LATAM’s Annual Financial Information

		Year ended December 31,
		2013				2012				2011				2010				2009
		(in US$ millions, except per share and capital stock data)
Net income for the period			(263.8	)			(5.6	)			320.6				420.9				233.0
Earnings per share
Average number of Shares			487,930,977				412,267,624				339,424,598				338,790,909				338,790,909
Basic earnings per share (US$)(4)			(0.57613	)			(0.0463	)			0.94335				1.23882				0.68221
Diluted earnings per share(US$)			(0.57613	)			(0.0463	)			0.9426				1.23534				0.68221

		At December 31,
		2011				2010				2009				2008				2007
Operational Data:
ASKs (million)			48,153.6				42,355.2				38,776.2				35,176.1				31,556.0
RPKs (million)			38,422.9				33,147.5				29,836.2				26,951.7				24,001.2
ATKs (million) (6)			5,192.7				4,628.7				3,848.9				4,071.9				3,636.3
RTKs (million)			3,612.4				3,245.3				2,627.4				2,906.2				2,701.0
System ATKs (million)			10,056.1				8,968.8				7,811.8				7,659.9				6,999.9

		At December 31,
		2013				2012				2011				2010				2009
		(in US$ millions, except per share and capital stock data)
Balance Sheet Data:
Cash, and cash equivalents			1,984.9				650.3				374.4				631.1				731.5
Other current assets in operation			2,992.2				2,626.2				964.3				896.5				666.6
Non-current assets and disposal groups held for sale			2.4				47.7				4.7				5.5				10.9
Total current assets			4,979.5				3,324.2				1,343.4				1,533.1				1,409.0
Property and equipment			10,982.8				11,807.1				5,928.0				4,948.4				4,196.6
Other non-current assets			6,668.8				7,195.0				377.3				304.4				166.4
Total non-current assets			17,651.6				19,002.1				6,305.3				5,252.8				4,363.0
Total assets			22,631.1				22,326.3				7,648.7				6,785.9				5,772.0
Total current liabilities			6,509.1				6,297.5				2,322.1				2,144.0				1,523.3
Total non-current liabilities			10,795.6				10,808.1				3,869.2				3,341.8				3,142.7
Total liabilities			17,304.7				17,105.6				6,191.3				5,485.8				4,666.0
Issued Capital			2,389.4				1,501.0				473.9				453.4				453.4
Net equity attributable to the parent company’s equity holders			5,238.8				5,112.1				1,445.3				1,296.8				1,098.8
Minority interest			87.6				108.6				12.0				3.2				7.1
Total net equity			5,326.5				5,220.7				1,457.4				1,300.1				1,105.9

The table below presents unaudited operating data of LATAM as at and for the year ended December 31, 2009, 2010, 2011 (which represents LAN’s historical unaudited operating data), as at and for the year ended December 31, 2012 (which includes TAM’s unaudited operating data since June 23, 2012), and as at and for the year ended December 31, 2013. LATAM believes this operating data is useful to report the operating performance of its business and may be used by certain investors in evaluating companies operating in the global air transportation sector. However these measures may differ from similarly titled measures reported by other companies, and should not be considered in isolation or as a substitute for measures of performance in accordance with IFRS. This unaudited operating data is not included in or derived from LATAM’s financial statements.

Although most of our revenues and expenses are denominated in U.S. dollars, some are denominated in different currencies, such as the Chilean peso.peso or the Brazilian real. Fluctuations in foreign exchange rates could lead to changes in the value of these items in U.S. dollars. Nevertheless, the impact on our results stemming from any such fluctuations is significantlypartially mitigated by the fact that 78.0%42% of our revenues and 53.0%60% of our operating expenses for the year ended December 31, 2013 are denominated in U.S. dollars.

LATAM Unaudited Pro Forma Financial Information

The unaudited pro forma statement of income data for the year ended December 31, 2012 combines the historical consolidated statements of income of LAN and TAM, giving effect to the combination as if it had been consummated on January 1, 2012. The table below compares the actual financial information of LATAM as of December 31, 2013 with the unaudited pro forma financial information of LATAM as at December 31, 2012.

The unaudited pro forma information has been prepared using the purchase method of accounting, with LAN treated as the acquirer of TAM. A reconciliation of the unaudited LATAM Pro Forma Financial Information to LATAM’s audited consolidated income statements for the year ended December 31, 2012, which have been prepared in accordance with IFRS, is included under “Item 5. Operating and Financial Review and Prospects—A. Operating Results—LATAM Airlines Group Financial Results Discussion: Year ended December 31, 2013 (Actual) compared to year ended December 31, 2012 (Pro forma)—Pro Forma Adjustments.”

The LATAM unaudited Pro Forma Financial Information is provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations or the consolidated financial position of LATAM would have been had the proposed combination occurred on the date assumed, nor are they necessarily indicative of future consolidated results of operations or consolidated financial position of LATAM.

