation
Type of Entity: Corporation constituted in the
United States.
Purpose: Ownership, operating leasing and sub-
leasing of aircrafts.
Subscribed and paid- in capital: MUS$1
Stake: 100.00%
Change YoY: 0.00%
% of consolidated assets: -0.00678%
CEO:
Ernesto Ramirez
-
Línea Aérea Carguera de Colombia
(Subsidiary of LAN Cargo Inversiones)
Type of Entity: Publicly held company formed in
Colombia.
Purpose: Delivery of public air commercial cargo
and mail transport service within the Republic of
Colombia, and from and to Colombia. Its
corporate secondary purpose the company is
enabled to delivery maintenance services to itself
or to third parties; operate its operations school
and delivery services of theory and practical
training, and training to aeronautical professionals
of its own or to third parties on its different
modalities and specialties; import for itself or for
third parties parts, components and pieces related
to the aviation industry; delivery port services to
third parties; represent or act as an agency for air
domestic or foreign companies, passenger or
cargo, and in general to companies that delivery
services from the aeronautic sector.
Subscribed and paid- in capital: MUS$774
Stake: 90.00%
Change YoY: 0.00%
% of consolidated assets: 0.03929%
Directors:
Alberto Davila Suarez
Pablo Canales
Jaime Antonio Gongora Esguerra
Fernando García Poitevin (Substitute)
Jorge Nicolas Cortazar Cardoso (Substitute)
Senior Management:
Jaime Antonio Gongora Esguerra
Erika Zarante Bahamon (Suplemente)
acquisition, sale and in general the negotiation of
every type of equity, social stakes and other
permitted by law...*The delivery or contracting of
technical services, advisory, as well as entering
into contracts or agreements to accomplish these
objectives.
Subscribed and paid- in capital: MUS$2,216
Stake: 49.00%
Change YoY: 0.00%
% of consolidated assets: 0.02302%
- Mas Investment Limited (Subsidiary of
LAN Overseas Limited)
Senior Management:
Luis Ignacio Sierra Arriola
Type of Entity: Limited Liability Company
formed in Bahamas.
-
Inversiones Áreas S.A (Subsidiary of
Mas Investmet Limited)
Purpose: Perform any activity not forbidden by
existing law in Bahamas and specifically to have
ownership in other subsidiaries of LAN.
Subscribed and paid- in capital: MUS$1,446
Stake: 100.000
Change YoY: 0.00%
% of consolidated assets: 0.03261%
Directors:
J. Richard Evans
Carlton Mortimer
Charlene Y. Wels
Geoffrey D. Andrews.
-
Promotora Aérea Latinoamérica S.A
and subsidiaries (Subsidiary of Mas
Investmet Limited)
Type of Entity: Publicly held company of
Variable Capital formed in Mexico.
Purpose: Promote, constitute, organize, operate
and participate in equity and capital, of all kind of
mercantile or civil companies, associations or
industrial companies, service or of any other kind,
domestic or international, and also to participate
in its management or winding up. *The
Type of Entity: Publicly held company formed in
Peru.
Purpose: Promote, constitute, organize, operate
and participate in equity and capital, of all kind of
mercantile or civil companies, associations or
industrial companies, service or of any other kind,
domestic or international, and also to participate
in its management or winding up. *The
acquisition, sale and in general the negotiation of
every type of equity, social stakes and other
permitted by law...*The delivery or contracting of
technical services, advisory, as well as entering
into contracts or agreements to accomplish these
objectives.
Subscribed and paid- in capital: MUS$428
Stake: 100.00%
Change YoY: 0.00%
% of consolidated assets: 0.02444%
Directors:
Andrés Enrique del Valle Eitel
Andrés Osorio Hermansen
Cristian Eduardo Toro Cañas
CEO:
Carlos Schacht Rotter
233
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs -
Americonsul S.A de C.V. (Subsidiary of
Promotora Aérea Latinoamérica S.A
and subsidiaries)
Type of Entity: Publicly held company of
Variable Capital formed in México.
Purpose: Provide and receive every type of
technical services, administration and advisory to
industrial companies, commercial and services
providers; Promote, organize, manage, supervise,
convey and manage training courses to the
employees; Perform every type of training to the
staff; Perform every type of studies, plans,
projects, research work; Hire the required
professional and technical staff.
Subscribed and paid- in capital: MUS$5
Stake: 49.00%
Change YoY: 0.00%
% of consolidated assets: 0.00000%
Senior Management:
Luis Ignacio Sierra Arriola
-
Americonsult de Guatemala S.A.
(Subsidiary of Americonsul S.A de C.V)
Type of Entity: Publicly held company formed in
Guatemala.
Purpose: Powers to represent, intermediate,
negotiate and commercialize; develop every type
of commercial and industrial activities; every type
of commerce in General. The purpose is broad
and allows every kind of operations in the
country.
Subscribed and paid- in capital: MUS$76
Stake: 99.00%
Change YoY: 0.00%
% of consolidated assets: 0.00238%
Presidente Directorio:
Luis Ignacio Sierra Arriola
Directors:
Carlos Fernando Pellecer Valenzuela
Senior Management:
Carlos Fernando Pellecer Valenzuela
-
Americonsult de Costa Rica S.A.
(Subsidiary of Americonsul S.A de C.V)
Type of Entity: Publicly held company formed in
Costa Rica.
Purpose: Commerce in general: industry,
agriculture and cattle.
Subscribed and paid- in capital: MUS$ 20
Stake: 99.00%
Change YoY: 0.00%
% of consolidated assets: 0.00353%
Senior Management:
Luis Ignacio Sierra Arriola
Tesorero: Alejandro Fernández Espinoza
Luis Miguel Renguel López
Tomás Nassar Pérez
Marjorie Hernández Valverde.
LAN PERÚ S.A
Constitution: Publicly held company formed in
Peru on February 14, 1997.
Purpose: Service delivery of air, cargo and mail
passengers transport, domestic and international,
in accordance with the civil aeronautic regulation.
Subscribed and paid- in capital: MUS$4,341
Net Income: MUS$5,068
Stake: 70.00%
Change YoY: 0.00%
% of consolidated assets: 0.08%
Chairman of the Board:
Emilio Rodríguez Larraín Salinas
Directors:
César Emilio Rodríguez Larraín Salinas
Ignacio Cueto Plaza (LATAM Senior
Management)
Enrique Cueto Plaza (LATAM Senior
Management)
Jorge Harten Costa
Alejandro García Vargas
Emilio Rodríguez Larraín Miró Quesada
Armando Valdivieso Montes (LATAM Senior
Management)
CEO:
Félix Antelo
INVERSIONES LAN S.A AND
SUBSIDIARIES
Constitution: It was incorporated as a limited
liability company, by public deed on January 23,
1990, granted in the Notary Humberto Quezada
M., registered in the Registry of Commerce of
Santiago in page 3,462 N°1,833 of 1990, and
published in the Official Journal on February 2,
1990.
234
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs Subscribed and paid- in capital: MUS$2
Stake: 98.00%
Change YoY: 0.00%
% of consolidated assets: 0.00197%
Directors:
E n r i q u e C u e t o P l a z a ( L ATA M S e n i o r
Management)
I g n a c i o C u e t o P l a z a ( L ATA M S e n i o r
Management)
Andrés Osorio Hermansen (LATAM Senior
Management)
Roberto Alvo Milosawlewitsch (LATAM Senior
Management)
Enrique Elsaca Hirmas (LATAM Senior
Management)
INMOBILIARIA AERONAUTICA S.A
Constitution: It was incorporated as a limited
liability company, by public deed on August 1st,
1995, granted in the Notary of Gonzalo de la
Cuadra Fabres, and registered in the Registry of
Commerce of Santiago in page 21,690 numbers
17,549 of 1995 and published in the Official
Journal on September 14, 1995.
Purpose: Perform acquisitions and sale of real
estate and its rights; the development, planning,
sale and construction of real properties and real
estate projects; leasing, administration, and any
form of real estate development, on its own
account or by third parties.
Subscribed and paid- in capital: MUS$1,147
Net Income: MUS$1,404
Stake: 100.00%
Change YoY: 0.0%
% of consolidated assets: 0.14%
Chairman of the Board:
Presidente: Enrique Cueto Plaza (LATAM Senior
Management)
Directors:
Andrés Osorio Hermansen (LATAM Senior
Management)
Armando Valdivieso Montes (LATAM Senior
Management)
Purpose: Make investments of every kind of
goods, which might be movable or immovable,
tangible or intangible. Besides, the Company
might enter into other type of companies, of any
kind; acquire rights in already formed companies,
manage, modify or wind up them.
Subscribed and paid- in capital: MUS$458
Net Income: MUS$2,798
Stake: 100.00%
Change YoY: 0.29%
% of consolidated assets: 0.01%
Directors;
Enrique Cueto Plaza (LATAM Senior
Management)
Ignacio Cueto Plaza (LATAM Senior
Management)
Andrés Osorio Hermansen (LATAM Senior
Management)
Roberto Alvo Milosawlewitsch (LATAM Senior
Management)
Enrique Elsaca Hirmas (LATAM Senior
Management)
CEO:
Juan Pablo Arias (LATAM Senior Management)
Subsidiaries of Inversiones Lan S.A. and
holdings
- Andes Airport Services S.A.
Type of Entity: Publicly held company formed in
Chile.
Purpose: Comprehensive advisory for companies
and service delivery to third parties, such as cargo
ground handling, staffing and every other service
required. To this end, the company will perform
its activities through staff specially hired of its
own account or third parties. In general, the
company would develop every activity directly or
indirectly related to its particular goal of advisory
and service delivery to third parties.
235
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs LANTOURS DIVISION SERVICIOS
TERRESTRES S.A
Subsidiary of Lantours División Servicios
Terrestres S.A. and holdings
LAN PAX GROUP S.A
Constitution: It was incorporated as a limited
liability company, by public deed on June 22,
1987, granted in the Notary of Raúl Undurraga
Laso, in Santiago, and registered in the Registry
of Commerce of Santiago in page 13,139 N°8495
of 1987 and published in the Official Journal on
July 2, 1987. The company has experienced
different profiles, the last one is registered by
public deed of August 24, 1999 granted in the
Notary don Eduardo Pinto Peralta in Santiago and
registered in the Registry of Commerce of
Santiago in page 21,042 N°16,759 of 1999 and
published in the Official Journal on September 8,
1999.
Purpose: Operation, administration and
representation of companies, domestic or
international companies or businesses focused on
hotels related activities, shipping, airlines and
tourism; operation on its own account or by third
parties, car leasing; import, export, production,
commercialization and distribution on its own
account or by third parties, in domestic or
international markets any kind or merchandise,
being raw materials, inputs or finished products.
Subscribed and paid- in capital: MUS$235
Net Income: MUS$2,341
Stake: 100.00%
Change YoY: 0.0%
% of consolidated assets: 0.00%
Directores:
Andrés del Valle Eitel (LATAM Senior
Management)
Armando Valdivieso Montes (LATAM Senior
Management)
Andrés Osorio Hermansen (LATAM Senior
Management)
CEO:
Sandra Espinoza Gerard
-
Lantours División Servicios Terrestres
II S.A.
Type of Entity: Publicly held company formed in
Chile.
Purpose: Operation, administration and
representation of companies, domestic or
international companies or businesses focused on
hotels related activities, shipping, airlines and
tourism in general; the intermediation of tourist
services such as: (a) seats reservations and tickets
sales of all kinds of domestic means of transport,
(b) reservation, acquisition and sale of
accommodation and tourist services, tickets to
every kind of shows, museums, monuments and
protected areas in the country, (c) organization,
promotion and sale of tourism packages, this
being understood as a set of tourist services
(maintenance, transport, accommodation, etc.),
adjusted or projected in relation to customers’
needs, at a preset price, to be operated within the
national territory, (d) air tourist, ground, maritime
and river transport within the national territory;
(e) leasing and charter of aircrafts, ships, buses,
trains and other means of transport for the
delivery of tourist services; (f) every other issue
related directly or indirectly to the delivery of the
aforementioned services.
Subscribed and paid- in capital: MUS$235
Stake: 99.99%
Change YoY: 0.00%
% of consolidated assets: 0.00050%
Directores:
Armando Valdivieso Montes (LATAM Senior
Management)
Andrés del Valle Eitel (LATAM Senior
Management)
Damián Scokin (LATAM Senior Management)
CEO:
Sandra Espinoza Gerard
Constitution: It was incorporated as a limited
liability company, by public deed on September
27, Se 2001, granted in the Notary of don Patricio
Zaldívar Mackenna in Santiago, and registered in
the Registry of Commerce of Santiago in page
25,636 N° 20,794 of October 04, 2001 and
published in the Official Journal on October 6,
2001.
