As filed with the Securities and Exchange Commission on April 2, 201230, 2013

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

OR

For the fiscal year ended December 31, 20112012

OR

OR

Commission File Number: 1-14728

LATAM Airlines Group S.A.

(Exact name of registrant as specified in its charter)

(Jurisdiction of incorporation or organization)

Presidente Riesco 5711, 20^th Floor

Las Condes

Santiago, Chile

(Address of principal executive offices)

(Name, telephone, e-mail and/or facsimile number and address of company contact person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 340,319,431.488,355,791.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yesx    No¨

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes¨    Nox

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yesx    No¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes¨    No¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated filer  x                Accelerated filer  ¨                Non-Accelerated filer  ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:

Item 17¨    Item 18¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes¨    Nox

TABLE OF CONTENTS

PRESENTATION OF INFORMATION

In this annual report on Form 20-F, unless the context otherwise requires, references to “Lan Airlines”“LATAM Airlines Group” are to LanLATAM Airlines Group S.A., the unconsolidated operating entity, and references to “LAN,“LATAM,” “we,” “us” or the “Company” are to LanLATAM Airlines Group S.A. and its consolidated subsidiaries.subsidiaries: Transporte Aéreo S.A. (which does business under the name “LAN Express”), LAN Perú S.A. (“LAN Peru”), Aerolane, Líneas Aéreas Nacionales del Ecuador S.A. (“LAN Ecuador”), LAN Argentina S.A. (“LAN Argentina,” previously Aero 2000 S.A.), Aerovías de Integración Regional, Aires S.A. (which does business under the name “LAN Colombia”), TAM Linhas Aereas S.A. (“TAM Linhas Aereas”) and LAN Cargo S.A. (“LAN Cargo”), and its three regional affiliates: Aero Transportes Mas de Carga S.A. de C.V. (“MasAir”) in Mexico, Linea Aerea Carguera de Colombia S.A. (“LANCO”) in Colombia and Aerolinhas Brasileiras S.A. (“ABSA”) in Brazil. All references to “Chile” are references to the Republic of Chile.

On June 22, 2012, LATAM Airlines Group was formed following the completion of the business combination between LAN Airlines S.A. and its consolidated subsidiaries (“LAN”) with TAM S.A. and its consolidated subsidiaries (“TAM”). Following the combination, LAN Airlines S.A. became “LATAM Airlines Group S.A.” and TAM continues to exist as a subsidiary of Holdco I S.A. (“Holdco I”) and a subsidiary of LATAM Airlines Group. LATAM’s consolidated financial statements for the year ended December 31, 2012 include TAM’s financial results from June 23, 2012. As LATAM Airlines Group S.A. is the owner of substantially all the economic rights in TAM, TAM and its consolidated subsidiaries are for the purposes of this annual report and LATAM’s consolidated financial statements treated as being subsidiaries of LATAM Airlines Group S.A. See “Item 4. Information on the Company—A. History and Development of the Company—Combination of LAN and TAM.”

In this annual report on Form 20-F, unless the context otherwise requires, references to “LAN” are to LAN Airlines S.A., currently known as LATAM Airlines Group S.A., and its consolidated subsidiaries, in connection with circumstances and facts occurring prior to June 22, 2012.

In this annual report on Form 20-F, unless the context otherwise requires, references to “TAM” are to TAM S.A., and its consolidated subsidiaries, including TAM Linhas Aereas S.A., the operating entity, Multiplus S.A. (“Multiplus”), Pantanal Linhas Aéreas S.A. (“Pantanal”), Fidelidade Viagens e Turismo Limited (“TAM Viagens”), and Transportes Aéreos Del Mercosur S.A. (“TAM Mercosur”).

This annual report contains conversions of certain Chilean peso and Brazilian real amounts into U.S. dollars at specified rates solely for the convenience of the reader. These conversions should not be construed as representations that the Chilean peso and the Brazilian real amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated. Unless we specify otherwise, all references to “$,” “US$,” “U.S. dollars” or “dollars” are to United States dollars, references to “pesos,” “Chilean pesos” or “Ch$” are to Chilean pesospesos. References to “reais,” “Brazilian reais,” or “R$” are to Brazilian reais, and references to “UF” are toUnidades de Fomento, a daily indexed Chilean peso-denominated monetary unit that takes into account the effect of the Chilean inflation rate. Unless we indicate otherwise, the U.S. dollar equivalent for information in Chilean pesos is based on the “dólar observado” or “observed” exchange rate published byBanco Central de Chile (which we refer to as the Central Bank of Chile) on December 31, 2011,28, 2012, which was Ch$519.20=478.60 = US$1.00. The observed exchange rate on March 23,April 15, 2013, was Ch$469.24 = US$1.00. Unless we indicate otherwise, the U.S. dollar equivalent for information in Brazilian reais is based on the “dólar observado” or “observed” exchange rate published byBanco Central doBrasil (which we refer to as the Central Bank of Brazil) on December 31, 2012, which was Ch$487.72=R$2.044 = US$1.00. The observed exchange rate on April 15, 2013, was R$ 1.979 =US$1.00. The Federal Reserve Bank of New York does not report a noon buying rate for Chilean pesos.pesos nor Brazilian reais. See “Item 3. Key Information—Selected Financial Data—Chilean Peso Exchange Rates”. and “Item 3. Key Information—Selected Financial Data—Brazilian Exchange Rates.”

LanLATAM Airlines Group and the majority of our subsidiaries (including our main cargo subsidiary Lan Cargo S.A., or Lan Cargo) maintain their accounting records and prepare their financial statements in U.S. dollars. Some of our other subsidiaries, however, maintain their accounting records and prepare their financial statements in Chilean pesos, Argentinean pesos, Colombian pesos or Colombian pesos.Brazilian reais. In particular, TAM maintains its accounting records and prepares its financial statements in Brazilian reais. Our

audited consolidated financial statements include the results of these subsidiaries translated into U.S. dollars. International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), require assets and liabilities to be translated at period-end exchange rates, while revenue and expense accounts are translated at each transaction date, although a monthly average rates.rate may also be used if exchange rates do not vary widely.

OurLATAM’s audited consolidated financial statements for the periods ended December 31, 2009, 2010, 2011, and 20112012, were prepared in accordance with IFRS. PriorLAN’s date of transition to 2009 ourIFRS was January 1, 2008. Consequently, LAN prepared opening consolidated statements of financial position under IFRS as of that date. The date of adoption of IFRS was January 1, 2009. As a result, the summary consolidated annual financial information as of December 31, 2008 and for the year ended December 31, 2008 presented in this annual report is derived from LAN’s audited consolidated annual financial statements were preparedincluded in previously issued annual reports filed by LAN. This financial information was previously presented in accordance with accounting principles generally accepted in Chile (“Chilean GAAP”)., and has been restated under IFRS differs in certain significant respects from Chilean GAAP.only for comparative purposes. As a result, ourLAN’s financial information presented under IFRS as of and for the year ended December 31, 2009 (and later periods) is not directly comparable to our financial information presented with respect to previous years under Chilean GAAP. Accordingly, readers should avoid such comparison.

We have rounded percentages and certain U.S. dollar, and Chilean peso and Brazilian reais amounts contained in this annual report for ease of presentation. Any discrepancies in any table between totals and the sums of the amounts listed are due to rounding.

This annual report contains certain terms that may be unfamiliar to some readers. You can find a glossary of these terms on page 46 of this annual report.

FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements, including those relating to our proposedrecently completed combination with TAM S.A. (“TAM”).TAM. See “Item 3. Key Information—Risk Factors—Risks Relating to the Exchange OfferCombination of LAN and Mergers” and “Item 4. Information on the Company—History and Development of the Company—Proposed Combination with TAM”.TAM.” Such statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” or other similar expressions. Forward-looking statements, including statements about our beliefs and expectations, are not statements of historical facts. These statements are based on current plans, estimates and projections, and, therefore, you should not place undue reliance on them. Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. These factors include, but are not limited to:

Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them, whether in light of new information, future events or otherwise. You should also read carefully the risk factors described in “Item 3. Key Information—Risk Factors”.Factors.”

GLOSSARY OF TERMS

The following terms, as used in this annual report, have the meanings set forth below.

“block hours”		The elapsed time between an aircraft leaving an airport gate and arriving at an airport gate.
“m²”		square meters.
“ton”		A metric ton, equivalent to 2,204.6 pounds.
“utilization rates”		The actual number of flight hours per aircraft per operating day.
“operating expenses”		Operating expenses, which are calculated in accordance with IFRS, comprise the sum of the line items “cost of sales” plus “distribution costs” plus “administrative expenses” plus “other operating expenses”, as shown on our consolidated statement of comprehensive income. These operating expenses include: wages and benefits, fuel, depreciation and amortization, commissions to agents, aircraft rentals, other rental and landing fees, passenger services, airdraft maintenance, and other operating expenses.

PART I

Not applicable.

Not applicable.

A. Selected Financial Data

The following table presents our summaryOn June 22, 2012, LATAM Airlines Group was formed through the combination of LAN and TAM. Following the combination, LAN Airlines S.A. became “LATAM Airlines Group S.A.” and TAM continues to exist as a subsidiary of Holdco I and a subsidiary of LATAM Airlines Group. Financial statements for LATAM fully consolidate TAM’s results since June 23, 2012.