LATAM has incurred and expects to incur significant costs in the future associated with integrating the operations of LAN and TAM. The LATAM unaudited Pro Forma Financial Information does not reflect the costs of any integration activities that had not already been incurred as of dates for which financial information is presented or benefits that may result from realization of future cost savings from operating efficiencies or revenue synergies expected to result from the proposed combination. You should read the unaudited pro forma financial information below in conjunction with our audited consolidated financial statements and the notes thereto, as well as “Item 5. Operating and Financial Review and Prospects—A. Operating Results—LATAM Airlines Group Financial Results Discussion: Year ended December 31, 2013 (Actual) compared to year ended December 31, 2012 (Pro forma)—Pro Forma Adjustments,” “Presentation of Information” and “Item 5. Operating and Financial Review and Prospects.”

		Year ended December 31,
		2013				2012(1)
		(actual)				(pro forma)
The Company(2)(3)
Statement of Income Data:
Operating revenues
Passenger			11,061.6				11,017.0
Cargo			1,863.0				1,939.8
Total operating revenues			12,924.5				12,956.7
Cost of sales			(10,054.2	)			(10,536.7	)
Gross margin			2,870.4				2,420.1
Other operating income(4)			341.6				265.4
Distribution costs			(1,025.9	)			(1,059.7	)
Administrative expenses			(1,136.1	)			(1,174.8	)
Other expenses			(408.7	)			(364.5	)
Other gains/(losses)			(55.4	)			(34.8	)
Financial income			72.8				117.2
Financial costs			(462.5	)			(444.2	)
Equity accounted earnings			2.0				1.0
Exchange rate differences			(482.2	)			(290.1	)
Result of indexation units			0.2				(0.0	)
Income before income taxes			(283.9	)			(564.5	)
Income tax			20.1				69.7
Net income for the period			(263.8	)			(494.9	)
Income attributable to the parent company’s equity holders			(281.1	)			(523.1	)
Income attributable to non-controlling interests			17.3				28.3
Net income for the period			(263.8	)			(496.7	)
Earnings per share(5)
Average number of Shares			487,930,977				476,293,870
Basic earnings per share (US$)			(0.57613	)			(1.26891	)
Diluted earnings per share(US$)			(0.57613	)			(1.26891	)

The table below compares the unaudited operating data of LATAM as at December 31, 2013 with the unaudited pro forma operating data of LATAM as at December 31, 2012, which has been prepared by adding the operating data for TAM for the period between January 1, 2012 and June 22, 2012 to LAN’s historical operating data for that period. LATAM believes this operating data is useful to report the operating performance of its business and may be used by certain investors in evaluating companies operating in the global air transportation sector. However these measures may differ from similarly titled measures reported by other companies, and should not be considered in isolation or as a substitute for measures of performance in accordance with IFRS. The unaudited operating data and the unaudited pro forma operating data is not included in or derived from LATAM’s financial statements.

		For the year ended and as at December 31,
Pro Forma Operating Data:		2013 (actual)				2012(1) (pro forma)
ASKs (million)			131,690.7				132,185.9
RPKs (million)			106,466.4				103,886.1
ATKs (million)			7,651.9				7,645.9
RTKs (million)			4,466.7				4,488.3
ASK Equivalent (million)			212,236.8				212,669.5

Dividend Policy

In accordance with theLey sobre Sociedades Anónimas No. 18,046(Chilean (Chilean Corporation Act) andReglamento de Sociedades Anónimas(Regulation to the Chilean Corporation Act) (collectively, the “Chilean Corporation Law”), we must pay annual cash dividends equal to at least 30.0% of our annual consolidated distributable net income each year (calculated in accordance with IFRS), subject to limited exceptions. In 2011, we paid interim dividends related to year 2011 results totaling US$141.6 million, equivalent to 44.2% of the Company’s net income in 2011. The aforementioned dividends were paid as follows: (i) on September 15, 2011, we paid a first interim dividend of US$56.6 million related to results as of June 30, 2011, to the shareholders on record as of September 9, 2011, representing US$0.16677 per share; and (ii) on January 12, 2012, we paid a second interim dividend of US$ 85.0 million related to full year 2011 results, to shareholders on record as of January 6, 2012, representing US$0.24988 per share. The table below sets forth the cash dividends per common share and per ADS, 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. In August 2007, LAN modified the ratio of its common shares to one of its American Depositary Receipts (“ADRs”), from 5:1 to 1:1.

Dividend for year:		Payment date(s)		Total dividend payment				Number of common shares entitled to dividend				Cash dividend per common share				Cash dividend per ADS
				(U.S. dollars)				(in millions)				(U.S. dollars)				(U.S. dollars)
		May 20, 2010			10,939,558				338.79				0.03229				0.03229
2010		August 19, 2010			74,466,242				338.79				0.21980				0.2198
		January 13, 2011			125,000,294				338.79				0.36896				0.36896
		April 29, 2011			10,386,295				339.31				0.03061				0.03061
2011		September 15, 2011			56,594,769				339.36				0.16677				0.16677
		January 12, 2012			85,000,207				340.16				0.24988				0.24988

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—A. Consolidated Financial Statements and Other Financial Information—Dividend Policy”. and “Item 10. Additional Information—B. Memorandum and Articles of Association—Dividend and Liquidation Rights.” LATAM did not pay an interim dividend in 2013.

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, 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 25, 2014 the observed exchange rate was Ch$559.67= 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 25, 2014 the observed exchange rate was Ch$487.72=R$2.231 = US$1.00.

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.TAM

If the squeeze-out condition is not satisfied and we waive this condition, weLATAM Airlines Group 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

In June 2012, 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 proposedcompleted its 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 shareswhich has required significant efforts in order 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

LAN may be unable to fully realize the anticipated benefits of the proposed combination

After completion of the proposed combination, LAN will change its name to “LATAM Airlines Group S.A.” The proposed combination involves bringing together two large and complex businesses that currently operate as independent public companies. LAN will be required to devote significant management attention and resources to integrating certain aspects of theintegrate both business practices and operations of LAN and TAM.operations. 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. LAN 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 currently expects or at all.it expects. Potential difficulties LAN may encounter as part ofinclude 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 separatewith different airline certificates. It is possible thatcertificates may introduce other complexities in terms of 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.procedures,

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 LAN 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 be reorganized and their resources will need to be combined in a timely and flexible manner. There can be no assurance that LAN 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 2013 the merged company has established numerous initiatives in order to integrate both companies and generate the estimated synergies, but we cannot assure you that these initiatives will be successful.

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. LANIn 2012 and 2013, LATAM incurred approximately US$1559.2 and US$56.0 million, inrespectively, of non-recurring expenses in connection with the proposedbusiness combination in 2011, and expectsintegration of LAN and TAM, principally relating to incur US$25 million in such expenses in 2012. Significant costsconsulting fees and expenses have been and are being incurred related to the exchange offer, the mergers and the other transactions.travel expenses. 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 shareholdersLATAM 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 A. Major Shareholders—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 may causeOur assets include a losssignificant amount of management personnel and other key employees that could adversely affect LAN, TAM and/or the combined companiesgoodwill.

The successassets of the proposed combinationLATAM Airlines Group included US$3,728 million of goodwill as of December 31, 2013, US$3,564 million of which results from the merger with TAM. Under IFRS, goodwill is dependent, in part, on the experiencesubject to an annual impairment test and industry knowledge of their senior management and other key employees of LAN and TAM and their ability to execute their business plans. In ordermay be required to be successful, LAN, TAM and the combined companies must be able to retain the senior management and other key employees and their ability to attract highly qualified personneltested more frequently if events or circumstances indicate a potential impairment. Any impairment could result in the future. Currentrecognition of a significant charge to earnings in LATAM’s statement of income, which could materially and prospective employees of LAN and TAM may experience uncertainty about their roles within LATAM following completion ofadversely impact our consolidated results for the proposed combination, which may have an adverse effect on the 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 segmentsperiod in which LAN and TAM operate, is intense. No assurances can be given that LAN and TAM or, after completion of the proposed combination, the combined companies will be able to retain or attract senior management and other key employees to the same extent that LAN and TAM have previously been able to do so.impairment occurs.

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, the size of the business of the combined companies will be significantly larger and more complex than the current business of LANFitch Ratings Inc. (“Fitch”) lowered LATAM’s credit rating. This downgrade, or TAM. LAN’s future success will depend, in part, on LAN’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 TAMfurther downgrades from the proposed combination.

The proposed combination could cause a downgrade of LAN’s credit ratings, whichsecurities rating agencies, 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 resultFollowing the combination, Fitch 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. Later, on May 3, 2013, Fitch downgraded LATAM’s rating again, to BB, citing the Company’s operational performance and the deterioration of the proposed combination, LAN’s credit rating could be downgraded by one or more creditits capital structure. The Fitch downgrade and any further securities rating agencies whichdowngrades 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 LAN intends to integrateLATAM has integrated these programs so that passengers can use frequent flyer miles earned with either LAN or TAM interchangeably, there is no guarantee that thisfull 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

LAN is currentlyhas left the Star Alliance and become a member of the oneworldoneworld^® airline alliance whilealliance. This change could adversely affect LATAM’s business if clients prefer other alliances.