Purpose: Make investments of every kind of
goods, which might be movable or immovable,
tangible or intangible. Besides, the Company
might enter into other type of companies, of any
kind; acquire rights in already formed companies,
manage, modify or wind up them. In general, the
entity may acquire and sale every kind of goods
and operate them, on its own account or third
parties, and also to perform every kind of acts and
enter into any type of contracts related to its
purpose. Exercise the development and operation
of every activity related to its corporate purpose
and/ or those related, liked or supplementary to it.
Subscribed and paid- in capital: MUS$424
Net Income: MUS$(35,181)
Stake: 100.00%
Change YoY: 0.00%
% of consolidated assets: 0.00%
Chairman of the Board:
I g n a c i o C u e t o P l a z a ( L ATA M S e n i o r
Management)
Directors:
Andrés del Valle (LATAM Senior Management)
Enrique Elsaca Hirmas (LATAM Senior
Management)
CEO:
Andrés del Valle Eitel (LATAM Senior
Management)
236
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs Subsidiaries of Lan Pax Group S.A. and
holdings
-
Lantours S.A.
-
Inversora Cordillera S.A. y filiales
Type of Entity: Publicly held company formed in
Argentina.
Purpose: Make investments on its own account
or by third parties, in other joint-stock companies,
for whatever purpose, constituted or to be
constituted, within or outside the territory of the
Republic of Argentina, through the acquisition,
constitution or sale of shares, stocks, quotas,
bonds, options, negotiable obligations,
convertibles or non-convertible, other transferable
securities or other forms of investments allowed,
according to the current regulations, whether the
objective is to hold them in portfolio or to sell all
or part of them. To that end, the company might
perform every operation not forbidden by law to
achieve its business purpose and holds full legal
capacity to acquire rights, contract obligations
and to exercise the acts not forbidden by law or
its bylaws.
Subscribed and paid- in capital: MUS$78,066
Stake: 95.78%
Change YoY: 0.00%
% of consolidated assets: 0.13504%
Directors:
Manuel Maria Benites
Jorge Luis Perez Alati
Ignacio Cueto Plaza
Senior Management:
Manuel María Benites
Jorge Luis Perez Alati
Rosario Altgelt
María Marta Forcada
Facundo Rocha Gonzalo Perez Corral
Nicolás Obejero
Norberto Díaz
Type of Entity: Publicly held company formed in
Argentina.
Purpose: Perform on its own account or by third
parties and/ or partnered with third parties, in the
country and/ or abroad, the following activities
and operations: A) COMMERCIALS: Perform,
intervene, develop or design every kind of
operations and activities that involve the sale of
flight, ground, river or ocean tickets, at both
domestic and international markets, or any other
service related with the tourism industry in
general. The aforementioned services might be
performed on its own account or by third parties,
by mandate, commission, using systems or
methods useful for that end, who might be hand-
operated, mechanic, electronic, by phone, or
Internet, or any other adequate technology. The
Company might perform concurring or related
activities to the aforementioned purpose, such as
the purchase-sale, import, export and re-export,
franchising and representation of every type of
goods, services, “know-how” and technology,
directly or indirectly linked with the purpose
described above; commercialize by any way or
title the technology it requires; develop,
distribute, promote and commercialize any type
of contents for media outlets of any kind. B)
TOURISM: In the performance of every kind of
activities related to the tourism and hotels
industry, as a responsible operator or operator of
service provider to third parties or as travel agent.
Planning exchange programs, tourism, field trips
and tours; intermediation and reservation of
services by any means of transport in the country
or abroad and ticket sales; intermediation in
contracting accommodation services in the
country or abroad; the booking of hotels, motels,
touristic flats and other touristic services; trips
organization for individuals or groups, field trips
or similar in the country or abroad; reception and
assistance of tourists during their trips and in—
country stay, delivery of tourist guide services and
baggage handling; representation of other travel
agencies and tourism, companies, or tourism
i n
institutions both national and international, to
deliver any of these services on its account. C)
CLIENT: By means of the acceptance,
performance and granting of representations,
concessions, commissions agencies and mandates
in general. D) CONSULTANCY: Performance of
consultancy services, advisory and administration
of every service related to the organization,
installation, attention, development, support and
promotion to companies related with the aero-
c o m m e r c i a l a c t i v i t y,
t h e s e f i e l d s :
administration, industrial, commercial, technical,
advertising, service to be delivered by
professionals qualified according to the
regulations in place and the provision of
organization and administration systems,
monitoring, maintenance and surveillance of the
adequate staff and specially trained to perform
such duties. E) FINANCIAL: Through
participation in other companies formed or to be
formed in the future, through the stock acquisition
in companies already constituted or through the
incorporation of companies, through the granting
of credits, loans, cash advances with or without
collaterals, granting of guarantees or sureties in
favor or third parties; the placement of funds in
foreign currency, gold or foreign exchange, or in
bank deposits of any kind. The company holds
full legal capacity to act in every way not
forbidden by law or bylaws, and even to contract
debt either public or publicly though the issuance
of debentures and negotiable obligations and the
performance of any kind of financial operations
with the exception of the ones included in the
Law 21,526 and any other required by public
deed.
Subscribed and paid- in capital: MUS$2,042
Stake: 100.00%
Change YoY: 0.00%
% of consolidated assets: -0.00519%
Directors:
Nicolas Obejero
Diego Alejandro Martínez
237
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs Senior Management:
Rosario Altgelt
María Marta Forcada
Facundo Rocha
Gonzalo Perez Corral
Nicolás Obejero
Norberto Díaz
-
Atlantic Aviation Investments LLC
Type of Entity: Limited Liability Company
formed in the United States
Purpose: Every lawful business that the company
can undertake.
Subscribed and paid- in capital: MUS$1
Stake: 99.00%
Change YoY: 0.00%
% of consolidated assets: 0.00362%
Directores:
Andrés del Valle Eitel
Andrés Osorio Hermansen
Senior Management
Andrés del Valle (LATAM Senior Management)
Andrés Osorio (LATAM Senior Management)
Pilar Duarte
-
Akemi Holdings S.A.
Type of Entity: Publicly held company formed in
Panamá.
Purpose: The corporate purposes of the company
are to establish, process and to carry out the
businesses of an investment company in any place
worldwide, buy, sale and negotiate any kind of
consumer products, capital stocks, bonds and
securities of all kinds, buy, sale, lease or any other
way to acquire or dispose movable or immovable
assets, invest in any industrial or commercial
business, both controlling or just shareholders,
receive and bring money as a loan, with or
without collateral, pact, celebrate, comply with
and celebrate all kind of contracts, become
guarantor or guarantee the compliance and
observance of any contract, carry out any lawful
business not forbidden to a publicly held
company, and perform any of the things that
precede as fundamental, agents or any other
representative aspect.
Subscribed and paid- in capital: MUS$0
Stake: 100.00%
Change YoY: 0.00%
% of consolidated assets: 0.00000%
Change YoY: 0.00%
% of consolidated assets: 0.00000%
Directors:
Edith O. de Bocanegra
Barbara de Rodriguez
Luis Alberto Rodriguez
Senior Management:
Luis Alberto Rodriguez
Barbara de Rodríguez
-
Aerolane, Líneas Aéreas Nacionales del
Ecuador S.A.
Type of Entity: Publicly held company formed in
Ecuador.
Purpose: Air passenger, cargo and mail transport
on a combined basis.
Subscribed and paid- in capital: MUS$1,000
Stake: 55.00%
Change YoY: 0.00%
% of consolidated assets: 0.05440%
Directors:
Antonio Stagg
Manuel Van Oordt
Mariana Villagómez
Senior Management:
Maximiliano Naranjo
Javier Macías
CEO:
Maximiliano Naranjo
Directors:
Edith O. de Bocanegra
Barbara de Rodriguez
Luis Alberto Rodriguez
Senior Management:
Luis Alberto Rodriguez
Barbara de Rodríguez
-
Saipan Holdings S.A.
Type of Entity: Publicly held company formed in
Panama.
Purpose: The corporate purposes of the company
are to establish, process and to carry out the
businesses of an investment company in any place
worldwide, buy, sale and negotiate any kind of
consumer products, capital stocks, bonds and
securities of all kinds, buy, sale, lease or any other
way to acquire or dispose movable or immovable
assets, invest in any industrial or commercial
business, both controlling or just shareholders,
receive and bring money as a loan, with or
without collateral, pact, celebrate, comply with
and celebrate all kind of contracts, become
guarantor or guarantee the compliance and
observance of any contract, carry out any lawful
business not forbidden to a publicly held
company, and perform any of the things that
precede as fundamental, agents or any other
representative aspect.
Subscribed and paid- in capital: MUS$0
Stake: 100.00%
238
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs -
Rampas Andes Airport Services S.A.
and subsidiaries
Type of Entity: Publicly held company formed in
Ecuador.
Purpose: Air passenger, cargo and mail transport
on a combined basis.
Subscribed and paid- in capital: MUS$6,001
Stake: 99.875%
Change YoY: 0.00%
% of consolidated assets: 0.04270%
Senior Management:
Ricardo Cadena
- Hodco Ecuador S.A
Type of Entity: Publicly held company formed in
Chile.
Purpose: Perform any kind of investments with
the purpose to obtain an income, in tangible or
intangible assets, movable or immovable, being in
Chile or abroad.
Subscribed and paid- in capital: MUS$507
Stake: 99.999%
Change YoY: 0.0%
% of consolidated assets: 0.00000%
Directors:
Antonio Stagg
Manuel Van Oordt
Mariana Villagómez
CEO:
Cristián Toro Cañas (LATAM Senior
Management)
-
Aerovias de Integración Regional, Aires
SA.
Type of Entity: Publicly held company formed in
Colombia.
Objeto: The corporate purpose of the company is
the operation of air commercial transport services,
national and international, in any of their forms,
and therefore, enter into and execute passenger
transport contracts, also goods and baggage, mail
and cargo in general, according to the operation
permissions issued by the Unidad Administrativa
Especial de la Aeronáutica Civil (Special
Administrative Unit of Civil Aeronautics), or the
responsible entity in the future, thus agreeing with
the regulations contained in
the Código de
Comercio (Code of Commerce), los Reglamentos
Aeronáuticos de Colombia (Aeronautic
Regulations of Colombia) and any other rule
related to the subject. Likewise, the delivery of
maintenance service and adequacy of the
equipment related to the operation of air transport
services, in or outside the country. To fulfill this
objective, the company will be authorized to
invest in other companies, national or foreign,
company with the same, similar or supplementary
purpose.
To fulfill its corporate purpose, the company may,
among others: (a) carry out the revision,
inspection, maintenance and/ or repair of its own
or third party aircrafts, and also their parts and
accessories, through the Aeronautic Repair
Workshops of the Company, thus performing the
necessary training; (b) organize, constitute and
invest in commercial transport companies in
Colombia or abroad, to operate industrial or
commercially the economic activity of its
purpose, therefore the company is enabled to
acquire under any legal title the aircrafts, parts
and accessories of any kind, required for air and
public transport and sell them, and to build and
operate workshops for the maintenance and repair
f aircrafts; (c) enter into leasing, charter, share
codes, location and other related to aircrafts
contracts to carry our its corporate purpose; (d)
operate regular airlines of passengers, cargo, mail
and securities, and also the vehicle that allows to
coordinate de development of the social
management; (e) integrate with companies alike,
similar or supplementary to operate its activity;
(f) accept national or international representations
of services from the
same industry or
supplementary industries; (g) acquire movable or
immovable goods for the development of its
social objectives, build these facilities or
constructions, such as warehouses, offices, etc.,
dispose or tax them; (h) make the import and
export activities, and every other foreign trade
operations required; (i) perform time deposits and
grant real personal and bank collaterals, for its
own and for third parties; (j) celebrate any type of
operations with securities, such as the purchase
and sale of third party obligations when they
provide an economic or patrimonial benefit of the
company, and contract debt through bonds or debt
securities; (k) engage with third parties the
administration and operation of the businesses
meant for accomplish its corporate purpose; (l)
enter into contracts and buy shares or
participations in the operating companies,
national or abroad; make contributions to one and
others, (m) merge with other companies and
associate with entities alike in order to promote
de development or air transport or with other
purposes related with trade associations; (n)
promote, provide technical assistance, finance or
manage companies or entities related with the
corporate purpose; (ñ) cerebrate or execute all
type of civil, industrial, financial or commercial
related with the corporate purpose; (o) cerebrate
businesses and carry out activities that
bring
customers, y obtain from the relevant authorities
the authorizations and licenses required to deliver
the service; (p) develop and operate other
activities resulting from the social objective and/
or linked, connected or supplementary to the
latter, including the delivery of tourist services
under any form allowed by law such as travel
agencies; (q) attend every business or lawful
activity, being related to commerce or not, only if
its related to its social objective or if it allows the
more rational operation of public service; and (r)
perform investment of any kind to use funds and
reserves in compliance with the law or the
bylaws.
239
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs Subscribed and paid- in capital: MUS$3,388
Stake: 99.017%
Change YoY: 0.00%
% of consolidated assets: 0.33637%
Directors:
Jorge Nicolas Cortazar Cardoso
Jaime Antonio Gongora Esguerra
Fernando García Poitevin. Suplente
Jorgue Enrique Cortazar Garcia
Alberto Davila Suarez
-
Lan Argentina S.A (Subsidiary of
Inversora Cordillera S.A)
Type of Entity: Publicly held company formed
in Argentina.
Purpose: Perform any kind of investments with
the purpose to obtain an income, in tangible or
intangible assets, movable or immovable, being
in Argentina or abroad.
Subscribed and paid- in capital: MUS$74,339
Stake: 99.00%
Change YoY: 0.00%
% of consolidated assets: 0.15685%
Directores:
Manuel Maria Benites
Jorge Luis Perez Alati
Ignacio Cueto Plaza (Ejecutivo LATAM)
Senior Management:
Manuel María Benites
Jorge Luis Perez Alati
Rosario Altgelt
María Marta Forcada
Facundo Rocha
Gonzalo Perez Corral
Nicolás Obejero
Norberto Díaz
240
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs TECHNICAL TRAINING LATAM S.A.
Constitution: It was incorporated as publicly
held company by public deed on December 23,
1997 in Santiago, Chile, and registered in the
Registry of Commerce of Santiago in page 878
numbers 675 of 1998.
Purpose: Its company purpose is to deliver
services such as technical training and other type
of services related to the latter.
Subscribed and paid- in capital: MUS$753
Net Income: MUS$(72)
Participación: 100.00%
Change YoY: 0.00%
% of consolidated assets: 0.01%
Chairman of the Board:
Enrique Elsaca (LATAM Senior Management)
Directors:
Sebastián Acuto
Fernando Andrade
CEO:
Alejandra Jara Hernández
241
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs MEMORIA ANUAL 2015
| SUBSIDIARIES AND AFFILIATED COMPANIES
TAM S.A.
Financial Statements Subdidiaries
MEMORIA ANUAL 2015
Consolidated Classified Statement of Financial Position
| SUBSIDIARIES AND AFFILIATED COMPANIES
ASSETS
13 fo sA
December
2015
MUS$
13 fo sA
December
2014
MUS$
lasopsid rof stessa fo spuorg ro stessa morf tnereffid stessa tnerruc latoT
owners
ot notiubirtsid rof dleh ro elas rof dleh sa defiissalc
lasopsid rof stessa fo spuorg ro stessa morf tnereffid stessa tnerruc-non latoT
ot notiubirtsid rof dleh ro elas rof dleh sa defiissalc
Total current assets
Total non-current assets
TOTAL ASSETS
277
1,335,614
3,360,939
4,696,553
1,335,337
owners
1,920,909
407
1,921,316
4,896,382
6,817,698
LIABILITIES AND EQUITY
LIABILITIES
Total current liabiliEes
Total non-current liabiliEes
Total liabili@es
EQUITY
Equity aNributable to controller´s owners
Non- controlling interest
Total equity
TOTAL LIABILITIES AND EQUITY
Consolidated Statement of Income by Func@on
Revenues from ordinary acEviEes
Gross Income
Profit (loss) before tax
Income tax expenses
PROFIT (LOSS) OF THE PERIOD
Profit (loss) of the period aNributable to:
Controller’s owners
Non-controlling interest
Profit (loss) of the period
1,963,400
2,235,823
4,199,223
2,279,110
3,530,419
5,809,529
423,190
74,140
497,330
4,696,553
912,639
95,530
1,008,169
6,817,698
For the 12 months period ended as of
2015
MUS$
4,597,612
599,784
2014
MUS$
6,588,741
1,238,846
(272,206) 356,613
(146,092)
126,008
(146,198)
210,521
(183,912) 171,655
37,714
(146,198)
38,866
210,521
242
242
243
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs
MEMORIA ANUAL 2015
| SUBSIDIARIES AND AFFILIATED COMPANIES
lasopsid rof stessa fo spuorg ro stessa morf tnereffid stessa tnerruc-non latoT
ot notiubirtsid rof dleh ro elas rof dleh sa defiissalc
owners
277
Total current assets
Total non-current assets
TOTAL ASSETS
LIABILITIES AND EQUITY
LIABILITIES
Total current liabiliEes
Total non-current liabiliEes
Total liabili@es
EQUITY
Equity aNributable to controller´s owners
Non- controlling interest
Total equity
TOTAL LIABILITIES AND EQUITY
Consolidated Statement of Income by Func@on
Revenues from ordinary acEviEes
Gross Income
Profit (loss) before tax
Income tax expenses
PROFIT (LOSS) OF THE PERIOD
Profit (loss) of the period aNributable to:
Controller’s owners
Non-controlling interest
Profit (loss) of the period
MEMORIA ANUAL 2015
| SUBSIDIARIES AND AFFILIATED COMPANIES
Consolidated Statements of Comprehensive Income
PROFIT (LOSS) OF THE PERIOD
Other Comprehensive income
Total comprehensive income
Total comprehensive income aNributable to:
Controller’s owners
Non-controlling interest
TOTAL COMPREHENSIVE INCOME
1,335,614
3,360,939
4,696,553
407
1,921,316
4,896,382
6,817,698
1,963,400
2,235,823
4,199,223
2,279,110
3,530,419
5,809,529
423,190
74,140
497,330
4,696,553
912,639
95,530
1,008,169
6,817,698
For the 12 months period ended as of
2015
MUS$
4,597,612
599,784
2014
MUS$
6,588,741
1,238,846
(272,206) 356,613
(146,092)
210,521
126,008
(146,198)
(183,912) 171,655
38,866
210,521
37,714
(146,198)
For the 12 months period ended as of
2015
MUS$
2014
MUS$
(146,198)
(347,490)
(493,688)
210,521.
(208,953)
1,568
(472,217)
(21,471)
(493,688)
2,060
(492)
1,568
Statement of Changes in Equity
Equity as of 1 January 2014
Total comprehensive income
Issue of Equity
Dividends
Oher increases (decreases) in equity
Closing balance at 31 December 2014
Equity as of 1 January 2015
Total comprehensive income
Dividends
Oher increases (decreases) in equity
Closing balance at 31 December 2015
Equity atributable to
controlling owners
MUS$
Non-controlling
interest
MUS$
Total
Equity
MUS$
617,039
5,764
250,000
-
39,836
912,639
912,639
(528,218)
-
38,769
423,190
711,787
94,748
44,138
38,374
250,000
-
(34,962)
(34,962)
(2,630)
37,206
95,530 1,008,169
95,530 1,008,169
16,243 (511,975)
(34,623)
(3,010)
74,140
(34,623)
35,759
497,330
Consolidated Statement of Cash Flow - Direct Method
Net cash flows from (used in) operaEng acEviEes
Net cash flows from (used in) investment acEviEes
Net cash flows from (used in) financing acEviEes
Net increase (decrease) in cash and cash equivalents before
effect of exchange rates variations
Effect of exchange rates variaEons on cash and cash equivalents
(49,381)
Cash and equivalents at the end of period
For the 12 months period ended as of
2015
MUS$
2014
MUS$
713,435
(244,750)
(335,088)
339,699
65,690
(575,519)
133,597
220,021
(170,130)
(62,433)
135,805
243
243
244
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs
MEMORIA ANUAL 2015
| SUBSIDIARIES AND AFFILIATED COMPANIES
Consolidated Statements of Comprehensive Income
PROFIT (LOSS) OF THE PERIOD
Other Comprehensive income
Total comprehensive income
Total comprehensive income aNributable to:
Controller’s owners
Non-controlling interest
TOTAL COMPREHENSIVE INCOME
For the 12 months period ended as of
2015
MUS$
2014
MUS$
(146,198)
210,521.
(347,490)
(493,688)
(208,953)
1,568
(472,217)
(21,471)
(493,688)
2,060
(492)
1,568
Statement of Changes in Equity
Equity as of 1 January 2014
Total comprehensive income
Issue of Equity
Dividends
Oher increases (decreases) in equity
Closing balance at 31 December 2014
Equity as of 1 January 2015
Total comprehensive income
Dividends
Oher increases (decreases) in equity
Closing balance at 31 December 2015
Equity atributable to
controlling owners
MUS$
Non-controlling
interest
MUS$
Total
Equity
MUS$
617,039
5,764
250,000
-
39,836
912,639
912,639
(528,218)
-
38,769
423,190
711,787
94,748
44,138
38,374
250,000
-
(34,962)
(34,962)
(2,630)
37,206
95,530 1,008,169
95,530 1,008,169
16,243 (511,975)
(34,623)
(34,623)
35,759
(3,010)
497,330
74,140
Consolidated Statement of Cash Flow - Direct Method
For the 12 months period ended as of
2015
MUS$
2014
MUS$
Net cash flows from (used in) operaEng acEviEes
Net cash flows from (used in) investment acEviEes
Net cash flows from (used in) financing acEviEes
Net increase (decrease) in cash and cash equivalents before
effect of exchange rates variations
Effect of exchange rates variaEons on cash and cash equivalents
Cash and equivalents at the end of period
(335,088)
133,597
(49,381)
220,021
713,435
(244,750)
339,699
65,690
(575,519)
(170,130)
(62,433)
135,805
244
244
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs
MEMORIA ANUAL 2015
| SUBSIDIARIES AND AFFILIATED COMPANIES
LAN CARGO S.A.
(Closed joint stock company)
Consolidated Classified Statement of Financial Position
ASSETS
As of 31 As of 31
December
2015
MUS$
December
2014
MUS$
lasopsid rof stessa fo spuorg ro stessa morf tnereffid stessa tnerruc latoT
ot notiubirtsid rof dleh ro elas rof dleh sa defiissalc
owners
164,412
311,741
lasopsid rof stessa fo spuorg ro stessa morf tnereffid stessa tnerruc-non latoT
ot notiubirtsid rof dleh ro elas rof dleh sa defiissalc
owners
Total current assets
Total non-current assets
TOTAL ASSETS
LIABILITIES AND EQUITY
LIABILITIES
Total current liabilities
Total non-current liabilities
Total liabilities
EQUITY
Equity aNributable to controller´s owners
Non-controlling interest
EQUITY
TOTAL LIABILITIES AND EQUITY
85
164,497
546,687
711,184
85
311,826
550,576
862,402
185,162
152,958
338,120
186,789
219,470
406,259
371,236
1,828
455,700
443
373,064
711,184
456,143
862,402
Consolidated Statement of Income by Function
For the 12 months period ended as of
2015
MUS$
2014
MUS$
Revenues from ordinary activities
788,019
912,792
245
245
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs
MEMORIA ANUAL 2015
| SUBSIDIARIES AND AFFILIATED COMPANIES
LAN CARGO S.A.
