As filed with the Securities and Exchange Commission on April 2, 20121, 2015

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

OR

For the fiscal year ended December 31, 20112013

OR

OR

Commission File Number: 1-14728

LATAM Airlines Group S.A.

(Exact name of registrant as specified in its charter)

(Translation of registrant’s name into English)

(Jurisdiction of incorporation or organization)Presidente Riesco 5711, 20^th Floor

Las Condes

(Address of principal executive offices)

Gisela Escobar Koch

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

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

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

None

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

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 340,319,431.545,558,101.

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

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

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

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

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

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

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

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

Item 17¨             Item 18¨

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

TABLE OF CONTENTS

PRESENTATION OF INFORMATION

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

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

Throughout this annual report on Form 20-F we make numerous references to “LAN”. Some references to “LAN” are to LAN Airlines S.A., currently known as LATAM Airlines Group S.A. and its consolidated subsidiaries, in connection with circumstances and facts occurring prior to June 22, 2012. Other references to “LAN”, however, are to the LAN brand which was launched in 2004 and brings together, under one internationally recognized name, all of the affiliate brands such as LAN Chile, LAN Peru, LAN Argentina, LAN Colombia, LAN Ecuador and LAN Cargo.

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

This annual report contains conversions of certain Chilean peso and Brazilian real amounts into U.S. dollars at specified rates solely for the convenience of the reader. These conversions should not be construed as representations that the Chilean peso and the Brazilian real amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated. Unless we specify otherwise, all references to “$,” “US$,” “U.S. dollars” or “dollars” are to United States dollars, references to “pesos,” “Chilean pesos” or “Ch$” are to Chilean pesospesos. References to “reais,” “Brazilian reais,” or “R$” are to Brazilian reais, and references to “UF” are toUnidades de Fomento, a daily indexed Chilean peso-denominated monetary unit that takes into account the effect of the Chilean inflation rate. Unless we indicate otherwise, the U.S. dollar equivalent for information in Chilean pesos is based on the “dólar observado” or “observed” exchange rate published byBanco Central de Chile (which we refer to as the Central Bank of Chile) on December 31, 2011,2014, which was Ch$519.20=607.38 = US$1.00. The observed exchange rate on March 23, 2012,24, 2015, was Ch$487.72=627.00= US$1.00. Unless we indicate otherwise, the U.S. dollar equivalent for information in Brazilian reais is based on the “dólar observado” or “observed” exchange rate published by Banco Central do Brasil (which we refer to as the Central Bank of Brazil) on December 31, 2014, which was R$2.656 = US$1.00. The observed exchange rate on March 24, 2015, was R$3.130 =US$1.00. The Federal Reserve Bank of New York does not report a noon buying rate for Chilean pesos.pesos nor Brazilian reais. See “Item 3. Key Information—Selected Financial Data—Chilean Peso Exchange Rates”. and “Item 3. Key Information—Selected Financial Data—Brazilian Exchange Rates.”

LanLATAM Airlines Group and the majority of our subsidiaries (including our main cargo subsidiary Lan Cargo S.A., or Lan Cargo) maintain their accounting records and prepare their financial statements in U.S. dollars. Some of our other subsidiaries, however, maintain their accounting records and prepare their financial statements in Chilean pesos, Argentinean pesos, Colombian pesos or Colombian pesos.Brazilian reais. In particular, TAM maintains its accounting records and prepares its financial statements in Brazilian reais. Our audited consolidated financial statements include the results of these subsidiaries translated into U.S. dollars. International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), require assets and liabilities to be translated at period-end exchange rates, while revenue and expense accounts are translated at each transaction date, although a monthly average rates.rate may also be used if exchange rates do not vary widely.

OurLATAM’s audited consolidated financial statements for the periods ended December 31, 2009, 2010, 2011, 2012, 2013 and 20112014 were prepared in accordance with IFRS. Prior to 2009 our audited consolidated financial statements were prepared in accordance with accounting principles generally accepted in Chile (“Chilean GAAP”). IFRS differs in certain significant respects from Chilean GAAP. As a result, our financial information presented under IFRS as of 2009 is not directly comparable to our financial information presented with respect to previous years under Chilean GAAP. Accordingly, readers should avoid such comparison.

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

This annual report contains certain terms that may be unfamiliar to some readers. You can find a glossary of these terms on page 4 of this annual report.

FORWARD-LOOKING STATEMENTS

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

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

GLOSSARY OF TERMS

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

“available seat kilometers equivalent” or “ASK equivalent”		The number of seats made available for sale plus the quotient of cargo ATKs divided by 0.095, all multiplied by the kilometers flown.
Traffic Measurements:
“revenue passenger kilometers” or “RPKs”		The number of passengers multiplied by the number of kilometers flown.
“revenue ton kilometers” or “RTKs”		The load (cargo) in tons multiplied by the kilometers flown.
“traffic revenue”		Revenue from passenger and cargo operations.
Yield Measurements:
“cargo yield”		Revenue from cargo operations divided by RTKs.
“overall yield”		Revenue from airline operations (passenger and cargo) divided by system RTKs (passenger and cargo).
“passenger yield”		Revenue from passenger operations divided by RPKs.
Load Factors:
“cargo load factor”		RTKs (cargo) expressed as a percentage of ATKs (cargo).
“passenger load factor”		RPKs expressed as a percentage of ASKs.
Other:
“ACMI leases”		A type of aircraft leasing contract, under which the lessor provides the aircraft, crew, maintenance and insurance on a per hour basis. Also referred to as a “wet lease.”
“Airbus A320-Family Aircraft”		The Airbus A318, Airbus A319, Airbus A320 and Airbus A320A321 models of aircraft.
“block hours”		The elapsed time between an aircraft leaving an airport gate and arriving at an airport gate.
“m²”		square meters.
“ton”		A metric ton, equivalent to 2,204.6 pounds.
“utilization rates”		The actual number of flight hours per aircraft per operating day.
“operating expenses”		Operating expenses, which are calculated in accordance with IFRS, comprise the sum of the line items “cost of sales” plus “distribution costs” plus “administrative expenses” plus “other operating expenses”, as shown on our consolidated statement of comprehensive income. These operating expenses include: wages and benefits, fuel, depreciation and amortization, commissions to agents, aircraft rentals, other rental and landing fees, passenger services, aircraft maintenance, and other operating expenses.
“MiSchDynamicDT” “Diio Mi”		Market Intelligence Schedule Dynamic Table. Data In Intelligence Out Market Intelligence.

