LATAM Airlines Group
Annual Report 2015

Plain-text annual report

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. 48 cORPORATE GOVERNANcE PRAcTIcES ANNUAL REPORT 2015| cORPORATE GOVERNANcE · cORPORATE GOVERNANcE PRAcTIcES 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 49 cORPORATE GOVERNANcE PRAcTIcES ANNUAL REPORT 2015| cORPORATE GOVERNANcE · cORPORATE GOVERNANcE PRAcTIcES 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 50 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. 51 cORPORATE GOVERNANcE PRAcTIcES ANNUAL REPORT 2015| cORPORATE GOVERNANcE · cORPORATE GOVERNANcE PRAcTIcES (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 53 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 56 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 58 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. 59 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% 60 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  61 ANNUAL REPORT 2015    | 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 62 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% 63 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 64 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. 66 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, 67 OWNERSHIP STRUcTURE AND PRINcIPAL SHAREHOLDERS 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 68 OWNERSHIP STRUcTURE AND PRINcIPAL SHAREHOLDERS ANNUAL REPORT 2015| cORPORATE GOVERNANcE · OWNERSHIP STRUcTURE AND PRINcIPAL SHAREHOLDERS 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; 69 OWNERSHIP STRUcTURE AND PRINcIPAL SHAREHOLDERS ANNUAL REPORT 2015 | 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 70 ANNUAL REPORT 2015 | cORPORATE GOVERNANcE · OWNERSHIP STRUcTURE AND PRINcIPAL SHAREHOLDERS 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 71 OWNERSHIP STRUcTURE AND PRINcIPAL SHAREHOLDERS ANNUAL REPORT 2015| cORPORATE GOVERNANcE · OWNERSHIP STRUcTURE AND PRINcIPAL SHAREHOLDERS 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 72 OWNERSHIP STRUcTURE AND PRINcIPAL SHAREHOLDERS ANNUAL REPORT 2015| cORPORATE GOVERNANcE · OWNERSHIP STRUcTURE AND PRINcIPAL SHAREHOLDERS 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 STRUcTURE AND PRINcIPAL SHAREHOLDERS 73 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 74 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$409.6 million in advances on aircraft financed with its own funds. The objective of the company’s Financial 75 ANNUAL REPORT 2015| cORPORATE GOVERNANcE · FINANcIAL POLIcY to centralize Investment Policy the is investment decisions, in order to optimize profitability, adjusted by currency risk, and maintain adequate security and liquidity levels. Additionally, the company manages risk through counterpart diversification, terms, currencies and instruments. | FINANcING POLIcY The scope of LATAM’s Financing Policy is to centralize financing activities and balance the useful life of assets with debt maturities. The vast majority of LATAM Airlines Group’s investments are fleet acquisition programs, which are generally financed through the combination of own resources and long-term structured financial debt. Usually, LATAM finances between 80% and 85% through bank loans or bonds guaranteed by export promotion agencies, and the rest through commercial loans or its own funds. Payment maturities of the different financing structures vary from 12 to 16 years, being the vast majority at 12 years.  Additionally, important portion of LATAM’s fleet acquisition undertakings take the form of operational leasing arrangements as additional financing measure. forward Looking to diversify financing alternatives for airplanes, LATAM carried out on May 29, 2015 a private placement of debt certificated named Enhanced Equipment Trust certificates (“EETc”) for an aggregate amount of US$ 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 76 ANNUAL REPORT 2015| cORPORATE GOVERNANcE · FINANcIAL POLIcY 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. 77 ANNUAL REPORT 2015| cORPORATE GOVERNANcE · FINANcIAL POLIcY 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 78 ANNUAL REPORT 2015| OPERATIONS INTERNATIONAL PASSENGER OPERATIONS CARGO OPERATION PROPERTY, PLANT AND EQUIPMENT BRAZIL ARGENTINA - CHILE COLOMBIA ECUADOR - PERU CUSTOMER LOYALTY PROGRAMS 79 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 80 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 INTERNATIONAL OPERATIONS 81 ANNUAL REPORT 2015 | 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 INTERNATIONAL OPERATIONS 82 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 99 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 100 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 101 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 102 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 103 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. 104 ANNUAL REPORT 2015| 2015 RESULTS · REGULATORY FRAMEWORK 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 105 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 106 REGULATORY FRAMEWORK 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 107 ANNUAL REPORT 2015| 2015 RESULTS · REGULATORY FRAMEWORK 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. 108 ANNUAL REPORT 2015| 2015 RESULTS · REGULATORY FRAMEWORK 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 125 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 RISK FAcTORS ANNUAL REPORT 2015| 2015 RESULTS · RISK FAcTORS 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 127 RISK FAcTORS 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. 128 RISK FAcTORS ANNUAL REPORT 2015| 2015 RESULTS · RISK FAcTORS 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. 129 RISK FAcTORS 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 131 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 RISK FAcTORS 132 ANNUAL REPORT 2015| 2015 RESULTS · RISK FAcTORS 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 133 ANNUAL REPORT 2015| 2015 RESULTS · RISK FAcTORS 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 134 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 RISK FAcTORS 135 ANNUAL REPORT 2015| 2015 RESULTS · RISK FAcTORS 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, RISK FAcTORS 136 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 137 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 138 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 141 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 145 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. 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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.
 159 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt ! ! 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. 
 160 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt ! ! 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. 161 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt ! ! 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. 162 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! 2 3 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. 163 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! ! ! 4 5 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 164 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! 6 7 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 165 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! 8 9 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. 166 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt !  10 11 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 167 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! !  12 13 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. 168 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! !  14 15 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 169 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! !  16 17 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). 170 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! !  18 19 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. 171 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! !  20 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: 172 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! !  22 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. 173 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! !  24 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. 174 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! ! 
 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! ! 
 ! !  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! ! !  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 - - 178 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! ! 
  34 35 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). 179 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! !    36 37 (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 180 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt!   !  38 39 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. 181 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! ! 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. 182 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! ! ! !  42 43 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. 183 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! ! ! 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. 184 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! ! !  46 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% 185 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! ! ! ! ! ! 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. 186 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! ! ! ! !  50 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 187 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! ! ! !  52 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) 171,655 188 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! ! !  54 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: 189 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! ! ! !  56 57 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$/barril 60-70 - (1) In line with the expectations of the Central Bank of Brazil The result of the impairment test, which includes a sensitivity analysis of the main variables, showed that the estimated recoverable amount is higher than carrying value of the book value of net assets allocated to the cash generating unit, and therefore impairment was not detected. CGU´s are sensitive to rates for annual growth, discount and exchanges. The sensitivity analysis included the individual impact of changes in estimates critical in determining the recoverable amounts, namely: Air transportation CGU Coalition and loyalty program M ultiplus CGU Increase M aximum WACC % 11.5 - Increase M aximum CoE % - 23.0 In none of the previous cases impairment in the cash- generating unit was presented. Decrease M inimum terminal growth rate % 1.5 4.4 190 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! ! ! !  58 59 NOTE 16 - PROPERTY, PLANT AND EQUIPMENT The composition by category of Property, plant and equipment is as follows: Gross Book Value Acumulated depreciation Net Book Value As of As of As of As of As of As of December 31, December 31, December 31, December 31, December 31, December 31, 2015 ThUS$ 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. 191 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! ! ! 
  60 61 (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). 192 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! ! ! !  62 63 (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 71 193 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! ! ! ! !  64 65 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: 194 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! ! ! !  66 67 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. 195 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! ! ! ! !  68 69 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. 196 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! ! ! ! !  70 71 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 8,758,067 197 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! 
 ! ! ! 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. 72 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! ! 
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  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: 203 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! ! !  84 85 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. 204 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! ! ! ! ! ! !  86 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 9 205 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! ! ! ! !  88 89 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. 206 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! ! !  90 91 (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. 207 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! ! ! ! ! (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 43 258 208 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! 
 ! ! !  94 95 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 22,091 209 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! 
 ! ! 
  96 97 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 221 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt! ! ! ! ! ! !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 $75,000 penalty to the SEC and to remain in compliance with LATAM’s compliance structure and internal accounting controls. • Over the past decade, since the occurrence of this event, the Company has implemented significant enhancements to its compliance structure and internal accounting controls. 222 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt ! !122 The Company and its senior executives maintain a strong commitment to complying with all laws and regulations in all countries where the company operates. The Company has been cooperating with the investigation of the U.S. regulatory authorities and will continue to do so as necessary. Subsequent to the closing date of the annual financial statements, at December 31, 2015, has occurred an important variation in the exchange rate (Central Bank of Brazil) R$/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. 223 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt 224 MEMORIA ANUAL 2015| FINANcIAL stAtEMENt225 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 226 MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs - 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 227 MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs - 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 228 MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs 
 
 
 
 - 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 229 MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEs 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 230 MEMORIA ANUAL 2015| sUbsIdIARIEs ANd AffILIAtEd cOMpANIEscustomer and the regulation related to the 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. 269 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 1,389,373 270 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) 267 271 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

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