LATAM announced on March 5, 2013 that TAM iswill leave Star Alliance and become a member ofoneworld^® airline alliance. On October 1, 2013 LATAM ratifiedoneworld^® as the global alliance for its airline members. With this decision, TAM left Star Alliance airline alliance. Although LANon March 30, 2014 and TAM will continue operating under their existing separate operating certificates afterjoinedoneworld^® on March 31, 2014, complying with the proposed combination, due to conditionsrequirement imposed on LATAM by the Chilean and Brazilian antitrust regulators, LAN and TAM may not participateauthorities in more than one airline alliance afterconnection with the end of the 24-month period following completion of the proposed combination. LAN and TAM are currently evaluating and have not decided yet to which airline alliance they will belong after the completion of the proposed 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.

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—B. 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$36.6 million losses.in losses, in addition to forgone revenue.

As for year 2014, the World Cup in Brazil could affect adversely our normal operations. Increasing traffic to Brazil during the month of the event will create operational challenges and could result in increased delays. In addition, during the month of the event, we expect a strong decrease in corporate traffic, although we expect this decrease to be offset by an increase in leisure traffic, the net effect on our revenues and yields could be negative. Our LATAM Airlines brand could be damaged if we do not fully comply with our passenger’s requirements during that month or if infrastructure deficits at some of Brazil’s main airports that hinder our normal operations are associated with the Company.

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 (for example, the current conflict between Russia and Ukraine) 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%35% of our operating expenses in 2011.2013. 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 DecemberJanuary 31, 2011,2014, we operated a fleet of 81243 Airbus, 5472 Boeing and 147 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 affected by certain factors beyondhave invested in new Boeing 787 “Dreamliner” aircraft.

In 2012, LATAM received the first three Boeing 787-8 Dreamliners, and became the first airline in the Americas (and one of the first in the world) to operate this modern and efficient aircraft. The incorporation of the Boeing 787-8 Dreamliners into our control, including weather conditions, which can affect our operations.

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 allfleet 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 were able to resume operations with Dreamliner aircraft. As of May 2013, LATAM resumed normal operations of the Boeing 787. However, new problems could be cancelled or significantly delayed, reducingdiscovered that adversely affect the our revenues.ability to use the Boeing 787 in our operations.

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. Approximately 30% of LATAM’s outstanding debt as of December 31, 2013 bears interest at a floating rate. Out of this floating rate debt, 19% 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. On July 9, 2013, it was reported that NYSE Euronext had been awarded the contract to administer LIBOR beginning in 2014. It is not possible to predict the effect of any changes in the methods pursuant to which LIBOR is determined, the administration of LIBOR by NYSE Euronext and any other reforms to LIBOR that will be enacted in the United Kingdom and elsewhere. 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 happenedoccurred 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.operations and increases the risk that we experience uncovered losses.

Problems with air traffic control systems or other technical failures could interrupt our operations and have a material adverse effect on our business.

Our operations, including our ability to deliver customer service, are dependent on the effective operation of our equipment, including our aircraft, maintenance systems and reservation systems. Our operations are also dependent on the effective operation 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, 2013 approximately 31% 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 (20% in 2011),2013) 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.

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—B. 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.

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 did not collect allowances from airlines in 2013 (it was enforced only 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.

Changes in the Chilean corporate tax rate or tax regime could adversely affect our financial results.

On December 2013, Ms. Bachelet won the Chilean Presidential elections with a healthy parliamentary majority. Ms Bachelet’s campaign proposed a raise in the Chilean corporate tax, which is currently at 20%. Such an increase, if implemented, would adversely affect the tax provision for Chilean companies, including LATAM, and would also require an adjustment in deferred taxes to reflect the higher tax rate. This change, as well as any other change in the Chilean tax regime, could adversely affect the financial results of the Company.

Fluctuations in the value of the Chilean peso, Brazilian real 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%75% of our indebtedness at December 31, 2011 is

2013 was denominated in U.S. dollars, 22%and 42% of our revenues and 47%60% of our operating expenses in 20112013 were denominated in currencies other than the U.S. dollar, mainly the Chilean peso.peso 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 depreciationappreciation of 1.3%5.3% against the U.S. dollar in 2008,2011, an average nominal depreciation of 4.7%0.7% against the U.S. dollar in 2012 and an average nominal depreciation of 1.9% in 2013.

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 appreciation of 25.5% and 4.3% against the U.S. dollar in 2009 and an average nominal appreciation2010, respectively, a depreciation of 4.6%12.6% against the U.S. dollar in 2010.2011, a depreciation of 16.7% in 2012 and a depreciation of 10.4% in 2013. 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—Prospects A. Operating Results—LATAM’s Financial Results Discussion: Year ended December 31, 20112012 (actual) compared to year ended December 31, 2010—Cost2011 (actual).” As of Sales” and “—Year ended December 31, 2010 compared2013, the devaluation of the Venezuelan bolivar had a cash impact of US$11.0 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 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,2014, the LATAM Controlling Shareholders, in the aggregate, beneficially owned 33.9%25.5% of our voting common shares, and the TAM Controlling Shareholders, in the aggregate, beneficially owned 12.0% of our voting common shares. The LATAM Controlling 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—A. 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, who currently is Mauricio Amaro, to serve in this role.

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—D. Exchange Controls—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 you that we will decide to file a registration statement or that such rights will be available to ADS holders and shareholders located in the United States.

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 underChilean-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 134 destinations in 22 countries and cargo affiliatesservices to approximately 143 destinations in Brazil, Mexico27 countries, with a fleet of 339 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 Iberia and Qantas, and have been a member of theoneworld^® alliance since 2000.Group has more than 52,000 employees.

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.

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 ownership and organizational structure of LATAM Airlines Group as of December 31, 2013 was as follows:

TAM S.A., the holding company, has two significant operating subsidiaries, 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—B. Liquidity and Capital Resources—Capital Expenditures”.Expenditures.”

Proposed CombinationB. BUSINESS OVERVIEW

General

We are the leading passenger airline group in South America and the main air cargo operator in the region. We currently provide domestic and international passenger services in Chile, Peru, Ecuador, Argentina, Colombia and Brazil. We carry out our cargo operations through the use of belly space on our passenger flights and dedicated cargo operations using freighter aircraft through our cargo airlines in Chile, Brazil, Colombia and Mexico.

As of January 31, 2014, we serviced 16 destinations in Chile, 14 destinations in Peru, 6 destinations in Ecuador, 14 destinations in Argentina, 20 destinations in Colombia, 40 destinations in Brazil, 11 destinations in other Latin American countries and the Caribbean, 5 destinations in the United States, 5 destinations in Europe and 3 destinations in the South Pacific. In addition, as of January 31, 2014, through our various code-share agreements, we offer service to 78 additional destinations in North America, 34 additional destinations in Europe, 33 additional destinations in Latin America and the Caribbean (including Mexico), 4 destinations in Africa and 7 destinations in Asia. We provide cargo service to all our passenger destinations and to approximately 9 additional destinations served only by freighter aircraft. We also offer other services, such as ground handling, courier, logistics, and maintenance.

Competitive Strengths

Our strategy is to maintain LATAM Airlines Group as the leading airline in South America and to maximize shareholder value by increasing revenues and profitability through leveraging the operational efficiencies between our cargo and passenger divisions, thoroughly planning for our expansion efforts and carefully controlling costs. We plan to accomplish these goals by both focusing on our existing competitive strengths and implementing new strategies to fuel our future growth. We believe our most important competitive strengths are:

Leading Presence in South America

Through a successful regional expansion strategy, LATAM Airlines Group has become the leading international and domestic passenger airline group in South America, as well as the largest cargo operator in Latin America. We have domestic passenger operations in Chile, Brazil, Peru, Argentina, Colombia and Ecuador. These six countries are the most relevant passenger markets in South America (excluding Venezuela) and represent approximately 90% of the passengers in the region. We are also the largest operator of intra-regional routes, connecting the main cities in South America. Furthermore, through our significant presence in the largest hubs in South America—Lima and Sao Paulo—we are able to offer the best connectivity between South America and the rest of the world. Finally, the cargo companies of LATAM Airlines Group are the largest air cargo operators within, to and from Latin America, particularly in Brazil, where we consolidated our position during 2013 through combining the operations of TAM Cargo and ABSA, bringing together their highly complementary capacities and networks.

Geographically Diversified Revenue Base, including both Passenger and Cargo Operations

The operations of the LATAM Airlines Group are highly geographically diversified, including domestic operations in six different countries, as well as operations within South America and connecting South America with TAMvarious international destinations. This provides resilience to external shocks that may occur in any particular market. Furthermore, we believe that one of our distinct competitive advantages is our ability to profitably integrate our scheduled passenger and cargo operations. We take into account potential cargo services when planning passenger routes, and also serve certain dedicated cargo routes using our freighter aircraft, when needed. By adding cargo revenues to our existing passenger service, we are able to increase the productivity of our assets and maximize revenue, which has historically covered fixed operating expenses per flight, lowered break-even load factors and enhanced per flight profitability. Additionally, this revenue diversification helps offset seasonal revenue fluctuations and reduces the volatility of our business over time. For the year ended December 31, 2013, passenger revenues accounted for 86% of total revenues and cargo revenues accounted for 14% of total revenues.

On August 13, 2010,

“Low Cost” Business Model in Domestic Operations

We continue to utilize the business model LAN launched in 2007 to increase the efficiency of our domestic operations in Chile, Brazil, Peru, Ecuador, Colombia, and, subject to certain regulatory restrictions, in Argentina. In addition, we jointly announced with TAM thatapply these initiatives on certain regional routes within Latin America and we had entered into a non-binding Memorandumare exploring opportunities to apply aspects of Understanding relatingthis model to the proposed all-stock transactiondomestic passenger operations in Brazil. A key objective of this business model has been to increase the utilization of our fleet through modified itineraries that would combineinclude more point-to-point and overnight flights and faster turnaround times. LATAM operates Airbus A320-Family Aircraft on all domestic and regional routes except some routes served by LAN Colombia. This fleet has increased efficiency and improved the holdingsmargins of our short-haul operations. In addition, our modern fleet allows for lower unscheduled maintenance costs, lower fuel consumption, and operational and cost efficiencies achieved through operating fewer fleet types. Other key objectives of this business model include a reduction in sales and distribution costs through increased Internet penetration, reduced agency commissions, and increased self check-in service through web check-in and airport kiosks. We expect that these initiatives, together with simplifications in back-office and support functions, will continue to help us expand operations while controlling fixed costs, spurring a reduction in overhead costs per ASK. We pass on a portion of these operating efficiencies to consumers through fare reductions, which has stimulated additional demand and enhanced our overall profitability.

Modern Fleet and Optimized Fleet Strategy

The average age of our fleet is less than 7.0 years, making our fleet one of the most modern in Latin America and in the world. A younger fleet makes us more cost competitive because it reduces fuel consumption and maintenance costs, and enables us to enjoy a high degree of performance reliability. In addition, a modern and fuel efficient fleet reflects our strong commitment to the environment as new aircraft incorporate the industry’s latest technology, allowing for a substantial reduction in emissions, while also decreasing noise levels.

We optimize our fleet structure through the careful selection of modern aircraft models and staggered lease maturities. We select our aircraft based on their ability to effectively and efficiently serve our short- and long-haul flight needs, while still striving to minimize the number of different aircraft types we operate. For short-haul flights, we principally operate the Airbus A320-Family Aircraft. We are in the process of replacing the fleet used by LAN Colombia—which is our only domestic short-haul fleet that includes Boeing 737 and Dash 8-200 aircraft—with more modern and efficient Airbus A320 Family aircraft. This process of fleet change is expected to be finished during 2014 and will allow us to generate important cost savings. For long-haul passenger flights, we operate the Boeing 767-300, Airbus A330, Airbus A340-300 and Boeing 777 aircrafts, and, in October 2012, we started operations with the new modern and efficient Boeing 787 Dreamliner, becoming the first airline in the Americas to operate this brand new aircraft. This aircraft has new technologies in aerodynamics, materials and coatings which allows us to achieve important savings on fuel consumption and also achieve sustainable expansion of our fleet (as the Dreamliner produces up to 20% less CO2 than similar aircraft) while incorporating modern technology to deliver the best travel experience for LATAM’s passengers. Our current fleet plan also includes the delivery starting in 2016 of Airbus A350 passenger aircraft, a new aircraft type that is expected to further improve the efficiency of the existing fleet.

Following the combination of LAN and TAM, under a single parent entity.

On January 18, 2011, we andare focused on the rationalization of the LAN controlling shareholdersand TAM fleets and as we acquire additional aircraft, we will use the same configurations across our various airlines to unify our product offerings and reach higher levels of efficiency.

Efficient Processes

We continue to implement LEAN, a system that seeks to improve our processes by eliminating activities that do not add value (thus increasing the value of each activity and suppressing those that are superfluous), which reduces costs, improves efficiency and increases customer satisfaction. Internationally, the LEAN system has been recognized as a methodology for achieving excellence and continuous improvement. The adoption of this system constituted a redesigning of processes to enable us to solve problems that may occur during the execution of any process, such as aircraft maintenance. The foregoing renders the daily tasks and processes carried out within LATAM more efficient. Since the merger, we have achieved important fuel savings by implementing the LEAN fuel program in TAM’s operations, resulting in more than 7.4 million gallons saved in the year ended December 31, 2013. LEAN also supports the Company’s growth plans by streamlining the pilot training process, which results in more pilots trained during the year. By establishing clear roles, challenges and achievements, the implementation of LEAN has also had an important benefit in terms of employee motivation.

Strong Brands Teamed with Key Global Strategic Alliances

Following the business combination, both LAN and TAM continue to operate under their existing brands in the same way as they have done until previously. We believe that both the LAN and TAM brands are associated with superior service, aircraft and technologically-advanced operations, and are well recognized and respected in their respective markets. In 2013, we also focused on enhancing our corporate image as LATAM Airlines Group, which allows us to unify marketing efforts as we continue to expand in our existing and new markets.

Our strategic global alliances and existing commercial agreements provide our customers with access to approximately 163 destinations worldwide, a combined reservations system, itinerary flexibility and various other benefits, which substantially enhance our competitive position within the Latin American market. In addition, in 2012, we entered into the transactionnew bilateral agreements with strategic partners such as American Airlines which signed new agreements with LAN Colombia and TAM, TEP and broadened our network of alliances in the combination with TAM, which maintains commercial agreements with a number of leading airlines. Lan Colombia joinedoneworld^® on October 1, 2013 and TAM joinedoneworld^® on March 31, 2014.

Track Record of Growth, Profitability and Access to Financing

We have historically managed our business to maintain financial flexibility and a strong balance sheet in order to accommodate our growth objectives while being able to respond to changing market conditions. Our financial flexibility has allowed us to secure large aircraft orders, including an important part of our current re-fleeting program, at attractive financing rates.

Recognized Loyalty Programs

TAM Fidelidade and LANPASS together represent the leading frequent flyer programs in South America, with strong participation rates and brand recognition by our customers. Customers in each program earn points or kilometers based on distance flown and class of ticket purchased, or by using other services of partners in the program. In addition, TAM’s Multiplus program, which was launched in 2009, allows members to accumulate points not just by flying with TAM, but also by making purchases through credit cards or using services and products at partner establishments, and to redeem points for TAM flights and other products at partner establishments. At the end of 2013, Multiplus had 472 partner establishments, including the TAM controlling shareholders,Fidelidade Program. Following the business combination between LAN and TAM, we have begun to harmonize the two airlines’ frequent flyer programs to make them fully fungible for our customers, and have advanced cost initiatives related to the contract renegotiations and process standardization.

We regard both of our frequent flyer programs as strong relationship tools and we believe that these flexible programs are attractive to customers because they do not impose restrictions on flights for which set forthpoints can be redeemed or the termsnumber of seats available to members using the loyalty program for any particular flight. LANPASS members can accrue and conditionsredeem points for flights with any of LAN’s alliance carriers, including ononeworld^® flights, and TAM Fidelidade members can accrue and redeem points for flights with any of TAM’s alliance carriers, including members of the Star Alliance (through 2014). During 2013, LANPASS reached new agreements with several partners in each specific market in which LAN operates, creating a proposed business combinationstrong position in the Spanish-speaking Latin American markets.

Business Strategy

The principal areas in which we plan to focus our efforts going forward are as follows:

Achieve the Successful Integration of LAN and TAM. For a discussion of howTAM, and Realize Merger Synergies

The Company has successfully completed the proposed combination will be implemented and the termsintegration of the transactioncorporate functions and of the commercial areas of both cargo and international passenger operations, which we believe will result in significant operational efficiencies, incremental revenues and a strong improvement in the cash flow generation of the combined business. In addition, we have harmonized the airlines’frequent flyer programs, and have made significant progress in contract renegotiations and procurement standardization, and are in the process of implementing a plan to transfer best practices across multiple areas of the Company. We strongly believe that passengers of both LAN and TAM are directly benefiting from improved connectivity, cross-selling and easier access to more destinations via LATAM’s expanded network and code-share destinations. LATAM has established new and improved agreements see “—The Transaction Agreements” below.with international carriers, has aligned certain commercial practices and aspects of the on-board product for certain routes, and implemented new operations on regional routes. Regarding synergy capture, the Company has sucesfully implemented all the synergy and efficiency initiatives and continues working to fully achieve the run rate of these initiatives, therefore, we remain confident in our synergy target of between US$600 and US$700 million, to be fully achieved by the fourth year after the merger (June 2016).

Fleet Restructuring Plan

After a process of reviewing its post-merger fleet plan and fleet requirements, during the second half of 2013 LATAM decided to undertake a broad fleet restructuring plan with the aim of reducing the number of models operated, phasing out less efficient models and allocating aircraft best suited to each one of its markets. As a result, beginning in the fourth quarter of 2013 and for approximately the next thirty months, the Company will phase out all of its A330s, A340s, B737s and Q400 and Q200s. During the fourth quarter of 2013 this process has generated non-recurring costs of US$17.5 million resulting from penalties related to anticipated redeliveries and other redelivery expenses. For the full year, these costs reached US$29 million. These initiatives are part of a long term strategy which we believe is key in order to have a cost efficient operation, increasing LATAM’s competitiveness in the long term.

The Transaction AgreementsImprove our Capital Structure

This section describesLATAM Airlines Group is focused on developing a solid balance sheet, which we believe is a competitive advantage in the material termsairline industry to facilitate access to fleet financing and provide resilience to the volatility inherent to airline operations. Following the business combination between LAN and TAM, we have significantly increased our outstanding indebtedness and aircraft purchase obligations. In the near-term, we are focused on improving our capital structure, by improving cash flow generation of the transaction agreements.business and actively managing capacity in our passenger and cargo businesses. 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 combinationnear-term fleet plans 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 withincluding for the SEC may supplement, update or modify the factual disclosures about TAM2013 and LAN contained in the transaction agreements. The representations, warranties and covenants made in the transaction agreements by TAM and LAN2014 years, 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 partydeveloped separately, prior to the transaction agreements may haveassociation of these airlines. LATAM Airlines Group has rationalized 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.”

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 ownershipfleet plans of LAN and TAM.

Current OwnershipIn December of TAM

As2013, LATAM issued 51,685,128 shares by way of March 28, 2012, TAM’s current authorized share capital was R$1,200,000,000, which consistedan equity rights offering, for total consideration of 55,816,683 TAM common$784 million (before offering expenses). In January 2014, LATAM issued an additional 10,314,872 million shares and 100,390,098 TAM preferred shares. The TAM controlling shareholders owned approximately 85.37%that were not subscribed for in the rights offering through a subsequent auction, for total consideration of $156.5 million (before offering expenses). Approximately 50% of the TAM common sharesnet proceeds from the rights offering and 25.09%subsequent auction were used to pre-pay short term financial liabilities of the TAM preferred shares as of March 28, 2012Company.

Maintain Excellent Customer Satisfaction

In both our passenger and cargo businesses, we focus on delivering high quality services that are valued by our customers. In our passenger businesses we strive to achieve high on-time performance, world-class on-board service on long-haul flights, attractive and convenient pricing, quick check-in for short-haul flights, and the remaining TAM shares were heldcomfort afforded by TAM’s minority shareholders.

Current Ownershipa modern fleet. During the first half of LAN

As of March 28, 2012 LAN’s current authorized share capital was 341,000,000 common shares, which consisted of 340,977,3092009 LAN common shares. The LAN controlling shareholders owned approximately 33.84%completed the reconfiguration of the LAN common sharescabins of all its long-haul aircraft, including both the Boeing 767 and the Airbus A340 passenger aircraft, in order to incorporate our new Premium Business Class including full-flat seats, as well as improvements in economy class which include a state-of-the-art on-board entertainment system. This high quality standard is shared by TAM, which currently offers first and business class in all its long haul flights as well as in some regional routes. Our frequent flyer programs, LANPASS and TAM Fidelidade, provide travel benefits and rewards to more than 8.5 million loyal customers in Chile, Argentina, Peru, Ecuador and Colombia as well to more than 12.2 million members in Brazil. In the cargo business, we focus on providing reliable service, taking advantage of March 5, 2012. For a descriptionour ability to handle different types of the rights attachedcargo as well as significant cargo volumes, and leveraging our facilities in key gateways, such as Miami, to LAN common shares, see “Item 10. Additional Information—Memorandumensure optimal handling of our customers’ needs. We continually assess opportunities to incorporate service improvements in order to respond effectively to our customers’ needs.

Focus on Efficiency and Articles of Association.”Sustainability

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 LANWe are increasingly focused on improving efficiency through a series of transactionsfleet initiatives that seek to reduce fuel consumption. The most significant is our ongoing fleet renewal and corporate restructurings described below.growth plan, through which we expect to incorporate 157 new aircraft between 2014 and 2019, which we expect will contribute to lower costs per ASK. As an example, we estimate that the Boeing 787 Dreamliner operates with costs per ASK that are approximately 12% lower than other long haul passenger aircraft, the new Boeing 777 freighter operates with costs per ATK that are approximately 17% lower than the Boeing 767 freighter, and the Airbus A350 will operate with costs per ASK that are approximately 25% lower than the Airbus A330. In addition, we completed the installation of winglets on all of LAN’s existing Boeing 767 aircraft, achieving average fuel efficiencies of approximately 5% per aircraft per year since implementation. We are also in the process of installing sharklets (a type of winglet) in our Airbus A320 Family fleet, which we expect to result in further fuel efficiencies in this fleet.

SubjectIn order to mitigate the environmental impact of our operations we seek to operate in a sustainable manner by reducing our fuel consumption and related emissions. We also continue to focus on adjusting the configuration of our aircraft to market demand by, for example, adjusting the configuration of certain Boeing 767s by reducing the number of Premium Business seats and increasing the number of Economy class seats.

During 2012, LAN also replaced its passenger service system, containing the reservation, inventory and departure control systems of the airline, with a new system provided by Sabre. The conversion process involved moving from two suppliers (Amadeus and Resiber), whose systems were previously required to cover the complete role of the passenger service system, to a single supplier (Sabre), and is expected to result in substantial savings over the coming years. For the near future, we are contemplating the migration of TAM’s reservation system to Sabre in order to achieve the synergies of having a unified passenger service system.

Airline Operations and Route Network

The following table sets forth our operating revenues by activity for the periods indicated, which for the year ended December 31, 2013 includes LATAM’s total revenues; for the year ended December 31, 2012 includes TAM’s revenues since June 23, 2012; and for the year ended December 31, 2011, represents the historical consolidated revenues of LAN:

		Year ended December 31,
		2013 LATAM				2012 LATAM				2011 LAN
		(in US$ millions)
Total passenger revenues			11,061.6				7,966.8				4,008.9
Total cargo revenues			1,863.0				1,743.5				1,576.5
Total traffic revenues			12,924.5				9,710.4				5,585.4