PART I

Not applicable.

Not applicable.

A. Selected Financial Data

The following table presents our summary financial data. Our audited consolidated financial statements relate to the period ended December 31, 2011, and constitute the third annual audited financial statements prepared in accordance with IFRS.

Our date of transition to IFRS was January 1, 2008. Consequently, we have prepared our opening consolidated statements of financial position under IFRS as of that date. Our date of adoption of IFRS was January 1, 2009.LATAM’s Historical Financial Information

The summary consolidated annual financial information of LATAM as of December 31, 2014, 2013, 2012, 2011 2010 and 2009, and each of the three years ended December 31, 2011, 2010 and 2009 has been prepared in accordance with IFRSIFRS(*). On June 22, 2012, LATAM Airlines Group was formed through the combination of LAN and is derived from our audited consolidated annual financialTAM. Following the combination, LAN Airlines S.A. became “LATAM Airlines Group S.A.” and TAM continues to exist as a subsidiary of Holdco I and a subsidiary of LATAM Airlines Group. Financial statements included in this annual report or previous annual reports. The summary consolidated annual financial information as of December 31, 2008 and for the year ended December 31, 2008 presented in this annual report is derived from our audited consolidated annual financial statements included in a previous annual report. This financial information has been previously presented in accordance with Chilean GAAP, and has been restated under IFRS only for comparative purpose. You should read the information below in conjunction with our audited consolidated financial statements and the notes thereto, as well as “Presentation of Information” and “Operating and Financial Review and Prospects.”

LATAM’s Annual Financial Information

		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,
		2014				2013				2012				2011				2010
		(in US$ millions, except per share and capital stock data)
Balance Sheet Data:
Cash, and cash equivalents			989.4				1,984.9				650.3				374.4				631.1
Other current assets in operation			2,644.1				2,992.2				2,626.2				964.3				896.5
Non-current assets and disposal groups held for sale			1.1				2.4				47.7				4.7				5.5
Total current assets			3,634.6				4,979.5				3,324.2				1,343.4				1,533.1
Property and equipment			10,773.1				10,982.8				11,807.1				5,928.0				4,948.4
Other non-current assets			6,076.7				6,668.8				7,195.0				377.3				304.4
Total non-current assets			16,849.8				17,651.6				19,002.1				6,305.3				5,252.8
Total assets			20,484.4				22,631.1				22,326.3				7,648.7				6,785.9
Total current liabilities			5,829.7				6,509.1				6,297.5				2,322.1				2,144.0
Total non-current liabilities			10,151.0				10,795.6				10,808.1				3,869.2				3,341.8
Total liabilities			15,980.7				17,304.7				17,105.6				6,191.3				5,485.8
Issued Capital			2,545.7				2,389.4				1,501.0				473.9				453.4
Net equity attributable to the parent company’s equity holders			4,401.9				5,238.8				5,112.1				1,445.3				1,296.8
Non-controlling interest			101,8				87.6				108.6				12.0				3.2
Total net equity			4,503.7				5,326.5				5,220.7				1,457.4				1,300.1
Shares Outstanding			545,558,101				535,243,229				479,107,860				340,319,431				338,790,999

Although most of our revenuesDecember 31, 2014, Law No. 20,780 issued on September 29, 2014, introduced modifications to the income tax system in Chile and expensesother tax matters. On October 17, 2014 the Chilean Superintendence of Securities and Insurance (the “SVS”) issued Circular No. 856, which established that the effects of the change in the income tax rates on deferred tax assets and liabilities must be recognized directly within “Retained earnings” instead of the income statement as required by IAS 12. In order to comply with IAS 12, the financial statements for the period ended December 31, 2014 are denominated in U.S. dollars, some are denominated in different currencies, suchto those presented to the SVS as the Chilean peso. Fluctuationsaforementioned effect has been recognized within the income statement. For more information on the reconciliation of such differences see Note 2.1 and see Note 17 in foreign exchange rates could leadour audited consolidated financial statements.

The table below presents unaudited operating data of LATAM as of and for the year ended December 31, 2010, 2011 (which represents LAN’s historical unaudited operating data), as of and for the year ended December 31, 2012 (which includes TAM’s unaudited operating data since June 23, 2012), and as of and for the years ended December 31, 2013 and December 31, 2014. LATAM believes this operating data is useful to changesreport the operating performance of its business and may be used by certain investors in evaluating companies operating in the valueglobal 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 these itemsperformance in U.S. dollars. Nevertheless, the impact on our results stemmingaccordance with IFRS. This unaudited operating data is not included in or derived from any such fluctuations is significantly mitigated by the fact that 78.0% of our revenues and 53.0% of our operating expenses are denominated in U.S. dollars.LATAM’s financial statements.

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—Consolidated Financial Statements and Other Financial Information—Dividend Policy”. and “Item 10. Additional Information—Dividend and Liquidation Rights.” LATAM did not pay an interim dividend regarding periods 2013 and 2014

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 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 March 24^th, 2015 the observed exchange rate was Ch$ 627.00= 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, 201224^th, 2015 the observed exchange rate was Ch$487.72=R$3.1304 = 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.