Selected audited consolidated historical financial data. Ourinformation of LATAM provided under “—LATAM’s Historical Financial Information” below has been derived from LATAM’s audited consolidated financial statements relate toas described below. The LATAM Historical Financial Information includes (i) statement of income data for LATAM for the periodyear ended December 31, 2011,2012 (which includes TAM’s financial results from June 23, 2012), (ii) balance sheet data for LATAM as at December 31, 2012 (which includes TAM’s assets and constitute the third annual audited financial statements prepared in accordance with IFRS.

Our date of transition to IFRS was January 1, 2008. Consequently, we have prepared our opening consolidated statements of financial position under IFRSliabilities as of that date. Our datesuch date), and (iii) statement of adoptionincome and balance sheet data for LATAM for the years ended December 31, 2008, 2009, 2010 and 2011, which represents LAN’s historical audited consolidated financial information.

LATAM’s Historical Financial Information

LATAM’s consolidated statement of IFRS was January 1, 2009.income data for the year ended December 31, 2012, includes TAM’s results of operations from June 23, 2012, and the LATAM balance sheet data as at December 31, 2012 consolidated TAM’s assets and liabilities as at December 31, 2012. The LATAM Historical Financial Information for the years ended 2011, 2010, 2009 and 2008 represents LAN’s historical audited consolidated financial information

The summary consolidated annual financial information of LATAM as of December 31, 2012, 2011, 2010 and 2009 and for each of the threefour years ended December 31, 2012, 2011, 2010 and 2009 has been prepared in accordance with IFRS and is derived from ourLATAM’s audited consolidated annual financial statements, which are included in this annual report or in previous annual reports.reports filed by LAN with the SEC.

LAN’s date of transition to IFRS was January 1, 2008. Consequently, LAN prepared opening consolidated statements of financial position under IFRS as of that date. The date of adoption of IFRS was January 1, 2009. As a result, the summary consolidated annual financial information as of December 31, 2008 and for the year ended December 31, 2008 presented in this annual report is derived from ourLAN’s audited consolidated annual financial statements included in a previouspreviously issued annual report.reports filed by LAN. This financial information has beenwas previously presented in accordance with Chilean GAAP, and has been restated under IFRS only for comparative purpose.purposes. You should read the information below in conjunction with ourLATAM’s audited consolidated financial statements and the notes thereto, as well as the sections of this annual report entitled “Presentation of Information” and “Operating“Item 5. Operating and Financial Review and Prospects.”

LATAM’s Annual Financial Information

OurLATAM Airlines Group’s board of directors has the authority to declare interim dividends. Year-end dividends, if any, are declared by our shareholders at our annual meeting. For a description of our dividend policy, see “Item 8. Financial Information—Consolidated Financial Statements and Other Financial Information—Dividend Policy”. and “Item 10. Additional Information—Dividend and Liquidation Rights.” LATAM did not pay an interim dividend in 2012.

We declare cash dividends in U.S. dollars, but make dividend payments in Chilean pesos, converted from U.S. dollars at the observed exchange rate two days prior to the day we first make payment to shareholders. Payments of cash dividends to holders of ADRs, if any, are made in Chilean pesos to the custodian, which converts those Chilean pesos into U.S. dollars and delivers U.S. dollars to the depositary for distribution to holders. In the event that the custodian is unable to convert immediately the Chilean currency received as dividends into U.S. dollars, the amount of U.S. dollars payable to holders of ADRs may be adversely affected by a devaluation of the Chilean currency that may occur before such dividends are converted and remitted.

LATAM’s Dividend Payments

The table below sets forth the cash dividends per common share and per ADS paid by LATAM prior to the merger with TAM, as well as the number of common shares entitled to such dividends, for the years indicated. Dividends per common share amounts have not been adjusted for inflation and reflect common share amounts outstanding immediately prior to the distribution of such dividend.

Chilean Peso Exchange Rates

The following table sets forth, for the periods indicated, the high, low, average and period-end observed exchange rate for the purchase of U.S. dollars, expressed in Chilean pesos per U.S. dollar. The rates have not been restated in constant currency units. On April 15, 2013 the observed exchange rate was Ch$469.24= US$1.00.

Source: Central Bank of Chile

Brazilian Exchange Rates

TAM maintains its accounting records and prepares its financial statements in Brazilian reais. The following tables set forth, for the periods indicated, the high, low, average and period-end observed exchange rate for the purchase of U.S. dollars, expressed in Brazilian reais per U.S. dollar. The rates have not been restated in constant currency units. On March 23, 2012April 15, 2013 the observed exchange rate was Ch$487.72=Br$1.979 = US$1.00.

Source: Central Bank of Brazil

B. Capitalization and IndebtnessIndebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

We wish to caution readers that the following important factors, and those important factors described in other reports submitted to, or filed with, the Securities and Exchange Commission (“SEC”) among other factors, could affect our actual results and could cause our actual results to differ materially from those expressed in any forward-looking statements made by us or on our behalf. In particular, as we are a non-U.S. company, there are risks associated with investing in our ADSs that are not typical for investments in the shares of U.S. companies. Prior to making an investment decision, you should carefully consider all of the information contained in this document, including the following risk factors.

Risks Relating to the Exchange Offer and Mergers involving TAM S.A.

Both commencement and completion of the exchange offer are subject to many conditions precedent and if these conditions are not satisfied or waived, the proposed combination with TAM S.A. will not be completed

We and TAM S.A., a Brazilian company (“TAM”), are proposing to combine to form the leading Latin American airline group with the largest fleet of aircraft of any airline in Latin America. When the proposed combination is completed, LAN will be the holding company of the combined companies and will change its name to “LATAM Airlines Group S.A.” (“LATAM”). The proposed combination will be implemented through a delisting exchange offer to be made in the United States and in Brazil to acquire all of the outstanding voting common shares of TAM (“TAM common shares”), non-voting preferred shares of TAM (“TAM preferred shares and collectively with the TAM common shares, the “TAM shares”) and American Depositary Shares representing TAM shares (“TAM ADSs”), in each case other than any such shares owned indirectly by the TAM controlling shareholders (as defined below), and other mergers and corporate restructuring transactions described under “Item 4. Information on the Company—History and Development of the Company—Proposed Combination with TAM”, in each case pursuant to the terms and conditions of the implementation agreement and the exchange offer agreement entered into on January 18, 2011 (the “transaction agreements”) by LAN, TAM, the controlling shareholders of LAN under Chilean law (Costa Verde Aeronáutica S.A. and Inversiones Mineras del Cantábrico S.A., which we refer to individually as “Costa Verde Aeronáutica” and “Mineras del Cantábrico,” respectively and collectively as the “LAN controlling shareholders”), the controlling shareholders of TAM under Brazilian law (Noemy Almeida Oliveira Amaro, Maria Cláudia Oliveira Amaro, Maurício Rolim Amaro and João Francisco Amaro, whom we refer to collectively as the “TAM controlling shareholders”), and TAM Empreendimentos e Participações S.A., a company through which the TAM controlling shareholders held their TAM shares (as defined below) at that time ( “TEP”). The commencement of the exchange offer is subject to certain conditions set forth in the transaction agreements as described under “Item 4. Information on the Company—History and Development of the Company—The Transaction Agreements—Conditions for the Commencement of the Exchange Offer”, including receipt of all required regulatory approvals (including the required approvals from theComissão de Valores Mobiliários(“CVM”), theSuperintendencia de Valores y Seguros (the Chilean Securities and Insurance Supervisor) (“SVS”), and the SEC. In addition, approval of the proposed combination by our shareholders is subject to the rendering of a final decision by the Chilean Supreme Court on our appeal of the mitigation measures imposed by theTribunal de Defensa de la Competencia (Chilean Free Competition Defense Court) (“TDLC”) in connection to the proposed combination with TAM. The completion of the exchange offer is also subject to certain conditions set forth in the transaction agreements as described under “Item 4. Information on the Company—History and Development of the Company—The Transaction Agreements—Conditions to Completion of the Exchange Offer,” including the following:

Delisting Condition

Squeeze-Out Condition

Certain of these conditions may not be waived without written agreement of both LAN and the TAM controlling shareholders, and neither LAN nor the TAM controlling shareholders has any obligation to waive any conditions not satisfied on or prior to the expiration of the exchange offer. Therefore, even if we are willing to waive an unsatisfied condition, we may be unable to complete the exchange offer if the TAM controlling shareholders refuse to waive the condition. In addition, the obligation of the TAM controlling shareholders under the transaction agreements to contribute their TAM shares into the proposed combination prior to the completion of the exchange offer is subject to certain conditions relating to the operations and business of LAN and certain events outside of our control. Payment of such subscriptions is a condition to the completion of the exchange offer. If any of these conditions is not satisfied or waived, the exchange offer and mergers will not be completed.

If the squeeze-out condition is not satisfied and we waive this condition, we may be unable to fully realize the anticipated benefits of the proposed combination

If the squeeze-out condition is not satisfied and we waive this condition, TAM will not be permitted under Brazilian law to compulsorily redeem any TAM shares (including those represented by TAM ADSs) that were not acquired in the exchange offer and the mergers unless LAN later acquires a sufficient number of TAM shares (including those represented by TAM ADSs) so as to allow TAM to compulsorily redeem the remaining outstanding TAM shares and TAM ADSs pursuant to Brazilian law. Depending on the quantity of minority shareholders remaining after completion of the exchange offer and the mergers, their existence may limit LATAM’s ability to combine the businesses and operations of LAN and TAM, which could adversely affect the combined companies’ ability to realize the potential benefits and cost savings from combining these businesses. Failure to fully realize these potential benefits and any temporary or permanent delay in integrating the businesses and operations of these two companies, could adversely affect the revenues, level of expenses and operating results of the combined companies after the completion of the proposed combination.

The final decision by the Chilean Supreme Court in connection with the mitigation measures imposed by the Chilean Free Competition Defense Court may not be rendered on time

Before the proposed combination of LAN and TAM may be completed, the final decision of the Chilean Supreme Court with respect to the appeal filed by LAN seeking the amendment or elimination of three of the conditions set forth in the decision issued by the TDLC with respect to the proposed combination with TAM, has been rendered. See “Item 4. Information on the Company—History and Development of the Company—Proposed Combination with TAM” and “Item 4. Information on the Company—History and Development of the Company—The Transaction Agreements—Conditions to Commencement of the Exchange Offer”, for a discussion of the status of the Company’s appeal. A final decision by the Chilean Supreme Court with respect to the appeal is expected by the Company in the next month, but there can be no assurance that the decision will be obtained within the expected time frame, or that the decision will not prevent the transaction to go forward. If the final decision of the Chilean Supreme Court is not rendered by the expected time frame, and this situation is not waived by the parties to the transactions agreements, the exchange offer and mergers will not be completed.

Any delay in completing the proposed combination may reduce or eliminate the benefits we expect to be achieved as a result of the proposed combination

The proposed combination is subject to a number of other conditions beyond our control that may prevent, delay or otherwise materially adversely affect its completion. We cannot predict whether or when these other conditions will be satisfied. Any delay in completing the proposed combination could cause the combined companies not to realize some or all of the synergies that we expect to achieve if the proposed combination is successfully completed within its expected time frame.

Failure to complete the proposed combination could negatively impact our stock price and future business and financial results

If the proposed combination is not completed, our ongoing businesses may be adversely affected, and we would be subject to several risks, including the following:

If the proposed combination is not completed, we cannot assure our stockholders that these risks will not materialize and will not materially adversely affect our business, financial results and stock price.

The transaction agreements contain provisions that could discourage a potential competing acquirer of LAN

The transaction agreements require our board of directors to recommend that its shareholders approve the proposed combination and does not permit our board of directors to withdraw or adversely modify those recommendations. The transaction agreements also contains “no shop” provisions that prohibit us from soliciting, initiating or encouraging any competing third party proposals, including acquisitions of our equity securities or material assets, and there are no exceptions to these provisions. In addition, if the transaction agreements are terminated under certain circumstances, we may be required to pay to TAM a termination fee of $200 million and to reimburse TAM for expenses incurred by TAM in connection with the transaction agreements and the proposed combination. See “Item 4. Information on the Company—History and Development of the Company—The Transaction Agreements” and “Item 4. Information on the Company—History and Development of the Company—The Transaction Agreements—Termination”. These provisions could discourage a potential third-party acquiror that might have an interest in acquiring all or a significant portion of LAN from considering or proposing that acquisition, even if it were prepared to pay consideration with a value per share higher than the benefits LAN shareholders may receive from the proposed combination, or might result in a potential third-party acquiror proposing to pay a lower price to the LAN shareholders than it might otherwise have proposed to pay because of the added expense of the $200 million termination fee and expense reimbursement that may become payable in certain circumstances.

The fairness opinion obtained by our board of directors from our financial advisor will not reflect changes in circumstances between signing the transaction agreements and the completion of the proposed combination

While our board of directors received an initial fairness opinion from J.P. Morgan, our financial advisor, before we entered into the transaction agreements (the “Initial JPM Opinion”), and a supplemental fairness opinion, dated November 11, 2011 (the “Supplemental JPM Opinion”), we have not obtained an updated fairness opinion as of the date of this annual report on Form 20-F. Changes in our operations and prospects and those of TAM, general market and economic conditions and other factors which may be beyond our control and on which the fairness opinions were based may alter the value of LAN or TAM and/or the prices of our common shares and/or the TAM shares by the time the proposed combination is completed. The Initial JPM Opinion and the Supplemental JPM speak only as of the date of such opinions and not as of the time the proposed combination will be completed or as of any other date. Because we do not anticipate asking our financial advisor to further update its fairness opinion, neither the Initial JPM Opinion nor the Supplemental JPM Opinion address the fairness of the exchange ratios in the exchange offer, from a financial point of view, to us at the time the proposed combination will be completed.

Resales of LAN shares issued in the mergers may cause the market price of such shares to fall

As of March 28, 2012, 340,977,309 LAN shares were issued and outstanding (of which 33.84% were beneficially owned by the LAN controlling shareholders) and 1,216,251 LAN shares were subject to issuance upon exercise of outstanding options and other rights to purchase such shares. In the mergers, LAN expects to issue a significant amount of LAN shares in the form of LAN American Depositary Shares (“LAN ADSs”) and LAN Brazilian Depositary Shares (“LAN BDSs”) to the holders of TAM shares and TAM ADSs in exchange for their TAM shares or TAM ADSs, although the actual number of LAN shares issued will depend on the extent to which holders of such TAM shares and TAM ADSs elect to tender their TAM shares and/or TAM ADSs into the exchange offer and the number of vested stock options and other rights to acquire TAM shares that are exercised before the completion of the exchange offer and the mergers. If all holders of TAM shares and TAM ADSs, other than the TAM controlling shareholders, validly tender all of their TAM shares and/or TAM ADSs into, and do not withdraw them from, the exchange offer, the TAM controlling shareholders contribute all of their TAM shares into the proposed business combination and no TAM shares (including those represented by TAM ADSs) or LAN shares (including those represented by LAN ADSs and LAN BDSs) are issued after the date of the exchange offer other than the LAN common shares to be issued pursuant to the exchange offer and the mergers which will be represented by LAN ADSs and LAN BDSs, then LAN will issue a total of 140,586,107 LAN common shares in connection with the exchange offer and the mergers and immediately after the effective time of the mergers, the issued and outstanding LAN shares (including those represented by LAN ADSs and LAN BDSs but excluding those reserved under stock option plans) will be owned approximately as follows: 13.62% of such LAN shares will be held by the TAM controlling shareholders, 15.59% of such LAN shares will be held by the holders of TAM shares and TAM ADSs other than the TAM controlling shareholders, 23.97% of such LAN shares will be held by the LAN controlling shareholders and 46.82% of such LAN shares will be held by the holders of LAN shares other than the LAN controlling shareholders. If there are substantial sales of the newly issued LAN shares shortly after the effective time of the mergers, this could adversely affect the market for, and the market price of, the LAN common shares, the LAN ADSs and the LAN BDSs.

Risks Relating to the Combination of LAN and TAM

LANLATAM Airlines Group may be unable to fully realize the anticipated benefits of the proposed combination of LAN and TAM

After completionIn June 2012, LAN and TAM completed a business combination, which was effected through a series of the proposedtransactions and corporate restructurings. The combination LAN will change its name to “LATAM Airlines Group S.A.” The proposed combination involves bringingbrought together two large and complex businesses that currently operatehad previously operated as independent public companies. LANSignificant management attention and resources will be required to devote significant management attention and resources to integratingintegrate certain aspects of the business practices and operations of LAN and TAM. The success of the proposed combination will depend, in part, on LAN’sthe ability of LATAM Airlines Group to realize anticipated revenue synergies, cost savings and growth opportunities by combining the businesses of LAN and TAM. LANLATAM Airlines Group hopes to generate synergies resulting from the consolidation of capabilities, rationalization of operations and headcount, greater efficiencies from increased scale and market integration, new product and service offerings and organic growth. There is a risk, however, that LANLATAM Airlines Group may not be able to combine the businesses of LAN and TAM in a manner that permits LANLATAM Airlines Group to realize these revenue synergies, cost savings and growth opportunities in the time, manner or amounts LAN currentlyit expects, or at all. Potential difficulties LANLATAM Airlines Group may encounter as part of the integration process include, among other things:

In addition, LAN and TAM have operated and, until the completion of the exchange offer and the mergers, will continue to operate under their existing separate airline certificates. It is possible that the integration process could result in:

each of which could adversely affect each company’s ability to maintain good relationships with its customers, suppliers, employees and other constituencies, or to achieve the anticipated benefits of the proposed combination, and could increase costs or reduce each company’s earnings or otherwise adversely affect the businesses, financial condition, results of operations and/or prospects of the combined companies following the completion of the exchange offer and the mergers.

Actual revenue synergies, cost savings, growth opportunities and efficiency and operational benefits that result from the proposed combination may be lower and may take a longer time to achieve than LANLATAM currently expects.

The integration of two large companies also presents significant management challenges. In order to achieve the anticipated benefits of the proposed combination, the operations of the two companies will need to beare being reorganized and

their resources will need to be combined in a timely and flexible manner. There can be no assurance that LANLATAM will be able to implement these steps as anticipated or at all. If LANLATAM fails to achieve the planned restructuring effectively within the time frame that is currently contemplated or to the extent that is currently planned, or if for any other reason the expected revenue synergies, cost savings and growth opportunities fail to materialize, the exchange offer, the mergers and the other combination transactions described in this annual report may not produce the benefits LAN currentlyLATAM anticipates. As of December 2012 the merged company has establish numerous of initiatives in order to integrate both companies and generate the estimated synergies. During the first six months of joint operations LATAM Airlines Group recognized US$72 million in merger synergies, before merger related expenses.

LANLATAM has incurred and will continue to incur significant costs and expenses in connection with the proposed combination and integration of the business operations of LAN and TAM

LANLATAM has incurred and will continue to incur substantial expenses in connection with the proposed combination and the integration of LAN and TAM. LAN incurred approximately US$15 million in non-recurring expenses in connection with the proposed combination during 2011. In 2012, LATAM incurred US$47.0 million of non-recurring expenses on an as reported basis, in 2011,connection with the business combination and expectsintegration of LAN and TAM, principally relating to incurlegal and consulting fees, and travel expenses.This latter figure is in line with the company’s estimate of US$25200 million in such expenses in 2012.one—time costs related to the merger to be incurred over the first year after the business combination. Significant costs and expenses have been and are beingwere incurred related to the exchange offer, the mergers and the other transactions.transactions to effect the combination. These costs and expenses includeincluded financial advisory, legal, accounting, consulting and other advisory fees and expenses, reorganization and restructuring costs, severance/employee benefit-related expenses, filing fees, printing expenses and other related charges. Some of these costs are payable by LAN and TAM depending on the nature of the expense and regardless of whether the proposed combination is completed. There are also a large number of processes, policies, procedures, operations, technologies and systems that must be integrated in connection with the proposed combination. While bothAny delay in the integration of the business operations of LAN and TAM have assumed that a certain level of expenses would be incurred in connection with these transactions, there are manyor factors beyond LAN’s and TAM’sLATAM’s control that could affect the total amount or the timing of the integration and implementation expenses.

There may also beIf additional unanticipated significant costs are incurred in connection with the proposed combination that LAN may not recoup. Theseor integration of these businesses, such costs and expenses could, particularly in the near term, exceed the savings that LANLATAM expects to achieve from the elimination of duplicative expenses and the realization of economies of scale, other efficiencies and cost savings. Although LANLATAM expects that theseto achieve savings willand economies of scale sufficient to offset these integration and implementation costs over time, this net benefit may not be achieved in the near term or at all.

LAN willLATAM does not control the voting shares or board of directors of TAM

After completionFollowing the combination of the exchange offer, the mergersLAN and the other transactions contemplated by the transaction agreements:TAM:

As a result of this ownership structure:

LAN, the TAM controlling shareholders

LATAM and TEP Chile and other parties have entered into shareholdersshareholders’ agreements that establish agreements and restrictions relating to corporate governance in an attempt to balance LAN’sLATAM’s interests, as the owner of substantially all of the economic rights in TAM, and the TAM controlling shareholders, as the continuing controlling shareholders of TAM under Brazilian law, by prohibitinglaw. See “Item 7. Controlling Shareholders and Related Party Transactions—Shareholders’ Agreements.” These shareholders’ agreements prohibit the taking of certain specified material corporate actions and decisions without prior supermajority approval of the shareholders (5/6 of the total of the shareholders) and/or the board of directors of Holdco I or TAM. However, no assurances can be given that LANLATAM and the TAM controlling shareholders will be able to reach an agreement with respect to such supermajority voting or board matters in the future and if they do not, the businesses, financial condition, results of operations and prospects of the combined companies could be adversely affected. In addition, pursuant to these shareholder agreements, neither Holdco I, TAM nor TAM’s subsidiaries may take certain actions without the prior approval of a supermajority of the board of directors and/or the shareholders of Holdco I or TAM. As a result of these supermajority requirements, these actions will effectively require the prior approval of both LANLATAM and TEP Chile S.A. (“TEP Chile”) (which will beis wholly owned by the TAM controlling shareholders). 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, encumbering assets, entering into certain agreements, making certain investments, modifying rights or claims, entering into settlements, appointing executives, creating security interests, 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 securities interest or entering into guarantees and agreements with related parties.

Uncertainties associated with the proposed combination of LAN and TAM may cause a loss of management personnel and other key employees that could adversely affect LAN, TAM and/or the combined companiesLATAM’s operations.

The success of the proposed combination is dependent, in part, on the experience and industry knowledge of their senior management and other key employees of LAN and TAM and their ability to execute their business plans. In order to be successful, LAN, TAM and the combined companiesLATAM must be able to retain the senior management and other key employees and their ability to attract highly qualified personnel in the future. Current and prospective employees of LAN and TAM may experience uncertainty about their roles within LATAM following completion of the proposed combination, which may have an adverse effect on theLATAM’s ability of LAN, TAM or the combined companies to retain or attract senior management and other key employees. Competition for highly qualified personnel in the various localities and business segments in which LAN and TAM operate,LATAM operates is intense. No assurances can be given that LAN and TAM or, after completion of the proposed combination, the combined companiesLATAM will be able to retain or attract senior management and other key employees following the merger to the same extent that LAN and TAM havehad previously been able to do so.

The financial results of LATAM will beare more exposed to foreign currency fluctuations following the combination with TAM.

The financial results of LATAM are more exposed to currency exchange rate fluctuations as a result of the proposed combination with TAM and the resulting increase in the proportion of its assets, liabilities and earnings that are denominated in currencies other than US dollarsU.S. dollars.

LATAM will prepareprepares and presentpresents its consolidated financial statements in US dollars.U.S. dollars, which was the functional and presentation currency of LAN. The proposed combination willof LAN and TAM has significantly increaseincreases the proportion of LAN’sLATAM’s consolidated net assets, revenues and income in non-USnon-U.S. dollar currencies, primarily Chileanpesos and Brazilianrealreais. 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. The consolidated financial condition and results of operations of LATAM will therefore be more sensitive to movements in exchange rates between the USU.S. dollar and other currencies. A depreciation of non-USnon-U.S. dollar currencies relative to the USU.S. dollar could have an adverse impact on the financial condition, results of operations and prospects of LATAM.

LATAM’s future results will suffer if it cannot effectively manage its expanded operations following completion of the proposed combination

Following the completion of the proposed combination, theThe size of LATAM’s combined business following the businesscombination of the combined companies will beLAN and TAM is significantly larger and more complex than the current businessprevious businesses of LAN or TAM. LAN’sTAM individually. LATAM’s future success will depend, in part, on LAN’sLATAM’s ability to manage this expanded business, which will pose substantial challenges for management, including those related to the management and monitoring of new operations and associated increased costs and complexity. There can be no assurances that LATAM will be successful or that it will realize the expected operating efficiencies, cost savings, revenue synergies and other benefits currently anticipated by LAN and TAM from the proposed combination.

The proposedFollowing the combination, could cause aFitch Ratings Inc. (“Fitch”) lowered LATAM’s credit rating. This downgrade, of LAN’s credit ratings, whichor further downgrades, could have a negative effect on LAN’s business

Prior to the combination, TAM currently hashad a lower credit rating and iswas more leveraged than LAN. As a result ofFollowing the proposed combination, LAN’sFitch Ratings Inc. downgraded LATAM Airlines Group S.A.’s long-term foreign currency issuer default rating from BBB to BB+, which is below investment grade. It is possible that LATAM’s credit rating could be further downgraded by one or more credit rating agencies, whichagencies. The Fitch downgrade and any further downgrades could increase LATAM’s financing costs and affect LATAM’s ability to finance future fleet acquisitions and could adversely affect the financial condition, results of operations and prospects of the combined companies. If LAN’s credit rating is downgraded, it could affect LAN’s ability to finance future fleet acquisitions and/or increase LAN’s financing costs.

It may take time to combine the frequent flyer programs of LAN and TAM

LAN and TAM each currently runpreviously ran their own frequent flyer programs. While LANLATAM intends to integrate these programs so that passengers can use frequent flyer miles earned with either LAN or TAM interchangeably, there is no guarantee that this integration 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 LANLATAM effectively combines these programs, passengers may prefer frequent flyer programs offered by other airlines, which may adversely affect our business.

LATAM will have to withdraw from an existing airline alliance to which LAN or TAM belongs no later than April 2014.

LAN is currently a member of the oneworldoneworld^® airline alliance while TAM is a member of the Star Alliance airline alliance. Although LAN and TAM will continue operatingto operate under their existing, separate operating certificates afterfollowing the proposed combination, due to conditions imposed by the Chilean and Brazilian antitrust regulators, LAN and TAM may not participate in more than one airline alliance after April 2014. LATAM announced in March 2013, that TAM will leave the endStar Alliance and become a member of the 24-month period following completion of the proposed combination. LAN and TAM are currently evaluating and have not decided yet to whichoneworld^® airline alliance they will belong afterduring the completionsecond quarter of 2014, in order to fulfill a requirement imposed on LATAM by the proposedChilean and Brazilian antitrust authorities in connection with the combination with TAM. The withdrawal from one of the alliances after the proposed combinationStar Alliance may impede LATAM from providing customers with exactly the same benefits currentlypreviously provided by LAN and TAM, such as the same travel destinations, combined reservation system, itinerary flexibility, among others. As a result, passengers may prefer alliances offered by LATAM’s competitors, and consequently decide to fly with them, which may adversely affect LATAM’s business.

Risks Related to our Operations and the Airline Industry

Our performance is heavily dependent on economic conditions in the countries in which we do business and 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, recession in Argentina and poor economic performance in certain emerging market countries in which we operate. The occurrence of similar events in the future could adversely affect our business. In fact, starting as of late 2008, and during 2009, many of the countries we serve, including Chile, experienced economic slowdowns or recessions,

which translated into a substantial weakening of passenger and cargo demand. 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:

Driven by the severe downturn in the global economy, including in the economies of many of the countries we serve, we began to experience weakening demand in cargo late in 2008, and this weak demand continued into 2009. However, we began to experience a recovery in cargo traffic in late 2009, which continued improving during 2010 and 2011. If the regional economic environment continues its positive performance, demand in cargo may continue to grow during the current year. 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.

The success of ourOur business depends upon keyis highly regulated and changes in the regulatory issues and these issuesenvironmental 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”) (management techniques utilizing passenger demand forecasting and fare mix optimization techniques to maximize profit for an airline) and adjust prices to reflect cost pressures. High levels of government regulation may limit the scope of our operations and our growth plans, especially in the event of deterioration of the relations between the countries in which we operate or the public perception of foreign companies in local markets. Accordingly, regulatory issues could adversely affect our business and results of operations.

Our business, financial condition and results of operations could be adversely affected if we or certain aviation authorities (among them, those from Argentina, Brazil, Chile, Ecuador, Mexico, Peru, Colombia andin the United States)countries served by our airlines fail to maintain the required foreign and domestic governmental authorizations. In order to maintain the necessary authorizations issued by the ChileanJunta Aeronáutica Civil(“JAC”) and technical operative authorizations issued by the ChileanDirección General de Aeronáutica Civil(“DGAC”), and other corresponding local authorities of the countries in which we operate, we must continue to comply with applicable statutes, rules and regulations pertaining to the airline industry, including any rules and regulations that may be adopted in the future.

We depend on strategic alliances or commercial relationships in many of the countries in which we operate and our business may suffer if any of our strategic alliances or commercial relationships 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 and, in particular, with American Airlines, Iberia, Qantas oroneworldoneworld^®, Japan Airlines, Korean Airlines, Cathay Pacific, Alaska Airlines deteriorates, or any of these agreements are terminated, our business, financial condition and results of operations could be negatively affected. By requirement of the antitrust authorities in Chile, LATAM is required to withdraw from an existing airline alliance, to which LAN or TAM belongs by April 2014. To comply with this requirement on March 2013 LATAM Airlines announced that TAM will leave the Star Alliance to joinoneworld^® in the second quarter of 2014.

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. Our operations could be constrained by any delay or inability to gain access to key routes or airports, including:

We operate numerous international routes, subject to bilateral agreements, and also internal flights within Chile, Peru, Brazil, Argentina, PeruEcuador, Colombia and other countries, subject to local route and airport access approvals. Bilateral aviation agreements as well as local aviation approvals frequently involve political and other considerations outside of our control. See “Item 4. Information on the Company—Business Overview—Regulation—Route Rights”.Regulation.”

There can be no assurance that existing bilateral agreements between 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 or destinations or the imposition of other sanctions could also have a material adverse effect. We cannot assure that aA change in a foreign government’sthe administration of current laws and regulations or that the adoption of new laws and regulations will notin 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.

If we are unable to obtain favorable take-off and landing authorizations at certain high-density airports, our business, financial condition and results of operations could be adversely affected. There can be no assurance that we will be able to obtain all requested authorizations and slots in the future because, among other factors, government policies regulating the distribution of the authorizations and slots are subject to change.

A failure to successfully implement our growth strategy would harm our business and the market value of the ADSs and our common shares.

Our growth strategy involves increasing the frequency of flights to the markets we currently serve and expanding our service to new markets. In order to carry out this strategy, we must be able to identify the appropriate geographic markets upon which to focus and to gain suitable airport access and route approval in these markets. There can be no assurance that the new markets we enter or in which we are seeking to expand our operations will provide passenger and cargo traffic that is sufficient to make our operations in those new markets profitable.

The expansion of our business will also require additional skilled personnel, equipment and facilities. An inability to hire and retain skilled personnel or secure the required equipment and facilities efficiently and cost-effectively may adversely affect our ability to execute our growth strategy. Expansion of our markets and flight frequencies may also strain our existing management resources and operational, financial and management information systems to the point that they may no longer be adequate to support our operations, requiring us to make significant expenditures in these areas.

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 disasters, epidemics, 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. For example, in January 2010, bad weatherextreme floods affected the city of Cuzco in Peru, causing important

human and material damage and severely affecting this tourist destination. This affected our operations, which led us to decrease our capacity in order to improve load factors. We estimateestimated the net impact of decreased passenger operations due to this weather event to have been approximately US$15.0 million.

In addition, on February 27, 2010, an earthquake struck Chile causing major damages mainly in the southern regions of the country. This earthquake damaged the terminal building at the Santiago International Airport causing the suspension of LAN’s passenger services to and from Chile until March 1, 2010. Lan Cargo’s2010 and reduced passenger operations suffered no impact since Lan Cargo has flexibility to redesign itineraries if and when needed. As ofuntil March 28, 2010, operations were restored to normal levels and the airport started to operate normally. As of December 31, 2010, we estimate2010. We estimated the net impact of decreased passenger operations due to the earthquake to have been approximately US$30 million.

In 2011, the Company was also impacted by the presence of volcanic ash on certain routes in Chile and other destinations, which we estimate resulted in US$36.618 million losses.in losses, in addition to forgone revenue.

Terrorist attacks may also have a severe adverse impact on the airline industry. For example, the terrorist attacks in the United States on September 11, 2001 substantially affected the airline industry, particularly foreign air carriers operating international service to and from the United States. Throughout South America, passenger traffic also decreased substantially, although the decrease was less severe than that in the United States. The airline industry experienced increased costs following the September 11, 2001 terrorist attacks. Airlines have been required to adopt additional security measures and may be required to comply with more rigorous security guidelines in the future.

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. Presently, there is a trend towards increases in jet fuel prices because of the increased demand caused by the 2010 recovery in the global economy coupled with conflicts during 2011 in Egypt and Libya that affected global fuel supply. It is impossible for us to predict if we will be able to fully protect ourselves against the volatility of fuel costs.

A significant portion of our cargo revenues comes from relatively few product types and may be impacted by events affecting their production or trade.

Our cargo demand, especially from Latin American exporters, is concentrated in a small number of product categories, such as exports or fish, and sea products and produce exports from Chile and Peru, and exports of fresh flowers from Ecuador and Colombia. Events that negatively affect the production or trade of 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.

In mid 2007, there was an outbreak of infectious salmon anemia virus (“ISA Virus”) in Chile, which was temporarily contained during 2008 but has continued to affect exports since then. The outbreak of ISA Virus has caused, and may continue to cause, a significant decline in salmon exports and has had, and may continue to have, an adverse impact on our cargo operations.

Our operations are subject to fluctuations in the supply and cost of jet fuel, which could negatively impact our business.

Higher jet fuel prices or a shortage in the supply of fuel could cause a reduction in our scheduled service and 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 34%36.3% of our pro forma operating expenses in 2011.2012. 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, some of our hedging methods may also limit our ability to take advantage of any decrease in fuel prices. Although we have implemented measures to pass a portion of incremental fuel costs to our customers, our ability to lessen the impact of any increase using these types of mechanisms may also 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.

Furthermore, high aircraft utilization rates increase the risk that, if an aircraft falls behind schedule, it could remain behind schedule for up to two days. Such delays could result in a disruption in our operating performance, leading to customer dissatisfaction due to any resulting delays or missed connections.

We fly and depend upon Airbus and Boeing aircraft, and our business is at risk 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, 2011,February 28, 2013, we operated a fleet of 81241 Airbus, 5475 Boeing and 14 Dash aircraft. These risks include:

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.

We are often affectedhave invested in new Boeing 787 “Dreamliner” aircraft, the operation of which has been delayed as a result of actions taken by certain factors beyond our control, including weather conditions, which can affect our operations.the Federal Aviation Administration (the “FAA”).

Revenues for airlines depend onIn 2012, LATAM received the numberfirst three Boeing 787-8 Dreamliners, and became the first airline in the Americas (and one of passengers carried, the fare paid by each passengerfirst in the world) to operate this modern and service factors, such asefficient aircraft. The incorporation of the timeliness of flight departures and arrivals. During periods of fog, ice, low temperatures, storms or other adverse weather conditions, some or allBoeing 787-8 Dreamliners into our fleet is part of our flights maystrategic objective to incorporate new, modern and fuel efficient aircraft into our existing fleet.

During January 2013, two incidents occurred with Boeing 787 aircraft operated by Japan Airlines, involving a fire risk to the battery of the aircraft. By recommendation of the FAA, LATAM ceased operations of its three Dreamliner aircraft in January 2013. On April 19, 2013, the FAA approved a solution proposed by Boeing to address the battery problems, and subject to the implementation of this corrective solution and approval from safety regulators, LATAM and other airline groups will be cancelled or significantly delayed, reducing our revenues.able to resume operations with Dreamliner aircraft. As of the date of this annual report, LATAM has not yet established a date to resume the operations of the Boeing 787. Delays in the approval of the resumption of operations with the Dreamliner aircraft could occur, and new problems that adversely affect the operation of the Boeing 787 aircraft could be discovered. We cannot assure you when we will be able to resume operations with this aircraft.

Losses and liabilities in the event of an accident involving one or more of our aircraft could materially affect our business.

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:

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 airline affiliates or alliance partners or affecting 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 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 could enter our markets and compete with us on any of these bases. Several of our competitors are larger than us and havebases, including by offering lower prices, more attractive services or increasing their route capacities in an effort to gain greater brand recognition and greater resources than we do.market share. Competing carriers include investor-owned, government-subsidized and national flag carriers of foreign countries as well as low-cost carriers offering discounted fares. The U.S. -ChileU.S.-Chile and other open skies agreements may subject us to

further competition from international carriers. In addition, the Brazilian Government is considering raising the regulatory limitation on foreign capital investments in the Brazilian airline industry from 20% to 49% of voting capital, which could lower barriers to entry and increase competition in this market.

In addition to traditional competition among airline companies, we face competition from companies that provide ground transportation, especially in our domestic cargo and passenger businesses, as well as sea transportation for our cargo business. Competition could reduce our passenger traffic and cargo demand, forcing us to reduce our fare levels, which could have a material adverse effect on our revenues and level of operations.

Chile may open its domestic aviation industry to foreign airlines without restrictions, which may change the competitive landscape of the domestic Chilean aviation sector and affect our business and results of operations

Currently, Chilean laws and regulations permit foreign airlines to operate domestic flights in Chile. Nevertheless, the rules currently prevent foreign-based carriers from flying within Chile without setting up a Chilean subsidiary first. There are currently no foreign airlines participating in the Chilean domestic market. However, on January 18, 2012, both the Secretary of Transportation and the Secretary of Economics of Chile announced steps towards unilaterally opening the Chilean domestic skies in the near term. Chilean Domestic Unilateral Open Skies Rule may change the competitive landscape of the Domestic Chilean Aviation Sector, as it will be easier for foreign companies in the future 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 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.

A recent proposal by the Brazilian government would result in the reallocation of certain takeoff and landing slots at Brazilian airports; if this proposal is enacted in its current form, it would reduce our access to important airport infrastructure and adversely affect our results of operations.

The Brazilian government has proposed, but has not yet implemented, regulations to reallocate existing takeoff and landing slots at major airports in Brazil from TAM and our competitor, GOL, to smaller airlines and new market entrants, in order to stimulate small airline access to airport infrastructure. These proposed regulations also focus on operational efficiency, and require airlines to meet specified punctuality and frequency benchmarks. We rely on access to takeoff and landing slots at the Guarulhos and Congonhas airports in Sao Paolo, as well as other major airports in Rio de Janeiro and throughout Brazil, to conduct our Brazilian passenger operations. The reallocation of any of our slots to other market participants could adversely affect our operations, particularly at the Congonhas airport where we currently utilize almost half of the existing slots to service our scheduled capacity.

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.

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 areis subject to long-term operating leases. Our operating leases typically run from three to twelve 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.

We are incorporating various new technologies and equipment and their phase-in may have a negative impact on our service and operating standards.

In recent years we have decided to incorporate a number of new aircraft, equipment and systems. The decision to incorporate these new elements has been based on their potential to enhance customer satisfaction, increase efficiency and/or streamline processes. However, the phase-in of these elements may temporarily result in lower service and operating standards, which could affect how our customers perceive us and have a negative impact on our results of operations.

Our business may be adversely affected if we are unable to meet our significant future financing requirements.

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. 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. In the combination of LAN and TAM, the LATAM Airlines Group assumed debt and payment obligations, including under aircraft lease

obligations, of TAM, and as a result we have significantly increased our leverage. 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 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.

Variations in interest rates may have adverse effects on our interest payments business, financial condition, results of operations and prospects and the trading price of our ADRs and BDRs and preferred shares.

We are exposed to the risk of interest rate variations, principally in relation to the U.S. dollar London Interbank Offer Rate (“LIBOR”), as well as the Long Term Interest Rate (Taxa de Juros de Longo Prazo, or TJLP), with respect to TAM’s loans denominated in reais. Many of our operating and financial leases are denominated in U.S. dollars and bear interest at a floating rate. Following the combination of LAN and TAM, LATAM is more exposed to fluctuations of interest rates, as more than half of TAM’s outstanding debt, principally, its financial leases, as well as its operating leases, bears interest at a floating rate. On a combined basis, approximately 62% of LATAM’s outstanding debt as of December 31, 2012 bears interest at a floating rate, 62% of which is hedged to a fixed rate using derivative instruments.

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 addition, concerns have been expressed that some of the member banks surveyed by the British Bankers’ Association (the “BBA”) in connection with the calculation of LIBOR rates may have been under-reporting the interbank lending rates applicable to them in order to avoid an appearance of capital insufficiency or adverse reputational or other consequences that may result from reporting higher interbank lending rates. Some member banks have admitted to under-reporting, and under-reporting may have resulted in LIBOR rates being artificially low. The BBA in June 2008 announced changes to the LIBOR rate-fixing process including tighter scrutiny of rates contributed by member banks into the rate-fixing mechanism and increasing the number of institutions surveyed to set LIBOR rates, and is continuing its consideration of ways to strengthen the oversight of the rate calculation process. Actions by the BBA, regulators or law enforcement agencies may result in changes to the manner in which LIBOR is determined. Uncertainty as to the nature of any potential changes in, or volatility in the calculation of, LIBOR may adversely affect our interest and lease payments for obligations which bear interest using LIBOR as a reference rate, including our fleet financing arrangements.

Increases in insurance costs and/or significant reductions in coverage could harm our financial condition and results of operations.

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 in significant decreases of insurance coverage, as it happenedocurred after the 9/September 11, 2001 terrorist attacks. Increases in insurance costs and/or significant reductions in coverage could harm our financial condition and results of operations.

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 of domestic and international air traffic control systems and the air traffic control infrastructure in the markets in which we operate. Equipment failures, 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.

Our financial success depends on the availability and performance of key personnel, who are not subject to non-competition restrictions.

Our success depends to a significant extent on the ability of our senior management team and key personnel to operate and manage our business effectively. Our employment agreements with key personnel do not contain any non-competition provisions applicable upon termination. Competition for highly qualified personnel is intense. If we lose any executive officer, senior manager or other key employee and are not able to obtain an adequate replacement, or if we are unable to attract and retain new qualified personnel, our business, financial condition and results of operations could be materially adversely affected.

Our business may experience adverse consequences if we are unable to reach satisfactory collective bargaining agreements with our unionized employees.

Approximately 49%As of ourDecember 31, 2012 approximately 20% of LATAM’s employees, including administrative personnel, cabin crews, flight attendants, pilots and maintenance technicians are members 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.

PressureCollective 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 how our customers perceive us.

For example, during the third quarter of 2001, members of one of our pilot unions implemented a series of actions that disrupted our services prior to the negotiation of their collective bargaining agreement, which had a negative impact on our operations and our profitability.

Increases in our labor costs, which constitute a substantial portion of our total operating costs,expenses, could directly impact our earnings.

Labor costs constitute a significant percentage of our total operating costs (19.6%expenses (19.7% in 2011),2012 on a pro forma basis) 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.

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 pilots and maintenance technicians. In 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. We cannot assure you that we will be able to recruit, train and retain the qualified employees that we need to continue our current operations or replace departing employees. A failure to hire and retain qualified employees at a reasonable cost could materially adversely affect our business, financial condition and results of operations.

FailureThe regulatory structure of Brazilian civil aviation is undergoing change and we have not yet been able to complyevaluate the results of this change on our business and results of operations.

Scheduled air transportation services are considered public utilities in Brazil and are subject to extensive regulation by the Brazilian government. Over recent years, the Brazilian regulatory authorities have taken a more proactive role in monitoring the development of the Brazilian civil aviation market. For example, in an effort to prevent excess supply, the authorities have established rigorous criteria for air transport companies to follow when creating new routes or increasing flight frequencies. Various legislative initiatives have taken place, including the drafting of a bill to amend the Brazilian Aeronautics Code, Law No. 7,565 of December 19, 1986, the establishment of ANAC, the national aviation agency that replaced the Departamento de Aviação Civil, or “DAC,” as the principal regulatory body for Brazilian civil aviation, and the Civil Aviation Secretariat (Secretaria de Aviação Civil), or SAC, created on March 18, 2011 pursuant to Provisory Measure (Medida Provisória) No. 527, or Provisory Measure No. 527. See “Item 4. Information on the Company—Business Overview—Regulation—Brazil—Route Rights.”

Operation of air transportation services, as well as airport infrastructure, is an exclusive right of the Brazilian government, which may choose to provide these services directly or through third parties by means of concessions or permits. TAM’s concession to operate public air transportation was obtained on December 9, 1996 and renewed on December 9, 2011, and it is valid until December 9, 2021. We cannot assure you that we will be able to automatically renew TAM’s concession when it expires. See “Item 4. Information on the Company—Business Overview—Regulation—Brazil—Aeronautical Regulation.”

Additionally, our capacity to grow our Brazilian operations is dependent on receiving the necessary authorizations from ANAC and the Bureau of International Relations (Superintendência de Relações Internacionais, or “SRI”). We cannot assure you that we will obtain all necessary authorizations in the future and any failure to do so would require us to re-evaluate our strategies.

The Brazilian civil aviation structure may change significantly in the future and we may not be able to anticipate or evaluate how this change will affect our business and results of operations. We cannot assure you that these or other changes in Brazilian civil aviation regulations will not have an adverse effect on our business or results of operations. Any change that requires us to focus a significant level of resources on compliance with new aviation regulations, for example, would result in additional expenditure on compliance and consequently adversely affect our results of operations.

In addition, our ability to increase prices to offset an increase in our fixed expenses may be adversely affected in the event that the Brazilian civil aviation authorities impose price control restrictions on air transportation services. If we are unable to adequately increase prices to offset increases in fixed expenses, this would adversely affect our results of operations. Changes in the regulations issued by the Brazilian government or the occurrence of any of the above factors may increase our expenses, limit our capacity to expand our routes or adversely affect our business and results of operations.

Our operations are subject to local, national and international environmental regulations; costs of compliance with applicable environmental regulations, or the consequences of noncompliance, could adversely affect our results, our business andor 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 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.

The European Union (“EU”) has adopted a directive under which the existing emissions trading scheme (the “ETS”) in each EU member state is to be extended to airlines. This directive would require us to submit annual emission allowances in order to operate routes to and from EU member states. The ETS’s application to flights was

scheduled to begin in 2012, however, its implementation to international flights has been delayed by the EU and the EU is not expected to collect allowances from airlines in 2013 (it was enforced with respect to airlines that conducted intra-European flights during 2012). Although it is uncertain when and if the ETS will be implemented, it is increasingly likely that we will be required to participate in some form of an international aircraft emissions program in the future. Currently, we operate 6 routes to and from Europe, and service additional destinations through our code-share agreements. The cost of compliance with any international emissions program, including the ETS, is difficult to estimate; however, these costs could be significant and could require us to reduce our emissions, purchase allowances or otherwise pay for our emissions, which could have a significant impact on our operating costs or impact the frequency of our flights to and from EU member states.

Risks Related to Chile, Brazil and Other Emerging Market Countries in which we Operate

Developments in Latin American countries and other emerging market countries may adversely affect the Chilean economy, 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 operations in emerging market countries, 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 economy or the market value of our securities and have a material adverse effect on our business, financial condition and results of operations. Beginning late 2008, and continuing during 2009, many of the countries we serve, including Chile, experienced economic slowdowns or recessions, which resulted in a substantial weakening of demand. Although economic conditions in other emerging market countries may differ significantly from economic conditions in Chile, we cannot assure that events in other countries, particularly other emerging market countries, will not adversely affect the market value of, or market for, our common shares or ADSs.

Fluctuations in the value of the Chilean peso and other currencies in the countries in which we operate may adversely affect our revenues and profitability.

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 Chilean peso and the U.S. dollar or other currencies in the countries in which we operate could adversely affect our business, financial condition and results of operations. 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. Approximately 99%97% of our indebtedness at December 31, 20112012 is

denominated in U.S. dollars, 22%and 46% of our revenues and 47%58% of our operating expenses in 20112012 were denominated in currencies other than the U.S. dollar, mainly the Chilean peso. Ifpeso and the Brazilian real.If the value of the peso, or of other currencies in which revenues are denominated, declines against the U.S. dollar, we will need more pesos or other local currency to repay the same amount of U.S. dollars. The Chilean peso has experienced volatility in recent years, including an average nominal depreciation of 1.3% against the U.S. dollar in 2008, an average nominal depreciation of 4.7% against the U.S. dollar in 2009 and an average nominal appreciation of 4.6% against the U.S. dollar in 2010.2010, an average nominal appreciation of 5.3% against the U.S. dollar in 2011 and an average nominal depreciation of 0.7% against the U.S. dollar in 2012.

Following the combination of LAN and TAM, our exposure to the Brazilian real has increased, as a significant proportion of TAM’s revenues are denominated in reais. The Brazilian real has also experienced volatility and depreciated frequently over the past decade, including depreciation of 25.5% against the U.S. dollar in 2008, appreciation of 25.5% and 4.3% against the U.S. dollar in 2009 and 2010, respectively, and a depreciation of 12.6% against the U.S. dollar in 2011. In 2012, the Brazilian real depreciated by 16.7%. 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 bolivarvis à vis the U.S. dollar during the period of time between the time we are paid in Venezuelan bolivares and the time we are able to repatriate such revenues in U.S. dollars. See “Item 5. Operating and Financial Review and Prospects—LAN’s Financial Results Discussion: Year ended December 31, 2011 compared to year ended December 31, 2010—Cost2010.” As of Sales” and “—Year ended December 31, 2010 compared2012, the devaluation of the Venezuelan bolivar had a cash impact of US$10.6 million on our results.

The Brazilian government has exercised, and may continue to year ended December 31, 2009—Costexercise, significant influence over the Brazilian economy, which may have an adverse impact on our business, financial condition and results of Sales”.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. Following the combination of LAN and TAM, our operations in Brazil have increased significantly. As a result, our business, financial condition, results of operations and prospects, and the trading price of our common shares and ADSs, may be adversely affected by changes in Brazilian governmental policies relating to Brazilian economic growth, inflation, interest rates, exchange control policies, fiscal policy and changes in tax law, liquidity of domestic capital and lending markets, government control of oil production activities and oil refinement and other general economic factors.

We cannot predict what future fiscal, monetary, social security or other policies will be adopted by current or future Brazilian governments, or whether these policies will adversely affect the Brazilian economy. In addition, possible political crises may affect the confidence of investors and the public in general, which may result in economic deceleration and affect the trading prices of securities issued by Brazilian companies.We are not required to disclose as much information to investors as a U.S. issuer 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 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 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.

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, 2012 our controlling shareholders,February 28, 2013, the LATAM Controlling Shareholders, in the aggregate, beneficially owned 33.9%25.68% of our voting common shares, and the TAM Controlling Shareholders, in the aggregate, beneficially owned 13.56% of our voting common shares. The LATAM Controlling shareholdersShareholders are in a position to elect fourthree of the nine members of our board of directors and are in a position to direct our management. In addition, underthe 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 that the TAM Controlling Shareholders 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 its chairman to serve in this role, who currently is Mauricio Amaro.

Trading of our ADSs and common shares in the securities markets is limited and could experience further illiquidity and price 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 that you wish to do so 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 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.

Future changes in Chilean foreign 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. Further, future changes in withholding taxes could negatively affect non-Chilean residents that invest in our shares.

When we established our ADS facility as part of our initial public offering in 1997, there were foreign exchange controls in Chile. At that time, in order to allow the depositary and investors to be able to enter into foreign exchange transactions to repatriate from Chile amounts they received in connection with the deposited shares of common stock (including dividends and proceeds from the sale in Chile of the underlying shares of common stock and any rights with respect thereto), we entered into a foreign investment contract (the “Foreign Investment Contract”) with the Central Bank and the depositary. The Foreign Investment Contract guaranteed ADS investors and the depositary access to the Formal Exchange Market to convert amounts from Chilean pesos into U.S. dollars and to repatriate such amounts.

In 2001, a new Compendium of Foreign Exchange Regulations (the “New Compendium”) removed exchange controls and many other barriers to investment. However, even though there are no longer foreign exchange controls in Chile, all foreign investment contracts (including the Foreign Investment Contract), continue to remain in full force.

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 Information—Foreign Investment and Exchange Controls in Chile”.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 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.

ITEM 4.

INFORMATION ON THE COMPANY

A. HISTORY AND DEVELOPMENT OF THE COMPANY

General

LanLATAM Airlines Group is a publicly-held stock corporation (sociedad anónima abierta) incorporated underChile-based airline holding company formed by the lawsmerger of LAN of Chile with unlimited duration. Lanand TAM of Brazil in 2012. Following the combination, LAN Airlines isS.A. became “LATAM Airlines Group S.A.” and TAM continues to exist as a companysubsidiary of Holdco I and a subsidiary of LATAM . LATAM is primarily involved in the transportation of passengers and cargo.cargo and operates as one unified, merged business enterprise with two separate brands: LAN and TAM.

TheLATAM is a publicly traded corporation listed in the Santiago Stock Exchange (“SSE”), the Valparaiso Stock Exchange, the Chilean Electronic Exchange, the New York Stock Exchange (“NYSE”) and the Brazilian Stock Exchange (“Bovespa”).

LATAM’s history goes back to 1929, when the Chilean government founded Lan Airlines (formerly Lan Chile S.A.) in 1929. Lan AirlinesLAN. LAN was a government-owned company from 1929 until its incorporation in 1983. WeThe company began international service to Buenos Aires, Argentina in 1946, to the United States in 1958 and to Europe in 1970. In 1989, the Chilean government sold 51.0% of Lan Airlines’sLAN’s capital stock to Chilean investors and to Scandinavian Airlines System. In 1994, our controlling shareholders together with other major shareholders acquired 98.7% of Lan Airlines’s stock,LAN’s stocks, including the remaining stockstocks held by the Chilean government, in a series of transactions. As of February 29, 2012, our controlling shareholders held 33.9% of our capital stock. For more information about our controlling shareholders, see “Item 7. Controlling Shareholders and Related Party Transactions—Controlling Shareholders” and “Item 7. Controlling Shareholders and Related Party Transactions—Related Party Transactions”. In 1997, Lan AirlinesLAN was listed on the New York Stock Exchange, becoming the first Latin American airline to trade its ADRs on this financial market.

Since thisOver the past decade, LAN has significantly expanded its operations in Latin America, initiating services in Peru in 1999, in Argentina in 2005 and in Colombia in 2010 through the acquisition of our capital stockAerovias de Integracion Regional, Aires S.A. (dba “LAN Colombia”). The combination of LAN and TAM in 1994June 2012 continued to expand the Company’s operations in Brazil, where TAM is a leading domestic and international airline offering flights throughout Brazil with a strong domestic market share, international passenger services and significant cargo operations. TAM was founded in May 1997 (under the appointmentname CIT—Companhia de Investimentos em Transportes), for the purpose of our current management, we have grown our revenue baseparticipating in, managing and maintained our profitability every year despite significant challenges. Additionally, we have created a comprehensive network acrossconsolidating shareholdings in airlines. TAM began international services to Miami on 1998 and to Europe (Paris) in 1999. In September 2002, the region by forming, together with local partners, or acquiring, passenger affiliatesname was changed to TAM S.A. and its shares began to be publicly traded on Bovespa in June 2005. In 2006 TAM was also listed in the NYSE.

Following the combination, LATAM’s airline holdings include LAN and its subsidiaries in Peru, Ecuador, Argentina, and Colombia and Ecuador; TAM and its subsidiaries, including TAM Linhas Aereas, TAM Mercosur, TAM Airlines (Paraguay) and Multiplus; and LAN Cargo and its regional affiliates, which include ABSA (in Brazil), MasAir (in Mexico) and LANCO (in Colombia).

This association creates one of the largest airline groups in the world in terms of network connections, providing passenger transport services to approximately 135 destinations in 22 countries and cargo affiliatesservices to approximately 145 destinations in Brazil, Mexico26 countries, with a fleet of 330 aircraft and Colombia. In early 2004, we changed our corporate image and started using the “LAN” brand in order to better reflect the common values and attributes present in all the companies forming our network. We have complemented our own network with a set of bilateral alliances with carriers such as Americanalliances. In total, LATAM Airlines IberiaGroup has more than 53,000 employees and Qantas, and have been a memberranks among the top five airlines in the world in terms of theoneworld^® alliance since 2000.market capitalization.

Our principal executive offices are located at Presidente Riesco 5711, 20^th20th floor, Las Condes, Santiago, Chile and our general telephone number at this location is (56-2) 565-2525. We have designated LANLATAM Airlines Group as our agent in the United States, located at 970 South Dixie Highway, Miami, Florida 33156. Our website address iswww.lan.com. www.latamairlinesgroup.net. Information obtained on, or accessible through, this website is not incorporated by reference herein and shall not be considered part of this annual report. For more information contact Gisela Escobar, Director of Investor Relations at gisela.escobar@lan.com.

Combination of LAN and TAM

On June 22, 2012, LAN and TAM successfully completed an exchange offer resulting in the combination of the two businesses and the creation of LATAM Airlines Group.

The LAN and TAM boards of directors considered a variety of factors in determining to enter into the business combination. The main reasons in favor of the combination were as follows:

Following the combination, on July 18, 2012, the registration of TAM as a publicly listed company in Brazil was cancelled and TAM was delisted from Bovespa.

In order to implement this combination, the TAM controlling shareholders formed four newsociedades anónimas cerradas with limited liability under the laws of Chile: TEP Chile, Holdco I, Holdco II and Sister Holdco. After the transaction was completed, Holdco II and Sister Holdco ceased to exist, and the current ownership and organizational structure of LATAM Airlines Group is as follows:

TAM S.A., the holding company, has two significant operating susbsidiaries, TAM Linhas Areas S.A. (“TLA”) and Multiplus S.A.

LATAM Airlines Group has begun integrating its business units and the transformation necessary to achieve the expected merger synergies, including the implementation of adjustments to its commercial practices and alignment of its international and domestic passenger operations. LATAM expects to fully achieve its estimated predicted merger synergies over the next four years; however, the Company’s short term results are expected to continue to reflect the transition costs as the business becomes fully integrated.

Capital Expenditures

For a description of our capital expenditures, see “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Capital Expenditures”.

Proposed Combination with TAM

On August 13, 2010, we jointly announced with TAM that we had entered into a non-binding Memorandum of Understanding relating to the proposed all-stock transaction that would combine the holdings of LAN and TAM under a single parent entity.

On January 18, 2011, we and the LAN controlling shareholders entered into the transaction agreements with TAM, TEP and the TAM controlling shareholders, which set forth the terms and conditions of a proposed business combination of LAN and TAM. For a discussion of how the proposed combination will be implemented and the terms of the transaction agreements, see “—The Transaction Agreements” below.

The Transaction Agreements

This section describes the material terms of the transaction agreements. The rights and obligations of the parties to the transaction agreements are governed by the express terms and conditions of the transaction agreements and not by this summary or any other information contained in this annual report on Form 20-F. The description in this section and elsewhere in this annual report on Form 20-F is qualified in its entirety by reference to the complete text of the transaction agreements, as amended, which are incorporated by reference into this annual report on Form 20-F. This summary does not purport to be complete and may not contain all of the information about the transaction agreements that is important to you. We encourage you to read the transaction agreements carefully and in their entirety.

Explanatory Note Regarding the Transaction Agreements

The following summary is included to provide you with information regarding the terms of the transaction agreements. This section is not intended to provide you with any factual information about either TAM or LAN. Such information can be found elsewhere in this annual report on Form 20-F, in the public filings TAM and LAN make with the SEC, and other relevant documents filed or that will be filed with the SEC in connection with the proposed business combination of LAN and TAM. Factual disclosures about TAM or LAN contained in this annual report on Form 20-F or in LAN’s or TAM’s respective public reports filed with the SEC may supplement, update or modify the factual disclosures about TAM and LAN contained in the transaction agreements. The representations, warranties and covenants made in the transaction agreements by TAM and LAN were qualified and subject to important limitations agreed to by TAM and LAN in connection with negotiating the terms of the transaction agreements. In particular, in your review of the representations and warranties contained in the transaction agreements and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purposes of establishing the circumstances in which a party to the transaction agreements may have the right not to commence the exchange offer if the representations and warranties of the other party proved to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the transaction agreements, rather than establishing matters as facts. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to shareholders and reports and documents filed with the SEC and in some cases were qualified by the matters contained in the disclosure schedules that TAM and LAN delivered in connection with the transaction agreements, which disclosures were not reflected in the transaction agreements. Therefore, the representations and warranties and other provisions in the transaction agreements should not be read alone but instead together with the information provided elsewhere in this annual report on Form 20-F and in the documents incorporated by reference into this annual report on Form 20-F. Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this annual report on Form 20-F, may have changed since the date of the transaction agreements and subsequent developments or new information qualifying a representation or warranty may have been included in this annual report on Form 20-F. In this annual report on Form 20-F, we refer to January 18, 2011, the date that the parties entered into the transaction agreements as the “signing date.Expenditures.”

Overview

To help you better understand the proposed combination and its component steps, set forth below is a description of those steps together with organizational charts that illustrate how the transaction will affect the ownership of LAN and TAM.

Current Ownership of TAM

As of March 28, 2012, TAM’s current authorized share capital was R$1,200,000,000, which consisted of 55,816,683 TAM common shares and 100,390,098 TAM preferred shares. The TAM controlling shareholders owned approximately 85.37% of the TAM common shares and 25.09% of the TAM preferred shares as of March 28, 2012 and the remaining TAM shares were held by TAM’s minority shareholders.

Current Ownership of LAN

As of March 28, 2012 LAN’s current authorized share capital was 341,000,000 common shares, which consisted of 340,977,309 LAN common shares. The LAN controlling shareholders owned approximately 33.84% of the LAN common shares as of March 5, 2012. For a description of the rights attached to LAN common shares, see “Item 10. Additional Information—Memorandum and Articles of Association.”

On the terms and subject to the conditions set forth in the transaction agreements, all or substantially all of the outstanding TAM common shares will be acquired by Holdco I and substantially all of the outstanding TAM preferred shares will be acquired by LAN through a series of transactions and corporate restructurings described below.

Subject to the terms and conditions of the transaction agreements, the proposed combination will be effected as described below:

in each case that are not owned by the TAM controlling shareholders in exchange for the same number of Holdco II shares.

and will receive a number of Sister Holdco shares equal to the total number of TAM common shares and TAM preferred shares that the TAM controlling shareholders contributed to TEP Chile.

After completion of the steps described in the immediately preceding bullet point, the ownership of TAM will be as follows:

After Holdco II accepts for exchange the TAM ADSs and TAM shares tendered into, and not withdrawn from, the exchange offer and immediately before the settlement of the exchange offer, each of Holdco II and Sister Holdco will merge with and into LAN as a result of which:

Promptly after settlement of the exchange offer, LAN will: