7Risks Relating to Our Chapter 11 Proceedings

9One of the largest operational risks that the El Dorado International Airport in Bogotá faces is the limited capacity that it has during certain time periods due to the adverse weather conditions, the operation of non-regular flights and the lack of availability of slots. As a result, measures have been implemented to mitigate and regulate the operation, such as Ground Stop and Ground Delay Program (GDP Program), which generate delays controlled by the control tower. Another issue faced at the El Dorado International Airport is delays by ATC of the control tower in connection with the GDP Program. These delays occur particularly in certain time periods with high traffic and are associated with non-regular flight operation, emergency flights, lower performance planes, all of which lower the airport’s capacity. However, the El Dorado Airport, its concessionaire, Opain S.A., and the relevant authorities are working on the ACDM (Airport Collaborative Decision Making) project which seeks to optimize the airport’s resources, involving all the industry’s players by understanding their needs, in order to achieve a more controlled operation with less schedule delays.

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

OurThe group’s cargo demand, especially from Latin American exporters, is concentrated in a small number of product categories, such as exports of fish, sea products and fruits from Chile, asparagus from Peru and fresh flowers from Ecuador and Colombia. Events that adversely affect the production, trade or demand for these goods may adversely affect the volume of goods that we transportare transported and may have a significant impact on ourthe results of operations. Future trade protection measures by or against the countries for which we provide cargo services may have an impact in cargo traffic volumes and adversely affect our financial results. Some of ourthe cargo products are sensitive to foreign exchange rates and, therefore, traffic volumes could be impacted by the appreciation or depreciation of local currencies.

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

Higher jet fuel prices could have a materially adverse 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 30.9%17.4% of our operating expenses in 2018.2020. For additional information, see “Item 4. Information on the Company—B. Business Overview—11. Quantitative and Qualitative Disclosures about Market Risk—Risk of Fluctuations in Fuel Supplies”.Prices.” Both the cost and availability of fuel are subject to many economic and political factors and events that we can neither control nor predict, including international political and economic circumstances such as the political instability in major oil-exporting countries. Any future fuel supply shortage (for example, as a result of production curtailments by the Organization of the Petroleum Exporting Countries, or “OPEC”), a disruption of oil imports, supply disruptions resulting from severe weather or natural disasters, labor actions such as the 2018 trucking strike in Brazil, the continued unrest in the Middle East or other events could result in higher fuel prices or reductions in scheduled airline services. We cannot ensure that we would be able to offset any increases in the price of fuel by increasing our fares. In addition, lower fuel prices may result in lower fares through the reduction or elimination of fuel surcharges. We have entered into fuel hedging arrangements, but there can be no assurance that such arrangements will be adequate to protect us from an increase in fuel prices in the near future or in the long term. Also, while these hedging arrangements are designed to limit the effect of an increase in fuel prices, our hedging methods may also limit our ability to take advantage of any decrease in fuel prices, as was the case in 2015 and, to a lesser extent, in 2016. See “Item 11. Quantitative and Qualitative Disclosures About Market Risk—RiskRisks of VariationFluctuations in Fuel Prices.” Hedging arrangements are limited after our Chapter 11 filings, as our ISDA contracts went stale. The Company is in the process of signing new contracts.

We rely on maintaining a high aircraft utilization rate to increase our revenues and absorb our fixed costs, which makes us especially vulnerable to delays.

AGenerally, a key element of our strategy is to maintain a high daily aircraft utilization rate, which measures the number of 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 absorb the fixed costs associated with our fleet 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, unanticipated maintenance and delays by third-party service providers relating to matters such as fueling, catering and ground handling. If an aircraft falls behind schedule, the resulting delays could cause a disruption in our operating performance and have a financial impact on our results.results

We flyAs a result of the COVID-19 pandemic our turnaround times between flights have increased to allow for the incorporation of numerous changes to the operation, such as increased aircraft sanitization and dependadjusted embarking and disembarking procedures. This increase in turnaround times has a direct impact on our utilization rate. Further, as a result of our Chapter 11 proceedings, the majority of LATAM’s fleet is operating on a payment by use (or Power By Hour, “PBH”) plan, thus turning the once fixed costs into variable costs that are not easily absorbed through higher utilization.

LATAM flies and depends upon Airbus and Boeing aircraft, and our business could suffer if we do not receive timely deliveries of aircraft, if aircraft from these companies become 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, 2018,2020, LATAM Airlines Group has a total fleet of 239 Airbus and 8161 Boeing aircraft. Risks 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. In the context of our Chapter 11 proceedings, certain of our agreements with suppliers may be rejected. For further information, related to current contractual obligations, see “Item 5. Operating and Financial Review and Prospects—F. Long term Indebtedness—Tabular Disclosure of Contractual Obligations.”

If we are unable to incorporate leased aircraft into ourthe fleet at acceptable rates and terms in the future, our business could be adversely affected.

A large portion of ourthe aircraft fleet is subject to long-term operating leases. Our operatingThe leases typically run from three to 12 years from the date of execution. 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 ourthe current operating leases or to lease additional capacity required for ourthe 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 ourthe fleet, our profitability could be adversely affected.

Furthermore, we will need Bankruptcy Court approval for certain lease transactions, which may delay or further complicate negotiations ultimately limiting our ability to take advantage of favorable market conditions.

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

We have a high degree of debt and payment obligations under our aircraft operating leases and financial debt arrangements. 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. Higher financing costs could affect our ability to expand or renew our fleet, which in turn could adversely affect our business.

In addition, the majoritya substantial portion of our property and equipment is subject to liens securing our indebtedness.indebtedness, including our debtor-in-possession financing. In the event that we fail to make payments on our debtor-in-possession financing or other 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. For further information, related to current contractual obligations, see “Item 5. Operating and Financial Review and Prospects—F. Long term Indebtedness—Tabular Disclosure of Contractual Obligations.”

Moreover, external conditions in the financial and credit markets may limit the availability of funding at particular times or increase its costs, which could adversely affect our profitability, our competitive position and result in lower net interest margins, earnings and cash flows, as well as lower returns on shareholders���shareholders’ equity and invested capital. Factors that may affect the availability of funding or cause an increase in our funding costs include global macro-economic crises, reductions in our credit rating or in that of our issuances, and other potential market disruptions.

We have significant exposure to LIBOR and other floating interest rates; increases in interest rates will increase our financing costscost and may have adverse effects on our financial condition and results of operations.

We are exposed to the risk of interest rate variations, principally in relation to the U.S. dollar London Interbank Offer Rate (“LIBOR”). Many of our financial leases are denominated in U.S. dollars and bear interest at a floating rate. 40.5%55% of our outstanding consolidated debt as of December 31, 20182020 bears interest at a floating rate (after(and 58% if you consider US$375 million in DIP financing provided by Related Parties), after giving effect to interest rate hedging agreements).agreements. Volatility in LIBOR or other reference rates 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 results of operations.

On July 27, 2017, the Financial Conduct Authority (the authority that regulates LIBOR) announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2021. The U.S. Federal Reserve in conjunction withBoard and the Federal Reserve Bank of New York convened the Alternative Reference Rates Committee is considering replacing(ARRC), a group of private-market participants, to help ensure a successful transition from U.S. dollar (USD) LIBOR withto a newly created index, calculated based on repurchase agreements backed by treasury securities. Itmore robust reference rate, its recommended alternative, the Secured Overnight Financing Rate (SOFR). Although the adoption of SOFR is not possiblevoluntary, the impending discontinuation of LIBOR makes it essential that market participants consider moving to predict the effectalternative rates such as SOFR and that they have appropriate fallback language in existing contracts referencing LIBOR. The impact of these changes, other reforms or the establishmentsuch a transition away from LIBOR could be significant for us because of alternative reference rates in the United Kingdom, the United States or elsewhere.our substantial indebtedness. See also the discussion of interest rate risk in “Item 11. Quantitative and Qualitative Disclosures About Market Risk—“Risk of Fluctuations in Interest Rates.”

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

MajorSignificant events affecting the aviation insurance industry (such as terrorist attacks, hijackingsairline crashes or airline crashes)accidents and health epidemics and the related widespread government-imposed travel restrictions) may result in significant increases of airlines’ insurance premiums and/or in significantrelevant decreases of insurance coverage, as occurred after the September 11, 2001 terrorist attacks.coverage. Further increases in insurance costs and/or reductions in available insurance coverage could have an adversea material impact on our financial results, change the insurance strategy, and results of operations andalso increase the risk that we experienceof 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.

OurThe operations, including ourthe ability to deliver customer service, are dependent on the effective operation of ourthe equipment, including our aircraft, maintenance systems and reservation systems. OurThe operations are also dependent on the effective operation of domestic and international air traffic control systems and the air traffic control infrastructure by the corresponding authorities in the markets in which we operate.the group operates. Equipment failures, personnel shortages, air traffic control problems and other factors that could interrupt operations could adversely affect ourthe operations and financial results as well as our reputation.

We depend on a limited number of suppliers for certain aircraft and engine parts.

We depend on a limited number of suppliers for aircraft, aircraft engines and many aircraft and engine parts. As a result, we are vulnerable to problems associated with the supply of those aircraft, parts and engines, including design defects, mechanical problems, contractual performance by the suppliers, or adverse perception by the public that would result in unscheduled maintenance requirements, in customer avoidance or in actions by the aviation authorities resulting in an inability to operate our aircraft. During the year 2018,2020, LATAM Airlines’sAirline’s main suppliers were aircraft manufacturers Airbus and Boeing.

In addition to Airbus and Boeing, LATAM Airlines has a number of other suppliers, primarily related to aircraft accessories, spare parts, and components, including Pratt & Whitney, MTU Maintenance, Rolls-Royce, General Electric and Pratt and& Whitney Canada.

During 2018, Airbus experiencedRolls-Royce continues to face delays inwith its Trent 1000 engine program, used to power LATAM’s Boeing 787 fleet, with increased demand for inspections and maintenance. This has affected the deliveryavailability and the operational flexibility of A320neothis aircraft for operators worldwide, which we understand is related to problems with the aircraft’s Pratt & Whitney engines. We are currently expecting delivery of 9 A320neo aircraft during 2019,impact for LATAM reaching its peak in July 2018. While the situation has improved considerably, there is no guarantee that this will not continue and any delays in delivery could adversely affect our operations. In addition, we currently have four A320neo aircraft in our fleet, and problems associated withtherefore reduce the lack of availability of Pratt & Whitney engines could potentially prevent these aircraft from remaining operational.

Rolls Royce is experiencing problems related to earlier-than-expected maintenance on the Rolls Royce Trent 1000 engines that power the Boeing 787 aircraft. The unexpected additional engine maintenance has reduced the number of Boeing 787 aircraft, available in service and may also impact our A350 aircraft. During 2018, LATAM had a lower availability for its Boeing 787 fleet (part of which remains unavailable awaiting engine maintainance by Rolls Royce). This has caused significant operational challenges for the company as LATAM has had to change itineraries, aircraft types for select routes, and wetlease aircraft from third parties to meet aircraft requirements. We cannot assure that we will not continue to have significant operational disruptions that couldthus negatively affect ouraffecting operations and financial results.

In the context of our Chapter 11 proceedings, certain of our agreements with suppliers may be rejected.

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 in their provision of services to us, could have an adverse effect on our financial position and results of operations.

We have engaged a significant 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 technology infrastructure and services, performance of business processes, including purchasing and cash management, provision of aircraft maintenance and repairs, catering, ground services, and provision of various utilities and performance of aircraft fueling operations, among other vital functions and services. We do not directly control these third-party service providers, although we do enter into agreements with many of them that define expected service performance. Any of these third-party service providers, however, may materially fail to meet their service performance commitments, may suffer disruptions to their systems that could impact their services, or the agreements with such providers may be terminated. For example, flight reservations booked by customers and/or travel agencies via third-party GDSs (Global Distribution Systems) may be adversely affected by disruptions in our business relationships with GDS operators or by issues in the GDS’s operations. 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. In the context of our Chapter 11 proceedings, certain of our agreements with suppliers and third-party contractors may be rejected. See “Item 4. Information on the Company—B. Business Overview—Chapter 11 Proceedings.”

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

A serious internal technology error, failure, or cybersecurity incident impacting systems hosted internally at our data centers, or externally at third-party locations or cloud providers, or large-scale interruption in technology infrastructure we depend on, such as power, telecommunications or the internet, may disrupt our technology network with potential impact on our operations. 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, cyber attackscyber-attacks and other security issues. These systems include our computerized airline reservation system, flight operations system, telecommunications systems, website, custumer,customer, self-service applications (“apps”), maintenance systems, check-in kiosks, in-flight entertainment systems and data centers.

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, deception, or cybersecurity incident. 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.

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

Labor costs constitute a significant percentage of our total operating expenses (18.8%(16.0% in 2018)2020) 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 could result in a material reduction in our earnings.

Collective action by employees could cause operating disruptions and adversely 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 adversely impact our operating and financial performance, as well as our image.

A strike, work interruption or stoppage or any prolonged dispute with our employees who are represented by any of these unions could have an adverse impact on our operations. These risks are typically exacerbated during periods of renegotiation with the unions, which typically occurs every two to four years depending on the jurisdiction and the union. Any renegotiated collective bargaining agreement could feature significant wage increases and a consequent increase in our operating expenses. Any failure to reach an agreement during negotiations with unions may require us to enter into arbitration proceedings, use financial and management resources, and potentially agree to terms that are less favorable to us than our existing agreements. Employees who are not currently members of unions may also form new unions that may seek further wage increases or benefits.

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

As of December 31, 2018,2020, approximately 86%64% of ourthe group’s employees, including administrative personnel, cabin crew, flight attendants, pilots and maintenance technicians are members of unions and have contracts and collective bargaining agreements which expire on a regular basis. OurThe 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 usthe group from competing effectively with other airlines. For further information regarding the unions representing our employees in each country in which we operatethe group operates and with which we havethere are established collective bargaining agreements, see “Item 6. Directors, Senior Management and Employees—D. Employees—Labor Relations.”

WeLATAM may experience difficulty finding, training and retaining employees.

OurThe business is labor intensive. We employThe group employs 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, especially pilots and maintenance technicians. Such shortage of qualified personnel is further exacerbated as a result of our Chapter 11 proceedings, and extends to non-flight personnel. In addition, as is common with most of our competitors, wethe group 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. WeLATAM cannot assure you that weit will be able to recruit, train and retain the managers, pilots, technicians and other qualified employees that we needare needed to continue ourthe current operations or replace departing employees. An increase in turnover or failure to recruit, train and retain qualified employees at a reasonable cost could materially adversely affect ourthe business, financial condition, and results of operations. As a result of the Chapter 11 proceedings, the group may experience increased levels of employee attrition. A loss of key personnel or material erosion of employee morale could impair the ability to execute strategy and implement operational initiatives, thereby adversely affecting the group.

Risks RelatedRelating to the Airline Industry and the Countries in Which We Operatethe Group Operates

Our performance is heavily dependent on economic conditions in the countries in which we dothe group does business. Negative economic conditions in those countries could adversely impact ourthe group’s business and results of operations and cause the market price of our common shares and ADSs to decrease.

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 adversely affected by global economic recessionary conditions, weak economic growth in Chile, recessionrecessions in Brazil and Argentina, and poor economic performance in certain emerging market countries in which we operate.the group operates. The occurrence of similar events in the future could adversely affect our business. We planThe group plans to continue to expand our operations based in Latin America, and ourwhich means that performance will therefore, continue to depend heavily on economic conditions in the region.

Any of the following factors could adversely affect ourthe business, financial condition and results of operations in the countries in which we operate:the group operates:

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

An adverse economic environment, whether global, regional or in a particular country, could result in a reduction in passenger traffic, as well as a reduction in ourthe cargo business, and could also impact ourthe ability to raiseset fares, which in turn would materially and negatively affect our financial condition and results of operations.

We are exposed to increases in landing fees and other airport service charges that could adversely affect our margin and competitive position. Also, it cannot be assured that in the future we will have access to adequate facilities and landing rights necessary to achieve our expansion plans.

WeThe group must pay fees to airport operators for the use of their facilities. Any substantial increase in airport charges, including at Guarulhos International Airport in São Paulo, Jorge Chavez International Airport in Lima or Comodoro Arturo Merino Benitez International Airport in Santiago, could have a material adverse impact on our results of operations. Passenger taxes and airport charges have increased substantially in recent years. We cannot assure you that the airports in which we operatethe group operates will not increase or maintain high passenger taxes and service charges in the future. Any such increases could have an adverse effect on our financial condition and results of operations.

Certain airports that we serve (or that we plan to serve in the future) are subject to capacity constraints and impose various restrictions, including takeoff and landing slot restrictions during certain periods of the day and limits on aircraft noise levels. We cannot be certain that wethe group will be able to obtain a sufficient number of slots, gates and other facilities at airports to expand our services in line with our growth strategy. It is also possible that airports not currently subject to capacity constraints may become so in the future. In addition, an airline must use its slots on a regular and timely basis or risk having those slots re-allocated to others. Where slots or other airport resources are not available or their availability is restricted in some way, wethe group may have to amend our schedules, change routes or reduce aircraft utilization. It is also possible that aviation authorities in the countries in which the group operates, change the rules for the assignment of takeoff and landing slots, as it was the case with the São Paulo airport (Congonhas) in 2019 where the slots previously operated by Avianca Brazil were reassigned. Any of these alternatives could have an adverse financial impact on our operations. We cannot ensure that airports at which there are no such restrictions may not implement restrictions in the future or that, where such restrictions exist, they may not become more onerous. Such restrictions may limit our ability to continue to provide or to increase services at such airports.

OurThe business is highly regulated and changes in the regulatory environment in the different countries 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 operatethe group operates 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. 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.

Our business, financial condition, results of operations and the price of preferredcommon shares and ADSs may be adversely affected by changes in policy or regulations at the federal, state or municipal level in the countries in which we operate,the group operates, involving or affecting factors such as:

For example, the Brazilian federal government has frequently intervened in the domestic economy and made drastic changes in policy and regulations to control inflation and affect other policies and regulations. This required the federal government to increase interest rates, change taxes and social security policies, implement price controls, currency exchange and remittance controls, devaluations, capital controls and limits on imports.

Uncertainty over whether the Brazilian federal government will implement changes in policy or regulation affecting these or other factors may contribute to economic uncertainty in Brazil and to heightened volatility in the Brazilian securities markets and securities issued abroad by Brazilian companies. These and other developments in the Brazilian economy and governmental policies may adversely affect us and our business and results of operations and may adversely affect the trading price of our preferredcommon shares and ADSs.

We are also subject to international bilateral air transport agreements that provide for the exchange of air traffic rights between the countries where we operate,the group operates, and we must obtain permission from the applicable foreign governments to provide service to foreign destinations. There can be no assurance that such existing bilateral agreements will continue, or that we will be able to obtain more route rights under those agreements to accommodate our future expansion plans. Certain bilateral agreements also include provisions that require substantial ownership or effective control. Any 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 permits to operate to certain airports or destinations, the inability for us to obtain favorable take-off and landing authorizations at certain high-density airports or the imposition of other sanctions could also have a negative impact on our business. We cannot be certain that a change in ownership or effective control or in a foreign government’s administration of current laws and regulations or the adoption of new laws and regulations will not have a material adverse effect on our business, financial condition 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.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 operations or aircraft are less safe or reliable than those operated by other airlines, or by other flight operators, 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, or due to a perception of increased risk in the industry related to concerns about war or terrorist attacks, the general industry, or general industry safety.

High levels of competition in the airline industry, such as the presence of low-cost carriers in the markets in which we operate,the group operates, may adversely affect ourthe 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.the group operates. 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 or passenger 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 offerings in an effort to gain greater market share. For more information regarding our main competitors, see “Item 4. Information of the Company—B. Business Overview—Passenger Operations—International Passenger Operations” and “Item 4. Information of the Company—B. Business Overview—Passenger Operations—Business Model for Domestic Operations.”

Low-cost carriers have an important impact in the industry’s revenues given their low unit costs. Lower costs allow low-cost carriers to offer inexpensive fares which, in turn, allow price sensitive customers to fly or to shift from large to low cost carriers. In past years we have seen more interest in the development of the low-cost model throughout Latin America. For example, in the Chilean market, Sky Airlines,Airline, our main competitor, has been migrating to a low-cost model since 2015, while in July 2017, JetSmart, a new low-cost airline, started operations. In the Peruvian domestic market, VivaAir Peru, a new low-cost airline, started operations in May 2017.2017, and in April 2019, another low-cost airline, Sky Airline Peru, started operations. In Colombia, low-cost competitor VivaColombia has been operating in the domestic market since May 2012. Low-cost competitors Flybondi and Norwegian began operations in the Argentinian domestic market during 2018. A number of low-cost carriers have announced growth strategies including commitments to acquire significant numbers of aircraft for delivery in the next few years. The entry of the low-cost carriers into local into markets in which we compete, including those described above, could have a material adverse effect on our operations and financial performance. Additionally, certain of our competitors have also filed voluntary petitions under Chapter 11 of the Bankruptcy Code. The ability of competitors to significantly adjust their cost structure and become more competitive, resulting from a bankruptcy reorganization process or other financial restructuring may also adversely affect our ability to compete.

Our internationalInternational strategic growth plans rely, in part, upon receipt of regulatory approvals of the countries in which we plan to expand our operations of certain Joint Business Agreements (JBAs)with joint business agreements (JBA). WeThe group may not be able to obtain those approvals, while other competitors might be approved. Accordingly, we might not be able to compete for the same routes as our competitors, which could diminish our market share and adversely impact our financial results. No assurances can be given as to any benefits, if any, that we may derive from such agreements.

Some of our competitors may receive external support, which could adversely 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 usthe group at a competitive disadvantage and adversely affect our operations and financial performance. For example, Aerolineas Argentinas has historically been government subsidized. Additionally, during the COVID-19 pandemic, some of our competitors on long-haul routes have received, or will receive, government support.

Moreover, as a result of the competitive environment, there may be further consolidation in the Latin American and global airline industry, whether by means of acquisitions, joint ventures, partnerships or strategic alliances. We cannot predict the effects of further consolidation on the industry. Furthermore, consolidation in the airline industry and changes in international alliances will continue to affect the competitive landscape in the industry and may result in the development of airlines and alliances with increased financial resources, more extensive global networks and reduced cost structures.

Some of the countries where we operatethe group operates may not comply with international agreements previously established, which could increase the risk perception of doing business in that specific market and as a consequence impact ourthe business and financial results.

Rulings by a bankruptcy court in Brazil and by higher judicial authorities related to the bankruptcy proceedings of Avianca Brazil may appear to be inconsistent with the Cape Town Convention (CTC) treaty that Brazil has signed, thus raising concerns about the rights of creditors in respect of financings secured by aircraft.Accordingly, if creditors perceive that an increase business risk is created by these rulings for leasing or other financing transactions involving aircraft in Brazil, there is a possibility that rating agencies may issue lower credit ratings in respect of financings that are secured by aircraft in Brazil. As a result, our business and financial results may be adversely affected if our financing activities in Brazil are impacted by such events..

events.

OurLATAM’s 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.

OurLATAM’s operations are affected 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 ourthe 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 ourthe group’s reputation.

In 2016, the International Civil Aviation Organization (“ICAO”) adopted a resolution creating the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), providing a framework for a global market-based measure to stabilize carbon dioxide (“CO2”) emissions in international civil aviation (i.e., civil aviation flights that depart in one country and arrive in a different country). CORSIA will be implemented in phases, starting with the participation of ICAO member states on a voluntary basis during a pilot phase (from 2021 through 2023), followed by a first phase (from 2024 through 2026) and a second phase (from 2027). Currently, CORSIA focuses on defining standards for monitoring, reporting and verification of emissions from air operators, as well as on defining steps to offset CO2 emissions after 2020. To the extent most of the countries in which we operatethe group operates continue to be ICAO member states, in the future we may be affected by regulations adopted pursuant to the CORSIA framework.

The proliferation of national regulations and taxes on CO2 emissions in the countries that we have domestic operations, including environmental regulations that the airline industry is facing in Colombia, may also affect our coststhe cost of operations and ourthe margins.

OurThe 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 and Zika) and pandemics (such as the COVID-19 pandemic), terrorist attacks, war or political and social instability. Situations such as these in one or more of the markets in which we operatethe group operates could have a material impact on ourthe business, financial condition and results of operations. Furthermore, these types of situationsthe COVID-19 pandemic and other adverse public health developments could have a prolonged effect on air transportation demand and on certain cost items.any prolonged or widespread effects could significantly impact operations.

After the terrorist attacks in the United States on September 11, 2001, the Company made the decision to reduce its flights to the United States. In connection with the reduction in service, the Company reduced its workforce resulting in additional expenses due to severance payments to terminated employees during 2001. Any future terrorist attacks or threat of attacks, whether or not involving commercial aircraft, any increase in hostilities relating to reprisals against terrorist organizations or otherwise and any related economic impact could result in decreased passenger traffic and materially and negatively affect ourthe business, financial condition and results of operations.

After the 2001 terrorist attacks, airlines have experienced increased costs resulting from additional security measures that may be made even more rigorous in the future. In addition to measures imposed by the U.S. Department of Homeland Security and the TSA, IATA and certain foreign governments have also begun to institute additional security measures at foreign airports we serve.

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 profitability. 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.

WeAn accumulation of ticket refunds could have an adverse effect on our financial results.

The COVID-19 pandemic and the corresponding widespread government-imposed travel restrictions that are outside of LATAM’s control have resulted in an unprecedented number of requests for ticket refunds from customers due to changed or cancelled flights. Although at the time this issue has been managed, we cannot assure you that the COVID-19 pandemic or other outbreak of contagious illness will not result in additional changed or cancelled flights, and we cannot predict the total amount of refunds that customers might request as a result thereof. If the group is required to pay out a substantial amount of ticket refunds in cash, this could have an adverse effect on our financial results or liquidity position. Furthermore, the Company has agreements with financial institutions that process customer credit card transactions for the sale of air travel and other services. Under certain of the Company’s credit card processing agreements, the financial institutions in certain circumstances have the right to require that the Company maintain a reserve equal to a portion of advance ticket sales that have been processed by that financial institution, but for which the Company has not yet provided the air transportation. Such financial institutions may require cash or other collateral reserves to be established or withholding of payments related to receivables to be collected, including if the Company does not maintain certain minimum levels of unrestricted cash, cash equivalents and short-term investments. Refunds lower our liquidity and put us at risk of triggering liquidity covenants in these processing agreements and, in doing so, could force us to post cash collateral with the credit card companies for advance ticket sales.

LATAM is subject to risks relatedrelating to litigation and administrative proceedings that could adversely affect ourthe business and financial performance in the event of an unfavorable ruling.

The nature of ourthe business exposes us to litigation relating to labor, insurance and safety matters, regulatory, tax and administrative proceedings, governmental investigations, tort claims and contract disputes. Litigation is inherently costly and unpredictable, making it difficult to accurately estimate the outcome among other matters. Currently, as in the past, we are subject to proceedings or investigations of actual or potential litigation. Although we establish accounting provisions as we deem necessary, the amounts that we reserve could vary significantly from any amounts we actually have to pay due to the inherent uncertainties in the estimation process. We cannot assure you that these or other legal proceedings will not materially affect ourthe business. For further information,see “Item 8. Financial Information—Legal and Arbitration Proceedings.”Proceedings” and Note 31 ofto our audited consolidated financial statements included in this report.

We areThe group is subject to anti-corruption, anti-bribery, anti-money laundering and antitrust laws and regulations in Chile, the United States and in the various countries we operate.in which it operates. Violations of any such laws or regulations could have a material adverse impact on our reputation and results of operations and financial condition.

We are subject to anti-corruption, anti-bribery, anti-money laundering, antitrust and other international laws and regulations and are required to comply with the applicable laws and regulations of all jurisdictions where we operate.the group operates. In addition, we are subject to economic sanctions regulations that restrict our dealings with certain sanctioned countries, individuals and entities. There can be no assurance that our internal policies and procedures will be sufficient to prevent or detect all inappropriate practices, fraud or violations of law by our affiliates, employees, directors, officers, partners, agents and service providers or that any such persons will not take actions in violation of our policies and procedures. Any violations by us of laws or regulations could have a material adverse effect on ourthe business, reputation, results of operations and financial condition.

The Brazilian government hasLatin American governments have exercised and may continue to exercise significant influence over their economies.

Governments in Latin America frequently intervene in the Brazilian economy, which mayeconomies of their respective countries and occasionally make significant changes in policy and regulations. Governmental actions have an adverse impactoften involved, among other measures, nationalizations and expropriations, price controls, currency devaluations, mandatory increases on ourwages and employee benefits, capital controls and limits on imports. Our business, financial condition and results of operations.operations may be adversely affected by changes in government policies or regulations, including such factors as exchange rates and exchange control policies, inflation control policies, price control policies, consumer protection policies, import duties and restrictions, liquidity of domestic capital and lending markets, electricity rationing, tax policies, including tax increases and retroactive tax claims, and other political, diplomatic, social and economic developments in or affecting the countries where the group operates.

The Brazilian economy has been characterized byFor example, the significant involvement of the Brazilian government, which often changes monetary, credit, fiscal and other policies to influence Brazil’s economy. The Brazilian government’s actions to control inflation and implement other policies have involved wage and price controls, depreciation of the real, controls over remittance of funds abroad, intervention by the Central Bank to affect base interest rates and other measures. We have no control over, and cannot predict what measures or policiesIn the Brazilian government may take infuture, the future.

The Peruvian government has exercised, andlevel of intervention by Latin American governments may continue to exercise, significant influence overor increase. We cannot assure you that these or other measures will not have a material adverse effect on the Peruvian economy which may have an adverse impact onof each respective country and, consequently, will not adversely affect our business, financial condition and results of operations.

Political instability and social unrest in Latin America may adversely affect the business.

LATAM operates primarily within Latin America and is thus subject to a full range of risks associated with our operations in this region. These risks may include unstable political or social conditions, lack of well-established or reliable legal systems, exchange controls and other limits on our ability to repatriate earnings and changeable legal and regulatory requirements.

Although political and social conditions in one country may differ significantly from another country, events in any of our key markets could adversely affect the business, financial conditions or results of operations.

For example, in Brazil, in the last couple of years, as a result of the ongoing Lava Jato investigation (“Operation Car Wash”), a number of senior politicians have resigned or been arrested and other senior elected officials and public officials are being investigated for allegations of corruption. One of the most significant events that elapsed from this operation was the impeachment of the former President Rousseff by the Brazilian Senate on August, 2016, for violations of fiscal responsibility laws and the governing of its Vice-President, Michel Temer, during the last two years of the presidential mandate, which, due to the development of the investigations conducted by the Federal Police Department and the General Federal Prosecutor’s Office, indicted President Temer on corruption charges. Along with the political and economic uncertainty period the country was facing, in July 2017, former President Luiz Inácio Lula da Silva was convicted of corruption and money laundering by a lower federal court in the State of Paraná in connection with Operation Car Wash.

In Peru, on September 30, 2019, President Martin Vizcarra took the executive action to dissolve the Peruvian Congress and called for a new election of congressional members. In response to the dissolution of the Congress, former members of the legislative body voted to suspend President Vizcarra for twelve months and appointed Vice President Mercedes Araoz as interim president to temporarily replace Mr. Vizcarra. Vice President Araoz resigned from her position as interim president the following day. On January 14, 2020, the Peruvian Constitutional Court declared the executive action taken by President Vizcarra to be constitutionally and legally valid. On January 26, 2020, congressional elections were held to elect the new Congress. The new Congress is fragmented and will likely be replaced in the next general election in April 2021.

On October 20, 2020, a group of 27 congressmen introduced a motion to hold new impeachment proceedings against President Vizcarra as a result of allegations that President Vizcarra received illicit payments from construction companies when he was the governor of Moquegua (between 2011 and 2014). On November 2, 2020, the Peruvian Congress voted to hold new impeachment proceedings. On November 9, 2020, with the affirmative vote of the required qualified members of Congress, the impeachment of President Vizcarra was approved. Because, at the time, Peru did not have designated vice presidents, the then-president of the Congress, Manuel Arturo Merino de Lama, assumed the role of acting President. Since that day, Peru has been undergoing political and social unrest, followed by multiple protests within the country. On November 15, 2020, Manuel Arturo Merino de Lama resigned from his role of acting President. On November 16, 2020, the Congress elected congressman Francisco Rafael Sagasti Hochhausler as president of Congress, and he assumed the role of acting President on November 17, 2020 until July 28, 2021.

Notwithstanding the foregoing, Peru is currently scheduled to hold a general election in April 2021 to elect a new President and Congress, which increases the uncertainty surrounding the Peruvian economy. In the past, governments have imposed controls on prices, exchange rates, local and foreign investment and international trade, restricted the ability of companies to dismiss employees, expropriated private sector assets and prohibited the remittance of profits to foreign investors. We cannot be certain whether the new Peruvian government (appointed by Congress) or the Peruvian government to be elected in 2021 will continue to pursue business-friendly and open-market economic policies that stimulate economic growth and stability.

In October 2019, Chile saw significant protests associated with economic conditions resulting in the declaration of a state of emergency in several major cities. The protests in Chile began over criticisms about social inequality, lack of quality education, weak pensions, increasing prices and low minimum wage. If social unrest in Chile were to continue or intensify, it could lead to operational delays or adversely impact our ability to operate in Chile.

Furthermore, current initiatives to address the concerns of the protesters are under discussion in the Chilean Congress. These initiatives include labor reforms, tax reforms and pension reforms, among others. It is not possible to predict the effect of these changes as they are still under discussion, but they could potentially result in higher payments of wages and salaries and an increase in taxes. On October 25, 2020 (postponed from April 26, 2020 due to the impact of the COVID-19 pandemic), Chile widely approved a referendum to redraft the constitution via constitutional convention. The election for selecting the 155-member constitutional convention is set to be held on April 11, 2021. Thereafter, the convention will have 9 months, with the possibility of a one-time, three-month extension, to present a new constitution, which will be approved or rejected in a referendum during 2022. In addition, Chile will hold presidential and congressional elections in November 2021.

Although conditions throughout Latin America vary from country to country, our customers’ reactions to developments in Latin America generally may result in a reduction in passenger traffic, which could materially and negatively affect our financial condition and results of operations.

Latin American countries have experienced periods of adverse macroeconomic conditions.

The business is dependent upon economic conditions prevalent in Latin America. Latin American countries have historically experienced economic instability, including uneven periods of economic growth as well as significant downturns. High interest, inflation (in some cases substantial and prolonged), and unemployment rates generally characterize each economy. Because commodities such as agricultural products, minerals, and metals represent a significant percentage of exports of many Latin American countries, the economies of those countries are particularly sensitive to fluctuations in commodity prices. Investments in the region may also be subject to currency risks, such as restrictions on the flow of money in and out of the country, extreme volatility relative to the U.S. dollar, and devaluation.

For example, in the past, Peru has experienced periods of severe economic recession, currency devaluation, high inflation, and political instability, which have led to adverse economic consequences. We cannot assure you that Peru will not experience similar adverse developments in the future even though for some years now, several democratic procedures have been completed without any violence. We cannot assure you that the current or any future administration will maintain business-friendly and open-market economic policies or policies that stimulate economic growth and social stability. AnyIn Brazil, the Brazil Real GDP decreased 3.5% in 2015, decreased 3.3% in 2016, increased 1.3% in 2017 and 2018 and increased 1.1% in 2019, according to the Brazilian Institute for Geography and Statistics (Instituto Brasileiro de Geografia e Estadística, or “IGBE”). In addition, the credit rating of the Brazilian federal government was downgraded in 2015 and 2016 by all major credit rating agencies and is no longer investment grade. We can offer no assurances as to the policies that may be implemented by the recently elected Argentine administration, or that political developments in Argentina will not adversely affect the Argentine economy.

Accordingly, any changes in the Peruvian economyeconomies of the Latin American countries in which LATAM and its affiliates operate or the Peruvian government’sgovernments’ economic policies may have a negative effect on ourthe business, financial condition and results of operations.

Instability and political unrest in Latin America may adversely affect our business.

We operate primarily within Latin America and are thus subject to a full range of risks associated with our operations in this region. These risks may include unstable political or economic conditions, lack of well-established or reliable legal systems, exchange controls and other limits on our ability to repatriate earnings and changeable legal and regulatory requirements.

Although conditions throughout Latin America vary from country to country, our customers’ reactions to developments in Latin America generally may result in a reduction in passenger traffic, which could materially and negatively affect our financial condition and results of operations

Risks RelatedRelating to our Common Shares and ADSs

Because our post-bankruptcy capital structure is yet to be determined, and any changes to our capital structure may have a material adverse effect on holders of the ADSs or our shares, trading in the ADSs or our shares during the pendency of our Chapter 11 proceedings is highly speculative and poses substantial risks.

Our post-bankruptcy capital structure will be set pursuant to a reorganization plan that requires approval by the bankruptcy court. The reorganization of our capital structure may include exchanges of new equity securities for existing equity securities or of debt securities for equity securities, which would dilute any value of our existing equity securities, or may provide for all existing equity interests in us to be extinguished. In this case, amounts invested by holders of the ADSs or our shares will not be recoverable and these securities will have no value.

As a result of our Chapter 11 proceedings, on June 10, 2020, the NYSE notified the SEC of its intention to remove the ADSs from listing and registration on the NYSE, effective at the opening of business on June 22, 2020. As of the date of this annual report, the ADSs are traded in the over-the-counter market, which is a less liquid market. There can be no assurance that the ADSs will continue to trade in the over-the-counter market or that any public market for the ADSs will exist in the future, whether broker-dealers will continue to provide public quotes of the ADSs, whether the trading volume of the ADSs will be sufficient to provide for an efficient trading market, whether quotes for the ADSs may be blocked in the future or that we will be able to relist the ADSs on a securities exchange.

Trading prices of the ADSs or our shares bear no relationship to the actual recovery, if any, by their holders in the context of our Chapter 11 proceedings. Additionally, trading prices of ADSs or our shares may experience significant fluctuation and volatility. Due to these and other risks described in this annual report, trading in the ADSs or our shares during the pendency of our Chapter 11 proceedings poses substantial risks and we urge extreme caution with respect to existing and future investments in these securities.

Our major shareholders may have interests that differ from those of our other shareholders.

One of ourthe major shareholder groups, the Cueto Group (the “LATAM Controlling Shareholders”“Cueto Group”), whichbeneficially owned 16.39% of our common shares as of February 28, 2019, beneficially owned 27.91% of our common shares, is entitled to elect three of the nine members of our board of directors and is in a position to direct our management. In addition, the LATAM Controlling Shareholders have entered into a shareholders’ agreement with the2021. The Amaro Group which(the “Amaro Group”), as of February 28, 2019,2021, held 2.58%6.40 % of LATAM shares through TEP Chile in addition toand TEP Aeronáutica S.A. Previously, the indirectAmaro Group held a 21.88% stake it has through the 21.88% interest it holds in Costa Verde Aeronáutica S.A., the main legal vehicle through which the Cueto Group holds its LATAM shares, pursuant to which these two major shareholder groups have agreed to vote together to elect individuals to our boardincluded 4.42% of directors in accordance with their directthe 6.40% LATAM shares held by the Amaro Group. On December 28, 2020, however, TEP Aeronáutica S.A. was created through a demerger of Costa Verde Aeronáutica S.A., and indirect shareholderthe Amaro Group’s interest in LATAM.Costa Verde Aeronáutica S.A. transferred to the new company, wholly-owned by the Amaro Group, and which as of February 28, 2021, held 4.42% of the LATAM Shares. Pursuant to aan existing shareholders’ agreement, the LATAM Controlling ShareholdersCueto Group and the Amaro Group have also agreed to use their good faith efforts to reach an agreement and act jointly on all actions to be taken by our board of directors or shareholders’ meeting, and if unable to reach to such agreement, to follow the proposals made by our board of directors. Decisions by the Company that require supermajority votes under Chilean law are subject to voting arrangements by the LATAM Controlling ShareholdersCueto Group and the Amaro Group. In addition, another major shareholder,other shareholders including, Delta Air Lines, Inc, which, as of February 28, 2021, held 20.00% of our common shares, and Qatar Airways Investments (UK) Ltd., which as of February 28, 2019,2021, held 10.00%9.999999918% of our common shares, is entitled to appoint one individual to our board of directors. Thecould have interests of our major shareholdersthat may differ from those of our other shareholders. See “Item 7. ControllingMajor Shareholders and Related Party Transactions—A. Major Shareholders.”

Under the terms of the deposit agreement governing the ADSs, if holders of ADSs do not provide JP Morgan Chase Bank, N.A., in its capacity as depositary for the ADSs, with timely instructions on the voting of the common shares underlying their ADRs, the depositary will be deemed to have been instructed to give a person designated by the board of directors the discretionary right to vote those common shares. The person designated by the board of directors to exercise this discretionary voting right may have interests that are aligned with our controllingmajority shareholders, which may differ from those of our other shareholders. Historically, our board of directors has designated its chairman to exercise this right; for example, the members of the board of directors elected by the shareholders in 20172020 designated Mr. Ignacio Cueto, 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.

Our common shares are listed on the varioustwo Chilean stock exchanges. Chilean securities markets are substantially smaller, less liquid and more volatile than major securities markets in the United States. In addition, Chilean securities markets may be materially affected by developments in other emerging markets, particularly other countries in Latin America. Accordingly, although you are entitled to withdraw the common shares underlying the ADSs from the depositary at any time, your ability to sell the common shares underlying ADSs in the amount and at the price and time of your choice may be substantially limited. This limited trading market may also increase the price volatility of the ADSs or the common shares underlying the ADSs.

Holders of ADRs 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,imposed such exchange controls. Nevertheless, foreign investors acquiring securities instill have to provide the secondary market in ChileCentral Bank with information related to maintain a cash reserve or to pay a fee upon conversion of foreign currency to purchaseequity investments and must conduct such securities.operations within the formal exchange market. Furthermore, any changes in withholding taxes could negatively affect non-Chilean residents that invest in our shares.

We cannot assure you that additional Chilean restrictions applicable to the holders of ADRs, the disposition of the common shares underlying ADSs or the repatriation of the proceeds from an acquisition, a disposition or a dividend payment, will not be imposed or required in the future, nor could we make an assessment as to the duration or impact, were any such restrictions to be imposed or required. For further information, see “Item 10. Additional Information—D. Exchange Controls—Foreign Investment and Exchange Controls in Chile.”

Our ADS holders may not be able to exercise preemptive rights in certain circumstances.

The Chilean Corporation Law providesAs described further in “Item 10. Additional Information—Preemptive Rights and Increases in Share Capital,” to the extent that a holder of our ADSs is unable to exercise its preemptive rights shall be grantedbecause a registration statement has not been filed, the depositary will attempt to all shareholders whenever a company issues new shares for cash, giving such holderssell the right to purchase a sufficient numberholder’s preemptive rights and distribute the net proceeds of shares to maintain their existing ownership percentage. We will not be able to offer shares to holdersthe sale, net of ADSsthe depositary’s fees and shareholders located in the United States pursuantexpenses, to the holder, provided that a secondary market for those rights exists and a premium can be recognized over the cost of the sale. A secondary market for the sale of preemptive rights grantedcan be expected to shareholdersdevelop if the subscription price of the shares of our common stock upon exercise of the rights is below the prevailing market price of the shares of our common stock. However, we cannot assure you that a secondary market in preemptive rights will develop in connection with any future issuance of shares unlessof our common stock or that if a registration statement undermarket develops, a premium can be recognized on their sale. Amounts received in exchange for the U.S. Securities Actsale or assignment of 1933, as amended, (the “Securities Act”), is effective with respectpreemptive rights relating to such rightsshares of our common stock will be taxable in Chile 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 StatesStates. See “Item 10. Additional Information—E. Taxation—Chilean Tax—Capital Gains.” As described further in “Item 10. Additional Information—Preemptive Rights and Increases in Share Capital,” the inability of holders of ADSs to exercise preemptive rights as well as any other factors that may be considered appropriate at that time,in respect of common shares underlying their ADSs could result in a change in their percentage ownership of common shares following a preemptive rights offering. If a secondary market for the sale of preemptive rights does not develop 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 cannot be sold, they will expire and a holder of our ADSs will not realize any value from the grant of the preemptive rights. In either case, the equity interest of a holder of our ADSs in us will be available to ADS holders and shareholders located in the United States.diluted proportionately.

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 “Exchange Act”). The disclosure requirements applicable to foreign issuers under the Exchange Act are more limited than the disclosure requirements applicable to U.S. issuers. Publicly available information about issuers of securities listed on Chilean stock exchanges also provides less detail in certain respects than the information regularly published by listed companies in the United States or in certain other countries. Furthermore, there is a lower level of regulation of the Chilean securities market 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. For further information, see “Item 16. Reserved—G. Corporate Governance.”

A. HISTORY AND DEVELOPMENT OF THE COMPANY

General

LATAM Airlines Group is a Chilean-based airline holding company formed through the business combination of LAN Airlines S.A. of Chile and TAM of Brazil in 2012. Following the combination, LAN Airlines S.A. became “LATAM Airlines Group S.A.” and TAM S.A. continues to exist as a subsidiary of LATAM. The Company is primarily involved in the transportation of passengers and cargo and operates as one unified business enterprise. During 2016, we began the transition of unifying LAN and TAM into a single brand: LATAM.

LATAM’s airline holdings include LATAM and its affiliates in Chile, Peru, Argentina, Colombia and Ecuador, and LATAM Cargo and its affiliate LANCO (in Colombia), as well as TAM S.A. and its affiliates TAM Linhas Aereas S.A (LATAMLATAM Airlines Brazil), TAM Transportes Aereos del MercosurBrazil, LATAM Airlines Paraguay, ABSA and Multiplus S.A., (LATAM (“Multiplus”). LATAM Airlines Paraguay), LATAM Cargo and Multiplus. LATAMGroup is a publicly traded corporation listed on the Santiago Stock Exchange (“SSE”), and the Chilean Electronic Exchange and its ADSs currently trade in the New York Stock Exchange (“NYSE”)over-the-counter market with a market capitalization of US$7.021.13 billion as of February 28, 2019.2021.

LATAM’s history goes back to 1929, when the Chilean government founded LAN. In 1989, the Chilean government sold 51.0% of LAN’s capital stock to Chilean investors and to the Scandinavian Airlines System. In 1994, the Cueto Group, one of LATAM’s current controllingmajor shareholders, together with other major shareholders, acquired 98.7% of LAN’s stock, including the remaining shares then held by the Chilean government. In 1997, LAN became the first Latin American airline to list its shares (which trade in the form of ADSs) on the New York Stock Exchange.

Over the past decade, LATAM has significantly expanded its operations in Latin America, initiating services in Peru in 1999, Argentina in 2005, Ecuador in 2009, and Colombia in 2010. The business combination of LAN and TAM in June 2012 further expanded the Company’s operations in Brazil, where TAM Linhas Aéreas S.A. (“TLA” or “LATAM Airlines Brazil”), the TAM operating entity, is a leading domestic and international airline offering flights throughout Brazil with a strong domestic market share, international passenger services and significant cargo operations. TAM was founded in May 1997 (under the nameCompanhia de Investimentos em Transportes), for the purpose of participating in, managing and consolidating shareholdings in airlines. In September 2002, TAM’s name was changed to TAM S.A. and its shares were listed on the Brazilian Stock Exchange (“Bovespa”) in June 2005. From 2006 until the combination with LAN in 2012, TAM ADSs were also listed on the NYSE.New York Stock Exchange (“NYSE”).

As a result of the COVID-19 pandemic and its profound impact on worldwide travel and our operations, on May 26, 2020 LATAM Airlines Group S.A. and 28 affiliates filed their petitions for relief under Chapter 11 of the Bankruptcy Code, with the Bankruptcy Court. On July 7, 2020 and July 9, 2020 nine additional affiliates of LATAM Airlines Group S.A. filed their petitions for relief under Chapter 11 of the Bankruptcy Code with the Bankruptcy Court. Additional parallel and ancillary proceedings were filed in the Cayman Islands, Colombia, Perú and Chile. In June 2020, LATAM Airlines Argentina announced its indefinite cessation of passenger and cargo operations.

Our principal executive offices are located at Presidente Riesco 5711, 20th floor, Las Condes, Santiago, Chile and our general telephone number at this location is (56-2) 2565-8765.2565-2525. We have designated LATAM Airlines Group as our agent in the United States, located at 970 South Dixie Highway, Miami, Florida 33156. Our Investor Relations website address is 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 Andrés del Valle, Senior Vice President of Corporate Finance and Investor Relations, atInvestorRelations@latam.com. InvestorRelations@latam.com.

The SEC maintains an internet site athttp://www.sec.gov that contains reports, information statements, and other information regarding issuers that file electronically with the SEC.

Capital Expenditures

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

B. BUSINESS OVERVIEW

General

LATAM Airlines Group is the largest passenger airline group in South America. We are also one of the largest airline groups in the world in terms of network connections, as of December 31, 2020, providing passenger transport services to approximately 143111 destinations in 2616 countries and cargo services to approximately 150117 destinations in 2920 countries, with an operating fleet of 312300 aircraft and a set of bilateral alliances. In total, LATAM Airlines Group has approximately 41,00028,400 employees.

For the year 2018,2020, LATAM transported approximately 6928 million passengers.passengers, a decrease from prior years due to the impact of the COVID-19 pandemic on worldwide travel. LATAM Airlines Group and its affiliates currently provide domestic services in Brazil, Chile, Peru, Argentina, Colombia and Ecuador; weEcuador (the Group suspended its operations in Argentina in June 2020); and also provide intra-regional and long-haul operations. The cargo affiliate carriers of LATAM in Chile, Brazil, and Colombia carry out cargo operations through the use of belly spacesspace on the passenger flights and dedicated cargo operations using freight aircraft. WeThe group also offeroffers other services, such as ground handling, courier, logistics and maintenance.

As of December 31, 2018, we2020, the group provided scheduled passenger service to 1712 destinations in Chile, 19 destinations in Peru, five7 destinations in Ecuador, 14 destinations in Argentina, 1412 destinations in Colombia, 4244 destinations in Brazil, 10eight destinations in other Latin American countries and the Caribbean, eight5 destinations in North America, eightand 4 destinations in Europe, four destinations ina decrease from last year due to impacts of the South Pacific, one destination in Asia and one destination in Africa. COVID-19 pandemic on the operations.

In addition, as of December 31, 2018,2020, through our various code-sharing and interline agreements, we offerthe group offers service to 7072 destinations in North America, 4452 destinations in Europe, 17 destinations in Australasia, 1321 destinations in Asia and four8 destinations in Africa.

Competitive Strengths

Our strategy is to maintain LATAM Airlines Group’s position as the leading airline in South America by leveraging our unique position in the airline industry. LATAM Airlines Group is the only airline group in the region with a domestic presence in sixfive markets, as well as intra-regional and long-haul operations.operations to three continents. As a result, the Company has geographical diversity and operational flexibility, as well as a proven track record of acting quickly to adapt its 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, ensuring LATAM’s long term sustainability. We believe our most important competitive strengths are:

Leader in the South America Airlines Space, with a Unique Leadership Position among Global Airlines

Through a successful regional expansion strategy, LATAM Airlines Group has become the leading international and domestic passenger airline group in South America. LATAM and its affiliates have domestic passenger operations in Chile, Brazil, Peru, Argentina, Colombia and Ecuador. We are also the largest operator of intra-regional routes, connecting the main cities and also some secondary cities in South America. Furthermore, through our significant presence in the largest hubs in South America—Lima and São Paulo—we are able to offer the best connectivity options between South America and the rest of the world.

Geographically Diversified Revenue Base, including both Passenger and Cargo Operations

Our operations are highly geographically diversified, including domestic operations in sixfive different countries, as well as operations within South America and connecting South America with various international destinations. We believe 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, reducing our break-even load factors and enhancing our per flight profitability. Additionally, this revenue diversification helps offset seasonal revenue fluctuations and reduces the volatility of ourthe business over time. For the year ended December 31, 2018,2020, passenger, cargo and other revenues accounted for 84.0%50.8%, 11.4%39.5% and 4.6%9.7% of total revenues respectively.

Modern Fleet and Optimized Fleet Strategy

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

We select ourLATAM selects aircraft based on their ability to effectively and efficiently serve ourthe short- and long-haul flight needs, while still striving to minimize the number of different aircraft types we operate.the group operates.

The Company’s current fleet plan as of December 31, 2020, includes a short-haul fleet formed exclusively by aircraft from the A320 family, with a focus on the A321 and A320neo, a re-engined A320 that the Company received for the first time in 2016, becoming the first airline in Latin America to fly this model. During 2018, LATAM incorporated two additional A321-200 into its fleet.

For long-haul passenger flights, we operate the group operates Boeing 767-300ER, the Boeing 787-8, the Boeing 787-9, the, the Boeing 777-300ER and the Airbus A350-900 which started operations in 2016. The Boeing 787 and Airbus A350 models allow us to achieve important savings in fuel consumption, while incorporating modern technology to deliver the best travel experience for our passengers. In 2018, we incorporated two Airbus 350-900 into our fleet.For cargo flights, the group operates Boeing 767-300F aircraft.

LATAM continues to take a flexible approach to itsIn connection with our Chapter 11 proceedings, we are evaluating the adequate fleet plan in order to better align it to market conditions.needs and right-sizing our fleet for the coming years. During 2018,bankruptcy, the Company received fourhas rejected 31 aircraft, agreed on stipulations with its lessors for more favorable rent terms, and subleased eight aircraft to third parties to adjust to demand during the year. In addition, LATAM further restructured its fleet delivery schedule, achieving a reduction of US$2.2 billion in fleet commitments for the period 2018-2021, equivalent to a reduction of approximately 40% of total fleet commitments for this period.negotiated lease amendments and new lease agreements.

Strong Brand Teamed with Key Global Strategic Alliances

In May 2016, our new brand, LATAM, was officially launched. We believe that our new brand is associated with superior service and technologically advanced operations, and is well recognized and respected in the markets in which we operate.the group operates. In 2018,2020, despite challenging global conditions, LATAM received first place in punctuality in the global category, according to the annual On-Time Performance (OTP) report compiled by Cirium, and first place of the ranking “Punctuality List 2020” compiled by the Official Airline Guide (OAG). In addition, LATAM Airlines Group was recognized as the only‘Best Airline in South American airline group to be named as a ‘Five Star Global Airline’ for its in-flight experienceAmerica’ in Skytrax World Airline Awards. Furthermore, LATAM was awarded “Best Cabin Service in South America” and “Best Inflight Entertainment in South America” in the APEX 2019 Airlines Official Ratings,Passenger Choice Awards and was named in Officialrecognized by APEX as “Best Global Airline Guide (OAG) as the most punctual ‘Mega Airline’, which compares the largest 20 operators in terms of scheduled flights.South America.”

LAN joined theoneworld^®alliance, one of the world’s leading airline alliances, in 2000. TAM (now LATAM Airlines Brazil) joinedoneworld^®in 2014, marking a significant milestone and completing the entry of all LATAM Airlines into oneworld^®. To our passengers, this means greater convenience when traveling, since they will have the same standard of high-quality customer service, regardless of their international destination. Our strategic global alliances and existing commercial agreements provide our customers with access to more than 1,000 destinations worldwide, a combined reservations system, itinerary flexibility and various other benefits, which substantially enhance our competitive position within the Latin American market.

In 20162020, LATAM entered into two joint business agreements: ana Trans-American Joint Venture Agreement with Delta Air Lines Inc, following the framework agreement with American Airlines,signed in 2019, which we expect to unlock new growth opportunities, building upon Delta’s and a separateLATAM’s global footprint. For more information on the framework agreement with British Airwayssee “Item 4. Information on the Company—B. Business Overview—Passenger Alliances and Iberia. These agreements further strengthen our relationship with otheroneworld® partners. Both agreements will allow LATAM to expand its network to more than 420 destinations worldwide, operating routes from South America to the United States and Canada with American Airlines and routes from South America to Europe with British Airways and Iberia. These agreements are subject to regulatory approvals, some of which were granted between 2016 and 2018. In 2017, the administrative court of economic defense of the CADE (Administrative Council for Economic Defense) in Brazil and the Civil Aviation Authority in Colombia approved the agreements with American Airlines and British Airways and Iberia. During the review, the authorities evaluated the scope of the agreement in terms of free competition and the benefits that it will bring to passengers, including improved connectivity, expansion of the destination network and reduced prices. Both agreements were approved in Uruguay in 2016. In 2018, Chile’s Free Competition Defence Court (TDLC) approved the joint business agreements with American Airlines and British Airways and Iberia, for both passenger and cargo businesses, subject to nine mitigation remedies. The TDLC’s decision has been appealed by certain third parties to the Supreme Court of Chile. In the meantime, LATAM Airlines Group is evaluating the implementation of the joint business agreement with British Airways and Iberia, while the joint business agreement with American Airlines is subject to the approval of the Department of Transportation in the United States.

Financial FlexibilityCommercial Agreements.”

We have historically managed our business to maintain financial flexibility and a strong balance sheet, seeking 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 deliveries, including an important part of our current re-fleeting program, at attractive financing rates.

Recognized Loyalty ProgramsProgram

Our frequent flyer programs, LATAM Fidelidade andprogram, LATAM Pass, together representis the leading frequent flyer programsprogram in South America, with strong participation rates and brand recognition by our customers. Customers in eachthe program earn miles and points or miles based on the price paid for the ticket, class of ticket purchased, and elite level, as well as by using the services of outside partners in the program. In addition, Multiplus, a coalition of loyalty programs in Brazil and an affiliate of TAM, which allows members to accumulate points not just by flying with LATAM, but also by making purchases through credit cards or using services and products at partner establishments, and allows members to redeem points for LATAM Airlines flights and other products at partner establishments.

We believe these flexible programs arethat our program is attractive to customers because they doit does not impose restrictions on those flights for which points can be redeemed, or limit the number of seats available on any particular flight to members using the loyalty program. LATAM Pass and LATAM Fidelidade members can also accrue and redeem points for flights on otheroneworld^® member airlines. airlines with whom we have bilateral commercial agreements.

Business Strategy

Our mission is to connect people safely, with operational excellence and a personal touch, seeking to become one of the most admired airline groups in the world. In order to achieve our mission, the principal areas on which we plan to focus our efforts going forward are as follows:

Continually Strengthen Our Network

We intend to continue to strengthen our route network in South America, offering the best connectivity within the region at competitive prices and ensuring that we are the most convenient option for our passengers. We believe that we are the only airline group in the world with a local presence in sixfive home markets and an international and intra-regional operation. This position is bolstered by our enhanced infrastructure in several of our key hubs, allowing us to further strengthen our network. We intend to leverage our position to create a leading portfolio of services and destinations, providing more options to our passengers and building a platform to support continued growth.

Enhance Brand Leadership and Customer Experience

We will always seek to be the preferred choice of passengers in South America. Our efforts are supported by a differentiated passenger experience and our leveraging of mobile digital technologies. We continue working on the implementation of our single, unified brand, culture, product and value proposition for our passengers. Additionally, we are focused on definingthe evolution of LATAM’s digitalE-business 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.

Improving Efficiency and Cost Competitiveness

We are continually working to maintain a competitive cost structure and further improve our efficiency, simplify our organization and increase flexibility and speed in decision-making. Cost savings include reductions in fuel and fees, procurement, operations, overhead and distribution costs, among others, as well as the implementation of a customized service offering in domestic and international markets. We are currently working at an accelerated pace on cost initiativesIn 2020 and in all these areas.the context of our Chapter 11 proceedings, we worked to reduce and variabilize fixed costs, specifically related to fleet costs and wages and benefits.

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 proposition to our customers and operate sustainably over the long term.

Proactive Risk Management

We strive to have a holistic and responsible view of risk in decision-making. We put special focus on risks that have high potential impact and low probability of occurrence, which could significantly affect LATAM’s strategic objectives.

COVID-19 Effects

As government-imposed travel restrictions loosened throughout the year, LATAM gradually restarted its operation and closed the year with 38.3% of ASKs compared to December of the previous year. LATAM Cargo played a key role during 2020 in terms of supporting the communities in which LATAM operates by transporting medical supplies, face masks, COVID-19 rapid tests, medicine and ventilators to the region from all over the world. One milestone in 2020 was LATAM Cargo’s first flight to China, and thereafter the completion of 86 flights in total from China to the region, to bring medical supplies.

Since our cargo operation transports the majority of goods in the bellies of our passenger aircraft, complementing the 12 dedicated cargo freighters, the worldwide decline in air travel led to a drastic decline in cargo capacity. Therefore, cargo operated many passenger planes adapted for cargo in order to compensate the capacity reduction and continue to support companies and industries that depend on the network to sustain their own business operations, including, for example, the Chilean salmon industry. In 2019, cargo revenues represented approximately 10% of LATAM’s revenues and during 2020 this figure increased to 39.5% of our total revenues.

In response to the COVID-19 pandemic, the Company implemented numerous changes to its operations related to aircraft sanitation, changes in boarding and disembarking procedures, making the use of face masks mandatory for passengers and crew, installation of HEPA filters in cabin ventilation systems in all of the group’s aircraft, among others, all of the foregoing in accordance with the recommendations of international organizations such as the International Air Transport Association (IATA), the WHO, and local governments. This has resulted in a substantial increase in our operating costs as well as an increase in the turnaround time between flights. LATAM has also modified its commercial policies and has implemented a series of measures to alleviate the impact of the COVID-19 pandemic on its passengers, including refunds and changes of tickets.

For more information regarding the economic impact of the pandemic on our operations, see “Item 4. Information of the Company—B. Business Overview—Passenger Operations—Passenger Marketing and Sales” and “Item 3. Key Information—D. Risk Factors—Risks Relating to the Airline Industry and the Countries in Which the Group Operates—A pandemic or the widespread outbreak of contagious illnesses can have a material adverse effect on the business and results of operations.”

Suspension of Operations of LATAM Airlines Argentina

On June 17, 2020, LATAM Airlines Argentina announced an indefinite cessation of its domestic passenger and cargo operations as a result of current local industry conditions, which were exacerbated by the COVID-19 pandemic. The international operations from Argentina to Brazil, Chile, Peru and the United States will continue to be served by other LATAM Airlines Group affiliates.

Chapter 11 Proceedings

As a result of the COVID-19 pandemic and its profound impact on worldwide travel and our operations, the Debtors filed their petitions for relief under Chapter 11 of the Bankruptcy Code with the Bankruptcy Court. LATAM also filed parallel and ancillary proceedings, which are intended to extend the relief provided for by the Bankruptcy Code to various local jurisdictions and help effectuate a global restructuring. The Bankruptcy Court and foreign courts have agreed to a cross-border communications protocol to facilitate the administration of the cases across jurisdictions.

Under the Bankruptcy Code, the Debtors have the right to assume, amend and assume, or reject certain contracts, subject to the approval of the Bankruptcy Court and certain other conditions. Generally, the assumption of a contract requires a debtor to satisfy pre-petition obligations under the contract, which may include payment of pre-petition liabilities in whole or in part. Rejection of a contract is typically treated as a breach occurring as of the moment immediately preceding the Chapter 11 filing. Subject to certain exceptions, this rejection relieves the debtor from performing its future obligations under the contract but entitles the counterparty to assert a pre-petition general unsecured claim for damages. Parties to contracts rejected by a debtor may file proofs of claim against that debtor’s estate for damages.

First Day Relief

Upon the commencement of our Chapter 11 proceedings, the Initial Debtors filed numerous motions seeking the relief provided by certain first day orders (the “First Day Orders”) intended to ensure a seamless transition between a Debtor’s prepetition and post-petition business operations. The First Day Orders approve certain normal business conduct that may not be specifically authorized under the Bankruptcy Code or as to which the Bankruptcy Code requires prior approval by the Bankruptcy Court. The First Day Orders authorized the Initial Debtors to, among other things (i) continue to pay critical and foreign vendors and service providers; (ii) continue to use the Initial Debtors’ cash management system and to make and receive intercompany loans; (iii) pay certain prepetition employee wages, reimbursable expenses, and benefits; (iv) permission to continue entering into certain derivative and hedging contracts in the ordinary course of business; (v) authorizing the Initial Debtors to pay certain prepetition amounts owed to fuel supply parties and to continue performing under such fuel supply arrangements; (vi) authorizing but not directing the Initial Debtors to assume certain critical airline contracts; and (vii) pay for goods and services ordered pre-petition but delivered post-petition.

The Initial Debtors later filed motions seeking additional relief (the “Second Day Orders”). The Second Day Orders included a motion to authorize rejection procedures for executory contracts and non-aircraft leases, a motion to authorize de minimize claims and judgment procedures and a motion to authorize additional payments to employees for wages, severance and other compensation. The Second Day Orders also authorized the Initial Debtors to retain, as of the Petition Date, various professionals and advisors to assist the Initial Debtors during the Chapter 11 proceedings.

Upon commencement of the Subsequent Debtors’ Chapter 11 proceedings, the Subsequent Debtors filed a motion seeking for certain orders in the Initial Debtors’ Chapter 11 cases be made applicable to the Subsequent Debtors (the “Bringdown Motion”).

Appointment of the Creditors’ Committee

On June 5, 2020, the U.S. Trustee appointed an official committee of unsecured creditors (the “Creditors’ Committee”) in the Initial Debtors’ Chapter 11 cases. The Committee consists of (1) Bank of New York Mellon, as Indenture Trustee, (2) Compañía de Seguros de Vida Consorcio Nacional de Seguros S.A., (3) AerCap Holdings, N.V., (4) Aircastle Limited, (5) Sindicato de Empresa de Pilotos, (6) Lufthansa Technik Aktiengesellschaft and (7) Repsol, S.A. On June 12, 2020, Compañía de Seguros de Vida Consorcio Nacional de Seguros S.A. resigned from the Creditors’ Committee.

Aircraft Stipulations

On the Initial Petition Date, the Initial Debtors sent the First Stipulation and Order Between Debtors and Aircraft Counterparties Concerning Certain Aircraft (the “First Aircraft Stipulation”) to the majority of its financial and operating lessors. On the Subsequent Petition Date, the Subsequent Debtors did the same with their financial and operating lease counterparties. The First Aircraft Stipulation was essentially a standstill agreement to provide the Debtors with the necessary additional time to consider its fleet strategy. The terms of the First Aircraft Stipulation provided a temporary reprieve from immediate economic obligations that otherwise would have made continued leasing burdensome, while giving certain protections to the counterparties. The majority of the First Aircraft Stipulations were signed by the Bankruptcy Court between June and August 2020. LATAM and its lessors have since negotiated the Second Stipulation and Order Between Debtors and Aircraft Counterparties Concerning Certain Aircraft (the “Second Aircraft Stipulation”), which supersedes the First Aircraft Stipulation and provides for similar relief and protections. The Bankruptcy Court signed the majority of the Second Aircraft Stipulations in January and February 2021.

The Debtors continue to undertake a review of their existing fleet to develop and determine their fleet strategy to account both for current circumstances and expected future needs and larger business considerations. To that end, to this date, the Debtors have rejected 31 aircraft leases from the Initial Petition Date. The Debtors have also sought to enter into new lease agreements or otherwise amend their existing lease agreements. See “Item 4. Information on the Company—B. Business Overview—Fleet.”

Debtor-in-Possession Financing

In connection with our Chapter 11 proceedings, the Bankruptcy Court approved our debtor-in-possession financing agreement on September 19, 2020, providing the group with access to US$2.45 billion for working capital and other purposes approved by the Bankruptcy Court.

The terms of the approved financing include three tranches: Tranche A for a principal amount of up to US$1.3 billion, a potential Tranche B for up to an additional amount of US$750 million, which would be subject to further authorization of the Bankruptcy Court and other conditions customary for this type of transactions, and a Tranche C for a principal amount of up to US$1.15 billion. 

On October 8, 2020, the company made the first draw of US$1.15 billion under the DIP financing, representing 50% of the total funds available as of that date (prior to the commitment of US$150 million from the Toesca Deuda Privada DIP LATAM fund). The draw consisted of US$650 million from Tranche A and US$500 million from Tranche C.

Current LATAM shareholders, Qatar Airways, the Cueto Group and the Eblen Group, participated in Tranche C of the DIP financing agreement committing a total of US$750 million.

Claims Reconciliation Process

Currently, the Debtors have the exclusive right to file a chapter 11 plan through June 30, 2020 though additional extensions may be sought.

On September 24, 2020, the Bankruptcy Court entered an order (the “Bar Date Order”) establishing December 18, 2020 at 4:00 p.m., prevailing Eastern Time as the last date and time for each person or entity to file proofs of claim based on prepetition Claims or on section 503(b)(9) of the Bankruptcy Code. Additionally, the Bar Date Order establishes separate Bar Dates for Claims arising from Debtors’ rejection of executory contracts and unexpired leases and Claims that Debtors have amended in Debtors’ Schedules (collectively, the “Bar Dates”). Establishing the Bar Dates is the first step in the claims reconciliation process, which will eventually lead to formulation of the chapter 11 plan of reorganization. The Debtors are evaluating the claims that have been filed and have already objected to a number of the claims.

For more information regarding our Chapter 11 proceedings, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Chapter 11 Proceedings.”

Recent Chapter 11 Developments

Recapitalization Motions

On November 20, 2020 and December 20, 2020, the Bankruptcy Court entered two orders approving the recapitalization of certain Debtors. The recapitalizations were a series of intercompany transactions involving the contribution of equity and the capitalization of certain intercompany accounts receivable that prevented Debtors LATAM Airlines Peru and LATAM-Airlines Ecuador from suffering dissolution events under local law related to net equity falling below a certain threshold of paid-in capital stock. The transactions with respect to LATAM Airlines Peru also prevent the potential violation of a provision of Peruvian law, which requires operating airlines to have at least 30% of their equity held by Peruvian persons or corporations.

Lease and Contract Assumptions and Rejections

The Debtors continue to analyze their leases and contracts in order to best match the future needs of the Debtors’ businesses. Outside of the Debtors’ fleet, through the Bankruptcy Court the Debtors have rejected 48 executory contracts or nonresidential real property leases. The Debtors have also assumed key contracts for their business needs, including assuming contracts with various airports including Miami International Airport, John F. Kennedy International Airport and Los Angeles International Airport for critical office and storage space. The Group is currently negotiating amendments and new lease agreements to its fleet.

Claims Reconciliation Process

As of February 28, 2021, approximately 6,000 proofs of claim had been filed against the Debtors.

The Debtors and their professionals have started the process of reconciling the amount and classification of the claims submitted in the Chapter 11 Cases. Additionally, the Debtors have begun to make non-substantive objections to certain claims through the Bankruptcy Court in order to ensure the claims register accurately reflects the Debtors’ obligations. To date, the Debtors have expunged, reclassified, and reduced claims through orders of the Bankruptcy Court. The Debtors have satisfied claims in part or in full. The Debtors also have resolved claims through joint stipulations and/or other consensual resolutions. The Debtors expect to continue preparing, filing and resolving objections to claims throughout the course of the Chapter 11 cases.

Nonetheless, a significant number of claims have not yet been resolved, additional claims could be filed and the actual ultimate aggregate amount of allowed claims may differ significantly from the amounts used for the purposes of the Debtors’ estimates. The Debtors continue to investigate differences between the claim amounts filed by Creditors and claim amounts determined by the Debtors. Certain claims filed may be duplicative (particularly given the multiple jurisdictions), may be based on contingencies that have not occurred, or may be otherwise overstated, and would therefore be subject to revision or disallowance. The Debtors intend to file a schedule of claims that will become disputed claims for the purposes of distributions and will remain subject to future potential objection.

Claims Motions

The Debtors have filed 18 omnibus claims objections over the course of these the Chapter 11 proceedings, and the Bankruptcy Court has granted the relief sought in approximately half of the motions.

Airline Operations and Route Network

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

Passenger Operations

General

As of December 31, 2018,2020, our passenger operations were performed through airlines in Chile, Brazil, Peru, Argentina, Colombia and Ecuador, where we operatethe group operates both domestic and international services. We collect and report operating data for our passenger operations in three categories: international (connecting more than one country), Domestic operations in Spanish speaking countries or “SSC” (including Chile, Peru, Argentina, Colombia, and Ecuador), and Domestic Brazil (wholly(entirely within Brazil).

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