RisksRisk Factors Relating to the Exchange Offer and Mergers involving TAM S.A.our Company

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

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

Delisting Condition

Squeeze-Out Condition

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Risks Relating to the Combination of LAN and TAM

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 the business practices and operations of LAN and TAM. The success of the proposed combination will depend, in part, on LAN’s ability 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 LAN may not be able to combine the businesses of LAN and TAM in a manner that permits LAN to realize these revenue synergies, cost savings and growth opportunities in the time, manner or amounts LAN currently expects or at all. Potential difficulties LAN may encounter as part of the integration process include, among other things:

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

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

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

LAN has 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

LAN has incurred and will continue to incur substantial expenses in connection with the proposed combination and the integration of LAN and TAM. LAN incurred approximately US$15 million in non-recurring expenses in connection with the proposed combination in 2011, and expects to incur US$25 million in such expenses in 2012. Significant costs and expenses have been and are being incurred related to the exchange offer, the mergers and the other transactions. These costs and expenses include 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 both LAN and TAM have assumed that a certain level of expenses would be incurred in connection with these transactions, there are many factors beyond LAN’s and TAM’s control that could affect the total amount or the timing of the integration and implementation expenses.

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

LAN will 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’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 prohibiting the taking of certaingovernance. Certain specified material corporate actions and decisions without priorrequire 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 LAN and the TAM controlling shareholders will be able to reach an agreement with respect to such supermajority voting or board matterswhich in the future and ifturn means 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 be wholly owned by the TAM controlling shareholders). ActionsChile. Examples of actions requiring supermajority approval by the board of directors of Holdco I or TAM include, among others, entering into acquisitions or business collaborations, amending or approving budgets, business plans, financial statements and accounting policies, incurring indebtedness, 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 interestsecurity interests or entering into guarantees and agreements with related parties.

LATAM assets include a significant amount of goodwill.

The assets of the LATAM Airlines Group included US$3,313.4 million of goodwill as of December 31, 2014, US$3,168.7 million of which results from the combination with TAM. Under IFRS, goodwill is subject to an annual impairment test and may be required to be tested more frequently if events or circumstances indicate a potential impairment. Any impairment could result in the recognition of a significant charge to earnings in LATAM’s statement of income, which could materially and adversely impact our consolidated results for the period in which the impairment occurs.

Uncertainties associatedA failure to successfully implement LATAM’S strategy would harm its business and the market value of its ADSs and common shares.

LATAM has developed a new strategic plan with the proposed combination may cause a lossgoal of management personnel and other key employees that could adversely affect LAN, TAM and/or the combined companies

The successbecoming one of the proposed combination is dependent, in part, on the experience and industry knowledgebest group of their senior management and other key employees of LAN and TAM and their ability to execute their business plans. In order to be successful, LAN, TAM and the combined companies must be able to retain the senior management and other key employees and their ability to attract highly qualified personnelairlines in the future. Currentworld and prospective employees of LANrenewing our commitment to sustained profitability and TAM may experience uncertainty about their roles within LATAM following completion of the proposed combination, which may have an adverse effectsuperior returns to shareholders. We based our strategic plan on the ability of LAN, TAM or the combined companiesfive central factors: Customer Experience, Network, Efficiency and Cost Reduction, Organization Strength and Proactive Risk Management. Our new strategy requires us to retain or attract senior management and other key employees. Competition for highly qualified personnel in the various localities and business segments in which LAN and TAM operate, 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.

The financial results of LATAM will be more exposed to currency exchange rate fluctuations as a result of the proposed combination and the resulting increase in the proportion of assets, liabilities and earningsidentify value propositions that are denominatedattractive to our clients, to find efficiencies in currencies other than US dollars

LATAM will prepare and present its consolidated financial statements in US dollars. The proposed combination will significantly increase the proportion of LAN’s consolidated net assets, revenues and income in non-US dollar currencies, primarily Chileanpesos and Brazilianreal. The consolidated financial condition and results of operations of LATAM will therefore be more sensitive to movements in exchange rates between the US dollar and other currencies. A depreciation of non-US dollar currencies relative to the US dollar could have an adverse impact on the financial condition, results ofour daily 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 largerto transform ourselves into a stronger and more complex than the current business of LAN or TAM. LAN’s future success will depend, in part, on LAN’s abilityrisk resilient company. Our strategic plan also anticipates strengthening our network and requires us to manage this expanded business, which will pose substantial challenges for management, including those related to the managementidentify cities with adequate infrastructure and monitoring of new operations and associated increased costs and complexity.sufficient demand. There can be no assurances, however, that LATAMwe will be successfulable to correctly identify cities and regions in which to expand our operations, or that itwe will realizebe able to attract sufficient passengers and cargo traffic to make our operations profitable. Difficulties in implementing our strategy and expanding our operations may adversely affect our business, results of operation and the expected operating efficiencies, cost savings, revenue synergiesmarket value of our ADSs and other benefits currently anticipated bycommon shares.

A failure to successfully implement the new single brand may adversely affect LATAM business and the market value of its ADSs and common shares.

Since the combination, LAN and TAM fromhave continued to operate with their original brands. LATAM Airlines Group has begun the proposed combination.

The proposed combination could causetransition of LAN and TAM into a downgrade of LAN’s credit ratings, which could have a negative effect on LAN’s business

single brand by gradually harmonizing the product and services offered by both airlines, although tge launch date for the new brand has not yet been determined. LAN and TAM currently has a lower credit ratinghave different value propositions, and is more leveraged than LAN. As a resultthere can be no assurances that we will be able to fully transfer the value of the proposed combination, LAN’s credit rating could be downgraded by one or more credit rating agencies, which couldoriginal LAN and TAM brands to the new single brand. Difficulties in implementing our single brand may prevent us from consolidating as a customer preferred carrier and may adversely affect the financial condition,our business and results of operations and prospectsthe market value 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.our ADSs and common shares.