(Closed joint stock company)
Consolidated Classified Statement of Financial Position
ASSETS
As of 31 As of 31
December
December
2015
MUS$
2014
MUS$
lasopsid rof stessa fo spuorg ro stessa morf tnereffid stessa tnerruc latoT
ot notiubirtsid rof dleh ro elas rof dleh sa defiissalc
owners
164,412
311,741
lasopsid rof stessa fo spuorg ro stessa morf tnereffid stessa tnerruc-non latoT
ot notiubirtsid rof dleh ro elas rof dleh sa defiissalc
owners
85
Total current assets
Total non-current assets
TOTAL ASSETS
LIABILITIES AND EQUITY
LIABILITIES
Total current liabilities
Total non-current liabilities
Total liabilities
EQUITY
MEMORIA ANUAL 2015
Equity aNributable to controller´s owners
Non-controlling interest
EQUITY
| SUBSIDIARIES AND AFFILIATED COMPANIES
TOTAL LIABILITIES AND EQUITY
Gross Income
MEMORIA ANUAL 2015
| SUBSIDIARIES AND AFFILIATED COMPANIES
Profit (loss) before tax
Income tax expenses
Consolidated Statement of Income by Function
PROFIT (LOSS) OF THE PERIOD
Profit (loss) of the period aNributable to:
Revenues from ordinary activities
Controller’s owners
Gross Income
Non-controlling interest
Profit (loss) of the period
Profit (loss) before tax
Income tax expenses
PROFIT (LOSS) OF THE PERIOD
Profit (loss) of the period aNributable to:
Controller’s owners
Non-controlling interest
Profit (loss) of the period
Consolidated Statements of Comprehensive Income
PROFIT (LOSS) OF THE PERIOD
Other Comprehensive income
Total comprehensive income
Total comprehensive income atributable to:
Controller’s owners
Consolidated Statements of Comprehensive Income
Non-controlling interest
TOTAL COMPREHENSIVE INCOME
PROFIT (LOSS) OF THE PERIOD
Other Comprehensive income
Total comprehensive income
Total comprehensive income atributable to:
Controller’s owners
Non-controlling interest
Statement of Changes in Equity
TOTAL COMPREHENSIVE INCOME
Equity as of 1 January 2014
Total comprehensive income
Oher increases (decreases) in equity
Closing balance at 31 December 2014
Equity as of 1 January 2015
Statement of Changes in Equity
Total comprehensive income
Oher increases (decreases) in equity
Equity as of 1 January 2014
Closing balance at 31 December 2015
Total comprehensive income
Oher increases (decreases) in equity
Closing balance at 31 December 2014
Equity as of 1 January 2015
Total comprehensive income
Oher increases (decreases) in equity
Closing balance at 31 December 2015
164,497
546,687
711,184
85
311,826
550,576
862,402
185,162
152,958
338,120
186,789
219,470
406,259
371,236
1,828
455,700
443
373,064
711,184
456,143
862,402
(90,201)
(141,480)
For the 12 months period ended as of
(88,244)
2015
26,912
MUS$
(61,332)
(106,717)
2014
3,130
MUS$
(103,587)
788,019
(62,701)
(90,201)
1,369
(61,332)
(88,244)
26,912
(61,332)
912,792
(103,285)
(141,480)
(302)
(103,587)
(106,717)
3,130
(103,587)
(62,701)
1,369
(61,332)
(103,285)
(302)
(103,587)
For the 12 months period ended as of
2015
MUS$
2014
MUS$
(61,332)
(2,936)
(64,268)
(103,587)
(1,732)
(105,319)
For the 12 months period ended as of
2015
MUS$
(65,634)
1,366
(64,268)
(61,332)
(2,936)
(64,268)
2014
(105,017)
MUS$
(302)
(105,319)
(103,587)
(1,732)
(105,319)
Equity atributable to
controlling owners
MUS$
Non-controlling
(65,634)
interest
1,366
MUS$
(64,268)
Total
(105,017)
Equity
(302)
MUS$
(105,319)
1,892
577,948
(17,231)
455,700
579,840
(105,017) (302) (105,319)
(18,378)
Total
456,143
Equity
455,700 443 456,143
MUS$
(64,268)
(1,147)
Non-controlling
443
interest
MUS$
1,366
Equity atributable to
controlling owners
MUS$
65,634)
(
(18,830)
577,948
371,236
19
(18,811)
1,828
1,892
579,840
373,064
(105,017) (302) (105,319)
(17,231)
455,700
(1,147)
443
(18,378)
456,143
455,700 443 456,143
(
65,634)
(18,830)
371,236
1,366
(64,268)
19
(18,811)
1,828
373,064
245
246
246
246
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs
MEMORIA ANUAL 2015
| SUBSIDIARIES AND AFFILIATED COMPANIES
Gross Income
Profit (loss) before tax
Income tax expenses
PROFIT (LOSS) OF THE PERIOD
Profit (loss) of the period aNributable to:
Controller’s owners
Non-controlling interest
Profit (loss) of the period
(90,201)
(141,480)
(88,244)
26,912
(61,332)
(106,717)
3,130
(103,587)
(62,701)
(103,285)
1,369
(302)
(61,332)
(103,587)
Consolidated Statements of Comprehensive Income
PROFIT (LOSS) OF THE PERIOD
Other Comprehensive income
Total comprehensive income
Total comprehensive income atributable to:
Controller’s owners
Non-controlling interest
TOTAL COMPREHENSIVE INCOME
Statement of Changes in Equity
Equity as of 1 January 2014
Total comprehensive income
Oher increases (decreases) in equity
Closing balance at 31 December 2014
MEMORIA ANUAL 2015
| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs
Equity as of 1 January 2015
Total comprehensive income
Oher increases (decreases) in equity
Closing balance at 31 December 2015
For the 12 months period ended as of
2015
MUS$
2014
MUS$
(61,332)
(2,936)
(64,268)
(103,587)
(1,732)
(105,319)
(65,634)
1,366
(64,268)
(105,017)
(302)
(105,319)
Equity atributable to
controlling owners
MUS$
Non-controlling
interest
MUS$
Total
Equity
MUS$
577,948
579,840
(105,017) (302) (105,319)
(18,378)
456,143
(17,231)
455,700
(1,147)
443
1,892
(
455,700 443 456,143
(64,268)
(18,811)
373,064
19
1,828
65,634)
(18,830)
371,236
1,366
Consolidated Statement of Cash Flow - Direct Method
For the 12 months period ended as of
2015
MUS$
2014
MUS$
246
Net cash flows from (used in) operaEng acEviEes
Net cash flows from (used in) investment acEviEes
Net cash flows from (used in) financing acEviEes
Net increase (decrease) in cash and cash equivalents before
effect of exchange rates varia@ons
(2,212) (374)
Effect of exchange rates variaEons on cash and cash equivalents (4) (2)
19,862
Cash and equivalents at the end of period
17,646
99,073
(50,264)
(51,021)
40,582
526,442
(567,398)
LAN PERU S.A.
(Closed joint stock company)
247
Consolidated Classified Statement of Financial Posi@on
ASSETS
Total current assets
Total non-current assets
TOTAL ASSETS
LIABILITIES AND EQUITY
LIABILITIES
Total current liabiliEes
Total non-current liabiliEes
Total liabili@es
EQUITY
As of 31 As of 31
December
December
2015
MUS$
2014
MUS$
232,547
23,144
255,691
214,245
25,225
239,470
239,521
1,417
240,938
226,784
1,611
228,395
Equity aNributable to controller´s owners
14,753
11,075
247
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs
MEMORIA ANUAL 2015
| SUBSIDIARIES AND AFFILIATED COMPANIES
Non-controlling interest
Total equity
YTIUQE DNA SEITILIBAIL LATOT
- -
14,753
255,691
11,075
239,470
Consolidated Statement of Income by Function
For the 12 months period ended as of
2015
MUS$
2014
MUS$
MEMORIA ANUAL 2015
| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs
299,870,1 setiivtica yranidro morf seuneveR
982,431,1
024,241 928,081 emocnI ssorG
Profit (loss) before tax
Income tax expenses
PROFIT (LOSS) OF THE PERIOD
7,237 4,636
(3,578)
1,058
(2,169)
5,068
Statement of Changes in Equity
Equity as of 1 January 2014
Total comprehensive income
Dividends
Closing balance at 31 December 2014
Equity as of 1 January 2015
Total comprehensive income
Dividends
Closing balance at 31 December 2015
Equity
Issued
MUS$
4,341
-
-
4,341
4,341
-
-
4,341
Legal
Reserve
MUS$
868
-
-
868
868
-
-
868
Retained
earnings
MUS$
6,198
1,058
(1,390)
5,866
5,866
5,068
(1,390)
9,544
Total
equity
MUS$
11,407
1,058
(1,390)
11,075
11. 075
5,068
(1,390)
14,753
Consolidated Statement of Cash Flow - Direct Method
Net cash flows from (used in) operaEng acEviEes
Net cash flows from (used in) investment acEviEes
Net cash flows from (used in) financing acEviEes
Net increase (decrease) in cash and cash equivalents before
effect of exchange rates varia@ons
Cash and equivalents at the end of period
For the 12 months period ended as of
2015
MUS$
(7,044)
(1,164)
9,099
891
118,377
2014
MUS$
(76,147)
(1,323)
24,132
(53,338)
117,486
248
248
249
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs
MEMORIA ANUAL 2015
| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs
Statement of Changes in Equity
Equity as of 1 January 2014
Total comprehensive income
Dividends
Closing balance at 31 December 2014
Equity as of 1 January 2015
Total comprehensive income
Dividends
Closing balance at 31 December 2015
Equity
Issued
MUS$
4,341
-
-
4,341
4,341
-
-
4,341
Legal
Reserve
MUS$
868
-
-
868
868
-
-
868
Retained
earnings
MUS$
6,198
1,058
(1,390)
5,866
5,866
5,068
(1,390)
9,544
Total
equity
MUS$
11,407
1,058
(1,390)
11,075
11. 075
5,068
(1,390)
14,753
Consolidated Statement of Cash Flow - Direct Method
Net cash flows from (used in) operaEng acEviEes
Net cash flows from (used in) investment acEviEes
Net cash flows from (used in) financing acEviEes
Net increase (decrease) in cash and cash equivalents before
effect of exchange rates varia@ons
Cash and equivalents at the end of period
For the 12 months period ended as of
2015
MUS$
(7,044)
(1,164)
9,099
891
118,377
2014
MUS$
(76,147)
(1,323)
24,132
(53,338)
117,486
249
249
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs
MEMORIA ANUAL 2015
| SUBSIDIARIES AND AFFILIATED COMPANIES
INVERSIONES LAN S.A.
(Closed joint stock company)
no@isoP laicnaniF fo tnemetatS defiissalC detadilosnoC
As of 31 As of 31
December
2015
$SUM
December
2014
$SUM
ASSETS
lasopsid rof stessa fo spuorg ro stessa morf tnereffid stessa tnerruc latoT
ot notiubirtsid rof dleh ro elas rof dleh sa defiissalc
owners
6,292
4,969
lasopsid rof stessa fo spuorg ro stessa morf tnereffid stessa tnerruc-non latoT
ot notiubirtsid rof dleh ro elas rof dleh sa defiissalc
Total current assets
Total non-current assets
TOTAL ASSETS
owners
572
572
6,864 5,541
10,494
9,648
16,035
16,512
LIABILITIES AND EQUITY
LIABILITIES
Total current liabilities
Total non-current liabilities
Total liabilities
EQUITY
13,380
1,296
14,676
13,560
1,186
14,746
Equity aNributable to controller´s owners
Non-controlling interest
EQUITY
YTIUQE DNA SEITILIBAIL LATOT
1,828
8
1,272
17
16,512
16,035
Consolidated Statement of Income by Function
For the 12 months period ended as of
2015
MUS$
2014
MUS$
Revenues from ordinary activities
32,366
32,821
250
250
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs
MEMORIA ANUAL 2015
| SUBSIDIARIES AND AFFILIATED COMPANIES
no@isoP laicnaniF fo tnemetatS defiissalC detadilosnoC
As of 31 As of 31
December
December
2015
$SUM
2014
$SUM
lasopsid rof stessa fo spuorg ro stessa morf tnereffid stessa tnerruc latoT
ot notiubirtsid rof dleh ro elas rof dleh sa defiissalc
owners
6,292
4,969
lasopsid rof stessa fo spuorg ro stessa morf tnereffid stessa tnerruc-non latoT
ot notiubirtsid rof dleh ro elas rof dleh sa defiissalc
owners
572
572
INVERSIONES LAN S.A.
(Closed joint stock company)
ASSETS
Total current assets
Total non-current assets
TOTAL ASSETS
LIABILITIES AND EQUITY
LIABILITIES
Total current liabilities
Total non-current liabilities
Total liabilities
EQUITY
6,864 5,541
9,648
16,512
10,494
16,035
13,380
1,296
14,676
13,560
1,186
14,746
Equity aNributable to controller´s owners
Non-controlling interest
EQUITY
YTIUQE DNA SEITILIBAIL LATOT
MEMORIA ANUAL 2015
1,828
8
1,272
17
16,512
16,035
| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs
Consolidated Statement of Income by Function
MEMORIA ANUAL 2015
Revenues from ordinary activities
| SUBSIDIARIES AND AFFILIATED COMPANIES
Gross Income
For the 12 months period ended as of
2015
MUS$
2014
MUS$
32,366
5,371
32,821
5,846
Profit (loss) before tax
(3,986)
Income tax expenses (402) (551)
(4,537)
PROFIT (LOSS) OF THE PERIOD
2,798
3,200
Profit (loss) of the period aNributable to:
Controller’s owners
(4,546)
Non-controlling interest 26 9
(4,537)
Profit (loss) of the period
2,798
2,772
Consolidated Statements of Comprehensive Income
For the 12 months period ended as of
2015
MUS$
2014
MUS$
PROFIT (LOSS) OF THE PERIOD
emocni evisneherpmoC rehtO
Total comprehensive income
2,798
(201)
2,597
(4,537)
(47)
(4,584)
Total comprehensive income atiributable to:
Controller’s owners
tseretni gnillortnoc-noN
TOTAL COMPREHENSIVE INCOME
2,598
(1)
2,597
(4,592)
8
(4,584)
Statement of Changes in Equity
Equity as of 1 January 2014
Total comprehensive income
Dividends
Oher increases (decreases) in equity
Closing balance at 31 December 2014
Equity as of 1 January 2015
Total comprehensive income
Dividends
Oher increases (decreases) in equity
Closing balance at 31 December 2015
Equity atributable to
controlling owners
MUS$
Non-controlling
interest
MUS$
Total
Equity
MUS$
6,421
(4,592)
(627)
70
1,272
1,272
2,598
(450)
(1,592)
1,828
8
8
6,429
(4,584)
- (627)
1
17
17
(1)
(8)
8
71
1,289
1,289
2,597
(1,600)
1,836
Consolidated Statement of Cash Flow - Direct Method
Net cash flows from (used in) operaEng activities
Net cash flows from (used in) investment activities
Net cash flows from (used in) financing activities
Net increase (decrease) in cash and cash equivalents before
effect of exchange rates variations
Cash and equivalents at the end of period
For the 12 months period ended as of
2015
MUS$
2014
MUS$
608
(41)
444
327
(4)
-
64
(4)
1,601 526
250
251
252
- (450)
251
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs
MEMORIA ANUAL 2015
| SUBSIDIARIES AND AFFILIATED COMPANIES
Consolidated Statements of Comprehensive Income
For the 12 months period ended as of
2015
MUS$
2014
MUS$
PROFIT (LOSS) OF THE PERIOD
2,798
emocni evisneherpmoC rehtO
Total comprehensive income
(201)
2,597
Total comprehensive income atiributable to:
Controller’s owners
tseretni gnillortnoc-noN
TOTAL COMPREHENSIVE INCOME
2,598
(1)
2,597
(4,537)
(47)
(4,584)
(4,592)
8
(4,584)
Statement of Changes in Equity
Equity as of 1 January 2014
Total comprehensive income
Dividends
Oher increases (decreases) in equity
Closing balance at 31 December 2014
Equity as of 1 January 2015
Total comprehensive income
Dividends
Oher increases (decreases) in equity
Closing balance at 31 December 2015
Equity atributable to
controlling owners
MUS$
Non-controlling
interest
MUS$
Total
Equity
MUS$
6,421
(4,592)
(627)
70
1,272
1,272
2,598
(450)
(1,592)
1,828
8
8
6,429
(4,584)
- (627)
71
1,289
1
17
17
(1)
1,289
2,597
- (450)
(1,600)
1,836
(8)
8
Consolidated Statement of Cash Flow - Direct Method
Net cash flows from (used in) operaEng activities
Net cash flows from (used in) investment activities
Net cash flows from (used in) financing activities
Net increase (decrease) in cash and cash equivalents before
effect of exchange rates variations
Cash and equivalents at the end of period
For the 12 months period ended as of
2015
MUS$
2014
MUS$
608
(41)
444
327
(4)
-
64
(4)
1,601 526
252
252
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs
MEMORIA ANUAL 2015
| SUBSIDIARIES AND AFFILIATED COMPANIES
INMOBILIARIA AERONAUTICA S.A.
(Closed joint stock company)
notiisoP laicnaniF fo tnemetatS defiissalC detadilosnoC
SUM $SUM
13 fo sA 13 fo sA
December December
2015 2014
ASSETS
Total current assets
Total non-current assets
TOTAL ASSETS
LIABILITIES AND EQUITY
LIABILITIES
Total current liabilities
Total non-current liabilites
Total liabilities
EQUITY
Total equity
TOTAL LIABILITIES AND EQUITY
1,978
37,324
39,302
1,475
38,445
39,920
5,003
9,829
14,832
6,642
10,212
16,854
24,470
39,302
23,066
39,920
Consolidated Statement of Income by Func@on
Revenues from ordinary activities
Gross Income
For the 12 months period ended as of
2015
MUS$
2014
MUS$
3,961
2,071
4,352
2,686
Profit (loss) before tax
sesnepxe xat emocnI
PROFIT (LOSS) OF THE PERIOD
1,146
2,527
258 (621)
1,906
1,404
253
Consolidated Statements of Comprehensive Income
PROFIT (LOSS) OF THE PERIOD
Total comprehensive income
For the 12 months period ended as of
2015
MUS$
2014
MUS$
1,404
1,404
1,906
1,906
253
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs
MEMORIA ANUAL 2015
| SUBSIDIARIES AND AFFILIATED COMPANIES
notiisoP laicnaniF fo tnemetatS defiissalC detadilosnoC
SUM $SUM
INMOBILIARIA AERONAUTICA S.A.
(Closed joint stock company)
ASSETS
Total current assets
Total non-current assets
TOTAL ASSETS
LIABILITIES AND EQUITY
LIABILITIES
Total current liabilities
Total non-current liabilites
Total liabilities
EQUITY
Total equity
TOTAL LIABILITIES AND EQUITY
13 fo sA 13 fo sA
December December
2015 2014
1,978
37,324
39,302
1,475
38,445
39,920
5,003
9,829
14,832
6,642
10,212
16,854
24,470
39,302
23,066
39,920
Consolidated Statement of Income by Func@on
Revenues from ordinary activities
Gross Income
For the 12 months period ended as of
2015
MUS$
2014
MUS$
3,961
2,071
4,352
2,686
Profit (loss) before tax
sesnepxe xat emocnI
PROFIT (LOSS) OF THE PERIOD
1,146
2,527
258 (621)
1,906
1,404
Consolidated Statements of Comprehensive Income
PROFIT (LOSS) OF THE PERIOD
Total comprehensive income
For the 12 months period ended as of
2015
MUS$
2014
MUS$
1,404
1,404
1,906
1,906
253
254
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs
MEMORIA ANUAL 2015
| SUBSIDIARIES AND AFFILIATED COMPANIES
Statement of Changes in Equity
Equity as of 1 January 2014
Total comprehensive income
Oher increases (decreases) in equity
Closing balance at 31 December 2014
Equity as of 1 January 2015
Total comprehensive income
Closing balance at 31 December 2015
Equity
Issue
MUS$
Retained
Earnings
MUS$
Total
Equity
MUS$
25,282
1,147
- (740) (740)
(2,623)
21,919
(2,623)
23,066
26,429
1,147
-
1,147
-
1,147
21,919
1,404
23,323
23,066
1,404
24,470
For the 12 months period ended as of
Consolidated Statement of Cash Flow - Direct Method
2015
MUS$
2014
MUS$
(2,086)
(2,098)
3,596
(41)
(2,586)
-
Net cash flows from (used in) operaEng activities
Net cash flows from (used in) investment activities
Net cash flows from (used in) financing activities
Net increase (decrease) in cash and cash equivalents before
effect of exchange rates variations
Effect of exchange rates variaEons on cash and cash equivalents
Cash and equivalents at the end of period
)21( 969
)71( )02(
949
-
255
254
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs
MEMORIA ANUAL 2015
| SUBSIDIARIES AND AFFILIATED COMPANIES
LANTOURS DIVISION SERVICIOS TERRESTRES S.A.
(Closed joint stock company)
notiisoP laicnaniF fo tnemetatS defiissalC detadilosnoC
ASSETS
Total current assets
Total non-current assets
TOTAL ASSETS
LIABILITIES AND EQUITY
LIABILITIES
Total current liabilities
Total non-current liabilities
Total liabilities
EQUITY
Total equity
TOTAL LIABILITIES AND EQUITY
13 fo sA
December
2015
SUM
13 fo sA
December
2014
$
SUM $
3,056
5,489
124 173
3,229
5,613
5,516
2,283
6 6
2,289
5,522
91
5,613
940
3,229
Consolidated Statement of Income by Function
For the 12 months period ended as of
2015
MUS$
2014
MUS$
256
255
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs
MEMORIA ANUAL 2015
| SUBSIDIARIES AND AFFILIATED COMPANIES
LANTOURS DIVISION SERVICIOS TERRESTRES S.A.
(Closed joint stock company)
notiisoP laicnaniF fo tnemetatS defiissalC detadilosnoC
SUM
SUM $
$
MEMORIA ANUAL 2015
| SUBSIDIARIES AND AFFILIATED COMPANIES
LIABILITIES
ASSETS
Total current assets
Total non-current assets
TOTAL ASSETS
LIABILITIES AND EQUITY
Total current liabilities
Total non-current liabilities
Total liabilities
Revenues from ordinary acEviEes
EQUITY
Gross Income
MEMORIA ANUAL 2015
MEMORIA ANUAL 2015
| SUBSIDIARIES AND AFFILIATED COMPANIES
| SUBSIDIARIES AND AFFILIATED COMPANIES
Total equity
Profit (loss) before tax
TOTAL LIABILITIES AND EQUITY
Income tax expenses
PROFIT (LOSS) OF THE PERIOD
Consolidated Statement of Income by Function
Revenues from ordinary acEviEes
Gross Income
Revenues from ordinary acEviEes
Gross Income
Consolidated Statements of Comprehensive Income
Profit (loss) before tax
Income tax expenses
Profit (loss) before tax
PROFIT (LOSS) OF THE PERIOD
PROFIT (LOSS) OF THE PERIOD
Income tax expenses
Total comprehensive income
PROFIT (LOSS) OF THE PERIOD
Consolidated Statements of Comprehensive Income
Consolidated Statements of Comprehensive Income
PROFIT (LOSS) OF THE PERIOD
Total comprehensive income
PROFIT (LOSS) OF THE PERIOD
Total comprehensive income
Statement of Changes in Equity
Equity as of 1 January 2014
Total comprehensive income
Dividends
Closing balance at 31 December 2014
Equity as of 1 January 2015
Statement of Changes in Equity
Total comprehensive income
Statement of Changes in Equity
Dividens
Closing balance at 31 December 2015
Equity as of 1 January 2014
Total comprehensive income
Equity as of 1 January 2014
Dividends
Total comprehensive income
Closing balance at 31 December 2014
Dividends
Closing balance at 31 December 2014
Equity as of 1 January 2015
Consolidated Statement of Cash Flow - Direct Method
Total comprehensive income
Equity as of 1 January 2015
Dividens
Total comprehensive income
Closing balance at 31 December 2015
Net cash flows from (used in) operaEng activities
Dividens
Net cash flows from (used in) investment activities
Closing balance at 31 December 2015
Consolidated Statement of Cash Flow - Direct Method
Consolidated Statement of Cash Flow - Direct Method
Net cash flows from (used in) operaEng activities
Net cash flows from (used in) investment activities
Net cash flows from (used in) operaEng activities
Net cash flows from (used in) investment activities
13 fo sA
13 fo sA
December
December
2015
2014
5,489
3,056
124 173
5,613
3,229
2,283
5,516
6 6
2,289
5,522
12,399
7,714
10,710
6,813
91
5,613
3,345
2,509
(1,004) (435)
2,074
2,341
940
3,229
For the 12 months period ended as of
For the 12 months period ended as of
2015
MUS$
12,399
7,714
12,399
2015
7,714
MUS$
3,345
2014
MUS$
10,710
6,813
10,710
6,813
2,509
(1,004) (435)
2,509
3,345
2,074
2,341
2,074
2,341
(1,004) (435)
2,074
2,341
2,074
2,341
2014
MUS$
For the 12 months period ended as of
For the 12 months period ended as of
2014
MUS$
2014
MUS$
2015
MUS$
2015
MUS$
2,341
2,341
2,341
2,341
2,074
2,074
2,074
2,074
255
Equity
Issue
MUS$
Retained Total
equity
MUS$
earnings
MUS$
-
-
225
Equity
Issue
Equity
MUS$
Issue
10
MUS$
-
225
225 287 512
2,078
(1,650)
940
2,078
(1,650)
715
earnings
MUS$
earnings
3,056
MUS$
(3,200)
(144)
Retained Total
equity
Retained Total
225 715 940
MUS$
equity
2,351
MUS$
(3,200)
91
225 287 512
2,078
225 287 512
(1,650)
2,078
940
(1,650)
940
2014
2015
225 715 940
MUS$
MUS$
2,351
225 715 940
(3,200)
2,351
91
2,078
(1,650)
2,078
715
(1,650)
715
3,056
(3,200)
3,056
(144)
-
-
-
225
-
225
10
-
10
225
For the 12 months period ended as of
-
225
3,207
(3,200)
2,027
(3,200)
)71( 091,3
(144)
91
For the 12 months period ended as of
For the 12 months period ended as of
2015
MUS$
2015
MUS$
3,207
3,207
2014
MUS$
2014
MUS$
2,027
2,027
)71( 091,3
)71( 091,3
257
256
256
256
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs
MEMORIA ANUAL 2015
| SUBSIDIARIES AND AFFILIATED COMPANIES
Revenues from ordinary acEviEes
Gross Income
Profit (loss) before tax
Income tax expenses
PROFIT (LOSS) OF THE PERIOD
Consolidated Statements of Comprehensive Income
PROFIT (LOSS) OF THE PERIOD
Total comprehensive income
12,399
7,714
10,710
6,813
3,345
2,509
(1,004) (435)
2,341
2,074
For the 12 months period ended as of
2015
MUS$
2,341
2,341
2014
MUS$
2,074
2,074
Statement of Changes in Equity
Equity as of 1 January 2014
Total comprehensive income
Dividends
Closing balance at 31 December 2014
Equity as of 1 January 2015
Total comprehensive income
Dividens
Closing balance at 31 December 2015
Equity
Issue
MUS$
Retained Total
earnings
MUS$
equity
MUS$
225 287 512
-
-
225
2,078
(1,650)
715
2,078
(1,650)
940
225 715 940
2,351
(3,200)
91
3,056
(3,200)
(144)
10
-
225
Consolidated Statement of Cash Flow - Direct Method
For the 12 months period ended as of
2015
MUS$
2014
MUS$
Net cash flows from (used in) operaEng activities
Net cash flows from (used in) investment activities
3,207
2,027
)71( 091,3
256
258
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs
MEMORIA ANUAL 2015
MEMORIA ANUAL 2015
BSIDIARIES AND AFFILIATED COMPANIES
| SUBSIDIARIES AND AFFILIATED COMPANIES
LAN PAX GROUP S.A.
(Closed joint stock company)
13 fo sA 13 fo sA
December
2015
SUM notiisoP laicnaniF fo tnemetatS defiissalC detadilosnoC
December
2014
$
SUM $
ASSETS
Total current assets
Total non-current assets
TOTAL ASSETS
LIABILITIES AND EQUITY
LIABILITIES
Total current liabilities
Total non-current liabilities
setiilibail latoT
302,304
217,359
519,663
343,304
296,716
640,020
352,056
697,176
1,049,232
390,914
674,243
1,065,157
(528,769)
(800)
(529,569)
519,663
(426,016)
879
(425,137)
640,020
EQUITY
Equity atiributable to controller´s owners
Non-controlling interest
Total equity
TOTAL LIABILITIES AND EQUITY
Consolidated Statement of Income by Func@on
Revenues from ordinary acEviEes
Gross Income
For the 12 months period ended as of
2015
MUS$
2014
MUS$
988,081
168,193
1,095,242
166,660
259
EQUITY
MEMORIA ANUAL 2015
Equity atiributable to controller´s owners
Non-controlling interest
Total equity
TOTAL LIABILITIES AND EQUITY
| SUBSIDIARIES AND AFFILIATED COMPANIES
Consolidated Statement of Income by Function
Revenues from ordinary activities
Gross Income
Profit (loss) before tax
Income tax expenses
PROFIT (LOSS) OF THE PERIOD
MEMORIA ANUAL 2015
BSIDIARIES AND AFFILIATED COMPANIES
Profit (loss) of the period aNributable to:
Controller’s owners
Non-controlling interest
Profit (loss) of the period
Consolidated Statements of Comprehensive Income
PROFIT (LOSS) OF THE PERIOD
Other Comprehensive income
Total comprehensive income
Total comprehensive income atributable to:
Controller’s owners
Non-controlling interest
TOTAL COMPREHENSIVE INCOME
(528,769)
(800)
(529,569)
519,663
(426,016)
879
(425,137)
640,020
For the 12 months period ended as of
2015
MUS$
2014
MUS$
988,081
168,193
1,095,242
166,660
(45,960)
10,779
(35,181)
(113,085)
(7,654)
(120,739)
(35,187)
6
(35,181)
(114,511)
(6,228)
(120,739)
For the 12 months period ended as of
2015
MUS$
2014
MUS$
(35,181)
(71,840)
(107,021)
(120,739)
(43,298)
(164,037)
(104,941)
(2,080)
(107,021)
(157,315)
(6,722)
(164,037)
Statement of Changes in Equity
MUS$
MUS$
MUS$
260
Equity a[ributable Non- controlling
Total to controller’s owners
interest
ytiuqE
Other Comprehensive income
Total comprehensive income
MEMORIA ANUAL 2015
| SUBSIDIARIES AND AFFILIATED COMPANIES
Total comprehensive income aNributable to:
Controller’s owners
Non-controlling interest
TOTAL COMPREHENSIVE INCOME
(71,840)
(107,021)
(43,298)
(164,037)
(104,941)
(2,080)
(107,021)
(157,315)
(6,722)
(164,037)
Statement of Changes in Equity
Equity atributable to
controller’s owners
MUS$
Non-controlling
interests
MUS$
Total
Equity
MUS$
Equity as of 1 January 2014 (246521)
(157,315)
Total comprehensive income
(22,180)
Oher increases (decreases) in equity
(426,016
Closing balance at 31 December 2014
)
(13,741)
(6,722)
21,342
879
Equity as of 1 January 2015
Total comprehensive income
Oher increases (decreases) in equity
Closing balance at 31 December 2015
(426,016) 879
(104,941)
2,188
(528,769
(2,080)
401
(800)
)
(260,262)
(164,037)
(838)
(425,137)
(425,137)
(107,021)
2,589
(529,569)
Consolidated Statement of Cash Flow - Direct Method
For the 12 months period ended as of
2015
MUS$
2014
MUS$
Net cash flows from (used in) operaEng acEviEes
Net cash flows from (used in) investment acEviEes
Net cash flows from (used in) financing acEviEes
Net increase (decrease) in cash and cash equivalents before
effect of exchange rates varia@ons
Effect of exchange rates variaEons on cash and cash equivalents
Cash and equivalents at the end of period
26,664
(108,757)
81,527
(566)
3,774
89,736
(12,710)
(53,535)
96,340
30,095
(77)
86,528
261
MEMORIA ANUAL 2015
| SUBSIDIARIES AND AFFILIATED COMPANIES
TECHNICAL TRAINING LATAM S.A.
(Limited liability Company)
SUM $SUM notiisoP laicnaniF fo tnemetatS defiissalC detadilosnoC
13 fo sA 13 fo sA
December
2015
December
2014
ASSETS
Total current assets
Total non-current assets
TOTAL ASSETS
LIABILITIES AND EQUITY
LIABILITIES
Total current liabilities
Total non-current liabilities
Total liabilities
EQUITY
Equity aNributable to controller´s owners
Total equity
TOTAL LIABILITIES AND EQUITY
Consolidated Statement of Income by Function
Revenues from ordinary activities
Gross Income
Profit (loss) before tax
Income tax expenses
PROFIT (LOSS) OF THE PERIOD
Profit (loss) of the period atributable to:
Controller’s owners
Non-controlling interest
Profit (loss) of the period
1,387
1,347
180 273
1,527
1,660
266
-
266
1,261
1,261
1,527
263
-
263
1,397
1,397
1,660
For the period
between November
26 to December 31
2014
MUS$
171
3
(26)
(23)
(49)
(49)
-
49
Fort the period
Ended as of
December 31 2015
MUS$
1,626
1,866
(22)
50
(72)
(72)
-
(72)
262
259
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs
MEMORIA ANUAL 2015
| SUBSIDIARIES AND AFFILIATED COMPANIES
TECHNICAL TRAINING LATAM S.A.
(Limited liability Company)
SUM $SUM notiisoP laicnaniF fo tnemetatS defiissalC detadilosnoC
13 fo sA 13 fo sA
December
December
2015
2014
ASSETS
Total current assets
Total non-current assets
TOTAL ASSETS
LIABILITIES AND EQUITY
LIABILITIES
Total current liabilities
Total non-current liabilities
Total liabilities
EQUITY
Equity aNributable to controller´s owners
Total equity
TOTAL LIABILITIES AND EQUITY
Consolidated Statement of Income by Function
Revenues from ordinary activities
Gross Income
Profit (loss) before tax
Income tax expenses
PROFIT (LOSS) OF THE PERIOD
Profit (loss) of the period atributable to:
Controller’s owners
Non-controlling interest
Profit (loss) of the period
1,347
1,527
180 273
1,387
1,660
266
-
266
1,261
1,261
1,527
263
-
263
1,397
1,397
1,660
For the period
between November
26 to December 31
2014
MUS$
171
3
(26)
(23)
(49)
(49)
-
49
Fort the period
Ended as of
December 31 2015
MUS$
1,626
1,866
(22)
50
(72)
(72)
-
(72)
259
263
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs
MEMORIA ANUAL 2015
| SUBSIDIARIES AND AFFILIATED COMPANIES
Statement of Changes in Equity
Equity as of November 26 2014
Total comprehensive income
Closing balance at 31 December 2014
Equity as of 1 January 2015
Total comprehensive income
Closing balance at 31 December 2015
Equity
Issue
MUS$
Retained
earnings
MUS$
Total
equity
MUS$
881
-
881
881
-
881
564
(68)
496
496
(72)
424
1,445
(68)
1,377
1,377
(72)
1305
Fort the period
Ended as of
December 31 2015
Consolidated Statement of Cash Flow - Direct Method
MUS$
Net cash flows from (used in) operating activities
Net cash flows from (used in) investment activities
Net cash flows from (used in) financing activities
Net increase (decrease) in cash and cash equivalents before
effect of exchange rates variations
Effect of exchange rates variations on cash and cash equivalents
Cash and equivalents at the beginning of period
Cash and equivalents at the end of period
89
-
-
89
6
384
479
For the period
between November
26 to December 31
2014
MUS$
281
-
-
281
1
168
450
264
260
MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs
LATAM AIRLINES GROUP RESULTS
Comparative analysis and explanation of the main trends:
1.
Consolidated Statement of Financial Position
As of December 31, 2015 Total Assets of the Company reached US$ 18,101,418 thousand,
compared to December 31, 2014, and represented a decrease of US$ 2,383,010 thousand, equivalent
to 11.6%.
Current assets of the Company dropped by US$ 811,721 thousand (22.3%) compared to year-end
2014. Main reductions were in the following items: Cash and cash equivalents, with a US$ 235,899
thousand drop (23.8%); Commercial debtors and other accounts receivables, with US$ 581,861
thousand decrease (42.2%); Current inventories, with US$ 41,131 thousand drop (15.5%) and
Assets on current taxes fell US$ 36,693 thousand (36.4%). The items mentioned above were
slightly compensated by the growth of Other Non-Current Financial Assets in US$ 82,145 thousand
(33.1%).
Liquidity index of the Company decreased from 0.62 times at year-end 2014 to 0.50 times on
December 2015. Current Assets declined 22.3% and Current Liabilities decreased 3.2%. In addition,
the Acid Test ratio decreased from 0.17 times at year-end 2014 to 0.13 times at year-end 2015.
Non-Current Assets of the Company decreased US$ 1,571,289 thousand (9.3%) compared to year-
end 2014. Main reductions were in the following items: Capital Gains of US$ 1,032,826 thousand
(31.2%), Intangible Assets other than Capital Gains of US$ 558,654 thousand (29.7%) reduction
that is mainly explained by the currency conversion of Brazilian reais into US dollars, Other Non-
Financial Assets of US$ 107,350 thousand (31.3%), Deferred Taxes Assets of US$ 30,728 thousand
(7.5%). All of the above was slightly offset by the increases of these items: Current taxes assets,
non-current, increasing US$ 7,966 thousand (45.1%), Property, plant and equipment increase of US
$ 165,581 thousand (1.5%) originated by the following operations: acquisition of eight Airbus A321
aircrafts, three Boeing 787 aircrafts and one Airbus A350 aircraft, and down payments for the
acquisition of aircrafts, among other growths in the period, the positive effect of these movements
was offset by the sale of three Airbus A340 aircrafts, seven Bombardier aircrafts, two Airbus A319
aircrafts; the currency conversion of companies whose functional currency is different than US
dollar of US$ (435,300 thousand), which in large part is related to TAM S.A. and Subsidiaries, and
depreciation expense as of December 31, 2015 of US$ (745,519) thousand.
As of December 31, 2015, Total Liabilities of the Company reached US$ 15,163,870 thousand,
which compared to December 31, 2014, showed a US$ 816,863 thousand decreased, equivalent to
(5.1%).
Current liabilities of the Company fell by US$ 188,758 thousand (3.2%), compared to year-end
2014. Main reductions were in the following items: other non-financial assets of US$ 195,353
thousand (7.3%), other current provisions of US$ 9,489 thousand (76.5%) and commercial accounts
Payable and other accounts payable of US$ 5,416 thousand (0.4%). These reductions were offset by
the growth of other financial liabilities of US$ 19,620 thousand (1.2%), which corresponds to the
net effect between the decrease of liability positions due to coverage derivatives, the decline of
other guaranteed obligations, and the increase of guaranteed obligations related to aircraft
acquisitions; and the increase of liabilities due to current taxes of US$ 1,489 thousand (8,3%).
The current liabilities indebtedness indicator of the Company grew 49.1%, from 1.32 times at year-
end 2014, to 1.97 times on December 31, 2015. The effect of Current Liabilities over Total Debt
increase 0.7%, from 36.48% at year-end 2014 to 37.20% at the end of this period.
Non-current Liabilities of the Company decreased US$ 628,105 thousand (6.2%), compared to
December 31, 2014. Main variations were in the following items: Other non-current provisions,
which declined US$ 278,643 thousand (39.6%); deferred taxes decrease in US$ 240,329 thousand
(22.8%); these items were mainly impacted by the monetary conversion of Brazilian reais into US
dollar, which mostly explains the decrease of those items at year-end 2015. Other items that decline
in the period are: commercial accounts payable y and Other accounts payable in US$ 160,404
thousand (27.8%), provisions for employees’ benefits of US$ 8,831 thousand (11.9%), which is
slightly compensated the growth of other financial liabilities in US$ 143,373 thousand (1.9%).
The non-current liabilities indebtedness indicator of the Company increased 44.6%, from 2.31 times
on December 31, 2014 to 3.33 times on December 31, 2015. The effect of non-current liabilities
over total debt declined 0.7%, from 63.52% at year-end 2014 to 62.80% in December 2015.
The total liabilities indebtedness indicator over equity of the Company grew 46.2%, from 3.63
times at year-end 2014 to 5.31 times at year-end 2015.
As of December 31, 2015, approximately 71% of the debt is covered with rates hedging
instruments; therefore the average rate is 3.91%.
Equity attributable to the controlling shareholders decreased US$ 1,545,361 thousand from US
$4,401,896 thousand on December 31, 2014 to US$ 2,856,535 thousand as of December 31, 2015.
The main explanation for this decline is the fall of other reserves (100.5%), mainly due to the
negative effect of the variation of reserves due to exchange rate differences in US$ 1,382,170
thousand, largely explained by the conversion adjustment of capital gains accounted after the
business merger of TAM and Subsidiaries, accounted in Brazilian reais, gains/ losses reserves on
benefits plans of US$ 10,717 thousand and other various reserves of US$ 1,069 thousand. These
negative variations were partially offset by the positive variation of reserves from cash flow
coverage of US$60,830 thousand and stock payments of US$ 6,005 thousand. In addition, retained
earnings also decline, mainly explained by the net loss attributable to the controlling shareholders
accounted as of December 31, 2015 that amounted to US$ 219,274 thousand.
265
MEMORIA ANUAL 2015| ANÁLISIS RAZONADO 2.
Consolidated Financial Results
As of December 31, 2015, net loss attributable to controlling shareholders reached US$ 219,274
thousand, which represents a 99.7% decrease compared to the net loss of US$ 109,790 thousand of
the previous period. Net margin decreased from -0.9% in 2014 to -2.2% in 2015.
Operating income as of December 31, 2015 reached US$ 513,919 thousand, increasing US$ 553
thousand compared to the previous year, equivalent to 0.1%, while operating margin reached 5.1%,
equivalent to 1.0% growth.
Operating revenues as of December 31, 2015, decreasing 18,8% compared to 2014, reaching US$
10,125,826 thousand. This is explained by a 19.0% decline of passenger revenues, and 22.4% fall of
cargo revenues, partially offset by the 2.2% growth of other revenues. The impact of the
depreciation of Brazilian reais represented lower revenues of approximately US$ 1,473 million.
Passenger revenues reached US$ 8,410,614 thousand, which compared to US$ 10,380,122 thousand
accounted in 2014, represents a 19.0% fall. This variation is mainly explained by the 21.4%
decrease in RASK due to the 21.1% decline in yields, resulting from the prevailing slowdown of the
economies in South America, the local currencies depreciation (particularly the Brazilian reais, the
Chilean peso and the Argentinean peso), and the lower business’ passengers demand in Brazil. The
latter was partially compensated by the 3.0% increase in capacity measured in ASK. Additionally,
load factor reached 83.1%, 0.3% less than the previous year.
As of December 2015, cargo revenues reached US$ 1,329,431 thousand, which represents a 22.4%
decrease compared to 2014. The latter is consequence of the 11.8% decline in yields and 12.0%
decrease of traffic measured in RTK. Lower yields were the result of the depressed cargo business
worldwide, the stronger competition of cargo operators in Latin America and the negative impact of
the depreciation of Brazilian reais in the domestic business revenues in Brazil. Additionally,
capacity measured in ATK decreased 1.9%.
On the other hand, other revenues increased US$ 8,136 thousand, mainly attributed to higher
revenues coming from aircraft leases to third parties and ground services.
As of December 31, 2015, operating expenses reached US$ 9,611,907 thousand, representing costs
savings of US$ 2,345,783 thousand, equivalent to a 19.6% decrease compared to the previous year,
while the unit cost per ASK-equivalent fell 20.7%. Additionally, the impact of the depreciation of
Brazilian reais in this item represents lower costs of approximately US$ 1,198 million. The
variations per item are explained are follows:
a) Wages and Benefits decreased US$ 277,297 thousand mainly due to the depreciation of Brazilian
reais and Chilean peso of 41.6% and 14.6% respectively. Additionally, the average headcount for
the period decline 1.1%, in line with the offer reduction in Brazil and the cost savings initiatives
carried out by the Company. The latter was partially offset by higher costs related to performance
incentives.
b) Fuel costs decreased 36.4%, equivalent to US$ 1,515,963 thousand lower costs. The latter is
consequence of the 40.2% fall of prices without hedging contracts, which was partially
compensated by a 0.1% growth of consumption measured in gallons. In 2015, the Company
recognized a US$ 239,430 thousand loss due to fuel hedging, compared to the US$ 108,771
thousand loss accounted the previous year.
c) Commissions decreased US$ 62,734 thousand, primarily explained by the decline in sales
revenues related to flight tickets.
d) Depreciation and amortization declined US$ 56,868 thousand, mainly due to the depreciation of
Brazilian reais, together with the phase out of six aircrafts from the Airbus A320 family, three
aircrafts from the Airbus A330 family, three aircrafts Airbus A340 family, and seven Bombardier
Dhc8-200. The latter was offset by the incorporation of fifteen aircrafts from the Airbus A320
family, one Airbus A350 aircraft and seven Boeing 787 aircrafts to the fleet.
e) Other Rental and Landing Fees fell US$ 217,412 thousand, largely due to lower costs coming
from aviation fees and aircraft rentals, resulting from the decreased cargo operations and the
depreciation of local currencies.
f) Passenger services decreased US$ 4,886 thousand, which represents a 1.6% variation, mainly
explained by higher baggage insurance recoveries and the depreciation of local currencies. The
latter was partially offset by higher costs related to the content of the onboard entertainment system.
g) Aircraft rentals grew US$ 3,750 thousand, mainly explained by the incorporation of seven
aircrafts from the Airbus A320 family and four aircrafts from the Boeing 787 family. The latter is
partially offset by the refund of four aircrafts form the Airbus A320 family, three aircrafts from the
Airbus A330 family and five aircrafts Bombardier Dhc8-200.
h) Aircraft maintenance decreased US$ 15,496 thousand, equivalent to a variation of 3.4%, mainly
due to the efficiencies gained on feet renovation.
i) Other operating expenses declined US$ 198,977 thousand, mainly due to the prescription of tax
contingencies in Brazil. Additionally, costs related to the sales network and marketing also
decreased in the period.
Financial income reached US$ 75,080 thousand, which compared to the US$ 90,500 thousand
accounted in 2014, represented lower income of US$ 15,420 thousand mainly explained by the
change in the value of the bonds investments in Argentina of the Company.
Financial expenses decreased 3.9%, amounting to US$ 413,357 thousand as of December 2015,
mainly due to the recognition in the first quarter of 2014 of the cost related to the sale of four
aircrafts B777.
Other income/ expenses accounted a negative result of US$ 532,757 thousand, mainly explained by
the losses recognition in TAM results related to the depreciation of the Brazilian reais in 2015.
266
MEMORIA ANUAL 2015| ANÁLISIS RAZONADO The main items of the Consolidated Financial Results of TAM S.A. and Subsidiaries, that explain a
loss of US$ 395,446 thousand for exchange rate differences in the last quarter of 2015, are the
following: other financial liabilities, accounted a loss of US$ 499,092 thousand related to loans and
financial leases on the fleet acquisition denominated in US dollars; and other items of net assets and
liabilities recorded a loss of US$ 190,717 thousand, which was offset by the exchange difference of
related companies accounts receivables, that accounted a gain of US$ 294,363 thousand.
Multiplus S.A. Results
Multiplus Net Results as of December 2015 was a gain of US$ 136,765 thousand, which compared
to the US$ 144,361 thousand of 2014, showed a 5,3% decrease.
Income dropped 11.4%, mainly explained by the effect of the depreciation of the Brazilian reais of
41.6%, partially offset by the 7.1% growth of points’ redemptions.
Operating costs fell 11.4%, mainly due to the depreciation of Brazilian reais, and partially offset by
the 3.9% increase in the points’ redemptions of flight tickets and the 25.0% growth of points’
redemptions at stores affiliated to the program.
Financial income/ costs showed a negative variation of 73.2%, mainly due to the depreciation of the
Brazilian reais, partially compensated by cash deposits of part of the Company’s cash in instruments
with coverage to the US dollar.
3.
Analysis and Description of Consolidated Cash Flow originated by Operational,
Investment and Financing Activities
Operational cash flow showed a positive variation of US$ 384,036 thousand, compared to the
previous year, due to the declines in the following items: payment to suppliers for good and services
of US$ 1,793,425 thousand; net effect of other charges and payments for operating activities of US$
168,343 thousand; payments to and on behalf of employees of US$ 268,468 thousand; growth of
income taxed paid of US$ 50,426 thousand; increase of interest gained of al US$31,785 thousand
and other cash inflows (outflows) of US$ 67,030 thousand due to higher cash flows coming form
fuel derivative contracts performed by the Company, and the constitution of collaterals for
derivatives margins and payments to compensate the active and passive positions at the contracts
maturities’ dates, and the increase of the constitution of collaterals for judicial deposits mainly
executed in TAM S.A. and Subsidiaries.
The overall positive variation of the aforementioned items was largely offset by the decrease of
receivables from the sale of goods and services of US$ 1,995,441 thousand.
Investment cash flow showed a negative variation of US$ 839,964 thousand compared to the
previous year, which is mainly explained by: the decrease of income from the sale of property, plant
and equipment of US$ 507,149 thousand (mainly originated by the sale of four Boeing 777 aircrafts
for US$ 510,482 thousand in 2014 and in 2015 the Company sold three Airbus A340 aircrafts,
seven Bombardier aircrafts and two Airbus A319 aircrafts for US$ 39,804 thousand); acquisitions of
property, plant and equipment for US$ 129,304 thousand, and other collections and payments for
the equity sales or debt instruments of other entities for US$ 234,369 thousand, which incorporates
the fluctuation of the investments of TAM S.A. and Subsidiaries in private investment funds and
investments made in bonds of subsidiaries in Argentina. The negative variation of the items
described above, was offset by the net increase of the following items: decline of other cash inflows
(outflows) of US$ 27,975 thousand (originated by the investments performed by TAM S.A. and
Subsidiaries of MUS$ 20.896 in bank time deposits compared to the recollections performed in
2014 that amounted to US$ 20,000 thousand, that corresponded to the recovery of the loan
convertible into shares in Atlantic LLP and US$ (12,921 thousand) originated in TAM S.A. and
Subsidiaries for taxes over financial operations, mainly off-shore investments) and lower intangible
assets acquisitions for US$ 3,310 thousand.
Financing cash flow showed a positive variation of US$ 1,191,866 thousand, compared to the
previous year, and it’s mainly explain by the decreased loan payments of US$ 1,051,327 thousand
(this is explained by the debt related to the four Boeing 777 aircrafts sold in the first quarter of
2014) y the increase of short and long-term payments of US$ 350.513 thousand.
The debt flows mentioned above were impacted in June, due to the issuance of the long-term
unsecured bond made by the parent company that amounted to US$ 500.000 thousand. These cash
flows were used to pay the secured loans of TAM Capital 2 Inc. (subsidiary of TAM S.A) for US
$300.000 thousand.
Financial leases payments also decreased to US$ 51,517 thousand. The items that experienced
negative variations in the financing cash flow in part offset the positive variations of the items
mentioned above, such as: other cash inflows (outflows) for US$ 85,980 thousand due to the lower
financing for aircrafts advances and cash coming from equity issuance of US$ 156,321 thousand,
mainly in the parent company, which is explained by to the fact that in 2015 there was no capital
267
MEMORIA ANUAL 2015| ANÁLISIS RAZONADO increase, compared to the previous year; interest payment of US$ 14,859 thousand, and payments
for the stock acquisition or redemption of the Company of US$ 4,661 thousand.
Finally, net flow of the Company as of December 31, 2015 experienced a positive variation of US$
759,608 thousand, compared to the previous year.
4.
Financial Risk Analysis
The objective of the global risk management program of the Company is to minimize the adverse
effects of financial risks that impact the Company.
(a) Market risk
Due to the nature of its operations, the Company is exposed to market risk factors, such as: (i) fuel
price risk, (ii) interest rate risk, and (iii) local exchange rate risk.
(i)
Fuel price risk
The Company acquires Jet Fuel 54 USGC degree, which is subject to fluctuations of fuel
international prices.
To cover the fuel risk exposure, the Company contracts derivative instruments (swaps and options)
whose underlying assets may be different to Jet Fuel, and it’s possible to perform fuel hedging in
West Texas Intermediate (“WTI”) fuel, Brent (“BRENT”) fuel and Heating Oil (“HO”) distilled, all
of them have high correlation to Jet Fuel and are more liquid.
As of December 31, 2015, the Company recognized losses of US$ 239,410 thousand of fuel
hedging net of allowances. Part of the differences generated by the lesser or greater market values
of these contracts were recognized as coverage reserve components of the Company’s net equity.
As of December 31, 2015, the market value of the outstanding contracts was US$ 56,423 thousand
(negative).
(ii)
Exchange rate risk
US dollar is the functional currency and the currency used for the Financial Statements of the Parent
Company, therefore the transactional and conversion exchange rate risk arises from the operational
activities of the business, and the strategic and accounting activities of the Company, which are
denominated in a currency different than the functional currency.
Likewise, TAM S.A. and LATAM Subsidiaries are also exposed to exchange rate risk whose impact
affects the Consolidated Result of the Company.
The largest exchange rate risk exposure of LATAM comes from the business concentration in
Brazil, which is mostly denominated in Brazilian reais (BRL), being actively managed by the
Company.
Additionally, the Company manages the exposition to operational revenues denominated in Euro
(EUR) and British pound (GBP).
The Company mitigates the exchange risk exposure through derivative instruments contracts or
through natural hedging or the execution of internal operations.
As of December 31, 2015, the market value of FX positions amounted to US$ 7,972 thousand
(positive).
268
MEMORIA ANUAL 2015| ANÁLISIS RAZONADO
The Company has arranged cross currency swaps contracts with the objective of dollarize the cash
flow of the obligation contracted in Chilean Unidades de Fomento, that bears interest at a fixed rate.
This financial instrument enables the Company to pay a floating interest rate, which bears interests
over LIBOR plus a fixed spread. As of December 31, 2015 the market value of CCS amounted to
US$ 50,230 thousand (negative).
(iii)
Interest rate risk
The Company is exposed to interest rate fluctuations of the markets thus affecting future and current
cash flows of financial assets and liabilities.
The Company is mainly exposed to the London Inter Bank Offer Rate (“LIBOR”).
With the objective of decreasing the risk of a potential raising trend of interest rates, the Company
arranged interest rates swaps and options contracts. In relation to these contracts, the Company
pays, receives, or only receives depending on the case, the difference between the agreed fix rate
and the floating rate calculated over outstanding capital of each contract. The Company recognized
in the period a loss of US$ 34,957 thousand for these contracts. Interest rate swap gains and losses
together with the allowances and gains on interest rates call options are recognized as a component
of the financial interest over the amortization base of the loan covered. As of December 31, 2015,
the market value of outstanding swaps and interest rate call contracts was US$ 39,753 thousand
(negative).
As of December 31, 2015, approximately 71% of the debt was contracted at fixed rate or fixed with
some of the instruments mentioned above. The average rate of the Company’s outstanding debt is
3.91%.
(b) Credit risk concentration
Accounts receivables of the Company largely come from the sale of flight tickets; cargo service to
individuals and various companies that are scattered economically and geographically, and mostly
are short-term receivables. Accordingly, the Company isn’t exposed to an important credit risk
concentration.
5.
Economic environment
To analyze the economic environment where the Company develops its business, we briefly explain
below the situation and evolution of the main relevant economies, in the national, regional and
global context.
Global growth has been discrete due to divergent expectations between emerging and developed
economies. Factors that support this situation are the slowdown of the Chinese economy, the
declining prices of commodities and the tightening of United States’ monetary policy. For 2015,
global forecasted growth is nearly 3.1% (3.4% in 2014).
The European economy has been growing slowly but steadily. Factors such as exchange rate
depreciation and internal demand growth have promoted this stability. Nevertheless, there are
negative threats such as the situations in Greece, Portugal and the refugees’ crisis in Central and
Eastern Europe. For 2015, forecasted growth is nearly 1.5% (0.8% in 2014).
United States’ growth has been moderate, mainly explained by the lower global economic growth,
lower commodities’ prices and the risk generated by the situation in China. On the other hand,
growth is sustained by internal consumption, which is explained by causes such as the stabilization
on the debt to household income relation and the improvements in the labor market. For 2015,
forecasted growth is nearly 2.5% (2.4% in 2014).
In Latin America the economic situation has not showed signs of recovery, mainly due to the fall of
export commodities’ prices, weakening of confidence indicators in the region, inflation and the
economic slowdown in China. For 2015, forecasted growth is nearly -0.3% (1.3% in 2014).
The Brazilian economy is still sluggish mainly due to the decline of investors’ levels of confidence,
a longer and deeper recession than expected, higher inflation and a strong depreciation of the
Brazilian reais versus US dollar. For 2015, forecasted growth is nearly -3.8% (0.1% in 2014).
In Chile, expectations are focused on lower growth rates, mainly explained by the slowdown of
global economic growth and exports’ decrease. However, signs of improvement in job creation,
more stable inflation levels and business confidence that stopped its falling trend offset these
expectations. For 2015, forecasted growth is nearly 2.1% (1.9% in 2014).
Taking into account this economic environment, the flexibility of the business model carried out by
the Company is key to cope with economic challenges in better conditions.
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MEMORIA ANUAL 2015| ANÁLISIS RAZONADO 6.
a)
Main financial indicators of the Consolidated Statement of Financial Position
are presented below:
12-31-2015
12-31-2014
Disposals
587,153
1,071,237
LIQUIDITY INDEXES
Current liquidity ratio (times)
(Operating current assets /
Current liabilities)
Acid test (times)
(Cash/ current liabilities)
DEBT RATIOS
0.50
0.62
0.13
0.17
Debt ratio (times)
(Current liabilities + non-current liabilities /
Net equity)
5.31
3.63
Current debt / Total debt (%)
Non-current debt / Total debt (%)
Interest rate coverage
(R.A.I.I. / financial expenses)
ACTIVITY RATIOS
37.20
62.80
36.48
63.52
0.06
1.19
Total Assets
18,101,418
20,484,428
Investments
1,533,637
1,389,373
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MEMORIA ANUAL 2015| ANÁLISIS RAZONADO MEMORIA ANUAL 2015
| ANÁLISIS RAZONADO
PROFITABILITY RATIOS
Profitability ratios have been calculated over equity and net income attributable to controlling
shareholders.
12-31-2015
12-31-2014
Return on equity
(Net income / Average net equity)
-0.06
-0,02
Return on assets
(Net income / Average assets)
-0.01
-0.01
Return on operating assets
(Net income
/ Average operating assets (**)
-0.01
-0.01
(**) Total assets minus deferred taxes, current account of employees, permanent and temporary
investments, and capital gains.
12-31-2015
12-31-2014
Income per share
(Net income / number of shares subscribed and
paid)
-0.40
-0.20
Return on dividends
(Paid dividends / market price)
0.00
0.00
INCOME STATEMENT RESULTS
INCOME STATEMENT RESULTS
b) The main financial ratios of the Consolidated Income Statement are the following:
b) The main financial ratios of the Consolidated Income Statement are the following:
Period ended on December 31,
Period ended on December 31,
2015
2015
2014
2014
US$ thousand
US$ thousand
US$ thousand
US$ thousand
Operating Revenues
Operating Revenues
Passengers
Passengers
Cargo
Cargo
Other
Other
Operating Costs
Operating Costs
Wages and benefits
Wages and benefits
Aircraft fuel
Aircraft fuel
Commissions to Agents
Commissions to Agents
Depreciation and amortization
Depreciation and amortization
Other rental and landing fees
Other rental and landing fees
Passengers services
Passengers services
Aircraft rentals
Aircraft rentals
Maintenance
Maintenance
Other operating expenses
10,125,826
10,125,826
12,471,146
12,471,146
8,410,614
10,380,122
8,410,614
10,380,122
1,329,431
1,329,431
1,713,379
1,713,379
385,781
385,781
377,645
377,645
(9,611,907)
(11,957,780)
(9,611,907)
(11,957,780)
(2,072,805)
(2,350,102)
(2,072,805)
(2,350,102)
(2,651,067)
(4,167,030)
(2,651,067)
(302,774)
(302,774)
(934,406)
(4,167,030)
(365,508)
(365,508)
(991,264)
(934,406)
(991,264)
(1,109,826)
(1,327,238)
(1,109,826)
(295,439)
(525,134)
(295,439)
(1,327,238)
(300,325)
(521,384)
(300,325)
(437,235)
(525,134)
(452,731)
(521,384)
(1,283,221)
(437,235)
(1,482,198)
(452,731)
Other operating expenses
(1,283,221)
(1,482,198)
Operating income
Operating Margin
Operating income
Operating Margin
Interest income
Interest expense
Interest income
Other income / costs
Interest expense
513,919
513,366
5.1%
513,919
4.1%
513,366
5.1%
4.1%
75,080
90,500
(413,357)
75,080
(430,034)
90,500
(532,757)
(413,357)
(108,599)
(430,034)
Other income / costs
(532,757)
(108,599)
267
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MEMORIA ANUAL 2015| ANÁLISIS RAZONADO
Income before taxes
(357,115)
65,233
Income taxes
178,383
(142,194)
Profit / loss before minority interest
(178,732)
(76,961)
Attributable to:
Controlling shareholders
(219,274)
(109,790)
Minority interest
40,542
32,829
Net Profit/Loss
Net Margin
(219,274)
(109,790)
-2.2%
-0.9%
Effective tax rate
44.9%
438.8%
Total Shares
545,547,819
545,547,819
Earnings per share (US$)
-0.40193
-0.20125
EBITDAR
875,026
1,363,202
272
MEMORIA ANUAL 2015| ANÁLISIS RAZONADO SWORN STATEMENT
As Directors and Chief Financial Officer of LATAM Airlines Group, we declare under our responsibility
on the veracity of the information contain in the Annual Report 2015.
273
MEMORIA ANUAL 2015| SwORN StAtEMENt