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 thisthe full 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.

The financial results of LATAM are exposed to foreign currency fluctuations.

LATAM will have to withdraw from an existing airline alliance to which LAN or TAM belongs

LANprepares and presents its consolidated financial statements in U.S. dollars. Because of LATAM’s presence in several Latin American markets, a portion of its consolidated net assets, revenues and income is currently a member of the oneworld^® airline alliance while TAM is a member of the Star Alliance airline alliance. Although LAN and TAM will continue operating under their existing separate operating certificates after the proposed combination, due to conditions imposed by thedenominated in non-U.S. dollar currencies, primarily Chilean pesos and Brazilian antitrust regulators, LANreais. 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 TAM may not participateresults of operations of LATAM is therefore sensitive to movements in more than one airline alliance afterexchange rates between the endU.S. dollar and other currencies. A depreciation of non-U.S. dollar currencies relative to 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 combination may impede LATAM from providing customers with exactly the same benefits currently 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 countriesU.S. dollar 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 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:and prospects of LATAM.

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 will be adequate to offset any future reduction in our cargo and/or air travel demand.

The success of our business depends upon key regulatory issues and these issues 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 and the United States) 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.

WeLATAM’S depend on strategic alliances or commercial relationships in many of the countries in which we operateit operates and ourit business may suffer if any of ourits 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.

OurLATAM’S business and results of operation may suffer if we fail to obtain and maintain routes, suitable airport access, slots and other operating permits.

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

There can be no assurance that existing bilateral agreements between the countries in which our companies are based and permits from foreign governments will continue. A modification, suspension or revocation of one or more bilateral agreements could have a material adverse effect on our business, financial condition and results of operations. The suspension of our permission to operate in certain airports, destinations or destinationsslots 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, natural disasters, war or terrorist attacks.

Demand for air transportation may be adversely impacted by exogenous events, such as 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.

During January 2010, bad weather 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 estimate the net impact of decreased passenger operations 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’s operations suffered no impact since Lan Cargo has flexibility to redesign itineraries if and when needed. As of March 28, 2010, operations were restored to normal levels and the airport started to operate normally. As of December 31, 2010, we estimate 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 which resulted in US$36.6 million losses.

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

In addition, fuel prices and supplies, which constitute a significant cost for us, may increase as a result of any future terrorist attacks, a general increase in hostilities or a reduction in output of fuel, voluntary or otherwise, by oil-producing countries. Such increases may result in both higher airline ticket prices and decreased demand for air travel generally, which could have an adverse effect on our revenues and results of operations. Presently, there is a trend towards increases in jet fuel prices because of the increased demand caused by the 2010 recovery in the global economy coupled with conflicts during 2011 in Egypt and Libya that affected global fuel supply. It is impossible for us to predict if we will be able to fully protect ourselves against the volatility of fuel costs.

A significant portion of our cargo revenues comescome 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 of fish, and sea products and produce exportsfruits from Chile and asparagus from 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 2011.2014. 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.prices as was the case during the second half of 2014. 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 If an aircraft falls behind schedule, it could remain behind schedule for up to two days. Suchthe resulting delays could result incause a disruption in our operating performance, leading to customer dissatisfaction due to any resulting delays or missed connections.performance.

We fly and depend upon Airbus and Boeing aircraft, and our business is at riskcould suffer if we do not receive timely deliveries of aircraft, if aircraft from these companies becomes unavailable or if the public negatively perceives our aircraft.

As our fleet has grown, our reliance on Airbus and Boeing has also grown. As of December 31, 2011,2014, we operated a fleet of 81247 Airbus, 5473 Boeing and 147 Dash aircraft. These risksRisks relating to Airbus and Boeing 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 beyondAny delays Airbus A350 aircraft could disrupt our control, including weather conditions, which can affect our operations.fleet plan.

Revenues for airlines depend onDuring 2015 LATAM Airlines expects to receive its first Airbus A350 aircraft out of an order of 27 aircraft of this model, becoming 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.

Losses and liabilitiesfirst airline in Latin America to operate this modern new technology aircraft. Any delays in the eventreception of an accident involving onethe aircraft or more of ourunanticipated operational issues with this new aircraft model 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.fleet plan.

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 have greater brand recognition and greater resources than we do. 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. -Chile and other open skies agreements may subject us to

further competition from international carriers. 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.

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. Following the combination of LAN and TAM, Fitch Ratings Inc. and Standard and Poor’s downgraded LATAM Airline Group S.A.’s credit rating to levels that are below investment grade. These downgrades and any further securities rating

agencies downgrades could increase LATAM’s financing costs. If we are unable to obtain financing for a significant portion of our capital requirements, our ability to acquire new aircraft or to expand operations could be impaired and our business negatively affected.

Our business may be adversely affected by our high degree of debt and aircraft lease obligations compared to our equity capital.

We have a high degree of debt and payment obligations under our aircraft operating leases compared to equity capital. In order to finance our debt, we depend in part on our cash flow from operations. We cannot assure you that in the future we will be able to meet our payment obligations. In addition, the majority of our property and equipment is subject to 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”). Many of our operating and financial leases are denominated in U.S. dollars and bear interest at a floating rate. Approximately 38% of LATAM’s outstanding consolidated debt as of December 31, 2014 bears interest at a floating rate. After giving effect to interest rate hedging agreements, approximately 32% of LATAM’s outstanding consolidated debt is exposed to floating rates.

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.

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 business relies extensively on third-party service providers. Failure of these parties to perform as expected, or interruptions in our relationships with these providers or their provision of services to us, could have an adverse effect on our financial position and results of operations.

We have engaged an increasing number of third-party service providers to perform a large number of functions that are integral to our business, including regional operations, operation of customer service call centers, distribution and sale of airline seat inventory, provision of information technology infrastructure and services, provision of aircraft maintenance and repairs, provision of various utilities and performance of aircraft fueling operations, among other vital functions and services. We do not directly control these third-party service providers, although we do enter into agreements with many of them that define expected service performance. Any of these third-party service providers, however, may materially fail to meet their service performance commitments, may suffer disruptions to their systems that could impact their services, or the agreements with such providers may be terminated. For example, flight reservations booked by customers and/or travel agencies via third-party GDSs may be adversely affected by disruptions in our business relationships with GDS operators. Such disruptions, including a failure to agree upon acceptable contract terms when contracts expire or otherwise become subject to renegotiation, may cause the carriers’ flight information to be limited or unavailable for display, significantly increase fees for both us and GDS users, and impair our relationships with customers and travel agencies. The failure of any of our third-party service providers to adequately perform their service obligations, or other interruptions of services, may reduce our revenues and increase our expenses or prevent us from operating our flights and providing other services to our customers. In addition, our business, financial performance and reputation could be materially harmed if our customers believe that our services are unreliable or unsatisfactory.

Disruptions or security breaches of our information technology infrastructure could interfere with our operations, compromise passenger or employee information and expose us to liability, possibly causing our business and reputation to suffer.

A serious internal technology error or failure impacting systems hosted internally at our data centers or externally at third-party locations, or large scale external interruption in technology infrastructure we depend on, such as power, telecommunications or the internet, may disrupt our technology network. Our technology systems and related data may also be vulnerable to a variety of sources of interruption, including natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers and other security issues. While we have in place, and continue to invest in, technology security initiatives and disaster recovery plans, these measures may not be adequate or implemented properly to prevent a business disruption and its adverse financial and reputational consequences to our business.

In addition, as a part of our ordinary business operations, we collect and store sensitive data, including personal information of our passengers and employees and information of our business partners. The secure operation of the networks and systems on which this type of information is stored, processed and maintained is critical to our business operations and strategy. Unauthorized parties may attempt to gain access to our systems or information through fraud or other means of deception. Hardware or software we develop or acquire may contain defects that could unexpectedly compromise information security. The compromise of our technology systems resulting in the loss, disclosure, misappropriation of, or access to, customers’, employees’ or business partners’ information could result in legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information, disruption to our operations and damage to our reputation, any or all of which could adversely affect our business.

Our 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, 2014 approximately 67% 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),2014) 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 ableA failure 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.

Risks Related the Airline Industry

FailureOur 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. Our business has been negatively affected by global economic recessionary conditions, weak economic growth in Chile, in Brazil, 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. We will continue to comply with applicable environmental regulationswork on 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:

No assurance can be given that capacity reductions or other steps we may take in response to weakened demand will be adequate to offset any future reduction in our cargo and/or air travel demand. Sustained weakened demand may adversely impact our revenues, results of operations or financial condition.

Our business is highly regulated and changes in the regulatory environment in which we operate may adversely affect our business and results of operations.

Our business is highly regulated and depends substantially upon the regulatory environment in the countries in which we operate or intend to operate. For example, price controls on fares may limit our ability to effectively apply customer segmentation profit maximization techniques (“passenger revenue management”) and adjust prices to reflect cost pressures. High levels of government regulation may limit the scope of our operations and our growth plans, and the possible failure of aviation authorities to maintain the required governmental authorizations or our failure to comply with applicable regulations, may adversely affect our business and results of 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 alliance partners or other airlines.

High levels of competition in the airline industry may adversely affect our level of operations.

Our business, financial condition and results of operations could be adversely affected by high levels of competition within the industry, particularly the entrance of new competitors into the markets in which we operate. Airlines compete primarily over fare levels, frequency and dependability of service, brand recognition, passenger amenities (such as frequent flyer programs) and the availability and convenience of other passenger or cargo services. New and existing airlines (and companies providing ground cargo transportation) could enter our markets and compete with us on any of these bases, including by offering lower prices, more attractive services or increasing their route capacities in an effort to gain greater market share.

Chile has opened 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.

Since November 2013, Chilean laws and regulations have permitted foreign airlines to operate domestic flights in Chile without necessarily setting up a Chilean subsidiary first.

The Chilean Domestic Unilateral Open Skies Rule may change the competitive landscape of the Domestic Chilean Aviation Sector, as it will be easier 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.

The reallocation of any of our slots to other market participants could adversely affect our operations.

The Brazilian government has proposed and in some cases already 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. In the case of the Congonhas airport in Sao Paulo, slots were increased in October 2014 and given to new entrants (Azul and Avianca Brazil); and in a second stage slots could be reallocated, if current operators don’t comply with measures regarding on-time performance and regularity of service. We rely on access to takeoff and landing slots at Congonhas airport and other airports throughout Brazil, to conduct our Brazilian passenger operations. The reallocation of any of our slots to other market participants could adversely affect our operations.

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.

The regulatory structure of Brazilian civil aviation is undergoing change and we have not yet been able to evaluate 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 first obtained on December 9, 1996, and is valid until December 9, 2021. We cannot assure you that we will be able to automatically renew TAM’s concession when it expires. See “Item 4. Information on the Company—Business Overview—Regulation—Brazil—Aeronautical Regulation.”

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

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

Our operations are covered by environmental regulations at local, national and international levels. These regulations cover, among other things, emissions to the atmosphere, disposal of solid waste and aqueous effluents, aircraft noise and other activities incident to our business. Future operations and financial results may vary as a result of such regulations. Compliance with these regulations and new or existing regulations that may be applicable to us in the future could increase our cost base and adversely affect our operations and 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.

Risks RelatedThe European Union (“EU”) had proposed a directive under which the existing emissions trading scheme (the “ETS”) in each EU member state was to Chilebe extended to all airlines. This directive would require us to submit annual emission allowances in order to operate routes to and Other Emerging Market Countriesfrom EU member states. As of the date of this Annual Report, this proposal has been postponed for evaluation in 2016 and the directive affects only intra-European flights (which are not material to LATAM’s operation but there is a possibility that the directive could be extended to all flights in the future. Currently, we operate 6 routes to and from Europe, and service additional destinations through our code-share agreements. Although it is uncertain if this directive will be approved in 2016, it is increasingly likely that we will be required to participate in some form of an international aircraft emissions program in the future, which may involve significant costs.Our business may be adversely affected by a downturn in the airline industry caused by exogenous events that affect travel behavior or increase costs, such as outbreak of disease, weather conditions and natural disasters, war or terrorist attacks.

Demand for air transportation may be adversely impacted by exogenous events, such as adverse weather conditions and natural disasters, epidemics (such as Ebola), terrorist attacks, war or political and social instability. Situations such as these in one or more of the markets in which we operate could have a material impact on our business, financial condition and results of operations. Furthermore, these types of situations could have a prolonged effect on air transportation demand and on certain cost items.

Revenues for airlines depend on the number of passengers carried, the fare paid by each passenger and service factors, such as the timeliness of flight departures and arrivals. During periods of fog, ice, low temperatures, storms or other adverse weather conditions, some or all of our flights may be cancelled or significantly delayed, reducing our revenues. In addition, fuel prices and supplies, which constitute a significant cost for us, may increase as a result of any future terrorist attacks, a general increase in hostilities or a reduction in output of fuel, voluntary or otherwise, by oil-producing countries. Such increases may result in both higher airline ticket prices and decreased demand for air travel generally, which could have an adverse effect on our revenues and results of operations.

Developments in Latin American countries and other emerging market countries may adversely affect the Chilean economy,and Brazilian economies, negatively impact our business and results of operations and cause the market price of our common shares and ADSs to decrease.

We conduct a significant portion of our 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 securitiesBrazilian economies and have a material adverse effect on our business, financial condition and results of operations. Beginning late 2008,operations and continuing during 2009, manythe market value of the countries we serve, including Chile, experienced economic slowdowns or recessions, which resulted in a substantial weakening of demand.our securities. Although economic conditions in other emerging market countries may differ significantly from economic conditions in Chile and Brazil, we cannot assure that events in other countries, particularly other emerging market countries, 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 October 2014, President Bachelet’s government approved a gradual increase in the Chilean corporate tax, from 20% to 25% or 27% (depending on the tax system chosen by the Chilean corporate tax payer) from 2014 to 2018. This increase, affected the tax provision for Chilean companies, including LATAM whose corporate tax rate will increase to 27%, and has required adjustments in deferred taxes to reflect the higher tax rate. Currently LATAM has losses resulting from its investment plan, but if LATAM records net income and no longer has tax losses available, our effective tax rate could increase and our net income could decrease. For more information on taxation see Note 17 in our audited consolidated financial statements

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

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. Changes in the exchange rate between the U.S. dollar and the currencies in the countries in which we operate could adversely affect our business, financial condition and results of operations. Approximately 99%97% of our indebtedness at December 31, 2011 is

2014 was denominated in U.S. dollars, 22%and we are expecting than 42% of our revenues and 47%35% of our operating expenses in 2011 were2015 are denominated in currencies other than the U.S. dollar, mainly the Brazilian real and the Chilean peso. If the value of the Brazilian real, Chilean peso or of other currencies, in which revenues are denominated, declines against the U.S. dollar, we will need more pesos or other local currencya greater amount of these currencies to repay the same amount of U.S. dollars. The Brazilian Real and the Chilean peso, hasrespectively, experienced volatility in recent years, including an average nominal depreciation of 1.3%depreciations against the U.S. dollar of 16.7% and 0.7% in 2008, an average nominal depreciation of 4.7% against the U.S. dollar2012, 10.5% and 1.8% in 20092013 and an average nominal appreciation of 4.6% against the U.S. dollar9.1% and 15.2% in 2010.2014. 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. OperatingDuring 2014, the company modified the exchange rate used in determining equivalence of United States Dollar in cash and Financial Reviewcash equivalents held in strong Bolivar, from 6.3 VEF/US$ to 12.0 VEF/US$, which represented a loss by foreign exchange of US$61 million on our results.

The Brazilian government has exercised, and Prospects—Year ended December 31, 2011 comparedmay continue to year ended December 31, 2010—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 “—Year ended December 31, 2010 comparedother policies to year ended December 31, 2009—Costinfluence Brazil’s economy. The Brazilian government’s actions to control inflation and implement other policies have involved wage and price controls, depreciation of Sales”.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.

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 or Brazilian stock exchanges also provides less detail in certain respects than the information regularly published by listed companies in the United States or in certain other countries. Furthermore, there is a lower level of regulation of the Chilean and Brazilian securities markets and of the activities of investors in such markets as compared with the level of regulation of the securities markets in the United States and in certain other developed countries.

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,2015, 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—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 soof your choice may be substantially limited. This limited trading market may also increase the price volatility of the ADSs or the common shares underlying the ADSs.

Holders of ADSs may be adversely affected by currency devaluations and foreign exchange fluctuations.

If the Chilean peso exchange rate falls relative to the U.S. dollar, the value of the ADSs and any distributions made thereon from the depositary could be adversely affected. Cash distributions made in respect of the ADSs are received by the depositary (represented by the custodian bank in Chile) in pesos, converted by the custodian bank into U.S. dollars at the then prevailing exchange rate and distributed by the depositary to the holders of the ADRs evidencing those ADSs. In addition, the depositary will incur foreign 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,Furthermore, 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—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 lawscombination 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. The Company is primarily involved in the transportation of passengers and cargo.cargo and operates as one unified, combined business enterprise with two separate brands: LAN and TAM.

TheLATAM’s airline holdings include LAN and its affiliates in Peru, Argentina, Colombia and Ecuador, and LAN Cargo and its affiliates MasAir (in Mexico) and LANCO (in Colombia), as well as TAM S.A and its subsidiaries TAM Linhas Aereas S.A, TAM Transportes Aereos del Mercosur S.A, (TAM Airlines (Paraguay)), TAM Cargo, and Multiplus. LATAM is a publicly traded corporation listed in the Santiago Stock Exchange (“SSE”), the Valparaiso Stock Exchange, the Chilean governmentElectronic Exchange, the New York Stock Exchange (“NYSE”) and the Brazilian Stock Exchange (“Bovespa”).

LAN was founded Lan Airlines (formerly Lan Chile S.A.) in 1929. Lan Airlines was a government-owned company from 1929 until its incorporation in 1983. We began international service to Buenos Aires, Argentina in 1946, toby the United States in 1958 and to Europe in 1970.Chilean government. 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”.government. 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 this Over the past decade, LAN has significantly expanded its operations in Latin America, initiating services in Peru in 1999, Argentina in 2005, Ecuador in 2009, and in Colombia in 2010 through the acquisition of our capital stock in 1994Aerovias de Integracion Regional, Aires S.A. (dba “LAN Colombia”).

TAM is a leading domestic and the appointment of our current management, we have grown our revenue base and maintained our profitability every year despite significant challenges. Additionally, we have created a comprehensive network across the region by forming, together with local partners, or acquiring, passenger affiliates in Peru, Ecuador, Argentina and Colombia, and cargo affiliates ininternational airline, offering flights throughout Brazil Mexico 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 setstrong domestic market share, international passenger services and significant cargo operations. The company was founded in 1997 (under the name CIT—Companhia de Investimentos em Transportes), for the purpose of bilateral alliancesparticipating in, managing and consolidating shareholdings in airlines. In 2002, the name was changed to TAM S.A. and its shares began to be publicly traded on Bovespa in June 2005. From 2006 until the combination with carriers such asLAN in 2012, TAM American Airlines, Iberia and Qantas, and have been a member ofDepositary Shares were was also listed on theoneworld^® alliance since 2000. New York Stock Exchange.

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 ofSenior Vice President Corporate Controller and 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, 2014 was as follows:

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

Capital Expenditures

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

Proposed Combination with TAMB. BUSINESS OVERVIEW

On August 13, 2010, we jointly announced with TAM that we had entered into a non-binding Memorandum of Understanding relating to the proposed all-stock transaction that would combine the holdingsGeneral

The association of LAN and TAM created the largest passenger and cargo airline groups in South America. We are also one of the largest airline groups in the world in terms of network connections, providing passenger transport services to approximately 135 destinations in 22 countries and cargo services to approximately 144 destinations in 26 countries, with a fleet of 327 aircraft and a set of bilateral alliances. In total, LATAM Airlines Group has more than 52,000 employees. LATAM currently provide domestic and international passenger services in Chile, Peru, Ecuador, Argentina, Colombia and Brazil. LATAM carry’s out its cargo operations through the use of belly space on the passenger flights and dedicated cargo operations using freighter aircraft through the cargo airlines in Chile, Brazil, Colombia and Mexico. We also offer other services, such as ground handling, courier, logistics, and maintenance.

As of January 31, 2015, LATAM serviced 16 destinations in Chile, 16 destinations in Peru, 5 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 North America, 5 destinations in Europe and 3 destinations in the South Pacific. In addition, as of January 31, 2015, through the various code-share and interline agreements, LATAM offered service to 117 destinations in Latin America, 435 destinations in North America, 395 destinations in Europe, and more than 800 destinations in Asia, Pacific, Africa and Middle East

Competitive Strengths

Our strategy is to maintain LATAM Airlines Group as the leading airline group in South America and to maximize shareholder value by increasing profitability through leveraging our unique position in the airline industry. LATAM Airlines Group is the only airline group in the region with a local presence in seven markets, as well as intra-regional and long haul operations. As a result, the Company has more flexibility, as well as a proven track record of acting quickly to adapt our business to economic challenges.

Moreover, LATAM’s unique leadership position in a region with growth potential and the focus on our existing competitive strengths will allow us to continue building our business model and 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. LATAM has domestic passenger operations in Chile, Brazil, Peru, Argentina, Colombia and Ecuador. These six countries are the most significant passenger markets in South America (excluding Venezuela) and represent approximately 90% of the passengers in the region. LATAM is also the largest operator of intra-regional routes, connecting the main cities in South America. Furthermore, through the significant presence in the largest hubs in South America—Lima and Sao Paulo—LATAM is 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.

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 various 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, 2014, passenger revenues accounted for 86% of total revenues and cargo revenues accounted for 14% of total revenues.

Modern Fleet and Optimized Fleet Strategy

The average age of our fleet is less than 7 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. Finally, a modern fleet also allows us to provide the best passenger experience.

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.

The Company’s current fleet plan involves a short-haul fleet formed exclusively by aircraft from the A320 family, with a focus on A321s and A320neos, whose use represents a saving per ASK of around 6% in comparison to A320ceos. In 2014, LATAM incorporated 11 Airbus A321s, the largest model in this family, for use on the busiest regional routes and for some domestic routes in Chile as well as in Brazil, ending the year with 21 aircraft of this type. Additionally, the Company has placed orders for 36 A320neos, with delivery dates between 2016 and 2018.

For long-haul passenger flights, we operate the Boeing 767-300, Airbus A330, Airbus A340-300 and Boeing 777 aircraft, and the modern and efficient Boeing 787 Dreamliner. 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 2015, of the first of a total of 27 Airbus A350 passenger aircraft, a new aircraft type that is expected to further improve the efficiency of the existing long-haul fleet.

In 2014, the Company took out of service it’s Dash Q400s and Boeing 737s (inherited from the Aires airline in Colombia) as well as seven A330s and three A340s and expects to conclude the withdrawal of these older models by 2016.

Overall, the Company’s continuous renewal of its fleet seeks to incorporate the best technology and position LATAM as a leader in fleet efficiency.

Strong Brands Teamed with Key Global Strategic Alliances

Following the business combination, both LAN and TAM continue to operate under their existing brands. 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 2014, LAN and TAM Airlines were recognized as the “Best Airlines in South America” in first and second places respectively by the SkyTrax World Airline Awards. The awards are considered the global barometer for customer satisfaction within the industry, thanks to their exclusive reliance on the opinion of passengers.

The strategic global alliances and existing commercial agreements provide the LATAM customers with access to more than 1700 destinations worldwide, itinerary flexibility and various other benefits, which substantially enhance our competitive position within the Latin American market. In addition, in March 2014 TAM Airlines and LAN Colombia joinedoneworld marking one of the most important steps to achieve the entry of all of the airlines of LATAM Airlines Group into oneworld. To the passengers of the carries part of LATAM Airlines Group, this means greater convenience when traveling, since they will have the same standard of high-quality customer service, regardless of their international destination.

Financial Flexibility

We have historically managed our business to maintain financial flexibility and a strong balance sheet in order to accommodate our growth objectives while having the ability 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. 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 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 points can be redeemed or the number of seats available to members using the loyalty program for any particular flight. LANPASS and TAM Fidelidade members can also accrue and redeem points foroneworld^® flights.

Business Strategy

Our mission is to connect people with safety, operational excellence and warmth, seeking to become one of the best airlines groups in the world. In order to reach our mission the principal areas in which we plan to focus our efforts going forward are as follows:

Strengthen our Network

LATAM currently intends to strengthen its route network in South America, thereby offering the best connectivity within the region at a competitive price, in order to become by far the most convenient option for our passengers.We are the only airline group in South America with a local presence in seven home markets and an international and intra-regional operation. This position is strengthened by improved infrastructure in some of our main hubs, allowing us to further strengthen our network and improve connection times. We intend to leverage our position to create a diversity of options and destinations and build a platform that will allow us to continue growing in the long term.

Brand leadership and customer experience:

We will always seek to be the preferred choice of passengers in this region. Our efforts are driven by a differentiated passenger experience, and our leveraging of mobile digital technologies. We are currently working on a single, parent entity.unified brand, culture, product and value proposition for our passengers. Additionally, we will focus on defining LATAM’s digital strategy including applications to achieve ancillary revenues, and improving the management of contingencies, so that we are able to provide information and solutions to our customers in a timely and transparent manner. We continually assess opportunities to incorporate service improvements in order to respond effectively to our customers’ needs.

Focus on Efficiency and Cost Competitiveness

We are currently working to establish a competitive cost structure to further improve our effectiveness, simplify our organization and increase flexibility and speed in decision making. The target is to reduce total costs by approximately 5% over the next 4 years (2015 to 2018). These savings are in addition to the efficiencies we expect to obtain from our new fleet technologies. Cost savings include reductions in fuel and fees, procurement, operations, overhead, and distribution costs, among others. The company has already started work on cost initiatives in all these areas. We currently are working to install behavior of austerity at all levels within the Company to continuously reduce costs.

Organizational Strength

We aspire to be a group of passionate people, working in a simple and aligned manner, with inspiring leaders making agile decisions. This will allow us to deliver a distinctive value to our customers, surpass our competitors in a consistent way and have a healthy and sustainable company.

Proactive risk management

We are working to incorporate a holistic and responsible view of risk in decision making, starting with risks that have high potential impact and low probability of occurrence, which could significantly affect LATAM’s strategic objectives.

Airline Operations and Route Network

The following tables sets forth our operating revenues by activity and point of sale for the periods indicated:

Passenger Operations

General

As of December 31, 2014, both domestic and international passenger services, were operated by LAN, TAM, LAN Peru, LAN Ecuador, LAN Argentina and LAN Colombia.

The following table sets forth certain of our passenger operating statistics for international and domestic routes for the periods indicated:

International Passenger Operations

Our international network combines the international operations of the Chilean, Peruvian, Ecuadorian, Argentinean, Colombian and Brazilian subsidiaries. LATAM has operated international services out of Chile since 1946 and have greatly expanded our international services, offering flights out of Peru, Ecuador, Argentina, Colombia and Brazil. As of December 31, 2014, we now offer 24 international destinations.

Our strategy to generally expand our international network is aimed at enhancing our value proposition by offering customers more destinations and routing alternatives, and promoting tourism in South America. Our sustained development of our international network has been a crucial factor in our long-term strategy. LATAM provides long-haul services out of Santiago, Lima, Guayaquil, Buenos Aires, Bogota, Sao Paulo and Rio de Janeiro. LATAM also provides regional services from Chile, Peru, Ecuador, Argentina, Colombia and Brazil.

During year 2014, after the necessary infrastructure investments were made, we completed our move to the new Terminal 3 at Guarulhos Airport in Sao Paulo with new slotsfor takeoff and landing slots in this airport which allow us to significantly decrease our connection times. This is a key milestone in the development of our building our most important hub at Guarulhos airport. In addition, we have continued to consolidate our secondary hubs in Lima and Santiago.

The following table sets forth the international destinations served from each of the aforementioned countries as of December 31, 2014: