20-F

As filed with the Securities and Exchange Commission on May 5, 2011

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF

THE SECURITIES EXCHANGE ACT OF 1934

OR

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2010

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

OR

¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 1-14728

Lan Airlines S.A.

(Exact name of registrant as specified in its charter)

Lan Airlines S.A.	Republic of Chile
(Translation of registrant’s name into English)	(Jurisdiction of incorporation or organization)

Presidente Riesco 5711, 20th Floor

Las Condes

Santiago, Chile

(Address of principal executive offices)

Gisela Escobar Koch

Tel.: 56-2-565-3944 ● E-mail: gisela.escobar@lan.com

Presidente Riesco 5711, 20th Floor

Las Condes

Santiago, Chile

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

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

Title of each class:	Name of each exchange on which registered:
American Depositary Shares (as evidenced by American Depositary Receipts), each representing one share of Common Stock, without par value	New York Stock Exchange

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

None

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

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 338,790,909.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes x No ¨

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

Yes ¨ No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ¨ No ¨

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

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

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

U.S. GAAP ¨ International Financial Reporting Standards as issued by the International Accounting Standards Board x Other ¨

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

Item 17 ¨ Item 18 ¨

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

Yes ¨ No x

TABLE OF CONTENTS

PRESENTATION OF INFORMATION		2
FORWARD-LOOKING STATEMENTS		3
GLOSSARY OF TERMS		5
PART I
ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	6
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE	6
ITEM 3.	KEY INFORMATION	6
ITEM 4.	INFORMATION ON THE COMPANY	25
ITEM 4A.	UNRESOLVED STAFF COMMENTS	104
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	104
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	127
ITEM 7.	CONTROLLING SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	134
ITEM 8.	FINANCIAL INFORMATION	136
ITEM 9.	THE OFFER AND LISTING	138
ITEM 10.	ADDITIONAL INFORMATION	140
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	161
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	166
PART II
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	167
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	167
ITEM 15.	CONTROLS AND PROCEDURES	167
ITEM 16.	RESERVED	168
ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT	168
ITEM 16B.	CODE OF ETHICS	168
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	168
ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	169
ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	169
ITEM 16F.	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT	169
ITEM 16G.	CORPORATE GOVERNANCE	169
PART III
ITEM 17.	FINANCIAL STATEMENTS	172
ITEM 18.	FINANCIAL STATEMENTS	172
ITEM 19.	EXHIBITS	173

i

PRESENTATION OF INFORMATION

In this annual report on Form 20-F, unless the context otherwise requires, references to “Lan Airlines” are to Lan Airlines S.A., the unconsolidated operating entity, and references to “LAN,” “we,” “us” or the “Company” are to Lan Airlines S.A. and its consolidated subsidiaries. All references to “Chile” are references to the Republic of Chile.

This annual report contains conversions of certain Chilean peso amounts into U.S. dollars at specified rates solely for the convenience of the reader. These conversions should not be construed as representations that the Chilean peso amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated. Unless we specify otherwise, all references to “$,” “US$,” “U.S. dollars” or “dollars” are to United States dollars, references to “pesos,” “Chilean pesos” or “Ch$” are to Chilean pesos and references to “UF” are to Unidades de Fomento, a daily indexed Chilean peso-denominated monetary unit that takes into account the effect of the Chilean inflation rate. Unless we indicate otherwise, the U.S. dollar equivalent for information in Chilean pesos is based on the “dólar observado” or “observed” exchange rate published by Banco Central de Chile (which we refer to as the Central Bank of Chile) on December 31, 2010, which was Ch$468.37=US$1.00. The observed exchange rate on April 29, 2011, was Ch$460.04 =US$1.00. The Federal Reserve Bank of New York does not report a noon buying rate for Chilean pesos. See “Key Information—Exchange Rates” under Item 3.

Lan Airlines and the majority of our subsidiaries (including our main cargo subsidiary Lan Cargo S.A., or Lan Cargo) maintain their accounting records and prepare their financial statements in U.S. dollars. Some of our other subsidiaries, however, maintain their accounting records and prepare their financial statements in Chilean pesos or Argentinean pesos. Our audited consolidated financial statements include the results of these subsidiaries translated into U.S. dollars. International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”), require assets and liabilities to be translated at period-end exchange rates, revenue and expense accounts at monthly average rates.

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

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

This annual report contains certain terms that may be unfamiliar to some readers. You can find a glossary of these terms on page 3 of this annual report.

2

FORWARD-LOOKING STATEMENTS

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

· the factors described in Item 3 under “Risk Factors” generally and with respect to our proposed combination with TAM S.A. in particular;

· whether the proposed combination with TAM S.A. is approved by regulators, LAN’s shareholders and other third parties and any conditions required in order to obtain such approvals have been satisfied or waived;

· whether the holders of a sufficient number of TAM’s free float shares accept the exchange offer;

· our ability to service our debt and fund our working capital requirements;

· future demand for passenger and cargo air service in Chile, other countries in Latin America and the rest of the world;

· the maintenance of relationships with customers;

· the state of the Chilean, Latin American and world economies and their impact on the airline industry;

· the effects on us from competition;

· future terrorist incidents or related activities affecting the airline industry;

· future outbreak of diseases, or spread of already existing diseases, affecting traveling behavior and/or exports;

· natural disasters affecting traveling behavior and/or exports;

· the relative value of the Chilean, Peruvian, Ecuadorian, Colombian, Brazilian, Mexican and Argentine currencies compared to other currencies;

· inflation;

· competitive pressures on pricing;

· our capital expenditure plans;

· changes in labor costs, maintenance costs, and insurance premiums;

· fluctuation of crude oil prices and its effect on fuel costs;

· cyclical and seasonal fluctuations in our operating results;

· defects or mechanical problems with our aircraft;

· our ability to successfully implement our growth strategy;

· increases in interest rates; and

· changes in regulations, including regulations related to access to routes in which we operate.

3

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

4

GLOSSARY OF TERMS

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

Capacity Measurements:
“available seat kilometers” or “ASKs”	The number of seats made available for sale multiplied by the kilometers flown.
“available ton kilometers” or “ATKs”	The number of tons available for the transportation of revenue load (cargo) multiplied by the kilometers flown.
“systems available ton kilometers” or “systems ATKs”	The number of total tons capacity for the transportation of revenue load (passenger and cargo) multiplied by the kilometers flown.
Traffic Measurements:
“revenue passenger kilometers” or “RPKs”	The number of passengers multiplied by the number of kilometers flown.
“revenue ton kilometers” or “RTKs”	The load (cargo) in tons multiplied by the kilometers flown.
“systems revenue ton kilometers” or “systems RTKs”	The load (passenger and/or cargo) in tons multiplied by the kilometers flown.
“traffic revenue”	Revenue from passenger and cargo operations.
Yield Measurements:
“cargo yield”	Revenue from cargo operations divided by RTKs.
“overall yield”	Revenue from airline operations (passenger and cargo) divided by system RTKs (passenger and cargo).
“passenger yield”	Revenue from passenger operations divided by RPKs.
Load Factors:
“cargo load factor”	RTKs (cargo) expressed as a percentage of ATKs (cargo).
“overall break-even load factor”	Total costs (operating expenses plus net interest expense less other revenue) per system ATK divided by overall yield.
“overall load factor”	RTKs (passenger and cargo) expressed as a percentage of ATKs (passenger and cargo).
“passenger break-even load factor”	Total costs attributable to passenger operations per ASK divided by passenger yield.
“passenger load factor”	RPKs expressed as a percentage of ASKs.
Other:
“ACMI leases”	A type of aircraft leasing contract, under which the lessor provides the aircraft, crew, maintenance and insurance on a per hour basis. Also referred to as a “wet lease.”
“Airbus A320-Family Aircraft”	The Airbus A318, Airbus A319 and Airbus A320 models of aircraft.
“block hours”	The elapsed time between an aircraft leaving an airport gate and arriving at an airport gate.
“ton”	A metric ton, equivalent to 2,204.6 pounds.
“utilization rates”	The actual number of flight hours per aircraft per operating day.

5

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

Selected Financial Data

The following table presents our summary financial data.  Our audited consolidated financial statements relate to the period ended December 31, 2010, and constitute the second annual audited financial statements prepared in accordance with IFRS.

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

The summary consolidated annual financial information as of December 31, 2010 and 2009 and each of the two years ended December 31, 2010 and 2009, has been prepared in accordance with IFRS and is derived from our audited consolidated annual financial statements included in this annual report. The summary consolidated annual financial information as of December 31, 2008 and for the year ended December 31, 2008 presented in this annual report, has been previously presented in accordance with Chilean GAAP, and has been restated under IFRS only for comparative purposes.

You should read the information below in conjunction with our audited consolidated financial statements and the notes thereto, as well as “Presentation of Information” and “Operating and Financial Review and Prospects.”

6

Annual Financial Information
	Year ended December 31,
	2010			2009			2008
	(in US$ millions, except per share and capital stock data)
The Company(1)(3)
Statement of Income Data:
Operating revenues
Passenger		3,109.8			2,623.6			2,820.8
Cargo		1,280.7			895.6			1,319.4
Total operating revenues		4,390.5			3,519.2			4,140.2
Cost of sales		(3,012.7	)		(2,522.8	)		(2,893.9	)
Gross margin		1,377.8			996.4			1,246.3
Other operating income(2)		132.8			136.4			142.9
Distribution costs		(383.5	)		(327.0	)		(366.7	)
Administrative expenses		(332	)		(270	)		(275	)
Other  expenses		(172.4	)		(100.5	)		(127.9	)
Other gains/(losses)(4)		5.4			(11.7	)		(135	)
Financial income		14.9			18.2			18.5
Financial costs		(155.3	)		(153.1	)		(125.5	)
Equity  accounted earnings		0.1			0.3			0.7
Exchange rate differences		13.8			(11.2	)		23.4
Result of indexation units		0.1			(0.6	)		1.2
Income before income taxes		502.0			277.5			403.4
Income tax		(81.1	)		(44.5	)		(65.1	)
Net income for the period		420.9			233.0			338.3
Income attributable to the parent company’s equity holders		419.7			231.1			336.5
Income attributable to non-controlling interests		1.2			1.9			1.8
Net income for the period		420.9			233.0			338.3
Earnings per share
Basic earnings per share (US$)(5)		1.23882			0.68221			0.99318
Diluted earnings per share(US$)		1.23454			0.68221			0.99318
	At December 31,
	2010			2009			2008
	(in US$ millions, except per share and capital stock data)
Balance Sheet Data:
Cash, and cash equivalents		631.1			731.5			401.0
Other current assets in operation		896.5			666.6			665.8
Non- current assets and disposal groups held for sale		5.5			10.9			10.4
Total current assets		1,533.1			1,409.0			1,077.2
Property and equipment		4,948.4			4,196.6			3,966.1
Other non- current assets		304.4			166.4			153.6
Total non- current assets		5,252.8			4,363.0			4,119.7
Total assets		6,785.9			5,772.0			5,196.9
Total current liabilities		2,144.0			1,523.3			1,551.5
Total non-current liabilities		3,341.8			3,142.7			2,876.8
Total liabilities		5,485.8			4,666.0			4,428.3
Net equity attributable to the parent company’s equity holders		1,296.8			1,098.8			761.8
Minority interest		3.2			7.1			6.8
Total net equity		1,300.1			1,105.9			768.6

7

	At December 31,
	2010		2009		2008		2007		2006
Operational Data:
ASKs (million)		42,355.2		38,776.2		35,176.1		31,556.0		26,347.3
RPKs (million)		33,147.5		29,836.2		26,951.7		24,001.2		19,465.6
ATKs (million) (6)		4,628.7		3,848.9		4,071.9		3,636.3		3,461.6
RTKs (million)		3,245,3		2,627.4		2,906.2		2,701.0		2,564.2
System ATKs (million)		8,968.8		7,811.8		7,659.9		6,999.9		6,345.5

(1) For more information on the subsidiaries included in this consolidated account, see Note 1 to our audited consolidated financial statements.

(2) Other income included in this Statement of Income Data is equivalent to the sum of income derived from duty free operations, aircraft leasing, logistics and courier operations, customs and warehousing operations, tours and other miscellaneous income. For more information, see Note 30 to our audited consolidated financial statements.

(3) The addition of the items may differ from the total amount due to rounding.

(4) In 2008, the Company recorded a provision of US$109.0 million in Other gains/lossesin connection with a plea agreement entered into with the United States Department of Justice regarding an antitrust investigation related to our cargo business (see “Information on the Company—Business of the Company—Cargo Operations—Cargo Related Investigations,” under Item 4). As of December 31, 2010 the Company recorded a US$14.0 million gain (pre-tax) due to the reversal of a portion of the provision related to the investigation in the cargo business carried out by the European Commission.  This was as a result of the fine announced in November 2010, which was lower than the amount provided for.   This reversal is recorded in Other gains/(losses).

(5) As of December 31, 2008, 2009 and 2010 we had 338,790,909 common shares outstanding, which was equivalent to 338,790,909 American Depositary Shares (“ADSs”).

(6) In August 2007, the Company implemented a change in its methodology used for calculating cargo ATKs in order to better represent the available capacity in the bellies of passenger aircraft. Cargo RTKs were not affected by this change. Historical data has been modified accordingly for comparison purposes.

Although most of our revenues and expenses are denominated in U.S. dollars, some are denominated in different currencies, such as the Chilean peso. Fluctuations in foreign exchange rates could lead to changes in the value of these items in U.S. dollars. Nevertheless, the impact on our results stemming from any such fluctuations is significantly mitigated by the fact that 85% of our revenues and 60% of our operating expenses are denominated in U.S. dollars.

8

In accordance with the Chilean Corporation Act and Regulation thereof, Ley sobre Sociedades Anónimas No. 18,046 and the Reglamento de Sociedades Anónimas, collectively known as the Chilean Corporation Law, we must pay annual cash dividends equal to at least 30% of our annual consolidated distributable net income each year (calculated in accordance with IFRS), subject to limited exceptions. On April 29, 2011 our Shareholders’ Meeting approved the payment of aggregate dividends for 2010 in the amount of US$209,852,536.48 to be paid in May 19, 2011.  Such ividends include two interim dividends paid in August 2010 and January 2011. The table below sets forth the cash dividends per common share and per ADS, as well as the number of common shares entitled to such dividends, for the years indicated. Dividends per common share amounts have not been adjusted for inflation and reflect common share amounts outstanding immediately prior to the distribution of such dividend. In August 2007, LAN modified its ADR to common share ratio from 5:1 to 1:1.

Dividend for year:	Payment date(s)	Total dividend payment		Number of common shares entitled to dividend		Cash dividend per common share		Cash dividend per ADS
		(U.S. dollars)		(in millions)		(U.S. dollars)		(U.S. dollars)
2006	August 24, 2006		48,061,644		318.91		0.15071		0.75355
	January 18, 2007		67,787,211		318.91		0.21256		1.06280
	April 25, 2007		53,059,893		318.91		0.16638		0.83190
2007	August 23, 2007		90,104,830		338.79		0.26596		0.26596
	January 17, 2008		119,894,715		338.79		0.35389		0.35389
	May 8, 2008		5,827,204		338.79		0.01720		0.01720
2008	August 21, 2008		96,785,787		338.79		0.28568		0.28568
	January 15, 2009		105,001,466		338.79		0.30993		0.30993
2009	August 20, 2009		34,621,043		338.79		0.10219		0.10219
	January 21, 2010		70,000,978		338.79		0.20662		0.20662
	May 20, 2010		10,939,558		338.79		0.03229		0.03229
2010	August 19, 2010		74,466,242		338.79		0.21980		0.2198
	January 13, 2011		125,000,294		338.79		0.36896		0.36896

Our board of directors has the authority to declare interim dividends. Year-end dividends, if any, are declared by our shareholders at our annual meeting. For a description of our dividend policy, see “Financial Information—Other Financial Information—Dividend Policy” under Item 8.

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

9

Exchange Rates

The following table sets forth, for the periods indicated, the high, low, average and period-end observed exchange rate for the purchase of U.S. dollars, expressed in Chilean pesos per U.S. dollar. The rates have not been restated in constant currency units.

	Daily Observed Exchange Rate
Year Ended December 31,	High		Low		Average(1)		Period-End
	Ch$ per US$
2006		549.63		511.44		531.03		534.43
2007		548.67		493.14		521.95		495.82
2008		676.75		431.22		528.88		629.11
2009		643.87		491.09		553.77		506.43
2010
November		488.04		477.05		482.32		486.39
December		487.87		468.37		474.78		468.37
End of year		549.17		468.37		511.20		468.37
2011
January		496.03		483.32		489.44		483.32
February		478.19		468.94		475.69		475.63
March		485.37		472.74		479.65		482.08
April		479.46		460.04		471.32		460.04

Source: Central Bank of Chile

(1) For each year, the average of the month-end exchange rates for the relevant year. For each month, the average daily exchange rate for the relevant month.

On April 29, 2011 the observed exchange rate was Ch$460.04=US$1.00.

10

Risk Factors

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

Risks Related to our Proposed Combination with TAM

The completion of the proposed combination is subject to many conditions precedent and if these are not satisfied or waived the proposed combination will not be completed.

The commencement of the exchange offer is subject to certain conditions set forth in the transaction agreements as described under “Transaction Agreements—Conditions to Commencement of the Exchange Offer,” under Item 4, including receipt of all required regulatory approvals (including the required approvals from the Comissão de Valores Mobiliários, or “CVM”, the Superintendencia de Valores y Seguros (the Chilean Securities and Insurance Supervisor, or “SVS”), and the SEC), approval of the proposed combination by the shareholders of LAN and the condition that the holders of not more than 2.5% of our outstanding common shares exercise their appraisal rights under Chilean law.  The completion of the exchange offer is also subject to certain conditions set forth in the transaction agreements as described under “Transaction Agreements—Conditions to Completion of the Exchange Offer,” under Item 4, including the conditions that the exchange offer be accepted by (i) the holders of at least 66 2/3 % of the outstanding shares of TAM not owned by TAM’s controlling shareholders and their affiliates (which is the minimum threshold required to permit the delisting of TAM stock from the BM&FBovespa (which we refer to as “Bovespa”) after completion of the proposedcombination), and (ii) the holders of a sufficient number of TAM shares so that the sum of (A) the total number of TAM shares that have accepted the exchange offer and (B) the number of TAM shares owned by TAM’s controlling shareholders is more than 95% of the outstanding TAM shares (which is the minimum threshold required to permit a statutory squeeze-out under Brazilian law of all TAM shares that do not accept the exchange offer after completion of the proposed combination).   Certain of these conditions may not be waived without written agreement of both LAN and TAM’s controlling shareholders, and neither LAN nor TAM’s controlling shareholders has any obligation to waive any conditions not satisfied on or prior to the expiration of the exchange offer. Therefore, even if we are willing to waive an unsatisfied condition, we may be unable to complete the exchange offer if TAM’s controlling shareholders refuse to waive the condition.  In addition, the obligation of TAM’s controlling shareholders under the transaction agreements to contribute their TAM shares into the proposedcombination prior to the completion of the exchange offer is subject to certain conditions relating to the operations and business of LAN and certain events outside of our control.  If any of these conditions is not satisfied or waived, the proposedcombination will not be completed.

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The proposed combination cannot be completed unless we receive consents and clearances from regulatory authorities and such authorities could impose conditions that could adversely affect LAN and/or the combined companies

Before the proposedcombination of LAN and TAM may be completed, applicable waiting periods must expire or terminate under antitrust and competition laws and various approvals or consents must be obtained from regulatory entities, including the Tribunal de Defensa de la Libre Competencia, or the “TDLC.”  See the section entitled “Information on the Company—Business–Proposed Combination with TAM,” under Item 4, for a discussion of the status of the review of the proposed combination by the TDLC.  In deciding whether to grant antitrust or regulatory clearances, the relevant governmental entities will consider, among other things, the effect the proposedcombination will have on competition and operations within their relevant jurisdictions. The terms and conditions of the approvals that are granted may impose requirements, limitations or costs or place restrictions on the conduct of the combined companies’ businesses. The transaction agreements expressly provide that neither we nor TAM is required to sell, hold separate or otherwise encumber any of our respective assets or to take the other actions specified therein in order to obtain such approvals and thus either company may refuse to complete the proposedcombination on the basis of those regulatory conditions. There can be no assurance that regulators will not impose conditions, terms, obligations or restrictions or that such conditions, terms, obligations or restrictions will not have the effect of delaying completion of the proposedcombination or imposing additional material costs on, or materially limiting the revenues of, the combined companiesfollowing the proposedcombination. In addition, it is a condition to our and TAM’s obligation to complete the proposed combination that no governmental authority shall have issued any law or order making the proposed combination illegal or materially limiting or impairing the ownership or operation of any material part of the combined companies.

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

In addition to the required regulatory clearances, the proposedcombination is subject to a number of other conditions beyond our control that may prevent, delay or otherwise materially adversely affect its completion. We cannot predict whether or when these other conditions will be satisfied. Furthermore, the requirements for obtaining the required clearances and approvals could delay the completion of the proposed combination for a significant period of time or prevent it from occurring. Any delay in completing the proposed combination could cause the combined companies not to realize some or all of the synergies that we expect to achieve if the proposedcombination is successfully completed within its expected time frame.

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

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

· being required to pay a termination fee to TAM of $200 million and reimburse up to $25 million of TAM’s expenses under certain circumstances provided in the transaction agreements;

· having to pay certain costs relating to the proposedcombination, such as legal, accounting, financial advisor and printing fees; and

· having had our management focus on the proposedcombination instead of pursuing other opportunities that could have been beneficial to us.

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

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

While our board of directors received a fairness opinion from J.P. Morgan, our financial advisor, before we entered into the transaction agreements, we have not obtained an updated fairness opinion as of the date of this Form 20-F. Changes in our operations and prospects of those of TAM, general market and economic conditions and other factors which may be beyond our control and on which the fairness opinion was based may alter the value of LAN or TAM and/or the prices of our common shares or the shares of TAM by the time the proposedcombination is completed. The fairness opinion speaks only as of the date of the opinion and not as of the time the proposedcombination will be completed or as of any other date. Because we do not anticipate asking our financial advisor to update its fairness opinion, the January 18, 2011 fairness opinion does not address the fairness of the exchange ratios, from a financial point of view, to our shareholders at the time the proposedcombination will be completed.

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

The transaction agreements require our board of directors to recommend that its shareholders approve the proposed combination and does not permit our board of directors to withdraw or adversely modify those recommendations. The transaction agreements also contains “no shop” provisions that prohibit us from soliciting, initiating or encouraging any competing third party proposals, including acquisitions of our equity securities or material assets, and there are no exceptions to these provisions. In addition, if the transaction agreements are terminated under certain circumstances, we may be required to pay to TAM a termination fee of $200 million and to reimburse TAM for up to $25 million of expenses incurred by TAM in connection with the transaction agreements and the proposed combination. See “Key Information—Transaction Agreements” and “Key Information—The Transaction Agreements—Termination,” under Item 4.  These provisions could discourage a potential third-party acquiror that might have an interest in acquiring all or a significant portion of LAN from considering or proposing that acquisition, even if it were prepared to pay consideration with a value per share higher than the benefits LAN shareholders may receive from the proposedcombination, or might result in a potential third-party acquiror proposing to pay a lower price to the LAN shareholders than it might otherwise have proposed to pay because of the added expense of the $225 million termination fee and expense reimbursement that may become payable in certain circumstances.

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

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

Resales of the common shares we issue in the mergers may cause the market price of such shares to fall.

As of April 27, 2011, 339,310,509 common shares (including those represented by the ADSs) were issued and outstanding (34.01% of which are beneficially owned by LAN’s controlling shareholders) and 1,689,491 common shares were subject to issuance upon exercise of outstanding options and other rights to purchase such shares.  In the mergers, we expect to issue a significant amount of common shares (including those represented by the ADSs) to the holders of TAM shares in exchange for their TAM shares or TAM ADSs, although the actual number of common shares issued will depend on the extent to which holders of TAM shares or TAM ADSs elect to participate in the exchange offer. If the holders of all of the outstanding TAM shares (other than TAM’s controlling shareholders) tender their shares into the exchange offer and, except for the shares of LAN contemplated to be issued pursuant to the transaction agreements,  there are no new issuances of shares of LAN or TAM (including those common shares subject to issuance upon exercise of outstanding options and other rights to purchase those shares that have not been exercised), then after completion of the mergers the issued and outstanding shares of LAN will be distributed approximately as follows: 13.67% of the common shares issued and outstanding  at that time will be held by TAM’s controlling shareholders, 15.65% of the common shares issued and outstanding  at that time will be held by TAM shareholders (other than TAM’s controlling shareholders), 24.07% of the common shares issued and outstanding  at that time will be held by LAN’s controlling shareholders and 46.60% LAN’s shareholders (other than LAN’s controlling shareholders). If there are substantial sales of the newly issued common shares shortly after the mergers, this could adversely affect the market for, and the market price of, our common shares and the ADSs.

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We have and will continue to incur significant costs and expenses in connection with the proposed combination and integration of the business operations of LAN and TAM.

We have incurred and expect to continue to incur substantial expenses in connection with the proposed combination and the integration of LAN and TAM. Non-recurring expenses expected to be incurred in connection with the proposed combination are anticipated to be approximately $ 25 million in 2011. These costs and expenses include financial advisory, legal and accounting fees and expenses, reorganization and restructuring costs, severance/employee benefit-related expenses, filing fees, printing expenses and other related charges. Some of these costs are payable regardless of whether the proposed combination is completed. There are also are a large number of processes, policies, procedures, operations, technologies and systems that must be integrated in connection with the proposed combination. While both we and TAM have assumed that a certain level of expenses would be incurred in connection with these transactions, there are many factors beyond our control that could affect the total amount or the timing of the integration expenses. Moreover, there could also be significant costs in compensating dissenting shareholders of LAN who exercise their appraisal rights under Chilean law.

There may also be additional unanticipated significant costs in connection with the transactions discussed below under “Key Information—The Transaction Agreements—Overview,” under Item 4, that we may not recoup. These costs and expenses could, particularly in the near term, exceed the savings that we expect the combined companiesto achieve from the elimination of duplicative expenses and the realization of economies of scale, other efficiencies and cost savings. Although we expect that these savings will offset these transaction- and combination-related costs over time, this net benefit may not be achieved in the near term or at all.

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

After completion of the proposed combination, we will change our name to “LATAM Airlines Group S.A.” (“LATAM”). The proposed combination involves bringing together two large and complex businesses that currently operate as independent public companies. We will be required to devote significant management attention and resources to integrating certain aspects of the business practices and operations of LAN and TAM. The success of the proposed combination will depend, in part, on our ability to realize anticipated revenue synergies, cost savings and growth opportunities by combining the businesses of LAN and TAM. We hope to generate synergies resulting from the consolidation of capabilities, rationalization of operations and headcount, greater efficiencies from increased scale and market integration, experience of product and service offerings and organic growth. There is a risk, however, that we may not be able to combine the businesses of LAN and TAM in a manner that permits us to realize these revenue synergies, cost savings and growth opportunities in the time, manner or amounts we currently expect, or at all. Potential difficulties we may encounter as part of the integration process include, among other things:

· the inability to successfully combine the businesses of LAN and TAM in a manner that permits us to achieve the full revenue and cost synergies anticipated to result from the proposed combination;

· complexities associated with managing the combined companies;

· the need to implement, integrate and harmonize various business-specific operating procedures and systems, as well as the financial, accounting, information and other systems of LAN and TAM;

· operational overlap among products and customer bases of LAN and TAM;

· potential loss of key employees as a result of implementing the proposed combination; and

· potential unknown liabilities and unforeseen increased expenses or delays associated with the exchange offer, the mergers and the other combination transactions, including one-time cash costs to integrate the two airlines that may exceed the one-time cash costs that we currently anticipate.

In addition, we and TAM have operated and, until the completion of the proposedcombination, will continue to operate independently. It is possible that the integration process could result in:

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· diversion of management’s attention from their normal areas of responsibility to address integration issues; and

· the disruption of, or the loss of momentum in, each company’s ongoing businesses or inconsistencies in its standards, controls, procedures and policies,

each of which could adversely affect each company’s ability to maintain good relationships with its customers, suppliers, employees and other constituencies or achieve the anticipated benefits of the proposed combination or could increase costs or reduce each company’s earnings or otherwise adversely affect the businesses, financial condition, results of operations and/or prospects of LATAM following the completion of the exchange offer and mergers. If they are achieved, actual revenue synergies, cost savings and efficiency and operational benefits may be lower and may take a longer time to achieve than we currently expect.

The integration of two large companies also presents significant management challenges. In order to achieve the anticipated benefits of the proposed combination of LAN and TAM, the operations of the two companies will need to be reorganized and their resources will need to be combined in a timely and flexible manner. There can be no assurance that we will be able to implement these steps as anticipated or at all. If we fail to achieve the planned restructuring effectively within the time frame that is currently contemplated or to the extent that is currently planned, or if for any other reason the expected synergies fail to materialize, the proposed combination may not produce the benefits we currently anticipate.

We will not control the voting shares or board of directors of TAM.

Under the terms of the transaction agreements, the controlling shareholders of TAM will retain ownership of at least 80% of the voting shares of TAM and will have the right to appoint 66 2/3% of the members of the board of directors of TAM and its subsidiaries. We will own the remaining voting shares of TAM and will have the right to appoint the remaining members of the board of directors of TAM and its subsidiaries. We will also own all of the non-voting shares of TAM, which will entitle us to substantially all of the economic rights in TAM. While we, the controlling shareholders of TAM and other parties have entered into shareholders agreements that establish agreements and restrictions relating to corporate governance in an attempt to balance our interests, as the owner of substantially all of the economic rights in TAM, with the interests of the controlling shareholders of TAM, as the continuing controlling shareholders of TAM, by, among other things, requiring the vote of the holders of at least 95% of the outstanding shares of TAM and/or supermajority approval of the board of directors of TAM prior to taking certain specified material corporate actions and decisions in respect of TAM and its subsidiaries, no assurances can be given that we and the controlling shareholders of TAM will be able to reach agreement with respect to such matters in the future and if we and they do not, our businesses, financial condition, results of operations and prospects could be adversely affected. For further discussion of these arrangements, see “Transaction Agreements—Conditions to Commencement of the Exchange Offer,” under Item 4.

Our financial results will be more exposed to currency exchange rate fluctuations as a result of the proposed combination and the resulting increase in the proportion of assets, liabilities and earnings that are denominated in currencies other than Chilean pesos.

LATAM will prepare and present its consolidated financial statements in U.S. dollars. The proposed combination will significantly increase the proportion of our consolidated net assets, revenues and income in currencies other than U.S. dollars, primarily Chilean pesos and Brazilian reais. Our consolidated financial condition and results of operations will therefore be more sensitive to movements in foreign exchange rates. A depreciation of non-US dollar currencies relative to the US dollar could have an adverse impact on our financial condition and results of operations.

Our future results will suffer if we cannot effectively manage our expanded operations following completion of the proposed combination.

Following the completion of the proposed combination, the size of the business of the combined companies will be significantly larger and more complex than the current business of LAN or TAM. Our future success will depend, in part, upon our ability to manage this expanded business, which will pose substantial challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. There can be no assurances that we will be successful or that we will realize the expected operating efficiencies, cost savings, revenue enhancements and other benefits we currently anticipate from the proposed combination.

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The proposed combination could cause a downgrade of our credit ratings, which could have a negative effect on our business.

TAM currently has a lower credit rating than us and is more leveraged than us.  As a result of the proposed combination with TAM, our credit rating could be downgraded by one or more credit rating agencies, which could adversely affect the results and financial condition of the combined companies.  If our credit rating is downgraded, it could affect our ability to finance future fleet acquisitions and/or increase our financing costs.

Risks Related to our Operations and the Airline Industry

Our performance is heavily dependent on economic conditions in the countries in which we do business and negative economic conditions in those countries could have an adverse impact on our business.

Passenger and cargo demand is heavily cyclical and highly dependent on global and local economic growth, economic expectations and foreign exchange rate variations, among other things. In the past, our business has been negatively affected by global economic recessionary conditions, weak economic growth in Chile, recession in Argentina and poor economic performance in certain emerging market countries in which we operate.  The occurrence of similar events in the future could adversely affect our business.  In fact, starting as of late 2008, and during 2009, many of the countries we serve, including Chile, experienced economic slowdowns or recessions, which translated into a substantial weakening of demand.  We plan to continue to expand our operations based in Latin America and our performance will, therefore, continue to depend heavily on economic conditions in the region. Any of the following factors could adversely affect our business, financial condition and results of operations in the countries in which we operate:

· changes in economic or other governmental policies;

· weak economic performance, including, but not limited to, low economic growth, low consumption and/or investment rates, and increased inflation rates; or

· other political or economic developments over which we have no control.

Driven by the severe downturn in the global economy, including in the economies of many of the countries we serve, we began to experience weakening demand in cargo late in 2008, and this weak demand continued into 2009. However, we began to experience a recovery in cargo traffic in late 2009, which continued improving during 2010. If the regional economic environment continues its positive performance, demand in cargo may continue to grow during the current year. No assurance can be given that capacity reductions or other steps we may take will be adequate to offset any future reduction in our cargo and/or air travel demand.

The success of our business depends upon key regulatory issues and these issues may adversely affect our business and results of operations.

Our business is highly regulated and depends substantially upon the regulatory environment in the countries in which we operate or intend to operate. For example, price controls on fares may limit our ability to effectively apply customer segmentation profit maximization techniques (“passenger revenue management”) (management techniques utilizing passenger demand forecasting and fare mix optimization techniques to maximize profit for an airline) and adjust prices to reflect cost pressures. High levels of government regulation may limit the scope of our operations and our growth plans, especially in the event of deterioration of the relations between the countries in which we operate or the public perception of foreign companies in local markets. Accordingly, regulatory issues could adversely affect our business and results of operations.

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

We depend on strategic alliances or commercial relationships in many of the countries in which we operate and our business may suffer if any of our strategic alliances or commercial relationships terminates.

In many of the jurisdictions in which we operate, we have found it in our interest, to maintain a number of alliances and other commercial relationships. These alliances or commercial relationships allow us to enhance our network and, in some cases, to offer our customers services that we could not otherwise offer. If any of our strategic alliances or commercial relationships and, in particular, with American Airlines, Iberia, Qantas or oneworld® deteriorates, or any of these agreements are terminated, our business, financial condition and results of operations could be negatively affected.

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

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

· limitations on our ability to process more passengers;

· the imposition of flight capacity restrictions;

· the inability to secure or maintain route rights in local markets or under bilateral agreements; or

· the inability to maintain our existing slots and obtain additional slots.

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

There can be no assurance that existing bilateral agreements between the countries in which our companies are based and permits from foreign governments will continue. A modification, suspension or revocation of one or more bilateral agreements could have a material adverse effect on our business, financial condition and results of operations. The suspension of our permission to operate in certain airports or destinations or the imposition of other sanctions could also have a material adverse effect. We cannot assure that a change in a foreign government’s administration of current laws and regulations or that the adoption of new laws and regulations will not have a material adverse effect on our business, financial condition and results of operations.

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

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

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

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

Our business may be adversely affected by a downturn in the airline industry caused by exogenous events that affect travel behavior or increase costs, such as outbreak of disease, natural disasters, war or terrorist attacks.

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

During January 2010, bad weather affected the city of Cuzco in Peru causing important human and material damage and severely affecting this tourist destination. This affected our operations, which led us to decrease our capacity in order to improve load factors. We estimate the net impact of decreased passenger operations to have been approximately US$15.0 million.

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

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

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

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

Our cargo demand, especially from Latin American exporters, is concentrated in a small number of product categories, such as fish and sea products and  produce exports from Chile and Peru, and fresh flowers from Ecuador and Colombia. Events that negatively affect the production or trade of these goods may adversely affect the volume of goods that we transport and may have a significant impact on our results of operations. Some of our cargo products are sensitive to foreign exchange rates and, therefore, traffic volumes could be impacted by the appreciation or depreciation of local currencies.

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

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

Higher jet fuel prices or a shortage in the supply of fuel could cause a reduction in our scheduled service and could have a materially negative effect on our business, financial condition and results of operations. Jet fuel costs have historically accounted for a significant amount of our operating expenses, and accounted for approximately 30% of our operating expenses in 2010. Both the cost and availability of fuel are subject to many economic and political factors and events that we can neither control nor predict. We have entered into fuel hedging arrangements, but there can be no assurance that such arrangements will be adequate to protect us from a significant increase in fuel prices in the near future or in the long term. Also, while these hedging arrangements are designed to limit the effect of an increase in fuel prices, some of our hedging methods may also limit our ability to take advantage of any decrease in fuel prices. Although we have implemented measures to pass a portion of incremental fuel costs to our customers, our ability to lessen the impact of any increase using these types of mechanisms may also be limited.

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

One of the key elements of our business strategy is to maintain a high daily aircraft utilization rate, which measures the number of flight hours we use our aircraft per day. High daily aircraft utilization allows us to maximize the amount of revenue we generate from our aircraft and is achieved, in part, by reducing turnaround times at airports and developing schedules that enable us to increase the average hours flown per day. Our rate of aircraft utilization could be adversely affected by a number of different factors that are beyond our control, including air traffic and airport congestion, adverse weather conditions and delays by third-party service providers relating to matters such as fueling and ground handling.

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

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

As our fleet has grown, our reliance on Airbus and Boeing has also grown. As of February 28, 2011, we operated a fleet of 74 Airbus and 51 Boeing aircraft. These risks include:

· our failure or inability to obtain Airbus or Boeing aircraft, parts or related support services on a timely basis because of high demand or other factors;

· the interruption of fleet service as a result of unscheduled or unanticipated maintenance requirements for these aircraft;

· the issuance by Chilean or other aviation authorities of other directives restricting or prohibiting the use of Airbus or Boeing aircraft, or requiring time-consuming inspections and maintenance;

· the adverse public perception of a manufacturer as a result of an accident or other negative publicity; or

· delays between the time we realize the need for new aircraft and the time it takes us to arrange for Airbus and Boeing or from a third-party provider to deliver this aircraft.

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.

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We are often affected by certain factors beyond our control, including weather conditions, which can affect our operations.

Revenues for airlines depend on the number of passengers carried, the fare paid by each passenger and service factors, such as the timeliness of flight departures and arrivals. During periods of fog, ice, low temperatures, storms or other adverse weather conditions, some or all of our flights may be cancelled or significantly delayed, reducing our revenues.

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

We are exposed to potential catastrophic losses in the event of an aircraft accident, terrorist incident or any other similar event. There can be no assurance that, as a result of an aircraft accident or significant incident:

· we will not need to increase our insurance coverage;

· our insurance premiums will not increase significantly;

· our insurance coverage will fully cover all of our liability; or

· we will not be forced to bear substantial losses.

Substantial claims resulting from an accident or significant incident in excess of our related insurance coverage could have a material adverse effect on our business, financial condition and results of operations. Moreover, any aircraft accident, even if fully insured, could cause the negative public perception that our aircraft are less safe or reliable than those operated by other airlines, which could have a material adverse effect on our business, financial condition and results of operations.

Insurance premiums may also increase due to an accident or incident affecting one of our airline affiliates or alliance partners or affecting other airlines.

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

Our business, financial condition and results of operations could be adversely affected by high levels of competition within the industry, particularly the entrance of new competitors into the markets in which we operate. Airlines compete primarily over fare levels, frequency and dependability of service, brand recognition, passenger amenities (such as frequent flyer programs) and the availability and convenience of other passenger or cargo services. New and existing airlines could enter our markets and compete with us on any of these bases. Several of our competitors are larger than us and have greater brand recognition and greater resources than we do. Competing carriers include investor-owned, government-subsidized and national flag carriers of foreign countries as well as low-cost carriers offering discounted fares. The U.S.-Chile and other open skies agreements may subject us to further competition from international carriers. In addition to traditional competition among airline companies, we face competition from companies that provide ground transportation, especially in our domestic cargo and passenger businesses, as well as sea transportation for our cargo business. Competition could reduce our passenger traffic and cargo demand, forcing us to reduce our fare levels, which could have a material adverse effect on our revenues and level of operations.

Some of our competitors may receive external support which could negatively impact our competitive position.

Some of our competitors may receive support from external sources, such as their national governments, which may be unavailable to us. Support may include, among others, subsidies, financial aid or tax waivers. This support could place us at a competitive disadvantage and adversely affect our operations and financial performance.

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

A large portion of our aircraft are subject to long-term operating leases. Our operating leases typically run from three to twelve years from the date of delivery. We may face more competition for, or a limited supply of, leased aircraft, making it difficult for us to negotiate on competitive terms upon expiration of our current operating leases or to lease additional capacity required for our targeted level of operations. If we are forced to pay higher lease rates in the future to maintain our capacity and the number of aircraft in our fleet, our profitability could be adversely affected.

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

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

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

We require significant amounts of financing to meet our aircraft capital requirements and may require additional financing to fund our other business needs. We cannot guarantee that we will have access to or be able to arrange for financing in the future on favorable terms. If we are unable to obtain financing for a significant portion of our capital requirements, our ability to acquire new aircraft or to expand operations could be impaired and our business negatively affected.

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

We have a high degree of debt and payment obligations under our aircraft operating leases compared to equity capital. In order to finance our debt, we depend in part on our cash flow from operations. We cannot assure you that in the future we will be able to meet our payment obligations. In addition, the majority of our property and equipment is subject to liens securing our indebtedness. In the event that we fail to make payments on the secured indebtedness, creditors’ enforcement of liens could limit or end our ability to use the affected property and equipment to fulfill our operational needs and thus generate revenue.

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

Major events affecting the aviation insurance industry (such as terrorist attacks, hijackings or airline crashes) may result in significant increases of the airlines' insurance premium or in significant decreases of insurance coverage, as it happened after the 9/11 terrorist attacks.  Increases in insurance costs and/or significant reductions in coverage could harm our financial condition and results of operations.

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

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

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

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

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

Approximately 39% of our employees, including administrative personnel, cabin crews, flight attendants, pilots and maintenance technicians are members of unions and have contracts and collective bargaining agreements which expire on a regular basis. Our business, financial condition and results of operations could be materially adversely affected by a failure to reach agreement with any labor union representing such employees or by an agreement with a labor union that contains terms that are not in line with our expectations or that prevent us from competing effectively with other airlines.

Pressure by employees could cause operating disruptions and negatively impact our business.

Certain employee groups such as pilots, flight attendants, mechanics and our airport personnel have highly specialized skills. As a consequence, actions by these groups, such as strikes, walk-outs or stoppages, could severely disrupt our operations and negatively impact our operating and financial performance, as well as how our customers perceive us.

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

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

Labor costs constitute a significant percentage of our total operating costs (20.4% in 2010), and at times in our operating history we have experienced pressure to increase wages and benefits for our employees. A significant increase in our labor costs above the assumed costs could result in a material reduction in our earnings.

We may experience difficulty finding, training and retaining employees.

Our business is labor intensive. We employ a large number of pilots, flight attendants, maintenance technicians and other operating and administrative personnel. The airline industry has, from time to time, experienced a shortage of qualified personnel, specifically pilots and maintenance technicians. In addition, as is common with most of our competitors, we may, from time to time, face considerable turnover of our employees. Should the turnover of employees, particularly pilots and maintenance technicians, sharply increase, our training costs will be significantly higher. We cannot assure you that we will be able to recruit, train and retain the qualified employees that we need to continue our current operations or replace departing employees. A failure to hire and retain qualified employees at a reasonable cost could materially adversely affect our business, financial condition and results of operations.

Failure to comply with applicable environmental regulations could adversely affect our business and reputation.

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

Risks Related to Chile and Other Emerging Market Countries

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

We conduct a significant portion of our operations in emerging market countries, particularly in Latin America. As a result, economic and political developments in these countries, including future economic crises and political instability, could impact the Chilean economy or the market value of our securities and have a material adverse effect on our business, financial condition and results of operations.  Beginning late 2008, and continuing during 2009, many of the countries we serve, including Chile, experienced economic slowdowns or recessions, which resulted in a substantial weakening of demand.  Although economic conditions in other emerging market countries may differ significantly from economic conditions in Chile, we cannot assure that events in other countries, particularly other emerging market countries, will not adversely affect the market value of, or market for, our common shares or ADSs.

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

Changes in the exchange rate between the Chilean peso and the U.S. dollar or other currencies in the countries in which we operate could adversely affect our business, financial condition and results of operations. We operate in numerous countries and face the risk of variation in foreign currency exchange rates against the U.S. dollar or between the currencies of these various countries. Approximately 99% of our indebtedness at December 31, 2010 is denominated in U.S. dollars, 15% of our revenues and 40% of our operating expenses in 2010 were denominated in currencies other than the U.S. dollar, mainly the Chilean peso. If the value of the peso, or of other currencies in which revenues are denominated, declines against the U.S. dollar, we will need more pesos or other local currency to repay the same amount of U.S. dollars. The Chilean peso has experienced volatility in recent years, including an average nominal depreciation of 1.3% against the U.S. dollar in 2008, an average nominal depreciation of 4.7% against the U.S. dollar in 2009 and an average nominal appreciation of 4.6% against the U.S. dollar in 2010. The exchange rate of the Chilean peso and other currencies against the U.S. dollar may fluctuate significantly in the future. Changes in Chilean and other governmental economic policies affecting foreign exchange rates could also adversely affect our business, financial condition, results of operations and the return to our shareholders on their common shares or ADSs.

Exchange controls in Venezuela delay our ability to repatriate cash generated from operations in Venezuela. They also increase our exposure to exchange rate losses due to potential devaluations of the Venezuelan bolivar vis à vis the U.S. dollar during the period of time between the time we are paid in Venezuelan bolivares and the time we are able to repatriate such revenues in U.S. dollars.  See “Operating and Financial Review and Prospects—Year ended December 31, 2010 compared to year ended December 31, 2009—Cost of Sales” and “—Year ended December 31, 2009 compared to year ended December 31, 2008—Cost of Sales,” under Item 5.

We are not required to disclose as much information to investors as a U.S. issuer is required to disclose and, as a result, you may receive less information about us than you would receive from a comparable U.S. company.

The corporate disclosure requirements that apply to us may not be equivalent to the disclosure requirements that apply to a U.S. company and, as a result, you may receive less information about us than you would receive from a comparable U.S. company. We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act. The disclosure requirements applicable to foreign issuers under the Exchange Act are more limited than the disclosure requirements applicable to U.S. issuers. Publicly available information about issuers of securities listed on Chilean stock exchanges also provides less detail in certain respects than the information regularly published by listed companies in the United States or in certain other countries. Furthermore, there is a lower level of regulation of the Chilean securities markets and of the activities of investors in such markets as compared with the level of regulation of the securities markets in the United States and in certain other developed countries.

Risks Related to our Common Shares and ADSs

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

As of April 29, 2011 our controlling shareholders, beneficially owned 34.01% of our voting common shares. Controlling shareholders are in a position to elect four of the nine members of our board of directors and are in a position to direct our management. In addition, under the terms of the deposit agreement governing the ADSs, if holders of ADSs do not provide The Bank of New York Mellon, 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 right to vote those common shares.

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Trading of our ADSs and common shares in the securities markets is limited and could experience further illiquidity and price volatility.

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

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

If the peso exchange rate falls relative to the U.S. dollar, the value of the ADSs and any distributions made thereon from the depositary could be adversely affected. Cash distributions made in respect of the ADSs are received by the depositary (represented by the custodian bank in Chile) in pesos, converted by the custodian bank into U.S. dollars at the then prevailing exchange rate and distributed by the depositary to the holders of the ADRs evidencing those ADSs. In addition, the depositary will incur foreign currency conversion costs (to be borne by the holders of the ADRs) in connection with the foreign currency conversion and subsequent distribution of dividends or other payments with respect to the ADSs.

Future changes in Chilean foreign investment controls and withholding taxes could negatively affect non-Chilean residents that invest in our shares.

Equity investments in Chile by non-Chilean residents have been subject in the past to various exchange control regulations that govern investment repatriation and earnings thereon. Although not currently in effect, regulations of the Central Bank of Chile have in the past required, and could again require, foreign investors acquiring securities in the secondary market in Chile to maintain a cash reserve or to pay a fee upon conversion of foreign currency to purchase such securities. Further, future changes in withholding taxes could negatively affect non-Chilean residents that invest in our shares.

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

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

We cannot assure 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 “Additional Information— Foreign Investment and Exchange Controls in Chile,” under Item 10.

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

The Chilean Corporation Law, provides that preemptive rights shall be granted to all shareholders whenever a company issues new shares for cash, giving such holders the right to purchase a sufficient number of shares to maintain their existing ownership percentage. We will not be able to offer shares to holders of ADSs and shareholders located in the United States pursuant to the preemptive rights granted to shareholders in connection with any future issuance of shares unless a registration statement under the U.S. Securities Act of 1933, as amended, or the Securities Act, is effective with respect to such rights and shares, or an exemption from the registration requirements of the Securities Act is available. At the time of any rights offering, we will evaluate the potential costs and liabilities associated with any such registration statement in light of any indirect benefit to us of enabling U.S. holders of ADRs evidencing ADSs and shareholders located in the United States to exercise preemptive rights, as well as any other factors that may be considered appropriate at that time, and we will then make a decision as to whether we will file a registration statement. We cannot assure that we will decide to file a registration statement or that such rights will be available to ADS holders and shareholders located in the United States.

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ITEM 4. INFORMATION ON THE COMPANY

BUSINESS

Overview

We are one of the leading passenger airlines in Latin America and the main air cargo operator in the region. We currently provide domestic and international passenger services in Chile, Peru, Ecuador, Argentina and Colombia. We carry out our cargo operations through the use of belly space on our passenger flights and dedicated cargo operations using freighter aircraft through our cargo airlines in Chile, Brazil, Colombia and Mexico. In 2007, we initiated a strategy for stimulating demand for air travel in our domestic markets by offering lower-fare options to travelers, lowering our costs and increasing the aircraft utilization rates and efficiency of operations. For more information about our short-haul operations see “—Business of the Company— Passenger Operations—Business Model for Domestic Operations” below.

As of February 28, 2011, we serviced 15 destinations in Chile, 14 destinations in Peru, 4 destinations in Ecuador, 14 destinations in Argentina, 24 destinations in Colombia, 14 destinations in other Latin American countries and the Caribbean, 5 destinations in the United States, 1 destination in Canada, 3 destinations in Europe and 4 destinations in the South Pacific. In addition, as of February 28, 2011, through our various code-share agreements, we offer service to 25 additional destinations in North America, 16 additional destinations in Europe, 25 additional destinations in Latin America and the Caribbean (including Mexico) and 2 destinations in Asia. We provide cargo service to all our passenger destinations and to approximately 20 additional destinations served only by freighter aircraft. We also offer other services, such as ground handling, courier, logistics, and maintenance.

Lan Airlines S.A. is a publicly-held stock corporation (sociedad anónima abierta) incorporated under the laws of Chile. 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) 565-2525.

History of the Company

The Chilean government founded Lan Airlines (formerly Lan Chile S.A.) in 1929. Lan Airlines was a government-owned company from 1929 until its incorporation in 1983. Lan Airlines began international service to Buenos Aires, Argentina in 1946, to the United States in 1958 and to Europe in 1970. In 1989, the Chilean government sold 51% of Lan Airlines’ capital stock to Chilean investors and to Scandinavian Airlines System. In 1994, our controlling shareholders together with other major shareholders acquired 98.7% of Lan Airlines’ stock, including the remaining stock held by the Chilean government, in a series of transactions. As of February 28, 2011, the controlling shareholders held 34.01% of our capital stock. For more information about our controlling shareholders, see “Controlling Shareholders” and “Related Party Transactions” under Item 7.

In 1997 LAN was listed on the New York Stock Exchange, becoming the first Latin American airline to trade its ADRs on this financial market.

Since this acquisition of our capital stock in 1994 and the appointment of our current management, we have grown our revenue base and maintained our profitability every year despite significant challenges. Additionally, we have created a comprehensive network across the region by forming, together with local partners, or acquiring, passenger affiliates in Peru, Ecuador, Argentina and Colombia, and cargo affiliates in Brazil, Mexico and Colombia. In early 2004, we changed our corporate image and started using the “LAN” brand in order to better reflect the common values and attributes present in all the companies forming our network. We have complemented our own network with a set of bilateral alliances with carriers such as American Airlines, Iberia and Qantas, and have been a member of the oneworld® alliance since 2000.

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Organizational Structure

LAN is a company primarily involved in the transportation of passengers and cargo. Our operations are carried out principally by Lan Airlines and also by a number of different subsidiaries. As of February 28, 2011, in the passenger business we operated through six main airlines: Lan Airlines, Transporte Aéreo S.A. (which does business under the name “Lan Express”), Lan Perú S.A. (“Lan Peru”), Aerolane Líneas Aéreas Nacionales del Ecuador S.A. (“Lan Ecuador”), Lan Argentina S.A. (“Lan Argentina,” previously Aero 2000 S.A.) and the recently acquired Aerovías de Integración Regional, Aires S.A. (“Aires”).

In the passenger business we market our sales primarily under the “LAN” brand, except for Aires, which is working towards being rebranded to “LAN”.  As of February 28, 2011 we held a 99.9% stake in Lan Express through direct and indirect interests, a 70.0% stake in Lan Peru through direct and indirect interests, a 71.9% indirect stake in Lan Ecuador, a 99.0% indirect stake in Lan Argentina and a 94.99% indirect stake in Aires (a Colombian entity which was acquired on November 26, 2010).

Our cargo operations are carried out by a number of companies, including Lan Airlines and Lan Cargo.  As of February 28, 2011, Lan Airlines and Lan Cargo were complemented by the operations of certain related companies, such as Aero Transportes Mas de Carga S.A. de C.V. (“MasAir”), in Mexico, Aerolinhas Brasileiras S.A. (“ABSA”), in Brazil and Linea Aérea Carguera de Colombia S.A. (“Lanco”), in Colombia. As of February 28, 2011, we held a 69.2% stake in MasAir through direct and indirect participations, a 73.3% stake in ABSA through direct and indirect participations, and a 90.0% stake in LANCO through direct and indirect participations.  In the cargo business, we market ourselves primarily under the Lan Cargo brand.

In addition to our air transportation activities, we provide a series of ancillary services. We offer handling services, courier services and logistics, small package and express door-to-door services through Lan Airlines and various subsidiaries.

Proposed Combination with TAM

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

On January 18, 2011, we and Costa Verde Aeronáutica and Mineras del Cantábrico (we refer to these entities together as the “LAN controlling shareholders”) entered into an implementation agreement and an exchange offer agreement (we refer to these agreements together as the “transaction agreements”) with TAM S.A., TAM Empreendimentos e Participações S.A. (we refer to this entity as the “TAM controlling shareholder”) and Maria Cláudia Oliveira Amaro, Maurício Rolim Amaro, Noemy Almeida Oliveira Amaro and João Francisco Amaro (we refer to these individuals together as the “Amaro family”), which set forth the terms and conditions of a proposed business combination of LAN and TAM.

On the terms and subject to the conditions set forth in the transaction agreements (including the minimum conditions discussed in this section below), all or substantially all of the outstanding voting common shares of TAM will be acquired by a new Chilean corporation (which we refer to as “Holdco 1”) and all or substantially all of the outstanding non-voting preferred shares of TAM will be acquired by LAN if the series of transactions and corporate restructurings described below are successfully completed:

· The Amaro family will create a new Chilean corporation (which we refer to as “TEP Chile”) that will be wholly owned by them;

· TEP Chile will acquire and hold at least 80% of the voting stock of Holdco 1, which will have no economic rights in Holdco 1 (other than nominal dividend rights);

· LAN will acquire no more than 20% of the voting stock of Holdco 1;

· LAN will acquire and hold 100% of the non-voting stock of Holdco 1, which will have all of the economic rights in Holdco 1 (other than the nominal dividend rights of the voting stock of Holdco 1);

· Holdco 1 will acquire and hold all or substantially all of the voting common shares of TAM;

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· LAN will acquire and hold all or substantially all of the non-voting preferred shares of TAM; and

· LAN, TAM, TEP Chile, Holdco 1 and the LAN controlling shareholders will enter into the shareholder agreements described below under “—Shareholders Agreements,” relating to the holding of shares in, and the governance of, and relationships between, LAN, Holdco 1, TAM and their respective subsidiaries.

Pursuant to and subject to the terms of the transaction agreements, the parties will form a new Chilean corporation (which we refer to as “Holdco 2”) that will commence a delisting exchange offer to acquire all of the voting common shares of TAM and all of the non-voting preferred shares of TAM (in each case other than any such shares owned indirectly by the Amaro family) in exchange for the same number of shares of common stock of Holdco 2 (which we refer to as the “exchange offer”).

At or prior to the completion of the exchange offer:

· the Amaro family will contribute to TEP Chile all of the voting common shares of TAM and non-voting preferred shares of TAM beneficially owned by them;

· TEP Chile will pay nominal consideration for all of the voting shares of Holdco 1 and will contribute all of the voting common shares of TAM it receives from the Amaro family to Holdco 1 in exchange for all of the non-voting shares of Holdco 1;

· TEP Chile will contribute (i) all of the non-voting shares of Holdco 1, (ii) 6.2% of the voting shares of Holdco 1 and (iii) all of the non-voting preferred shares of TAM it receives from the Amaro family to a new Chilean corporation (which we refer to as “Sister Holdco”) in exchange for all of the shares of common stock of Sister Holdco (other than one share held by a nominee of TEP Chile);

· each of Holdco 2 and Sister Holdco will merge with and into LAN (we refer to these mergers together as the “mergers,” and individually as the “Holdco 2 Merger” and the “Sister Holdco Merger,” respectively), with LAN being the surviving company of each such merger; and

· in the mergers, each share of common stock of Holdco 2 and each share of common stock of Sister Holdco will be converted into the right to receive 0.9 of a LAN common share.

As a result of the exchange offer and Holdco 2 merger, each holder of a voting common share of TAM and each holder of a non-voting preferred share of TAM that sells such shares in the exchange offer will ultimately receive 0.9 of a LAN common share for each share they sell.  Similarly, as a result of the foregoing transactions and the Sister Holdco merger, the Amaro family will ultimately receive 0.9 of a LAN common share for each voting common share of TAM and each non-voting preferred share of TAM that they own.

The commencement of the exchange offer is subject to certain conditions set forth in the transaction agreements as described under “Key Information—The Transaction Agreements—Conditions to Commencement of the Exchange Offer,” under Item 4, including receipt of all required regulatory approvals, approval of the proposed combination by the holders of LAN common shares and the condition that the holders of no more than 2.5% of the outstanding LAN common shares exercise their appraisal rights under Chilean law.  The completion of the exchange offer is also subject to certain conditions set forth in the transaction agreements as described under “Key Information—The Transaction Agreements—Conditions to Completion of the Exchange Offer,” under Item 4, including minimum tender conditions and conditions to the Amaro family’s obligation to contribute their TAM shares as described above.  As a result, no assurance can be given that the proposed combination will be completed.

If the proposed combination is completed, then:

· LAN’s common shares will be listed in Brazil on the Bovespa in the form of BDRs;

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· LAN’s common shares will continue to be listed in Chile on the SSE and in the United States on the NYSE in the form of ADRs;

· subject to satisfaction of the minimum tender conditions described above, all TAM shares (whether voting common shares or non-voting preferred shares) will be delisted from the from the Bovespa in Brazil and the NYSE in the United States; and

· LAN will change its name to “LATAM Airlines Group S.A.”

On January 28, 2011, in response to a petition filed by a Chilean consumer association, Conadecus, the TDLC, determined to submit the proposed combination between LAN and TAM to a voluntary review procedure that is available under the Chilean antitrust laws upon the request of the Fiscalía Nacional Económica or someone with a legitimate interest. This voluntary review procedure could delay the implementation of the proposed combination because LAN and TAM cannot complete the proposed combination until the TDLC renders its final decision at the end of this process. On April 5, 2011, LAN, together with TAM, submitted a presentation in support the proposed combination.

On March 1, 2011, the Brazilian Agencia Nacional de Aviçao Civil (the Brazilian National Civil Aviation Agency or “ANAC”) authorized the transfers of the shares of TAM and its subsidiairies that are necessary to implement the proposed combination.  However, the proposed combination remains subject to other regulatory and shareholder approvals.

Competitive Strengths

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

Leading Presence in Key South American Markets

We are one of the main international and domestic passenger airlines in Latin America, as well as the largest cargo operator in Chile and most of the South American markets that we serve. We hold the largest market share of passenger traffic to and from Chile, Peru and Ecuador, as well as the largest market share of domestic passenger traffic in both Chile and Peru. More recently, we have also achieved a solid and growing position in the Argentine domestic market through Lan Argentina and in the Argentine international market through Lan Argentina and our other passenger airlines. We are also strengthening our presence in the Ecuadorian market, where we began domestic passenger operations on April 6, 2009. We entered the Colombian domestic and international market through the acquisition of Aires on November 26, 2010. We are also the leading air cargo operator within, to and from South America, and we are consolidating our leadership through new cargo operations in Colombia and in the Brazilian domestic market, as well as through an increased presence in routes between South America and Europe. Our international and domestic passenger and cargo operations have increased substantially over the past four years in terms of capacity, traffic and revenue. Between 2005 and 2010, our passenger capacity grew 78.8% and our cargo capacity grew 28.2%.

Diversified Revenue Base from both Passenger and Cargo Operations

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 freight aircraft, when needed. By adding cargo revenues to our existing passenger service, we are able to increase the productivity of our assets and maximize revenue, which has historically covered fixed operating expenses per flight, lowered break-even load factors and enhanced per flight profitability. Additionally, this revenue diversification helps offset seasonal revenue fluctuations and reduces the volatility of our business over time. As of December 2010, passenger revenues accounted for 68.8% of total revenues and cargo revenues accounted for 28.3% of total revenues.

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Attractive Cost Structure with High Utilization of our Assets and Productive Personnel

We believe that we have a highly competitive cost structure with a cost per ATK of 43.7 cents in 2010. Our cost advantage arises mainly from our productive and committed employees, high aircraft utilization, modern and fuel-efficient fleet and cost-conscious culture. Our wages and labor costs accounted for approximately 20.4% of total costs in 2010, which we believe is a lower percentage than that of many other U.S. and European carriers.

Furthermore, our itineraries and aircraft rotations are designed to maximize aircraft utilization. During 2010, our long-haul aircraft (Boeing 767-300 passenger and Airbus A340-300s) operated an average of approximately fourteen hours per day. We also implemented a new business model for short-haul operations in 2007; as a result, by the end of 2010 we increased the utilization of our narrow body aircraft to reach 9.5 hours per day.  In May 2008, we completed the phase out of the Boeing B737-200 from our fleet.  Our short haul fleet is now entirely composed of Airbus A320-Family Aircraft with the exception of the recently acquired Aires fleet.

In addition, during 2009 we continued with the implementation of LEAN, a system that seeks to improve our processes by eliminating activities that do not add value (thus increasing the value of each activity and suppressing those that are superfluous), which reduces costs, improves efficiency and increases customer satisfaction. The adoption of this system constituted a redesigning of processes that permits solving problems that may occur during the execution of any process, such as aircraft maintenance. The foregoing renders the daily tasks and processes carried out within the Company more efficient. Due to its implementation, during 2010 we achieved a 30% reduction in the time that an aircraft remains in the hangar and we were also able to reduce the period needed to install winglets from 58 to 18 days.  LEAN also allowed us in 2011 to support the Company’s high growth, by streamlining the pilot training process, which resulted in more pilots trained during that year.  Finally, it allowed the Company to reduce CO2 emissions, by redesigning processes in various areas that result in fuel consumption. In addition, by establishing clear roles, challenges and achievements, the implementation of LEAN has had an important benefit in terms of employee motivation. See Item 4. “Information on the Company—Business of the Company—Maintenance.”

Strong Brand Teamed with Key Global Strategic Alliances

In March 2004 we launched the “LAN” brand, under which we operate all of our international passenger airlines (except for Aires, which is working towards being rebranded to “LAN”).  Brand uniformity enables our customers to better identify us with the high standards of service and safety that are common to all of our airlines. This corporate image has also improved the cost effectiveness and efficiency of our marketing efforts as we continue to expand in our existing and new markets. Additionally, LAN and our entire passenger affiliates (with the exception of Aires) are a member of the oneworld® alliance. We have also entered into bilateral agreements with strategic partners such as American Airlines, Iberia and Qantas, among others, whose leading presence in their respective markets creates a truly global reach for our passengers. Our passenger alliances and commercial agreements provide our customers with approximately 750 travel destinations, a combined reservations system, itinerary flexibility and various other benefits, which substantially enhance our competitive position within the Latin American market.

Optimized Fleet Strategy

We make optimal use of our fleet structure through a combination of minimal aircraft types, modern aircraft and staggered lease maturities. We carefully select our aircraft based on their ability to effectively and efficiently serve our short- and long-haul flight needs, while still striving to minimize the number of aircraft types we operate. For short-haul flights we operate the Airbus A320-Family Aircraft and the recently acquired Aires fleet in the Colombian market.  As of May 18, 2008, we stopped using Boeing 737-200 aircraft in our Chilean domestic operations. For long-haul passenger flights we operate the Boeing 767-300 passenger aircraft and for long-haul cargo flights we operate the Boeing 767-300 Freighters. For ultra long-haul service, such as between Santiago and Madrid and between Santiago and Auckland, we use the Airbus A340-300 aircraft. Having a fleet with minimal aircraft types reduces inventory costs, as fewer spare parts are required, and reduces the need to train our pilots to operate different types of aircraft.  LAN’s strategic fleet renewal plan involves the sale of five Airbus A318 aircraft in 2011, five in 2012 and five in 2013.

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The average age of our fleet as of February 28, 2011 was 6.1 years (excluding the recently acquired Aires fleet), making our fleet one of the most modern in Latin America. The phasing out of our Boeing 737-200s, our oldest aircraft, which was completed in May 2008, contributed to reducing the average age of our fleet. Additionally, we expect that our purchase of additional aircraft, to be delivered between 2011 and 2018 will further reduce the average age of our fleet. Having a younger fleet makes us more cost competitive because it reduces fuel consumption and maintenance costs, and enables us to enjoy a high degree of performance reliability. In addition, a modern and fuel efficient fleet reflects our strong commitment to the environment as new aircraft incorporate the industry’s latest technology, allowing for a substantial reduction in emissions, while also decreasing noise levels.

Additionally, our leased fleet is structured with staggered lease maturities over time to create the strategic flexibility to expand or reduce capacity according to market conditions. We believe that our aircraft and the flexibility of our fleet allow us to maximize aircraft utilization by adapting rapidly to changes in passenger and cargo demand in the markets that we serve.

Strong Financial Position with Track Record of Growth and Profitability

We have historically managed our business to maintain financial flexibility and a strong balance sheet in order to accommodate our growth objectives while being able to respond to changing market conditions. We are one of the few investment-grade rated airlines in the world and we maintained this status during 2010. We have built our strong financial position by preserving our financial liquidity and continuing to structure long-term financing for newly acquired aircraft. Our financial flexibility has allowed us to secure large aircraft orders, including an important part of our current re-fleeting program at attractive financing rates.  We also monitor and seek opportunities to reduce financial risks associated with currency, interest rate and jet fuel price fluctuations. Over the last five years, while much of the airline industry has faced significant competitive and liquidity crises, we have remained consistently profitable.

Business Strategy

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

Continue to Grow Both our Passenger and Cargo Networks

We currently intend to continue to expand our capacity over the next several years to accommodate robust long-term growth in both passenger and cargo demand in the markets we target. We plan on expanding our operations not only in the markets we currently serve but also into new South American markets where we believe demand exists for our combination of passenger and cargo services. To meet this growth,

· as of February 28, 2011, we had an order book of 82 latest generation Airbus A320-Family Aircraft to be delivered between 2011 and 2016 and nine Boeing 767-300 wide body passenger aircraft to be delivered between 2011 and 2012;

· as of February 28, 2011, we had orders for two Boeing 777-200 Freighter aircraft to be delivered in 2012; and

· we also have outstanding orders for 32 Boeing 787 Dreamliner passenger aircraft, currently expected to start to be delivered in 2012.

We will continue to leverage the benefits of combining our passenger and cargo operations. Our passenger and cargo operations are equally important aspects of our business, and we dedicate the necessary resources, employees, facilities, management and fleet to enable both operations to provide high-quality service and to compete effectively in their respective markets.

Enhance the Profitability of our Short-Haul Operations

We plan to continue implementing the business model launched in 2007 to increase the efficiency of our domestic and short-haul operations, specifically in the domestic markets in Chile and Peru. This model is also being applied in the domestic markets in Ecuador and Argentina, as well as in our recently acquired passenger operations in Colombia. In Argentina, the implementation of the model is subject to certain regulatory restrictions as a result of the fare bands in place in the Argentinean domestic market. In addition, we are evaluating the application of these initiatives on certain regional routes within Latin America. A key objective of this program has been to increase the utilization of our fleet through modified itineraries that include more point-to-point and overnight flights and faster turnaround times. Our Boeing 737-200 fleet was completely phased out in May 2008 in favor of the new Airbus A320-Family Aircraft, which we currently operate on all domestic and regional routes except those served by Aires.  These initiatives have increased efficiency and improved the margins of our short-haul operations. In addition, our modern fleet allows for lower unscheduled maintenance costs, lower fuel consumption, and operational and cost efficiencies achieved through operating fewer fleet types. Other key objectives of this business model include a reduction in sales and distribution costs through increased Internet penetration, reduced agency commissions, and increased self check-in service through web check-in and airport kiosks. We expect that these initiatives, together with simplifications in back-office and support functions, will continue to help us expand operations while controlling fixed costs, spurring a reduction in overhead costs per ASK. We have begun to pass on a portion of these operating efficiencies to consumers through fare reductions, which has stimulated additional demand and enhanced our overall profitability.

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Maintain Excellent Customer Satisfaction

In both our passenger and cargo businesses, we focus on delivering high quality services that are valued by our customers. In our passenger businesses we strive to achieve high on-time performance, world-class on-board service on long-haul flights, attractive and convenient pricing and quick check-in for short-haul flights, and the comfort afforded by a modern fleet. During the first half of 2009 we completed the reconfiguration of the cabins of all our long-haul aircraft, including both the Boeing 767 and the Airbus A340 passenger aircraft, in order to incorporate our new Premium Business Class including full-flat seats, as well as improvements in economy class which include a state-of-the-art on-board entertainment system. Our frequent flyer program, LANPASS, provides travel benefits and rewards to almost 4.3 million loyal customers in Chile, Argentina, Peru and Ecuador as well as in other countries where we operate. In the cargo business, we focus on providing reliable service, taking advantage of our ability to handle different types of cargo as well as significant cargo volumes, and leveraging our facilities in key gateways, such as Miami, to ensure optimal handling of our customers’ needs. We continually assess opportunities to incorporate service improvements in order to respond effectively to our customers’ needs.

Continued Emphasis on Safety

Our top priority is safety, and we have structured our operations and maintenance to focus on safe flying. Our main maintenance facilities are certified by the Federal Aviation Administration (“FAA”), DGAC and other civil aviation authorities. Our flight and maintenance safety procedures are certified under ISO 9001-2000 standards. We have programs in place to train our crews and mechanics to world-class standards both at facilities abroad or at our training centers, which we have developed in association with high-quality partners.

Focus on Efficiency and Sustainability

We are increasingly concerned with improving efficiency through a series of fleet initiatives that seek to reduce fuel consumption. The most significant is our ongoing fleet renewal and growth plan, through which we expect to incorporate 125 new aircraft between 2011and 2018. As an example, we estimate that the Boeing 787 Dreamliner operates with costs per ASK that are approximately 12% lower than other long haul passenger aircraft, while the new Boeing 777 freighter is approximately 17% more efficient in terms of costs per ASK than the Boeing 767 freighter. In addition, during the second half of 2010 we finalized the installation of winglets on all of our Boeing 767 aircraft, achieving fuel efficiencies of approximately 5% per aircraft. In order to mitigate the environmental impact of our operations we seek to operate in a sustainable manner by reducing our fuel consumption and related emissions. We also continue to focus on adjusting the configuration of our aircraft to market demand by, for example, adjusting the configuration of four Boeing 767s that operate on long-haul routes from Ecuador by reducing the number of Premium Business seats and increasing the number of Economy class seats.   Other long-term projects that aim at improving our cost structure include implementing the LEAN operating processes in our maintenance operations, as well as investing in new inventory and reservations systems provided by Sabre.

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BUSINESS OF THE COMPANY

Airline Operations and Route Network

We are one of the main air transport operators in Latin America. As of February 28, 2011, we operated passenger airlines in Chile, Peru, Ecuador, Argentina and Colombia. We are also the largest air cargo operator in the region.

The following table sets forth our operating revenues by activity for the periods indicated:

	Year ended December 31,
	2010		2009		2008
	(in US$ millions)
The Company(1)
Total passenger revenues		3,109.8		2,623.6		2,820.8
Total cargo revenues		1,280.7		895.6		1,319.4
Total traffic revenues		4,309.5		3,519.2		4,140.2

(1) Consolidated information for the Company.

Passenger Operations

General

As of February 28, 2011, our passenger operations were performed through airlines in Chile, Peru, Ecuador, Argentina and Colombia where we operate both domestic and international services.

As of February 28, 2011, our network consisted of 15 destinations in Chile, 14 destinations in Peru, 4 destinations in Ecuador, 14 destinations in Argentina, 24 destinations in Colombia, 14 destinations in other Latin American countries and the Caribbean, 5 destinations in the United States, 1 destination in Canada, 3 destinations in Europe and 4 destinations in the South Pacific. Within Latin America, we have routes to and from Argentina, Bolivia, Brazil, Chile, Colombia, Cuba, the Dominican Republic, Ecuador, Mexico, Peru, Uruguay and Venezuela. We also fly to a variety of international destinations outside Latin America, including Auckland, Fort Lauderdale, Frankfurt, Los Angeles, Madrid, Miami, Mount Pleasant (Falkland Islands), New York, Toronto, Papeete (Tahiti), Paris, San Francisco, and Sydney.  In addition, as of February 28, 2011, through our various code-share agreements, we offer service to 25 additional destinations in North America, 16 additional destinations in Europe, 25 additional destinations in Latin America and the Caribbean (including Mexico), and 2 destinations in Asia.

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

	Year ended December 31,
	2010			2009			2008
The Company(1) (2)
ASKs (million)
International		29,582.8			26,797.10			25,378.3
Domestic		12,772.4			11,979.10			9,797.8
Total		42,355.2			38,776.20			35,176.1
RPKs (million)
International		23,226.4			20,861.20			19,507.2
Domestic		9,921.1			8,975.00			7,444.5
Total		33,147.5			29,836.20			26,951.7
Passengers (thousands)
International		6,302			5,676			5,194
Domestic		10,991			9,730			8,046
Total		17,293			15,406			13,240
Passenger yield (passenger revenues/RPKs, in US cents)
International	US¢	8.7			8.0			9.6
Domestic	US¢	10.8			10.4			12.2
Combined yield(3)	US¢	9.4			8.8			10.5
Passenger load factor (%)
International		78.5	%		77.8	%		76.9	%
Domestic		77.7	%		74.9	%		76.0	%
Combined load factor(4)		78.3	%		76.9	%		76.6	%

(1) Information provided for the Company consolidates Lan Ecuador, Lan Argentina and Lan Perú.

(2) Domestic passenger operations include domestic operations in Chile, Peru, Argentina and Ecuador.  These figures do not include operating statistics from Aires, which shall be included starting on January 2011.

(3) Aggregate international and domestic passenger yield.

(4) Aggregate international and domestic passenger load factor.

International Passenger Operations

As of February 28, 2011, we operated scheduled international services from Chile, Peru, Ecuador and Argentina through Lan Airlines; Lan Express in Chile; Lan Peru in Peru; Lan Ecuador in Ecuador; Lan Argentina in Argentina and Aires in Colombia. International passenger traffic has grown significantly in the past couple of years due to demand growth, market share gains, increased connecting traffic to and from other Latin American countries, the launch of new routes and additional frequencies on existing routes, and expansion into new markets.

Our international network combines our Chilean, Peruvian, Ecuadorian, Argentinean and Colombian affiliates. We have operated international services out of Chile since 1946, and we greatly expanded our flights out of Peru with the creation of Lan Peru in 1999 and out of Ecuador through Lan Ecuador in 2003. In August 2006, we expanded our international operations through Lan Argentina, which until then had only been offering domestic flights. The international operations of Aires, however, are being reduced since its acquisition in 2010. This strategy to generally expand our international network is aimed at enhancing our value proposition by offering customers more destinations and routing alternatives, maximizing aircraft utilization, increasing load factors, leveraging complementary seasonal patterns, and optimizing our commercial efforts. We provide long-haul services out of our four main hubs in Santiago, Lima, Guayaquil and Buenos Aires.  We also provide regional services from Chile, Peru, Ecuador and Argentina. Since 2004, we have grown our intra-Latin American operations out of Lima to position it as our main regional hub.

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The following table sets forth the destinations served from each of the aforementioned countries as of February 28, 2011:

Country of Origin	Destination	Number of Destinations
Chile	Argentina	7
	Bolivia	2
	Brazil	3
	Colombia	1
	Cuba	1
	Ecuador	1
	Peru	1
	Uruguay	2
	Venezuela	1
	Dominican Republic	1
	Mexico	2
	United States	3
	Canada	1
	Spain	1
	Germany	1
	New Zealand	1
	Falkland Islands	1
	French Polynesia	1
	Australia	2
Peru	Argentina	2
	Bolivia	2
	Brazil	1
	Chile	1
	Colombia	4
	Ecuador	2
	Venezuela	1
	Mexico	1
	United States	3
	Dominican Republic	1
	Spain	1
Ecuador	Argentina	1
	Chile	1
	United States	2
	Spain	1
Argentina	United States	1
	Brazil	1
	Chile	1
	Dominican Republic	1
	Peru	1
Colombia	Chile	1
	Perú	1
	Ecuador	1
	United States	2

   

In line with our long-standing commitment to provide customers with superior service and the best products on the market, in May 2009 LAN completed the retrofit of all its long-haul fleet (including its Boeing 767 and Airbus A340 passenger aircraft) with the new Premium Business class and improved Economy class. Combining the best features of the traditional First and Business classes, the new Premium Business includes 180 degrees recline full-flat seats which allow passengers to sleep with the maximum comfort and privacy. Premium Business also includes top-level personalized in-flight service. Changes in Economy class include new seats with a greater recline angle, a cushion that slides forward for increased comfort and convenience, and larger individual video monitors for each seat.

LAN’s sustained development of its coverage has been a crucial factor in its growth and 2010 was no exception. New routes were added along with flight increases in some key existing routes in order to offer more and better alternatives to both business and tourist travelers. In 2010, the Company continued to consolidate its hub in Lima, which serves as the center of its Latin American network and also complements its intercontinental network, by opening new routes and increasing flights on existing routes.

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As part of its mission, LAN seeks to promote tourism to South America. Due to its large network of services, visitors from around the world can experience world renowned destinations such as Cusco, Easter Island, the Galapagos Islands, or Patagonia in Chile and Argentina, including the cities of Punta Arenas, Ushuaia, El Calafate and Bariloche.

According to JAC data, Chilean international air passenger traffic increased 9.4% from 2009 to 2010 approximately 5.1 million passengers. We had a 52.8% market share in 2010, based on RPKs, compared to 52.4% in 2009. Our international operations out of Chile can be divided into four main segments, to: North America, Europe, the rest of Latin America, and the Pacific. As of February 28, 2011, the other principal carriers that transported passengers between Chile and North America with direct flights included American Airlines, Delta Airlines, Air Canada and Aeromexico. TACA and COPA also participated in the Chile-North American markets with stopovers in their respective Central American hubs. Our main competitors on routes between Chile and Europe were Air France-KLM and Iberia. On regional routes our main competitors were Aerolineas Argentinas, Air Canada, Avianca, GOL, TACA and TAM. We were the only airline operating between Chile and the South Pacific during this time.

Based on the information provided by the Peruvian DGAC, we flew approximately 5.0 million passengers on international flights to and from Peru in 2010. That year, we had 45.4% of the international market share in Peru, which was an increase from our 41.7% market share in 2009. Our Peruvian international operations can be divided into three main segments, based on the destination: North America, Europe and the rest of Latin America. As of February 28, 2011, our main competitors on direct routes to North America included American Airlines, Continental Airlines, Delta Airlines, Spirit Airlines, Air Canada and Aeromexico. TACA and COPA also participated in the Peru-North American markets with stopovers in their respective Central American hubs. On routes to Europe, our main competitors were Iberia, Air Europa and Air France-KLM. The other principal carriers operating between Peru and the rest of Latin America as of that date included Aerolineas Argentinas, TACA, TAM, Avianca and GOL.

The Ecuadorian international market increased 4.1% to approximately 2.8 million passengers between 2009 and 2010. According to travel agency statistics (“BSP”) and our estimates, we had a 28.7% market share of the Ecuadorian international market in 2010 compared to 24.5% in 2009. Our Ecuadorian international operations can be divided into three main segments, to: North America, Europe and the rest of Latin America. As of February 28, 2011, on direct routes to North America, our main competitors were American Airlines, Continental Airlines, Delta Airlines and Aerogal. TACA and COPA also participate in the Ecuador-North American markets with stopovers in their respective Central American hubs. On routes to Europe, our main competitors were Air Comet, Iberia, and Air France-KLM. On regional routes, our main competitors were TACA, COPA and Avianca.

Based on our internal estimates, the Argentinean international market increased 18.0% to approximately 9.1 million passengers between 2009 and 2010. Our estimated market share of the Argentinean international market was 15.9% in 2010 compared to 16.7% in 2009. Our Argentinean international operations can be divided into two main segments, based on destination to: North America and the rest of Latin America. As of February 28, 2011, on the Buenos Aires-Miami route, our main competitors were American Airlines and Aerolíneas Argentinas. TAM, TACA and COPA also participated in the Argentina-North American markets with stopovers in their respective hubs. On the Buenos Aires-Dominican Republic route, our main competitors were COPA and American Airlines. On the Buenos Aires-Sao Paulo route, our main competitors were TAM, GOL and Aerolíneas Argentinas. On the Buenos Aires-Lima route, our main competitors were TACA and Aerolíneas Argentinas. On the Buenos Aires-Santiago route, our main competitors were Aerolíneas Argentinas and Air Canada.

Business Model for Domestic Operations

In 2007 we initiated an important project to redesign our domestic business operations with the goal of increasing efficiency and improving the margins of LAN’s short-haul operations, specifically with respect to our domestic operations in Chile and Peru.  The new business model was first tested in the last quarter of 2006. A key element of this project has been to significantly increase the utilization of our narrow body fleet, which we have been successfully achieving through modified itineraries including more point-to-point and overnight flights. We removed the Boeing 737-200 aircraft from our fleet in favor of the new more efficient Airbus A320-Family Aircraft. The Airbus A320-Family Aircraft fleet utilization reached approximately 10.9 block hours per day in 2010. The transition to a newer fleet allows for lower unscheduled maintenance costs as well as cost efficiencies achieved through operating fewer fleet types and operational efficiencies, including lower fuel consumption.

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Other key elements of our new business model are the reduction in sales and distribution costs through higher Internet penetration and reduced agency commissions, a faster turnaround time, and increased self-check-in service through web check-in and kiosks at airports. These initiatives, together with simplifications in back-office and support functions, will continue to allow us to expand operations while controlling fixed costs, spurring a reduction in overhead costs. We have begun to pass on these operating efficiencies to consumers through significant fare reductions, which we expect will have a strong effect of stimulating new demand.

In 2007, we implemented all aspects of this new business model in the Chilean and Peruvian domestic markets. We launched our new short-haul business model on all domestic routes in Chile in April 2007, after a marketing campaign that began in March 2007. We launched the new model in all domestic Peruvian routes in January 2007.

As a result of the implementation of this model, we increased the number of passengers transported in all domestic markets. Between 2006 and 2010, the number of passengers transported increased significantly:

· 83% (from 2.5 million to 4.6 million) in Chile,

· 123% (from 1.7 million to 3.8 million) in Peru,

· 200% (from 0.6 million to 1.9 million) in Argentina, and

· with a minor effect in Ecuador as we just started domestic operations during 2009.

Over the past three years we have sustained constant growth in each of our domestic passenger operations, and between 2009 and 2010 we achieved an increase in domestic transported passengers at 13%.

On November 26, 2010, LAN acquired Colombian airline Aerovías de Integración Regional S.A. (“Aires”) for US$12 million in cash, in addition to assuming net liabilities of US$87 million.  The Colombian market is the second largest market in South America with over 13 million annual domestic passengers and represents a key market in LAN’s consolidation as a leading airline within the region.  Aires is currently the second largest operator in Colombia’s domestic market with approximately a 20% market share as of December 2010.  The Aires fleet consists of 9 B737-700s, 11 Q200 and 4 Q400, all of which are operating leases.

We plan to continue with the implementation of this business model during 2011 and we are evaluating its implementation in some regional routes, as we look for ways to increase operational efficiency, encourage direct sales and self check-in, and implement new sales strategies aimed at stimulating demand.

Operations within Chile

Through Lan Airlines and Lan Express we are the leading domestic passenger airline in Chile. We have operated domestic flights in Chile since the Company’s creation in 1929. As of February 28, 2011, we flew to 13 destinations within Chile (including Santiago, but not including Easter Island, which we consider an international destination even though it is a part of Chile, because we serve it with long-haul aircraft) as well as some seasonal destinations. Lan Airlines and Lan Express have integrated passenger operations, including operations under the same two-letter “designator reservation code,” and have coordinated fare structures, scheduling and other commercial matters in order to maximize cooperative benefits and revenues for the two carriers. Our strategy is based on providing frequent service to Chile’s main destinations, offering a reliable and high quality service, and leveraging our strong brand position in Chile and abroad. We evaluate our network of domestic routes on an ongoing basis in order to achieve optimal operational efficiency and profitability. Our strategic objective is to maintain our leadership position in our domestic routes.

LAN’s flexibility and broad passenger network also allowed us to manage the negative impact of the catastrophic earthquake that struck Chile in February 2010, causing significant damage to the terminal building at the Santiago International Airport and affecting all air travel in and out of the country. With no alternative airport in the Santiago Metropolitan Region, commercial passenger operations were suspended for three days, and were re-launched on March 2, 2010 with provisional facilities. LAN operated with reduced capacity out of Santiago until the terminal building was fully operational on March 28, 2010. LAN estimates the net impact of decreased passenger operations due to the earthquake were approximately US$30 million in 2010. Cargo operations were not materially affected by the earthquake, nor were the passenger operations of LAN or its subsidiaries in Peru, Ecuador and Argentina.

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During 2010 we operated an average fleet of 18 Airbus A320-Family Aircraft in the Chilean domestic market, and we plan to operate an average fleet of 21 Airbus A320-Family Aircraft in 2011. Domestic operations in Chile were positively affected by the greater utilization of the latest-generation Airbus fleet and the retirement of the Boeing 737-200s. The new business model was launched nationwide within Chile in April 2007. We reduced sales costs by increasing direct sales from 78% in 2009 to 80% in 2010 (with 63% of our 2010 sales done through the Internet) and by reducing agency commissions from 6% to 1% in February 2007. We also increased fleet utilization, crew productivity and the average flight leg through schedule changes. Additionally, we simplified our processes, which helped to increase the self check-in rate from 77% in 2009 to 80% in 2010. Finally, we utilized the greater efficiency of the Airbus aircraft to reach operational efficiencies such as reducing the turn-around time, increasing our punctuality (which reached 94.0% in 2009 and 87.5% in 2010) and lowering fuel consumption. As of February 28, 2011, we operated 100% of our ASKs with our Airbus A320-Family Aircraft fleet

According to JAC data, the Chilean domestic market as a whole transported approximately 6.0 million passengers in 2010 and it had an increase of 16% in terms of RPK. Our domestic passenger market share in Chile was 77.5% for 2010 and 75.6% as of  March 31, 2011. During 2010, our main competitors in the domestic market were Sky Airlines and PAL Airlines, which began operations in June 2009. Sky Airlines currently operates a fleet of 13 Boeing 737-200 aircraft and flies to12 destinations. PAL Airlines currently operates a fleet of 4 Boeing 737-200 aircraft and flies to 5 destinations.

There are currently no foreign airlines participating in the Chilean domestic market. Chile permits foreign airlines to operate in Chile if the airline’s home country gives similar treatment to Chilean airlines. Additionally, there are no regulatory barriers that prevent a foreign airline from creating a Chilean subsidiary and entering the Chilean domestic market using that subsidiary.

Operations within Peru

Lan Peru started operations in 1999 with domestic and international flights from Lima. During the past ten years, Lan Peru has expanded consistently, consolidating its domestic operations and coverage of relevant markets.

Regarding the domestic market, Peru has tremendous potential compared to other Latin American markets based on per capita travel ratios.  In 2010 the domestic market reached 5.0 million passengers and 6.4 million passengers are expected for 2011.

LAN Peru has one of the most modern fleets in Latin America, operating 19 Airbus A319 aircraft, with twelve for domestic operations and seven for regional operations.  This fleet is ideal for Peruvian routes, as it maximizes available payload in high-altitude airports with tail wind conditions. This uniform fleet also allows for low maintenance costs, high crew productivity and operational flexibility.

Compared to 2009, Lan Peru’s domestic operations in Peru showed an expansion of 8.9% during 2010, due to an increase in the number of flights to existing destinations. According to data provided by the Corporación Peruana de Aeropuertos y Aviación Comercial S.A. (the Peruvian Airport and Commercial Aviation Corporation, or “CORPAC”), our domestic market share in Peru was 62% for 2007, 73% for 2008, 80% for 2009 and 70% for 2010.

A total of 3,836,134 passengers traveled on LAN Peru’s domestic Peruvian routes in 2010, which represented an increase of 13% compared to 2009. As of February 28, 2011, competitors included Star Peru, Peruvian Airlines and TACA (which has increased its operations in the domestic market by adding new frequencies to Cusco, Juliaca, Tarapoto and Trujillo).

LAN Peru expects to increase the connections between cities within the country.  Cusco, the country’s most important tourist destination, accounts for most of LAN Peru’s domestic operations and is served by 16 (and even 21 during certain periods) flights each day. LAN Peru flies at least two times daily to each of its 13 destinations from Lima with Tumbes as an exception (10 flights a week).

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Regarding airport services, LAN Peru has over 141 domestic daily arrivals and departures.  Self-check in levels have grown steadily in the past years, reaching 83% for domestic routes at the end of 2010.

In 2010, LAN Peru was awarded the “Gran Marca Moderna” by the Effie Awards (a Marketing Hall of Fame distinction), and was the first airline in the country to receive this honor.

Operations within Argentina

Lan Argentina initiated services in June 2005, covering two Argentine domestic destinations from Buenos Aires, Cordoba and Mendoza. Between 2005 and 2007, Lan Argentina increased the number of Argentine domestic destinations to nine adding Bariloche, Iguazu, Comodoro Rivadavia, Rio Gallegos, Ushuaia, Calafate and Salta. In June 2008, Lan Argentina initiated services to Neuquen and in September 2008 to San Juan. In April 2009, Lan Argentina initiated services to Tucuman.

From June to November 2006, Lan Argentina replaced its Boeing B737-200 fleet, which consisted of five aircraft, four of which were Airbus A320 aircraft. We use these aircraft in both domestic and regional operations. The replacement of these aircraft enabled Lan Argentina to increase the scope, size and efficiency of its operations. By the end of December 2010, we operated a fleet of eight Airbus A320 aircraft in our domestic operations.

In the domestic Argentine market, Lan Argentina operates in a regulated environment in which fares sold to Argentine passengers are subject to minimum and maximum prices that vary per route. In August 2006, by presidential decree, both the floor and ceiling of the regulated price range were increased by 20%. The decree liberalized foreign ownership of Argentinean airlines, previously capped at 49%. Since this decree, the floor and ceiling of the regulated price range have been consistently increased as follows:  by 18% in April 2008, by 18% in May 2008, by 20% in 2009, by 15% in June 2010 and by 10% in November 2010.

Our domestic market share in Argentina, based on our internal estimates for December 2010 amounted to 27%. Our competitors in the Argentinean market during 2010 were Aerolíneas Argentinas and its affiliate Austral Líneas Aéreas. Together, these two companies held substantially the entire remaining share of the domestic Argentine market.

Operations within Ecuador

At the end of 2008, the Civil Aviation National Board authorized us to operate domestic flights in Ecuador. In April 2009, we initiated the operations between Quito and Guayaquil.

In December 2009, LAN Ecuador operated 49 weekly flights between Quito and Guayaquil, one of Latin America’s major routes. The company also began daily flights between Cuenca and Quito. As of February 28, 2011, LAN Ecuador operated 63 flights between Quito and Guayaquil. In September 2010, the company incorporated daily flights to the Galapagos Islands.

In 2010, LAN Ecuador transported 623,104 passengers in the domestic passenger market, achieving a load factor of 75% with a growth of 70% in passengers in respect with 2009 and a national market of 25%.

In Ecuador, the company’s principal competitors are TAME, Aerogal and Icaro.

Operations within Colombia (Acquisition of AIRES)

On November 26, 2010, LAN acquired Colombian airline Aerovías de Integración Regional S.A., (“Aires”) for US$12 million in cash, in addition to assuming net liabilities of US$87 million. The Colombian market is the second largest market in South America with over 13 million annual domestic passengers and represents a key market in LAN’s consolidation as a leading airline within the region.  Aires is currently the second largest operator in Colombia’s domestic market with approximately a 20% market share as of December 2010.  The Aires fleet consists of 9 B737-700s, 11 Q200 and 4 Q400, all of which are operating leases.

The company will replicate LAN’s “low cost” model already operating in the domestic markets of Argentina, Chile, Ecuador and Peru, stimulating demand on domestic flights by providing more Colombian citizens the opportunity to use air transportation.  In the medium term, Aires will evaluate the expansion of international passenger operations and the advantages of any synergies it may obtain from LAN Cargo’s affiliate in Colombia, Lanco, launched in March 2009.

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LAN will dedicate its maximum efforts to ensure that the safety, on time performance and service quality standards of its new affiliate are consistent with LAN’s own high standards.  The integration process may involve certain operational changes such as itinerary modifications and efficiency improvements.  This process will not interfere with the continuity of current operations of Aires.

Prior to the acquisition of Aires, since May 6, 2010, LAN had an agreement to provide technical support and service consultancy to Colombian airline Aeroasis S.A. (“Aeroasis”) while Aeroasis completed the process of obtaining an operating permit from the Colombian civil aviation authority (Unidad Administrativa Especial de Aeronáutica Civil), within the established deadline of February 2011. This process included the hiring of personnel and development of technical materials, as well as the selection and acquisition of equipment, all in compliance with the applicable legal and regulatory frameworks. On February, 2011 LAN acquired the parent companies of Aeroasis with the purpose to merge with Aires operations.

Passenger Alliances and Commercial Agreements

The following are our passenger alliances and partnerships as of February 28, 2011:

· oneworld®. In June 2000, Lan Airlines and Lan Peru were officially incorporated into the oneworld® alliance along with Aer Lingus. At the time, oneworld® was a global marketing alliance consisting of American Airlines, British Airways, Cathay Pacific Airlines, Qantas, Iberia and Finnair, that, among other benefits, offered improved service to its customers. In April 2007, JAL from Japan, Royal Jordanian from Jordan and Malev from Hungary, together with Lan Ecuador and Lan Argentina, joined the alliance, while AerLingus withdrew from the alliance. In November 2009, Mexicana joined the alliance. In November 2010, S7 Airlines joined oneworld® adding 55 destinations in Russia to the alliance.  Last November 2010, S7 Airlines joined oneworld® adding 55 destinations in Russia to the alliance.  Together, these airlines are able to offer customers travel advantages, such as approximately 750 worldwide destinations, schedule flexibility and reciprocal frequent flyer program benefits. Additionally, oneworld® is the first alliance to deploy full interline e-ticketing between its partners.

· American Airlines. Since 1997, Lan Airlines has had an agreement with American Airlines, which enables Lan Airlines and American Airlines to share carrier codes for certain flights on global reservations systems, thereby enabling American Airlines passengers to purchase seats on Lan Airlines flights and vice-versa. The Department of Transportation, or DOT, granted antitrust immunity to our arrangement with American Airlines in October 1999. The antitrust immunity encompasses cooperation in commercial and operational areas such as pricing, scheduling, joint marketing efforts and reductions of airport and purchasing costs, as well as further implementation of cargo synergies in areas such as handling and other airport services. For more information see “—Regulation—U.S. Aeronautical Regulation—Regulatory Authorizations in Connection With Strategic Alliances” below. Through this alliance, we currently offer service to thirty additional destinations in the United States and Canada. In 2005, the DOT granted antitrust immunity to a similar agreement between Lan Peru and American Airlines. This antitrust immunity allows enhanced coordination between Lan Peru and American Airlines, and both companies established in 2007 code-share operations between Peru and the U.S. with additional destinations in both countries.

· Iberia. In January 2001, Lan Airlines initiated a code-share agreement with Iberia, pursuant to which we offer passengers between ten and fourteen non-stop frequencies per week between Santiago and Madrid. In subsequent years, other destinations were added to the agreement, such as Alicante, Amsterdam, Barcelona, Bilbao, Brussels, London (Heathrow), Malaga, Milan, Paris, Rome and Zurich. In 2007, Lan Ecuador and Lan Peru set up code-share agreements with Iberia for routes between Ecuador, Peru and Spain; as well as four additional European destinations with Lan Peru and seven destinations with Lan Ecuador.

· Qantas. In July 2002, Lan Airlines initiated a code-share agreement with Qantas to operate between Santiago, Chile and Sydney, Australia with a stopover in Auckland, New Zealand. As of February 28, 2011, this code-share agreement includes daily flights operated by Lan Airlines.

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· British Airways. In 2007, Lan Airlines initiated a code-share agreement with British Airways on Lan Airlines flights between Sao Paulo and Santiago to provide service for British Airways passengers traveling from London to Santiago through a connection in Sao Paulo. This code-share agreement also includes British Airways’ flights between Madrid and London.

· Aeromexico. In 2004, we expanded our previous alliance with Aeromexico. The new agreement includes all of our passenger airlines. Under this alliance, we code-share in flights to Mexico from Chile and Peru, as well as to eighteen domestic destinations in Mexico. Additionally, it provides our passengers with benefits such as easier connections and reciprocal accrual and redemption of frequent flyer program rewards.

· TAM. In 2007, Lan Airlines and Lan Peru, established regional code-share agreements with TAM Linhas Aéreas. Through this agreement, LAN offers twelve additional destinations in Brazil. LAN also code shares with Transportes Aéreos del Mercosur S.A. (“TAM Mercosur”) with respect to flights from Santiago to Asunción, Paraguay, that are operated by TAM Mercosur. These arrangements provide our passengers with reciprocal accrual and redemption of frequent flyer program rewards. In 2008, Lan Argentina established a code-share agreement with TAM from Buenos Aires to Sao Paulo and vice versa, which includes eight domestic destinations in Argentina and twelve domestic destinations in Brazil.

· Cathay Pacific. In May 2010, Lan Airlines initiated a code-share agreement with Cathay Pacific to operate between Santiago, Chile and Hong Kong, China, through connections in Los Angeles, California, New York and Auckland, and in November 2010, Lan Peru initiated a code-share agreement with Cathay Pacific to operate between Lima, Peru and Hong Kong, China, through connections in Los Angeles and San Francisco.

· Jetstar Airways. In November 2010, LAN signed an Interline Agreement and a Special Prorate Agreement with Jetstar Airways in order to broaden the destinations offered to LAN’s customers, particularly in the domestic markets of New Zealand, Australia, and South East Asia.

· JetBlue. During March 2011, LAN signed an Interline Agreement and a Special Prorate Agreement with JetBlue increasing the connection opportunities between New York and Boston, Washington, Chicago, Pittsburgh and many other US cities through JetBlue’s HUB in JFK.

· Other alliances and partnerships: Since 2005, we have had a code-share agreement with Korean Air. Under this agreement we place our code on Korean Air flights between Los Angeles and Seoul, while Korean Air places its code on our flights from Los Angeles to Santiago. In 2004, LAN and Mexicana signed a frequent flyer program that allows for reciprocal accrual and allowance of frequent flyer benefits. Since 1999, Lan Airlines has been in an alliance with Alaska Airlines, which permits us to provide customers with service between Chile and three destinations in the west coast of the U.S. and Canada. Reciprocal accrual and redemption of frequent flyer program rewards is also available for LAN customers flying on Alaska Airlines flights and vice versa.

Passenger Marketing and Sales

Even though we market our services under the common “LAN” brand, we differentiate our marketing strategies between our long-haul and short-haul services.

Our long-haul marketing strategy emphasizes attributes valued by our international customers, including reliability, high quality on-board and ground service, comfort, comprehensive coverage of key South American markets and frequent service to major overseas gateways such as New York, Los Angeles, San Francisco, Miami, Madrid and Sydney. In order to strengthen our market position, we have continued improving our passenger cabins and service and constantly monitor our corporate image. As such, in December 2008 and May 2009 we completed a retrofit program for our Boeing 767-300 and for our Airbus A340-300 fleet respectively, merging the Business and First Classes cabins into a Premium Business Class featuring full-flat seats, new entertainment units for both Premium Business and Economy cabins, together with a new on-board service.  We invested US$124 million in this retrofit program for all our long haul passenger aircraft, which aims to give our passengers a sense of a “shorter” and more pleasant flight. For our Business passengers, our cabin features an on-board service aimed at providing the passenger with more time to rest, and for our Economy Class passengers, our upgraded entertainment units aim to make the flight a more enjoyable one.

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Our long-haul fleet plan includes the incorporation of the new Boeing 787 in 2012. LAN will be the first airline in Latin America, and one of the first in the world, to receive this model whose latest-generation technology and cabin innovations represent a revolution in the airline industry. Passengers will experience the 787’s advantages in the form of higher cabin humidity and increased comfort. These acquisitions will allow us to reach new destinations and boost LAN’s existing services while also continuing to increase the efficiency of our operations and reduce our carbon footprint.

Our short-haul operations are designed to better match the customers’ needs in those routes, which are punctuality, reliability, higher frequencies, modern aircraft and efficient operations. As such, these routes now feature modern planes, with leather seats, increased frequencies with more point-to-point flights, improved punctuality and streamlined processes including Internet sales, web check-in and airport self-check-in. We completed the phase-out of our Boeing B737-200 fleet in 2008 and replaced it with modern Airbus Family Aircraft such as A320, A319 and A318.

We are constantly focused on delivering the services and flight items valued by customers in order to maintain high levels of customer satisfaction and we continuously monitor our customers’ preferences through surveys and perception studies. As a result, we created the new Premium Economy class on some regional routes in response to comments made by our business travelers. The Premium Economy program grants our customers preferential check-in and boarding, access to our VIP lounges, priority baggage claim, exclusive cabins with only twelve passengers, and personalized attention by our cabin attendants, among other benefits.

As mentioned above, we have been implementing a new business model in all our domestic operations (Argentina, Chile, Peru and Ecuador) that seeks to make air travel accessible to more people through low fares supported by a low-cost operation based on the efficient use of our resources. During 2010 LAN received several awards solidifying the Company’s market position. These awards included Best Airline in South America (Skytrax) and Airline Staff Service Excellence in South America (Skytrax).

Branding

In March 2004, we launched our new “LAN” brand to bring together, under one strong international name, all our local brands such as “LAN Chile,” “LAN Peru,” “LAN Argentina” and “LAN Ecuador.” We developed our new brand and corporate image after an extensive process supported by a leading global branding agency.

Our corporate image is based on two core concepts: reliability and warmth, which support our promise of the best travel experience to, from and within South America.  We are also committed to offer our customers with the best coverage to, from and within South America, and to promote sustainable tourism, helping develop the regions where we operate.

During 2005 and 2006, we focused on advancing the transition to our new brand image. This included the gradual repainting of our fleet, which was completed in the second quarter of 2006. Our commercial strategy, centered on exploiting the LAN alliance concept, has been widely recognized, as exemplified by Airline Business magazine’s recognition of us in 2004 with its “Airline Strategy Award, Marketing.”

Using a single brand enabled our customers to better understand the common service and operating standards among our airlines, and our new image improved our visibility, which enhanced flexibility and increased the efficiency of our marketing efforts.  It also provided a platform for the strategic use in mature markets of the following three powerful sub-brands, all related to the LAN root:

· the www.lan.com website for the convenience of our web booking engine and services platform;

· LANPASS for our frequent flyer program; and

· LANTOURS, a sub-brand through which we offer travel packages, hotels and other ancillary products, as well as promote tourism activities to and from the regions in which we operate.  LANTOURS took hold first in Chile and is gradually being introduced into other key markets.

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Our regular brand tracking and marketing effectiveness measurements show outstanding results in brand consistency and recognition, improving year after year, with marketing investments managed at healthily stable rates. As the corporate values behind our umbrella brand encompass attributes applicable to both operations, long haul and short haul, a single brand strategy has resulted in significant savings, as we only have to promote one master brand, thereby increasing the efficiency of our marketing efforts.

Distribution Channels

We use direct and indirect distribution channels. In the past few years, we have focused on streamlining our distribution strategy in order to reduce costs and enhance the effectiveness of our commercial efforts. This effort has resulted in efficiency gains, and we believe it should lead to further benefits in the future.

Travel agents conduct indirect sales that accounted for approximately 38% of passengers during 2010. We paid these travel agents standard commissions ranging from 0% to 6% depending on the market and the ticket region type (domestic / international). Consistent with our efforts to reduce commission costs, and in line with current market practices, in recent years we have reduced standard commissions in several markets. However, we are now charging a fee to customers for sales done through our own ticket offices or call centers in most countries, leaving the Internet as the only free-of-charge distribution channel.

Travel agents obtain airline travel information and issue airline tickets through Global Distribution Systems, or GDSs, that enable them to make reservations on flights from a large number of airlines. We participate actively in all major international GDSs, including Sabre, Amadeus, Galileo and Worldspan. In return for access to these systems, we pay transaction fees that are generally based on the number of reservations booked through each system. As part of its continued commitment to its passengers, in late 2009, LAN signed a series of agreements with Sabre, one of the major suppliers of IT solutions in the global airline industry. Through these agreements, Sabre will provide the Company with the most advanced technology in reservation and distribution systems, optimization of routes and operational planning. The process of implementing the new system platforms comprises a period of adjustment and migration that will last between two and three years until its full implementation. These agreements represent a major step in terms of innovation by implementing the industry’s most advanced technology to streamline business and operational processes involved in the service the Company provides to its customers. These agreements will serve to provide itineraries that best fit the needs of passengers and to provide simpler, agile and efficient services in airports and in the sales and distribution channels, improving LAN’s services in each of the stages of the travel experience.

Direct channels refer to sales by our own ticket offices, contact-centers and website. In 2010, direct bookings accounted for approximately 62% of all our passengers.

We have an extensive sales and marketing network in over thirty countries consisting of more than 155 domestic and international points-of-sale owned by us and approximately 37 general sales agents.

Our contact-centers support the growth of our operations constituting a sales and a multi-service channel. During 2010, we continued to grow and develop new services to match the increasing expectations of our clients and the growth of our direct sales channels, in particular the www.lan.com website. Our main contact-center located in Santiago accounts for 700 agents (of which 270 are home-based) and 230 agents in Lima. We complement our contact-center’s operations with third-party service providers that add approximately 400 agents who are located in Santiago, Lima and Buenos Aires. In total, all the centers handle more than 28,000 calls/contacts per day, which mainly originate from the regions where we fly (South America, North America, Europe and Australasia) and cover four languages (Spanish, English, Portuguese, French and German). We have continually upgraded our systems by incorporating technological advances to enhance efficiency and customer service.

Our website, www.lan.com, is an integral part of our commercial, marketing and service efforts. Together with other direct sales initiatives, our website provides us with an important tool to reduce our distribution costs. Our Internet-related sales have increased significantly in recent years, by 21.9% in 2009 compared to 2008, and 22.0% in 2010 compared to 2009, which amounted to US$646 million in 2010. We are continually improving our website, a key element of our new short-haul model, so that the technological platform can support the expected future growth.

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Besides serving as a sales channel, we have utilized our website as a tool to provide value-added services and enhance communications. We send weekly promotional e-mails to more than 3.8 million subscribers. Members of our frequent flyer program receive their monthly balances and other information by e-mail and can access the data and redeem awards through our website. We have an active online marketing program which brings visitors to the website from search engines and travel-related websites.

During 2009 we improved several services on the website. We introduced the flexible award redemption service, which enables LANPASS members to obtain flights with their kilometers at any time of year. We also updated our Flight Information System to ensure accurate, real time information.  In addition, we continued to promote our web-based check-in service for domestic and international flights. This system allows those passengers who are not checking-in bags, to go directly to the gate, and the remaining checked-in passengers, to leave their bags at a special bag drop counter and proceed to the gate. In addition to web-based check-in, we have self-check kiosks in 13 airports in Chile, seven airports in Peru, two airports in Argentina and three airports in Ecuador. As of December 31, 2010, the kiosk and web check-in utilization rate increased to 81% for domestic routes in Chile, 82% for domestic routes in Peru, 52% for domestic routes in Argentina and 39% for domestic routes in Ecuador.  Also in 2010 we launched our LAN.com Mobile service, enabling our customers to check-in, verify their flight status and other itineraries using their internet-enabled mobile phones.

In 2010 LAN was recognized as the “Latin American e-commerce Company of the Year” by the Latin American e-Commerce Institute.

Electronic Ticketing

In 1997, we introduced electronic tickets, commonly referred to as e-tickets, and have since worked to increase their use. E-tickets are a key element of our sales efforts through the Internet and our call centers and they also produce important simplifications in our back-office, enabling us to significantly reduce distribution costs. Since 2008, the Company has reached a 100% penetration of e-ticketing on all LAN routes.

Also, during 2010 we completed the implementation of interline e-ticketing with all of our oneworld® partners.

Advertising and Promotional Activities

Our advertisement and promotional efforts are aimed at enhancing our brand positioning and supporting specific aspects of our commercial efforts. These activities include the use of television, print, outdoors and radio advertisements as well as direct and online marketing.

During 2010, our campaigns where mainly focused on continuing stimulating demand by implementing a pricing strategy that has made flying more accessible to those traveling especially for tourism. Our various promotional efforts have allowed us to reach new customers and to promote local and regional tourism in the markets where we operate.  This is supported by the unique coverage and travel experience that we offer to those passengers traveling to, from and within South America.

On a country-specific level, we carried out a TV campaign in Chile to promote sustainable tourism within the country, inviting people to discover and take care of the wonders of Chile, travelling in an environmentally conscious way.  This was also leveraged by a second TV campaign launched by SERNATUR, Chile’s National Tourism Agency, in partnership with LAN and other members, aimed at promoting local tourism among Chilean citizens.  These efforts show LAN’s ongoing commitment with the development of local communities through the promotion of sustainable tourism.

In Peru, we carried out a campaign aimed at communicating LAN’s extensive international coverage through its unique South American network and the oneworld alliance.  The campaign also focused on attributes such as quality of service and travel experience.

In Argentina, we launched a campaign aimed at communicating the main reasons why LAN has become the airline of choice, focusing on attributes such as unique service and flight experience, reliability, punctuality and domestic coverage.

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In April 2009, LAN Ecuador launched its domestic operations, which constituted a turning point in Ecuador’s domestic market by broadening access to air travel, as a result of lower prices and LAN Ecuador’s world-class service. In 2010, we launched a campaign to communicate the new daily route to the wonderful and exotic Galápagos Islands, as well as the new direct flight from Guayaquil to Miami, offered four times a week.

LAN has built a comprehensive database that includes valuable information such as flying preferences, demographic and other relevant customer information, which is used for passenger revenue management (including targeted promotions to different customer segments), thereby reducing dilution and maximizing response rates. This type of information is also a source for customer metrics and monitoring and provides significant management information.  During the past years, the skills involved in profitably exploiting these resources were strengthened with the incorporation of key teams to act locally in Peru, Argentina, Ecuador, the United States and Europe, in close collaboration with the head office.

Frequent Flyer Program

Our frequent flyer program is called LANPASS. The objective of LANPASS is to generate incremental revenue and customer retention through customer loyalty and targeted marketing. Worldwide, as of December 2010 LANPASS has approximately 4.3 million members.

Customers earn kilometers in their LANPASS accounts based on distance flown and class of ticket purchased, or by using services of other participants in the LANPASS program. Based on an award schedule, customers can redeem kilometers for free tickets, upgrades or other products. Under our current frequent flyer program, our passengers are grouped into one standard level and three different elite levels based on each passenger’s flying behavior. These different groups determine which benefits customers are eligible to receive, such as free upgrades on a space-available basis, VIP lounge access and preferred boarding and check-in.

Aiming to increase redemptions and broaden redemption alternatives, in 2010 LANPASS offered new redemption options such as an online product catalogue and special wine events where top tier members were invited to redeem their kilometers for the wine offered in LAN’s Premium Business menu. These new offerings along with the traditional rewards already offered resulted in an increase of 25% in kilometers redeemed by LANPASS’ members in 2010.

LANPASS has highly rated partners, including other airlines, hotels, car rental agencies, retailers, and credit card issuers from the main financial institutions in Chile, Peru, Ecuador, Argentina and beginning in 2010 in the United States.  These partnerships give our customers the opportunity to accrue additional kilometers for using their services.

Through the incorporation of additional partners in 2010, LAN customers accrued 48% more kilometers than in 2009, by using other services different from the services offered by LAN and other airlines.  In the banking segment, LANPASS renewed its partnership with Santander Chile for another five years, spreading LANPASS accrual from credit/debit card to all retail banking offering.  LANPASS also launched a new partnership with BBVA, a leading bank in Argentina, began to issue credit cards in the United States with US Bank, and increased our offering in redemption catalogs in Brazil with Banco Itau.

In the non banking segment, LANPASS continues to leverage its member’s purchase behavior to partner with leading players in the markets and become the most attractive loyalty program in the home markets. Last year, LANPASS enter in new industries, such as Automotive, Real Estate, Drugstores and Health Care Centers.

As an active member of the oneworld® alliance, we have reciprocal frequent-flyer agreements with all oneworld® carriers. In addition, we have reciprocal agreements with other carriers, such as Alaska Airlines, Aeromexico, Mexicana and TAM, which allow us to benefit from the loyalty of their customers, as they can accrue points under their frequent flyer program when traveling on LAN’s flights.

The LANPASS frequent flyer program aims to be the leading loyalty program in all of LAN’s home markets. In the past couple of years, we have implemented a number of marketing initiatives to increase customer’s engagement with the program outside Chile. In 2010, membership in LANPASS grew 36% in Peru, 42% in Ecuador and 32% in Argentina.

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Cargo Operations

General

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

	Year ended December 31,
	2010			2009			2008
The Company
ATKs (millions)
Total		4,628.7			3,848.9			4,071.9
RTKs (millions)
Total		3,245.3			2,627.4			2,906.2
Weight of cargo carried (thousands of tons)
Total		780.8			649.3			661.5
Total cargo yield (cargo revenues/RTKs, in US cents)		39.5			34.1			45.4
Total cargo load factor (%)		70.1	%		68.3	%		71.4	%

Our cargo business generated revenues of US$895.6 million in 2009 and US$1,280.7 million in 2010.  This represented 24.5% and 28.3% of our operating revenues, respectively. Cargo revenues declined 32.1% between 2008 and 2009 primarily due to the global economic crisis that affected the industry and the decline in salmon exports from Chile due to the ISA virus. Nevertheless, during 2010 revenues increased 43.0% on a year-over-year basis as we took advantage of the recovery of world cargo markets.

Our cargo business generally operates on the same route network used by our passenger airline business, which is supplemented by freighter-only operations. Overall, it includes approximately 86 destinations (over 66 are operated by passenger and/or freighter aircraft and approximately 20 operated only by freighter aircraft). We complement our own international operations through coordination with our regional affiliates, MasAir in Mexico, ABSA in Brazil and Lanco in Colombia. ABSA also operates in the Brazilian domestic market since March 2009. We carry cargo for a variety of customers, including other international air carriers, freight-forwarding companies, export oriented companies and individual consumers. For information about our fleet, see “—Fleet—General” below.

We transport cargo in four ways: (i) in the bellies of our passenger aircraft, (ii) in our own dedicated freighter fleet, (iii) in belly space that we purchase from other airlines and, (iv) in aircraft that we charter or lease pursuant to ACMI contracts (Aircraft, Crew, Maintenance and Insurance). Under the latter, which are also known as “wet-leases,” the lessor operates the aircraft and provides the aircraft, crew, maintenance and insurance pursuant to short- and medium-term contracts.

Our international cargo operations are headquartered in Miami, whose geographical location positions it as the natural gateway for Latin American imports and exports to and from the United States. Since 2001 we have operated in our 380,000 square-foot facilities within the Miami International Airport. In 2010 we upgraded this facility to enhance our ability to handle perishables and we leased an additional 117,000 square-foot warehouse close to our main facilities. The United States accounts for the majority of the cargo traffic to and from Latin America. Besides being the main market for Latin American exports by air, the United States is also the main supplier of goods, such as high-tech equipment or spare parts, transported by air to Latin American countries. To complement our own cargo operations to the United States, we have negotiated commercial agreements with American Airlines on some routes from Miami to Brazil.

We operate to three destinations in Europe: to Madrid, which we serve via passenger aircraft (using our flights from Santiago, Lima and Guayaquil), Frankfurt (through both passenger flights and freighter operations since October 2002, when we signed our partnership with Lufthansa Cargo (for more information on this agreement see “—Cargo Agreements” below), and Amsterdam (through freighter operations since October 2005).

In Latin America, the principal origins of our cargo are Colombia, Chile, Ecuador, Peru, Argentina and Brazil, which represent a large part of our northbound traffic. And for our southbound flights, Brazil is the main import market.

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In general terms, cargo flows are unidirectional. This characteristic is a key determinant in the structure of cargo operations as well as in the commercial conditions in the cargo business. This is especially relevant in markets featuring structural imbalances between inbound and outbound flows or during specific periods of such disequilibrium. Lack of demand in one particular direction may force airlines to rely on different markets in order to maximize loads on return flights. Furthermore, demand weakness in one direction may limit the capacity that is profitable to allocate to some routes, therefore creating pressure on fares in order to compensate for weaker revenues in one particular direction. The evolution of our international cargo operations has always been affected by the flow imbalances of the Latin American cargo markets, resulting in a dramatic shift in the relative weight of southbound and northbound cargo flows throughout the years. For example, from 2002 to 2003 our international operations were characterized by very strong export traffic out of Latin America, but gradual increases in import demand, as well as the deceleration of export growth, led to more balanced cargo flows during 2004. Further extension of this trend led to excess demand on southbound routes since 2005.

We have designed our operations, route network and commercial strategies with the flexibility required to respond to changing conditions. As such, during 2003 we allocated additional capacity to northbound routes and adjusted fares on northbound routes in response to excess demand. During 2004 we gradually adjusted our operations to leverage a more balanced demand environment by performing an increased number of direct roundtrips between key export and import markets. However, weakness in exports since 2005 has driven us to support the northbound segment of certain routes with stopovers in additional export markets, to reduce northbound fares to stimulate demand and to raise southbound fares.

The flexibility that this business model allows based on adaptation to changes in market trends was key for LAN’s operations in 2009 when the business was affected by the contraction of import and export markets in response to the global economic crisis. In addition LAN Cargo saw a sharp drop in salmon exports from Chile as a result of an outbreak of the ISA virus. Such flexibility has also been a key element in the recuperation and growth experienced by LAN Cargo during 2010.

Our cargo traffic increased 23.5% between 2009 and 2010, from 2,623 million cargo revenue ton kilometers in 2009 to 3,239 million cargo revenue ton kilometers in 2010. This increase was above the 20.6% growth experienced by cargo traffic of the international airline industry. The company increased its capacity by approximately 20.5%, resulting in a 1.7 point increase in its load factor to 70.1% in December 2010. The increase in capacity was mainly driven by the incorporation of additional freighters, in particular two Boeing 777 freighters received between April and May 2009, as well as higher utilization of the freighter fleet. LAN Cargo transported 779,509 tons of freight in 2010, up by 20.1% compared to 2009.

In 2010, LAN’s cargo revenues increased by 43.0% to US$1,280.7 million, representing 29.2% of the Company’s total annual revenues, from US$895.6 million in 2009, when cargo represented 25.4% of annual revenues. The increase in revenues also reflected the 15.8% increase in cargo yields.

The sharp contraction of LAN’s traditional markets in 2009 - imports into the region and exports from the region – followed by the rapid recovery of demand in 2010 required the Company to fully lever the flexibility of its business model. During 2009 the Company implemented of a series of measures such as the adjustment of its capacity through a reduction in the number of planes rented under Aircraft, Crew, Maintenance & Insurance (“ACMI”) agreements and adjustments in the operations of its own cargo fleet of Boeing 767F freighters. This process was also reinforced by the incorporation of two new Boeing 777-200F, the most modern and efficient cargo aircraft of their type in the world, with a capacity of 104tons of freight and a range of 9,045 kilometers when carrying its maximum payload. This significant investment allowed LAN to consolidate its regional competitiveness by positioning it as the first airline in the region, and only the second internationally, to use these latest-generation cargo planes.

The Company also achieved a significant regional expansion in 2009.  In March, LAN Cargo launched Lanco, a subsidiary in Colombia, which began operations after successfully obtaining the necessary operational and technical certification. It launched its services with two Boeing 767-300Fs, with a capacity for 54 tons of freight, connecting the cities of Bogotá and Medellín with Miami. It is important to note that Colombia is Latin America’s largest market for exports by air to the United States reaching an estimated 200,000 tons annually.

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In addition, in March 2009, the Company’s cargo subsidiary in Brazil, ABSA, began operations in that country’s domestic market, with one flight daily, from Monday through Friday, between the cities of Sao Paulo and Manaus. On this route, ABSA operates an advanced-technology Boeing 767-300F with a capacity of 54 tons.  This route accounts for a large part of Brazil’s airfreight traffic. Manaus is the country’s fourth largest city in terms of GDP, with a large number of companies, principally part of the electronics sector, in its industrial pole. The special tax incentives offered by the Amazon capital of Manaus as part of efforts to promote the area’s development, make it an attractive alternative for exporter and importer clients.

During 2010, revenue growth in the cargo business continued to reflect the Company’s ability to exploit the expansion in global cargo flows, as well as the development of key strategic initiatives. Active capacity management, with the purpose of optimizing capacity assignation coupled with new revenue management tools to manage cargo rates in response to demand, enabled LAN Cargo to benefit from the growth trends seen in import markets to Latin America, especially to Brazil. The expansion of operations to Europe utilizing the new Boeing 777-200 freighter fleet strengthened the Company’s competitive position and further diversified its revenue base. Additionally, through its Brazilian affiliate, ABSA, the Company continued to strengthen domestic cargo operations in Brazil. During 2010, ABSA launched operations from Sao Paulo to Recife and Fortaleza and added a second daily flight from Sao Paulo to Manaus. The Company also added capacity by securing three leased Boeing 767-300F, two of which were incorporated in late 2010 and one in early 2011. Furthermore, the Company continues to successfully optimize capacity in the bellies of passenger aircraft, maximizing the synergies of the Company’s integrated passenger and cargo operation.

During the last five years, we also improved our competitive position as key operators reduced their operations, and competitors such as UPS and FedEx either downsized their operations or exited some markets. Since mid-2004, competition increased as regional carriers added capacity, but despite this increase in competition, we have been able to maintain solid market shares in large part because of the efficient utilization of our fleet and network. Today, on Latin America-United States routes, our main competitors are Centurion, Transportes Aéreos Mercantiles Panamericanos S.A., or TAMPA, and Polar Air, and on the Latin American-Europe routes, our main competitors are Cargolux, Lufthansa Cargo, Martinair and Air France-KLM.

Cargo Agreements

Since 2002, Lan Cargo and Lufthansa Cargo have had a block space agreement between Europe and Latin America. As part of this agreement, Lan Cargo allocates space to Lufthansa Cargo on its flights between selected cities in Latin America and Europe, and Lufthansa Cargo allocates space to Lan Cargo on its flights between Europe and Brazil and Argentina.

We also have agreements with Asian carriers such as Korean Airlines, JAL, China Airlines, Air China and Cathay Pacific through which Lan Cargo receives space allocations from these airlines to move our cargo from Seoul, Tokyo, Taipei, Shanghai and Hong Kong to Los Angeles and Miami connecting with our network. In exchange, Lan Cargo provides them with space from these same two hubs in the United States to all Latin American destinations and also feeds them with westbound cargo.

Marketing and Sales

Our sales and marketing efforts are carried out either directly when we have a local office or through general sales agents. In Latin America we have our own offices in all key markets. In the United States we have our own offices in Miami, New York and Los Angeles, and work with representatives in various other cities. In Europe we have offices in Frankfurt and Madrid and use agents in other key cities. Finally, in Asia all our sales efforts are done through general sales agents. In total, we maintain a network of more than forty independent cargo sales agencies domestically and internationally.

Our cargo marketing strategy emphasizes our combination of freighter and passenger aircraft cargo capacity, which allows customers to ship large, bulky freight, as well as smaller, high-density cargo, fresh products, express shipments, and other types of cargo. Our cargo marketing strategy also emphasizes our high-quality services, scheduling flexibility and punctuality. On some routes, Lan Cargo offers special, value-added products such as Positive Flight Specific or FS, which enables the customer to choose a specific passenger flight to transport its goods. During 2010 we also launched the first phase of a new revenue management project aimed at optimizing yields.

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Cargo-Related Investigations

In February 2006 the European Commission (“EC”), in conjunction with the Department of Justice of the United States (“DOJ”), initiated a global investigation of a large number of international cargo airlines (among them Lan Cargo, LAN’s cargo subsidiary) for possible price fixing of cargo fuel surcharges and other fees in the European and United States air cargo markets. On December 26, 2007, the European competition authorities notified Lan Cargo and LAN of the initiation of proceedings against twenty-five cargo airlines, among them Lan Cargo, for allegations of anti-competitive behavior in the airfreight business. On January 21, 2009, Lan Cargo announced that it had reached a plea agreement with the DOJ in relation to the DOJ’s ongoing investigation regarding price fixing of fuel surcharges and other fees for cargo shipments. Under the plea agreement, Lan Cargo agreed to pay a fine of US$88 million. In addition, ABSA also reached a plea agreement with the DOJ and agreed to pay a fine of US$21 million. These amounts were stipulated to be paid over a five-year payment schedule starting in 2009.  As of December 31, 2010, the pending amount to be paid during the next four years is approximately US$72 million and has been recorded within “Other Accounts Payable.”

On November 9, 2010 the EC imposed fines to 11 air carriers for a total amount of €800 million (equivalent to approximately US$1.1 billion). The fine imposed against Lan Cargo and its parent company, LAN Airlines, totaled €8.2 million (equivalent to approximately US$ 10.9 million).  The Company provisioned US$25 million during the fourth quarter of 2007 for such fines, and maintained this provision until the fine was imposed in 2010.  This was the lowest fine applied by the EC, which includes a significant reduction due to the Company’s cooperation with the Commission during the course of the investigation. In accordance with European Union law, on January 24, 2011 this administrative decision was appealed by Lan Cargo and Lan Airlines to the General Court in Luxembourg. Any judgment by the General Court may also be appealed to the Court of Justice of the European Union.

As of December 31, 2010 the Company recorded a US$14.0 million gain (pre-tax) due to the reversal of a portion of the provision related to the investigation in the cargo business carried out by the European Commission. This was as a result of the fine announced in November 2010, which was lower than the amount provided for. This reversal is recorded in Other gains/(losses).

The investigation by the DOJ prompted the filing of numerous civil class actions by freight forwarding and shipping companies against many airlines, including Lan Cargo and Lan Airlines, including fifty-four in the United States. The cases filed in the United States were consolidated in the United States District Court, Eastern District of New York and the original complaint was subsequently amended to include additional airlines, including ABSA. In February 2006 the Canadian Competition Bureau (“CCB”), in conjunction with the DOJ, initiated a global investigation of a large number of international cargo airlines (among them Lan Cargo) for possible price fixing of cargo fuel surcharges and other fees in the Canadian air cargo markets. The CCB’s investigation prompted the filing of four separate civil class actions by freight forwarding and shipping companies against many airlines, including Lan Cargo and Lan Airlines in Canada.  Given the current stage of the both proceedings, it is not possible at this time to anticipate with any precision the outcome of the Civil actions filed against Lan Cargo.

On April 5, 2008, Brazilian authorities notified ABSA of the initiation of administrative proceedings before the Conselho Administrativo de Defesa Econômica (the Brazilian Antitrust Authority) against several cargo airlines and airline officers, among them ABSA, for allegations of anticompetitive practices regarding fuel surcharges in the air cargo business. Given the current stage of the proceedings, it is not possible at this time to anticipate with any precision the outcome of the civil actions filed against Lan Cargo, although it is expected to be a lengthy process.

In June 2008, the Korean Fair Trade Commission notified LAN of an investigation into the air cargo industry and its non-compliance with the Monopoly Regulation and Fair Trade Act and has requested information and documentation from LAN, which LAN duly submitted. On May 26, 2010 the Korean Fair Trade Commission announced the imposition of penalties against 29 other airlines and excluded LAN from further investigation.

The New Zealand Commerce Commission also initiated an investigation into potential anti-competitive activities in the international air cargo markets and requested information and documentation from LAN, which LAN duly submitted. On December 15, 2008, the New Zealand Commerce Commission announced it would focus its investigation on ten airlines and excluded LAN from further investigation.

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Fleet

General

As of February 28, 2011, we operated a fleet of 140 aircraft, comprised of 126 passenger aircraft and 14 cargo aircraft, as set forth in the following chart:

	Number of aircraft in operation						Average term of lease		Average age
	Total		Owned(1)		Operating Lease		remaining (years)		(years)
Passenger aircraft
Airbus A318-100		15		15		-		-		3.0
Airbus A319-100		23		23		-		-		4.0
Airbus A320-200		31		26		5		4.9		5.0
Boeing 737-700		9		0		9		3.4		8.4
Dash 8-200		11		0		11		4.0		13.7
Dash 8-400		4		0		4		9.4		4.8
Boeing 767-700		28		18		10		3.1		8.4
Airbus A340-300		5		4		1		1.8		10.7
Total passenger aircraft		126		86		40		4.2		6.6
Cargo aircraft
Boeing 767-300 Freighter		12		8		4		5.0		7.4
Boeing 777-200 Freighter		2		0		2		6.1		1.9
Total cargo aircraft		14		8		6		5.4		6.6
Total fleet(2)		140		94		46		4.4		6.6

(1) Aircraft included within property, plant and equipment.

(2) Does not include one Boeing 767-200 passenger aircraft leased to Aeromexico.

LAN’s strategic fleet renewal plan involves the sale of five Airbus A318 aircraft during 2011, five during 2012 and five during 2013.

The daily average hourly utilization rates of our aircraft for each of the periods indicated are set forth below.

	Year ended December 31,
	2010		2009		2008		2007
	(measured in hours)
Passenger aircraft
Airbus A340-300		14.6		14.5		14.6		14.7
Boeing 767-300 ER		13.5		13.2		13.6		14.2
Airbus A320-Family Aircraft		10.8		10.3		10.4		10.6
Cargo aircraft
Boeing 767-300 Freighter		15.2		14.7		16.7		16.5
Boeing 777-200 Freighter		14.3		10.6		-		-

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We operate different aircraft types as we perform various different missions ranging from short-haul domestic trips to long-haul trans-continental flights. We have selected our aircraft based on the ability to effectively and efficiently serve these missions while trying to minimize the number of aircraft families we operate.

· For short-haul domestic and regional flights we operate the Airbus A320-Family aircraft and, since the acquisition of Aires, we also operate the Boeing 737-700 aircraft, the Dash 8-200 aircraft, and the Dash 8-400 aircraft. The Airbus A320 Family that we currently operate has been incorporated into our fleet pursuant to operating leases or have been purchased directly from Airbus pursuant to various purchase agreements since 1999. In December 2010, we ordered 50 Airbus A320 Family aircraft. Consequently, as of February 28, 2011 we had outstanding orders for 16 Airbus A319 aircraft, 61 Airbus A320 aircraft, and 10 Airbus A321 aircraft for delivery between 2011 and  2016.  Our purchase contracts with Airbus provide for some flexibility with regard to future changes in aircraft types and delivery dates. We believe that our fleet of A320-Family Aircraft will allow us to provide broader service across Latin America as well as the domestic markets that we serve given their longer range. We also believe that they will enable us to increase efficiency levels through reduced fuel consumption and maintenance costs.

· For long-haul passenger and cargo flights we operate the Airbus A340-300 aircraft, the Boeing 767-300 passenger aircraft and Boeing 767-300 aircraft’s Freighters 777. The Boeing 767-300 aircraft’s size and range provides an optimal alternative for most of our long-haul passenger and cargo routes. Additionally, the commonality between the passenger and dedicated cargo versions allows us to leverage the ensuing economies of scale. We believe that these aircraft provide a key efficiency advantage over our peers, especially in the cargo business. The Boeing 767-300 aircraft that we currently operate have been incorporated into our fleet pursuant to operating leases or have been purchased directly from Boeing pursuant to various purchase orders since 1997. As of February 28, 2011 we had outstanding orders for nine Boeing 767-300 aircraft.  We also operate five Airbus A340-300 aircraft for long-haul routes. Given their range and four-engine configuration, these aircraft are well suited to perform trans-Atlantic and trans-Pacific missions out of Santiago. In the future, we will operate Boeing 787 aircraft for our long-haul fleet, for which we have placed 26 orders and committed 6 operating leases. We expect to receive our first Boeing 787 in 2012. For our cargo operations, we operate 12 Boeing 767 Freighters and two Boeing 777 Freighters.

For more information, see “Additional Information—Material Contracts” under Item 10.

During the first quarter of 2009, we initiated the process of incorporation of winglets, advanced technology devices, in all our Passenger and Freighter Boeing 767-300 aircraft. Winglets are placed on the wings of an aircraft causing an approximate 5% reduction in fuel consumption. The total investment in this project amounts to approximately US$ 70 million while as of February 28, 2011, 38 aircraft have been modified and US$ 50.5 million of the total investment has been disbursed. We expect to continue with the implementation of this project during 2011 and 2012 as we continue to receive Boeing 767s.

Fleet Leasing and Financing Arrangements

Our financing and leasing methods include borrowing from financial institutions and leasing under financial leases, tax leases and operating leases.

In 2000, to finance Airbus aircraft, LAN entered into a US$1.3 billion umbrella credit facility with a syndicate of international financial institutions under which the Company borrowed in the form of separate loans in connection with the specific financing requirements of each Airbus aircraft (including pre-delivery and long-term financing). This umbrella facility was guaranteed by the English, French and German Export Credit Agencies. The repayment profile for each aircraft financed under the facility was for a period of up to eighteen years. Under this financing package LAN incorporated Airbus aircraft into its fleet through operating leases, financial leases and tax leases. Even though this facility covered the aircraft scheduled to be delivered under our 1998/9 Airbus purchase agreements through December 31, 2006, the Company decided to fund the 2006 deliveries with a new facility negotiated in 2006. This new facility financed the acquisition of

· eight Airbus A319 delivered in 2006;

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· five A318 and two A320 delivered in 2007;

· ten A318, two A319 and two A320 delivered in 2008; and

· three A319 delivered in the first quarter of 2009.

This new US$920 million facility is similar to the previous one as there are separate loans drawn in connection with the specific financing requirements of each Airbus aircraft and is also based on support guarantees from the European Export Credit Agencies namely Compagnie Francaise d'Assurance pour le Commerce Exterieur (Coface), Euler Hermes Kreditversicherungs-AG (Euler Hermes) and the Secretary of State of Her Britannic Majesty's Government acting by the Export Credits Guarantee Department (ECGD).. Under this financing package LAN incorporated into its fleet Airbus aircraft through financial leases. The facility covered 85% of the purchase price of each aircraft plus the associated export credit agencies premium. The remaining 15% was funded directly by the Company. There is no remaining drawdown availability under this facility.

Between 2004 and 2006, LAN ordered fifteen Boeing 767-300 Passenger aircraft and Freighters for delivery between 2005 and 2008. In 2004 the Company structured a new syndicated facility for US$260 million to finance the entire cost of the two Boeing 767-300 Freighters delivered in 2005 and the first Boeing 767-300 Passenger aircraft delivered in 2006. In 2005, LAN finalized the syndicated facility to fund the purchase of four Boeing 767-300 Passenger and Freighter aircraft for delivery in 2006. Between 2005 and 2006, LAN also finalized two additional syndicated facilities to fund the purchase of the remaining eight Boeing 767-300 Passenger aircraft. Three of these aircraft were delivered in 2007, and five were delivered in 2008. Each loan with respect to these aircraft is guaranteed by the Export-Import Bank of the United States (“Ex-Im Bank”) with a twelve-year profile for the financing of 85% of the aircraft value.

On June 12, 2005, LAN finished the payments with respect to a Boeing 767-200 aircraft that was held under a financial lease. This aircraft has been subleased to a third party at market rate until December 2011.

In 2006, LAN also ordered three additional Boeing 767-300 passenger aircraft for delivery between 2009 and 2010. The first aircraft, which was delivered in November 2009, was financed through the issuance of an Ex-Im-Bank guaranteed bond and through LAN’s own funds (85% and 15%, respectively). The remaining two aircraft were financed through a new Ex-Im Bank guaranteed facility and through LAN’s own funds (85% and 15%, respectively).

In April 2007, we entered into two lease agreements with GE Commercial Aviation Services for the lease of two Boeing 777-200LR Freighters, for delivery in 2009. In October 2007, we signed a purchase agreement with the Boeing Company for two additional Boeing 777-200LR Freighters to be delivered in 2011 and 2012.  In March 2010, LAN and the Boeing Company agreed to switch the first Boeing 777-200LR Freighter for two Boeing 767-300 Passenger aircraft to be delivered in 2011.

In the second half of 2007, the Company decided to acquire thirty-two new Boeing 787 Dreamliner aircraft with deliveries initially scheduled between 2011 and 2016. The Company entered into a purchase agreement with the Boeing Company for 26 of these aircraft and entered into leasing agreement with the International Lease Finance Corporation for the remaining six aircraft.

In November 2008, the Company entered into a purchase agreement for four additional Boeing 767-300 Passenger aircraft to be delivered in 2012. In March 2010, LAN decided to replace three of these passenger aircraft with three Boeing 767-300 Freighters to be delivered between 2013 and 2014. The fourth aircraft was rescheduled to be delivered in 2011.  During the last quarter of 2010, LAN decided to exchange the three Boeing 767 Freighters with three Boeing passenger 767-300 aircraft with deliveries in 2012. As part of this same contract, LAN also ordered a Boeing 777 Aircraft to be delivered in 2012.

During 2008, LAN decided to exercise 15 options to acquire A320-Family Aircraft.  Six of these aircraft were delivered in 2010 and the remaining nine are scheduled for delivery in 2011.  In March 2010, LAN entered into a credit facility to finance the entire pre-delivery payments attached to these 15 aircraft.  In April 2010, LAN entered into an agreement to finance the purchase of these 15 aircraft partially guaranteed by the European Export Credit Agencies and partially through its own funds (85% and 15%, respectively).

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In the third quarter of 2010, LAN entered into three lease agreements with GE Commercial Aviation Services for the six year lease of Boeing 767-300 Freighters already delivered in November 2010, December 2010 and January 2011.

In December 2009, LAN entered into a purchase agreement with Airbus for 30 aircraft of the A320 family to be delivered between 2011 and 2014.

As of February 28, 2011, and as a result of the aircraft purchase agreements entered into with Airbus in 2009 and 2010, LAN has 82 Airbus passenger aircraft of the A320 family expected to be delivered between 2011 and 2016.

In September 2010, LAN entered into two new six-year operating lease agreements with AerCap for two A320 aircraft for our operations in Colombia.

In January 2011, LAN entered into a seven year lease agreement with the Bank of China Aviation Pte. Ltd. for one A320 aircraft.

In February 28, 2011, LAN increased its long haul aircraft orders by three Boeing 767-300 Passenger Aircraft with deliveries in the second half of 2012.

Regarding our Boeing fleet, three Boeing 767-300 Passenger aircraft are expected to be delivered in 2011, six Boeing 767-300 Passenger aircraft are expected to be delivered in 2012, Boeing 787-8/9 passenger aircraft are expected to be delivered between 2012 and 2018 and two Boeing 777-Freighter are expected to be delivered in 2012.

As of February 28, 2011, we held 46 aircraft under operating leases compared to 16 as of February, 2010. Twenty five of these aircraft are related to Aires domestic operations which consist of 10 Boeing 737-700, 11 Dash 8-200 and 4 Dash 8-400 aircraft. Under the terms of our operating leases, we are required to return the aircraft in an agreed upon condition at the end of the lease. Although the title to the aircraft remains with the lessor, we are responsible during the lease term for the maintenance, servicing, insurance, repair and overhaul of the aircraft.

As of December 31, 2010, aggregate future minimum lease payments required under our aircraft operating leases were US$675million, with US$193 million related to Aires. Our operating leases have terms ranging from three months to twelve years from the date of delivery of the aircraft. For more information, see Note 2.21 to our audited consolidated financial statements.

For more information on our expected future capital expenditures in connection with aircraft purchases see “Capital Expenditures” under Item 5.

Maintenance

Our heavy maintenance, line maintenance and component shop are equipped to service our entire fleet of Airbus and Boeing aircraft. Our maintenance capabilities allow us flexibility in scheduling airframe maintenance, offering us an alternative to third-party maintenance providers.

LAN facilities at Comodoro Arturo Merino Benítez International Airport in Santiago, Chile are among the most extensive in Latin America and have been certified according to IOSA standards and as a FAA approved repair station. Our hangars and components shops at our Santiago repair station can service the Boeing 767, Boeing 777, Airbus 340 and Airbus 320 Family Aircraft fleet. In addition, we have facilities for designing and manufacturing galleys, structures and composite materials, and we have the capability to retrofit aircraft interiors, including sophisticated in-flight entertainment equipment, and blended winglets in the Boeing 767 fleet.

Our engineering and maintenance division is supervised by the local Civil Aviation Authority (the Dirección General de Aeronáutica Civil “DGAC”) and is subject to several recurrent external audits from civil aviation authorities and international entities such as the FAA, the Argentine Dirección Nacional de Aeronavegabilidad (the National Directorate of Airworthiness or “DNA”), the Brazilian Agencia Nacional de Aviacao Civil (the ANAC), the International Air Transport Association Operational Safety Audit (“IOSA”) (from the International Air Transport Association or “IATA”) and the International Civil Aviation Organization (“ICAO”), in order to strictly comply with applicable regulations. The audits are conducted in connection with each country’s certification procedures and enable us to continue to perform maintenance for aircraft registered in the certificating jurisdictions. Our repair station holds FAA Part-145 certifications under these approvals.

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We also rely on third parties for certain maintenance support for our aircraft and engines. Lufthansa Technik provides our Airbus A320-Family Aircraft and A340 Aircraft component support on a power-by-the-hour basis under a long-term contract, which runs until 2019. International Aero Engines provides the A320 and A319 engine support on a power-by-the-hour contract, which runs for twelve years once each engine is received. Pratt and Whitney provides the A318 engine support on a power-by-the-hour basis contract, which runs for ten years once an engine is received. General Electric provides the maintenance of our Airbus A340 engines under a similar contract, which also runs for twelve years once an engine is received In addition, General Electric provides for the maintenance of most of our Boeing 767 engines under a contract effective until 2014. Third parties also provide certain additional engine maintenance services. Air France-KLM, which services have been contracted until 2015, provides the maintenance of our Boeing 777 engines and components and to our Boeing 767-300 components.

We occasionally perform certain maintenance services for other airlines.

Our aircraft maintenance personnel participate in extensive training programs at the jointly operated Lufthansa LAN Technical Training S.A., located in Santiago, Chile.

In 2010, LAN continued implementing the management system known as LEAN in an effort to increase efficiency, specifically in its operational areas. The adoption of this system constituted a redesigning of processes that permits solving problems that may occur during aircraft maintenance. The foregoing renders the daily tasks and processes carried out within the Company more efficient. Internationally, the LEAN system has been defined as a methodology for achieving excellence and continuous improvement. It seeks to eliminate activities that do not add value to processes, and suppressing those activities that are superfluous, thereby allowing companies to reduce costs, improve processes and increase customer satisfaction.

During the last year, LAN continued to benefit from the implementation of LEAN in heavy maintenance. Heavy maintenance is performed approximately every 12–18 months or a specific amount of actual flight hours as defined by the manufacturer.  This maintenance check puts the aircraft out of service. In 2010, we achieved a 20% reduction in the time an aircraft remains in the hangar.  Other benefits of LEAN include a reduction of approximately 80% in errors, a gain of approximately 60% in productivity and a reduction of approximately 60% in labor accidents.  Furthermore, by establishing clear roles, challenges and achievements, the implementation of LEAN has had an important benefit in terms of employee motivation.

Safety and Security Corporate Direction

The Safety and Security Corporate Direction (“SSCD”) is an internal division in charge of the management of safety and security matters related to flight operations, operative and administrative buildings, organization and coordination of emergency response matters, safety and security audits and safety and occupational health.

The SSCD reports directly to LAN’s Chief Executive Officer (“CEO”), which reflects the firm commitment that the Company’s senior management has with its employees. The SSCD is comprised of five independent reporting management areas: safety management, security management, emergency response management, Safety & Security Audit management and Safety and Occupational Health Management .

Safety Management

We give high priority to providing safe and reliable air service, as it is considered a fundamental asset to LAN and one of the basic pillars for the development of our Company. We have uniform safety standards and safety-related training programs that cover all of our operations. LAN has implemented a Safety and Quality Management System (“SMS”) throughout the operational areas of the Company, which is certified by the Chilean DGAC and IOSA System. The SMS provides clear definitions of the functions and responsibilities regarding operational safety for all persons involved, from the top to the bottom of the operational structure of the airline. It strengthens the commitment and knowledge required from everyone in the Company regarding any and all actions that could affect safety.

The Operational Safety Director (“OSD”) is responsible for the Operational Safety Oversight and the implementation of the SMS. The OSD supervises a staff of approximately twenty-one safety specialists of different backgrounds, including pilots, aeronautical engineers, aircraft maintenance engineers, a psychologist, and dangerous goods and ground handling safety specialists.

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Our corporate operational safety organization consists of four main areas:

· Flight Safety Management: The Flight Safety Area oversees and audits our operational safety measures, investigates major incidents and programs and controls the LOSA and FOQA Programs (as defined below). The Flight Safety Area also oversees and audits safety measures related to ground handling and cargo areas and investigates related incidents.

· Maintenance Safety Management: The Maintenance Safety Area oversees and audits our maintenance safety measures and investigates maintenance-related incidents.

· Flight Data Monitoring Management: The Flight Data Monitoring Area is responsible for the maintenance and administration of the recorded flight data and safety-related databases and software.

· Corporate Quality Management: The Corporate Quality Management Area is responsible for the administration of Internal Evaluation Program conducting organization-wide audits in all operational areas.

The main safety programs, elements and procedures include:

· Flight Operations Quality Assurance (“FOQA”). Since the end of 2002, LAN has been implementing a Flight Data Monitoring (“FDM”) program using two different analysis programs. The FDM program is fully developed for the A320-Family Aircraft, A340,Boeing B767, and B777 fleet. The statistical information obtained has produced standard operational procedure changes and valuable inputs to the Advance Qualification Program project. We have also fully developed a maintenance variation for the same fleets which monitors the engines, flight controls and general performance of the airplanes.

· Mandatory Occurrence and Mandatory Reports. Our operations policy manuals define the incidents that require a mandatory report. On a voluntary basis, personnel can provide confidential reports to the flight safety area in hard copy or electronic form.

· Safety Information Management. All safety information regarding all occurrences is entered into dedicated software, where it is analyzed according to its potential risk. Important incidents are investigated thoroughly. The relevant areas related to each particular incident implement corrective actions with the assistance of the corporate operational safety directory.

· Line Operation Safety Audit (“LOSA”). LOSA is a program designed to survey and analyze the safety components of our equipment and operations. LOSA observations have been conducted on the A-340, A-320 and Boeing B767 fleets. In 2007, a second LOSA observation has been applied to the A-340 fleet, which has given important information of the effectiveness of the corrective actions recommended by the first observation conducted in 2004.

· Human Factors Program. This program is based on a manual developed by LAN that includes all interconnectivities between flight operations and human factors. The program includes a Fatigue Risk Management Program that is being implemented since 2008.  The program also includes Crew Resource Management and Flight Crews Training and study of incidents using the Threat and Error Management (“TEM”) model.

· Quality Assurance and IOSA Certification Programs. Our flight and maintenance safety areas have a quality assurance system and are currently certified ISO 9001-2000. Our safety management system is based on the ISO 9001-2000 standards. We also periodically evaluate the skills, experience and safety records of our flight crews in order to maintain strict control over the quality of our flight crews. All of our aircraft pilots participate in training programs, some of which are sponsored by aircraft manufacturers, and all are required to undergo recurrent training. LAN Airlines, and passenger subsidiaries are IOSA registered. Currently, cargo subsidiaries IOSA audits are ongoing.

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We also have an operational safety committee, composed of senior executives and key operational managers, responsible for the initiation of safety-related actions.

All of our Boeing 767, A320, A340 and Boeing 777 fleets are equipped with an enhanced ground proximity warning system, a traffic collision avoidance system, a wind shear detection system and reduced vertical separation minimum capabilities.

Since 1991, we have had no accidents involving major injury to passengers, crew or aircraft.

Security Management

The main policy and the essential principle of the Company is to ensure an adequate security protection to all its flights, aircraft, passengers, crew members, ground personnel, airport facilities and other services related to the commercial civil aviation against any threat or unlawful action.

The Company has implemented corporate policies and a quality management system through the operational system to detect any lack of security in its operations. Audits and assessments are used to assign different levels of security to international and domestic operations.

The Corporate Security Manager (“CSM”) has the responsibility to evaluate, analyze and assign threat levels (high, medium, low) to international and domestic operations, proposing security procedures for each scenario. The CSM leads an organization of five security managers and approximately fifteen security specialists. The current CSM is a former police officer with more than 25 years of experience in the civil aviation.

The corporate security organization has five main areas:

· Domestic Security Operations: that report to a former police officer with more than 20 years of experience in civil aviation.

· International Security Operations: that report to a former police officer, with more than 20 years of experience in civil aviation.

· North America, Caribbean and Europe Security Operations: that report to a security specialist, with more than 18 years of experience in civil aviation.

· Argentinean Security Operations: that report to a security specialist, with more than 30 years of experience in civil aviation.

· Peruvian Security Operations: that report to a security specialist, with more than 19 years of experience in civil aviation.

Each of the five areas is subdivided in internal investigations, fraud, training, cargo security, security of facilities and quality control.

Since 2002, the Company’s Corporate Security Manual unified international and domestic security procedures:

· Manual de Gestión de Seguridad (Manual of Security Management). The basis for local security procedures.

· Airport Security Plan or Airport Security Program. Approved by the DGAC for each country in which we have operations.  It includes procedures to prevent unlawful conduct and procedures for a bomb threat or hijacking drill.

· Corporate Security Training Program. It includes the contents and definitions regarding security training for all areas involved in acceptance of aircraft, baggage, cargo and passengers.

· Airport Security Inspection Program. It has the contents and definitions regarding airport inspections and identification of security issues and corrective action plans for non-compliance.

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Emergency Response Management

The emergency response area is responsible for the administration of the Emergency Response Plan (ERP). It has been developed for the effective management of accidents and serious incidents with the purpose of mitigating any impacts on the passenger and their relatives and the operations.

The ERP consists mainly of:

· Emergency Procedures. They are widely advertised inside the Company, approved by the DGAC and covered by the Emergency Administration Manual.

· Emergency Response Centre (ERC).  The ERC includes three principal areas: the Emergency Strategy Committee, the Emergency Resolution Committee and the Public Relations Monitoring Area.  Those areas are located at Santiago, Chile. Most of them have meetings rooms, computers, satellite TV, conference call systems, video conference facilities, kitchens and rest rooms.

· Special Assistance Team (SAT). We have a humanitarian assistance program that we deploy for family and passenger assistance. We have about 1,200 total active volunteers distributed as follows: Santiago (700 volunteers), Miami (120 volunteers), Lima (210 volunteers), Ecuador (110 volunteers), and Buenos Aires (90 volunteers). Our SAT is complemented by service vendors.

· Telephone Inquiry Center. It is located in Santiago, Chile, at our call-center office  and has 500 agents. There are 18 toll free lines activated for family member calls and are published through the company web site and the media, in case of emergencies.

· Go Team. We have a special team that is dispatched to emergencies involving LAN aircraft. The Go Team includes a director, a SAT leader, a field investigation team (FIT) leader and other representatives from the general support, an Informatics & Telecommunication (IT) team, and security, finance, legal and maintenance departments.

· Logistic Area. It is activated and deployed in our head quarters and at the location of the accident.

Safety and Security Audit Management

The Safety and Security Audit Management reports directly to the Corporate Director. This area has the mission to advise senior management on issues relating to planning and control, design, documentation, implementation, maintenance and improvement of the SMS of LAN and its subsidiaries.

Functions and Responsibilities:

· Advise to senior management regarding the fulfillment of IOSA and ISAGO standards.

· Report to senior management the status of the SMS and Corporate Quality Management Area.

· Coordination of the implementation of the IOSA and ISAGO external audits with the Audit Organization.

· Participation in the ISAGO IATA Audit Pool.

· Creation of guidelines for the quality assurance of the operational areas of Lan Airlines, Lan Express and Lan Cargo, and quality coordinators of the LAN subsidiaries.

· Implementation of the Internal Audit Plan and ISAGO and IOSA audits including operational processes relating to safety and security, quality objectives, status of corrective and prevented actions, and customer complains.

· Coordination of corrective and preventive actions arising from the implementation of the SMS and corporate quality.

· Establishing the IOSA and ISAGO Training and Qualification Auditors Procedure.

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· Establishing a corporate system to evaluate and control the external suppliers, in case of outsourcing services.

Safety and Occupational Health Management

The main objective of the Safety and Occupational Health Management is to ensure the safety and health of workers at work, by advising, managing and helping the company prevent occupational accidents and diseases through the identification and control of occupational hazards and medical surveillance.

The forgoing objectives are satisfied through a dedicated team of professionals (engineers, doctors, risk prevention experts and paramedics), who constantly develop activities aimed at protecting LAN employees

Functions and Responsibilities:

· Implementation and control of the preventive management systems.

· Development of training programs.

· Promotion and dissemination of safety and occupational guidelines,

· Assessment of risk of work place.

· Medical assistance to all injured employees.

· Investigation of all accidents.

· Preemployment medical assessment.

· Compliance with legal regulations regarding occupational health, safety and environmental issues.

· Checking of the emergency systems installed in the facilities.

Fuel Supplies

Fuel costs comprise the single largest category of our operating expenses. Over the last years, our fuel consumption and operating expenses have increased due to the significant growth in our operations and to the increase in fuel prices as a result of economic and political factors. In 2010, the foregoing trend was enhanced by the global economic recovery and the total fuel costs represented 29.79% of our total operating expenses.  The into-wing (fuel price plus taxes and transportation costs) 2010 average final price was US$2.32 per gallon, representing a 9.4% increase from the 2009 average. We can neither control nor accurately predict the volatility of fuel prices. Despite the foregoing, it is possible to partially offset the price volatility risk through our hedging and fuel surcharge programs in place in both our passenger and cargo business. For more information, see “Quantitative and Qualitative Disclosures About Market Risk —Risk of Fluctuations in Jet Fuel Prices” under Item 11.

The following table details our consolidated fuel consumption and operating costs (which exclude fuel costs related to charter operations in which fuel expenses are covered by the entity that charters the flight) during the last three years.

	Year ended December 31,
	2010			2009			2008
Fuel consumption (thousands of gallons)		501,098.2			452,708.5			445,667.7
ATKs (millions)		8,968.8			7,811.8			7,659.9
Fuel consumption (thousands of gallons) per ATKs (millions)		55.9			58.0			58.2
Total fuel costs (US$ thousands)		1,161,927			959,608			1,388,826
Cost per gallon (US$)		2.32			2.12			3.12
Total fuel costs as a percentage of total operating costs		29.79	%		29.80	%		37.91	%

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We have entered into fuel contracts to serve operations to more than sixty international and domestic destinations around the world.  Contractual terms and conditions vary for each location depending on market conditions, logistics network, volume, economic and political factors, among others. In 2010, approximately 26.0% of our total fuel consumption was originated in Chile where we maintain a long-term commercial relationship with a joint venture between Air BP and Copec, and where we have entered into specific supply contracts with Petrobras Aviation and Shell Aviation. We have more than twenty additional suppliers in our network such as Repsol YPF, Cepsa, Petroperu, Chevron, Air Total, Q8 Aviation and Exxon Mobil. In our secondary hubs we have the following fuel suppliers: Shell Aviation (Miami), Exxon Mobil and Petroperu (Lima), Exxon Mobil, Repsol YPF and Shell (Buenos Aires) and PetroEcuador (Guayaquil).

Ground Facilities and Services

Our main operations are based at the Comodoro Arturo Merino Benítez International Airport in Santiago, Chile. We also operate from various other airports in Chile and abroad. We operate hangars, aircraft parking and other airport service facilities at the Comodoro Arturo Merino Benítez International Airport and other airports throughout Chile pursuant to concessions granted by the DGAC. We also maintain one customs warehouse at the Comodoro Arturo Merino Benítez International Airport, additional customs warehouses in Chile (Iquique, Antofagasta and Punta Arenas) and Argentina (Aeroparque) and operate cargo warehouses at the Miami International Airport to service our cargo customers. Our facilities at Miami International Airport include corporate offices for our cargo and passenger operations and temperature-controlled and freezer space for imports and exports.

We have VIP lounges at the Comodoro Arturo Merino Benítez International Airport. The 7,500 square foot Neruda lounge, which represented an investment of approximately US$550,000 in 2001, has been widely acclaimed. In 2005, Latin Trade magazine selected it as the “Best Airline Lounge” in Latin America. In the same airport we also have the 4,300 square foot Mistral lounge.

Finally, we incur certain airport usage fees and other charges for services performed by the various airports where we operate, such as air traffic control charges, take-off and landing fees, aircraft parking fees and fees payable in connection with the use of passenger waiting rooms and check-in counter space.

During 2010, APV’s (“In-flight Service Supplier”) new 1,650 square meter facilities were completed in the Comodoro Arturo Merino Benitez International Airport.

The development of the new building for the facilities of Andes Airports Services (“Andes,” which performs ground handling services) is in process which is scheduled to be delivered at the beginning of 2012.

Ancillary Airline Activities

In addition to our airline operations, we generate revenues from a variety of other activities. In 2010, LAN generated other revenues of US$132.8 million from ancillary activities.

Our total revenue from aircraft leases (including subleases, dry-leases, wet-leases and capacity sales to certain alliance partners) and charter flights amounted to US$13.1 million in 2010.

LAN also provides cargo-related services such as courier, warehousing, value-added door-to-door services and customs services, through various subsidiaries.  During 2010, our logistics and courier businesses generated revenues of US$36.8 million while customs and warehousing services generated US$ 24.7 million. During January 2011, in relation with our courier business, we signed a promise of sale of our subsidiaries Blue Express Intl. Servicios de Transporte Limitada and Blue Express S.A. (together referred to as “Blue Express”), through which we operate vans and trucks and offer distribution and warehouse services throughout Chile. In April 2011, LAN sold Blue Express to Bethia S.A. a related party of LAN, for US$54.0 million. Since Blue Express’ book value is US$9.1 million, the sale generates a non-operational profit of approximately US$44.9 million, which will be reflected in the second quarter of 2011 financial results.

During 2010, we had revenues of US$28.1 million for tours and US$12.0 million for duty-free in-flight sales. The balance of our operating revenues, US$18.1 million in 2010, was generated by maintenance and handling. Other revenues in 2010 decreased mainly because of  fewer revenues from aircraft leases, tours and travel services, but this decrease was partially offset by higher revenues from customs and warehousing and from duty-free sales.

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Insurance

We carry hull insurance that includes, among other coverage, “all risk,” war and allied risks, spares and liability for passengers, cargo, mail, baggage and third parties. We renew our insurance coverage yearly, and are subject to deductibles that vary depending on the coverage type and the loss type. Our deductibles are US$1,250 for loss or damage associated with passengers’ baggage liabilities, US$10,000 for loss or damage associated with cargo liabilities and between US$500,000 and US$1.0 million for hull “all risk” insurance (depending on the aircraft type). Additionally, we have hull deductible coverage to reduce the net hull deductible to US$100,000 per occurrence (aircraft and/or engine).

Since December 2006, we have negotiated common terms for Hull All Risk, Aviation Legal Liabilities and Spares coverage, together with British Airways, Aer Lingus and their affiliates and franchises which allows us to obtain premium reductions and coverage improvements.

Our insurance coverage has a one-year term starting in April of each year. The aggregate cost of our insurance coverage for the 2010 calendar year was US$15.6 million, which represents a 2.6% increase in insurance expenses and a 2.0% decrease in average insurance rates compared to the 2009 calendar year.

Aires is covered under a separate insurance policy, and its acquisition in 2010 resulted in an additional insurance cost of US$600,000 during 2010.

Information Technology

General

We use information technology in almost every aspect of our business.

Our reservations, departure control (check-in), inventory, flight planning and baggage tracing systems are operated by Amadeus, Sabre, Iberia and SITA, and we operate our internal systems from two data center facilities in Santiago, Chile. In 2006, we implemented a Disaster Recovery Plan between those two sites in order to ensure the functionality of our critical systems, with a recovery time objective of four days.  The line of business infrastructure currently has an average recovery time of two hours for 80% of our systems and two days for the remaining 20%.

Third-party suppliers provide us with the following technical infrastructure elements:

· wide-area data network (provided mainly by SITA and Telefónica); and

· data centers and desktop operations and support (provided by Accenture and IBM).

Basic Infrastructure Operation

Since early 2010, we have outsourced our IT infrastructure with Accenture and IBM worldwide. IBM manages the data center and Accenture handles our desktop equipment. This outsourcing allowed us to:

· deliver a standard world-class service;

· increase the efficiency of our IT operations;

· convert fixed costs into variable costs;

· guarantee that the service standards (such as up-time and response time) required by critical processes of our business are fulfilled;

· accelerate critical infrastructure projects while significantly reducing the resources required;

· increase the efficiency of our personnel; and

· focus internal IT efforts on business functions, rather than basic hardware and software issues.

Telecommunications

We have used the latest technology available with regard to our global telecommunications network. Our network has the capacity to transport voice, data, and video with the quality required by the Company, combining traditional private data channels with virtual private networks through the Internet.

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Front-End Systems

During 2002, we deployed new systems to support our sales personnel. These systems provide the employees who have a direct contact with our customers with additional tools to improve service, enhance customer information and increase efficiency. During 2004 and 2005, we implemented these systems at our airport counters and our call centers.

Since 2005, we have favored a strategy of encouraging and facilitating self service alternatives for customers, through improving the functionality of the www.lan.com website as well as implementing self check-in kiosks in airports.

During 2009, we deployed a new online system in order to provide the processes that our engineering, maintenance and materials areas develop, with technological solutions.  This project has allowed us to establish and automate simple and integrated processes, standardize processes for the Company (including our subsidiaries and related companies), facilitate handling of materials and maintenance, make relevant information available in a full, unique and consistent way to all users, and optimize distribution and execution (planned and non planned), among other benefits.

Enterprise Resource Planning

In 2002, we purchased an enterprise resource planning (“ERP”) system from SAP. This system was fully implemented in the second quarter of 2004 for Lan Airlines and almost all of its subsidiaries. This ERP system includes modules covering areas such as: finance, accounting, inventory management, human resources, business warehouse, as well as a user-friendly portal. We are currently working on optimizing and simplifying this system, and in leveraging it to increase the efficiency of our back-office processes.

Development and Maintenance System

With respect to new development needs, our first choice is to acquire existing packaged software, but we outsource this service when such software is not available in the market.  Since early 2007, we have outsourced our IT system development to three principal vendors:  TATA Consultancy Services, Everis and Indra.  Thanks to this outsourcing initiative, we have achieved:

· a decrease in project delays;

· an increase in systems reliability; and

· a shift in the efforts of the internal IT department to a more business oriented perspective.

New initiatives

We are implementing a new host (“Host”). A Host change is one of the most important decisions for the passenger business division in an airline in terms of process and technology. It consists in replacing the PSS, or Passenger Service System, that contains the reservation, inventory and departure control systems of an airline. This decision permits the understanding of the software from an aviation industry provider in ASP mode, adherence to standard processes and best industry practices and the integration of multiple legacy applications that complement the needs of the processes model for the airline business. For LAN, the Host change implies going from two suppliers (Amadeus and Resiber) currently covering the role of the complete PSS, to a single supplier (Sabre). This project represents an investment of approximately US$70.0 million, and is expected to provide immediate savings of 75% per passenger in reservation transaction costs and is estimated to be in place during March 2012.

The IT department expects to implement a Technology Refreshing Project between 2010 and 2012, to move to the platforms that will host our applications and services for the next five years.  During 2010, Lan Airlines will define the Technology Refreshing Project and all the platforms, software, solutions and services that it will use to support its business. These hardware and software solutions will be gradually implemented   between 2011 and 2012.

We are also buying new airplanes, namely, Boeing 787 aircraft. The Boeing 787 Dreamliner is Boeing's most fuel-efficient aircraft and is the world’s first e-Enabled commercial airplane.

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The Boeing 787 combines the integrated information and communications systems to drive operational efficiency and streamline airplane maintenance. The e-Enabled tools on the 787 will be a significant change from any other commercial airplane previously operated. The extensive e-Enabling on the 787 increases the need for network connectivity, hardware and software improvements, and systems management practices.

Regulation

Below is a brief reference to the material effects of aeronautical and other regulations in force in each of the relevant jurisdictions in which LAN and its subsidiaries operate.

Chile

Aeronautical Regulation

Both the DGAC and the JAC oversee and regulate the Chilean aviation industry. The DGAC reports directly to the Chilean Air Force and is responsible for supervising compliance with Chilean laws and regulations relating to air navigation. The JAC is the Chilean civil aviation authority. Primarily on the basis of Decree Law No. 2,564, which regulates commercial aviation, the JAC regulates the assignment of international routes, and the compliance with certain insurance requirements, and the DGAC regulates flight operations, including personnel, aircraft and security standards, air traffic control and airport management. We have obtained and maintain the necessary authority from the Chilean government to conduct flight operations, including authorization certificates from the JAC and technical operative certificates from the DGAC, the continuation of which is subject to the ongoing compliance with applicable statutes, rules and regulations pertaining to the airline industry, including any rules and regulations that may be adopted in the future.

Chile is a contracting state, as well as a permanent member, of the ICAO, an agency of the United Nations established in 1947 to assist in the planning and development of international air transport. The ICAO establishes technical standards for the international aviation industry, which Chilean authorities have incorporated into Chilean laws and regulations. In the absence of an applicable Chilean regulation concerning safety or maintenance, the DGAC has incorporated by reference the majority of the ICAO’s technical standards. We believe that we are in material compliance with all relevant technical standards.

Route Rights

Domestic Routes. Chilean airlines are not required to obtain permits in connection with carrying passengers or cargo on any domestic routes, but only to comply with the technical requirements established by the DGAC. Non-Chilean airlines are permitted to provide domestic air service between destinations in Chile, provided that the country in which the foreign airline is based grants a reciprocal right to Chilean airlines. There are no regulatory barriers that would prevent a foreign airline from creating a Chilean subsidiary and entering the Chilean domestic market using that subsidiary.

International Routes. As an airline providing services on international routes, Lan Airlines is also subject to a variety of bilateral civil air transport agreements that provide for the exchange of air traffic rights between Chile and various other countries. There can be no assurance that existing bilateral agreements between Chile and foreign governments will continue, and a modification, suspension or revocation of one or more bilateral treaties could have a material adverse effect on our operations and financial results.

International route rights, as well as the corresponding landing rights, are derived from a variety of air transport agreements negotiated between Chile and foreign governments. Under such agreements, the government of one country grants the government of another country the right to designate one or more of its domestic airlines to operate scheduled services to certain destinations of the former and, in certain cases, to further connect to third-country destinations. In Chile, when additional route frequencies to and from foreign cities become available, any eligible airline may apply to obtain them. If there is more than one applicant for a route frequency the JAC awards it through a public auction for a period of five years. The JAC grants route frequencies subject to the condition that the recipient airline operate them on a permanent basis. If an airline fails to operate a route for a period of six months or more, the JAC may terminate its rights to that route. International route frequencies are freely transferable. In the past, we have generally paid only nominal amounts for international route frequencies obtained in uncontested auctions.

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Airfare Pricing Policy. Chilean airlines are permitted to establish their own domestic and international fares without government regulation, as long as they do not abuse any dominant market position they may enjoy. For more information, see “Antitrust Regulation” below. Airlines may file complaints before the Antitrust Court with respect to monopolistic or other pricing practices by other airlines that violate Chile’s antitrust laws. In 1997, the Antitrust Commission approved and imposed a specific self-regulatory fare plan for our domestic operations consistent with the Antitrust Commission’s directive to maintain a competitive environment. According to this plan, we must file notice with the JAC of any increase or decrease in standard fares on routes deemed “non-competitive” by the JAC and any decrease in fares on “competitive” routes at least twenty days in advance. We must file notice with the JAC of any increase in fares on “competitive” routes at least ten days in advance. In addition, the Chilean authorities now require that we justify any modification that we make to our fares on non-competitive routes. We must also ensure that our average yields on a non-competitive route are not higher than those on competitive routes of similar distance.

Registration of Aircraft. Aircraft registration in Chile is governed by the Chilean Aeronautical Code (“CAC”). In order to register or continue to be registered in Chile, an aircraft must be wholly owned by either:

· a natural person who is a Chilean citizen; or

· a legal entity incorporated in and having its domicile and principal place of business in Chile and a majority of the capital stock of which is owned by Chilean nationals, among other requirements established in article 38 of the CAC.

The Aeronautical Code expressly allows the DGAC to permit registration of aircraft belonging to non-Chilean individuals or entities with a permanent place of business in Chile. Aircraft owned by non-Chileans, but operated by Chileans or by an airline which is affiliated with a Chilean aviation entity, may also be registered in Chile. Registration of any aircraft can be cancelled if it is not in compliance with the requirements for registration and, in particular, if:

· the ownership requirements are not met; or

· the aircraft does not comply with any applicable safety requirements specified by the DGAC.

Safety. The DGAC requires that all aircraft operated by Chilean airlines be registered either with the DGAC or with an equivalent supervisory body in a country other than Chile, so long as that country is a member of the Warsaw Convention. All aircraft must have a valid certificate of airworthiness issued by either the DGAC or an equivalent non-Chilean supervisory entity. In addition, the DGAC will not issue maintenance permits to a Chilean airline until the DGAC has assessed the airline’s maintenance capabilities. The DGAC renews maintenance permits annually, and has approved our maintenance operations. Only DGAC-certified maintenance facilities or facilities certified by an equivalent non-Chilean supervisory body in the country where the aircraft is registered may maintain and repair the aircraft operated by Chilean airlines. Aircraft maintenance personnel at such facilities must also be certified either by the DGAC or an equivalent non-Chilean supervisory body before assuming any aircraft maintenance positions.

Security. The DGAC establishes and supervises the implementation of security standards and regulations for the Chilean commercial aviation industry. Such standards and regulations are based on standards developed by international commercial aviation organizations. Each airline and airport in Chile must submit an aviation security handbook to the DGAC describing its security procedures for the day-to-day operations of commercial aviation and procedures for staff security training. Lan Airlines has submitted its aviation security handbook to the DGAC. Chilean airlines that operate international routes must also adopt security measures in accordance with the requirements of applicable bilateral international agreements.

Airport Policy. The DGAC supervises and manages airports in Chile, including the supervision of take-off and landing charges. The DGAC proposes airport charges, which are approved by the JAC and are the same at all airports. Since the mid-90s, a number of Chilean airports have been privatized, including the Comodoro Arturo Merino Benítez International Airport in Santiago. At the privatized airports, the airport administration manages the facilities under the supervision of the DGAC and JAC.

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Environmental and Noise Regulation. There are no material environmental regulations or controls imposed upon airlines, applicable to aircraft, or that otherwise affect us in Chile, except for environmental laws and regulations of general applicability. There is no noise restriction regulation currently applicable to aircraft in Chile. However, Chilean authorities are planning to pass a noise-related regulation governing aircraft that fly to and within Chile. The proposed regulation will require all such aircraft to comply with certain noise restrictions, referred to in the market as Stage 3 standards. LAN’s fleet already complies with the proposed restrictions so we do not believe that enactment of the proposed standards would impose a material burden on us.

Argentina

Aeronautical Regulation.

Both the Administración Nacional de Aviación Civil (“ANACI”) and the Secretary of Transport oversee and regulate the Argentinean aviation industry. ANACI regulates flight operations, including personnel, aircraft and security standards, air traffic control and airport management, and reports indirectly to the Ministry of Planning and is responsible for supervising compliance with Argentinean laws and regulations relating to air navigation. The Secretary of Transport also reports to the Ministry of Planning and regulates the assignment of international routes and matters related to tariff regulation policies. We have obtained and maintain the necessary authorizations from the Argentinean government to conduct flight operations, including authorization certificates and technical operative certificates from ANACI, the continuation of which is subject to the ongoing compliance with applicable statutes, rules and regulations pertaining to the airline industry, including any rules and regulations that may be adopted in the future.

Argentina is a contracting state and a permanent member of the ICAO, an agency of the United Nations established in 1947 to assist in the planning and development of international air transport. The ICAO establishes technical standards for the international aviation industry, which Argentinean authorities have incorporated into Argentinean laws and regulations. In the absence of applicable Argentinean regulation concerning safety or maintenance, the ANACI has incorporated by reference the majority of the ICAO’s technical standards. We believe that we are in material compliance with all relevant technical standards.

Route Rights

Domestic Routes. In Argentina airlines are required to obtain permits in connection with carrying passengers or cargo on any domestic routes, and to comply with the technical requirements established by the local authority. There are no regulatory barriers preventing a foreign airline from creating an Argentine subsidiary and entering the Argentine domestic market using that subsidiary. However, ownership of such subsidiary by the foreign airline may not be direct, but through a subsidiary formed in Argentina, which in turn may be directly or indirectly owned by the foreign company. However, such subsidiary should operate Argentine registered aircraft and employ Argentine aeronautical personnel.

International Routes. As an airline providing services on international routes, Lan Argentina is also subject to a variety of bilateral civil air transport agreements that provide for the exchange of air traffic rights between Argentina and various other countries. There can be no assurance that existing bilateral agreements between Argentina and foreign governments will continue. Furthermore, a modification, suspension or revocation of one or more bilateral treaties could have a material adverse effect on our operations and financial results.

International route rights, as well as the corresponding landing rights, are derived from a variety of air transport agreements negotiated between Argentina and foreign governments. Under such agreements, the government of one country grants the government of another country the right to designate one or more of its domestic airlines to operate scheduled services to certain destinations of the former and, in certain cases, to further connect to third-country destinations. In Argentina, when additional route frequencies to and from foreign cities become available, any eligible airline may apply to obtain them. ANACI grants route frequencies subject to the condition that the recipient airline operate them on a permanent basis. If an airline fails to operate a route for a period of six months or more, the ANACI may terminate its rights to that route.

Airfare Pricing Policy. Argentine airlines are permitted to establish their own international fares without government regulation, as long as they do not abuse any dominant market position they may enjoy. Yet, there are government-fixed maximum and minimum prices for domestic flights.

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Registration of Aircraft. Aircraft registration in Argentina is governed by the Argentinean Aeronautical Code (“AAC”). In order to register or continue to be registered in Argentina, an aircraft must be wholly owned by either:

· a natural person who is an Argentinean citizen; or

· a legal entity incorporated in and having its domicile and principal place of business in Argentina and a majority of the capital stock of which is owned, directly or indirectly, by Argentinean nationals, among other requirements established in the AAC.

Safety. ANACI requires that all aircraft operated by Argentinean airlines be registered with ANACI. All aircraft must have a valid certificate of airworthiness issued by ANACI. In addition, ANACI will not issue maintenance permits to an Argentinean airline until ANACI has assessed the airline’s maintenance capabilities. ANACI renews maintenance permits periodically and approves maintenance operations once the airline initiates its operations and each time an airline changes its maintenance regime. Only ANACI-certified maintenance facilities (in Argentina or in any other country) may maintain and repair the aircraft operated by Argentinean airlines. Aircraft maintenance personnel at such facilities must also be certified by ANACI before assuming any aircraft maintenance positions.

Security. ANACI establishes and supervises the implementation of security standards and regulations for the Argentinean commercial aviation industry. Such standards and regulations are based on standards developed by international commercial aviation organizations. Each airline and airport in Argentina must submit an aviation security handbook to ANACI describing its security procedures for the day-to-day operations of commercial aviation and procedures for staff security training. Lan Argentina has submitted its aviation security handbook to ANACI. Argentinean airlines that operate international routes must also adopt security measures in accordance with the requirements of applicable bilateral international agreements.

Airport Policy. The ORSNA (Organismo Regulador del Sistema Nacional de Aeropuertos) supervises and manages the airports in Argentina, including the supervision of take-off and landing charges. The ORSNA proposes airport charges, which are approved by ANACI and are the same at all airports. Nevertheless, while domestic flights are charged in local currency, international flights are charged in U.S. dollars. Since the late-90s, a number of Argentinean airports have been privatized, including Aeroparque and Aeropuerto Internacional de Ezeiza Ministro Pistarini in Buenos Aires, the two most important airports in Argentina. At the privatized airports, the airport administration manages the facilities under the supervision of ANACI and ORSNA.

Environmental and Noise Regulation. There are no material environmental regulations or controls imposed upon airlines, applicable to aircraft, or that otherwise affect us in Argentina, except for environmental laws and regulations of general applicability and noise restriction regulation currently applicable to aircraft in Argentina. Any aircraft operated by an Argentinean airline should comply with certain noise restrictions, specifically with Stage 3 standards, as set forth in chapter 91.805 of the Argentinean civilian aviation regulations (Regulaciones Argentinas de Aviación Civil) referred to in the market as Stage 3 standards. LAN’s fleet already complies with the proposed restrictions so we do not believe that enactment of the proposed standards would impose a material burden on us.

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Peru

Aeronautical Regulation.

The Peruvian DGAC (“PDGAC”) oversees and regulates the Peruvian aviation industry. The PDGAC reports directly to the Ministry of Transportation and Communications and is responsible for supervising compliance with Peruvian laws and regulations relating to air navigation. In addition,  the PDGAC regulates the assignment of national and international routes, and the compliance with certain insurance requirements, and  it regulates flight operations, including personnel, aircraft and security standards, air traffic control and airport management. We have obtained and maintain the necessary authorizations from the Peruvian government to conduct flight operations, including authorization and technical operative certificates, the continuation of which is subject to the ongoing compliance with applicable statutes, rules and regulations pertaining to the airline industry, including any rules and regulations that may be adopted in the future.

Peru is a contracting state and a permanent member of the ICAO. The ICAO establishes technical standards for the international aviation industry, which Peruvian authorities have incorporated into Peruvian laws and regulations. In the absence of an applicable Peruvian regulation concerning safety or maintenance, the PDGAC has incorporated by reference the majority of the ICAO’s technical standards. We believe that we are in material compliance with all relevant technical standards.

Route Rights

Domestic Routes. Peruvian airlines are required to obtain permits in connection with carrying passengers or cargo on any domestic routes, but only to comply with the technical requirements established by the PDGAC. Non-Peruvian airlines are not permitted to provide domestic air service between destinations in Peru.

International Routes. As an airline providing services on international routes, Lan Peru is also subject to a variety of bilateral civil air transport agreements that provide for the exchange of air traffic rights between Peru and various other countries. There can be no assurance that existing bilateral agreements between Peru and foreign governments will continue, and a modification, suspension or revocation of one or more bilateral treaties could have a material adverse effect on our operations and financial results.

International route rights, as well as the corresponding landing rights, are derived from a variety of air transport agreements negotiated between Peru and foreign governments. Under such agreements, the government of one country grants the government of another country the right to designate one or more of its domestic airlines to operate scheduled services to certain destinations of the former and, in certain cases, to further connect to third-country destinations. In Peru, when additional route frequencies to and from foreign cities become available, any eligible airline may apply to obtain them. If there is more than one applicant for a route frequency the PDGAC awards it through a public auction for a period of four years. The PDGAC grants route frequencies subject to the condition that the recipient airline operate them on a permanent basis. If an airline fails to operate a route for a period of 90 days or more, the PDGAC may terminate its rights to that route, although that has never happened.

Airfare Pricing Policy. Peruvian airlines are permitted to establish their own domestic and international fares without government regulation, as long as they do not abuse any dominant market position they may enjoy. For more information, see “Antitrust Regulation” below. Airlines may file complaints before the Institute for Protection of Fair Competition and Consumer Rights (“Indecopi”) with respect to monopolistic or other pricing practices by other airlines that violate Peru’s antitrust laws.

Registration of Aircraft. Aircraft registration in Peru is governed by the Peruvian Civil Aviation Law. In order to register or continue to be registered in Peru, an aircraft must be wholly owned by either:

· a natural person who is a Peruvian citizen; or is domiciled in Peru; or

· a legal entity incorporated in and having its domicile and principal place of business in Peru and a majority of the capital stock of which is owned by Peruvian nationals, among other requirements established in article 47 of the  Peruvian Civil Aviation Law.

The Civil Aviation Law expressly allows the PDGAC to permit registration of aircraft belonging to non-Peruvian individuals or entities with a permanent place of business in Peru. Aircraft owned by non-Peruvians, but operated by a Peruvian airline, may also be registered in Peru but only if the aircraft is used for general, not commercial aviation.  Registration of any aircraft can be cancelled if it is not in compliance with the requirements for registration and, in particular, if:

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· the ownership requirements are not met; or

· the aircraft does not comply with any applicable safety requirements specified by the PDGAC.

Safety. Peruvian law allows the use of aircraft that are registered either with the PDGAC or with an equivalent supervisory body in a country other than Peru. All aircraft must have a valid certificate of airworthiness issued by either the PDGAC or an equivalent non-Peruvian supervisory entity. In addition, the PDGAC will not issue maintenance permits to a Peruvian airline until the PDGAC has assessed the airline’s maintenance capabilities. The PDGAC renews maintenance permits annually, and has approved our maintenance operations. Only PDGAC-certified maintenance facilities or facilities certified by an equivalent non-Peruvian supervisory body in the country where the aircraft is registered may maintain and repair the aircraft operated by Peruvian airlines. Aircraft maintenance personnel at such facilities must also be certified either by the PDGAC or an equivalent non-Peruvian supervisory body before be appointed to any aircraft maintenance positions.

Security. The PDGAC establishes and supervises the implementation of security standards and regulations for the Peruvian commercial aviation industry. Such standards and regulations are based on standards developed by international commercial aviation organizations. Each airline and airport in Peru must submit an aviation security handbook to the PDGAC describing its security procedures for the day-to-day operations of commercial aviation and procedures for staff security training. Lan Peru has submitted its aviation security handbook to the PDGAC. Peruvian airlines that operate international routes must also adopt security measures in accordance with the requirements of applicable bilateral international agreements.

Airport Policy. CORPAC supervises and manages airports in Peru, including the supervision of take-off and landing charges. CORPAC sets airport charges for navigation facilities, which may differ  from airport to airport. Since the mid-90s, a number of Peruvian airports have been privatized, including the Aeropuerto Internacional Jorge Chávez in Lima. At the privatized airports, the airport administration manages the facilities under the supervision of the Organismo Supervisor de la Inversión en Infraestructura de Transporte de Uso Público, (the Supervising Agency of Investment in Public Transport Infrastructure Facilities or “OSITRAN”), an independent regulatory and supervising entity.

Environmental and Noise Regulation. There are no material environmental regulations or controls imposed upon airlines, applicable to aircraft, or that otherwise affect us in Peru, except for environmental laws and regulations of general applicability, but there are noise restriction regulations currently applicable to aircraft in Peru. LAN’s fleet complies with the proposed restrictions so they do not impose a material burden on us.

Ecuador

Aeronautical Regulation.

There are two institutions that control commercial aviation on behalf of the State:  (i) The National Civil Aviation Board (“CNAC”), which directs aviation policy; and (ii) the General Civil Aviation Bureau (“EDGAC”), which is a technical regulatory and control agency. The CNAC issues operating permits and grants operating concessions to national and international airlines.  It also issues opinions on bilateral and multilateral air transportation treaties, allocates routes and traffic rights, and approves joint operating agreements such as wet leases and shared codes.

Fundamentally, the EDGAC is responsible for:

· ensuring that the national standards and technical regulations and international ICAO standards and regulations are observed;

· keeping records on insurance, airworthiness and licenses of Ecuadorian civil aircraft;

· maintaining the National Aircraft Registry;

· issuing licenses to crews; and

· controlling air traffic control inside domestic air space.

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The EDGAC also must comply with the standards and recommended methods of the ICAO since Ecuador is a signatory of the 1944 Chicago Convention.

Route Rights

Domestic Routes. Airlines must obtain authorization from CNAC (an operating permit or concession) to provide air transportation. For domestic operations, only companies incorporated in Ecuador can operate locally, and only Ecuadorian-licensed aircraft and dry leases are authorized to operate domestically.

International Routes. Permits for international operations are based on air transportation treaties signed by Ecuador or, otherwise, the principle of reciprocity is applied. All airlines doing business in Latin America that are incorporated in countries that are members of the Comunidad Andina de Naciones (the Andean Community, or “CAN”) obtain their traffic rights on the basis of decisions currently in force under that regime, in particular decision N°582 of 2004, which guarantee free access to markets, with no type of restriction except technical considerations.

Shared codes are allowed in Ecuador after authorization by the CNAC, but the respective airlines must have the relevant traffic rights.

Airfare Pricing Policy. There is no law in Ecuador regulating competition, although currently there is one under discussion. So far, the government has enacted a decision of the CAN that is being applied by the Undersecretary of Competition. This Department can impose sanctions and penalties if it is proven that a certain fare is predatory, i.e., when the fare is below cost.Rates are not regulated and are subject only to registration. In general, bilateral treaties regarding air transportation provide for airfares to be regulated by the regulation of the country of origin.

Registration of Aircraft. The legislation allows Ecuadorian companies to provide international air transportation services using aircraft licensed in Ecuador and aircraft with a foreign license, always provided the latter are exploited under dry leases. For domestic operations, aircraft is authorized only pursuant to dry leases and Ecuadorian registration. Aircraft interchange agreements are also allowed for international operations, provided that the aviation authority can confirm that the aircraft is under the operational control of an Ecuadorian operator. Wet leases are permitted, but very restricted.

Safety. In order to ensure aviation safety, the EDGAC requires that the airline hold an Air Operator Certificate and have Operating Specifications that are examined technically and rigorously to ensure compliance with the Civil Aviation Technical Regulations, which are essentially the same as the Federal Aviation Regulations (“FAR”) of the FAA. They cover matters of aircraft airworthiness, certification of maintenance facilities, and oversight by the EDGAC.

Security. The governing rules also apply to security in respect of the EDGAC. There are regulations, manuals and procedures on airport security overseen by the EDGAC.

Airport Policy. The international airports in Quito and Guayaquil are managed under administrative concessions, and the EDGAC merely controls air traffic. Fees for the use of airport facilities, terminal fees, landing fees, parking fees are all overseen and collected by the operator. Over-flight and approach fees are controlled and collected by the EDGAC.

Environmental and Noise Regulation. Aircraft must comply with the standards of category 3 under Ecuadorian applicable noise regulations, as set forth in Executive Decree (Decreto Ejecutivo) 1,405, enacted on October 24,2008, which provides certain technical specific criteria. Beginning in May 2010, aircraft must comply with standards of category 4 under cited regulation. Category 3 provides for compliance with ICAO regulations and technical conditions mandatory in the United States of America.

United States of America

Aeronautical Regulation.

Operations to and from the United States by non-U.S. airlines, such as Lan Airlines, are subject to Title 49 of the U.S. Code, under which the Department of Transportation (“DOT”) and the FAA exercise regulatory authority. The DOT has jurisdiction over international aviation in connection with the United States, subject to review by the President of the United States. The DOT also has jurisdiction with respect to unfair practices and methods of competition by airlines and related consumer protection matters. The U.S. DOJ also has jurisdiction over airline competition matters under the federal antitrust laws. Flight operations between Chile and the United States by airlines licensed by either country are governed generally by the open skies air transport agreement that Chile and the United States signed in October 1997. Under the open skies agreement, there are no restrictions on the number of destinations or flights that either a U.S. or a Chilean airline may operate between the two countries or on the number of U.S. and Chilean airlines that may operate.

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Authorizations and Licenses.

Lan Airlines is authorized by the DOT to engage in scheduled and charter air transportation services, including the transportation of persons, property (cargo) and mail, or combinations thereof, between points in Chile and points in the United States and beyond (via intermediate points in other countries). Lan Airlines holds the necessary authorizations from the DOT in the form of a foreign air carrier permit, exemption authorizations and statements of authorization to conduct current operations to and from the United States. Exemptions and statements of authorization are temporary in nature and are subject to renewal and therefore there can be no assurance that any particular exemption or statement of authorization will be renewed. Lan Airlines’ foreign air carrier permit has no expiration date, while a renewal of the exemption authorization (which includes the open skies traffic rights) was timely filed and the Authority was automatically extended until such time as the DOT issues the renewal order. Lan Airlines intends to request the inclusion of the open skies rights into our foreign air carrier permit, which would eliminate our need to renew the exemption authority in the future.

The FAA is engaged in the regulation with respect to safety matters, including aircraft maintenance and operations, equipment, aircraft noise, ground facilities, dispatch, communications, personnel, training, weather observation and other matters affecting air safety. The FAA requires each foreign air carrier to obtain certain operations specifications that authorize it to operate to particular airports on approved international routes using specified equipment. Lan Airlines currently holds FAA operations specifications under Part 129 of the FAR in compliance in all material respects with all requirements necessary to maintain in good standing of its operations specifications issued by the FAA. The FAA can amend, suspend, revoke or terminate those specifications, or can suspend temporarily or revoke permanently our authority if an airline fails to comply with the regulations, and can assess civil penalties for such failure. A modification, suspension or revocation of any of our DOT authorizations or FAA operations specifications could have a material adverse effect on our business.

The FAA also conducts safety audits and has the power to impose fines and other sanctions for violations of airline safety regulations. We have not incurred any material fines related to operations.

Certain Regulatory Authorizations in Connection with Strategic Alliances.

The alliance between Lan Airlines and American Airlines includes three major components: a frequent flyer agreement, a reciprocal code-share agreement and the coordination of pricing, scheduling and other functions. The last two of these items required the approval of regulatory authorities in both Chile and the United States. With respect to the code-share agreement, the open skies agreement between Chile and the United States expressly permits code-sharing operations by U.S. and Chilean airlines. With regard to the coordination of pricing and scheduling, Lan Airlines and American Airlines filed a joint application with the DOT in December 1997, requesting approval of their alliance agreement and immunity from the application of all U.S. antitrust laws pursuant to Title 49 of the U.S. Code. Lan Airlines and American Airlines received approval and antitrust immunity from the DOT in September 1999, and implemented the code-share agreement in October 1999. In accordance with the terms of the DOT’s 1999 approval, Lan Airlines and American Airlines were required to resubmit their alliance agreement to the DOT for review within three years after the DOT’s grant of approval. Lan Airlines and American Airlines resubmitted the agreement in September 2002 and did not receive any comments from the DOT.

Lan Peru was granted antitrust immunity by the DOT on October 13, 2005 with respect to the alliance agreements and other agreements incorporated therein (i.e., the reciprocal code-share agreements, among others) with Lan Airlines and American Airlines. In accordance with the terms of the DOT’s 2005 approval, Lan Airlines, Lan Peru and American Airlines resubmitted their alliance agreement to the DOT for review in October 2010.

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Flight operations between Argentina and the United States by airlines licensed by either country are governed generally by the air transport agreement that Argentina and the United States signed in 1986, as amended, including the Memorandum of Consultation dated March 22, 2007.  Lan Argentina is authorized by the DOT to engage in scheduled air transportation of persons, property and mail, between any point or points in Argentina and Miami, Florida, (via the intermediate point of Punta Cana, Dominican Republic).  Lan Argentina holds the necessary authorizations from the DOT in the form of exemption authorizations and statements of authorization to conduct current operations to and from the United States. Lan Argentina also holds the necessary DOT authorizations regarding code share with American Airlines, which have been granted indefinitely, subject to applicable conditions and all other required authorizations remaining in place for both air carriers.

Security. On November 19, 2001, the Congress of the United States passed, and the President signed into law, the Aviation and Transportation Security Act, also referred to as the Aviation Security Act. This law federalized substantially all aspects of civil aviation security and created the Transportation Security Administration (“TSA”), which took over security responsibilities previously held by the FAA. The TSA is an agency of the U.S. Department of Homeland Security. The Aviation Security Act requires, among other things, the implementation of certain security measures by airlines and airports, such as the requirement that all passenger bags be screened for explosives. Funding for airline and airport security required under the Aviation Security Act is provided in part by a US$2.50 per segment passenger security fee, subject to a US$10 per roundtrip cap; however, airlines are responsible for costs in excess of this fee. Implementation of the requirements of the Aviation Security Act has resulted in increased costs for airlines and their passengers. Since the events of September 11, 2001, Congress has mandated and the TSA has implemented numerous security procedures and requirements that have imposed and will continue to impose burdens on airlines, passengers and shippers.

Noise Restrictions. Under the Airport Noise and Capacity Act of 1990 (“ANCA”), and related FAA regulations, aircraft that fly to the United States must comply with certain Stage 3 noise restrictions, which are currently the most stringent FAA noise requirements. All of our aircraft that fly to the United States meet the Stage 3 requirements.

Under the direction of the ICAO, governments are considering the creation of a new and more stringent noise standard than that contained in the ANCA. The ICAO adopted new noise standards in 2001 that established more stringent noise requirements for aircraft manufactured after January 1, 2006. In the U.S., legislation known as the “Vision 100—Century of Aviation Reauthorization Act,” which was signed into law in December 2003, required the FAA to issue regulations implementing Stage 4 noise standards consistent with recommendations adopted by the ICAO. FAA regulations require all aircraft designed and certified after January 1, 2006 to comply with Stage 4 noise restrictions.

FAA regulations also require compliance with the Traffic Alert and Collision Avoidance System, approved airborne wind shear warning system and aging aircraft regulations. Our entire fleet meets these requirements.

Brazil

Aeronautical Regulation.

The Brazilian aviation industry is regulated and overseen by the ANAC. The ANAC reports directly to the Brazilian Defense Ministry, which is subordinated by the Federal Executive Power of this country. Primarily on the basis of Law No. 11.182/2005, ANAC was created to regulate commercial aviation, air navigation, the assignment of domestic and international routes,  compliance with certain insurance requirements, flight operations, including personnel, aircraft and security standards, air traffic control, in this case sharing it activities and responsibilities with the Departamento de Controle do Espaço Aéreo (Department of Airspace Control, or “DECEA”),which is a public secretary also subordinated by the  Brazilian Defense Ministry, and airport management, in this last case sharing responsibilities with the Empresa Brasileira de Infra-Estrutura Aeroportuária (the Brazilian Airport Infrastructure Company, or “INFRAERO”), a public company that was created by Law No. 5862/72, and is responsible for administrating, operating and exploring Brazilian airports  industrially  and commercially.

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We have obtained and maintain the necessary authority from the Brazilian government to conduct flight operations, including authorization and technical operative certificates from ANAC, the continuation of which is subject to ongoing compliance with applicable statutes, rules and regulations pertaining to the airline industry, including any rules and regulations that may be adopted in the future.

ANAC is the Brazilian civil aviation authority and it is responsible for supervising compliance with Brazilian laws and regulations relating to air navigation. Brazil is a contracting state and a permanent member of the ICAO. The ICAO establishes technical standards for the international aviation industry, which Brazilian authorities, represented by the Brazilian Defense Ministry, have incorporated into Brazilian laws and regulations. In the absence of an applicable Brazilian regulation concerning safety or maintenance, ANAC has incorporated by reference the majority of the ICAO’s technical standards.

Route Rights.

Domestic Routes. Brazilian airlines are not required to obtain permits in connection with domestic passenger or cargo transportation, but only to comply with the technical requirements established by ANAC. Based on the Brazilian Aeronautical Code (“CBA”) established by Law No. 7.565/86, non-Brazilian airlines are not permitted to provide domestic air service between destinations in Brazil. The same law prevents a foreign airline from creating a Brazilian subsidiary and entering the Brazilian domestic market using that subsidiary.

International Routes. Brazilian and non-Brazilian airlines providing services on international routes are also subject to a variety of bilateral civil air transport agreements that provide for the exchange of air traffic rights between Brazil and various other countries. International route rights, as well as the corresponding landing rights, are derived from a variety of air transport agreements negotiated between Brazil and foreign governments. Under such agreements, the government of one country grants the government of another country the right to designate one or more of its domestic airlines to operate scheduled services to certain destinations of the former and, in certain cases, to further connect to third-country destinations. In Brazil, when additional route frequencies to and from foreign cities become available, any eligible airline may apply to obtain them. If there is more than one applicant for a route frequency ANAC must carry out a public bid and award it to the elected airline. ANAC grants route frequencies subject to the condition that the recipient airline operate them on a permanent basis. If an airline fails to operate a route for a period of six months or more, ANAC may terminate its rights to that route. ANAC may also terminate its right if the recipient airline does not operate at least 80% of the frequency given for that specific route.

Airfare Pricing Policy. Brazilian and non-Brazilian airlines are permitted to establish their own international and domestic fares, in this last case only for Brazilian airlines, without government regulation, as long as they do not abuse any dominant market position they may enjoy. Airlines may file complaints before the Antitrust Court with respect to monopolistic or other pricing practices by other airlines that violate Brazil’s antitrust laws.

Registration of Aircraft. Aircraft registration in Brazil is managed by ANAC, which maintains the Brazilian Aeronautical Register, as regulated by the CBA. The CBA allows ANAC to permit registration of aircraft belonging to Brazilian and non-Brazilian individuals.

Safety. ANAC requires that all Brazilian aircraft must have a valid certificate of airworthiness issued by ANAC. In addition, ANAC will not issue maintenance permits to a Brazilian airline until it has assessed the airline’s maintenance capabilities. ANAC renews maintenance permits annually, and has approved our maintenance operations. Only ANAC certifies aircraft maintenance services and its personnel.

 Security. ANAC establishes and supervises the implementation of security standards and regulations for the Brazilian commercial aviation industry. Such standards and regulations are based on standards developed by international commercial aviation organizations. Each airline and airport in Brazil must submit an aviation security handbook to ANAC describing its security procedures for the day-to-day operations of commercial aviation and procedures for staff security training.

Brazilian Airport Policy. INFRAERO supervises and manages airports in Brazil, including the supervision of take-off and landing charges. INFRAERO proposes airport charges, which are approved by ANAC and are the same at all airports. At privatized airports, the airport administration manages the facilities under the supervision of ANAC.

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Environmental and Noise Regulation. ANAC coordinates and supervises noise regulations by regulation 121, which established noise restriction applicable to aircraft in Brazil. There are no material environmental regulations or controls imposed specifically upon airlines companies, applicable to aircraft, other than Brazilian general environmental laws and regulations.

Colombia

Aeronautical Regulation.

The governmental entity in charge of regulating, directing and supervising the civil aviation is the Aeronáutica Civil (“AC”), a technical agency ascribed to the Ministry of Transportation. The AC is the aeronautical authority for the entire domestic territory, in charge of regulating and supervising the Colombian air space. The AC may interpret, apply and complement all civil aviation and air transportation regulation to ensure compliance with the Colombian Aeronautical Regulations (“RAC”). The AC also grants the necessary permits for air transportation.

Route Rights.

The AC grants operation permits to domestic and foreign carrier that intend to operate in, from and to Colombia. In the case of Colombian airlines in order to obtain the operational permit the company must comply with the RAC and fulfill legal, economic and technical requirements, to later be subject to public hearings where the public convenience and necessity of the service is considered. The same process must be followed to add national or international routes, whose concession is subject to the bilateral instruments entered into by Colombia. Routes cannot be transferred under any circumstance and there is no limit to foreign investment in domestic airlines.

Airfare Pricing Policy. Domestic and international cargo transportation fares are not restricted in Colombia, but are subject to market regulations.  In addition, there is a fuel surcharge that is regulated by the AC and that fluctuates in accordance with the cost of fuel.  This surcharge, which is regulated by the authority, is not mandatory for cargo and it can be applied without exceeding the regulated maximum.

Registration of Aircraft. The AC, through the Office of Aeronautical Registration, is in charge of handling the registration of aircraft that will be operated by Colombian airlines. Registration may be obtained by a registration process fully conducted in Colombia or through the validation in Colombia of a foreign registration. For such registration, the aircraft must be legally imported to the country and inspected by the aeronautical inspectors. This office is also in charge of property registrations, lease contracts and liens of the registered aircraft.

Safety. Aircraft registered in Colombia obtain an airworthiness certificate or a validation of the airworthiness certificate (if they operate under the approval of the foreign registration).

 Security. Following the guidelines of the OACI annexes, the AC issued an airport security program that must be strictly complied with by all the aircraft operators in the country as well as by airports.

Environmental and Noise Regulation. In Colombia, only aircraft that comply with category 3 noise limits may operate.  There are strict regulations to control noise during takeoffs and landings of the aircraft at the El Dorado Airport in Bogotá due to its location in an urban area.

Antitrust Regulation

The Chilean antitrust authority, which we refer to as the Antitrust Court (previously the Antitrust Commission), oversees antitrust matters, which are governed by Decree Law No. 211 of 1973, as amended, or the Antitrust Law. The Antitrust Law prohibits any entity from preventing, restricting or distorting competition in any market or any part of any market. The Antitrust Law also prohibits any business or businesses that have a dominant position in any market or a substantial part of any market from abusing that dominant position. An aggrieved person may sue for damages arising from a breach of Antitrust Law and/or file a complaint with the Antitrust Court requesting an order to enjoin the violation of the Antitrust Law. The Antitrust Court has the authority to impose a variety of sanctions for violations of the Antitrust Law, including termination of contracts contrary to the Antitrust Law, dissolution of a company and imposition of fines and daily penalties on businesses. Courts may award damages and other remedies (such as an injunction) in appropriate circumstances. Lan Airlines, Lan Express and Lan Cargo must comply with Chilean Antitrust Law that prohibits a carrier from abusing a dominant position in the market. As described above under “Route Rights—Air Fare Pricing Policy,” in October 1997, the Antitrust Court approved a specific self-regulatory fare plan for us consistent with the Antitrust Court’s directive to maintain a competitive environment within the domestic market.

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Since October 1997, Lan Airlines and Lan Express follow a self-regulatory plan, which was modified and approved by the Tribunal de la Libre Competencia (the Competition Court) in July 2005. In February 2010, the Fiscalía Nacional Economica (the National Economic Prosecutor’s Office) finalized the investigation initiated in 2007 regarding our compliance with this self-regulatory plan and no further observations were made.

For more recent information regarding regulatory proceedings see “Other Financial Information—Legal and Arbitration Proceedings” under Item 8.

Property

Headquarters

Our main facilities are located on approximately five acres of land near the Comodoro Arturo Merino Benítez International Airport. The complex includes approximately 150,695 square feet of office space, 32,292 square feet of conference space and training facilities, 9,688 square feet of dining facilities and mock-up cabins used for crew instruction. In 2004, we adapted part of this building to meet our expanding training needs. This process included developing new rooms for technical instruction, in-flight and airport services.

During the fourth quarter of 2003, we moved some of our executive offices into a new building in a more central location in Santiago, Chile, where we initially occupied a total of four floors. In the first half of 2005 we added three more floors to accommodate our growth requirements. In 2007, in order to accommodate the Company’s growth, LAN leased two floors in an adjacent building (totaling 1,700 square meters), where some of LAN staff moved in February 2008. In 2009, to respond to the Company’s growth, LAN leased two additional floors in this building (totaling 1,200 square meters).  In 2010, new offices were leased east of Santiago to allow for Company growth and to implement projects such as “Host,” which involves changing our system of reservations, sales, inventory and passenger check-in. These additional offices add a total of 1,850 square meters to LAN’s property.

In addition, during 2011 we expect to add a new floor of 1,100 square meters to the Arrau Building for the new facilities of LAN Cargo.

Maintenance Base

Our 877,258 square feet maintenance base is located on a site that we own inside the grounds of the Comodoro Arturo Merino Benítez International Airport. This facility contains our aircraft hangar, warehouses, workshops and offices, as well as a 559,720 square feet aircraft parking area capable of accommodating up to seventeen short-haul aircraft. We have a five-floor, 53,820 square feet office building plus a 10,000 square feet office and workshop space. This facility is certified by several civil aviation authorities, including the United States’ FAA. As such, we are permitted to perform maintenance work for third parties at the facility. The FAA periodically inspects the facility to ensure its compliance with FAA standards. In 2005, we finalized the construction of an additional hangar, as well as 75,000 square feet of aircraft parking space, for US$2.1 million. During 2006 we started a new investment plan at this facility that includes building 64,580 square feet of additional aircraft parking space, a new 15,340 square foot building for offices and maintenance shops, a new 16,680 square feet engine shop and storage facility, and additional warehousing and external work space. The plan also included the upgrade of some of the current facilities, increasing parking space and building a new access road. Further, in 2006 we completed construction of an engine workshop with eight workstations and capacity for 36 engines, for a total investment of US$820,000. We also lease from the DGAC 193,750 square feet of space inside the Comodoro Arturo Merino Benítez International Airport for operational and service purposes.

In 2007, LAN approved a two-year capital expenditures plan earmarking approximately US$7.0 million for preparing our buildings and plants for the future growth of the Company and of its fleet.

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During 2008, LAN finalized the construction of a 4,300 square feet warehouse especially designed for the storage of oil and flammable supplies, which complies with all the security standards required for its operation. We also upgraded some facilities such as bathrooms and dressing rooms in our maintenance base increasing the total area in 15,000 square feet.

During 2009, LAN finalized the construction of a new five-story building located in our maintenance base, which has a total surface of 49,500 square feet and represented an investment of US$5.8 million. This building has new workshops, a new food court with capacity for over 2,500 people in different shifts, two floors of new offices and meeting rooms.

Also, during 2009, LAN finalized the extension of the engine workshop, which added 900 square feet and represented an investment of US$0.5 million. This extension will be used mainly for the Boeing 777’s engine maintenance.

During 2010 LAN remodelled portions of the administrative offices in the Mario Bontempi Building and the Luis Ernesto Videla Buildings (“LEV Building”), which are located within the Company’s maintenance base inside the ground of the Comodoro Arturo Merino Benitez International Airport.  Currently we are working in adding a fifth floor to the LEV Building, which is expected to be finalized on May 2011.

Miami Facilities

We occupy a 36.3-acre site at the Miami International Airport that has been leased to us by the airport under a concession agreement. Our facilities include a 48,000 square foot corporate building, a 380,000 square foot cargo warehouse and a 783,000 square foot aircraft-parking platform, which were constructed and are now leased to us under a long-term contract by a North American developer. We began using these new facilities in September 2001 for our passenger and cargo offices (with the exception of our reservations and ticket offices). We converted 21,528 square feet of the warehouse into fully furbished offices during 2004.

During 2009, LAN began the extension of the cooling area in the cargo warehouse. This extension added 30,000 square feet and represented an investment of US$4.0 million. This extension was inaugurated on April 20, 2010.

During 2010, LAN signed a concession agreement with the Miami International Airport to add a new cargo warehouse for additional areas for future developments.

Other Facilities

We own a building and sixteen acres of land on the west side of the Comodoro Arturo Merino Benítez International Airport that houses a flight-training center. As of March 2007, this facility features three full-flight simulators for Boeing 767, Airbus A320 and Boeing 737 aircraft. We rent this flight-training center under a long-term lease to CAE Inc. (a leading Canadian company in the flight training business).  These full-flight simulators are being extended and are expected to be completed in the second semester of 2011.

We own a 661,980-square foot warehouse in Santiago, which includes 91,493 square feet of space for offices and other administrative facilities and 45,000 square foot distribution center. We use this facility to support Blue Express door-to-door cargo transport business.

In 2004, Fast Air Almacenes de Carga S.A. (“Fast Air”), one of our subsidiaries that operates import customs warehouses, began utilizing an import warehouse and office building at the Comodoro Arturo Merino Benítez International Airport. This 172,000 square foot building was developed in conjunction with two other operators.

We have also developed a recreational facility for our employees with Airbus’ support. The facility, denominated “Parque LAN,” is located near the Comodoro Arturo Merino Benítez International Airport. Parque LAN includes amenities such as a gymnasium, synthetic fields for multiple uses and swimming pools.

During 2008, we acquired a 43,000 square feet piece of land in Chile, which represented a US$12 million investment, for the purpose of constructing our new corporate building.

During 2008, we acquired a 161,000 square feet piece of land near the Lima airport, which will host new facilities for the Company.

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We are currently working on the design and estimate that the construction will start during the first semester of 2011.

In March 2009, we began the construction of a new maintenance base in Argentina. The project includes a new hangar of 26,900 square feet with 9,600 square feet of offices, 1,070 square feet of workshops and an exterior platform of 5,300 square feet.  This project comprised a US$3.2 million investment and was completed in 2009.

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THE TRANSACTION AGREEMENTS

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

Explanatory Note Regarding the Transaction Agreements

The following summary is included to provide you with information regarding the terms of the transaction agreements.  This section is not intended to provide you with any factual information about either TAM or LAN.  Such information can be found elsewhere in this annual report on Form 20-F, in the public filings TAM and LAN make with the SEC, and in the registration statement on Form F-4, the related offer to exchange/prospectus and other relevant documents filed or that will be filed with the SEC in connection with the proposed business combination of LAN and TAM.  Factual disclosures about TAM or LAN contained in this annual report on Form 20-F or in LAN’s or TAM’s respective public reports filed with the SEC may supplement, update or modify the factual disclosures about TAM and LAN contained in the transaction agreements.  The representations, warranties and covenants made in the transaction agreements by TAM and LAN were qualified and subject to important limitations agreed to by TAM and LAN in connection with negotiating the terms of the transaction agreements.  In particular, in your review of the representations and warranties contained in the transaction agreements and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purposes of establishing the circumstances in which a party to the transaction agreements may have the right not to commence the exchange offer if the representations and warranties of the other party proved to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the transaction agreements, rather than establishing matters as facts.  The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to shareholders and reports and documents filed with the SEC and in some cases were qualified by the matters contained in the disclosure schedules that TAM and LAN delivered in connection with the transaction agreements, which disclosures were not reflected in the transaction agreements.  Therefore, the representations and warranties and other provisions in the transaction agreements should not be read alone but instead together with the information provided elsewhere in this annual report on Form 20-F and in the documents incorporated by reference into this annual report on Form 20-F.  Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this annual report on Form 20-F, may have changed since the date of the transaction agreements and subsequent developments or new information qualifying a representation or warranty may have been included in this annual report on Form 20-F.  In this annual report on Form 20-F, we refer to January 18, 2011, the date that the parties entered into the transaction agreements as the “signing date.”

TAM Representations and Warranties

TAM made customary representations and warranties that are subject, in some cases, to specified exceptions and qualifications and the matters contained in the disclosure schedule delivered by TAM to LAN pursuant to the exchange offer agreement. These representations and warranties relate to, among other things:

• due organization, existence, good standing and authority to carry on the businesses of TAM and its subsidiaries;

• its capitalization;

• ownership and the absence of encumbrances on ownership of the equity interests of its subsidiaries;

• the absence of preemptive or other similar rights or any debt securities that give their holders the right to vote with its shareholders;

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• its corporate power and authority to enter into, and complete the transactions under, the transaction agreements and the shareholders agreements, provided that certain shareholder approvals are obtained, and the enforceability of such agreements against it;

• the absence of violations of, or conflicts with, its governing documents, applicable law and certain agreements as a result of entering into and performing under the transaction agreements and the shareholders agreements;

• the required governmental consents, approvals, notices and filings;

• its SEC filings since December 31, 2006 and the financial statements included therein;

• compliance with the Sarbanes-Oxley Act of 2002 and the listing and corporate governance rules and regulations of the NYSE;

• its disclosure controls and procedures and internal controls over financial reporting;

• the absence of a TAM material adverse effect (as defined below in this section) and the absence of certain other changes or events since December 31, 2009 through the signing date;

• the conduct of business in accordance with the ordinary course consistent with past practice since December 31, 2009 through the signing date;

• the absence of legal proceedings, investigations and governmental orders against it or its subsidiaries;

• the absence of certain undisclosed liabilities;

• employee benefit plans;

• certain employment and labor matters;

• compliance with applicable laws and regulations, governmental orders and all applicable operating certificates, air carrier obligations, airworthiness directives, aviation regulations and other similar rules and regulations, of any airline regulator applicable to it, its rights or other assets or its businesses or operations;

• aircraft owned, leased and/or operated by TAM and its subsidiaries;

• takeoff and landing slots, authorizations and similar rights of TAM and its subsidiaries;

• environmental matters;

• tax matters;

• intellectual property;

• the receipt of a fairness opinion from BTG Pactual;

• affiliate transactions;

• information provided for inclusion in the US offering documents and Brazilian offering documents;

• the absence of any undisclosed broker’s or finder’s fees; and

• material contracts and the absence of any default under any material contract.

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Many of TAM’s representations and warranties are qualified by, among other things, exceptions relating to the absence of a “TAM material adverse effect,” which means any change, effect, occurrence or circumstance which, individually or in the aggregate, (i) has had or would reasonably be expected to have a material adverse effect on the business, financial condition, results of operations, assets or liabilities of TAM and its subsidiaries, taken as a whole, other than (x) any such change, effect, occurrence or circumstance to the extent resulting from (A) any changes after the signing date in general economic or financial market conditions, (B) any changes after the signing date generally affecting the industries in which TAM and its subsidiaries operate, (C) changes after the signing date in IFRS or the interpretation thereof, (D) geopolitical conditions, the outbreak of a pandemic or other widespread health crisis, the outbreak or escalation of hostilities, any acts of war, sabotage or terrorism, or any escalation or worsening of any such acts of war, sabotage or terrorism threatened or underway as of the signing date or (E) any hurricane, tornado, flood, earthquake, volcanic eruption or natural disaster; provided, however, that the foregoing clauses (A), (B), (D) and (E) shall not apply to the extent that any such change, effect, occurrence or circumstance disproportionately impacts TAM and/or its subsidiaries compared to other participants in the industries in which TAM and its subsidiaries participate, or (y) any failure, in and of itself, of TAM to meet any internal or analyst projections, forecasts or estimates of revenue or earnings or any decrease in the market price or trading volume of the TAM preferred shares (but the exception in this clause (y) will not apply to the underlying causes of any such failure or decrease or prevent any of such underlying causes from being taken into account in determining whether a TAM material adverse effect has occurred); or (ii) impairs or would reasonably be expected to impair in any material respect the ability of TAM to complete the transactions contemplated by the transaction agreements or to perform its obligations under those agreements on a timely basis.

LAN Representations and Warranties

LAN made customary representations and warranties that are subject, in some cases, to specified exceptions and qualifications and the matters contained in the disclosure schedule delivered by LAN to TAM pursuant to the exchange after agreement.  These representations and warranties relate to, among other things:

• due organization, existence, good standing and authority to carry on the business of LAN and its subsidiaries;

• its capitalization;

• ownership and the absence of encumbrances on ownership of the equity interests of its subsidiaries;

• the absence of preemptive or other similar rights or any debt securities that give their holders the right to vote with its shareholders;

• its corporate power and authority to enter into, and complete the transactions under the transaction agreements and the shareholders agreements, provided that the holders of at least two-thirds of the outstanding LAN common shares vote to approve the mergers and the other transactions contemplated by the transaction agreements at a duly called and held meeting of the shareholders of LAN, and the enforceability of such agreements against it;

• the absence of violations of, or conflicts with, its governing documents, applicable law and certain agreements as a result of entering into and performing under the transaction agreements and the shareholders agreements;

• the required governmental consents, approvals, notices and filings;

• its SEC filings since December 31, 2006 and the financial statements included therein;

• compliance with the Sarbanes-Oxley Act of 2002 and the listing and corporate governance rules and regulations of the NYSE;

• its disclosure controls and procedures and internal controls over financial reporting;

• the absence of a LAN material adverse effect (as defined below) and the absence of certain other changes or events since December 31, 2009 through the signing date;

• the conduct of business in accordance with the ordinary course consistent with past practice since December 31, 2009 through the signing date;

• the absence of legal proceedings, investigations and governmental orders against it or its subsidiaries;

• the absence of certain undisclosed liabilities;

• employee benefit plans;

• certain employment and labor matters;

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• compliance with applicable laws and regulations, governmental orders and all applicable operating certificates, air carrier obligations, airworthiness directives, aviation regulations and other rules and regulations, any airline regulator applicable to it, its similar rights or other assets or its businesses or operations;

• aircraft owned, leased and/or operated by LAN and its subsidiaries;

• takeoff and landing slots, authorizations and similar rights of LAN and its subsidiaries;

• environmental matters;

• tax matters;

• intellectual property;

• the receipt of a fairness opinion from J.P. Morgan Securities LLC;

• affiliate transactions;

• information provided for inclusion in the US offering documents and Brazilian offering documents;

• the absence of any undisclosed broker’s or finder’s fees; and

• material contracts and the absence of any default under any material contract.

Many of LAN’s representations and warranties are qualified by, among other things, exceptions relating to the absence of a “LAN material adverse effect,” which means any change, effect, occurrence or circumstance which, individually or in the aggregate, (i) has had, or would reasonably be expected to have, a material adverse effect on the business, financial condition, results of operations, assets or liabilities of LAN and its subsidiaries, taken as a whole, other than (x) any such change, effect, occurrence or circumstance to the extent resulting from (A) any changes after the signing date in general economic or financial market conditions, (B) any changes after the signing date generally affecting the industries in which LAN and its subsidiaries operate, (C) changes after the signing date in IFRS or the interpretation thereof, (D) geopolitical conditions, the outbreak of a pandemic or other widespread health crisis, the outbreak or escalation of hostilities, any acts of war, sabotage or terrorism, or any escalation or worsening of any such acts of war, sabotage or terrorism threatened or underway as of the signing date or (E) any hurricane, tornado, flood, earthquake, volcanic eruption or natural disaster; provided, however, that the foregoing clauses (A), (B), (D) and (E) shall not apply to the extent that any such change, effect, occurrence or circumstance disproportionately impacts LAN and/or its subsidiaries compared to other participants in the industries in which LAN and its subsidiaries participate, or (y) any failure, in and of itself, of LAN to meet any internal or analyst projections, forecasts or estimates of revenue or earnings or any decrease in the market price or trading volume of LAN common shares (but the exception in this clause (y) will not apply to the underlying causes of any such failure or decrease or prevent any of such underlying causes from being taken into account in determining whether a LAN material adverse effect has occurred); or (ii) impairs or would reasonably be expected to impair in any material respect the ability of LAN to complete the transactions contemplated by the transaction agreements or to perform its obligations under those agreements on a timely basis.

Controlling Shareholder Representations and Warranties

The LAN controlling shareholders, the TAM controlling shareholder and the Amaro family made customary representations and warranties to the other parties pursuant to the exchange offer agreement. These representations and warranties relate to, among other things:

• due organization, existence, good standing and authority to carry on their businesses, as applicable;

• ownership and absence of encumbrances on their direct or indirect ownership of equity interests of TAM or LAN, as applicable;

• its corporate power and authority to enter into, and complete the transactions under, the transaction agreements and shareholders agreements to which they are a party, and the enforceability of such agreements against them, in the case of the TAM controlling shareholder and the LAN controlling shareholders only;

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• the absence of violations of, or conflicts with, its governing documents, applicable law and certain agreements as a result of it entering into and performing under such agreements;

• the required governmental consents, approvals, notices and filings;

• the absence of legal proceedings and investigations against it; and

• the absence of successor liability resulting from the TEP Chile subscription defined below under the “―Actions on the Expiration Date” section.

Conduct of Business Pending the Combination

Under the implementation agreement, both we and TAM have agreed that, subject to certain exceptions set forth in the implementation agreement or as required by applicable law, unless the other party gives its prior written approval between the signing date and the effective time, each of us and our subsidiaries and each of TAM and its subsidiaries will use our commercially reasonable efforts to preserve our business organizations intact and all licenses necessary for us and our respective subsidiaries to own, lease or operate our respective properties, rights and other assets and to carry on our respective business and operations conducted at the signing date and maintain, and keep available the services of our respective current officers, employees and consultants and existing relationships and goodwill with our respective customers, suppliers, employees, strategic partners and other persons with whom we conduct business.

Subject to certain exceptions set forth in the implementation agreement or as required by law, neither we nor TAM will, or will permit our subsidiaries to, take any of the following actions without the other’s written approval:

• make, declare or pay any dividend, or make any other distribution, on or in respect of any of its equity securities, other than (A) dividends or distributions paid or made to such party by its wholly owned subsidiary or to another wholly owned subsidiary of such party and (B) regular dividends paid to such party’s shareholders in accordance with the dividend policy approved at the last regular meeting of its shareholders in an amount not to exceed 50% (in the case of LAN) and 25% (in the case of TAM) of such party’s net income for the year in respect of which the dividends are paid;

• adjust, split, combine, subdivide or reclassify any of its equity securities or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for its equity securities;

• purchase, redeem or otherwise acquire any equity securities or convertible securities of such party or any of its subsidiaries or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities, subject to customary exceptions;

• issue, deliver, sell, grant, pledge or otherwise encumber or subject to any lien any equity securities or convertible securities of such party or any of its subsidiaries, or any “phantom” stock, “phantom” stock rights, stock option, stock purchase or appreciation rights or stock-based performance units relating to or permitting the purchase of any such equity securities or convertible securities, subject to customary exceptions;

• except as otherwise expressly contemplated in the implementation agreement, amend the by-laws of it or its subsidiaries in any way that is or would reasonably be expected to be materially adverse to such party and its subsidiaries, taken as a whole;

• other than in the ordinary course of business consistent with past practice, directly or indirectly make, or agree to directly or indirectly make, any acquisition or investment or make any capital expenditures, other than (i) capital expenditures disclosed in such party’s capital plans for 2010 and 2011, (ii) acquisitions of properties or assets that are not material to such party and its subsidiaries, taken as a whole, and (iii) certain other customary exceptions;

• sell, lease, assign, license, grant, extend, amend, subject to liens, waive or modify any material rights in or to, cancel, abandon or allow to lapse, or otherwise transfer or dispose of, or agree to take or permit any such action, all or any part of its assets, rights or properties which are material, individually or in the aggregate, to such party and its subsidiaries, taken as a whole, subject to certain exceptions;

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• incur any indebtedness or guarantee indebtedness of another person, other than (i) indebtedness incurred in the ordinary course of business consistent with past practice, (ii) indebtedness that does not exceed $10 million in the aggregate and (iii) certain other exceptions;

• settle or compromise any claim or action where the amount paid exceeds the amount set forth in such party’s disclosure schedule;

• other than in the ordinary course of business, enter into any material contract, terminate or amend in any material respect any material contract or waive, encumber or otherwise transfer any material rights or claims thereunder;

• make any material changes to the policies or work rules applicable to any group of employees or labor union;

• except as required by applicable law or its existing benefit plans, adopt or enter into, terminate, amend or grant any waiver or consent under any material benefit plan, or other than with respect to the hiring of any person whose annual compensation does not exceed $500,000, any contract, plan or policy involving any current or former employee, independent consultant, officers, or directors of such party or any of its subsidiaries, except in the ordinary course of business consistent with past practice with respect to employees who are not key personnel; grant any severance or termination payment or increase compensation or benefits of any employee (except for increases in compensation of employees who are not key personnel made in the ordinary course of business consistent with past practice); remove any existing restrictions in any benefit plans; take any action to fund or secure the payment of, or accelerate the vesting or payment of, any compensation or benefits under any benefit plan; except as required by any existing benefit plan and except for normal payments and increases in the ordinary course of business consistent with past practice, increase in any manner the compensation or fringe benefits of any employee or pay any amount or benefit; or grant any retention or similar bonuses, payments or rights to any employee;

• except as required by applicable law, the IFRS or regulatory guidelines, make any material change in its accounting methods or principles; make or change any material tax election; settle any material tax liability; amend any material tax return; enter into any material closing agreement with respect to any tax or surrender any right to claim a material tax refund; or change its current independent auditors;

• enter into any new line of business that is material to such party and its subsidiaries, taken as a whole, or any related party agreement;

• authorize or adopt a plan of complete or partial liquidation or any restructuring, recapitalization or reorganization;

• enter into or amend any contract that would restrict or limit the ability of LAN, TAM or any of their respective subsidiaries to engage in any business, that would reasonably be expected to prevent or materially impede the commencement or the completion the exchange offer, the mergers or the other transactions contemplated in the implementation agreement or to adversely affect in a material respect the expected benefits (taken as a whole) of the exchange offer and the mergers or if the completion of those transactions would conflict with, result in any breach or default or in any termination or modification of or acceleration under, or any change in any right or obligation under, or result in any lien on any property or asset of such party or any of its subsidiaries under any provisions of such contract;

• take or fail to take any action to prevent or delay, or that would reasonably be expected to prevent or delay, the satisfaction of any of the conditions to the commencement or completion of the exchange offer, the mergers or the other transactions contemplated by the implementation agreement;

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• cancel, terminate or amend any binding financing commitment to fund the acquisition of an aircraft unless it is replaced by another financing with substantially equivalent terms or such party and/or its subsidiaries receives equivalent value from the manufacturer of the applicable aircraft;

• enter into or materially amend any aircraft purchase agreement, engine purchase agreement or engine maintenance agreement that involves or is reasonably expected to involve aggregate payments in excess of $25 million in any twelve-month period;

• enter into, amend or terminate any alliance or brand alliance agreement, code-sharing agreement, frequent flyer participation agreement, capacity purchase or similar agreement, cooperation, joint venture, profit or revenue sharing agreement, special prorate agreement or interlining agreement with any person; or

• authorize any of, or commit, resolve, propose or agree to take any of, the foregoing actions.

LAN Shareholder Meeting

Prior to the LAN shareholders meeting, our board of directors will recommend that our shareholders vote to approve the mergers, changing our name to “LATAM Airlines Group S.A.” (which we refer to as the “name change”) and the other transactions contemplated by the implementation agreement (which we refer to as the “LAN board merger recommendation”).  We are required to take all action necessary to establish a record date for, duly call, give notice of, convene and hold a meeting (which we refer to as the “LAN shareholders meeting”) of our shareholders for the purpose of voting to approve the mergers, the name change and the other transactions contemplated by the implementation agreement (which we refer to collectively as, the “LAN shareholder merger matters”), (ii) cause such vote to be taken and completed and (iii) include the LAN board recommendations in the materials distributed to our shareholders connection with the LAN shareholders meeting.  Under Chilean law and our by-laws, the mergers must be approved by the holders of at least two-thirds of the outstanding shares of LAN common stock (which we refer to as the “requisite LAN shareholder approval”).  Approval of the LAN shareholder merger matters will be expressly conditioned upon, and will become effective only upon, the completion of the mergers.

TAM Shareholder Meeting

Prior to the TAM shareholders meeting, TAM will convene a meeting of the TAM board of directors to approve a list of three independent specialized companies experienced in valuing companies with similar size and operations to TAM (we refer to each such company as an “appraiser” and to such list as the “appraiser list”) to be submitted to holders of the free float shares at the TAM shareholders meeting.  TAM is required to take all action necessary to establish a record date for, duly call, give notice of, convene and hold a meeting of its shareholders solely for the purpose of voting to select an appraiser from the appraiser list to prepare an appraisal report to determine the economic value of TAM and LAN (which we refer to as the “appraisal report”) in accordance with the terms of TAM’s by-laws and the rules of the Bovespa (which we refer to as the “TAM shareholders meeting”).  Under TAM’s by-laws and the rules of the Bovespa, the quorum for the first calling of the TAM shareholders meeting requires the presence in person or by proxy of holders of shares of TAM stock (other than the TAM controlling shareholder, the Amaro family, their respective affiliates and TAM and its subsidiaries) (which we refer to collectively as, the “free float shares”) representing at least 20% of the outstanding shares of TAM stock.  Under TAM’s by-laws and the rules of the Bovespa, any appraiser so selected must be approved by a majority of the votes cast by the holders of the free float shares present in person or by proxy at the TAM shareholders meeting at which the requisite quorum is present (we refer to this approval as the “requisite TAM shareholder approval”).

If a quorum is not present at the first calling of the TAM shareholders meeting, then TAM is required to call additional meetings of its shareholders solely for the same purpose until a quorum is established, and under TAM’s by-laws and the rules of the Bovespa the quorum for any such subsequently called meeting requires the presence in person or by proxy of any holder of at least one free float share.  If quorum is established at any TAM shareholders meeting and a vote of the holders of free float shares is taken but the requisite TAM shareholder approval is not obtained, then TAM is required to call additional meetings of its shareholders solely for the same purpose until the requisite TAM shareholder approval is obtained.  However, TAM is not required to call more than five shareholder meetings within a period of five months.

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If after the appraiser prepares the appraisal report the holders of free float shares exercise their right under Brazilian law to request that TAM call a special meeting of the shareholders of TAM to vote upon whether or not to request a new appraisal report and to appoint a new appraiser, then TAM is required to take all action necessary to establish a record date for, duly call, give notice of, convene and hold such a special meeting of the TAM shareholders no later than 45 days after the request for such special meeting.

Prior to the commencement of the exchange offer, TAM is required to convene a special meeting of the TAM board of directors to recommend that the holders of shares of TAM stock tender and sell such shares in the exchange offer (which we refer to as the “TAM board exchange offer recommendation”), and promptly after such meeting TAM must publicly announce the TAM board exchange offer recommendation.

Holdco Shareholder Meetings

The Amaro family is required to cause Holdco 2 to (i) take all action necessary to establish a record date for, duly call, give notice of, convene and hold a special meeting of the shareholders of Holdco 2 (we refer to this meeting as the “Holdco 2 shareholders meeting”) for the purpose of voting to approve (i) the Holdco 2 merger and the other transactions contemplated by the implementation agreement, (ii) the relevant audited financial statements and appraisal report and (iii) the by-laws of the surviving corporation of the Holdco 2 merger (which we refer to collectively as, the “Holdco 2 merger matters”).  Under Chilean law and Holdco 2’s by-laws, the Holdco 2 merger matters must be approved by the holders of at least two-thirds of the outstanding shares of Holdco 2 stock (we refer to this approval as the “requisite Holdco 2 shareholder approval”).  The requisite Holdco 2 shareholder approval will be expressly conditioned upon, and will become effective only upon, the completion of the mergers.

The Amaro family is also required to cause Sister Holdco to (i) take all action necessary to establish a record date for, duly call, give notice of, convene and hold a special meeting of the shareholders of Sister Holdco  (we refer to this meeting as the “Sister Holdco shareholders meeting”) for the purpose of voting to approve (i) the Sister Holdco merger and the other transactions contemplated by the implementation agreement, (ii) the relevant audited financial statements and appraisal report and (iii) the by-laws of the surviving corporation of the Sister Holdco merger (which we refer to collectively as, the “Sister Holdco merger matters”).  Under Chilean Law and Sister Holdco ’s by-laws, the Sister Holdco merger matters must be approved by the holders of at least two-thirds of the outstanding shares of Sister Holdco stock (we refer to this approval as the “requisite Sister Holdco shareholder approval”).  The requisite Sister Holdco shareholder approval will be expressly conditioned upon, and will become effective only upon, the completion of the mergers.

Further Actions; Notification

We and TAM have agreed to cooperate with each other and use (and cause our respective affiliates to use) our respective reasonable best efforts to take or cause to be taken all actions and to do or cause to be done all things reasonably necessary, proper or advisable under the transaction agreements and applicable law to satisfy the conditions to the commencement and completion of the exchange offer described below under “—Conditions to the Commencement of the Exchange Offer” and “—Conditions to the Completion of the Exchange Offer” (we refer to these conditions collectively as “exchange offer conditions”) and to complete as soon as reasonably practicable the exchange offer, the mergers and the other transactions contemplated by the transaction agreements in accordance with the terms of the transaction agreements.  If any action or proceeding is instituted (or threatened to be instituted) by any person challenging any such transaction, each party is required to cooperate in all respects with the other parties and use its respective reasonable best efforts to contest and resist any such action or proceeding and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order, whether temporary, preliminary or permanent, that is in effect and that prohibits, prevents or restricts completion of such transaction so as to permit such completion by the fifth business day before December 30, 2011.  In addition, each party is required to, at its own cost and expense, defend any such actions or proceedings against it or its affiliates in connection with the transactions contemplated by the transaction agreements.

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Neither we nor TAM nor any of our respective affiliates will be required to sell, transfer, dispose of, or otherwise encumber, or to hold separate pending any such action, or propose, commit or agree to any of the foregoing or to hold separate, either before or after the effective time, any assets, licenses, operations, rights, product lines, businesses or interest of either of us or any of our affiliates or to take or agree to take any other action, or agree or consent to any limitations or restrictions on freedom of actions with respect to, or our ability to own, retain or make changes in, any assets, licenses, operations, rights, product lines, businesses or interests of either of us or any of our affiliates or our ability to receive and exercise full voting, economic and ownership rights with respect to our interests in Holdco 1, TAM and its subsidiaries, subject only to the rights of TEP Chile in respect of its voting shares of Holdco 1 and under the shareholders agreements.

Each of the parties is required to promptly advise the other parties orally and in writing if it fails to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under the transaction agreements, if any of the exchange offer conditions or the Amaro subscription conditions (as defined under “—Subscription Conditions”) fail or cease to be satisfied or if an appraisal event (as defined under “—Conditions to the Commencement of the Exchange Offer”) occurs.

No Solicitation

Each of the parties has agreed to cease and immediately terminate all existing activities and discussions with any person conducted prior to the signing date with respect to an alternative proposal concerning its relevant parent entity.  In this annual report on Form 20-F, we refer to LAN as the relevant parent entity of LAN and the LAN controlling shareholders, and TAM as the relevant parent entity of TAM and the TAM controlling shareholders and the Amaro family, and we refer to any of the following actions or any proposal or exchange offer (including any proposal or exchange offer to or from any representative of any party) with respect to any relevant parent entity by any person or group relating to, or that could reasonably be expected to lead to, any of the following as an “alternative proposal”: (i) any direct or indirect acquisition, lease, license or outsourcing, in one transaction or a series of related transactions, of any assets, services or businesses of such relevant parent entity or any of its subsidiaries collectively representing more than 25% of the fair market value of the total assets of such relevant parent entity or collectively generating or contributing 25% or more of the total consolidated revenues or operating income of such person during the last fiscal year, (ii) any tender exchange offer or exchange offer that, if completed, would result in any person or group beneficially owning any equity securities of such relevant parent entity, or (iii) any business combination, recapitalization, issuance or amendment of securities, liquidation, dissolution, joint venture, share exchange or similar transaction involving such relevant parent entity or any of its subsidiaries.

The parties have agreed not to, and to cause their respective directors, officers, employees, affiliates, financial advisors, attorneys, accountants or other advisors, agents and other representatives and each of the individuals who ultimately beneficially own it, which we refer to collectively as the “representatives” of a party, not to, directly or indirectly, (i) solicit, initiate or encourage any inquiries or the making or completion of any proposal or exchange offer that constitutes, or is reasonably likely to lead to, an alternative proposal with respect to its relevant parent entity, (ii) engage in, continue or otherwise participate in any discussions or negotiations regarding, or provide to any person any non-public information or data in connection with, or otherwise cooperate in any way with, any such alternative proposal, (iii) waive, terminate, modify or fail to enforce any provision of any “standstill” or similar obligation of any person, (iv) enter into any binding or non-binding contract with respect to any such alternative proposal, or (v) otherwise knowingly facilitate any effort or attempt to make any such alternative proposal.

The parties have also agreed to:

• as promptly as practicable (and in any event within 24 hours after receipt) advise the other parties orally and in writing of the receipt of any alternative proposal relating to its relevant parent entity, the material terms and conditions of such alternative proposal (including any changes thereto) and the identity of the person making such alternative proposal;

• keep the other parties fully informed in all material respects of the status and details (including any changes to the terms) of such alternative proposal; and

• provide to the other parties as soon as practicable after receipt or delivery thereof copies of all correspondence and other written material sent or provided to it, such relevant parent entity or any of their respective representatives from any person that describes any of the terms or conditions of such alternative proposal.

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Stockholder Actions

Both we and TAM have agreed to give the other the opportunity to participate in the defense or settlement of any stockholder action or proceeding against us and/or our directors or officers relating to the transactions contemplated by the implementation agreement and not to agree to settlement of any such action without the other party’s prior written consent.

Controlling Shareholder Covenants

Voting Agreements

Each of the TAM controlling shareholder and the Amaro family have agreed to adhere to the following until the termination of the transaction agreements or the effective time of the mergers, whichever event occurs sooner:

• cause TEP Chile to vote its voting common shares of TAM and non-voting preferred shares of TAM against any alternative proposal relating to LAN and any transaction that would reasonably be expected to result in a breach by LAN of the transaction agreements; and

• not to transfer its voting common shares of TAM and non-voting preferred shares of TAM, except for certain permitted transfers to affiliates and only if the transferor continues to be, and the transferee agrees to become, bound by the terms of the transaction agreements.

The LAN controlling shareholders have agreed to adhere to the following until the termination of the transaction agreements or the effective time of the mergers, whichever event occurs sooner:

• vote their LAN common shares in favor of the approval of the mergers, the name change and the other transactions contemplated by the transaction agreements;

• vote their LAN common shares against any alternative proposal relating to LAN and any transaction that would reasonably be expected to result in a breach by LAN of the transaction agreements; and

• not to transfer their LAN common shares, except for certain permitted transfers to affiliates and only if the transferor continues to be, and the transferee agrees to become, bound by the terms of the transaction agreements.

In addition, each of the LAN controlling shareholders, the TAM controlling shareholder and the Amaro family have agreed that it has not entered into any voting agreement, voting trust or any other agreement, arrangement or obligations (whether or not legally binding) with respect to any of the shares of capital stock of LAN, TAM, the TAM Controlling Shareholder, TEP Chile, Holdco 1, Holdco 2 or Sister Holdco that it beneficially owns and has not granted a proxy, a consent or power of attorney with respect to any such shares and will not take any such actions while the exchange offer agreement remains in effect.

Conditions to Commencement of the Exchange Offer

Mutual Conditions to the Commencement of the Exchange Offer

Holdco 2 is not permitted to commence the exchange offer unless all of the following conditions are satisfied or waived by both LAN and the Amaro family:

• the requisite LAN shareholder approval has been obtained;

• the requisite TAM shareholder approval has been obtained;

• all required approvals from CADE, FNE, TDLC, the applicable antitrust authorities in Italy, Spain and Germany or any other governmental authorities whose consent is required in connection with the transactions contemplated by the transaction agreements (other than those which the failure to obtain, individually or in the aggregate, would not reasonably be expected to have a TAM material adverse effect or a LAN material adverse effect or to result in criminal or civil sanctions against any party to the transaction agreements, its affiliates or any directors or employees of it), which we refer to collectively as, the “required approvals,” have been obtained;

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• no court or other governmental entity of competent jurisdiction has enacted, issued, promulgated, enforced or entered any law or order or taken any other action that (i) makes illegal, restrains or otherwise prohibits the commencement of the exchange offer or the completion of the transactions contemplated by the transaction agreement on the terms contemplated by the transaction agreements, or (ii) limits or impairs the ability of the parties to jointly own and operate all or a material portion of TAM and its subsidiaries or exercise full ownership of their equity interests in Holdco 1, TAM and its subsidiaries consistent with the terms of the shareholders agreements (which we refer to collectively as “restraining orders”);

• no action seeking a restraining order or to limit or impair the ability of the parties to jointly own and operate all or a material portion of TAM and its subsidiaries or exercise full ownership of each of Holdco 1, TAM and its subsidiaries consistent with the terms of the shareholders agreements (other than any action by a person other than a governmental entity that could not reasonably be expected to succeed on its merits) (which we refer to collectively as “adverse actions”);

• CVM has granted the registrations of LAN and the LAN BDRs representing the LAN common shares to be issued in the mergers on the Bovespa;

• (i) the approval for listing the LAN BDRs representing the LAN common shares to be issued in the mergers on the Bovespa, (ii) the approval for listing the LAN ADRs representing LAN common shares to be issued in the mergers on the NYSE, subject to notice of issuance, (iii) the approval for listing the LAN common shares to be issued in the mergers on the SSE and (iv) approvals for any other listings required by governmental entities has been obtained (which we refer to as collectively as the “required listings”) and such listings will become effective no later than the effective time of the mergers;

• the registration statement on Form F-4 (which we refer to as the “Form F-4”) to be filed in connection with the exchange offer has been declared effective by the SEC under the Securities Act.  No stop order suspending the effectiveness of the Form F-4 has been issued by the SEC, and no proceeding for that purpose has been initiated or threatened by the SEC;

• each of the formation and restructuring transactions described and all corporate actions required under applicable law and the terms of the transaction agreements to be taken by LAN and TAM in order to commence the exchange offer and to complete the exchange offer and the mergers has been taken; and

• the product of 0.9 and the high end of the range of economic value of LAN per LAN common share most recently determined by the appraiser approved by the shareholders of TAM is greater than or equal to the low end of the range of economic value of TAM per share of TAM stock as determined by the appraiser at such time, which we refer to as an “appraisal event,” and if the determination was in an appraisal report, the appraisal report has not been replaced by a new appraisal report by a new appraiser at the request of the holders of the outstanding free float shares in accordance with Brazilian law.

LAN Conditions to the Commencement of the Exchange Offer

Holdco 2 is not permitted to commence the exchange offer unless all of the following conditions are satisfied or waived by LAN:

• the representations and warranties of TAM regarding capitalization and the absence of events or changes since December 31, 2009 that, individually or in the aggregate, have had or would reasonably be expected to have a TAM material adverse effect must be true and correct both on the signing date and on the condition date as though made on and as of such date (except to the extent that any such representation and warranty expressly relates to a specified earlier date, in which case such representation and warranty need only be true and correct as of such specified earlier date), and except, in the case of the representations and warranties with respect to capitalization matters, for inaccuracies that, individually or in the aggregate, are de minimis in nature and amount;

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• all other representations and warranties of TAM contained in the exchange offer agreement, disregarding any TAM material adverse effect or any other materiality exception, qualification or limitation contained in the exchange offer agreement, must be true and correct on the signing date and on the day immediately preceding the commencement of the exchange offer as though made on and as of such date (except to the extent any representation and warranty expressly relates to a specified earlier date, in which case such representation and warranty need only be true and correct as of such specified earlier date), other than any failures of such representations and warranties to be so true and correct to the extent that such failures and the underlying causes of such failures, individually or in the aggregate, have not had and would not reasonably be expected to have a TAM material adverse effect;

• TAM has performed in all material respects all obligations it is required to perform under the transaction agreements on or prior to the condition date;

• LAN has received a certificate signed on behalf of TAM by the chief executive officer of TAM certifying that all of the above conditions with respect to representations and warranties and performance of the obligations of TAM have been satisfied;

• the representations and warranties of the TAM controlling shareholder and the Amaro family are true and correct on the signing date and on the Condition Date as though made on and as of the day immediately preceding the commencement of the exchange offer;

• the TAM controlling shareholder and the Amaro family have performed in all material respects all obligations it is required to perform under the transaction agreements on or prior to the condition date;

• since December 31, 2009, no change, event, circumstance or development has occurred (including any adverse change or development with respect to any such matters that occurred or existed on or prior to such date) that, individually or in the aggregate, has had or would reasonably be expected to have a TAM material adverse effect;

• since the signing date, no (i) general suspension of, or limitation on trading in securities on, the SSE, the Bovespa or the NYSE (other than a shortening of trading hours or any coordinated trading halt triggered solely as a result of a specified increase or decrease in a market index), (ii) declaration of a banking moratorium or any suspension of payments in respect of banks in Chile, Brazil or the United States, or (iii) commencement of a war or armed hostilities or airline industry events, which we refer to collectively as “market disruption events,” has occurred which, in the case of clauses (ii) and (iii), could reasonably be expected to have a TAM material adverse effect;

• the requisite Holdco 2 shareholder approval and the requisite Sister Holdco shareholder approval have been obtained;

• the holders of not more than 2.5% of the outstanding shares of LAN common stock have exercised their appraisal rights (derecho a retiro) under Chilean law with respect to the mergers;

• TEP Chile has duly executed and/or delivered to LAN copies of the TAM shareholders agreement, Holdco 1 shareholders agreement, the LATAM/TEP shareholders agreement and the control group shareholders agreement.  Holdco 1 has duly executed and/or delivered to LAN copies of the Holdco 1 shareholders agreement and the TAM shareholders agreement.  TAM has duly executed and/or delivered to LAN a copy of the TAM shareholders agreement.  The LAN controlling shareholders have duly executed and/or delivered to LAN a copy of the control group shareholders agreement; and

• CVM has approved the inclusion in the Edital of all of LAN’S conditions to the completion of the exchange offer, and none of the events described in the sixth and seventh bullets below under “LAN’s Conditions to the Completion of the Exchange Offer” has occurred since the signing date (without giving effect to any references to the commencement date contained in those sections).

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Conditions of the Amaro Family to the Commencement of the Exchange Offer

Holdco 2 is not permitted to commence the exchange offer unless all of the following conditions are satisfied or waived by the Amaro family:

• the representations and warranties of LAN regarding capitalization and the absence of events or changes since December 31, 2009 that, individually or in the aggregate, have had or would reasonably be expected to have a LAN material adverse effect must be true and correct both on the signing date and on the condition date as though made on and as of such date (except to the extent that any such representation and warranty expressly relates to a specified earlier date, in which case such representation and warranty need only be true and correct as of such specified earlier date), and except, in the case of the representations and warranties with respect to capitalization matters, for inaccuracies that, individually or in the aggregate, are de minimis in nature and amount;

• all other representations and warranties of LAN contained in the exchange offer agreement, disregarding any LAN material adverse effect or any other materiality exception, qualification or limitation contained in the exchange offer agreement, must be true and correct on the signing date and on the condition date as though made on and as of such (except to the extent any representation and warranty expressly relates to a specified earlier date, in which case such representation and warranty need only be true and correct as of such specified earlier date), other than any failures of such representations and warranties to be so true and correct to the extent that such failures and the underlying causes of such failures, individually or in the aggregate, have not had and would not reasonably be expected to have a LAN material adverse effect;

• LAN has performed in all material respects all obligations it is required to perform under the transaction agreements on or prior to the condition date;

• TAM has received a certificate signed on behalf of LAN by the chief executive officer of LAN certifying that all of the above conditions with respect to representations and warranties and performance of the obligations of LAN have been satisfied;

• the representations and warranties of the LAN controlling shareholders are true and correct on the signing date and on the condition date as though made on and as of the condition date;

• the LAN controlling shareholders have performed in all material respects all obligations it is required to perform under the transaction agreements on or prior to the condition date;

• since December 31, 2009, no change, event, circumstance or development has occurred (including any adverse change or development with respect to any such matters that occurred or existed on or prior to such date) that, individually or in the aggregate, has had or would reasonably be expected to have a LAN material adverse effect;

• since the signing date, no market disruption event has occurred that could reasonably be expected to have a LAN material adverse effect;

• LAN has duly executed and/or delivered to the Amaro family copies of the Holdco 1 shareholders agreement, the TAM shareholders agreement and the LATAM/TEP shareholders agreement.  The LAN controlling shareholders have duly executed and/or delivered to the Amaro family a copy of the control group shareholders agreement; and

• since the signing date, none of the subscription conditions described below under “Conditions to the Subscriptions” has occurred (without giving effect to any references to the commencement date contained in those provisions).

We refer to the conditions to commencement of the exchange offer collectively as the “commencement conditions.”

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Pre-Commencement Closing; Commencement of the Exchange Offer

The parties will attend a meeting (which we refer to as the “pre-commencement closing”) on the first business day (which we refer to as the “pre-commencement closing date”) following the first day on which all of the commencement conditions are satisfied or waived in accordance with the exchange offer agreement (other than any such conditions that by their nature are to be satisfied at the pre-commencement closing, but subject to the satisfaction or waiver of those conditions) (we refer to this date as the “condition date”).  Holdco 2 is required to commence the exchange offer as promptly as practicable on the first business day after the pre-commencement closing date by publishing the Edital relating to the exchange offer (which we refer to as the “Edital”) in Brazil in accordance with Brazilian law.  We refer to the date and time at which such publication occurs as the “commencement date.”

Conditions to Completion of the Exchange Offer

The only conditions to the completion of the exchange offer are the conditions set forth below. Holdco 2 is not obligated to, and will not, purchase or pay for any of the TAM shares or TAM ADSs validly tendered and not withdrawn pursuant to the exchange offer unless all of such conditions are satisfied or waived by LAN (in the case of LAN’s conditions) or both LAN and Amaro family (in the case of the mutual conditions).

Mutual Conditions to the Completion of the Exchange Offer

Holdco 2 is prohibited from purchasing any shares of TAM stock validly tendered and not withdrawn in the exchange offer unless the following conditions to the completion of the exchange offer are satisfied or waived by LAN and by the Amaro family:

• since the commencement date, none of the Bovespa, the NYSE or the SSE has revoked or suspended its approval of any of its required listings and under the terms of each such approval the relevant required listing will become effective no later than the effective time of the mergers;

• since the commencement date, no stop order suspending the effectiveness of the Form F-4 has been issued by the SEC and no proceeding for that purpose has been initiated or threatened by the SEC;

• the number of free float shares validly tendered and not withdrawn from, or that otherwise approve, the exchange offer is at least equal to the number of free float shares required to permit the delisting of the TAM preferred shares from the Bovespa under the rules of CVM and applicable Brazilian law; and

• since the commencement date, no appraisal event has occurred, the holders of the free float shares have not requested a new appraisal report and a new appraiser in accordance with Brazilian law and the holders of the outstanding free float shares no longer have the right to select a new appraiser and to cause the appraisal report to be replaced with a new appraisal report.

LAN Conditions to the Completion of the Exchange Offer

• the number of TAM shares and TAM ADSs validly tendered and not withdrawn from the exchange offer is at least equal to the number of TAM shares and TAM ADSs that need to be acquired so that, if Holdco 2 or LAN owned all the TAM shares beneficially owned by the Amaro family, it would have the right and ability to effect a statutory squeeze-out under Brazilian law of all TAM shares and TAM ADSs that do not accept the exchange offer, and the Amaro family has stated in writing to LAN that all of the subscription conditions have been satisfied or waived by them;

• since the commencement date, none of the required approvals have been revoked or amended, modified or supplemented in any way that could reasonably be expected to materially impede or interfere with, delay, postpone or materially and adversely affect the completion of the transactions contemplated by the transaction agreements;

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• since the commencement date, no court or other governmental entity of competent jurisdiction has enacted, issued, promulgated, enforced or entered any restraining order;

• no adverse action commenced since the commencement date remains pending;

• none of the following actions, events or circumstances has occurred with respect to TAM and its subsidiaries since the commencement date (or prior to that date if no executive officer of LAN had actual knowledge of such event as of the commencement date) that, individually or in the aggregate, have had an adverse effect on the businesses, revenues, operations or financial condition of TAM and its subsidiaries (which we refer to collectively as the “TAM Companies”) in any material respect: (a) changes or termination of licenses used to conduct cargo or passenger transport services or threats of any such change or termination; (b) any loss of 5% or more of the total number of slots at Congonhas Airport – São Paulo or any loss of 10% or more of the total takeoff and landing scheduled operations at certain specified airports; (c) any loss of 15% or more of the permits or air traffic rights to operate in any country in the E.U.; (d) termination or expiration of any aeronautical insurance policy covering the TAM Companies unless replaced by a substantially equivalent policy within 24 hours; (e) initiations of inquiries or investigations of the TAM Companies by an airline regulatory entity relating to safety issues that could be expected to result in the revocation of any license or to be detrimental to TAM’s public image; (f) any event that prevents the TAM Companies from operating at a certain level out of certain airports; (g) the inability of Brazil to safely control its airspace which prevents normal operations of TAM for any certain period of time; (h) aircraft accidents that result in loss of life or total loss of aircraft; (i) issuances of laws or orders that fix or regulate Brazilian passenger airline fares, challenge or impair the completion of the exchange offer or the mergers or the ability of the parties to exercise their rights, to own or receive the benefits of their interests in Holdco 1, TAM and its subsidiaries consistent with the shareholders agreements, provide for the expropriation or confiscation of TAM assets, or limit the ability to dispose of assets, suspend or limit foreign currency transactions or transfer of funds in and out of Brazil, and change the current regulations applicable to capital markets in Brazil or Chile or an increase in taxes or tax rates that adversely impacts the shareholders of TAM who enter into the exchange offer; (j) any natural disaster or similar event that causes damage to infrastructure or airspace used by or any industry affecting TAM Companies or any assets of the TAM Companies used in the ordinary course; and (k) any other event that prevents the TAM Companies from operating at least 50% of their regular flights during a 30 day period;

• since the commencement date, no default in the performance or breach, or any event that with notice, lapse of time or both would result in such a default or breach, by any TAM Company of any covenant or agreement contained in any contract to which any of them is a party under which the aggregate consideration provided or received, or to be provided or received, is greater than US$10,000,000 has occurred that continues to exist, in each case after giving effect to any waivers granted by any other party to such contract and regardless of whether or not any event of default, acceleration or other enforcement action shall have been declared or taken by any such other party;

• since the commencement date, no market disruption event that could reasonably be expected to have a TAM material adverse effect has occurred; and

• the subscriptions have been fully paid in each case in accordance with the exchange offer agreement.

Conditions to the Subscriptions

The obligations of the Amaro Family to make and pay the TEP Chile subscription, and for TEP Chile to pay the Holdco subscriptions are subject to the following conditions (we refer to these conditions collectively as the “subscription conditions”):

• since the commencement date, none of the required approvals have been revoked or amended, modified or supplemented in any way that could reasonably be expected to materially impede or interfere with, delay, postpone or materially and adversely affect the completion of the transactions contemplated by the transaction agreements;

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• since the commencement date, no court or other governmental entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any restraining order;

• no adverse action commenced since the commencement date shall remain pending;

• none of the following actions, events or circumstances has occurred with respect to LAN and its subsidiaries since the commencement date (or prior to that date if no executive officer of TAM had actual knowledge of such event as of the commencement date) that, individually or in the aggregate, have had an adverse effect on the businesses, revenues, operations or financial condition of LAN and its subsidiaries, in any material respect: (a) changes or termination of licenses used to conduct cargo or passenger transport services or threats of any such change or termination; (b) any loss of 10% or more the total takeoff and landing scheduled operations of LAN and its subsidiaries at certain specified airports; (c) any loss of 15% or more of the permits or air traffic rights to operate in the United States of America; (d) termination or expiration of any aeronautical insurance policy covering LAN and its subsidiaries unless replaced by a substantially equivalent policy within 24 hours; (e) initiations of inquiries or investigations of LAN and its subsidiaries by an airline regulatory entity relating to safety issues that could be expected to result in the revocation of any license or to be detrimental to LAN’s public image; (f) any event that prevents LAN and its subsidiaries from operating at a certain level out of certain airports; (g) the inability of Chile or Perú to safely control its airspace which prevents normal operations of LAN and its subsidiaries for any certain period of time; (h) aircraft accidents that result in loss of life or total loss of aircraft; (i) issuances of laws or orders that fix or regulate international passenger airline fares affecting 15% or more of the revenues of the international operations of LAN and its subsidiaries, impair the completion of the exchange offer or the mergers or the ability of the parties to exercise their rights and receive the benefits of their interests in Holdco 1, TAM and its subsidiaries, provide for the expropriation or confiscation of LAN assets, or limit the ability to dispose of assets, suspend or limit foreign currency transactions or transfer of funds in and out of Chile, and change the current regulations applicable to capital markets in Brazil or Chile or an increase in taxes or tax rates that adversely impacts the shareholders of TAM who enter into the exchange offer; (j) any natural disaster or similar event that causes damage to infrastructure or airspace used by or any industry affecting LAN and its subsidiaries or any assets of LAN and its subsidiaries used in the ordinary course; and (k) any other event that prevents LAN and its subsidiaries from operating at least 50% of their regular flights during a 30 day period;

• since the commencement date, no default in the performance or breach, or any event that with notice, lapse of time or both would result in such a default or breach, by LAN or any of its subsidiaries of any covenant or agreement contained in any contract to which any of them is a party under which the aggregate consideration provided or received, or to be provided or received, is greater than US$10,000,000 has occurred that continues to exist, in each case after giving effect to any waivers granted by any other party to such contract and regardless of whether or not any event of default, acceleration or other enforcement action shall have been declared or taken by any such other party

• since the commencement date, no market disruption event that could reasonably be expected to have a LAN material adverse effect has occurred.

Actions on the Expiration Date; Completion of the Exchange Offer

The date on which the auction (leilão) established in the Edital will occur as specified in the Edital is referred to as the “expiration date”.

The transaction agreements describe the schedule of events on the expiration date as follows:

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• at 2:00 p.m., São Paulo time, on the expiration date, the Bovespa will inform LAN, Holdco 2 and the Amaro family whether or not the minimum conditions have been satisfied;

• promptly after receiving that notice (but no later than 2:10 p.m., São Paulo time, on the expiration date), we will notify the Amaro family in writing as to whether all of the exchange offer conditions (other than the condition relating to the TEP Chile subscription) have been satisfied or irrevocably waived by us;

• if we state in that notice that all exchange offer conditions are satisfied or waived by us, then promptly after receiving our notice (but no later than 2:20 p.m., São Paulo time, on the expiration date), the Amaro family will inform us in writing whether or not all of the exchange offer conditions and the subscription conditions have been satisfied or irrevocably waived by them, and if all such conditions have been satisfied or waived by them, then promptly after sending that notice (but no later than 2:30 p.m., São Paulo time, on the expiration date) the Amaro family will subscribe and pay for all shares of TEP Chile stock in exchange for all of the voting common shares of TAM and non-voting preferred shares of TAM held by them, which we refer to as the “TEP Chile subscription.” The transaction agreements require that, as a result of the TEP Chile subscription, each member of the Amaro family will have the same ownership in TEP Chile as he or she had in the TAM controlling shareholder;

• prior to the date of this annual report on Form 20-F, TEP Chile subscribed for non-voting shares of Holdco 1 in exchange for all of the voting common shares of TAM to be contributed by the Amaro family to TEP Chile and subscribed for Sister Holdco shares in exchange for all of the non-voting shares of Holdco 1, 6.2% of the voting shares of Holdco 1 and all of the non-voting preferred shares of TAM to be contributed by the Amaro family to TEP Chile.  Immediately after subscription and payment of the TEP Chile subscription, TEP Chile will pay for the Holdco subscriptions by paying Holdco 1 with all of the voting common shares of TAM contributed by the Amaro family and pay Sister Holdco with all of the non-voting shares of Holdco 1, 6.2% of the voting shares of Holdco 1 and all of the non-voting preferred shares of TAM contributed by the Amaro family.  We refer to the subscriptions for shares of Holdco 1 and Sister Holdco as the “Holdco subscriptions” and the Holdco subscriptions and TEP Chile subscription collectively as the “subscriptions”;

• promptly after payment of the subscriptions (but no later than 2:40 p.m., São Paulo time, on the expiration date), we and the Amaro family will issue a press release announcing that all of the exchange offer conditions have been satisfied or irrevocably waived; and

• the auction will commence at 3:00 p.m., São Paulo time (or such other time as the Bovespa may determine), on the expiration date, and the Amaro family will cause Holdco 2 to complete the exchange offer on the expiration date by accepting for exchange and exchanging (with LAN shares issuable in the mergers) all TAM shares and TAM ADSs validly tendered into and not withdrawn from the exchange offer that Holdco 2 is obligated to purchase pursuant to the terms of the exchange offer. The completion of the exchange offer will be deemed to be the purchases of TAM shares and TAM ADSs pursuant to the auction, and such purchases will be settled on the third business day following the expiration date in accordance with the applicable procedures of the Bovespa.

However, if (x) either we or the Amaro family do not state that all of the conditions described above have been satisfied or irrevocably waived by us or (y) the TEP Chile subscription or any of the payments required pursuant to the subscriptions are not made in full when required by the transaction agreements, then the auction will not occur and the exchange offer will expire without the purchase of any TAM shares or TAM ADSs.

Notwithstanding the foregoing, if the auction commences at any time other than 3:00 p.m., São Paulo time, on the expiration date, then each of the times specified above (except for the last time that a withdrawal may be made) will be adjusted by the same amount that the actual time of the commencement of the Auction differs from 3:00 p.m., São Paulo time.

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Extensions and Amendments

The exchange offer will initially expire on the date provided in the Edital.  However, if all of the exchange offer conditions are not satisfied at, or waived by the parties prior to, the scheduled expiration time for the exchange offer, then we or the Amaro family (if they are entitled to the benefit of the unsatisfied condition) may cause Holdco 2 to request permission from the CVM to extend the expiration time for the exchange offer in maximum increments of 30 days to no later than 28 days after the commencement date. If both we and the Amaro family agree to request a modification to the terms and conditions of the exchange offer or revocation of the exchange offer, the Amaro family is required to cause Holdco 2 to request permission from the CVM to modify the terms and conditions of the exchange offer or to revoke the exchange offer.  We and the Amaro family have agreed to cause Holdco 2 to request permission from the CVM to revoke the exchange offer if the transaction agreements terminate in accordance with their terms.

Post-Completion Board Meeting

We are required to convene a special meeting of our board of directors to approve the issuance of LAN common shares issuable pursuant to the mergers as soon as practicable, but not later than two business days following the completion of the exchange offer.

The Mergers; Directors and Officers; By-laws

Holdco 2 Merger

The implementation agreement provides for the merger of Holdco 2 with and into LAN after the completion of the exchange offer and prior to the settlement of the purchases made pursuant to the exchange offer.  As the surviving corporation, we will continue to exist following the Holdco 2 merger.  Pursuant to the Holdco 2 merger, each share of Holdco 2 stock (including those issuable pursuant to the settlement of the purchases made pursuant to the Auction) will be converted into a LAN common share at a ratio of 0.9 of a LAN common share per share of Holdco 2 stock (we refer to this ratio as the “Holdco 2 exchange ratio”).  Holders of TAM preferred shares (including those represented by TAM ADSs) will receive, by virtue of the Holdco 2 merger, LAN common shares in the following form in exchange for their TAM shares or TAM ADSs tendered and accepted for exchange in the exchange offer, depending on the form of TAM preferred shares tendered in the exchange offer:

• holders of TAM ADSs that are tendered and accepted for exchange in the exchange offer will receive LAN ADRs issued pursuant to the deposit agreement, dated as of March 25, 2003, among LAN, the LAN depositary, and the record holders and beneficial owners of LAN ADRs from time to time;

• holders of TAM shares registered under Resolution No. 2,689/00 of January 26, 2000 enacted by the CMN that are tendered and accepted for exchange in the exchange offer will receive LAN common shares in the form of LAN BDRs or LAN ADRs, as permitted by applicable law; and

• holders of all other TAM shares tendered and accepted for exchange in the exchange offer will receive LAN common shares in the form of BDRs representing such shares to be issued pursuant to a deposit agreement in customary form among LAN, a depositary agent to be selected by LAN and reasonably acceptable to TAM and the holders of LAN BDRs from time to time.

We are required to pay or cause to be paid all deposit fees and other expenses payable in connection with the issuance of such LAN ADRs and LAN BDRs.

Immediately after the completion of the Holdco 2 merger, we will contribute any TAM common shares beneficially owned by Holdco 2 immediately prior to such merger to Holdco 1 in exchange for new non-voting shares of Holdco 1 on a one-for-one basis.  After this contribution, we will increase our ownership percentage of the outstanding voting shares of Holdco 1 by converting our non-voting shares of Holdco 1 into voting shares of Holdco 1 to (A) 100% minus (B) 80% divided by the percentage of the outstanding TAM common shares owned by Holdco 1 determined on a primary basis after giving effect to such contribution.

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Voting shares of Holdco 1 have the exclusive right to vote on, approve or consent to all matters that are subject to any vote of or approval by the shareholders of Holdco 1 under the applicable law of Chile or otherwise (other than the limited voting rights of the non-voting shares of Holdco 1) and have no economic rights other than the right to receive a nominal dividend (we refer to these rights as the “dividend rights” ).  Non-voting shares of Holdco 1 have the exclusive right to receive all dividends, distributions or other amounts payable by Holdco 1 in respect of any shares of its capital stock other than the dividend rights and have no right to vote on or approve any matter that is subject to any vote of or approval by the shareholders of Holdco 1 under applicable law of Chile or otherwise other than the rights to vote on and approve the matters requiring the approval of the holders of such shares under the applicable law of Chile or otherwise.

Sister Holdco Mergers

The implementation agreement also provides for the merger of Sister Holdco with and into LAN after the completion of the exchange offer and prior to the settlement of the purchases made pursuant to the exchange offer. As the surviving corporation, LAN will continue to exist following the Sister Holdco merger. We refer to the time that the mergers become effective as the “effective time.”

Pursuant to the Sister Holdco merger, each share of Sister Holdco stock will be converted into 0.90 of a LAN common share at a ratio of 0.9 of a LAN common share per share of Sister Holdco stock (we refer to this ratio as the “Sister Holdco exchange ratio” ). We will pay or cause to be paid all deposit fees and other expenses payable in connection with the issuance of such LAN common shares.

By-Laws

The parties are required to take all necessary action so that immediately following the effective time the by-laws of Holdco 1, Sister Holdco and Holdco 2 shall be in the forms attached to the exchange offer agreement.

Directors

We and the controlling shareholder are required to discuss in good faith and agree upon the individuals who will be directors of LAN, Holdco 1, TAM and their subsidiaries as of the effective time and to take all necessary action to ensure that immediately following, and on the same day as, the effective time, the individuals selected for election to the board of directors of LAN, Holdco 1, TAM and their subsidiaries by each of us and TEP Chile pursuant to the Holdco 1 shareholders agreement, by each of us and TEP Chile pursuant to the TAM shareholders agreement and by each of the LAN controlling shareholders and TEP Chile pursuant to the control group shareholders agreement shall be the directors of LAN, Holdco 1, TAM and their subsidiaries.  For a discussion of the parties rights to elect the directors of LAN, Holdco 1, TAM and their subsidiaries, see the “Shareholders Agreements—Voting Agreements.”

Effects of the Mergers

Capital Increase

If and when our shareholders approve the mergers, the share capital of LAN will be increased by an aggregate amount equal to the sum of the share capital of Holdco 2 and the share capital of Sister Holdco at such time. We refer to this capital increase as the “initial capital increase.” After the completion of the mergers, the share capital of LAN will be increased by the amount by which the net asset value of the shares of TAM stock contributed pursuant to the subscriptions exceeds, or is decreased by the amount by which such net asset value is less than, the initial capital increase.

Treatment of Holdco 2 Stock

At the effective time, each share of Holdco 2 Stock issued and outstanding immediately prior to the effective time will be converted into the right to receive a fraction of a validly issued, fully paid and non-assessable LAN common share at the Holdco 2 exchange ratio, less applicable withholding taxes.  Each share of Sister Holdco stock issued and outstanding immediately prior to the effective time will be converted into the right to receive a fraction of a validly issued, fully paid and non-assessable LAN common share at the Sister Holdco exchange ratio, less applicable withholding taxes.

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TAM Options

TAM and the TAM board of directors, as applicable, were required prior to the commencement of the exchange offer to adopt any resolutions and take any actions necessary to ensure that (a) from and after the effective time each TAM stock option outstanding immediately prior to the effective time, whether vested or unvested, will be exercisable only when vested and only for an amount in cash equal to the product of (i) the total number of shares of TAM stock in respect of which such TAM stock option is exercisable, and (ii) the amount (if any) by which (x) the product of the Holdco 2 exchange ratio and the closing price of the LAN common shares on the SSE on the last business day prior to the date on which such TAM stock option was exercised exceeds (y) the exercise price per share of TAM stock under such TAM stock option, less any applicable taxes required to be withheld with respect to such payment, and (b) none of execution, delivery or performance of the implementation agreement or the completion of the mergers or any other transactions contemplated by implementation agreement will, directly or indirectly, cause or result in any acceleration of the vesting of any TAM stock options, whether prior to, on or after the effective time.

Exchange Fund

Prior to the effective time, we will deposit or cause to be deposited with the US exchange agent, for the benefit of the holders of Holdco 2 stock and Sister Holdco stock, certificates or, at our option, evidence of shares in book-entry form, representing LAN common shares, including any cash to be paid in lieu of fractional LAN common shares, as discussed below in this section.  We refer to such certificates or evidence of book-entry form, as the case may be, for LAN common shares and such cash paid in lieu of fractional shares collectively as the “exchange fund.”  Any interest or income produced from investments of the exchange fund by the US exchange agent will not be deemed part of the exchange fund and will be payable to us.

Fractional Shares

No certificates or scrip representing fractional LAN common shares will be issued in the mergers or pursuant to the statutory squeeze-out and such fractional shares will not entitle the owner thereof to vote or to any rights of a shareholder of LAN. In lieu of fractional shares, we will pay each holder of a fractional LAN common share an amount in cash in US dollars equal to the product of (a) the fractional LAN common shares to which such holder would otherwise be entitled after taking into account all shares of Holdco 2 Stock or Sister Holdco stock owned of record by such holder immediately prior to the effective time, and (b) the closing price of the LAN common shares on the SSE on the last trading day immediately preceding the effective time (as reported in www.bolsadesantiago.com or, if not reported therein, by another authoritative source).

Statutory Squeeze-Out

After the completion of the exchange offer, if permitted under applicable Brazilian law, we (as the surviving corporation of the Holdco 2 merger) will effect a statutory squeeze-out of any holders of voting common shares of TAM and/or non-voting preferred shares of TAM (including those represented as TAM ADSs) other than those beneficially owned by the Amaro family that did not accept the exchange offer (we refer to these shares collectively as “non-tendered shares”).  In this statutory squeeze-out, the holders of non-tendered shares will have the right to receive cash in an amount equal to the product of (i) the number of LAN common shares that it would have received pursuant to the exchange offer in respect of its non-tendered shares (assuming it could have received fractional LAN common shares), and (ii) the closing price of the LAN common shares on the SSE on the day on which the exchange offer is completed.  After the squeeze-out of all remaining voting common shares of TAM, LAN will (i) contribute all voting ordinary shares of TAM acquired in the exchange offer to Holdco 1 in exchange for non-voting shares of Holdco 1, and (ii) increase its ownership percentage of the outstanding voting shares of Holdco 1 to 20% by converting its non-voting shares of Holdco 1 into voting shares of Holdco 1.

Delistings

Each of the TAM controlling shareholder and TAM are required to use its or their commercially reasonable efforts to cause (i) the TAM preferred shares to be delisted from the Bovespa if the delisting condition is satisfied with respect to such class of TAM stock and (ii) the TAM ADSs to be delisted from the NYSE as soon as practicable after the effective time.

Termination

The transaction agreements will terminate automatically if and when (i) the exchange offer expires in accordance with its terms or is revoked with the permission of CVM without the purchase of any TAM stock or (ii) if the product of 0.9 and the high end of the range of economic value of LAN per share of LAN common stock as determined by the appraiser at any time is less than the low end of the range of economic value of TAM per share of TAM stock as determined by the appraiser at such time.  In addition, LAN and the Amaro family may terminate the transaction agreements by mutual written consent.

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The transaction agreements may also be terminated and the exchange offer and the mergers may be abandoned at any time prior to the commencement of the exchange offer as follows, whether before or after receipt of any requisite shareholder approvals:

· by either LAN or the Amaro family:

o if the exchange offer has not commenced by December 31, 2011 (as it may be extended as set forth below, which we refer to as the “outside date”); however if all conditions to commencement of the exchange offer, other than the conditions relating to receipt of all required approvals and absence of pending adverse actions and conditions that by their nature are to be satisfied at the closing to be held on the condition date, then the outside date may be extended until June 30, 2012 at the election of the Amaro family or LAN by written notice to the other party;

o if any governmental entity of competent jurisdiction refuses to grant any required approval (other than any approval required from CVM with respect to the inclusion in the Edital of any of the LAN’s conditions to the completion of the exchange offer) and such refusal has become final and nonappealable or any governmental entity of competent jurisdiction has enacted, issued, promulgated, enforced or entered any restraining order that has become final and non-appealable, and such event would give rise to the failure of the condition relating to receipt of all required approvals or absence of restraining order;

o if the vote of the holders of LAN common stock at the LAN shareholders meeting to approve the mergers and the other transactions contemplated by the transaction agreements has been taken and completed and the requisite LAN shareholder approval is not obtained; or

o if TAM has called five TAM shareholders meetings and a quorum is not present at any such meeting or if a quorum was present and the vote of the holders of the free float shares at the TAM shareholders meeting to select an appraiser is taken and completed but the requisite TAM shareholder approval is not obtained;

however, none of the termination rights described in the preceding bullet points will be available to any party whose material breach of a representation, warranty or covenant in any transaction agreement has been a principal cause of the failure of the exchange offer to commence by the outside date or the failure of the condition giving rise to such termination right, as applicable.

· by LAN:

o if TAM, the TAM controlling shareholder or the Amaro family has breached or failed to perform any of its representations, warranties, covenants or agreements set forth in the transaction agreements or any of such representations and warranties becomes untrue as of any date after the signing date, which breach or failure to perform or untruth (i) would give rise to the failure of the condition relating to accuracy of the representations and warranties of TAM, the TAM controlling shareholder and the Amaro family or compliance by any of them with their obligations under the transaction agreements and (ii) is not capable of being cured or, if capable of being cured, is not cured by TAM, the TAM controlling shareholder or the Amaro family, as applicable, by the earlier of (A) the day before the outside date and (B) the 30th calendar day following receipt of written notice of such breach or failure to perform from LAN;

o prior to the commencement of the exchange offer if CVM has refused to grant its approval to the inclusion in the Edital of any of the LAN’s conditions to the completion of the exchange offer; or

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o if (i) the TAM board of directors fails to make and publicly announce its recommendation of the exchange offer to its shareholders promptly after the signing date or the TAM board exchange offer recommendation (we refer to these recommendations collectively as the “TAM board recommendations”), (ii) the TAM board of directors or any committee thereof (x) withholds, withdraws or modifies or qualifies in any manner adverse to LAN either of the TAM board recommendations, (y) approves, adopts, or recommends any alternative proposal, or (z) makes, causes to be made or resolves to make or cause to be made any public statement proposing or announcing an intention to take any of the preceding actions (which we refer to as a “TAM board recommendation change”) or (iii) the TAM board of directors fails to publicly reaffirm the TAM board recommendations as promptly as practicable (but in any event within two business days) after receipt of a written request by LAN to provide such reaffirmation, and in any such case all of the directors designated for election to the TAM board of directors by the TAM controlling shareholder and/or the Amaro family do not vote against the TAM board recommendation change or in favor of reaffirming the TAM board recommendations.

· by the Amaro family:

o if LAN or the LAN controlling shareholders has breached or failed to perform any of its representations, warranties, covenants or agreements set forth in the transaction agreements or any of such representations and warranties becomes untrue as of any date after the signing date, which breach or failure to perform or untruth (i) would give rise to the failure of the condition relating to accuracy of the representations and warranties of LAN and the LAN controlling shareholders or compliance by any of them with their obligations under the transaction agreements and (ii) is not capable of being cured or, if capable of being cured, is not cured by LAN or the LAN controlling shareholders, as applicable, by the earlier of (A) the day before the outside date and (B) the 30th calendar day following receipt of written notice of such breach or failure to perform from TAM; or

o if (i) the LAN board of directors fails to unanimously recommend the transactions contemplated by the implementation agreement to its shareholders promptly after the signing date or to make the LAN board merger recommendation (we refer to these recommendations collectively as the “LAN board recommendations”) on or prior to the LAN shareholder meeting to approve the matters recommended by the LAN board of directors, (ii) the LAN board of directors or any committee thereof (x) withholds, withdraws or modifies or qualifies in any manner adverse to TAM either of the LAN board recommendations, (y) approves, adopts, or recommends any alternative proposal, or (z) makes, causes to be made or resolves to make or cause to be made any public statement proposing or announcing an intention to take any of the preceding actions (which we refer to collectively as, a “LAN board recommendation change”) or (iii) the LAN board of directors fails to publicly reaffirm the LAN board recommendations as promptly as practicable (but in any event within two business days) after receipt of a written request by TAM to provide such reaffirmation, and in either such case all of the directors designated for election to the LAN board of directors by the LAN controlling shareholders did not vote against the LAN board recommendation change or in favor of reaffirming the LAN board recommendations.

Termination Fees

TAM is required to pay us a fee equal to $200 million (which we refer to as the “TAM termination fee”) and reimburse LAN for all documented out-of-pocket expenses incurred by it or any of its subsidiaries in connection with the transaction agreements and the transactions contemplated by the transaction agreements up to a maximum amount of $25 million (no later than the second business day after TAM receives documentation for reimbursement) if:

• LAN terminates the transaction agreements due to a TAM board change of recommendation; or

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• within 12 months after the date that a competing proposal termination occurs, TAM or any of its subsidiaries completes any transaction that constitutes a competing proposal with the person that made the competing proposal or any of its affiliates, enters into any binding or non-binding agreement with such person or any of its affiliates providing for a transaction that constitutes a competing proposal or the TAM board of directors approves or recommends to its shareholders or does not oppose any competing proposal made by such person or any of its affiliates (in each case regardless of whether such competing proposal was made or announced or became publicly known before or after termination of the transaction agreements and in any such case the TAM termination fee is payable on the date that is the first to occur of the event(s) referred to in this paragraph).

A “competing proposal termination” occurs if (i)

• (A) any person makes an alternative proposal with respect to TAM or LAN, or a “competing proposal,” to any party or its representatives,

• (B) a competing proposal by any person becomes publicly known, or

• (C) any person publicly announces an intention (whether or not conditional) to make a competing proposal; and

(ii) the transaction agreements automatically terminate solely because either of the minimum conditions is not satisfied or because an appraisal event occurs.

We are required to pay TAM a fee equal to $200 million (which refer to as the “LAN termination fee”) and reimburse TAM for all documented out-of-pocket expenses incurred by it or any of its subsidiaries in connection with the transaction agreements and the transactions contemplated by the transaction agreements up to a maximum amount of $25 million (no later than the second business day after we receive documentation for reimbursement) if:

• the Amaro family terminates the transaction agreements due to a LAN board change of recommendation; or

• within 12 months after the date that a competing proposal termination occurs, we or any of our subsidiaries complete any transaction that constitutes a competing proposal with the person that made the competing proposal or any of its affiliates, enter into any binding or non-binding agreement with such person or any of its affiliates providing for a transaction that constitutes a competing proposal or our board of directors approves or recommends to its shareholders or does not oppose any competing proposal made by such person or any of its affiliates (in each case regardless of whether such competing proposal was made or announced or became publicly known before or after termination of the transaction agreements and in any such case the LAN termination fee is payable on the date that is the first to occur of the event(s) referred to in this paragraph).

Remedies

If either we or TAM fails promptly to pay the amount due to the other party as a result of the termination of the transaction agreements under certain circumstances and, in order to obtain such payment, the other party commences a suit that results in a judgment against us or TAM for all or a portion of the TAM termination fee or the LAN termination fee, as applicable, such party is required to pay to the other party its costs and expenses (including reasonable attorneys’ fees and expenses) in connection with such suit, together with interest on the amount of the TAM termination fee or the LAN termination fee, as applicable, accruing from the date such payment was required to be made pursuant to the implementation agreement until the date of payment at the six-month LIBOR rate in effect on the date such payment was required to be made plus 3%.  The right to receive the fees and expenses payable described above under “—Termination Fees” will be in addition to, and not in lieu of, any other remedies a party may have at law or in equity with respect to breaches of the implementation agreement by the other party.

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Indemnification

Indemnification by LAN

We are required to indemnify, defend and hold the TAM Controlling Shareholder, its affiliates and their respective directors, officers, employees and shareholders harmless from and against any and all damages, losses, charges, liabilities, claims, demands, actions, suits, proceedings, payments, judgments, settlements, assessments, deficiencies, taxes, interest, penalties, and costs and expenses (including reasonable attorneys’ fees and disbursement), which we refer to collectively as “indemnifiable losses,” incurred by any of them (whether or not involving a claim by any third party) arising out of or resulting from (i) the failure of the exchange offer to be completed solely as a result of any failure by LAN to confirm in writing to the controlling shareholders of TAM on the expiration date that any exchange offer condition waivable only by LAN (other than the squeeze-out condition) was satisfied if (but only if) such condition was in fact satisfied or (ii) any failure of the exchange offer to be completed after the controlling shareholders of TAM has paid for the TEP Chile subscription.

Indemnification by the TAM Controlling Shareholders

The controlling shareholders of TAM, jointly and severally, are required to indemnify, defend and hold us, our affiliates and our respective directors, officers, employees and shareholders harmless from and against any and all indemnifiable losses incurred by any of us (whether or not involving a claim by a third party) arising out of or resulting from any failure by the controlling shareholders of TAM to confirm in writing to us on the expiration date that any of the subscription conditions was satisfied if (but only if) such condition was in fact satisfied.

Access

Subject to certain exceptions, both we and TAM will, upon reasonable prior written notice, afford the other and its authorized representatives reasonable access to it and furnish the other information concerning its business, properties and personnel as may reasonably be requested until the completion of the exchange offer or termination of the transaction agreements, whichever occurs sooner.

Amendment

The parties are not permitted to amend transaction agreements after the commencement of the exchange offer.

Expenses

Except for the termination fees described above, each party is required to pay its own fees and expenses that it incurs in connection with the transaction agreements, the mergers and the other transactions contemplated by the transaction agreements, regardless of whether the exchange offer is commenced or the exchange offer and the mergers are completed, except that expenses incurred in connection with the printing and mailing of this offer to exchange/prospectus and the filing fee for the Form F-4 will be shared equally by LAN, on the one hand, and TAM controlling shareholders, on the other hand.

Choice of Law and Jurisdiction

The transaction agreements are governed by New York law with regard to all matters other than the authorization and execution of the transaction agreements, which are governed by the laws of each party’s jurisdiction of incorporation.

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SHAREHOLDERS AGREEMENTS

As discussed above under the section entitled “Proposed Combinaton with TAM,” following the combination of LAN and TAM, TAM will continue to exist as a subsidiary of Holdco 1 (and as an indirect subsidiary of LAN) and our name will be changed to “LATAM Airlines Group S.A.,” or “LATAM.” Prior to the LAN shareholders meeting, we and the LAN controlling shareholders will enter into several shareholders agreements with TAM and TEP Chile to set forth our agreement with respect to the governance, management and operation of LAN, Holdco 1, TAM and their respective subsidiaries (we refer to these entities collectively as the “LATAM Group.”) following the effective time.  The shareholders agreements set forth an extensive set of principles that will apply to the corporate governance and organization of the LATAM Group following the effective time, which are summarized below.  Pursuant to their terms, the shareholders agreements will become effective only if and at the time that Holdco 1 becomes a holder of at least 80% of the outstanding voting common shares of TAM.

Governance and Management of LATAM Group

The control group shareholders agreement and the LAN-TEP shareholders agreement set forth the parties’ agreement on the governance and management of the LATAM Group following the effective time.  The key provisions of these agreements are summarized below but are qualified in their entirety by reference to the full text of these agreements, which are attached to this annual report on Form 20-F as Exhibits 4.11, and 4.12. For a full understanding of these agreements, we advise you to read these agreements carefully and in their entirety. We refer to the shareholders agreement among the LAN controlling shareholders and TEP Chile, which sets forth the parties’ agreement concerning the governance, management and operation of the LATAM Group, and voting and transfer of their respective LAN common shares and TEP Chile’s voting shares of Holdco 1, following the effective time as the “control group shareholders agreement.”  We refer to the shareholders agreement between us and TEP Chile, which sets forth our agreement concerning the governance, management and operation of the LATAM Group following the effective time as the “LAN-TEP shareholders agreement.”

Composition of the LATAM Board

Mr. Mauricio Rolim Amaro will be the chairman of our board of directors for the first two years following the effective time. If Mr. Amaro vacates this position for any reason within that two-year period, TEP Chile has the right to select a replacement to complete his term. Thereafter, our board of directors will appoint any of its members as the chairman of our board of directors, from time to time, in accordance with our by-laws.

LATAM Board Committees

Promptly after the effective time, our board of directors will establish four committees to review, discuss and make recommendations to our board of directors.  These include a Strategy Committee, a Leadership Committee, a Finance Committee and a Brand, Product and Frequent Flyer Program Committee.  The Strategy Committee will focus on the corporate strategy, current strategic issues and the three-year plans and budgets for the main business units and functional areas and high-level competitive strategy reviews.  The Leadership Committee will focus on, among other things, group culture, high-level organizational structure, appointment of the chief executive officer (Vice Presidente Ejecutivo), (LATAM CEO) of the LATAM Group (which we refer to as the “LATAM CEO”) and his or her other reports, corporate compensation philosophy, compensation structures and levels for the LATAM CEO and other key executives, succession or contingency planning for the LATAM CEO and performance assessment of the LATAM CEO.  The Finance Committee will be responsible for financial policies and strategy, capital structure, monitoring policy compliance, tax optimization strategy and the quality and reliability of financial information. Finally, the Brand and Frequent Flyer Program Committee will be responsible for brand strategies and brand building initiatives for the corporate and main business unit brands, the main characteristics of products and services for each of the main business units, frequent flyer program strategy and key program features and regular audit of brand performance.

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Management of the LATAM Group

Enrique Cueto, currently our CEO, will be the LATAM CEO following the effective time.  The LATAM CEO will be the highest ranked officer of the LATAM Group and will report directly to the LATAM board of directors.  The LATAM CEO will be charged with the general supervision, direction and control of the business of the LATAM Group and certain other responsibilities set forth in the LAN-TEP shareholders agreement.  After any departure of the LATAM CEO, our board of directors will select his or her successor after receiving the recommendation of the Leadership Committee.

Ignacio Cueto, currently our president and chief operating officer (Gerente General), or the “COO”, will be the COO of LATAM, or the “LATAM COO,” following the effective time.  The LATAM COO will report directly to the LATAM CEO and will have general supervision, direction and control of the passenger and cargo operations of the LATAM Group, excluding those conducted by Holdco 1, TAM and its subsidiaries, and the international passenger business of the LATAM Group.  The LATAM COO, together with the TAM Group CEO, will recommend a candidate to the LATAM CEO to serve as the head of the international passenger business of the LATAM Group (including both long haul and regional operations), who shall report jointly to the LATAM COO and the TAM Group CEO.  The key executives of the LATAM Group (other than the LATAM CEO and those in the TAM Group) will be appointed by, and will report, directly or indirectly, to the LATAM CEO.

The head office of the LATAM Group will continue to be located in Santiago, Chile following the effective time.

Governance and Management of Holdco 1 and TAM

The Holdco 1 shareholders agreement and the TAM shareholders agreement set forth the parties’ agreement on the governance and management of Holdco 1, TAM and its subsidiaries (we refer to these entities collectively as the “TAM Group”) following the effective time.  The key provisions of these agreements are summarized below but are qualified in their entirety by reference to the full text of these agreements, which are attached to this annual report on Form 20-F as Exhibits 4.13, and 4.14. For a full understanding of these agreements, we advise you to read these agreements carefully and in their entirety. We refer to the shareholders agreement between us, Holdco 1 and TEP Chile, which sets forth our agreement concerning the governance, management and operation of Holdco 1, and voting and transfer of voting shares of Holdco 1, following the effective time as the “Holdco 1 shareholders agreement” and to the shareholders agreement between us, Holdco 1, TAM and TEP Chile, which sets forth our agreement concerning the governance, management and operation of TAM and its subsidiaries following the effective time as the “TAM shareholders agreement.”

Composition of the Holdco 1 and TAM Boards

The Holdco 1 shareholders agreement and TAM shareholders agreement generally provide for identical boards of directors and the same chief executive officer at Holdco 1 and TAM, with us appointing two directors and TEP Chile appointing four directors (including the chairman of the board of directors).  For the first two years after the effective time, the chairman of the Holdco 1 and TAM boards of directors will be Maria Cláudia Oliveira Amaro.

The control group shareholders agreement provides that the persons elected by or on behalf of the LAN controlling shareholders or the TAM Controlling Shareholder to our board of directors must also serve on the boards of directors of both Holdco 1 and TAM.

Management of Holdco 1 and TAM

The day-to-day business and affairs of Holdco 1 will be managed by the TAM Group CEO under the oversight of the board of directors of Holdco 1.  The day-to-day business and affairs of TAM will be managed by the TAM Diretoria under the oversight of the board of directors of TAM.  The “TAM Diretoria” will be comprised of the TAM Group CEO, the TAM CFO, the TAM COO and the TAM CCO.  Marco Bologna, currently the CEO of TAM, will be the initial CEO of Holdco 1 and TAM, or the “TAM Group CEO” and any successor CEO will be selected by us from three candidates proposed by TEP Chile.  The TAM Group CEO will have general supervision, direction and control of the business and operations of the TAM Group (other than the international passenger business of the LATAM Group) and will carry out all orders and resolutions of the board of directors of TAM.  The initial chief financial officer of TAM, or the “TAM CFO,” will be jointly selected by us and TEP Chile and any successor CFO will be selected by TEP Chile from three candidates proposed by us.  The chief operating officer of TAM, or the “TAM COO,” and chief commercial officer of TAM, or the “TAM CCO,” will be jointly selected and recommended to the TAM board of directors by the TAM Group CEO and TAM CFO and approved by the TAM board of directors.  These shareholders agreements also regulate the composition of the boards of directors of subsidiaries of TAM.

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TAM will continue to be headquartered in São Paulo, Brazil following the effective time.

Supermajority Actions

Certain actions by Holdco 1 or TAM require supermajority approval by the board of directors or the shareholders of Holdco 1 or TAM which effectively require the approval of both us and TEP Chile before the specified actions can be taken.  Actions that require supermajority approval of the Holdco 1 board of directors or the TAM board of directors include, as applicable:

• to approve the annual budget and business plan and the multi-year business (which we refer to collectively as the “approved plans”), as well as any amendments to these plans;

• to take or agree to take any action which causes, or will reasonably cause, individually, or in the aggregate, any capital, operating or other expense of any TAM Company and its subsidiaries to be greater than (i) the lesser of 1% of revenue or 10% of profit under the approved plans, with respect to actions affecting the profit and loss statement, or (ii) the lesser of 2% of assets or 10% of cash and cash equivalents (as defined by IFRS) as set forth in the approved plan then in effect , with respect to actions affecting the cash flow statement;

• to create, dispose of or admit new shareholders to any subsidiary of the relevant company, except to the extent expressly contemplated in the approved plans;

• to approve the acquisition, disposal, modification or encumbrance by any TAM company of any asset greater than $15 million or of any equity securities or securities convertible into equity securities of any TAM Company or other company, except to the extent expressly contemplated in the approved plans;

• to approve any investment in assets not related to the corporate purpose of the relevant company, except to the extent expressly contemplated in the approved plans;

• to enter into any agreement in an amount greater than $15 million, except to the extent expressly contemplated in the approved plans;

• to enter into any agreement related to profit sharing, joint ventures, business collaborations, alliance memberships, code sharing arrangements, except as approved by the business plans and budget then in effect, except to the extent expressly contemplated in the approved plans;

• to terminate, modify or waive any rights or claims of a relevant company or its subsidiaries under any arrangement in any amount greater than $15 million, except to the extent expressly contemplated in the approved plans;

• to commence, participate in, compromise or settle any material action with respect to any litigation or proceeding in an amount greater than $15 million, relating to the relevant company, except to the extent expressly permitted in the approved plans;

• to approve the execution, amendment, termination or ratification of agreements with related parties, except to the extent expressly contemplated in the approved plans;

• to approve any financial statements, amendments, or to any accounting, dividend or tax policy of the relevant company;

• to approve the grant of any security interest or guarantee to secure obligations of third parties;

• to appoint executives other than the Holdco 1 CEO or the TAM Diretoria or to re-elect the then current TAM CEO or TAM CFO; and

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• to approve any vote to be cast by the relevant company or its subsidiaries in its capacity as a shareholder.

Actions requiring supermajority shareholder approval include:

• to approve any amendments to the by-laws of any relevant company or its subsidiaries in respect to the following matters: (i) corporate purpose, (ii) corporate capital; (iii) the rights inherent to each class of shares and its shareholders; (iv) the attributions of shareholder regular meetings or limitations to attributions of the board of directors; (v) changes in the number of directors or officers; (vi) the term; (vii) the change in the corporate headquarters of a relevant company; (viii) the composition, attributions and liabilities of management of any relevant company; and (ix) dividends and other distributions;

• to approve the dissolution, liquidation, winding up of a relevant company;

• to approve the transformation, merger, spin-up or any kind of corporate re-organization of a relevant company;

• to pay or distribute dividends or any other kind of distribution to the shareholders;

• to approve the issuance, redemption or amortization of any debt securities, equity securities or convertible securities;

• to approve a plan or the disposal by sale, encumbrance or otherwise of 50% or more of the assets, as determined by the balance sheet of the previous year, of Holdco 1;

• to approve the disposal by sale, encumbrance of otherwise of 50% or more of the assets of a subsidiary of Holdco 1 representing at least 20% of Holdco 1 or to approve the sale, encumbrance or disposition of equity securities such that Holdco 1 loses control;

• to approve the grant of any security interest or guarantee to secure obligations in excess of 50% of the assets of the relevant company; and

• to approve the execution, amendment, termination or ratification of acts or agreement with related parties but only if applicable law requires approval of such matters.

Voting Agreements, Transfers and Other Arrangements

Voting Agreements

The LAN controlling shareholders and TEP Chile have agreed in the control group shareholders agreement to vote their respective LAN common shares as follows after the effective time:

• until such time as TEP Chile sells any of its LAN common shares, the LAN controlling shareholders will vote their LAN common shares to elect to the LATAM board of directors any individual designated by TEP Chile unless TEP Chile beneficially owns enough LAN common shares to directly elect two directors to the LATAM board of directors;

• the parties agree to vote their LAN common shares to assist the other parties in removing and replacing the directors such other parties elected to the LATAM board of directors;

• the parties agree to consult with one another and use their good faith efforts to reach an agreement and act jointly on all actions (other than actions requiring supermajority approval under Chilean law) to be taken by the LATAM board of directors or the LAN shareholders;

• the parties agree to maintain the size of the LATAM board of directors at a total of nine directors and to maintain the quorum required for action by the LATAM board of directors at a majority of the total number of directors of the LATAM; and

• if, after good faith efforts to reach an agreement with respect to any action that requires supermajority approval under Chilean law and a mediation period, the parties do not reach such an agreement then TEP Chile has agreed to vote its shares on such supermajority matter as directed by the LAN controlling shareholders, which we refer to as a “directed vote.”

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The parties to the Holdco 1 shareholders agreement and TAM shareholders agreement have agreed to vote their voting shares of Holdco 1 and shares of TAM so as to give effect to the agreements with respect to representation on the TAM board of directors discussed above.

Transfer Restrictions

Pursuant to the control group shareholders agreement, the LAN controlling shareholders and TEP Chile are subject to certain restrictions on sales, transfers and pledges of the LAN common shares and (in the case of TEP Chile only) the voting shares of Holdco 1 beneficially owned by them. Except for a limited amount of LAN common shares, neither the LAN controlling shareholders nor TEP Chile may sell any of its LAN common shares, and TEP Chile may not sell its voting shares of Holdco 1, until the third anniversary of the effective time.  Thereafter, sales of LAN common shares by either party are permitted, subject to (i) certain limitations on the volume and frequency of sales and (ii) in the case of TEP Chile only, certain minimum ownership requirements. After the tenth anniversary of the effective time, TEP Chile may sell all of its LAN common shares and voting shares of Holdco 1 as a block, subject to (x) approval of the transferee by the LATAM board of directors, (y) the condition that the sale not have an adverse effect and (z) a right of first offer in favor of the LAN controlling shareholders, which we refer to collectively as “block sale provisions.” An “adverse effect” is defined in the control group shareholders agreement to mean a material adverse effect on our and Holdco 1’s ownership of TAM and its subsidiaries or the ability of TAM and its subsidiaries to operate their airline businesses worldwide. The LAN controlling shareholders have agreed to transfer any voting shares of Holdco 1 acquired pursuant to such right of first offer to us for the same consideration paid for such shares.

The block sale provisions will also apply to any transfer by TEP Chile of LAN common shares or voting shares of Holdco 1 beneficially owned by it after the third anniversary of the effective time if a release event (as described below) occurs or if TEP Chile is required to make two or more directed votes during any twenty-four month period at two meetings (consecutive or not) of the shareholders of LAN held at least twelve months apart and we have has not yet fully exercised our conversion option described below. A “release event” will occur if (i) a capital increase of LATAM occurs, (ii) TEP Chile does not fully exercise the preemptive rights granted to it under applicable law in Chile with respect to such capital increase in respect of all of its restricted LAN common shares, and (iii) after such capital increase is completed, the individual designated by TEP Chile for election to the LATAM board of directors with the assistance of the LAN controlling shareholders is not elected to the LATAM board of directors.

In addition, after the tenth anniversary of the effective time and after the occurrence of the full ownership trigger date (as described below under the “—Conversion Option” section), TEP Chile may sell all or any portion of its LAN common shares, subject to (x) a right of first offer in favor of the LAN controlling shareholders and (y) the restrictions on sales of LAN common shares more than once in a 12-month period.

The control group shareholders agreement provides certain exceptions to these restrictions on transfer for certain pledges of LAN common shares made by the parties and for transfers to affiliates, in each case under certain limited circumstances.

In addition, TEP Chile agreed in the Holdco 1 shareholders agreement not to vote its voting shares of Holdco 1, or to take any other action, in support of any transfer by Holdco 1 of any equity securities or convertible securities issued by it or by any of TAM or its subsidiaries without our prior written consent.

Call Option

We agreed in the Holdco 1 shareholders agreement not to sell or transfer any shares of TAM stock to any person (other than our affiliates) at any time when TEP Chile owns any voting shares of Holdco 1.  However, we will have the right to effect such a sale or transfer if, at the same time as such sale or transfer, we (or our assignee) acquires all the voting shares of Holdco 1 beneficially owned by TEP Chile for an amount equal to TEP Chile’s then current tax basis in such shares and any costs TEP Chile is required to incur to effect such sale or transfer.  TEP Chile has irrevocably granted us the assignable right to purchase all of the voting shares of Holdco 1 beneficially owned by TEP Chile in connection with any such sale.

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Conversion Option

Pursuant to the control group shareholders agreement and the Holdco 1 shareholders agreement, we have the unilateral right to convert our shares of non-voting stock of Holdco 1 into shares of voting stock of Holdco 1 to the maximum extent allowed under law and to increase our representation on the TAM and Holdco 1 boards of directors if and when permitted in accordance with foreign ownership control laws in Brazil and other applicable laws if the conversion would not have an adverse effect (as defined above under the “—Transfer Restrictions” section).

On or after the tenth anniversary of the effective time and after we have fully converted all of our shares of non-voting stock of Holdco 1 into shares of voting stock of Holdco 1 as permitted by Brazilian law and other applicable laws, we will have the right to purchase all of the voting shares of Holdco 1 held by the controlling shareholders of TAM for an amount equal to their then current tax basis in such shares and any costs incurred by them to effect such sale, which amount we refer to as the “sale consideration.” If we do not timely exercise our right to purchase these shares or if, after the tenth anniversary of the effective time, we have the right under applicable law in Brazil and other applicable law to fully convert all the shares of non-voting stock of Holdco 1 beneficially owned by us into shares of voting stock of Holdco 1 and such conversion would not have an adverse effect but we have not fully exercised such right within a specified period, then the controlling shareholders of TAM will have the right to put their shares of voting stock of Holdco 1 to us for an amount equal to the sale consideration.

Acquisitions of TAM Stock

The parties have agreed that all acquisitions of TAM common shares by any member of the LATAM Group from and after the effective time will be made by Holdco 1.

ITEM 4A. UNRESOLVED STAFF COMMENTS

None.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

You should read the following discussion of our financial condition and results of operations together with our audited consolidated financial statements and the accompanying notes beginning on page F-14 of this annual report.

The summary consolidated annual financial information as of December 31, 2009 and 2010 and for the years ended December 31, 2008, 2009 and 2010, has been prepared in accordance with IFRS and has been derived from our audited consolidated annual financial statements included in this annual report. The summary consolidated annual financial information as of December 31, 2008 and for the year ended December 31, 2008 presented in this annual report were previously presented in accordance with Chilean GAAP, and have been restated under IFRS only for comparative purposes.

Overview

The principal and most distinctive aspect of our business model is the way in which we integrate our passenger and cargo activities. Our sophisticated service-oriented approach to combining passenger and cargo traffic enables us to better utilize our aircraft, reduce our break-even load factors on passenger flights, and diversify our revenue streams. Furthermore, the geographically diversified nature of the passenger and cargo networks of LAN and its subsidiaries provide additional diversification in our operations and reduce exposure to any single market. These benefits have helped us maintain strong profitability and expand our operations consistently in recent years, despite volatile macroeconomic conditions and various external shocks that have affected the airline industry over the years.

Approximately 97% of our revenues are generated by our air transport activities. We generate the balance of our operating revenues from customs and storage brokerage operations, aircraft leases, courier services, on-board sales, tour operator services, third-party maintenance, ground handling and interest income.

Our operating environment in 2010 was marked by strong recovery and growth in both the cargo and passenger businessescompared with 2009. The Company demonstrated its ability to seize opportunities in the recovery of global economy despite the challenging outlook we faced in 2009, and withstand the impact of the earthquake that affected Chile in February 2010.

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During 2010, growth in passenger demand was driven by growth in both domestic and international markets.  During this period, cargo demand showed a strong recovery and growth as a result of the global economic recovery, which affected global trade. While competition on both passenger and cargo routes has grown gradually since 2005, changes in competitive conditions in specific markets generated opportunities for us to expand. Certain factors outside of our control, such as fuel prices that have risen consistently since 2002, and reached historically record-high levels in mid-2008, have also generated significant cost pressures. During 2010, fuel prices again increased as compared to 2009.

Our results for the period between 2009 and 2010 reflect our efforts in recent years to expand and diversify our revenue base while maintaining an efficient cost base. We have aimed to effectively respond to the opportunities and challenges presented by the expansion and diversification of our revenue base. This process included expanding our domestic passenger operations in Chile and Peru, continuing to develop the domestic operations of LAN Argentina, launching domestic operations of LAN Ecuador in April 2009, and starting passenger operations in Colombia through the purchase of Aires in November 2010. As a result, we have significantly increased our passenger capacity and redeployed our assets in response to specific opportunities. In the cargo business, we have adjusted our routes and our capacity mix to adapt to changing cargo flows and we have expanded cargo operations within the region and on long haul routes to take advantage of existing opportunities. We have also launched initiatives to enhance customer preference and increase efficiency. These initiatives have enabled us to maintain a solid market position and to develop new mechanisms to sustain high levels of profitability despite facing unprecedented high fuel prices during 2008 and the negative effect of the global economic crisis during 2009. As a result, net income amounted to US$336.5 million in 2008, US$231.1 million in 2009 and US$419.7 million in 2010.

Passenger Business

In general, our passenger revenues are driven by international and country-specific political and economic conditions, competitive activity, the attractiveness of the destinations that we serve, and the capacity we allocate among our different routes.

Passenger demand has grown in the last years, driven by positive economic conditions in Latin America. Economic growth and improved customer confidence have led to an expansion in both business and leisure traffic to and from Latin America. Increased interest in travel into South America from Europe and the United States has been another factor positively impacting overall passenger traffic. As a consequence, passenger volumes in markets such as Chile, Peru, Argentina and Ecuador grew significantly between 2009 and 2010. LAN’s traffic growth during 2010, which reached 11.1%, was also based on a capacity expansion plan driven by the delivery of nine new passenger aircraft during the year.

Competitive activity on both our domestic and international passenger routes has also varied over the last several years. On our international routes, competition gradually increased as both incumbent and new competitors expanded their operations. Nevertheless, we have maintained our market share in most of our international markets since 2005 and have gradually increased our presence in the domestic markets of Chile and Peru, as well as in the Argentine domestic and international routes. We also initiated domestic operations in Ecuador in April 2009 and in Colombia, through the acquisition of Aires, in November 2010.  During 2010 the combined yield for the international and domestic passenger businesses increased 6.8%, reflecting the recovery and growth in demand experienced in 2010.  During 2009 yields experienced a 16.2% decrease compared with 2008, as a result of the economic crisis that affected passenger demand for airflights in 2009 and a high comparison base in 2008 as fuel surcharge incorporated in the yields represented the increase in fuel prices during that year.

Overall, market conditions on the passenger business provided us with opportunities to advance on our strategic development plans and expand our operations. We addressed these by taking advantage of our integrated business model, efficient operations, continued customer focus, and flexible capacity management. Customer focus has provided a key tool to address competitive challenges as well as to successfully enter new markets.

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We also took advantage of our flexibility to adapt capacity quickly in response to demand shocks or market opportunities. We actively manage our capacity by transferring capacity between routes or adding new aircraft when necessary. This enabled us to rapidly respond by adding capacity in the Peruvian domestic market during 2004 and supporting the launch of LAN Argentina’s domestic operations in 2005, as well as launching the latter’s international operations in October 2006, and launching domestic operations in Ecuador in April 2009.

These opportunistic actions fit in with our long-term development strategy, which is aimed at consolidating LAN as the preferred carrier in the Southern Cone. This plan incorporates development of domestic, regional and intercontinental routes in the markets we serve. Continuous monitoring of demand trends and competitive activity has allowed us to identify opportunities and, as a consequence, additional capacity has also been allocated to operations to the South Pacific, Europe and the United States, as well to specific regional routes. We also shifted capacity among our routes in order to better match seasonal patterns in flights to the United States and to other destinations. Further refinements to our itineraries were also implemented in order to improve connectivity between our operations and those of our partners.

LAN’s flexibility and broad passenger network also allowed us to manage the negative impact of the catastrophic earthquake that struck Chile in February 2010, causing significant damage to the terminal building at the Santiago International Airport and affecting all air travel in and out of the country. With no alternative airport in the Santiago Metropolitan Region, commercial passenger operations were suspended for three days, and were re-launched on March 2, 2010 with provisional facilities. LAN operated with reduced capacity out of Santiago until the terminal building was fully operational on March 28, 2010. LAN estimates the net impact of decreased passenger operations due to the earthquake were approximately US$30 million in 2010. Cargo operations were not materially affected by the earthquake, nor were the passenger operations of LAN or its subsidiaries in Peru, Ecuador and Argentina.

We have also enhanced our regional network by selectively adding new destinations and launching new routes. Since 2004, we have been developing an intra-regional hub in Lima. We have launched several routes that enable us to effectively use Lima as a connecting point for passengers traveling between Mexico City, Bogotá, Caracas, Guayaquil, Quito, Buenos Aires, La Paz, Santa Cruz, Sao Paulo and Santiago de Chile. In 2007, we began direct service between Lima and Madrid; in 2008, we began service to Medellín, Colombia (with one stop in Quito); and in 2009, we began direct service to Cartagena de Indias, Colombia as well as service from Lima to Cali via Quito and from Lima to Punta Cana, Cancun and Cordoba. During the first half of 2010 the Company implemented various new passenger destinations. Lan Peru launched a new regional route in August 2010 between Lima and Brasilia. Regarding long-haul operations, in July 2010, LAN Peru launched four weekly frequencies between Lima and San Francisco, with connections from Sao Paulo, Santiago and Buenos Aires. We plan to continue growing our operation in Lima by increasing the number of flight frequencies we operate on these routes and also by adding new destinations.

Among others, on May 10, 2010, LAN Argentina launched three daily flights between Santiago and Aeroparque and in June 2010 it launched services between Aeroparque and Sao Paulo.  In 2010, Lan Argentina also initiated flights between Rosario and Lima.

Our domestic operations have also grown between 2009 and 2010.

· In both the Chilean and Peruvian domestic markets, total domestic traffic increased during 2010, driven mainly by the positive macroeconomic scenarios in both markets and by attractive fare structures in line with the model for short-haul operations that we implemented in 2007.

· Between 2005 and 2010, LAN Argentina increased the number of Argentine domestic destinations from six to fourteen and, based on internal estimates, our market share was approximately 30% as of December 2010.

· By the end of 2008, Ecuador’s aeronautical authority, CNAC, granted LAN Ecuador permission to operate domestic flights within the country. Theseoperations started in April 2009 with flights between the cities of Quito and Guayaquil. As of December 2010, LAN Ecuador was operating sixty-three flights a week between Guayaquil and Quito, one of the most heavily traveled routes in Latin America, as well as fourteen flights a week from Quito to Cuenca and seven flights a week from Guayaquil to Cuenca. In September 2010, LAN Ecuador launched regular service to the Galapagos Islands, offering a daily flight from both Quito and Guayaquil. LAN Ecuador had 16.7% market share in the domestic market of Ecuador as of December 2010.

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Cargo Business

Our cargo business depends on exports from and imports to South America and  is, therefore, affected by economic conditions, foreign exchange rates, changes in international trade, the health of particular industries, competition and fuel prices (which we usually pass on to our customers through a cargo fuel surcharge). The relative size of inbound and outbound flows to a particular market or route is a key element in cargo operations as the unidirectional nature of freight flows requires airlines to create routes that combine origin-destination pairs that feature complementary freight flows. Changes in macroeconomic conditions may lead to major fluctuations in cargo flows to and from Latin America, therefore requiring continuous route and capacity adjustments.

The flexibility that this business model allows based on adaptation to changes in market trends was key for LAN’s operations in 2009 when the business was affected by the contraction of import and export markets in response to the global economic crisis. In addition, LAN Cargo saw a sharp drop in salmon exports from Chile as a result of an outbreak of the ISA virus.During 2009 LAN received two Boeing 777 freighters at a time where there was a decrease in demand in cargo operations. These aircraft were utilized to increase capacity, mainly on routes between South America and Europe.  Not only did the incorporation of these cargo planes increase capacity, but they also helped the company expand its coverage beyond the region and strengthen its cargo services to Europe; LAN currently operates routes between Frankfurt and Brazil, Argentina and Chile, Ecuador and Colombia and Amsterdam and Frankfurt. In line with this strategy, the Company plans to initiate a fifth weekly freighter frequency to Europe.

During 2009 the Company achieved an important step in regional expansion. Colombia is Latin America’s largest market for exports by air transport to the United States, exporting an estimated 200,000 tons annually. In March 2009, LAN Cargo launched LANCO, after successfully obtaining the necessary operational and technical certification. It launched its services with two latest-generation Boeing 767-300Fs, with a capacity for 54 tons of freight, connecting the cities of Bogotá and Medellin with Miami.

In addition, in March 2009, the Company’s cargo subsidiary in Brazil, ABSA, began operations in the country’s domestic market, with one flight daily - from Monday to Friday - between the cities of Sao Paulo and Manaus. On this route, ABSA operates an advanced-technology Boeing 767-300F with a capacity of 54 tons.  This route accounts for a large part of Brazil’s airfreight traffic. Manaus is the country’s fourth largest city in terms of GDP, with a large number of companies, principally in the electronics sector, in its industrial pole. The special tax incentives offered by the Amazon capital of Manaos as part of efforts to promote the area’s development, make it an attractive alternative for exporter and importer clients. During 2010, the Company opened a route between Sao Paulo and Fortaleza and Sao Paulo and Recife.

As the economy started to recover at the end of 2009, and continuing through 2010, LAN was able to take advantage of the new capacity and growth opportunities in various markets; as a result, the cargo business played an important role in driving LAN’s revenue growth in 2010.

Cargo traffic increased 23.5% between 2009 and 2010, from US$2,623.3 million in cargo revenue ton kilometers in 2009 to 3,238.3 million cargo revenue ton kilometers in 2010. This improvement was in line with the 20.6% growth experienced by this segment of the international air cargo industry. The Company increased its capacity by approximately 20.5%, resulting in a 1.7-point improvement in its load factor to 70.1%. The increase in capacity was mainly driven by LAN’s incorporation of two types of aircraft.  LAN added two new Boeing 777-200 freighters in 2009, which is the most modern and efficient cargo aircraft of its type in the world, with a capacity for 104 tons of freight and a range of 9,045 kilometers when carrying its maximum weight.  LAN also leased two Boeing 767-300 freighters at the end of 2010 in order to expand routes between Latin America and the United States, as well as by higher utilization of the freighter fleet. These efforts allow LAN to enhance its competitiveness in the region by positioning it as the first airline in the region - and only the second internationally - to use these latest-generation cargo planes. LAN Cargo transported 779 thousand tons of freight in 2010, an increase of 20.1% as compared to 2009.

In 2010, LAN’s cargo revenues rose in 43.0% to US$1.281 million, representing 28.3% of the Company’s total annual revenues. The growth in revenues also reflects the 15.8% increase in cargo yields that year.

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Cost Structure

LAN’s costs are generally driven by the size of our operations, fuel prices, fleet costs and exchange rates.

As an airline, we are subject to fluctuations in costs that are outside our control, particularly fuel prices and exchange rates. However, we manage part of our exposure to changes in fuel prices through a fuel-hedging policy and the use of pass-through mechanisms on both the passenger and cargo businesses. For more information see “Quantitative and Qualitative Disclosures About Market Risk—Risk of Fluctuations in Jet Fuel Prices” under Item 11. Personnel expenses are another significant component of our overall costs. Because a significant portion of our labor costs is denominated in pesos, appreciation of the peso against the dollar as well as increases in local inflation rates can result in increased costs in dollar terms and can negatively affect our results. However, this cost pressure is mitigated by the partial natural hedge between the currencies of denomination of our total operating revenues and expenses.

Commission to travel and cargo agents also compose a significant cost to us. We compete with other airlines over the amount of commission we pay per sale, particularly in connection with special programs and marketing efforts, and to maintain competitive incentives with travel agents. In February 2007 we reduced commission paid to agents in Chile for economy class ticket sales from 6% to 1%. Between 2007 and 2008, commissions were also reduced to 1% in Ecuador, Argentina and Peru.

Fleet related expenses, namely aircraft rentals and depreciation are another significant cost. These costs are mainly fixed and can be reduced on a per unit basis by achieving higher daily aircraft utilization rates.

During 2010, LAN’s operating costs increased.  For example, fuel prices increased from record-low levels in 2009 which led to US$202.3 million in increased fuel expenses and contributed to a 5.7% increase in cost per ATK (a key industry metric). Excluding fuel costs, the increase in cost per ATK over this period was 5.9%.  In addition, the Company recognized a US$1.0 million fuel hedge gain compared to a US$128.7 million fuel hedge loss in 2009.

Apart from higher expenditure on fuel, the Company paid higher wages and salaries due to a higher average headcount that is in-line with the Company’s operational expansion, and the impact of the appreciation of Latin American currencies in 2010.

We have launched various efficiency-related initiatives aimed at reducing fuel consumption and increasingly incorporating efficient aircraft into the fleet.

Higher aircraft utilization has been an important source of improved efficiency. Our long-haul passenger and cargo aircraft are used, on average, over 14.3 hours per day. Our utilization strategy in 2010 was designed in concert with the addition of new routes to our network, which enabled us to leverage our human and physical assets for increased efficiency. This was especially the case in our domestic operations in Chile and Peru, where we increased aircraft utilization as a result of the itineraries of our new short-haul business model. We have increased our use of our narrow body fleet of Airbus A320-Family Aircraft to approximately 10.8 block hours per day per aircraft.

In domestic operations we have also worked consistently to improve our cost structure. This process has included initiatives such as the modification of short-haul service standards, which were implemented in late 2005 and modified further in 2007 as a result of the new business model on domestic routes, enabling us to reduce passenger service expenses. The key elements of this new business model have been a reduction in sales and distribution costs through higher Internet penetration and reduced agency commission, a faster turnaround time, and increased self check-in service through web check-in and kiosks at airports.

In addition, during 2009 we implemented LEAN, a system for improving our processes by eliminating activities that do not add value to processes (thus increasing the value of each activity and suppressing those that are superfluous), thereby allowing us to reduce costs, and increase customer satisfaction. In addition, during 2010 we continued to install winglets on our Boeing 767 aircraft fleet, achieving fuel efficiencies of approximately 5% per aircraft. To mitigate the environmental impact of our operations we strive to operate in a sustainable manner by reducing our fuel consumption and related emissions.

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Outlook

Our long-term strategy is aimed at consolidating LAN’s position as the main passenger and cargo airline in South America. We will continue to expand our network by further developing our existing routes, adding new destinations, developing new alliances, and entering new markets. We expect our brand recognition and a continuous effort to improve service standards to drive increased customer preference, ultimately leading to strong market shares in the markets we serve. Our product and service design is aimed at providing passengers and cargo customers with differentiated offerings that provide valuable solutions to the needs of each of our customer types. We also aim to have products and services that evolve together with changes in technology, market conditions and competitive actions. We plan to maintain a highly competitive cost structure by leveraging our cost-conscious culture, incorporating new technologies and practices, and by identifying and implementing adequate cost-reduction and efficiency-related initiatives. We believe that a focus on flexibility will enable us to adequately react to changing market conditions. Finally, a healthy financial structure will allow us to effectively fund our growth, enhance our strategic development and reinforce our customer appeal.

Our results will be mainly determined by the expansion of our current network, the evolution of our market share in our main markets, our level of success in entering new markets, the continued implementation of new efficiency-related programs, the continued implementation of our business model for short-haul operations, and fuel price levels.

· We plan to increase frequencies on long-haul flights out of Chile, Peru, Ecuador and Argentina, and eventually add new destinations in the United States and Europe. We plan to reinforce our regional network through the addition of new frequencies on our current routes and the addition of new destinations. We will also seek to enter into new alliances in both the passenger and cargo business, especially to build up our presence in new markets.

· Competitive activity in key markets has increased gradually in recent years, and we expect it to continue doing so in the future. Nevertheless, we expect to maintain solid market shares based on offering attractive value propositions that combine broad international and domestic networks, a strong customer focus and a competitive cost base.

· We are also working on increasing efficiency by streamlining our support processes, reducing commercial costs, and by continuing with the implementation of our new business model on short-haul operations. Further enhancements should arise from economies of scale, especially as solid growth in the passenger business accompanied by controlled fixed costs will serve to dilute our fixed costs base. In both the passenger and the cargo business, efficiencies are also expected to come from the replacement of older aircraft with new and more fuel-efficient Boeing 787 and Boeing 777 models and from efficiency-related initiatives such as installing winglets on the B767 fleet as well as continuing to adjust aircraft configuration to market demand.

Our financial performance will also be highly dependent on jet fuel prices.  These prices rose significantly until mid-2008, which led to a sharp rise in our fuel expenditures, but significantly declined in 2009. Presently, there is a trend towards increases in jet fuel prices because of the increased demand caused by the 2010 recovery in the global economy coupled with conflicts during February 2011 in Egypt and Libya that affect global fuel supply. Although we have implemented a number of strategies to mitigate the impact of the volatility of fuel prices, including financial hedging and the use of fuel surcharges, it is unlikely that we will be able to fully protect ourselves against the volatility of fuel costs.

Overall, we believe that these initiatives will enable us to successfully respond to growth opportunities, maintain a solid competitive position, and enhance our distinct cost performance.

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Operating Results

The following table sets forth certain income statement data for Lan Airlines.

	Year Ended December 31,
	2010			2009			2008			2010			2009			2008			10/09			09/08
	(in US$ millions, except per share and capital stock data)									As a percentage of total operating revenues									% change
Consolidated Results of Income by Function
Operating revenues
Passenger		3,109.8			2,623.6			2,820.8			70.8			74.6			68.1			18.5			(7.0	)
Cargo		1,280.7			895.6			1,319.4			29.2			25.4			31.9			43.0			(32.1	)
Total operating revenues		4,390.5			3,519.2			4,140.2			100.0			100.0			100.0			24.8			(15.0	)
Cost of sales		(3,012.7	)		(2,522.8	)		(2,893.9	)		(68.6	)		(71.7	)		(69.9	)		19.4			(12.8	)
Gross margin		1,377.8			996.4			1,246.3			31.4			28.3			30.1			38.3			(20.1	)
Other operating income		132.8			136.4			142.9			3.0			3.9			3.5			(2.6	)		(4.3	)
Distribution costs		(383.5	)		(327.0	)		(366.7	)		(8.7	)		(9.3	)		(8.9	)		17.3			6.7
Administrative expenses		(331.8	)		(269.6	)		(275.0	)		(7.6	)		(7.7	)		(6.6	)		23.1			(10.8	)
Other operating expenses		(172.4	)		(100.5	)		(127.9	)		(3.9	)		(2.9	)		(3.1	)		71.5			(7.5	)
Financial Income		14.9			18.2			18.5			(0.3	)		(0.5	)		(0.5	)		(18.1	)		(21.4	)
Financial costs (from non-financial activities)		(155.3	)		(153.1	)		(125.5	)		(3.5	)		(4.4	)		(3.3	)		1.4			22.0
Earning on investments (equity method)		0.1			0.3			0.7			0.0			0.0			0.0			(66.7	)		(54.7	)
Exchange rate differences		13.8			(11.2	)		23.4			0.3			(0.3	)		0.6			-			-
Result of indexation units		0.1			(0.6	)		1.2			0.0			0.0			0.0			-			-
Negative goodwill		-			-			-			0.0			0.0			0.0			-			-
Other net earnings (losses)		5.4			(11.7	)		(134.7	)		1.0			(0.3	)		(3.0	)		-			(91.3	)
Income before income taxes		502.0			277.5			403.4			11.4			7.9			9.7			80.9			(31.2	)
Income tax		(81.1	)		(44.5	)		(65.1	)		(1.8	)		(1.3	)		(1.6	)		82.2			(31.7	)
Net income for the period		420.9			233.0			338.3			9.6			6.6			8.2			81.6			(31.1	)
Income for the period attributable to the parent company’s equity holders		419.7			231.1			336.5			9.6			6.6			8.2			81.6			(31.3	)
Income for the period attributable to non-controlling interest		1.2			1.9			1.8			0.1			0.1			0.1			(36.8	)		4.0
Net income for the period		420.9			233.0			338.3			9.6			6.6			8.2			81.6			(31.1	)
Earnings per share
Basic earnings per share (US$)		1.2388			0.6822			0.9932															(31.1	)
Diluted earnings per share (US$)		1.2353			0.6822			0.9932															(31.1	)

Year ended December 31, 2010 compared to year ended December 31, 2009

Net Income

Net income for the period increased 80.6% from US$233.0 million in 2009 to US$420.9 million in 2010. Net income attributable to the parent company’s equity holders increased 81.6% from US$231.1 million in 2009 to US$419.7 million in 2010.

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The revenue increase during 2010 was driven by the recovery of the world economy and the strong capacity expansion in both the passenger and cargo businesses. In addition, the traffic increased strongly, driving yields and load factors higher.

Operating costs increased mainly due to higher fuel prices, higher wages and salaries driven by the appreciation of Latin America currencies, as well as higher costs related to ACMI leases in the cargo business.

Operating Revenues

Operating revenues in 2010 totaled US$4,390.5 million, a 24.7% increase as compared to total operating revenues of US$3,519.2 million in 2009. Our consolidated passenger revenues increase 18,5% to US$3,109.8 million in 2010 from US$2,623.6 million in 2009, due to a 6.8% increase in yields (from US¢8.8 to US¢9.4), and passenger load factors, which increased from 76.9% in 2009 to 78.3% in 2010 as the 11.2% increase in traffic outpaced the 9.2% capacity increase. Overall, revenues per ASK increased 8.5%. Traffic grew as a result of a 10.6% increase in domestic traffic (including domestic operations by LAN and its affiliates in Chile, Argentina, Peru and Ecuador), and an 11.3% increase in international traffic. International traffic accounted for approximately 70% of our total passenger traffic during 2010. Yields increased 6.8% as a result of a stronger demand environment driven by world economy recovery during the year.

Domestic passenger revenues in Chile, Peru, Argentina and Ecuador, which accounted for approximately 35% of our total passenger revenues in 2010 as compared to approximately 36% in 2009, increased 14.7% to US$1,072.4 million in 2010 from US$934.9 million in 2009. Domestic passenger traffic (as measured in RPKs) increased 10.5%, while domestic passenger capacity (as measured in ASKs) increased 6,6%, resulting in a increase in load factor from 74.9% in 2009 to 77.7% in 2010. Domestic passenger yield increased 3.7% from US¢10.4 in 2009 to US¢10.8 in 2010, mainly due to strong increases in traffic.

International passenger revenues, which accounted for approximately 65% of total passenger revenues in 2010 as compared to approximately 64% of passenger revenues in 2009, increased 20.7% to US$2,018.2 million in 2010 from US$1,672.0 million in 2009. International passenger traffic (as measured in RPKs) increased 11.3%, while passenger capacity (as measured in ASKs) increased 10.4% in 2010, resulting in an improvement in load factor from 77.8% in 2009 to 78.5% in 2010. Total international passenger yield (based on RPKs) increased 8.0% to US¢9.6 in 2010 from US¢8.7 in 2009, driven by strong world economy recovery.

Cargo revenues increased 32.1%, to US$1,280.7 million in 2010 from US$895.6 million in 2009, mainly driven by a 24.8% increase in yields (US¢41.6 in 2010 from US¢35.7 in 2009), and coupled with a 23.5% increase in traffic. In 2010, cargo traffic was driven by a strong recovery and growth in the global cargo markets, as well as better revenue management practices capacity increased 20.5% during 2010. As a consequence, load factors increased from 68.4% in 2009 to 70.1% in 2010. Revenues per ATK also increased 18.7% as compared to 2009.

Cost of Sales

Cost of sales in 2010 totaled US$3,012.7 million, representing a 19.4% increase as compared to cost of sales of US$2,522.8 million in 2009. As a percentage of total revenues, cost of sales decreased from 71.7% in 2009 to 68.6% in 2010, as a result of higher traffic and yields compared to 2009.

The increase in cost of sales was driven by higher aircraft fuel expenses, which totaled US$1,161.9 million in 2010, a 21.1% increase as compared to aircraft fuel expenses of US$959.6 million in 2009. Fuel expenses increased 21.1% mainly due to a 26.4% increase in unhedged jet fuel prices (9.4% in the hedged price), coupled with a 10.7% increase in consumption. However, the Company recognized a US$1.0 million fuel hedge gain, compared to a US$128.7 million fuel hedge loss in 2009.

In addition, the Company recorded higher ACMI leases in the cargo business due to the expansion in the cargo business. Depreciation expenses increased mainly due to the incorporation of one new Boeing 767-300 passenger aircraft in February 2010 and eight new Airbus A320 aircraft between July and December 2010. For further information on depreciation policies, please refer to “Critical Accounting Policies” below, and Note 2 to our audited consolidated financial statements.

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Aircraft maintenance expenses decreased by 0.3%, from US$121.0 million in 2009 to US$120.6 million in 2010, due to lower maintenance payments to third parties, which offset the effects of a larger fleet. Aircraft rental expenses increased mainly due to an increase in the average rental cost due to the delivery of two leased Boeing 777 freighters in April and May 2009, two leased Airbus A320s in September 2010 and two leased Boeing 767-300 freighters in November and December 2010. Wages and benefits expenses increased mainly because of a higher average headcount, which is in-line with the Company’s operational expansion, an appreciation of Latin American currencies, and an increase in variable bonus payments, which were in line with higher profits obtained in 2010.

Passenger service expenses totaled US$114.2 million in 2010 compared to US$92.8 million in 2009. This represented a 23.1% increase that was driven by a 12.3% increase in the number of passengers transported during the year, as well as higher compensation paid to passengers during this period.

As a result of the above, gross margin increased 38.2% from US$996.4 million in 2009 to US$1,377.8 million in 2010.

Other operating income decreased by 2.6% to US$132.8 million in 2010 from US$136.4 million in 2009, mainly because of a decrease in tour and travel services and lower revenues from aircraft leases, which were partially offset by higher revenues from storage and custom services to third parties. Interest income decreased by 18.1% to US$14.9 million in 2010 from US$18.2 million in 2009, mainly due to lower average interest rates.

Distribution costs increased 17.3% from US$327.0 million in 2009 to US$383.5 million in 2010. This increase was caused by higher overall commissions to agents (related to both passenger and cargo sales), which increased by 20.5% to US$173.4 million in 2010 from US$143.9 million in 2009, and by a 24.8% increase in traffic revenues (for both passenger and cargo revenues); this increase was partially offset by a 0.1 point reduction in the average commission paid. This reduction was mainly related to a decrease in the commission rate paid to agents in the passenger business.

Administrative expenses increased 23.1% from US$269.6 million in 2009 to US$331.8 million in 2010 due to the higher wages of administrative personnel and higher asset (non aircraft) depreciation, as a result of additions in 2009 and 2010.

Other operating expenses increased 71.5% from US$100.5 million in 2009 to US$172.4 million in 2010, as a result of higher sales costs, advertising and marketing expenses and costs related to tours and travel services.

Financial costs (from non-financial activities) increased by 1.4% to US$155.3 million in 2010 from US$153.1 million in 2009 due to higher debt related to fleet financing, but was partially offset by lower average interest rates.

Exchange rate differences increased from an expense of US$11.2 million in 2009 to a gain of US$13.8 million in 2010 as a result of a recognized US$5.4 million gain that mainly stemmed from foreign exchange variations during the period; part of the exchange gain was a result of remittances from LAN’s operations in Venezuela. See “Quantitative and Qualitative Disclosures About Market Risk—Risk of Variation in Foreign Currency Exchange Rates,” under Item 11, for a discussion of LAN’s hedging program for currency fluctuations.. During 2009 the devaluation of the Venezuelan currency impacted the Company’s operations in that country and the Company recognized a US$28.0 million charge related to it.

On December 31, 2010, the Company held US$ 36.0 million in assets located in Venezuela, of which over 74.0% constituted cash equivalents. On a consolidated basis, the Company’s assets related to its operations in Venezuela represented less than 0.5% of the total assets of the Company. For the year 2010, operating revenues of the Venezuelan regional office represented 1.7% of the Company’s consolidated revenues.  The Company´s operations in Venezuela are carried out through an agency that, from an accounting perspective, is considered an extension of the Company. Therefore, the functional currency is the US dollar and hyperinflationary accounting is not required.

As of December 31, 2010 the Company recorded a US$14.0 million gain (pre-tax) due to the reversal of a portion of the provision related to the investigation in the cargo business carried out by the European Commission. This was as a result of the fine announced in November 2010, which was lower than the amount provided for. This reversal is recorded in Other gains/(losses).  (See “Information on the Company—Business of the Company—Cargo Operations—Cargo-Related Investigations,” under Item 4).

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Income tax expenses increased by 82.2%, amounting to US$81.1 million in 2010 as compared to US$44.5 million in 2009. This increase was primarily the result of an 80.9% increase in pre-tax income, coupled with a 0.1% increase in the average tax rate (currently 16.2%) in 2010. For more information, see “—Critical Accounting Policies—Deferred Income Taxes” below and Note 20 to our audited consolidated financial statements.

Year ended December 31, 2009 compared to year ended December 31, 2008

Net Income

Net income for the period decreased 31.1% from US$338.3 million in 2008 to US$233.0 million in 2009. Net income attributable to the parent company’s equity holders decreased 31.3% from US$336.5 million in 2008 to US$231.1 million in 2009.

The revenue decline during 2009 was partially offset by a strong capacity expansion and an improvement in demand in the passenger business, mainly driven by the domestic markets. The decline in cargo revenues reflected the impact of the global crisis in both import and export markets, as well as the salmon ISA Virus crisis in Chile. These negative impacts were partially offset by our entrance into new markets, and the expansion of our routes network. Operating costs declined mainly due to lower fuel prices, as well as due to expense-reduction initiatives. In addition, during 2008 the Company had recorded a provision of US$109.0 million in other net earnings in connection with a plea agreement entered into with the DOJ regarding an antitrust investigation related to our cargo business (see “Information on the Company—Business of the Company—Cargo Operations—Cargo-Related Investigations,” under Item 4).

Operating Revenues

Operating revenues in 2009 totaled US$3,519.2 million, a 15.0% decrease as compared to total operating revenues of US$4,140.2 million in 2008. Our consolidated passenger revenues declined 7.0% to US$2,623.6 million in 2009 from US$2,820.8 million in 2008, due to a 16.0% decrease in yields (from US¢10.5 to US¢8.8), which was partially offset by a 10.7% increase in passenger traffic. Load factors increased from 76.6% in 2008 to 76.9% in 2009 as the 10.7% increase in traffic outpaced the 10.2% capacity increase. Overall, revenues per ASK decreased 15.6%. Traffic grew as a result of a 20.6% increase in domestic traffic (including domestic operations by LAN and its affiliates in Chile, Argentina, Peru and Ecuador), and a 6.9% increase in international traffic. International traffic accounted for approximately 70% of our total passenger traffic during 2009. Yields decreased 16.0% as a result of lower fuel surcharges and lower fares due to price promotions implemented on certain routes as a result of weaker demand during 2009.

Domestic passenger revenues in Chile, Peru, Argentina and Ecuador, which accounted for approximately 36% of our total passenger revenues in 2009 as compared to approximately 32% in 2008, increased 2.6% to US$934.9 million in 2009 from US$911.5 million in 2008. Domestic passenger traffic (as measured in RPKs) increased 20.6%, while domestic passenger capacity (as measured in ASKs) increased 22.3%, resulting in a decrease in load factor from 76.0% in 2008 to 74.9% in 2009. Domestic passenger yield decreased 14.9% from US¢12.2 in 2008 to US¢10.4 in 2009, mainly due to lower fuel surcharges driven by lower fuel prices and lower fares due to price promotions.

International passenger revenues, which accounted for approximately 64% of total passenger revenues in 2009 as compared to approximately 67% of passenger revenues in 2008, decreased 11.1% to US$1,672.0 million in 2009 from US$1,880.9 million in 2008. International passenger traffic (as measured in RPKs) increased 6.9%, while passenger capacity (as measured in ASKs) increased 5.6% in 2009, resulting in an improvement in load factor from 76.9% in 2008 to 77.8% in 2009. Total international passenger yield (based on RPKs) decreased 16.9% to US¢8.0 in 2009 from US¢9.6 in 2008, driven by lower fuel surcharges and nominal fare decreases due to price promotions.

Cargo revenues fell by 32.1%, to US$895.6 million in 2009 from US$1,319.4 million in 2008, mainly driven by a 24.8% decrease in yields (US¢34.1 in 2009 from US¢45.4 in 2008), and coupled with a 9.7% decrease in traffic. In 2009, cargo traffic was impacted by the global economic crisis, a very weak seed export season, as well as by the decline in salmon exports from Chile as a result of the ISA virus. Capacity during 2009 decreased 6.0%. As a consequence, load factors decreased from 71.2% in 2008 to 68.4% in 2009. Revenues per ATK decreased 27.8% as compared to 2008.

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Cost of Sales

Cost of sales in 2009 totaled US$2,522.8 million, representing a 12.8% decrease as compared to cost of sales of US$2,893.9 million in 2008. As a percentage of total revenues, cost of sales increased from 69.9% in 2008 to 71.7% in 2009.

The decline in cost of sales was driven by lower aircraft fuel expenses, which totaled US$959.6 million in 2009, a 30.9% decrease as compared to aircraft fuel expenses of US$1,388.8 million in 2008. Fuel expenses declined due to a 42.6% decrease in average fuel prices, which was partially offset by the Company’s recognition of a US$128.7 million fuel hedge loss, as compared to a US$35.4 million fuel hedge gain in 2008.

In addition, the Company recorded lower ACMI leases in the cargo business. These lower costs were offset in part by higher fleet costs. Depreciation expenses increased mainly due to the incorporation of two new Boeing 767 aircraft and three Airbus A319 aircraft to LAN’s fleet during 2009. For further information on depreciation policies, please refer to “Critical Accounting Policies” below, and Note 2 to our audited consolidated financial statements.

Aircraft maintenance expenses increased by 14.3%, from US$105.9 million in 2008 to US$121.0 million in 2009, due to a larger fleet and the escalation in maintenance contracts. Aircraft rental expenses increased mainly due to an increase in the average rental cost due to the arrival of two Boeing 777 freighters in the second quarter of 2009. Wages and benefits expenses increased mainly driven by an increase in average headcount during 2009, which was partially offset by an average depreciation of local currencies versus the U.S. dollar.

Passenger service expenses totaled US$92.8 million in 2009 compared to US$85.3 million in 2008. This represented an 8.8% increase driven mainly by a 16.3% increase in the number of passengers transported during 2009. This was partially offset by a decrease in on-board service costs due to a renegotiation of agreements with third party suppliers and an increase in logistics’ efficiencies in the on board service process.

As a result of the above, gross margin declined 20.1% from US$1,246.3 million in 2008 to US$996.4 million in 2009.

Other operating income decreased by 4.3% to US$154.5 million in 2009 from US$161.4 million in 2008, mainly driven by a decrease in onboard sales, storage and custom services to third parties and lower revenues from aircraft leases, which was partially offset by higher revenues from tour and travel services. Interest income decreased by 1.6% to US$18.2 million in 2009 from US$18.5 million in 2008 as a higher cash balance during 2009 was largely offset by lower interest rates. Marketing costs increased by 6.7% from US$107.3 million in 2008 to US$114.5 million in 2009, mainly driven by higher selling and marketing expenses.

Distribution costs declined 10.8% from US$366.7 million in 2008 to US$327.0 million in 2009.This decline was driven by lower commissions to agents (related to both passenger and cargo sales), which decreased by 24.4% to US$143.9 million in 2009 from US$190.2 million in 2008, due to a 15.0% decrease in traffic revenues (passenger and cargo), coupled with a 0.5% reduction in average commissions. This reduction was mainly related to lower commissions in the passenger business as a result of a higher penetration of internet sales and to a higher percentage of passengers traveling in Economy Class.

Administrative expenses declined 7.5% from US$167.6 million in 2008 to US$155.1 million in 2009 due to lower general and administrative expenses, offset in part by higher wages related to administrative personnel and higher asset (non aircraft) depreciation.

Other operating expenses declined 21.4% from US$127.9 million in 2008 to US$100.5 million in 2009, as a result of lower sales costs, as well as lower costs related to on-board sales, employee travel expenses and lower general expenses.

Financial costs (from non-financial activities) increased by 22.0% to US$153.1 million in 2009 from US$125.5 million in 2008 due to increased average long-term debt related to fleet financing.

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Exchange rate differences decreased to an expense of US$11.2 million in 2009 from a gain of US$23.4 million in 2008. In addition, during 2009 the Company recognized a US$28.0 million charge related to the impact that the devaluation of the Venezuelan currency had on the Company’s operations in that country.  As of December 31, 2009 the Company held US$ 28.0 million in assets located in Venezuela (net of  already registered charges), of which  over 94.0% constituted cash equivalents. On a consolidated basis, the Company’s assets related to its operations in Venezuela represented less than 0.5% of the total assets of the Company.  For the year 2009, operating revenues of the Venezuelan regional office represented 2.4% of the Company’s consolidated revenues.  Given the foregoing, the Company does not foresee that hyperinflationary accounting will have a material effect on the Company in the near future.

Other net earnings (losses) amounted to a loss of US$11.7 million in 2009 as compared to a loss of US$135.3 million in 2008. In 2008, the Company recorded a provision of US$109.0 million in other net earnings in connection with a plea agreement entered into with the DOJ regarding an antitrust investigation related to our cargo business (see “Information on the Company—Business of the Company—Cargo Operations—Cargo-Related Investigations,” under Item 4).

Income tax expense decreased by 31.7%, amounting to US$44.5 million in 2009 as compared to US$65.1 million in 2008. This was mainly the result of a 31.2% decrease in pre-tax income, coupled with a 0.1% decrease in the average tax rate (currently 16.1%) in 2009. For more information, see “—Critical Accounting Policies—Deferred Income Taxes” below and Note 20 to our audited consolidated financial statements.

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U.S. Dollar Presentation and Price-Level Adjustments

General

Foreign currency transactions

(a)           Presentation and functional currencies

The items included in the financial statements of each of Lan Airlines and its consolidated subsidiaries are valued using the currency of the main economic environment in which the entity operates (the “functional currency”). The functional currency of Lan Airlines is the U.S. dollar, which is also the currency of presentation of the audited consolidated financial statements of Lan Airlines and its subsidiaries.

(b)           Transactions and balances

Foreign currency transactions are translated to the functional currency using the exchange rates on the transaction dates. Foreign currency gains and losses resulting from the liquidation of these transactions and from the translation, at the closing exchange rates, of the monetary assets and liabilities denominated in foreign currency, are shown in the consolidated statement of income.

(c)           Group entities

The results and financial position of all the LAN entities (none of which utilizes the currency of a hyper-inflationary economy) that have a functional currency other than the currency of presentation are translated to the currency of presentation as follows:

(i) Assets and liabilities of each consolidated statement of financial position are translated at the closing exchange rate on the date of the consolidated statement of financial position;

(ii)          The revenues and expenses of each results account are translated at monthly average rates; and

(iii)         All the resultant exchange differences are shown as a separate component in net equity.

For consolidation purposes, exchange differences arising from the translation of a net investment in foreign entities (or in local entities with a functional currency different to that of the parent), and of loans and other foreign currency instruments designated as hedges for such investments, are recorded within net equity. When the investment is sold, these exchange differences are shown in the consolidated statement of income as part of the loss or gain on the sale.

Adjustments to the goodwill and fair value arising from the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and are translated at the period-end exchange rate.

Effects of Exchange Rate Fluctuations

Our functional currency is the U.S. dollar in terms of the pricing of our products, composition of our balance sheet and effects on our results of operations. Most of our revenues (85% in 2010) are in U.S. dollars or in prices pegged to the U.S. dollar and a substantial portion of our expenses (60% in 2010) is denominated in dollars or pegged to the U.S. dollar, particularly fuel costs, landing and over flight fees, aircraft rentals, insurance and aircraft components and supplies. Almost all of our liabilities are denominated in U.S. dollars (92% as of December 31, 2010), including bank loans, air traffic liabilities, and certain amounts payable to our suppliers. As of December 31, 2010, 90% of our assets were denominated in U.S. dollars, principally aircraft, cash and cash equivalents, accounts receivable and other fixed assets. Substantially all of our commitments, including operating leases and purchase commitments for aircraft, are denominated in U.S. dollars.

Although we generally maintain our international passenger fares and cargo prices in U.S. dollars or at prices pegged to the U.S. dollar, we are exposed to foreign exchange losses and gains due to exchange rate fluctuations. We recorded a net foreign exchange loss of US$11.2 million in 2009 and a net foreign exchange profit of US$13.8 million in 2010, which are set forth in our consolidated statement of income under “Exchange rates differences.” For more information, see Notes 2.3(a) and 31 to our audited consolidated financial statements. The profit incurred in 2010 was mainly related to the appreciation of the Latin American currencies against the U.S. dollar.

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IFRS/Non-IFRS Reconciliation

We use “Cost per ATK” and “Cost per ATK excluding fuel price variations” in analyzing operating costs on a per unit basis. “ATKs” (available ton kilometers) measure the number of tons of capacity available for the transportation of revenue load (passengers and/or cargo) multiplied by the kilometers flown. To obtain our unit costs, which are used by our management in the analysis of our results, we divide our “total costs” by our total ATKs. “Total costs” are calculated by starting with operating costs as defined under IFRS and making certain adjustments for interest costs and other  revenues. The cost component is further adjusted to obtain “costs per ATKs excluding fuel price variations,” in order to remove the impact of changes in fuel prices for the year. “Cost per ATK” and “Cost per ATK excluding fuel price variations” do not have a standardized meaning, and as such may not be comparable to similarly titled measures provided by other companies.  These metrics should not be considered in isolation or as a substitute for operating costs or as indicators of performance or cash flows as a measure of liquidity.

The table below reconciles operating costs as defined by IFRS to costs used in the calculation of “Cost per ATK” and “Cost per ATK excluding fuel price variations.”

	2010		2009		2008
Cost per ATK
Operating cost (US$ thousands)		3,900,440		3,219,821		3,663,395
+ Interest expense (US$ thousands)		155,279		153,109		125,488
− Other operating income(US$ thousands)		132,826		154,534		161,422
ATK operating costs		3,922,893		3,218,396		3,627,461
Divided by system’s ATKs (thousands)		8,968,792		7,811,750		7,659,874
= Cost per ATK (US$ cents)		43.74		41.20		47.36
Cost per ATK excluding fuel price variations
ATK operating costs (thousands)		3,922,893		3,218,396		3,627,461
− Actual fuel expenses (US$ thousands)		1,161,927		959,608		1,388,826
+ (Gallons consumed) times (previous year’s fuel price)		1,062,179		1,410,767		1,019,420
ATK operating costs excluding fuel price variations		3,823,145		3,669,555		3,258,055
Divided by system’s ATKs (thousands)		8,968,792		7,811,750		7,659,874
= Cost per ATK excluding fuel price variations (US$ cents)		42.63		46.97		42.53

In addition, we use revenues per ASK or ATK, as applicable, in analyzing revenues on a per unit basis. To obtain our unit revenues, which are used by our management in the analysis of our results, we divide our passenger revenues by our total ASKs and our cargo revenues by our total ATKs. We use our revenues as defined under IFRS for purposes of the calculation of this metric. Revenues per ASK or ATK, as the case may be, do not have a standardized meaning, and as such may not be comparable to similarly titled measures provided by other companies. It is not an IFRS based measure of performance or liquidity. This metric should not be considered in isolation or as a substitute for revenues or as indicators of performance or cash flows as a measure of liquidity.

The table below shows the calculation of our revenues per ASK or ATK, as applicable, in each of the periods indicated:

	2010		2009		2008
Passenger Revenues (US$ million)		3,109.79		2,623.61		2,820.83
ASK (million)		42,355.20		38,776.20		35,176.10
Passenger Revenues/ASK (US$ cents)		7.3		6.8		8.0
Cargo Revenues (US$ million)		1,280.71		895.55		1,319.42
ATK (million)		4,628.73		3,848.89		4,071.89
Cargo Revenues/ATK (US$ cents)		27.7		23.3		32.4

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Seasonality

Our operating revenues are substantially dependent on overall passenger and cargo traffic volume, which is subject to seasonal and other changes in traffic patterns. Our passenger revenues are generally higher in the first and fourth quarters of each year, during the southern hemisphere’s (Chile and Argentina) spring and summer, than in the second and third quarters. Since Peru and Ecuador have different seasonal patterns, the expansion into those markets has led to stronger passenger revenues in the second and third quarters, therefore moderating the overall seasonality of our passenger business. Our cargo revenues generally are higher in the fourth quarter, which correspond to the harvest season in the southern hemisphere.

Critical Accounting Policies

A summary of our significant accounting policies is included in Note 2 to our audited consolidated financial statements. We believe that the consistent application of these policies enables us and our subsidiaries to provide readers of the financial statements with more useful and reliable information about our operating results and financial condition. The preparation of financial statements requires management to make certain estimates and assumptions. The following are the accounting policies that we believe are the most important to the portrayal of our financial condition and results of operations and require our most difficult, subjective or complex judgments.

Accounting estimates judgments

The Company has used estimates to value and book some of the assets, liabilities, revenues, expenses and commitments; these basically refer to:

· The evaluation of possible impairment loss for certain assets.

· The useful life and residual value of fixed assets and intangible assets.

· The criteria employed in the valuation of certain assets.

· Air tickets sold that are not actually used.

· The calculation of deferred income at the period-end corresponding to the valuation of kilometers credited to holders of the LANPASS loyalty card which have not yet been used.

· The need for provisioning and where required the determination of their values.

· The recoverability of deferred tax assets.

These estimates are made on the basis of the best information available on the matters analyzed. In any case, it is possible that events will require them to be modified in the future, in which case the effects would be accounted for prospectively.

Revenue Recognition

Revenues include the fair value of the proceeds received or to be received on sales of goods and rendering services in the ordinary course of the Company’s business. Revenues are shown net of refunds, rebates and discounts.

(a)           Rendering of services

a.1           Passenger and cargo transport

We recognize passenger and cargo revenues either when the transportation service is provided or when we determine that the tickets will not be used or refunded, which, in the case of passenger revenues, reduces the air traffic liability. We estimate revenue breakage based on historical breakage experience that takes into account the aging of tickets that will not be used or refunded. Commissions payable related to such unearned earnings are shown net of the air traffic liability.  Other revenues, including aircraft leases, courier, logistic and ground services, duty free sales, and storage and customs brokering, are recognized when services are provided.

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The amount of passenger ticket sales not yet recognized as revenue is reflected as an air traffic liability. Air traffic liability includes estimates of the amount of future refunds and exchanges, net of forfeitures for all unused tickets once the flight date has passed. We perform periodic evaluations of this estimated liability based on actual results. Any adjustments, which can be significant, are included in the results of operations for the periods in which the evaluations are completed. These adjustments relate primarily to the differences between our estimation of certain revenue transactions and the related sales price, as well as refunds, exchanges and other items for which final settlement occurs in periods subsequent to the sale of the related tickets at amounts other than the original sales price.

Actual events and circumstances may differ from historical fare sale activity and customer travel patterns and can result in refunds, exchanges or forfeited tickets differing significantly from estimates. We evaluate our estimates periodically. If actual refunds, exchanges or forfeitures fall outside of our estimated ranges, we review our estimates and assumptions and adjust air traffic liability and passenger revenues as necessary. Our estimation techniques have been consistently applied from year to year and in the last two years, deviations from our estimates did not result in material differences that required adjustments. Nevertheless, as with any estimates, actual results may vary from estimated amounts.

a.2           Frequent flyer program

The Company has a frequent flyer program called LANPASS, whose objective is customer loyalty through the delivery of kilometers every time that member fly with the Company or its alliance partners, use the services of entities registered with the program or make purchases with an associated credit card. The kilometers earned can be exchanged for flights tickets or other services of associated entities. The consolidated financial statements include liabilities for this concept (deferred income), according to the estimate of the valuation established for the kilometers accumulated pending use at that date, in accordance with IFRIC 13: “Customer loyalty programs”.

Property and Equipment

The land of Lan Airlines Subsidiaries is recognized at cost less any accumulated impairment loss. The rest of the property, plant and equipment are shown, initially and subsequently, at their historic cost less the corresponding depreciation and any impairment loss, except for certain land and minor equipment that are reassessed at first adoption, according to IFRS.

The amount of advance payments to aircraft manufacturers are capitalized by the Company under “Construction in progress” until receipt of aircraft.

Subsequent costs (replacement of components, improvements and extensions) are included in the value of the initial asset or shown as a separate asset only when it is probable that the future economic benefits associated with the elements of property, plant and equipment are going to flow to the Company and the cost of such element can be determined reliably. The value of the component replaced is written-off in the books. The rest of the repairs and maintenance are charged to the result of the year in which they are incurred.

Depreciation of property, plant and equipment is calculated using the straight-line method over their estimated useful lives; except in the case of certain technical components, which are depreciated on the basis of cycles and hours flown.

The residual value and useful life of assets is revised, and adjusted if necessary, once a year.

When the carrying amount of an asset is higher than its estimated recoverable amount, its value is reduced immediately to its recoverable amount. For more information, see Notes 2.8 to our audited consolidated financial statements.

Losses and gains on the sale of property, plant and equipment are calculated by comparing the proceeds obtained with the book value and are included in the consolidated statement of income.

Maintenance

The costs incurred for scheduled major maintenance of aircraft´s fuselage and engines are capitalized and depreciated until the next maintenance. The depreciation rate is determined on technical grounds, according to its use expressed based on cycles and flight hours. Unscheduled maintenances of aircraft and engines are charged to income as incurred.

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Derivative Financial Instruments and Hedging Activities

Derivatives are booked initially at fair value on the date the derivative contracts are signed and later they continue to be valued at their fair value. The method for booking the resultant loss or gain depends on whether the derivative has been designated as a hedging instrument and, if so, the nature of the item hedged. The Company designates certain derivatives as:

(a)  Hedge of the fair value of recognized assets (“fair value hedge”);

(b) Hedge of a identified risk associated with a recognized liability or an expected highly-probable transaction (“cash-flow hedge”); or

(c)  Derivatives that do not qualify for hedge accounting.

The Company documents, at the inception of each transaction, the relationship between the hedging instrument and the hedged item, as well as its objectives for managing risk and the strategy for carrying out various hedging transaction. The Company also documents its assessment, both at the beginning and on an ongoing basis, as to whether the derivatives used in the hedging transactions are highly effective in offsetting the changes in the fair value or cash flows of the items being hedged.

The total fair value of the hedging derivatives is booked as an other non-current financial asset or liability if the remaining maturity of the item hedged is over 12 months, and as an other current financial asset or liability if the remaining term of the item hedged is less than 12 months. Derivatives not booked as hedges are classified as other financial assets or liabilities, current in the case that their remaining is less than 12 months and non-current in the case that it is more than 12 months.

(a)           Fair value hedges

Changes in the fair value of derivatives designated and that qualify as fair value hedges are shown in the consolidated statement of income, together with any change in the fair value of the asset or liability hedged that is attributable to the risk being hedged.

(b)           Cash flow hedges

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is shown in net equity. The loss or gain relating to the ineffective portion is recognized immediately in the consolidated statement of income under “Other gains (losses).”

In the case of variable interest-rate hedges, this means that the amounts recognized in equity are reclassified to results within financial cost at the same time the associated debts accrue interest.

For fuel price hedges, the amounts shown in equity are reclassified to income as Cost of sales to the extent that the fuel subject to the hedge is used.

When hedging instruments mature or are sold or when they do not meet the requirements to be accounted for as hedges, any gain or loss accumulated in net equity until that moment remains in equity and is reclassified to the consolidated statement of income when the hedged transaction is finally recognized. When its is expected that the hedged transaction is no longer going to occur, the gain or loss accumulated in net equity is taken immediately to the consolidated statement of income as “Other gains (losses).”

(c)           Derivatives not booked as a hedge

Certain derivatives are not booked as a hedge. The changes in fair value of any derivative instrument that is not booked as a hedge are shown immediately in the consolidated statement of income, in “Other gains (losses).”

Deferred taxes

Deferred taxes are calculated, according to the balance-sheet method, on the temporary differences arising between the tax bases of assets and liabilities and their book values. However, if the temporary differences arise from the initial recognition of a liability or an asset in a transaction different from a business combinations that at the time of the transaction does not affect the accounting result or the tax gain or loss, they are not booked. The deferred tax is determined using the tax rates (and laws), that have been enacted or substantially enacted at the end of reporting period, and are expected to apply when the related deferred tax asset is realized or the deferred tax liability is discharged.

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Deferred tax assets are recognized when it is probable that there will be sufficient future tax earnings with which to compensate the temporary differences.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except for deferred income tax liability where timing of the reversal of the temporary differences is controlled by the group and it is probable that the temporary difference will not reverse in the foreseeable future.

Liquidity and Capital Resources

Our cash and cash equivalents totaled US$631.1 million as of December 31, 2010, US$731.5 million as of December 31, 2009 and US$401.0 million as of December 31, 2008. The decrease in our cash and cash equivalents from 2009 to 2010 was due to higher investment activities partly compensated by higher cash from operations. Cash from operations derives primarily from providing air passenger and cargo transportation to customers. Operating cash outflows are primarily related to the recurring expenses of airline operations. Net cash inflows from operating activities were US$1,125.3 million in 2010, US$845.8 million in 2009 and 631.1 in 2008. Net cash inflows increased $279.5 million from 2009 to 2010 due to higher yields and higher load factors. In recent years, we have been able to meet our working capital and capital expenditure requirements through cash from our operations. Given the nature of our business, the Company generally benefits from having a positive working capital (cash inflows). We expect to continue generating positive working capital through our operations. However, we cannot predict whether current trends and conditions will continue, or how the effects of competition or other factors that are beyond our control could affect us.

We have generally been able to arrange for short-term loans with local Chilean and international banks when we have needed to finance working capital expenditures or increase our liquidity. During the first quarter of 2009, the Board of Directors of the Company approved entering into loans with different local financial institutions for a total of US$250 million in order to increase the Company’s cash position during the global economic crisis. As of December 2009, the Company had borrowed the equivalent of US$252 million in U.S. dollar and Chilean peso denominated facilities. In order to avail itself of U.S. dollar cash flows, the Company entered into cross currency swaps for an equivalent amount of US$171 million. As of February 28, 2011, we maintained US$513 million in short-term credit lines of which US$167.3 million are unused, with both local and foreign banks. These short term credit lines have been used in issuing stand by letters of credit and the obtaining of cash advances included within other financial liabilities in the consolidated statements of financial position. With respect to collateral posting, the company has issued stand-by letters of credit for approximately US$32.7 million as of February 28, 2011.

As of December 31, 2010, the cash pledged to financial institutions relating to margin calls on derivative positions was US$78.5 million.

Cash capital expenditures were US$1,029.2 million in 2010, US$538.6 million in 2009 and US$779.3 in 2008. The increase in capital expenditures in 2010 was due to the acquisition of higher number of aircraft in 2010.

Our capital expenditures for 2010 were mainly composed of:

· cash contributions for pre-delivery deposits related to aircraft with deliveries in 2010, 2011 and 2012;

· the acquisition of eight Airbus A320 Passenger aircraft and one Boeing B767-300 Passenger aircraft; and

· the acquisition of aircraft spare parts and spare engines.

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Our capital expenditures for 2009 were mainly composed of:

· cash contributions for pre-delivery deposits related to aircraft with deliveries in 2009, 2010 and 2011;

· the acquisition of three Airbus A319 Passenger aircraft and three Boeing B767-300 Passenger aircraft; and

· the acquisition of aircraft spare parts and spare engines.

Our capital expenditures for 2008 were mainly composed of:

· cash contributions for pre-delivery deposits related to aircraft that will be incorporated into our fleet in 2008, 2009 and 2010;

· the acquisition of four Boeing 767-300 Passenger aircraft, ten Airbus A318 Passenger aircraft, two Airbus A319 and two A320 Passenger aircraft; and

· the acquisition of aircraft spare parts and spare engines.

For more information about current and future capital expenditures, see “—Capital Expenditures” under this Item 5. The difference between net cash used in investing activities and cash capital expenditures during 2008, 2009 and 2010 relates mainly to the investment in financial instruments and the purchase of our new subsidiary in Colombia, Aires.

Net cash outflows from financing activities were US$124.7 million in 2010, compared to net cash inflows of US$99.2 million in 2009 and US$100.4 million in 2008. Such variance was due to an increase in loan payments and higher dividend payments. In 2010, our main uses of cash were US$554.5 million for loan payments, US$155.4 million for dividends payments and US$128.7 million for interest payments. In 2009, our main uses of cash were US$261.7 million for loan payments, US$139.9 million for dividend payments and US$129.3 million for interest payments. In 2008, our main uses of cash were US$222.4 million for dividend payments, US$102.6 million for loan payment and US$81.4 million for interest payments.

Our cash and cash equivalents including investment funds and domestic and foreign bonds are mainly held in U.S. dollars or U.S. dollar-based instruments. A fraction (around 16%) of our cash position is held in currencies other than U.S. dollars to fulfill short-term obligations denominated in local currencies.

We have contractual obligations and commitments primarily related to the payment of debt, lease arrangements and for the future incorporation of aircraft to our fleet. As of December 31, 2010 we have financed the acquisition of 18 Boeing 767-300 Passenger aircraft and eight Boeing 767-300 Freighters through bond issuances and syndicated loans provided by international financial institutions with the support of partial guarantees issued by the Ex-Im Bank with repayment profiles of either 12 or 15 years. The Ex-Im Bank guarantees support 85% of the net purchase price and are secured with a first priority mortgage on the aircraft in favor of a security trustee on behalf of Ex-Im Bank. The documentation for each loan follows standard market forms for this type of financing, including standard events of default. We have financed the remaining 15% of the net purchase price with commercial loans or with our own funds. Our Ex-Im Bank supported financings are denominated in U.S. dollars and have quarterly amortizations with a combination of fixed and floating rates linked to U.S. dollar LIBOR. Through the use of interest rate swaps, we have effectively converted a significant portion of our floating rate debt under these loans into fixed rate debt. See “Quantitative and Qualitative Disclosures about Market Risk—Risk of Fluctuations in Interest Rates” under Item 11, for more information. Between 2004 and 2009, LAN sold its ownership in the entities borrowing some of these loans and they were therefore reclassified as financial leases. As of December 31, 2010, the total amount outstanding under our Ex-Im Bank-supported financings totaled US$1,116.0 million.

In 2000, in order to finance our Airbus aircraft, we entered into a US$1.3 billion umbrella credit facility with a syndicate of international financial institutions under which we borrowed in the form of separate loans in connection with the specific financing requirements of each Airbus aircraft (including pre-delivery and long-term financings). This umbrella facility provided for guarantees from the English, French and German export credit agencies and contained customary terms for the industry, including standard events of default. Loans under the facility were denominated in U.S. dollars and bore interest at floating rates linked to LIBOR. The majority of these loans were converted into fixed rate loans through interest rate swaps. All the aircraft acquired under this facility were delivered by the end of 2005. In late 2005, we decided to negotiate a US$920 million facility to finance the acquisition of the 32 Airbus A320-Family Aircraft that were received in 2006, 2007, 2008 and in the first quarter of 2009. The new facility, arranged in early 2006, provided us with guarantees from the export credit agencies for 85% of the net purchase price of each aircraft. The remaining 15% of the net purchase price was funded internally. As of March 31, 2009, all the aircraft acquired under this new facility have been delivered and there are no remaining availabilities thereunder.

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Our total debt (including capital leases) as of December 31, 2010, was US$3,259.7 million compared to US$3,074.4 million in 2009 and US$2,657.2 million in 2008. The increase in long-term debt during 2010 relates to the incorporation of debt-financed fixed assets. We have minimum lease payment obligations primarily associated with our aircraft leases. As of December 31, 2010, we had 45 aircraft under operating leases (25 which correspond to recent acquired Aires total fleet), and we had minimum lease payment obligations of US$675 million compared to US$444 million as of December 31, 2009 and US$207 as of December 31, 2008. The amount of lease obligations in 2010 includes US$193 million related to Aires’ recently incorporated fleet. The average interest rate of our long-term debt was 5.0% as of December 31, 2010. Of the total debt amount, 94.0% accrues interest at a fixed rate (either through a stated fixed interest rate or through our use of interest rate swap agreements) or is subject to interest rate caps. As of February 28, 2011, we also had purchase obligations for:

· 15 Airbus A319, 57 Airbus A320, 10 Airbus A321;

· 9 Boeing 767-300 Passenger aircraft;

· 2 Boeing 777-200 Freighter aircraft; and

· 26 Boeing 787 Passenger aircraft;

The purchase obligations amount to a combined total of US$7,974.6 million, with delivery between 2011 and 2018.

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The following table sets forth our material expected obligations and commitments as of February 28, 2011:

	Payments due by period, as of February 28, 2011
	Total		2011		2012		2013		2014		2015		Thereafter
	(in US$ millions)
Principal debt payments		2,321.7		267.8		278.6		251.8		233.1		234.8		1,055.6
Interest debt payments		416.7		87.3		75.5		63.6		53.8		44.9		91.6
Capital leases(1)		240.9		47.3		58.5		31.7		23.2		25.1		55.1
Operating leases(2)		675.3		148.1		143.4		126.6		93.1		65.9		98.2
Purchase obligations		7,974.6		1,014.8		2,080.5		1,168.1		756.2		1,277.5		1,677.5
Total		11,629.2		1,565.3		2,636.5		1,641.8		1,159.4		1,648.2		2,978.0

 (1) Includes interests.

 (2) Includes aircraft leases and other non-cancelable leases.

Trend Information

During 2011, we expect to continue seeing positive trends in both passenger and cargo operations driven by strong economic growth and solid demand in the markets we operate after the global crisis that affected markets worldwide during 2009.

Currently, fuel supply remains uncertain given the increase in fuel prices and demand. Although fuel supply is key to our business, as it represents approximately 30% of our operating costs, we plan to address the issue of fuel supply through our fuel-hedging policy and the use of pass-through mechanisms for both the passenger and cargo businesses. Specifically, we expect to face:

· revenue growth in the passenger business, caused by capacity expansion and an increase in yields resulting mainly from higher demand. We expect to pass through current fuel prices increases to the passenger through the fuel surcharge. During January and February 2011, passenger traffic increased 14.4% compared with the same period in 2010, driven mainly by a strong recovery in international passenger operations, which increased 10.7% as compared to 2010 as well as domestic passenger operations which increased 22.8% in that period. During such period, total passenger capacity increased 13.8%, leading to a 0.4 points increase in load factors - from 82.1% to 82.5%. Capacity expansion was mainly driven by an increase in operations on certain regional routes, as well as routes to the United States and the incorporation of Aires; and

· growth in cargo demand, in line with global and regional trends. Growth is expected to be driven by a continued increase in imports to Latin America, mainly to Brazil. Furthermore, we already received three new B767 freighters between November 2010 and January 2011. In June 2010, LAN Cargo also launched domestic cargo operations in Brazil to Recife and Fortaleza through its affiliate, ABSA. During January and February 2011, cargo demand, as measured in RTKs, increased 14.4%, while capacity increased by 16.0%. In turn, the cargo load factor decreased 0.9 points to 66.8%.

In 2011, we expect to continue expanding and diversifying our revenue base through the expansion of our network, namely, by further developing our existing routes, adding new destinations, developing new alliances, and entering new markets. For example, during January and February 2011, we received seven Airbus A320 family aircraft designated for domestic and regional passenger operations, and we expect to receive sixteen additional passenger aircraft, thirteen Airbus A320 family aircraft and three Boeing 767-300 aircraft, that are designated for international long-haul passenger operations during the remainder of 2011.

In the cargo business, we will continue adjusting our routes and our capacity mix to adapt to changing cargo flows and to take advantage of expansion opportunities. During 2011, we intend to expand our Boeing 767 Freighter operation between Latin America and the United States.

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We continue to maintain significant flexibility to adjust the physical size of our fleet. Between 2012 and 2014, we will have thirteen operating lease expirations (including Japanese operating leases) in our wide-body passenger fleet, which can be terminated without cost. Furthermore, during 2010 part of our Boeing 767 fleet began to be fully paid for, providing us with additional flexibility.

We also intend to make our cost structure more efficient and to offset decreases in demand with more efficient asset utilization, and we aim to enhance efficiency by streamlining our support processes, reducing commercial costs, continuing to implement our new business model for short-haul operations, and implementing the LEAN system in our processes.

We expect jet fuel prices to continue being volatile in 2011, but will continue using fuel hedging programs and fuel surcharge mechanisms in both the passenger and cargo businesses to help minimize the impact of short-term movements in crude oil prices. For instance, as of February 28, 2011 we have hedged approximately 54.0% of our estimated fuel requirements for the first quarter 2011, 74.8% for the second quarter, 19.2% for the third quarter, and 8.4% for the fourth quarter. These hedging instruments are comprised of a combination of collars and swaps at an average price of approximately US$84.4 per barrel.

Capital Expenditures

Our capital expenditures are related to the acquisition of aircraft, aircraft-related equipment, IT equipment, support infrastructure and the funding of pre-delivery deposits. Net cash flow used in investment activities totaled US$1029.2 million in 2010, US$538.6 million in 2009 and US$779.3 in 2008. The increase in capital expenditure is explained by a higher number of aircraft acquired during 2010 and higher expenditure in pre-delivery deposits.

The following chart sets forth our estimate, as of February 28, 2011, of our future capital expenditures for 2011, 2012, 2013, 2014 and 2015:

	Expenditures by year, as of February 28, 2011
	2011			2012		2013		2014			2015
	(in US$ millions)
Expenditures on aircraft		1,015			2,081		1,168		756			1,278
PDPs (1)		(213	)		346		45		(25	)		85
Purchase Obligations		802			2,427		1,213		731			1,363
Other expenditures(2)		201			182		165		156			160
Total		1,003			2,609		1,378		887			1,523

(1) Pre-delivery payments (inflows are presented as after the delivery of the aircraft is made, the manufacturer refunds the pdp’s to LAN).

(2) Includes expenditures on spare engines and parts, information technology and other expenditures. The Company plans to finance these expenditures through approximately 15% internally generated funds and 85% through guaranteed facilities with third party international financial institutions.

The expenditures set out in the table above reflect payments for purchases and other fleet-related items, as well as for information technology and other items. See “Business of the Company — Fleet” under Item 4 above. Principally, we have projected our capital expenditures based on:

· the delivery of 17 Airbus A320-Family Aircraft in 2011, 13 in 2012, 15 in 2013, 15 in 2014, 15 in 2015 and 12 in 2016;

· the delivery of three Boeing B767-300 Passenger aircraft in 2011, six in 2012.

· the delivery of two Boeing 777 Freighter aircraft in 2012;

· the delivery of seven Boeing 787-8 passenger aircraft in 2012, five in 2013 and ten between 2014 and 2018.

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· the delivery of four Boeing 787-9 passenger aircraft in 2015.

· the implementation of a new host system as a part of a three year capital expenditure plan, totaling approximately US$70 million; and

· Costs related to the startup of new operations in the region under LAN’s standards.

We expect that cash generated from operations, short-term credit-lines and long-term syndicated loans with various banks will be sufficient to meet our cash requirements in the foreseeable future, although events that materially affect our operating results could also have a negative impact on our liquidity.

Credit Card Receivables Securitization

We have raised a total of US$100.0 million through two similar transactions involving the private placement of certificates backed by our credit card receivables. In these transactions, we sold our right to receive certain present and future U.S. dollar payment obligations, referred to as future credit card receivables, arising from the purchase of passenger tickets and related services in the United States through American Express, Diners Club, Discover, Visa and MasterCard to Pelican Finance Ltd. (“Pelican”). In the first transaction, completed in March 1999, we sold US$60.0 million of our future credit card receivables to Pelican which then issued notes to a United States trust, backed by payments received on these payment obligations, which in turn issued trust certificates, backed by payments received on the notes, to investors. This transaction had a term of seven years and our sale of these receivables authorized Pelican to collect payments on them until March 2006. We utilized this securitization facility to pay down our short-term debt. Final payment for this transaction was made in June 2006. In August 2002, we entered into a similar sale of future credit card receivables to Pelican for an additional US$40.0 million. This transaction had a term of seven years, with a four-year grace period on principal payments. Our sale of these receivables authorized Pelican to collect payments on them until the earlier of the date the notes issued by Pelican were fully redeemed and August 2009. We utilized this securitization facility to improve our liquidity. Final payments for this transaction were made on June 30, 2009.

As of February 28, 2011, LAN has no securitization agreement in place.

Off-Balance Sheet Arrangements

As of December 31, 2010 the Company had aircraft and aircraft engines under operating leases. These operating leases provide us with great flexibility to adjust to any demand volatility that may affect the airline industry and therefore we consider such arrangements to be of great value.

Under the aforementioned operating leases, LAN is responsible for all maintenance, insurance and other costs associated with operating these aircraft. The Company has not made any residual value or similar guarantees to our lessors. There are certain guarantees and indemnities to other unrelated parties that are not reflected on the Company’s balance sheet, but we believe that these will not have a significant impact on our results of operations or financial condition.

The Company operates 17 aircraft under a financing structure called Japanese Operating Lease (“JOL”). This method involves the creation of a special purpose entity that acquires aircraft with bank and third party financing. Under IFRS, these aircraft are shown in the consolidated statement of financial position as part of “Property, plant and equipment” and the corresponding debt is shown as a liability.

Revenues from aircraft under operating leases account for approximately 11.6% of the total revenues of the Company.

As of February 28, 2011 we are not aware of any event, lawsuit, commitment, trend or uncertainty that may result in, or is reasonably likely to result in, the termination of the operating leases. See Note 37 to our audited consolidated financial statements for a more detailed discussion of these commitments.

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Directors and Senior Management

The management of Lan Airlines is conducted by its board of directors which, in accordance with Lan Airlines’ by-laws, consists of nine directors who are elected every two years for two-year terms at annual regular shareholders’ meetings, and may be re-elected. The board of directors may appoint replacements to fill any vacancies that occur during periods between elections. Scheduled meetings of the board of directors are held once a month and extraordinary board of directors’ meetings are called when summoned by the chairman of the board of directors and two other directors, or when requested by a majority of the directors.

The current board of directors was elected at the annual shareholders’ meeting held on April 29, 2010. Its term expires in April 2012. The following are Lan Airlines’ directors and senior management:

Directors	Position
Jorge Awad Mehech(1)	Director / Chairman
Darío Calderón González	Director
José Cox Donoso	Director
Juan José Cueto Plaza(2)	Director
Juan Cueto Sierra(2)	Director
Ramón Eblen Kadis(3)	Director
Bernardo Fontaine Talavera	Director
Carlos Heller Solari(4)	Director
Gerardo Jofré Miranda	Director
Senior Management	Position
Enrique Cueto Plaza(2)	Chief Executive Officer
Ignacio Cueto Plaza(2)	President and Chief Operating Officer
Alejandro de la Fuente Goic	Chief Financial Officer
Armando Valdivieso Montes	Chief Executive Officer-Passenger
Cristián Ureta Larraín	Chief Executive Officer-Cargo
Roberto Alvo Milosawlewitsch	Senior Vice President, Strategic Planning and Corporate Development
Cristian Toro Cañas	Senior Vice President, Legal
Enrique Elsaca Hirmas	Senior Vice President, Operations
Emilio del Real Sota	Senior Vice President, Human Resources
Rene Muga Escobar	Senior Vice President, Corporate Affairs

 (1) Mr. Jorge Awad Mehech was re-elected chairman of the board of directors in May 2010.

(2) Messrs. Ignacio, Juan José and Enrique Cueto Plaza are brothers, and Mr. Juan Cueto Sierra is their father. All four are members of the Cueto Group (as defined in “Item 7”), the Controlling Shareholders.

(3) Mr. Ramón Eblen Kadis is a member of the Eblen Group, which is defined in “Item 7” as a “Major Shareholder.”

(4) Mr. Carlos Heller Solari is a member of the Bethia Group, which is defined in “Item 7” as a “Major Shareholder.”

Biographical Information

Set forth below are brief biographical descriptions of Lan Airlines’ directors and senior management.

Directors

Mr. Jorge Awad Mehech, 65 years old, has served as chairman and member of Lan Airlines’ board of directors since July 2001. Mr. Awad had previously served as chairman of our board of directors from 1994 to October 2000. Mr. Awad’s current term as chairman ends on the date of the annual shareholders’ meeting to be held in 2012. He held the position of Senior Vice President of Fast Air from 1979 to 1993. Additionally Mr. Awad serves on the board of directors of Banco de Chile. He is also a board member of ICARE (Instituto Chileno de Administración Racional de Empresas), a Chilean organization seeking to promote private enterprise, and Prohumana, a Chilean organization that promotes corporate social responsibility within Chilean corporations. As of February 28, 2011, according to shareholder registration data in Chile, Mr. Awad shared in the beneficial ownership of Lan Airlines, through Inversiones y Asesorías Fabiola S.A., of 201,784 common shares (0.06% of Lan Airlines’ outstanding shares).

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Mr. Darío Calderón González, 64 years old, has served on Lan Airlines’ board of directors since 1994. Mr. Calderón’s term as a director ends on the date of the annual shareholders’ meeting to be held in 2012. Mr. Calderón has been a partner in Calderón y Cía, a Chilean law firm, since 1970. Mr. Calderón currently serves on the board of directors of other Chilean companies, including Integramédica S.A., Imprenta A Molina Flores S.A., Enjoy S.A., and Datanet S.A.

Mr. José Cox Donoso, 56 years old, has served on Lan Airlines’ board of directors from April 1994 to June 1995 and from September 1995 to the present. Mr. Cox’s term as a director ends on the date of the annual shareholders’ meeting to be held in 2012. Mr. Cox has also served as chairman of the board of directors of Lan Cargo since September 1995. In addition, Mr. Cox serves on the board of directors of CMB-Prime Administradora de Fondos S.A., Socovesa S.A., Puerto Coronel S.A., Puerto Angamos S.A., Kaufmann S.A., Asesorías e Inversiones Ilihue S.A. and Inversiones Tricahue S.A. As of February 28, 2011, according to shareholder registration data in Chile, Mr. Cox shared in the beneficial ownership of Lan Airlines, through Asesorías e Inversiones Ilihue Limitada, 2,654,324 common shares of Lan Airlines (0.78% of Lan Airlines’ outstanding shares).

Mr. Juan José Cueto Plaza, 51 years old, has served on Lan Airlines’ board of directors since 1994. Mr. Cueto’s term as a director ends on the date of the annual shareholders’ meeting to be held in 2012. Mr. Cueto currently serves as Executive Vice President of Inversiones Costa Verde S.A., a position he has held since 1990, and serves on the boards of directors of Consorcio Maderero S.A., Minera Michilla S.A., Inversiones del Buen Retiro S.A., Inmobiliaria e Inversiones Asturias S.A., Inversiones Mineras del Cantábrico S.A., Costa Verde Aeronáutica S.A., Sinergia Inmobiliaria S.A. and Valle Escondido S.A. Mr. Cueto is the son of Mr. Juan Cueto Sierra, a director of Lan Airlines, and the brother of Messrs. Enrique and Ignacio Cueto Plaza, Chief Executive Officer and Chief Operating Officer of Lan Airlines, respectively. Mr. Cueto is a member of the Cueto Group (one of Lan Airlines’ Controlling Shareholders). As of February 28, 2011, Mr. Cueto shared in the beneficial ownership of 115,399,502 common shares of Lan Airlines (34.01% of Lan Airlines’ outstanding shares) held by the Cueto Group. For more information see “Controlling Shareholders and Related Party Transactions,” under Item 7.

Mr. Juan Cueto Sierra, 81 years old, was one of the founders of Fast Air in 1978 and has served on Lan Airlines’ board of directors since 1998. Mr. Cueto’s term as a director ends on the date of the annual shareholders’ meeting to be held in 2012. Mr. Cueto has wide experience in a range of business activities. Mr. Cueto is the father of Messrs. Juan José, Enrique and Ignacio Cueto Plaza, Director, Chief Executive Officer and Chief Operating Officer of Lan Airlines, respectively. Mr. Cueto currently serves on the board of directors of Costa Verde Aeronáutica S.A.

Mr. Ramón Eblen Kadis, 66 years old, has served on Lan Airlines’ board of directors since June 1994. Mr. Eblen’s term as a director ends on the date of the annual shareholders’ meeting to be held in 2012. Mr. Eblen has served as President of Comercial Los Lagos Ltda., Inversiones Santa Blanca S.A., and TJC Chile S.A. Mr. Eblen is a member of the Eblen Group (a major shareholder of Lan Airlines). As of February 28, 2011, Mr. Eblen shared in the beneficial ownership of 31,778,049 common shares of Lan Airlines (approximately 9.38% of Lan Airlines’ outstanding shares) held by the Eblen Group. For more information see “Controlling Shareholders and Related Party Transactions,” under Item 7.

Mr. Bernardo Fontaine Talavera, 46 years old, has served on Lan Airlines’ board of directors since April 2005. Mr. Fontaine’s term ends on the date of the annual shareholders’ meeting to be held in 2012. Mr. Fontaine wasHead ofthe financial services branch of Falabella, a major Chilean retailer, and served as Executive Director of CMR Falabella and Vice-Chairman of the Board of Banco Falabella. Mr. Fontaine also served as head of the M&A Corporate Finance division of Citicorp-Citibank Chile. Mr. Fontaine currently serves on the boards of Deutsche Bank Chile, Metro S.A., Aquamont S.A., South-Am S.A., Fundación el Buen Samaritano, Place Vendome S.A. and Loginsa S.A. He is also the general manager of Tres Mares S.A., Indigo S.A. and Sarlat S.A., which owned, together, as of February 28, 2011, 2,739,186 shares of Lan Airlines S.A. (0.81% of Lan Airlines’ outstanding shares).

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Mr. Carlos Heller Solari,49 years old, joined Lan Airline’s board of directors in May 2010.  Mr. Heller’s term as a director ends on the date of the annual shareholders’ meeting to be held in 2012. Mr. Heller has a vast experience in the retail, transports and agriculture sectors. Mr. Heller is Vice President of Bethia (holding company and owner of Axxion), Chairman of Axxion S.A., Club Hípico de Santiago, Sotraser S.A. and Agrícola Ancali. He also participates as a board of directors’ member of SACI Falabella S.A., Falabella Retail S.A., Sodimac S.A. and Titanium S.A. Additionally he is the major shareholder and Vice President of “Azul Azul” (Universidad de Chile’s first division soccer team administrator). As of February 28, 2011, Mr. Heller directly held 192,700 common shares of Lan Airlines (0.06% of Lan Airlines’ outstanding shares) and indirectly held 27,103,273 common shares of Lan Airlines through Axxion (7.99% of Lan Airlines’ outstanding shares).

Mr. Gerardo Jofré Miranda, 61 years old, has joined Lan Airlines’ Board of directors on May 2010. Mr. Jofré’s term as a director ends on the date of the annual shareholders’ meeting to be held in 2012. Mr. Jofré is Chairman of Codelco and member of the boards of directors of Construmart S.A., Andromeda S.A., Inmobiliaria Playa Amarilla S.A. and Air Life Chile S.A. Mr. Jofré is President of Saber Más Foundation and member of the Real Estate Investment Council of Santander Real Estate Funds. From 2005 to 2008 he served as member of the boards of directors of Endesa Chile S.A., Viña San Pedro Tarapacá S.A., D&S S.A., Inmobiliaria Titanium S.A. and Inmobiliaria Parque del Sendero S.A. Mr. Jofré was Director of Insurance for America for Santander Group of Spain between the years 2004 and 2005. From 1989 to 2004 he served on Santander Group in Chile, as Vice Chairman of the Group and as CEO, member of the boards of directors and Chairman of many of the Group’s companies.

Senior Management

Mr. Enrique Cueto Plaza, 52 years old, is Lan Airlines’ Chief Executive Officer, and has held this position since 1994. From 1993 to 1994, Mr. Cueto served on Lan Airlines’ board of directors. From 1983 to 1993, Mr. Cueto was Chief Executive Officer of Fast Air, a Chilean Cargo airline. Mr. Cueto has in-depth knowledge of passenger and cargo airline management, both in commercial and operational aspects, gained during his 22 years in the airline industry. Mr. Cueto is an active member of the oneworld® Alliance Governing Board, the IATA (International Air Transport Association) Board of Governors. He is also member of the Board of the Federation of Chilean Industry (SOFOFA) and of the Board of the Endeavor foundation, an organization dedicated to the promotion of entrepreneurship in Chile. Mr. Cueto is the son of Mr. Juan Cueto Sierra, a member of the board of Lan Airlines, and the brother of Messrs. Juan José and Ignacio Cueto Plaza, member of the board and President and Chief Operating Officer of Lan Airlines, respectively. Mr. Cueto is also a member of the Cueto Group (one of Lan Airlines’ Controlling Shareholders). As of February 28, 2011, Mr. Cueto shared in the beneficial ownership of 115,399,502 common shares of Lan Airlines (34.01% of Lan Airlines’ outstanding shares) held by the Cueto Group. For more information see “Controlling Shareholders and Related Party Transactions,” under Item 7.

Mr. Ignacio Cueto Plaza, 47 years old, is Lan Airlines’ President and Chief Operating Officer. Until being promoted to his current position in 2005, Mr. Cueto served as Chief Executive Officer-Passenger Business, a position he assumed in 1999. Mr. Cueto served on the board of directors of Lan Airlines and Ladeco from 1995 to 1997 and from 1994 to 1997, respectively. In addition, Mr. Cueto served as Chief Executive Officer of Fast Air from 1993 to 1995 and as President of the LAN Cargo Group from 1995 to 1998. Between 1985 and 1993, Mr. Cueto held several positions at Fast Air, including Service Manager for the Miami sales office, Director of Sales for Chile and Vice President of Sales and Marketing. Mr. Cueto is the son of Mr. Juan Cueto Sierra, director of Lan Airlines, and the brother of Messrs. Juan José and Enrique Cueto Plaza, Director and Chief Executive Officer of Lan Airlines, respectively. Mr. Cueto is also a member of the Cueto Group (one of Lan Airlines’ Controlling Shareholders). As of February 28, 2011, Mr. Cueto shared in the beneficial ownership of 115,399,502 common shares of Lan Airlines (34.01% of Lan Airlines’ outstanding shares) held by the Cueto Group. For more information see “Controlling Shareholders and Related Party Transactions,” under Item 7.

Mr. Alejandro de la Fuente Goic, 52 years old, is Lan Airlines’ Chief Financial Officer, and has held this position since October 1995. Mr. de la Fuente joined Lan Airlines in April 1995. Prior to joining Lan Airlines, Mr. de la Fuente served as Chief Financial Officer of Chiquita Frupac Ltd., a subsidiary of Chiquita Brands Inc., beginning in 1992. As of February 28, 2011, Mr. de la Fuente owned 37,383 common shares of Lan Airlines (0.01% of Lan Airlines’ outstanding shares).

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Mr. Armando Valdivieso Montes, 48 years old, is Lan Airlines’ Chief Executive Officer-Passenger, a position he assumed in 2006. Between 1997 and 2005 he served as Chief Executive Officer-Cargo Business. From 1994 to 1997, Mr. Valdivieso was President of Fast Air. From 1991 to 1994, Mr. Valdivieso served as Vice President, North America of Fast Air Miami. As of February 28, 2011, according to shareholder registration data in Chile, Mr. Valdivieso owned 59,704 common shares of Lan Airlines (0.02% of Lan Airlines’ outstanding shares).

Mr. Cristian Ureta Larrain, 48 years old, is Lan Airlines’ Chief Executive Officer-Cargo, a position he assumed in 2005. Mr. Ureta has an Engineering degree from Pontificia Universidad Católica and a Special Executive Program from Stanford University. Between 2002 and 2005 Mr. Ureta served as Production Vice President for Lan Cargo. Between 1998 and 2002 he was Lan Cargo’s Planning and Development Vice President. Prior to that, Mr. Ureta served as General Director and Commercial Director at MAS Air, and as Service Manager for Fast Air.

Mr. Roberto Alvo Milosawlewitsch, 42 years old, is Lan Airlines’ Senior Vice-president Strategic Planning and Development, a position he assumed in 2008. Prior to holding his current position, Mr. Alvo served as CFO of Lan Argentina from 2005 until 2008, as Vice-president of Development of Lan Airlines from 2003 until 2005 and Vice-president of Treasury of Lan Airlines from 2001 until 2003. Before 2001 Mr. Alvo held various positions at Sociedad Química y Minera de Chile S.A., a leading non-metallic Chilean mining company. Mr. Alvo is a civil engineer and obtained an MBA from IMD in Lausanne, Switzerland.

Mr. Cristian Toro Cañas, 40 years old, is Lan Airlines’ Senior Vice President, Legal, a position he assumed in January 2008. Mr. Toro has a law degree from Pontificia Universidad Católica de Chile (1993), as well as a master’s law degree (MCJ 97’) from New York University. Prior to joining Lan Airlines, Mr. Toro served as General Counsel for Citibank Chile, where he worked and held various positions from 1997 until 2007. He also worked as an international trainee at Shearman & Sterling in New York (1999).

Mr. Enrique Elsaca Hirmas, 43 years old, is Lan Airlines’ Senior Vice President, Operations, a position he assumed in 2008. Between 2004 and 2008, Mr. Elsaca served as Senior Vice President, Strategic Planning. Mr. Elsaca has a degree in industrial engineering from Pontificia Universidad Católica de Chile, as well as a Master in Business Administration from Massachusetts Institute of Technology. Prior to joining Lan Airlines, Mr. Elsaca served as Real Estate and Development Manager of Cencosud, Chile’s second largest retail group. From 1997 to 1999, Mr. Elsaca worked at Booz Allen & Hamilton in Latin America, and from 1991 to 1995; Mr. Elsaca held various positions in Esso Chile, a subsidiary of Exxon.

Mr. Emilio del Real Sota, 46 years old, is Lan Airlines’ Senior Vice President, Human Resources, a position he assumed in August 2005. Mr. del Real has a Psychology degree from Universidad Gabriela Mistral. Between 2003 and 2005, Mr. del Real was the Human Resource Manager of DYS, a Chilean retail company. Between 1997 and 2003 Mr. del Real served in various positions in Unilever, including Human Resource Manager for Chile, and Training and Recruitment Manager and Management Development Manager for Latin America.   

Mr. Rene Muga Escobar, 47 years old, is Lan Airlines’ Senior Vice President of Corporate Affairs. Mr. Muga holds a degree in Business Administration and a Master’s degree in International Economic Relations from the Catholic University of Chile. Previously, he was General Manager of the Confederation for Production and Commerce, which groups and represents the Chilean business community. During his career he also was Director of Business Development of the Corporación Nacional del Cobre de Chile (“CODELCO”), the leading mining company in Chile and the world’s largest copper producer.

Compensation

For the year ended December 31, 2010, the aggregate amount of compensation we paid to all executives and senior managers was US$77.3million, which did not include US$14.7 million paid as bonuses. Our variable compensation plan is based on our corporate profits, and team and individual performance.

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Under Chilean law, Lan Airlines must disclose in its annual report details of all compensation paid to its directors during the relevant fiscal year, including any amounts that they received from Lan Airlines for functions or employment other than serving as a member of the board of directors, including amounts received as per diem stipends, bonuses and, generally, all other payments. Additionally, pursuant to regulations of the Superintendencia de Valores y Seguros (the Chilean Securities and Insurance Supervisor, or “SVS”), the annual report must also include the total compensation and severance payments received by managers and principal executives, and the terms of and the manner in which board members and executive officers participate in any stock option plans.

Lan Airlines’ directors are paid 24 UF per meeting (56 UF for the chairman of the board). Lan Airlines also provides certain benefits to its directors and executive officers, such as free and discounted airline tickets and health insurance. We do not have contracts with any of our directors to provide benefits upon termination of employment.

On April 5, 2007, the extraordinary shareholders meeting approved a capital increase of 22,090,910 shares. The same meeting designated 10% of the approved capital increase (2,209,091 shares) for purposes of a proposed employee stock option compensation plan. The shareholders’ meeting authorized our board of directors to elaborate the compensation plan. During the last quarter of 2009, the original terms of the plan were amended regarding subscription and payment options. These modifications were carried out during the first quarter of 2010 and established a new term and exercise price. For more detailed information, please see Note 39 to our audited consolidated financial statements.

As set forth in further detail in the following table, in 2010 the members of our board of directors currently in office received fees and salaries in the aggregate amount of US$150,101.94.

Board Members	Fees (US$)(1)
Jorge Awad Mehech		39,506.94
Darío Calderón González		10,841.34
José Cox Donoso		14,456.77
Juan José Cueto Plaza		11,684.49
Juan Cueto Sierra		8.950.81
Ramon Eblen Kadis		23,927.61
Bernardo Fontaine Talavera		11,684.49
Ignacio Guerrero Gutiérrez		2,778.21
Carlos Heller Solari		7,963.98
Juan Gerardo Jofre Miranda		17,434.82
Andrés Navarro		872.49
Total		150,101.94

 (1) Includes fees paid to members of the board of directors’ committee, as described below.

As required by Chilean law, Lan Airlines makes obligatory contributions to the privatized pension fund system on behalf of its senior managers and executives, but it does not maintain any separate program to provide pension, retirement or similar benefits to these or any other employees.

Board of Directors’ Committee and Audit Committee

Pursuant to Chilean Corporation Law, as amended by Law No. 19,705, Lan Airlines must have a board of directors’ committee composed of no less than three board members. Lan Airlines has established a three-person committee of its board of directors, which, among other duties, is responsible for:

· examining the reports of Lan Airlines’ external auditors, the balance sheets and other financial statements submitted by Lan Airlines’ administrators to the shareholders, and issuing an opinion with respect thereto prior to their presentation to the shareholders for their approval;

· proposing external auditors and rating agencies to the board of directors;

· evaluating and proposing external auditors and rating agencies;

· reviewing internal control reports pertaining to related party transactions;

· examining and reporting on all related-party transactions; and

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· reviewing the pay scale of Lan Airlines’ senior management.

Under Chilean law we are required, to the extent possible, to appoint a majority of independent directors to the board of directors committee. The corresponding independence requirements are set forth in Chilean Corporation Law, as amended by Law No. 19,705, and relate to the relationship between the directors and the shareholders that control a corporation. A director is considered independent when he or she can be elected regardless of the voting of the controlling shareholders.

Pursuant to U.S. regulations, we are required to have an audit committee of at least three board members, which complies with the independence requirements set forth in Rule 10A-3 under the Exchange Act. Given the similarity in the functions that must be performed by our Board of Directors’ Committee and the audit committee, our Board of Directors’ Committee serves as our Audit Committee for purposes of Rule 10A-3 under the Exchange Act.

As of February 28, 2011, all of the members of our Board of Directors’ Committee, which also serves as our Audit Committee, were independent under Rule 10A-3 of the Exchange Act. As of February 28, 2011, the committee members were Mr. Jorge Awad Mehech, Mr. Gerardo Jofré Miranda and Mr. Ramón Eblen Kadis. We pay each member of the committee 32 UFs per meeting.

Employees

The following table sets forth the number of employees in various positions at the Company.

Employees	As of December 31, 2010
	2010(1)		2009		2008
Administrative		3,940		3,106		3,181
Sales		2,643		2,352		2,276
Maintenance		2,576		2,264		2,147
Operations		5,730		4,852		4,784
Cabin crew		3,561		2,890		2,587
Cockpit crew		1,835		1,380		1,346
Total		20,285		16,844		16,321

(1) LAN’s acquisition of Aires in November 2010 provided an additional 1,319 employees to the Company’s total number of employees. By the end of 2010, approximately 54% of our employees worked in Chile, 44% in other Latin American countries and 2% in the rest of the world.

We have a performance-related pay structure for our administrative, management and flight personnel (such as cabin crew members, airport and sales agents, call-center employees, and some back office employees) including performance-based bonuses and pay scales that reward foreign language proficiency among counter, technical and administrative personnel. During 2010, over 94% of our employees were eligible to receive performance related bonus payments that are linked to personal, team and corporate performance.

We provide our employees with medical insurance complementary to the coverage of the private health system, and also grant other benefits, such as free and discounted airline tickets, to our permanent employees.

A stock option compensation plan is offered to key senior executives. For a detailed description of the stock option compensation plan, please see Note 36 to our audited consolidated financial statements for the fiscal year ended December 31, 2010.

As required by Chilean law, we make obligatory contributions to the privatized pension fund system on behalf of our employees, but we do not maintain any separate program to provide pension, retirement or similar benefits to these or any other employees. However, the pilots’ collective bargaining agreement includes a clause that permits resignation with severance payment, in case a pilot reaches a certain age and is still providing services to the company.

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Training

Some of our employees, such as the flight operations, maintenance and customer ground operations personnel undergo training when they join the Company and throughout their employment with us. For this training, we invested US$12.6 million in 2008, US$12.5 million in 2009 and US$13.7 million in 2010. We generally recruit our pilots from the Academia de Ciencias Aeronáuticas (at the Universidad Técnica Federico Santa María), aeroclubs and the armed forces. Before being promoted to the position of captain, first officers must have logged at least 4,000 flight hours and received the approval of a special pilots’ committee. We provide ground-school training in Santiago, as well as in Lima and Quito for our Peruvian and Ecuadorian crews. We maintain an agreement with CAE (a Canadian firm specializing in flight simulators and training centers) to develop a pilot training center in Santiago de Chile. This training center includes two Airbus A320 and one Boeing 767 Full Flight simulators plus 1 MFTD A320/340 simulator. Our pilot staff also receives simulator training at sites in the United States and Brazil.

Our pilots are rated for only one aircraft type by local aeronautical authorities, and they are not cross-qualified between two or more aircraft types. Chilean regulations require pilots to be licensed as commercial pilots for a first officer position and as an airline transport pilot for a captain position, with specific type, function and special ratings for each aircraft to be flown, and to be medically certified as physically fit. Licenses and medical certifications are subject to periodic reevaluation, including flight simulator recurrent training, ground recurrent training, annual emergency procedures training, safety and security training and recent flying experience. Our pilots receive a variety of training, such as lectures, simulations and gaming and computer based training. Cabin crew must have initial and periodic competency fitness training.

Aircraft mechanics and maintenance supervisory personnel must be licensed by the DGAC and other corresponding authorities in other countries in which we operate. We train our technicians (Mechanics, Specialists, Inspectors and Maintenance Supervisors) in all programs required by both local authority (DGAC) and international authorities and aviation associations, such as the FAA, the European Aviation Safety Agency (“EASA”), IATA rules and regulations, those required by aircraft manufacturers and the training needs that we identify during our annual reviews. The program of study contains initial and continuing training. Initial training is level III ATA SPEC 104 and lasts forty to fifty days depending on the aircraft types and continuing training lasts up to five to six days.

During 2010, we continued training sales and administrative personnel in areas such as service and sales quality. We also continued delivering learning programs to develop leadership skills and others with different methodologies including e-learning.

Labor Relations

We have negotiated longer-term labor contracts with the labor unions in anticipation of their scheduled expirations, which under Chilean law are limited to a period of four years. In general, the expiration of our labor agreements with the several unions that represent our pilots and other personnel are staggered in a way that we avoid being in the position of having to renegotiate contract terms with substantially all of our pilots or other personnel at the same time.

Two collective contracts are in place between Lan Airlines and its pilots, both through the pilots’ union. Non-unionized pilots (less than 5% of the pilot corps), have the same benefits, through direct extension of the union’s collective agreement. These contracts were negotiated in February 2009 and expire between August 2012 and January 2013. Lan Cargo is also a party to an employment agreement with its pilots that expires in November 2012. Finally, Lan Express has two collective agreements with its pilots, both unionized and non-unionized. Those contracts expire between September and December 2012.

Lan Airlines and its affiliates have also entered into collective bargaining agreements (CBAs) with many of their employees:

LAN entered into a CBA covering the majority of its flight attendants that will likely be renegotiated in the second quarter of 2011.

Lan Airlines renewed the CBAs with its maintenance personnel in June 2008 for a period of four years. On March 30, 2011, the collective bargaining agreement with maintenance personnel working for Lan Express, one of LAN’s Chilean subsidiaries, was renewed until March 31, 2015.

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LAN’s CBA with the union representing our administrative personnel expires in July 2013, but the CBA with Lan Express, administrative personnel expires in April of the same year.

The majority of Lan Argentina’s employees belong to industry-wide unions. Currently, labor relations are stable. In 2005, Lan Argentina hired employees from another airline and agreed to maintain their employment conditions and labor stability during a three-year period. The conditions and labor relations that Lan Argentina had to maintain expired on September 2008, a situation that did not generate any conflict for the company. In December 2009, salary agreements were finalized with the five unions in Lan Argentina. These agreements expired on September 2010 and were renewed until September 2011. The three remaining collective agreements (Land personnel, Hierarchical Personnel and Cabin Crew) also expired.

In Lan Peru and Lan Ecuador, meanwhile, the employment relationship is smooth and stable. With respect to Lan Ecuador, there is a collective agreement in force since October 2010 with Pilots (non-union), whose duration is 3 years and 6 months. The only union that exists in this country is the Cabin Crew. It still has no legal authority to negotiate collective agreements with the Company. Notwithstanding the foregoing, the Company maintains a relationship with the union continuing to address issues of common interest and welfare. As for Lan Peru, in 2010 negotiated a collective agreement with the union of technical and mechanical, with a duration of 4 years. The next collective bargaining with the union will Pilots, 2012.

We believe we generally maintain good relations with our employees and the unions, and expect to continue to enjoy good relations with our employees and the unions in the future. We also believe that we have built a solid base among our employees that will support and facilitate our growth plans. We can provide no assurance, however, that our employee compensation arrangements may not be subject to change or modification after the expiration of the contracts currently in effect, or that we will not be subject to labor-related disruptions due to strikes, stoppages or walk-outs.

ITEM 7. CONTROLLING SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Controlling Shareholders

As of February 28, 2011, the Cueto Group controlled the Company. The Cueto Group is comprised by Mr. Juan Cueto Sierra, Mr. Juan José Cueto Plaza, Mr. Ignacio Cueto Plaza, Mr. Enrique Cueto Plaza and certain other family members.

Beginning in the first quarter of 2010, the Piñera Group (which was comprised by Mr. Sebastián Piñera Echenique and certain members of his family), which owned 26.3% of the voting common shares as of December 31, 2009, commenced to sell its ownership of the Company after Mr. Sebastián Piñera Echenique was elected as the new president of Chile.

On March 9, 2010, the Cueto Group acquired an 8.6% stake of the Company from the Piñera Group. As a result of this transaction, the shareholders agreement between the two groups was terminated.

In addition, the Piñera Group sold 9.8% of the Company through two auctions in the Santiago Stock Exchange, which took place on February 25, 2010 and on March 25, 2010, respectively.

Finally, on March 24, 2010, the Piñera Group signed an agreement to sell an additional 8.0% stake in the Company to Bethia S.A.

As a result of the above, the Cueto Group controls the Company. As of February 28, 2011, the Cueto Group owned 34.01% of the voting common shares. This Controlling Shareholder is entitled to elect a four of the nine members of our board of directors and is in a position to direct the management of the Company.

As of February 28, 2011, a second shareholder group, which includes our director Ramón Eblen Cádiz, owned 9.37% of our common shares. Also Bethia Group, which includes our director Carlos Heller Solari, owned 7.99% of LAN’s common shares.

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The table below sets forth the beneficial ownership of common shares as of March 31, 2011, broken down between our Controlling Shareholders, other major shareholders (beneficial owners of more than 5% of the Company) and minority shareholders.

	Beneficial ownership (as of February 28, 2011)
	Number of shares of common stock beneficially owned		Percentage of common stock beneficially owned
Shareholder
Cueto Group		115,399,502		34.01	%
Costa Verde Aeronáutica S.A.		108,320,407		31.92	%
Inversiones Mineras del Cantábrico S.A.		7,079,095		2.09	%
Eblen Group.		31,778,049		9.38	%
Inv. Andes S.A.		22.288.695		6.57	%
Other		9,489,354		2.80	%
Bethia Group(1).		27.103.273		7.99	%
Axxion		27.103.273		7.99	%
Others		164,869,635		48.62	%
Total		339,150,459		100.00	%

(1) Additionally as of February 28, 2011, Mr. Carlos Heller, Bethia´s Vice President owned directly 192,700 common shares of Lan Airlines (0.06% of Lan Airlines’ outstanding shares)

On July 6, 2007, the Superintendencia de Valores y Seguros (“SVS”) fined Juan José Cueto Plaza 1,620 UF (approximately US$58,000) in connection with the purchase of Shares that he carried out through Inversiones Mineras del Cantábrico on July 24, 2006. The SVS considered that such purchase had breached an obligation not to acquire Shares until the financial statements of the company became publicly available, in alleged violation of Article 165, paragraph 1 of Law No.18,045 of October 22, 1981. The SVS ruled that, although Mr. Cueto had not used any privileged information, LAN’s financial statements should be considered to be privileged information per se, and thus, created a duty to abstain from trading the securities prior to the disclosure of the financial statements. On July 26, 2007 Juan José Cueto filed an appeal of this fine before the 27° Civil Court of Santiago, which was dismissed on January 8, 2009. The defense of Mr. Cueto filed two legal recourses against the first dismissal, which were rejected by the Court of Appeals of Santiago on March 8, 2010. Against this second dismissal Juan José Cueto filed two additional and separate legal recourses, which as of this date are pending before the Supreme Court of Chile. A final decision is pending.

As of February 28, 2011, investors outside of Chile held 4.41% of our capital stock in the form of ADSs, Chilean pension funds held 13.2% of our capital stock and other minority investors held 31% in the form of common shares. It is not practicable for us to determine the number of ADSs or common shares beneficially owned in the United States. As of February 28, 2011, we had 1,508 record holders of our common shares. It is not practicable for us to determine the portion of shares held in Chile or the number of record holders in Chile.

All of our shareholders have identical voting rights.

Related Party Transactions

General

We have engaged in a variety of transactions with our affiliates, including entities owned or controlled by certain of our controlling shareholders. In the ordinary course of our business we render to and receive from related companies services of various types, including aircraft leases, aircraft interchanges, freight transportation and reservation services.

It is our policy not to engage in any transaction with or for the benefit of any shareholder or member of the board of directors, or any entity controlled by such a person or in which such a person has a substantial economic interest, unless the transaction is related to our business and the price and other terms are at least as favorable to us as those that could be obtained on an arm’s-length basis from a third party, such transactions, none of which is individually material, are summarized in Note 35 to our audited consolidated financial statements for the fiscal year ended December 31, 2010.

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ITEM 8. FINANCIAL INFORMATION

Consolidated Financial Statements

See Item 18, “Financial Statements” and pages F-1 through F-120.

Other Financial Information

Legal and Arbitration Proceedings

We are involved in routine litigation and other proceedings relating to the ordinary course of our business.

In February 2006 the European Commission (“EC”), in conjunction with the Department of Justice of the United States (“DOJ”), initiated a global investigation of a large number of international cargo airlines (among them Lan Cargo, LAN’s cargo subsidiary) for possible price fixing of cargo fuel surcharges and other fees in the European and United States air cargo markets. On December 26, 2007, the European competition authorities notified Lan Cargo and LAN of the initiation of proceedings against twenty-five cargo airlines, among them Lan Cargo, for allegations of anti-competitive behavior in the airfreight business.

On January 21, 2009, Lan Cargo announced that it had reached a plea agreement with the DOJ in relation to the DOJ’s ongoing investigation regarding price fixing of fuel surcharges and other fees for cargo shipments. Under the plea agreement, Lan Cargo agreed to pay a fine of US$88 million. In addition, ABSA also reached a plea agreement with the DOJ and agreed to pay a fine of US$21 million. These amounts were stipulated to be paid over a five-year payment schedule starting in 2009. As of December 31, 2010, the pending amount to be paid during the next four years is approximately US$72 million and has been recorded within “Other Accounts Payable.”

On November 9, 2010 the EC imposed fines to 11 air carriers for a toatal amount of €800 million (equivalent to approximately US$1.1 billion). The fine imposed against Lan Cargo and its parent company, LAN Airlines, totaled €8.2 million (equivalent to approximately US$ 10.9 million). The Company provisioned US$25 million during the fourth quarter of 2007 for such fines, and maintained this provision until the fine was imposed in 2010. This was the lowest fine applied by the European Commission, which includes a significant reduction due to the Company’s cooperation with the Commission during the course of the investigation. In accordance with European Union law, on January 24, 2011 this administrative decision was appealed by Lan Cargo and Lan Airlines to the General Court in Luxembourg. Any judgment by the General Court may also be appealed to the Court of Justice of the European Union.

As of December 31, 2010 the Company recorded a US$14.0 million gain (pre-tax) due to the reversal of a portion of the provision related to the investigation in the cargo business carried out by the European Commission. This was as a result of the fine announced in November 2010, which was lower than the amount provided for. This reversal is recorded in Other gains/(losses).

The investigation by the DOJ prompted the filing of numerous civil class actions by freight forwarding and shipping companies against many airlines, including Lan Cargo and Lan Airlines, including fifty-four in the United States. The cases filed in the United States were consolidated in the United States District Court, Eastern District of New York and the original complaint was subsequently amended to include additional airlines, including ABSA. In February 2006 the Canadian Competition Bureau (“CCB”), in conjunction with the DOJ, initiated a global investigation of a large number of international cargo airlines (among them Lan Cargo) for possible price fixing of cargo fuel surcharges and other fees in the Canadian air cargo markets. The CCB’s investigation prompted the filing of four separate civil class actions by freight forwarding and shipping companies against many airlines, including Lan Cargo and Lan Airlines in Canada. Given the current stage of the both proceedings, it is not possible at this time to anticipate with any precision the outcome of the civil actions filed against Lan Cargo.

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On April 5, 2008, Brazilian authorities notified ABSA of the initiation of administrative proceedings before the Conselho Administrativo de Defesa Econômica (the Brazilian Antitrust Authority) against several cargo airlines and airline officers, among them ABSA, for allegations of anticompetitive practices regarding fuel surcharges in the air cargo business. Given the current stage of the proceedings, it is not possible at this time to anticipate with any precision the outcome of the civil actions filed against Lan Cargo, although it is expected to be a lengthy process.

In June 2008, the Korean Fair Trade Commission notified LAN of an investigation into the air cargo industry and its non-compliance with the Monopoly Regulation and Fair Trade Act and has requested information and documentation from LAN, which LAN duly submitted. On May 26, 2010 the Korean Fair Trade Commission announced the imposition of penalties against 29 other airlines and excluded LAN from further investigation.

The New Zealand Commerce Commission also initiated an investigation into potential anti-competitive activities in the international air cargo markets and requested information and documentation from LAN, which LAN duly submitted. On December 15, 2008, the New Zealand Commerce Commission announced it would focus its investigation on ten airlines and excluded LAN from further investigation.

In January 2007, we announced that we had provided, through our wholly owned subsidiary, Atlantic Aviation Investments LLC (“AAI”), a total of US$17.1 million in financing to Brazilian company VRG LINHAS AEREAS S.A. (“New Varig”), convertible into shares of New Varig. On March 28, 2007, GOL announced that it was acquiring 100% of the equity participation in New Varig. Pursuant to the terms of the relevant loan agreements, upon the sale of New Varig to GOL, we sought repayment of the principal of the loans plus interest from Varig Logística S.A. (“VarigLog”), the parent company of New Varig. VarigLog failed to respond to our demands for repayment and we subsequently filed a lawsuit in New York State court on August 29, 2007, seeking repayment of the outstanding principal plus interest. On October 10, 2008, the Court granted summary judgment in our favor for the full principal amount of the loans, US$17.1 million and entered a final judgment on December 1, 2008. The Court also held that AAI was entitled to collect the interest due under the loan agreement along with reasonable attorneys’ fees. After a hearing, a special referee appointed by the Court to decide the issue recommended that AAI recover US$1.9 million in accrued interest and attorneys’ fees, and the Court approved that recommendation. VarigLog appealed that decision, and the decision was upheld. On March 3, 2009, VarigLog filed an insolvency proceeding (recuperação judicial) before the bankruptcy court in Brazil, and on March 31, 2009, VarigLog filed a Chapter 15 petition in bankruptcy court in Florida seeking recognition of its Brazilian filing. The Florida court has entered an order, based upon AAI’s stipulation with VarigLog pursuant to which there would be no stay against the continuation and commencement of legal actions by AAI against VarigLog and any of its affiliates but AAI would not be able take any action against two discreet VarigLog assets located in the United States. AAI continues its enforcement efforts to recover the amounts owed to it by VarigLog under the loan agreements.

In July 2009, as a result of VarigLog’s continued failure to repay the amount owed to AAI, we instituted a second lawsuit in New York State court against MatlinPatterson Global Advisers LLC, MatlinPatterson Global Opportunities Partners II LP, MatlinPatterson Global Opportunities (Cayman) II LP and Volo Logistics LLC (collectively, the “MP Entities”), seeking to hold them liable as the alter egos of VarigLog and asserting separate contract-based claims related to AAI’s loans to VarigLog. If AAI succeeds in its alter ego claim, the MP Entities would be liable for VarigLog’s debts, and obligated to repay what VarigLog has been adjudged to owe AAI by the prior decisions of the New York courts. The Court denied in large part the MP Entities motion to dismiss AAI’s complaint on April 23, 2010. Thereafter, the MP Entities answered AAI’s complaint and filed counter-claims against AAI and its direct and indirect parents, LAN Pax Group S.A. (“LAX Pax”) and LAN Airlines S.A. (“LAN Airlines”), seeking declaratory relief and damages for breach of contract and tortuous interference with contract. AAI and LAN Airlines moved to dismiss the counterclaims and the Court heard oral argument on January 13, 2011, but has yet to announce its decision. AAI also moved for summary judgment on its breach of contract claims against the MP Entities and is awaiting the Court’s decision. The discovery phase of this case is ongoing.

During 2009, two antitrust administrative investigations were initiated against our subsidiary in Ecuador, and conducted before the Undersecretary of Competition and Consumer Defense (Subsecretaría de la Competencia y Defensa del Consumidor) of the Ministry of Industries and Productivity (Ministerio de Industrias y Productividad), arising from the introductory fares offered by Aerolane for its Guayaquil-Quito and Quito-Guayaquil routes. The first proceeding was initiated on April 7, 2009, following a request by Aerogal alleging predatory pricing. The second proceeding was initiated on April 20, 2009, following a request by Tame (an Ecuadorian airline) based on similar allegations. Based on the absence of legal basis and on the evidence that Aerolane had complied with the regulation currently in place in Ecuador, on June 29, 2010, both investigations were disregarded.

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Dividend Policy

In accordance with the Chilean Corporation Law, Lan Airlines must distribute cash dividends equal to at least 30% of its annual consolidated net income calculated in accordance with IFRS, unless otherwise decided by a unanimous vote of the holders of all issued shares and unless and except to the extent it has accumulated losses. If there is no net income in a given year, Lan Airlines can elect but is not legally obligated to distribute dividends out of retained earnings. The board of directors may declare interim dividends out of profits earned during such interim period. Pursuant to Lan Airlines’ by-laws, the annual cash dividend is approved by the shareholders at the annual ordinary shareholders’ meeting held between February 1 and April 30 of the year following the year with respect to which the dividend is proposed. All outstanding common shares are entitled to share equally in all dividends declared by Lan Airlines, unless the shares have not been fully paid by the shareholder after being subscribed.

Holders of ADSs will be entitled to receive dividends on the underlying common shares to the same extent as holders of common shares. Holders of ADRs on the applicable record dates will be entitled to receive dividends paid on the common shares represented by the ADSs evidenced by such ADRs. Dividends payable to holders of ADSs will be paid by us to the depositary in Chilean pesos and remitted by the depositary to such holders net of foreign currency conversion fees and expenses of the depositary and will be subject to Chilean withholding tax currently imposed at a rate of 35% (subject to credits in certain cases as described under “Chilean Taxation—Cash Dividends and Other Distributions” under Item 10). Owners of the ADSs will not be charged any dividend remittance fee by the depositary with respect to cash dividends.

Chilean law requires that holders of shares of Chilean companies that are not residents of Chile register as foreign investors under one of the foreign investment regimes established by Chilean law in order to have dividends, sale proceeds or other amounts with respect to their shares remitted outside Chile through the Formal Exchange Market (Mercado Cambiario Formal). Under our Foreign Investment Contract, the depositary, on behalf of ADS holders, will be granted access to the Formal Exchange Market to convert cash dividends from pesos to U.S. dollars and to pay such U.S. dollars to ADS holders outside Chile.

ITEM 9. THE OFFER AND LISTING

Stock Price History

The principal trading market for our common shares is the Santiago Stock Exchange. The common shares have been listed on the Santiago Stock Exchange under the symbol “LAN” since 1989, and the ADSs have been listed on The New York Stock Exchange under the symbol “LFL” since November 7, 1997. The common shares also trade on the Bolsa de Valores de Valparaíso and the Bolsa Electrónica de Chile. The outstanding ADSs are identified by the CUSIP number 501723100. The following table sets forth, for the periods indicated, the high and low closing sale prices on the Santiago Stock Exchange for the common shares and the high and low closing prices on The New York Stock Exchange for the common shares represented by ADSs. The information set forth in the table below reflects actual historical amounts and has not been restated in constant Chilean pesos.

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	Ch$ per Common Share				US$ per ADS
Period	Low		High		Low		High
2006		3,250.40		5,867.00		29.85		55.34
2007(1)		5,839.90		8,997.00		13.03		84.15
2008		4,350.00		7,110.00		6.90		14.87
2009
Quarters:
First Quarter		4,400.00		5,700.00		7.08		9.14
Second Quarter		4,810.00		6,761.00		8.11		12.66
Third Quarter		6,200.00		7,220.00		11.14		13.21
Fourth Quarter		7,000.00		8,670.00		12.31		17.09
Annual:
Annual 2009		7,798.10		8,664.30		15.77		16.90
2010
Quarters:
First		8,120.00		9,470.00		15.60		18.36
Second		9,200.00		10,550.00		20.00		16.65
Third		10,000.00		15,900.00		18.74		30.50
Fourth		14,200.00		15,600.00		29.07		32.68
Months:
October 2010		14,200.00		15,238.00		29.07		31.28
November 2010		15,600.00		14,500.00		32.23		29.70
Annual:
Annual 2010		14,790.00		15,600.00		30.79		32.68
2011
Quarters:
First Quarter		11,755.00		15,150.00		24.30		31.39
Months:
January 2011		13,250.00		15,150.00		28.29		31.39
February 2011		12,000.00		14,730.00		25.76		29.40
March 2011		11,755.00		13,300.00		24.30		27.92
April 2011		12,000.00		13,070.00		25.15		28.31
Source: Santiago Stock Exchange and the New York Stock Exchange

 (1) In August 2007, the ADR to common share ratio was changed from 5:1 to 1:1.

As of February 28, 2011, a total of 339,150,459 common shares were outstanding, including 14,947,874 common shares represented by ADSs.

Trading

The Chilean stock market, which is regulated by the SVS under Law 18,045 of October 22, 1981, as amended, which we refer to as the Securities Market Law, is one of the most developed among emerging markets, reflecting the particular economic history and development of Chile. The Chilean government’s policy of privatizing state-owned companies, implemented during the 1980s, led to an expansion of private ownership of shares, resulting in an increase in the importance of stock markets. Privatization extended to the social security system, which was converted into a privately managed pension fund system. These pension funds have been allowed, subject to certain limitations, to invest in stocks and are currently major investors in the stock market. Some market participants, including pension fund administrators, are highly regulated with respect to investment and remuneration criteria, but the general market is less regulated than the U.S. market with respect to disclosure requirements and information usage.

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The Santiago Stock Exchange is Chile’s principal exchange and accounts for approximately 86.23% of securities traded in Chile. Approximately 13.36% of equity trading is conducted on the Chilean Electronic Stock Exchange, an electronic trading market created by banks and non-member brokerage houses. The remaining equity trading is conducted on the Valparaíso Stock Exchange.

Equities, closed-end funds, fixed-income securities, short-term and money market securities, gold and U.S. dollars are traded on the Santiago Stock Exchange. In 1991, the Santiago Stock Exchange initiated a futures market with two instruments: U.S. dollar futures and Selective Shares Price Index, or IPSA, futures. Securities are traded primarily through an open voice auction system; a firm offers system or daily auctions. Trading through the open voice system occurs on each business day between 9:30 a.m. to 4:30 p.m. The Santiago Stock Exchange has an electronic system of trade, called Telepregón, which operates continuously for stocks trading in high volumes from 9:30 a.m. to 4:30 p.m. The Chilean Electronic Stock Exchange operates continuously from 9:30 a.m. to 4:30 p.m. (or 5:30 p.m., depending on the period of the year) on each business day. In February 2000, the Santiago Stock Exchange Off-Shore Market began operations. In the Off-Shore Market, publicly offered foreign securities are traded and quoted in U.S. dollars.

ITEM 10. ADDITIONAL INFORMATION

This Item 10 reflects recent legal amendments effected by Law No. 20,382 on Corporate Governance, which was enacted on October 20, 2009, and came into effect on January 1, 2010.

Memorandum and Articles of Association

Set forth below is information concerning our share capital and a brief summary of certain significant provisions of our by-laws and Chilean law. This description contains all material information concerning the common shares but does not purport to be complete and is qualified in its entirety by reference to our by-laws, the Chilean Corporation Law and the Securities Market Law, each referred to below. For additional information regarding the common shares, reference is made to our by-laws, a copy of which is included as Exhibit 1.1 to this annual report on Form 20-F.

Organization and Register

Lan Airlines is a publicly held stock corporation (sociedad anónima abierta) incorporated under the laws of Chile. Lan Airlines was incorporated by a public deed dated December 30, 1983, an abstract of which was published in the Chilean Official Gazette (Diario Oficial de la República de Chile) No. 31.759 on December 31, 1983, and registered on page 20,341, No. 11,248 of the Chilean Real Estate and Commercial Registrar (Registro de Comercio del Conservador de Bienes Raices y Comercio de Santiago) for the year 1983. Our corporate purpose, as stated in our by-laws, is to provide a broad range of transportation and related services, as more fully set forth in Article Four thereof.

General

Shareholders’ rights in a Chilean company are generally governed by the company’s by-laws and the Chilean Corporation Law. Article 22 of the Chilean Corporation Law states that the purchaser of shares of a company implicitly accepts its by-laws and any prior agreements adopted at shareholders’ meetings. Additionally, the Chilean Corporation Law regulates the government and operation of corporations (“sociedades anónimas,” or S.A.) and provides for certain shareholder rights. Article 137 of the Chilean Corporation Law provides that the provisions of the Chilean Corporation Law take precedence over any contrary provision in a corporation’s by-laws. The Chilean Corporation Law and our by-laws also provide that all disputes arising among shareholders in their capacity as such or between us or our administrators and the shareholders may either be submitted to arbitration in Chile or to the courts of Chile at the election of the plaintiff initiating the action. Despite the foregoing a recent legal amendment has forbidden certain individuals (directors, senior managers, administrators and main executives of the corporation, and any shareholder that directly or indirectly holds shares whose book or market value exceed 5,000 UF at the moment of filing of the action) from submitting such action before the ordinary courts, thus obligating them to proceed with arbitration in all situations.. Finally, Decree-Law No. 3,500 on Pension Fund Administrators, which allows pension funds to invest in the stock of qualified corporations, indirectly affects corporate governance and prescribes certain rights of shareholders. The Chilean Corporation Law sets forth the rules and requirements under which a corporation is deemed to be “publicly held.” Article 2 of the Chilean Corporation Law defines publicly held corporations as corporations that register their shares with the Registro de Valores (Securities Registry) of the SVS, either voluntarily or pursuant to a legal obligation. In addition, Article 5 of the Chilean Securities Market Law indicates which corporation’s shares must be registered with the Securities Registry:

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· one with 500 or more shareholders; and

· one in which 100 or more shareholders own at least 10% of the subscribed capital (excluding any direct or indirect individual holdings exceeding 10%).

The framework of the Chilean securities market is regulated by the SVS under the Securities Market Law and the Chilean Corporation Law, which imposes certain disclosure requirements, restricts insider trading, prohibits price manipulation and protects minority investors. In particular, the Securities Market Law establishes requirements for public offerings, stock exchanges and brokers and outlines disclosure requirements for corporations that issue publicly offered securities.

Ownership Restrictions

Under Articles 12 and 20 of the Securities Market Law and Circular 289 issued by the SVS in 2009, certain information regarding transactions in shares of publicly held corporations must be reported to the SVS and the Chilean stock exchanges on which the shares are listed. Since the ADRs are deemed to represent the shares underlying the ADSs, transactions in ADRs will be subject to those reporting requirements. Among other matters, the beneficial owners of ADSs that directly or indirectly hold 10% or more of the subscribed capital of Lan Airlines, or that reach or exceed such percentage through an acquisition, are required to report to the SVS and the Chilean stock exchanges, the day following the event:

· any acquisition or sale of shares; and

· any acquisition or sale of contracts or securities the price or performance of which depends on the price variation of the Lan Airlines’ shares.

These obligations are extended (i) to certain individuals (immediate family, next of kin and others) if the ADSs holder is a natural person; (ii) to any entity controlled by the holder, if the ADSs is an legal entity,; and (iii) to groups, if a holder has any joint action agreement with other holders and the group reaches or exceeds the cited threshold.

In addition, majority shareholders must state in their report whether their purpose is to acquire control of the company or if they are making a financial investment.

Under Article 54 of the Securities Market Law and under SVS regulations, persons or entities that intend to acquire control, whether directly or indirectly, of a publicly traded company, must follow certain notice requirements, regardless of the acquisition vehicle or procedure or whether the acquisition will be made through direct subscriptions or private transactions. In the first place, the potential acquiror must first send a written communication to the target corporation, any companies controlling or controlled by the target corporation, the SVS and the Chilean stock exchanges on which the target’s securities are listed, stating, among other things, the person or entity purchasing or selling and the price and conditions of any negotiations. Subsequently, the potential acquiror must also inform the public of its planned acquisition by means of a publication in two Chilean newspapers with national distribution and by uploading such notice to the acquiror’s website, if available. Both requirements shall be met at least ten business days prior to the date on which the acquisition transaction is to close, and in any event, as soon as negotiations regarding the change of control have been formalized or when confidential information or documents concerning the target are delivered to the potential acquiror. The notices must state, among other things, the person or entity purchasing or selling and the price and conditions of any negotiations.

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In addition to the foregoing, Article 54A of the Securities Market Law requires that within two business days of the completion of the transactions pursuant to which a person has acquired control of a publicly traded company, a notice shall be published in the same newspapers in which the notice referred to above was published and notices shall be sent to the same persons mentioned in the preceding paragraphs.

Consequently, a beneficial owner of ADSs intending to acquire control of Lan Airlines will be subject to the foregoing reporting requirements.

The provisions of the aforementioned articles do not apply whenever the acquisition is being made through a tender or exchange offer.

Title XXV of the Securities Market Law on tender offers and SVS regulations provide that the following transactions shall be carried out through a tender offer:

· an offer which allows to take control of a publicly traded company, unless the shares are being sold by a controlling shareholder of such company at a price in cash which is not substantially higher than the market price and the shares of such company are actively traded on a stock exchange;

· an offer for all the outstanding shares of a publicly traded company upon acquiring two-thirds or more of its voting shares (this offer must be made at a price not lower than the price at which appraisal rights may be exercised, that is, book value if the shares of the company are not actively traded or, if the shares of the company are actively traded, the weighted average price at which the stock has been traded during the two months immediately preceding the acquisition); and

· an offer for a controlling percentage of the shares of a publicly traded company if the acquiror intends to take control of the company (whether publicly-traded or privately held) controlling such publicly traded company, to the extent that the latter represents 75.0% or more of the consolidated net assets of the former.

Article 200 of the Securities Market Law prohibits any shareholder that has taken control of a publicly traded company from acquiring, for a period of twelve months from the date of the transaction that granted it control of the publicly traded company, a number of shares equal to or higher than 3.0% of the outstanding issued shares of the target without making a tender offer at a price per share not lower than the price paid at the time of taking control. Should the acquisition from the other shareholders of the company be made on the floor of a stock exchange and on a pro rata basis, the controlling shareholder may purchase a higher percentage of shares, if so permitted by the regulations of the stock exchange.

Title XV of the Securities Market Law sets forth the basis for determining what constitutes a controlling power, a direct holding and a related party.

Capitalization

Under Chilean law, the shareholders of a company, acting at an extraordinary shareholders’ meeting, have the power to authorize an increase in the company’s share capital. When an investor subscribes issued shares, the shares are registered in that investor’s name even without payment, and the investor is treated as a shareholder for all purposes except with regard to receipt of dividends and return of capital, provided that the shareholders may, by amending the by-laws, also grant the right to receive dividends of distribution of capital despite not having paid for the subscribed shares. The investor becomes eligible to receive dividends once it has paid for the shares, or, if it has paid for only a portion of such shares, it is entitled to receive a corresponding pro rata portion of the dividends declared with respect to such shares, unless the company’s by-laws provide otherwise. If an investor does not pay for shares for which it has subscribed on or prior to the date agreed upon for payment, the company is entitled under Chilean law to auction the shares on the appropriate stock exchange, and it has a cause of action against the investor to recover the difference between the subscription price and the price received for the sale of those shares at auction. However, until such shares are sold at auction, the investor continues to exercise all the rights of a shareholder (except the right to receive dividends and return of capital, as noted above). Regarding shares issued but not paid for within the period determined by the extraordinary shareholders’ meeting for their payment (which period cannot exceed three years from the date of such shareholders’ meeting), until January 1, 2010 they were canceled and no longer available for issuance by us. As of January 1, 2010, the board of directors of Lan Airlines has a legal obligation to initiate the necessary legal actions to collect the unpaid amounts, unless the shareholders’ meeting which authorized the capital increase, allowed the board to abstain from taking such action by a vote of two thirds of the issued shares, in which case the former rule still applies. Once the foregoing legal actions are exhausted, the board of directors shall propose to the shareholders’ meeting the appropriate capital adjustment measures, to be decided by simple majority. Fully paid shares are not subject to further calls or assessments or to liabilities of Lan Airlines.

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As of February 28, 2011, our share capital consisted of 339,150,459 common shares, all of which were subscribed and fully paid. Chilean law recognizes the right to issue common and preferred shares. To date, we have issued and are authorized by our shareholders to issue only common shares. Each share of stock is entitled to one vote. Pursuant to an employee compensation plan approved by extraordinary shareholders’ meetings dated April 5, 2007 and October 29, 2009, the issuance of certain shares has been authorized but that has not been made effective in full, as such issuance is subject to the exercising of rights granted to certain employees that expire on December 31, 2011.

Preemptive Rights and Increases in Share Capital

The Chilean Corporation Law requires Chilean companies to offer existing shareholders the right to purchase a sufficient number of shares to maintain their existing percentage of ownership in a company whenever that company issues new shares for cash, except for up to 10% of the capital increase which may be destined to employee compensation pursuant to article 24 of the Corporation Law. Under this requirement, any preemptive rights will be offered by us to the depositary as the registered owner of the common shares underlying the ADSs, but holders of ADSs and shareholders located in the United States will not be allowed to exercise preemptive rights with respect to new issuances of shares by us unless a registration statement under the Securities Act is effective with respect to those common shares or an exemption from the registration requirements thereunder is available.

We intend to evaluate at the time of any preemptive rights offering the costs and potential liabilities associated with the preparation and filing of a registration statement with the Securities and Exchange Commission, as well as the indirect benefits of enabling the exercise by the holders of ADSs and shareholders located in the United States of preemptive rights and any other factors we consider appropriate at the time. No assurances can be given that any registration statement would be filed. If preemptive rights are not made available to ADS holders, the depositary may sell those holders’ preemptive rights and distribute the proceeds thereof if a secondary market for such rights exists and a premium can be recognized over the cost of such sale. In the event that the depositary does not sell such rights at a premium over the cost of any such sale, all or certain holders of ADRs may receive no value for the preemptive rights. The inability of holders of ADSs to exercise preemptive rights 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.

Under Chilean law, preemptive rights are freely exercisable, transferable or waived by shareholders during a thirty-day period commencing upon publication of the official notice announcing the start of the preemptive rights period in the newspaper designated by the shareholders’ meeting. The preemptive right of the shareholders is the pro rata amount of the shares registered in their name in the shareholders’ registry of Lan Airlines as of the fifth business day prior to the date of publication of the notice announcing the start of the preemptive rights period. During such thirty-day period (except for shares as to which preemptive rights have been waived), Chilean companies are not permitted to offer any newly issued common shares for sale to third parties. For that thirty-day period and an additional thirty-day period, Chilean publicly held corporations are not permitted to offer any unsubscribed common shares for sale to third parties on terms that are more favorable to the purchaser than those offered to shareholders. At the end of such additional thirty-day period, Chilean publicly held corporations are authorized to sell non-subscribed shares to third-parties on any terms, provided they are sold on a Chilean stock exchange.

Directors

Our by-laws provide for a board of nine directors. Compensation to be paid to directors must be approved by vote at the annual shareholders’ meeting. We hold elections for all positions on the board of directors every two years. Under our by-laws, directors are elected by cumulative voting. Each shareholder has one vote per share and may cast all of his or her votes in favor of one nominee or may apportion his or her votes among any number of nominees. These voting provisions currently ensure that a shareholder owning more than 10% of our outstanding shares is able to elect at least one representative to our board of directors.

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Under the Chilean Corporation Law, transactions of a publicly-traded company with a “related” party must be conducted on an arm’s-length basis and must satisfy certain approval and disclosure requirements which are different from the ones that apply to a privately-held company. The conditions apply to the publicly-traded company and to all of its subsidiaries.

These transactions include any negotiation, act, contract or operation in which the publicly-traded company intervenes together with either (i) parties which are legally deemed related pursuant to article 100 of the Chilean Securities Market Law, (ii) a director, senior manager, administrator, main executive or liquidator of the company, either on their own behalf or on behalf of a third party, including those individuals’ spouses or close relatives, (iii) companies in which the foregoing individuals own at least 10% (directly or indirectly), or in which they serve as directors, senior managers, administrators or main executives (iv) parties indicated as such in the publicly-traded company’s by-laws, or identified by the directors’ committee, or (v) those who have served as directors, senior managers, administrators, main executives or liquidators of the counterparty in the last eighteen months and are now serving in one of those positions at the publicly-traded company.

Corporations may enter into transactions with interested parties if (i) the transaction is in the interest of the corporation, (ii) the transaction is made on an arm’s-length basis at market conditions, (iii) the individuals involved in the transactions report them immediately to the board, (iv) the transaction is approved after a reasoned explanation by the majority of the board, excluding those directors or liquidators that are involved in the transaction (who shall, nonetheless, render an opinion on the matter if required by the board), (v) the decisions of the board is disclosed at the next shareholders’ meeting, and (vi) in case the majority of the board is disqualified to vote, the majority of the non-involved directors have approved the transaction, or two thirds of the voting shares have approved the transaction).

If as noted in (vi) above, the transaction is to be approved by the shareholder’s meeting, the following additional rules apply: (i) the board shall appoint an independent appraiser that shall report to the shareholders on the transaction; (ii) the director’s committee or the non-involved directors may appoint a second independent appraiser; (iii) the appraiser’s reports shall be made available for fifteen days; (iv) the receipt and availability of the reports shall be disclosed as a material fact; (iv) directors shall render an opinion on the transaction within five business days after receiving the reports.

Transactions which do not meet the foregoing requirements are valid and enforceable, but neither the corporation nor its shareholders shall have a cause of action to sue the infringing party for reimbursement on behalf of the corporation, for a total of the benefits reported to the interested party, in addition to indemnification for the damages caused. In such proceedings, the defendant shall prove that the transaction met the legal requirements.

The Chilean Corporation Law sets forth a number of exceptions to the foregoing rules. In the following situations, transactions with related parties may be carried out without complying with the foregoing rules: (i) if a transaction does not involve a substantial amount (if it does not exceed 1.0% of the net worth of the company and does not exceed the equivalent of 2,000 UF or approximately US$79,000 as of the date of this annual report) unless such a transaction exceeds 20,000 UF (for this calculation all similar transactions carried out within a consecutive 12-month period between the same parties or for the same subject matter, shall be deemed as a single transaction), (ii) transactions which according to the policies determined by the board of directors, are deemed to be within the ordinary course of business (the determination of such policies shall be disclosed as a material fact and made available to shareholders), and (iii) if the counterparty is an entity in which the publicly-traded company has, directly or indirectly, at least a 95.0% ownership. As per the exemption indicated in (ii) above, on December 29, 2009, the Board of Directors of LAN determined the cited policies setting forth the transactions that fall within the ordinary course of business. That determination was publicly disclosed on the same day and is currently available on LAN’s website under the “Corporate Governance” section.”

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Shareholders’ Meetings and Voting Rights

The Chilean Corporation Law requires that an ordinary annual meeting of shareholders be held within the first four months of each year after being called by the board of directors (generally they are held in April, but in any case following the preparation of our financial statements, including the report of our auditors, for the previous fiscal year). Lan Airlines’ by-laws further provide that the ordinary annual meeting of shareholders must take place between February 1 and April 30. The shareholders at the ordinary annual meeting approve the annual financial statements, including the report of our auditors, the annual report, the dividend policy and the final dividend on the prior year’s profits, elect the board of directors (in our case, every two years or earlier if a vacancy occurs) and approve any other matter that does not require an extraordinary shareholders’ meeting. The most recent extraordinary meeting of our shareholders was held on October 29, 2009, and the most recent ordinary annual meeting of our shareholders was held on April 29, 2010.

Extraordinary shareholders’ meetings may be called by the board of directors, if deemed appropriate, and ordinary or extraordinary shareholders’ meetings must be called by the board of directors when requested by shareholders representing at least 10.0% of the issued voting shares or by the SVS. In addition, as from January 1, 2010 there are two new rules in this regard: (i) the SVS may directly call for an extraordinary shareholders’ meeting in case of a publicly-traded companies, and (ii) any kind of shareholders’ meeting may be self-convened and take place if all voting shares attend, regardless of the fulfillment of the notice and other type of procedural requirements.

Notice to convene the ordinary annual meeting or an extraordinary meeting is given by means of three notices which must be published in a newspaper of our corporate domicile (currently Santiago, Chile) designated by the shareholders at their annual meeting and, if the shareholders fail to make such designation, the notice must be published in the Chilean Official Gazette pursuant to legal requirements. The first notice must be published not less than fifteen days and not more than twenty days in advance of the scheduled meeting. Notice also must be mailed not less than fifteen days in advance of the meeting to each shareholder and to the SVS and the Chilean stock exchanges. Currently, we publish our official notices in the newspaper La Tercera (available online at www.latercera.com).

The quorum for a shareholders’ meeting is established by the presence, in person or by proxy, of shareholders representing a majority of our issued common shares. If that quorum is not reached, the meeting can be reconvened within forty-five days, and at the second meeting the shareholders present are deemed to constitute a quorum regardless of the percentage of the common shares that they represent.

Only shareholders registered with us on the fifth business day prior to the date of a meeting are entitled to attend and vote their shares. A shareholder may appoint another individual (who need not be a shareholder) as his or her proxy to attend and vote on his or her behalf. Proxies addressed to us that do not designate a person to exercise the proxy are taken into account in order to determine if there is a sufficient quorum to hold the meeting, but the shares represented thereby are not entitled to vote at the meeting. The proxies must fulfill the requirements set forth by the Chilean Corporation Law and its regulatory norms. Every shareholder entitled to attend and vote at a shareholders’ meeting has one vote for every share subscribed.

The following matters can only be considered at an extraordinary shareholders’ meeting:

· our dissolution;

· a merger, transformation, division or other change in our corporate form or the amendment of our by-laws;

· the issuance of bonds or debentures convertible into shares;

· the conveyance of 50% or more of our assets (whether or not it includes our liabilities);

· the adoption or amendment of any business plan which contemplates the conveyance of assets in excess of the foregoing percentage;

· the conveyance of 50% or more of the assets of a subsidiary, if the latter represents at least 20% of our assets;

· the conveyance of shares of a subsidiary which entails the transfer of control;

· granting of a security interest or a personal guarantee in each case to secure the obligations of third parties, unless to secure or guarantee the obligations of a subsidiary, in which case only the approval of the board of directors will suffice; and

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· other matters that require shareholder approval according to Chilean law or the by-laws.

The matters referred to in the first seven items listed above may only be approved at a meeting held before a notary public, who shall certify that the minutes are a true record of the events and resolutions of the meeting.

The by-laws establish that resolutions are passed at shareholders’ meetings by the affirmative vote of an absolute majority of those voting shares present or represented at the meeting. However, under the Chilean Corporation Law, the vote of a two-thirds majority of the outstanding voting shares is required to approve any of the following actions:

· a change in our corporate form, division or merger with another entity;

· amendment to our term of existence, if any;

· our early dissolution;

· change in our corporate domicile;

· decrease of our capital stock;

· approval of contributions and the assessment thereof whenever consisting of assets other than money;

· any modification of the authority reserved for the shareholders’ meetings or limitations on the powers of the board of directors;

· decrease in the number of members of the board of directors;

· the conveyance of 50% or more our assets (whether or not it includes our liabilities);

· the adoption or amendment of any business plan which contemplates the conveyance of assets in excess of the foregoing percentage;

· the conveyance of 50% or more of the assets of a subsidiary, if the latter represents at least 20% of our assets;

· the conveyance of shares of a subsidiary which entails the transfer of control;

· the form that dividends are paid in;

· granting a security interest or a personal guarantee in each case to secure obligations of third parties that exceeds 50% of our assets, unless to secure or guarantee the obligations of a subsidiary, in which case only approval of the board of directors will suffice;

· the acquisition of our own shares, when, and on the terms and conditions, permitted by law;

· all other matters provided for in the by-laws; and

· the correction of any formal defect in our incorporation or any amendment to our by-laws that refers to any of the matters indicated in the first thirteen items listed above;

· the institution of the right of the controlling shareholder who has purchases at least 95% of the shares, to purchase shares of the outstanding minority shareholders pursuant to the procedure set forth in article 71 bis of the Corporation Law;

· the approval or ratification of transactions with related parties, as per article 147 of the Corporation Law (described above).

Amendments to the by-laws that have the effect of establishing, modifying or eliminating any special rights pertaining to any series of shares require the consenting vote of holders of two-thirds of the shares of the affected series. As noted above, Lan Airlines does not have special series of shares.

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In general, Chilean law does not require a publicly held corporation to provide the level and type of information that the U.S. securities laws require a reporting company to provide to its shareholders in connection with a solicitation of proxies. However, shareholders are entitled to examine the books of the company and its subsidiaries within the fifteen-day period before the scheduled meeting. No later than the first notice summoning an ordinary shareholder’s meeting, the board of directors of a publicly held corporation shall send to every shareholder notice by regular mail, containing a reference to the issues that will be discussed, together with instructions to obtain all the appropriate documentation regarding those issues, in addition to being obligated to publish them in our website, and also a copy of the annual report and the financial statements of the company. However, the SVS may authorize companies that have a large number of shareholders to limit the sending of such documents only to those shareholders who have a number of shares exceeding a certain number, and, in any case, to any shareholder that has required of the company such sending. Shareholders who do not fall into this category but who request it must be sent a copy of our annual report. In addition to these requirements, we regularly have provided, and currently intend to continue to provide, together with the notice of shareholders’ meeting, a proposal for the final annual dividend for shareholder approval. See “—Dividend and Liquidation Rights” below.

The Chilean Corporation Law provides that, whenever shareholders representing 10% or more of the issued voting shares so request, a Chilean company’s annual report must include such shareholders’ comments and proposal in relation to the company’s affairs, together with the comments and proposals set forth by the directors’ committee. Similarly, the Chilean Corporation Law provides that whenever the board of directors of a publicly held corporation convenes an ordinary meeting of the shareholders and solicits proxies for that meeting, or distributes information supporting its decisions or other similar material, it is obligated to include as an annex to its annual report any pertinent comments and proposals that may have been made by shareholders owning 10% or more of the company’s voting shares who have requested that such comments and proposals be included, together with the comments and proposals set forth by the directors’ committee.

Dividend and Liquidation Rights

In accordance with the Chilean Corporation Law, Lan Airlines must distribute an annual cash dividend equal to at least 30% of its annual net income calculated in accordance with IFRS, unless otherwise decided by a unanimous vote of the holders of all issued shares, and unless and except to the extent it has accumulated losses. If there is no net income in a given year, Lan Airlines can elect but is not legally obligated to distribute dividends out of retained earnings. All outstanding common shares are entitled to share equally in all dividends declared by Lan Airlines, unless the shares have not been fully paid by the shareholder after being subscribed.

For all dividend distributions agreed by the board of directors in excess of the mandatory minimum of 30% noted in the preceding paragraph, Lan Airlines may grant an option to its shareholders to receive those dividends in cash, or in shares issued by either Lan Airlines or other corporations. Shareholders who do not expressly elect to receive a dividend other than in cash are legally presumed to have decided to receive the dividend in cash. A U.S. holder of ADSs may, in the absence of an effective registration statement under the Securities Act or an available exemption from the registration requirement thereunder, effectively be required to receive a dividend in cash. See “—Preemptive Rights and Increases in Share Capital” above.

Dividends that are declared but not paid within the appropriate time period set forth in the Chilean Corporation Law (as to minimum dividends, thirty days after declaration; as to additional dividends, the date set for payment at the time of declaration) are adjusted to reflect the change in the value of the UF. The UF is a daily indexed, Chilean peso-denominated accounting unit designed to discount the effect of Chilean inflation and it is based on the previous month’s inflation rate as officially determined. Such dividends also accrue interest at the then-prevailing rate for UF-denominated deposits during such period. The right to receive a dividend lapses if it is not claimed within five years from the date such dividend is payable. After that period, the amount not claimed is given to a non-profit organization, the Junta Nacional de Cuerpos de Bomberos de Chile (the National Corporation of Firefighters).

In the event of Lan Airlines’ liquidation, the holders of fully paid common shares would participate pro rata in the distribution of assets remaining after payment of all creditors. Holders of shares not fully paid will participate in such distribution in proportion to the amount paid.

Approval of Financial Statements

The board of directors is required to submit our consolidated financial statements to the shareholders for their approval at the annual ordinary shareholders’ meeting. If the shareholders reject the financial statements, the board of directors must submit new financial statements not later than sixty days from the date of that meeting. If the shareholders reject the new financial statements, the entire board of directors is deemed removed from office and a new board is to be elected at the same meeting. Directors who approved such financial statements are disqualified for re-election for the ensuing period.

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Right of Dissenting Shareholders to Tender Their Shares

The Chilean Corporation Law provides that, upon the adoption at an extraordinary meeting of shareholders of any of the resolutions or if it takes place any of the situations enumerated below, dissenting or affected shareholders acquire the right to withdraw and to compel the company to repurchase their shares, subject to the fulfillment of certain terms and conditions. However, such right shall be suspended if we are declared bankrupt or are subject to a creditor’s agreement pursuant to Title XII of Book IV of the Commerce Code. In the case of holders of ADRs, however, in order to exercise such rights, holders of ADRs would be required to first withdraw the common shares represented by the ADRs pursuant to the terms of the deposit agreement. Such holders of ADRs would need to perfect the withdrawal of the common shares on or before the fifth business day prior to the date of the meeting.

“Dissenting shareholders” are defined as those who attend a shareholders’ meeting and vote against a resolution which results in the withdrawal right, or, if absent at such a meeting, those who state in writing to the company their opposition to such resolution within the following thirty days. Dissenting shareholders must perfect their withdrawal rights by tendering their stock to the company within thirty days after adoption of the resolution.

The price paid to a dissenting shareholder of a publicly held corporation is the weighted average of the sales prices for the shares as reported on the Chilean stock exchanges on which the shares are quoted for the two-month period preceding the event giving rise to the withdrawal right. If, because of the volume, frequency, number and diversity of the buyers and sellers, the SVS determines that the shares are not shares actively traded on a stock exchange (acciones de transacción bursátil), the price paid to the dissenting shareholder is the book value. Book value for this purpose equals paid capital plus reserves and profits, less losses, divided by the total number of subscribed shares (whether entirely or partially paid). For the purpose of making this calculation, the last annual balance sheet is used and adjusted to reflect inflation up to the date of the shareholders’ meeting that gave rise to the withdrawal right.

The resolutions and situations that result in a shareholder’s right to withdraw are the following:

·  the transformation of the company into an entity that is not a publicly held corporation governed by the Chilean Corporation Law;

·  the merger of the company with or into another company;

·  the conveyance of 50% or more of the assets of the company, whether or not such sale includes the company’s liabilities;

·  the adoption or amendment of any business plan which contemplates the conveyance of assets in excess of the foregoing percentage;

·  the conveyance of 50% or more of the assets of a subsidiary, if the latter represents at least 20% of our assets;

·  the conveyance of shares of a subsidiary which entails the transfer of control;

·  the creation of preferential rights for a class of shares or an extension, amendment or reduction to those already existing, in which case the right to withdraw only accrues to the dissenting shareholders of the class or classes of shares adversely affected;

·  the correction of any formal defect in the incorporation of the company or any amendment to the company’s by-laws that grants the right to withdraw;

·  the granting of security interests or personal guarantees to secure or guarantee third parties’ obligations exceeding 50% of the company’s assets, except with regard to subsidiaries;

·  resolutions of the shareholders’ meeting approving the decision to make private a public corporation in the case the requirements set forth in “—General” cease to be met;

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· if a publicly-traded company ceases to be obligated to register its shares in the Securities Registry of the SVS, and an extraordinary shareholders’ meeting agrees to de-register the shares and finalize its disclosure obligations mandated by the Corporation Law;

· if the controlling shareholder of a publicly-traded company reaches over 95% of the shares (in such case, the right must be exercised within 30 days of the date in which the threshold is reached, circumstance that must be communicated by means of a publication); and

· such other causes as may be established by the company’s by-laws (no such additional resolutions currently are specified in our by-laws).

In addition, shareholders of publicly held corporations have the right to withdraw if a person acquires two-thirds or more of the outstanding shares of such corporation with the right to vote (except as a result of other shareholders not having subscribed and paid a capital increase) and does not make a tender offer for the remaining shares within thirty days after acquisition.

Under Article 69(bis) of the Chilean Corporation Law, the right to withdraw also is granted to shareholders (other than pension funds that administer private pension plans under the national pension law), under certain terms and conditions, if a company were to become controlled by the Chilean government, directly or through any of its agencies, and if two independent rating agencies downgrade the rating of its stock from first class because of certain actions specified in Article 69(bis) undertaken by the company or the Chilean government that affect negatively and substantially the earnings of the company. Shareholders must perfect their withdrawal rights by tendering their shares to the company within thirty days of the date of the publication of the new rating by two independent rating agencies. If the withdrawal right is exercised by a shareholder invoking Article 69(bis), the price paid to the dissenting shareholder shall be the weighted average of the sales price for the shares as reported on the stock exchanges on which the company’s shares are quoted for the six-month period preceding the publication of the new rating by two independent rating agencies. If, as previously described, the SVS determines that the shares are not actively traded on a stock exchange, the price shall be the book value calculated as described above.

There is no legal precedent as to whether a shareholder that has voted both for and against a proposal (such as the depositary) may exercise withdrawal rights with respect to the shares voted against the proposal. As such, there is doubt as to whether holders of ADRs who have not surrendered their ADRs and withdrawn common shares on or before the fifth business day prior to the shareholder meeting will be able to exercise withdrawal rights either directly or through the depositary with respect to the shares represented by ADRs. Under the provisions of the deposit agreement the depositary will not exercise these withdrawal rights.

The circumstance indicated above regarding ownership in excess of 95% by the controlling shareholder creates not only a withdrawal right for the remaining minority shareholders, but as of January 1, 2010, it also creates a “squeeze out” right by the controlling shareholder with respect to those same shareholders (granting a call option by means of which the controlling shareholder may buy-out the existing ownership participations pursuant to the provisions of article 71 bis of the Corporation Law).

Registration and Transfers

The Depósito Central de Valores, (“DCV”), acts as Lan Airlines’ registration agent. In the case of jointly owned common shares, an attorney-in-fact must be appointed to represent the joint owners in dealings with us.

Material Contracts

Boeing

On March 31, 2006, we entered into supplemental agreement No. 22, to purchase agreement No. 2126 dated as of January 30, 1998 (“Purchase Agreement No. 2126”), whereby we agreed to purchase a total of three Boeing 767-300 aircraft. Five passenger aircraft were delivered in 2008 pursuant to Purchase Agreement No. 2126. We had the option to convert some of the orders from the passenger version to the freighter version or vice versa with certain notice. The estimated gross value (at list prices) of the Boeing aircraft for which we had firm commitments to take delivery under this contract was US$0.5 billion.

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On July 3, 2007, we entered into a purchase agreement with the Boeing Company for the acquisition of two Boeing 777-Freighter aircraft.  Delivery is scheduled to take place in 2011 and 2012.

On October 29, 2007, we entered into a purchase agreement with the Boeing Company for the acquisition of twenty-six Boeing 787-8 and 787-9 aircraft to be delivered between 2012 and 2016. This purchase agreement provides us with the option of purchasing ten additional aircraft to be delivered in 2017 and 2018.

On November 10, 2008, we entered into a supplemental agreement to the purchase agreement entered into with the Boeing Company for the acquisition of four additional Boeing 767-300 passenger aircraft.  Delivery is scheduled to take place in 2012. The estimated gross value (at list prices) of these aircraft is US$636 million.

On November 10, 2008, we entered into Supplemental Agreement No. 24 to the Purchase Agreement No. 2126 dated January 30, 1998, as amended, with the Boeing Company.

On March 22, 2010, we entered into Supplemental Agreement No. 1 to the Purchase Agreement No. 3256 dated October 29, 2007, as amended, with the Boeing Company.  Additionally, on March 22, 2010, we entered into Supplemental Agreement No. 28 to the Purchase Agreement No. 2126 dated January 30, 1998, as amended, with the Boeing Company.

On July 8, 2010, we entered into Supplemental Agreement No. 1 to the Purchase Agreement No. 3256 dated October 29, 2007, as amended, with the Boeing Company.

On November 10, 2010, we entered into Supplemental Agreement No. 29 to the Purchase Agreement No. 2126 dated January 30, 1998, as amended, with the Boeing Company. Moreover, on November 2, 2010, we entered into Supplemental Agreement No. 2 to the Purchase Agreement No. 3194 dated July 3, 2007, as amended, with the Boeing Company.

Airbus

On March 6, 2007, we entered into amendment No.3 to the First A340 purchase agreement with Airbus S.A.S. (“Airbus”) for the cancellation of two A340 aircraft, and amendment No.3 to the Second A320-Family purchase agreement with Airbus S.A.S. for the conversion of fifteen options to purchase aircraft into firm orders. The net increase in capital expenditures related to these agreements is US$315 million.

On December 23, 2009, we entered into Amendment No. 5 to the Second A320-Family Purchase Agreement dated March 20, 1998, as amended, with Airbus, for the acquisition of 30 additional A-319 and A-320 Airbus aircraft, for a list price amount of US$2.0 billion.

On May 10, 2010, we entered into Amendment No. 6 to the Second A320-Family Purchase Agreement dated March 20, 1998, as amended, with Airbus, to convert the aircraft types of three aircraft and advance the scheduled delivery of two aircraft.  Additionally, on May 19, 2010, we entered into Amendment No. 7 to the Second A320-Family Purchase Agreement dated March 20, 1998, as amended, with Airbus S.A.S., to advance the scheduled delivery of three aircraft.

On September 23, 2010, we entered into Amendment No. 8 to the Second A320-Family Purchase Agreement dated March 20, 1998, as amended, with Airbus S.A.S., to convert the aircraft types of one aircraft and advance the scheduled delivery of four aircraft.

On December 21, 2010, we entered into Amendment No. 9 to the Second A320-Family Purchase Agreement dated March 20, 1998, as amended, with Airbus S.A.S., for the acquisition of 50 additional A-319, A-320 and A321 Airbus aircraft.

For more information, see “Information on the Company—Fleet—Fleet Leasing and Financing Arrangements” under Item 4.

GE Commercial Aviation

On April 30, 2007, we also entered into an Aircraft Lease Common Terms Agreement with GE Commercial Aviation Services Limited and two Aircraft Lease Agreements with Wells Fargo Bank Northwest N.A., as owner trustee, for the lease of two Boeing B777-200LRF aircraft.

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For more information, see “Information on the Company—Fleet—Fleet Leasing and Financing Arrangements” under Item 4.

GE Engine Services

On December 17, 2010, we entered in to a Digital Services Agreement with GE Engine Services, LLC, for the provision of operational analysis, performance and maintenance services of aircraft engines.

CFM International

On December 17, 2010, we entered into General Terms Agreement No. CFM-1-2377460475 (the “GTA”) and Letter Agreement No. 1 to GTA with CFM International, Inc. (“CFM”) for the sale and support by CFM of spare engines, related equipment and spare parts.  Moreover, on December 17, 2010, we entered into a Rate Per Flight Hour Engine Shop Maintenance Services Agreement with CFM for the provision by CMF of maintenance services over our aircraft engines.

Proposed Merger Agreements

On January 18, 2011, we and Costa Verde Aeronáutica and Mineras del Cantábrico (we refer to these entities together as the “LAN controlling shareholders”) entered into an implementation agreement and an exchange offer agreement (we refer to these agreements together as the “transaction agreements”) with TAM S.A., TAM Empreendimentos e Participações S.A. (we refer to this entity as the “TAM controlling shareholder”) and Maria Cláudia Oliveira Amaro, Maurício Rolim Amaro, Noemy Almeida Oliveira Amaro and João Francisco Amaro (we refer to these individuals together as the “Amaro family”), which set forth the terms and conditions of a proposed business combination of LAN and TAM.  For more information, see “Key Information—Transaction Agreements” under Item 4.

Foreign Investment and Exchange Controls in Chile

The Central Bank of Chile is responsible, among other things, for monetary policies and exchange controls in Chile. Equity investments, including investments in shares of stock by persons who are non-Chilean residents, have been generally subject in the past to various exchange control regulations restricting the repatriation of their investments and the earnings thereon.

Article 47 of the Central Bank Act and Chapter XXVI of the Central Bank Foreign Exchange Regulations regulated the foreign exchange aspects of the issuance of ADSs by a Chilean company until April 2001. According to Chapter XXVI, the Central Bank of Chile and the depositary had to enter into an agreement in order to gain access to the formal exchange market. The issuers of the shares underlying the ADSs and the custodian could also be parties to these agreements and we are party to such agreement.

On April 16, 2001, the Central Bank of Chile agreed that, effective April 19, 2001:

· prior foreign exchange restrictions would be eliminated: and

· a new Compendium of Foreign Exchange Regulations (Compendio de Normas de Cambios Internacionales) would be applied.

The main objective of these amendments, as declared by the Central Bank of Chile, is to facilitate movement of capital in and out of Chile and to encourage foreign investment.

In connection with the change in policy, the Central Bank of Chile eliminated the following restrictions:

· a reserve requirement with the Central Bank of Chile for a period of one year (this mandatory reserve was imposed on foreign loans and funds brought into Chile to purchase shares other than those acquired in the establishment of a new company or in the capital increase of the issuing company; the reserve requirement was gradually decreased from 30% of the proposed investment to 0%);

· the requirement of prior approval by the Central Bank of Chile for certain operations;

· mandatory return of foreign currencies to Chile; and

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· mandatory conversion of foreign currencies into Chilean pesos.

Under the new regulations, only the following limitations apply to these operations:

· the Central Bank of Chile must be provided with information related to certain operations; and

· certain operations must be conducted with the Formal Exchange Market.

The Central Bank of Chile also eliminated Chapter XXVI of the Compendium of Foreign Exchange Regulations, which regulated the establishment of an ADR facility by a Chilean company. Pursuant to the new rules, it is no longer necessary to seek the Central Bank of Chile’s prior approval in order to establish an ADR facility nor to enter into a foreign investment contract with the Central Bank of Chile. The establishment of an ADR facility is now regarded as an ordinary foreign investment, and simply requires that the Central Bank of Chile be informed of the transaction pursuant to Chapter XIV of the revised Compendium of Foreign Exchange Regulations and that the transaction be conducted exclusively through the Formal Exchange Market.

However, all contracts executed under the provisions of Chapter XXVI (including the foreign investment contract among Lan Airlines, the Central Bank of Chile and the ADS depositary, or the “Foreign Investment Contract”), remain in full force and effect and continue to be governed by the provisions, and continue to be subject to the restrictions, set forth in Chapter XXVI at the time of its abrogation. Our Foreign Investment Contract guarantees ADS investors access to the Formal Exchange Market to convert amounts from Chilean pesos into U.S. dollars and repatriate amounts received with respect to deposited common shares or common shares withdrawn from deposit or surrender of ADRs (including amounts received as cash dividends and proceeds from the sale in Chile of the underlying common shares and any rights arising from them).

The guarantee of access to the Formal Exchange Market under the Foreign Investment Contract requires compliance of the following conditions:

· the funds to purchase the common shares underlying the ADSs are brought into Chile and converted into Chilean pesos through the Formal Exchange Market;

· the purchase of the underlying common shares is made on a Chilean stock exchange; and

· within five business days from conversion of the funds into Chilean pesos, the Central Bank of Chile is informed that the conversion funds were used to purchase the underlying common shares.

The following is a summary of material provisions of the Foreign Investment Contract, a form of which was filed as an exhibit to the registration statement on Form F-1 (File No. 333-7750) that we filed on October 10, 1997 in connection with our November 6, 1997 offering. This summary is not complete and is qualified in its entirety by reference to Chapter XXVI and the Foreign Investment Contract.

Under Chapter XXVI and the Foreign Investment Contract, the Central Bank of Chile agreed to grant to the depositary, on behalf of ADR holders, and to any investor not residing or domiciled in Chile who withdraws common shares upon surrender of ADRs, access to the Formal Exchange Market to convert Chilean pesos into U.S. dollars (and to remit those dollars outside Chile) in respect of common shares represented by ADSs or withdrawn shares, including amounts received as:

· cash dividends;

· proceeds from the sale in Chile of withdrawn shares or from shares distributed as a result of a liquidation, merger or consolidation of Lan Airlines (subject to receipt by the Central Bank of Chile of a certificate from the holder of the withdrawn shares or the distributed shares (or from an institution authorized by the Central Bank of Chile) that the holder’s residence and domicile are outside of Chile, and a certificate from a Chilean stock exchange (or from a brokerage or securities firm established in Chile) that the withdrawn shares or the distributed shares were sold on a Chilean stock exchange);

· proceeds from the sale in Chile of preemptive rights to subscribe for additional common shares;

· proceeds from the liquidation, merger or consolidation of Lan Airlines;

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· proceeds from the sale in Chile of common shares received as a dividend; and

· other distributions, including those in respect of any recapitalization resulting from holding common shares represented by ADSs or withdrawn shares.

Chapter XXVI provided that access to the Formal Exchange Market in connection with dividend payments is conditioned on our certifying to the Central Bank of Chile that a dividend payment has been made and that any applicable tax has been withheld. We agreed to provide this certification. Chapter XXVI also provides that access to the Formal Exchange Market in connection with the sale of withdrawn shares, or distribution on them, is conditioned upon receipt by the Central Bank of Chile of a certification by the depositary or custodian, as the case may be, that the common shares have been withdrawn in exchange for delivery of the appropriate ADRs and receipt of a waiver of the benefit of the Foreign Investment Contract with respect to them (except in connection with the proposed sale of the common shares) until the withdrawn shares are redeposited.

Chapter XXVI and the Foreign Investment Contract provided that a person who brings foreign currency into Chile to purchase common shares pursuant to the Foreign Investment Contract must convert that foreign currency into Chilean pesos on the date of entry into Chile, and must invest in common shares within five banking business days in order to receive the benefits of the Foreign Investment Contract. If a person does not invest in common shares within that period, that person can access the Formal Exchange Market to reacquire foreign currency, provided that the request is presented to the Central Bank of Chile within seven banking business days of the initial conversion into pesos. Common shares acquired as described above may be deposited in exchange for ADRs and will receive the benefits of the Foreign Investment Contract, subject to:

· receipt by the Central Bank of Chile of a certificate from the depositary that the common shares have been deposited and that the related ADRs have been issued; and

· receipt by the custodian of a declaration from the person making the deposit waiving the benefits of the Foreign Investment Contract with respect to the deposited common shares.

Access to the Formal Exchange Market under any of the circumstances described above is not automatic. Pursuant to Chapter XXVI, such access required approval of the Central Bank of Chile based on a request presented through a banking institution established in Chile. The Foreign Investment Contract provides that if the Central Bank of Chile has not acted on the request within seven banking days, the request is deemed approved.

Under current Chilean law, the Foreign Investment Contract cannot be changed unilaterally by the Central Bank of Chile. We cannot guarantee, however, 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.  On May 10, 2007, the Council of the Central Bank of Chile agreed to grant the Chilean companies that increased their capital stock between the date of the agreement and August 31, 2007 the option to request, on a one-time only basis, the application of Chapter XXVI to those shares issued and actually paid before August 31, 2008 (assuming prior fulfillment of the requirements of the Central Bank of Chile).

Voting Rights

Holders of our ADSs, which represent common shares, may instruct the depositary to vote the shares underlying their ADRs. If we ask holders for instructions, the depositary will notify such holders of the upcoming vote and arrange to deliver our voting materials to such holders. The materials will describe the matters to be voted on and explain how holders may instruct the depositary to vote the shares or other deposited securities underlying their ADSs as they direct by a specified date. For instructions to be valid, the depositary must receive them on or before the date specified as “Vote Cut-Off Date.” The depositary will try, as far as practical, subject to Chilean law and the provisions of our by-laws, to vote or to have its agents vote the shares or other deposited securities as holders instruct. Otherwise, holders will not be able to exercise their right to vote unless they withdraw the shares. However, holders may not know about the meeting far enough in advance to withdraw the shares. We will use our best efforts to request that the depositary notify holders of upcoming votes and ask for their instructions.

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If the depositary does not receive voting instructions from a holder by the specified date, it will consider such holder to have authorized and directed it to give a discretionary proxy to a person designated by our board of directors to vote the number of deposited securities represented by such holder’s ADSs. The depositary will give a discretionary proxy in those circumstances to vote on all questions to be voted upon unless we notify the depositary that:

· we do not wish to receive a discretionary proxy;

· we think there is substantial shareholder opposition to the particular question; or

· we think the particular question would have an adverse impact on our shareholders.

The depositary will only vote or attempt to vote as such holder instructs or as described above.

We cannot assure holders that they receive the voting materials in time to ensure that they can instruct the depositary to vote their shares. This means that holders may not be able to exercise their right to vote and there may be nothing they can do if their shares are not voted as they requested.

Exchange Rates

Prior to 1989, Chilean law permitted the purchase and sale of foreign exchange only in those cases explicitly authorized by the Central Bank of Chile. The Central Bank Act liberalized the rules that govern the ability to buy and sell foreign currency. The Central Bank Act empowers the Central Bank of Chile to determine that certain purchases and sales of foreign currency specified by law must be carried out exclusively in the Formal Exchange Market, which is made up of the banks and other entities authorized by the Central Bank of Chile. All payments and distributions with respect to the ADSs must be conducted exclusively in the Formal Exchange Market.

For purposes of the operation of the Formal Exchange Market, the Central Bank of Chile sets a reference exchange rate (dólar acuerdo). The Central Bank of Chile resets the reference exchange rate monthly, taking internal and external inflation into account, and adjusts the reference exchange rate daily to reflect variations in parities between the Chilean peso, the U.S. dollar, the Japanese yen and the European euro.

The observed exchange rate (dólar observado) is the average exchange rate at which transactions were actually carried out in the Formal Exchange Market on a particular day, as certified by the Central Bank of Chile on the next banking day.

Prior to September 3, 1999, the Central Bank of Chile was authorized to buy or sell dollars in the Formal Exchange Market to maintain the observed exchange rate within a specified range above or below the reference exchange rate. On September 3, 1999, the Central Bank of Chile eliminated the exchange band. As a result, the Central Bank of Chile may buy and sell foreign exchange in the Formal Exchange Market in order to maintain the observed exchange rate at a level the Central Bank of Chile determines.

Purchases and sales of foreign exchange may be effected outside the Formal Exchange Market through the Informal Exchange Market (Mercado Cambiario Informal) established by the Central Bank in 1990. There are no limits on the extent to which the rate of exchange in the Informal Exchange Market can fluctuate above or below the observed exchange rate.

Although our results of operations have not been significantly affected by fluctuations in the exchange rates between the peso and the U.S. dollar because our functional currency is the U.S. dollar, we are exposed to foreign exchange losses and gains due to exchange rate fluctuations. Even though the majority of our revenues are denominated in or pegged to the U.S. dollar, the Chilean government’s economic policies affecting foreign exchange and future fluctuations in the value of the peso against the U.S. dollar could adversely affect our results of operations and an investor’s return on an investment in ADSs.

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Chilean Taxation

The following discussion relates to Chilean income tax laws presently in force, including Ruling No. 324 of January 29, 1990 of the Chilean Internal Revenue Service (“Chilean IRS”) and other applicable regulations and rulings, all of which are subject to change. The discussion summarizes the principal Chilean income tax consequences of an investment in the ADSs or common shares by a person who is neither domiciled in, nor a resident of, Chile or by a legal entity that is not organized under the laws of Chile and does not have a branch or a permanent establishment located in Chile (such an individual or entity is referred to herein as a Foreign Holder). For purposes of Chilean tax law, an individual holder is a resident of Chile if such person has resided in Chile for more than six consecutive months in one calendar year or for a total of six months, whether consecutive or not, in two consecutive tax years. In addition, an individual is considered domiciled in Chile in case he or she resides in Chile with the actual or presumptive intent of staying in the country. The discussion is not intended as tax advice to any particular investor, which can be rendered only in light of that investor’s particular tax situation.

Under Chilean law, provisions contained in statutes such as tax rates applicable to foreign investors, the computation of taxable income for Chilean purposes and the manner in which Chilean taxes are imposed and collected may only be amended by another statute. In addition, the Chilean tax authorities enact rulings and regulations of either general or specific application and interpret the provisions of Chilean tax law. Chilean tax may not be assessed retroactively against taxpayers who act in good faith relying on such rulings, regulations and interpretations, but Chilean tax authorities may change these rulings, regulations and interpretations prospectively. On February 4, 2010, representatives of the governments of the United States and Chile signed an income tax treaty. The new treaty will have to be approved by the U.S. Senate.

Cash Dividends and Other Distributions.

Cash dividends we pay with respect to the ADSs or common shares held by a Foreign Holder will be subject to a 35% Chilean withholding tax, which we withhold and pay over to the Chilean tax authorities and which we refer to as the Withholding Tax. A credit against the Withholding Tax is available based on the level of corporate income tax we actually paid on the income to be distributed (referred to herein as the First Category Tax); however, this credit does not reduce the Withholding Tax on a one-for-one basis because it also increases the base on which the Withholding Tax is imposed. If we register net income but taxable losses, no credit against the Withholding Tax will be available. In addition, if we distribute less than all of our distributable income, the credit for First Category Tax we pay is proportionately reduced. In 2010 the First Category Tax rate was 17%. That year, the first category tax rate was increased to 20% for fiscal year 2011, and to 18.5% for fiscal year 2012. From 2013 onwards, the rate of First Category Tax will revert back to 17%. In general, the example below illustrates the effective Withholding Tax burden on a cash dividend received by a Foreign Holder, assuming a Withholding Tax rate of 35%, an effective First Category Tax rate of 17%, the actual payment of such First Category Tax at that 17% rate and a distribution of 30% of the consolidated net income of the Company after payment of the First Category Tax:

The Company’s taxable income	100.00
First Category Tax (17% of Ch$100)	(17	)
Net distributable income	83.00
Dividend distributed (30% of net distributable income)	24.9
First category increase	5.1
Withholding Tax (35% of the sum of Ch$24.9 dividend plus Ch$5.1 First Category Tax paid)	(10.5	)
Credit for 17% of First Category Tax	5.1
Net tax withheld	(5.4	)
Net dividend received	19.5
Effective dividend withholding rate	21.69	%

In general, the effective dividend Withholding Tax rate, after giving effect to the credit for the First Category Tax, can be calculated using the following formula:

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(Withholding Tax rate) − (First Category Tax effective rate)

1 − (First Category Tax effective rate)

Under Chilean income tax law, dividends generally are assumed to have been paid out of our oldest retained profits for purposes of determining the level of First Category Tax that we paid. The effective rate of Withholding Tax to be imposed on dividends we pay will vary depending upon the amount of First Category Tax we paid (if any) on the earnings to which the dividends are attributed, according to the Company’s Taxable Profit Fund. The Effective Withholding Tax rate for dividends attributed to earnings from 1991 until 2001, for which the First Category Tax rate was 15%, will be 23.5%. For 2002, the First Category Tax rate was 16.0%, which results in an effective rate of 22.62%. In 2003, the First Category Tax rate was 16.5%, which results in an effective rate of 22.16%, and from 2004 onwards, the First Category Tax rate is 17%, which results in an effective rate of Withholding Tax of 21.69%.

For dividends attributable to our profits during years when the First Category Tax was 10% (before 1991), the effective rate will be 27.8%. However, whether the First Category Tax is 10%, 15%, 16%, 16.5% or 17%, the effective overall combined tax rate imposed on our distributed profits will be 35%. In the event that profits from previous years are not sufficient to cover a particular dividend, and the dividend is attributable to the current year, we will generally withhold tax from the dividend at the full 35% rate. If as of December 31 of the year in which the dividend is paid, the withholding is determined to be excessive taking into account First Category Tax, holders may file for a refund.

Dividend distributions made in property would be subject to the same Chilean tax rules as cash dividends based on the fair market value of such property. Stock dividends and the distribution of preemptive rights are not subject to Chilean taxation.

Capital Gains

Gain from the sale or other disposition by a Foreign Holder of ADRs evidencing ADSs outside Chile will not be subject to Chilean taxation. The deposit and withdrawal of common shares in exchange for ADRs will not be subject to any Chilean taxes.

Gain recognized on a sale or disposition of common shares (as distinguished from sales or exchanges of ADRs evidencing ADSs representing such common shares) may be subject to both the First Category Tax and the Withholding Tax (the former being creditable against the latter) if:

· the Foreign Holder has held the common shares for less than one year since exchanging ADSs for the Shares;

· the Foreign Holder acquired and disposed of the common shares in the ordinary course of its business or as a habitual trader of shares; or

· the Foreign Holder and the purchaser of the common shares are “related parties” or has an interest in the latter within the meaning of Article 17, Number 8, of the Chilean Income Tax Law.

In all other cases, gain on the disposition of common shares will be subject only to a flat capital gains tax which is assessed at the same rate as the First Category Tax as sole income tax (currently imposed at a rate of 17% for 2010, 20% for 2011, 18.5% for 2012 and 17% from 2013 onwards) and no withholding tax will apply. The sale of shares of common stock by a Foreign Holder to an individual or entity resident or domiciled in Chile is subject to a provisional withholding. Such a provisional withholding will be equal to (i) 5% of the total (sale price) amount, without any deduction, paid to, credited to, account for, put at the disposal of, or corresponding to, the Foreign Holder if the transaction is subject to the First Category Tax, as a sole tax. Unless the gain subject to taxation can be determined, case in which the withholding is equal to 17%, 20% o 18,5%, whichever is applicable, on the gain, or (ii) 20% of the total amount (the sale price without any deduction), paid to, credited to, account for, put at the disposal of, or corresponding to, the Foreign Holder if the transaction is subject to the general tax regime, that is, the First Category Tax, and the Withholding Tax, with a credit of the First Category Tax already paid. The Foreign Holder would be entitled to request a tax refund for any amounts withheld in excess of the taxes actually due, in April of the following year upon filing its corresponding tax return. Gain recognized in the transfer of common shares that have a high presence in the stock exchange, however, is not subject to capital gains tax in Chile, provided that the common shares are transferred in a local stock exchange, in other authorized stock exchanges or within the process of a public tender of common shares governed by the Securities Market Law.

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Chile’s Internal Revenue Service Ruling Nº224 (issued on January 30, 2008) confirmed that capital gains stemming from the sale of shares with high stock-market presence acquired through the exchange of American Depositary Receipts (ADRs) for shares is not subject to capital gains tax in Chile. Such exemption is applicable provided that the purchase of such ADR certificates has been made at stock exchanges duly authorized by SVS (which includes the New York Stock Exchange).

The common shares must also have been acquired either in a stock exchange, within the process of a public tender of common shares governed by the Securities Market Law, in an initial public offer of common shares resulting from the formation of a corporation or a capital increase of the same, or in an exchange of convertible bonds. Shares are considered to have a high presence in the stock exchange when they:

· are registered in the Securities Registry;

· are registered in a Chilean Stock exchange; and

· have an adjusted presence equal to or above 25%.

To calculate the adjusted presence of a particular share, the aforementioned regulation first requires a determination of the number of days in which the operations regarding the stock exceeded, in Chilean pesos, the equivalent of 200 UF (US$9,060 as of February 28, 2011) within the previous 180 business days of the stock market. That number must then be divided by 180, multiplied by 100, and expressed in a percentage value. This tax regime does not apply if the transaction involves an amount of shares that would allow the acquirer to take control of the publicly traded corporation, in which case the ordinary tax regime referred to in the previous paragraph will apply, unless the transfer is part of a tender offer governed by the Securities Market Law or the transfer is done on a Chilean stock exchange, without substantially exceeding the market price.

Capital gains obtained in the sale of shares that are publicly traded and have a high presence in a stock exchange are also exempt from capital gains tax in Chile when the sale is made by “foreign institutional investors” such as mutual funds and pension funds, provided that the sale is made in a stock exchange or in accordance with the provisions of the Securities Market Law, or in any other form authorized by the SVS. To qualify as a foreign institutional investor, an entity must be formed outside of Chile, not have a domicile in Chile, and must be at least one of the following:

· a fund that offers its common shares or quotas publicly in a country with investment grade public debt, according to a classification performed by an international risk classification entity registered with the SVS;

· a fund registered with a regulatory agency or authority from a country with investment grade public debt, according to a classification performed by an international risk classification entity registered with the SVS, provided that its investments in Chile constitute less than 30% of the share value of the fund, including deeds issued abroad representing Chilean securities, such as ADRs of Chilean companies;

· a fund whose investments in Chile represent less than 30% of the share value of the fund, including deeds issued abroad representing Chilean securities, such as ADRs of Chilean companies, provided that not more than 10% of the share value of the fund is directly or indirectly owned by Chilean residents;

· a pension fund that is formed exclusively by natural persons that receive pensions out of an accumulated capital in the fund;

· a Foreign Capital Investment Fund, as defined in Law No. 18,657, in which case all quota holders shall be Chilean residents or domestic institutional investors; or

· any other foreign institutional investor that complies with the requirements set forth in general regulations for each category of investor or prior information from the SVS and the Chilean IRS.

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The foreign institutional investor must not directly or indirectly participate in the control of the corporations issuing the shares it invests in, nor possess or participate in 10% or more of the capital or the profits of such corporations.

Another requirement for the exemption is that the foreign institutional investor must execute a written contract with a bank or a stock broker incorporated in Chile. In this contract, the bank or stock broker must undertake to execute purchase and sale orders, verify the applicability of the tax exemption or tax withholding and inform the Chilean IRS of the investors it works with and the transactions it performs. Finally, the foreign institutional investor must register with the Chilean IRS by means of a sworn statement issued by such bank or stock broker.

The tax basis of common shares received in exchange for ADRs will be the acquisition value of the common shares on the date of exchange duly adjusted for local inflation. The valuation procedure set forth in the deposit agreement, which values common shares which are being exchanged at the highest price at which they trade on the Santiago Stock Exchange on the date of the exchange, will determine the acquisition value for this purpose. Consequently, the surrender of ADRs for common shares and the immediate sale of the common shares for the value established under the Deposit Agreement will not generate a capital gain subject to taxation in Chile, provided that the sale of the common shares is made on the same date on which the exchange of ADRs for common shares is recorded, or if the price of the common shares at the exchange date, as determined above, is higher than the price at which the common shares are sold.

The exercise of preemptive rights relating to the common shares will not be subject to Chilean taxation. Any gain on the sale of preemptive rights relating to the common shares will be subject to both the First Category Tax and the Withholding Tax (the former being creditable against the latter).

Other Chilean Taxes

There are no Chilean inheritance, gift or succession taxes applicable to the ownership, transfer or disposition of ADSs by a Foreign Holder, but such taxes generally will apply to the transfer at death or by gift of the common shares by a Foreign Holder. There are no Chilean stamp, issue, registration or similar taxes or duties payable by Foreign Holders of ADSs or common shares.

Withholding Tax Certificates

Upon request, we will provide to Foreign Holders appropriate documentation evidencing the payment of the Withholding Tax (net of the applicable First Category Tax).

United States Federal Income Tax Considerations

The following is a summary of certain U.S. federal income tax considerations that may be relevant to the purchase, ownership and disposition of our common shares and ADSs by a beneficial owner that is: (i) a citizen or resident of the United States; (ii) a U.S. domestic corporation; (iii) an estate the income of which is subject to U.S. federal income tax regardless of its source; or (iv) a trust if a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all substantial decisions of the trust (or otherwise if the trust has a valid election in effect under current Treasury regulations to be treated as a U.S. person). For purposes of this discussion, we refer to these owners of common shares and ADSs as U.S. Holders. If a partnership holds common shares or ADSs, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. A prospective investor who is a partner of a partnership holding our common shares or ADSs should consult its own tax advisor.

This summary is not a comprehensive discussion of all of the tax considerations that may be relevant to your decision to purchase ADSs or common shares. In particular, this discussion is directed only to U.S. Holders that will hold ADSs or common shares as capital assets and it does not address any special U.S. federal income tax consequences that may be applicable to U.S. Holders that are subject to special treatment under the U.S. Internal Revenue Code of 1986, as amended, commonly referred to as the “Code,” such as banks, brokers or dealers in securities or currencies, traders in securities electing to mark to market, financial institutions, life insurance companies, tax exempt entities, holders that own or are treated as owning 10% or more of our voting common shares, persons holding common shares or ADSs as part of a hedging or conversion transaction or a straddle, or persons whose functional currency is not the U.S. dollar. Prospective purchasers are advised to satisfy themselves as to the overall U.S. federal, state and local tax consequences of their ownership of ADSs or common shares by consulting their own tax advisers.

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The statements of U.S. federal income tax laws set out below are based on the laws in force as of the date hereof and may be subject to changes in U.S. federal income tax law occurring after that date, including changes that may have retroactive effect.

ADRs

In general, if you are a U.S. Holder of ADRs evidencing our ADSs, you will be treated, for U.S. federal income tax purposes, as the beneficial owner of the underlying common shares that are represented by those ADSs and evidenced by those ADRs.

Taxation of Dividends

If you are a U.S. Holder, distributions of cash or property (other than common stock, if any, distributed pro rata to all of our shareholders, including holders of ADSs) paid out of our current or accumulated earnings and profits (as determined for U.S. federal income tax purposes) with respect to common shares or ADSs, including the net amount of the Chilean Withholding Tax withheld on the distribution (after taking into account the credit for the First Category Tax), will be includible in your gross income as ordinary income on the day on which you receive the dividends, in the case of common shares, or the date the depositary receives the dividends, in the case of common shares represented by ADSs, and will not be eligible for the dividends-received deduction allowed to corporations under the Code. If you are a U.S. Holder, dividends paid in pesos generally will be includible in your gross income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the day you receive the dividends, in the case of common shares, or the date the depositary receives the dividends, in the case of common shares represented by ADSs. U.S. Holders should consult their own tax advisers regarding the treatment of foreign currency gain or loss, if any, on any pesos received which are converted into U.S. dollars after they are received. To the extent that the amount of any distribution exceeds our current and accumulated earnings and profits as determined for U.S. federal income tax purposes, such excess amounts will be treated first as a nontaxable return of capital to the extent of such U.S. Holder’s tax basis in the common shares or ADSs and, thereafter, as capital gain.

Subject to certain exceptions for short-term and hedged positions, the U.S. dollar amount of dividends received by an individual prior to January 1, 2013 with respect to the ADSs will be subject to taxation at a maximum rate of 15% if the dividends are “qualified dividends.” Dividends paid on the ADSs will be treated as qualified dividends if:

· the ADSs are readily tradable on an established securities market in the United States; and

· we were not, in the year prior to the year in which the dividend was paid, and are not, in the year in which the dividend is paid, a passive foreign investment company (“PFIC”).

The ADSs are listed on the New York Stock Exchange, and will qualify as readily tradable on an established securities market in the United States so long as they are so listed. Moreover, based on our audited financial statements and relevant market and shareholder data, we believe that we were not treated as a PFIC, for U.S. federal income tax purposes with respect to our 2009 or 2010 taxable year. In addition, based on our audited financial statements and our current expectations regarding the value and nature of our assets, the sources and nature of our income, and relevant market and shareholder data, we do not anticipate becoming a PFIC for our 2011 taxable year. However, there can be no assurance in this regard because the PFIC determination is made annually and is based on the portion of our assets and income that is characterized as passive under the PFIC rules.

Based on existing guidance, it is not clear whether dividends received with respect to the common shares will be treated as qualified dividends, because the common shares are not themselves listed on a U.S. exchange. In addition, the U.S. Treasury has announced its intention to promulgate rules pursuant to which U.S. Holders of ADSs or common shares and intermediaries through whom such securities are held will be permitted to rely on certifications from issuers to establish that dividends are treated as qualified dividends. Because such procedures have not yet been issued, it is not clear whether we will be able to comply with them. Holders should consult their own tax advisers regarding the availability of the reduced dividend tax rate in light of their own particular circumstances.

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Subject to generally applicable limitations and conditions under the Code, Chilean Withholding Tax withheld from dividends (after taking into account the credit for the First Category Tax, when it is available) will be treated as a foreign income tax eligible for credit against a U.S. Holder’s U.S. federal income tax liability. If the amount of Chilean Withholding Tax initially withheld from a dividend is determined to be excessive, however (as described above under “Taxation—Chilean Taxation—Cash Dividends and Other Distributions”), the excess tax will not be creditable. For purposes of calculating the foreign tax credit, dividends paid on the common shares will generally constitute foreign source “passive income.” U.S. Holders are not allowed foreign tax credits for withholding taxes imposed in respect of certain short-term or hedged positions in securities and may not be allowed foreign tax credits in respect of arrangements in which their expected economic profit is insubstantial. U.S. Holders should consult their own advisers concerning the implications of these rules in light of their particular circumstances.

U.S. Holders that receive distributions of additional common shares or rights to subscribe for common shares as part of a pro rata distribution to all our shareholders generally will not be subject to U.S. federal income tax in respect of the distributions.

Taxation of Capital Gains or Losses

If you are a U.S. Holder, gain or loss realized on the sale, exchange or other taxable disposition of ADSs or common shares, generally will be capital gain or loss and generally will be long-term capital gain or loss if the ADSs or common shares have been held for more than one year. Long-term capital gain realized by an individual U.S. Holder generally is subject to preferential tax rates. The deductibility of capital losses is subject to significant limitations.

Any gain or loss a U.S. Holder realizes on such a sale, exchange or other taxable disposition will generally be treated as U.S. source income or loss for U.S. foreign tax credit purposes. Consequently, in the case of a disposition of common shares (which, unlike a disposition of ADSs, could be taxable in Chile), a U.S. Holder generally would not be able to utilize foreign tax credits in respect of any Chilean tax imposed on the disposition (see “Taxation—Chilean Taxation—Capital Gains”) unless the U.S. Holder has other income from foreign sources, in the appropriate category, for purposes of the foreign tax credit limitation rules. U.S. Holders should consult their own tax advisers regarding the application of the foreign tax credit limitation rules to their investment in, and disposition of, the ADSs and common shares.

Deposits and withdrawals of common shares by U.S. Holders in exchange for ADSs will not result in the realization of gain or loss for U.S. federal income tax purposes.

Backup Withholding and Information Reporting

Dividends paid on, and proceeds from the sale or other disposition of, the ADSs or common shares to a U.S. Holder generally may be subject to the information reporting requirements of the Code and may be subject to backup withholding unless the U.S. Holder provides an accurate taxpayer identification number and makes any other required certification or otherwise establishes an exemption. Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder’s U.S. federal income tax liability and may entitle the U.S. Holder to a refund, provided that certain required information is timely furnished to the U.S. Internal Revenue Service.

A holder that is a foreign corporation or a non-resident alien individual may be required to comply with certification and identification procedures in order to establish its exemption from information reporting and backup withholding.

In addition, U.S. Holders should be aware that recently enacted legislation imposes new reporting requirements with respect to investments in certain foreign financial assets, if the aggregate value of all such assets exceeds $50,000.  Investors who fail to report required information could become subject to substantial penalties. Potential investors are encouraged to consult with their own tax advisors regarding the possible implications of this legislation on their investment in ADSs or common shares.

HOLDERS AND/OR PROSPECTIVE PURCHASERS OF ADSs OR COMMON SHARES SHOULD CONSULT THEIR OWN TAX ADVISERS AS TO THE CHILEAN, U.S. FEDERAL INCOME OR OTHER TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF ADSs OR COMMON SHARES, INCLUDING, IN PARTICULAR, THE EFFECT OF ANY NON-U.S., STATE OR LOCAL TAX LAWS.

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Documents on Display

We are subject to the information requirements of the Exchange Act, as amended. In accordance with these requirements, we file reports, including annual reports on Form 20-F and other information with the SEC. These materials, including this annual report and the exhibits hereto, may be inspected and copied at the SEC’s public reference rooms in Washington, D.C. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. In addition, some of our SEC filings, including those filed on and after February 19, 2002, are also available to the public through the SEC’s website at www.sec.gov.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

General

Given the nature of its business, LAN is exposed mainly to three market risks:

· Jet fuel price fluctuations;

· Interest rate fluctuations; and

· Exchange rate fluctuations.

The level of exposure to these risks is periodically assessed to determine the most effective mechanisms to hedge against them. LAN purchases derivative instruments in foreign markets to offset market risk exposure, typically utilizing a mixture of call options, collar structures and fixed price swaps agreements. LAN does not hold derivative contracts for trading purposes.

Risk of Fluctuations in Jet Fuel Prices

Jet fuel price fluctuations are largely dependent on supply and demand for crude oil, OPEC decisions, refinery capacities, stock levels of crude oil and geopolitical factors. In order to minimize the risk of jet fuel price fluctuations, LAN hedges against such risk using derivative instruments.

Because jet fuel is not traded in organized futures exchanges, there are limited options to hedge against jet fuel price fluctuations. However, LAN deems financial derivative instruments in other commodities such as crude oil or heating oil, useful for decreasing its exposure to jet fuel price increases.

LAN uses swaps, calls and collars to hedge against fuel prices fluctuations. Swap contracts allow us to eliminate the volatility risk by fixing the price. In a typical swap contract, LAN is compensated if the market price is above the fixed price at certain predetermined dates or needs to make disbursements if the market price is below the fixed price in those dates. Call options give us protection against rise in prices. Call option are only exercised when the market price is above the predetermined strike price thus providing LAN with protection with no downside risk. Collars are a combination of call and put options that limit the range of possible positive or negative outcomes to a specific price range. Above the predetermined ceiling price, LAN is compensated for the difference between the market price and the ceiling price. For any price below the predetermined floor price, LAN has to disburse the difference between the market price and the floor price.

We are exposed to fuel hedging transaction losses if the counterparties default. To manage this credit risk, we select counterparties based on their credit ratings and monitor our relative market position on a daily basis. For more information see “—Our operations are subject to fluctuations in the supply and cost of jet fuel which could materially impact our business” under Item 3.

During 2010, 2009 and 2008 we entered into a mix of swaps, calls, zero cost collars and collars option contracts on WTI with investment banks and other financial entities for notional fuel purchases. In 2010, 282.7 million gallons were purchased, which represented 55.5% of our total annual fuel consumption; in 2009, 205.2 million gallons were purchased, which represented 45.7% of our fuel consumption; and in 2008, 218.5 million gallons were purchased, which represented 48.0% of our total fuel consumption. The combined result of these contracts was a gain of US$1 million in 2010, compared to a loss of US$128.7 million in 2009 and a gain of US$35.4 million in 2008. As of December 31, 2010, the fair value of our outstanding fuel related derivative contracts was estimated to be US$45.8 million (asset).

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	Fair value by quarter, as of December 31, 2010
		1Q11	2Q11	3Q11	4Q11	Total
	(in US$ millions)
Fair value of outstanding fuel derivative contracts		20.5	12.8	8.9	3.6		45.8

Gains and losses on the hedging contracts outlined above are recognized as a cost of sales in the income statement when the fuel subject to the hedge is consumed. Premiums paid related to fuel derivative contracts are recorded as prepaid expenses (current assets) and amortized over the respective contract periods.

Under IFRS, the fair value of the hedging derivatives is booked as a non-current asset or liability if the remaining maturity of the item hedged is over 12 months, and as a current asset or liability if the remaining term of the item hedged is less than 12 months. The fair value of the derivative contracts is deferred within an equity reserve account. Please see Note 2.10 to our audited consolidated financial statements.

Sensitivity analysis

In order to protect the Company from increases in fuel prices, a portion of the fuel consumption is hedged using a mixture of protective instruments (call, collars) and fixing instruments (swaps). To keep the Company competitive, a portion of the fuel consumption is not hedged, as a drop in fuel prices affects the   Company through a reduction in costs.

As the current positions do not represent changes in cash flows but a variation in the exposure to the market value, the Company’s current hedge positions have no impact on income (they are booked as cash flow hedge contracts, so a variation in fuel prices has an impact on the Company’s net equity).

The following table shows the sensitivity analysis of the financial instruments reflecting reasonable changes in fuel prices and their effect on equity. The term used for the projection was December 31, 2011, the final date of the last current fuel hedge contract. The calculations were made considering a parallel movement of US$5 per barrel in the curve of the WTI crude futures benchmark price at the end of December 2010, 2009 and 2008.

The Company seeks to reduce the risk of increases in fuel price in order to maintain its competitivity, therefore hedging instruments like swaps, options and collars are used to partially hedge against these fuel price fluctuations.

	Position as of December 31 (effect on equity),
WTI benchmark price	2010		2009		2008
(US$ per barrel)	(millions of US$)
+5		+16.7		+14.6		+15.7
-5		-15.7		-13.6		-16.1

During the periods presented, the Company has not recorded amounts for ineffectiveness in the consolidated income statement pursuant to IAS 39 (IFRS principles for recognizing and measuring financial instruments).

Given the fuel hedge structure as of December 31, 2010, which considers a hedge-free portion, a vertical fall by US$ 5 in the WTI benchmark price (the monthly daily average) for each month would have meant savings of approximately US$ 27.1 million in the cost of the Company’s total fuel consumption. A vertical increase by US$ 5 in the WTI benchmark price (the monthly daily average) for each month would have meant an additional cost of approximately US$ 26.0 million of the Company’s total fuel consumption.

Risk of Fluctuations in Interest Rates

As of December 31, 2010, LAN’s debt amounted to US$2,955 million in interest bearing loans. LAN uses swaps and caps to reduce the impact of an increase of interest rates. As of December 31, 2010, 94% of our outstanding debt was effectively at fixed rate either as fixed rate loans or variable rate loans hedged using a floating to fix rate derivative instrument.

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As of December 31, 2010, 94% of our outstanding debt was subject to a fixed rate either through a fixed rate loan converting floating rate payment obligations to fixed rate obligations.

Given the percentage of our outstanding debt that is hedged and the instruments that we use to hedge, an increase in interest rates has no material impact on LAN’s costs. Under an interest rate swap contract, given the case of decreases in interest rates, LAN has to pay compensation equal to the difference between the fixed and floating rate times the outstanding debt under the specific contract. However, under such contracts the interest rate has a floor preventing LAN from incurring major financial losses.

In May 2001, we entered into six swap contracts in order to hedge our floating rate-exposure on US$331 million of our debt. Pursuant to these contracts, we pay or receive, depending on the case, the difference between the agreed fixed rate and the floating rate, calculated on the notional amount of each contract. In October 2005, the Company entered into two interest rate swap contracts in order to hedge the LIBOR exposure of the financing of two Airbus A319 aircraft delivered in 2005.

In July 2003, we purchased four interest rate cap contracts for a total notional amount of US$127.7 million. These caps are intended to limit the Company’s exposure arising from variable-rate debt. These contracts qualify as cash flow hedges with no ineffectiveness associated to them due to the fact that all critical terms of the debt and the caps match perfectly.  As of December 31, 2010, the fair value of these contracts has been estimated at US$102.7 thousand.

In July 2003, the Company purchased two additional interest rate cap contracts. These caps are intended to limit the exposure of LIBOR-linked operational lease payments on aircraft received during 2004. As of December 2010, the fair value of these contracts at year-end amounted to US$142.4 thousand.

In April 2004, the Company purchased two additional interest rate Cap contracts. These caps are intended to limit the exposure of LIBOR-linked operational lease payments on aircraft received during 2005.  As of December 31, 2010, the fair value of these contracts at year-end amounted to US$176.1 thousand.

In 2005, the Company purchased three additional interest rate Cap contracts. These contracts are intended to limit the exposure of LIBOR-linked financing on aircraft delivered in 2005 and 2006. As of December 31, 2010, the fair value of these contracts at year-end amounted US$0.84 thousand.

The premiums paid on the cap were allocated to individual caplets and recognized in the income statement throughout the term of each contract. Under IAS 39 these derivatives qualify as cash flow hedges even though some ineffectiveness exists as the notional amount over which some caps are calculated is different from the one used to determine the interest and lease payments on the aircraft. For IFRS purposes, there was no amount of ineffectiveness recorded in earnings because the change in fair value of the perfect hypothetical option was greater than the change in the fair value of the Company’s option.

In the first half of 2006, the Company also entered into ten fixed-floating interest rate swap contracts in order to hedge the variable interest payments on the unhedged portion of existing debt of approximately US$46.7 million. Additionally, in May 2006 the Company entered into thirty-two forward starting interest rate swap contracts in order to hedge the LIBOR exposure of the financing of thirty-two A320-Family Aircraft to be delivered between 2006 and 2009. Of these thirty-two contracts, twenty-five were contracted directly with the debt provider, while the remaining seven swaps were contracted with a different institution. In 2009 all of the thirty-two aircraft were delivered to the Company.  Of those, twenty-five were converted into fixed interest rate debt.

In June 2006 the Company entered into eleven forward starting interest rate swap contracts in order to hedge the LIBOR exposure of the financing of 11 Boeing 767-300 ER aircraft to be delivered between 2006 and 2009. All of those aircraft have already been delivered to the Company, and the corresponding swap and loan were restructured into fixed rate debt.

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In August 2007 the Company entered into three forward starting interest rate swaps contracts in order to hedge the LIBOR exposure of the debt financing of three Boeing 767-300 ER aircraft to be delivered in 2009. This debt allows for conversion of the variable interest rate loan into fixed interest rate debt by capital markets financing after the arrival of the aircraft. As of February 28, 2011, the three aircraft had been delivered to the Company. The first aircraft was refinanced through a fixed interest rate bond issued in December 2009, the second was refinanced through a fixed interest rate bond issued in June 2010 and the third was refinanced through a fixed interest rate bond issued in April 2010. In September 2007, the Company entered into another three forward starting interest rate swaps contracts in order to hedge the LIBOR exposure of the financing of three Airbus A320-Family Aircraft to be delivered in 2010.

In June 2008, the Company entered into fourteen forward starting interest rate swaps contracts in order to hedge the LIBOR exposure of the financing of 12 A320-Family Aircraft to be delivered in 2010 and 2011, two Boeing 767-300 aircraft to be delivered in 2011 and two Boeing 787-8 to be delivered in 2012.

As of December 31, 2010, the fair value of all the aforementioned interest rate swaps was estimated to be a negative US$119.0 million.

Under IFRS, the positive fair value of these interest rate swaps is reflected in the balance sheet as hedging assets and the negative fair value of these agreements is reflected as hedging liabilities.

The utilization of the aforementioned hedging instruments, combined with fixed interest rate financing for two Boeing 767-300 F aircraft delivered in 2001, 17 Boeing 767-300 Passenger and Freighter aircraft delivered in 2005, 2006, 2007, 2008 and 2009 and 32 Airbus A320-Family Aircraft delivered in 2006, 2007, 2008 and 2009, has enabled the Company to have a predictable interest rate costs, reducing the cash volatility. As of December 2010, the average interest rate of all of our outstanding interest-bearing long-term debt rate was 5.0%.

The following table summarizes our principal payment obligations on our interest-bearing long-term debt and capital leases as of December 31, 2010 and the related average interest rates. The average interest rates for U.S. dollar liabilities are calculated based on the prevailing interest rate on December 31, 2010 for each loan.

	Principal payment obligations by year of expected maturity(1)
	(in US$ millions)
Liabilities	Average interest rate(2)			2011		2012		2013		2014		2015		Thereafter 2016
U.S. dollars		5.0	%		459.1		591.2		281.6		255.0		259.0		1,109.0

(1) At cost.

(2) Average interest rate means the average prevailing interest rate on December 31, 2010 on our debt after giving effect to hedging arrangements.

The following table shows the sensitivity of changes in financial obligations that are not hedged against interest-rate variations.  These changes are considered reasonably possible based on current market conditions.

	Position as of December 31 (effect on pre-tax earnings)
Increase (decrease)  in Libor	2010		2009		2008
	(millions of US$)
+100 basis points		-1.18		-0.87		-0.65
-100 basis points		+1.18		+0.87		+0.65

Changes in market conditions produce a change in the valuation of current financial instruments hedging against fluctuations in interest rates, causing an effect on the Company’s equity (because they are booked as cash-flow hedges). These changes are considered reasonably possible based on current market conditions. The calculations were made vertically increasing (decreasing) 100 basis points of the three-month Libor futures curve.

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	Position as of December 31 (effect on equity)
Increase (decrease in three month Libor)	2010		2009		2008
Future rates	(millions of US$)
+100 basis points		+42.39		+49.64		+63.37
-100 basis points		-45.35		-53.23		-68.94

During the periods presented, the company has not recorded amounts for ineffectiveness in the consolidated income statement pursuant to IAS 39.

There are market-related limitations in the method used for the sensitivity analysis. These limitations derive from the fact that the levels indicated by the futures curves may not be necessarily met and may change in each period.

Risk of Variation in Foreign Currency Exchange Rates

LAN sells most of its services in U.S. dollars (or prices equivalent to the U.S. dollar), and a large part of its expenses are denominated in U.S. dollars (or its equivalents), particularly fuel costs, aeronautic charges, aircraft leases, insurance and aircraft components and accessories. Of the Total expenses, the main item denominated in local currencies is Remunerations. During 2010, 85% of our operating revenues and 60% of our operating expenses were denominated in U.S. dollars. However, because we conduct business in local currencies in several countries, we face the risk of variations in foreign currency exchange rates. A depreciation of the Chilean peso, the Brazilian real, the Argentine peso, the Mexican peso, the Peruvian nuevo sol, the Venezuelan bolivar or the euro against the U.S. dollar could have an adverse effect on us as part of our revenues and receivables are denominated in those currencies. LAN has entered into currency forward contracts in order to convert its deposit in Chilean pesos to U.S. dollars. As of December 31, 2010 we had foreign exchange forward contracts for a notional amount of US$169 million with a market negative value of US$14 million.

During the first half of 2009, the Company entered into cross currency swaps for a notional amount of US$ 171 million, in order to hedge significant variation of the cash flows associated to the current interest rate and the dolar-peso exchange rate of the bank loan. For accounting purposes, the market value of this position was reflected as a hedging asset, with a market value of positive US$27 million as of December 31, 2010.

Our foreign currency exchange exposure pertaining to our balance sheet as of December 31, 2010 was as follows

	US dollars MUS$		% of total			Chilean pesos MUS$		% of total			Other currencies MUS$		% of total			Total MUS$
Current assets		897.687		58.55	%		415,039		27.07	%		220,343		14.37	%		1,533,069
Other assets		5.209.233		99.17	%		8,457		0.16	%		35,138		0.67	%		5,252,828
Total assets		6.106.920		89.99	%		423,496		6.24	%		255,481		3.76	%		6,785,897
Current liabilities		1.689.752		78.81	%		220,719		10.29	%		233,548		10.89	%		2,144,019
Long-term liabilities		3.267.164		97.77	%		68,274		2.04	%		6,380		0.19	%		3,341,818
Total liabilities and shareholders’ equity		6.256.976		92.21	%		288,993		4.26	%		239,928		3.54	%		6,785,897

For more information on Market Risk, see Note 3 “Financial Risk Management” to our audited consolidated financial statements.

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ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

12.D.3 Fees and Charges for ADR Holders

The Bank of New York Mellon, as depositary, collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of the distributable property to pay the fees. The depositary may also collect its annual fee for depositary services by deductions from cash distributions, by directly billing investors or by charging the book-entry system accounts of participants acting for them. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.

Persons depositing or withdrawing shares must pay:	For:
US$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)	•   Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property
	•   Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates
US$.02 (or less) per ADS	• Any cash distribution to ADS registered holders
A fee equivalent to the fee that would be payable if securities distributed had been shares and the shares had been deposited for issuance of ADSs	• Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADS registered holders
US$.02 (or less) per ADSs per calendar year	• Depositary services
Registration or transfer fees	• Transfer and registration of shares on the depositary’s  share register to or from the name of the depositary or its agent when investors deposit or withdraw shares
Expenses of the depositary	• Cable, telex and facsimile transmissions
	• Conversion of foreign currencies into U.S. dollars
Taxes and other governmental charges the depositary or the custodian have to pay on any ADS or share underlying an ADS, such as stock transfer taxes, stamp duty or withholding taxes	• As necessary
Any charges incurred by the depositary or its agents for servicing the deposited securities	• As necessary

12.D.4 Fees and Direct and Indirect Payments Made by the Depositary to the Foreign Issuer

Past Fees and Payments

During 2010, the Company received from the depositary $420,871.53 for continuing annual stock exchange listing fees, standard out-of-pocket maintenance costs for the ADRs (consisting of the expenses of postage and envelopes for mailing annual and interim financial reports, printing and distributing dividend checks, electronic filing of U.S. Federal tax information, mailing required tax forms, stationery, postage, facsimile, and telephone calls), any applicable performance indicators relating to the ADR facility, underwriting fees and legal fees.

Future Fees and Payments

The depositary has agreed to reimburse the Company for expenses incurred by the Company in connection with the establishment and maintenance of the ADS program. The depositary has agreed to reimburse the Company for its continuing annual stock exchange listing fees. The depositary has also agreed to pay the standard out-of-pocket maintenance costs for the ADRs, which consist of the expenses of postage and envelopes for mailing annual and interim financial reports, printing and distributing dividend checks, electronic filing of U.S. Federal tax information, mailing required tax forms, stationery, postage, facsimile, and telephone calls. The depositary has also agreed to annually reimburse the Company for certain investor relationship programs or special investor relationship promotional activities. In certain instances, the depositary has agreed to provide additional payments to the Company based on any applicable performance indicators relating to the ADR facility. There are limits on the amount of expenses for which the depositary will reimburse the Company, but the amount of such reimbursements is not necessarily tied to the amount of fees the depositary collects from investors.

166

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not applicable.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not applicable.

ITEM 15. CONTROLS AND PROCEDURES

(a)           Controls and Procedures. We carried out an evaluation under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2010. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, our chief executive officer and chief financial officer concluded that the disclosure controls and procedures, as of December 31, 2010, were effective in providing reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act, as amended, is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management including our Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure.

(b)           Management’s annual report on internal control over financial reporting.

The management of the Company, including the Chief Executive Officer and the Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, as amended.

The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

167

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness of internal control to future periods are subject to the risk that controls may become inadequate because of changes in conditions, and that the degree of compliance with the policies or procedures may deteriorate.  Lan Airlines’ management, including the Chief Executive Officer and the Chief Financial Officer, has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2010 based on the criteria established in Internal Control - “Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and, based on such criteria, Lan Airlines’ management has concluded that, as of December 31, 2010, the Company’s internal control over financial reporting is effective. The Company’s internal control over financial reporting effectiveness as of December 31, 2010 has been audited by PricewaterhouseCoopers Consultores, Auditores y Companía Limitada, an independent registered public accounting firm, as stated in their report included herein.

(c)           Attestation report of the registered public accounting firm. See page F-2 of our audited consolidated financial statements.

(d)           Changes in internal control over financial reporting. There has been no change in our internal control over financial reporting during 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 16. RESERVED

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

Our Board of Directors has designated Jorge Awad Mehech, as an “audit committee financial expert” within the meaning of this Item 16A. See “Directors, Senior Management and Employees—Directors ,” under Item 6.

ITEM 16B. CODE OF ETHICS

We have adopted a code of ethics and conduct, as defined in Item 16B of Form 20-F under the Exchange Act. Our code of ethics applies to our senior management, including our chief executive officer, our chief financial officer and our chief accounting officer, as well as to other employees. Our code is freely available online at our website, www.lan.com, under the heading “Corporate Governance” in the Investor Relations page. In addition, upon written request, by regular mail, to the following address: Lan Airlines S.A., Investor Relations Department, attention: Investor Relations, Av. Presidente Riesco 5711, Piso 20, Comuna Las Condes, Santiago, Chile, or by e-mail at investor.relations@lan.com, we will provide any person with a copy of it without charge. If we amend the provisions of our code of ethics that apply to our senior management or to other persons performing similar functions, or if we grant any waiver of such provisions, we will disclose such amendment or waiver on our website.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit and Non-Audit Fees

The following table sets forth the fees billed to us by our independent auditors, PricewaterhouseCoopers, during the fiscal years ended December 31, 2008, 2009 and 2010:

	2010		2009		2008
Audit fees		1,478.0		1,431.4		1,323.2
Audit-related fees		427.0		0.0		0.0
Tax fees		149.0		0.0		3.8
Other fees		14.0		37.7		158.8
Total fees		2,068.0		1,469.1		1,485.8

168

Audit-related fees in the above table are fees billed by PricewaterhouseCoopers for due diligence and other audit related services.

Other fees in the above table are fees billed by PricewaterhouseCoopers primarily for training services in IFRS.

Board of Directors’ Committee Pre-Approval Policies and Procedures

Since January 2004, LAN complies with the SEC regulation regarding what type of additional services PricewaterhouseCoopers is authorized to offer to us. In addition to this, our Board of Directors’ Committee decided to automatically authorize those accepted services for an amount of up to 10% of the fees charged by the auditing firm, and for an amount of up to 50% when adding all those services together. In case the amount is larger than that, then it will need the approval of the Board of Directors’ Committee.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Neither we nor any affiliated purchaser has engaged in share repurchases during the year ended December 31, 2010.

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

Not applicable.

ITEM 16G. CORPORATE GOVERNANCE

New York Stock Exchange Corporate Governance Comparison

Pursuant to Section 303A.11 of the Listed Company Manual of the The New York Stock Exchange (“NYSE”), we are required to provide a summary of the significant ways in which our corporate governance practices differ from those required for U.S. companies under the NYSE listing standards.  We are a Chilean corporation with shares listed on the Santiago Stock Exchange, the Chilean Electronic Exchange and the Valparaiso Stock Exchange and ADSs on the NYSE.  Our corporate governance practices are governed by our bylaws, the Chilean Corporation Law and the Securities Market Law.

The table below discloses the significant differences between our corporate governance practices and the NYSE standards.

NYSE Standards	Our Corporate Governance Practice
Director Independence.  Majority of board of directors must be independent.  §303A.01	Under Chilean law, we are not required to have a majority of independent directors on our board.

169

NYSE Standards	Our Corporate Governance Practice
	Our board of directors’ committee (all of whom are members of our board of directors) is composed of three directors, two of whom must be independent if we have a sufficient number of independent directors on our board.
	The definition of independence applicable to us pursuant to the Chilean Corporation Law differs in certain respects from the definition applicable to U.S. issuers under the NYSE rules.
	Pursuant to Law No. 20,382 on Corporate Governance, which came into effect on January 1, 2010, we are also required to have at least one independent director. Until January 1, 2010, under the Chilean Corporation Law, a director was deemed to be independent if such member would have been elected as a Director at the Shareholders Meeting after excluding the votes of any controlling shareholder or party related to it. Starting on January 1, 2010, directors are deemed to be independent if they have not fallen within any of the following categories during the 18 months prior to their election: (i) had a relevant relationship, interest or dependence on us, our subsidiaries, controlling shareholders, main executives, or had served any of the foregoing in a senior position; (ii) had a close family relationship with any of the individuals indicated in (i); (iii) had served in a non-profit organization which received significant funds from the individuals indicated in (i); (iv) had been a partner or shareholder (with a direct or indirect participation in excess of 10%) in, or had a senior position at a company which has rendered significant services to, the individuals indicated in (i); (v) had been a partner or shareholder (with a direct or indirect participation in excess of 10%) in, or had a senior position at, our main competitors, suppliers or clients. In addition, the election of such an independent director is subject to a procedure set forth by the cited Corporation Law.
Executive Sessions. Non-management directors must meet regularly in executive sessions without management. Independent directors should meet alone in an executive session at least once a year. §303A.03	There is no similar requirement under our bylaws or under applicable Chilean law.
Audit committee. Audit committee satisfying the independence and other requirements of Rule 10A-3 under the Exchange Act, as amended, and the more stringent requirements under the NYSE standards is required. §§303A.06, 303A.07	We are in compliance with Rule 10A-3. We are not required to satisfy the NYSE independence and other audit committee standards that are not prescribed by Rule 10A-3.
Nominating/corporate governance committee. Nominating/corporate governance committee of independent directors is required. The committee must have a charter specifying the purpose, duties and evaluation procedures of the committee. § 303A.04	We are not required to have, and do not have, a nominating/corporate governance committee.

170

NYSE Standards	Our Corporate Governance Practice
Compensation committee. Compensation committee of independent directors is required, which must approve executive officer compensation. The committee must have a charter specifying the purpose, duties and evaluation procedures of the committee. §303A.05	We are not required to have a compensation committee. Pursuant to the Chilean Corporation Law, our board of directors’ committee must approve our senior management and employee’s compensation.
Equity compensation plans. Equity compensation plans require shareholder approval, subject to limited exemptions.	Under the Chilean Corporation Law, equity compensation plans require shareholder approval.
Code of Ethics. Corporate governance guidelines and a code of business conduct and ethics is required, with disclosure of any waiver for directors or executive officers. §303A.10	We have adopted a code of ethics and conduct applicable to our senior management, including our chief executive officer, our chief financial officer and our chief accounting officer, as well as to other employees. Our code is freely available online at our website, www.lan.com, under the heading “Corporate Governance” in the Investor Relations informational page. In addition, upon written request, by regular mail to Lan Airlines S.A., Investor Relations Department, attention: Investor Relations, Av. Presidente Riesco 5711, Piso 20, Comuna Las Condes, Santiago, Chile or by e-mail at Investor.Relations@lan.com, we will provide any person with a copy of our code of ethics without charge. We are required by Item 16B of Form 20-F to disclose any waivers granted to our chief executive officer, chief financial officer, principal accounting officer and persons performing similar functions.

The disclosure of the significant ways in which our corporate governance practices differ from those required for U.S. companies under the New York Stock Exchange listing standards is also posted on our website and can be accessed at www.lan.com.

171

PART III

ITEM 17. FINANCIAL STATEMENTS

Our financial statements have been prepared in accordance with Item 18 hereof.

ITEM 18. FINANCIAL STATEMENTS

In accordance with SVS’s regulations, Chile started a process to adopt IFRS for all public companies with significant market presence over a three-year period from 2009 to 2011, as follows:

· January 1, 2009: major listed (open) companies were required to report under IFRS (i.e. 2009 financial statements had to be prepared using IFRS and had to include 2008 comparative information using IFRS). However, IFRS reporting may be postponed until 2010 so long as a supplemental “pro forma” disclosure of expected impact of moving to IFRS is provided;

· January 1, 2010: smaller listed (open) companies, insurance companies, mutual funds, pension funds, stock brokers and dealers, insurance agents, companies that issue publicly traded debt securities, and large listed (open) companies that were unable to move to IFRS in 2009; and

· January 1, 2011: other entities registered with the SVS (non-issuers who have voluntarily registered).

We have adopted, and have started reporting under, IFRS as of January 1, 2009.

See pages F-1 through F-120, incorporated herein. The following is an index of the financial statements.

Consolidated Financial Statements for Lan Airlines and its Subsidiaries

	Page
Audited Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Statements of Financial Position at December 31, 2009 and 2010	F-7
Consolidated Statement of Comprehensive Income for the years ended December 31, 2008, 2009 and 2010	F-9
Statement of Changes in net equity for the year ended December 31, 2008, 2009 and 2010	F-11
Consolidated Statements of Cash Flows – Direct Method for the years ended December 31, 2008, 2009 and 2010	F-13
Notes to Consolidated Financial Statements at December 31, 2010	F-14

172

ITEM 19. EXHIBITS

Documents filed as exhibits to this annual report:

Exhibit No.	Description
1.1	By-laws of Lan Airlines S.A. (incorporated by reference to our annual report on Form 20-F (File No. 001-14728) filed on June 29, 2010).
2.1	Amended and Restated Deposit Agreement among LanChile S.A., The Bank of New York, and all registered holders from time to time of any American Depositary Receipts, including the form of American Depositary Receipt (incorporated by reference to our annual report on Form 20-F (File No. 001-14728) filed on June 14, 2004).
2.2	Foreign Investment Contract among the Central Bank of Chile, LanChile S.A. and Citibank, N.A., as depositary, relating to the foreign exchange treatment of holders of ADSs (incorporated by reference to our annual report on Form 20-F (File No. 001-14728) filed on June 14, 2004).
2.3	Foreign Investment Contract Assignment Agreement among the Central Bank of Chile, LanChile S.A., Citibank N.A., as assignor, and The Bank of New York, as assignee, relating to the foreign exchange treatment of holders of ADSs (incorporated by reference to our annual report on Form 20-F (File No. 001-14728) filed on June 14, 2004).
4.1	Purchase Agreements between LanChile S.A. and Airbus Industrie relating to Airbus A320-Family Aircraft and Airbus A340 series aircraft (incorporated by reference to our annual report on Form 20-F (File No. 001-14728) filed on June 24, 2001 and portions of which have been omitted pursuant to a request for confidential treatment).
4.1.1	Amendment No. 2 dated as of October 4, 2005, to the Second A320-Family Purchase Agreement dated as of March 20, 1998, as amended and restated, and Amendment No. 3 dated as of October 4, 2002, to the Second A320-Family Purchase Agreement dated as of March 20, 1998, as amended and restated, Letter Agreements No. 1, 2, 3, 4, 5, 6A, 6B, 7, 8 to Amendment No. 2, Side Letters to Amendment No. 2 and Side Letter to Amendment No. 3, between Lan Airlines S.A. (formerly known as LanChile S.A.) and Airbus S.A.S. (as successor to Airbus Industrie) (incorporated by reference to our amended annual report on Form 20-F (File No. 001-14728) filed on May 7, 2007 and portions of which have been omitted pursuant to a request for confidential treatment).
4.1.2	Amendment No. 3 dated as of March 6, 2007, to the Second A320-Family Purchase Agreement dated as of March 20, 1998, as amended and restated, between Lan Airlines S.A. and Airbus S.A.S. (incorporated by reference to our amended annual report on Form 20-F (File No. 001-14728) filed on April 23, 2007 and portions of which have been omitted pursuant to a request for confidential treatment).
4.1.3	Amendment No. 5 dated as of December 23, 2009, to the Second A320-Family Purchase Agreement dated as of March 20, 1998, as amended and restated, between Lan Airlines S.A. and Airbus S.A.S.  (incorporated by reference to our amended annual report on Form 20-F (File No. 001-14728) filed on June 29, 2010 and portions of which have been omitted pursuant to a request for confidential treatment).
4.1.4	Amendments No. 6, 7, 8 and 9 (dated as of May 10, 2010, May 19, 2010, September 23, 2010 and December 21, 2010, respectively), to the Second A320-Family Purchase Agreement dated as of March 20, 1998, as amended and restated, between Lan Airlines S.A. and Airbus S.A.S. Portions of these documents have been omitted pursuant to a request for confidential treatment. Such omitted portions have been filed separately with the Securities and Exchange Commission.

173

Exhibit No.	Description
4.2	Purchase Agreement No. 2126 dated as of January 30, 1998, between LanChile S.A. and The Boeing Company as amended and supplemented, relating to Model 767-316ER, Model 767-38EF, and Model 767-316F Aircraft (incorporated by reference to our amended annual report on Form 20-F (File No. 001-14728) filed on December 21, 2004 and portions of which have been omitted pursuant to a request for confidential treatment).
4.2.1	Supplemental Agreements No. 16, 17, 18, 19, 20, 21 and 22 (dated as of November 11, 2004, January 21, March 10, April 1, April 28, and July 20, 2005, and March 31, 2006, respectively) to the Purchase Agreement No. 2126 dated January 30, 1998, between Lan Airlines S.A. (formerly known as LanChile S.A.) and The Boeing Company, relating to Model 767-316ER, Model 767-38EF, and Model 767-316F Aircraft, (incorporated by reference to our amended annual report filed on Form 20-F (File No. 001-14728) filed on May 7, 2007 and portions of which have been omitted pursuant to a request for confidential treatment).
4.2.2	Supplemental Agreement No. 23 dated as of March 6, 2007, to the Purchase Agreement No. 2126, dated as of January 30, 1998, between Lan Airlines S.A. and The Boeing Company (incorporated by reference to our amended annual report on Form 20-F (File No. 001-14728) filed on April 23, 2007 and portions of which have been omitted pursuant to a request for confidential treatment).
4.2.3	Supplemental Agreement No. 24 dated as of November 10, 2008, to the Purchase Agreement No. 2126, dated as of January 30, 1998, between Lan Airlines S.A. and The Boeing Company. Portions of this document have been omitted pursuant to a request for confidential treatment. (incorporated by reference to our amended annual report on Form 20-F (File No. 001-14728) filed on June 25, 2009 and portions of which have been omitted pursuant to a request for confidential treatment).
4.2.4.	Supplemental Agreements No. 28 and 29 (dated as of March 22, 2010 and November 10, 2010, respectively), to the Purchase Agreement No. 2126, dated as of January 30, 1998, between Lan Airlines S.A. and The Boeing Company. Portions of these documents have been omitted pursuant to a request for confidential treatment. Such omitted portions have been filed separately with the Securities and Exchange Commission.
4.3	Aircraft Lease Common Terms Agreement between GE Commercial Aviation Services Limited and Lan Cargo S.A., dated as of April 30, 2007, and Aircraft Lease Agreements between Wells Fargo Bank Northwest N.A., as owner trustee, and Lan Cargo S.A., dated as of April 30, 2007 (incorporated by reference to our amended annual report on Form 20-F (File No. 001-14728) filed on May 7, 2007 and portions of which have been omitted pursuant to a request for confidential treatment).
4.4	Purchase Agreement No 3194 between The Boeing Company and Lan Airlines S.A. relating to Boeing Model 777-Freighter aircraft dated as of July 3, 2007 (incorporated by reference to our amended annual report on Form 20-F (File No. 001-14728) filed on June 25, 2008 and portions of which have been omitted pursuant to a request for confidential treatment).
4.4.1	Supplemental Agreement No. 2 dated as of November 2, 2010, to the Purchase Agreement No 3194 between The Boeing Company and Lan Airlines S.A., dated as of July 3, 2007. Portions of these documents have been omitted pursuant to a request for confidential treatment. Such omitted portions have been filed separately with the Securities and Exchange Commission.
4.5	Purchase Agreement No. 3256 between The Boeing Company and Lan Airlines S.A. relating to Boeing Model 787-8 and 787-9 aircraft dated as of October 29, 2007 (incorporated by reference to our amended annual report on Form 20-F (File No. 001-14728) filed on June 25, 2008 and portions of which have been omitted pursuant to a request for confidential treatment).
4.5.1	Supplemental Agreements No. 1 and 2 (dated March 22, 2010 and July 8, 2010, respectively) to the Purchase Agreement No. 3256 dated October 29, 2007, as amended, with the Boeing Company.  Portions of these documents have been omitted pursuant to a request for confidential treatment. Such omitted portions have been filed separately with the Securities and Exchange Commission.
4.6	General Terms Agreement No. CFM-1-2377460475 and Letter Agreement No. 1 to General Terms Agreement No. CFM-1-2377460475 between Lan Airlines S.A. and CFM International, Inc., both dated December 17, 2010.  Portions of these documents have been omitted pursuant to a request for confidential treatment.  Such omitted portions have been filed separately with the Securities and Exchange Commission.

174

Exhibit No.	Description
4.7	Rate Per Flight Hour Engine Shop Maintenance Services Agreement between Lan Airlines S.A. and CFM International, Inc., dated December 17, 2010.  Portions of this document have been omitted pursuant to a request for confidential treatment.  Such omitted portions have been filed separately with the Securities and Exchange Commission.
4.8	Digital Services Agreement between Lan Airlines S.A. and GE Engine Services, LLC, dated December 17, 2010. Portions of this document have been omitted pursuant to a request for confidential treatment.  Such omitted portions have been filed separately with the Securities and Exchange Commission.
4.9	Implementation Agreement, dated as of January 18, 2011, among Lan Airlines S.A., Costa Verde Aeronáutica S.A., Inversiones Mineras del Cantábrico S.A., TAM S.A., TAM Empreedimentos e Participações S.A. and Maria Cláudia Oliveira Amaro, Maurício Rolim Amaro, Noemy Almeida Oliveira Amaro and João Francisco Amaro.
4.10	Exchange Offer Agreement, dated as of January 18, 2011, among Lan Airlines S.A., Costa Verde Aeronáutica S.A., Inversiones Mineras del Cantábrico S.A., TAM S.A., TAM Empreedimentos e Participações S.A. and Maria Cláudia Oliveira Amaro, Maurício Rolim Amaro, Noemy Almeida Oliveira Amaro and João Francisco Amaro.
4.11	Form of Control Group Shareholders Agreement to be entered into among Costa Verde Aeronáutica S.A., Inversiones Mineras del Cantábrico S.A. and TEP Chile S.A.
4.12	Form of LAN-TEP Shareholders Agreement to be entered into between LAN Airlines S.A. and TEP Chile S.A.
4.13	Form of Holdco 1 Shareholders Agreement to be entered into among LAN, TEP Chile and Holdco 1
4.14	Form of TAM Shareholders Agreement to be entered into among LAN, TEP Chile, Holdco 1 and TAM
8.1	List of subsidiaries of the Company
12.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
12.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
13.1	Certifications of Chief Financial Officer and Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
15.1	Consent of PricewaterhouseCoopers.

175

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

Lan Airlines S.A.

/s/ Alejandro de la Fuente Goic

Name: Alejandro de la Fuente Goic

Title: Chief Financial Officer

Date: May 5, 2011

176

LAN AIRLINES S.A. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2010

CONTENTS
Report of the Independent Auditors	F-2
Consolidated Statement of Financial Position	F-7
Consolidated Statement of Comprehensive Income	F-9
Consolidated Statement of Comprehensive Income	F-10
Consolidated Statement of Changes in Equity	F-11
Consolidated Statement of Cash Flows - Direct Method	F-13
Notes to the Consolidated Financial Statements	F-14

CLP	-	CHILEAN PESO
ARS	-	ARGENTINE PESO
US$	-	UNITED STATES DOLLAR
THUS$	-	THOUSANDS OF UNITED STATES DOLLARS

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Lan Airlines S.A.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows present fairly, in all material respects, the financial position of Lan Airlines S.A. and its subsidiaries at December 31, 2010 and 2009 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.  Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 15.  Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audits.  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects.  Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

F-2

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Santiago - Chile

March 1, 2011

F-3

Contents of the notes to the consolidated financial statements of Lan Airlines S.A. and Subsidiaries.

Notes			Page
1	General information		14
2	Summary of significant accounting policies		17
	2.1.	Preparation	17
	2.2.	Consolidation	19
	2.3.	Foreign currency transactions	19
	2.4.	Property, plant and equipment	20
	2.5.	Intangible assets	21
	2.6.	Goodwill	22
	2.7.	Borrowing costs	22
	2.8.	Losses for impairment of non-financial assets	22
	2.9.	Financial assets	22
	2.10.	Derivative financial instruments and hedging activities	23
	2.11.	Inventories	24
	2.12.	Trade and other accounts receivable	24
	2.13.	Cash and cash equivalents	25
	2.14.	Capital	25
	2.15.	Trade and other accounts payable	25
	2.16.	Interest-bearing loans	25
	2.17.	Deferred taxes	25
	2.18.	Employee benefits	25
	2.19.	Provisions	26
	2.20.	Revenue recognition	27
	2.21.	Leases	27
	2.22.	Non-current assets (or disposal groups) classified as held for sale	28
	2.23.	Maintenance	28
	2.24.	Environment costs	28
3	Financial risk management		29
	3.1.	Financial risk factors	29
	3.2.	Capital risk management	36
	3.3.	Estimates of fair value	36

F-4

 

4	Accounting estimates and judgments		39
5	Segmental Information		40
6	Cash and cash equivalents		41
7	Financial instruments		42
	7.1.	Financial instruments by category	42
	7.2.	Financial instruments by currency	44
8	Trade, other accounts receivable  and non-currents rights receivable		45
9	Accounts receivable from/payable to related parties		49
10	Inventories		50
11	Other financial assets		51
12	Other non financial assets		53
13	Non-current assets (or disposal groups) classified as held for sale		55
14	Investments in subsidiaries		56
15	Equity accounted investments		59

F-5

Notes		Page
16	Intangible assets other than goodwill	61
17	Goodwill	63
18	Property, plant and equipment	64
19	Income taxes	72
20	Other financial liabilities	77
21	Trade and other current accounts payable	82
22	Other provisions	84
23	Other current non-financial liabilities	86
24	Employee benefits	86
25	Other non-current accounts payable	88
26	Equity	89
27	Revenues	93
28	Costs and expenses by nature	94
29	Gains (losses) on the sale of non-current assets not classified as held for sale	95
30	Other income, by function	96
31	Foreign currency and exhange rate differences	97
32	Earnings per share	103
33	Contingencies	104
34	Commitments	108
35	Transactions with related parties	112
36	Share-based payments	115
37	The environment	116
38	Subsequent events	117
39	Business combinations	118

F-6

LAN AIRLINES S.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

ASSETS
	Note	2010		2009
		ThUS$		ThUS$
Current Assets
Cash and cash equivalents	6 - 7		631,052		731,497
Other financial assets	7 - 11		245,451		110,667
Other non-financial assets	12		18,820		17,128
Trade and other accounts receivable	7 - 8		481,350		423,739
Accounts receivable from related entities	7 - 9		50		38
Inventories	10		53,193		46,563
Tax assets			97,656		68,420
Total current assets other than non-current assets
(or disposal groups) classified as held for sale			1,527,572		1,398,052
Non-current assets (or disposal groups)
classified as held for sale	13		5,497		10,919
Total current assets			1,533,069		1,408,971
Non-current Assets
Other financial assets	7 - 11		21,587		20,024
Other non-financial assets	12		32,508		28,736
Rights receivable	7 - 8		7,883		7,190
Equity accounted investments	15		593		1,236
Intangible assets other than goodwill	16		45,749		34,814
Goodwill	17		157,994		63,793
Property, plant and equipment	18		4,948,430		4,196,556
Deferred tax assets	19		38,084		10,652
Total non-current assets			5,252,828		4,363,001
Total assets			6,785,897		5,771,972

The accompanying Notes 1 to 39 form an integral part of these consolidated financial statements.

F-7

 

LAN AIRLINES S.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

LIABILITIES AND NET EQUITY		For the year ended
		December 31,
	Note	2010			2009
		ThUS$			ThUS$
LIABILITIES
Current liabilities
Other financial liabilities	7 - 20		542,624			417,932
Trade and other accounts payable	7 - 21		645,571			476,597
Accounts payable to related entities	7 - 9		184			297
Other provisions	22		753			970
Tax liabilities			15,736			11,287
Other non-financial liabilities	23		939,151			616,256
Total current liabilities			2,144,019			1,523,339
Non-current liabilities
Other financial liabilities	7 - 20		2,562,348			2,443,178
Other accounts payable	7 - 25		425,681			426,521
Other provisions	22		32,120			26,834
Deferred tax liabilities	19		312,012			240,619
Employee benefits	24		9,657			5,555
Total non-current liabilities			3,341,818			3,142,707
Total liabilities			5,485,837			4,666,046
EQUITY
Share capital	26		453,444			453,444
Retained earnings	26		949,214			740,047
Other equity interests	26		5,463			2,490
Other reserves	26		(111,307	)		(97,154	)
Equity attributable to owners of parent			1,296,814			1,098,827
Non-controlling interest			3,246			7,099
Total equity			1,300,060			1,105,926
Total liabilities and equity			6,785,897			5,771,972

The accompanying Notes 1 to 39 form an integral part of these consolidated financial statements.

F-8

 

LAN AIRLINES S.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		For the year ended
		December 31,
	Note	2010			2009			2008
		ThUS$			ThUS$			ThUS$
Revenue	27		4,390,502			3,519,162			4,140,245
Cost of sales			(3,012,698	)		(2,522,778	)		(2,893,944	)
Gross margin			1,377,804			996,384			1,246,301
Other income	30		132,826			136,351			142,942
Distribution costs			(383,517	)		(326,964	)		(366,652	)
Administrative expenses			(331,831	)		(269,588	)		(274,950	)
Other expenses			(172,428	)		(100,483	)		(127,864	)
Other gains/(losses)			5,438			(11,728	)		(134,731	)
Financial income			14,946			18,183			18,480
Financial costs	28		(155,279	)		(153,109	)		(125,488	)
Equity accounted earnings	15		132			315			696
Foreign exchange gains/(losses)	31		13,792			(11,237	)		23,443
Result of indexation units			149			(605	)		1,229
Income before taxes			502,032			277,519			403,406
Income tax expense	19		(81,107	)		(44,487	)		(65,094	)
NET INCOME FOR T HE PERIOD			420,925			233,032			338,312
Income attributable to owners of the parent			419,702			231,126			336,480
Income attributable to non-controlling interests			1,223			1,906			1,832
Net income for the period			420,925			233,032			338,312
EARNINGS PER SHARE
Basic earnings per share (US$)			1.23882			0.68221			0.99318
Diluted earnings per share (US$)			1.23534			0.68221			0.99318

The accompanying Notes 1 to 39 form an integral part of these consolidated financial statements.

F-9

 

LAN AIRLINES S.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		For the year ended
		December 31,
	Note	2010			2009			2008
		ThUS$			ThUS$			ThUS$
NET INCOME			420,925			233,032			338,312
Currency translation differences
Gains (losses) on currency translation, before tax	31		708			1,442			(7,371	)
Other comprehensive income, before taxes, currency translation differences			708			1,442			(7,371	)
Cash flow hedges
Gains (losses) on cash flow hedges before tax	20		(17,855	)		252,508			(308,901	)
Other comprehensive income, before taxes, cash flow hedges			(17,855	)		252,508			(308,901	)
Other components of other comprehensive income, before taxes			(17,147	)		253,950			(316,272	)
Income tax relating to components of other comprehensive income
Income tax related to currency translation differences in other comprehensive income	19		(120	)		1,008			-
Income tax related to cash flow hedges in other comprehensive income	19		3,035			(42,925	)		52,513
Amount of income taxes related to components of other comprehensive income			2,915			(41,917	)		52,513
Other comprehensive income			(14,232	)		212,033			(263,759	)
Total comprehensive income			406,693			445,065			74,553
Comprehensive income attributable to the owners of the parent			405,549			441,977			73,900
Comprehensive income attributable to non-controlling interest			1,144			3,088			653
TOTAL COMPREHENSIVE INCOME			406,693			445,065			74,553

The accompanying Notes 1 to 39 form an integral part of these consolidated financial statements.

F-10

 

LAN AIRLINES S.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

						Other reserves
															Equity
				Other		Currency			Cash flow						attributable to			Non-
		Share		equity		translation			hedging			Retained			owners			controlling			Total
	Note	capital		interests		reserve			reserve			earnings			of the parent			interest			net equity
		ThUS$		ThUS$		ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$
Opening balance as of January 1, 2010			453,444		2,490		(4,924	)		(92,230	)		740,047			1,098,827			7,099			1,105,926
Changes in equity
Comprehensive income
Net income	26		-		-		-			-			419,702			419,702			1,223			420,925
Other comprehensive income			-		-		667			(14,820	)		-			(14,153	)		(79	)		(14,232	)
Total comprehensive income			-		-		667			(14,820	)		419,702			405,549			1,144			406,693
Transactions with shareholders
Dividends	26		-		-		-			-			(210,406	)		(210,406	)		-			(210,406	)
Increase (decrease) for transfers and other changes	26-36		-		2,973		-			-			(129	)		2,844			(4,997	)		(2,153	)
Total transactions with shareholders			-		2,973		-			-			(210,535	)		(207,562	)		(4,997	)		(212,559	)
Closing balance as of December 31, 2010			453,444		5,463		(4,257	)		(107,050	)		949,214			1,296,814			3,246			1,300,060

The accompanying Notes 1 to 39 form an integral part of these consolidated financial statements.

F-11

LAN AIRLINES S.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

						Other reserves
															Equity
				Other		Currency			Cash flow						attributable to			Non-
		Share		equity		translation			hedging			Retained			owners			controlling			Total
	Note	capital		interests		reserve			reserve			earnings			of the parent			interest			net equity
		ThUS$		ThUS$		ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$
Opening balance as of January 01, 2009			453,444		1,749		(6,192	)		(301,813	)		614,587			761,775			6,829			768,604
Changes in equity
Comprehensive income
Net income	26		-		-		-			-			231,126			231,126			1,906			233,032
Other comprehensive income			-		-		1,268			209,583			-			210,851			1,182			212,033
Total comprehensive income			-		-		1,268			209,583			231,126			441,977			3,088			445,065
Transactions with shareholders
Dividends	26		-		-		-			-			(104,622	)		(104,622	)		-			(104,622	)
Increase (decrease) for transfers and other changes	26-36		-		741		-			-			1,613			2,354			(2,818	)		(464	)
Increase (decrease) in ownership interests that do not result in a loss of control			-		-		-			-			(2,657	)		(2,657	)		-			(2,657	)
Total transactions with shareholders			-		741		-			-			(105,666	)		(104,925	)		(2,818	)		(107,743	)
Closing balance as of December 31, 2009			453,444		2,490		(4,924	)		(92,230	)		740,047			1,098,827			7,099			1,105,926

The accompanying Notes 1 to 39 form an integral part of these consolidated financial statements.

F-12

LAN AIRLINES S.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS DIRECT – METHOD

		For the year ended
		December 31,
	Note	2010			2009			2008
		ThUS$			ThUS$			ThUS$
Cash flows from operating activities
Cash collection from operating activities
Proceeds from sales of goods and services			4,831,963			3,871,189			4,648,591
Other cash receipts from operating activities			46,336			40,319			35,457
Payments for operating activities
Payments to suppliers for goods and services			(3,058,168	)		(2,475,716	)		(3,318,680	)
Payments to and on behalf of employees			(633,686	)		(636,603	)		(614,528	)
Other payments for operating activities			(18,000	)		(19,000	)		-
Interest paid			(387	)		-			-
Interest received			11,438			13,542			8,226
Income taxes refunded (paid)			(11,098	)		10,304			(26,994	)
Other cash inflows (outflows)			(43,061	)		41,792			(100,997	)
Net cash flows from operating activities			1,125,337			845,827			631,075
Cash flows used in investing activities
Cash flows from disposal of subsidiaries			1,491			1,568			6,708
Cash flows used for acquisition of subsidiaries			(12,000	)		(921	)		(698	)
Cash flows used in the purchase of non-controlling interest			-			(2,439	)		-
Other cash receipts from sales of equity or debt instruments of other entities			12,915			8,743			14,511
Other payments to acquire equity or debt instruments of other entities			(60,000	)		(58,983	)		(2,607	)
Amounts raised from sale of property, plant and equipment			577			10,777			6,625
Purchases of property, plant and equipment			(1,029,158	)		(538,576	)		(779,315	)
Purchases of intangible assets			(19,236	)		(12,888	)		(23,388	)
Dividends received			111			414			813
Interest received			4,048			2,637			2,743
Other cash inflows (outflows)			812			-			5
Net cash flow used in investing activities			(1,100,440	)		(589,668	)		(774,603	)
Cash flows from (used in) financing activities
Amounts raised from term loans			687,792			671,425			574,874
Loan Payments			(554,539	)		(261,705	)		(102,644	)
Payments of finance lease liabilities			(54,034	)		(62,858	)		(52,386	)
Dividends paid			(155,407	)		(139,937	)		(222,803	)
Interest paid			(128,722	)		(129,323	)		(81,421	)
Other cash inflows			80,181			21,588			(15,210	)
Net cash flows from (used in) financing activities			(124,729	)		99,190			100,410
Net increase (decrease) in cash and cash equivalents before the effect of changes in the exchange rate			(99,832	)		355,349			(43,118	)
Effects of variation in the exchange rate on cash and cash equivalents			(613	)		(24,824	)		(1,525	)
Net increase (decrease) in cash and cash equivalents			(100,445	)		330,525			(44,643	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	6		731,497			400,972			445,615
CASH AND CASH EQUIVALENTS AT END OF PERIOD	6		631,052			731,497			400,972

The accompanying Notes 1 to 39 form an integral part of these consolidated financial statements.

F-13

LAN AIRLINES S.A. AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2010

NOTE 1 - GENERAL INFORMATION

Lan Airlines S.A. (the “Company” or “LAN”) is a public company registered with the Chilean Superintendency of Securities and Insurance (SVS), under No.306, whose shares are quoted in Chile on the Valparaíso Stock Exchange, the Chilean Electronic Exchange and the Santiago Stock Exchange; it is also quoted on the New York Stock Exchange (NYSE) in the form of American Depositary Receipts (ADRs). Its principal business is passenger and cargo air transportation, both in the domestic markets of Chile, Peru, Argentina, Colombia and Ecuador and a series of regional and international routes in America, Europe and Oceania. These businesses are performed directly or through its subsidiaries in different countries.In addition, the company has subsidiaries operating in the freight business in Mexico, Brazil and Colombia.

On August 13, 2010, LAN Airlines S.A. and TAM S.A. (TAM) announced they have signed a non-binding Memorandum of Understanding (MOU) in which the companies agree to proceed with their intention of carrying out their operations jointly under one parent company, to be named LATAM Airlines Group. The proposed partnership of LAN with TAM would be within the world’s 10 largest airline groups. LATAM will provide transport services for passengers and cargo to more than 115 destinations in 23 countries, operating with a fleet of over 280 aircraft, with over 40,000 employees. Both airlines will continue operating independently with their current operating licenses and brands. Within the group, TAM will continue operating as a Brazilian company with its own structure. The current holding of LAN Airlines S.A. will operate as an independent business unit within the group. On October 20, 2010, LAN Airlines and TAM announced that the operating subsidiaries of TAM had presented the structure of the transaction to the Brazilian Civil Aviation Agency (ANAC) for approval.

The Company is located in Santiago, Chile, at Avenida Américo Vespucio Sur 901, Renca.

Corporate governance practices of the Company are set in accordance with Securities Market Law 18,045 the Corporations Law 18,046 and its regulations, and the regulations of the SVS and the laws and regulations of the United States of America and the US Securities and Exchange Commission (SEC) with respect to the issuance of ADRs.

The Board of the Company is composed of nine members who are elected every two years by the ordinary shareholders meeting. The board meets in regular monthly sessions and in extraordinary sessions as the corporate needs demand. Of the nine board members, three form part of its Directors’ Committee which fulfills both the role foreseen in the Corporations Law and the functions of the Audit Committee required by the Sarbanes Oxley Act of the United States of America and the respective regulations of the SEC.

The majority shareholder of the Company is the Cueto Group, which through Costa Verde Aeronáutica S.A. and Inversiones Mineras del Cantábrico S.A.  owns 34.1% of the shares issued by the Company, as is the controller of the Company in accordance with the provisions of the letter b) of Article 97 and Article 99 of the Securities Market Law, attended that despite not meeting the majority of votes at shareholder meetings and to elect the majority of the directors of the Company, has a decisive influence in its administration.

As of December 31, 2010, the Company had a total of 1,412 registered shareholders, and 5.23% of the Company’s share capital was in the form of ADRs.

F-14

For the year ended December 31, 2010 the Company had an average of 17,810 employees, ending the year with a total of 20,285 people, with 3,940 in administration, 2,576 in maintenance, 5,730 in operations, 3,561 flight personnel, 1,835 cabin crew, and 2,643 in sales.

F-15

The significant operating subsidiaries included in these consolidated financial statements are as follows:

				As of December 31, 2010						As of December 31, 2009
				Direct		Indirect		Total		Direct		Indirect		Total
		Country	Functional	ownership		ownership		ownership		ownership		ownership		ownership
Tax No.	Company	of origin	Currency	interest		interest		interest		interest		interest		interest
				%		%		%		%		%		%
96.518.860-6	Lantours Division de Servicios Terrestres S.A. (*)	Chile	US$		99.9900		0.0100		100.0000		99.9900		0.0100		100.0000
96.763.900-1	Inmobiliaria Aeronáutica S.A.	Chile	US$		99.0100		0.9900		100.0000		99.0100		0.9900		100.0000
96.969.680-0	Lan Pax Group S.A. and Subsidiaries	Chile	US$		99.8361		0.1639		100.0000		99.8361		0.1639		100.0000
Foreign	Lan Perú S.A.	Perú	US$		49.0000		21.0000		70.0000		49.0000		21.0000		70.0000
Foreign	Lan Chile Investments Limited and Subsidiaries	Caymán Island	US$		99.9900		0.0100		100.0000		99.9900		0.0100		100.0000
93.383.000-4	Lan Cargo S.A.	Chile	US$		99.8939		0.0041		99.8980		99.8939		0.0041		99.8980
Foreign	Connecta Corporation	U.S.A	US$		0.0000		100.0000		100.0000		0.0000		100.0000		100.0000
Foreign	Prime Airport Services Inc. and Subsidiary	U.S.A	US$		0.0000		100.0000		100.0000		0.0000		100.0000		100.0000
96.951.280-7	Transporte Aéreo S.A.	Chile	US$		0.0000		100.0000		100.0000		0.0000		100.0000		100.0000
96.634.020-7	Ediciones Ladeco América S.A.	Chile	CLP		0.0000		100.0000		100.0000		0.0000		100.0000		100.0000
Foreign	Aircraft International Leasing Limited	U.S.A	US$		0.0000		100.0000		100.0000		0.0000		100.0000		100.0000
96.631.520-2	Fast Air Almacenes de Carga S.A.	Chile	CLP		0.0000		100.0000		100.0000		0.0000		100.0000		100.0000
96.631.410-9	Ladeco Cargo S.A.	Chile	CLP		0.0000		100.0000		100.0000		0.0000		100.0000		100.0000
Foreign	Laser Cargo S.R.L.	Argentina	ARS		0.0000		100.0000		100.0000		0.0000		100.0000		100.0000
Foreign	Lan Cargo Overseas Limited and Subsidiaries	U.S.A	US$		0.0000		100.0000		100.0000		0.0000		100.0000		100.0000
96.969.690-8	Lan Cargo Inversiones S.A. and Subsidiary	Chile	CLP		0.0000		100.0000		100.0000		0.0000		100.0000		100.0000
96.801.150-2	Blue Express INTL S.A. and Subsidiary	Chile	CLP		0.0000		100.0000		100.0000		0.0000		100.0000		100.0000
96.575.810-0	Inversiones Lan S.A. and Subsidiaries	Chile	CLP		99.7100		0.0000		99.7100		99.7100		0.0000		99.7100

(*) Comercial Masterhouse S.A.,  in July 2010, changed name to Lantours División de Servicios Terrestres S.A.

Additionally, the Company has proceeded to consolidate certain special purpose entities according with standards issued by the Standing Interpretations Committee of the International Accounting Standards: Consolidation - Special Purpose Entities (“SIC 12”) and private investment funds in which the parent company and subsidiaries are contributors.

All the entities controlled have been included in the consolidation.

Changes in the scope of consolidation from January 01, 2009 and December 31, 2010, are detailed below:

(1) Dissolution of company

Nigsy S.A., indirect subsidiary of Lan Chile Investments Limited

(2) Incorporation or acquisition of companies

Florida West Technical Services LLC., direct subsidiary of Prime Airport Services S.A., in April 2010, changed name to Lan Cargo Repair Station, LLC.

Aerovías de Integración Regional, Aires S.A., indirect subsidiary of Lan Pax Group S.A., in November 2010, acquired through the purchase of companies Akemi Holdings S.A. and Saipan Holdings S.A.

F-16

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following describes the principal accounting policies adopted in the preparation of these consolidated financial statements.

2.1.     Preparation

The consolidated financial statements of Lan Airlines SA are for the period ended December 31, 2010 and have been prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).

The consolidated financial statements have been prepared under the historic-cost criterion, although modified by the valuation at fair value of certain financial instruments.

The preparation of the consolidated financial statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires management to use its judgment in applying the Company’s accounting policies. Note 4 shows the areas that imply a greater degree of judgment or complexity or the areas where the assumptions and estimates are significant to the consolidated financial statements.

At the date of these consolidated financial statements, the following accounting pronouncements had been issued by the IASB:

a)  Accounting pronouncements effective as of January 1, 2010:

	Mandatory application:
	annual periods
Standards and amendments	beginning on or after
IFRS 3 revised: Business Combinations	01/07/2009
Amendment to IAS 27: Consolidated and separate financial statements	01/07/2009
Amendment to IFRS 2: Share-based payment	01/01/2010
Amendment to IAS 38: Intangible assets	01/07/2010
Amendment to IAS 1: Presentation of financial statements	01/01/2010
Amendment to IAS 36: Impairment assets	01/01/2010
Amendment to IFRS 5: Non-current assets held for sale and discontinued operations	01/01/2010

	Mandatory application:
	annual periods
Interpretation	beginning on or after
IFRIC 17: Distributions to owners of non-monetary assets	01/07/2009
IFRIC 18: Transfers of assets from customers	01/07/2009
Amendment to IFRIC 9: Reassessment of embedded derivatives	01/07/2009
Amendment to IFRIC 16: Hedges of a net investment in a foreign operation	01/07/2009

F-17

b)  Accounting pronouncements effective as of January 1, 2011:

	Mandatory application:
	annual periods
Standards and amendments	beginning on or after
Amendment to IAS 32: Classification of rights issues	01/02/2010
IAS 24 revised: Related party disclosures	01/01/2011
IFRS 9: Financial instruments	01/01/2013
Amendment to IFRS 3: Business Combinations	01/07/2010
Amendment to IFRS 7: Financial Instruments: Disclosures	01/01/2011
Amendment to IAS 1: Presentation of financial statements	01/01/2011
Amendment to IAS 27: Consolidated and separate financial statements	01/07/2010
Amendment to IAS 34: Interim financial reporting	01/01/2011

	Mandatory application:
	annual periods
Interpretation	beginning on or after
IFRIC 19:  Extinguishing financial liabilities with equity instruments	01/07/2010
Amendment to IFRIC 14: Pre-payments of a minimum funding requirement	01/01/2011
Amendment to IFRIC 13: Customer loyalty programs	01/01/2011

The Company’s management believes that the adoption of the standards, amendments and interpretations described above would not have had a significant impact on the Company’s consolidated financial statements in the period of their first application.

F-18

2.2.    Consolidation

(a) Subsidiaries

Subsidiaries are all the entities (including special-purpose entities) over which the Company has the power to control the financial and operating policies, which are generally accompanied by a holding of more than half of the voting rights. In evaluating whether the Company controls another entity, the existence and effect of potential voting rights that are currently exercisable or convertible are considered. The subsidiaries are consolidated from the date on which control is passed to the Company and they are excluded from the consolidation on the date they cease to be so controlled.

The Company uses the acquisition-cost method or purchase accounting for the purchase of subsidiaries. The cost of acquisition is the fair value of the assets delivered, the equity instruments issued and the liabilities incurred or assumed on the exchange date. The identifiable assets acquired and the liabilities and contingent liabilities assumed in a business combination are initially valued at their fair value on the date of acquisition, regardless of the extent of the non-controlling interests. The excess of the acquisition cost over the fair value of the Company’s holding in the net identifiable assets acquired is shown as goodwill. If the cost is less than the fair value of the net assets of the acquired subsidiary, the difference is recorded directly in the consolidated statement of income (Note 2.6).

Inter-company transactions, balances and unrealized gains on transactions between the Company’s entities are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment loss of the asset transferred. When necessary in order to ensure uniformity with the policies adopted by the Company, the accounting policies of the subsidiaries are modified.

(b)  Transactions and minority holdings

The Group applies the policy of considering transactions with non-controlling interests, when not related to loss of control, as equity transactions without an effect on income.

(c) Investees or associates

Investees or associates are all entities over which Lan Airlines S.A. and Subsidiaries exercise a significant influence but has no control, this usually arise by a holding of between 20% and 50% of the voting rights. Investments in associates are booked using the equity method and are initially recorded at their cost.

The participation of Lan Airlines S.A. and Subsidiaries in the losses or gains after the acquisition of its investees or associates is shown in results, and its participation in post acquisition movements in reserves of investees or associates are shown in reserves. Post-acquisition movement is adjusted against the carrying amount of the investment. When the participation of Lan Airlines S.A. and Subsidiaries in the losses of an investee or associate is equal to or more than its holding in it, including any other non guaranteed account receivable, Lan Airlines S.A. and Subsidiaries will not show the additional losses unless it has incurred obligations or made payments on behalf of the investee or associate.

Gains or losses for dilution in investees or associates are shown in the consolidated statement of income.

2.3. Foreign currency transactions

(a)      Presentation and functional currencies

The items included in the financial statements of each of the entities of Lan Airlines S.A. and Subsidiaries are valued using the currency of the main economic environment in which the entity operates (the functional currency). The functional currency of Lan Airlines S.A. is the United States dollar which is also the currency of presentation of the consolidated financial statements of Lan Airlines S.A. and Subsidiaries.

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(b) Transactions and balances

Foreign currency transactions are translated to the functional currency using the exchange rates on the transaction dates. Foreign currency gains and losses resulting from the liquidation of these transactions and from the translation at the closing exchange rates of the monetary assets and liabilities denominated in foreign currency are shown in the consolidated statement of income.

(c) Group entities

The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency other than the currency of presentation are translated to the currency of presentation as follows:

(i) Assets and liabilities of each consolidated statement of financial position presented are translated at the closing exchange rate on the consolidated statement of financial position date;

(ii) The revenues and expenses of each results account are translated at the exchange rates prevailing on the transaction dates,

(iii) All the resultant exchange differences are shown as a separate component in net equity.

In the consolidation, exchange differences arising from the translation of a net investment in foreign entities (or local with a functional currency different to that of the parent), and of loans and other foreign currency instruments designated as hedges for these investments, are recorded within net equity. When the investment is sold, these exchange differences are shown in the consolidated statement of income as part of the loss or gain on the sale.

Adjustments to the goodwill and fair value arising from the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and are translated at the period-end exchange rate.

2.4. Property, plant and equipment

The land of Lan Airlines S.A. and Subsidiaries is recognized at cost less any accumulated impairment loss. The rest of the property, plant and equipment is shown, initially and subsequently, at historic cost less the corresponding depreciation and any impairment loss, except for certain land and minor equipment that were  revalued on first time adoption of IFRS.

The amounts of advance payments to aircraft manufacturers are capitalized by the Company under Construction in progress until receipt of the aircraft.

Subsequent costs (replacement of components, improvements, extensions, etc.) are included in the value of the initial asset or shown as a separate asset only when it is probable that the future economic benefits associated with the elements of property, plant and equipment are going to flow to the Company and the cost of the element can be determined reliably. The value of the component replaced is written off in the books at the time of replacement. The rest of the repairs and maintenance are charged to the result of the year in which they are incurred.

Depreciation of property, plant and equipment is calculated using the straight-line method over their estimated technical useful lives; except in the case of certain technical components which are depreciated on the basis of cycles and hours flown.

The residual value and useful life of assets is revised, and adjusted if necessary, once a year.

When the carrying amount of an asset is higher than its estimated recoverable amount, its value is reduced immediately to its recoverable amount (Note 2.8).

Losses and gains on the sale of property, plant and equipment are calculated by comparing the proceeds obtained with the book value and are included in the consolidated statement of income.

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2.5. Intangible assets

Computer software

Licenses for computer software acquired are capitalized on the basis of the costs incurred in acquiring them and preparing them for using the specific software. These costs are amortized over their estimated useful lives.

Expenses related to the development or maintenance of computer software which do not qualify for capitalization, are shown as an expense when incurred. Certain costs directly related to the production of unique and identifiable computer software controlled by the Company, are shown as intangible assets when met all the criteria for capitalization. The direct costs include the expenses of the personnel who develop the computer software and other costs directly associated.

Development costs of computer software shown as assets are amortized over their estimated useful lives.

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2.6. Goodwill

Goodwill represents the excess of acquisition cost over the fair value of the Company’s participation in the net identifiable assets of the subsidiary on the acquisition date. Goodwill related to acquisitions of subsidiaries is not amortized but tested for impairment annually and when there are indications that the carrying value may not be recoverable. Gains and losses on the sale of an entity include the book amount of the goodwill related to the entity sold.

2.7. Borrowing costs

Interest costs incurred for the construction of any qualified asset are capitalized over the time necessary for completing and preparing the asset for its intended use. Other interest costs are charged to income and expenses.

2.8. Losses for impairment of non-financial assets

Assets that have an indefinite useful life, and developing IT projects, are not subject to amortization and are subject to annual testing for impairment losses. Assets subject to amortization are subjected to impairment tests whenever any event or change in circumstances indicates that the book value of the assets may not be recoverable. An impairment loss is recorded when the book value is greater than the recoverable amount. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. In evaluating the impairment, the assets are grouped at the lowest level for which cash flows are separately identifiable (CGUs). Non-financial assets other than goodwill that have suffered an impairment loss are subjected to a test once a year to check that there has been no reversal of the loss.

2.9. Financial assets

The Company classifies its financial instruments in the following categories: financial assets at fair value through profit and loss, loans and accounts receivable and financial assets held to maturity. The classification depends on the purpose for which the financial instruments were acquired. Management determines the classification of its financial instruments at the time of initial recognition, which occurs on the date of transition.

(a) Financial assets at fair value through profit and loss

Financial assets at fair value through profit and loss are financial instruments held for trading and those in their initial classification has been designated as at fair value through profit or loss. A financial asset is classified in this category if acquired mainly for the purpose of being sold in the near future or when these assets are managed and measured using  fair value. Derivatives are also classified as acquired for trading unless they are designated as hedges. Assets in this category are classified as cash and cash equivalents, held for trading, and other financial assets, designated on initial recognition.

(b) Loans and accounts receivable

Loans and accounts receivable are non-derivative financial instruments with fixed or determinable payments not traded on an active market. These items are classified in current assets except for those with maturity over 12 months from the date of the consolidated statement of financial position, which are classified as non-current assets. Loans and accounts receivable are included in trade and other accounts receivable in the consolidated statement of financial position (Note 2.12).

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(c) Financial assets held to maturity

Financial assets held to maturity are non-derivative financial instruments with fixed or determinable payments and fixed maturities that the Company’s management has the positive intention and capacity to hold until their maturity. Should the Company sell a not-insignificant amount of the financial assets held to their maturity, the whole category is reclassified as available for sale. These financial instruments held to maturity  are included in non-current assets, except for those maturity equal to or less than 12 months from the consolidated statement of financial position, which are classified as other current financial assets.

Regular purchases and sales of financial assets are recognized on the trade-date – the date on which the group commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognized at fair value, and transaction costs are expensed in the income statement. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership. Financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortized cost using the effective interest method. Held to maturity investments are carried at amortized cost using the effective interest rate.

The company valued at the date of each consolidated statement of financial position if there is objective evidence that a financial asset or group of financial assets may have suffered an impairment loss. For the case of financial assets held to maturity, if any evidence of impairment, the amount of the provision is  the difference between the book value of the assets and the present value of the estimated future cash flows, discounted at the original effective interest rate.

2.10. Derivative financial instruments and hedging activities

Derivatives are booked initially at fair value on the date the derivative contracts are signed and later they continue to be valued at their fair value. The method for booking the resultant loss or gain depends on whether the derivative has been designated as a hedging instrument and, if so, the nature of the item hedged. The Company designates certain derivatives as:

(a) Hedge of the fair value of recognized assets (fair value hedge);

(b) Hedge of an identified risk associated with a recognized liability or an expected highly-probable transaction (cash-flow hedge), or

(c) Derivatives that do not qualify for hedge accounting.

The Company documents, at the inception of each transaction, the relationship between the hedging instrument and the hedged item, as well as its objectives for managing risk and the strategy for carrying out various hedging transaction. The Company also documents its assessment, both at the beginning and on an ongoing basis, as to whether the derivatives used in the hedging transactions are highly effective in offsetting the changes in the fair value or cash flows of the items being hedged.

The total fair value of the hedging derivatives is booked as an other non-current financial asset or liability if the remaining maturity of the item hedged is over 12 months, and as an other current financial asset or liability if the remaining term of the item hedged is less than 12 months.

Derivatives not booked as hedges are classified as other financial assets or liabilities, current in the case that their remaining maturity is less than 12 months and non-current in the case that it is more than 12 months.

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(a) Fair value hedges

Changes in the fair value of derivatives designated and that qualify as fair value hedges are shown in the consolidated statement of income, together with any change in the fair value of the asset or liability hedged that is attributable to the risk being hedged.

(b) Cash flow hedges

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is shown in net equity. The loss or gain relating to the ineffective portion is recognized immediately in the consolidated statement of income under “Other gains (losses)”.

In the case of variable interest-rate hedges, this means that the amounts recognized in equity are reclassified to results within financial cost at the same time the associated debts accrue interest.

For fuel price hedges, the amounts shown in equity are reclassified to income as Cost of sales to the extent that the fuel subject to the hedge is used.

When hedging instruments mature or are sold or when they do not meet the requirements to be accounted for as hedges, any gain or loss accumulated in net equity until that moment remains in equity and is reclassified to the consolidated statement of income when the hedged transaction is finally recognized. When it is expected that the hedged transaction is no longer going to occur, the gain or loss accumulated in net equity is taken immediately to the consolidated statement of income as “Other gains (losses)”.

(c) Derivatives not booked as a hedge

Certain derivatives are not booked as a hedge. The changes in fair value of any derivative instrument that is not booked as a hedge are shown immediately in the consolidated statement of income, in “Other gains (losses)”.

2.11. Inventories

Inventories, detailed in note 10, are shown at the lower of cost and their net realizable value. The cost is determined on the basis of the weighted average cost method. The net realizable value is the estimated selling price in the normal course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

2.12. Trade and other accounts receivable

Trade accounts receivable are shown initially at their fair value and later at their amortized cost in accordance with the effective interest rate method, less the allowance for impairment losses.  An allowance for impairment losses of trade accounts receivable is made when there is objective evidence that the Company will not be able to recover all the amounts due according to the original terms of the accounts receivable. The existence of significant financial difficulties on the part of the debtor, the probability that the debtor is entering bankruptcy or financial reorganization and the default or delay in making payments are considered as indicators that the receivable has been impaired. The amount of the provision is the difference between the book value of the assets and the present value of the estimated future cash flows, discounted at the original effective interest rate. The book value of the asset is reduced by the amount of the allowance and the loss is shown in the consolidated statement of income in Cost of sales. When an account receivable is written off, it is charged to the allowance account for accounts receivable.

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2.13.           Cash and cash equivalents

Cash and cash equivalents include cash and bank balances, time deposits in financial institutions, and other short-term and easily-liquidated investments.

2.14. Capital

The common shares are classified as net equity.

Incremental costs directly attributable to the issuance of new shares or options are shown in net equity as a deduction from the proceeds obtained.

2.15. Trade and other accounts payable

Trade payables and other accounts payables are initially recognized at fair value and subsequently at amortized cost are valued according to the method of the effective interest rate

2.16.           Interest-bearing loans

Financial liabilities are shown initially at their fair value, net of the costs incurred in the transaction. Later, these financial liabilities are valued at their amortized cost; any difference between the proceeds obtained (net of the necessary arrangement costs) and the repayment value, is shown in the consolidated statement of income during the term of the debt, according to the effective interest rate method.

Financial liabilities are classified in current and non-current liabilities according to the contractual payment dates of the nominal principal.

2.17. Deferred taxes

Deferred taxes are calculated, according to the balance-sheet method, on the temporary differences arising between the tax bases of assets and liabilities and their book values. However, if the temporary differences arise from the initial recognition of a liability or an asset in a transaction different from a business combination that at the time of the transaction does not affect the accounting result or the tax gain or loss, they are not booked. The deferred tax is determined using the tax rates (and laws), that have been enacted or substantially enacted at the end of the reporting period, and are expected to apply when the related deferred tax asset is realized or the deferred tax liability discharged.

Deferred tax assets are recognised when it is probable that there will be sufficient future tax earnings with which tocompensate the temporary differences.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the group and it is probable that the temporary difference will not reverse in the foreseeable future.

2.18. Employee benefits

(a) Personnel vacations

The Company recognizes the expense for personnel vacations on an accrual basis.

(b) Share-based compensation

The compensation plans implemented by the granting of options for the subscription and payment of shares are shown in the consolidated financial statements in accordance with IFRS 2: Share based payments, showing the effect of the fair value of the options granted as a charge to remuneration on a straight-line basis between the date of granting such options and the date on which these become vested.

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(c) Post-employment and other long-term benefits

Provisions are made for these obligations by the application of the actuarial value of the accrued cost of the benefit method, and take into account estimates of future permanence, mortality rates and future wage increases determined on the basis of actuarial calculations. The discount rates are determined by reference to market interest-rate curves. Actuarial gains or losses are shown in results for the period when they occur.

(d) Incentives

The Company has an annual incentives plan for its personnel for compliance with objectives and individual contribution to the results. The incentives eventually granted consist of a given number or portion of monthly remuneration and the provision is made on the basis of the amount estimated for distribution.

2.19. Provisions

Provisions are recognised when:

(i) The Company has a present legal or implicit obligation as a result of past events.

(ii) Itis probable that some payment is going to be necessary to settle an obligation, and

(iii) The amount has been reliably estimated.

Provisions are shown at the present value of the disbursements expected to be necessary for settling the obligation using the Company’s best estimates. The pre-tax discount rate used for determining the present value reflects current market evaluations on the date of the financial statements of the time value of money, plus the specific risks related to the liability in question.

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2.20. Revenue recognition

Revenues include the fair value of the proceeds received or to be received on sales of goods and rendering services in the ordinary course of the Company’s business. Revenues are shown net of refunds, rebates and discounts.

(a) Rendering of services

a.1 Passenger and cargo transport

The Company shows revenue from the transportation of passengers and cargo once the service has been provided.

a.2 Frequent flyer program

The Company currently has a frequent flyer program called Lan Pass, whose objective is customer loyalty through the delivery of kilometers every time that members fly with the Company or its alliance partners, use the services of entities registered with the program or make purchases with an associated credit card. The kilometers earned can be exchanged for flights tickets or other services of associated entities. The consolidated financial statements include liabilities for this concept (deferred income), according to the estimate of the valuation established for the kilometers accumulated pending use at that date, in accordance with IFRIC 13: Customer loyalty programs.

a.3 Other revenues

The Company records revenues for other services when these have been provided.

(b) Interest income

Interest income is booked using the effective interest rate method.

(c) Dividend income

Dividend income is booked when the right to receive the payment is established.

2.21. Leases

(a) When the Company is the lessee – financial lease

The Company leases certain property, plant and equipment in which it has substantially all the risk and benefits deriving from the ownership; they are therefore classified as financial leases. Financial leases are capitalized at the start of the lease at the lower of the fair value of the asset leased and the present value of the minimum lease payments.

Every lease payment is separated between the liability component and the financial expenses so as to obtain a constant interest rate over the outstanding amount of the debt. The corresponding leasing obligations, net of financial charges, are included in Interest-bearing loans. The element of interest in the financial cost is charged in the consolidated statement of income over the lease period so that it produces a constant periodic rate of interest on the remaining balance of the liability for each period. The asset acquired under a financial lease is depreciated over the shorter of its useful life and the lease term and is included in Property, plant and equipment.

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(b) When the Company is the lessee – operating lease

Leases, in which the lessor retains an important part of the risks and benefits deriving from ownership, are classified as operating leases. Payments with respect to operating leases (net of any incentive received from the lessor) are charged in the consolidated statement of income on a straight-line basis over the term of the lease.

2.22. Non-current assets (or disposal groups) classified as held for sale

Non-current assets (or disposal groups) are classified as assets held for sale and are shown at the lesser of their book value and the fair value less costs to sell.

2.23. Maintenance

 The costs incurred for scheduled major maintenance of the aircraft’s fuselage and engines are capitalized and depreciated until the next maintenance. The depreciation rate is determined on technical grounds, according to its use expressed based on cycles and flight hours.

The unscheduled maintenances of aircraft and engines, and minor maintenances, are charged to income as incurred.

2.24. Environmental costs

Disbursements related to environmental protection are charged to income when incurred.

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NOTE 3 - FINANCIAL RISK MANAGEMENT

3.1. Financial risk factors

The Company’s activities are exposed to different financial risks: (a) market risk, (b) credit risk, and (c) liquidity risk. The Company’s global risk management program is focused on uncertainty in the financial markets and tries to minimize the potential adverse effects on the net margin. The Company uses derivatives to hedge part of these risks.

(a) Market risk

Due to the nature of its operations, the Company is exposed to market risks such as:

(i) fuel-price risk, (ii) interest-rate risk, and (iii) local exchange-rate risk. In order to fully or partially hedge all these risks, the Company operates with derivative instruments to fix or limit rises in the underlying assets.

(i) Fuel-price risk:

Fluctuations in fuel prices largely depend on the global supply and demand for oil, decisions taken by Organization of Petroleum Exporting Countries (OPEC), global refining capacity, stock levels maintained, and weather and geopolitical factors.

The Company purchases an aircraft fuel called Jet Fuel grade 54. There is a benchmark price in the international market for this underlying asset, which is US Gulf Coast Jet 54. However, the futures market for this asset has a low liquidity index and as a result the Company hedges its exposure using West Texas Intermediate (WTI) crude, which has a high correlation with Jet Fuel and is a highly liquid asset and therefore has advantages in comparison to the use of the U.S. Gulf Coast Jet 54 index.

During 2010, the Company booked gains of US$ 1 million on fuel hedging. During 2009, the Company recognized losses of US$ 128.7 million for the same reason.

At December 31, 2010, the market value of its fuel positions amounted to US$ 45.8 million.  At the December 31, 2009, this market value was US$ 13.6 million. The following tables show the notional value of the purchase positions together with the derivatives contracted for the different periods:

Positions as of December 31, 2010	Maturities
	Q111			Q211			Q311			Q411			Total
Volume (thousands of barrels WTI)		1,848			918			687			324			3,777
Agreed future value (US$ per barril)(*)		82			81			84			90			83
Total (ThUS$)		151,536			74,358			5,778			29,160			313,491
Approximate percentage of hedge
(of expected consumption value)		54	%		27	%		19	%		8	%		26	%

(*)Weighted average between collars and asset options

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Positions as of December 31, 2009	Maturities
	Q110			Q210			Q310			Q410			Total
Volume (thousands of barrels WTI)		1,404			1,371			876			738			4,389
Agreed future value (US$ per barril)(*)		84			80			79			82			81
Total (ThUS$)		117,936			109,680			69,204			60,516			355,509
Approximate percentage of hedge
(of expected consumption value)		48	%		49	%		29	%		24	%		37	%

(*)Weighted average between collars and asset options

Sensitivity analysis

A drop in fuel prices positively affects the Company through a reduction in costs. However, this drop negatively affects contracted positions as these are to protect the Company against the risk of a rise in prices. The policy therefore is to maintain a hedge-free percentage in order to be competitive in the event of a drop in prices.

As the current positions do not represent changes in cash flows, but a variation in the exposure to the market value, the current hedge positions have no impact on income (they are booked as cash flow hedge contracts, so a variation in the fuel price has an impact on the Company’s net equity).

The following table shows the sensitivity analysis of the financial instruments according to reasonable changes in the fuel price and their effect on equity. The term of the projection was defined until the end of the last current fuel hedge contract, being the last business day of 2011. The calculations were made considering a parallel movement of US$ 5 per barrel in the curve of the WTI crude futures benchmark price at the end of December 2010, and 2009.

	Positions as of December 31, 2010		Positions as of December 31, 2009
Benchmarck price	effect on equity		effect on equity
WTI (US$ per barrel)	(millions of US$)		(millions of US$)
+ 5		+16.7		+ 14.6
-5		-15.7		-13.6

The Company seeks to reduce the risk of fuel price rises to ensure it is not left at a disadvantage compared to its competitors in the event of a sharp price fall. The Company therefore uses hedge instruments like swaps, options and collars to partially hedge the fuel volumes consumed.

According to that required by IAS 39, during the periods presented, the company has not recorded amounts for ineffectiveness in the consolidated income statement.

Given the fuel hedge structure to December 31, 2010, which considers a hedge-free portion, a vertical fall by US$ 5 in the WTI benchmark price (the monthly daily average) for each month would have meant a saving of approximately US$ 27.1 million in the cost of total fuel consumption. A vertical rise by US$ 5 in the WTI benchmark price (the monthly daily average) would have meant an impact of approximately US$ 26.0 million of increased fuel costs for 2010.

(ii) Cash flow interest-rate risk:

The fluctuation in interest rates depends heavily on the state of the global economy. An improvement in long-term economic prospects moves long-term rates upward while a drop causes a decline through market effects. However, if we consider government intervention in periods of economic recession, it is usual to reduce interest rates to stimulate aggregate demand by making credit more accessible and increasing production (in the same way interest rates are raised at times of economic expansion). The present uncertainty about how the market and governments will react, and thus how interest rates will change, creates a risk related to the Company’s debt at floating interest rates and its investments.

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Cash flow interest rate risk equates to the risk of future cash flows of the financial instruments due to the fluctuation in interest rates on the market. The Company’s exposure to risks of changes in market interest rates is mainly related to long-term obligations which accrued interest at a floating rate.

In order to reduce the risk of an eventual rise in interest rates, the Company has signed interest-rate swap and call option contracts in order to eliminate more than 94% of its exposure to interest-rate fluctuations. The Company is therefore exposed to a small portion of the fluctuations in the 90 days London Inter Bank Offer Rate (LIBOR) and the nominal Chilean Active Banking Rate (TAB) 180-day rate.

The following table shows the sensitivity of changes in financial obligations that are not hedged against interest-rate variations.  These changes are considered reasonably possible based on current market conditions.

	Positions as of December 31, 2010		Positions as of December 31, 2009
Increase (decrease)	effect on pre-tax earnings		effect on pre-tax earnings
in libor 3 months	(millions of US$)		(millions of US$)
+100 basis points		-1.18		-0.87
-100 basis points		+1.18		+0.87

Changes in market conditions produce a change in the valuation of current financial instruments hedging interest rates, causing an effect on the Company’s equity (because they are booked as cash-flow hedges). These changes are considered reasonably possible based on current market conditions. The calculations were made increasing (decreasing) vertically 100 basis points of the three-month Libor futures curve.

Increase	Positions as of December 31, 2010			Positions as of December 31, 2009
futures curve	effect on equity			effect on equity
months	(millions of US$)			(millions of US$)
+100 basis points		42.39			49.64
-100 basis points		(45.35	)		(53.23	)

There are limitations in the method used for the sensitivity analysis and relate to those provided by the market. These are because the levels indicated by the futures curves are not necessarily met and will change in each period.

According to that required by IAS 39, during the periods presented, the company has not recorded amounts for ineffectiveness in the consolidated income statement.

(iii)  Local exchange-rate risk:

The functional currency used by the parent Company is the US dollar in terms of setting prices for its services, the composition of its classified statements of financial position and effects on its operating income. It sells most of its services in US dollars or prices equivalent to the US dollar, and a large part of its expenses are denominated in US dollars or equivalents of the US dollar, particularly fuel costs, aeronautic charges, aircraft leases, insurance and aircraft components and accessories. Remuneration expenses are denominated in local currencies.

The Company maintains its cargo and passenger business tariffs in US dollars. There is a mix in the domestic markets as sales in Peru are in local currency but the prices are indexed to the US dollar. In Chile and Argentina, tariffs are in local currency without any kind of indexation. In the case of the domestic business in Ecuador, both tariffs and sales are in dollars. The Company is therefore exposed to fluctuations in the different currencies, mainly: Chilean peso, Argentine peso, Uruguayan peso, Peruvian sol, Brazilian real, Australian dollar and New Zealand dollar; of these, the largest exposure is in Chilean pesos.

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The company manages its exposure to foreign currency risk through hedging selected balances using forward exchange contracts and cross currency swaps. The impact of remaining, unhedged exposures is monitored on an ongoing basis and for the periods presented has not been relevant to the company’s results.

(b) Credit risk

Credit risk occurs when the counterparty to a financial agreement or instrument fails to discharge an obligation due.

The Company is exposed to credit risk due to its operative and financial activities, including deposits with banks and financial institutions, investments in other kinds of instruments, exchange-rate transactions and the contracting of derivative instruments or options.

(i) Financial activities

Cash surpluses that remain after the financing of assets necessary for the operation are invested according to credit limits approved by the Company’s board, mainly in time deposits with different financial institutions, short-term mutual funds, and easily-liquidated corporate and sovereign bonds with short remaining maturities. These investments are booked as cash and cash equivalents and as investments held to maturity.

In order to reduce counterparty risk and to ensure that the risk assumed is known and managed by the Company, investments are diversified among different banking institutions (both local and international). The Company evaluates the credit standing of each counterparty and the levels of investment, based on (i) their credit rating, (ii) the equity size of the counterparty, and (iii) investment limits according to the Company’s level of liquidity. According to these three parameters, the Company chooses the most restrictive parameter of the previous three and based on this, establishes limits for operations with each counterparty. All other financial assets with contractual cash flows other than trade receivables are considered by the Company to have minimal credit risk, as they relate principally to the instruments issued by counterparties with high credit quality. The maximum credit loss associated with these instruments is their carrying value.

The Company has no guarantees to mitigate this exposure.

(ii) Operational activities

The Company has four large sales “clusters”: travel agencies, cargo agents, airlines and credit-card administrators. The first three are governed by IATA (International Air Transport Association), international organization comprising most of the airlines that represent over 90% of scheduled commercial traffic and one of its main objectives is to regulate the financial transactions between airlines and travel agents and cargo. When an agency or airline does not pay their debt, they are excluded from operating with IATA’s member airlines. In the case of credit-card administrators, they are fully guaranteed by the issuing institutions.

The exposure consists of the term granted, and this fluctuates between 1 and 45 days.

One of the tools the Company uses for reducing credit risk is to participate in global entities related to the industry, such as IATA, Business Sales Processing (BSP), Cargo Account Settlement Systems (“CASS”), IATA Clearing House (“ICH”) and banks (credit cards). These institutions fulfill the role of collectors and distributors between airlines and travel and cargo agencies. In the case of the Clearing House, it acts as an offsetting entity between airlines for the services provided between them. A reduction in term and implementation of guarantees has been achieved through these entities.

Credit quality of financial assets

The credit evaluation system used by the Company for trade receivables is that provided by IATA. Internal systems are also used for particular evaluations or specific markets based on trade reports available on the local market. The internal classification system is complementary to the external one, i.e. for agencies or airlines not members of IATA, the internal demands are greater. The bad-debt rate in the principal countries where the Company has a presence is insignificant.

F-32

(c)  Liquidity risk

Liquidity risk represents the risk that the Company has no funds to meet its obligations.

Because of the cyclical nature of the business, the operation, and its investment and financing needs related to the acquisition of new aircraft and renewal of its fleet, plus the financing needs related to market-risk hedges, the Company requires liquid funds to meet its payment obligations.

The Company therefore manages its cash and cash equivalents and its financial assets, matching the term of investments with those of its obligations. Its policy is that the average term of its investments may not exceed the average term of its obligations. This cash and cash equivalents position is invested in highly-liquid short-term instruments through first-class financial entities.

The Company has future obligations related to financial leases, operating leases, maturities of other bank borrowings, derivative contracts and aircraft purchase contracts.

F-33

Class of liability for the analysis of liquidity risk ordered by date of maturity as of December 31, 2010

											More than		More than		More than
									Up to		90 days		one to		three to		More than
Class of	Debtor		Debtor	Creditor		Creditor			90		to one		three		five		five					Effective			Nominal		Nominal
liability	Tax No.	Debtor	country	Tax No.	Creditor	country		Currency	days		year		years		years		years		Total		Amortization	rate			value		rate
									ThUS $		ThUS $		ThUS $		ThUS $		ThUS $		ThUS $			%			ThUS $		%
Guaranteed obligations	89.862.200- 2	Lan Airlines S.A.	Chile	0- E	ING	U.S.A.		US $		7,425		22,305		53,471		47,128		93,325		223,654	Quarterly		5.19	%		181,029		4.69	%
		Lan Airlines S.A.	Chile	0- E	CALYON	France		US $		21,045		63,352		130,785		39,186		20,916		275,284	Quarterly		4.47	%		256,417		4.47	%
		Lan Airlines S.A.	Chile	0- E	PEFCO	U.S.A.		US $		19,838		59,513		158,688		149,595		209,374		597,008	Quarterly		5.16	%		497,692		4.60	%
		Lan Airlines S.A.	Chile	0- E	BNP PARIBAS	U.S.A.		US $		22,831		68,726		184,673		186,931		385,438		848,599	Quarterly		4.49	%		707,306		4.00	%
		Lan Airlines S.A.	Chile	0- E	WELLS FARGO	U.S.A.		US $		5,626		16,842		44,872		44,796		135,714		247,850	Quarterly		3.64	%		204,392		3.53	%
		Lan Airlines S.A.	Chile	0- E	CITIBANK	U.S.A.		US $		8,984		27,039		72,767		73,806		206,771		389,367	Quarterly		3.93	%		326,235		3.48	%
		Lan Airlines S.A.	Chile	0- E	SANTANDER	Spain		US $		2,919		8,859		24,242		25,206		95,708		156,934	Quarterly		0.95	%		148,741		0.83	%
Financial leases	89.862.200- 2	Lan Airlines S.A.	Chile	0- E	ING	U.S.A.		US $		3,899		11,685		30,440		25,695		11,675		83,394	Quarterly		4.08	%		77,096		3.71	%
		Lan Airlines S.A.	Chile	0- E	CALYON	France		US $		2,249		6,786		18,376		22,613		43,431		93,455	Quarterly		1.27	%		87,337		1.27	%
		Lan Airlines S.A.	Chile	0- E	CITIBANK	U.S.A.		US $		1,692		5,249		26,758		-		-		33,699	Quarterly		1.32	%		32,921		1.27	%
		Lan Airlines S.A.	Chile	0- E	S.CHARTERED	U.S.A.		US $		3,858		11,873		14,628		-		-		30,359	Quarterly		1.28	%		29,864		1.25	%
Bank loans	89.862.200- 2	Lan Airlines S.A.	Chile	0- E	SANTANDER MADRID	Spain		US $		-		26,125		12,726		-		-		38,851	Semiannual		3.64	%		37,500		3.55	%
Bank loans	89.862.200- 2	Lan Airlines S.A.	Chile	97.023.000- 9	CORPBANCA	Chile		CLP		13,479		13,158		12,713		-		-		39,350	Semiannual		6.53	%		36,858		6.44	%
		Lan Airlines S.A.	Chile	76.645.030- K	ITAU	Chile		CLP		-		21,653		10,332		-		-		31,985	Semiannual		6.67	%		29,967		6.60	%
		Lan Airlines S.A.	Chile	97.006.000- 6	BCI	Chile		CLP		-		38,144		18,188		-		-		56,332	Semiannual		6.71	%		52,723		6.63	%
		Lan Airlines S.A.	Chile	97.030.000- 7	ESTADO	Chile		CLP		-		47,521		22,666		-		-		70,187	Semiannual		6.65	%		65,704		6.59	%
		Aires S.A.	Colombia	0- E	HELM	Colombia		COP		3,944		-		-		-		-		3,944	30 days		3.37	%		3,936		3.37	%
Other loans	89.862.200- 2	Lan Airlines S.A.	Chile	0- E	SANTANDER MADRID	Spain		US $		586		1,587		72,962		-		-		75,135	-		3.29	%		72,962		3.29	%
		Lan Airlines S.A.	Chile	0- E	BOEING	U.S.A.		US $		1,862		1,207		106,665		-		-		109,734	-		2.04	%		106,209		2.04	%
Derivatives	89.862.200- 2	Lan Airlines S.A.	Chile	-	OTHERS		-	US $		6,018		22,331		61,273		24,643		4,751		119,016	-		-			115,189		-
Non-hedging Derivatives	89.862.200- 2	Lan Airlines S.A.	Chile	-	OTHERS		-	US $		1,461		4,239		9,891		5,608		-		21,199	-		-			20,703		-
Accounts payable		Lan Airlines S.A.
other accounts payable		and subsidiaries	Varios	-	Varios		-	US $		277,327		26,002		-		-		-		303,329	-		-			303,329		-
								CLP		28,058		-		-		-		-		28,058	-		-			28,058
								Others		169,307		-		-		-		-		169,307	-		-			169,307
Other accounts payable,		Lan Airlines S.A.
non-currents		and subsidiaries	Varios	-	Varios		-	US $		-		-		54,000		-		-		54,000	-		-			54,000		-
Accounts payable		Lan Airlines S.A.			Lufthansa Lan
related parties		and subsidiaries	Varios	96847880- k	Technical training S.A.		-	-		184		-		-		-		-		184	-		-			184		-
	Total									602,592		504,196		1,141,116		645,207		1,207,103		4,100,214						3,645,660

F-34

Class of liability  for the analysis of liquidity risk ordered by date of maturity as of December 31, 2009

											More than		More than		More than
									Up to		90 days		one to		three to		More than
Class of	Debtor		Debtor	Creditor		Creditor			90		to one		three		five		five						Effective			Nominal		Nominal
Liability	Tax No.	Debtor	country	Tax No.	Creditor	country		Currency	days		year		years		years		years			Total		Amortization	rate			value		rate
									ThUS $		ThUS $		ThUS $		ThUS $		ThUS $			ThUS $			%			ThUS $		%
Guaranteed obligations	89.862.200-2	Lan Airlines S.A.	Chile	0-E	ING	U.S.A.		US $		7,355		22,153		59,137		47,630		116,885			253,160	Quarterly		5.19	%		201,409		4.63	%
		Lan Airlines S.A.	Chile	0-E	CALYON	France		US $		20,878		62,824		166,879		67,336		40,878			358,795	Quarterly		5.01	%		325,998		5.01	%
		Lan Airlines S.A.	Chile	0-E	PEFCO	U.S.A.		US $		19,830		59,513		158,706		158,703		279,604			676,356	Quarterly		5.14	%		552,605		4.58	%
		Lan Airlines S.A.	Chile	0-E	BNP PARIBAS	U.S.A.		US $		24,127		72,581		195,244		197,936		529,928			1,019,816	Quarterly		3.86	%		840,814		3.72	%
		Lan Airlines S.A.	Chile	0-E	RBS	U.S.A.		US $		6,083		18,250		48,667		48,667		135,929			257,596	Quarterly		6.40	%		191,879		5.67	%
		Lan Airlines S.A.	Chile	0-E	WELLS FARGO	U.S.A.		US $		1,551		5,637		15,009		14,975		52,100			89,272	Quarterly		3.61	%		72,770		3.50	%
Financial leases	89.862.200-2	Lan Airlines S.A.	Chile	0-E	ING	U.S.A.		US $		3,940		11,790		31,105		51,561		-			98,396	Quarterly		4.45	%		89,389		3.98	%
		Lan Airlines S.A.	Chile	0-E	CALYON	France		US $		2,215		6,659		18,054		31,643		41,394			99,965	Quarterly		1.26	%		95,036		1.24	%
		Lan Airlines S.A.	Chile	0-E	CITIBANK	U.S.A.		US $		1,585		4,920		33,656		-		-			40,161	Quarterly		1.10	%		39,018		1.03	%
		Lan Airlines S.A.	Chile	0-E	S.CHARTERED	U.S.A.		US $		9,709		19,053		29,958		-		-			58,720	Quarterly		0.89	%		58,247		0.73	%
Bank loans	89.862.200-2	Lan Airlines S.A.	Chile	97.036.000-K	SANTANDER	Chile		US $		930		13,435		52,335		-		-			66,700	Semiannual		3.77	%		50,000		3.68	%
Bank loans	89.862.200-2	Lan Airlines S.A.	Chile		CORPBANCA	Chile		CLP		643		11,993		34,991		-		-			47,627	Semiannual		2.92	%		45,356		2.82	%
		Lan Airlines S.A.	Chile		ITAU	Chile		CLP		-		10,348		28,504		-		-			38,852	Semiannual		3.14	%		36,876		3.06	%
		Lan Airlines S.A.	Chile		BCI	Chile		CLP		-		18,390		50,287		-		-			68,677	Semiannual		3.38	%		64,879		3.30	%
		Lan Airlines S.A.	Chile		ESTADO	Chile		CLP		-		22,721		62,520		-		-			85,241	Semiannual		3.12	%		80,852		3.06	%
Other loans	89.862.200-2	Lan Airlines S.A.	Chile		BOEING	U.S.A.		US $		604		715		34,524		-		-			35,843	-		1.78	%		34,524		1.78	%
Derivatives	89.862.200-2	Lan Airlines S.A.	Chile	-	OTHERS		-	US $		5,118		16,647		39,874		11,326		(2,279	)		70,686	-		-			69,433		-
Non-hedging Derivatives	89.862.200-2	Lan Airlines S.A.	Chile	-	OTHERS		-	US $		511		1,484		3,364		2,557		263			8,179	-		-			7,839		-
Accounts payable other accounts payable		Lan Airlines S.A.
		and subsidiaries	Several	-	sundry		-	US $		176,136		52,845		-		-		-			228,981	-		-			228,981		-
								CLP		35,023		-		-		-		-			35,023	-		-			35,023		-
								Others		113,434		-		-		-		-			113,434	-		-			113,434		-
Other accounts payable,		Lan Airlines S.A.
non-currents		and subsidiaries	Several	-	sundry		-	US $		-		-		54,000		18,000		-			72,000	-		-			72,000		-
Accounts payable		Lan Airlines S.A.
related parties		and subsidiaries	Several	-	sundry		-	US $		297		-		-		-		-			297	-		-			297		-
	Total									429,969		431,958		1,116,814		650,334		1,194,702			3,823,777						3,306,659

F-35

The Company has fuel and interest rate hedging, strategies involving derivatives contracts with different financial institutions. The Company has margin facilities with each financial institution in order to regulate the mutual exposure produced by changes in the market valuation of the derivatives. During 2008, with the fall in the fuel price, the Company was obliged to provide cash guarantees for this concept.

At the end of 2009, the Company had provided US$ 40.4 million in derivative margin guarantees, for cash and stand-by letters of credit. At the end of December 31, 2010, have provided US$ 38.1 millions in security for cash due at maturity and acquisition of fuel contracts and rates, rising fuel prices and falling interest rates .

3.2. Capital risk management

The Company’s objectives,  with respect to the management of capital, are (i) to safeguard it in order to continue as an on-going business, (ii) to seek a return for its shareholders, and (iii) to maintain an optimum capital structure and reduce its cost.

In order to maintain or adjust the capital structure, the Company could adjust the amount of the dividends payable to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The Company monitors the capital according to the leverage ratio, in line with sector practice. This ratio is calculated as net adjusted debt to capital. Net adjusted debt is total financial debt plus 8 times the operating lease payments of the last 12 months, less total cash (measured as the sum of cash and cash equivalents plus marketable securities). Capital is the amount of net equity without the impact of the market value of derivatives, plus net adjusted debt.

Currently the company's strategy, which has not changed since 2007, and has consisted of maintaining a leverage ratio of between 70% and 80% and an international credit rating of higher than BBB- (the minimum required for being considered investment grade). The leverage ratios as of December 31, 2010, and December 31, 2009, were as follows:

	As of			As of
	December 31,			December 31,
	2010			2009
	ThUS$			ThUS$
Total Loans		3,259,666			3,074,425
Last twelve months Operating lease payment x 8		788,704			669,696
Less:
Cash and marketable securities		(737,093	)		(791,912	)
Total net adjusted debt		3,311,277			2,952,209
Net Equity		1,296,814			1,098,827
Net coverage reserves		107,050			92,230
Total Capital		4,715,141			4,143,266
Leverage ratio		70.2	%		71.3	%

F-36

3.3. Estimates of fair value

At December 31, 2010, the Company maintained financial instruments that should be recorded at fair value. These include:

Investments in short-term Mutual Funds (cash equivalent),

Interest rate derivative contracts,

Fuel derivative contracts,

Currency derivative contracts, and

Investment funds.

The Company has classified the fair value measurement using a hierarchy that reflects the level of information used in the assessment. This hierarchy consists of 3 levels (I) fair value based on quoted prices in active markets for identical assets or liabilities, (II) fair value based on inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (III) fair value based on inputs for the asset or liability that are not based on observable market data.

The fair value of financial instruments traded in active markets, such as investments acquired for trading, is based on quoted market prices at the close of the period used the current price buyer. The fair value of financial assets not traded in active markets (derivative contracts) is determined using valuation techniques that maximize use of available market information. Valuation techniques generally used by the Company are quoted market prices of similar instruments and / or estimating the present value of future cash flows using forward price curves of period-end market.

The following table shows the classification of financial instruments at fair value at December 31, 2010 depending on the level of information used in the assessment:

	Fair value		Fair value measurements using values
	At December 31,		considered as
	2010		Level I		Level II		Level III
	ThUS$		ThUS$		ThUS$		ThUS$
Assets
Short-term mutual funds		196,620		196,620		-		-
Fair value of interest rate derivatives		422		-		422		-
Fair value of fuel derivatives		45,814		-		45,814		-
Fair value of investment funds		58,857		58,857		-		-
Liabilities
Fair value of interest rate derivatives		119,014		-		119,014		-
Fair value of foreign currency derivatives		20,916		-		20,916		-
Interest rate derivatives not accounted for as hedging instruments		19,748		-		19,748		-

F-37

Additionally, at December 31, 2010, the Company has financial instruments which are not recorded at fair value. In order to meet the disclosure requirements of fair values the Company has valued these instruments as shown in the table below:

	As of December 31, 2010				As of December 31, 2009
	Book		Fair		Book		Fair
	value		value		value		value
	ThUS$		ThUS$		ThUS$		ThUS$
Cash and cash equivalents
Cash and cash equivalents		3,857		3,857		2,707		2,707
Bank balance		24,432		24,432		31,176		31,176
Time Deposits		406,143		406,143		522,077		522,077
Other financial assets
Domestic and foreign bonds		47,184		50,294		60,415		63,341
Other financial assets		80,836		80,836		27,227		27,227
Trade and other accounts receivables and right receivable, non-currents		489,233		489,233		430,929		430,929
Accounts receivable from related entities		50		50		38		38
Other financial liabilities		2,945,294		2,965,803		2,774,942		2,900,232
Trade and other accounts payable, currents		500,694		500,694		377,438		377,438
Accounts payable to related entities		184		184		297		297
Other accounts payable, non-currents		368,372		368,372		371,483		371,483

The book values of accounts receivable and payable are assumed to approximate their fair values, due to their short-term nature. In the case of cash on hand, bank balances, deposits and others accounts payables, non-currents, fair value approximates their carrying values.

The fair value of other financial liabilities is estimated by discounting the future contractual cash flows at the current market interest rate for similar financial instruments. In the case of other financial assets, valuation was performed according to market prices at year end.

F-38

NOTE 4 - ACCOUNTING ESTIMATES AND JUDGMENTS

The Company has used estimates to value and book some of the assets, liabilities, revenues, expenses and commitments; these relate principally to:

1.  The evaluation of possible impairment losses for certain assets.

2.  The useful lives and residual values of fixed and intangible assets.

3.  The criteria employed in the valuation of certain assets.

4.  Air tickets sold that are not actually used.

5.  The calculation of deferred income at the period-end, corresponding to the valuation of kilometers credited to holders of the Lan Pass loyalty card which have not yet been used.

6.  The need provisions and where required the determination of their values.

7.  The recoverability of deferred tax assets.

These estimates are made on the basis of the best information available on the matters analyzed.

In any case, it is possible that events will require them to be modified in the future, in which case the effects would be accounted for prospectively.

F-39

NOTE 5 – SEGMENTAL INFORMATION

The Company reports information by segments as established in IFRS 8 “Operating segments”. This standard sets rules for the reporting of information by segments in the financial statements, plus reporting about products and services, geographical areas and principal customers. An operating segment is defined as a component of an entity on which financial information is held separately and which is evaluated regularly by the senior management in taking decisions with respect to the assignment of resources and evaluation of results. The Company believes that it has only one operating segment: air transportation.

	Air transportation segment
	For the year ended
	December 31,
	2010			2009			2008
	ThUS			$ThUS			$ThUS$
Income from ordinary activities		4,523,328			3,655,513			4,283,187
Interest income		14,946			18,183			18,480
Interest expense		(155,279	)		(153,109	)		(125,488	)
Total Net interest expense		(140,333	)		(134,926	)		(107,008	)
Depreciation and amortization		(336,491	)		(304,062	)		(256,499	)
Segment profit		419,702			231,126			336,480
Earnings on investments		132			315			696
Expenses for income tax		(81,107	)		(44,487	)		(65,094	)
Assets of segment		6,785,897			5,771,972			5,196,866
Investments in associates		593			1,236			1,389
Purchase of non-monetary assets		1,048,394			555,279			788,906

The Company’s revenues by geographic area are as follows:

	For the year ended
	December 31,
	2010		2009		2008
	ThUS$		ThUS$		ThUS$
Peru		554,072		458,384		432,979
Argentina		496,546		404,795		437,759
USA		858,630		680,179		946,235
Europe		447,702		343,819		380,824
Chile		1,239,350		1,004,291		1,149,084
Others*		927,028		764,045		936,306
Total (**)		4,523,328		3,655,513		4,283,187

The Company allocates revenues by geographic area based on the point of sale of the passenger ticket or cargo. Assets are primarily composed of aircraft and aeronautical equipment, which are used throughout the different countries, so it is not possible to assign a geographic area.

(*)  Includes the rest of Latin America and Asia Pacific.

(**) Includes operating revenues and other operating income.

F-40

NOTE 6 – CASH AND CASH EQUIVALENTS

	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
Cash		3,857		2,707
Bank balances		24,432		31,176
Time deposits		406,143		522,077
Others		196,620		175,537
Total		631,052		731,497

Cash and cash equivalents are denominated in the following currencies at December 31, 2010, and December 31, 2009, are as follows:

	As of		As of
	December 31,		December 31,
Currency	2010		2009
	ThUS$		ThUS$
US Dollar		194,212		228,879
Chilean peso (*)		368,360		435,514
Euro		7,844		13,255
Argentine peso		11,230		6,105
Brazilian real		4,759		3,041
Other currencies		44,647		44,703
Total		631,052		731,497

(*)  The Company entered into currency derivative contracts (forward exchange controls) for  ThUS $ 169,357 at December 31, 2010 (ThUS $ 367,412 at December 31, 2009), for conversion into dollars of investments in Chilean pesos and currency derivative contracts (cross currency swaps) for ThUS $ 30,258 at December 31, 2010 (ThUS $ 0 at December 31, 2009), for conversion into dollars of investment in Unidades de Fomento (“UF”).

In Venezuela, effective 2003, the authorities decreed that all remittances abroad should be approved by the Currency Management Commission (CADIVI). Despite having free availability of bolivars in Venezuela, the Company has certain restrictions for freely remitting these funds outside Venezuela.  At December 31, 2010 the amount subject to such restrictions in dollar terms is ThUS$ 26,738 (ThUS$ 26,196 at 31 December 2009).

The Company has no significant non-monetary transactions that should be reported.

F-41

NOTE 7 - FINANCIAL INSTRUMENTS

7.1. Financial instruments by category

As of December 31, 2010

Assets									Designated as
									at fair value
			Loans and						through profit
	Held to		accounts		Hedging		Held to		and loss on initial
	maturity		receivable		derivatives		trading		recognition		Total
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
Cash and cash equivalents		-		434,432		-		196,620		-		631,052
Other financial assets (*)		47,691		80,329		80,161		-		58,857		267,038
Trade and other current accounts receivable		-		481,350		-		-		-		481,350
Current accounts receivable from related parties		-		50		-		-		-		50
Non-current rights receivable		-		7,883		-		-		-		7,883
Total		47,691		1,004,044		80,161		196,620		58,857		1,387,373
Liabilities					Other
					Financial		Hedging		Held to
					liabilities		derivatives		trading		Total
					ThUS$		ThUS$		ThUS$		ThUS$
Other financial liabilities						2,945,294		139,930		19,748		3,104,972
Trade and other current accounts payable						500,694		-		-		500,694
Current accounts payable to related parties						184		-		-		184
Other non-current accounts payable						368,372		-		-		368,372
Total						3,814,544		139,930		19,748		3,974,222

(*)The value submitted in held to maturity corresponds, mainly, to domestic and foreign bonds; and in the initial time designated at fair value through profit or loss applicable to private investment funds.

F-42

As of December 31, 2009

Assets			Loans and
	Held to		accounts		Hedging		Held to
	maturity		receivable		derivatives		trading		Total
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
Cash and cash equivalents		-		555,960		-		175,537		731,497
Others financial assets (*)		60,923		26,719		43,049		-		130,691
Trade and other current accounts receivable		-		423,739		-		-		423,739
Current accounts receivable from related parties		-		38		-		-		38
Non-current rights receivable		-		7,190		-		-		7,190
Total		60,923		1,013,646		43,049		175,537		1,293,155
Liabilities			Other
			financial		Hedging		Held to
			liabilities		derivatives		trading		Total
			ThUS$		ThUS$		ThUS$		ThUS$
Other financial liabilities				2,774,942		78,333		7,835		2,861,110
Trade and other current accounts payable				377,438		-		-		377,438
Current accounts payable to related parties				297		-		-		297
Other non-current accounts payable				371,483		-		-		371,483
Total				3,524,160		78,333		7,835		3,610,328

(*) The value submitted in held to maturity corresponds mainly to domestic and foreign bonds.

F-43

7.2. Financial instruments by currency

	As of		As of
	December 31,		December 31,
a)  Assets	2010		2009
	ThUS$		ThUS$
Cash and cash equivalents		631,052		731,497
US Dollar		194,212		228,879
Chilean Peso		368,360		435,514
Euro		7,844		13,255
Argentine Peso		11,230		6,105
Brazilian Real		4,759		3,041
Others		44,647		44,703
Other financial Assets		267,038		130,691
US Dollar		255,808		122,122
Brazilian Real		6,731		5,334
Others		4,499		3,235
Trade and other current accounts receivable		481,350		423,739
US Dollar		354,702		319,980
Chilean Peso		28,606		52,073
Euro		8,429		5,192
Argentine Peso		6,702		15,158
Brazilian Real		31,329		11,190
Australian Dollar		12,456		7,595
Others		39,126		12,551
Non-current rights receivable		7,883		7,190
US Dollar		9		9
Chilean Peso		7,864		7,179
Others		10		2
Current accounts receivable from related parties		50		38
US Dollar		29		29
Chilean Peso		21		9
Total financial assets		1,387,373		1,293,155
US Dollar		804,760		671,019
Chilean Peso		404,851		494,775
Euro		16,273		18,447
Argentine Peso		17,932		21,263
Brazilian Real		42,819		19,565
Australian Dollar		12,456		7,595
Others		88,282		60,491

F-44

b) Liabilities

Liabilities information is detailed in the table within Note 3 section (c) Liquidity risk.

NOTE 8 – TRADE, OTHER ACCOUNTS RECEIVABLE AND NON-CURRENT RIGHTS RECEIVABLE

	As of			As of
	December 31,			December 31,
	2010			2009
	ThUS$			ThUS$
Trade accounts receivable		435,576			407,320
Other accounts receivable and rights receivable		75,734			47,426
Total trade and other accounts receivable		511,310			454,746
Less: Allowance for impairment loss		(22,077	)		(23,817	)
Total net trade and other accounts receivable		489,233			430,929
Less: non-currents portion – rights receivable		(7,883	)		(7,190	)
Trade and other accounts receivable, currents		481,350			423,739

The fair value of trade and other accounts receivable does not differ significantly from their book value.

There are overdue accounts receivable but that are not impaired. Maturity of these accounts is as follows:

	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
Up to 3 months		12,506		10,094
Between 3 and 6 months		11,114		8,718
Total		23,620		18,812

F-45

The amounts of impaired trade and other accounts receivable are as follows:

	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
Judicial and extra-judicial collection		10,586		10,383
Debtors under extra-judicial collection process		5,259		5,031
Total		15,845		15,414

Currency balances that make up the trade receivables, other accounts receivables and rights receivables non-current at December 31, 2010 and December 31, 2009, are as follows:

	As of		As of
	December 31,		December 31,
	2010		2009
Currency	ThUS$		ThUS$
US Dollar		354,711		319,989
Chilean Peso		36,470		59,252
Euro		8,429		5,192
Argentine Peso		6,702		15,158
Brazilian Real		31,329		11,190
Australian Dollar		12,456		7,595
Other		39,136		12,553
Total		489,233		430,929

The Company recorded allowances when there is evidence of impairment of trade receivables.The criteria used to determine that there is objective evidence of impairment losses are the maturity of the portfolio, specific acts of damage (default) and specific market signals.

Maturity	Impairment
Judicial and extra-judicial collection Assets		100	%
Over 1 year		100	%
Betwen 6 and 12 months		50	%

F-46

The movement in the allowance for impairment loss of trade accounts and other accounts receivables from January 01, 2009 and December 31, 2010 is as follows:

	ThUS$
As of January 01, 2009		(22,790	)
Write-offs		6,110
Increase in allowance		(7,137	)
Balance as of December 31, 2009		(23,817	)
As of January 01, 2010		(23,817	)
Write-offs		5,039
Increase in allowance		(3,299	)
Balance as of December 31, 2010		(22,077	)

Once extra-judicial and judicial collection efforts are exhausted, the assets are written off against the allowance. The Company only uses the allowance method rather than direct write-off, to ensure control.

Historic and current re-negotiations are not relevant and the policy is to analyze case by case in order to classify them according to the existence of risk determining whether it is appropriate to re-classify accounts as in pre-judicial recovery. If such re-classification is justified, an allowance is made for the account, whether overdue or falling due.

The maximum credit-risk exposure at the date of presentation of the information is the fair value of each one of the categories of accounts receivable indicated above:

As of December 31, 2010

As of December 31, 2009

Gross

Exposure net

Gross

Exposure net

Gross

Impaired

of risk

Gross

Impaired

of risk

exposure

exposure

concentrations

exposure

exposure

concentrations

ThUS$

ThUS$

ThUS$

ThUS$

ThUS$

ThUS$

Trade accounts receivable

435,576

(22,077

)

413,499

407,320

(23,817

)

383,503

Other accounts receivable

75,734

-

75,734

47,426

-

47,426

There are no relevant guarantees covering credit risk and these are valued when they are settled; no materially important direct guarantees exist. Existing guarantees, if appropriate, are made through IATA.

F-47

NOTE 9 - ACCOUNTS RECEIVABLE FROM/PAYABLE TO RELATED PARTIES

The accounts receivable from and payable to related entities as of December 31, 2010 and December 31, 2009, respectively, are as follows:

a) Accounts Receivable

At December 31, 2010 and December 31, 2009, there have been no loan loss provisions.

			Country	As of		As of
			of	December 31,		December 31,			Transaction	Nature of
Tax No.	Related Party	Relationship	origin	2010		2009		Currency	deadlines	transaction
				MUS$		MUS$
96.778.310-2	Concesionaria Chucumata S.A.	Asociate	Chile		4		6	CLP	30 to 45 Days	Monetary
96.921.070-3	Austral Sociedad Concesionaria S.A.	Asociate	Chile		2		-	CLP	30 to 45 Days	Monetary
87.752.000-5	Granja Marina Tornagaleones S.A.	Others Related Parties	Chile		15		-	CLP	30 to 45 Days	Monetary
96.669.520-K	Red de Televisión Chilevisión S.A.	Others Related Parties	Chile		-		3	CLP	30 to 45 Days	Monetary
96.812.280-0	San Alberto S.A. y Filiales	Others Related Parties	Chile		29		29	US$	30 to 45 Days	Monetary
	Total current assets				50		38

F-48

b) Accounts payable

			Country	As of		As of
			of	December 31,		December 31,			Transaction	Nature of
Tax No.	Related Party	Relationship	origin	2010		2009		Currency	deadlines	transaction
				ThUS$		ThUS$
96.847.880-K	Lufthansa Lan Technical Training S.A.	Associate	Chile		184		246	US$	30 to 45 Days	Monetary
96.921.070-3	Austral Sociedad Concesionaria S.A.	Associate	Chile		-		6	CLP	30 to 45 Days	Monetary
87.752.000-5	Granja Marina Tornagaleones S.A.	Other Related Parties	Chile		-		10	CLP	30 to 45 Days	Monetary
Foreign	Inversora Aeronáutica Argentina	Other Related Parties	Argentina		-		35	US$	30 to 45 Days	Monetary
	Total current liabilities				184		297

Transactions between related parties have been carried out on free-trade conditions between interested and duly-informed parties.

F-49

NOTE 10 – INVENTORIES

The inventories at December 31, 2010 and December 31, 2009 respectively, are detailed below:

	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
Technical stock		40,625		35,684
Non-technical stock		12,568		10,879
		53,193		46,563

The items included in this heading are spare parts and materials that will be used mainly in consumption in in-flight and maintenance services, which are valued at average cost, net of provision for obsolescence that as of December 31, 2010 amounts to ThUS$ 3,075 (ThUS$ 808 as of December 31, 2009). The resulting amounts do not exceed the respective net realizable values.

For the period ended December 31, 2010, the Company recorded ThUS$ 32,915 (ThUS$ 32,677 for the period ended December 31, 2009 and ThUS$ 35,147 for the period ended December 31, 2008) within the income statement, mainly due to in-flight consumption and maintenance, which forms part of cost of sales.

F-50

NOTE 11 – OTHER FINANCIAL ASSETS

The composition of other financial assets, is as follows:

	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
Current
a)   Other financial assets		165,712		72,027
b)   Hedging asset		79,739		38,640
Total Current		245,451		110,667
Non-current
a)   Other		21,165		15,615
b)   Hedging assets		422		4,409
Total non-current		21,587		20,024

a) Other financial assets

	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
Current
Investment Funds		58,857		-
Domestic and Foreign bonds		47,184		60,415
Guarantees for margins of derivatives		39,868		2,400
Deposits in guarantee (aircraft)		12,030		308
Other guarantees given		7,773		8,904
Total current		165,712		72,027
Non-current
Deposits in guarantee (aircraft)		15,000		13,780
Other guarantees given		5,658		1,327
Other investments		507		508
Total non-current		21,165		15,615
Total other financial assets		186,877		87,642

F-51

b)      Hedging assets

Hedging assets as of December 31, 2010 and December 31, 2009, are as follows:

	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
Current
Interest accrued since last payment date currency Swap		3,691		-
Cash-flow hedge of interest-rate risk		-		501
Cash-flow hedge of currency risk		30,234		23,691
Cash-flow hedge of fuel-price risk		45,814		14,448
Total current		79,739		38,640
Non-current
Cash-flow hedge of interest-rate risk		422		2,628
Cash-flow hedge of currency risk		-		1,781
Total non-current		422		4,409
Total hedging assets		80,161		43,049

Foreign currency derivatives include the fair value of Cross Currency Swap contracts.

The types of derivative hedging contracts maintained by the Company at the end of each period are presented in Note 20.

F-52

NOTE 12 – OTHER NON FINANCIAL ASSETS

The composition of other non financial assets is as follows:

	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
Current
a) Advance Payments		17,648		15,258
b) Other assets		1,172		1,870
Total current		18,820		17,128
Non-Current
a) Advance Payments		3,768		713
b) Other assets		28,740		28,023
Total non-current		32,508		28,736

a) Advance payments

Advance payments as of December 31, 2010 as of December 31, 2009 are as follows:

	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
Current
Aircraft insurance and other		6,459		5,978
Aircraft leases		7,343		6,204
Others		3,846		3,076
Total current		17,648		15,258
Non-Current
Handling and ground handling services		2,971		-
Others		797		713
Total non-current		3,768		713
Total advance payments		21,416		15,971

F-53

b) Other assets

Other assets as of December 31, 2010, as of December 31, 2009 are as follows:

	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
Current
Others		1,172		1,870
Total current		1,172		1,870
Non-current
Recoverable taxes		23,343		20,308
Deferred expense for aircraft rental		4,984		7,328
Others		413		387
Total non-current		28,740		28,023
Total other assets		29,912		29,893

F-54

NOTE 13 – NON-CURRENT ASSETS (OR DISPOSAL GROUPS) CLASSIFIED AS HELD FOR SALE

Non-current assets and disposal groups held for sale as of December 31, 2010, and December 31, 2009 are as follows:

	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
Engines		2,204		5,603
Inventories on consignment		748		2,348
Aircraft		1,537		1,537
Scrapped aircraft		970		880
Rotables		38		551
Total		5,497		10,919

During the financial year 2010 sales were made of rotables, inventories held on consignment and three engines, all of the Boeing 737 fleet.

During the same period of 2009 sales were made of rotables, inventories held on consignment, sale of an aircraft and five engines, all of the Boeing 737 fleet.

The balances have been written down by ThUS$ 5,212 (ThUS$ 4,179 at December 31, 2009) to fair value less costs to sell.

The Company has no discontinued operations as of December 31, 2010.

 

F-55

NOTE 14 - INVESTMENTS IN SUBSIDIARIES

The Company has investments in companies recognized as investments in subsidiaries. All the companies defined as subsidiaries have been consolidated within the financial statements of Lan Airlines S.A. and Subsidiaries. The consolidation also includes special-purpose entities and investment funds.

The following is a summary of financial information with respect to the sum of the financial statements of subsidiary companies, special-purpose entities and investment funds that have been consolidated:

As of December 31, 2010

	Assets		Liabilities
	ThUS$		ThUS$
Current		442,743		565,606
Non-current		1,388,194		773,927
Total		1,830,937		1,339,533

As of December 31, 2009

	Assets		Liabilities
	ThUS$		ThUS$
Current		261,917		359,230
Non-current		1,246,141		757,164
Total		1,508,058		1,116,394

	For the year ended
	December 31,
	2010			2009
	ThUS$			ThUS$
Total operating revenues		1,931,998			1,567,503
Total expenses		(1,849,438	)		(1,483,185	)
Total net income		82,560			84,318

F-56

Significant subsidiaries detailed as of December 31, 2010

					Nature and scope of
	Country				significants restrictions
	of	Functional	%		on transferring funds
Name of significant subsidiary	incorporation	currency	Ownership		to controller
Lan Perú S.A.	Perú	US$		70.00000	Without significant restrictions
Lan Cargo S.A.	Chile	US$		99.89804	Without significant restrictions
Lan Argentina S.A.	Argentina	ARS		99.00000	Without significant restrictions
Transporte Aéreo S.A.	Chile	US$		100.00000	Without significant restrictions
Aerolane Líneas Aéreas Nacionales de Ecuador S.A.	Ecuador	US$		71.91673	Without significant restrictions

Summary financial information of significant subsidiaries

	Statement of financial position as of December 31, 2010												For the year ended December 31, 2010
	Total		Current		Non-current		Total		Current		Non-current				Net
Name of significant subsidiary	Assets		Assets		Assets		Liabilities		Liabilities		Liabilities		Revenue		Income
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
Lan Perú S.A.		124,761		113,579		11,182		114,771		113,750		1,021		759,704		1,524
Lan Cargo S.A.		737,550		183,877		553,673		340,082		103,018		237,064		209,512		59,285
Lan Argentina S.A.		113,168		84,751		28,417		88,286		87,420		866		381,168		2,984
Transporte Aéreo S.A.		329,190		215,575		113,615		123,056		28,777		94,279		296,543		31,227
Aerolane Líneas Aéreas Nacionales de Ecuador S.A.		48,416		24,561		23,855		51,723		38,299		13,424		235,877		1,011

F-57

Significant subsidiaries detailed as of December 31, 2009

					Nature and scope of
	Country				significants restrictions
	of	Functional	%		on transferring funds
Name of significant subsidiary	incorporation	currency	Ownership		to controller
Lan Perú S.A.	Perú	US$		70.00000	Without significant restrictions
Lan Cargo S.A.	Chile	US$		99.89804	Without significant restrictions
Lan Argentina S.A.	Argentina	ARS		99.00000	Without significant restrictions
Transporte Aéreo S.A.	Chile	US$		100.00000	Without significant restrictions
Aerolane Líneas Aéreas Nacionales de Ecuador S.A.	Ecuador	US$		71.91673	Without significant restrictions

Summary financial information of significant subsidiaries

	Statement of financial position as of December 31, 2009												For the year ended December 31, 2009
	Total		Current		Non-current		Total		Current		Non-current				Net
Name of significant subsidiary	Assets		Assets		Assets		Liabilities		Liabilities		Liabilities		Revenues		Income
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
Lan Perú S.A.		85,773		75,886		9,887		75,221		74,607		614		683,453		4,830
Lan Cargo S.A.		744,176		174,147		570,029		374,378		87,213		287,165		175,734		97,186
Lan Argentina S.A.		96,720		66,020		30,700		73,194		72,521		673		316,859		10,205
Transporte Aéreo S.A.		319,340		202,246		117,094		118,433		21,256		97,177		251,398		38,759
Aerolane Líneas Aéreas Nacionales de Ecuador S.A.		43,638		19,137		24,501		47,955		34,953		13,002		195,718		1,651

F-58

NOTE 15 - EQUITY ACCOUNTED INVESTMENTS

The following summarized financial information is the sum of the financial statements of the investees, corresponding to the statements of financial position as of December 31, 2010 and December 31, 2009, and the statements of income for the periods ended December 31, 2010, and December 31, 2009:

As of December 31, 2010

	Assets		Liabilities
	ThUS$		ThUS$
Current		1,865		301
Non-current		382		562
Total		2,247		863

As of December 31, 2009

	Assets		Liabilities
	ThUS$		ThUS$
Current		5,338		414
Non-current		356		322
Total		5,694		736

	For the year ended
	December 31,
	2010			2009
	ThUS$			ThUS$
Total operating revenues		2,408			5,981
Total expenses		(2,162	)		(4,486	)
Sum of net income		246			1,495

The Company has shown as investment in associates its holdings in the following companies: Austral Sociedad Concesionaria S.A., Lufthansa Lan Technical Training S.A. and Concesionaria Chucumata S.A. The Company made no investments in associates during the year ended December 31, 2010.

F-59

			Percentage of ownership				Cost of investment
			As of		As of		As of		As of
	Country of	Functional	December 31,		December 31,		December 31,		December 31,
Company	incorporation	currency	2010		2009		2010		2009
			%		%		ThUS$		ThUS$
Austral Sociedad
Concesionaria S.A.	Chile	CLP		20.00		20.00		661		661
Lufthansa Lan Technical Training S.A.	Chile	CLP		50.00		50.00		702		702
Concesionaria Chucumata S.A.	Chile	CLP		16.70		16.70		119		119

These companies do not have significant restrictions on the ability to transfer funds.

The movement of investments in associates for the periods January 01, 2009 and December 31, 2010 is as follows:

	ThUS$
Opening balance as of January 01, 2009		1,389
Equity accounted earnings		315
Participation in previous period items		(54	)
Dividends received		(414	)
Total changes in investments in associated entities		(153	)
Closing balance as of December 31, 2009		1,236
Opening balance as of January 01, 2010		1,236
Equity accounted earnings		132
Other reductions		(665	)
Dividends received		(110	)
Total changes in investments in associated entities		(643	)
Closing balance as of December 31, 2010		593

The Company records the gain or loss on its investments in associates on a monthly basis in the consolidated statement of income, using the equity method. The Company has no investments in associates which are not accounted for using the equity method.

F-60

NOTE 16 - INTANGIBLE ASSETS OTHER THAN GOODWILL

Composition and movement of intangible assets

Intangible assets are as follows:

Classes of intangible assets (net)	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
Computer software		45,183		34,087
Other assets		566		727
Total		45,749		34,814

Classes of intangible assets (gross)	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
Computer software		83,875		63,585
Other assets		808		808
Total		84,683		64,393

The movement in software and other assets from January 01, 2009 and December 31, 2010 is as follows:

				Other
	Software			assets
	Net			Net			Total
	ThUS$			ThUS$			ThUS$
Opening balance as of January 01, 2009		27,447			-			27,447
Additions		14,881			808			15,689
Withdrawals		(73	)		-			(73	)
Amortization		(8,168	)		(81	)		(8,249	)
Balance as of December 31, 2009		34,087			727			34,814

F-61

				Other
	Software			assets
	Net			Net			Total
	ThUS$			ThUS$			ThUS$
Opening balance as of January 01, 2010		34,087			727			34,814
Additions		20,915			-			20,915
Acquisitions through business combinations		154			-			154
Withdrawals		(779	)		-			(779	)
Amortization		(9,194	)		(161	)		(9,355	)
Balance as of December 31, 2010		45,183			566			45,749

Intangible assets with defined useful lives consist primarily of licensing and computer software, for which the Company has established useful lives of between 4 and 7 years.

The Company shows its intangible assets at cost and amortization is made on a straight-line basis over their estimated useful lives. The amortization of each period is shown in the consolidated statement of results in administrative expenses. The accumulated amortization of computer programs as of December 31, 2010 amounts to ThUS$ 38,692 (ThUS$ 29,498 as of December 31, 2009). The accumulated amortization of other identifiable intangible assets as of December 31, 2010 amounts to ThUS$ 242 (ThUS$ 81 as of December 31, 2009).

F-62

NOTE 17 – GOODWILL

The goodwill represents the excess of cost of acquisition over the fair value of the participation of the Company in the identifiable net assets of the subsidiary at the acquisition date. Goodwill at December 31, 2010 amounted to ThUS$ 157,994 (ThUS$ 63,793 at December 31, 2009)

The Company performed an impairment test based on the value in use and no impairment was identified.

The value in use of those cash generating units to which goodwill has been assigned has been determined assuming that yields, occupation factors and fleet capacity are maintained at current obtainable levels. The company projects cash flows for number periods which is consistent with its internal budgeting process and thereafter calculates a terminal value. Growth rates applied in determining these terminal values are consistent with long range economic forecasts for the relevant markets in which these cash generating units operate. The determined cash flows are discounted at a rate which takes into account the time value of money and risks related to those cash generating units which have not been taken into account in estimation of the units’ future cash flows.

The movement of goodwill from January 01, 2009 to December 31, 2010, is as follows:

Opening balance as of January 01, 2009	62,927
Additions	920
Decrease due to exchange rate differences	(54	)
Closing balance as of December 31, 2009	63,793
Opening balance as of January 01, 2010	63,793
Additions (*)	94,224
Decrease due to exchange rate differences	(23	)
Closing balance as of December 31, 2010	157,994

(*) Corresponds to the goodwill generated by the purchase of Aerovías de Integración Regional, Aires S.A. (see Note 39).

F-63

NOTE 18 - PROPERTY, PLANT AND EQUIPMENT

The composition by category of property, plant and equipment is as follows:

	Gross Book Value				Acumulated depreciation						Net Book Value
	As of		As of		As of			As of			As of		As of
	December 31,		December 31,		December 31,			December 31,			December 31,		December 31,
	2010		2009		2010			2009			2010		2009
	ThUS$		ThUS$		ThUS$			ThUS$			ThUS$		ThUS$
Construction in progress		715,603		264,259		-			-			715,603		264,259
Land		35,538		35,538		-			-			35,538		35,538
Buildings		101,181		100,662		(21,060	)		(18,696	)		80,121		81,966
Plant and equipment		4,816,723		4,051,718		(1,153,587	)		(820,036	)		3,663,136		3,231,682
Information technology equipment		83,711		75,185		(65,112	)		(60,142	)		18,599		15,043
Fixed installations and accessories		52,954		45,526		(25,951	)		(21,867	)		27,003		23,659
Motor vehicles		3,269		2,853		(1,979	)		(1,902	)		1,290		951
Leasehold improvements		87,168		76,536		(43,048	)		(26,250	)		44,120		50,286
Other property, plants and equipment		646,236		863,620		(283,216	)		(370,448	)		363,020		493,172
Total		6,542,383		5,515,897		(1,593,953	)		(1,319,341	)		4,948,430		4,196,556

F-64

The movement in the different categories of property, plant and equipment from January 01, 2009 to December 31, 2010 is shown below:

a) As of December 31, 2009																								Other
												Information			Fixed									property,			Property,
									Plant and			technology			installations			Motor			Leasehold			plant and			Plant and
	Construction					Buildings			equipment			equipment			& accessories			vehicles			improvement			equipment			equipment
	in progress			Land		Net			Net			Net			Net			Net			Net			Net			Net
	ThUS$			ThUS$		ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$
Opening balance as of January 01, 2009		267,844			35,538		78,210			3,079,911			16,336			22,027			809			46,549			418,839			3,966,063
Additions		15,232			-		20			531,038			4,025			2,109			341			863			12,951			566,579
Disposals		(7	)		-		-			(6,047	)		-			(16	)		(25	)		-			(1	)		(6,096	)
Transfers to (from) non-current assets (or disposal groups) classified as Held for Sale		-			-		-			(4,029	)		-			-			-			-			-			(4,029	)
Asset retirements		-			-		-			(2,299	)		(22	)		(5	)		(2	)		-			(864	)		(3,192	)
Depreciation		-			-		(2,114	)		(199,673	)		(5,672	)		(3,777	)		(179	)		(13,371	)		(42,069	)		(266,855	)
Increases (decreases) due to
exchanges differences		(49	)		-		-			(2,034	)		278			284			(2	)		-			5			(1,518	)
Other increases (decreases)		(18,761	)		-		5,850			(165,185	)		98			3,037			9			16,245			104,311			(54,396	)
Changes, total		(3,585	)		-		3,756			151,771			(1,293	)		1,632			142			3,737			74,333			230,493
Closing balance as of December 31, 2009		264,259			35,538		81,966			3,231,682			15,043			23,659			951			50,286			493,172			4,196,556

F-65

b) As of December 31, 2010																								Other
												Information			Fixed									property,			Property,
									Plant and			technology			installations			Motor			Leasehold			plant and			Plant and
	Construction					Buildings			equipment			equipment			& accessories			vehicles			improvements			equipment			equipment
	in progress			Land		Net			Net			Net			Net			Net			Net			Net			Net
	ThUS$			ThUS$		ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$
Opening balance as of January 01, 2010		264,259			35,538		81,966			3,231,682			15,043			23,659			951			50,286			493,172			4,196,556
Additions		10,229			-		115			571,422			9,516			2,341			420			2,410			6,673			603,126
Acquisitions through business combinations							1,006			490			137			335			107						480			2,555
Disposals		-			-		-			(190	)		-			-			(7	)		-			(2	)		(199	)
Transfers to (from) non-current assets (or disposal groups) classified as Held for Sale		-			-		-			2,552			-			-			-			-			-			2,552
Retirements		-			-		-			(6,633	)		(536	)		(2	)		(12	)		-			(2,550	)		(9,733	)
Depreciation		-			-		(2,315	)		(235,800	)		(5,217	)		(3,997	)		(172	)		(16,797	)		(32,315	)		(296,613	)
Increases (decreases) due to
exchanges differences		(62	)		-		-			(857	)		16			(13	)		(3	)		-			(27	)		(946	)
Other increases (decreases)		441,177			-		(651	)		100,470			(360	)		4,680			6			8,221			(102,411	)		451,132
Changes, total		451,344			-		(1,845	)		431,454			3,556			3,344			339			(6,166	)		(130,152	)		751,874
Closing balance as of December 31, 2010		715,603			35,538		80,121			3,663,136			18,599			27,003			1,290			44,120			363,020			4,948,430

F-66

c)      Composition of the fleet

Aircraft included in the company’s property, plant and equipment:

		As of		As of
		December 31,		December 31,
Aircraft	Model	2010		2009
Boeing 737	200ADV (1)		-		2
Boeing 767	300ER		18		17
Boeing 767	300F		8		8
Boeing 767	200ER (2)		1		1
Airbus A318	100		15		15
Airbus A319	100		20		20
Airbus A320	200		24		16
Airbus A340	300		4		4
Total			90		83

(1) Leased to Sky Service S.A.

(2) Leased to Aerovías de México S.A.

Operating leases:
		As of		As of
		December 31,		December 31,
Aircraft	Model	2010		2009
Boeing 767	300ER		10		10
Boeing 767	300F		3		1
Boeing 777	Freighter		2		2
Airbus A320	200(3)		5		2
Airbus A340	300		1		1
Boeing 737	700(4)		9		-
Bombardier	Dash 8-200 (4)		11		-
Bombardier	Dash 8-Q400 (4)		4		-
Total			45		16
Total fleet			135		99

(3) Two aircraft leased to Aeroasis S.A.

(4) Aircraft incorporated through the business combination with Aires S.A.

F-67

d)  Method used for the depreciation of property, plant and equipment:

		Useful life
	Method	minimum		maximum
Buildings	Straight line without residual value		20		50
Plant and equipment	Straight line with residual value of 20% in the short-haul fleet and 36% in the long-haul fleet (*)		5		20
Information technology equipment	Straight line without residual value		5		10
Fixed installations and accessories	Straight line without residual value		10		10
Motor vehicle	Straight line without residual value		10		10
Leasehold improvements	Straight line without residual value		5		5
Other property, plants and equipment	Straight line with residual value of 20% in the short-haul fleet and 36% in the long-haul fleet (*)		3		20

(*) Except for certain technical components, which are depreciated on the basis of cycles and flight hours.

Depreciation charged to income in the period ended December 31, 2010, included in the consolidated statement of income, amounts to ThUS$ 296,613 (ThUS$ 266,855 for the period ended December 31, 2009 and ThUS$ 222,997 for the period ended December 31, 2008). Depreciation charges for the year are recognized in Cost of Sales and Administrative Expenses in the consolidated statement of income.

e)  Additional information regarding property, plant and equipment:

i) Property, plant and equipment pledged as guarantee:

In the period ended December 31, 2010 direct guarantees were added for nine aircraft, eight of them corresponding to the Airbus 320-200 fleet, and one Boeing 767-300 fleet. Additionally, the Company exercised the option to buy three Boeing 767-300 aircraft to Condor Leasing LLC.

Description of property, plant and equipment pledged as guarantee:

			As of				As of
			December 31, 2010				December 31, 2009
Creditor of	Assets		Existing		Book		Existing		Book
guarantee	committed	Fleet	Debt		Value		Debt		Value
			ThUS$		ThUS$		ThUS$		ThUS$
Wilmington	Aircraft and	Boeing 767		1,061,378		1,330,614		1,091,379		1,316,103
Trust Company	engines
BNP Paribas	Aircraft and	Airbus A319		297,320		370,476		324,584		389,071
	engines	Airbus A318		299,422		359,944		323,947		380,928
		Airbus A320		407,275		478,082		119,567		140,501
Calyon	Aircraft and	Airbus A319		108,803		178,342		123,760		176,072
	engines	Airbus A320		58,236		172,426		80,361		176,135
		Airbus A340		89,378		234,892		121,877		259,820
Total direct guarantee				2,321,812		3,124,776		2,185,475		2,838,630

The amounts of existing debt are presented at nominal value. Book value corresponds to the carrying value of the goods provided as guarantees.

Additionally, there are indirect guarantees related to assets recorded in property, plant and equipment whose total debt at December 31, 2010 amounted to ThUS $ 227,218 (ThUS $ 281,691 at December 31, 2009). The book value of assets with indirect guarantees as of December 31, 2010 amounts to ThUS$ 328,838 (ThUS $ 453,970 as of December 31, 2009).

F-68

ii) Commitments and others

Assets fully depreciated and commitments for future purchases are as follows:

	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
Gross book value of property, plants and equipment fully depreciated still in use (1)		57,612		53,417
Commitments for the acquisition of aircraft		12,350,000		8,880,000

(1)   The amounts shown relate mainly to land support equipment, computer equipment and tools.

In December 2009, the Company signed a purchase commitment with Airbus for the purchase of another 30 aircraft of the A320 family with deliveries between 2011 and 2014. Additionally, in December 2010 the Company made another commitment to the manufacturer for the purchase of 50 new A320 family aircraft with deliveries between 2012 and 2016.

With the above, as of December 31, 2010, and as a result of different aircraft purchase contracts signed with Airbus S.A.S., there remain 87 Airbus aircraft of the A320 family to be delivered between 2011 and 2016. The approximate amount is ThUS$ 6,300,000, according to the manufacturer’s price list.

As of December 31, 2010, and as a result of different aircraft purchase contracts signed with The Boeing Company, there remain 6 B767-300ER aircraft to be delivered between 2011 and 2012, 2 B777 – Freighter aircraft for delivery in 2012 and 26  B787  Dreamliner aircraft with a delivery date within the next 10 years. The approximate amount is ThUS$ 6,050,000, according to the manufacturer’s price list. In addition, the Company has purchase options over 1 B777- Freighter aircraft and 15 B787 Dreamliner aircraft.

The acquisition of the aircraft is part of the strategic plan for long haul fleet. This plan also means the sale of 15 aircraft model Airbus 318 between 2011 and 2013. It is estimated that this sale will have no significant impact on results.

F-69

iii) Capitalized interest costs with respect to property, plant and equipment.

		For the year ended
		December 31,
		2010		2009		2008
Average rate of capitalization of capitalized interest cost	%		4.31		4.33		5.26
Costs of capitalized interest	ThUS$		18,400		9,943		18,821

iv) Financial leases

The detail of the main financial leases is as follows:

		As of		As of
		December 31,		December 31,
Lessor	Aircraft	2010		2009
Condor Leasing LLC	Boeing 767		-		3
Bluebird Leasing LLC	Boeing 767		2		2
Eagle Leasing LLC	Boeing 767		2		2
Seagull Leasing LLC	Boeing 767		1		1
Linnet Leasing Limited	Airbus A320		4		4
Total			9		12

Leasing contracts where the lessee acts as the parent company of aircraft set a duration of 12 years and quarterly payments of obligations. Additionally, the tenant will hire and have outstanding obligations of insurance coverage for the aircraft, perform maintenance on them to update their own cost and airworthiness certificates.

Fixed assets acquired under financial leases are classified as Other fixed assets in Property, plant and equipment. As of December 31, 2010, the Company has 9 aircraft and 1 spare engine recorded as financial leases (12 aircraft and 1 spare engine as of December 31, 2009).

In the period ended December 31, 2010 the Company exercised the option to buy three Boeing 767-300 aircraft to Condor Leasing LLC. Product of the above, both aircraft were reclassified from the category Other property, plant and equipment to Plant and equipment category. Additionally, during December 2010 extending the financing period of a Boeing 767-300 for a period of three years.

The book value of assets under financial leases as of December 31, 2010 amounts to ThUS$ 319,541 (ThUS$ 458,417 as of December 31, 2009).

F-70

The minimum payments under financial leases are as follows:

As of December 31, 2010
	Gross					Present
	Value		Interest			Value
	ThUS$		ThUS$			ThUS$
No later than one year		57,976		(3,679	)		54,297
Between one and five years		127,370		(7,421	)		119,949
Over five years		55,106		(1,781	)		53,325
Total		240,452		(12,881	)		227,571

As of December 31, 2009
	Gross					Present
	Value		Interest			Value
	ThUS$		ThUS$			ThUS$
No later than one year		59,871		(4,846	)		55,025
Between one and five years		195,102		(9,584	)		185,518
Over five years		41,395		(129	)		41,266
Total		296,368		(14,559	)		281,809

F-71

NOTE 19 – INCOME TAXES

Deferred tax assets and liabilities are offset if there is a legal right to offset assets and liabilities for income taxes relating to the same tax authority. The balances of deferred taxes are as follows:

	Assets						Liabilities
Concept	As of			As of			As of			As of
	December 31,			December 31,			December 31,			December 31,
	2010			2009			2010			2009
	ThUS$			ThUS$			ThUS$			ThUS$
Depreciation		(415	)		(476	)		290,254			221,712
Amortization		12,286			2,103			29,606			24,556
Provisions		8,128			2,995			23,017			5,097
Post-employment benefit obligations		622			333			(982	)		(850	)
Revaluation of financial instruments		-			-			(21,926	)		(18,891	)
Tax losses		13,229			5,013			-			-
Others		4,234			684			(7,957	)		8,995
Total		38,084			10,652			312,012			240,619

Movements of deferred tax assets and liabilities from January 01, 2009 to December 31, 2010 are as follows:

a)         As of December 31, 2009
	Beginning			Recognized in			Recognized in			Incorporation by		Ending
	balance			consolidated			comprehensive			business		balance
	asset (liability)			income			income			combinations		asset (liability)
	ThUS$			ThUS$			ThUS$			ThUS$		ThUS$
Depreciation		(166,970	)		(55,218	)		-			-		(222,188	)
Amortization		(29,831	)		7,378			-			-		(22,453	)
Provisions		4,082			(6,184	)		-			-		(2,102	)
Post-employment benefit obligations		853			330			-			-		1,183
Revaluation of financial		61,817			(1	)		(42,925	)		-		18,891
Tax losses		10,182			(5,169	)		-			-		5,013
Others		(34,920	)		25,601			1,008			-		(8,311	)
Total		(154,787	)		(33,263	)		(41,917	)		-		(229,967	)

F-72

b)         As of December 31, 2010
	Beginning			Recognized in			Recognized in			Incorporation by		Ending
	balance			consolidated			comprehensive			business		balance
	asset (liability)			income			income			combinations		asset (liability)
	ThUS$			ThUS$			ThUS$			ThUS$		ThUS$
Depreciation		(222,188	)		(68,481	)		-			-		(290,669	)
Amortization		(22,453	)		(5,948	)		-			11,081		(17,320	)
Provisions		(2,102	)		(17,968	)		-			5,181		(14,889	)
Post-employment benefit obligations		1,183			(196	)		-			617		1,604
Revaluation of financial		18,891			-			3,035			-		21,926
Tax losses		5,013			(1,303	)		-			9,519		13,229
Others		(8,311	)		18,077			(120	)		2,545		12,191
Total		(229,967	)		(75,819	)		2,915			28,943		(273,928	)

Deferred tax assets not recognized:	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
Temporary differences		2,152		2,152
Tax losses		1,662		3,629
Total Deferred tax assets not recognized		3,814		5,781

Deferred income tax assets are recognized for tax loss carry-forwards to the extent that the realization of the related tax benefit through future taxable profits is probable. The group did not recognize deferred income tax assets of ThUS$ 1,662 (ThUS$ 3,629 at December 31, 2009) in respect of losses amounting to ThUS$ 5,992 (ThUS$ 11,456 at December 31, 2009) that can be carried against future taxable income.

F-73

Expense (income) for deferred and current income taxes for the years ended at December 31, 2010 and 2009 respectively, are as follows:

	For the year ended
	December 31,
	2010			2009
	ThUS$			ThUS$
Expense for current income tax
Current tax expense		8,890			8,323
Adjustment to previous year’s current tax		(3,153	)		(2,177	)
Other current tax expense (income)		(1,881	)		5,556
Current tax expense, net, total		3,856			11,702
Expense for deferred income taxes
Deferred expense (income) for taxes related to the creation and reversal of temporary differences		75,284			31,128
Increases (reduction) in value of deferred tax assets		1,967			1,657
Deferred tax expense, net, total		77,251			32,785
Income tax expense		81,107			44,487

Composition of income tax expense (income):

	For the year ended
	December 31,
	2010		2009
	ThUS$		ThUS$
Current tax expense, net, foreign		1,121		2,185
Current tax expense, net, Chile		2,735		9,517
Current tax expense, net, total		3,856		11,702
Deferred tax expense, net, foreign		3,724		2,024
Deferred tax expense, net, Chile		73,527		30,761
Deferred tax expense, net, total		77,251		32,785
Income tax expense		81,107		44,487

F-74

Reconciliation of tax expense using the legal rate to the tax expense using the effective rate:

	For the year ended
	December 31,
	2010			2009
	ThUS$			ThUS$
Tax expense using the legal rate		85,138			46,854
Tax effect of rates in other jurisdictions		1,491			6,792
Tax effect of non-taxable operating revenues		(4,089	)		(10,556	)
Tax effect of disallowable expenses		849			836
Tax effect of current period tax losses not recognized		1,967			1,801
Other increases (decreases)		(4,249	)		(1,240	)
Total adjustments to tax expense using the legal rate		(4,031	)		(2,367	)
Tax expense using the effective rate		81,107			44,487

Reconciliation of legal tax rate to effective tax rate:

	For the year ended
	December 31,
	2010			2009
	%			%
Legal tax rate		17.00			17.00
Effect of tax rates in other jurisdictions		0.30			2.46
Effect of tax rate on non-taxable operating revenues		(0.82	)		(3.83	)
Effect of tax rate on disallowable expenses		0.17			0.30
Effect of tax rate on use of not-previously recognized tax losses		0.39			0.66
Other increase (decrease)		(0.84	)		(0.45	)
Total adjustment to the legal tax rate		(0.80	)		(0.86	)
Total effective tax rate		16.20			16.14

F-75

Deferred taxes related to items charged to net equity:

	For the year ended
	December 31,
	2010		2009
	ThUS$		ThUS$
Aggregate deferred taxation related to items charged to net equity		2,316		(42,425	)
Total deferred taxes related to item charged to net equity		2,316		(42,425	)

Effects on deferred taxes of the components of other comprehensive income:

	As of December 31, 2010
				Income tax			Amount
	Amount before			expense			after
	Taxes			(income)			Taxes
	ThUS$			ThUS$			ThUS$
Cash-flow hedges		17,855			(3,035	)		14,820
Translation adjustment		(708	)		120			(588	)
					(2,915	)

	As of December 31, 2009
				Income tax			Amount
	Amount before			expense			after
	Taxes			(income)			Taxes
	ThUS$			ThUS$			ThUS$
Cash-flow hedges		(252,508	)		42,925			(209,583	)
Translation adjustment		5,929			(1,008	)		4,921
					41,917

F-76

NOTE 20 – OTHER FINANCIAL LIABILITIES

The composition of other financial liabilities is as follows:

		As of		As of
		December 31,		December 31,
		2010		2009
		MUS$		MUS$
Current
a)	Bank loans		495,261		385,421
b)	Other financial liabilities		5,321		2,031
c)	Hedge liabilities		42,042		30,480
	Total Current		542,624		417,932
Non-current
a)	Bank loans		2,450,033		2,389,521
b)	Other financial liabilities		14,427		5,804
c)	Hedge liabilities		97,888		47,853
	Total Non-current		2,562,348		2,443,178

a) Interest bearing loans

Obligations with credit institutions and debt instruments:

	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
Current
Bank loans		150,915		71,124
Guaranteed obligations		283,637		245,717
Financial leases		54,297		68,076
Other loans		6,412		504
Total current		495,261		385,421
Non-current
Bank loans		73,921		207,657
Guaranteed obligations		2,023,666		1,933,607
Financial leases		173,274		213,733
Other loans		179,172		34,524
Total non-current		2,450,033		2,389,521
Total obligations with financial institutions		2,945,294		2,774,942

F-77

All interest-bearing liabilities are recorded using the effective interest rate method. Under IFRS, the effective interest rate for loans with a fixed interest rate does not vary throughout the loan, while in the case of loans with variable interest rates, the effective rate changes on each repricing date.

Currency balances that make the interest bearing loans interest at December 31, 2010 and December 31, 2009, are as follows:

	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
US Dollar		2,753,788		2,546,411
Chilean Peso (*)		187,101		228,531
Other currency		4,405		-
Total		2,945,294		2,774,942

 (*) The Company entered into cross currency swaps, fixing the payment of ThUS$ 128,056 of debt, in dollars.

b) Other financial liabilities

The detail of other financial liabilities as of December 31, 2010 and December 31, 2009, respectively, is as follows:

	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
Current
Interest rate derivative not recognized as a hedge		5,321		2,031
Total current		5,321		2,031
Non-current
Interest rate derivative not recognized as a hedge		14,427		5,804
Total non-current		14,427		5,804
Total other financial liabilities		19,748		7,835

F-78

c) Hedging liabilities

Hedging liabilities as of December 31, 2010 and December 31, 2009 are as follows:

	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
Current
Interest accrued since last payment date swap rates		3,826		2,935
Fair value interest rate derivatives		24,522		21,580
Fair value of foreign currency derivatives		13,694		5,089
Fair value of fuel price derivatives		-		876
Total current		42,042		30,480
Non-current
Fair value interest rate derivatives		90,666		47,853
Fair value of foreign currency derivatives		7,222		-
Total non-current		97,888		47,853
Total hedging liabilities		139,930		78,333

The foreign currency derivatives correspond to forward contracts and cross currency swaps.

Hedging operation

The fair values by type of derivative contracts held as hedging instruments are presented below:

	As of			As of
	December 31,			December 31,
	2010			2009
	ThUS$			ThUS$
Forward starting swaps (FSS) (1)		(54,670	)		(31,928	)
Interest rate options (2)		422			3,129
Interest rate Swaps (3)		(64,344	)		(37,506	)
Cross currency swaps (CCIRS) (4)		26,703			19,706
Fuel Collars (5)		17,782			5,329
Fuel Swap (6)		28,032			8,244
Currency forward (7)		(13,694	)		677

(1) Covers the significant variations in cash flows associated with market risk implicit in the changes in the 3-month Libor interest rate for long-term loans incurred in the acquisition of aircraft to be produced from the future contract date. These contracts are recorded as cash flow hedges.

(2) Covers the significant variations in cash flows associated with market risk implicit in the changes in the 3-month Libor interest rate for long-term loans incurred in the acquisition of aircraft. These contracts are recorded as cash flow hedges.

F-79

(3) Covers the significant variations in cash flows associated with market risk implicit in the increases in the 3 and 6 months Libor interest rates for long-term loans incurred in the acquisition of aircraft and bank loans. These contracts are recorded as cash flow hedges.

(4) Covers the significant variations in cash flows associated with market risk implicit in the changes in the TAB 180 days interest rate and the dollar exchange rate. These contracts are recorded as cash flow hedges.

(5) Covers significant variations in cash flows associated with market risk implicit in the changes in the price of future fuel purchases.

(6) Covers the significant variations in cash flows associated with market risk implicit in the changes in the price of future fuel purchases.

(7) Covers investments denominated in Chilean pesos to changes in the US Dollar - Chilean Peso exchange rate, with the aim of ensuring investment in dollars.

During the periods presented, the Company only maintains cash flow hedges. In the case of fuel hedges, future fuel purchases will occur and impact results from 1 to 12 months from the consolidated statement of financial position date, whereas in the case of interest rate hedging, they will occur and will impact results over the life of the related loans, which are valid for 12 years. Regarding coverage rate and currency, the impact on outcomes will occur continuously throughout the life of the contract (3 years), while cash flows will occur quarterly. Finally, the results will impact investment hedges steadily over the life of the investment (up to 3 months), while the cash flows occur at the maturity of the investment.

During the periods presented, all hedged highly probable forecast transactions have occurred.

During the periods presented, there has been no hedge ineffectiveness recognized in the consolidated statement of income.

Since none of the coverage resulted in the recognition of a nonfinancial asset, no portion of the result of the derivatives recognized in equity was transferred to the initial value of such assets.

F-80

The amounts recognized in comprehensive income and transferred from net equity to income during the year, are as follows:

	For the year ended
	December 31,
	2010			2009
	ThUS$			ThUS$
Debit (credit) recognized in comprehensive Income during the year		(17,855	)		252,508
Debit (credit) transferred from net equity to Income during the year		(35,010	)		(193,534	)

F-81

NOTE 21 - TRADE AND OTHER CURRENT ACCOUNTS PAYABLE

The composition of trade and other accounts payables is as follows:

	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
Current
a) Trade and other accounts payable		500,694		377,438
b) Accrued liabilities of the reporting date		144,877		99,159
Total trade and other accounts payable		645,571		476,597

a) Trade and other accounts payable as of December 31, 2010 and  December 31, 2009 are as follows:

	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
Trade creditors		389,568		311,441
Leasing obligations		26,474		9,441
Other accounts payable (*)		84,652		56,556
Total		500,694		377,438

(*) Includes agreement entitled "Plea Agreement" with the Department of Justice of the United States of America. See detail in note 22.

F-82

Trade and other payables by concept:

	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
Aircraft fuel		104,404		71,881
Baording Fee		72,864		72,291
Landing fees		43,941		34,321
Handling and ground handling		39,915		25,885
Providers technical buying		29,594		24,784
Maintenance		28,658		15,821
Aircraft and engines lease		26,474		9,441
Professional service and advice		22,445		18,536
Other personal expenses		21,275		16,938
Marketing		21,041		11,624
U.S.A Department of Justice (*)		18,387		18,097
Achievement of objectives		15,263		13,228
In-flight services		11,761		10,253
Crew		8,188		6,400
Aviation insurance		5,931		4,976
Others		30,553		22,962
Total trade and other accounts payable		500,694		377,438

(*) Includes agreement entitled "Plea Agreement" with the Department of Justice of the United States of America. See detail in note 22.

b) The liabilities accrued at December 31, 2010 and December 31, 2009 , are as follows:

	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
Aircraft and engine maintenance		26,133		29,055
Accounts payable to personnel		52,441		33,890
Accrued personnel expenses		40,974		24,576
Others accrued liabilities		25,329		11,638
Total accrued liabilities		144,877		99,159

F-83

NOTE 22 - OTHER PROVISIONS

The detail of other provisions as of December 31, 2010 and December 31, 2009 is as follows:

	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
Current
Provision legal claims (1)		753		970
Total other provisions, Current		753		970
Non-current
Provision legal claims (1)		21,204		1,834
Provision for European Commision investigation (2)		10,916		25,000
Total other provisions, non-current		32,120		26,834
Total other provisions		32,873		27,804

(1)      The amount represents a provision for certain demands made against the Company by former employees, regulatory agencies and others. The charge for the provision is shown in the consolidated statement of income in Administrative expenses. It is expected that the current balance as of December 31, 2010 will be applied during the next 12 months. Within other non-current provisions, provisions for legal claims relating to Aires S.A are included.

(2)       Provision made for proceedings brought by the European Commission for possible breaches of free competition in the freight market.

The movement of provisions from January 01, 2009 and December 31, 2010 is as follows:

				European
	Legal			Commission
	claims			Investigation		Total
	ThUS$			ThUS$		ThUS$
Opening balance as of January 01, 2009		3,561			25,000		28,561
Increase in provisions		1,607			-		1,607
Provision used		(2,679	)		-		(2,679	)
Exchange difference		315			-		315
Balance as of December 31, 2009		2,804			25,000		27,804

F-84

				European
	Legal			Commission
	claims			Investigation			Total
	ThUS$			ThUS$			ThUS$
Opening balance as of January 01, 2010		2,804			25,000			27,804
Increase in provisions		2,872			-			2,872
Acquisition through business combination		17,174			-			17,174
Provision used		(681	)		-			(681	)
Reversal of not used provision		-			(14,084	)		(14,084	)
Exchange difference		(212	)		-			(212	)
Balance as of December 31, 2010		21,957			10,916			32,873

European Commission Provision:

(a) This provision was established because of the investigation begun by the Directorate General for Competition of the European Commission against more than 25 cargo airlines, including Lan Cargo S.A., as part of a global investigation begun in 2006 regarding possible unfair competition on the air cargo market.  This was a joint investigation by the European and U.S.A. authorities.  The start of the investigation was disclosed through a material event notice dated December 27, 2007.  The U.S.A. portion of the global investigation concluded with respect to Lan Cargo S.A. and its subsidiary, Aerolíneas Brasileiras S.A. (“ABSA”) by the signature of a Plea Agreement with the U.S.A.  Department of Justice, as disclosed in a material event notice on January 21, 2009.

(b) A significant matter report dated November 9, 2010, reported that the General Direction of Competition had issued its decision  on this case (the "decision"), under which it imposed fines totaling € 799,445,000 (seven hundred and ninety nine million four hundred and forty-five thousand  Euro) for infringement of European Union regulations on free competition against eleven (11) airlines, among which are Lan Airlines S.A. and Lan Cargo S.A., Air Canada, Air France, KLM, British Airways, Cargolux, Cathay Pacific, Japan Airlines, Qanta Airways, SAS and Singapore Airlines.

(c) Jointly, Lan Airlines S.A. and Lan Cargo S.A., have been fined in the amount of € 8,220,000 (approximately equivalent to ThUS$ 10,916) for such infractions, which was provisioned in the financial statements of LAN. This is a minor fine in comparison to the original decision, as there was a significant reduction in fine because Lan cooperated during the investigation.

(d) On January 25, 2011, Lan Airlines S.A. and Lan Cargo S.A. appealed the decision before the Court of Justice of the European Union. According to the above, the Company decided to make a provision for the amount of ThUS$ 10,916.

F-85

NOTE 23 – OTHER CURRENT NON-FINANCIAL LIABILITIES

Other non-financial liabilities as of December 31, 2010 and  December 31, 2009 are as follows:

	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
Deferred revenues		810,524		542,832
Dividends payable		125,435		70,387
Other sundry liabilities		3,192		3,037
Total other non-financial liabilities, current		939,151		616,256

NOTE 24 - EMPLOYEE BENEFITS

Provisions for employee benefit as of December 31, 2010 and December 31, 2009, respectively, are as follows:

	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
Pension payments		3,164		2,588
Termination payments		1,161		1,053
Other obligations		5,332		1,914
Total provisions for employee benefits, non-current		9,657		5,555

F-86

(a)      The movement in payments for termination indemnities and other obligations between January 01, 2009 and December 31, 2010 is as follows:

	ThUS$
Opening balance as of January 01, 2009		3,865
Increase (decrease) current service provision		3,705
Benefits paid		(2,015	)
Balance as of December 31, 2009		5,555
Opening balance as of January 01, 2010		5,555
Increase (decrease) current service provision		4,825
Benefits paid		(723	)
Balance as of December 31, 2010		9,657

(b)      The provision for short-term benefits as of December 31, 2010 and December 31, 2009 respectively, is detailed below:

	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
Profit-sharing and bonuses		52,441		29,596

The participation in profits and bonuses are annual incentives plan for achievement the objectives.

Employment expenses are detailed below:

			For the year ended
			December 31,
	2010		2009		2008
	ThUS$		ThUS$		ThUS$
Salaries and wages		587,148		476,404		456,599
Short-term employee benefits		73,335		58,530		54,148
Termination benefits		11,751		17,408		13,757
Other personnel expenses		121,030		84,329		83,433
Total		793,264		636,671		607,937

F-87

NOTE 25 – OTHER NON-CURRENT ACCOUNTS PAYABLE

Other liabilities non-current as of December 31, 2010 and December 31, 2009 are as follows:

	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
Fleet financing(JOL)		314,372		299,483
Other accounts payable (*)		54,000		72,000
Aircraft and engine maintenance		47,607		46,644
Provision for vacations and bonuses		7,949		6,212
Other sundry liabilities		1,753		2,182
Total non-current liabilities		425,681		426,521

(*)           Agreement entitled "Plea Agreement" with the Department of Justice of United States of America, and its short-term part in trade payables and other payables. See details in Note 22.

F-88

NOTE 26 -  EQUITY

a)      Capital

The capital of the company is in the following form:

The Company’s objective is to maintain an appropriate level of capitalization that enables it to ensure access to the financial markets for carrying out its medium and long-term objectives, optimizing the return for its shareholders and maintaining a solid financial position.

The capital of the Company at the end of each period amounts to ThUS$ 453,444, divided into 338,790,909 common stock of a same series, of ordinary character, no par value. There are no special series of shares and no privileges. The form of its stock certificates and their issuance, exchange, disuse, loss, replacement and other circumstances, and the transfer of the shares, is governed by the provisions of Corporations Law and its regulations.

b)      Subscribed and paid shares

As of December 31, 2010 and December 31, 2009,  the total number of authorized common shares is 341 million shares of no par value. Of the total shares subscribed 338,790,909 shares have been fully paid, leaving 2,209,091 shares reserved for issuance under option contracts.

c)      Other equity interests

The movement of other equity interest from January 01, 2009 and December 31, 2010 is as follows:

	Stock
	options			Other
	plans			reserves			Total
	ThUS$			ThUS$			ThUS$
Opening balance as of January 01, 2009		1,801			(52	)		1,749
Stock option plans		1,183			-			1,183
Deferred tax		(507	)		-			(507	)
Legal reserves		-			65			65
Balance as of December 31, 2009		2,477			13			2,490

	Stock
	options			Other
	plans			reserves		Total
	ThUS$			ThUS$		ThUS$
Opening balance as of January 01, 2010		2,477			13		2,490
Stock option plans		3,523			-		3,523
Deferred tax		(599	)		-		(599	)
Legal reserves		-			49		49
Balance as of December 31, 2010		5,401			62		5,463

(c.1)           Reserves for stock option plans

F-89

These reserves are related to the share-based payments explained in Note 36.

 (c.2)       Other reserves

The balance of other sundry reserves comprises the following:

	As of			As of
	December 31,			December 31,
	2010			2009
	ThUS$			ThUS$
Reserve for the adjustment of the value of fixed assets (1)		2,620			2,620
Share issuance and placement costs (2)		(2,672	)		(2,672	)
Others		114			65
Total		62			13

(1) Corresponds to the technical revaluation of fixed assets authorized by the Superintendence of Securities and Insurance in 1,979, in Circular No. 1,529.  The revaluation was optional and could be taken only once, the reserve is not distributable and can only be capitalized.

(2) As established in Circular 1,736 of the Superintendence of Securities and Insurance, the next extraordinary shareholders meeting to be held by the parent Company should approve that the share issuance and placement costs be deducted from the paid in capital.

F-90

d)      Other reserves

The movement of other reserves from January 01, 2009 and December 31, 2010 is as follows:

	Currency			Cash flow
	translation			hedging
	reserve			reserve			Total
	ThUS$			ThUS$			ThUS$
Opening balance as of January 01, 2009		(6,192	)		(301,813	)		(308,005	)
Derivatives valuation gains		-			252,508			252,508
Deferred tax		1,009			(42,925	)		(41,916	)
Currency translation differences		259			-			259
Balance as of December 31, 2009		(4,924	)		(92,230	)		(97,154	)
	Currency			Cash flow
	translation			hedging
	reserve			reserve			Total
	ThUS$			ThUS$			ThUS$
Opening balance as of January 01, 2010		(4,924	)		(92,230	)		(97,154	)
Derivatives valuation losses		-			(17,855	)		(17,855	)
Deferred tax		(137	)		3,035			2,898
Currency translation differences		804			-			804
Balance as of December 31, 2010		(4,257	)		(107,050	)		(111,307	)

(d.1)           Currency translation reserve

These originate from exchange differences arising on the translation of any investment in foreign entities (or Chilean with a functional currency different to that of the parent), and from loans and other instruments in foreign currency designated as hedges for such investments. When the investment (all or part) is sold or disposed, and loss of control occurs, these reserves are shown in the consolidated statement of income as part of the loss or gain on the sale or disposal.If the sale does not involve loss of control, these reserves are transferred to non-controlling interests.

(d.2)           Cash flow hedging reserve

These originate from the at fair value valuation the end of each period of the outstanding derivative contracts that have been defined as cash flow hedges. When these contracts expire, these reserves should be adjusted and the corresponding results recognized.

e)      Retained earnings

The movement of  retained earnings between January 01, 2009 and December 31, 2010 is as follows:

F-91

	ThUS$
Opening balance as of January 01, 2009		614,587
Result for the period		231,126
Other decreases		(1,044	)
Dividends		(104,622	)
Balance as of December 31, 2009		740,047
Opening balance as of January 01, 2010		740,047
Result for the period		419,702
Other decreases		(129	)
Dividends		(210,406	)
Balance as of December 31, 2010		949,214

f)           Dividends per share

As of December 31, 2010
	Final		Interim		Interim
	dividend		dividend		dividend
Description	2009		2010		2010
Date of dividend	4/29/2010		7/27/2010		12/23/2010
Amount of the dividend (ThUS$)		10,940		74,466		125,000
Number of shares among which the dividend is distributed		338,790,909		338,790,909		338,790,909
Dividend per share (US$)		0.03229		0.2198		0.36896
As of December 31, 2009

	Interim		Interim
	dividend		dividend
Description	2009		2009
Date of dividend	7/28/2009		12/29/2009
Amount of the dividend (ThUS$)		34,621		70,001
Number of shares among which the dividend is distributed		338,790,909		338,790,909
Dividend per share (US$)		0.10219		0.20662

The Company’s dividend policy is that these be equal to the minimum required by law, i.e. 30% of the net income according to current regulations. This policy does not preclude the Company from distributing dividends in excess of this obligatory minimum, based on the events and circumstances that may occur during the course of the year.

At December 31, 2010 interim dividends have been declared for 47.5% of 2010 net income.

F-92

NOTE 27 - REVENUES

The detail of revenues is as follows:

	For the year ended
	December 31,
	2010		2009		2008
	ThUS$		ThUS$		ThUS$
Passengers		3,109,797		2,623,608		2,820,830
Cargo		1,280,705		895,554		1,319,415
Total		4,390,502		3,519,162		4,140,245

F-93

NOTE 28 - COSTS AND EXPENSES BY NATURE

a)     Costs and operating expenses

The main operating costs and administrative expenses are detailed below:

	For the year ended
	December 31,
	2010		2009		2008
	ThUS$		ThUS$		ThUS$
Other rentals and landing fees		595,214		490,921		544,247
Aircraft Fuel		1,161,927		959,608		1,388,826
Comissions		173,397		143,900		190,224
Other operating expenses		506,730		387,106		413,973
Aircraft rentals		98,588		83,712		70,527
Aircraft maintenance		120,642		121,037		105,920
Passenger service		114,221		92,796		85,257
Total		2,770,719		2,279,080		2,798,974

b)    Depreciation and amortization

Depreciation and amortization are detailed below:

	For the year ended
	December 31,
	2010		2009		2008
	ThUS$		ThUS$		ThUS$
Depreciation (*)		327,136		295,894		249,708
Amortization		9,355		8,168		6,791
Total		336,491		304,062		256,499

 (*) Includes the depreciation of property, plant and equipment and the maintenance cost of aircraft held under operating leases.

c)     Personnel expenses

The costs for this item are disclosed in provisions for employee benefits (Note 24).

d)    Financial costs

The detail of financial costs is as follows:

F-94

	For the year ended
	December 31,
	2010		2009		2008
	ThUS$		ThUS$		ThUS$
Bank loan interest		117,405		113,827		102,768
Financial leases		5,880		4,406		10,042
Other financial instruments		31,994		34,876		12,678
Total		155,279		153,109		125,488

Costs and expenses by nature presented in this note are equivalent to the sum of cost of sales, distribution costs, and administrative expenses, other expenses by function and financing costs presented in the consolidated statement income by function.

NOTE 29 - GAINS (LOSSES) ON THE SALE OF NON-CURRENT ASSETS NOT CLASSIFIED AS HELD FOR SALE

The gains (losses) on sales of non-current assets not classified as Held for Sale as of December 31, 2010 and 2009 are as follows:

	For the year ended
	December 31,
	2010		2009			2008
	ThUS$		ThUS$			ThUS$
Property, plant and equipment		1,413		4,278			2,546
Investments in companies, associates and joint businesses		-		(2	)		3,664
Total		1,413		4,276			6,210

The gain (loss) on sales of the period is presented in other operating income, by function.

F-95

NOTE 30 - OTHER INCOME, BY FUNCTION

Other incomes, by function are as follows:

	For the year ended
	December 31,
	2010		2009		2008
	ThUS$		ThUS$		ThUS$
Duty free		11,983		9,593		15,668
Aircraft leasing		13,130		20,696		41,417
Logistics and courier		36,778		33,132		32,161
Customs and warehousing		24,673		18,682		25,375
Tours		28,216		31,088		3,187
Other miscellaneous income		18,046		23,160		25,134
Total		132,826		136,351		142,942

F-96

NOTE 31 – FOREIGN CURRENCY AND EXHANGE RATE DIFFERENCES

a)        Foreign currency

The foreign currency detail of current and non-current assets is as follows:

	As of		As of
	December 31,		December 31,
Current assets	2010		2009
	ThUS$		ThUS$
Cash and cash equivalents		436,840		502,618
Chilean peso		368,360		435,514
Euro		7,844		13,255
Argentine peso		11,230		6,105
Brazilian real		4,759		3,041
Other currency		44,647		44,703
Other current financial assets		6,726		8,041
Brazilian real		4,740		5,288
Other currency		1,986		2,753
Other current non-financial assets		2,692		1,983
Chilean peso		1,247		784
Argentine peso		419		273
Brazilian real		96		-
Other currency		930		926
Trade and other current accounts receivable		126,648		103,759
Chilean peso		28,606		52,073
Euro		8,429		5,192
Argentine peso		6,702		15,158
Brazilian real		31,329		11,190
Australian dollar		12,456		7,595
Other currency		39,126		12,551
Current accounts receivable from related entities		21		9
Chilean peso		21		9
Current tax assets		62,455		50,734
Chilean peso		16,805		11,420
Argentine peso		14,477		8,668
Brazilian real		6,735		5,575
Mexican peso		17,477		16,554
Other currency		6,961		8,517
Total current assets		635,382		667,144
Chilean peso		415,039		499,800
Euro		16,273		18,447
Argentine peso		32,828		30,204
Brazilian real		47,659		25,094
Mexican peso		17,477		16,554
Australian dollar		12,456		7,595
Other currency		93,650		69,450

F-97

	As of		As of
	December 31,		December 31,
Non-current assets	2010		2009
	ThUS$		ThUS$
Other non-current financial assets,		4,504		528
Brazilian real		1,991		46
Other currency		2,513		482
Other non-current non-financial assets		1,681		4
Argentine peso		1,681		-
Other currency		-		4
Non-current rights receivable		7,874		7,181
Chilean peso		7,864		7,179
Other currency		10		2
Investment recorded using the method of participation		593		1,236
Chilean peso		593		1,236
Deferred tax assets		28,493		-
Other currency		28,493		-
Total non-current assets		43,595		8,949
Chilean peso		8,457		8,415
Argentine peso		1,681		-
Brazilian real		1,991		46
Other currency		31,466		488

The foreign currency detail of current and non-current liabilities is as follows:

F-98

	Up to 90 days				91 days to 1 year
	As of		As of		As of		As of
	December 31,		December 31,		December 31,		December 31,
Current liabilities	2010		2009		2010		2009
	ThUS$		ThUS$		ThUS$		ThUS$
Other current financial liabilities		46,043		1,231		112,672		56,991
Chilean peso		41,638		1,231		112,672		56,991
		4,405		-		-		-
Trade and other current accounts payable		240,419		155,819		14,012		11,150
Chilean peso		52,779		35,326		9,559		8,209
Euro		9,438		9,138		14		-
Argentine peso		43,214		33,377		3,725		2,211
Brazilian real		22,633		13,334		-		-
Other currency		112,355		64,644		714		730
Current acounts payable to related Entities		-		6		-		10
Chilean peso		-		6		-		10
Current tax liabilities		9,700		6,230		2,621		4,262
Chilean peso		3,007		2,920		1,064		945
Argentine peso		240		1,223		1,202		751
Brazilian real		1,994		1,487		-		-
Other currency		4,459		600		355		2,566
Other current non-financial liabilities		27,729		375		1,071		934
Brazilian real		-		-		1,041		930
Other currency		27,729		375		30		4
Total current liabilities		323,891		163,661		130,376		73,347
Chilean peso		97,424		39,483		123,295		66,155
Euro		9,438		9,138		14		-
Argentine peso		43,454		34,600		4,927		2,962
Brazilian real		24,627		14,821		1,041		930
Other currency		148,948		65,619		1,099		3,300

F-99

	More than 1 to 3 years				More than 3 to 5 years				More than 5 years
	As of		As of		As of		As of		As of		As of
	December 31,		December 31,		December 31,		December 31,		December 31,		December 31,
Non-current liabilities	2010		2009		2010		2009		2010		2009
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
Other non-current financial liabilities		61,477		170,309		-		-		-		-
Chilean peso		61,477		170,309		-		-		-		-
Other non-current accounts payable		7,696		5,776		71		1,256		5		39
Chilean peso		6,721		5,114		71		195		5		39
Brazilian real		-		-		-		844		-		-
Other currency		975		662		-		217		-		-
Other long-term provisions		-		-		1,554		-		-		-
Brazilian real		-		-		1,401		-		-		-
Other currency		-		-		153		-		-		-
Non-current provisions for employee benefits		3,153		-		-		-		698		457
Argentine peso		-		-		-		-		698		457
Other currency		3,153		-		-		-		-		-
Total Non-current liabilities		72,326		176,085		1,625		1,256		703		496
Chilean peso		68,198		175,423		71		195		5		39
Argentine peso		-		-		-		-		698		457
Brazilian real		-		-		1,401		844		-		-
Other currency		4,128		662		153		217		-		-

F-100

	As of			As of
	December 31,			December 31,
General summary of foreign currency:	2010			2009
	ThUS$			ThUS$
Total assets		678,977			676,093
Chilean peso		423,496			508,215
Euro		16,273			18,447
Argentine peso		34,509			30,204
Brazilian real		49,650			25,140
Mexican peso		17,477			16,554
Australian dollar		12,456			7,595
Other currency		125,116			69,938
Total liabilities		528,921			414,845
Chilean peso		288,993			281,295
Euro		9,452			9,138
Argentine peso		49,079			38,019
Brazilian real		27,069			16,595
Mexican peso		-			-
Australian dollar		-			-
Other currency		154,328			69,798
Net position		150,056			261,248
Chilean peso		134,503			226,920
Euro		6,821			9,309
Argentine peso		(14,570	)		(7,815	)
Brazilian real		22,581			8,545
Mexican peso		17,477			16,554
Australian dollar		12,456			7,595
Other currency		(29,212	)		140

F-101

b)        Exchange differences

Exchange rate differences, other than those relating to financial instruments at fair value through profit and loss, generated a gain of ThUS $13,792 and a loss of ThUS $11,237 for the periods ended December 31, 2010 and December 31, 2009 respectively, recorded on the Income Statement.

Exchange rate differences shown in equity as translation reserves for the years ended December 31, 2010 and 2009 represented a gain of ThUS$ 708 and a loss of ThUS$ 1,442, respectively.

The following shows the current exchange rates for the US dollar at the end of each period:

	As of		As of
	December 31,		December 31,
	2010		2009
Chilean peso		468.01		507.10
Argentine peso		3.97		3.80
Brazilian real		1.66		1.74
Peruvian Sol		2.81		2.89
Australian dollar		0.99		1.12
Strong Bolivar		4.30		2.14
Boliviano		6.94		7.00
Uruguayan peso		19.80		19.45
Mexican peso		12.38		13.06
Colombian peso		1,905.10		2,043.07
New Zealand dollar		1.30		1.39
Euro		0.75		0.70

F-102

NOTE 32 - EARNINGS PER SHARE

	For the year ended
	December 31,
Basic earnings	2010		2009
	ThUS$		ThUS$
Earnings attributable to controlling company’s equity holders (ThUS$)		419,702		231,126
Weighted average number of shares, basic		338,790,909		338,790,909
Basic earnings per share (US$)		1.23882		0.68221

	For the year ended
	December 31,
Diluted earnings	2010		2009
	ThUS$		ThUS$
Earnings attributable to controlling company’s equity holders (ThUS$)		419,702		231,126
Weighted average number of shares, basic		338,790,909		338,790,909
Adjustment diluted weighted average shares Stock options		954,544		-
Weighted average number of shares, diluted		339,745,453		338,790,909
Diluted earnings per share (US$)		1.23534		0.68221

F-103

NOTE 33 - CONTINGENCIES

a)     Lawsuits

a1)   Actions brought by Lan Airlines S.A. and Subsidiaries.

				Stage and level	Amounts
Company	Court	Case No.	Origin	of proceeding	involved
					ThUS$
Atlantic Aviation Investments LLC (AAI)	Supreme Court of the State of New York County of New York	07-6022920	Atlantic Aviation Investments LLC., an indirect subsidiary of Lan Airlines S.A. constituted under the laws of the state of Delaware, sued Varig Logística S.A. (“Variglog”) for the non-payment of four loans under loan agreements governed by the law of New York. These agreements provide for the acceleration of the loans in the event of sale of the original debtor, VRG Linhas Aéreas S.A.	Stage of execution in Switzerland of judgment condemning Variglog to repay the principal, interest and costs in favor of AAI. An embargo is held over the bank account of Variglog in Switzerland by AAI. Varilog is seeking recovery through the courts in Brazil.	17,100 plus interest and costs
Atlantic Aviation Investments LLC	Supreme Court of the State of New York County of New York	602286-09	Atlantic Aviation Investments LLC. Sued Matlin Patterson Global Advisers LLC, Matlin Patterson Global Opportunities Partners II LP, Matlin Patterson Global Opportunities Partners (Cayman) II LP y Volo Logistics LLC (a) as alter egos for Variglog, for failure to pay the four loans indicated in the previous note; and (b) for a default on their obligations of guarantors and other obligations under the Memorandum of Understanding signed by the parties on September 29, 2006	The court dismissed in part and upheld in part the motion to dismiss counterclaims brought by defendants in the case. The parties continue to conduct the test stage (discovery).	17,100 plus interest costs and damages

F-104

				Stage and level	Amounts
Company	Court	Case No.	Origin	of proceeding	involved
					ThUS$
Aerolane, Líneas Aéreas Nacionales del Ecuador S.A.	Distrital Tax Court N°2 (Guayaquil)	6319-4064-05	Against the regional director of the Guayaquil Internal Revenue Service for payment of VAT credit.	Delivered at first instance decision pending appeal against.	4,210
Lan Airlines S.A.	Tax Tribunal of Quito	23493-A	Against the regional director of the Quito Internal Revenue Service for payment of VAT credit.	Requested sentencing issue.	3,958
Aerolane, Líneas Aéreas Nacionales del Ecuador S.A.	Distrital Tax Court N°2 (Guayaquil)	09504-2010- 0114	Against the regional director of the Internal Revenue Service Guayaquil, to determine tax credit reduction by 2006.	Pending opening of term evidence.	4,565
Lan Argentina S.A.	15th National Court of first instance commercial, Buenos Aires.	10587/09	Request for bankruptcy of Southern Winds S.A. for various unpaid loans.	Successfully completed direct negotiations with the debtor, proceeding to desist the bankruptcy petition. Signed two agreements, one for Lan Argentina S.A. and another for LAN Airlines S.A. Recognized all debts. In the case of Lan Argentina S.A. the agreement was signed for U.S. $ 66,428 payable in 30 quotas. There is no expectation of a recovery.	66

F-105

a2)       Lawsuits against  Lan Airlines S.A. and Subsidiaries

				Stage and level	Amounts
Company	Court	Cause No.	Origin	of proceeding	involved
					ThUS$
Aerolinhas Brasileiras S.A.	Secretary of Finance of State of Río de Janeiro	2003	The administrative authority of Río de Janeiro, Brazil, notified breach action or fine for alleged non-payment of ICMS (VAT ) on import of Boeing-767 aircraft registered No. PR-ABB.	Pending resolution of the revision group to annul the fine.	3,000
Lan Argentina S.A.	Laboral, Salta, Argentina	24826/10	Labor demand initiated by a custom agent.	In order to answer demand	700
Lan Cargo S.A.	Civil Court of Asunción, Paraguay	78-362	Request of indemnification for damages interposed by his who had been general agent in Paraguay.	Pending appeal of the decision to reject one of the exceptions to lack of overt action, made by lawyers for the defendant.	437
Lan Airlines S.A. y Lan Cargo S.A.	European commission and Canada	-	Investigation of possible breaches of free Competition of cargo airlines, especially the fuel surcharge. On December 26, 2007, the Director General for Competition of the European Commission notified Lan Cargo S.A. and Lan Airlines S.A. of the instruction of a process against twenty-five cargo airlines, including Lan Cargo S.A., for alleged breaches of free competition in the European air cargot market, especially the intended fixing of a surcharge for fuel and cargo. Dated November 09, 2010 the Direction General for Competition of the European Commission notified Lan Cargo SA and Lan Airlines SA the imposition of fines in the amount of ThUS$ 10,916. This fine is being appealed by Lan Cargo SA and Lan Airlines SA We can not predict the outcome of the appeal process.	On 14 April 2008, answered the European Commission's notification. Appeal will be filed before the next day January 25, 2011.	10,916
Lan Cargo S.A. and Lan Airlines S.A.	Competent tribunal of the United States and Canada to hear class actions	-	As a consequence of the investigation into alleged breaches of free competition of cargo airlines, especially fuel surcharge	Case is in the process of discovery of evidence	Undetermined

F-106

				Stage and level	Amounts
Company	Court	Case No.	Origin	of proceeding	involved
					ThUS$
Lan Logistics, Corp	Federal Court, Florida, United States	-	In mid June 2008 a demand was presented for purchase option right for sale of LanBox.	Failed against Lanlogistics, Corp. for $ 5 million, which is appealing to the court of appeals. Appeal process takes between six months to a year.	Undetermined
Aerolinhas Brasileiras S.A.	Competent court of United States for hearing class actions	-	As a consequence of the investigation into alleged breaches of free competition of cargo airlines, especially fuel surcharge	Investigation pending.	Undetermined
Aerolinhas Brasileiras S.A.	Conselho Administrativo de Defesa Econômica, Brasil	-	Investigation of alleged breaches of free competition of cargo airlines, especially fuel surcharge.	Investigation pending.	Undetermined
Lan Airlines S.A. "Brazil"	Instituto de Defesa do Consumidor de Sao Paulo	-	The Department of Consumer Protection and Defense ("PROCON") has applied a fine to Lan Airlines S.A. in the amount of R$1,688,240.00 equivalent to approximately ThUS$ 970. This penalty relates to thecancellation of flights to Chile as a product of the 2010 earthquake, holding that Lan Airlines S.A. did not act in accordance with the rules applicable to the facilities and offered no compensation to passengers who could not travel as a result of this extraordinary	Fine imposed by the consumer entity Sao Paulo	970

Considering the stage of process for each of the cases mentioned above and/or the improbable event of obtaining an adverse sentence, as of December 31, 2010 the Company has estimated that is not necessary to make a provision for any case, with the exception of the significant matter relating to the European Commission which was reported to the SVS. A provision of ThUS$ 10,916 has been recorded for the decision issued by the European Commission on November 9, 2010.

F-107

NOTE 34 - COMMITMENTS

(a)      Loan covenants

With respect to various loans signed by the Company for the financing of Boeing 767 aircraft, which carry the guarantee of the United States Export–Import Bank, limits have been set on some of the parent Company’s financial indicators on a consolidated basis. Restrictions are also in place on the Company’s management in terms of its ownership and disposal of assets. These same restrictions also exist with respect to several contracts signed by its subsidiary Lan Cargo S.A. for the financing of Boeing 767 aircraft with the guarantee of the US Export–Import Bank, this time applied to both the parent Company and its subsidiary Lan Cargo S.A. Regarding the various contracts of the Company for the financing of Airbus A320 aircraft, which are guaranteed by European export credit agencies, limits have been established on some of the Company’s financial indicators, together with management restrictions in terms of its ownership and asset disposals.  In connection with the financing of spare engines for its fleet Boeing 767 and 777, which are guaranteed by the Export - Import Bank of the United States, restrictions have been placed on the shareholding of its guarantors and their legal successor in case of merger.

In relation to credit agreements entered into by the Company, for the present year local banks have set limits to some financial indicators of the parent company on a consolidated basis. At December 31, 2010, the Company is in compliance with these covenants.

F-108

(b)      Commitments under operating leases as lessee

Details of the main operating leases are as follows:

		As of		As of
		December 31,		December 31,
Lessor	Aircraft	2010		2009
Delaware Trust Company, National Association (CRAFT)	(*) Bombardier Dhc8-200		9		-
International Lease Finance Corporation	Boeing 767		8		8
KN Operating Limited (NAC)	(*) Bombardier Dhc8-400		4		-
Orix Aviation Systems Limited	Airbus 320		2		2
Pembroke B737-7006 Leasing Limited	(*) Boeing 737		2		-
International Lease Finance Corp. (ILFC)	(*) Boeing 737		2		-
Sunflower Aircraft Leasing Limited - AerCap	Airbus 320		2		-
Celestial Aviation Trading 35 Limited	Boeing 767		1		1
MSN 167 Leasing Limited	Airbus 340		1		1
Celestial Aviation Trading 16 Limited	Boeing 767		1		1
CIT Aerospace International	Boeing 767		1		1
Celestial Aviation Trading 39 Ltd. GECAS (WFBN)	Boeing 777		1		1
Celestial Aviation Trading 23 Ltd. GECAS (WFBN)	Boeing 777		1		1
Celestial Aviation Trading 47 Ltd. GECAS (WFBN)	Boeing 767		1		-
Celestial Aviation Trading 51 Ltd. GECAS (WFBN)	Boeing 767		1		-
AerCap (WFBN)	Airbus 320		1		-
MSN 32415, LLC - AWAS	(*) Boeing 737		1		-
JB 30244, Inc. - AWAS	(*) Boeing 737		1		-
NorthStar AvLease Ltd.	(*) Bombardier Dhc8-200		1		-
JB 30249, Inc. - AWAS	(*) Boeing 737		1		-
TIC Trust (AVMAX)	(*) Bombardier Dhc 8-200		1		-
ACS Aircraft Finance Bermuda Ltd. - Aircastle (WFBN)	(*) Boeing 737		1		-
MCAP Europe Limited - Mitsubishi (WTC)	(*) Boeing 737		1		-
Total			45		16

(*) Aircraft incorporated through the business combination with Aires S.A.

The rentals are shown in profit and loss for the period as they are incurred.

F-109

The minimum future lease payments not yet payable are the following:

	As of		As of
	December 31,		December 31,
	2010		2009
	ThUS$		ThUS$
Up to a year		151,781		90,731
More than one year and five years.		440,632		273,055
More than five years		107,593		80,165
Total		700,006		443,951

The minimum lease payments charged to income are the following:

	For year ended
	December 31,
	2010		2009		2008
	ThUS$		ThUS$		ThUS$
Minimum operating lease payments		93,219		81,425		67,781
Total		93,219		81,425		67,781

In April 2009, the first B777-Freighter aircraft was incorporated and in May 2009 the second of these aircraft arrived. In September 2009 the leasing of the Boeing 767-300F, registration CC-CGN, will end, aircraft was returned in October 2009. In September 2010 the Company added two Airbus A320-200 aircraft for a period of six years, while in December 2010 the Company added an aircraft of the same fleet for a period of eight years. Additionally, in November and December 2010, The Company added two Boeing 767-300F aircraft, with terms of contract for seven and six years respectively.

From October 2009 lease terms were modified for 7 Boeing 767-300ER aircraft. Five aircraft were extended from three to seven years and two aircraft were reduced by two to three years.

Later, in June 2010, the term of income was extended for another Boeing 767-300ER aircraft for two years, ending in May 2013.

The operating lease agreements signed by the Company and its subsidiaries state that maintenance of the aircraft should be done according to the manufacturer’s technical instructions and within the margins agreed in the leasing agreements, a cost that must be assumed by the lessee. The lessee should also contract insurance for each aircraft to cover associated risks and the amounts of these assets. Regarding rental payments, these are unrestricted and may not be netted against other accounts receivable or payable between the lessor and lessee.

F-110

(c) Oher commitments

At December 31, 2010 the Company has existing letters of credit,  guarantee ballots and guarantee insurance policies as follows:

			Value	Release
Creditor Guaranteed	Debtor	Type	ThUS$	date
Deutsche Bank A.G.	Lan Airlines S.A.	Two letters of credit	20,000	31-Jan-11
The Royal Bank of Scotland plc	Lan Airlines S.A	Two letters of credit	18,000	08-Jan-11
Dirección General de Aviación Civil de Chile	Lan Airlines S.A.	Forty-three guarantee ballots	5,833	18-Jan-11
Dirección Seccional de Aduanas de Bogota	Línea Aérea Carguera
	de Colombia S.A.	Two guarantee insurance policies	2,430	07-Apr-14
Washington International Insurance	Lan Airlines S.A.	Seven Letter of credit	3,040	05-Apr-11
Metropolitan Dade County	Lan Airlines S.A.	Five letters of credit	1,675	31-May-11

F-111

NOTE 35 – TRANSACTIONS WITH RELATED PARTIES

a) Transactions with related parties for the period ended December 31, 2010

			Country	Other information on			Amount of
Tax No.	Related parties	Relationship	of origin	related party	Transaction	Currency	transactions
							ThUS$
96.810.370-9	Inversiones Costa	Controlling	Chile	Investments	Property rental granted	CLP	77
	Verde Ltda. y CPA	Shareholder			Passenger services provided	CLP	13
96.847.880-K	Lufthansa Lan T echnical	Associate	Chile	Training center	Building rental granted	US$	17
	Training S.A.				Training received	US$	(363	)
					Assignment of debt granted	US$	18
					Other prepayments received	US$	(467	)
96.921.070-3	Austral Sociedad	Associate	Chile	Concessionaire	Aviation rates received	CLP	(35	)
	Concesionaria S.A.				Basic consumptions received	CLP	(8	)
					Aeronautical concession received	CLP	(153	)
					Dividend distribution	CLP	73
87.752.000-5	Granja Marina	Other related	Chile	Fish farming	Passenger services provided	CLP	63
	T ornagaleones S.A.	parties
96.669.520-K	Red de Televisión	Other related	Chile	Television	Passenger services provided	CLP	65
	Chilevisión S.A.	parties			Publicity services received	CLP	(100	)
96.894.180-1	Bancard Inversiones Ltda.	Other related	Chile	Professional advice	Professional advice received	CLP	(7	)
		parties
Foreign	Inversora Aeronáutica	Other related	Argentina	Investments	Building rental received	US$	(271	)
	Argentina	parties			Other services provided	US$	13

F-112

b) Transactions with related parties for the period ended December 31, 2009

			Country	Other information on			Amount of
Tax No.	Related parties	Relationship	of origin	related party	Transaction	Currency	transactions
							ThUS$
96.810.370-9	Inversiones Costa	Controlling	Chile	Investments	Property rental granted	CLP	65
	Verde Ltda. y CPA	Shareholder			Passenger services provided	CLP	15
96.847.880-K	Lufthansa Lan T echnical	Associate	Chile	Training center	Building rental granted	US$	17
	T raining S.A.				Training received	US$	(1,103	)
					Assignment of debt granted	US$	2
					Other prepayments provided	US$	137
96.921.070-3	Austral Sociedad	Associate	Chile	Concessionaire	Aviation rates received	CLP	(93	)
	Concesionaria S.A.				Basic consumptions received	CLP	(11	)
					Aeronautical concession received	CLP	(297	)
78.005.760-2	Sociedad de Seguridad	Other related	Chile	Safety services	Safety service received	CLP	(575	)
	Aérea S.A.	parties			Other prepayments provided	CLP	1,018
87.752.000-5	Granja Marina	Other related	Chile	Fish farming	Passenger services provided	CLP	29
	T ornagaleones S.A.	parties
96.669.520-K	Red de T elevisión	Other related	Chile	Television	Publicity services received	CLP	(949	)
	Chilevisión S.A.	parties			Passenger services provided	CLP	623
96.894.180-1	Bancard Inversiones Ltda.	Other related	Chile	Professional advice	Professional advice received	CLP	(82	)
		Parties			Other prepayments received	CLP	(12	)
Foreign	Inversora Aeronáutica	Other related	Argentina	Investments	Building rental received	US$	(386	)
	Argentina	parties

F-113

c)      Compensation of key management

The Company has defined for these purposes that key management personnel are the executives who define the Company’s policies and major guidelines and who directly affect the results of the business, considering the levels of vice-presidents, chief executives and directors.

	For the year ended
	December 31,
	2010		2009
	ThUS$		ThUS$
Remuneration		7,505		6,226
Management fees		150		131
Corrections of value and non-monetary benefits		352		340
Short-term benefits		4,680		4,480
Share-based payments		3,523		1,183
Others		-		780
Total		16,210		13,140

F-114

NOTE 36 - SHARE-BASED PAYMENTS

The compensation plans implemented through the granting of options to subscribe and pay for shares, which have been granted since the last quarter of 2007, are shown in the consolidated statements of  financial position in accordance with IFRS 2 “Share-based payments”, booking the effect of the fair value of the options granted as a charge to remuneration on a straight-line basis between the date of granting the options and the date on which these become vested.

During the last quarter of 2009, the original terms of the plan were amended regarding subscription and payment options. These modifications were carried out during the first quarter of 2010 and established a new term and exercise price.

The original grant and subsequent amendments have been formalized through the signing of option contracts for the subscription of shares according to the proportions shown in the accrual schedule and which are related to the permanence of the executive on those dates for exercising the options:

Percentage	Period
30%	From the October 29, 2010 and until December 31, 2011
70%	From the October 30, 2011 and until December 31, 2011

These options have been valued and booked at their fair value on the grant date, determined using the “Black-Scholes-Merton” method.

All options expire on December 31, 2011.

	Number of share
	options
Stock options under a share-based payment agreement balance as of January 1, 2010		1,311,000
Stock options granted		898,091
Stock options annulled		-
Stock options exercised		-
Stock options under a share-based payment agreement balance as of December 31, 2010		2,209,091

Entry data of valuation model of options used for stock options conceded during the period.

Weighted average

Exercise

Expected

Life of

Dividends

Risk-free

share price

price

volatility

option

expected

interest

US$

17.3

US$

14.5

33.20

%

1.9 years

50

%

0.0348

F-115

NOTE 37 - THE ENVIRONMENT

In accordance with the General Environment Bases Law issued in Chile and its complementary regulations, there are no provisions that affect the operation of air transport services

F-116

NOTE 38 – SUBSEQUENT EVENTS

The consolidated financial statements of Lan Airlines S.A. and Subsidiaries as of December 31, 2010 have been approved in ordinary session of the Board on March 01, 2011, which was attended by the following directors:

1. Jorge Awad Mehech,

2. Darío Calderón González,

3. José Cox Donoso,

4. Ramón Eblen Kadis,

5. Bernardo Fontaine Talavera,

6. Carlos Heller Solari, and

7. Juan Gerardo Jofré Miranda.

On January 25, 2011 direct subsidiaries Lan Cargo S.A. and Inversiones Lan S.A., signed a promise of sale, as promissory sellers with Bethia S.A., as promissory purchaser, for 100% of the shares of companies Blue express Intl SA and Blue Express SA, companies dedicated to ground courier services, operating brands and certain computer programs. In the same promise, contemplates the future sale by Lan Airlines S.A. trademarks and Internet domains associated with Blue Express Intl S.A. and Blue Express S.A. along with some computer systems. The final price is subject to the completion of a due diligence process and the fulfillment of certain conditions of the promissory agreement. The price stated in the promissory agreement is ThUS$ 54,000 subject to any adjustments arising as a result of the due diligence realized on behalf of Bethia S.A.

Bethia S.A. is an entity related to Lan Airlines SA in the terms provided in Article 100 of Law 18,045 Securities Market.

On January 18, 2011 the parties of the MOU (1) and Mrs. Maria Cláudia Oliveira Amaro, Maurício Rolim Amaro, Noemy Almeida Olivera Amaro and Joao Francisco Amaro (“Amaro Family”), as the only shareholders of TEP, signed (a) an Implementation Agreement and (b) a binding Exchange Offer Agreement ("Contracts Signed") containing the final terms and conditions of the proposed partnership between LAN and TAM

(1) On August 13, 2010 LAN reported as a significant matter to the Superintendency of Securities and Insurance that LAN, Costa Verde Aeronáutica S.A. and Inversiones Mineras del Cantábrico S.A. (the last two, "Cueto subsidiaries”), TAM S.A. (“TAM”) and TAM Empreendimentos e Participacoes S.A. (“TEP”) signed a non-binding  Memorandum of Understanding ("MOU") for which the primary terms were outlined.

Except as mentioned above, subsequent to December 31, 2010 until the date of issuance of these financial statements, the Company has no knowledge of any other subsequent events, that may significantly affect the balances or their interpretation.

F-117

NOTE 39 – BUSINESS COMBINATIONS

On November 26, 2010 Lan Pax Group S.A., a subsidiary of Lan Airlines S.A., acquired 98.942% of the Colombian company Aerovías de Integración Regional, AIRES S.A. This acquisition was made through the purchase of 100% of the shares of the Panamanian corporations AKEMI Holdings S.A. and SAIPAN Holding S.A., which owned the aforementioned percentage of AIRES S.A. The purchase price was ThUS$ 12,000.

Aerovías de Integración Regional, AIRES S.A., is a Colombian airline founded in 1980, which is currently the second largest operator within the Colombian domestic market with a market share of 22%. AIRES offers regular service to 27 domestic destinations within Colombia as well as 3 international destinations. Synergies are expected between the combination of AIRES S.A. in the Colombian market and efficiency of the business model of LAN Airlines S.A. Additionally, better performance is expected by the business of Lan Airlines S.A. (passengers and cargo) through an increase in coverage in Latin America.

The Company has measured the non-controlling interest in Aires S.A. using the proportionate share of the non-controlling interest in net identifiable assets of the acquired.

The business combination is recognized in the statement of financial position of Lan Airlines S.A. and Subsidiaries as goodwill of ThUS$ 94,224.

Summary statement of financial position
	ThUS$				ThUS$
Current assets		27,315		Current liabilities		125,193
Non-current assets		31,652		Non-current liabilities		20,327
				Equity		(86,553	)
Total assets		58,967		Total liabilities & equity		58,967
Controlling interest		(82,224	)
Goodwill determination
	ThUS$
Controlling interest		82,224
Purchase price		12,000
Goodwill		94,224

In accordance with IFRS 3, the determined value of goodwill is provisional.

F-118

EX-4.1X4

Exhibit 4.1.4

AMENDMENT No. 6

TO THE

SECOND A320 FAMILY PURCHASE AGREEMENT

BETWEEN

LAN AIRLINES S.A.

AND

AIRBUS S.A.S.

This amendment No. 6 to the Second A320 Family Purchase Agreement (as defined below) is entered into as of May 2010, by and between

AIRBUS S.A.S., having its principal office at:

1 Rond-Point Maurice Bellonte

31707 BLAGNAC  -  CEDEX

FRANCE

(hereinafter referred to as the "Seller") of the one part

AND

LAN AIRLINES S.A. having its principal office at :

Edificio Huidobro

Avenida Presidente Riesco 5711– 20th Floor

Las Condes

SANTIAGO

CHILE

 (hereinafter referred to as the "Buyer") of the other part.

The Buyer and the Seller being collectively referred to as the "Parties" and individually as a "Party"

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WHEREAS

A The Buyer and the Seller entered into an A320 family purchase agreement dated March 20th, 1998 covering the purchase by the Buyer and the sale by the Seller of twenty (20) A320 family aircraft bearing rank numbers 1 to 20. By an amendment No.1 to such purchase agreement, entered into by the Buyer and the Seller on February 24th, 2000 the number of A320 family aircraft to be purchased by the Buyer pursuant to such purchase agreement was increased to twenty five (25), with the additional five (5) A320 family aircraft bearing rank numbers 21 to 25. Such twenty five (25) A320 family aircraft are hereinafter referred to as the “Original A320 Family Aircraft”, and such purchase agreement, amendment No.1, and all exhibits, appendices and letter agreements thereto are together referred to as the “Original A320 Family Purchase Agreement”.

B The Buyer and the Seller entered into a deed of amendment and restatement of the Original A320 Family Purchase Agreement, dated August 2nd, 2000, dividing the Original A320 Family Purchase Agreement into two (2) separate purchase agreements, the first agreement concerning the Original A320 Family Aircraft bearing rank numbers 1 to 20, and the second agreement concerning the Original A320 Family Aircraft bearing rank numbers 21 to 25. The second agreement as supplemented with all exhibits and appendices thereto is hereinafter referred to as the “Second A320 Family Purchase Agreement”.

C The Buyer and the Seller entered into an amendment No.1 to the Second A320 Family Purchase Agreement dated November 14th 2003 (the “Amendment No.1”) modifying certain provisions of the Second A320 Family Purchase Agreement.

D The Buyer and the Seller entered into an amendment No.2 to the Second A320 Family Purchase Agreement dated October 4th, 2005 (the “Amendment No.2”) covering the purchase by the Buyer and the sale by the Seller of twenty five (25) additional firm A320 family aircraft comprising twenty (20) A318-100, one (1) A319-100 and four (4) A320-200 aircraft type (the ”Additional Aircraft”).

E The Buyer and the Seller entered into an amendment No.3 to the Second A320 Family Purchase Agreement dated March 6th, 2007 (the “Amendment No.3”) covering the conversion of fifteen (15) Option Aircraft (as defined in the Amendment No.2) into firmly ordered Converted Aircraft (as defined in Amendment No.3).

F The Buyer and the Seller entered into an amendment No. 4 to the Second A320 Family Purchase Agreement dated June 11th, 2008 (the “Amendment No.4”) covering the conversion of five (5) A318-100 Additional Aircraft bearing rank Nos. 26 to 30 as set forth in Amendment No.2 and three (3) A318-100 Converted Aircraft bearing rank Nos. 37, 40 and 43 as set forth in Amendment No.3, into A319 aircraft type.

G The Buyer and the Seller entered into an amendment No. 5 to the Second A320 Family Purchase Agreement dated December 23rd, 2009 (the “Amendment No.5”) covering the order of thirty (30) incremental A319-100 and A320-200 aircraft and amending certain provisions of the Second A320 Family Purchase Agreement.

H [***]

I The Buyer and the Seller wish to enter into this amendment No. 6 to the Second A320 Family Purchase Agreement (the “Amendment No.6”) covering the conversion of the aircraft type of three (3) A319-100 First Batch of Incremental Aircraft (as defined in the Amendment No.5) into firmly ordered A320-200 First Batch Incremental Aircraft and the advancement of the scheduled delivery positions of Two (2) Aircraft from the First Batch of Incremental Aircraft and Eleven (11) Aircraft from the Second Batch of Incremental Aircraft (as defined in the Amendment No.5).

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NOW IT IS HEREBY AGREED AS FOLLOWS :

0. DEFINITIONS

0.1 The terms "herein", "hereof" and "hereunder" and words of similar import refer to this Amendment N° 6 and capitalized terms used herein and not otherwise defined in this Amendment N° 6 shall have the meanings assigned thereto in the  Purchase Agreement (as defined below).

0.2 Purchase Agreement:       means the Second A320 Family Purchase Agreement together with Amendments No. 1 to 5 thereto.

1. SCOPE

1.1 The Buyer has requested and the Seller has agreed to hereby convert the aircraft type of three (3) Aircraft from the First Batch of Incremental Aircraft and advance the Scheduled Delivery Quarters of Two (2) Aircraft from the First Batch of Incremental Aircraft and Eleven (11) Aircraft from the Second Batch of Incremental Aircraft upon the terms and conditions contained in this Amendment No.6.

1.2 The Parties agree to amend certain provisions of the Second A320 Family Purchase Agreement pursuant to the terms and conditions set out in this Amendment No.6.

1.3 The Parties hereby agree that in the event of any inconsistency between the terms and conditions of the Second A320 Family Purchase Agreement (save for Amendments Nos.1 to 5) and those of the Original A320 Family Purchase Agreement, then the Original A320 Family Purchase Agreement shall prevail to the extent of such inconsistency.

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2. DELIVERY SCHEDULE

Pursuant to the Buyer’s request, the Scheduled Delivery Quarters of two (2) Aircraft from the First Batch of Incremental Aircraft and eleven (11) Aircraft from the Second Batch of Incremental Aircraft shall be amended as set forth in the table here below :

Rank number	Aircraft Type	Original Scheduled Delivery Quarters	Revised Scheduled Delivery Months / Quarters	Aircraft batch
54	A319-100	2nd Quarter [***]	[***]	First Batch of Incremental Aircraft
55	A320-200	4th Quarter [***]	[***]	First Batch of Incremental Aircraft
65	A320-200	4th Quarter [***]	3rd Quarter 2012	Second Batch of Incremental Aircraft
66	A319-100	1st Quarter [***]	[***]	Second Batch of Incremental Aircraft
67	A320-200	2nd Quarter [***]	3rd Quarter [***]	Second Batch of Incremental Aircraft
68	A319-100	3rd Quarter [***]	4th Quarter [***]	Second Batch of Incremental Aircraft
69	A320-200	3rd Quarter [***]	4th Quarter [***]	Second Batch of Incremental Aircraft
70	A320-200	4th Quarter [***]	4th Quarter [***]	Second Batch of Incremental Aircraft
71	A320-200	4th Quarter [***]	1st Quarter [***]	Second Batch of Incremental Aircraft
72	A319-100	1st Quarter [***]	1st Quarter [***]	Second Batch of Incremental Aircraft
73	A319-100	3rd Quarter [***]	2nd Quarter [***]	Second Batch of Incremental Aircraft
74	A320-200	4th Quarter [***]	3rd Quarter [***]	Second Batch of Incremental Aircraft
75	A320-200	4th Quarter [***]	4th Quarter [***]	Second Batch of Incremental Aircraft

It is furthermore agreed by the Parties that the provisions and obligations set forth in article 9.1.5 of clause 2.1.1 to the Amendment No 5 shall herewith be considered fulfilled in their entirety and neither Party shall have any further rights and or obligations under the Amendment No 5 toward the other Party with respect thereto.

3. AIRCRAFT TYPE CONVERSION

Pursuant to the Buyer’s request to convert the aircraft type of three (3) Aircraft from the First Batch of Incremental Aircraft, the Parties hereby agree that the aircraft type of First Batch of Incremental Aircraft with rank numbers 48, 49 and 50, as set forth in article 9.1.2 of clause 2.1.1 of Amendment No.5 shall hereby be amended as set out in the table here below:

5/180

Rank number	Scheduled Delivery Months	Original Aircraft type	Revised Aircraft type	Aircraft batch
48	[***]	A319-100	A320-200	First Batch of Incremental Aircraft
49	[***]	A319-100	A320-200	First Batch of Incremental Aircraft
50	[***]	A319-100	A320-200	First Batch of Incremental Aircraft

4. INCREMENTAL AIRCRAFT

For the avoidance of doubt the quantity per aircraft type as defined in clause 1.1 of Amendment 5 shall hereby be amended to read:

QUOTE

1.1 The Seller shall sell and deliver and the Buyer shall buy and take delivery of ten (10) A319-100 aircraft and twenty (20) A320-200 aircraft (respectively the “A319 Aircraft” and the “A320 Aircraft”) upon the terms and conditions contained in this Amendment No.5 (hereinafter for the purposes of this Amendment N°5 collectively the “Incremental Aircraft”).

UNQUOTE

5. PREDELIVERY PAYMENTS

The parties hereby agree, that upon signature of this Amendment N° 6, the Buyer shall with respect to the First Batch of Incremental Aircraft with rank numbers 48, 49 and 50 and Second Batch of Incremental Aircraft with rank numbers 54 and 55 and from 65 to 75, [***] Predelivery Payments due in accordance with the Predelivery Payment schedule set out in Clause 5 of the Second A320 Family Purchase Agreement, as replaced by Letter Agreements No.1A and 1B to Amendment No.5.

6. AMENDMENT AND LETTER AGREEMENT STATUS

It is hereby agreed by the Parties that the letters agreements n° 1, 2, 3, 4, 5, 6, 7, 8A, 8B, 8C, 9 and 10 to the Second A320 Family Aircraft Purchase Agreement and the Amendments 1, 2, 3 and 4 to the Second A320 Family Aircraft Purchase Agreement shall not in any way be applicable to the Incremental Aircraft unless expressly stated otherwise in Amendment No. 5 or this Amendment N° 6.

7. EFFECT OF THE AMENDMENT

7.1 This Amendment No. 6 contains the entire agreement between the Parties with respect to the subject matter hereof and supersedes any previous understanding, commitments or representations whatsoever, whether oral or written.

7.2 The Purchase Agreement shall be deemed amended to the extent provided in this Amendment No. 6 and, except as specifically amended hereby, shall continue in full force and effect in accordance with its original terms.

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7.3 The Parties agree that this Amendment No. 6 shall constitute an integral, non-severable part of the Purchase Agreement and be governed by all of its provisions. For the sake of clarity, Amendment 5 and its Appendices, Letter Agreements and Side Letter No.1 shall continue to apply to the First Batch of Incremental Aircraft with rank numbers 48, 49 and 50 and Second Batch of Incremental Aircraft with rank numbers 54 and 55 and from 65 to 75, unless expressly stated otherwise in this Amendment N° 6.

7.4 In the event of any inconsistency between the terms and conditions of the Purchase Agreement and those of the present Amendment N°6, the latter shall prevail to the extent of such inconsistency, whereas the part not concerned by such inconsistency shall remain in full force and effect.

7.5 This Amendment N° 6 will not be modified or varied except by an instrument in writing executed by both Parties.

7.6 Each of the Parties hereto agree that the provisions of this Amendment No. 6 are personal to it and will not without the prior written consent of the other Parties disclose such information to any other Party. [***]

7.7 The Parties agree that clause 21 of the Second A320 Family Purchase Agreement shall govern the assignability and transferability of each Party’s rights and obligations under this Amendment No.6.

7.8 This Amendment N°6 may be signed by the Parties hereto in separate counterparts, each of which when so signed and delivered will be an original, but all such counterparts will together constitute but one and the same instrument.

7.9 This Amendment N°6 shall be governed by and construed in accordance with the laws of England.

7/180

 IN WITNESS WHEREOF this Amendment No. 6 to the Second A320 Family Purchase Agreement was duly entered into the day and year first above written.

For and on behalf of	For and on behalf of
LAN AIRLINES S.A.	AIRBUS S. A. S.
Name :	Name :
Title :	Title :

LAN AIRLINES S.A.

By           :

Its           :

Date           :

8/180

AMENDMENT No. 7

TO THE

SECOND A320 FAMILY PURCHASE AGREEMENT

BETWEEN

LAN AIRLINES S.A.

AND

AIRBUS S.A.S.

A320F - LAN - AMDT 7 - Second A320 Family PA

Ref. CT1001125.2

***This information is subject to confidential treatment and has been omitted and filed separately with the commission.

9/180

This amendment No. 7 to the Second A320 Family Purchase Agreement (as defined below) is entered into as of May 2010, by and between

AIRBUS S.A.S., having its principal office at:

1 Rond-Point Maurice Bellonte

31707 BLAGNAC  -  CEDEX

FRANCE

(hereinafter referred to as the "Seller") of the one part

AND

LAN AIRLINES S.A. having its principal office at :

Edificio Huidobro

Avenida Presidente Riesco 5711– 20th Floor

Las Condes

A320F - LAN - AMDT 7 - Second A320 Family PA

Ref. CT1001125.2

***This information is subject to confidential treatment and has been omitted and filed separately with the commission.

10/180

SANTIAGO

CHILE

(hereinafter referred to as the "Buyer") of the other part.

The Buyer and the Seller being collectively referred to as the "Parties" and individually as a "Party"

A320F - LAN - AMDT 7 - Second A320 Family PA

Ref. CT1001125.2

***This information is subject to confidential treatment and has been omitted and filed separately with the commission.

11/180

WHEREAS

A The Buyer and the Seller entered into an A320 family purchase agreement dated March 20th, 1998 covering the purchase by the Buyer and the sale by the Seller of twenty (20) A320 family aircraft bearing rank numbers 1 to 20. By an amendment No.1 to such purchase agreement, entered into by the Buyer and the Seller on February 24th, 2000 the number of A320 family aircraft to be purchased by the Buyer pursuant to such purchase agreement was increased to twenty five (25), with the additional five (5) A320 family aircraft bearing rank numbers 21 to 25. Such twenty five (25) A320 family aircraft are hereinafter referred to as the “Original A320 Family Aircraft”, and such purchase agreement, amendment No.1, and all exhibits, appendices and letter agreements thereto are together referred to as the “Original A320 Family Purchase Agreement”.

B The Buyer and the Seller entered into a deed of amendment and restatement of the Original A320 Family Purchase Agreement, dated August 2nd, 2000, dividing the Original A320 Family Purchase Agreement into two (2) separate purchase agreements, the first agreement concerning the Original A320 Family Aircraft bearing rank numbers 1 to 20, and the second agreement concerning the Original A320 Family Aircraft bearing rank numbers 21 to 25. The second agreement as supplemented with all exhibits and appendices thereto is hereinafter referred to as the “Second A320 Family Purchase Agreement”.

C The Buyer and the Seller entered into an amendment No.1 to the Second A320 Family Purchase Agreement dated November 14th 2003 (the “Amendment No.1”) modifying certain provisions of the Second A320 Family Purchase Agreement.

D The Buyer and the Seller entered into an amendment No.2 to the Second A320 Family Purchase Agreement dated October 4th, 2005 (the “Amendment No.2”) covering the purchase by the Buyer and the sale by the Seller of twenty five (25) additional firm A320 family aircraft comprising twenty (20) A318-100, one (1) A319-100 and four (4) A320-200 aircraft type (the ”Additional Aircraft”).

E The Buyer and the Seller entered into an amendment No.3 to the Second A320 Family Purchase Agreement dated March 6th, 2007 (the “Amendment No.3”) covering the conversion of fifteen (15) Option Aircraft (as defined in the Amendment No.2) into firmly ordered Converted Aircraft (as defined in Amendment No.3).

F The Buyer and the Seller entered into an amendment No. 4 to the Second A320 Family Purchase Agreement dated June 11th, 2008 (the “Amendment No.4”) covering the conversion of five (5) A318-100 Additional Aircraft bearing rank Nos. 26 to 30 as set forth in Amendment No.2 and three (3) A318-100 Converted Aircraft bearing rank Nos. 37, 40 and 43 as set forth in Amendment No.3, into A319 aircraft type.

A320F - LAN - AMDT 7 - Second A320 Family PA

Ref. CT1001125.2

***This information is subject to confidential treatment and has been omitted and filed separately with the commission.

12/180

G The Buyer and the Seller entered into an amendment No. 5 to the Second A320 Family Purchase Agreement dated December 23rd, 2009 (the “Amendment No.5”) covering the order of thirty (30) incremental A319-100 and A320-200 aircraft and amending certain provisions of the Second A320 Family Purchase Agreement.

H [***]

I The Buyer and the Seller entered into an amendment No. 6 to the Second A320 Family Purchase Agreement (the “Amendment No.6”) covering the conversion of the aircraft type of three (3) A319-100 First Batch of Incremental Aircraft (as defined in the Amendment No.5) into firmly ordered A320-200 First Batch Incremental Aircraft and the advancement of the scheduled delivery positions of Two (2) Aircraft from the First Batch of Incremental Aircraft and Eleven (11) Aircraft from the Second Batch of Incremental Aircraft (as defined in the Amendment No.5).

J The Buyer and the Seller wish to enter into an amendment No. 7 to the Second A320 Family Purchase Agreement (the “Amendment No.7”) covering the advancement of the scheduled delivery positions of Three (3) Converted Aircraft.

NOW IT IS HEREBY AGREED AS FOLLOWS :

A320F - LAN - AMDT 7 - Second A320 Family PA

Ref. CT1001125.2

***This information is subject to confidential treatment and has been omitted and filed separately with the commission.

13/180

0. DEFINITIONS

0.1 The terms "herein", "hereof" and "hereunder" and words of similar import refer to this Amendment N° 7 and capitalized terms used herein and not otherwise defined in this Amendment N° 7 shall have the meanings assigned thereto in the  Purchase Agreement (as defined below).

0.2 Purchase Agreement:     means the Second A320 Family Purchase Agreement together with Amendments No. 1 to 6 thereto.

1. SCOPE

1.4 The Buyer has requested and the Seller has agreed to hereby advance the Scheduled Delivery Months of Three (3) Converted Aircraft upon the terms and conditions contained in this Amendment No.7.

1.5 The Parties agree to amend certain provisions of the Second A320 Family Purchase Agreement pursuant to the terms and conditions set out in this Amendment No.7.

1.6 The Parties hereby agree that in the event of any inconsistency between the provisions of the Second A320 Family Purchase Agreement which have not been amended by Amendments Nos. 1 to 6 and those of the Original A320 Family Purchase Agreement, then the Original A320 Family Purchase Agreement shall prevail to the extent of such inconsistency.

A320F - LAN - AMDT 7 - Second A320 Family PA

Ref. CT1001125.2

***This information is subject to confidential treatment and has been omitted and filed separately with the commission.

14/180

2. DELIVERY SCHEDULE

Pursuant to the Buyer’s request, the Scheduled Delivery Months of three (3) Converted Aircraft shall be amended as set forth in the table here below :

Rank number	Aircraft Type	Original Scheduled Delivery Months	Revised Scheduled Delivery Months	Aircraft Batch
42	A319-100	[***]	[***]	Converted Aircraft
44	A320-200	[***]	[***]	Converted Aircraft
45	A320-200	[***]	[***]	Converted Aircraft

3. PREDELIVERY PAYMENTS

The Parties hereby agree that, in [***], the Buyer shall with respect to the Converted Aircraft with rank number 45 [***] of the Predelivery Payments due in accordance with the Predelivery Payment schedule set out in Clause 5 of the Second A320 Family Purchase Agreement, as amended by Amendment No.2.

4. EFFECT OF THE AMENDMENT

4.1 This Amendment No. 7 contains the entire agreement between the Parties with respect to the subject matter hereof and supersedes any previous understanding, commitments or representations whatsoever, whether oral or written.

4.2 The Purchase Agreement shall be deemed amended to the extent provided in this Amendment No. 7 and, except as specifically amended hereby, shall continue in full force and effect in accordance with its original terms.

4.3 The Parties agree that this Amendment No. 7 shall constitute an integral, non-severable part of the Purchase Agreement and be governed by all of its provisions.

A320F - LAN - AMDT 7 - Second A320 Family PA

Ref. CT1001125.2

***This information is subject to confidential treatment and has been omitted and filed separately with the commission.

15/180

4.4 In the event of any inconsistency between the terms and conditions of the Purchase Agreement and those of the present Amendment N°7, the latter shall prevail to the extent of such inconsistency, whereas the part not concerned by such inconsistency shall remain in full force and effect.

4.5 This Amendment N° 7 will not be modified or varied except by an instrument in writing executed by both Parties.

A320F - LAN - AMDT 7 - Second A320 Family PA

Ref. CT1001125.2

***This information is subject to confidential treatment and has been omitted and filed separately with the commission.

16/180

4.6 Each of the Parties hereto agree that the provisions of this Amendment No. 7 are personal to it and will not without the prior written consent of the other Parties disclose such information to any other Party. [***]

4.7 The Parties agree that clause 21 of the Second A320 Family Purchase Agreement shall govern the assignability and transferability of each Party’s rights and obligations under this Amendment No.7.

4.8 This Amendment N°7 may be signed by the Parties hereto in separate counterparts, each of which when so signed and delivered will be an original, but all such counterparts will together constitute but one and the same instrument.

4.9 This Amendment N°7 shall be governed by and construed in accordance with the laws of England.

A320F - LAN - AMDT 7 - Second A320 Family PA

Ref. CT1001125.2

***This information is subject to confidential treatment and has been omitted and filed separately with the commission.

17/180

IN WITNESS WHEREOF this Amendment No. 7 to the Second A320 Family Purchase Agreement was duly entered into the day and year first above written.

For and on behalf of	For and on behalf of
LAN AIRLINES S.A.	AIRBUS S. A. S.
Name :	Name :
Title :	Title :

LAN AIRLINES S.A.

By           :

Its           :

Date           :

A320F - LAN - AMDT 7 - Second A320 Family PA

Ref. CT1001125.2

***This information is subject to confidential treatment and has been omitted and filed separately with the commission.

18/180

AMENDMENT No. 8

TO THE

SECOND A320 FAMILY PURCHASE AGREEMENT

BETWEEN

LAN AIRLINES S.A.

AND

AIRBUS S.A.S.

A320F - LAN - AMDT 8 - Second A320 Family PA

Ref. CT1003497

***This information is subject to confidential treatment and has been omitted and filed separately with the commission

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This amendment No. 8 to the Second A320 Family Purchase Agreement (as defined below) is entered into as of          September 2010, by and between

AIRBUS S.A.S., having its principal office at:

1 Rond-Point Maurice Bellonte

31707 BLAGNAC  -  CEDEX

FRANCE

(hereinafter referred to as the "Seller") of the one part

AND

LAN AIRLINES S.A. having its principal office at :

Edificio Huidobro

Avenida Presidente Riesco 5711– 20th Floor

Las Condes

SANTIAGO

CHILE

(hereinafter referred to as the "Buyer") of the other part.

The Buyer and the Seller being collectively referred to as the "Parties" and individually as a "Party"

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WHEREAS

A The Buyer and the Seller entered into an A320 family purchase agreement dated March 20th, 1998 covering the purchase by the Buyer and the sale by the Seller of twenty (20) A320 family aircraft bearing rank numbers 1 to 20. By an amendment No.1 to such purchase agreement, entered into by the Buyer and the Seller on February 24th, 2000 the number of A320 family aircraft to be purchased by the Buyer pursuant to such purchase agreement was increased to twenty five (25), with the additional five (5) A320 family aircraft bearing rank numbers 21 to 25. Such twenty five (25) A320 family aircraft are hereinafter referred to as the “Original A320 Family Aircraft”, and such purchase agreement, amendment No.1, and all exhibits, appendices and letter agreements thereto are together referred to as the “Original A320 Family Purchase Agreement”.

B The Buyer and the Seller entered into a deed of amendment and restatement of the Original A320 Family Purchase Agreement, dated August 2nd, 2000, dividing the Original A320 Family Purchase Agreement into two (2) separate purchase agreements, the first agreement concerning the Original A320 Family Aircraft bearing rank numbers 1 to 20, and the second agreement concerning the Original A320 Family Aircraft bearing rank numbers 21 to 25. The second agreement as supplemented with all exhibits and appendices thereto is hereinafter referred to as the “Second A320 Family Purchase Agreement”.

C The Buyer and the Seller entered into an amendment No.1 to the Second A320 Family Purchase Agreement dated November 14th 2003 (the “Amendment No.1”) modifying certain provisions of the Second A320 Family Purchase Agreement.

D The Buyer and the Seller entered into an amendment No.2 to the Second A320 Family Purchase Agreement dated October 4th, 2005 (the “Amendment No.2”) covering the purchase by the Buyer and the sale by the Seller of twenty five (25) additional firm A320 family aircraft comprising twenty (20) A318-100, one (1) A319-100 and four (4) A320-200 aircraft type (the ”Additional Aircraft”).

E The Buyer and the Seller entered into an amendment No.3 to the Second A320 Family Purchase Agreement dated March 6th, 2007 (the “Amendment No.3”) covering the conversion of fifteen (15) Option Aircraft (as defined in the Amendment No.2) into firmly ordered Converted Aircraft (as defined in Amendment No.3).

F The Buyer and the Seller entered into an amendment No. 4 to the Second A320 Family Purchase Agreement dated June 11th, 2008 (the “Amendment No.4”) covering the conversion of five (5) A318-100 Additional Aircraft bearing rank Nos. 26 to 30 as set forth in Amendment No.2 and three (3) A318-100 Converted Aircraft bearing rank Nos. 37, 40 and 43 as set forth in Amendment No.3, into A319 aircraft type.

G The Buyer and the Seller entered into an amendment No. 5 to the Second A320 Family Purchase Agreement dated December 23rd, 2009 (the “Amendment No.5”) covering the order of thirty (30) incremental A319-100 and A320-200 aircraft and amending certain provisions of the Second A320 Family Purchase Agreement.

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H [***]

I The Buyer and the Seller entered into an amendment No. 6 to the Second A320 Family Purchase Agreement dated May 10th, 2010 (the “Amendment No.6”) covering the conversion of the aircraft type of three (3) A319-100 First Batch of Incremental Aircraft (as defined in the Amendment No.5) into firmly ordered A320-200 First Batch of Incremental Aircraft and the advancement of the scheduled delivery positions of Two (2) Aircraft from the First Batch of Incremental Aircraft and Eleven (11) Aircraft from the Second Batch of Incremental Aircraft (as defined in the Amendment No.5).

J The Buyer and the Seller entered into an amendment No. 7 to the Second A320 Family Purchase Agreement dated May 19th, 2010 (the “Amendment No.7”) covering the advancement of the scheduled delivery positions of Three (3) Converted Aircraft.

K The Buyer and the Seller wish to enter into an amendment No. 8 to the Second A320 Family Purchase Agreement (the “Amendment No.8”) covering (i) the advancement of the scheduled delivery positions of Two (2) Aircraft from the First Batch of Incremental Aircraft and Two (2) Aircraft from the Second Batch of Incremental Aircraft and (ii) the conversion of the aircraft type of one (1) A319-100 from the Second Batch of Incremental into firmly ordered A320-200 from the Second Batch of Incremental Aircraft.

NOW IT IS HEREBY AGREED AS FOLLOWS :

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0. DEFINITIONS

0.1 The terms "herein", "hereof" and "hereunder" and words of similar import refer to this Amendment N° 8 and capitalized terms used herein and not otherwise defined in this Amendment N° 8 shall have the meanings assigned thereto in the  Purchase Agreement (as defined below).

0.2 Purchase Agreement:     means the Second A320 Family Purchase Agreement together with Amendments No. 1 to 7 thereto.

1. SCOPE

1.7 The Buyer has requested and the Seller has agreed to hereby (i) advance the Scheduled Delivery Months of Two (2) Aircraft from the First Batch of Incremental Aircraft and Two (2) Aircraft from the Second Batch of Incremental Aircraft and (ii) convert the aircraft type of one (1) A319-100 from the Second Batch of Incremental Aircraft into firmly ordered A320-200 from the Second Batch Incremental Aircraft.

1.8 [***]

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2. DELIVERY SCHEDULE

The Scheduled Delivery Months of Two (2) Aircraft from the First Batch of Incremental Aircraft and Two (2) Aircraft from the Second Batch of Incremental Aircraft shall be amended as set forth in the table here below :

Rank number	Aircraft Type	Original Scheduled Delivery Months	Revised Scheduled Delivery Months	Aircraft Batch
53	A320-200	[***]	[***]	First Batch of Incremental Aircraft
55	A320-200	[***]	[***]	First Batch of Incremental Aircraft
62	A320-200	[***]	[***]	Second Batch of Incremental Aircraft
64	A320-200	[***]	[***]	Second Batch of Incremental Aircraft

3. AIRCRAFT TYPE CONVERSION

Pursuant to the Buyer’s request to convert the aircraft type of one (1) Aircraft from the Second Batch of Incremental Aircraft, the Parties hereby agree that the aircraft type of Second Batch of Incremental Aircraft with rank number 66 shall hereby be amended as set out in the table here below:

Rank number	Scheduled Delivery Months	Original Aircraft type	Revised Aircraft type	Aircraft batch
66	[***]	A319-100	A320-200	Second Batch of Incremental Aircraft

It is furthermore agreed by the Parties that the provisions and obligations set forth in letter agreement No.5B to the Amendment No 5 in relation to the Second Batch of Incremental Aircraft shall herewith be considered fulfilled in their entirety with regard to the Aircraft with rank number 66 and neither Party shall have any further rights and or obligations under the Amendment No 5 toward the other Party with respect thereto.

4. INCREMENTAL AIRCRAFT

The Parties agree to delete in its entirety clause 1.1 of Amendment No. 5, amended pursuant to clause 4 of Amendment No. 6, and replace it as follows

QUOTE

1.1 The Seller shall sell and deliver and the Buyer shall buy and take delivery of nine (9) A319-100 aircraft and twenty one (21) A320-200 aircraft (respectively the “A319 Aircraft” and the “A320 Aircraft”) upon the terms and conditions contained in this Amendment No.5 (hereinafter for the purposes of this Amendment N°5 collectively the “Incremental Aircraft”).

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UNQUOTE

5. PREDELIVERY PAYMENTS

The Parties hereby agree, that upon signature of this Amendment N° 8, the Buyer shall with respect to the Aircraft from the First Batch of Incremental Aircraft with rank numbers 53 and 55 and the Aircraft from the Second Batch of Incremental Aircraft with rank numbers 62, 64 and 66, [***]Predelivery Payments due in accordance with the Predelivery Payment schedule set out in Clause 5 of the Second A320 Family Purchase Agreement, as amended by Amendment No.2.

6. PROPULSION SYSTEMS

With reference to the Aircraft bearing rank numbers 46 to 75 the Parties hereby agree to delete in its entirety clause 1.3.2 of the Second A320 Family Purchase Agreement, amended by clause 3.1 of Amendment No.2 and by clause 2.2.3 of Amendment No.5, and replace it with the following quoted text:

1.3.2 [***]

7. EFFECT OF THE AMENDMENT

7.1 This Amendment No. 8 contains the entire agreement between the Parties with respect to the subject matter hereof and supersedes any previous understanding, commitments or representations whatsoever, whether oral or written.

7.2 The Purchase Agreement shall be deemed amended to the extent provided in this Amendment No. 8 and, except as specifically amended hereby, shall continue in full force and effect in accordance with its original terms.

7.3 The Parties agree that this Amendment No. 8 shall constitute an integral, non-severable part of the Purchase Agreement and be governed by all of its provisions.

7.4 In the event of any inconsistency between the terms and conditions of the Purchase Agreement and those of the present Amendment No. 8, the latter shall prevail to the extent of such inconsistency, whereas the part not concerned by such inconsistency shall remain in full force and effect.

7.5 This Amendment N° 8 will not be modified or varied except by an instrument in writing executed by both Parties.

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7.6 Each of the Parties hereto agree that the provisions of this Amendment No. 8 are personal to it and will not without the prior written consent of the other Parties disclose such information to any other Party.  [***]

7.7 The Parties agree that clause 21 of the Second A320 Family Purchase Agreement shall govern the assignability and transferability of each Party’s rights and obligations under this Amendment No. 8.

7.8 This Amendment No. 8 may be signed by the Parties hereto in separate counterparts, each of which when so signed and delivered will be an original, but all such counterparts will together constitute but one and the same instrument.

7.9 This Amendment No. 8 shall be governed by and construed in accordance with the laws of England.

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IN WITNESS WHEREOF this Amendment No. 8 to the Second A320 Family Purchase Agreement was duly entered into the day and year first above written.

For and on behalf of	For and on behalf of
LAN AIRLINES S.A.	AIRBUS S. A. S.
Name :	Name :
Title :	Title :

LAN AIRLINES S.A.

By           :

Its           :

Date           :

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AMENDMENT No. 9

TO THE

SECOND A320 FAMILY PURCHASE AGREEMENT

BETWEEN

LAN AIRLINES S.A.

AND

AIRBUS S.A.S.

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This amendment No. 9 to the Second A320 Family Purchase Agreement (as defined below) is entered into as of December 2010, by and between

AIRBUS S.A.S., having its principal office at:

1 Rond-Point Maurice Bellonte

31707 BLAGNAC  -  CEDEX

FRANCE

(hereinafter referred to as the "Seller") of the one part

AND

LAN AIRLINES S.A. having its principal office at :

Edificio Huidobro

Avenida Presidente Riesco 5711– 20th Floor

Las Condes

SANTIAGO

CHILE

(hereinafter referred to as the "Buyer") of the other part.

The Buyer and the Seller being collectively referred to as the "Parties" and individually as a "Party"

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WHEREAS

A The Buyer and the Seller entered into an A320 family purchase agreement dated March 20th, 1998 covering the purchase by the Buyer and the sale by the Seller of twenty (20) A320 family aircraft bearing rank numbers 1 to 20. By an amendment No.1 to such purchase agreement, entered into by the Buyer and the Seller on February 24th, 2000 the number of A320 family aircraft to be purchased by the Buyer pursuant to such purchase agreement was increased to twenty five (25), with the additional five (5) A320 family aircraft bearing rank numbers 21 to 25. Such twenty five (25) A320 family aircraft are hereinafter referred to as the “Original A320 Family Aircraft”, and such purchase agreement, amendment No.1, and all exhibits, appendices and letter agreements thereto are together referred to as the “Original A320 Family Purchase Agreement”.

B The Buyer and the Seller entered into a deed of amendment and restatement of the Original A320 Family Purchase Agreement, dated August 2nd, 2000, dividing the Original A320 Family Purchase Agreement into two (2) separate purchase agreements, the first agreement concerning the Original A320 Family Aircraft bearing rank numbers 1 to 20, and the second agreement concerning the Original A320 Family Aircraft bearing rank numbers 21 to 25. The second agreement as supplemented with all exhibits and appendices thereto is hereinafter referred to as the “Second A320 Family Purchase Agreement”.

C The Buyer and the Seller entered into an amendment No.1 to the Second A320 Family Purchase Agreement dated November 14th 2003 (the “Amendment No.1”) modifying certain provisions of the Second A320 Family Purchase Agreement.

D The Buyer and the Seller entered into an amendment No.2 to the Second A320 Family Purchase Agreement dated October 4th, 2005 (the “Amendment No.2”) covering the purchase by the Buyer and the sale by the Seller of twenty five (25) additional firm A320 family aircraft comprising twenty (20) A318-100, one (1) A319-100 and four (4) A320-200 aircraft type (the ”Additional Aircraft”).

E The Buyer and the Seller entered into an amendment No.3 to the Second A320 Family Purchase Agreement dated March 6th, 2007 (the “Amendment No.3”) covering the conversion of fifteen (15) Option Aircraft (as defined in the Amendment No.2) into firmly ordered Converted Aircraft (as defined in Amendment No.3).

F The Buyer and the Seller entered into an amendment No. 4 to the Second A320 Family Purchase Agreement dated June 11th, 2008 (the “Amendment No.4”) covering the conversion of five (5) A318-100 Additional Aircraft bearing rank Nos. 26 to 30 as set forth in Amendment No.2 and three (3) A318-100 Converted Aircraft bearing rank Nos. 37, 40 and 43 as set forth in Amendment No.3, into A319 aircraft type.

G The Buyer and the Seller entered into an amendment No. 5 to the Second A320 Family Purchase Agreement dated December 23rd, 2009 (the “Amendment No.5”) covering the order of thirty (30) incremental A319-100 and A320-200 aircraft (the ”Incremental  Aircraft”) and amending certain provisions of the Second A320 Family Purchase Agreement.

H [***]

I The Buyer and the Seller entered into an amendment No. 6 to the Second A320 Family Purchase Agreement dated May 10th, 2010 (the “Amendment No.6”) covering the conversion of the aircraft type of three (3) A319-100 First Batch of Incremental Aircraft (as defined in the Amendment No.5) into firmly ordered A320-200 First Batch Incremental Aircraft and the advancement of the scheduled delivery positions of Two (2) Aircraft from the First Batch of Incremental Aircraft and Eleven (11) Aircraft from the Second Batch of Incremental Aircraft (as defined in the Amendment No.5).

J The Buyer and the Seller entered into an amendment No. 7 to the Second A320 Family Purchase Agreement dated May 19th, 2010 (the “Amendment No.7”) covering the advancement of the scheduled delivery positions of Three (3) Converted Aircraft.

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K The Buyer and the Seller entered into an amendment No. 8 to the Second A320 Family Purchase Agreement dated September 23rd, 2010 (the “Amendment No.8”) covering (i) the advancement of the scheduled delivery positions of Two (2) Aircraft from the First Batch of Incremental Aircraft and Two (2) Aircraft from the Second Batch of Incremental Aircraft and (ii) the conversion of the aircraft type of one (1) A319-100 from the Second Batch of Incremental into firmly ordered A320-200 from the Second Batch Incremental Aircraft.

L The Buyer and the Seller wish to enter into this amendment No. 9 to the Second A320 Family Purchase Agreement (the “Amendment No.9”) covering the order of fifty (50) incremental A319-100, A320-200 and A321-200 aircraft and amending certain provisions of the Second A320 Family Purchase Agreement.

M [***]

NOW IT IS HEREBY AGREED AS FOLLOWS :

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2 DEFINITIONS

Capitalized terms used herein and not otherwise defined in this Amendment No. 9 will have the meanings assigned to them in the Purchase Agreement (as defined below).

The terms “herein,” “hereof,” and “hereunder” and words of similar import refer to this Amendment No.9.

Predelivery Payment	means the payment(s) determined in accordance with clause 5.2.1 of the Second A320 Family Purchase Agreement.
Purchase Agreement	means the Second A320 Family Purchase Agreement together with Amendments N° 1 to 8 thereto.
Specification	means the Standard Specification as modified by Specification Change Notices (SCN) to be selected after signature of this Amendment No.9 and which shall constitute the Buyer’s detailed Specification.
Standard Specification	means for the A319 Aircraft, the Standard Specification Document N° [***] with the following design weights: MTOW: [***], MLW: [***], MZFW: [***] tons as set forth in Amendment No.5 and for which a preliminary list of SCNs is attached in Exhibit A of Appendix 1 to Amendment No.9,
	means for the A320 Aircraft, the Standard Specification Document N° [***] with the following design weights: MTOW: [***], MLW: [***], MZFW: [***] as set forth in Amendment No.5 and for which a preliminary list of SCNs is attached in Exhibit B of Appendix 1 to Amendment No.9,
	means for the A321 Aircraft, the Standard Specification Document N° [***] with the following design weights: MTOW: [***], MLW: [***], MZFW: [***], and for which a preliminary list of SCNs is attached in Exhibit C of Appendix 1 to Amendment No.9.

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3 SCOPE

1.1 The Seller shall sell and deliver and the Buyer shall buy and take delivery of six (6) A319-100 aircraft, thirty four (34) A320-200 aircraft and ten (10) A321-200 aircraft (respectively the “2010 A319 Aircraft”, the “2010 A320 Aircraft” and the “2010 A321 Aircraft”) upon the terms and conditions contained in this Amendment No.9 (hereinafter for the purposes of this Amendment N°9 collectively the “2010 Incremental Aircraft

1.2 The Parties agree to amend certain provisions of the Second A320 Family Purchase Agreementpursuant to the terms and conditions set out in this Amendment No.9.

1.3 All references to Aircraft in the Purchase Agreement and this Amendment N° 9 shall be deemed to refer to the 2010 Incremental Aircraft unless expressly stipulated otherwise herein.

1.4 The Parties hereby agree that in the event of any inconsistency between the terms and conditions of the Second A320 Family Purchase Agreement (save for Amendments Nos.1 to 8) and those of the Original A320 Family Purchase Agreement, then the Original A320 Family Purchase Agreement shall prevail to the extent of such inconsistency.

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2. 2010 INCREMENTAL AIRCRAFT

2.1 DELIVERY SCHEDULE

2.1.1 With reference to the Aircraft bearing rank numbers 37 to 125 the Parties hereby agree to delete clause 9.1 of the Second A320 Family Purchase Agreement as substituted by clause 2.1.1 of Amendment No.5, and as subsequently amended by clauses 2 and 3 of Amendment No.6, clause 2 of Amendment No.7 and clauses 2 and 3 of Amendment No.8 in its entirety and replace it with the following quoted text:

QUOTE

9.1 Delivery Schedule

9.1.1 Swap of Aircraft definition:

The Parties agree to swap the Aircraft definition between Aircraft bearing rank numbers 62 and 54. Therefore, the Aircraft bearing rank number 62 shall be defined as Aircraft from the First Batch of Incremental Aircraft and the Aircraft bearing rank number 54 shall be defined as Aircraft from the Second Batch of Incremental Aircraft as set out in the table here below.

9.1.2 Subject to the provisions of Clauses 2, 7, 8, 10 and 18 the Seller shall have the Aircraft ready for Delivery at the Delivery Location in accordance with the following schedule:

Scheduled Delivery Months or Scheduled Delivery Quarters		Rank number	Aircraft type	Aircraft defined as
[***]	[***]
[***]	[***]
[***]	[***]	37	A320-200	Converted Aircraft
[***]	[***]	38	A320-200	Converted Aircraft
[***]	[***]	39	A319-100	Converted Aircraft
[***]	[***]	44	A320-200	Converted Aircraft
[***]	[***]	40	A320-200	Converted Aircraft
[***]	[***]	41	A319-100	Converted Aircraft
[***]	[***]	42	A319-100	Converted Aircraft
[***]	[***]	45	A320-200	Converted Aircraft
[***]	[***]	43	A320-200	Converted Aircraft
[***]	[***]	53	A320-200	First Batch of Incremental Aircraft
[***]	[***]	55	A320-200	First Batch of Incremental Aircraft
[***]	[***]	46	A320-200	First Batch of Incremental Aircraft
[***]	[***]	47	A320-200	First Batch of Incremental Aircraft
[***]	[***]	48	A320-200	First Batch of Incremental Aircraft
[***]	[***]	49	A320-200	First Batch of Incremental Aircraft
[***]	[***]	50	A320-200	First Batch of Incremental Aircraft
[***]	[***]	51	A319-100	First Batch of Incremental Aircraft
[***]	[***]	52	A320-200	First Batch of Incremental Aircraft
[***]	[***]	62	A320-200	First Batch of Incremental Aircraft
[***]	[***]	54	A319-100	Second Batch of Incremental Aircraft
[***]	[***]	76	A319-100	2010 Incremental Aircraft
[***]	[***]	64	A320-200	Second Batch of Incremental Aircraft
[***]	[***]	66	A320-200	Second Batch of Incremental Aircraft
[***]	[***]	77	A320-200	2010 Incremental Aircraft

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[***]	[***]	65	A320-200	Second Batch of Incremental Aircraft
[***]	[***]	78	A320-200	2010 Incremental Aircraft
[***]	[***]	67	A320-200	Second Batch of Incremental Aircraft
[***]	[***]	79	A320-200	2010 Incremental Aircraft
[***]	[***]	80	A319-100	2010 Incremental Aircraft
[***]	[***]	68	A319-100	Second Batch of Incremental Aircraft
[***]	[***]	69	A320-200	Second Batch of Incremental Aircraft
[***]	[***]	70	A320-200	Second Batch of Incremental Aircraft
2013	[***]	81	A320-200	2010 Incremental Aircraft
	[***]	82	A320-200	2010 Incremental Aircraft
	[***]	56	A320-200	Second Batch of Incremental Aircraft
	[***]	71	A320-200	Second Batch of Incremental Aircraft
	[***]	72	A319-100	Second Batch of Incremental Aircraft
	[***]	83	A320-200	2010 Incremental Aircraft
	[***]	84	A320-200	2010 Incremental Aircraft
	[***]	85	A320-200	2010 Incremental Aircraft
	[***]	57	A320-200	Second Batch of Incremental Aircraft
	[***]	73	A319-100	Second Batch of Incremental Aircraft
	[***]	58	A319-100	Second Batch of Incremental Aircraft
	[***]	59	A319-100	Second Batch of Incremental Aircraft
	[***]	74	A320-200	Second Batch of Incremental Aircraft
	[***]	60	A320-200	Second Batch of Incremental Aircraft
	[***]	75	A320-200	Second Batch of Incremental Aircraft
2014	[***]	61	A319-100	Second Batch of Incremental Aircraft
	[***]	86	A320-200	2010 Incremental Aircraft
	[***]	87	A321-200	2010 Incremental Aircraft
	[***]	88	A321-200	2010 Incremental Aircraft
	[***]	89	A319-100	2010 Incremental Aircraft
	[***]	90	A321-200	2010 Incremental Aircraft
	[***]	91	A321-200	2010 Incremental Aircraft
	[***]	63	A319-100	Second Batch of Incremental Aircraft
	[***]	92	A320-200	2010 Incremental Aircraft
	[***]	93	A320-200	2010 Incremental Aircraft
	[***]	94	A321-200	2010 Incremental Aircraft
	[***]	95	A320-200	2010 Incremental Aircraft
	[***]	96	A320-200	2010 Incremental Aircraft
	[***]	97	A320-200	2010 Incremental Aircraft
	[***]	98	A321-200	2010 Incremental Aircraft
2015	[***]	99	A320-200	2010 Incremental Aircraft
	[***]	100	A320-200	2010 Incremental Aircraft
	[***]	101	A321-200	2010 Incremental Aircraft
	[***]	102	A320-200	2010 Incremental Aircraft
	[***]	103	A320-200	2010 Incremental Aircraft
	[***]	104	A320-200	2010 Incremental Aircraft
	[***]	105	A321-200	2010 Incremental Aircraft
	[***]	106	A320-200	2010 Incremental Aircraft
	[***]	107	A320-200	2010 Incremental Aircraft
	[***]	108	A320-200	2010 Incremental Aircraft

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	[***]	109	A321-200	2010 Incremental Aircraft
	[***]	110	A320-200	2010 Incremental Aircraft
	[***]	111	A320-200	2010 Incremental Aircraft
	[***]	112	A320-200	2010 Incremental Aircraft
	[***]	113	A321-200	2010 Incremental Aircraft
2016	[***]	114	A319-100	2010 Incremental Aircraft
	[***]	115	A319-100	2010 Incremental Aircraft
	[***]	116	A319-100	2010 Incremental Aircraft
	[***]	117	A320-200	2010 Incremental Aircraft
	[***]	118	A320-200	2010 Incremental Aircraft
	[***]	119	A320-200	2010 Incremental Aircraft
	[***]	120	A320-200	2010 Incremental Aircraft
	[***]	121	A320-200	2010 Incremental Aircraft
	[***]	122	A320-200	2010 Incremental Aircraft
	[***]	123	A320-200	2010 Incremental Aircraft
	[***]	124	A320-200	2010 Incremental Aircraft
	[***]	125	A320-200	2010 Incremental Aircraft

9.1.2 [***]

9.1.3 [***]

UNQUOTE

2.1.2 For the avoidance of doubt the provisions set forth in clause 9.1 of the Second A320 Family Purchase Agreement as amended pursuant to clause 2 of Amendment No.1, clause 3.5 of Amendment No.2, clause 2 of Amendment No.3, clause 3.1 of Amendment No.4 and relevant to the Aircraft with rank numbers 1 to 30 shall hereby remain in full force and effect. Clause 9.1 of the Second A320 Family Purchase Agreement, as substituted by clause 2.1.1 of Amendment No.5, will apply to Aircraft with rank number 31 to 37.

2.2 SPECIFICATION

2.2.1 2010 Incremental Aircraft Specification

With respect to the 2010 Incremental Aircraft, the Parties hereby agree to delete clause 1.2.1 of the Second A320 Family Purchase Agreement in its entirety and replace it with the Standard Specification as defined in this Amendment N° 9, as may be modified or varied after the date of this Amendment N° 9 by the Specification Change Notices listed in:

- Exhibit A of Appendix 1 to Amendment No.9 for 2010 A319 Aircraft, and

- Exhibit B of Appendix 1 to Amendment No.9 for 2010 A320 Aircraft, and

- Exhibit C of Appendix 1 to Amendment No.9 for 2010 A321 Aircraft.

3.2.2 Clauses 1.2.2 and 1.2.3 of the Second A320 Family Purchase Agreement shall apply to the 2010 Incremental Aircraft.

3.2.3 With respect to the 2010 Incremental Aircraft, the Parties hereby agree to delete clauses 1.3, 1.3.1 and 1.3.2 of the Second A320 Family Purchase Agreement, amended by clause 3.1 of Amendment No.2 in its entirety and replace them with the following quoted text:

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QUOTE

1.3 The Airframe shall be equipped with a set of two (2) engines including nacelles and thrust reversers (the “Propulsion Systems”) as follows:

For the A319 Aircraft:

                                            CFM INTERNATIONAL 56-5B6/3                    (23,500 lb)

                                            or

                                            INTERNATIONAL AERO ENGINE V2524-A5 (23,500 lb)

For the A320 Aircraft:

                                           CFM INTERNATIONAL 56-5B4/3                    (27,000 lb)

                                           or

                                           INTERNATIONAL AERO ENGINE V2527E-A5 or V2527-A5         (26,500 lb)

For the A321 Aircraft:

                                            CFM INTERNATIONAL 56-5B3/3                    (33,000 lb)

                                            or

                                            INTERNATIONAL AERO ENGINE V2533                    (33,000 lb)

1.3.1 In the event the Buyer has not selected the Propulsion Systems for the Aircraft with rank numbers 76 to 125, as of the date of the Amendment No.9, the Buyer shall notify the Seller of such choice as follows;

- [***]

- [***]

1.3.2 Notwithstanding the foregoing the Buyer shall have the right to select the alternate Propulsion Systems Manufacturer, in each case as mentioned in the above Clause 1.3 for all or any of the Aircraft at any time, provided that such selection is notified in writing to the Seller not less than [***] prior to the first (1st) day of Scheduled Delivery Month of the relevant Aircraft and it being understood that it shall be the sole responsibility of the Buyer to inform, negotiate and conclude a settlement with the Propulsion Systems Manufacturer initially selected by the Buyer.

 UNQUOTE

3. INCREMENTAL AIRCRAFT BASIC PRICES

It is hereby agreed that clauses 3.1 and 3.2 of the Second A320 Purchase Agreement shall not apply to the 2010 Incremental Aircraft and the Basic Prices of the 2010 Incremental Aircraft and the Final Price of the 2010 Incremental Aircraft are set forth in Appendix 2 to Amendment No.9.

4. GENERAL PAYMENT TERMS

4.1 With respect to the 2010 Incremental Aircraft, the Parties agree to delete sub-clause 5.2.2 of the Second A320 Purchase Agreement in its entirety and replace it as follows:

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QUOTE

5.2.2 Balance of the Final Aircraft Price

5.2.2.1 The Balance of the Final Aircraft Price payable by the Buyer to the Seller on the Delivery Date shall be the Final Aircraft Price less the amount of Predelivery Payment received by the Seller on or before the Delivery Date.

5.2.2.2 Upon receipt of the Seller’s invoice and immediately prior to Delivery of the Aircraft, the Buyer shall pay to the Seller the Balance of the Final Aircraft Price.

5.2.2.3 Any Predelivery Payment received by the Seller shall constitute an instalment in respect of the Final Aircraft Price. The Seller shall be entitled to hold and use any such Predelivery Payment as absolute owner thereof (the “Status of Predelivery Payments”); subject only to the obligation of the Seller to: (i) deduct an amount equal to any such Predelivery Payments from the Final Aircraft Price when calculating the balance of the Final Aircraft Price; or (ii) pay to the Buyer (or to any assignee or transferee of the Buyer permitted by the terms of this Purchase Agreement) an amount equal to any such Predelivery Payments pursuant to any other provision of this Second A320 Family Purchase Agreement.

UNQUOTE

4.2 In conjunction with the transaction of the buy back from the Buyer of fifteen (15) Airbus A318-100 aircraft and with respect to the Incremental Aircraft, the  2010 Incremental Aircraft and the A330 Converted Aircraft, the Parties agree to delete sub-clauses 5.4.5 and 5.4.6 to the Second A320 Purchase Agreement amended by clause 4.2 of the Amendment No.5 and replace it as follows:

QUOTE

5.4.5 [***]

5.4.5.1 [***].

5.4.5.2 [***]:

(i) [***] and unconditionally released to the Buyer upon such cure or waiver);

(ii) [***].

UNQUOTE

5. [***]

5.1 [***]: 

6. Termination for Default

With respect to the Converted Aircraft, the Incremental Aircraft, the 2010 Incremental Aircraft and the A330 Converted Aircraft (if any), the Parties agree to insert sub-clause 20.5 to the Second A320 Purchase Agreement as follows:

QUOTE

[***].

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UNQUOTE

7. AMENDMENT AND LETTER AGREEMENT STATUS

It is hereby agreed by the Parties that the letter agreements inserted or further amended or deleted to the Second A320 Family Aircraft Purchase Agreement and the Amendments 1, 2, 3, 4, 5, 6, 7 and 8 to the Second A320 Family Aircraft Purchase Agreement shall not in any way be applicable to the 2010 Incremental Aircraft as defined herein unless expressly stated otherwise in this Amendment N° 9.

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8. EFFECT OF THE AMENDMENT

8.1 This Amendment No. 9 contains the entire agreement between the Parties with respect to the subject matter hereof and supersedes any previous understanding, commitments or representations whatsoever, whether oral or written.

8.2 The Purchase Agreement shall be deemed amended to the extent provided in this Amendment No. 9 and, except as specifically amended hereby, shall continue in full force and effect in accordance with its original terms.

8.3 The Parties agree that this Amendment No. 9 shall constitute an integral, non-severable part of the Purchase Agreement and be governed by all of its provisions.

8.4 In the event of any inconsistency between the terms and conditions of the Purchase Agreement and those of the present Amendment N°9, the latter shall prevail to the extent of such inconsistency, whereas the part not concerned by such inconsistency shall remain in full force and effect.

8.5 This Amendment N° 9 will not be modified or varied except by an instrument in writing executed by both Parties.

8.6 Each of the Parties hereto agree that the provisions of this Amendment No. 9 are personal to it and will not without the prior written consent of the other Parties disclose such information to any other Party. [***]

8.7 The Parties agree that clause 21 of the Second A320 Family Purchase Agreement shall govern the assignability and transferability of each Party’s rights and obligations under this Amendment No.9

8.8 This Amendment N°9 may be signed by the Parties hereto in separate counterparts, each of which when so signed and delivered will be an original, but all such counterparts will together constitute but one and the same instrument.

8.9 This Amendment N°9 shall be governed by and construed in accordance with the laws of England.

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 IN WITNESS WHEREOF this Amendment No. 9 to the Second A320 Family Purchase Agreement was duly entered into the day and year first above written.

For and on behalf of	For and on behalf of
LAN AIRLINES S.A.	AIRBUS S. A. S.
Name :	Name :
Title :	Title :

LAN AIRLINES S.A.
By	:
Its	:
Date	:

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Appendix 1 - Exhibit A – A319 SCNs List

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Appendix 1 - Exhibit A – A319 SCNs List

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Appendix 1 - Exhibit A – A319 SCNs List

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Appendix 1 - Exhibit A – A319 SCNs List

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[***]	[***]	[***]	[***]
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Appendix 1 - Exhibit A – A319 SCNs List

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Appendix 1 - Exhibit A – A319 SCNs List

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[***]		[***]	[***]

[***]

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Appendix 1 - Exhibit B– A320 SCNs List

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Appendix 1 - Exhibit B– A320 SCNs List

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Appendix 1 - Exhibit B– A320 SCNs List

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Appendix 1 - Exhibit B– A320 SCNs List

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Appendix 1 - Exhibit B– A320 SCNs List

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Appendix 1 - Exhibit B– A320 SCNs List

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Appendix 1 – Exhibit C – A321 SCNs List

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[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]

A320F - LAN - AMDT 9 - Second A320 Family PA

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Appendix 1 – Exhibit C – A321 SCNs List

[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]

A320F - LAN - AMDT 9 - Second A320 Family PA

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Appendix 1 – Exhibit C – A321 SCNs List

[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]

A320F - LAN - AMDT 9 - Second A320 Family PA

Ref. CT1003496

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Appendix 1 – Exhibit C – A321 SCNs List

[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]		[***]	[***]

A320F - LAN - AMDT 9 - Second A320 Family PA

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Appendix 2 – to Amendment 9

1. With respect to the 2010 Incremental Aircraft, the provisions contained in clauses 3.1 and 3.2 of the Second A320 Family Purchase Agreement are hereby cancelled and replaced by the following quoted provisions:

QUOTE

3.1 PRICE OF [***]

The base price of each 2010 Incremental Aircraft (the “Aircraft Base Price”) is the sum of:

[***]

and is exclusive of any variation resulting from price revision provisions.

3.1.1 Airframe Base Price

The base price of the Airframe (the “Airframe Base Price”)is the sum of:

(i) [***]

(ii) [***]

3.1.2 Propulsion Systems Base Price

The base price of the Propulsion Systems (the “Propulsion Systems Base Price”) shall be, as applicable pursuant to Clauses 3.1.2.1 or 3.1.2.2, the base price of the Propulsion Systems selected by the Buyer.

3.1.2.1 The base price of a set of two (2) CFM INTERNATIONAL Propulsion Systems

[***]

at economic conditions prevailing for a theoretical delivery in [***].

Such base prices have been computed from the propulsion systems’ reference prices (the “Propulsion Systems Reference Price”) as defined in Exhibit B of Appendix 3 to Amendment No 9.

[***]

The CFM INTERNATIONAL Propulsion Systems Reference Prices have been established in accordance with the delivery conditions prevailing in January 2002 at Reference Composite Price Index of 148.84 and shall be subject to revision up to the Delivery Date of each 2010 Incremental Aircraft in accordance with the CFM INTERNATIONAL Price Revision Formula set out in Exhibit B of Appendix 3 of Amendment No.9.

3.1.2.2 The base price for a set of two (2) IAE Propulsion Systems is:

[***]

at economic conditions prevailing for a theoretical delivery in [***].

Such base prices have been computed from the Reference Prices of propulsion systems’ reference prices (the “Propulsion Systems Reference Price”) as defined in Exhibit C of Appendix 3 to Amendment No 9. :

[***]

A320F - LAN - AMDT 9 - Second A320 Family PA

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Appendix 2 – to Amendment 9

The INTERNATIONAL AERO ENGINES Propulsion Systems Reference Prices are expressed at theoretical delivery conditions prevailing in January 2006 and shall be subject to revision up to the Delivery Date of each 2010 Incremental Aircraft Delivery Date in accordance with the INTERNATIONAL AERO ENGINES Price Revision Formula set out in Exhibit C of Appendix 3 to Amendment No.9.

3.1.2.3 Seller confirms that the above-mentioned quotations as well as Propulsion Systems Manufacturer Price Revision Formulae (as set out in Clauses 4.2 and 4.3, as inserted by Exhibits B and C of Appendix 3 to Amendment No.9) are based upon information received from the respective Propulsion Systems Manufacturer and remain subject to any modification that might be imposed by the Propulsion Systems Manufacturer on the Seller. [***].

3.2 Final Aircraft Price

The final price of each [***] (the “Final Aircraft Price”) at Delivery shall be the sum of:

(i) [***]

(ii) [***];

(iii) [***]

(iv) [***].

A320F - LAN - AMDT 9 - Second A320 Family PA

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Appendix 3 Exhibit A – to Amendment 9

UNQUOTE

With respect to the 2010 Incremental Aircraft, the provisions contained in Clause 4.1 of the Second A320 Family Purchase Agreement are hereby cancelled and replaced by the following quoted provisions:

[***]

4.1. [***]

4.1.1 [***]

[***].

4.1.2 [***]

[***].

4.1.3 [***]

[***]

4.1.4 [***]

[***]

A320F - LAN - AMDT 9 - Second A320 Family PA

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4.1.5 [***]

4.1.5.1 [***]

[***]

4.1.5.2 [***]

(i) [***]

(ii) [***]

(iii) [***];

4.1.5.3 [***]

[***]

A320F - LAN - AMDT 9 - Second A320 Family PA

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Appendix 3 Exhibit B– to Amendment 9

With respect to [***], the provisions contained in Clause 4.2 of the Second A320 Family Purchase Agreement are hereby cancelled and replaced by the following quoted provisions:

QUOTE

4.2. [***]

4.2.1 [***]

4.2.2 [***].

4.2.3 [***].

4.2.4 [***]

A320F - LAN - AMDT 9 - Second A320 Family PA

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Appendix 3 Exhibit B– to Amendment 9

4.2.5 [***]

4.2.5.1 [***]

4.2.5.2 [***]

4.2.5.3 [***].

4.2.5.4 [***]

4.2.5.5 [***].

[***]

A320F - LAN - AMDT 9 - Second A320 Family PA

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Appendix 3 Exhibit C– to Amendment 9

With respect to the [***], the provisions contained in Clause 4.3 of the Second A320 Family Purchase Agreement are hereby cancelled and replaced by the following quoted provisions:

[***]

4.3. [***]

4.3.1 [***]

4.3.2 [***]

4.3.3 [***].

4.3.4 [***]

A320F - LAN - AMDT 9 - Second A320 Family PA

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Appendix 3 Exhibit C– to Amendment 9

4.3.5 [***]

4.3.5.1 [***].

4.3.5.2 [***]

4.3.5.3 [***].

4.3.5.4 [***].

4.3.5.5 [***].

A320F - LAN - AMDT 9 - Second A320 Family PA

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Letter Agreement No. 1

LAN AIRLINES S.A.

Edificio Huidobro

Avenida Presidente Riesco 5711

Las Condes

Santiago - Chile

Subject  : PREDELIVERY PAYMENTS OF THE [***]

LAN Airlines S.A (the “Buyer") and Airbus S.A.S. (the “Seller") have entered into an amendment N°9 to the Second A320 Purchase Agreement (as defined therein) dated of even date herewith (“Amendment N°9”), and which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the Incremental Aircraft described therein.

Capitalized terms used herein and not otherwise defined in this letter agreement N°1 to Amendment N°9 (the “Letter Agreement N°1”) shall have the meanings assigned thereto in the Second A320 Family Purchase Agreement and/or Amendment N°9 as the case may be.

Both Parties agree that this Letter Agreement N°1, upon execution thereof, shall constitute an integral, non-severable part of said Amendment N°9 and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement N°1.

A320F - LAN - AMDT 9 - Second A320 Family PA

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Letter Agreement No. 1

1. With respect to the [***], the provisions contained in clause 5.1 and 5.2 of the Second A320 Family Purchase Agreement are hereby cancelled in their entirety and replaced by the following quoted provisions:

QUOTE

5.1 Seller's Account

The Buyer shall pay the Predelivery Payments, the Balance of Final Aircraft Price and/or any other amount due by the Buyer to the Seller, to the Seller's account:

[***]

or to such other account as may be designated by the Seller in such other jurisdiction where the Buyer shall not be required to withhold or make other deductions on account of taxes in relation to such payment.

5.2 Predelivery Payments

5.2.0 [***].

5.2.1 The Buyer shall pay Predelivery Payments to the Seller calculated on the predelivery payment reference price of each [***]. The predelivery payment reference price is determined by the following formula:

A = Pb (1 + 0.03N)

Where

A : The predelivery payment reference price for Aircraft of the [***] to be delivered in year T;

T : the year of Delivery of the relevant [***];

Pb : the Aircraft Base Price;

N : [***]

A320F - LAN - AMDT 9 - Second A320 Family PA

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5.2.2 Such Predelivery Payments shall be made in accordance with the following schedule:

DUE DATE OF PAYMENTS	PERCENTAGE OF PREDELIVERY PAYMENT REFERENCE PRICE
Upon signature of this Amendment No.9	[***]
On the first day of each of the following months prior to the Scheduled Delivery Month
[***] months	[***]
[***] months	[***]
[***]months	[***]
___________________________	[***]
Total Payment prior to Delivery

In the event of the above schedule resulting in any Predelivery Payment falling due prior to the date of signature of the Amendment No.9, such Predelivery Payments shall be made upon signature of this Amendment No.9.

UNQUOTE

2. Assignment

The Parties agree that clause 21 of the Second A320 Family Purchase Agreement shall govern the assignability and transferability of each Party’s rights and obligations under this Letter Agreement N°1.

3. Confidentiality

Each of the Parties hereto agree that the provisions of this Letter Agreement N°1 are personal to it and will not without the prior written consent of the other Parties disclose such information to any other Party. [***]

A320F - LAN - AMDT 9 - Second A320 Family PA

Ref. CT1003496

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Letter Agreement No. 1

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement N°1 to the Seller.

Agreed and Accepted		Agreed and Accepted
For and on behalf of		For and on behalf of
LAN AIRLINES S.A.		AIRBUS S.A.S.
By	:	By	:
Its	:	Its	:
Date	:	Date	:
LAN AIRLINES S.A.
By	:
Its	:
Date	:

A320F - LAN - AMDT 9 - Second A320 Family PA

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Letter Agreement No. 2

LAN AIRLINES S.A.

Edificio Huidobro

Avenida Presidente Riesco 5711

Las Condes

Santiago - Chile

Subject: [***]

LAN Airlines S.A (the “Buyer") and Airbus S.A.S. (the “Seller") have entered into an amendment N°9 to the Second A320 Purchase Agreement (as defined therein) dated of even date herewith (“Amendment N°9”), and which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the Incremental Aircraft described therein.

Capitalized terms used herein and not otherwise defined in this letter agreement N°2 to Amendment N°9 (the “Letter Agreement N°2”) shall have the meanings assigned thereto in the Second A320 Family Purchase Agreement and/or Amendment N°9 as the case may be.

Both Parties agree that this Letter Agreement N°2, upon execution thereof, shall constitute an integral, non-severable part of said Amendment N°9 and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement N°2.

A320F - LAN - AMDT 9 - Second A320 Family PA

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Letter Agreement No. 2

1. This Letter Agreement No.2 shall be applicable to the [***].

2. [***]

2.1 [***]

2.2 [***].

2.3 [***].

2.4 [***].

2.5 [***].

3. Assignment

The Parties agree that clause 21 of the Second A320 Family Purchase Agreement shall govern the assignability and transferability of each Party’s rights and obligations under this Letter Agreement N°2.

4. Confidentiality

Each of the Parties hereto agree that the provisions of this Letter Agreement N°2 are personal to it and will not without the prior written consent of the other Parties disclose such information to any other Party. [***]

A320F - LAN - AMDT 9 - Second A320 Family PA

Ref. CT1003496

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Letter Agreement No. 2

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement N°2 to the Seller.

Agreed and Accepted		Agreed and Accepted
For and on behalf of		For and on behalf of
LAN AIRLINES S.A.		AIRBUS S.A.S.
By	:	By	:
Its	:	Its	:
Date	:	Date	:
LAN AIRLINES S.A.
By	:
Its	:
Date	:

A320F - LAN - AMDT 9 - Second A320 Family PA

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Letter Agreement No. 3

LAN AIRLINES S.A.

Edificio Huidobro

Avenida Presidente Riesco 5711

Las Condes

Santiago - Chile

Subject  : [***]

LAN Airlines S.A (the “Buyer") and Airbus S.A.S. (the “Seller") have entered into an amendment N°9 to the Second A320 Purchase Agreement (as defined therein) dated of even date herewith (“Amendment N°9”), and which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the Incremental Aircraft described therein.

Capitalized terms used herein and not otherwise defined in this letter agreement N°3 to Amendment N°9 (the “Letter Agreement N°3”) shall have the meanings assigned thereto in the Second A320 Family Purchase Agreement and/or Amendment N°9 as the case may be.

Both Parties agree that this Letter Agreement N°3, upon execution thereof, shall constitute an integral, non-severable part of said Amendment N°9 and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement N°3.

A320F - LAN - AMDT 9 - Second A320 Family PA

Ref. CT1003496

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Letter Agreement No. 3

1. This Letter Agreement No.3 shall be applicable to the [***].

2 [***]

3. Assignment

The Parties agree that clause 21 of the Second A320 Family Purchase Agreement shall govern the assignability and transferability of each Party’s rights and obligations under this Letter Agreement N°3.

4. Confidentiality

Each of the Parties hereto agree that the provisions of this Letter Agreement N°3 are personal to it and will not without the prior written consent of the other Parties disclose such information to any other Party. [***]

A320F - LAN - AMDT 9 - Second A320 Family PA

Ref. CT1003496

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Letter Agreement No. 3

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement N°3 to the Seller.

Agreed and Accepted		Agreed and Accepted
For and on behalf of		For and on behalf of
LAN AIRLINES S.A.		AIRBUS S.A.S.
By	:	By	:
Its	:	Its	:
Date	:	Date	:
LAN AIRLINES S.A.
By	:
Its	:
Date	:

A320F - LAN - AMDT 9 - Second A320 Family PA

Ref. CT1003496

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Letter Agreement No. 4

LAN AIRLINES S.A.

Edificio Huidobro

Avenida Presidente Riesco 5711

Las Condes

Santiago - Chile

Subject  : [***]

LAN Airlines S.A (the “Buyer") and Airbus S.A.S. (the “Seller") have entered into an amendment N°9 to the Second A320 Purchase Agreement (as defined therein) dated of even date herewith (“Amendment N°9”), and which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the 2010 Incremental Aircraft described therein.

Capitalized terms used herein and not otherwise defined in this letter agreement N°04 to Amendment N°9 (the “Letter Agreement N°04”) shall have the meanings assigned thereto in the Second A320 Family Purchase Agreement and/or Amendment N°9 as the case may be.

Reference in this Letter Agreement N°04 to “Facility” shall mean any ECA supported financing facility to be provided in respect of any or all of the 2010 Incremental Aircraft.

Both Parties agree that this Letter Agreement N°04, upon execution thereof, shall constitute an integral, non-severable part of said Amendment N°9 and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement N°04.

A320F - LAN - AMDT 9 - Second A320 Family PA

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Letter Agreement No. 4

GENERAL TERMS AND CONDITIONS

[***]:

1 [***].

2 [***].

3 [***]

4 [***].

5 [***].

6 [***].

7 [***].

8 [***].

9 [***]

9.1 [***].

9.2 [***]

10 [***]

10.1. [***].

10.2. [***].

11. Assignment

The Parties agree that clause 21 of the Second A320 Family Purchase Agreement shall govern the assignability and transferability of each Party’s rights and obligations under this Letter Agreement N°04.

12. Confidentiality

Each of the Parties hereto agree that the provisions of this Letter Agreement N°04 are personal to it and will not without the prior written consent of the other Parties disclose such information to any other Party. [***]

A320F - LAN - AMDT 9 - Second A320 Family PA

Ref. CT1003496

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Letter Agreement No. 4

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement No.4 to the Seller.

Agreed and Accepted		Agreed and Accepted
For and on behalf of		For and on behalf of
LAN AIRLINES S.A.		AIRBUS S.A.S.
By	:	By	:
Its	:	Its	:
Date	:	Date	:
LAN AIRLINES S.A.
By	:
Its	:
Date	:

A320F - LAN - AMDT 9 - Second A320 Family PA

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Letter Agreement No. 4

Table 1

[***]

A320F - LAN - AMDT 9 - Second A320 Family PA

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Letter Agreement No. 4

[***]

A320F - LAN - AMDT 9 - Second A320 Family PA

Ref. CT1003496

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Letter Agreement No. 5

LAN AIRLINES S.A.

Edificio Huidobro

Avenida Presidente Riesco 5711

Las Condes

Santiago - Chile

Subject  : [***]

LAN Airlines S.A (the “Buyer") and Airbus S.A.S. (the “Seller") have entered into an amendment N°9 to the Second A320 Purchase Agreement (as defined therein) dated of even date herewith (“Amendment N°9”), and which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the Incremental Aircraft described therein.

Capitalized terms used herein and not otherwise defined in this letter agreement N°5 to Amendment N°9 (the “Letter Agreement N°5”) shall have the meanings assigned thereto in the Second A320 Family Purchase Agreement and/or Amendment N°9 as the case may be.

Both Parties agree that this Letter Agreement N° 5, upon execution thereof, shall constitute an integral, non-severable part of said Amendment N°9 and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement N°5.

A320F - LAN - AMDT 9 - Second A320 Family PA

Ref. CT1003496

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Letter Agreement No. 5

1. This Letter Agreement No.5 shall be applicable to the [***].

2. [***]

3. [***]

4. Assignment

The Parties agree that clause 21 of the Second A320 Family Purchase Agreement shall govern the assignability and transferability of each Party’s rights and obligations under this Letter Agreement N° 5.

5. Confidentiality

Each of the Parties hereto agree that the provisions of this Letter Agreement N° 5 are personal to it and will not without the prior written consent of the other Parties disclose such information to any other Party. [***]

A320F - LAN - AMDT 9 - Second A320 Family PA

Ref. CT1003496

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Letter Agreement No. 5

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement N°5 to the Seller.

Agreed and Accepted		Agreed and Accepted
For and on behalf of		For and on behalf of
LAN AIRLINES S.A.		AIRBUS S.A.S.
By	:	By	:
Its	:	Its	:
Date	:	Date	:
LAN AIRLINES S.A.
By	:
Its	:
Date	:

A320F - LAN - AMDT 9 - Second A320 Family PA

Ref. CT1003496

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Letter Agreement No. 6

LAN AIRLINES S.A.

Edificio Huidobro

Avenida Presidente Riesco 5711

Las Condes

Santiago - Chile

Subject : PRODUCT SUPPPORT FOR 2010 INCREMENTAL AIRCRAFT

LAN Airlines S.A (the “Buyer") and Airbus S.A.S. (the “Seller") have entered into an amendment N°9 to the Second A320 Purchase Agreement (as defined therein) dated of even date herewith (“Amendment N°9”), and which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the 2010 Incremental Aircraft described therein.

Capitalized terms used herein and not otherwise defined in this letter agreement N°6 to Amendment N°9 (the “Letter Agreement N°6”) shall have the meanings assigned thereto in the Second A320 Family Purchase Agreement and/or Amendment N°9 as the case may be.

Both Parties agree that this Letter Agreement N°6, upon execution thereof, shall constitute an integral, non-severable part of said Amendment N°9 and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement N°6.

A320F - LAN - AMDT 9 - Second A320 Family PA

Ref. CT1003496

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Letter Agreement No. 6

1. GENERAL

1.1 For the avoidance of doubt, all quantities indicated below are the total quantities granted for the [***] firmly ordered 2010 Incremental Aircraft unless otherwise specified.

Should the Buyer decide to cancel any of the [***] 2010 Incremental Aircraft, the Seller reserves the right to modify the quantities as defined herein.

1.2 The Buyer and the Seller mutually agree that the contractual training allocations provided by the Seller under clauses 14.4.1, 15.1.1, 16.3 and 16.4.2 of the Second A320 Purchase Agreement, shall not be applicable to the 2010 Incremental Aircraft.

In substitution, the Seller shall provide the Buyer with the training allocations defined in this Letter Agreement N°6.

1.3 The contractual training courses defined in Clause 2 here below shall be provided up to [***] 2010 Incremental Aircraft delivered under Amendment N°9.

2 TRAINING SUPPORT AND SERVICES

2.1 With respect to the 2010 Incremental Aircraft, the provisions contained in clause 16.3.1 of the Second A320 Family Purchase Agreement, are hereby cancelled in their entirety and replaced by the following quoted provisions:

2.1.1 Notwithstanding the above Clause 1.3, the flight operations training courses as defined in this Clause 2 shall be granted to and may be utilised by the Buyer on the basis of [***] during the [***] 2010 Incremental Aircraft.

2.1.2 Such flight operations training courses shall be granted on a cumulative basis.

2.1.3 Furthermore in the event the Buyer has any remaining flight operations training courses upon Delivery of the last 2010 Incremental Aircraft the Buyer may utilise such remaining flight operations training courses [***].

QUOTE

16.3.1 Flight Crew Training Course

16.3.1.1 The Seller shall perform a flight crew training course program (standard transition course or a cross crew qualification program as applicable) for a total of [***] of the Buyer's flight crews, each of which shall consist of [***]. The training manual used shall be the Seller’s Flight Crew Operating Manual (FCOM), except for base Flight training, for which the Buyer’s customized FCOM shall be used.

16.3.1.2 If a [***] is required, the Buyer shall use its delivered Aircraft, or any other aircraft operated by the Buyer, for any base flight training, which shall not exceed [***], according to the related Airbus training course definition. In the event of it being necessary to ferry the Buyer’s delivered Aircraft to the location where the base flight training shall take place, the additional flight time required for the ferry flight to and/or from the base training field shall not be deducted from the base flight training allowance.

However, if the base flight training is performed outside of the zone where the Seller usually performs such training, the ferry flight to the location where the base flight training shall take place shall be performed by a crew composed of the Seller’s and/or the Buyer’s qualified pilots, in accordance with the Aviation Authorities’ regulations related to the place of performance of the base flight training.

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Letter Agreement No. 6

16.3.1.3 [***]

The Seller shall provide free [***] for a total of [***] of the Buyer's flight crews having followed Flight Crew Training as per Clause 16.3.1.1 above.

UNQUOTE

2.2 With respect to the 2010 Incremental Aircraft, clause 16.3.3 is hereby inserted in the Second A320 Family Purchase Agreement with the following quoted provisions:

QUOTE

16.3.3 Maintenance Training

The Seller shall provide to the Buyer [***] of maintenance training [***] for the Buyer's personnel.

The available courses are listed in the Seller's applicable Training Courses Catalog.

The above trainee days shall be used solely for the Maintenance training courses as defined in the Seller’s applicable Training Courses Catalog.

Within the above trainee days allowance, the number of Engine Run-up courses shall be limited to [***] 2010 Incremental Aircraft and to a [***] in total.

The Buyer shall provide the Seller with an attendance list of trainees at the latest [***] start of the training course.

The practical training provided in the frame of maintenance training is performed exclusively on the training devices in use in the Seller’s Training Centers or Affiliated Training Center.

In the event of practical training on aircraft being requested by the Buyer, such practical training can be organized with the assistance of the Seller, in accordance with Clause 16.3.3

UNQUOTE

2.3 With respect to the 2010 Incremental Aircraft, the provisions contained in clause 16.3.7 of the Second A320 Family Purchase Agreement are hereby cancelled in their entirety and replaced by the following quoted provisions:

QUOTE

16.3.7 Trainee days accounting

16.3.7.1 Definitions

Seller’s Training Centers: Seller’s training center in Blagnac, France, and/or in Hamburg, Germany.

Affiliated Training Center: Seller’s affiliated training center in Miami, U.S.A.

16.3.7.2 Trainee days are counted as follows:

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For instruction at the Seller's Training Centers or Affiliated Training Center: [***] of instruction for [***] trainee equals [***] trainee day. The number of trainees originally registered at the beginning of the course shall be counted as the number of trainees to have taken the course.

For instruction outside of the Seller's Training Centers or Affiliated Training Center: [***] of instruction by [***] Seller Instructor equals the actual number of trainees attending the course or a minimum of [***] trainee days, except for structure maintenance training course(s).

For structure maintenance training courses outside the Seller’s Training Center(s) or Affiliated Training Center, [***] day of instruction by [***] Seller Instructor equals the actual number of trainees attending the course or the minimum number of trainees as indicated in the Seller’s Customer Services Catalog.

For practical training, whether on training devices or on aircraft, [***] day of instruction by [***] Seller Instructor equals the actual number of trainees attending the course or a minimum of [***] trainee days.

UNQUOTE

3 SELLER REPRESENTATIVE SERVICES

3.1 The Parties agree that the Seller’s representative allocations provided to the Buyer under clause 15.1.1 of the Second A320 Purchase Agreement shall not be applicable to the 2010 Incremental Aircraft. In substitution, the Seller shall provide the Buyer with the Seller Representative allocation for the 2010 Incremental Aircraft as defined hereunder.

QUOTE

15.1 The Seller shall provide to the Buyer, Seller Representative services at the Buyer's main base or at other locations to be mutually agreed for a total of [***].

For the sake of clarification, such Seller Representatives’ services shall include initial Aircraft Entry Into Service (EIS) assistance and sustaining support services.

The number of the Seller Representatives assigned to the Buyer at any one time shall be mutually agreed, but shall at no time exceed [***] Seller Representatives.

UNQUOTE

4 TECHNICAL DATA AND SOFTWARE REVISION SERVICE

4.1 The Parties agree that the terms and conditions of the Technical Publications Revision Service (now called Technical Data and Software Revision Service) provided to the Seller under clause 14.4.1 of the Second A320 Purchase Agreement shall not be applicable to the 2010 Incremental Aircraft. In substitution, the Seller shall provide the Buyer with the Technical Data and Software Revision Service for the 2010 Incremental Aircraft as defined hereunder.

QUOTE

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14.4.1 General

For each firmly ordered 2010 Incremental Aircraft covered under the Amendment No 9, the Technical Data and Software Revision Service shall be provided [***] 2010 Incremental Aircraft.

Thereafter the Revision Service shall be provided in accordance with the terms and conditions set forth in the Seller’s then current Customer Services Catalog.

Mandatory changes (including Aviation Authority Airworthiness Directives) and Alert Service Bulletins shall be incorporated into the Technical Publications at no charge [***].

UNQUOTE

5 LOAD AND TRIM SHEET SOFTWARE

5.1 Description

The “Load and Trim Sheet Software” (LTS) is a ground software which allows the Buyer to produce, for a given aircraft configuration, a cabin configuration combination, a paper trim sheet with the standard Airbus layout and its associated AHM 560 document.

5.2 Commercial Conditions

LTS shall be provided to the Buyer [***] for each firmly ordered 2010 Incremental Aircraft for the [***] of the applicable 2010 Incremental Aircraft [***].

After said period, the LTS shall be [***] to the Buyer at standard [***] as set forth in the Seller's then current Customer Services Catalog.

5.3 Delivery

Delivery of LTS shall be mutually scheduled and agreed upon between the parties.

5.4 Installation

Prerequisites to the functioning of LTS and conditions of site preparation shall be indicated by the Seller to the Buyer.

[***].

5.5 Support

Support, assistance and training shall be provided upon the Buyer’s request on a chargeable basis at the rates defined in the Seller’s Customer Services Catalog.

5.6 Licence

The use of LTS by the Buyer is subject to the signature of the applicable LTS License Agreement by the Buyer.

6. ASSIGNMENT

The Parties agree that clause 21 of the Second A320 Family Purchase Agreement shall govern the assignability and transferability of each Party’s rights and obligations under this Letter Agreement N°6.

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Letter Agreement No. 6

7. CONFIDENTIALITY

Each of the Parties hereto agree that the provisions of this Letter Agreement N°6 are personal to it and will not without the prior written consent of the other Parties disclose such information to any other Party. [***]

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Letter Agreement No. 6

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement N°6 to the Seller.

Agreed and Accepted		Agreed and Accepted
For and on behalf of		For and on behalf of
LAN AIRLINES S.A.		AIRBUS S.A.S.
By	:	By	:
Its	:	Its	:
Date	:	Date	:
LAN AIRLINES S.A.
By	:
Its	:
Date	:

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Letter Agreement No. 7A

LAN AIRLINES S.A.

Edificio Huidobro

Avenida Presidente Riesco 5711

Las Condes

Santiago - Chile

Subject  : [***]

LAN Airlines S.A (the “Buyer") and Airbus S.A.S. (the “Seller") have entered into an amendment N°9 to the Second A320 Purchase Agreement (as defined therein) dated of even date herewith (“Amendment N°9”), and which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the 2010 Incremental Aircraft described therein.

Capitalized terms used herein and not otherwise defined in this letter agreement N°7A to Amendment N°9 (the “Letter Agreement N°7A”) shall have the meanings assigned thereto in the Second A320 Family Purchase Agreement and/or Amendment N°9 as the case may be.

Both Parties agree that this Letter Agreement N° 7A, upon execution thereof, shall constitute an integral, non-severable part of said Amendment N°9 and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement N°7A.

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Letter Agreement No. 7A

This Letter Agreement No.7A shall be applicable to the 2010 A319 Aircraft.

1           [***].

2           [***].

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Letter Agreement No. 7A

3           [***]

4           [***].

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Letter Agreement No. 7A

5           [***]

6           [***].

7           [***].

8           [***].

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Letter Agreement No. 7A

9           [***].

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Letter Agreement No. 7A

10. [***].

11. [***]

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Letter Agreement No. 7A

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement N°7A to the Seller.

Agreed and Accepted		Agreed and Accepted
For and on behalf of		For and on behalf of
LAN AIRLINES S.A.		AIRBUS S.A.S.
By	:	By	:
Its	:	Its	:
Date	:	Date	:
LAN AIRLINES S.A.
By	:
Its	:
Date	:

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Letter Agreement No. 7A

APPENDIX No.1 to LETTER AGREEMENT No.7A

[***]

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LETTER AGREEMENT N°7B

LAN AIRLINES S.A.

Edificio Huidobro

Avenida Presidente Riesco 5711

Las Condes

Santiago - Chile

Subject  : [***]

LAN Airlines S.A (the “Buyer") and Airbus S.A.S. (the “Seller") have entered into an amendment N°9 to the Second A320 Purchase Agreement (as defined therein) dated of even date herewith (“Amendment N°9”), and which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the 2010 Incremental Aircraft described therein.

Capitalized terms used herein and not otherwise defined in this letter agreement N°7B to Amendment N°9 (the “Letter Agreement N°7B”) shall have the meanings assigned thereto in the Second A320 Family Purchase Agreement and/or Amendment N°9 as the case may be.

Both Parties agree that this Letter Agreement N°7B, upon execution thereof, shall constitute an integral, non-severable part of said Amendment N°9 and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement N°7B.

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LETTER AGREEMENT N°7B

This Letter Agreement No.7B shall be applicable to the [***].

1           [***]

2           [***].

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LETTER AGREEMENT N°7B

3           [***]

4           [***].

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LETTER AGREEMENT N°7B

5 [***]

5.1 [***].

5.2 [***].

5.2.1 [***].

5.2.2 [***]

5.3 [***].

5.4 [***].

5.5 [***].

6 [***]

6.1 [***].

6.2 [***].

6.3 [***].

6.4 [***].

6.5 [***].

6.6 [***].

6.7 [***].

6.8 [***].

7 [***]

7.1 [***].

7.2 [***].

8 [***].

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LETTER AGREEMENT N°7B

9           [***].

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LETTER AGREEMENT N°7B

10. [***].

11. [***]

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LETTER AGREEMENT N°7B

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement N°7B to the Seller.

Agreed and Accepted		Agreed and Accepted
For and on behalf of		For and on behalf of
LAN AIRLINES S.A.		AIRBUS S.A.S.
By	:	By	:
Its	:	Its	:
Date	:	Date	:
LAN AIRLINES S.A.
By	:
Its	:
Date	:

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LETTER AGREEMENT N°7B

APPENDIX No.1 to LETTER AGREEMENT No.7B

[***]

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LETTER AGREEMENT N°7C

LAN AIRLINES S.A.

Edificio Huidobro

Avenida Presidente Riesco 5711

Las Condes

Santiago - Chile

Subject  : [***]

LAN Airlines S.A (the “Buyer") and Airbus S.A.S. (the “Seller") have entered into an amendment N°9 to the Second A320 Purchase Agreement (as defined therein) dated of even date herewith (“Amendment N°9”), and which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the 2010 Incremental Aircraft described therein.

Capitalized terms used herein and not otherwise defined in this letter agreement N°7C to Amendment N°9 (the “Letter Agreement N°7C”) shall have the meanings assigned thereto in the Second A320 Family Purchase Agreement and/or Amendment N°9 as the case may be.

Both Parties agree that this Letter Agreement N° 7C, upon execution thereof, shall constitute an integral, non-severable part of said Amendment N°9 and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement N°7C.

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LETTER AGREEMENT N°7C

This Letter Agreement No.7C shall be applicable to the [***].

1           [***].

2           [***]

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LETTER AGREEMENT N°7C

3 [***]

4 [***]

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LETTER AGREEMENT N°7C

5 [***]

5.1 [***].

5.2 [***]

5.2.1 [***]

5.2.2 [***]

5.3 [***]

5.4 [***].

5.5 [***]

6 [***]

6.1 [***].

6.2 [***]

6.3 [***]

6.4 [***]

6.5 [***]

6.6 [***]

6.7 [***]

6.8 [***]

7 [***]

7.1 [***]

7.2 [***]:

a)  [***]

b)  [***]

c) [***]

8 [***]

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LETTER AGREEMENT N°7C

9 [***]

9.1 [***]:

9.1.1 [***].

9.1.2 [***].

9.1.3 [***].

9.2 [***].

9.3 [***].

9.4 [***].

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LETTER AGREEMENT N°7C

10. [***].

11. [***]

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LETTER AGREEMENT N°7C

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement N°7C to the Seller.

Agreed and Accepted		Agreed and Accepted
For and on behalf of		For and on behalf of
LAN AIRLINES S.A.		AIRBUS S.A.S.
By	:	By	:
Its	:	Its	:
Date	:	Date	:
LAN AIRLINES S.A.
By	:
Its	:
Date	:

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LETTER AGREEMENT N°7C

APPENDIX No.1 to LETTER AGREEMENT No.7C

[***]

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LETTER AGREEMENT N°7D

LAN AIRLINES S.A.

Edificio Huidobro

Avenida Presidente Riesco 5711

Las Condes

Santiago - Chile

Subject  : [***]

LAN Airlines S.A (the “Buyer") and Airbus S.A.S. (the “Seller") have entered into an amendment N°9 to the Second A320 Purchase Agreement (as defined therein) dated of even date herewith (“Amendment N°9”), and which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the 2010 Incremental Aircraft described therein.

Capitalized terms used herein and not otherwise defined in this letter agreement N°7D to Amendment N°9 (the “Letter Agreement N°7D”) shall have the meanings assigned thereto in the Second A320 Family Purchase Agreement and/or Amendment N°9 as the case may be.

Both Parties agree that this Letter Agreement N° 7D, upon execution thereof, shall constitute an integral, non-severable part of said Amendment N°9 and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement N°7D.

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LETTER AGREEMENT N°7D

This Letter Agreement No.7D shall be applicable to the [***]

1           [***]

2           [***].

3           [***]

4           [***].

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LETTER AGREEMENT N°7D

5 [***]

5.1 [***].

5.2 [***]

5.2.1 [***]

5.2.2 [***]

5.3 [***]

5.4 [***]

5.5 [***].

6 [***]

6.1 [***].

6.2 [***].

6.3 [***].

6.4 [***]

6.5 [***].

6.6 [***].

6.7 [***].

6.8 [***].

7 [***]

7.1 [***]

7.2 [***]t.

8 [***]

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LETTER AGREEMENT N°7D

9 [***].

9.1 [***]:

9.1.1 [***]

9.1.2 [***]

9.1.3 [***]

9.2 [***].

9.3 [***].

9.4 [***].

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LETTER AGREEMENT N°7D

10. [***].

11. [***]

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LETTER AGREEMENT N°7D

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement N°7D to the Seller.

Agreed and Accepted		Agreed and Accepted
For and on behalf of		For and on behalf of
LAN AIRLINES S.A.		AIRBUS S.A.S.
By	:	By	:
Its	:	Its	:
Date	:	Date	:
LAN AIRLINES S.A.
By	:
Its	:
Date	:

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LETTER AGREEMENT N°7D

APPENDIX No.1 to LETTER AGREEMENT No.7D

[***]

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LETTER AGREEMENT N°7E

LAN AIRLINES S.A.

Edificio Huidobro

Avenida Presidente Riesco 5711

Las Condes

Santiago - Chile

Subject  : [***].

LAN Airlines S.A (the “Buyer") and Airbus S.A.S. (the “Seller") have entered into an amendment N°9 to the Second A320 Purchase Agreement (as defined therein) dated of even date herewith (“Amendment N°9”), and which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the 2010 Incremental Aircraft described therein.

Capitalized terms used herein and not otherwise defined in this letter agreement N°7E to Amendment N°9 (the “Letter Agreement N°7E”) shall have the meanings assigned thereto in the Second A320 Family Purchase Agreement and/or Amendment N°9 as the case may be.

Both Parties agree that this Letter Agreement N° 7E, upon execution thereof, shall constitute an integral, non-severable part of said Amendment N°9 and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement N°7E.

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LETTER AGREEMENT N°7E

This Letter Agreement No.7E shall be applicable to the [***]

1           [***].

2           [***].

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LETTER AGREEMENT N°7E

3           [***]

4           [***].

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LETTER AGREEMENT N°7E

5 [***]

5.1 [***].

5.2 [***].

5.2.1 [***].

5.2.2 [***]

5.3 [***]

5.4 [***].

5.5 [***]

6 [***]

6.1 [***].

6.2 [***].

6.3 [***].

6.4 [***].

6.5 [***].

6.6 [***].

6.7 [***].

6.8 [***].

7 [***]

7.1 [***].

7.2 [***].

8 [***].

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LETTER AGREEMENT N°7E

9 [***].

9.1 [***]:

9.1.1 [***].

9.1.2 [***].

9.1.3 [***].

9.2 [***].

9.3 [***].

9.4 [***].

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LETTER AGREEMENT N°7E

10. [***].

11. [***]

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LETTER AGREEMENT N°7E

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement N°7E to the Seller.

Agreed and Accepted		Agreed and Accepted
For and on behalf of		For and on behalf of
LAN AIRLINES S.A.		AIRBUS S.A.S.
By	:	By	:
Its	:	Its	:
Date	:	Date	:
LAN AIRLINES S.A.
By	:
Its	:
Date	:

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LETTER AGREEMENT N°7E

APPENDIX No.1 to LETTER AGREEMENT No.7E

[***]

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LETTER AGREEMENT N°7F

 

LAN AIRLINES S.A.

Edificio Huidobro

Avenida Presidente Riesco 5711

Las Condes

Santiago - Chile

Subject  : [***].

LAN Airlines S.A (the “Buyer") and Airbus S.A.S. (the “Seller") have entered into an amendment N°9 to the Second A320 Purchase Agreement (as defined therein) dated of even date herewith (“Amendment N°9”), and which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the 2010 Incremental Aircraft described therein.

Capitalized terms used herein and not otherwise defined in this letter agreement N°7F to Amendment N°9 (the “Letter Agreement N°7F”) shall have the meanings assigned thereto in the Second A320 Family Purchase Agreement and/or Amendment N°9 as the case may be.

Both Parties agree that this Letter Agreement N° 7F, upon execution thereof, shall constitute an integral, non-severable part of said Amendment N°9 and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement N°7F.

A320F - LAN - AMDT 9 - Second A320 Family PA

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LETTER AGREEMENT N°7F

 

This Letter Agreement No.7f shall be applicable to the [***]

1           [***]

2           [***]

A320F - LAN - AMDT 9 - Second A320 Family PA

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LETTER AGREEMENT N°7F

3           [***]

4           [***]

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LETTER AGREEMENT N°7F

5           [***].

6           [***]

7           [***].

8           [***].

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LETTER AGREEMENT N°7F

9           [***]

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LETTER AGREEMENT N°7F

10. [***].

11. [***]

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LETTER AGREEMENT N°7F

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement N°7F to the Seller.

Agreed and Accepted			Agreed and Accepted
For and on behalf of			For and on behalf of
LAN AIRLINES S.A.			AIRBUS S.A.S.
By	:	____________________	By	:	____________________
Its	:	____________________	Its	:	____________________
Date	:	____________________	Date	:	____________________

LAN AIRLINES S.A.
By	:	___________________
Its	:	___________________
Date	:	___________________

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LETTER AGREEMENT N°7F

APPENDIX No.1 to LETTER AGREEMENT No.7F

[***]

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LETTER AGREEMENT N°7G

LAN AIRLINES S.A.

Edificio Huidobro

Avenida Presidente Riesco 5711

Las Condes

Santiago - Chile

Subject  : [***]

LAN Airlines S.A (the “Buyer") and Airbus S.A.S. (the “Seller") have entered into an amendment N°9 to the Second A320 Purchase Agreement (as defined therein) dated of even date herewith (“Amendment N°9”), and which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the 2010 Incremental Aircraft described therein.

Capitalized terms used herein and not otherwise defined in this letter agreement N°7G to Amendment N°9 (the “Letter Agreement N°7G”) shall have the meanings assigned thereto in the Second A320 Family Purchase Agreement and/or Amendment N°9 as the case may be.

Both Parties agree that this Letter Agreement N° 7G, upon execution thereof, shall constitute an integral, non-severable part of said Amendment N°9 and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement N°7G.

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LETTER AGREEMENT N°7G

This Letter Agreement No.7G shall be applicable to the [***]

1           [***]

2           [***].

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LETTER AGREEMENT N°7G

3           [***]

4           [***].

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LETTER AGREEMENT N°7G

5           [***].

6           [***].

7           [***].

8           [***].

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LETTER AGREEMENT N°7G

9           [***].

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LETTER AGREEMENT N°7G

10. [***].

11. [***]

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LETTER AGREEMENT N°7G

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement N°7G to the Seller.

Agreed and Accepted			Agreed and Accepted
For and on behalf of			For and on behalf of
LAN AIRLINES S.A.			AIRBUS S.A.S.
By	:	____________________	By	:	____________________
Its	:	____________________	Its	:	____________________
Date	:	____________________	Date	:	____________________

LAN AIRLINES S.A.
By	:	___________________
Its	:	___________________
Date	:	___________________

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LETTER AGREEMENT N°7G

APPENDIX No.1 to LETTER AGREEMENT No.7G

[***]

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LETTER AGREEMENT N°7H

LAN AIRLINES S.A.

Edificio Huidobro

Avenida Presidente Riesco 5711

Las Condes

Santiago - Chile

Subject  : [***]

LAN Airlines S.A (the “Buyer") and Airbus S.A.S. (the “Seller") have entered into an amendment N°9 to the Second A320 Purchase Agreement (as defined therein) dated of even date herewith (“Amendment N°9”), and which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the 2010 Incremental Aircraft described therein.

Capitalized terms used herein and not otherwise defined in this letter agreement N°7H to Amendment N°9 (the “Letter Agreement N°7H”) shall have the meanings assigned thereto in the Second A320 Family Purchase Agreement and/or Amendment N°9 as the case may be.

Both Parties agree that this Letter Agreement N° 7H, upon execution thereof, shall constitute an integral, non-severable part of said Amendment N°9 and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement N°7H.

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LETTER AGREEMENT N°7H

This Letter Agreement No.7H shall be applicable to the [***]

1 [***].

2 [***]

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LETTER AGREEMENT N°7H

3 [***]

4 [***]

5 [***]

6 [***]

7 [***]

8 [***]

9 [***]

10. [***]

11. [***]

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LETTER AGREEMENT N°7H

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement N°7H to the Seller.

Agreed and Accepted			Agreed and Accepted
For and on behalf of			For and on behalf of
LAN AIRLINES S.A.			AIRBUS S.A.S.
By	:	____________________	By	:	____________________
Its	:	____________________	Its	:	____________________
Date	:	____________________	Date	:	____________________

LAN AIRLINES S.A.
By	:	___________________
Its	:	___________________
Date	:	___________________

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LETTER AGREEMENT N°7H

APPENDIX No.1 to LETTER AGREEMENT No.7H

[***]

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LETTER AGREEMENT N°7I

LAN AIRLINES S.A.

Edificio Huidobro

Avenida Presidente Riesco 5711

Las Condes

Santiago - Chile

Subject: [***]

LAN Airlines S.A (the “Buyer") and Airbus S.A.S. (the “Seller") have entered into an amendment N°9 to the Second A320 Purchase Agreement (as defined therein) dated of even date herewith (“Amendment N°9”), and which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the 2010 Incremental Aircraft described therein.

Capitalized terms used herein and not otherwise defined in this letter agreement N°7I to Amendment N°9 (the “Letter Agreement N°7I”) shall have the meanings assigned thereto in the Second A320 Family Purchase Agreement and/or Amendment N°9 as the case may be.

Both Parties agree that this Letter Agreement N° 7I, upon execution thereof, shall constitute an integral, non-severable part of said Amendment N°9 and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement N°7I.

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LETTER AGREEMENT N°7I

This Letter Agreement No.7I shall be applicable to the [***]..

1 [***].

2 [***]

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LETTER AGREEMENT N°7I

3 [***]

4 [***]

5 [***]

6 [***]

7 [***]

8 [***]

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LETTER AGREEMENT N°7I

9 [***]

A320F - LAN - AMDT 9 - Second A320 Family PA

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LETTER AGREEMENT N°7I

10. [***]

11. [***]

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LETTER AGREEMENT N°7I

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement N°7I to the Seller.

Agreed and Accepted			Agreed and Accepted
For and on behalf of			For and on behalf of
LAN AIRLINES S.A.			AIRBUS S.A.S.
By	:	____________________	By	:	____________________
Its	:	____________________	Its	:	____________________
Date	:	____________________	Date	:	____________________

LAN AIRLINES S.A.
By	:	___________________
Its	:	___________________
Date	:	___________________

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LETTER AGREEMENT N°7I

APPENDIX No.1 to LETTER AGREEMENT No.7I

[***]

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LETTER AGREEMENT N°7J

LAN AIRLINES S.A.

Edificio Huidobro

Avenida Presidente Riesco 5711

Las Condes

Santiago - Chile

Subject: [***]

LAN Airlines S.A (the “Buyer") and Airbus S.A.S. (the “Seller") have entered into an amendment N°9 to the Second A320 Purchase Agreement (as defined therein) dated of even date herewith (“Amendment N°9”), and which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the 2010 Incremental Aircraft described therein.

Capitalized terms used herein and not otherwise defined in this letter agreement N°7J to Amendment N°9 (the “Letter Agreement N°7J”) shall have the meanings assigned thereto in the Second A320 Family Purchase Agreement and/or Amendment N°9 as the case may be.

Both Parties agree that this Letter Agreement N° 7J, upon execution thereof, shall constitute an integral, non-severable part of said Amendment N°9 and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement N°7J.

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LETTER AGREEMENT N°7J

This Letter Agreement No.7J shall be applicable to the [***]

1 [***]

2 [***]

3 [***]

4 [***].

5 [***].

6 [***]

7 [***].

8 [***]

9 [***].

10. [***].

11. [***]

A320F - LAN - AMDT 9 - Second A320 Family PA

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LETTER AGREEMENT N°7J

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement N°7J to the Seller.

Agreed and Accepted			Agreed and Accepted
For and on behalf of			For and on behalf of
LAN AIRLINES S.A.			AIRBUS S.A.S.
By	:	____________________	By	:	____________________
Its	:	____________________	Its	:	____________________
Date	:	____________________	Date	:	____________________

LAN AIRLINES S.A.
By	:	___________________
Its	:	___________________
Date	:	___________________

A320F - LAN - AMDT 9 - Second A320 Family PA

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LETTER AGREEMENT N°7J

APPENDIX No.1 to LETTER AGREEMENT No.7J

[***]

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LETTER AGREEMENT N°7K

LAN AIRLINES S.A.

Edificio Huidobro

Avenida Presidente Riesco 5711

Las Condes

Santiago - Chile

Subject: [***].

LAN Airlines S.A (the “Buyer") and Airbus S.A.S. (the “Seller") have entered into an amendment N°9 to the Second A320 Purchase Agreement (as defined therein) dated of even date herewith (“Amendment N°9”), and which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the 2010 Incremental Aircraft described therein.

Capitalized terms used herein and not otherwise defined in this letter agreement N°7K to Amendment N°9 (the “Letter Agreement N°7K”) shall have the meanings assigned thereto in the Second A320 Family Purchase Agreement and/or Amendment N°9 as the case may be.

Both Parties agree that this Letter Agreement N° 7K, upon execution thereof, shall constitute an integral, non-severable part of said Amendment N°9 and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement N°7K.

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LETTER AGREEMENT N°7K

This Letter Agreement No.7K shall be applicable to the [***]

1 [***]

2 [***]

3 [***]

4 [***]

5 [***]

6 [***]

7 [***]

8 [***]

9 [***]

10. [***]

11. [***]

A320F - LAN - AMDT 9 - Second A320 Family PA

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LETTER AGREEMENT N°7K

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement N°7K to the Seller.

Agreed and Accepted			Agreed and Accepted
For and on behalf of			For and on behalf of
LAN AIRLINES S.A.			AIRBUS S.A.S.
By	:	____________________	By	:	____________________
Its	:	____________________	Its	:	____________________
Date	:	____________________	Date	:	____________________

LAN AIRLINES S.A.
By	:	___________________
Its	:	___________________
Date	:	___________________

A320F - LAN - AMDT 9 - Second A320 Family PA

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LETTER AGREEMENT N°7K

APPENDIX No.1 to LETTER AGREEMENT No.7K

[***]

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LETTER AGREEMENT N°7L

LAN AIRLINES S.A.

Edificio Huidobro

Avenida Presidente Riesco 5711

Las Condes

Santiago - Chile

Subject: [***]

LAN Airlines S.A (the “Buyer") and Airbus S.A.S. (the “Seller") have entered into an amendment N°9 to the Second A320 Purchase Agreement (as defined therein) dated of even date herewith (“Amendment N°9”), and which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the 2010 Incremental Aircraft described therein.

Capitalized terms used herein and not otherwise defined in this letter agreement N°7L to Amendment N°9 (the “Letter Agreement N°7L”) shall have the meanings assigned thereto in the Second A320 Family Purchase Agreement and/or Amendment N°9 as the case may be.

Both Parties agree that this Letter Agreement N° 7L, upon execution thereof, shall constitute an integral, non-severable part of said Amendment N°9 and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement N°7L.

A320F - LAN - AMDT 9 - Second A320 Family PA

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LETTER AGREEMENT N°7L

This Letter Agreement No.7L shall be applicable to the [***]

1 [***].

2 [***].

3 [***]

4 [***].

5 [***].

6 [***].

7 [***].

8 [***].

9 [***].

10. [***].

11. [***]

A320F - LAN - AMDT 9 - Second A320 Family PA

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LETTER AGREEMENT N°7L

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement N°7L to the Seller.

Agreed and Accepted			Agreed and Accepted
For and on behalf of			For and on behalf of
LAN AIRLINES S.A.			AIRBUS S.A.S.
By	:	____________________	By	:	____________________
Its	:	____________________	Its	:	____________________
Date	:	____________________	Date	:	____________________

LAN AIRLINES S.A.
By	:	___________________
Its	:	___________________
Date	:	___________________

A320F - LAN - AMDT 9 - Second A320 Family PA

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LETTER AGREEMENT N°7L

APPENDIX No.1 to LETTER AGREEMENT No.7L

[***]

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Letter Agreement No. 8

LAN AIRLINES S.A.

Edificio Huidobro

Avenida Presidente Riesco 5711

Las Condes

Santiago - Chile

Subject  : [***]

LAN Airlines S.A (the “Buyer") and Airbus S.A.S. (the “Seller") have entered into an amendment N°9 to the Second A320 Purchase Agreement (as defined therein) dated of even date herewith (“Amendment N°9”), and which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the Incremental Aircraft described therein.

Capitalized terms used herein and not otherwise defined in this letter agreement N°8 to Amendment N°9 (the “Letter Agreement N°8”) shall have the meanings assigned thereto in the Second A320 Family Purchase Agreement and/or Amendment N°9 as the case may be.

Both Parties agree that this Letter Agreement N° 8, upon execution thereof, shall constitute an integral, non-severable part of said Amendment N°9 and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement N°8.

A320F - LAN - AMDT 9 - Second A320 Family PA

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Letter Agreement No. 8

0. [***].

1. T[***]

2. [***]

3. Assignment

The Parties agree that clause 21 of the Second A320 Family Purchase Agreement shall govern the assignability and transferability of each Party’s rights and obligations under this Letter Agreement N° 8.

4. Confidentiality

Each of the Parties hereto agree that the provisions of this Letter Agreement N° 8 are personal to it and will not without the prior written consent of the other Parties disclose such information to any other Party. [***]

A320F - LAN - AMDT 9 - Second A320 Family PA

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Letter Agreement No. 8

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement N°8 to the Seller.

Agreed and Accepted			Agreed and Accepted
For and on behalf of			For and on behalf of
LAN AIRLINES S.A.			AIRBUS S.A.S.
By	:	____________________	By	:	____________________
Its	:	____________________	Its	:	____________________
Date	:	____________________	Date	:	____________________

LAN AIRLINES S.A.
By	:	___________________
Its	:	___________________
Date	:	___________________

A320F - LAN - AMDT 9 - Second A320 Family PA

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Letter Agreement No. 9

LAN AIRLINES S.A.

Edificio Huidobro

Avenida Presidente Riesco 5711

Las Condes

Santiago - Chile

Subject: [***]

LAN Airlines S.A (the “Buyer") and Airbus S.A.S. (the “Seller") have entered into an amendment N°9 to the Second A320 Purchase Agreement (as defined therein) dated of even date herewith (“Amendment N°9”), and which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the Incremental Aircraft described therein.

Capitalized terms used herein and not otherwise defined in this letter agreement N°9 to Amendment N°9 (the “Letter Agreement N°9”) shall have the meanings assigned thereto in the Second A320 Family Purchase Agreement and/or Amendment N°9 as the case may be.

Both Parties agree that this Letter Agreement N°9, upon execution thereof, shall constitute an integral, non-severable part of said Amendment N°9 and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement N°9.

A320F - LAN - AMDT 9 - Second A320 Family PA

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Letter Agreement No. 9

1. [***].

2. [***].

3. Assignment

The Parties agree that clause 21 of the Second A320 Family Purchase Agreement shall govern the assignability and transferability of each Party’s rights and obligations under this Letter Agreement N°9.

4. Confidentiality

Each of the Parties hereto agree that the provisions of this Letter Agreement N°9 are personal to it and will not without the prior written consent of the other Parties disclose such information to any other Party. [***]

A320F - LAN - AMDT 9 - Second A320 Family PA

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Letter Agreement No. 9

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement N°9 to the Seller.

Agreed and Accepted			Agreed and Accepted
For and on behalf of			For and on behalf of
LAN AIRLINES S.A.			AIRBUS S.A.S.
By	:	____________________	By	:	____________________
Its	:	____________________	Its	:	____________________
Date	:	____________________	Date	:	____________________

LAN AIRLINES S.A.
By	:	___________________
Its	:	___________________
Date	:	___________________

A320F - LAN - AMDT 9 - Second A320 Family PA

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Letter Agreement No. 9

Appendix 1

[***]

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Side Letter No. 1

LAN AIRLINES S.A.

Edificio Huidobro

Avenida Presidente Riesco 5711

Las Condes

Santiago - Chile

Subject  : [***]

LAN Airlines S.A (the “Buyer") and Airbus S.A.S. (the “Seller") have entered into an amendment N°9 to the Second A320 Purchase Agreement (as defined therein) dated of even date herewith (“Amendment N°9”), and which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the Incremental Aircraft described therein.

Capitalized terms used herein and not otherwise defined in this side letter N°1 to Amendment N°9 (the “Side Letter N°1”) shall have the meanings assigned thereto in the Second A320 Family Purchase Agreement and/or Amendment N°9 as the case may be.

Both Parties agree that this Side Letter N°1, upon execution thereof, shall constitute an integral, non-severable part of said Amendment N°9 and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Side Letter N°1.

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Side Letter No. 1

1. [***]

2. [***]

3. Assignment

This Side Letter N°1 and the rights and obligations of the Buyer herein shall not be assigned or transferred in any manner without the prior written consent of the Seller, and any attempted assignment or transfer in contravention of the provisions of this Side Letter N°1  shall be void and of no force or effect.

4. Confidentiality

Each of the Parties hereto agree that the provisions of this Side Letter N°1 are personal to it and will not without the prior written consent of the other Parties disclose such information to any other Party. [***]

A320F - LAN - AMDT 9 - Second A320 Family PA

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Side Letter No. 1

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Side Letter N°1 to the Seller.

Agreed and Accepted			Agreed and Accepted
For and on behalf of			For and on behalf of
LAN AIRLINES S.A.			AIRBUS S.A.S.
By	:	____________________	By	:	____________________
Its	:	____________________	Its	:	____________________
Date	:	____________________	Date	:	____________________

LAN AIRLINES S.A.
By	:	___________________
Its	:	___________________
Date	:	___________________

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EX-4.2X4

Exhibit 4.2.4

Supplemental Agreement No. 28 (“SA-28”)

to

Purchase Agreement No. 2126

between

THE BOEING COMPANY

and

LAN AIRLINES S.A.

Relating to Boeing Model 767-316ER, Model 767-38EF, and Model 767-316F Aircraft

THIS SUPPLEMENTAL AGREEMENT, entered into as of the 22 day of  March of 2010, by and between THE BOEING COMPANY, a Delaware corporation (hereinafter called “Boeing”), and LAN Airlines S.A., a Chilean corporation (hereinafter called “Customer”);

WITNESSETH:

WHEREAS, the parties entered into that certain Purchase Agreement No. 2126, dated as of January 30, 1998 relating to the purchase and sale of Boeing Model 767-316ER, Model 767-38EF, and Model 767-316F aircraft (hereinafter referred to as "Aircraft") which agreement, including all tables, exhibits, supplemental exhibits and specifications thereto, together with all letter agreements then or thereafter entered into that by their terms constitute part of such purchase agreement and as such purchase agreement may be amended or supplemented from time to time, is hereinafter called the "Purchase Agreement;"

WHEREAS, the parties have agreed to accelerate the delivery of ten (10) Model 787-8 aircraft, substitute four (4) aircraft from 787-916 to 787-816 and substitute three (3) 767-316ER to 767-316F freighter aircraft, and

WHEREAS, the parties have agreed upon the three (3) Boeing Model 767-316ER Aircraft being substituted to 767-316F Aircraft and have agreed to a deferral in the delivery of such Aircraft.

WHEREAS, Boeing and Customer have agreed to amend the Purchase Agreement to incorporate the above changes;

NOW THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree to amend the Purchase Agreement as follows:

1.           Substitute 767 Freighter Aircraft.  In accordance with Letter Agreement 6-1162-ILK-0383R1, paragraph 3 the two (2) 767-316ER 2012 Deferral Aircraft are substituted to 767-316F Aircraft leaving no 2012 Deferral Aircraft and in accordance with Letter Agreement 6-1162-KSW-6424, paragraph 3 one (1) 767-316ER Incremental Aircraft is substituted to a 767-316F Aircraft leaving one Incremental Aircraft remaining.  Letter Agreement 6-1162-KSW-6424, paragraphs 4 and 5 no longer apply to the Incremental Aircraft converted to a 767-316F aircraft.  The three (3) Aircraft substituted from 767-316ER Aircraft to 767-316F Aircraft are shown in the chart below (hereinafter the “Substitute 767 Freighter Aircraft”).

Manufacturer’s Serial Number	Previous Aircraft Minor Model	Revised Aircraft Minor Model	Original Contract Delivery	Revised Contract Delivery
40799	767-300ER	767-316F	Sep 2012	2nd Qtr 2013
40592	767-300ER	767-316F	Oct 2012	4th Qtr 2013
40593	767-300ER	767-316F	Nov 2012	1st Qtr 2014

2.           Boeing will notify Customer of the delivery month of each Substitute 767 Freighter Aircraft eighteen (18) months prior to the scheduled delivery month and a supplemental agreement will be executed within thirty (30) days making the changes to the Purchase Agreement reflecting the delivery month, the corresponding price (the current price escalated in accordance with the escalation factor) and the BFE on dock dates.  Boeing and Customer will work diligently and in good faith to sign the supplemental agreement in 30 days.

3.           Table of Contents.  The Table of Contents to the Purchase Agreement is revised and a revised Table of Contents dated January 2010 is attached hereto.

4.           Tables.

4.1           Aircraft Information Table 11, Aircraft Delivery, Description, Price and Advance Payments is revised to delete the Aircraft delivering in September 2012, October 2012 and November 2012.  The revised Table 11 dated January 2010 is attached hereto.

4.2           Aircraft Information Table 12, Aircraft Delivery, Description, Price and Advance Payments for the Substitute 767 Freighter Aircraft, attached hereto, is added to the Purchase Agreement.

5.           Exhibits.

Exhibit A-10, Aircraft Configuration relating to the Substitute 767 Freighter Aircraft, attached hereto, is added to the Purchase Agreement.

6.           Letter Agreements.

6.1           Letter Agreement 6-1162-ILK-0381R1 entitled “Special Matters Letter Applicable to the 2011 Accelerated Aircraft and the 2012 Deferral Aircraft is deleted and replaced by Letter Agreement 6-1162-ILK-0381R2 entitled “Special Matters Letter Applicable to the 2011 Accelerated Aircraft and the Substitute 767 Freighter Aircraft,” attached hereto.

6.2           Letter Agreement 6-1162-ILK-0384R2 entitled “16G Seats Requirements” does not apply to the Substitute 767 Freighter Aircraft.

6.3           Letter Agreement 6-1162-ILK-0388 entitled “Option Aircraft” is deleted.

6.4           Letter Agreement 6-1162-KSW-6456 entitled “Performance Guarantees Relating to the Substitute 767 Freighter Aircraft, attached hereto, is added to the Purchase Agreement.

7.           Amount Due at Signing.  [***].

8.           Confidentiality.

Boeing and Customer understand that the commercial and financial information contained in this Supplemental Agreement is considered by the parties as confidential (Confidential Information) and both agree not to disclose such Confidential Information except as provided herein.  In addition to the parties’ respective officers, directors and employees who need to know the Confidential Information and who understand the obligation to keep it confidential, the parties may disclose Confidential Information (1) to the extent required by law and (2) to its agents, auditors and advisors who need to know the Confidential Information for purposes of enabling each party to understand, perform its obligations under, or receive the benefits of, this Supplemental Agreement and who have agreed not to use or disclose the Confidential Information for any other purpose without the other party’s prior written consent.  In the event that a party concludes that disclosure of Confidential Information contained in this Supplemental Agreement is required by applicable law, the party will so advise the other party promptly in writing and endeavor to protect the confidentiality of such Confidential Information to the widest extent possible.  In the event of a legal dispute with Boeing, nothing herein will preclude Customer from sharing with its legal counsel information necessary for purposes of enabling counsel to advise or represent Customer provided that so long as Customer causes its legal counsel to maintain the confidentiality of information that is the subject of this Article.  Except as provided in the assignment provisions of Article 7 of the Special Matters Applicable to the Incremental Aircraft; 6-1162-KSW-6423; Article 21 of Letter Agreement 6-1162-LAJ-0895R6 entitled “Business Considerations”; Article 8 of Letter Agreement 6-1162-ILK-0381R2 entitled “Special Matters Letter Applicable to the 2011 Accelerated Aircraft and the Substitute 767 Freighter Aircraft”; and Article 9 of Letter Agreement 6-1162-ILK-0412 entitled “Special Matters Relating to Three Aircraft Originally Scheduled to Deliver in 2009”, Customer will not disclose this Supplemental Agreement for purposes of financing payments without the prior written consent of Boeing, which consent will be provided once the financier enters into a Non Disclosure Agreement with Boeing in form and substance reasonably satisfactory to Boeing, which will include agreeing not to disclose or use Confidential Information except for the purpose set forth herein. This provision shall not apply to any Confidential Information that is in the public domain except that a party will be liable to the other for breach of its obligations under this provision if the Confidential Information entered the public domain as a consequence of a wrongful act or omission on its part.

The Purchase Agreement shall be deemed amended to the extent herein provided and as amended shall continue in full force and effect.

EXECUTED IN DUPLICATE as of the day and year first above written.

THE BOEING COMPANY		LAN AIRLINES S.A.
By:		By:
	Kathie S. Weibel		Mr. Roberto Alvo
Its	Attorney-In-Fact	Its:	Sr. Vice President Strategic Planning & Corporate Development
		By:
			Mr. Alejandro de la Fuente
		Its:	Chief Financial Officer

PURCHASE AGREEMENT NUMBER 2126

between

THE BOEING COMPANY

and

LAN Airlines  S.A.

Relating to Boeing Model 767-316ER, Model 767-38EF, and Model 767-316F Aircraft

TABLE OF CONTENTS

		Supplemental
		Agreement
ARTICLES
1.	Quantity, Model and Description	24
2.	Delivery Schedule	24
3.	Price	24
4.	Payment	24
5.	Miscellaneous	24
6.	Confidentiality	24
TABLE
1.	Aircraft Information Table 767-300ER Aircraft – 1995$	1
2.	Aircraft Information Table 767-300F Aircraft – 1997$	1
3.	Aircraft Information Table 767-300F Aircraft – 1998$	8
4.	Aircraft Information Table 767-300F Aircraft – 1999$	11
5.	Aircraft Information Table 767-300F Aircraft – 2003$	18
6.	Aircraft Information Table 767-316ER Aircraft – 2003$	21
7.	Aircraft Information Table 767-300F Aircraft – 2004$	24
8.	Aircraft Information Table 767-316ER Aircraft – 2004$	22
9.	Aircraft Information Table 767-316ER Aircraft – 2005 $	22
10.	Aircraft Information Table 767-316ER Aircraft – 2006 $	25
11.	Aircraft Information Table 767-316ER Aircraft – 2008 $	28
12.	Aircraft Information Table 767-316F Aircraft – 2008$	28
EXHIBITS
A.	Aircraft Configuration
A-1	Aircraft Configuration	1
A-2	Aircraft Configuration	5
A-3	Aircraft Configuration	10
A-4	Aircraft Configuration 767-316F Aircraft – 2003$	15
A-5	Aircraft Configuration 767-316ER Aircraft – 2003$	17
A-6	Aircraft Configuration 767-316ER Aircraft – 2004$	22
A-7	Aircraft Configuration 767-316ER Aircraft – 2005$	22
A-8	Aircraft Configuration 767-316ER Aircraft – 2006$	23
A-9	Aircraft Configuration 767-316ER Aircraft – 2008$	24
A-10	Aircraft Configuration 767-316F Aircraft – 2008$	28
B.	Aircraft Delivery Requirements and Responsibilities	1
SUPPLEMENTAL EXHIBITS
BFE1.	BFE Variables	1
CS1.	Customer Support Variables	1
EE1.	Engine Escalation/Engine Warranty and Patent Indemnity	1
EE1-1.	Engine Escalation/Engine Warranty and Patent Indemnity	5
EE1-2.	Engine Escalation/Engine Warranty and Patent Indemnity	13
EE1-2006$	Engine Escalation, Engine Warranty & Patent Indemnity	26
EE1-2008$	Engine Escalation, Engine Warranty & Patent Indemnity	26
SLP1.	Service Life Policy Components
AE1	Escalation adjustment - airframe and optional features	22
AE1 2008$	Escalation adjustment - airframe and optional features	24
LETTER AGREEMENTS
2126-1	Seller Purchased Equipment
2126-2R1	Cabin Systems Equipment	17
2126-3R4	Option Aircraft	13

RESTRICTED LETTER AGREEMENTS

6-1162-DMH-350	Performance Guarantees
6-1162-DMH-351	Promotion Support
6-1162-DMH-472	Performance Guarantees	1
6-1162-DMH-475	Configuration Matters	1
[***]	[***]	[***]
6-1162-LAJ-311	Special Matters Relating to the July 2001 and September 2001 Aircraft	11
6-1162-LAJ-956	Special Matters Relating to four 2006 Delivery Aircraft (February 4, 2005)
6-1162-LAJ-0895R6	Business Considerations	23
[***]	[***]	[***]
6-1162-ILK-0381 R2	Special Matters Letter Applicable to the 2011 Accelerated Aircraft and the Substitute 767 Freighter Aircraft	28
6-1162-ILK-0382	No longer applicable	26
6-1162-ILK-0383 R1	Aircraft Model Substitution Relating to the 2011 Accelerated Aircraft and the Substitute 767 Freighter Aircraft	26
6-1162-ILK-0384 R2	16G Seats	27
6-1162-ILK-0385 R2	Performance Guarantees Relating to the 2011 Accelerated Aircraft; the 2012 Accelerated Aircraft and the Incremental Aircraft	27
6-1162-ILK-0388	Option Aircraft -deleted	28 (Art 6.2)
6-1162-ILK-0412	Special Matters Relating to Three Aircraft Originally Scheduled to Deliver in 2009	25
[***]	[***]	[***]
6-1162-KSW-6423	Special Matters Letter Applicable to the Incremental Aircraft	27
6-1162-KSW-6424	Aircraft Model Substitution Relating to the Incremental Aircraft	27
	RESTRICTED LETTER AGREEMENTS
	(continued)
6-1162-KSW-6456	Performance Guarantees for Substitute 767 Freighter Aircraft	28

Airframe Model/MTOW:	767-300F	412000 pounds	Detail Specification:		D019T002LAN63F-1
Engine Model/Thrust:	CF6-80C2B6F	60200 pounds	Airframe Price Base Year/Escalation Formula:		Jul-08 ECI-MFG / CPI
Airframe Price:		[***]	Engine Price Base Year/Escalation Formula:		Jul-08 GE CF6-80 & GE90 (99 rev.)
Optional Features:		[***]
Sub-Total of Airframe and Features:		[***]	Airframe Escalation Data:	(2Q09 Esc Fcst)
Engine Price (Per Aircraft):		[***]	Base Year Index (ECI):	103.1
Aircraft Basic Price (Excluding BFE/SPE):		[***]	Base Year Index (CPI):	208.2
Buyer Furnished Equipment (BFE) Estimate:		[***]	Engine Escalation Data:
Seller Purchased Equipment (SPE) Estimate:		[***]	Base Year Index (CPI):	129.930
Initial Payment/Aircraft at Proposal Accept:		[***]	Escalation is not fixed for these aircraft

		Escalation	Escalation		[***]	[***]
Delivery	Number of	Factor	Factor	Manufacturer	[***]	[***]	[***]	[***]	[***]
Date	Aircraft	(Airframe)	(Engine)	Serial Number	[***]	[***]	[***]	[***]	[***]
[***]	1	1.0964	1.1360	40799	[***]	[***]	[***]	[***]	[***]
[***]	1	1.1066	1.1510	40592	[***]	[***]	[***]	[***]	[***]
[***]	1	1.1146	1.1610	40593	[***]	[***]	[***]	[***]	[***]
Total	3

[***]	[***]
	[***]
	[***]

6-1162-ILK-0381R2

LAN Airlines S.A.

Avenida Presidente Riesco 5711

Piso 19

Las Condes

Santiago, Chile

Subject: Special Matters Letter Applicable to the 2011 Accelerated Aircraft and the Substitute 767 Freighter Aircraft

Reference: Purchase Agreement No. 2126 (the Purchase Agreement) between The Boeing Company (Boeing) and LAN Airlines S.A. (Customer) relating to Model 767-316F, Model 767-38EF and Model 767-316ER aircraft (hereinafter referred to as "Aircraft")

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement.  All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement.

1.  Definitions.

1.1      “STE” when used specifically in relation to any credit memorandum contained in this letter agreement shall mean that the relevant credit memorandum shall be escalated to the month of delivery in the same manner as the Airframe Price in accordance with the escalation formula reflected in Supplemental Exhibit AE1 2008$ to the Purchase Agreement entitled “Escalation adjustment - airframe and optional features”.

1.2      “Limitations on Use” when used in relation to any credit memorandum contained in this letter agreement shall mean that the applicable credit memorandum may be used for the purchase of Boeing goods and services or applied to the final delivery payment for the Aircraft for which the credit was issued, but that the relevant credit memorandum shall be prohibited from use for satisfaction of any Advance Payment obligation.

1.3      “2011 Accelerated Aircraft” shall mean either or both, as the case may be, of the two new Boeing Model 767-316ER Aircraft originally scheduled for delivery during the months of February and March of 2012, which contingent upon satisfaction of the terms of this letter agreement, are now scheduled for delivery in October and November of 2011, respectively.

1.4      “2012 Deferral Aircraft” shall mean the two (2) 767-300ER Aircraft scheduled for delivery in October and November 2012 that were substituted to 767-316F Aircraft.

1.5      [***].

1.6      “Incremental Aircraft” shall mean either or both, as the case may be, of the two new Boeing Model 767-316ER Aircraft scheduled for delivery during the months of September 2011 and September of 2012 to be purchased by Customer.  Supplemental Agreement 28 converts the September 2012 Incremental Aircraft into a Substitute 767 Freighter Aircraft.

1.7      [***].

1.8       “Table 11” shall mean the table entitled “Aircraft Information Table 11 to the Purchase Agreement”.

1.9      “Table 12” shall mean the table entitled “Aircraft Information Table 12 for the Substitute 767 Aircraft to the Purchase Agreement”.

1.10    “Substitute 767 Freighter Aircraft” shall mean the three (3) Boeing Model 767-316F Aircraft bearing serial numbers 40799, 40592, and 40593 now scheduled for delivery in 2nd Quarter 2013, 4th Quarter 2013, and 1st Quarter 2014, respectively.  Prior to substitution, these Aircraft were the two (2) 2012 Deferral Aircraft and one (1) Incremental Aircraft.

2. Export License.

Customer understands and confirms that it is Customer’s responsibility to obtain any required Export License from the relevant U.S. authority.  Without accepting any liability for any failure to do so, Boeing will use reasonable endeavors to alert Customer to any regulatory changes of which Boeing becomes aware and which require Customer to obtain such Export License.

3. Warranty Modification.

Notwithstanding paragraph 3.2 of Part 2 of Exhibit C to the AGTA, Boeing agrees that the warranty period for a Corrected Boeing Product resulting from a defect in material or workmanship is 6 months or the remainder of the initial warranty period, whichever is longer.

4. Credit Memoranda for the 2011 Accelerated Aircraft and Substitute 767 Freighter Aircraft.

Subject to Customer’s adherence to the Limitations on Use, Boeing will provide the Customer with a credit memorandum concurrently with the delivery of each Aircraft, in description and amount which is identified in the credit memoranda table 4.1 for each of the 2011 Accelerated Aircraft and in credit memoranda table 4.2 for each of the Substitute 767 Freighter Aircraft:

Table 4.1 Credit Memoranda Table Exclusive to the 2011 Accelerated Aircraft

[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]

Table 4.2 Credit Memoranda Table Exclusive to the Substitute 767 Freighter Aircraft

[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]

4.2.3                 [***].

[***].

5. [***].

5.1            [***]:

	[***].
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]

* - [***].

ü - [***].

# [***].

5.2            [***]. [***]                      

5.3            [***]:

(i)  [***]

(ii) [***].

5.4            [***].

6. Special Considerations for the Substitute Aircraft.

6.1            If Customer elects to change the configuration of any 2011 Accelerated Aircraft from a 767-316ER Passenger Aircraft to a 767-316F Freighter Aircraft in accordance with the terms of Letter Agreement 6-1162-ILK-0383R1 entitled “Aircraft Model Substitution Relating to the 2011 Accelerated Aircraft (such Customer election creating a Substitute Aircraft), then the following provisions shall apply:

6.2            Aircraft Purchase Price.  The Airframe Base Price, Optional Features Prices, Engine Price and Aircraft Basic Price of a Substitute Aircraft shall be as set forth in Exhibit A to this Letter Agreement for the applicable Substitute Aircraft.

6.3            Economic Considerations. The credit memoranda applicable to any Substitute Aircraft will be revised as set forth in Exhibit B to this Letter Agreement.

6.4            Optional Features.  The Aircraft Basic Price for any Substitute Aircraft incorporates the selected Optional Features Prices set forth in Exhibit C to this Letter Agreement.

6.5            Advance Payments.  Customer may apply the terms of the following to its payment obligations arising from Customer’s purchase of any Substitute Aircraft:

6.5.1 Article 5 of this Letter Agreement; and

6.5.2 [***].

7. Intentionally Deleted.

8. Assignment.

Any assignment by Customer of any benefits, entitlements, or services described in this Letter Agreement requires Boeing's prior written consent.  Further, Customer will not reveal to any third party the amount of the credit memoranda provided to Customer by Boeing without Boeing’s prior written consent and subject to such circumstances as Boeing may reasonably require.

Boeing will not unreasonably withhold consent to Customer’s request to assign, as security, rights in the Purchase Agreement if done for purposes of obtaining financing or for such other purpose consistent with fulfilling its obligations under the Purchase Agreement.  Boeing’s consent will be conditioned on all parties accepting Boeing’s customary conditions for consenting to an assignment, including, but not limited to, the following: assignor and assignee indemnification of Boeing for any actions taken by an assignee under any assignment agreement; Boeing’s right to exercise the manufacturer’s option to assume Customer’s rights under the Purchase Agreement in the event of a default under an assignment agreement; and confidentiality.  A Party that is

i.            bound by a customary confidentiality agreement;

ii.           neither an airplane manufacturer nor an airline;  and

iii. responding to a Customer request for proposals to provide financing of Aircraft pursuant to the Purchase Agreement, including pre-delivery payment financing

shall be deemed a “Financing Party”.

Without Boeing’s consent, Customer may represent to any Financing Party that Boeing will provide to that Financing Party, concurrently with the delivery of each of the Aircraft to that Financing Party, a financier credit memorandum equal to

(a)  [***]

(b)  [***]

escalated to the month of delivery in the same manner as the Airframe Price as described in Supplemental Exhibit AE-1 and in conformance with terms and conditions of this Letter Agreement.  Insofar as such Financing Party is concerned, this Financier Credit Memorandum shall be in lieu of any other provision in the Letter Agreement. When the Customer identifies a Financing Party and the preliminary terms of an assignment under which pre-delivery payment financing or aircraft purchase financing could be provided, at Customer’s request, Boeing agrees to enter into discussions with the Customer to consider whether an additional credit memorandum can be assigned, with the goal of helping Customer obtain third-party financing.

Boeing will consent to any reasonable request by Customer to assign the Purchase Agreement to an affiliate provided that Boeing is provided with an adequate  guarantee of performance of all obligations under this Purchase Agreement and in a form reasonably satisfactory to Boeing.

Customer understands that Boeing is not required under any circumstances to consent to an assignment that would constitute a novation.

The foregoing provisions are intended to supplement, and not to supersede, the assignment provisions of the AGTA, which address delivery date and post-delivery assignments, merger-type assignments, and other matters.

9. 16G Seat Requirement Credit Memorandum.

In the event that Customer notifies Boeing of a selection of record option 2525C826G85 (for Boeing certification of the business class, economy class and attendant seats to Federal Aviation Administration (FAA) Regulation Information Number 2120-AC84 entitled “Improved Seats in Air Carrier Transport Category Airplanes” (the 16G Requirement) in lieu of existing 9G capability) (such record option, including successor record options which supersede the identified record option, are herein referred to as the 16G Record Option), [***]:

[***]	[***]
[***]	[***]
[***]	[***]

Boeing acknowledges that Customer has provided a waiver for the 2011 Aircraft and does not have to comply with the 16G requirement for said Aircraft.

10. Deferral of Payment Due at Signing of Supplemental Agreement 24 (SA-24). (This section is no longer applicable.)

11. [***].

12. Confidentiality.

Boeing and Customer understand that the commercial and financial information contained in this Letter Agreement is considered by the parties as confidential (Confidential Information) and both agree not to disclose such Confidential Information except as provided herein.  In addition to the parties’ respective officers, directors and employees who need to know the Confidential Information and who understand the obligation to keep it confidential, the parties may disclose Confidential Information (1) to the extent required by law and (2) to its agents, auditors and advisors who need to know the Confidential Information for purposes of enabling each party to understand, perform its obligations under, or receive the benefits of, this Letter Agreement and who have agreed not to use or disclose the Confidential Information for any other purpose without the other party’s prior written consent.  In the event that a party concludes that disclosure of Confidential Information contained in this Letter Agreement is required by applicable law, the party will so advise the other party promptly in writing and endeavor to protect the confidentiality of such Confidential Information to the widest extent possible.  In the event of a legal dispute with Boeing, nothing herein will preclude Customer from sharing with its legal counsel information necessary for purposes of enabling counsel to advise or represent Customer provided that so long as Customer causes its legal counsel to maintain the confidentiality of information that is the subject of this Article.  Except as provided in the assignment provisions of Article 7 of Letter Agreement 6-1162-KSW-6423, Special Matters Applicable to the Incremental Aircraft; Article 21 of Letter Agreement 6-1162-LAJ-0895, as amended, entitled “Business Considerations”; Article 8 herein and Article 9 of Letter Agreement 6-1162-ILK-0412 entitled “Special Matters Relating to Three Aircraft Originally Scheduled to Deliver in 2009”, Customer will not disclose this Letter Agreement for purposes of financing payments without the prior written consent of Boeing, which consent will be provided once the financier enters into a Non Disclosure Agreement with Boeing in form and substance reasonably satisfactory to Boeing, which will include agreeing not to disclose or use Confidential Information except for the purpose set forth herein. This provision shall not apply to any Confidential Information that is in the public domain except that a party will be liable to the other for breach of its obligations under this provision if the Confidential Information entered the public domain as a consequence of a wrongful act or omission on its part.

The Purchase Agreement shall be deemed amended to the extent herein provided and as amended shall continue in full force and effect.

Very truly yours,

THE BOEING COMPANY
By:
	Kathie S. Weibel
Its:	Attorney-In-Fact

If the foregoing correctly sets forth your understanding of our agreement with respect to the matters treated herein, please indicate your acceptance, agreement and approval.

ACCEPTED AND AGREED TO this 22 day of March 2010.
LAN AIRLINES S.A.
By:
	Mr. Roberto Alvo
Its:	Sr. Vice President  Strategic Planning
	& Corporate Development
By:
	Mr. Alejandro de la Fuente
Its:	Chief Financial Officer

Airframe Model/MTOW:	767-300F	412000 pounds	Detail Specification:		D019T002LAN63F-1
Engine Model/Thrust:	CF6-80C2B6F	60200 pounds	Airframe Price Base Year/Escalation Formula:		Jul-08 ECI-MFG / CPI
Airframe Price:		***	Engine Price Base Year/Escalation Formula:		Jul-08 GE CF6-80 & GE90 (99 rev.)
Optional Features:		***
Sub-Total of Airframe and Features:		***	Airframe Escalation Data:	(4Q08 Esc Fcst)
Engine Price (Per Aircraft):		***	Base Year Index (ECI):	103.1
Aircraft Basic Price (Excluding BFE/SPE):		***	Base Year Index (CPI):	208.2
Buyer Furnished Equipment (BFE) Estimate:		***0	Engine Escalation Data:
Seller Purchased Equipment (SPE) Estimate:		***	Base Year Index (CPI):	129.930
Initial Payment/Aircraft at Proposal Accept:		***	Escalation is not fixed for these aircraft

		Escalation	Escalation		Escalation Estimage		***
Delivery	Number of	Factor	Factor	Manufacturer	Adv Payment Base		***	***	***	***
Date	Aircraft	(Airframe)	(Engine)	Serial Number	Price Per A/P		***	***	***	***
Oct-2011	1	1.0622	1.0900	40590	$	171,309,000	***	***	***	***
Nov-2011	1	1.0633	1.0930	40591	$	171,529,000	***	***	***	***
Total	2

	***
***	***
***	***
***	***
***	***

0110-000035	MAJOR MODEL 767 AIRPLANE	[***]
0110-000038	MINOR MODEL 767-300F FREIGHTER AIRPLANE	[***]
0110-000094	MODEL 767-300 GENERAL MARKET FREIGHTER AIRPLANE	[***]
0220-000040	FAA TYPE CERTIFICATION	[***]
0220-000136	15 KNOT MAXIMUM TAKEOFF AND LANDING TAILWIND COMPONENT CERTIFICATION	[***]
0221-000002	DISPATCH WITH GEAR EXTENDED FOR REVENUE FLIGHT	[***]
0221A251A19	ENGINE INOPERATIVE TEN-MINUTE TAKEOFF THRUST OPERATION - CF6-80C2B6F THRUST RATING	[***]
0228-000032	OPERATIONS MANUAL IN FAA FORMAT	[***]
0229A141A41	PERFORMANCE - CERTIFICATION FOR OPERATION AT AIRPORT ALTITUDES OF 9500 FEET AND BELOW	[***]
0252-000014	ENVIRONMENTAL CONTROL SYSTEM  -  TEMPERATURE INDICATIONS IN DEGREES CELSIUS	[***]
0252-000017	INSTRUMENTATION WITH METRIC UNITS  -  MODEL 767	[***]
0351A114C45	TAKEOFF PERFORMANCE IMPROVEMENT - ALTERNATE FORWARD CENTER OF GRAVITY LIMITS	[***]
0360B604F64	MISCELLANEOUS WEIGHT COLLECTOR	[***]
1110B657K77	MP - EXTERIOR COLOR SCHEME AND MARKINGS - REVISION - LAN 767-316F	[***]
1110B657P08	MP - EXTERIOR COLOR SCHEME AND MARKINGS - REVISION - LAN 767-316F	[***]
1110C262A21	EXTERIOR COLOR SCHEME AND MARKINGS - LAN 767-316F	[***]
1130-000344	BOEING STANDARD MARKINGS - MAIN DECK CARGO COMPARTMENT	[***]
1130A931A06	IATA STANDARD MARKINGS - LOWER LOBE CARGO COMPARTMENT	[***]
2145-000004	BULK CARGO AREA HEATING AND VENTILATING FOR ANIMAL CARRIAGE	[***]
2210-000030	AUTOFLIGHT - THREE DIGIT MACH NUMBER ON MODE CONTROL PANEL	[***]
2210-000031	AUTOFLIGHT - AUTOMATIC AUTOPILOT CHANNEL SELECTION IN APPROACH MODE	[***]
2210-000037	AUTOFLIGHT - BANK ANGLE HOLD AT AUTOPILOT COMMAND ENGAGE	[***]
2210-000039	AUTOFLIGHT - FULL TIME FLIGHT DIRECTOR	[***]
2210-000151	AUTOFLIGHT - ENABLE GLIDE SLOPE CAPTURE PRIOR TO LOCALIZER CAPTURE	[***]
2210-000311	AUTOFLIGHT - FLIGHT CONTROL COMPUTER (FCC) WITHOUT ONBOARD SOFTWARE LOADING CAPABILITY	[***]
2210A064A02	AUTOFLIGHT - ALTITUDE ALERT - 300/900 FEET	[***]
2210A811A40	AUTOFLIGHT-REV-INHIBIT ILO ENABLE	[***]
2210B403A07	MODE CONTROL PANEL WITH BACKCOURSE SWITCH	[***]
2230-000127	AUTOTHROTTLE - SELECTION OF CLIMB DERATES	[***]
2230-000133	AUTOTHROTTLE - FIXED PERCENTAGE DERATE LEVELS OF 10% AND 20%	[***]
2230-000135	AUTOTHROTTLE - CLIMB DERATE WASHOUT SCHEDULE - 10,000 TO 12,000 FEET	[***]
2311-000122	HF COMMUNICATIONS - DUAL GABLES HF CONTROL PANEL WITH SENSITIVITY CONTROL - P/N G7401-03 - BFE/SPE	[***]
2311A213A84	HF COMMUNICATIONS - DUAL ROCKWELL HF TRANSCEIVERS - P/N 822-0330-001 AND DIGITAL HF COUPLERS - P/N 822-0987-003 - BFE/SPE	[***]
2311B800D30	MP - HIGH FREQUENCY (HF) COMMUNCIATIONS - ACTIVATION - DUAL ARINC 753 DATA LINK	[***]
2311B800D40	MP - HF COMMUNICATIONS - REPLACEMENT - DUAL GABLES HF CONTROL PANELS - P/N G7401-16 IN LIEU OF P/N G7401-03 - SPE	[***]
2311B800D41	MP - HF COMMUNICATIONS - REPLACEMENT - DUAL ROCKWELL HF TRANSCEIVERS AND COUPLERS - 822-0990-004 AND 822-0987-004 IN LIEU OF 822-0330-001 AND 822-0987-003 - SPE	[***]

2311C351C28	MP - HF COMMUNICATIONS - REVISIONS - PARTIAL PROVISIONS FOR DUAL ARINC 753 HF DATALINK	[***]
2312-000432	VHF COMMUNICATIONS - TRIPLE GABLES VHF TUNING PANELS (DUAL KNOB) - P/N G7400-27 - BFE/SPE	[***]
2312-000703	VHF COMMUNICATIONS - ACTIVATION OF 8.33 KHZ CHANNEL SPACING	[***]
2312-000786	VHF COMMUNICATIONS - TRIPLE ROCKWELL ARINC 716/750 VHF-900B FM IMMUNE TRANSCEIVERS WITH 8.33 KHZ CHANNEL SPACING AND CMC INTERFACE CAPABILITY - P/N 822-1047-003 - BFE/SPE	[***]
2312B800D42	MP - VHF COMMUNICATIONS SYSTESM - REPLACEMENT - GABLES CONTROL PLANEL - G7400-227 IN LIEU OF G7400-27 - SPE	[***]
2312B800D44	MP - VHF COMMUNICATIONS - REPLACEMENT - ROCKWELL VHF TRANSCEIVERS - 822-1250-002 IN LIEU OF 822-1047-003 - SPE	[***]
2315A213A67	SATCOM - PARTIAL PROVISIONS FOR SATCOM SYSTEM AND TOP MOUNTED HIGH GAIN ANTENNA SYSTEM - MODEL 767	[***]
2315B800C72	SATCOM - HF/SATCOM SELECT PANEL - INSTALLATION - FLIGHT DECK	[***]
2321B401A04	SELCAL - AVTECH FIVE CHANNEL DECODER - P/N NA138-714C  - BFE/SPE	[***]
2322-000250	ACARS - PARTIAL PROVISIONS FOR SINGLE ARINC 724B ACARS	[***]
2322B800D45	MP - ACARS - REVISION - ROCKWELL COLLINS ARINC 758 CMU (LEVEL AOA/VDL MODE 2 OPERATION) - SPE	[***]
2322B800D46	MP - ACARS - INSTALLATION - ROCKWELL MULTIPURPOSE INTERACTIVE DISPLAY UNIT (MIDU) IN LIEU OF TELEDYNE INTERACTIVE DISPLAY UNIT (IDU) - SPE	[***]
2324B800D31	MP - EMERGENCY LOCATOR TRANSMITTER (ELT) - ELTA 3-FREQUENCY AUTOMATIC - FIXED - P/N 95N6088 - SPE	[***]
2340B800C73	CREW COMMUNICATION - PILOTS' CALL PANEL - SELCAL AND CARGO LOADING/GROUND CALL - 767 FREIGHTER	[***]
2350B800C71	AUDIO INTEGRATING - AUDIO SELECTOR PANELS - FLIGHT DECK	[***]
2351-000042	CONTROL WHEEL PUSH TO TALK (PTT) SWITCH - STANDARD THREE POSITION	[***]
2351A138C64	HAND HELD MICROPHONE - CAPTAIN, FIRST OFFICER AND FIRST OBSERVER -TELEPHONICS - P/N 107C800-22 - BFE/SPE	[***]
2351A213A33	AUDIO INTEGRATION - INSTALLATION - TWO-PLUG AUDIO JACKS IN THE FLIGHT DECK	[***]
2351A213B77	BOOM MICROPHONE HEADSETS - CAPTAIN AND FIRST OFFICER - TELEX AIRMAN 750 - P/N 64300-200 - BFE/SPE	[***]
2351A213B80	HEADPHONE - FIRST OBSERVER - TELEX - P/N 64400-200 - BFE/SPE	[***]
2371-000009	NO MONITOR JACK IN THE WHEEL WELL	[***]
2371-000017	SOLID STATE VOICE RECORDER ED56A AND SOLID STATE MICROPHONE/MONITOR ED56A - ALLIEDSIGNAL - 2 HOUR RECORDING TIME - P/N 980-6022-001 AND P/N 980-6116-002 - BFE/SPE	[***]
2433-000021	STANDBY POWER - EXTENDED TIME CAPABILITY - BATTERY PARALELLING	[***]
2511-000022	MANUALLY OPERATED SEATS  -  CAPTAIN AND FIRST OFFICER	[***]
2513-000405	SUNVISOR INSTALLATION - NUMBER 1 AND 2 WINDOWS - FLIGHT DECK - SFE	[***]
2527-000732	CONVERSION OPTION - GALLEY/ENTRY AND LAVATORY MAT INSTALLATION - TARAFLEX - 767 FREIGHTER	[***]
2530B604F65	GALLEY INSERT PART NUMBERS - BFE/SPE	[***]

2550-000157	DELIVERY CONFIGURATION - MAIN DECK - TRANSVERSE TYPE A (88" X 125 ") PALLETS	[***]
2550-000162	ALTERNATE CARGO COMPARTMENT ARRANGEMENT - MAIN DECK - SIDE BY SIDE CONTOURED 88" X 125" TYPE A PALLETS	[***]
2550-000261	CONVERSION OPTION - FIRST PALLET POSITION FOR ACCESS TO LIVE ANIMAL CARRIAGE OR HAZARDOUS MATERIAL CARRIAGE - 767 FREIGHTER	[***]
2550-000263	CONVERSION OPTION - ALTERNATE CARGO COMPARTMENT ARRANGEMENT - MAIN DECK - ADDITIONAL 96" X 196" PALLETS - FREIGHTER	[***]
2553-000044	HARDWARE FOR CARRIAGE OF 88 X 125 AND 96 X 125 INCH PALLETS AND STANDARD CONTAINERS IN THE FORWARD CARGO COMPARTMENT	[***]
2555-000053	CONVERSION OPTION - INSTALLATION OF ADDITIONAL NET AFT OF THE AFT CARGO DOOR	[***]
2560-000177	HALON FIRE EXTINGUISHER - FLIGHT DECK - WALTER KIDDE	[***]
2560A141A86	CREW LIFE VESTS - FLIGHT DECK - SWITLIK - P/N S-31850-6300-AAR001 - BFE/SPE	[***]
2560B599A35	PROTECTIVE BREATHING EQUIPMENT - FLIGHT DECK - B/E AEROSPACE - BFE/SPE	[***]
2560C635A43	MP - EMERGENCY EQUIPMENT - REVISION - FLIGHT DECK - LIFE VESTS - HOOVER IN LIEU OF SWITLIK - SPE	[***]
2562A115D57	EMERGENCY LOCATOR TRANSMITTER (RESCU 406) - INSTALLATION - BFE/SPE	[***]
2564-000215	CONVERSION OPTION - FIRST AID KIT - UPS - BFE/SPE	[***]
2610-000025	KIDDE FIRE DETECTION SYSTEM  -  GE CF6-80C2 ENGINES AND APU	[***]
2618-000009	SINGLE LOOP DUCT LEAK DETECTION SYSTEM - 3 ZONE	[***]
2622-000002	FIRE BOTTLE COMMONALITY  -  CF6-80C2 ENGINES AND APU	[***]
2732-000001	STALL WARNING COMPUTER SPEED TAPE ACTIVATION - INHIBIT DISPLAY OF MINIMUM MANEUVER SPEED ON TAKEOFF	[***]
2844-000005	FUEL MEASURING STICKS IN KILOGRAMS WITH CONVERSION TABLES IN KILOGRAMS	[***]
2911-000003	AC MOTOR-DRIVEN HYDRAULIC PUMPS  -  VICKERS (P/N S270T201-7)	[***]
2911-000038	ENGINE-DRIVEN HYDRAULIC PUMPS   -  VICKERS INC.   (60B00200-12)	[***]
3042-000003	WINDSHIELD WIPERS - TWO SPEED - SINGLE SWITCH	[***]
3080-000006	MANUAL ANTI-ICING SYSTEM - NO ICE DETECTION	[***]
3120-000011	ELECTRONIC CLOCKS - WITHOUT TENTHS OF MINUTE DISPLAY - MAIN INSTRUMENT PANEL	[***]
3131-000143	ACCELEROMETER  -  Honeywell  P/N 971-4193-001  -  BFE/SPE	[***]
3131-000187	DIGITAL FLIGHT DATA RECORDER - ALLIEDSIGNAL - 256 WORDS PER SECOND MAXIMUM DATA RATE - P/N 980-4700-042 BFE/SPE	[***]
3131-000435	INTEGRATED DISPLAY UNIT (IDU) INSTALLATION - BFE/SPE - TELEDYNE P/N 2229346-7	[***]
3131A218A57	DIGITAL FLIGHT DATA ACQUISITION UNIT (DFDAU) WITH ACMS CAPABILITY AND INTERGRATED PCMCIA MEDIA INTERFACE-TELEDYNE CONTROLS-P/N 2233000-816-1 -BFE/SPE	[***]
3131B800C90	DIGITAL FLIGHT DATA ACQUISITION UNIT (DFDAU) WITH ACMS CAPABILITY AND INTERGRATED PCMCIA MEDIA INTERFACE-TELEDYNE CONTROLS-P/N 2233000-816-1 -BFE/SPE	[***]
3131B800D34	MP - FLIGHT DATA RECORDER SYSTEM - REPLACEMENT - DIGITAL FLIGHT DATA ACQUISITION UNIT (DFDAU) - TELEDYNE CONTROLS - SPE	[***]
3132-000105	PORTABLE DATA LOADER/RECORDER CONNECTOR IN FLIGHT DECK - ARINC 615 - SFE	[***]
3132-000117	DATA LOADER SELECTOR SWITCH MODULE - 20 POSITION 3 WAY - SFE	[***]

3132B800D35	MP - DATA AND RECORDER SYSTEMS - REVISION - ARINC 615 DATA LOADER IN ADDITION TO PORTABLE DATA LOADER CONNECTOR - SPE	[***]
3133-000057	FULL FORMAT PRINTER - MILTOPE - ARINC 744 - P/N 706300-212 - BFE/SPE	[***]
3133-000126	ARINC 744 PRINTER PROVISIONS IN AN AISLESTAND EXTENSION IN THE FLIGHT DECK	[***]
3151-000042	FIREBELL AURAL WARNING - 1 SECOND ON, 9 SECONDS OFF	[***]
3151-000046	AUTOPILOT DISCONNECT - AURAL WARNING SIREN - AURAL WARNING AND MASTER WARNING LIGHT INHIBITED WHEN AUTOPILOT DISCONNECT SWITCH IS DOUBLE PRESSED QUICKLY	[***]
3151A065A47	RESETTABLE OVERSPEED AURAL WARNING - SIREN	[***]
3161-000135	HYDRAULIC PRESSURE ON EICAS STATUS PAGES	[***]
3161-000137	APU RPM ON EICAS STATUS PAGES	[***]
3161-000139	APU OIL QUANTITY LEVEL ON EICAS	[***]
3161-000141	ADDITIONAL ENVIRONMENTAL CONTROL SYSTEM (ECS) PARAMETERS - DISPLAY ON EICAS MAINTENANCE PAGE	[***]
3161-000144	GENERATOR OFF AND ENGINE OIL PRESSURE - EICAS ADVISORY LEVEL MESSAGES	[***]
3161-000147	ECS PRECOOLER OUTLET TEMPERATURE - (PW AND GE ENGINES) - DISPLAY ON EICAS	[***]
3161-000152	BULK CARGO COMPARTMENT TEMPERATURE - DISPLAY ON EICAS	[***]
3161-000154	RAM AIR OUTLET DOOR POSITION - DISPLAY ON EICAS	[***]
3161-000189	ENGINE FUEL FLOW - FULL TIME DISPLAY - LOWER EICAS DISPLAY	[***]
3162-000016	FLIGHT MODE ANNUNCIATION AT TOP OF ADI	[***]
3162-000021	AIRSPEED TAPE - ROLLING DIGITS AND TREND VECTOR - ADI	[***]
3162-000022	FLIGHT DIRECTOR COMMAND DISPLAY - SPLIT AXIS - ADI	[***]
3162-000026	DISPLAY OF ROUND DIAL AND DIGITAL RADIO ALTITUDE - ADI	[***]
3162-000030	RISING RUNWAY - DISPLAYED ON THE ADI	[***]
3162-000034	RADIO ALTITUDE HEIGHT ALERT DISPLAY - 2500 FEET - ADI	[***]
3162-000054	ILS DEVIATION WARNING - ADI	[***]
3162-000059	MAP MODE ORIENTATION - TRACK UP - NAVIGATION DISPLAY	[***]
3162-000066	TRUE AIRSPEED AND GROUND SPEED - NAVIGATION DISPLAY	[***]
3162-000070	WIND BEARING DIGITAL DISPLAY - NAVIGATION DISPLAY	[***]
3221-000011	TORQUE ARM QUICK DISCONNECT  -  NOSE LANDING GEAR	[***]
3242A114B69	ANTISKID/AUTOBRAKE CONTROL UNIT (AACU) P/N 42-767-2 (S283T001-27)  - INSTALLATION	[***]
3244-000022	PARKING BRAKE REPEATER LIGHT - SINGLE LIGHT - NOSE LANDING GEAR AREA - LIGHT VISIBLE TO GROUND CREW	[***]
3245-000230	WHEELS AND TIRES - NOSE LANDING GEAR - WHEELS - ALLIEDSIGNAL - INSTALLATION WITH SFE 24 PR, 235 MPH TIRES	[***]
3245A298A12	BRAKES - CARBON - MESSIER-BUGATTI	[***]
3245A438A27	OPERATIONAL TIRE SPEED LIMITS - 235MPH	[***]
3245A438A28	WHEELS AND TIRES - MAIN LANDING GEAR - HIGH GROSS WEIGHT WHEELS - MESSIER-BUGATTI - INSTALLATION WITH SFE 32 PR, 235 MPH TIRES.	[***]
3246-000005	BRAKE TEMPERATURE MONITORING SYSTEM	[***]
3342-000009	TAXI LIGHTS  -  NOSE GEAR MOUNTED  -  SPACE PROVISIONS	[***]
3413-000027	MACH/AIRSPEED INDICATOR - TWO KNOT GRADUATIONS BELOW 250 KNOTS	[***]
3421-000042	FAA MACH/AIRSPEED LIMITS AND OVERSPEED ALERTING	[***]
3423-000006	STANDBY MAGNETIC COMPASS COMPENSATION FOR ELECTRICAL CIRCUITS (+/- 5 DEGREES)	[***]
3430-000187	ILS/GPS MULTI-MODE RECEIVER (MMR) - ROCKWELL - P/N 822-1152-002 - BFE/SPE	[***]

3433-000032	RADIO ALTIMETER (RA)  -  ROCKWELL INTERNATIONAL CORP  -  P/N 822-0334-002  -  BFE/SPE	[***]
3443-000050	DUAL WEATHER RADAR CONTROL PANEL - ROCKWELL P/N 622-5130-114 - BFE/SPE	[***]
3443A065A34	DUAL WEATHER RADAR SYSTEM - WITH PREDICTIVE WINDSHEAR - ROCKWELL TRANSCEIVER P/N 622-5132-633 - BFE/SPE	[***]
3443A141A90	WEATHER RADAR INDICATOR ON FORWARD ELECTRONICS PANEL - ROCKWELL COLLINS - BFE/SPE	[***]
3445A065A86	TCAS SYSTEM - ROCKWELL COLLINS TCAS COMPUTER P/N 822-1293-002 - TCAS CHANGE 7 COMPLIANT - BFE/SPE	[***]
3446-000045	STANDARD VOLUME FOR ALTITUDE CALLOUTS	[***]
3446-000048	ENHANCED GROUND PROXIMITY WARNING SYSTEM (EGPWS) - BANK ANGLE CALLOUT ENABLE	[***]
3446-000050	500 SMART CALLOUT	[***]
3446-000088	GROUND PROXIMITY WARNING SYSTEM ALTITUDE CALLOUTS - 2500, 1000, 50, 40, 30, 20, 10, APPROACHING DECISION HEIGHT, MINIMUMS	[***]
3446B800A01	MP - GROUND PROXIMTY WARNING SYSTEM (GPWS) - REVISION - 500 SMART CALL OUT - INHIBITED IN LIEU OF ENABLED	[***]
3446C351C29	MP - ENHANCED GROUND PROXIMITY WARNING SYSTEM (EGPWS) - ACTIVATION - PEAKS AND OBSTACLES FEATURE	[***]
3451-000022	VOR/MARKER BEACON - ROCKWELL RECEIVER P/N 822-0297-001 - BFE/SPE	[***]
3453B866A16	ATC SYSTEM - ROCKWELL COLLINS ATC TRANSPONDER P/N 822-1338-003 - ELS/EHS/ES AND TCAS CHANGE 7 COMPLIANT - GABLES CONTROL PANEL P/N G6992-12 - BFE/SPE	[***]
3455-000019	DISTANCE MEASURING EQUIPMENT (DME) - ROCKWELL INTERROGATOR P/N 822-0329-001 - BFE/SPE	[***]
3457-000212	AUTOMATIC DIRECTION FINDER (ADF) - DUAL SYSTEM -  ROCKWELL ADF-900 SERIES - ADF RECEIVER P/N 822-0299-001;  ADF ANTENNA P/N 822-5404-001 - BFE/SPE	[***]
3457-000219	AUTOMATIC DIRECTION FINDER (ADF) - DUAL SYSTEM - ROCKWELL ADF-900/700 SERIES - ADF RECEIVER P/N 822-0299-001 - ADF ANTENNA P/N 622-5404-003 - BFE/SPE	[***]
3457-000289	DUAL ADF CONTROL PANEL - BOEING - 285T0557-2 - WITHOUT BFO OR TONE SWITCH - SFE	[***]
3461A114D05	MP - FLIGHT MANAGEMENT COMPUTING SYSTEM (FMCS) - REVISION - RUNWAY DISTANCE AND OFFSET POSITION SHIFT IN UNITS OF FEET	[***]
3461A138D87	FMCS-INSTALL-ACC DL-FANS FEATUREACTIVATION	[***]
3461A138D88	FMCS-INSTALL-PRINTER INTERFACE FANSFEATURE ACTIVATION	[***]
3461A425A03	FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS) - OFFPATH DESCENT CIRCLES AND DISTANCE MEASURING EQUIPMENT RANGE RINGS DISPLAYED	[***]
3461A425A04	FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS) - SCANNING DME OPERATIONS - ENABLE	[***]
3461A425A06	FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS) - RUNWAY DISTANCE AND OFFSET POSITION SHIFT IN UNITS OF METERS	[***]
3461A425A10	FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS) - NAVIGATION DATABASE - CUSTOMER SUPPLIED	[***]
3461B053A05	FLT MGMT CPU SYS (FMCS) REV AIR TRAFFIC SERV DATA LINK	[***]
3461C351C30	MP - FLIGHT MANAGEMENT COMPUTING SYSTEM (FMCS) - REVISION - TAKEOFF DATA LINK - ENABLE IN LIEU OF INHIBIT	[***]

3461C351C31	MP - FLIGHT MANAGEMENT COMPUTING SYSTEM (FMCS) - INSTALLATION - AIRLINE MODIFIABLE INFORMATION (AMI) - CUSTOMER SUPPLIED	[***]
3511B899B43	CREW OXYGEN MASKS - DILUTER DEMAND REGULATORS  WITH SEPARATE SMOKE GOGGLES - CAPTAIN AND FIRST OFFICER - EROS - BFE/SPE	[***]
3511B899B44	CREW OXYGEN MASKS - DILUTER DEMAND TYPE REGULATORS WITH SEPARATE SMOKE GOGGLES - FIRST OBSERVER - EROS - BFE/SPE	[***]
3611-000006	ALLIEDSIGNAL INC.  -  INTERMEDIATE PRESSURE (IP) CHECK VALVES - GE\P&W ENGINES	[***]
4970-000045	APU HOURMETER  - FLIGHT DECK	[***]
7200-000382	STANDARD FAN SPINNER - GE ENGINES	[***]
7200-000412	GE PROPULSION SYSTEM	[***]
7200-000459	GENERAL ELECTRIC ENGINES - CF6-80C2-B6F - B6F RATING - WITH FADEC	[***]
7200A114C90	ENG REPLACE GE ENG CF6-80C2-B6FSTAGE 1 HTP COATED BLADES	[***]
7830-000012	MANUAL OPENING OF THRUST REVERSER ASSEMBLIES - GE CF6-80C2 ENGINES	[***]
7900-000117	LUBRICATING OIL - BP TURBO OIL 2380	[***]
8011-000006	HAMILTON STANDARD STARTERS AND STARTER VALVES  -  GE ENGINES	[***]
MISC FO	FOLLOW ON EXH A VR259	[***]
MISC/FAA4	FLAME PROPAGATION - INSULATION BLANKETS	[***]
		[***]
OPTIONS: 171	TOTAL:	[***]

AIRCRAFT CONFIGURATION

between

THE BOEING COMPANY

and

LAN AIRLINES S.A.

Exhibit A-10 to Purchase Agreement Number 2126

AIRCRAFT CONFIGURATION

relating to

BOEING MODEL 767-316F AIRCRAFT

THE LAN AIRCRAFT

The Detail Specification will be D019-T002LAN63F-2 which will be comprised of Boeing Configuration Specification D019T002, Revision I dated December 12, 2008 revised to incorporate the Options listed below, including the effects on Manufacturer's Empty Weight (MEW) and Operating Empty Weight (OEW).  These Options are the same Options listed in Letter Agreement 6-1162-KSW-6423 Exhibit C.  As soon as practicable, Boeing will furnish to Customer copies of the Detail Specification, which copies will reflect such Options.  The Aircraft Basic Price reflects and includes all effects of such Options, except such Aircraft Basic Price does not include the price effects of any Buyer Furnished Equipment or Seller Purchased Equipment.

0110-000035	MAJOR MODEL 767 AIRPLANE	[***]
0110-000038	MINOR MODEL 767-300F FREIGHTER AIRPLANE	[***]
0110-000094	MODEL 767-300 GENERAL MARKET FREIGHTER AIRPLANE	[***]
0220-000040	FAA TYPE CERTIFICATION	[***]
0220-000136	15 KNOT MAXIMUM TAKEOFF AND LANDING TAILWIND COMPONENT CERTIFICATION	[***]
0221-000002	DISPATCH WITH GEAR EXTENDED FOR REVENUE FLIGHT	[***]
0221A251A19	ENGINE INOPERATIVE TEN-MINUTE TAKEOFF THRUST OPERATION - CF6-80C2B6F THRUST RATING	[***]
0228-000032	OPERATIONS MANUAL IN FAA FORMAT	[***]
0229A141A41	PERFORMANCE - CERTIFICATION FOR OPERATION AT AIRPORT ALTITUDES OF 9500 FEET AND BELOW	[***]
0252-000014	ENVIRONMENTAL CONTROL SYSTEM  -  TEMPERATURE INDICATIONS IN DEGREES CELSIUS	[***]
0252-000017	INSTRUMENTATION WITH METRIC UNITS  -  MODEL 767	[***]
0351A114C45	TAKEOFF PERFORMANCE IMPROVEMENT - ALTERNATE FORWARD CENTER OF GRAVITY LIMITS	[***]
0360B604F64	MISCELLANEOUS WEIGHT COLLECTOR	[***]
1110B657K77	MP - EXTERIOR COLOR SCHEME AND MARKINGS - REVISION - LAN 767-316F	[***]
1110B657P08	MP - EXTERIOR COLOR SCHEME AND MARKINGS - REVISION - LAN 767-316F	[***]
1110C262A21	EXTERIOR COLOR SCHEME AND MARKINGS - LAN 767-316F	[***]
1130-000344	BOEING STANDARD MARKINGS - MAIN DECK CARGO COMPARTMENT	[***]
1130A931A06	IATA STANDARD MARKINGS - LOWER LOBE CARGO COMPARTMENT	[***]
2145-000004	BULK CARGO AREA HEATING AND VENTILATING FOR ANIMAL CARRIAGE	[***]
2210-000030	AUTOFLIGHT - THREE DIGIT MACH NUMBER ON MODE CONTROL PANEL	[***]
2210-000031	AUTOFLIGHT - AUTOMATIC AUTOPILOT CHANNEL SELECTION IN APPROACH MODE	[***]
2210-000037	AUTOFLIGHT - BANK ANGLE HOLD AT AUTOPILOT COMMAND ENGAGE	[***]
2210-000039	AUTOFLIGHT - FULL TIME FLIGHT DIRECTOR	[***]
2210-000151	AUTOFLIGHT - ENABLE GLIDE SLOPE CAPTURE PRIOR TO LOCALIZER CAPTURE	[***]
2210-000311	AUTOFLIGHT - FLIGHT CONTROL COMPUTER (FCC) WITHOUT ONBOARD SOFTWARE LOADING CAPABILITY	[***]
2210A064A02	AUTOFLIGHT - ALTITUDE ALERT - 300/900 FEET	[***]
2210A811A40	AUTOFLIGHT-REV-INHIBIT ILO ENABLE	[***]
2210B403A07	MODE CONTROL PANEL WITH BACKCOURSE SWITCH	[***]
2230-000127	AUTOTHROTTLE - SELECTION OF CLIMB DERATES	[***]
2230-000133	AUTOTHROTTLE - FIXED PERCENTAGE DERATE LEVELS OF 10% AND 20%	[***]
2230-000135	AUTOTHROTTLE - CLIMB DERATE WASHOUT SCHEDULE - 10,000 TO 12,000 FEET	[***]
2311-000122	HF COMMUNICATIONS - DUAL GABLES HF CONTROL PANEL WITH SENSITIVITY CONTROL - P/N G7401-03 - BFE/SPE	[***]

2311A213A84	HF COMMUNICATIONS - DUAL ROCKWELL HF TRANSCEIVERS - P/N 822-0330-001 AND DIGITAL HF COUPLERS - P/N 822-0987-003 - BFE/SPE	[***]
2311B800D30	MP - HIGH FREQUENCY (HF) COMMUNCIATIONS - ACTIVATION - DUAL ARINC 753 DATA LINK	[***]
2311B800D40	MP - HF COMMUNICATIONS - REPLACEMENT - DUAL GABLES HF CONTROL PANELS - P/N G7401-16 IN LIEU OF P/N G7401-03 - SPE	[***]
2311B800D41	MP - HF COMMUNICATIONS - REPLACEMENT - DUAL ROCKWELL HF TRANSCEIVERS AND COUPLERS - 822-0990-004 AND 822-0987-004 IN LIEU OF 822-0330-001 AND 822-0987-003 - SPE	[***]
2311C351C28	MP - HF COMMUNICATIONS - REVISIONS - PARTIAL PROVISIONS FOR DUAL ARINC 753 HF DATALINK	[***]
2312-000432	VHF COMMUNICATIONS - TRIPLE GABLES VHF TUNING PANELS (DUAL KNOB) - P/N G7400-27 - BFE/SPE	[***]
2312-000703	VHF COMMUNICATIONS - ACTIVATION OF 8.33 KHZ CHANNEL SPACING	[***]
2312-000786	VHF COMMUNICATIONS - TRIPLE ROCKWELL ARINC 716/750 VHF-900B FM IMMUNE TRANSCEIVERS WITH 8.33 KHZ CHANNEL SPACING AND CMC INTERFACE CAPABILITY - P/N 822-1047-003 - BFE/SPE	[***]
2312B800D42	MP - VHF COMMUNICATIONS SYSTESM - REPLACEMENT - GABLES CONTROL PLANEL - G7400-227 IN LIEU OF G7400-27 - SPE	[***]
2312B800D44	MP - VHF COMMUNICATIONS - REPLACEMENT - ROCKWELL VHF TRANSCEIVERS - 822-1250-002 IN LIEU OF 822-1047-003 - SPE	[***]
2315A213A67	SATCOM - PARTIAL PROVISIONS FOR SATCOM SYSTEM AND TOP MOUNTED HIGH GAIN ANTENNA SYSTEM - MODEL 767	[***]
2315B800C72	SATCOM - HF/SATCOM SELECT PANEL - INSTALLATION - FLIGHT DECK	[***]
2321B401A04	SELCAL - AVTECH FIVE CHANNEL DECODER - P/N NA138-714C  - BFE/SPE	[***]
2322-000250	ACARS - PARTIAL PROVISIONS FOR SINGLE ARINC 724B ACARS	[***]
2322B800D45	MP - ACARS - REVISION - ROCKWELL COLLINS ARINC 758 CMU (LEVEL AOA/VDL MODE 2 OPERATION) - SPE	[***]
2322B800D46	MP - ACARS - INSTALLATION - ROCKWELL MULTIPURPOSE INTERACTIVE DISPLAY UNIT (MIDU) IN LIEU OF TELEDYNE INTERACTIVE DISPLAY UNIT (IDU) - SPE	[***]
2324B800D31	MP - EMERGENCY LOCATOR TRANSMITTER (ELT) - ELTA 3-FREQUENCY AUTOMATIC - FIXED - P/N 95N6088 - SPE	[***]
2340B800C73	CREW COMMUNICATION - PILOTS' CALL PANEL - SELCAL AND CARGO LOADING/GROUND CALL - 767 FREIGHTER	[***]
2350B800C71	AUDIO INTEGRATING - AUDIO SELECTOR PANELS - FLIGHT DECK	[***]
2351-000042	CONTROL WHEEL PUSH TO TALK (PTT) SWITCH - STANDARD THREE POSITION	[***]
2351A138C64	HAND HELD MICROPHONE - CAPTAIN, FIRST OFFICER AND FIRST OBSERVER -TELEPHONICS - P/N 107C800-22 - BFE/SPE	[***]
2351A213A33	AUDIO INTEGRATION - INSTALLATION - TWO-PLUG AUDIO JACKS IN THE FLIGHT DECK	[***]
2351A213B77	BOOM MICROPHONE HEADSETS - CAPTAIN AND FIRST OFFICER - TELEX AIRMAN 750 - P/N 64300-200 - BFE/SPE	[***]
2351A213B80	HEADPHONE - FIRST OBSERVER - TELEX - P/N 64400-200 - BFE/SPE	[***]
2371-000009	NO MONITOR JACK IN THE WHEEL WELL	[***]

2371-000017	SOLID STATE VOICE RECORDER ED56A AND SOLID STATE MICROPHONE/MONITOR ED56A - ALLIEDSIGNAL - 2 HOUR RECORDING TIME - P/N 980-6022-001 AND P/N 980-6116-002 - BFE/SPE	[***]
2433-000021	STANDBY POWER - EXTENDED TIME CAPABILITY - BATTERY PARALELLING	[***]
2511-000022	MANUALLY OPERATED SEATS  -  CAPTAIN AND FIRST OFFICER	[***]
2513-000405	SUNVISOR INSTALLATION - NUMBER 1 AND 2 WINDOWS - FLIGHT DECK - SFE	[***]
2527-000732	CONVERSION OPTION - GALLEY/ENTRY AND LAVATORY MAT INSTALLATION - TARAFLEX - 767 FREIGHTER	[***]
2530B604F65	GALLEY INSERT PART NUMBERS - BFE/SPE	[***]
2550-000157	DELIVERY CONFIGURATION - MAIN DECK - TRANSVERSE TYPE A (88" X 125 ") PALLETS	[***]
2550-000162	ALTERNATE CARGO COMPARTMENT ARRANGEMENT - MAIN DECK - SIDE BY SIDE CONTOURED 88" X 125" TYPE A PALLETS	[***]
2550-000261	CONVERSION OPTION - FIRST PALLET POSITION FOR ACCESS TO LIVE ANIMAL CARRIAGE OR HAZARDOUS MATERIAL CARRIAGE - 767 FREIGHTER	[***]
2550-000263	CONVERSION OPTION - ALTERNATE CARGO COMPARTMENT ARRANGEMENT - MAIN DECK - ADDITIONAL 96" X 196" PALLETS - FREIGHTER	[***]
2553-000044	HARDWARE FOR CARRIAGE OF 88 X 125 AND 96 X 125 INCH PALLETS AND STANDARD CONTAINERS IN THE FORWARD CARGO COMPARTMENT	[***]
2555-000053	CONVERSION OPTION - INSTALLATION OF ADDITIONAL NET AFT OF THE AFT CARGO DOOR	[***]
2560-000177	HALON FIRE EXTINGUISHER - FLIGHT DECK - WALTER KIDDE	[***]
2560A141A86	CREW LIFE VESTS - FLIGHT DECK - SWITLIK - P/N S-31850-6300-AAR001 - BFE/SPE	[***]
2560B599A35	PROTECTIVE BREATHING EQUIPMENT - FLIGHT DECK - B/E AEROSPACE - BFE/SPE	[***]
2560C635A43	MP - EMERGENCY EQUIPMENT - REVISION - FLIGHT DECK - LIFE VESTS - HOOVER IN LIEU OF SWITLIK - SPE	[***]
2562A115D57	EMERGENCY LOCATOR TRANSMITTER (RESCU 406) - INSTALLATION - BFE/SPE	[***]
2564-000215	CONVERSION OPTION - FIRST AID KIT - UPS - BFE/SPE	[***]
2610-000025	KIDDE FIRE DETECTION SYSTEM  -  GE CF6-80C2 ENGINES AND APU	[***]
2618-000009	SINGLE LOOP DUCT LEAK DETECTION SYSTEM - 3 ZONE	[***]
2622-000002	FIRE BOTTLE COMMONALITY  -  CF6-80C2 ENGINES AND APU	[***]
2732-000001	STALL WARNING COMPUTER SPEED TAPE ACTIVATION - INHIBIT DISPLAY OF MINIMUM MANEUVER SPEED ON TAKEOFF	[***]
2844-000005	FUEL MEASURING STICKS IN KILOGRAMS WITH CONVERSION TABLES IN KILOGRAMS	[***]
2911-000003	AC MOTOR-DRIVEN HYDRAULIC PUMPS  -  VICKERS (P/N S270T201-7)	[***]
2911-000038	ENGINE-DRIVEN HYDRAULIC PUMPS   -  VICKERS INC.   (60B00200-12)	[***]
3042-000003	WINDSHIELD WIPERS - TWO SPEED - SINGLE SWITCH	[***]
3080-000006	MANUAL ANTI-ICING SYSTEM - NO ICE DETECTION	[***]

3120-000011	ELECTRONIC CLOCKS - WITHOUT TENTHS OF MINUTE DISPLAY - MAIN INSTRUMENT PANEL	[***]
3131-000143	ACCELEROMETER  -  Honeywell  P/N 971-4193-001  -  BFE/SPE	[***]
3131-000187	DIGITAL FLIGHT DATA RECORDER - ALLIEDSIGNAL - 256 WORDS PER SECOND MAXIMUM DATA RATE - P/N 980-4700-042 BFE/SPE	[***]
3131-000435	INTEGRATED DISPLAY UNIT (IDU) INSTALLATION - BFE/SPE - TELEDYNE P/N 2229346-7	[***]
3131A218A57	DIGITAL FLIGHT DATA ACQUISITION UNIT (DFDAU) WITH ACMS CAPABILITY AND INTERGRATED PCMCIA MEDIA INTERFACE-TELEDYNE CONTROLS-P/N 2233000-816-1 -BFE/SPE	[***]
3131B800C90	DIGITAL FLIGHT DATA ACQUISITION UNIT (DFDAU) WITH ACMS CAPABILITY AND INTERGRATED PCMCIA MEDIA INTERFACE-TELEDYNE CONTROLS-P/N 2233000-816-1 -BFE/SPE	[***]
3131B800D34	MP - FLIGHT DATA RECORDER SYSTEM - REPLACEMENT - DIGITAL FLIGHT DATA ACQUISITION UNIT (DFDAU) - TELEDYNE CONTROLS - SPE	[***]
3132-000105	PORTABLE DATA LOADER/RECORDER CONNECTOR IN FLIGHT DECK - ARINC 615 - SFE	[***]
3132-000117	DATA LOADER SELECTOR SWITCH MODULE - 20 POSITION 3 WAY - SFE	[***]
3132B800D35	MP - DATA AND RECORDER SYSTEMS - REVISION - ARINC 615 DATA LOADER IN ADDITION TO PORTABLE DATA LOADER CONNECTOR - SPE	[***]
3133-000057	FULL FORMAT PRINTER - MILTOPE - ARINC 744 - P/N 706300-212 - BFE/SPE	[***]
3133-000126	ARINC 744 PRINTER PROVISIONS IN AN AISLESTAND EXTENSION IN THE FLIGHT DECK	[***]
3151-000042	FIREBELL AURAL WARNING - 1 SECOND ON, 9 SECONDS OFF	[***]
3151-000046	AUTOPILOT DISCONNECT - AURAL WARNING SIREN - AURAL WARNING AND MASTER WARNING LIGHT INHIBITED WHEN AUTOPILOT DISCONNECT SWITCH IS DOUBLE PRESSED QUICKLY	[***]
3151A065A47	RESETTABLE OVERSPEED AURAL WARNING - SIREN	[***]
3161-000135	HYDRAULIC PRESSURE ON EICAS STATUS PAGES	[***]
3161-000137	APU RPM ON EICAS STATUS PAGES	[***]
3161-000139	APU OIL QUANTITY LEVEL ON EICAS	[***]
3161-000141	ADDITIONAL ENVIRONMENTAL CONTROL SYSTEM (ECS) PARAMETERS - DISPLAY ON EICAS MAINTENANCE PAGE	[***]
3161-000144	GENERATOR OFF AND ENGINE OIL PRESSURE - EICAS ADVISORY LEVEL MESSAGES	[***]
3161-000147	ECS PRECOOLER OUTLET TEMPERATURE - (PW AND GE ENGINES) - DISPLAY ON EICAS	[***]
3161-000152	BULK CARGO COMPARTMENT TEMPERATURE - DISPLAY ON EICAS	[***]
3161-000154	RAM AIR OUTLET DOOR POSITION - DISPLAY ON EICAS	[***]
3161-000189	ENGINE FUEL FLOW - FULL TIME DISPLAY - LOWER EICAS DISPLAY	[***]
3162-000016	FLIGHT MODE ANNUNCIATION AT TOP OF ADI	[***]
3162-000021	AIRSPEED TAPE - ROLLING DIGITS AND TREND VECTOR - ADI	[***]
3162-000022	FLIGHT DIRECTOR COMMAND DISPLAY - SPLIT AXIS - ADI	[***]
3162-000026	DISPLAY OF ROUND DIAL AND DIGITAL RADIO ALTITUDE - ADI	[***]
3162-000030	RISING RUNWAY - DISPLAYED ON THE ADI	[***]
3162-000034	RADIO ALTITUDE HEIGHT ALERT DISPLAY - 2500 FEET - ADI	[***]

3162-000054	ILS DEVIATION WARNING - ADI	[***]
3162-000059	MAP MODE ORIENTATION - TRACK UP - NAVIGATION DISPLAY	[***]
3162-000066	TRUE AIRSPEED AND GROUND SPEED - NAVIGATION DISPLAY	[***]
3162-000070	WIND BEARING DIGITAL DISPLAY - NAVIGATION DISPLAY	[***]
3221-000011	TORQUE ARM QUICK DISCONNECT  -  NOSE LANDING GEAR	[***]
3242A114B69	ANTISKID/AUTOBRAKE CONTROL UNIT (AACU) P/N 42-767-2 (S283T001-27)  - INSTALLATION	[***]
3244-000022	PARKING BRAKE REPEATER LIGHT - SINGLE LIGHT - NOSE LANDING GEAR AREA - LIGHT VISIBLE TO GROUND CREW	[***]
3245-000230	WHEELS AND TIRES - NOSE LANDING GEAR - WHEELS - ALLIEDSIGNAL - INSTALLATION WITH SFE 24 PR, 235 MPH TIRES	[***]
3245A298A12	BRAKES - CARBON - MESSIER-BUGATTI	[***]
3245A438A27	OPERATIONAL TIRE SPEED LIMITS - 235MPH	[***]
3245A438A28	WHEELS AND TIRES - MAIN LANDING GEAR - HIGH GROSS WEIGHT WHEELS - MESSIER-BUGATTI - INSTALLATION WITH SFE 32 PR, 235 MPH TIRES.	[***]
3246-000005	BRAKE TEMPERATURE MONITORING SYSTEM	[***]
3342-000009	TAXI LIGHTS  -  NOSE GEAR MOUNTED  -  SPACE PROVISIONS	[***]
3413-000027	MACH/AIRSPEED INDICATOR - TWO KNOT GRADUATIONS BELOW 250 KNOTS	[***]
3421-000042	FAA MACH/AIRSPEED LIMITS AND OVERSPEED ALERTING	[***]
3423-000006	STANDBY MAGNETIC COMPASS COMPENSATION FOR ELECTRICAL CIRCUITS (+/- 5 DEGREES)	[***]
3430-000187	ILS/GPS MULTI-MODE RECEIVER (MMR) - ROCKWELL - P/N 822-1152-002 - BFE/SPE	[***]
3433-000032	RADIO ALTIMETER (RA)  -  ROCKWELL INTERNATIONAL CORP  -  P/N 822-0334-002  -  BFE/SPE	[***]
3443-000050	DUAL WEATHER RADAR CONTROL PANEL - ROCKWELL P/N 622-5130-114 - BFE/SPE	[***]
3443A065A34	DUAL WEATHER RADAR SYSTEM - WITH PREDICTIVE WINDSHEAR - ROCKWELL TRANSCEIVER P/N 622-5132-633 - BFE/SPE	[***]
3443A141A90	WEATHER RADAR INDICATOR ON FORWARD ELECTRONICS PANEL - ROCKWELL COLLINS - BFE/SPE	[***]
3445A065A86	TCAS SYSTEM - ROCKWELL COLLINS TCAS COMPUTER P/N 822-1293-002 - TCAS CHANGE 7 COMPLIANT - BFE/SPE	[***]
3446-000045	STANDARD VOLUME FOR ALTITUDE CALLOUTS	[***]
3446-000048	ENHANCED GROUND PROXIMITY WARNING SYSTEM (EGPWS) - BANK ANGLE CALLOUT ENABLE	[***]
3446-000050	500 SMART CALLOUT	[***]
3446-000088	GROUND PROXIMITY WARNING SYSTEM ALTITUDE CALLOUTS - 2500, 1000, 50, 40, 30, 20, 10, APPROACHING DECISION HEIGHT, MINIMUMS	[***]
3446B800A01	MP - GROUND PROXIMTY WARNING SYSTEM (GPWS) - REVISION - 500 SMART CALL OUT - INHIBITED IN LIEU OF ENABLED	[***]
3446C351C29	MP - ENHANCED GROUND PROXIMITY WARNING SYSTEM (EGPWS) - ACTIVATION - PEAKS AND OBSTACLES FEATURE	[***]
3451-000022	VOR/MARKER BEACON - ROCKWELL RECEIVER P/N 822-0297-001 - BFE/SPE	[***]
3453B866A16	ATC SYSTEM - ROCKWELL COLLINS ATC TRANSPONDER P/N 822-1338-003 - ELS/EHS/ES AND TCAS CHANGE 7 COMPLIANT - GABLES CONTROL PANEL P/N G6992-12 - BFE/SPE	[***]

3455-000019	DISTANCE MEASURING EQUIPMENT (DME) - ROCKWELL INTERROGATOR P/N 822-0329-001 - BFE/SPE	[***]
3457-000212	AUTOMATIC DIRECTION FINDER (ADF) - DUAL SYSTEM -  ROCKWELL ADF-900 SERIES - ADF RECEIVER P/N 822-0299-001;  ADF ANTENNA P/N 822-5404-001 - BFE/SPE	[***]
3457-000219	AUTOMATIC DIRECTION FINDER (ADF) - DUAL SYSTEM - ROCKWELL ADF-900/700 SERIES - ADF RECEIVER P/N 822-0299-001 - ADF ANTENNA P/N 622-5404-003 - BFE/SPE	[***]
3457-000289	DUAL ADF CONTROL PANEL - BOEING - 285T0557-2 - WITHOUT BFO OR TONE SWITCH - SFE	[***]
3461A114D05	MP - FLIGHT MANAGEMENT COMPUTING SYSTEM (FMCS) - REVISION - RUNWAY DISTANCE AND OFFSET POSITION SHIFT IN UNITS OF FEET	[***]
3461A138D87	FMCS-INSTALL-ACC DL-FANS FEATUREACTIVATION	[***]
3461A138D88	FMCS-INSTALL-PRINTER INTERFACE FANSFEATURE ACTIVATION	[***]
3461A425A03	FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS) - OFFPATH DESCENT CIRCLES AND DISTANCE MEASURING EQUIPMENT RANGE RINGS DISPLAYED	[***]
3461A425A04	FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS) - SCANNING DME OPERATIONS - ENABLE	[***]
3461A425A06	FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS) - RUNWAY DISTANCE AND OFFSET POSITION SHIFT IN UNITS OF METERS	[***]
3461A425A10	FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS) - NAVIGATION DATABASE - CUSTOMER SUPPLIED	[***]
3461B053A05	FLT MGMT CPU SYS (FMCS) REV AIR TRAFFIC SERV DATA LINK	[***]
3461C351C30	MP - FLIGHT MANAGEMENT COMPUTING SYSTEM (FMCS) - REVISION - TAKEOFF DATA LINK - ENABLE IN LIEU OF INHIBIT	[***]
3461C351C31	MP - FLIGHT MANAGEMENT COMPUTING SYSTEM (FMCS) - INSTALLATION - AIRLINE MODIFIABLE INFORMATION (AMI) - CUSTOMER SUPPLIED	[***]
3511B899B43	CREW OXYGEN MASKS - DILUTER DEMAND REGULATORS  WITH SEPARATE SMOKE GOGGLES - CAPTAIN AND FIRST OFFICER - EROS - BFE/SPE	[***]
3511B899B44	CREW OXYGEN MASKS - DILUTER DEMAND TYPE REGULATORS WITH SEPARATE SMOKE GOGGLES - FIRST OBSERVER - EROS - BFE/SPE	[***]
3611-000006	ALLIEDSIGNAL INC.  -  INTERMEDIATE PRESSURE (IP) CHECK VALVES - GE\P&W ENGINES	[***]
4970-000045	APU HOURMETER  - FLIGHT DECK	[***]
7200-000382	STANDARD FAN SPINNER - GE ENGINES	[***]
7200-000412	GE PROPULSION SYSTEM	[***]
7200-000459	GENERAL ELECTRIC ENGINES - CF6-80C2-B6F - B6F RATING - WITH FADEC	[***]
7200A114C90	ENG REPLACE GE ENG CF6-80C2-B6FSTAGE 1 HTP COATED BLADES	[***]
7830-000012	MANUAL OPENING OF THRUST REVERSER ASSEMBLIES - GE CF6-80C2 ENGINES	[***]
7900-000117	LUBRICATING OIL - BP TURBO OIL 2380	[***]
8011-000006	HAMILTON STANDARD STARTERS AND STARTER VALVES  -  GE ENGINES	[***]

MISC FO	FOLLOW ON EXH A VR259	[***]
MISC/FAA4	FLAME PROPAGATION - INSULATION BLANKETS	[***]
		[***]
OPTIONS: 171	TOTAL:	[***]

Exhibit A to Letter Agrement 6-1162-ILK-0381R2

Article 6.2

Substitute Aircraft Delivery, Description, Price and Advance Payments

Airframe Model/MTOW:	767-300F	412000 pounds	Detail Specification:		D019T002LAN63F-1
Engine Model/Thrust:	CF6-80C2B6F	60200 pounds	Airframe Price Base Year/Escalation Formula:		Jul-08 ECI-MFG / CPI
Airframe Price:		***	Engine Price Base Year/Escalation Formula:		Jul-08 GE CF6-80 & GE90 (99 rev.)
Optional Features:		***
Sub-Total of Airframe and Features:		[***]	Airframe Escalation Data:	(4Q08 Esc Fcst)
Engine Price (Per Aircraft):		[***]	Base Year Index (ECI):	103.1
Aircraft Basic Price (Excluding BFE/SPE):		[***]	Base Year Index (CPI):	208.2
Buyer Furnished Equipment (BFE) Estimate:		[***]	Engine Escalation Data:
Seller Purchased Equipment (SPE) Estimate:		[***]	Base Year Index (CPI):	129.930
Initial Payment/Aircraft at Proposal Accept:		[***]	Escalation is not fixed for these aircraft

		Escalation	Escalation		[***]	[***]	[***]	[***]	[***]
Delivery	Number of	Factor	Factor	Manufacturer	[***]	[***]	[***]	[***]	[***]
Date	Aircraft	(Airframe)	(Engine)	Serial Number	[***]	[***]	[***]	[***]	[***]
Oct-2011	1	1.0622	1.0900	40590	[***]	[***]	[***]	[***]	[***]
Nov-2011	1	1.0633	1.0930	40591	[***]	[***]	[***]	[***]	[***]
Total	2

EXHIBIT 2: ARTICLE 6.2, SUBSTITUTE AIRCRAFT

SA-28

P. A. No. 2126	Boeing Proprietary
Attachment A		Page 1

6-1162-KSW-6456

LAN Airlines S.A.

Avenida Presidente Riesco 5711

Piso 19

Las Condes

Santiago, Chile

Subject:           Aircraft Performance Guarantees

Reference:       Purchase Agreement No. 2126 (Purchase Agreement) between The Boeing Company (Boeing) and LAN Airlines S.A. (Customer) relating to three Model 767-316F aircraft (Substitute 767 Freighter Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement.  All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement.

Boeing agrees to provide Customer with the performance guarantees in the Attachment.  [***].

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer becoming the operator of the Aircraft and cannot be assigned, in whole or in part.

The information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties.  Customer will limit the disclosure of its contents to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

Very truly yours,
THE BOEING COMPANY
By
Its	Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: March 22, 2010
LAN AIRLINES S.A.
By
	Mr. Roberto Alvo
Its	Sr. Vice President Strategic
	Planning & Corporate Planning
By
	Mr. Alejandro de la Fuente
Its	Chief Financial Officer

MODEL 767-316F FREIGHTER PERFORMANCE GUARANTEES

FOR LAN AIRLINES S.A.

SECTION	CONTENTS
1	AIRCRAFT MODEL APPLICABILITY
2	FLIGHT PERFORMANCE
3	MANUFACTURER'S EMPTY WEIGHT
4	AIRCRAFT CONFIGURATION
5	GUARANTEE CONDITIONS
6	GUARANTEE COMPLIANCE
7	EXCLUSIVE GUARANTEES

1 AIRCRAFT MODEL APPLICABILITY

[***].

2 FLIGHT PERFORMANCE

2.1 [***]

[***]

2.2 [***]

[***]

2.3 [***]

[***]:

3 MANUFACTURER'S EMPTY WEIGHT

[***].

4 AIRCRAFT CONFIGURATION

4.1 The guarantees contained in this Attachment are based on the Aircraft configuration as defined in Detail Specification D019T002LAN63F-2 (hereinafter referred to as the Detail Specification).  Appropriate adjustment shall be made for changes in such Detail Specification approved by the Customer and Boeing or otherwise allowed by the Purchase Agreement which cause changes to the flight performance and/or weight and balance of the Aircraft.  Such adjustment shall be accounted for by Boeing in its evidence of compliance with the guarantees.

4.2 The Manufacturer's Empty Weight guarantee of Section 3 will be adjusted by Boeing for the following in its evidence of compliance with the guarantees:

(1)        Changes to the Detail Specification or any other changes mutually agreed upon between the Customer and Boeing or otherwise allowed by the Purchase Agreement.

(2)        The difference between the component weight allowances given in Appendix IV of the Detail Specification and the actual weights.

5 GUARANTEE CONDITIONS

5.1 All guaranteed performance data are based on the International Standard Atmosphere (ISA) and specified variations therefrom; altitudes are pressure altitudes.

5.2 The Federal Aviation Administration (FAA) regulations referred to in this Attachment are, unless otherwise specified, the 767-300 Certification Basis regulations specified in the Type Certificate Data Sheet A1NM, Revision 23, dated May 10, 2004.

5.3 In the event a change is made to any law, governmental regulation or requirement, or in the interpretation of any such law, governmental regulation or requirement that affects the certification basis for the Aircraft as described in Paragraph 5.2, and as a result thereof, a change is made to the configuration and/or the performance of the Aircraft in order to obtain certification, the guarantees set forth in this Attachment shall be appropriately modified to reflect any such change.

5.4 The takeoff and landing guarantees are based on hard surface, level and dry runways with no wind or obstacles, no clearway or stopway, 225 mph tires, with Category D brakes and anti-skid operative, and with the Aircraft center of gravity at the most forward limit unless otherwise specified.  The takeoff performance is based on no engine bleed for air conditioning or thermal anti-icing and the Auxiliary Power Unit (APU) turned off unless otherwise specified.  The improved climb performance procedure will be used for takeoff as required.  The landing performance is based on the use of automatic spoilers.

5.5 The cruise fuel mileage guarantee includes allowances for normal power extraction and engine bleed for normal operation of the air conditioning system.  Normal electrical power extraction shall be defined as not less than a 140 kilowatts total electrical load.  Normal operation of the air conditioning system shall be defined as pack switches in the "Auto" position, the temperature control switches in the "Auto" position that results in a nominal cabin temperature of 75°F, and all air conditioning systems operating normally.  This operation allows a maximum cabin pressure differential of 8.6 pounds per square inch at higher altitudes, with a nominal Aircraft cabin ventilation rate of 1,600 cubic feet per minute including passenger cabin recirculation (nominal recirculation is 0 percent).  The APU is turned off unless otherwise specified.

5.6 The cruise fuel mileage guarantee is based on an Aircraft center of gravity location of 17 percent of the mean aerodynamic chord.

5.7 Performance, where applicable, is based on a fuel Lower Heating Value (LHV) of 18,580 BTU per pound.

6 GUARANTEE COMPLIANCE

6.1 Compliance with the guarantees of Sections 2 and 3 shall be based on the conditions specified in those sections, the Aircraft configuration of Section 4 and the guarantee conditions of Section 5.

6.2 Compliance with the takeoff and landing guarantees shall be based on the FAA approved Airplane Flight Manual for the Model 767-300F.

6.3 Compliance with the cruise fuel mileage guarantee shall be established by calculations based on flight test data obtained from an aircraft in a configuration similar to that defined by the Detail Specification.

6.4 Compliance with the Manufacturer's Empty Weight guarantee shall be based on information in the "Weight and Balance Control and Loading Manual - Aircraft Report."

6.5 The data derived from tests shall be adjusted as required by conventional methods of correction, interpolation or extrapolation in accordance with established engineering practices to show compliance with these guarantees.

6.6 Compliance shall be based on the performance of the airframe and engines in combination, and shall not be contingent on the engine meeting its manufacturer's performance specification.

7 EXCLUSIVE GUARANTEES

The only performance guarantees applicable to the Aircraft are those set forth in this Attachment.

Supplemental Agreement No. 29 (“SA-29”)

to

Purchase Agreement No. 2126

between

THE BOEING COMPANY

and

LAN AIRLINES S.A.

Relating to Boeing Model 767-316ER, Model 767-38EF, and Model 767-316F Aircraft

THIS SUPPLEMENTAL AGREEMENT, entered into as of the ___ day of November of 2010, by and between THE BOEING COMPANY, a Delaware corporation (hereinafter called “Boeing”), and LAN Airlines S.A., a Chilean corporation (hereinafter called “Customer”);

WITNESSETH:

WHEREAS, the parties entered into that certain Purchase Agreement No. 2126, dated as of January 30, 1998 relating to the purchase and sale of Boeing Model 767-316ER, Model 767-38EF, and Model 767-316F aircraft (hereinafter referred to as "Aircraft") which agreement, including all tables, exhibits, supplemental exhibits and specifications thereto, together with all letter agreements then or thereafter entered into that by their terms constitute part of such purchase agreement and as such purchase agreement may be amended or supplemented from time to time, is hereinafter called the "Purchase Agreement;"

WHEREAS, the parties have mutually agreed to (i) accelerate the delivery of three Aircraft and (ii) substitute the three Aircraft from 767-316F to 767-316ER (each and collectively “2012 Accelerated Aircraft”); and

WHEREAS, Boeing and Customer have agreed to amend the Purchase Agreement to incorporate the above changes;

NOW THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree to amend the Purchase Agreement as follows:

1. Table of Contents, Articles, Tables, Exhibits and Supplemental Exhibits:

1.1.          Table of Contents. The “Table of Contents” to the Purchase Agreement is deleted in its entirety and the new “Table of Contents” attached hereto is substituted in lieu thereof to reflect the changes made by this SA-29.

1.2.          Deletion of Table 12.  The “Aircraft Information Table 12 to Purchase Agreement No. 2126, Aircraft Delivery, Description, Price and Advance Payments” is deleted in its entirety since it is no longer applicable.

1.3.          Addition of Table 13.  “Aircraft Information Table 13 to Purchase Agreement No. 2126, Aircraft Delivery, Description, Price and Advance Payments” attached hereto is added to the Purchase Agreement to reflect, among other things, the scheduled delivery month, price and Advance Payments applicable to the 2012 Accelerated Aircraft.

1.4.          Deletion of Exhibit A-10.  “Aircraft Configuration 767-316F Aircraft-2008$ to Purchase Agreement No. 2126”, Aircraft Delivery, Description, Price and Advance Payments” is deleted in its entirety since it is no longer applicable.

1.5.          Addition of Exhibit A-11.  “Aircraft Configuration 767-316ER Aircraft-2010$ to Purchase Agreement No. 2126” attached hereto is added to the Purchase Agreement to reflect, among other things, the price of Customer selected Optional Features applicable to the 2012 Accelerated Aircraft.

1.6.          Addition of Supplemental Exhibit EE1-2010$.  Supplemental Exhibit EE1-2010$ entitled “Engine Escalation, Engine Warranty & Patent Indemnity” attached hereto is added to the Purchase Agreement to provide the 2010 base year escalation formula applicable to the prices of engines selected by the Customer for the 2012 Accelerated Aircraft.

1.7.          Addition of Supplemental Exhibit AE1-2010$.  Supplemental Exhibit AE1-2010$ entitled “Escalation adjustment-airframe and optional features” attached hereto is added to the Purchase Agreement to provide the 2010 base year escalation formula applicable to the 2012 Accelerated Aircraft.

2. Restricted Letter Agreements.

2.1.          Addition of Special Matters Letter Applicable to the 2012 Accelerated Aircraft.  Letter Agreement 6-1162-ILK-0450 entitled “Special Matters Letter Applicable to the 2012 Accelerated Aircraft” (Special Matters Letter Applicable to the 2012 Accelerated Aircraft), a copy of which is attached hereto, is added to the Agreement to provide the terms and conditions, including the economic considerations, applicable to each 2012 Accelerated Aircraft.

2.2.          Revision of Special Matters Letter Applicable to the 2011 Accelerated Aircraft and the Substitute 767 Freighter Aircraft.  The parties mutually agree that Letter Agreement 6-1162-ILK-0381R2 entitled “Special Matters Letter Applicable to the 2011 Accelerated Aircraft and the Substitute 767 Freighter Aircraft” is no longer applicable.

2.3.          Deletion of Performance Guarantees Relating to the Substitute 767 Freighter Aircraft.  Letter Agreement 6-1162-KSW-6456 entitled “Performance Guarantees Relating to the Substitute 767 Freighter Aircraft” is deleted from the Purchase Agreement since it is no longer applicable.

2.4.          Applicability of 16G Seats Letter to each 2012 Accelerated Aircraft.  Letter Agreement 6-1162-ILK-0384R1 entitled “16G Seats” applies to each 2012 Accelerated Aircraft.

3. Payment Due at Effective Date of this Supplemental Agreement.

To effect the implementation of this SA-29, payments to Boeing are due by Customer as follows:

Computation  of amount due upon signing of SA-29:
[***]
[***]	[***]
[***]	[***]
[***]	[***]
Subtotal	[***]
Less:  Creditable amount from Substituted 767-316F Aircraft	[***]

Total amount due upon signing SA-29	[***]
+-in accordance with delivery terms specified in the Special Matters Letter Applicable to the 2012 Accelerated Aircraft

4. Confidentiality.

Boeing and Customer understand that the commercial and financial information contained in this Supplemental Agreement is considered by the parties as confidential (Confidential Information) and both agree not to disclose such Confidential Information except as provided herein.  In addition to the parties’ respective officers, directors and employees who need to know the Confidential Information and who understand the obligation to keep it confidential, the parties may disclose Confidential Information (1) to the extent required by law and (2) to its agents, auditors and advisors who need to know the Confidential Information for purposes of enabling each party to understand, perform its obligations under, or receive the benefits of, this Supplemental Agreement and who have agreed not to use or disclose the Confidential Information for any other purpose without the other party’s prior written consent.  In the event that a party concludes that disclosure of Confidential Information contained in this Supplemental Agreement is required by applicable law, the party will so advise the other party promptly in writing and endeavor to protect the confidentiality of such Confidential Information to the widest extent possible.  In the event of a legal dispute with Boeing, nothing herein will preclude Customer from sharing with its legal counsel information necessary for purposes of enabling counsel to advise or represent Customer provided that so long as Customer causes its legal counsel to maintain the confidentiality of information that is the subject of this Article.  Except as provided in the assignment provisions of Article 7 of Letter Agreement 6-1162-KSW-6423 entitled “Special Matters Applicable to the Incremental Aircraft”; Article 21 of Letter Agreement 6-1162-LAJ-0895R6 entitled “Business Considerations”; Article 8 of Letter Agreement 6-1162-ILK-0381R2 entitled “Special Matters Letter Applicable to the 2011 Accelerated Aircraft and the Substitute 767 Freighter Aircraft”; Article 9 of Letter Agreement 6-1162-ILK-0412 entitled “Special Matters Relating to Three Aircraft Originally Scheduled to Deliver in 2009” and Article 6 of Letter Agreement 6-1162-ILK-0450 entitled “Special Matters Relating to 2012 Accelerated Aircraft”, Customer will not disclose this Supplemental Agreement for purposes of financing payments without the prior written consent of Boeing, which consent will be provided once the financier enters into a Non Disclosure Agreement with Boeing in form and substance reasonably satisfactory to Boeing, which will include agreeing not to disclose or use Confidential Information except for the purpose set forth herein. This provision shall not apply to any Confidential Information that is in the public domain except that a party will be liable to the other for breach of its obligations under this provision if the Confidential Information entered the public domain as a consequence of a wrongful act or omission on its part.

The Purchase Agreement shall be deemed amended to the extent herein provided and as amended shall continue in full force and effect.

EXECUTED IN DUPLICATE as of the day and year first above written.

THE BOEING COMPANY		LAN AIRLINES S.A.
By:		By:
Ms. Irma L. Krueger		Mr. Roberto Alvo
Its	Attorney-In-Fact	Its:	Sr. Vice President Strategic Planning &
			Corporate Development

By:
Mr. Alejandro de la Fuente Goic
Its:	Chief Financial Officer

PURCHASE AGREEMENT NUMBER 2126

between

THE BOEING COMPANY

and

LAN Airlines  S.A.

Relating to Boeing Model 767-316ER, Model 767-38EF, and Model 767-316F Aircraft

TABLE OF CONTENTS

		Supplemental
ARTICLES		Agreement
1.	Quantity, Model and Description		24
2.	Delivery Schedule		24
3.	Price		24
4.	Payment		24
5.	Miscellaneous		24
6.	Confidentiality		24

TABLE
1.	Aircraft Information Table 767 300ER Aircraft – 1995$	1
2.	Aircraft Information Table 767 300F Aircraft – 1997$	1
3.	Aircraft Information Table 767 300F Aircraft – 1998$	8
4.	Aircraft Information Table 767 300F Aircraft – 1999$	11
5.	Aircraft Information Table 767 300F Aircraft – 2003$	18
6.	Aircraft Information Table 767 316ER Aircraft – 2003$	21
7.	Aircraft Information Table 767 300F Aircraft – 2004$	24
8.	Aircraft Information Table 767 316ER Aircraft – 2004$	22
9.	Aircraft Information Table 767 316ER Aircraft – 2005 $	22
10.	Aircraft Information Table 767-316ER Aircraft – 2006 $	25
11.	Aircraft Information Table 767-316ER Aircraft – 2008 $	28
12.	Aircraft Information Table 767-316F Aircraft – 2008 $: DELETED	29
13.	Aircraft Information Table 767-316ER Aircraft – 2010 $	29

EXHIBITS
A.	Aircraft Configuration
A-1	Aircraft Configuration	1
A-2	Aircraft Configuration	5
A-3	Aircraft Configuration	10
A-4	Aircraft Configuration 767-316F Aircraft – 2003$	15
A-5	Aircraft Configuration 767-316ER Aircraft – 2003$	17
A-6	Aircraft Configuration 767-316ER Aircraft – 2004$	22
A-7	Aircraft Configuration 767-316ER Aircraft – 2005$	22
A-8	Aircraft Configuration 767-316ER Aircraft – 2006$	23
A-9	Aircraft Configuration 767-316ER Aircraft – 2008$	24
A-10	Aircraft Configuration 767-316F Aircraft – 2008$: DELETED	29
A-11	Aircraft Configuration 767-316ER Aircraft – 2010$	29
B.	Aircraft Delivery Requirements and Responsibilities	1

		Supplemental
SUPPLEMENTAL EXHIBITS		Agreement (s)
BFE1.	BFE Variables		1
CS1.	Customer Support Variables		1
EE1.	Engine Escalation/Engine Warranty and Patent Indemnity		1
EE1-1.	Engine Escalation/Engine Warranty and Patent Indemnity		5
EE1-2.	Engine Escalation/Engine Warranty and Patent Indemnity		13
EE1-2006$	Engine Escalation, Engine Warranty & Patent Indemnity		26
EE1-2008$	Engine Escalation, Engine Warranty & Patent Indemnity		26
EE1-2010$	Engine Escalation, Engine Warranty & Patent Indemnity		29
SLP1.	Service Life Policy Components
AE1	Escalation adjustment-airframe and optional features		22
AE1 2008$	Escalation adjustment-airframe and optional features		24
AE1 2010$	Escalation adjustment-airframe and optional features		29

LETTER AGREEMENTS
2126-1	Seller Purchased Equipment
2126-2R1	Cabin Systems Equipment	17
2126-3R4	Option Aircraft	13

RESTRICTED LETTER AGREEMENTS
6-1162-DMH-350	Performance Guarantees
6-1162-DMH-351	Promotion Support
6-1162-DMH-472	Performance Guarantees	1
[***]	[***]	1
[***]	[***]	9
6-1162-LAJ-311	Special Matters Relating to the July 2001 and September 2001 Aircraft	11
6-1162-LAJ-956	Special Matters Relating to four 2006 Delivery Aircraft (February 4, 2005)
6-1162-LAJ-0895R6	Business Considerations	23
[***]	[***]	21
6-1162-ILK-0381 R2	Special Matters Letter Applicable to the 2011 Accelerated Aircraft and the Substitute 767 Freighter Aircraft	29 DELETED
6-1162-ILK-0382	No longer applicable	26
[***]	[***]	26

		Supplemental
RESTRICTED LETTER AGREEMENTS, continued		Agreement (s)
6-1162-ILK-0384 R2	16G Seats	27
6-1162-ILK-0385 R2	Performance Guarantees Relating to the 2011 Accelerated Aircraft; the 2012 Accelerated Aircraft and the Incremental Aircraft	27
6-1162-ILK-0388	Option Aircraft – DELETED	28 (Art 6.2)
6-1162-ILK-0412	Special Matters Relating to Three Aircraft Originally Scheduled to Deliver in 2009	25
[***]	[***]	25
6-1162-KSW-6423	Special Matters Letter Applicable to the  Incremental Aircraft	27
6-1162-KSW-6424	Aircraft Model Substitution Relating to the Incremental Aircraft	27
6-1162-KSW-6456	Performance Guarantees for Substitute 767 Freighter Aircraft:  DELETED	29
6-1162-ILK-0450	Special Matters Letter Applicable to the 2012 Accelerated Aircraft	29

THIS TABLE IS NO LONGER APPLICABLE.

Airframe Model/MTOW:	767-300ER	412000 pounds	Detail Specification:	D019T001-L (2/10/2010)
Engine Model/Thrust:	CF6-80C2B6F	60200 pounds	Airframe Price Base Year/Escalation Formula:	Jul-10	ECI-MFG/CPI
Airframe Price:		[***]	Engine Price Base Year/Escalation Formula:	Jul-10	GE CF6-80 & GE90 (99 rev.)
Optional Features:		[***]
Sub-Total of Airframe and Features:		[***]	Airframe Escalation Data:
Engine Price (Per Aircraft):		[***]	Base Year Index (ECI):	106.8
Aircraft Basic Price (Excluding BFE/SPE):		[***]	Base Year Index (CPI):	215.6
Buyer Furnished Equipment (BFE) Estimate:		[***]	Engine Escalation Data:
Seller Purchased Equipment (SPE) Estimate:		[***]	Base Year Index (CPI):	133.190
[***]		[***]

		Escalation	Escalation		Escalation Estimate	Advance Payment Per Aircraft (Amts. Due/Mos. Prior to Delivery):
Delivery	Number of	Factor	Factor	Manufacturer	Adv Payment Base	[***]	[***]	[***]	Total
Date	Aircraft	(Airframe)	(Engine)	Serial Number	Price Per A/P	[***]	[***]	[***]	[***]
Jun-2012	1	1.0391	1.081	40799	[***]	[***]	[***]	$8,538,100	[***]
Jul-2012	1	1.0405	1.084	40592	[***]	[***]	[***]	$8,551,450	[***]
Oct-2012	1	1.0455	1.093	40593	[***]	[***]	[***]	$8,596,950	[***]
Total:	3

AIRCRAFT CONFIGURATION

between

THE BOEING COMPANY

and

LAN AIRLINES S.A.

Exhibit A-11 to Purchase Agreement Number 2126

AIRCRAFT CONFIGURATION

relating to

BOEING MODEL 767-300ER AIRCRAFT

THE LAN AIRCRAFT

For the 2012 Accelerated Aircraft, the detail specification is Boeing Detail Specification D019T001, Revision L dated as of February 10, 2010.  Such Detail Specification will be comprised of Boeing Configuration Specification D019T001, Revision K dated December 1, 2008 to incorporate the Options listed below, including the effects on Manufacturer's Empty Weight (MEW) and Operating Empty Weight (OEW).  As soon as practicable, Boeing will furnish to Customer copies of the Detail Specification, which copies will reflect such Options.  The Aircraft Basic Price reflects and includes all effects of such Options, except such Aircraft Basic Price does not include the price effects of any Buyer Furnished Equipment or Seller Purchased Equipment.

0110-000035	MAJOR MODEL 767 AIRPLANE	[***]
0110-000037	MINOR MODEL 767-300 PASSENGER AIRPLANE	[***]
0110-000092	MODEL 767-300ER PASSENGER AIRPLANE	[***]
0110A276A30	NEW LOOK INTERIOR - 767-300ER	[***]
0130B657J85	MP - INTERIOR ARRANGEMENT - REVISION	[***]
0130B657L12	MP - BUSINESS CLASS PASSENGER SEATS - REVISION - PASSENGER CABIN	[***]
0130B657L60	MP - INTERIOR ARRANGEMENT - REVISION	[***]
0130B657L79	MP - RELOCATION OF MONUMENT MOUNTED LCD MONITORS,  LITERATURE POCKETS AND BASSINET FITTINGS - PASSENGER CABIN - SPE	[***]
0220B604D37	TYPE CERTIFICATON & EXPORT CERTIFICATE OF AIRWORTHINESS FOR AIRPLANE DELIVERY - REQUIREMENT - LAN 767-300ER	[***]
0221-000002	DISPATCH WITH GEAR EXTENDED FOR REVENUE FLIGHT	[***]
0221A251A19	ENGINE INOPERATIVE TEN-MINUTE TAKEOFF THRUST OPERATION - CF6-80C2B6F THRUST RATING	[***]
0221B401A43	TAKEOFF AND LANDING WITH TAILWIND UP TO 15-KNOTS	[***]
0224-000024	EXTENDED RANGE TWIN ENGINE OPERATIONS  (ETOPS)	[***]
0228-000001	FLIGHT MANUALS IN FAA FORMAT	[***]
0228-000032	OPERATIONS MANUAL IN FAA FORMAT	[***]
0229A141A41	PERFORMANCE - CERTIFICATION FOR OPERATION AT AIRPORT ALTITUDES OF 9500 FEET AND BELOW	[***]
0252-000014	ENVIRONMENTAL CONTROL SYSTEM  -  TEMPERATURE INDICATIONS IN DEGREES CELSIUS	[***]
0252-000017	INSTRUMENTATION WITH METRIC UNITS  -  MODEL 767	[***]
0254-000003	USPHS CERTIFICATE OF SANITARY CONSTRUCTION	[***]
0315C417A53	CERTIFIED OPERATIONAL AND STRUCTURAL DESIGN WEIGHTS 767-300ER	[***]
0351B523A03	TEMPLATE - TAKEOFF PERFORMANCE IMPROVEMENT - ALTERNATE FORWARD CENTER OF GRAVITY LIMITS	[***]
0351C417B92	MP - CENTER-OF-GRAVITY LIMITS - REPLACE - TEMPLATE OPTION	[***]
0360C417A60	MISCELLANEOUS WEIGHT COLLECTOR	[***]
1110B657G71	EXTERIOR COLOR SCHEME AND MARKINGS	[***]
1110B657M33	MP - BFE - PREMASK - VERTICAL STABILIZER - EXTERIOR COLOR SCHEMES AND MARKINGS	[***]
1120-000019	MAINTENANCE MARKINGS - ACCESS PANELS - ENGINE STRUT AND COWLS	[***]
1130A931A06	IATA STANDARD MARKINGS - LOWER LOBE CARGO COMPARTMENT	[***]
1130B657G72	INTERIOR PASSENGER COMPARTMENT PLACARDS AND MARKINGS	[***]
1130B657J09	SEAT ROW MARKERS -  PASSENGER CABIN	[***]
1130B657L11	MP - ECONOMY CLASS SEAT ROW MARKERS REVISION - INTERIOR PLACARDS	[***]
1130B657P19	MP - INTERIOR PLACARDS - REVISION - PASSENGER CABIN	[***]

1130B657P39	INTERIOR PLACARDS - REVISION - ADDITIONAL SEAT ROW MARKERS - CENTER OVERHEAD BINS INTERIOR	[***]
2145-000004	BULK CARGO AREA HEATING AND VENTILATING FOR ANIMAL CARRIAGE	[***]
2158A071A11	IN-FLIGHT ENTERTAINMENT EQUIPMENT COOLING SYSTEM, FWD OF DOOR 2 - 200 CFM INSTALLATION	[***]
2210-000003	AUTOFLIGHT - INHIBIT GLIDE SLOPE CAPTURE PRIOR TO LOCALIZER CAPTURE	[***]
2210-000030	AUTOFLIGHT - THREE DIGIT MACH NUMBER ON MODE CONTROL PANEL	[***]
2210-000031	AUTOFLIGHT - AUTOMATIC AUTOPILOT CHANNEL SELECTION IN APPROACH MODE	[***]
2210-000037	AUTOFLIGHT - BANK ANGLE HOLD AT AUTOPILOT COMMAND ENGAGE	[***]
2210-000039	AUTOFLIGHT - FULL TIME FLIGHT DIRECTOR	[***]
2210-000311	AUTOFLIGHT - FLIGHT CONTROL COMPUTER (FCC) WITHOUT ONBOARD SOFTWARE LOADING CAPABILITY	[***]
2210A064A02	AUTOFLIGHT - ALTITUDE ALERT - 300/900 FEET	[***]
2210B403A08	MODE CONTROL PANEL WITHOUT BACKCOURSE SWITCH	[***]
2230-000127	AUTOTHROTTLE - SELECTION OF CLIMB DERATES	[***]
2230-000133	AUTOTHROTTLE - FIXED PERCENTAGE DERATE LEVELS OF 10% AND 20%	[***]
2230-000135	AUTOTHROTTLE - CLIMB DERATE WASHOUT SCHEDULE - 10,000 TO 12,000 FEET	[***]
2311-000124	HF COMMUNICATIONS - DUAL GABLES HF CONTROL PANELS WITH SENSITIVITY AND DATALINK CONTROL - P/N G7401-16 - BFE/SPE	[***]
2311-000137	HF COMMUNICATIONS - PARTIAL PROVISIONS FOR DUAL ARINC 753 HF DATALINK	[***]
2311B401A29	DUAL HF DATA RADIO - ARINC 753 - ACTIVATION - AIRLINE DATA LINK COMMUNICATIONS ONLY	[***]
2311B401A39	HF COMMUNICATIONS - EQUIPMENT INSTALLATION OF DUAL ROCKWELL HF VOICE/DATA TRANSCEIVERS - P/N 822-0990-004 AND DIGITAL HF COUPLERS - P/N 822-0987-004    BFE/SPE	[***]
2312-000703	VHF COMMUNICATIONS - ACTIVATION OF 8.33 KHZ CHANNEL SPACING	[***]
2312B401A16	VHF COMMUNICATIONS - EQUIPMENT INSTALLATION OF TRIPLE ROCKWELL ARINC 750 VHF-920 FM IMMUNE TRANSCEIVERS WITH 8.33 KHZ CHANNEL SPACING, VDL MODE 2, AND CMC INTERFACE CAPABILITY - P/N 822-1250-002 - BFE/SPE	[***]
2312B800D19	VHF COMMUNICATIONS - TRIPLE GABLES VHF TUNING PANELS (DUAL KNOB) - P/N G7400-227 - BFE/SPE	[***]
2321B401A04	SELCAL - AVTECH FIVE CHANNEL DECODER - P/N NA138-714C  - BFE/SPE	[***]
2322A213B76	CMU - INSTALLATION OF PARTIAL PROVISIONS FOR SINGLE CMU ACCORDANCE WITH ARINC 758	[***]
2322B401A31	CMU - INSTALLATION OF ROCKWELL COLLINS ARINC 758 LEVEL AOA CMU - P/N 822-1239-151  - BFE / SPE	[***]

2322B800A68	AIRCRAFT COMMUNICATIONS ADDRESSING AND REPORTING SYSTEM (ACARS) - LARGE FORMAT MULTIPURPOSE INTERACTIVE DISPLAY UNIT (MIDU) - ROCKWELL - P/N 822-1626-105 -  BFE/SPE	[***]
2324B800D31	MP - EMERGENCY LOCATOR TRANSMITTER (ELT) - ELTA 3-FREQUENCY AUTOMATIC - FIXED - P/N 95N6088 - SPE	[***]
2324C485B12	MP - EMERGENCY LOCATOR TRANSMITTER (ELT) - INSTALLATION - ELTA 3 - FREQUENCY AUTOMATIC - FIXED - P/N 01N65900 - SPE	[***]
2331B702M61	PASSENGER ADDRESS (PA) SYSTEM - TWO CLASS -  ROCKWELL COLLINS	[***]
2332A324A38	IN-FLIGHT ENTERTAINMENT SYSTEM POWER CONTROL SWITCH - HEAD END	[***]
2332A324A39	IN-FLIGHT ENTERTAINMENT SYSTEM POWER CONTROL SWITCH - SEAT AND AREA DISTRIBUTION	[***]
2332A324A40	IN-FLIGHT ENTERTAINMENT SYSTEM POWER CONTROL SWITCH - MASTER	[***]
2332B702M66	IN-FLIGHT ENTERTAINMENT - PARTIAL PROVISIONS - THALES - 767	[***]
2332B702N44	IN-FLIGHT ENTERTAINMENT SYSTEM - THALES - WITH OVERHEAD VIDEO - FULL CABIN PC POWER - FUL CABIN AVOD - PAX - CSE	[***]
2332B702N67	MP - PASSENGER ENTERTAINMENT SYSTEM - PARTIAL PROVISIONS - PARTITION RELOCATION - MOBILE FRONTIER	[***]
2332B702P67	MP - PASSENGER ENTERTAINMENT SYSTEM - VIDEO - REVISION - THALES - CSE	[***]
2332C417B98	MP - PASSENGER ENTERTAINMENT SYSTEM - REPLACEMENT - THALES 15" MONITOR IN LIEU OF JAMCO 15" MONITOR - THALES - SPE	[***]
2332C522A02	MP - PASSENGER ENTERTAINMENT SYSTEM - REVISION - TPCU HANDSET - THALES - SPE	[***]
2332C817F17	MP - PASSENGER ENTERTAINMENT SYSTEM - VIDEO - REVISION - SOFTWARE PART NUMBERS - THALES - SPE	[***]
2340B800D47	CREW COMMUNICATIONS - PILOTS' CALL PANEL - FLIGHT DECK	[***]
2342-000016	CABIN INTERPHONE SYSTEM - CABIN INTERPHONE HANDSET - FLIGHT COMPARTMENT	[***]
2350B800C71	AUDIO INTEGRATING - AUDIO SELECTOR PANELS - FLIGHT DECK	[***]
2350C164D44	MP - AUDIO SELECTOR PANEL (ASP) & PILOT'S CALL PLANEL - REPLACEMENT - SFE ASP WITH INTEGRATED SELCAL AND CREW CALL FUNCTIONS - 3 VHF/2 HF/2 SATCOM (P/N 285T0022-51)	[***]
2351-000033	HAND HELD MICROPHONE - CAPTAIN AND FIRST OFFICER - ELECTROVOICE - P/N 903-1342 - BFE/SPE	[***]
2351-000035	HAND HELD MICROPHONE - FIRST OBSERVER - ELECTROVOICE - P/N 903-1342 - BFE/SPE	[***]
2351-000042	CONTROL WHEEL PUSH TO TALK (PTT) SWITCH - STANDARD THREE POSITION	[***]

2351A213A33	AUDIO INTEGRATION - INSTALLATION - TWO-PLUG AUDIO JACKS IN THE FLIGHT DECK	[***]
2351A213B77	BOOM MICROPHONE HEADSETS - CAPTAIN AND FIRST OFFICER - TELEX AIRMAN 750 - P/N 64300-200 - BFE/SPE	[***]
2351A213B80	HEADPHONE - FIRST OBSERVER - TELEX - P/N 64400-200 - BFE/SPE	[***]
2351A213B81	HEADPHONE - SECOND OBSERVER - TELEX - P/N 64400-200 - BFE/SPE	[***]
2371-000009	NO MONITOR JACK IN THE WHEEL WELL	[***]
2371-000017	SOLID STATE VOICE RECORDER ED56A AND SOLID STATE MICROPHONE/MONITOR ED56A - ALLIEDSIGNAL - 2 HOUR RECORDING TIME - P/N 980-6022-001 AND P/N 980-6116-002 - BFE/SPE	[***]
2432-000002	AUXILIARY POWER UNIT (APU) - ADDITIONAL STARTING CAPABILITY	[***]
2433-000021	STANDBY POWER - EXTENDED TIME CAPABILITY - BATTERY PARALELLING	[***]
2451-000002	90 KVA GALLEY POWER SUPPLY	[***]
2501A611A19	FORWARD MONUMENT COMPLEX 4	[***]
2504A611A14	AFT MONUMENT COMPLEX 3	[***]
2511-000022	MANUALLY OPERATED SEATS  -  CAPTAIN AND FIRST OFFICER	[***]
2511-000026	FIRST OBSERVER'S SEAT - WALL MOUNTED	[***]
2511B806J86	MP - SECOND OBSERVER STSATION WITH ARMRESTS - ADDITION	[***]
2513-000405	SUNVISOR INSTALLATION - NUMBER 1 AND 2 WINDOWS - FLIGHT DECK - SFE	[***]
2520B657G80	INTERIOR COLOR AND MATERIAL - STANDARD OFFERING	[***]
2520B657J42	UNIQUE DECORATIVE TEDLAR LAMINATE (DTL) - MONUMENTS - INTERIOR COLOR AND MATERIAL - SFE	[***]
2520B657K41	MP - BFE RAW CARPET, CURTAIN AND FLOOR MAT MATERIAL	[***]
2520B657M19	MP - INTERIOR DECOR - REVISION - PASSENGER CABIN	[***]
2520B657M35	MP - DECORATIVE TEDLAR LAMINATE (DTL) - REVISION - MONUMENT MOUNTED - INTERIOR COLOR AND MATERIAL - SFE	[***]
2520B657M56	MP - DECORATIVE TEDLAR LAMINATE (DTL) - REVISION - MONUMENT MOUNTED - INTERIOR COLOR AND MATERIAL - SFE	[***]
2523B657J10	ADDITIONAL PASSENGER SERVICE UNITS -	[***]
2523B657J31	PASSENGER SERVICE UNITS	[***]
2524B657G86	SPE - FULL HEIGHT CENTERLINE CLOSET - STA 353 - STA 379	[***]
2524B657G99	CURTAIN AND TRACK INSTALLATION - DOOR 1 LEFT AFT	[***]
2524B657H01	CURTAIN AND TRACK INSTALLATION - DOOR 1 RIGHT AFT	[***]
2524B657H04	CURTAIN AND TRACK INSTALLATION - DOOR 4	[***]
2524B657H95	UNDERBIN CENTERLIN CLASS DIVIDER - SPE	[***]
2524B657H96	LH UNDERBIN OUTBOARD CLASS DIVIDER - SPE	[***]

2524B657H97	RH UNDERBIN OUTBOARD CLASS DIVIDER - SPE	[***]
2524B657J00	CURTAIN AND TRACK INSTALLATION	[***]
2524B657J01	CURTAIN AND TRACK INSTALLATION - BETWEEN BUSINESS CLASS AND ECONOMY CLASS	[***]
2524B657J13	LH UNDERBIN OUTBOARD CLASS DIVIDER - SPE	[***]
2524B657J15	RH UNDERBIN OUTBOARD CLASS DIVIDER - SPE	[***]
2524B657J40	SPE - CLOSET WITH INTEGRAL STOWAGE UNIT AND WALL MOUNTED ATTENDANT SEAT PROVISIONS - LH UNDERBIN - ECONOMY CLASS - FORWARD DOOR 4	[***]
2524B657J41	SPE - CLOSET WITH INTEGRAL STOWAGE UNIT AND WALL MOUNTED ATTENDANT SEAT PROVISIONS - RH UNDERBIN - ECONOMY CLASS - FORWARD DOOR 4	[***]
2524B657K50	MP - CLOSETS, PARTITION & CLASS DIVIDERS - REVISION - FULL HEIGHT CENTERLINE STA 344 - STA 366 - SPE	[***]
2524B657P10	MP - CURTAINS - REVISION - CURTAIN AND CURTAIN TRACK - PASSENGER CABIN	[***]
2524B657P16	MP - CLASS DIVIDERS - REPLACEMENT - BUSINESS CLASS - SPE	[***]
2524C417C49	MP - CURTAINS - REVISION - CURTAIN AND CURTAIN TRACK - PASSENGER CABIN	[***]
2524C707A33	MP - CLOSETS, PARTITION & CLASS DIVIDERS - REVISION - FULL HEIGHT SEAT TRACK MOUNTED CLOSETS - STA 1465.95 - STA 1478.95 AND STA 1467.95 - STA 1478.95 - SPE	[***]
2524C826C28	MP - CURTAINS - REVISION - BFE CURTAIN MATERIAL	[***]
2524C826R50	MP - CLOSETS, PARTITIONS AND CLASS DIVIDERS - REVISION - CURTAIN MATERIAL - NEO-TEX - BFE	[***]
2525B657H05	BUSINESS CLASS SEATS	[***]
2525B657H07	ECONOMY CLASS SEATS	[***]
2525B657J37	ATTENDANT SEATS FOR 767-300	[***]
2525B657L13	MP - ECONOMY CLASS PASSENGER SEATS - REVISION	[***]
2525B657N74	MP - BUSINESS CALSS SEATS - REVISION - REVIEW AND APPROVE SUPPLIER DATA - SPE	[***]
2525C485B41	MP - PASSENGER SEATS - REVISION - BUSINESS CLASS SEAT PART NUMBER REVISION - PASSENGER COMPARTMENT - SPE	[***]
2526B657H11	SPE - IF-1C VIDEO CONTROL CENTER - FORWARD COMPARTMENT OF THE F2 GALLEY	[***]
2527B657H12	ENTRYWAY FLOOR COVERING	[***]
2527B657H98	FLOOR COVERING - SPE	[***]
2527B657K59	MP - SEAT TRACK COVES AND RACEWAYS - REVISION - BFE IN LIEU OF SFE - ECONOMY CLASS	[***]
2527B657L92	MP - FLOOR COVERING - REVISION - FLOOR MAT MATERIAL - SCHNELLER - BFE	[***]
2527B657N98	MP - FLOOR COVERING - REVISION - BUSINESS CLASS CARPET AND FLOOR MOUNTED EMERGENCY ESCAPE PATH LIGHTING SYSTEM	[***]
2527C006A05	FLOOR COVERING - CARPET, SERGED EDGES	[***]
2528B657H13	OVERHEAD STOWAGE BINS	[***]
2528B657H21	LITERATURE POCKETS	[***]

2528B657J03	CENTERLINE FLOOR MOUNTED STOWAGE UNIT - SPE	[***]
2528B657J23	MAGAZINE STOWAGE - MONUMENT MOUNTED	[***]
2528B657J29	LH OUTBOARD FLOOR MOUNTED STOWAGE UNIT - SPE	[***]
2528B657J30	RH OUTBOARD FLOOR MOUNTED STOWAGE UNIT - SPE	[***]
2528B657J59	BIN FAIRING AND CLOSEOUT PANEL - OUTBAOARD OVERHEAD STOWAGE  BINS	[***]
2528B657K02	MP - STOWAGE COMPARTMENTS - REVISION - BUSTLE IN LIEU OF MAGAZINE BUSTLE - 4F-2LC AND 4F-2RC LAVATORIES	[***]
2529B657H43	CURTAIN AND CURTAIN TRACK INSTALLATION - IN-FLIGHT CREW REST - FORWARD OF DOOR 4R	[***]
2529B657N61	MP - PASSENGER AND CABIN ATTENDANTS' ACCOMODATIONS - INSTALLATION - CURTAINS AND CURTAIN TRACK - IN-FLIGHT CREW REST ENCLOSURE - BUSINESS CLASS - AFT RH	[***]
2529B657R29	MP - PASSENGER AND CABIN ATTENDANTS ACCOMODATIONS - REVISION - LONGITUDINAL CURTAIN TRACK TO BIN SUPPORT FITTINGS - IN-FLIGHT CREW REST ENCLOSURE- BUSINESS CLASS - RH AFT	[***]
2529C417A72	ATTENDANT WORKSTATION	[***]
2530B657H31	F1 GALLEY	[***]
2530B657H33	F2 GALLEY	[***]
2530B657H35	F3 GALLEY	[***]
2530B657H37	A1 GALLEY	[***]
2530B657H39	A2 GALLEY	[***]
2530B657H40	A3 GALLEY	[***]
2530B657H41	GALLEY PART NUMBERS - BFE/SPE	[***]
2530B657H42	GALLEY INSERT PART NUMBERS - BFE/SPE	[***]
2530B657J92	MP - BUFFETS/GALLEYS - REPLACEMENT - F3 GALLEY WITH INTEGRAL CHILLER IN LIEU OF F3 GALLEY WITHOUT INTEGRAL CHILLER - SPE	[***]
2530B657N79	MP - BUFFET/GALLEY - REVISION - F3 GALLEY - SPE	[***]
2530B657N82	MP - BUFFET/GALLEY - REVISION - ALTERNATE GALLEY CART PART NUMBER - F2 GALLEY - SPE	[***]
2530C485B69	MP - GALLEY - REVISION - OVEN PART NUMBER - SPE	[***]
2530C635A24	MP - GALLEY - REVISION - CHILLER - BE AEROSPACE - SPE	[***]
2530C826R54	MP - GALLEY - REVISION - WATER BOILER - B.E. AEROSPACE - SPE	[***]
2531B657H99	PARTIAL PROVISIONS FOR NON-STANDARD A4 GALLEY - SPE	[***]
2533A798A01	CHILLERS (6800 BTUH) - THREE - GALLEY  -  FORWARD AND AFT  -  BFE/SPE - P/N 267-100	[***]
2540B657H46	1F-1L LAVATORY	[***]
2540B657H54	4F-2LC LAVATORY	[***]
2540B657H56	4F-2RC LAVATORY	[***]
2540B657H60	1A-1L LAVATORY	[***]
2540B657J34	2F-9L LAVATORY	[***]
2540B657J36	2F-9R LAVATORY	[***]

2540B657K45	MP - LAVATORIES - REVISION - ADDITONAL MIRROR IN 2F-9L AND 2F-9R LAVATORIES	[***]
2540B657L09	MP - LAVATORY REVISION - BABY CARE TABLE	[***]
2540B657P32	MP - LAVATORY EQUIPMENT - REVISION - 1A-1L LAVATORY MIRROR	[***]
2550-000040	NO PROVISIONS FOR LOADING LONG LIGHTWEIGHT ITEMS - FORWARD CARGO COMPARTMENT	[***]
2552-000135	CARGO COMPARTMENTS - PARTIAL FLOOR	[***]
2552-000223	FABRIC STA 744 ENDWALL	[***]
2552A931A07	SLOPING SIDEWALL - CARGO COMPARTMENTS - .020 THICKNESS OVERALL  AND .030 THICKNESS AT CARGO DOORS - BMS 8-223	[***]
2553-000036	HARDWARE FOR STANDARD CONTAINERS IN THE AFT CARGO COMPARTMENT	[***]
2553-000042	NO SPOOL-TYPE LOADER INDEX FITTINGS - AFT CARGO COMPARTMENT	[***]
2553-000044	HARDWARE FOR CARRIAGE OF 88 X 125 AND 96 X 125 INCH PALLETS AND STANDARD CONTAINERS IN THE FORWARD CARGO COMPARTMENT	[***]
2553-000085	REMOTELY OPERATED CONTAINER ROLLOUT STOPS - AFT CARGO COMPARTMENT DOORWAY	[***]
2555-000022	STANDARD BULK CARGO AREA FLOOR	[***]
2555-000024	BULK CARGO DOOR PROTECTOR - NET	[***]
2560-000175	HALON FIRE EXTINGUISHER - FLIGHT DECK - WALTER KIDDE	[***]
2560-000200	PROTECTIVE BREATHING EQUIPMENT - FLIGHT DECK - SCOTT AVIATION - P/N 802300-14 - BFE/SPE	[***]
2560B800A79	CREW LIFE VESTS - FLIGHT DECK - AIR CRUISER - P/N D21344-101 - BFE/SPE	[***]
2561A931A10	FORWARD ESCAPE HATCH POSITION FOR ESCAPE STRAP	[***]
2562B657J43	OVERWATER EMERGENCY EQUIPMENT	[***]
2562C826P97	MP - OVERWATER SURVIVAL EQUIPMENT - REVISION - PORTABLE EMERGENCY LOCATOR TRANSMITTER (ELT) - SPE	[***]
2562C826R66	MP - OVERWATER SURVIVAL EQUIPMENT - REPLACEMENT - LIFE VEST - SPE	[***]
2564B657J49	DETACHABLE EMERGENCY EQUIPMENT - PASSENGER COMPARTMENT	[***]
2564B657K19	MP - DETACHABLE EMERGENCY EQUIPMENT - REVISION - PASSENGER COMPARTMENT - SPE	[***]
2564B657L23	MP - DETACHABLE EMERGENCY EQUIPMENT - REVISION - PASSENGER COMPARTMENT	[***]
2564B657M21	MP - DETACHABLE EMERGENCY EQUIPMENT - REVISION - PASSENGER COMPARTMENT	[***]
2564B657M45	MP - DETACHABLE EMERGENCY EQUIPMENT - NON-RECHARGEABLE FLASHLIGHT IN LIEU OF RECHARGEABLE FLASHLIGHT - SPE	[***]
2564B657N93	MP - DETACHABLE EMERGENCY EQUIPMENT - REVISION - PASSENGER COMPARTMENT - SPE	[***]
2564B657P30	MP - DETACHABLE EMERGENCY EQUIPMENT - REVISION - PASSENGER COMPARTMENT	[***]

2564C826A13	MP - DETACHABLE EMERGENCY EQUIPMENT - REVISION -  PORTABLE OXYGEN BOTTLE RELOCATION - PASSENGER COMPARTMENT	[***]
2566A649A46	ESCAPE SLIDE - DUAL LANE - TYPE III EXIT WITH VISUAL GUIDANCE	[***]
2566C522A04	MP - ESCAPE SLIDE - DUALLANE - TYPE 111 EXIT WITH VISUAL GUIDANCE	[***]
2610-000025	KIDDE FIRE DETECTION SYSTEM  -  GE CF6-80C2 ENGINES AND APU	[***]
2613B657G91	LAVATORY SMOKE DETECTORS  -  767	[***]
2618-000009	SINGLE LOOP DUCT LEAK DETECTION SYSTEM - 3 ZONE	[***]
2622-000004	FIRE BOTTLE COMMONALITY - CF6-80C2 ENGINES AND DUAL APU FIRE EXTINGUISHING SYSTEM	[***]
2732-000002	STALL WARNING COMPUTER SPEED TAPE ACTIVATION - DISPLAY MINIMUM MANEUVER SPEED ON TAKEOFF	[***]
2811-000021	EXTENDED RANGE (ER) FUEL TANK AND FUEL JETTISON SYSTEMS	[***]
2844-000005	FUEL MEASURING STICKS IN KILOGRAMS WITH CONVERSION TABLES IN KILOGRAMS	[***]
2911-000003	AC MOTOR-DRIVEN HYDRAULIC PUMPS  -  EATON (VICKERS) S270T201-7	[***]
2911-000038	ENGINE-DRIVEN HYDRAULIC PUMPS   -  VICKERS INC.   (60B00200-12)	[***]
3042-000003	WINDSHIELD WIPERS - TWO SPEED - SINGLE SWITCH	[***]
3080-000006	MANUAL ANTI-ICING SYSTEM - NO ICE DETECTION	[***]
3120-000011	ELECTRONIC CLOCKS - WITHOUT TENTHS OF MINUTE DISPLAY - MAIN INSTRUMENT PANEL	[***]
3131-000143	ACCELEROMETER  -  Honeywell  P/N 971-4193-001  -  BFE/SPE	[***]
3131-000187	DIGITAL FLIGHT DATA RECORDER - ALLIEDSIGNAL - 256 WORDS PER SECOND MAXIMUM DATA RATE - P/N 980-4700-042 BFE/SPE	[***]
3131A715A01	DIGITAL FLIGHT DATA ACQUISITION UNIT (DFDAU) WITH ACMS CAPABILITY AND INTERGRATED PCMCIA MEDIA INTERFACE-TELEDYNE CONTROLS-P/N 2233000-816-1 -BFE/SPE	[***]
3132-000095	AIRBORNE DATA LOADER/RECORDER - ARINC 615 - ALLIEDSIGNAL - 964-0401-006 - BFE/SPE	[***]
3132-000117	DATA LOADER SELECTOR SWITCH MODULE - 20 POSITION 3 WAY - SFE	[***]
3132A887A01	DUAL ARINC 615 DATA LOADER/RECORDER INTERFACE TO THE THREE WAY, TWENTY POSITION SYSTEM SELECTOR SWITCH - PORTABLE DATA LOADER/RECORDER CONNECTOR INSTALLATION IN P61 RIGHT SIDE PANEL - SFE	[***]
3133-000057	FULL FORMAT PRINTER - MILTOPE - ARINC 744 - P/N 706300-212 - BFE/SPE	[***]
3133-000125	ARINC 744 PRINTER PROVISIONS IN THE FLIGHT DECK AISLESTAND	[***]
3151-000042	FIREBELL AURAL WARNING - 1 SECOND ON, 9 SECONDS OFF	[***]

3151-000046	AUTOPILOT DISCONNECT - AURAL WARNING SIREN - AURAL WARNING AND MASTER WARNING LIGHT INHIBITED WHEN AUTOPILOT DISCONNECT SWITCH IS DOUBLE PRESSED QUICKLY	[***]
3151A065A47	RESETTABLE OVERSPEED AURAL WARNING - SIREN	[***]
3161-000135	HYDRAULIC PRESSURE ON EICAS STATUS PAGES	[***]
3161-000137	APU RPM ON EICAS STATUS PAGES	[***]
3161-000139	APU OIL QUANTITY LEVEL ON EICAS	[***]
3161-000141	ADDITIONAL ENVIRONMENTAL CONTROL SYSTEM (ECS) PARAMETERS - DISPLAY ON EICAS MAINTENANCE PAGE	[***]
3161-000144	GENERATOR OFF AND ENGINE OIL PRESSURE - EICAS ADVISORY LEVEL MESSAGES	[***]
3161-000147	ECS PRECOOLER OUTLET TEMPERATURE - (PW AND GE ENGINES) - DISPLAY ON EICAS	[***]
3161-000152	BULK CARGO COMPARTMENT TEMPERATURE - DISPLAY ON EICAS	[***]
3161-000154	RAM AIR OUTLET DOOR POSITION - DISPLAY ON EICAS	[***]
3161-000189	ENGINE FUEL FLOW - FULL TIME DISPLAY - LOWER EICAS DISPLAY	[***]
3162-000016	FLIGHT MODE ANNUNCIATION AT TOP OF ADI	[***]
3162-000021	AIRSPEED TAPE - ROLLING DIGITS AND TREND VECTOR - ADI	[***]
3162-000022	FLIGHT DIRECTOR COMMAND DISPLAY - SPLIT AXIS - ADI	[***]
3162-000026	DISPLAY OF ROUND DIAL AND DIGITAL RADIO ALTITUDE - ADI	[***]
3162-000030	RISING RUNWAY - DISPLAYED ON THE ADI	[***]
3162-000034	RADIO ALTITUDE HEIGHT ALERT DISPLAY - 2500 FEET - ADI	[***]
3162-000054	ILS DEVIATION WARNING - ADI	[***]
3162-000059	MAP MODE ORIENTATION - TRACK UP - NAVIGATION DISPLAY	[***]
3162-000066	TRUE AIRSPEED AND GROUND SPEED - NAVIGATION DISPLAY	[***]
3162-000070	WIND BEARING DIGITAL DISPLAY - NAVIGATION DISPLAY	[***]
3162-000081	ADF POINTER(S) - NAVIGATION DISPLAY	[***]
3221-000011	TORQUE ARM QUICK DISCONNECT  -  NOSE LANDING GEAR	[***]
3242A114B69	ANTISKID/AUTOBRAKE CONTROL UNIT (AACU) P/N 42-767-2 (S283T001-27)  - INSTALLATION	[***]
3245-000230	WHEELS AND TIRES - NOSE LANDING GEAR - WHEELS - ALLIEDSIGNAL - INSTALLATION WITH SFE 24 PR, 235 MPH TIRES	[***]
3245A298A12	BRAKES - CARBON - MESSIER-BUGATTI	[***]
3245A438A27	OPERATIONAL TIRE SPEED LIMITS - 235MPH	[***]
3245A438A28	WHEELS AND TIRES - MAIN LANDING GEAR - HIGH GROSS WEIGHT WHEELS - MESSIER-BUGATTI - INSTALLATION WITH SFE 32 PR, 235 MPH TIRES.	[***]
3246-000005	BRAKE TEMPERATURE MONITORING SYSTEM	[***]

3320B657N77	MP - PASSENGER COMPARTMENT - REVISION - OUTBOARD OVERHEAD CLOSEOUT PANEL AREA LIGHT - LH/RH STA 792 - STA 813-95	[***]
3324-000117	NO-SMOKING LIGHT ON - HARD WIRE	[***]
3324B657H92	OVER AISLE EXIT SIGNS - PASSENGER CABIN	[***]
3324B657K03	MP - INFORMATION SIGNS - REPLACEMENT - STANDARD OVER AISLE EXIT SIGNS - PASSENGER CABIN	[***]
3342-000009	TAXI LIGHTS  -  NOSE GEAR MOUNTED  -  SPACE PROVISIONS	[***]
3350A704A30	EMERGENCY ESCAPE PATH LIGHTING - SEAT/MONUMENT MOUNTED	[***]
3350B657K04	MP - EMERGENCY ESCAPE PATH LIGLHTLING - REVISION - FLOOR MOUNTED INLIEU OF SEAT/MONUMENT MOUNTED - PASSENGER CABIN	[***]
3413-000027	MACH/AIRSPEED INDICATOR - TWO KNOT GRADUATIONS BELOW 250 KNOTS	[***]
3421-000042	FAA MACH/AIRSPEED LIMITS AND OVERSPEED ALERTING	[***]
3423-000006	STANDBY MAGNETIC COMPASS COMPENSATION FOR ELECTRICAL CIRCUITS (+/- 5 DEGREES)	[***]
3430-000187	ILS/GPS MULTI-MODE RECEIVER (MMR) - ROCKWELL - P/N 822-1152-002 - BFE/SPE	[***]
3433-000032	RADIO ALTIMETER (RA)  -  ROCKWELL INTERNATIONAL CORP  -  P/N 822-0334-002  -  BFE/SPE	[***]
3443-000050	DUAL WEATHER RADAR CONTROL PANEL - ROCKWELL P/N 622-5130-114 - BFE/SPE	[***]
3443A065A34	DUAL WEATHER RADAR SYSTEM - WITH PREDICTIVE WINDSHEAR - ROCKWELL TRANSCEIVER P/N 622-5132-633 - BFE/SPE	[***]
3445A065A86	TCAS SYSTEM - ROCKWELL COLLINS TCAS COMPUTER P/N 822-1293-002 - TCAS CHANGE 7 COMPLIANT - BFE/SPE	[***]
3446-000045	STANDARD VOLUME FOR ALTITUDE CALLOUTS	[***]
3446-000048	ENHANCED GROUND PROXIMITY WARNING SYSTEM (EGPWS) - BANK ANGLE CALLOUT ENABLE	[***]
3446-000049	500 SMART CALLOUT INHIBITED	[***]
3446A065A49	EGPWS - PEAKS AND OBSTACLES FEATURES	[***]
3446B800D17	GROUND PROXIMITY WARNING SYSTEM - MODE 6 ALTITUDE CALLOUTS - 2500, 1000, 500, 400, 300, 200, 100, 50, 40, 30, 20, 10, MINIMUMS	[***]
3451-000022	VOR/MARKER BEACON - ROCKWELL RECEIVER P/N 822-0297-001 - BFE/SPE	[***]
3453B866A16	ATC SYSTEM - ROCKWELL COLLINS ATC TRANSPONDER P/N 822-1338-003 - ELS/EHS/ES AND TCAS CHANGE 7 COMPLIANT - GABLES CONTROL PANEL P/N G6992-12 - BFE/SPE	[***]
3455-000019	DISTANCE MEASURING EQUIPMENT (DME) - ROCKWELL INTERROGATOR P/N 822-0329-001 - BFE/SPE	[***]
3457-000219	AUTOMATIC DIRECTION FINDER (ADF) - DUAL SYSTEM - ROCKWELL ADF-900/700 SERIES - ADF RECEIVER P/N 822-0299-001 - ADF ANTENNA P/N 622-5404-003 - BFE/SPE	[***]

3457-000289	DUAL ADF CONTROL PANEL - BOEING - 285T0557-2 - WITHOUT BFO OR TONE SWITCH - SFE	[***]
3461A425A03	FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS) - OFFPATH DESCENT CIRCLES AND DISTANCE MEASURING EQUIPMENT RANGE RINGS DISPLAYED	[***]
3461A425A04	FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS) - SCANNING DME OPERATIONS - ENABLE	[***]
3461A425A05	FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS) - RUNWAY DISTANCE AND OFFSET POSITION SHIFT IN UNITS OF FEET	[***]
3461A425A10	FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS) - NAVIGATION DATABASE - CUSTOMER SUPPLIED	[***]
3461A425A12	FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS) - TAKEOFF DATA LINK - ENABLE	[***]
3461A425A13	FMCS - AIRLINE MODIFIABLE INFORMATION (AMI) - CUSTOMER SUPPLIED	[***]
3461A425A16	FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS) - AIR TRAFFIC SERVICES DATA LINK (ATS DL) - FANS FEATURE ACTIVATION	[***]
3461A425A17	FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS) - AIRLINE OPERATIONAL COMMUNICATIONS DATA LINK (AOC DL) - FANS FEATURE ACTIVATION	[***]
3461A425A18	FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS) - PRINTER INTERFACE - FANS FEATURE ACTIVATION	[***]
3511B899B48	CREW OXYGEN MASKS - AUTOMATIC PRESSURE BREATHING TYPE - CAPTAIN AND FIRST OFFICER - EROS - BFE/SPE	[***]
3511B899B49	CREW OXYGEN MASKS - AUTOMATIC PRESSURE BREATHING TYPE - FIRST OBSERVER - EROS - BFE/SPE	[***]
3511B899B50	CREW OXYGEN MASKS - AUTOMATIC PRESSURE BREATHING TYPE - SECOND OBSERVER - EROS/SCOTT AVIATION - BFE/SPE	[***]
3611-000005	HAMILTON STANDARD  -  INTERMEDIATE PRESSURE (IP) CHECK VALVES - GE\P&W ENGINES	[***]
3811-000022	POTABLE WATER - SERVICEABLE TO 149 GALLONS	[***]
3831-000008	WASTE TANK CAPACITY  -  116 GALLONS	[***]
3832-000031	VACUUM WASTE SYSTEM  -  ENVIROVAC TOILET ASSEMBLIES	[***]
3910B800A77	CONTROL PANEL ARRANGEMENT - P8 AISLE STAND - FLIGHT DECK - LAN	[***]
4970-000046	APU CYCLEMETER   -  AFT ELECTRONIC EQUIPMENT (E/E) COMPARTMENT	[***]
4970-000047	APU HOURMETER  -  AFT ELECTRONIC EQUIPMENT (E/E) COMPARTMENT	[***]
5210-000024	TYPE A  - III - III - A DOOR ARRANGEMENT	[***]
5300B657K48	MP - INSTALLATION OF SEAT TRACKS - BL 45.5 LEFT AND RIGHT - STA 389 TO STA 721.805	[***]
7200-000382	STANDARD FAN SPINNER - GE ENGINES	[***]
7200-000412	GE PROPULSION SYSTEM	[***]

7200A114C89	GENERAL ELECTRIC ENGINES - CF6-80C2-B6F - B6F RATING - WITH FADEC	[***]
7830-000012	MANUAL OPENING OF THRUST REVERSER ASSEMBLIES - GE CF6-80C2 ENGINES	[***]
7900-000117	LUBRICATING OIL - BP TURBO OIL 2380	[***]
8011-000006	HAMILTON STANDARD STARTERS AND STARTER VALVES  -  GE ENGINES	[***]
MISC	INTERIOR ALLOWANCE	[***]
MISC/FAA5	FIRE PENETRATION - BURNTHROUGH, FAR 25.865 (b)	[***]
OPTIONS: 299	[***]	[***]

ENGINE ESCALATION,

ENGINE WARRANTY AND PATENT INDEMNITY

between

THE BOEING COMPANY

and

LAN AIRLINES S.A

Supplemental Exhibit EE1 to Purchase Agreement Number 2126

ENGINE ESCALATION,

ENGINE WARRANTY AND PATENT INDEMNITY

relating to

BOEING MODEL 767-316ER and BOEING MODEL 767-316F AIRCRAFT

1.            [***] ENGINE ESCALATION.

(a)           The Aircraft Basic Price of each Aircraft set forth in Table 13 of the Purchase Agreement includes an aggregate price for engines and all accessories, equipment and parts provided by General Electric Aircraft Engines (GE).  The adjustment in Engine Price applicable to each Aircraft (Engine Price Adjustment) will be determined at the time of Aircraft delivery in accordance with the following formula:

 Pe = [(Pb + F)  x ( CPI / CPIb)] - Pb

where CPIb is the engine escalation base year index of 133.190 as set forth in Table 13 of the Purchase Agreement .

(b)   The following definitions will apply herein:

 Pe =           Engine Price Adjustment

Pb  =  Engine Price (per Aircraft), as set forth in Table 13 of the Purchase Agreement.

F=  0.005 x (N/12) x Pb where N is the number of calendar months which have elapsed from the Engine Price base year and month up to and including the month of delivery, both as shown in Table 13 of the Purchase Agreement.

 CPI =        L + ICI  (rounded to the nearest hundredth)

L  = A value determined using the U.S. Department of Labor, Bureau of Labor Statistics "Employment Cost Index Wages and Salaries for Aircraft Manufacturing (BLS series ID ciu2023211000000i)”, base 100 = December 2005, calculated as a 3-month arithmetic average of the released values (expressed as a decimal and rounded to the nearest tenth) using the values for the 12th, 13th, and 14th months prior to the month of scheduled Aircraft delivery, then multiplied by sixty-five percent (65%) (rounded to the nearest thousandth).

ICI  = A value determined using the U.S. Department of Labor, Bureau of Labor Statistics "Producer Prices and Price Index - Industrial Commodities Index (BLS series ID wpu03thru15)", base 100 = Calendar year 1982, calculated as a 3 month arithmetic average of the released monthly values (expressed as a decimal and rounded to the nearest hundredth) using the values for the 12th, 13th and 14th months prior to the month of scheduled Aircraft delivery, then multiplied by thirty-five percent (35%) (rounded to the nearest thousandth).

The Engine Price Adjustment will not be made if it would result in a decrease in the Engine Price.

(c)           The values of the Employment Cost Index Wages & Salaries and Producer Prices and Price Index - Industrial Commodities Index used will be those published as of a date thirty (30) days prior to the first day of the scheduled Aircraft delivery month to Customer.  As the Employment Cost Index values are only released on a quarterly basis, the value released for the first quarter will be used for the months of January, February and March; the value released for the second quarter will be used for the months of April, May and June; the value released for the third quarter will be used for the months of July, August and September; the value released for the fourth quarter will be used for the months of October, November and December.  Such values will be considered final and no Engine Price Adjustment will be made after Aircraft delivery for any subsequent changes in published index values.  If no values have been released for an applicable month, the provisions set forth in paragraph 1(e), below, will apply.  If prior to delivery of an Aircraft, the U.S. Department of Labor, Bureau of Labor Statistics changes the base year for determination of the L or ICI values as defined above, such rebase values will be incorporated in the Engine Price Adjustment calculation.

(d)           If at the time of delivery of an Aircraft, Boeing is unable to determine the Engine Price Adjustment because the applicable values to be used to determine L and ICI have not been released by the U.S. Department of Labor, Bureau of Labor Statistics; then, in the event the Engine Price escalation provisions are made non enforceable or otherwise rendered null and void by any agency of the United States Government, GE agrees to meet jointly with Boeing and Customer (to the extent such parties may lawfully do so) to adjust equitably  the Aircraft Basic Price of any affected Aircraft to reflect an allowance for increase or decrease in labor compensation and material costs occurring since February of the base price year which is consistent with the application provisions of this Supplemental Exhibit EE1.

(e)           If prior to delivery of an Aircraft, the U.S. Department of Labor, Bureau of Labor Statistics substantially revises the methodology used for the determination of the values to be used to determine the L and ICI values (in contrast to benchmark adjustments or other corrections of previously released values), Customer, Boeing and GE will, prior to delivery of such Aircraft, select a substitute for such values from data published by the U.S. Department of Labor, Bureau of Labor Statistics or other similar data reported by non-governmental United States organizations, such substitute to lead in application to the same adjustment result insofar as possible, as would have been achieved by continuing the use of the original values as they may have fluctuated during the applicable time period.  Appropriate revisions of the formula will be made as required to reflect any substitute values.  However, if within twenty-four (24) months from delivery of the Aircraft, the U.S. Department of Labor, Bureau of Labor Statistics should resume releasing values for the months needed to determine the Engine Price Adjustment, such values will be used to determine the increase or decrease in the Engine Price Adjustment determined at the time of delivery of such Aircraft.

NOTE: The factor (CPI divided by the base year index) by which the Engine Price is to be multiplied will be expressed as a decimal and rounded to the nearest thousandth.  Any rounding of a number, as required under this Supplemental Exhibit EE1 with respect to escalation of the Engine Price, will be accomplished as follows:  if the first digit of the portion to be dropped from the number to be rounded is five or greater, the preceding digit will be raised to the next higher number.

2.           ENGINE WARRANTY AND PRODUCT SUPPORT PLAN.

Boeing has obtained from GE the right to extend to Customer the provisions of GE's warranty and product support plan (Warranty and Product Support Plan); subject, however, to Customer's acceptance of the conditions set forth herein and in such Warranty and Product Support Plan.  Accordingly, Boeing hereby extends to Customer and Customer hereby accepts the provisions of GE's Warranty and Product Support Plan, and such Warranty and Product Support Plan shall apply to allCF6 turbofan engines including all Modules and Parts thereof, as these terms are defined in the Warranty and Product Support Plan, (Engines) installed in the Aircraft at the time of delivery or purchased from Boeing by Customer for support of the Aircraft except that, if Customer and GE have executed a general terms agreement (Engine GTA), then the terms of the Engine GTA shall be substituted for and supersede the below-stated provisions and such provisions shall be of no force or effect and neither Boeing nor GE shall have any obligation arising therefrom.  In consideration for Boeing's extension of the GE Warranty and Product Support Plan to Customer, Customer hereby releases and discharges Boeing from any and all claims, obligations and liabilities whatsoever arising out of the purchase or use of the Engines and Customer hereby waives, releases and renounces all its rights in all such claims, obligations and liabilities.

The Warranty and Product Support Plan is set forth in Exhibit C to the applicable purchase contract between GE and Boeing.  Copies of the Warranty and Product Support Plan shall be provided to Customer by Boeing upon request.

ESCALATION ADJUSTMENT

AIRFRAME AND OPTIONAL FEATURES

between

THE BOEING COMPANY

and

LAN AIRLINES S.A

Supplemental Exhibit AE1 [***] to Purchase Agreement Number 2126

1.           [***].

Airframe and Optional Features price adjustments (Airframe Price Adjustment) are used to allow prices to be stated in current year dollars at the signing of this Purchase Agreement and to adjust the amount to be paid by Customer at delivery for the effects of economic fluctuation.  The Airframe Price Adjustment will be determined at the time of Aircraft delivery in accordance with the following formula:

Pa = (P) (L + M) - P

Where:

Pa=   Airframe Price Adjustment.

  P = Airframe Price plus the price of the Optional Features (as set forth in Table 13 of this Purchase Agreement).

L =           .65 x (ECI

            ECIb)

Where:

ECIb is the base year airframe escalation index (computed as the three month arithmetic average value of 106.8 for June, July and August [***] as set forth in Table 13 of this Purchase Agreement);

ECI is a value determined using the U.S. Department of Labor, Bureau of Labor Statistics, Employment Cost Index for NAICS Manufacturing – Total Compensation (BLS Series ID CIU2013000000000I), calculated by establishing a three-month arithmetic average value (expressed as a decimal and rounded to the nearest tenth) using the values for the 11th, 12th, and 13th months prior to the month of scheduled delivery of the applicable Aircraft.  As the Employment Cost Index values are only released on a quarterly basis, the value released for the first quarter will be used for the months of January, February, and March; the value released for the second quarter will be used for the months of April, May, and June; the value released for the third quarter will be used for the months of July, August, and September; the value released for the fourth quarter will be used for the months of October, November, and December.

M =           .35 x (CPI 

             CPIb )

Where:

CPIb is the base year airframe escalation index (computed as the three month arithmetic average value of 215.6 for June, July and August of 2009 as set forth in Table 13 of this Purchase Agreement); and

CPI is a value determined using the U.S. Department of Labor, Bureau of Labor Statistics, Consumer Price Index – All Urban Consumers (BLS Series ID CUUR0000SA0), calculated as a three (3) month arithmetic average of the released monthly values (expressed as a decimal and rounded to the nearest tenth) using the values for the 11th, 12th, and 13th months prior to the month of scheduled delivery of the applicable Aircraft.

As an example, for an Aircraft scheduled to be delivered in the month of July, the months of June, July, and August of the preceding year will be utilized in determining the value of ECI and CPI.

Note: i. In determining the values of L and M, all calculations and resulting values will be expressed as a decimal rounded to the nearest ten-thousandth.

ii. .65 is the numeric ratio attributed to labor in the Airframe Price Adjustment formula.

iii. .35 is the numeric ratio attributed to materials in the Airframe Price Adjustment formula.

iv. The denominators (base year indices) are the actual average values reported by the U.S. Department of Labor, Bureau of Labor Statistics.  The actual average values are calculated as a 3-month arithmetic average of the released monthly values (expressed as a decimal and rounded to the nearest tenth) using the values for the [***].  The applicable base year and corresponding denominator is provided by Boeing in Table 13 of this Purchase Agreement.

v. The final value of Pa will be rounded to the nearest dollar.

vi. The Airframe Price Adjustment will not be made if it will result in a decrease in the Aircraft Basic Price.

2.           Values to be Utilized in the Event of Unavailability.

2.1           If the Bureau of Labor Statistics substantially revises the methodology used for the determination of the values to be used to determine the ECI and CPI values (in contrast to benchmark adjustments or other corrections of previously released values), or for any reason has not released values needed to determine the applicable Airframe Price Adjustment, the parties will, prior to the delivery of any such Aircraft, select a substitute from other Bureau of Labor Statistics data or similar data reported by non-governmental organizations.  Such substitute will result in the same adjustment, insofar as possible, as would have been calculated utilizing the original values adjusted for fluctuation during the applicable time period.  However, if within 24 months after delivery of the Aircraft, the Bureau of Labor Statistics should resume releasing values for the months needed to determine the Airframe Price Adjustment, such values will be used to determine any increase or decrease in the Airframe Price Adjustment for the Aircraft from that determined at the time of delivery of the Aircraft.

2.2           Notwithstanding Article 2.1 above, if prior to the scheduled delivery month of an Aircraft the Bureau of Labor Statistics changes the base year for determination of the ECI and CPI values as defined above, such re-based values will be incorporated in the Airframe Price Adjustment calculation.

2.3           In the event escalation provisions are made non-enforceable or otherwise rendered void by any agency of the United States Government, the parties agree, to the extent they may lawfully do so, to equitably adjust the Aircraft Price of any affected Aircraft to reflect an allowance for increases or decreases consistent with the applicable provisions of paragraph 1 of this Supplemental Exhibit AE1 in labor compensation and material costs occurring since August of the year prior to the price base year shown in the Purchase Agreement.

2.4           If within twelve (12) months of Aircraft delivery, the published index values are revised due to an acknowledged error by the Bureau of Labor Statistics, the Airframe Price Adjustment will be re-calculated using the revised index values (this does not include those values noted as preliminary by the Bureau of Labor Statistics).  A credit memorandum or supplemental invoice will be issued for the Airframe Price Adjustment difference. Interest charges will not apply for the period of original invoice to issuance of credit memorandum or supplemental invoice.

Note: i. The values released by the Bureau of Labor Statistics and available to Boeing 30 days prior to the first day of the scheduled delivery month of an Aircraft will be used to determine the ECI and CPI values for the applicable months (including those noted as preliminary by the Bureau of Labor Statistics) to calculate the Airframe Price Adjustment for the Aircraft invoice at the time of delivery.  The values will be considered final and no Airframe Price Adjustments will be made after Aircraft delivery for any subsequent changes in published Index values, subject always to Paragraph 2.4 above.

ii. The maximum number of digits to the right of the decimal after rounding utilized in any part of the Airframe Price Adjustment equation will be 4, where rounding of the fourth digit will be increased to the next highest digit when the 5th digit is equal to 5 or greater.

6-1162-ILK-0450

LAN Airlines S.A.

Avenida Presidente Riesco 5711

Piso 19

Las Condes

Santiago, Chile

Subject: Special Matters Letter Applicable to the 2012 Accelerated Aircraft

Reference: Purchase Agreement No. 2126 (the Purchase Agreement) between The Boeing Company (Boeing) and LAN Airlines S.A. (Customer) relating to Model 767-316F, Model 767-38EF and Model 767-316ER aircraft (hereinafter referred to as "Aircraft")

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement.  All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement.

13. Definitions.

1.11           “STE” when used specifically in relation to any credit memorandum contained in this letter agreement shall mean that the relevant credit memorandum shall be escalated to the month of delivery in the same manner as the Airframe Price in accordance with the escalation formula reflected in Supplemental Exhibit AE1 2010$ to the Purchase Agreement entitled “Escalation adjustment - airframe and optional features”.

1.12           “Limitations on Use” when used in relation to any credit memorandum contained in this letter agreement shall mean that the applicable credit memorandum may be used for the purchase of Boeing goods and services or applied to the final delivery payment for the Aircraft for which the credit was issued, but that the relevant credit memorandum shall be prohibited from use for satisfaction of any Advance Payment obligation.

1.13           “2012 Accelerated Aircraft” shall mean each or all three, as the case may be, of the three Substitute 767 Freighter Aircraft (as previously defined in Article 1 of Supplemental Agreement No. 28 to the Purchase Agreement) scheduled for delivery during the second and fourth quarters of 2013 and the first quarter of 2014, which contingent upon satisfaction of the terms of this letter agreement, are substituted to Boeing Model 767-316ER Aircraft scheduled for delivery in June, July and October of 2012, respectively.

1.14           “Initial Payment” [***].

1.15           “Table 13” shall mean the table entitled “Aircraft Information Table 767-316ER Aircraft [***]”.

14. Export License.

Customer understands and confirms that it is Customer’s responsibility to obtain any required Export License from the relevant U.S. authority.  Without accepting any liability for any failure to do so, Boeing will use reasonable endeavors to alert Customer to any regulatory changes of which Boeing becomes aware and which require Customer to obtain such Export License.

15. Warranty Modification.

[***]

16.  Credit Memoranda for the 2012 Accelerated Aircraft.

Subject to Customer’s adherence to the Limitations on Use, Boeing will provide the Customer with a credit memorandum concurrently with the delivery of each Aircraft, in description and amount which is identified in the credit memoranda table 4.1 for each of the 2012 Accelerated Aircraft:

Table 4.1 Credit Memoranda Table Exclusive to the 2012 Accelerated Aircraft

[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]

17. [***]

18. Assignment.

Any assignment by Customer of any benefits, entitlements, or services described in this Letter Agreement requires Boeing's prior written consent.  Further, Customer will not reveal to any third party the amount of the credit memoranda provided to Customer by Boeing without Boeing’s prior written consent and subject to such circumstances as Boeing may reasonably require.

Boeing will not unreasonably withhold consent to Customer’s request to assign, as security, rights in the Purchase Agreement if done for purposes of obtaining financing or for such other purpose consistent with fulfilling its obligations under the Purchase Agreement.  Boeing’s consent will be conditioned on all parties accepting Boeing’s customary conditions for consenting to an assignment, including, but not limited to, the following: assignor and assignee indemnification of Boeing for any actions taken by an assignee under any assignment agreement; Boeing’s right to exercise the manufacturer’s option to assume Customer’s rights under the Purchase Agreement in the event of a default under an assignment agreement; and confidentiality.  A Party that is

i.  bound by a customary confidentiality agreement;

ii.  neither an airplane manufacturer nor an airline;  and

iii. responding to a Customer request for proposals to provide financing of Aircraft pursuant to the Purchase Agreement, including pre-delivery payment financing

[***]

Boeing will consent to any reasonable request by Customer to assign the Purchase Agreement to an affiliate provided that Boeing is provided with an adequate  guarantee of performance of all obligations under this Purchase Agreement and in a form reasonably satisfactory to Boeing.

Customer understands that Boeing is not required under any circumstances to consent to an assignment that would constitute a novation.

The foregoing provisions are intended to supplement, and not to supersede, the assignment provisions of the AGTA, which address delivery date and post-delivery assignments, merger-type assignments, and other matters.

19.  16G Seat Requirement Credit Memorandum.

In the event that Customer notifies Boeing of a selection of record option 2525C826G85 (for Boeing certification of the business class, economy class and attendant seats to Federal Aviation Administration (FAA) Regulation Information Number 2120-AC84 entitled “Improved Seats in Air Carrier Transport Category Airplanes” (the 16G Requirement) in lieu of existing 9G capability) (such record option, including successor record options which supersede the identified record option, are herein referred to as the 16G Record Option), then Boeing will provide the Customer, concurrently with the delivery of each Aircraft, a credit memorandum equal to the cost of the 16G Record Option.  The parties shall document the effect of Customer’s notification that it has selected the 16G Record Option through appropriate Purchase Agreement documentation. The parties agree that Customer’s selection of the 16G Record Option is due by the dates identified below:

Scheduled Delivery Month	Due Date for Customer Notification of 16G Record Option
June 2012	1st of November of 2010
July 2012	1st of November of 2011
October  2012	1st of February of 2011

20. [***]

21. Confidentiality.

Boeing and Customer understand that the commercial and financial information contained in this Letter Agreement is considered by the parties as confidential (Confidential Information) and both agree not to disclose such Confidential Information except as provided herein.  In addition to the parties’ respective officers, directors and employees who need to know the Confidential Information and who understand the obligation to keep it confidential, the parties may disclose Confidential Information (1) to the extent required by law and (2) to its agents, auditors and advisors who need to know the Confidential Information for purposes of enabling each party to understand, perform its obligations under, or receive the benefits of, this Letter Agreement and who have agreed not to use or disclose the Confidential Information for any other purpose without the other party’s prior written consent.  In the event that a party concludes that disclosure of Confidential Information contained in this Letter Agreement is required by applicable law, the party will so advise the other party promptly in writing and endeavor to protect the confidentiality of such Confidential Information to the widest extent possible.  In the event of a legal dispute with Boeing, nothing herein will preclude Customer from sharing with its legal counsel information necessary for purposes of enabling counsel to advise or represent Customer provided that so long as Customer causes its legal counsel to maintain the confidentiality of information that is the subject of this Article.  Except as provided in the assignment provisions of Article 7 of Letter Agreement 6-1162-KSW-6423 entitled “Special Matters Applicable to the Incremental Aircraft”; Article 21 of Letter Agreement 6-1162-LAJ-0895R6 entitled “Business Considerations”; Article 8 of Letter Agreement 6-1162-ILK-0381R3 entitled “Special Matters Letter Applicable to the 2011 Accelerated Aircraft”; Article 9 of Letter Agreement 6-1162-ILK-0412 entitled “Special Matters Relating to Three Aircraft Originally Scheduled to Deliver in 2009” and Article 6 herein, Customer will not disclose this Letter Agreement for purposes of financing payments without the prior written consent of Boeing, which consent will be provided once the financier enters into a Non Disclosure Agreement with Boeing in form and substance reasonably satisfactory to Boeing, which will include agreeing not to disclose or use Confidential Information except for the purpose set forth herein. This provision shall not apply to any Confidential Information that is in the public domain except that a party will be liable to the other for breach of its obligations under this provision if the Confidential Information entered the public domain as a consequence of a wrongful act or omission on its part.

The Purchase Agreement shall be deemed amended to the extent herein provided and as amended shall continue in full force and effect.

Very truly yours,
THE BOEING COMPANY
By:
Irma L. Krueger
Its:	Attorney-In-Fact

If the foregoing correctly sets forth your understanding of our agreement with respect to the matters treated herein, please indicate your acceptance, agreement and approval.

ACCEPTED AND AGREED TO this day of November of 2010.

LAN AIRLINES S.A.
By:
Mr. Roberto Alvo
Its:	Sr. Vice President Strategic Planning
	& Corporate Development
By:
Mr. Alejandro de la Fuente Goic
Its:	Chief Financial Officer

 

EX-4.4X1

Exhibit 4.4.1

Supplemental Agreement No. 2

to

Purchase Agreement No. 3194

between

The Boeing Company

and

LAN AIRLINES S.A.

Relating to Boeing Model 777-FREIGHTER Aircraft

THIS SUPPLEMENTAL AGREEMENT, entered into as of the ___ day of November of 2010, by and between THE BOEING COMPANY, a Delaware corporation with offices in Seattle, Washington, (hereinafter called “Boeing”) and LAN AIRLINES S.A., a Chilean corporation (hereinafter called “Customer”).

WITNESSETH:

WHEREAS, Boeing and Customer entered into Purchase Agreement No. 3194 dated as of the 3rd day of July of 2007 relating to Boeing Model 777-FREIGHTER aircraft (Aircraft) which agreement, including all tables, exhibits, supplemental exhibits and specifications thereto, together with all letter agreements then or thereafter entered into that by their terms constitute part of such purchase agreement and as such purchase agreement may be amended or supplemented from time to time, is hereinafter called the "Purchase Agreement;"

WHEREAS, Customer has exercised its September 2015 Option Aircraft and Boeing has agreed to accelerated the delivery month to October 2012; and

WHEREAS, Boeing and Customer have mutually agreed to amend the Purchase Agreement to incorporate the effect of this and certain other changes.

AGREEMENT:

NOW THEREFORE, and in consideration of the mutual covenants herein contained, the parties agree to amend the Purchase Agreement as follows:

1. Customer has exercised the Option Aircraft delivering in September 2015 and the delivery date has been accelerated to the month of October 2012.  This exercised Option Aircraft will have serial number 41518 and is hereafter designated the “Table 2 Aircraft”.

2. Revision of Table of Contents and Aircraft Information Table to the Purchase Agreement:

2.1. Table of Contents.  The Table of Contents of the Purchase Agreement is deleted in its entirety and is replaced by a new Table of Contents attached hereto and identified with an SA-2 legend.

2.2. Table 2, “Aircraft Delivery, Description, Price and Advance Payments” to Purchase Agreement No. 3194, (Table 2), attached hereto, is added to the Purchase Agreement and provides the aircraft delivery, description, price and advance payments for the Table 2 Aircraft.

3. Exhibit A, “777-Freighter Aircraft Configuration”.  The initial configuration for the Table 2 Aircraft will be based on Boeing Configuration Specification DO19W007 Rev D dated February 19, 2010.  The final configuration will be a follow-on configuration to that of the September 2012 firm Aircraft.

4. Revision of Supplemental Exhibits.

4.1. Exhibit AE2 “Escalation Adjustment Airframe and Optional Features”, attached hereto, provides the escalation formula for the Table 2 Aircraft.

4.2. Exhibit BFE1, “Buyer Furnished Equipment Variables” is deleted in its entirety and replaced by a new Exhibit BEF1, attached hereto and identified with a SA-2 legend.

5. Revision to Letter Agreements.

5.1.           Letter Agreement 6-1162-ILK-0270R1 “Special Matters” is deleted in its entirety and replaced by Letter Agreement 6-1162-ILK-0270R2, attached hereto.

[***]

5.4.           The Attachment to Letter Agreement 6-1162-KSW-6454R1 is revised to show the Option for the Option Aircraft delivering in September 2015 as exercised.  The revised Attachment identified with an SA-2 legend is attached hereto.

5.5.           Letter Agreement LA-1002327 “Performance Guarantees for Table 2 Aircraft”, attached hereto, provides the performance guarantees for the Table 2 Aircraft.

6.           Amount Due At Signing.   To effect the implementation of this SA-2, payment of [***].

7.           Confidentiality.   Boeing and Customer understand that the commercial and financial information contained in this Purchase Agreement is considered by the parties as confidential (Confidential Information) and both agree not to disclose such Confidential Information except as provided herein.  In addition to the parties’ respective officers, directors and employees who need to know the Confidential Information and who understand the obligation to keep it confidential, the parties may disclose Confidential Information (1) to the extent required by law and (2) to its agents, auditors and advisors who need to know the Confidential Information for purposes of enabling each party to understand, perform its obligations under, or receive the benefits of, this Purchase Agreement and who have agreed not to use or disclose the Confidential Information for any other purpose without the other party’s prior written consent.  In the event that a party concludes that disclosure of Confidential Information contained in this Purchase Agreement is required by applicable law, the party will so advise the other party promptly in writing and endeavor to protect the confidentiality of such Confidential Information to the widest extent possible.  In the event of a legal dispute with Boeing, nothing herein will preclude Customer from sharing with its legal counsel information necessary for purposes of enabling counsel to advise or represent Customer provided that so long as Customer causes its legal counsel to maintain the confidentiality of information that is the subject of this Article.  Except as provided in the assignment provisions of Article 8 of the Special Matters Letter, Customer will not disclose this Purchase Agreement for purposes of financing payments without the prior written consent of Boeing, which consent will be provided once the financier enters into a Non Disclosure Agreement with Boeing in form and substance reasonably satisfactory to Boeing, which will include agreeing not to disclose or use Confidential Information except for the purpose set forth herein. This provision shall not apply to any Confidential Information that is in the public domain except that a party will be liable to the other for breach of its obligations under this provision if the Confidential Information entered the public domain as a consequence of a wrongful act or omission on its part.

The rest of this page is intentionally left blank.

The Purchase Agreement shall be deemed amended to the extent herein provided and as amended shall continue in full force and effect.

EXECUTED IN DUPLICATE as of the day and year first above written.

THE BOEING COMPANY		LAN AIRLINES S.A.
By:		By:
	Ms. Irma L. Krueger		Mr. Roberto Alvo
Its	Attorney-In-Fact	Its:	Sr Vice President Strategic Planning &
			Corporate Development
		By:
			Mr. Alejandro de la Fuente Goic
		Its:	Chief Financial Officer

Airframe Model/MTOW:	777-Freighter	750000 pounds	Detail Specification:	D019W007-Rev D (2/19/2010)
Engine Model/Thrust:	GE90-110B1L	110100 pounds	Airframe Price Base Year/Escalation Formula:	Jul-10           ECI-MFG/CPI
Airframe Price:		[***]	Engine Price Base Year/Escalation Formula:	N/A              N/A
Optional Features:		[***]
Sub-Total of Airframe and Features:		[***]	Airframe Escalation Data:
Engine Price (Per Aircraft):		[***]	Base Year Index (ECI):	106.8
Aircraft Basic Price (Excluding BFE/SPE):		[***]	Base Year Index (CPI):	215.6
Buyer Furnished Equipment (BFE) Estimate:		[***]
Seller Purchased Equipment (SPE) Estimate:		[***]
Transferred Option Deposit		[***]

		Escalation
Delivery	Number of	Factor		Manufacturer		[***]
Date	Aircraft	(Airframe)	Aircraft Block	Serial Number	[***]	[***]	[***]	[***]	[***]
Oct-2012	1	1.0455	TBD	41518	[***]	[***]	[***]	[***]	[***]
Total:	1

PURCHASE AGREEMENT NUMBER 3194

between

THE BOEING COMPANY

and

LAN AIRLINES S.A.

Relating to Boeing Model 777-Freighter Aircraft

TABLE OF CONTENTS

Page Number		ARTICLES	SA  NUMBER
	1.	Quantity, Model and Description
	2.	Delivery Schedule
	3.	Price
	4.	Payment
	5.	Miscellaneous
		TABLE
	1	777-FREIGHTER Aircraft Information Table
5	2	777-FREIGHTER Aircraft Information Table	SA-2
		EXHIBIT
2	A.	777-FREIGHTER Aircraft Configuration	SA-2, Art 3.
	B.	Aircraft Delivery Requirements & Responsibilities
		SUPPLEMENTAL EXHIBITS
	AE1	Escalation Adjustment/Airframe & Optional Features
9	AE2	Escalation Adjustment/Airframe & Optional Features	SA-2
13	BFE1	Buyer Furnished Equipment Variables	SA-2
	CS1	Customer Support Document
	EE1	Engine Escalation And Engine Warranty
	SLP1	Service Life Policy Components
		LETTER AGREEMENTS
	3194-01	777 Spare Parts Initial Provisioning
	3194-02	Open Configuration Matters
	3194-03	Seller Purchased Equipment
		RESTRICTED LETTER AGREEMENTS
16	6-1162-ILK-0270R2	Special Matters	SA-2
	6-1162-ILK-0271	AGTA Terms Revisions
2	[***]	[***]	[***]
	6-1162-ILK-0273	EULA Special Matters
	6-1162-ILK-0274	Performance Guarantees
	[***]	[***]
Page Number		ARTICLES	SA NUMBER
		RESTRICTED LETTER AGREEMENTS, continued
[***]	[***]	[***]	[***]
	6-1162-ILK-0276	Special Matters Relating to Advance Payments Requirements
22	6-1162-KSW-6454R1	Option Aircraft	SA-2
23	LA-1002327	Aircraft Performance Guarantees for Table 2 Aircraft	SA-2

BUYER FURNISHED EQUIPMENT VARIABLES

between

THE BOEING COMPANY

and

LAN AIRLINES S.A.

Supplemental Exhibit BFE1 to Purchase Agreement Number 3194

BUYER FURNISHED EQUIPMENT VARIABLES

relating to

BOEING MODEL  AIRCRAFT

This Supplemental Exhibit BFE1 contains vendor selection dates, on-dock dates and other variables applicable to the Aircraft.

1. Supplier Selection.   Customer will:

1.1                 Select and notify Boeing of the suppliers and part numbers of the following BFE items by the following dates:

Avionics September 1, 2011

2. On-dock Dates

Boeing will provide to Customer a BFE Requirements On-Dock/Inventory Document (BFE Document) or an electronically transmitted BFE Report which may be periodically revised, setting forth the items, quantities, on-dock dates and shipping instructions relating to the in-sequence installation of BFE.  For planning purposes, a preliminary BFE on-dock schedule is set forth as related in Attachment 1 to this Supplemental Exhibit BFE1 to Purchase Agreement Number 3194.

3. Additional Delivery Requirements

Customer will insure that Customer’s BFE suppliers provide sufficient information to enable Boeing, when acting as Importer of Record for Customer’s BFE, to comply with all applicable provisions of the U.S. Customs Service.

Attachment 1 to Supplemental Exhibit BFE1 to Purchase Agreement Number 3194.

Item	Preliminary On-Dock Dates
as noted
	Sep-2012	Oct-2012
	Aircraft	Aircraft
Avionics	Apr 2012	May 2012

6-1162-ILK-0270R2

LAN Airlines S.A.

Avenida Presidente Riesco 5711

Piso 19

Las Condes

Santiago, Chile

Subject: Special Matters

Reference: Purchase Agreement No. 3194 (the Purchase Agreement) between The Boeing Company (Boeing) and LAN Airlines S.A. (Customer) relating to Boeing Model 777-FREIGHTER aircraft

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement.  All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement.

Definitions.

“STE” when used specifically in relation to any credit memorandum contained in this letter agreement shall mean that the relevant credit memorandum shall be escalated to the month of delivery in the same manner as the Airframe Price.

“Limitations on Use” when used in relation to any credit memorandum contained in this letter agreement shall mean that the applicable credit memorandum may be used for the purchase of Boeing goods and services or applied to the final delivery payment for the Aircraft for which the credit was issued, but that the relevant credit memorandum shall be prohibited from use for satisfaction of any Advance Payment obligation.

“Table 1 Aircraft” shall mean the new Boeing Model 777-FREIGHTER Aircraft incorporated in the table entitled “Aircraft Information Table 1 to the Purchase Agreement” as of the date of this Letter Agreement contingent upon Customer’s satisfaction of the conditions of Article [INSERT PAGE NUMBER] herein which are applicable to the Cancelled Aircraft.

1. [***]

2. STE Credit Memoranda for the Table 1 and Table 2 Aircraft.

2.1              Subject to Customer’s adherence to the Limitations on Use, Boeing will provide the Customer with a credit memorandum concurrently with the delivery of each Table 1 and Table 2 Aircraft in description and amount which is identified in the following credit memoranda table:

[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]

2.2              FIXED Amount Credit Memoranda for the Table 1 and Table 2 Aircraft.

Subject to Customer’s adherence to the Limitations on Use, Boeing will provide the Customer with a credit memorandum concurrently with the delivery of each Table 1 and Table 2 Aircraft in description and amount which is identified in the following credit memoranda table:

[***]	[***]
[***]	[***]
[***]	[***]

2.3.[***]

3. Not Used.

4. Fuel Provided by Boeing.

Boeing will provide to Customer, without charge, the amount of fuel shown in U.S. gallons in the table below for the model of Aircraft being delivered and full capacity of engine oil at the time of delivery or prior to the ferry flight of the Aircraft as follows:

[***]	[***]
[***]	[***]

5. Correction Time Objectives

In the event that Boeing is able to make improvements to Correction Time Objectives as defined in Article 8.3.1 of Exhibit C to the AGTA, Product Assurance Document, then Boeing will revise the referenced article to reflect the revision, e.g., to reflect subsequent schedule improvement to the extent realized.

6. [***]

7. [***]

8. Assignment.

The Credit Memoranda described in this Letter Agreement are provided as a financial accommodation to Customer in consideration of Customer’s becoming the operator of the Aircraft, and cannot be assigned, in whole or in part, without the prior written consent of The Boeing Company.

9. Confidential Treatment.

Boeing and Customer understand that the commercial and financial information contained in this Letter Agreement is considered by the parties as confidential (Confidential Information) and both agree not to disclose such Confidential Information except as provided herein.  In addition to the parties’ respective officers, directors and employees who need to know the Confidential Information and who understand the obligation to keep it confidential, the parties may disclose Confidential Information (1) to the extent required by law and (2) to its agents, auditors and advisors who need to know the Confidential Information for purposes of enabling each party to understand, perform its obligations under, or receive the benefits of, this Letter Agreement and who have agreed not to use or disclose the Confidential Information for any other purpose without the other party’s prior written consent.  In the event that a party concludes that disclosure of Confidential Information contained in this Letter Agreement is required by applicable law, the party will so advise the other party promptly in writing and endeavor to protect the confidentiality of such Confidential Information to the widest extent possible.  In the event of a legal dispute with Boeing, nothing herein will preclude Customer from sharing with its legal counsel information necessary for purposes of enabling counsel to advise or represent Customer provided that so long as Customer causes its legal counsel to maintain the confidentiality of information that is the subject of this Article.  Except as provided in the assignment provisions of Article 8 of this Letter Agreement, Customer will not disclose this Letter Agreement for purposes of financing payments without the prior written consent of Boeing, which consent will be provided once the financier enters into a Non Disclosure Agreement with Boeing in form and substance reasonably satisfactory to Boeing, which will include agreeing not to disclose or use Confidential Information except for the purpose set forth herein. This provision shall not apply to any Confidential Information that is in the public domain except that a party will be liable to the other for breach of its obligations under this provision if the Confidential Information entered the public domain as a consequence of a wrongful act or omission on its part.

Very truly yours,

THE BOEING COMPANY

By
	Ms. Irma L. Krueger
Its:	Attorney-In-Fact

If the foregoing correctly sets forth your understanding of our agreement with respect to the matters treated herein, please indicate your acceptance, agreement and approval.

ACCEPTED AND AGREED TO this day of November of  2010.

LAN AIRLINES S.A.

By:
	Mr. Roberto Alvo
Its:	Sr. Vice President Strategic Planning &
	Corporate Finance Director
By:
	Mr. Mr. Alejandro de la Fuente Goic
Its:	Chief Financial Officer

Attachment To

Letter Agreement

6-1162-KSW-6454R1

Option Aircraft Delivery, Description, Price and Advance Payments

Airframe Model/MTOW:	777-Freighter	750000 pounds	Detail Specification:	D019W007-NEW (7/24/2006)
Engine Model/Thrust:	GE90-110B1L	110100 pounds	Airframe Price Base Year/Escalation Formula:	Jul-06	ECI-MFG/CPI
Airframe Price:		[***]	Engine Price Base Year/Escalation Formula:	N/A	N/A
Optional Features:		[***]
Sub-Total of Airframe and Features:		[***]	Airframe Escalation Data:
Engine Price (Per Aircraft):		[***]	Base Year Index (ECI):	180.3
Aircraft Basic Price (Excluding BFE/SPE):		[***]	Base Year Index (CPI):	195.4
Buyer Furnished Equipment (BFE) Estimate:		[***]
Seller Purchased Equipment (SPE) Estimate:		[***]
Non-Refundable Deposit/Aircraft at Def Agreemt:		[***]

		Escalation
Delivery	Number of	Factor			[***]
Date	Aircraft	(Airframe)		[***]	[***]	[***]	[***]	[***]
Sep-2014	1	1.1828		[***]	[***]	[***]	[***]	[***]
Sep-2015	1	1.2136	Exercised SA-2	[***]	[***]	[***]	[***]	[***]
Total	2

[***]

P.A. No. 3194		SA-2
LAN- 54163-10.TXT	Boeing Proprietary	Page 1

LAN-3194-LA-1002327

LAN Airlines S.A.

Avenida Presidente Riesco 5711

Piso 19

Las Condes

Santiago, Chile

Subject: Aircraft Performance Guarantees for Table 2 Aircraft

Reference: Purchase Agreement No. 3194 (Purchase Agreement) between The Boeing Company (Boeing) and LAN Airlines S.A. (Customer) relating to Model 777-F aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement.  All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement.

Boeing agrees to provide Customer with the performance guarantees in the Attachment for the Table 2 Aircraft.  [***]

Assignment.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer’s becoming the operator of the Aircraft and cannot be assigned in whole or, in part.

Confidential Treatment.

The information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties.  Customer will limit the disclosure of its contents to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

Very truly yours,

THE BOEING COMPANY
By:
	Ms. Irma L. Krueger
Its:	Attorney-In-Fact

ACCEPTED AND AGREED TO this day of November of  2010.

LAN AIRLINES S.A.

By:
	Mr. Roberto Alvo
Its:	Sr. Vice President Strategic Planning &
	Corporate Finance Director
By:
	Mr. Mr. Alejandro de la Fuente Goic
Its:	Chief Financial Officer

MODEL 777 FREIGHTER PERFORMANCE GUARANTEES

FOR LAN AIRLINES S.A.

SECTION	CONTENTS
1	AIRCRAFT MODEL APPLICABILITY
2	FLIGHT PERFORMANCE
3	MANUFACTURER'S EMPTY WEIGHT
4	AIRCRAFT CONFIGURATION
5	GUARANTEE CONDITIONS
6	GUARANTEE COMPLIANCE
7	EXCLUSIVE GUARANTEES

1 AIRCRAFT MODEL APPLICABILITY

[***]

2 FLIGHT PERFORMANCE

2.1 [***]

2.2 [***]

2.3 [***]

3 MANUFACTURER'S EMPTY WEIGHT

[***]

4 AIRCRAFT CONFIGURATION

4.1 The guarantees contained in this Attachment are based on the Aircraft configuration as defined in the original release of Detail Specification TBD (hereinafter referred to as the Detail Specification).  Appropriate adjustment shall be made for changes in such Detail Specification approved by the Customer and Boeing or otherwise allowed by the Purchase Agreement which cause changes to the flight performance and/or weight and balance of the Aircraft.  Such adjustment shall be accounted for by Boeing in its evidence of compliance with the guarantees.

4.2 The Manufacturer's Empty Weight guarantee of Section 3 will be adjusted by Boeing for the following in its evidence of compliance with the guarantees:

(1)        Changes to the Detail Specification or any other changes mutually agreed upon between the Customer and Boeing or otherwise allowed by the Purchase Agreement.

(2)        The difference between the component weight allowances given in Appendix IV of the Detail Specification and the actual weights.

5 GUARANTEE CONDITIONS

5.1 All guaranteed performance data are based on the International Standard Atmosphere (ISA) and specified variations therefrom; altitudes are pressure altitudes.

5.2 The Federal Aviation Administration (FAA) regulations referred to in this Attachment are, unless otherwise specified, the 777F Certification Basis regulations specified in the Type Certificate Data Sheet T00001SE, dated July 28, 2009.

5.3 In the event a change is made to any law, governmental regulation or requirement, or in the interpretation of any such law, governmental regulation or requirement that affects the certification basis for the Aircraft as described in Paragraph 5.2, and as a result thereof, a change is made to the configuration and/or the performance of the Aircraft in order to obtain certification, the guarantees set forth in this Attachment shall be appropriately modified to reflect any such change.

5.4 The takeoff and landing guarantees are based on hard surface, level and dry runways with no wind or obstacles, no clearway or stopway, 235 mph tires, with anti-skid operative, and with the Aircraft center of gravity at the most forward limit unless otherwise specified.  The takeoff performance is based on no engine bleed for air conditioning or thermal anti-icing and the Auxiliary Power Unit (APU) turned off unless otherwise specified.  Unbalanced field length calculations and the improved climb performance procedure will be used for takeoff as required.  The landing performance is based on the use of automatic spoilers.

5.5 The cruise range guarantee includes allowances for normal power extraction and engine bleed for normal operation of the air conditioning system.  Normal electrical power extraction shall be defined as not less than a 212 kilowatts total electrical load.  Normal operation of the air conditioning system shall be defined as pack switches in the "Auto" position, the temperature control switches in the "Auto" position that results in a nominal cabin temperature of 75°F, and all air conditioning systems operating normally.  This operation allows a maximum cabin pressure differential of 8.6 pounds per square inch at higher altitudes, with a nominal Aircraft cabin ventilation rate of 9,100 cubic feet per minute including passenger cabin recirculation (nominal recirculation is 50 percent).  The APU is turned off unless otherwise specified.

5.6 The cruise range guarantee is based on an Aircraft center of gravity location, as determined by Boeing, not to be aft of 30 percent of the mean aerodynamic chord.

5.7 Performance, where applicable, is based on a fuel Lower Heating Value (LHV) of 18,580 BTU per pound.

6 GUARANTEE COMPLIANCE

6.1 Compliance with the guarantees of Sections 2 and 3 shall be based on the conditions specified in those sections, the Aircraft configuration of Section 4 and the guarantee conditions of Section 5.

6.2 Compliance with the takeoff and landing guarantees shall be based on the FAA approved Airplane Flight Manual for the Model 777F.

6.3 Compliance with the cruise range guarantee shall be established by calculations based on flight test data obtained from an aircraft in a configuration similar to that defined by the Detail Specification.

6.4 Compliance with the Manufacturer's Empty Weight guarantee shall be based on information in the "Weight and Balance Control and Loading Manual - Aircraft Report."

6.5 The data derived from tests shall be adjusted as required by conventional methods of correction, interpolation or extrapolation in accordance with established engineering practices to show compliance with these guarantees.

6.6 Compliance shall be based on the performance of the airframe and engines in combination, and shall not be contingent on the engine meeting its manufacturer's performance specification.

7 [***]

Table 2 To

Purchase Agreement No. 3194

Aircraft Delivery, Description, Price and Advance Payments

Airframe Model/MTOW:	777-Freighter	750000 pounds	Detail Specification:	D019W007-Rev D (2/19/2010)
Engine Model/Thrust:	GE90-110B1L	110100 pounds	Airframe Price Base Year/Escalation Formula:	Jul-10       ECI-MFG/CPI
Airframe Price:		[***]	Engine Price Base Year/Escalation Formula:	N/A          N/A
Optional Features:		[***]
Sub-Total of Airframe and Features:		[***]	Airframe Escalation Data:
Engine Price (Per Aircraft):		[***]	Base Year Index (ECI):	106.8
Aircraft Basic Price (Excluding BFE/SPE):		[***]	Base Year Index (CPI):	215.6
Buyer Furnished Equipment (BFE) Estimate:		[***]
Seller Purchased Equipment (SPE) Estimate:		[***]
Transferred Option Deposit		[***]

		Escalation
Delivery	Number of	Factor		Manufacturer		[***]
Date	Aircraft	(Airframe)	Aircraft Block	Serial Number	[***]	[***]	[***]	[***]	[***]
Oct-2012	1	1.0455	TBD	41518	[***]	[***]	[***]	[***]	[***]
Total:	1

P.A. 3194 SA-2		10/2010
LAN- 55257-1F.TXT	Boeing Proprietary	Page 1

EX-4.5X1

Exhibit 4.5.1

Supplemental Agreement No. 1 (“SA-1”)

to

Purchase Agreement No. 3256

between

THE BOEING COMPANY

and

LAN AIRLINES S.A.

Relating to Boeing Model 787-916/787-816 Aircraft

THIS SUPPLEMENTAL AGREEMENT, entered into as of the 22 day of  March of 2010, (hereinafter called “Supplemental Agreement” or “SA-1”by and between THE BOEING COMPANY, a Delaware corporation (hereinafter called “Boeing”), and LAN Airlines S.A., a Chilean corporation (hereinafter called “Customer”);

WITNESSETH:

WHEREAS, the parties entered into that certain Purchase Agreement No. 3256, dated as of October 29, 2007 relating to the purchase and sale of Boeing Model 787-916 and Model 787-816 aircraft (hereinafter referred to as "Aircraft") which agreement, including all tables, exhibits, supplemental exhibits and specifications thereto, together with all letter agreements then or thereafter entered into that by their terms constitute part of such purchase agreement and as such purchase agreement may be amended or supplemented from time to time, is hereinafter called the "Purchase Agreement;"

WHEREAS, the parties have agreed to accelerate the delivery of ten (10) Model 787-8 aircraft, substitute four (4) aircraft from 787-916 to 787-816 and substitute three (3) 767-316ER to 767-316F freighter aircraft, and

WHEREAS, Customer has selected Rolls Royce Engines for its 787 Aircraft, and

WHEREAS, Boeing and Customer have agreed to amend the Purchase Agreement to incorporate the above changes;

NOW THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree to amend the Purchase Agreement as follows:

1

1. Accelerated and Substitute Aircraft

1.1.           Ten (10) 787-816 Aircraft are accelerated as shown in the chart below (Accelerated Aircraft).  Two (2) Accelerated Aircraft are delivering in 2011 (2011 Aircraft).  The remaining eight (8) Accelerated Aircraft are delivering in 2012 and 2013 (2012-2013 Aircraft)

Serial Numbers	Original Delivery Month	Accelerated Delivery Month
38464	October 2013	April 2011
38475	November 2013	June 2011
38472	November 2015	May 2012
38473	April 2016	June 2012
38484	June 2016	August 2012
38476	July 2016	2Q2013
38477	August 2016	3Q2013
38478	September 2016	3Q2013
38479	November 2016	4Q2013
38480	October 2016	4Q2013

1.2.           Four (4) Aircraft are substituted from 787-916 Aircraft to 787-816 Aircraft as shown in the chart below (Substitute Aircraft)

Serial Numbers	Original Delivery Month	New Delivery Month
38460	June 2014	2Q2017
38462	August 2014	2Q2017
38463	September 2014	3Q2017
38465	October 2014	3Q2017

2. Engine Selection.

Customer has selected Rolls Royce Engines for its Accelerated Aircraft.  Sections of the Purchase Agreement related to GENX engines no longer apply to the Accelerated Aircraft.

 

2

3. Table of Contents.

The “Table of Contents” to the Purchase Agreement is revised to reflect the changes made by this Supplemental Agreement 1 (SA-1).  The revised Table of Contents is attached hereto.

4. Articles.

4.1.           Article 2 is deleted in its entirety and replaced by the following:

“The scheduled months of delivery of the Aircraft are listed in the attached Tables. Exhibit B describes certain responsibilities for both Customer and Boeing in order to accomplish the delivery of the Aircraft.”

4.2.           Article 3, paragraph 3.1 is deleted in its entirety and replaced by the following:

“3.1 Aircraft Basic Price.  The Aircraft Basic Price is listed in the Tables and is subject to escalation.”

4.3.           Article 3, paragraph 3.2 is revised to add a sentence at the end of the paragraph as follows:

“[***].”

4.4.           Article 5, paragraph 5.1 is revised to delete in the first sentence the words “Table 1 ROLLS and Table 1 GENX” and replace them with the words “The Tables” and to delete the last sentence of the paragraph.

5. Tables.

The Aircraft information Tables are revised a) to revise Table 1-ROLLS 787-916 to delete the Substitute Aircraft; b) to revise Table 1-ROLLS 787-816 to delete the Accelerated Aircraft; c) to add Table 2 for the 2011 Aircraft, d) to add Table 3 for the 2012-2013 Aircraft and e) to add Table 4 for the Substitute Aircraft.  The revised and new Tables are attached hereto and identified with the SA-1 legend.

3

6. Exhibits and Supplemental Exhibits.

6.1           Exhibit A1, Aircraft Configuration relating to 2011 Aircraft is added to the Purchase Agreement to provide the configuration for the 2011 Aircraft.  Exhibit A1 is attached hereto.  Exhibit A continues to provide the Aircraft configuration for the 787-8 Aircraft with deliveries beginning in 2012.

6.2.          Supplemental Agreement BFE2, Buyer Furnished Equipment Variables for the 2012-2013 Aircraft, attached hereto, is added to the Purchase Agreement.  Supplemental Agreement BFE1 no longer applies to the Accelerated Aircraft.

7. Letter Agreements.

7.1          Letter Agreement 3256-01, Spare Parts Initial Provisioning.  The Initial Provisioning Meeting for the Accelerated Aircraft will be held in March 2010 rather than the 30 months prior to delivery as called out in paragraph 2.2 of Letter Agreement 3256-01.

7.2          Letter Agreement 3256-02, Boeing Model 787 Open Configuration Matters.

 7.2.1.  The 2011 Aircraft configuration is finalized at the time SA-1 is signed.  Therefore, except for paragraphs 1.2.4 and 1.2.5, Letter Agreement 3256-02, Boeing Model 787 Open Configuration Matters does not apply to the 2011 Aircraft.  Master changes may still be processed in accordance with Boeing standard processes.

 7.2.2.  Letter Agreement 3256-02 continues to apply to the remainder of the Aircraft except as revised by Supplemental Exhibit BFE2, paragraphs 1 and 2 for the 2012-2013 Aircraft.  The final configuration of the 2012-2013 Aircraft must be finalized by December 8, 2010.

7.3.          Letter Agreement 6-1162-ILK-0310 entitled “Special Matters” is revised to add the economic considerations for the 2011 Aircraft.  The revised Letter Agreement 6-1162-ILK-0310R1 is attached hereto.

7.4.           [***].

7.5.           [***].

7.6            [***] revised in accordance with paragraph 3.1.4 to delete the existing Table A and replace it with a Table A dated February 2010.  [***] Agreement “Table 1” is defined to include Tables 2, 3 and 4 which address the Accelerated and Substitute Aircraft.  Table A dated February 2010 is attached hereto.

7.7.           [***].

7.8           Letter Agreement 6-1162-ILK-0316, Aircraft Model Substitution.  Customer may substitute the Substitute Aircraft back to 787-816 Aircraft in accordance with the provisions of Letter Agreement 6-1162-ILK-0316.

7.9.          Letter Agreement 6-1162-ILK-0323, Special Matters Customer Support Document.  For the Accelerated Aircraft the Planning Conferences called out in paragraph 1 revising CS1 Part 1, Art. 2.1 and Part 3, item 2 will be held in March 2010.

7.10.        Letter Agreement 6-1162-ILK-0326, Special Matters Customer 787 Fleet does not apply to the Accelerated Aircraft.

4

7.11.           Letter Agreement 6-1162-KSW-6446 entitled “Aircraft Performance Guarantees for the 787-816 2011 Aircraft” is added to the Purchase Agreement.  The Letter is attached hereto.

7.12.           [***].

7.13.           [***].

7.14.           [***].

8. [***].

[***]

9. [***].

[***].

10. Confidential Treatment.

Boeing and Customer understand that the commercial and financial information contained in this Supplemental Agreement is considered by the parties as confidential (Confidential Information) and both agree not to disclose such Confidential Information except as provided herein.  In addition to the parties’ respective officers, directors and employees who need to know the Confidential Information and who understand the obligation to keep it confidential, the parties may disclose Confidential Information (1) to the extent required by law and (2) to its agents, auditors and advisors who need to know the Confidential Information for purposes of enabling each party to understand, perform its obligations under, or receive the benefits of, this Agreement and who have agreed not to use or disclose the Confidential Information for any other purpose without the other party’s prior written consent.  In the event that a party concludes that disclosure of Confidential Information contained in this Supplemental Agreement is required by applicable law, the party will so advise the other party promptly in writing and endeavor to protect the confidentiality of such Confidential Information to the widest extent possible.  In the event of a legal dispute with Boeing, nothing herein will preclude Customer from sharing with its legal counsel information necessary for purposes of enabling counsel to advise or represent Customer provided that so long as Customer causes its legal counsel to maintain the confidentiality of information that is the subject of this Article.  Except as provided in the assignment provisions of Article 10 of the Special Matters Letter Agreement 6-1162-ILK-0310R1, Customer will not disclose this Supplemental Agreement for purposes of financing payments without the prior written consent of Boeing, which consent will be provided once the financier enters into a Non Disclosure Agreement with Boeing in form and substance reasonably satisfactory to Boeing, which will include agreeing not to disclose or use Confidential Information except for the purpose set forth herein. This provision shall not apply to any Confidential Information that is in the public domain except that a party will be liable to the other for breach of its obligations under this provision if the Confidential Information entered the public domain as a consequence of a wrongful act or omission on its part.

5

The Purchase Agreement shall be deemed amended to the extent herein provided and as amended shall continue in full force and effect.

EXECUTED IN DUPLICATE as of the day and year first above written.

THE BOEING COMPANY		LAN AIRLINES S.A.
By:		By:
	Ms Kathie Weibel		Mr. Roberto Alvo
Its	Attorney-In-Fact	Its:	Sr. Vice President Strategic
			Planning & Corporate Development
		By:
			Mr. Alejandro de la Fuente
		Its:	Chief Financial Officer

6

TABLE OF CONTENTS

	ARTICLES	SA NUMBER
1.	Quantity, Model and Description	SA-1 pg 2
2.	Delivery Schedule	SA-1 pg 2
3.	Price	SA-1 pg 3
4.	Payment
5.	Additional Terms	SA-1 pg 3
	TABLE
1-ROLLS	787-916 Aircraft Information Table	SA-1 pg 11
1-GENX	787-916 Aircraft Information Table
1-ROLLS	787-816 Aircraft Information Table	SA-1 pg 12
1-GENX	787-816 Aircraft Information Table
Table 2	Aircraft Information Table for 2011 Aircraft	SA-1 pg 13
Table 3	Aircraft Information Table for 2012-2013 Aircraft	SA-1 pg 14
Table 4	Aircraft Information Table for Substitute Aircraft	SA-1 pg 15
	EXHIBIT
A 787-916	Aircraft Configuration
A 787-816	Aircraft Configuration	SA-1 (Art 6.1), pg 4
A1 787-816	Aircraft Configuration for 2011 Aircraft	SA-1 pg 17
B.	Aircraft Delivery Requirements and Responsibilities
	SUPPLEMENTAL EXHIBITS
AE1	Escalation Adjustment/Airframe and Optional Features
BFE1	Buyer Furnished Equipment Variables
BFE2	Buyer Furnished Equipment Variables for Accelerated Aircraft	SA-1 pg 20
CS1	Customer Support Document
	Attachment A to the Customer Support Document

7

	SUPPLEMENTAL EXHIBITS, continued	SA NUMBER
EE1. ROLLS	Engine Escalation And Engine Warranty
EE1. GENX	Engine Escalation And Engine Warranty
SLP1.	Service Life Policy Components
	LETTER AGREEMENTS
3256-01	787 Spare Parts Initial Provisioning	SA-1(Art 7.1), pg 4
3256-02	Open Configuration Matters	SA-1(Art 7.2), pg 4
3256-03	787 e-Enabling Letter Agreement
3256-04	787 Spare Parts Commitment
6-1162-ILK-0310R1	Special Matters	SA-1 pg 24
6-1162-ILK-0310R1	[***]
6-1162-ILK-0310R1	[***]
6-1162-ILK-0310R1	[***]
6-1162-ILK-0310R1	[***]
6-1162-ILK-0311	787 AGTA Terms Revisions
6-1162-ILK-0312	Promotional Support
6-1162-ILK-0313	EULA Special Matters
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	SA-1(Art 7.8), pg 5
[***]	[***]
[***]	[***]
6-1162-ILK-0318	Alternate Engine Selection	SA-1(Art 2), pg2
[***]	[***]
[***]	[***]	[***]
[***]	[***]
6-1162-ILK-0321	Demonstration Flight Waiver
6-1162-ILK-0322	AGTA Article 8.2 Insurance; Warranty Coverage & Exhibit B Matters for Certain Boeing Model 787-9 Aircraft Leased from International Lease Finance Corporation by LAN Airlines S.A.

	LETTER AGREEMENTS, continued	SA NUMBER
6-1162-ILK-0323	Special Matters Customer Support	SA-1(Art 7.9), pg 5
6-1162-ILK-0324	Special Matters Warranty
6-1162-ILK-0325	NOT USED in the Purchase Agreement
6-1162-ILK-0326	Special Matters Customer 787 Fleet	SA-1(Art 7.10), pg 5
6-1162-ILK-0326	Attachment 1, Relevant Dates for First Aircraft
6-1162-ILK-0326	Attachment 2, Covered Aircraft
6-1162-ILK-0327	Performance Guarantees 787-916/-816
[***]	[***]	[***]
6-1162-ILK-0329	Extended Operations (ETOPS) Matters
[***]	[***]
[***]	[***]
6-1162-KSW-6446	Performance Guarantees 787-816 2011 Aircraft	SA-1 pg 67
[***]	[***]	[***]
[***]	[***]	SA-1 pg 113
[***]	[***]	SA-1 pg 128

8

Table 1 Rev 1

787-916 Aircraft Delivery, Description, Price and Advance Payments

Airframe Model/MTOW:	787-9	[***]	Detail Specification:	787B1-4102-B (7/9/2007)
Engine Model/Thrust:	TRENT1000-J	[***]	Airframe Price Base Year/Escalation Formula:	Jul-06		Non-Standard
Airframe Price:		[***]	Engine Price Base Year/Escalation Formula:	Jul-06		787 ECI-MFG CPI Eng
Optional Features:		[***]	Airframe Escalation Data:
Sub-Total of Airframe and Features:		[***]	Base Year Index (ECI):		180.3
Engine Price (Per Aircraft):		[***]	Base Year Index (CPI):		195.4
Aircraft Basic Price (Excluding BFE/SPE):		[***]	Engine Escalation Data:
Buyer Furnished Equipment (BFE) Estimate:		[***]	Base Year Index (ECI):		180.300
Catalog Selected In Flight Entertainment (IFE) Estimal		[***]	Base Year Index (CPI):		195.400
Refundable Deposit/Aircraft at Proposal Accept:		[***]

						Advance Payment Per Aircraft (Amts. Due/Mos. Prior to Delivery):
	Number of	3% Escalation				***	***	***	***
Delivery Date	Aircraft	Factor (Airframe)	[***]	[***]	***	***	***	***	***
May-2012	1	[***]	[***]	[***]	***	***	***	***	***
Jul-2012	1	[***]	***	***	***	***	***	***	***
Oct-2012	1	[***]	***	***	***	***	***	***	***
Nov-2012	1	[***]	***	***	***	***	***	***	***
Total:	4				***	***	***	***	***

LAN PA 3256, SA-1		3-2010
45876-2f.TXT	Boeing Proprietary	Page 1

9

Table 1R1

787-816 Aircraft Delivery, Description, Price and Advance Payments

Airframe Model/MTOW:	787-8	***	Detail Specification:	787B1-4102-B (7/9/2007)
Engine Model/Thrust:	TRENT1000-A	***	Airframe Price Base Year/Escalation Formula:	Jul-06		Non-Standard
Airframe Price:		***	Engine Price Base Year/Escalation Formula:	Jul-06		787 ECI-MFG CPI Eng
Optional Features:		***	Airframe Escalation Data:
Sub-Total of Airframe and Features:		***	Base Year Index (ECI):		180.3
Engine Price (Per Aircraft):		***	Base Year Index (CPI):		195.4
Aircraft Basic Price (Excluding BFE/SPE):		***	Engine Escalation Data:
Buyer Furnished Equipment (BFE) Estimate:		***	Base Year Index (ECI):		180.300
Catalog Selected In Flight Entertainment (IFF) Estimate:		***	Base Year Index (CPI):		195.400
Refundable Deposit/Aircraft at Proposal Accept:		***

	Number				Escalation Estimate	Advance Payment Per Aircraft (Amis. Due/Mos. Prior to Delivery):
Delivery	of			Manufacturer	Adv Payment Base	***	***	***	***
Date	Aircraft	***	***	Serial Number	Price Per A/P		***	***	***
Jun-2013	1	***	***	38461	***		***	***	***
Aug-2013	1	***	***	38468	***	***	***	***	***
May-2015	1	***	***	38481	***	***	***	***	***
Jun-2015	1	***	***	38483	***	***	***	***	***
Jul-2015	1	***	***	38469	***	***	***	***	***
Aug-2015	1	***	***	38470	***	***	***	***	***
Sep-2015	1	***	***	38471	***	***	***	***	***
Oct-2015	1	***	***	38466	***	***	***	***	***
Total:	8				***	***	***	***	***
						***

LAN PA 3256, SA-1
45875-2f.TXT	Boeing Proprietary	3-2010

10

Table 2

Aircraft Delivery, Description, Price and Advance Payments for 2011 Aircraft

Airframe Model/MTOW:	787-8	***	Detail Specification:	787B1-4102-B (7/9/2007)
Engine Model/Thrust:	TRENT1000-A	***	Airframe Price Base Year/Escalation Formula:	Jul-06		Non-Standard
Airframe Price:		***	Engine Price Base Year/Escalation Formula:	Jul-06		787 ECI-MFG CPI Eng
Optional Features:		***
Sub-Total of Airframe and Features:		***	Airframe Escalation Data:
Engine Price (Per Aircraft):		***
Aircraft Basic Price (Excluding BFE/SPE):		***	Engine Escalation Data:
Buyer Furnished Equipment (BFE) Estimate:		***	Base Year Index (ECI):		180.300
Seller Purchased Equipment (SPE) Estimate:		***	Base Year Index (CPI):		195.400
Thales IFE Fixed Price		***
Proposal Acceptance Deposit		***

		***	***	Aircraft	Escalation Estimate	Advance Payment Per Aircraft (Amts. Due/Mos. Prior to Delivery):
Delivery	Number of	***	***	Serial	***	***	***	***	***
Date	Aircraft	***	***	Numbers	***	***	***	***	***
Apr-2011	1	***	***	38464	***	***	***	***	***
Jun-2011	1	***	***	38475	***	***	***	***	***
Total:	2

***

***

LAN PA 3256, SA-1		3-2010
LAN- 53257-1F.TXT	Boeing Proprietary	Page 1

11

Table 3 To

SA-1

Aircraft Delivery, Description, Price and Advance Payments (2012-2013 Aircraft)

Airframe Model/MTOW:	787-8	***	Detail Specification:	787B1-4102-B (7/9/2007)
Engine Model/Thrust:	TRENT1000-A	***	Airframe Price Base Year/Escalation Formula:	Jul-06		Non-Standard
Airframe Price:		***	Engine Price Base Year/Escalation Formula:	Jul-06		787 ECI-MFG CPI Eng
Optional Features:		***
Sub-Total of Airframe and Features:		***	Airframe Escalation Data:
Engine Price (Per Aircraft):		***
Aircraft Basic Price (Excluding BFE/SPE):		***	Engine Escalation Data:
Buyer Furnished Equipment (BFE) Estimate:		***	Base Year Index (ECI):		180.300
Seller Purchased Equipment (SPE) Estimate:		***	Base Year Index (CPI):		195.400
Deposit/Aircraft at Proposal Acceptance:		***

		***	***		Escalation Estimate	Advance Payment Per Aircraft (Amts. Due/Mos. Prior to Delivery):
Delivery	Number of	***	***		Adv Payment Base	***	***	***	***
Date	Aircraft	***	***		Price Per A/P	***	***	***	***
May-2012	1	***	***	38472	***	***	***	***	***
Jun-2012	1	***	***	38473	***	***	***	***	***
Aug-2012	1	***	***	38484	***	***	***	***	***
May-2013*	1	***	***	38476	***	***	***	***	***
Aug-2013*	1	***	***	38477	***	***	***	***	***
Aug-2013*	1	***	***	38478	***	***	***	***	***
Nov-2013*	1	***	***	38479	***	***	***	***	***
Nov-2013*	1	***	***	38480	***	***	***	***	***
Total:	8
***	***

***

LAN PA 3256, SA-1		3-2010
53190-1F.TXT	Boeing Proprietary	Page 1

12

Table 4

787-816 Substitute

Aircraft Delivery, Description, Price and Advance Payments

Airframe Model/MTOW:	787-8	***	Detail Specification:	787B1-4102-B (7/9/2007)
Engine Model/Thrust:	TRENT 1000-A	***	Airframe Price Base Year/Escalation Formula:	Jul-06		Non-Standard
Airframe Price:		***	Engine Price Base Year/Escalation Formula:	Jul-06		787 ECI-MFG CPI Eng
Optional Features:		***
Sub-Total of Airframe and Features:		***	Airframe Escalation Data:
Engine Price (Per Aircraft):		***
Aircraft Basic Price (Excluding BFE/SPE):		***	Engine Escalation Data:
Buyer Furnished Equipment (BFE) Estimate:		***	Base Year Index (ECI):		180.300
Seller Purchased Equipment (SPE) Estimate:		***	Base Year Index (CPI):		195.400
Deposit at Proposal Acceptance:		***

		***	***		Escalation Estimate	Advance Payment Per Aircraft (Amts. Due/Mos. Prior to Delivery):
Delivery	Number of	***	***	Serial	Adv Payment Base	***	***	***	***
Date	Aircraft	***	***	Numbers	Price Per A/P	***	***	***	***
2Q2017	1	***	***	***	***	***	***	***	***
2Q2017	1	***	***	***	***	***	***	***	***
3Q2017	1	***	***	***	***	***	***	***	***
3Q2017	1	***	***	***	***	***	***	***	***
Total:	4
***		***
***		***
***		****

LAN PA 3256, Sa-1		2-2010
53215-1F.TXT	Boeing Proprietary	Page 1

13

AIRCRAFT CONFIGURATION

between

THE BOEING COMPANY

and

LAN AIRLINES S.A.

787-816 Exhibit A1 to Purchase Agreement Number 3256

[***]

14

AIRCRAFT CONFIGURATION

Dated February 2010

relating to

BOEING MODEL 787-816 AIRCRAFT

The Detail Specification for the [***]

 will be Boeing Detail Specification DO19E001LAN88P-38464 and DO19E001LAN88P-38475, respectively.  Such Detail Specification will be comprised of Boeing Configuration Specification 787B1-4102-B dated as of the 9th of July of 2007 as amended to incorporate the Options listed below, including the effects on Manufacturer’s Empty Weight (MEW) and Operating Empty Weight (OEW).  As soon as practicable, Boeing will furnish to Customer copies of the Detail Specification, which copies will reflect such Options.  The Aircraft Basic Price reflects and includes all effects of such Options except such Aircraft Basic Price does not include the price effects of any Buyer Furnished Equipment.

 

15

Exhibit A1 BOEING PROPRIETARY 4/19/2011-12:13 AM

CR	Title	*** ***
0110B750A60	MAJOR MODEL 787 AIRPLANE	**
0110B750A62	MINOR MODEL 787-8 AIRPLANE	***
0130C921F65	LAN - INTERIOR ARRANGEMENT - 262 PASSENGERS	**
0220C513M19	TYPE CERTIFICATION AND EXPORT CERTIFICATION OF AIRWORTHINESS	***
0222C513M21	ALTERNATE FORWARD CENTER-OF-GRAVITY VALUES	***
0228C512A10	FLIGHT CREW OPERATIONS MANUAL DATA IN COMPLIANCE WITH FAA	***
0228C513M24	AIRPLANE FLIGHT MANUAL DATA	***
0352C512A14	CUSTOMIZED LOADING SCHEDULE FOR WEIGHT AND BALANCE CONTROL -ALIGNMENT CHART LOADING	***
0360D121A11	MISCELLANEOUS WEIGHT COLLECTOR	***
1110D104A01	EXTERIOR COLOR SCHEME AND MARKING - LAN AIRLINES	***
1130C513M25	LEASING/OWNERSHIP NAMEPLATES	**
1130D104A03	INTERIOR PASSENGER COMPARTMENT PLACARDS AND MARKINGS	***
2154C512B72	FORWARD CARGO COMPARTMENT AIR-CONDITIONING SYSTEM	**
2170C512A18	FLIGHT DECK HUMIDIFICATION SYSTEM	***
2324C512A29	EMERGENCY LOCATOR TRANSMITTER (ELT) - ANTENNA & CONTROL PANEL	***
2375C512B73	FLIGHT DECK ENTRY VIDEO SURVEILLANCE SYSTEM (FDEVSS)	***
2520C512J27	DOOR 2 FULL CEILING DOME ARCHITECTURE	***
2524D104A04	CURTAINS - DOOR 1C, FWD	***
2524D104A05	PARTITION - DOOR 2L - AFT	***
2524D104A11	CLOSET - FULL HEIGHT - DOOR 1L , AFT	***
2524D104A12	CLOSET - FULL HEIGHT - DOOR 1C, AFT	**
2524D104A79	PARTITION - DOOR 2R - AFT	***
2524D104A80	PARTITION - DOOR 2C - FWD	**
2524D104A81	PARTITION - DOOR 3C - FWD	***
2524D104A82	CLOSET - FULL HEIGHT - DOOR 1R , AFT	***
2524D104A83	CLOSET - FULL HEIGHT - DOOR 2C, AFT	***
2524D104A84	CLOSET - FULL HEIGHT, BL62 - DOOR 4L, FWD	***
2524D104A85	CLOSET - FULL HEIGHT, BL62 - DOOR 4R, FWD	***
2524D104A86	CURTAINS - DOOR 1L, AFT	***
2524D104A87	CURTAINS - DOOR 1R, AFT	***
2524D104A88	CURTAINS - DOOR 2L, FWD	**
2524D104A89	CURTAINS - DOOR 2R, FWD	***
2524D104A90	CURTAINS - DOOR 2L, AFT	**
2524D104A91	CURTAINS - DOOR 2R, AFT	***
2524D104A92	CURTAINS - DOOR 3 - GALLEY COMPLEX, LEFT	***
2524D104A93	CURTAINS - DOOR 3 - GALLEY COMPLEX, RIGHT	***
2524D104A94	CURTAINS - DOOR 4L, FWD	***
2524D104A95	CURTAINS - DOOR 4R, FWD	***
2524D104A96	CURTAINS - DOOR 2R, FWD, AFT SIDE	***
2524D104A97	CURTAINS - DOOR 4 CENTER, AFT	***
2524D104A98	CURTAIN - CREW REST ENCLOSURE - BUSINESS CLASS, RIGHT	**
2524D104A99	CURTAIN - CREW REST ENCLOSURE - ECONOMY CLASS, LEFT	***
2524D104B00	CURTAIN - CREW REST ENCLOSURE - ECONOMY CLASS, RIGHT	***
2524D104B04	CURTAINS - DOOR 1C, FWD, AISLE	***
2524D104B05	CLOSET - FULL HEIGHT - DOOR 4C FWD - LEFT	***
2525D121A01	BUSINESS CLASS SEAT - CONTOUR - AURA - 6 ABREAST SEATING (2-2-2)	***
2525D121A05	ECONOMY CLASS SEAT - WEBER - 5751 - 9 ABREAST SEATING (3-3-3)	***
2526D104A16	WALL MOUNTED VIDEO CONTROL STATION (VCS) - DOOR 2R FWD	***
2526D104A17	CABIN ATTENDANT PANEL	**
2526D104A69	ATTENDANT SEAT - STANDARD - AS1F-1L	***
2526D104A70	ATTENDANT SEAT - STANDARD - AS1A-1R	**
2526D104A71	ATTENDANT SEAT - STANDARD - AS2F-1L	***
2526D104A72	ATTENDANT SEAT - STANDARD - AS2F-1R	***
2526D104A73	ATTENDANT SEAT -STANDARD - AS2A-1L	***
2526D104A74	ATTENDANT SEAT -STANDARD - AS2A-1R	***
2526D104A75	ATTENDANT SEAT - STANDARD - AS3F-1L	***
2526D104A76	ATTENDANT SEAT - STANDARD - AS3F-1R	***
2526D104A77	ATTENDANT SEAT - STANDARD - AS4F-1LC	***
2526D104A78	ATTENDANT SEAT - STANDARD - AS4A-1R	**
2527D104A18	FLOOR COVERING COLLECTOR	***
2528C512F39	DOOR 4 OVERHEAD CEILING STOWAGE	**

P.A. 3256, SA-1 BOEING PROPRIETARY Page 1

16

Exhibit A1 BOEING PROPRIETARY 4/19/2011-12:13 AM

 

CR	Title	*** ***
2528D104A20	FLOOR MOUNTED STOWAGE UNIT - CENTERLINE - DOOR 3	***
2528D104A21	FLOOR MOUNTED STOWAGE UNIT - CENTERLINE - DOOR 4	***
2528D104A22	LITERATURE POCKETS	***
2528D104A23	MAGAZINE RACKS	***
2528D104A24	ATTENDANT STOWAGE MODULES (AMODS)	***
2528D104A37	OVERHEAD STOWAGE BINS	***
2530D104A25	BAR UNIT - COUNTER HEIGHT - FAMILY 501- B2F-1C	***
2530D104A26	GALLEY - FAMILY 1 - G1F-1C	**
2530D104A27	GALLEY - FAMILY 8 - G1A-1C	***
2530D104B02	GALLEY - FAMILY 6 - G3F-1C	***
2530D104B03	GALLEY - FAMILY 52 - G4A-1C	***
2540C513M33	LAVATORY - FAMILY 1 - L1F-1L	***
2540C513M34	LAVATORY - FAMILY 12 - L2F-1L	***
2540C513M35	LAVATORY - FAMILY 11 - L2F-1R	***
2540C513M36	LAVATORY - FAMILY 42 - L3F-1L	***
2540C513M37	LAVATORY - FAMILY 11 - L3F-1R	**
2540C513M38	LAVATORY - FAMILY 61B - L4F-1RC	***
2540C513M39	LAVATORY - FAMILY 8 - L4A-1L	**
2560C171H74	PROTECTIVE BREATHING EQUIPMENT- FLIGHT DECK - AVOX - P/N 802300-14	***
2560C171W39	CREW LIFE VESTS - FLIGHT DECK	***
2562D104A35	OVERWATER EMERGENCY EQUIPMENT	***
2564D104A36	DETACHABLE EMERGENCY EQUIPMENT	***
2566C512A82	ESCAPE SYSTEM, PASSENGER CAPACITY UP TO 300 WITH SLIDE/RAFTS AT ALL DOORS (C-A-C-A)	***
2623C512A31	CARGO COMPARTMENT FIRE SUPPRESSION - TBD MINUTES (TO SUPPORT APPROXIMATELY 330 MINUTES ETOPS) 787-8 AND -9	***
3245C513A04	WHEELS AND CARBON BRAKES - MESSIER-BUGATTI	***
3321C513C23	LIGHTING SCENES - DYNAMIC CABIN LIGHTING SYSTEM - CUSTOMER	**
3324C513C24	PASSENGER INFORMATION SIGNS - CUSTOMER SPECIFIC INFORMATION	***
3457C513A05	DUAL AUTOMATIC DIRECTION FINDER	**
3520C513A10	PASSENGER OXYGEN MEDIUM CAPACITY DESCENT	***
3810C512A57	POTABLE WATER PRE-SELECT AT SERVICE PANEL	***
3810C512A58	POTABLE WATER STORAGE CAPACITY -787-8	***
4611C512A60	SECOND MAINTENANCE SYSTEMS FILE SERVER MODULE	***
4611C512A61	CREW WIRELESS LAN UNIT	***
4611C513M30	OFFBOARD LINK CAPABILITY TO AIRLINE SPECIFIED ADDRESSES	***
5010C512B63	TRANSVERSE LD-4 / LD-8 CARGO CONTAINER LOADING - FWD CARGO COMPARTMENT	***
7200B750A70	ROLLS-ROYCE PROPULSION SYSTEM	***
7200C513M31	ROLLS-ROYCE TRENT 1000 THRUST RATINGS	***
7900C512C67	LUBRICATING OIL -BP2197	***
MISC	INTERIOR ALLOWANCE	***
		***
	TOTAL OPTIONS SUBJECT TO ESCALATION:	***
FIXED PRICE IFE OPTIONS:		**
4420C171K81	IN-SEAT VIDEO CABIN EQUIPMENT CENTER (CEC) WITH ADDITIONAL ON-DEMAND SERVER(S) CONFIGURATION - THALES	***
4420C171Z71	WALL MOUNTED VIDEO CONTROL STATION (VCS) EQUIPMENT - THALES	**
4420D109A47	THALES - IN-SEAT VIDEO EQUIPMENT - ECONOMY CLASS SEATS	***
4420D109A49	THALES - IN-SEAT VIDEO EQUIPMENT - BUSINESS CLASS SEATS	***
4420D109A50	OVERHEAD VIDEO INSTALLATION - THALES	***
4420D109A67	INFLIGHT ENTERTAINMENT SYSTEM - LAN - COLOR SELECTIONS - THALES	***
4420THALES	INFLIGHT ENTERTAINMENT SYSTEM	***
		***
	TOTAL EXHIBIT A	***

P.A. 3256, SA-1 BOEING PROPRIETARY Page 2

17

BUYER FURNISHED EQUIPMENT VARIABLES

For 2012-2013 Aircraft

between

THE BOEING COMPANY

and

LAN AIRLINES S.A.

Supplemental Exhibit BFE2 to Purchase Agreement Number 3256

18

BUYER FURNISHED EQUIPMENT VARIABLES

relating to

BOEING MODEL 787 [***] AIRCRAFT

This Supplemental Exhibit BFE2 contains vendor selection dates, on-dock dates and other requirements applicable to the [***] Aircraft as defined in Supplemental Agreement No. 1 to the Purchase Agreement 3256.

1. Supplier Selection.

Customer will select and notify Boeing of the suppliers of Buyer Furnished Equipment Premium Class Seats and the Catalog Selectable In-Flight Entertainment for Buyer Furnished Equipment  Premium Class Seats by the following dates:

1.1. Catalog seats and IFE.  These are the business class seats listed in the Boeing catalog. Customer has until November 1, 2010 to make a selection from the catalog.  Minor changes can be made to these seats and are shown in the catalog for each seat model as selectable features.  There are also "stylization & branding" zones for unique customer customization which vary by seat supplier.  Customer Engineering will notify Customer of unique customization changes that have become offerable between catalog revisions and Customer may select any such changes prior to November 1, 2010.

1.2. Customer Unique Seat and IFE.  If Customer wants a unique business class seat and unique IFE, the supplier select date is May 28, 2010.  This gives Customer, the seat/IFE supplier and Boeing sufficient time to design, produce and certify the seats and IFE.

1.3. Customer Seat Derivative of Existing Design. Seat suppliers offer derivatives of seats they have built for other customers or for Customer’s other models.  In this case Customer must make its choice by June 30th.  In addition

· Seat supplier and IFE supplier notifications must be concurrent

· IFE selection may include any catalog elements and other offerable IFE not yet included in the catalog.  Customer Engineering will notify Customer of IFE that has become offerable between catalog revisions.

· ITCM must occur within one week of supplier notification.

· Seats on dock date of March 15, 2012 remains unchanged

· All supplier data submittals must meet Boeing internal engineering release schedule, which will be established at ITCM

· If any of the above conditions are not met, Catalog seats will be installed in the Aircraft.

2. Certification Document.

Customer will deliver to Boeing a copy of the FAA Technical Standard Order (TSO) 127a authorization letter or equivalent evidence of certification for Buyer Furnished Equipment Premium Class Seats no later than March 12, 2012.

19

3. Additional Delivery Requirements

Customer will insure that Customer’s BFE suppliers provide sufficient information to enable Boeing, when acting as Importer of Record for Customer’s BFE, to comply with all applicable provisions of the U.S. Customs Service.

20

4. Delivery Dates and Other Information

On or before January 14, 2011, Boeing will provide to Customer a BFE Requirements On-Dock/Inventory Document (BFE Document) or an electronically transmitted BFE Report which may be periodically revised, setting forth the items, quantities, on-dock dates, shipping instructions and other requirements relating to the in-sequence installation of BFE.  For planning purposes, preliminary BFE on-dock dates are set forth below:

787-8

Item	Preliminary On-Dock Dates
	[Month of Delivery:]
Premium Class (PC) Seats	April 2011	June 2011
	Aircraft	Aircraft
	Not Required	Not Required
	May 2012	June 2012
	Aircraft	Aircraft
Premium Class (PC) Seats	3/27/12	4/12/2012
	August 2012	2Q13
	Aircraft	Aircraft
Premium Class (PC) Seats	6/12/2012	1Q13
	3Q13	3Q13
	Aircraft	Aircraft
Premium Class (PC) Seats	2Q13	2Q13
	4Q13	4Q13
	Aircraft	Aircraft
Premium Class (PC) Seats	3Q13	3Q13

21

 

6-1162-ILK-0310R1

LAN Airlines S.A.

Avenida Presidente Riesco 5711

Piso 19

Las Condes

Santiago, Chile

Subject: Special Matters

Reference: Purchase Agreement No. 3256 (the Purchase Agreement) between The Boeing Company (Boeing) and LAN Airlines S.A. (Customer) relating to Boeing Model 787-916/-816 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement.  All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement.

1. Definitions.

1.1           “STE” when used specifically in relation to any credit memorandum contained in this letter agreement shall mean that the relevant credit memorandum shall be escalated to the month of delivery in the same manner as the Airframe Price pursuant to escalation factors developed as set forth in the Tailored Escalation Letter Agreement Number 6-1162-ILK-0319 in accordance with the escalation formula reflected in Supplemental Exhibit AE1 to the Purchase Agreement (AE1).

1.2           “Limitations on Use” when used in relation to any credit memorandum contained in this letter agreement shall mean that the applicable credit memorandum may be used for the purchase of Boeing goods and services or applied to the final delivery payment for the Aircraft for which the credit was issued, but that the relevant credit memorandum shall be prohibited from use for satisfaction of any Advance Payment obligation.

1.3           “Accelerated Aircraft” are defined as ten (10) Boeing Model 787-8 Aircraft with accelerated delivery months of (1) April 2011 sn 38464, (1) June 2011 sn 38475, (1) May 2012 sn 38472, (1) June 2012 sn 38473, (1) August 2012 sn 38484, (1) 2nd Quarter 2013 sn 38476, (2) 3rd Quarter 2013 sn 38477 and sn 38478, and (2) 4th Quarter 2013 sn 38480 and sn 38479 which were originally scheduled to deliver in the months of (1) October 2013. (1) November 2013, (1) November 2015, (1) April 2016, (1) June 2016, (1) July 2016, (1) August 2016, (1) September 2016, (1) October 2016 and (1) November 2016.

1.4           “2011 Aircraft” are defined as the Accelerated Aircraft delivering (1) April 2011 sn 38464 and (1) June 2011 sn 38475.

1.5           “2012-2013 Aircraft” are defined as the Accelerated Aircraft delivering in (1) May 2012 sn 38472, (1) June 2012 sn 38473, (1) August 2012 sn 38484, (1) 2nd Quarter 2013 sn 38476, (2) 3rd Quarter 2013 sn 38477 and sn 38478, and (2) 4th Quarter 2013 sn 38479 and 38480.

1.6           “Substitute Aircraft” are defined as the Substitution Aircraft 787-816 aircraft delivering in (2) 2nd Quarter 2017 sn 38460 and sn 38462, (2) 3rd Quarter 2017 sn 38463 and sn 38465 which were originally 787-916 aircraft delivering in (1) June 2014, (1) August 2014, (1) September 2014 and (1) October 2014 as shown in Table 1-ROLLS 787-916.  The Substitute Aircraft may be substituted back to 787-916 aircraft.

22

2. 787-9/-8 Credit Memoranda.

Subject to Customer’s adherence to the Limitations on Use, Boeing will provide Customer a credit memorandum concurrently with the delivery of each 787-916 and each 787-816 Aircraft identified in each Table 1 to the Purchase Agreement, (For this Letter Agreement, “Table 1” shall have the same definition specified in the [***]) in description and in amount identified in the following Article 2 credit memoranda table:

Article 2 Credit Memoranda Table

Article 2 Credit Memoranda	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]

3. Payment Due at Signing of the Purchase Agreement.

[***].

4. Economic Considerations for the 2011 Aircraft.

4.1           [***] Credit Memoranda.  In addition to the concessions provided in paragraph 2 above and subject to the Limitations of Use, Boeing will provide at the time of delivery of each [***].

4.2.           [***] Goods & Services Credit Memoranda.

Boeing will also provide at the time of delivery of each [***].

5. [***].

[***].

23

6. Economic Considerations for the Option Aircraft.

Subject to Customer’s adherence to the Limitations on Use, Boeing agrees that [***].

Additionally, Boeing agrees that Customer [***]:

(i) [***]

(ii) [***].

[***].

7. [***].

[***].

8. Correction Time Objectives.

In the event that Boeing is able to make improvements to Correction Time Objectives as defined in Article 8.3.1 of Exhibit C to the AGTA, Product Assurance Document, then Boeing will revise the referenced Article to reflect the revision, e.g., to reflect subsequent schedule improvement to the extent realized.

9. Fuel Provided by Boeing.

Boeing will provide to Customer, without charge, the amount of fuel shown in U.S. gallons in the table below for the model of Aircraft being delivered and full capacity of engine oil at the time of delivery or prior to the ferry flight of the Aircraft as follows:

Aircraft Model	Fuel Provided
Boeing Model 787 Aircraft,  including all minor models	3,000

10. Assignment.

Any assignment by Customer of any benefits, entitlements, or services described in this Letter Agreement requires Boeing's prior written consent.  Further, Customer will not reveal to any third party the amount of the credit memoranda provided to Customer by Boeing without Boeing’s prior written consent and subject to such circumstances as Boeing may reasonably require.

Boeing will not unreasonably withhold consent to Customer’s request to assign, as security, rights in the Purchase Agreement if done for purposes of obtaining financing or for such other purpose consistent with fulfilling its obligations under the Purchase Agreement.  Boeing’s consent will be conditioned on all parties accepting Boeing’s customary conditions for consenting to an assignment, including, but not limited to, the following: assignor and assignee indemnification of Boeing for any actions taken by an assignee under any assignment agreement; Boeing’s right to exercise the manufacturer’s option to assume Customer’s rights under the Purchase Agreement in the event of a default under an assignment agreement; and confidentiality.  A Party that is

i.       bound by a customary confidentiality agreement;

24

ii.       neither an airplane manufacturer nor an airline;  and

iii.       responding to a Customer request for proposals to provide financing of Aircraft pursuant to the Purchase Agreement, including pre-delivery payment financing

shall be deemed a “Financing Party”.

[***]. When the Customer identifies a Financing Party and the preliminary terms of an assignment under which pre-delivery payment financing (PDP) or aircraft purchase financing could be provided, at Customer’s request, [***].

Boeing will consent to any reasonable request by Customer to assign the Purchase Agreement to an affiliate provided that Boeing is provided with an adequate  guarantee of performance of all obligations under this Purchase Agreement and in a form reasonably satisfactory to Boeing.

Customer understands that Boeing is not required under any circumstances to consent to an assignment that would constitute a novation.

The foregoing provisions are intended to supplement, and not to supersede, the assignment provisions of the AGTA, which address delivery date and post-delivery assignments, merger-type assignments, and other matters.

11. [***].

Boeing recognizes that Customer requires early notification of Development Changes, incorporated into the Detail Specification, and Manufacturer Changes applicable to the Aircraft so Customer can evaluate, in a timely manner, the effect of such changes on maintenance and operation of the Aircraft.  Boeing will provide to Customer notification of such Developmental Changes and Manufacturer Changes affecting Customer's airplanes through Boeing's standard notification process.

[***]

12. [***].

[***].

13. Confidential Treatment.

Boeing and Customer understand that the commercial and financial information contained in this Letter Agreement is considered by the parties as confidential (Confidential Information) and both agree not to disclose such Confidential Information except as provided herein.  In addition to the parties’ respective officers, directors and employees who need to know the Confidential Information and who understand the obligation to keep it confidential, the parties may disclose Confidential Information (1) to the extent required by law and (2) to its agents, auditors and advisors who need to know the Confidential Information for purposes of enabling each party to understand, perform its obligations under, or receive the benefits of, this Agreement and who have agreed not to use or disclose the Confidential Information for any other purpose without the other party’s prior written consent.  In the event that a party concludes that disclosure of Confidential Information contained in this Letter Agreement is required by applicable law, the party will so advise the other party promptly in writing and endeavor to protect the confidentiality of such Confidential Information to the widest extent possible.  In the event of a legal dispute with Boeing, nothing herein will preclude Customer from sharing with its legal counsel information necessary for purposes of enabling counsel to advise or represent Customer provided that so long as Customer causes its legal counsel to maintain the confidentiality of information that is the subject of this Article.  Except as provided in the assignment provisions of Article 10 of this Special Matters Letter Agreement, Customer will not disclose this Letter Agreement for purposes of financing payments without the prior written consent of Boeing, which consent will be provided once the financier enters into a Non Disclosure Agreement with Boeing in form and substance reasonably satisfactory to Boeing, which will include agreeing not to disclose or use Confidential Information except for the purpose set forth herein. This provision shall not apply to any Confidential Information that is in the public domain except that a party will be liable to the other for breach of its obligations under this provision if the Confidential Information entered the public domain as a consequence of a wrongful act or omission on its part.

25

Very truly yours,

THE BOEING COMPANY
By:
	Ms. Kathie S. Weibel
Its:	Attorney-In-Fact

26

If the foregoing correctly sets forth your understanding of our agreement with respect to the matters treated herein, please indicate your acceptance and approval.

ACCEPTED AND AGREED TO this 22 day of March of 2010

LAN AIRLINES S.A.
By:
	Mr. Roberto Alvo
Its:	Sr. Vice President Strategic Planning & Corporate Development
By:
	Mr. Alejandro de la Fuente
Its:	Chief Financial Officer

27

[***]

28

[***]

29

[***]

Article 5 Credit Memoranda	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]

30

Appendix 1 to Special Matters Letter Agreement 6-1162-ILK-0310R1

FORM OF

Supplemental Agreement No. 1 (FORM OF SA-1)

to

Purchase Agreement No. 3256

between

The Boeing Company

and

LAN AIRLINES S.A.

Relating to Boeing Model 787-916/-816 Aircraft

THIS SUPPLEMENTAL AGREEMENT, entered into as of this ____________ day of ____ of 20__, by and between THE BOEING COMPANY, a Delaware corporation with offices in Seattle, Washington, (Boeing) and LAN AIRLINES S.A., a Chilean corporation with offices in Santiago, Chile (Customer);

RECITALS:

WHEREAS, Boeing and Customer entered into Purchase Agreement No. 3256 dated October   , 2007 (the Purchase Agreement), relating to Boeing Model 787-916/-816 aircraft (Aircraft).

WHEREAS, Customer has subsequently provided written notice to Boeing of its election to exercise its rights in respect of two (2) Option Aircraft reflected in Letter Agreement 6-1162-ILK-0317, dated October   , 2007 in order to purchase two (2) 787-816 Aircraft (the Exercised Aircraft) pursuant to the terms and conditions of the Purchase Agreement;

WHEREAS, Boeing has received Customer’s written notice and, in wishing to reach a definitive agreement for the purchase of the Exercised Aircraft, confirms its acceptance of Customer’s written notice for each of the Exercised Aircraft;

WHEREAS, as a result of the preceding Boeing and Customer wish to reflect the

  (i) purchase of the two (2) Exercised Aircraft by the Customer as a result of the exercise of its rights in respect of one Option Aircraft;  and

  (ii) decrease in the number of remaining Option Aircraft;

WHEREAS, the parties see continuing merit in revising Appendix 1 to incorporate data in accordance with the next sequential delivery date Option Aircraft;

WHEREAS, the parties wish to reflect revision of Table A to the Tailored Escalation Letter Agreement 6-1162-ILK-0319 to incorporate the Exercised Aircraft;

WHEREAS, the parties see continuing merit in revising Attachment 2 to the Special Matters Customer 787 Fleet Letter Agreement 6-1162-ILK-0326 to incorporate the Exercised Aircraft; and

WHEREAS, Boeing and Customer have mutually agreed to amend the Purchase Agreement to incorporate the effect of this and certain other changes.

31

AGREEMENT:

NOW THEREFORE, and in consideration of the mutual covenants herein contained, the parties agree to amend the Purchase Agreement as follows:

1.                 The Table of Contents of the Purchase Agreement is deleted in its entirety and is replaced by the new Table of Contents identified with an SA-1 legend.

2.                 Table 1 ROLLS 787-816 Aircraft Information and Table 1 GENX 787-816 Aircraft Information Table are each deleted in their entirety and are replaced by successor Table 1 ROLLS 787-816 Aircraft Information and successor Table 1 GENX 787-816 Aircraft Information Table to Purchase Agreement No. 3256 Aircraft Delivery, Description, evidenced with an “SA-1” legend to add the Exercised Aircraft.

3.                 Attachment 1R1 to Special Matters Letter Agreement 6-1162-ILK-310 shall replace its predecessor in its entirety and shall reflect deletion for the Exercised Aircraft due to Customer’s exercise of its option rights in respect of the Exercised Aircraft and the thirteen remaining Option Aircraft.

4.                 Appendix 1R1 to the Special Matters Letter Agreement 6-1162-0310 shall replace its predecessor in its entirety with the intent of its revision being to replace the Exercised Aircraft with the Option Aircraft having the next sequential delivery.

5.                 Attachment 1R1 to Option Aircraft Letter Agreement 6-1162-ILK-0317 shall replace its predecessor in its entirety and shall reflect deletion for the Exercised Aircraft due to Customer’s exercise of its option rights in respect of the Exercised Aircraft and the thirteen remaining Option Aircraft.

6.                 [***].

7.                 The parties agree that:

 7.1. Subject to Customer’s adherence to the Limitations on Use and to all terms and conditions set forth in article 2 of the Special Matters Letter Agreement 6-1162-ILK-0310 (Special Matters Letter),  [***];

 7.2. [***]

 7.3. [***].

8.                 Attachment 2 to the Special Matters Customer 787 Fleet Letter Agreement 6-1162-ILK-0326 is revised to incorporate the Exercised Aircraft.

9.                 [***]:

[***]	[***]
[***]	[***]
[***]	[***]

[***].

32

The Purchase Agreement will be deemed to be amended to the extent provided herein and as so amended will continue in full force and effect.  In the event of any inconsistency between the above provisions and the provisions contained in the referenced exhibits to this Supplemental Agreement, the terms of the exhibits will control.

DATED AS OF  this ______ day of ______ of 20__

LAN AIRLINES S.A.		THE BOEING COMPANY
By:		By:
	Mr. Carlos Prado C.		Ms. Irma L. Krueger
Its:	Senior VP Corporate Investments	Its:	Attorney in Fact
By:
	Mr. Marco Jofré M.
Its:	Senior VP Operations, Engineering &
	Maintenance

33

TABLE OF CONTENTS

Page Number		ARTICLES	SA NUMBER
	1.	Quantity, Model and Description
	2.	Delivery Schedule
	3.	Price
	4.	Payment
	5.	Miscellaneous
		TABLE
	1-ROLLS	787-916 Aircraft Information Table
	1-GENX	787-916 Aircraft Information Table
	1-ROLLS	787-816 Aircraft Information Table	SA-1
	1-GENX	787-816 Aircraft Information Table	SA-1
		EXHIBIT
	A 787-916	Aircraft Configuration
	A 787-816	Aircraft Configuration
	B.	Aircraft Delivery Requirements and Responsibilities
		SUPPLEMENTAL EXHIBITS
	AE1	Escalation Adjustment/Airframe and Optional Features
	BFE1	Buyer Furnished Equipment Variables
	CS1	Customer Support Document
		Attachment A to the Customer Support Document
	EE1. ROLLS	Engine Escalation And Engine Warranty
	EE1. GENX	Engine Escalation And Engine Warranty
	SLP1.	Service Life Policy Components
		LETTER AGREEMENTS
	3256-01	787 Spare Parts Initial Provisioning
	3256-02	Open Configuration Matters
	3256-03	787 e-Enabling Letter Agreement
	3256-04	787 Spare Parts Commitment
	6-1162-ILK-0310	Special Matters
	[***]	[***]
	[***]	[***]

34

TABLE OF CONTENTS, continued

Page Number		LETTER AGREEMENTS, continued	SA NUMBER
	[***]	[***]	SA-1
	[***]	[***]
	6-1162-ILK-0311	787 AGTA Terms Revisions
	6-1162-ILK-0312	Promotional Support (First of Minor Model)
	6-1162-ILK-0313	EULA Special Matters
	[***]	[***]
	[***]	[***]
	6-1162-ILK-0316	Aircraft Model Substitution
	[***]	[***]
	[***]	[***]	SA-1
	6-1162-ILK-0318	Alternate Engine Selection
	[***]	[***]
	[***]	[***]	SA-1
	6-1162-ILK-0320	Delivery Flexibility
	6-1162-ILK-0321	Demonstration Flight Waiver
	6-1162-ILK-0322	AGTA Article 8.2 Insurance; Warranty Coverage; and Exhibit B Matters for Certain Boeing Model 787-9 Aircraft Leased from International Lease Finance Corporation by LAN Airlines S.A.
	6-1162-ILK-0323	Special Matters Customer Support
	6-1162-ILK-0324	Special Matters Warranty
	6-1162-ILK-0325	NOT USED in the Purchase Agreement
	6-1162-ILK-0326	Special Matters Customer 787 Fleet
	6-1162-ILK-0326	Attachment 1, Relevant Dates for First Aircraft
	6-1162-ILK-0326	Attachment 2R1 Covered Aircraft	SA-1
	6-1162-ILK-0327	Performance Guarantees 787-916/ 816
	[***]	[***]
	6-1162-ILK-0329	Extended Operations (ETOPS) Matters
	[***]	[***]
	[***]	[***]

35

[***]

36

[***]

37

[***]

38

[***]

39

[***]

40

[***]

41

[***]

[***]* - [***]

42

CUSTOMER 787 FLEET

	Aircraft	Delivery Date	Ownership Data	Boeing Model
	1	[***]	[***]	787-9
	2	[***]	[***]	787-9
	3	[***]	[***]	787-9
	4	[***]	[***]	787-9
	5	[***]	[***]	787-9
	6	[***]	[***]	787-9
	7	[***]	[***]	787-9
	8	[***]	[***]	787-9
	9	[***]	[***]	787-9
	10	[***]	[***]	787-9
	11	[***]	[***]	787-8
	12	[***]	[***]	787-8
	13	[***]	[***]	787-8
	14	[***]	[***]	787-8
	15	[***]	[***]	787-9
	16	[***]	[***]	787-9
	17	[***]	[***]	787-9
	18	[***]	[***]	787-9
	19	[***]	[***]	787-8
	20	[***]	[***]	787-8
	21	[***]	[***]	787-8
	22	[***]	[***]	787-8
	23	[***]	[***]	787-8
	24	[***]	[***]	787-8
	25	[***]	[***]	787-8
	26	[***]	[***]	787-8
	27	[***]	[***]	787-8
	28	[***]	[***]	787-8
	29	[***]	[***]	787-8
	30	[***]	[***]	787-8
	31	[***]	[***]	787-8
	32	[***]	[***]	787-8
R1	33	[***]	[***]	787-8
R1	34	[***]	[***]	787-8

43

Appendix 2 to Special Matters Letter Agreement 6-1162-ILK-0310R1

FORM OF

Supplemental Agreement No. 1 (FORM OF SA-1)

to

Purchase Agreement No. 3256

between

The Boeing Company

and

LAN AIRLINES S.A.

Relating to Boeing Model 787-916/-816 Aircraft

THIS SUPPLEMENTAL AGREEMENT, entered into as of this _______ day of ___________ of 20__, by and between THE BOEING COMPANY, a Delaware corporation with offices in Seattle, Washington, (Boeing) and LAN AIRLINES S.A., a Chilean corporation with offices in Santiago, Chile (Customer);

RECITALS:

WHEREAS, Boeing and Customer entered into Purchase Agreement No. 3256 dated October   , 2007 (the Purchase Agreement), relating to Boeing Model 787-916/-816 aircraft (Aircraft).

WHEREAS, Customer has subsequently provided [***];

[***];

WHEREAS, the parties wish to revise the Aircraft Information Tables to reflect the [***];

WHEREAS, the parties see continuing merit to revise Attachment 2 to the Special Matters Customer 787 Fleet Letter Agreement 6-1162-ILK-0326 [***]

WHEREAS, Boeing and Customer have mutually agreed to amend the Purchase Agreement to incorporate the effect of this and certain other changes.

AGREEMENT:

NOW THEREFORE, and in consideration of the mutual covenants herein contained, the parties agree to amend the Purchase Agreement as follows:

10.                 The Table of Contents of the Purchase Agreement is deleted in its entirety and is replaced by the new Table of Contents identified with an SA-1 legend.

11.                 Table 1 ROLLS 787-816 Aircraft Information and Table 1 GENX 787-816 Aircraft Information Table are each deleted in their entirety and are replaced by successor Table 1 ROLLS 787-816 Aircraft Information and successor Table 1 GENX 787-816 Aircraft Information Table to Purchase Agreement No. 3256 Aircraft Delivery, Description, evidenced with an “SA-1” legend to delete the Replaced Aircraft.

44

12.                 Table 1 ROLLS 787-916 Aircraft Information and Table 1 GENX 787-916 Aircraft Information Table are each deleted in their entirety and are replaced by successor Table 1 ROLLS 787-916 Aircraft Information and successor Table 1 GENX 787-916 Aircraft Information Table to Purchase Agreement No. 3256 Aircraft Delivery, Description, evidenced with an “SA-1” legend to incorporate the Substitution Aircraft.

13.                 The parties agree that:

13.1. [***];

13.2. [***]

13.3. [***].

14.                 Attachment 2 to the Special Matters Customer 787 Fleet Letter Agreement 6-1162-ILK-0326 is revised [***].

[***].

The Purchase Agreement will be deemed to be amended to the extent provided herein and as so amended will continue in full force and effect.  In the event of any inconsistency between the above provisions and the provisions contained in the referenced exhibits to this Supplemental Agreement, the terms of the exhibits will control.

DATED AS OF  this ____ day of ______ of 20__

LAN AIRLINES S.A.		THE BOEING COMPANY
By:		By:
	Mr. Carlos Prado C.		Ms. Irma L. Krueger
Its:	Senior VP Corporate Investments	Its:	Attorney in Fact
By:
	Mr. Marco Jofré M.
Its:	Senior VP Operations, Engineering &
	Maintenance

45

TABLE OF CONTENTS

Page Number		ARTICLES	SA NUMBER
	1.	Quantity, Model and Description
	2.	Delivery Schedule
	3.	Price
	4.	Payment
	5.	Miscellaneous
		TABLE
	1-ROLLS	787-916 Aircraft Information Table	SA-1
	1-GENX	787-916 Aircraft Information Table	SA-1
	1-ROLLS	787-816 Aircraft Information Table	SA-1
	1-GENX	787-816 Aircraft Information Table	SA-1
		EXHIBIT
	A 787-916	Aircraft Configuration
	A 787-816	Aircraft Configuration
	B.	Aircraft Delivery Requirements and Responsibilities
		SUPPLEMENTAL EXHIBITS
	AE1	Escalation Adjustment/Airframe and Optional Features
	BFE1	Buyer Furnished Equipment Variables
	CS1	Customer Support Document
		Attachment A to the Customer Support Document
	EE1. ROLLS	Engine Escalation And Engine Warranty
	EE1. GENX	Engine Escalation And Engine Warranty
	SLP1.	Service Life Policy Components
		LETTER AGREEMENTS
	3256-01	787 Spare Parts Initial Provisioning
	3256-02	Open Configuration Matters
	3256-03	787 e-Enabling Letter Agreement
	3256-04	787 Spare Parts Commitment
	6-1162-ILK-0310	Special Matters
	[***]	[***]
	[***]	[***]

46

 

TABLE OF CONTENTS, continued

Page Number		LETTER AGREEMENTS, continued	SA NUMBER
	[***]	[***]
	[***]	[***]
	6-1162-ILK-0311	787 AGTA Terms Revisions
	6-1162-ILK-0312	Promotional Support (First of Minor Model)
	6-1162-ILK-0313	EULA Special Matters
	[***]	[***]
	[***]	[***]
	6-1162-ILK-0316	Aircraft Model Substitution
	6-1162-ILK-0317	Option Aircraft
	6-1162-ILK-0317	Attachment 1 to Option Aircraft
	6-1162-ILK-0318	Alternate Engine Selection
	[***]	[***]
	[***]	[***]
	[***]	[***]
	6-1162-ILK-0321	Demonstration Flight Waiver
	6-1162-ILK-0322	AGTA Article 8.2 Insurance; Warranty Coverage; and Exhibit B Matters for Certain Boeing Model 787-9 Aircraft Leased from International Lease Finance Corporation by LAN Airlines S.A.
		Special Matters Customer Support
	6-1162-ILK-0324	Special Matters Warranty
	6-1162-ILK-0325	NOT USED in the Purchase Agreement
	6-1162-ILK-0326	Special Matters Customer 787 Fleet
	6-1162-ILK-0326	Attachment 1, Relevant Dates for First Aircraft
	6-1162-ILK-0326	Attachment 2R1 Covered Aircraft	SA-1
	6-1162-ILK-0327	Performance Guarantees 787-916/ 816
	[***]	[***]
	6-1162-ILK-0329	Extended Operations (ETOPS) Matters
	[***]	[***]
	[***]	[***]

47

[***]

[***]

[***]

[***]

CUSTOMER 787 FLEET

	Aircraft	Delivery Date	Ownership Data	Boeing Model
	1	[***]	[***]	787-9
	2	[***]	[***]	787-9
	3	[***]	[***]	787-9
	4	[***]	[***]	787-9
	5	[***]	[***]	787-9
	6	[***]	[***]	787-9
	7	[***]	[***]	787-9
	8	[***]	[***]	787-9
	9	[***]	[***]	787-9
	10	[***]	[***]	787-9
R	11	[***]	[***]	787-9
	12	[***]	[***]	787-8
	13	[***]	[***]	787-8
	14	[***]	[***]	787-8
	15	[***]	[***]	787-9
	16	[***]	[***]	787-9
	17	[***]	[***]	787-9
	18	[***]	[***]	787-9
	19	[***]	[***]	787-8
	20	[***]	[***]	787-8
	21	[***]	[***]	787-8
	22	[***]	[***]	787-8
	23	[***]	[***]	787-8
	24	[***]	[***]	787-8
	25	[***]	[***]	787-8
	26	[***]	[***]	787-8
	27	[***]	[***]	787-8
	28	[***]	[***]	787-8
	29	[***]	[***]	787-8
	30	[***]	[***]	787-8
	31	[***]	[***]	787-8
	32	[***]	[***]	787-8

@@@6-1162-ILK-0314R1

LAN Airlines S.A.

Avenida Presidente Riesco 5711

Piso 19

Las Condes

Santiago, Chile

Subject: Liquidated Damages – Non-Excusable Delay

References: 1) Purchase Agreement No. 3256 (the Purchase Agreement) between The Boeing Company (Boeing) and LAN Airlines S.A. (Customer) relating to Boeing Model 787-916/-816 aircraft (Aircraft); and

2) Aircraft General Terms Agreement dated as of the 9th of May of 1997 between the parties, identified as AGTA-LAN (AGTA).

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement.  All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement.

Definition of Terms:

Non-Excusable Delay:  delay in delivery of any Aircraft beyond the last day of the delivery month (Scheduled Delivery) established in the Purchase Agreement by any cause that is not an Excusable Delay pursuant to Article 7 of the AGTA and for which Customer is otherwise entitled to a remedy from Boeing pursuant to applicable law.

1. Liquidated Damages

[***]:

a) [***].

(i) [***]

(ii) [***]

(iii) [***].

2. Interest.

[***]

The product of the daily interest rate (computed by dividing the annual interest rate in effect for each day by 360 days) times the entire amount of advance payments received by Boeing for such Aircraft.  The annual interest rate in effect for each day shall be computed using the thirty day U.S. dollar London Interbank Rate (LIBOR) [***].  Such interest will compound monthly and will be due and payable each calendar quarter, in arrears with any unpaid residual interest due at (x) actual delivery or (y) upon termination as specified in paragraph 4 below.

3. [***].

a)           [***]..

b)           [***].  .

4. [***]

[***].

5. Exclusive Remedies

Customer agrees that the consideration and provisions contained herein are Customer’s exclusive remedies for all issues with respect to the delay in delivery of the Aircraft and are in lieu of all other damages, claims, and remedies of Customer arising at law or otherwise for any Non-Excusable Delay in the Aircraft delivery.  The entering into this Letter Agreement shall constitute complete, full and final settlement and satisfaction of all Boeing’s obligations and liabilities to Customer for any such delay.  Customer hereby waives and renounces all other claims, remedies and causes of action arising at law or otherwise for any such Non-Excusable Delay.

6. Confidential Treatment

Boeing and Customer understand that the commercial and financial information contained in this Letter Agreement is considered by the parties as confidential (Confidential Information) and both agree not to disclose such Confidential Information except as provided herein.  In addition to the parties’ respective officers, directors and employees who need to know the Confidential Information and who understand the obligation to keep it confidential, the parties may disclose Confidential Information (1) to the extent required by law and (2) to its agents, auditors and advisors who need to know the Confidential Information for purposes of enabling each party to understand, perform its obligations under, or receive the benefits of, this Agreement and who have agreed not to use or disclose the Confidential Information for any other purpose without the other party’s prior written consent.  In the event that a party concludes that disclosure of Confidential Information contained in this Letter Agreement is required by applicable law, the party will so advise the other party promptly in writing and endeavor to protect the confidentiality of such Confidential Information to the widest extent possible.  In the event of a legal dispute with Boeing, nothing herein will preclude Customer from sharing with its legal counsel information necessary for purposes of enabling counsel to advise or represent Customer provided that so long as Customer causes its legal counsel to maintain the confidentiality of information that is the subject of this Article.  Except as provided in the assignment provisions of Article 10 of the Special Matters Letter Agreement 6-1162-ILK-0310R1, Customer will not disclose this Letter Agreement for purposes of financing payments without the prior written consent of Boeing, which consent will be provided once the financier enters into a Non Disclosure Agreement with Boeing in form and substance reasonably satisfactory to Boeing, which will include agreeing not to disclose or use Confidential Information except for the purpose set forth herein. This provision shall not apply to any Confidential Information that is in the public domain except that a party will be liable to the other for breach of its obligations under this provision if the Confidential Information entered the public domain as a consequence of a wrongful act or omission on its part.

Very truly yours,
THE BOEING COMPANY
By
	Ms. Kathie S. Weibel
Its	Attorney-In-Fact

If the foregoing correctly sets forth your understanding of our agreement with respect to the matters treated herein, please indicate your acceptance and approval.

ACCEPTED AND AGREED TO this 22 day of March of 2010
LAN AIRLINES S.A.
By:
	Mr. Roberto Alvo
Its:	Sr. Vice President Strategic Planning & Corporate Development
By:
	Mr. Alejandro de la Fuente
Its:	Chief Financial Officer

Table A

[***]

[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]

Table A

[***]

[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]

* [***]

** Indicative of midmonth of the quarter.

6-1162-KSW-6446

LAN Airlines S.A.

Avenida Presidente Riesco 5711

Piso 19

Las Condes

Santiago, Chile

Subject: Aircraft Performance Guarantees for 787-816 2011 Aircraft

Reference: Purchase Agreement No. 3256 (Purchase Agreement) between The Boeing Company (Boeing) and LAN Airlines S.A. (Customer) relating to Model 787-916/-816 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement.  All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement.

Boeing agrees to provide Customer with the performance guarantees in the Attachment.   [***].

Customer agrees not to disclose this Letter Agreement, attachments, or any other information related to this Letter Agreement without the prior written consent of Boeing.

Very truly yours,
THE BOEING COMPANY
By
Its	Attorney-In-Fact

ACCEPTED AND AGREED TO this

Date: March 22, 2010

.

LAN AIRLINES S.A.
By:
	. Mr. Roberto Alvo
Its:	Sr. Vice President Strategic Planning & Corporate Development

By:
	. Mr. Alejandro de la Fuente
Its:	Chief Financial Officer

MODEL 787-816 PERFORMANCE GUARANTEES

FOR LAN AIRLINES S.A.

SECTION	CONTENTS
1	AIRCRAFT MODEL APPLICABILITY
2	FLIGHT PERFORMANCE
3	RUNWAY LOADING
4	AIRCRAFT CONFIGURATION
5	GUARANTEE CONDITIONS
6	GUARANTEE COMPLIANCE
7	EXCLUSIVE GUARANTEES

1 AIRCRAFT MODEL APPLICABILITY

The guarantees contained in this Attachment (the "Performance Guarantees") are applicable to the 787-816 Aircraft with a maximum takeoff weight of [***], a maximum landing weight of [***], and a maximum zero fuel weight of 156,489 kilograms, and equipped with Boeing furnished [***].

2 FLIGHT PERFORMANCE

2.1 Takeoff

2.1.1 The FAA approved takeoff field length at a gross weight at the start of the ground roll of 219,538 kilograms, at a temperature of 30°C, at a sea level altitude, and using maximum takeoff thrust, shall not be more than the following guarantee value:

NOMINAL:	[***]
TOLERANCE:	[***]
GUARANTEE:	[***]

2.1.2 The FAA approved takeoff gross weight at the start of ground roll, at a temperature of 24°C, at an altitude of 8,361 feet, from a 12,467 foot runway, and satisfying the conditions defined below, and using maximum takeoff thrust, shall not be less than the following guarantee value:

NOMINAL:	[***]
TOLERANCE:	[***]
GUARANTEE:	[***]

Conditions:

The clearway is 984 feet.

The stopway is 197 feet.

The runway slope is 0.04 percent uphill.

The following obstacle definition is based on a straight-out departure where obstacle height and distance are specified with reference to the liftoff end of the runway:

	Distance	Height
1.	[***]	[***]
2.
3.	[***]	[***]
4.

2.1.3 The FAA approved takeoff gross weight at the start of ground roll, at a temperature of 24°C, at an altitude of 8,361 feet, from a 12,467 foot runway, and satisfying the conditions defined below, and using maximum takeoff thrust, shall not be less than the following guarantee value:

NOMINAL:	[***]
TOLERANCE:	[***]
GUARANTEE:	[***]

Conditions:

The runway is wet.

The clearway is 984 feet.

The stopway is 197 feet.

The runway slope is 0.04 percent uphill.

The following obstacle definition is based on a straight-out departure where obstacle height and distance are specified with reference to the liftoff end of the runway:

	Distance	Height
1.	[***]	[***]
2.	[***]	[***]
3.	[***]	[***]
4.

2.1.4 The FAA approved takeoff gross weight at the start of ground roll, at a temperature of 30°C, at an altitude of 19 feet, from a 9,154 foot runway, and satisfying the conditions defined below, and using maximum takeoff thrust, shall not be less than the following guarantee value:

NOMINAL:	[***]
TOLERANCE:	[***]
GUARANTEE:	[***]

Conditions:

The stopway is 285 feet.

The runway slope is 0.02 percent uphill.

The following obstacle definition is based on a straight-out departure where obstacle height and distance are specified with reference to the liftoff end of the runway:

	Distance	Height
1.	[***]	[***]
2.	[***]	[***]
3.	[***]	[***]
4.	[***]	[***]
5.	[***]	[***]

2.1.5 The FAA approved takeoff gross weight at the start of ground roll, at a temperature of 24°C, at an altitude of 7,316 feet, from a 12,795 foot runway, and satisfying the conditions defined below, and using maximum takeoff thrust, shall not be less than the following guarantee value:

NOMINAL:	[***]
TOLERANCE:	[***]
GUARANTEE:	[***]

Conditions:

The runway slope is 0.08 percent uphill.

2.1.6 The FAA approved takeoff gross weight at the start of ground roll, at a temperature of 24°C, at an altitude of 7,316 feet, from a 12,795 foot runway, and satisfying the conditions defined below, and using maximum takeoff thrust, shall not be less than the following guarantee value:

NOMINAL:	[***]
TOLERANCE:	[***]
GUARANTEE:	[***]

Conditions:

The runway is wet.

The runway slope is 0.08 percent uphill.

2.1.7 The FAA approved takeoff gross weight at the start of ground roll, at a temperature of 30°C, at an altitude of 1,554 feet, from a 12,303 foot runway, and satisfying the conditions defined below, and using maximum takeoff thrust, shall not be less than the following guarantee value:

NOMINAL:	[***]
TOLERANCE:	[***]
GUARANTEE:	[***]

Conditions:

The runway slope is 0.06 percent uphill.

The following obstacle definition is based on a straight-out departure where obstacle height and distance are specified with reference to the liftoff end of the runway:

	Distance	Height
1.	[***]	[***]
2.	[***]	[***]

2.1.8 The FAA approved takeoff gross weight at the start of ground roll, at a temperature of 16°C, at an altitude of 9,234 feet, from a 10,236 foot runway, and satisfying the conditions defined below, and using maximum takeoff thrust, shall not be less than the following guarantee value:

NOMINAL:	[***]
TOLERANCE:	[***]
GUARANTEE:	[***]

Conditions:

The runway slope is 0.41 percent uphill.

The following obstacle definition is based on a straight-out departure where obstacle height and distance are specified with reference to the liftoff end of the runway:

	Distance	Height
1.	[***]	[***]
2.	[***]	[***]

2.2 Landing

2.2.1 The FAA approved landing field length at a gross weight of 167,829 kilograms and at a sea level altitude, shall not be more than the following guarantee value:

NOMINAL:	[***]
TOLERANCE:	[***]
GUARANTEE:	[***]

2.2.2 The FAA approved landing gross weight at a 12,467 foot runway, at a temperature of 30°C and at an altitude of 1,554 feet under wet conditions, shall not be less than the following guarantee value:

GUARANTEE: [***]

2.2.3 The FAA approved landing gross weight at a 10,236 foot runway, at a temperature of 16°C and at an altitude of 9,234 feet under wet conditions, shall not be less than the following guarantee value:

NOMINAL:	[***]
TOLERANCE:	[***]
GUARANTEE:	[***]

2.3 Maximum Takeoff and Landing Altitude

The FAA approved maximum takeoff and landing pressure altitude, shall not be less than the following guarantee value:

GUARANTEE: [***]

2.4 Maximum Tailwind

The FAA approved maximum tail wind for takeoff and landing measured at a 10 meter height above the runway, shall not be less than the following guarantee value:

GUARANTEE: [***]

2.5 Enroute One-Engine-Inoperative Altitude

The FAA approved enroute one-engine-inoperative altitude at which the available gross climb gradient equals 1.1 percent at a gross weight of 195,500 kilograms on an ISA+10°C day using not more than maximum continuous thrust, shall not be less than the following guarantee value:

NOMINAL:	[***]
TOLERANCE:	[***]
GUARANTEE:	[***]

2.6 Altitude Capability - All Engines Operating

The altitude capability at a gross weight of 214,100 kilograms, representative of the gross weight after takeoff from sea level at 219,540 kilograms, on an ISA+10°C day, at 0.85 Mach number, and satisfying the conditions defined below, shall not be less than the following guarantee value:

NOMINAL:	[***]
TOLERANCE:	[***]
GUARANTEE:	[***]

Conditions:

1) The Aircraft shall be capable of maintaining level cruising flight using not more than maximum cruise thrust.

2) The Aircraft shall be capable of maintaining a rate of climb of 300 feet per minute using not more than maximum climb thrust.

3) The Aircraft shall be capable of at least a 1.3 g maneuver load factor at buffet onset.

2.7 Cruise Range

The still air range at an initial cruise altitude of 36,000 feet on a standard day at 0.85 Mach number, starting at a gross weight of 213,190 kilograms and consuming 68,040 kilograms of fuel, and using not more than maximum cruise thrust (except maximum climb thrust may be used during a step climb) and using the conditions and operating rules defined below, shall not be less than the following guarantee value:

NOMINAL:	[***]
TOLERANCE:	[***]
GUARANTEE:	[***]

Conditions and operating rules:

A step climb or multiple step climbs of 2,000 feet altitude may be used when beneficial to minimize fuel burn.

2.8 Maximum Altitude

The FAA approved maximum altitude shall not be less than the following guarantee value.

GUARANTEE: [***]

2.9 Mission

2.9.1 Mission Payload

The payload plus tare for a stage length of [***] nautical miles in still air (equivalent to a distance of [***] nautical miles with a 9 knot tailwind, representative of a [***] route) using the conditions and operating rules defined below, shall not be less than the following guarantee value:

NOMINAL:	[***]
TOLERANCE:	[***]
GUARANTEE:	[***]

Conditions and operating rules:

Stage Length:	The stage length is defined as the sum of the distances for the climbout maneuver, climb, cruise, and descent.
Takeoff:	The airport altitude is 1,554 feet.
	The airport temperature is 30°C.
	The runway length is 12,467 feet.
	The runway slope is 0.01 percent downhill.
	The following obstacle definition is based on a straight out departure where obstacle height and distance are specified with reference to the liftoff end of the runway:

	Distance	Height
1.	[***]	[***]

	Maximum takeoff thrust is used for the takeoff.
	The takeoff gross weight shall conform to FAA Regulations.
Climbout Maneuver:	Following the takeoff to 35 feet, the Aircraft accelerates to 250 KCAS while climbing to 1,500 feet above the departure airport altitude and retracting flaps and landing gear.
Climb:	The Aircraft climbs from 1,500 feet above the departure airport altitude to 10,000 feet altitude at 250 KCAS.
	The Aircraft then accelerates at a rate of climb of 500 feet per minute to the recommended climb speed for minimum block fuel.
	The climb continues at the recommended climb speed for minimum block fuel until 0.85 Mach number is reached.
	The climb continues at 0.85 Mach number to the initial cruise altitude.
	The temperature is ISA+10°C during climb.
	Maximum climb thrust is used during climb.
Cruise:	The Aircraft cruises at the Long Range Cruise (LRC) speed.

	The initial cruise altitude is 37,000 feet.
	A step climb or multiple step climbs of 2,000 feet altitude may be used when beneficial to minimize fuel burn.
	The temperature is ISA+10°C during cruise.
	The cruise thrust is not to exceed maximum cruise thrust except during a step climb when maximum climb thrust may be used.
Descent:	The Aircraft descends from the final cruise altitude at 250 KCAS to an altitude of 1,500 feet above the destination airport altitude.
	Throughout the descent, the cabin pressure will be controlled to a maximum rate of descent equivalent to 300 feet per minute at sea level.
	The temperature is ISA+10°C during descent.
Approach and Landing Maneuver:	The Aircraft decelerates to the final approach speed while extending landing gear and flaps, then descends and lands.
	The destination airport altitude is 2,000 feet.
Fixed Allowances:	For the purpose of this guarantee and for the purpose of establishing compliance with this guarantee, the following shall be used as fixed quantities and allowances:
	Taxi-Out: Fuel            [***]
	Takeoff and Climbout Maneuver: Fuel            [***] Distance               [***]
	Approach and Landing Maneuver: Fuel            [***]
	Taxi-In (shall be consumed from the reserve fuel): Fuel            [***]
	Usable reserve fuel remaining upon completion of the approach and landing maneuver:  [***]
	For information purposes, the reserve fuel is based on a ISA + 10°C day temperature and a) a contingency fuel allowance equivalent to 3 percent of the trip fuel from takeoff through the completion of the approach and landing maneuver at the destination airport, b) a missed approach and flight to a 156 nautical mile alternate with a 9 knot tailwind, c) an approach and landing maneuver at the alternate airport, and d) a 30 minute hold at 1,500 feet above the alternate airport altitude of 240 feet.

2.9.2 [***]

The block fuel for a stage length of [***] nautical miles in still air (equivalent to a distance of [***] nautical miles with a 9 knot tailwind, representative of a [***] route) with a 28,980 kilogram payload (including tare) using the conditions and operating rules defined below, shall not be more than the following guarantee value:

NOMINAL:	[***]
TOLERANCE:	[***]
GUARANTEE:	[***]

Conditions and operating rules are the same as Paragraph 2.9.1 except as follows:

Block Fuel:	The block fuel is defined as the sum of the fuel used for taxi-out, takeoff and climbout maneuver, climb, cruise, descent, approach and landing maneuver, and taxi-in.
Fixed Allowances:	For the purpose of this guarantee and for the purpose of establishing compliance with this guarantee, the following shall be used as fixed quantities and allowances:
	Taxi-Out: [***]           [***]
	Takeoff and Climbout Maneuver: [***]           [***] [***]           [***]
	Approach and Landing Maneuver: [***]           [***]
	Taxi-In (shall be consumed from the reserve fuel): [***]           [***]
	Usable reserve fuel remaining upon completion of the approach and landing maneuver:  [***]

2.9.3 Mission Payload

The payload plus tare for a stage length of [***]nautical miles in still air (equivalent to a distance of [***]nautical miles with a 33 knot headwind, representative of a [***]) using the conditions and operating rules defined below, shall not be less than the following guarantee value:

NOMINAL:	[***]
TOLERANCE:	[***]
GUARANTEE:	[***]

Conditions and operating rules:

Stage Length:	The stage length is defined as the sum of the distances for the climbout maneuver, climb, cruise, and descent.
Takeoff:	The airport altitude is 2,000 feet.
	The airport temperature is 30°C.
	The runway length is 14,271 feet.
	The clearway is 853 feet.
	The runway slope is 0.12 percent uphill.
	The following obstacle definition is based on a straight out departure where obstacle height and distance are specified with reference to the liftoff end of the runway:

	Distance	Height
1.	[***]	[***][***]
2.	[***]	[***]
3.	[***][***]	[***]
4.	[***]	[***]
5.	[***]	[***]

	Maximum takeoff thrust is used for the takeoff.
	The takeoff gross weight shall conform to FAA Regulations.
Climbout Maneuver:	Following the takeoff to 35 feet, the Aircraft accelerates to 250 KCAS while climbing to 1,500 feet above the departure airport altitude and retracting flaps and landing gear.
Climb:	The Aircraft climbs from 1,500 feet above the departure airport altitude to 10,000 feet altitude at 250 KCAS.
	The Aircraft then accelerates at a rate of climb of 500 feet per minute to the recommended climb speed for minimum block fuel.
	The climb continues at the recommended climb speed for minimum block fuel until 0.85 Mach number is reached.
	The climb continues at 0.85 Mach number to the initial cruise altitude.
	The temperature is ISA+10°C during climb.

	Maximum climb thrust is used during climb.
Cruise:	The Aircraft cruises at the Long Range Cruise (LRC) speed.
	The initial cruise altitude is 36,000 feet.
	A step climb or multiple step climbs of 2,000 feet altitude may be used when beneficial to minimize fuel burn.
	The temperature is ISA+10°C during cruise.
	The cruise thrust is not to exceed maximum cruise thrust except during a step climb when maximum climb thrust may be used.
Descent:	The Aircraft descends from the final cruise altitude at 0.85 Mach number until 250 KCAS is reached.
	The descent continues at 250 KCAS to an altitude of 1,500 feet above the destination airport altitude.
	Throughout the descent, the cabin pressure will be controlled to a maximum rate of descent equivalent to 300 feet per minute at sea level.
	The temperature is ISA+10°C during descent.
Approach and Landing Maneuver:	The Aircraft decelerates to the final approach speed while extending landing gear and flaps, then descends and lands.
	The destination airport altitude is 1,554 feet.
Fixed Allowances:	For the purpose of this guarantee and for the purpose of establishing compliance with this guarantee, the following shall be used as fixed quantities and allowances:
	Taxi-Out: [***]           [***]
	Takeoff and Climbout Maneuver: [***]           [***] [***]           [***]
	Approach and Landing Maneuver: [***]           [***]
	Taxi-In (shall be consumed from the reserve fuel): [***]           [***]
	Usable reserve fuel remaining upon completion of the approach and landing maneuver:  [***]

For information purposes, the reserve fuel is based on a ISA + 10°C day temperature and a) a contingency fuel allowance equivalent to 3 percent of the trip fuel from takeoff through the completion of the approach and landing maneuver at the destination airport, b) a missed approach and flight to a 196 nautical mile alternate with a 35 knot tailwind, c) an approach and landing maneuver at the alternate airport, and d) a 30 minute hold at 1,500 feet above the alternate airport altitude of 2,310 feet.

2.9.4 Mission Block Fuel

The block fuel for a stage length of [***] nautical miles in still air (equivalent to a distance of [***] nautical miles with a 33 knot headwind, representative of a [***] route) with a 24,480 kilogram payload (including tare) using the conditions and operating rules defined below, shall not be more than the following guarantee value:

NOMINAL:	[***]
TOLERANCE:	[***]
GUARANTEE:	[***]

Conditions and operating rules are the same as Paragraph 2.9.3 except as follows:

Block Fuel:	The block fuel is defined as the sum of the fuel used for taxi-out, takeoff and climbout maneuver, climb, cruise, descent, approach and landing maneuver, and taxi-in.
Fixed Allowances:	For the purpose of this guarantee and for the purpose of establishing compliance with this guarantee, the following shall be used as fixed quantities and allowances:
	Taxi-Out: [***]           [***]
	Takeoff and Climbout Maneuver: [***]           [***] [***]           [***]
	Approach and Landing Maneuver: [***]           [***]
	Taxi-In (shall be consumed from the reserve fuel): [***]           [***]
	Usable reserve fuel remaining upon completion of the approach and landing maneuver:  [***]

2.9.5 Mission Payload

The payload plus tare for a stage length of [***]1 nautical miles in still air (equivalent to a distance of [***]nautical miles with a 57 knot headwind, representative of a [***] route) using the conditions and operating rules defined below, shall not be less than the following guarantee value:

NOMINAL:	[***]
TOLERANCE:	[***]
GUARANTEE:	[***]

Conditions and operating rules:

Stage Length:	The stage length is defined as the sum of the distances for the climbout maneuver, climb, cruise, and descent.
Takeoff:	The airport altitude is 1,554 feet.
	The airport temperature is 30°C.
	The runway length is 12,467 feet.
	The runway slope is 0.01 percent downhill.
	The following obstacle definition is based on a straight out departure where obstacle height and distance are specified with reference to the liftoff end of the runway:
	[***]                            [***] 1.                   [***]                            [***]
	Maximum takeoff thrust is used for the takeoff.
	The takeoff gross weight shall conform to FAA Regulations.
Climbout Maneuver:	Following the takeoff to 35 feet, the Aircraft accelerates to 250 KCAS while climbing to 1,500 feet above the departure airport altitude and retracting flaps and landing gear.
Climb:	The Aircraft climbs from 1,500 feet above the departure airport altitude to 10,000 feet altitude at 250 KCAS.
	The Aircraft then accelerates at a rate of climb of 500 feet per minute to the recommended climb speed for minimum block fuel.
	The climb continues at the recommended climb speed for minimum block fuel until 0.85 Mach number is reached.
	The climb continues at 0.85 Mach number to the initial cruise altitude.
	The temperature is ISA+10°C during climb.
	Maximum climb thrust is used during climb.
Cruise:	The Aircraft cruises at the Long Range Cruise (LRC) speed.
	The initial cruise altitude is 36,000 feet.

	A step climb or multiple step climbs of 2,000 feet with a final step climb of 3,000 feet altitude may be used when beneficial to minimize fuel burn.
	The temperature is ISA+10°C during cruise.
	The cruise thrust is not to exceed maximum cruise thrust except during a step climb when maximum climb thrust may be used.
Descent:	The Aircraft descends from the final cruise altitude at 0.85 Mach number until 250 KCAS is reached.
	The descent continues at 250 KCAS to an altitude of 1,500 feet above the destination airport altitude.
	Throughout the descent, the cabin pressure will be controlled to a maximum rate of descent equivalent to 300 feet per minute at sea level.
	The temperature is ISA+10°C during descent.
Approach and Landing Maneuver:	The Aircraft decelerates to the final approach speed while extending landing gear and flaps, then descends and lands.
	The destination airport altitude is 23 feet.
Fixed Allowances:	For the purpose of this guarantee and for the purpose of establishing compliance with this guarantee, the following shall be used as fixed quantities and allowances:
	Taxi-Out: [***]           [***]
	Takeoff and Climbout Maneuver: [***]           [***] [***]           [***]
	Approach and Landing Maneuver: [***]           [***]
	Taxi-In (shall be consumed from the reserve fuel): [***]           [***]
	Usable reserve fuel remaining upon completion of the approach and landing maneuver:  [***]

For information purposes, the reserve fuel is based on a ISA + 10°C day temperature and a) a contingency fuel allowance equivalent to 3 percent of the trip fuel from takeoff through the completion of the approach and landing maneuver at the destination airport, b) a missed approach and flight to a 424 nautical mile alternate in a 21 knot headwind, c) an approach and landing maneuver at the alternate airport, d) a 30 minute hold at 1,500 feet above the alternate airport altitude of 123 feet, and f) critical fuel on board is determined using a reasonable interpretation of FAR paragraph 121.646 and is representative of an emergency descent and diversion from the critical point to an enroute alternate airport.

2.9.6 Mission Payload

The payload plus tare for a stage length of [***] nautical miles in still air (equivalent to a distance of [***] nautical miles with a 4 knot headwind, representative of a [***]route) using the conditions and operating rules defined below, shall not be less than the following guarantee value:

NOMINAL:	[***]
TOLERANCE:	[***]
GUARANTEE:	[***]

Conditions and operating rules:

Stage Length:	The stage length is defined as the sum of the distances for the climbout maneuver, climb, cruise, and descent.
Takeoff:	The airport altitude is 7,316 feet.
	The airport temperature is 24°C.
	The runway length is 12,795 feet.
	The runway slope is 0.08 percent uphill.
	Maximum takeoff thrust is used for the takeoff.
	The takeoff gross weight shall conform to FAA Regulations.
Climbout Maneuver:	Following the takeoff to 35 feet, the Aircraft accelerates to 250 KCAS while climbing to 1,500 feet above the departure airport altitude and retracting flaps and landing gear.
Climb:	The Aircraft climbs from 1,500 feet above the departure airport altitude to 10,000 feet altitude at 250 KCAS.
	The Aircraft then accelerates at a rate of climb of 500 feet per minute to the recommended climb speed for minimum block fuel.
	The climb continues at the recommended climb speed for minimum block fuel until 0.85 Mach number is reached.
	The climb continues at 0.85 Mach number to the initial cruise altitude.
	The temperature is ISA+10°C during climb.

	Maximum climb thrust is used during climb.
Cruise:	The Aircraft cruises at the Long Range Cruise (LRC) speed.
	The initial cruise altitude is 39,000 feet.
	A step climb or multiple step climbs of 2,000 feet altitude may be used when beneficial to minimize fuel burn.
	The temperature is ISA+10°C during cruise.
	The cruise thrust is not to exceed maximum cruise thrust except during a step climb when maximum climb thrust may be used.
Descent:	The Aircraft descends from the final cruise altitude at 250 KCAS to an altitude of 1,500 feet above the destination airport altitude.
	Throughout the descent, the cabin pressure will be controlled to a maximum rate of descent equivalent to 300 feet per minute at sea level.
	The temperature is ISA+10°C during descent.
Approach and Landing Maneuver:	The Aircraft decelerates to the final approach speed while extending landing gear and flaps, then descends and lands.
	The destination airport altitude is 1,554 feet.
Fixed Allowances:	For the purpose of this guarantee and for the purpose of establishing compliance with this guarantee, the following shall be used as fixed quantities and allowances:
	Taxi-Out: [***]           [***]
	Takeoff and Climbout Maneuver: [***]           [***] [***]           [***]
	Approach and Landing Maneuver: [***]           [***]
	Taxi-In (shall be consumed from the reserve fuel): [***]           [***]
	Usable reserve fuel remaining upon completion of the approach and landing maneuver:  [***]

For information purposes, the reserve fuel is based on a ISA + 10°C day temperature and a) a contingency fuel allowance equivalent to 3 percent of the trip fuel from takeoff through the completion of the approach and landing maneuver at the destination airport, b) a missed approach and flight to a 196 nautical mile alternate in a 35 knot tailwind, c) an approach and landing maneuver at the alternate airport, and d) a 30 minute hold at 1,500 feet above the alternate airport altitude of 2,310 feet.

2.9.7 Mission Payload

The payload plus tare for a stage length of [***]nautical miles in still air (equivalent to a distance of 1,614 nautical miles with a 1 knot tailwind, representative of a [***] route) using the conditions and operating rules defined below, shall not be less than the following guarantee value:

NOMINAL:	[***]
TOLERANCE:	[***]
GUARANTEE:	[***]

Conditions and operating rules:

Stage Length:	The stage length is defined as the sum of the distances for the climbout maneuver, climb, cruise, and descent.
Takeoff:	The airport altitude is 9,234 feet.
	The airport temperature is 16°C.
	The runway length is 10,236 feet.
	The runway slope is 0.41 percent uphill.
	The following obstacle definition is based on a straight out departure where obstacle height and distance are specified with reference to the liftoff end of the runway:

	Distance	Height
1.	[***]	[***]
2.	[***]	[***]

	Maximum takeoff thrust is used for the takeoff.
	The takeoff gross weight shall conform to FAA Regulations.
Climbout Maneuver:	Following the takeoff to 35 feet, the Aircraft accelerates to 275 KCAS while climbing to 1,500 feet above the departure airport altitude and retracting flaps and landing gear.
Climb:	The Aircraft continues to climb at 275 KCAS from 1,500 feet above the departure airport altitude until 0.85 Mach number is reached.
	The climb continues at 0.85 Mach number to the initial cruise altitude.
	The temperature is ISA+10°C during climb.
	Maximum climb thrust is used during climb.
Cruise:	The Aircraft cruises at the Long Range Cruise (LRC) speed.
	The initial cruise altitude is 40,000 feet.
	A step climb of 3,000 feet altitude may be used when beneficial to minimize fuel burn.
	The temperature is ISA+10°C during cruise.

	The cruise thrust is not to exceed maximum cruise thrust except during a step climb when maximum climb thrust may be used.
Descent:	The Aircraft descends from the final cruise altitude at 0.85 Mach number until 250 KCAS is reached.
	The descent continues at 250 KCAS to an altitude of 1,500 feet above the destination airport altitude.
	Throughout the descent, the cabin pressure will be controlled to a maximum rate of descent equivalent to 300 feet per minute at sea level.
	The temperature is ISA+10°C during descent.
Approach and Landing Maneuver:	The Aircraft decelerates to the final approach speed while extending landing gear and flaps, then descends and lands.
	The destination airport altitude is 8 feet.
Fixed Allowances:	For the purpose of this guarantee and for the purpose of establishing compliance with this guarantee, the following shall be used as fixed quantities and allowances:
	Taxi-Out: [***]                     [***]
	Takeoff and Climbout Maneuver: [***][***]           [***]   [***][***]           [***]
	Approach and Landing Maneuver: [***]                     [***]
	Taxi-In (shall be consumed from the reserve fuel): [***]                     [***]
	Usable reserve fuel remaining upon completion of the approach and landing maneuver:  [***][***]
	For information purposes, the reserve fuel is based on a ISA + 10°C day temperature and a) a contingency fuel allowance equivalent to 5 percent of the trip fuel from takeoff through the completion of the approach and landing maneuver at the destination airport, b) a missed approach and flight to a 163 nautical mile alternate in a 16 knot tailwind, c) an approach and landing maneuver at the alternate airport, and d) a 30 minute hold at 1,500 feet above the alternate airport altitude of 16 feet.

2.9.8 Mission Payload

The payload plus tare for a stage length of [***] nautical miles in still air (equivalent to a distance of 5,022 nautical miles with a 6 knot tailwind, representative of a [***] route) using the conditions and operating rules defined below, shall not be less than the following guarantee value:

NOMINAL:	[***]
TOLERANCE:	[***]
GUARANTEE:	[***]

Conditions and operating rules:

Stage Length:	The stage length is defined as the sum of the distances for the climbout maneuver, climb, cruise, and descent.
Takeoff:	The airport altitude is 19 feet.
	The airport temperature is 30°C.
	The runway length is 9,154 feet.
	The stopway is 810 feet.
	The runway slope is 0.02 percent downhill.
	The following obstacle definition is based on a straight out departure where obstacle height and distance are specified with reference to the liftoff end of the runway:

	[***]	[***][***]
1.	[***]	[***]
2.	[***]	[***]

	Maximum takeoff thrust is used for the takeoff.
	The takeoff gross weight shall conform to FAA Regulations.
Climbout Maneuver:	Following the takeoff to 35 feet, the Aircraft accelerates to 250 KCAS while climbing to 1,500 feet above the departure airport altitude and retracting flaps and landing gear.
Climb:	The Aircraft climbs from 1,500 feet above the departure airport altitude to 10,000 feet altitude at 250 KCAS.
	The Aircraft then accelerates at a rate of climb of 500 feet per minute to the recommended climb speed for minimum block fuel.
	The climb continues at the recommended climb speed for minimum block fuel until 0.85 Mach number is reached.
	The climb continues at 0.85 Mach number to the initial cruise altitude.
	The temperature is ISA+10°C during climb.
	Maximum climb thrust is used during climb.

Cruise:	The Aircraft cruises at the Long Range Cruise (LRC) speed.
	The initial cruise altitude is 37,000 feet.
	A step climb or multiple step climbs of 2,000 feet altitude may be used when beneficial to minimize fuel burn.
	The temperature is ISA+10°C during cruise.
	The cruise thrust is not to exceed maximum cruise thrust except during a step climb when maximum climb thrust may be used.
Descent:	The Aircraft descends from the final cruise altitude at 250 KCAS to an altitude of 1,500 feet above the destination airport altitude.
	Throughout the descent, the cabin pressure will be controlled to a maximum rate of descent equivalent to 300 feet per minute at sea level.
	The temperature is ISA+10°C during descent.
Approach and Landing Maneuver:	The Aircraft decelerates to the final approach speed while extending landing gear and flaps, then descends and lands.
	The destination airport altitude is 2,000 feet.
Fixed Allowances:	For the purpose of this guarantee and for the purpose of establishing compliance with this guarantee, the following shall be used as fixed quantities and allowances:
	Taxi-Out: [***]           [***]
	Takeoff and Climbout Maneuver: [***]           [***] [***]           [***]
	Approach and Landing Maneuver: [***]           [***]
	Taxi-In (shall be consumed from the reserve fuel): [***]           [***]
	Usable reserve fuel remaining upon completion of the approach and landing maneuver:  [***]
	For information purposes, the reserve fuel is based on a ISA + 10°C day temperature and a) a contingency fuel allowance equivalent to 3 percent of the trip fuel from takeoff through the completion of the approach and landing maneuver at the destination airport, b) a missed approach and flight to a 156 nautical mile alternate in a 9 knot tailwind, c) an approach and landing maneuver at the alternate airport, and d) a 30 minute hold at 1,500 feet above the alternate airport altitude of 240 feet.

2.9.9 Mission Block Fuel

The block fuel for a stage length of [***] nautical miles in still air (equivalent to a distance of 3,707 nautical miles with a 8 knot headwind, representative of a [***] route) with a 27,510 kilogram payload (including tare) using the conditions and operating rules defined below, shall not be more than the following guarantee value:

[***]:	[***]
[***]:	[***]
[***]:	[***]

Conditions and operating rules:

Stage Length:	The stage length is defined as the sum of the distances for the climbout maneuver, climb, cruise, and descent.
Block Fuel:	The block fuel is defined as the sum of the fuel used for taxi-out, takeoff and climbout maneuver, climb, cruise, descent, approach and landing maneuver, and taxi-in.
Takeoff:	The airport altitude is 1,554 feet.
	The airport temperature is 30°C.
	The runway length is 12,467 feet.
	The runway slope is 0.01 percent downhill.
	The following obstacle definition is based on a straight out departure where obstacle height and distance are specified with reference to the liftoff end of the runway:
	Distance                      Height   1.                [***]                          [***]
	Maximum takeoff thrust is used for the takeoff.
	The takeoff gross weight shall conform to FAA Regulations.
Climbout Maneuver:	Following the takeoff to 35 feet, the Aircraft accelerates to 250 KCAS while climbing to 1,500 feet above the departure airport altitude and retracting flaps and landing gear.
Climb:	The Aircraft climbs from 1,500 feet above the departure airport altitude to 10,000 feet altitude at 250 KCAS.
	The Aircraft then accelerates at a rate of climb of 500 feet per minute to the recommended climb speed for minimum block fuel.
	The climb continues at the recommended climb speed for minimum block fuel until 0.85 Mach number is reached.
	The climb continues at 0.85 Mach number to the initial cruise altitude.
	The temperature is ISA+10°C during climb.
	Maximum climb thrust is used during climb.

Cruise:	The Aircraft cruises at the Long Range Cruise (LRC) speed.
	The initial cruise altitude is 40,000 feet.
	A step climb of 3,000 feet altitude may be used when beneficial to minimize fuel burn.
	The temperature is ISA+10°C during cruise.
	The cruise thrust is not to exceed maximum cruise thrust except during a step climb when maximum climb thrust may be used.
Descent:	The Aircraft descends from the final cruise altitude at 0.85 Mach number until 250 KCAS is reached.
	The descent continues at 250 KCAS to an altitude of 1,500 feet above the destination airport altitude.
	Throughout the descent, the cabin pressure is controlled to a maximum rate of descent equivalent to 300 feet per minute at sea level.
	The temperature is ISA+10°C during descent.
Approach and Landing Maneuver:	The Aircraft decelerates to the final approach speed while extending landing gear and flaps, then descends and lands.
	The destination airport altitude is 8 feet.
Fixed Allowances:	For the purpose of this guarantee and for the purpose of establishing compliance with this guarantee, the following shall be used as fixed quantities and allowances:
	Taxi-Out: [***]           [***]
	Takeoff and Climbout Maneuver: [***]           [***] [***]           [***]
	Approach and Landing Maneuver: [***]           [***]
	Taxi-In (shall be consumed from the reserve fuel): [***]           [***]
	Usable reserve fuel remaining upon completion of the approach and landing maneuver:  [***]

For information purposes, the reserve fuel is based on a ISA + 10°C day temperature and a) a contingency fuel allowance equivalent to 3 percent of the trip fuel from takeoff through the completion of the approach and landing maneuver at the destination airport, b) a missed approach and flight to a 163 nautical mile alternate in a 16 knot headwind, c) an approach and landing maneuver at the alternate airport, and d) a 30 minute hold at 1,500 feet above the alternate airport altitude of 16 feet.

2.9.10 Operational Empty Weight Basis

The Operational Empty Weight (OEW) derived in Paragraph 2.9.11 is the basis for the mission guarantees of Paragraphs 2.9.1, 2.9.2, 2.9.3, 2.9.4, 2.9.5, 2.9.6, 2.9.7, 2.9.8, and 2.9.9.

2.9.11   Weight Summary - LAN Airlines

	Kilograms
Standard Model Baseline MEW	[***]
787 Airplane Configuration Specification Addendum, 787B1-4102-BLAN04
Dated January 15, 2010
[***]
Trent 1000 Engines
[***]
[***]
Changes for LAN Airlines (Reference LOPA B875558A)*
Delete Boeing Seats and Interior	[***]
Business Class Seats	[***]
Economy Seats	[***]
Business Class In-Seat Video Equipment	[***]
Economy Class In-Seat Video Equipment	[***]
In-Flight Entertainment - Head End Equipment	[***]
Interior	[***]
Options Allowance	[***]
LAN Airlines Manufacturer's Empty Weight (MEW)	[***]
Standard and Operational Items Allowance (Paragraph 2.9.12)	[***]
LAN Airlines Operational Empty Weight (OEW)	[***]

	Quantity	Kilograms	Kilograms
Seat Weight Included*			[***]
Business Class Double - Front Row	[***]	[***]
Business Class Double	[***]	[***]
Business Class Double - Aft Row	[***]	[***]
	[***]	[***]
Economy Class Double - Aft Row	[***]	[***]
Economy Class Triple - Front Row	[***]	[***]
Economy Class Triple	[***]	[***]
Economy Class Triple - Aft Row	[***]	[***]

2.9.12  Standard and Operational Items Allowance

	Qty	kg	kg	kg
Standard Items Allowance				[***]
Unusable Fuel			[***]
Oil			[***]
Oxygen Equipment			[***]
Portable Oxygen Bottles	[***]	[***]
Miscellaneous Equipment			[***]
First Aid Kits	[***]	[***]
Crash Axe	[***]	[***]
Megaphones	[***]	[***]
Flashlights	[***]	[***]
Smoke Goggles	[***]	[***]
PBE - Flight Deck	[***]	[***]
PBE	[***]	[***]
Galley Structure & Fixed Inserts			[***]
Operational Items Allowance				[***]
Crew and Crew Baggage			[***]
Flight Crew (inc. Baggage) [***].)	[***]	[***]
Cabin Crew (inc. Baggage) ([***].)	[***]	[***]
Document & Tool Kit ([***].)	[***]	[***]
Catering Allowance & Removable Inserts	[***]	[***]	[***]
Business Class	[***]	[***]
Economy Class	[***]	[***]
Duty Free Allowance			[***]
Potable Water  - (1021 Liters)			[***]
Waste Tank Disinfectant			[***]
Emergency Equipment   (Includes Over Water Equip.)			[***]
Slide Rafts: Main Entry	[***]	[***]
Life Vests	[***]	[***]
Locator Transmitter	[***]	[***]
Cargo System			[***]
Total Standard and Operational Items Allowance				[***]

3 RUNWAY LOADING

3.1 [***]

The Aircraft Classification Number (ACN) for flexible pavement having subgrade codes A through D, at the maximum taxi weight of [***] kgs with [***] of the load on the main gear ([***] MAC) and with the main gear tires at a tire pressure of 228 pounds per square inch, shall not exceed the following guarantee values:

	Code A	Code B	Code C	Code D
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]

3.2 Maximum ACN Value – Rigid Pavement

The Aircraft Classification Number (ACN) for rigid pavement having subgrade codes A through D, at the maximum taxi weight of [***]with [***]% of the load on the main gear ([***]) and with the main gear tires at a tire pressure of [***] pounds per square inch, shall not exceed the following guarantee values:

	Code A	Code B	Code C	Code D
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]

4 [***]

4.1 The guarantees contained in this Attachment are based on the Aircraft configuration as defined in Boeing Document [***], “787 Airplane Configuration Specification Addendum”, dated January 15, 2010, plus any changes mutually agreed to or otherwise allowed by the Purchase Agreement to be incorporated into the original release of the Customer’s Detail Specification (hereinafter referred to as the Detail Specification).  Appropriate adjustment shall be made for changes in such Detail Specification approved by the Customer and Boeing or otherwise allowed by the Purchase Agreement which cause changes to the flight performance and/or weight and balance of the Aircraft.  Such adjustment shall be accounted for by Boeing in its evidence of compliance with the guarantees.

4.2 The guarantee payloads of Paragraph 2.9.1, 2.9.3, 2.9.5, 2.9.6, 2.9.7, and 2.9.8 and the specified payloads of Paragraph 2.9.2 and 2.9.4 block fuel guarantees will be adjusted by Boeing for the effect of the following on OEW in its evidence of compliance with the guarantees:

(1)        Changes to the Detail Specification or any other changes mutually agreed upon between the Customer and Boeing or otherwise allowed by the Purchase Agreement.

(2)        The difference between the seat weight allowances to be incorporated into the Detail Specification and the actual weights.

5 GUARANTEE CONDITIONS

5.1 All guaranteed performance data are based on the International Standard Atmosphere (ISA) and specified variations therefrom; altitudes are pressure altitudes.

5.2 The Federal Aviation Administration (FAA) regulations referred to in this Attachment are, unless otherwise specified, Code of Federal Regulations 14, Part 25 amended by Amendments 25-1 through 25-117, subject to the approval of the Federal Aviation Administration.

5.3 In the event a change is made to any law, governmental regulation or requirement, or in the interpretation of any such law, governmental regulation or requirement that affects the certification basis for the Aircraft as described in Paragraph 5.2, and as a result thereof, a change is made to the configuration and/or the performance of the Aircraft in order to obtain certification, the guarantees set forth in this Attachment shall be appropriately modified to reflect any such change.

5.4 The takeoff and landing guarantees, and the takeoff portion of the mission guarantees are based on hard surface, level and dry runways with no wind or obstacles, no clearway or stopway, [***] tires, with anti-skid operative.  The takeoff performance is based on an Aircraft alternate center of gravity of 17.6 percent of the mean aerodynamic chord unless otherwise specified.  The takeoff performance is based on engine power extraction for normal operation of the air conditioning with thermal anti-icing turned off and the Auxiliary Power Unit (APU) turned off unless otherwise specified.  Unbalanced field length calculations and the improved climb performance procedure will be used for takeoff as required.  The landing performance is based on the use of automatic spoilers.

5.5 The enroute one-engine-inoperative altitude guarantee is based on engine power extraction for engine and wing thermal anti-icing, and air conditioning with two packs operating.  The APU is turned off unless otherwise specified.

5.6 The altitude capability and cruise range guarantees, and the climb, cruise and descent portions of the mission guarantees include allowances for normal power extraction and engine power extraction for normal operation of the air conditioning system.  Normal operation of the air conditioning system shall be defined as pack switches in the "Auto" position, the temperature control switches in the "Auto" position that results in a nominal cabin temperature of 75°F, and all air conditioning systems operating normally.  No engine power extraction for thermal anti-icing is provided unless otherwise specified.  The APU is turned off unless otherwise specified.

5.7 Long Range Cruise (LRC) speed is defined to be the highest speed where cruise fuel mileage is 99 percent of the maximum cruise fuel mileage.

5.8 The altitude capability and cruise range guarantees, and the climb, cruise and descent portions of the mission guarantees are based on an Aircraft center of gravity location, as determined by Boeing, not to be aft of 28 percent of the mean aerodynamic chord.

5.9 The runway loading guarantees are based on the aircraft being configured with two 4-wheel main landing gears and a dual wheel nose gear, with the main gear wheel spacing (center-to-center) of [***] in the inboard/outboard direction and [***] the forward/aft direction and equal loading for all of the main gear tires.

5.10 Performance, where applicable, is based on a fuel Lower Heating Value [***] per pound and a fuel density of [***] per U.S. gallon ([***]).

6 GUARANTEE COMPLIANCE

6.1 Compliance with the guarantees of Section 2 and 3 shall be based on the conditions specified in those sections, the Aircraft configuration of Section 4 and the guarantee conditions of Section 5.

6.2 Compliance with the takeoff, landing, and enroute one-engine-inoperative altitude guarantees, the buffet onset portion of the altitude capability guarantee, the maximum takeoff and landing altitude guarantee, the maximum altitude guarantee, and the takeoff portion of the mission guarantee shall be based on the FAA approved Airplane Flight Manual for the Model 787-8.

6.3 Compliance with the takeoff guarantee and the takeoff portion of the mission guarantee shall be shown using an alternate forward center of gravity limit of [***] percent of the mean aerodynamic chord.

6.4 Compliance with the altitude capability and cruise range guarantees, and the climb, cruise and descent portions of the mission guarantees shall be established by calculations based on flight test data obtained from an aircraft in a configuration similar to that defined by the Detail Specification.

6.5 The OEW used for compliance with the mission guarantees shall be the actual MEW plus the Standard and Operational Items Allowance in Paragraph 03-60-00 of the Detail Specification.

6.6 Compliance with the maximum tailwind guarantee of Paragraph 2.4 shall be based on the FAA approved Airplane Flight Manual for the Model 787-8 and shall be contingent upon the necessary atmospheric conditions being available during the certification flight test program, or subsequent tailwind test program, if required.

6.7 Compliance with the runway loading guarantees shall be based on the “ICAO Aerodrome Design Manual”, Part 3, Pavements, 2nd Edition, 1983, Section 1.1 (The ACN-PCN Method), and utilizing the alpha factors approved by ICAO in October 2007.  ACN’s are not quoted as having decimal values and, therefore, ACN’s are rounded up to the next higher integer value.

6.8 The data derived from tests shall be adjusted as required by conventional methods of correction, interpolation or extrapolation in accordance with established engineering practices to show compliance with these guarantees.

6.9 Compliance shall be based on the performance of the airframe and engines in combination, and shall not be contingent on the engine meeting its manufacturer's performance specification.

7 EXCLUSIVE GUARANTEES

The only performance guarantees applicable to the Aircraft are those set forth in this Attachment.

6-1162-KSW-6447

LAN Airlines S.A.

Av. Presidente Riesco 5711

Piso 19, Las Condes

SANTIAGO

CHILE

Subject: [***]

Aircraft

Reference: a)  Purchase Agreement No. 3256 (the Purchase Agreement) between The Boeing Company (Boeing) and LAN Airlines S.A. (Customer) relating to Boeing Model 787-916/-816 aircraft.

This letter agreement (Letter Agreement) is entered into on the date below and amends and supplements the Purchase Agreement.  All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement.

The attachment to Letter Agreements 6-1162-KSW-6446 contains 787-8 performance guarantees (the Performance Guarantees) for 787-816 2011 Aircraft (Aircraft).  Paragraphs 2.9.1, 2.9.3, 2.9.5, 2.9.6, 2.9.7, and 2.9.8 of the Performance Guarantees are mission payload guarantees (the Payload Guarantees) which will be effective and applicable to the 2011 Aircraft in accordance with such letter agreement.  [***].

In response to Customer's request, Boeing offers [***].

1.           Demonstration of Compliance.

Article 5.4 of AGTA-LAN provides a procedure for demonstration of compliance with Performance Guarantees prior to delivery.  That method will be used to demonstrate compliance with the Payload Guarantees [***].

2.       [***].

2.1             2011 Aircraft Delivery.

[***].

2.2     [***].

[***].

[***].

[***]

[***]

3.           [***].

[***].

4.               [***]             

5.           Assignment.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer’s becoming the operator of the 2011 Aircraft, and cannot be assigned, in whole or in part, without the prior written consent of Boeing. Articles 9.2 and 9.3 of the AGTA shall apply to this provision.

6.           [***].

[***].

7.           Confidential Treatment.

Boeing and Customer understand that the commercial and financial information contained in this Letter Agreement is considered by the parties as confidential (Confidential Information) and both agree not to disclose such Confidential Information except as provided herein.  In addition to the parties’ respective officers, directors and employees who need to know the Confidential Information and who understand the obligation to keep it confidential, the parties may disclose Confidential Information (1) to the extent required by law and (2) to its agents, auditors and advisors who need to know the Confidential Information for purposes of enabling each party to understand, perform its obligations under, or receive the benefits of, this Agreement and who have agreed not to use or disclose the Confidential Information for any other purpose without the other party’s prior written consent.  In the event that a party concludes that disclosure of Confidential Information contained in this Letter Agreement is required by applicable law, the party will so advise the other party promptly in writing and endeavor to protect the confidentiality of such Confidential Information to the widest extent possible.  In the event of a legal dispute with Boeing, nothing herein will preclude Customer from sharing with its legal counsel information necessary for purposes of enabling counsel to advise or represent Customer provided that so long as Customer causes its legal counsel to maintain the confidentiality of information that is the subject of this Article.  Except as provided in the assignment provisions of Article 8 of the Special Matters Letter Agreement, Customer will not disclose this Letter Agreement for purposes of financing payments without the prior written consent of Boeing, which consent will be provided once the financier enters into a Non Disclosure Agreement with Boeing in form and substance reasonably satisfactory to Boeing, which will include agreeing not to disclose or use Confidential Information except for the purpose set forth herein. This provision shall not apply to any Confidential Information that is in the public domain except that a party will be liable to the other for breach of its obligations under this provision if the Confidential Information entered the public domain as a consequence of a wrongful act or omission on its part.

Very truly yours,
THE BOEING COMPANY
By:
Its:	Attorney-In-Fact

If the foregoing correctly sets forth your understanding of our agreement with respect to the matters treated herein, please indicate your acceptance and approval below.

ACCEPTED AND AGREED TO this 22 day of Marchof 2010.

LAN AIRLINES S.A.
By:
	. Mr. Roberto Alvo
Its:	Sr. Vice President Strategic Planning & Corporate Development

By:
	. Mr. Alejandro de la Fuente
Its:	Chief Financial Officer

6-1162-KSW-6453

LAN Airlines S.A.

Av. Presidente Riesco 5711

Piso 19, Las Condes

SANTIAGO

CHILE

Subject:  [***]

Reference: Purchase Agreement No. 3256 (the Purchase Agreement) between The Boeing Company (Boeing) and LAN Airlines S.A. (Customer) relating to Boeing Model 787-916/-816 Aircraft (Aircraft).

[***].

1. [***].

2. [***].

2.1 Delivery Schedule for Covered Aircraft.

[***].

Aircraft	Delivery Date	Ownership	Aircraft Model
1	[***]	Direct Purchase	787-8
2	[***]	Direct Purchase	787-8
3	[***]	Direct Purchase	787-8
4	[***]	Direct Purchase	787-8
5	[***]	Direct Purchase	787-8
6	[***]	Direct Purchase	787-8
7	[***]	Direct Purchase	787-8
8	[***]	Direct Purchase	787-8
9	[***]	Direct Purchase	787-8
10	[***]	Direct Purchase	787-8
11	[***]	Direct Purchase	787-8
12	[***]	Direct Purchase	787-8
13	[***]	Direct Purchase	787-8
14	[***]	Direct Purchase	787-8
15	[***]	Direct Purchase	787-8
16	[***]	Direct Purchase	787-8
17	[***]	Direct Purchase	787-8
18	[***]	Direct Purchase	787-8
19	[***]	Direct Purchase	787-8
20	[***]	Direct Purchase	787-8
21	[***]	Direct Purchase	787-8
22	[***]	Direct Purchase	787-8

2.2 Performance Retention Term.

[***]

3. Conditions.

3.1 Operation and Maintenance.

Customer shall operate and maintain the Covered Aircraft in accordance with the applicable aviation authority-approved operations and maintenance programs.  Customer shall operate and maintain the engines in accordance with the Operation and Maintenance Manuals and Customer's Maintenance Program and an Engine Management Program mutually defined and agreed to by the Engine Manufacturer and Customer.

3.2 Powerback.

It is specifically agreed that reverse thrust will not be used for normal ground maneuvering (Powerback) of the Covered Aircraft.

3.3 [***].

The parties agree that the Aircraft Commitment, as set forth in Paragraph 1 herein, is based upon the following assumptions:

-     [***]

[***]

4. [***].

[***].

5. [***].

[***].

6. [***].

[***]:

6.1 [***].

[***].

6.2 Surveys.

[***].

6.3 Weight.

Boeing may request that Customer weigh such Covered Aircraft, in which event Customer agrees to weigh such Covered Aircraft in conjunction with its normally scheduled maintenance and will report its findings to Boeing.

6.4     [***]

[***].

6.5    [***].

[***].

7. [***].

[***].

7.1    [***].

7.3    [***].

7.4.   [***].

[***]

7.5    [***].

[***][***]

8. [***]

9. Assignment Prohibited.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer’s becoming the operator of the Aircraft, and cannot be assigned, in whole or in part, without the prior written consent of Boeing; [***].

10. [***].

[***].

11. Confidential Treatment.

Boeing and Customer understand that the commercial and financial information contained in this Letter Agreement is considered by the parties as confidential (Confidential Information) and both agree not to disclose such Confidential Information except as provided herein.  In addition to the parties’ respective officers, directors and employees who need to know the Confidential Information and who understand the obligation to keep it confidential, the parties may disclose Confidential Information (1) to the extent required by law and (2) to its agents, auditors and advisors who need to know the Confidential Information for purposes of enabling each party to understand, perform its obligations under, or receive the benefits of, this Agreement and who have agreed not to use or disclose the Confidential Information for any other purpose without the other party’s prior written consent.  In the event that a party concludes that disclosure of Confidential Information contained in this Letter Agreement is required by applicable law, the party will so advise the other party promptly in writing and endeavor to protect the confidentiality of such Confidential Information to the widest extent possible.  In the event of a legal dispute with Boeing, nothing herein will preclude Customer from sharing with its legal counsel information necessary for purposes of enabling counsel to advise or represent Customer provided that so long as Customer causes its legal counsel to maintain the confidentiality of information that is the subject of this Article.  Except as provided in the assignment provisions of Article 8 of the Special Matters Letter Agreement, Customer will not disclose this Letter Agreement for purposes of financing payments without the prior written consent of Boeing, which consent will be provided once the financier enters into a Non Disclosure Agreement with Boeing in form and substance reasonably satisfactory to Boeing, which will include agreeing not to disclose or use Confidential Information except for the purpose set forth herein. This provision shall not apply to any Confidential Information that is in the public domain except that a party will be liable to the other for breach of its obligations under this provision if the Confidential Information entered the public domain as a consequence of a wrongful act or omission on its part.

Very truly yours,
THE BOEING COMPANY
By:
	Ms. Kathie S. Weibel
Its:	Attorney-In-Fact

If the foregoing correctly sets forth your understanding of our agreement with respect to the matters treated herein, please indicate your acceptance and approval.

ACCEPTED AND AGREED TO this 22day of March 2010

LAN AIRLINES S.A.

By:
	. Mr. Roberto Alvo
Its:	Sr. Vice President Strategic Planning & Corporate
	Development

By:
	. Mr. Alejandro de la Fuente
Its:	Chief Financial Officer

[***].

Cruise Fuel Mileage Performance Determination

Cruise performance data shall be obtained by using the Airplane Condition Monitoring System (ACMS). This data will be recorded during level flight cruise in steady state conditions.  The following data will be obtained during each such data recording:

Initial C.G.

Initial Takeoff Gross Weight

Zero Fuel Weight

Initial Fuel Quantity for each tank

dVG/dt

Time

Ground Speed

SAT

TAT

Mach

CAS

Altitude

Gross Weight

Primary Power Setting Parameter for each engine

Fuel Flow for each engine

EGT for each engine

Latitude

True Track

Air-conditioning mass flow – left and right

Electrical load for each engine

Fuel used for each engine

Fuel Quantity for each tank

Fuel Density

Fuel Temperature

Fuel Totals; calculated and totalizer

Control Surface Positions

[***].

[***]

(b) The following definitions shall apply herein:

[***].

(c) [***] substitute to lead in application to the same adjustment result, insofar as possible, as would have been achieved by continuing the use of the original as it may have fluctuated had it not been revised or discontinued.  Appropriate revision of the formula shall be made to accomplish this result.  In the event escalation provisions are made nonenforceable or otherwise rendered null and void by any agency of the United States Government, [***].

NOTE: Any rounding of a number, as required under this Attachment with respect to escalation of the AAL, shall be accomplished as follows:  If the first digit of the portion to be dropped from the number to be rounded is five or greater, the preceding digit shall be raised to the next higher number.

6-1162-KSW-6458

LAN Airlines S.A.

Av. Presidente Riesco 5711

Piso 19, Las Condes

SANTIAGO

CHILE

Subject: [***]

Reference: Purchase Agreement No. 3256 (the Purchase Agreement) between The Boeing Company (Boeing) and LAN Airlines S.A. (Customer) relating to Boeing Model 787-916/-816 Aircraft (Aircraft).

[***].

[***].

12. [***].

[***].

[***].

[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]

[***].

13. [***].

[***].

13.1 Delivery Schedule for Covered Aircraft.

For the purposes of this Letter Agreement, it is anticipated that Boeing will deliver the Covered Aircraft to Customer in accordance with the following delivery schedule set forth in the following table.  If the fleet size and delivery schedule is significantly different, the Aircraft Commitment may be appropriately adjusted to reflect such changes.

Aircraft	[***]	Ownership	Aircraft Model
1	[***]	Leased	787-9
2	[***]	Leased	787-9
3	[***]	Leased	787-9
4	[***]	Leased	787-9
5	[***]	Direct Purchase	787-9
6	[***]	Leased	787-9
7	[***]	Direct Purchase	787-9
8	[***]	Direct Purchase	787-9
9	[***]	Direct Purchase	787-9
10	[***]	Leased	787-9

13.2 Performance Retention Term.

[***].

14. [***].

3.3 Operation and Maintenance.

Customer shall operate and maintain the Covered Aircraft in accordance with Customer’s Chilean DGAC-approved operations and maintenance programs.  Customer shall operate and maintain the engines in accordance with the Operation and Maintenance Manuals and Customer's Maintenance Program and an Engine Management Program mutually defined and agreed to by the Engine Manufacturer and Customer.

3.4 Powerback.

[***].

15. [***].

16. [***].

.

17. [***].

17.1 [***].

6.3 [***].

6.4 Weight.

Boeing may request that Customer weigh such Covered Aircraft, in which event Customer agrees to weigh such Covered Aircraft in conjunction with its normally scheduled maintenance and will report its findings to Boeing.

6.5 [***].

[***].

6.5 [***].

[***].

18. [***].

18.1 [***].

18.2 [***].

19. [***]

20. Assignment Prohibited.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer’s becoming the operator of the Aircraft, and cannot be assigned, in whole or in part, without the prior written consent of Boeing; [***]

21. [***].

11. Confidential Treatment.

Boeing and Customer understand that the commercial and financial information contained in this Letter Agreement is considered by the parties as confidential (Confidential Information) and both agree not to disclose such Confidential Information except as provided herein.  In addition to the parties’ respective officers, directors and employees who need to know the Confidential Information and who understand the obligation to keep it confidential, the parties may disclose Confidential Information (1) to the extent required by law and (2) to its agents, auditors and advisors who need to know the Confidential Information for purposes of enabling each party to understand, perform its obligations under, or receive the benefits of, this Agreement and who have agreed not to use or disclose the Confidential Information for any other purpose without the other party’s prior written consent.  In the event that a party concludes that disclosure of Confidential Information contained in this Letter Agreement is required by applicable law, the party will so advise the other party promptly in writing and endeavor to protect the confidentiality of such Confidential Information to the widest extent possible.  In the event of a legal dispute with Boeing, nothing herein will preclude Customer from sharing with its legal counsel information necessary for purposes of enabling counsel to advise or represent Customer provided that so long as Customer causes its legal counsel to maintain the confidentiality of information that is the subject of this Article.  Except as provided in the assignment provisions of Article 8 of the Special Matters Letter Agreement, Customer will not disclose this Letter Agreement for purposes of financing payments without the prior written consent of Boeing, which consent will be provided once the financier enters into a Non Disclosure Agreement with Boeing in form and substance reasonably satisfactory to Boeing, which will include agreeing not to disclose or use Confidential Information except for the purpose set forth herein. This provision shall not apply to any Confidential Information that is in the public domain except that a party will be liable to the other for breach of its obligations under this provision if the Confidential Information entered the public domain as a consequence of a wrongful act or omission on its part.

Very truly yours,

THE BOEING COMPANY

By
Its:	Attorney-In-Fact

If the foregoing correctly sets forth your understanding of our agreement with respect to the matters treated herein, please indicate your acceptance and approval.

ACCEPTED AND AGREED TO this  22 day of  March 2010

LAN AIRLINES S.A.

By:
	. Mr. Roberto Alvo
Its:	Sr. Vice President Strategic Planning & Corporate
	Development

By:
	. Mr. Alejandro de la Fuente
Its:	Chief Financial Officer

[***].

Cruise Fuel Mileage Performance Determination

Cruise performance data shall be obtained by using the Airplane Condition Monitoring System (ACMS). This data will be recorded during level flight cruise in steady state conditions.  The following data will be obtained during each such data recording:

Initial C.G.

Initial Takeoff Gross Weight

Zero Fuel Weight

Initial Fuel Quantity for each tank

dVG/dt

Time

Ground Speed

SAT

TAT

Mach

CAS

Altitude

Gross Weight

Primary Power Setting Parameter for each engine

Fuel Flow for each engine

EGT for each engine

Latitude

True Track

Air-conditioning mass flow – left and right

Electrical load for each engine

Fuel used for each engine

Fuel Quantity for each tank

Fuel Density

Fuel Temperature

Fuel Totals; calculated and totalizer

Control Surface Positions

[***].

In addition, Customer will maintain records of factors relating to fuel mileage deterioration.  These factors will include (a) engine history, cockpit instrumentation history and airframe history and condition of such Covered Aircraft, (b) pertinent Covered Aircraft maintenance and operational procedures used by Customer, (c) drag effects of any post delivery airframe and/or engine changes incorporated in such Covered Aircraft, (d) sudden shifts in engine EGT condition monitoring data, and (e) any other relevant factors.

[***]

[***] substitute to lead in application to the same adjustment result, insofar as possible, as would have been achieved by continuing the use of the original as it may have fluctuated had it not been revised or discontinued.  Appropriate revision of the formula shall be made to accomplish this result.  In the event escalation provisions are made nonenforceable or otherwise rendered null and void by any agency of the United States Government, the parties agree, to the extent they may lawfully do so, to equitably adjust the price of any affected AAL to reflect an allowance for increases in the commercial jet fuel price.

NOTE: Any rounding of a number, as required under this Attachment with respect to escalation of the AAL, shall be accomplished as follows:  If the first digit of the portion to be dropped from the number to be rounded is five or greater, the preceding digit shall be raised to the next higher number.

Supplemental Agreement No. 2 (“SA-2”)

to

Purchase Agreement No. 3256

between

THE BOEING COMPANY

and

LAN AIRLINES S.A.

Relating to Boeing Model 787-916/787-816 Aircraft

THIS SUPPLEMENTAL AGREEMENT, entered into as of the 8 day of July of 2010, (hereinafter called “Supplemental Agreement 2” or “SA-2”by and between THE BOEING COMPANY, a Delaware corporation (hereinafter called “Boeing”), and LAN Airlines S.A., a Chilean corporation (hereinafter called “Customer”);

WITNESSETH:

WHEREAS, the parties entered into that certain Purchase Agreement No. 3256, dated as of October 29, 2007 relating to the purchase and sale of Boeing Model 787-916 and Model 787-816 aircraft (hereinafter referred to as "Aircraft") which agreement, including all tables, exhibits, supplemental exhibits and specifications thereto, together with all letter agreements then or thereafter entered into that by their terms constitute part of such purchase agreement and as such purchase agreement may be amended or supplemented from time to time, is hereinafter called the "Purchase Agreement;"

WHEREAS, the parties have agreed to accelerate the delivery of two (2) Model 787-816 Aircraft to September 2011 and

WHEREAS, Boeing and Customer have agreed to amend the Purchase Agreement to incorporate the above changes;

NOW THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree to amend the Purchase Agreement as follows:

1. Delivery of September 2011 Accelerated Aircraft

1.1.     Delivery of the two (2) 787-816 Aircraft are accelerated as shown in the chart below (hereinafter called “September 2011 Accelerated Aircraft”).

Serial Numbers	Original Delivery Month	Accelerated Delivery Month
38471	Sep 2015	September 2011
38466	Oct 2015	September 2011

2. Engine Selection.

Customer has selected Rolls Royce Engines for its September 2011 Accelerated Aircraft.  Sections of the Purchase Agreement related to GENX engines no longer apply to the September 2011 Accelerated Aircraft.

3. Table of Contents.

The “Table of Contents” to the Purchase Agreement is revised to reflect the changes made by this SA-2.  The revised Table of Contents is attached hereto.

4. Articles.

4.1.   [***]:

“[***].”

5.      Tables.

The Aircraft Information Tables are revised a) to delete the September 2011 Accelerated Aircraft from Table 1-ROLLS 787-816 and b) to add Table 5 for the September 2011 Accelerated Aircraft.  The revised Table 1-ROLLS 787-816 and Table 5 are attached hereto and identified with the SA-2 legend.

6. Exhibits and Supplemental Exhibits.

6.1           Exhibit A1, “Aircraft Configuration” relating to 2011 787-816 Aircraft provides the configuration for the September 2011 Accelerated Aircraft.  If Boeing defers the delivery of one or both of the September 2011 Accelerated Aircraft so that the new delivery date is June 2012 or later, the deferred aircraft will have the same configuration as Customer’s Aircraft delivering in May 2012.  Boeing and Customer continue to analyze what, if any, of Customer’s May 2012 configuration could be incorporated into the Aircraft delivering in 2011 during production.

6.2.          Subject to paragraph 6.1, BFE seats are not available for the September 2011 Accelerated Aircraft.  Supplemental Agreements “Buyer Equipment Variables” (BFE1) and “Buyer Equipment Variables for 2012-2013 Aircraft” (BFE2) do not apply to the September 2011 Accelerated Aircraft.  If Boeing defers the delivery of one or both of the September 2011 Accelerated Aircraft so that the new delivery date is June 2012 or later, “Buyer Equipment Variables for 2012-2013 Aircraft” (BFE2) will be revised to include such deferred September 2011 Accelerated Aircraft.

7. Letter Agreements.

7.1.          For the Accelerated Aircraft and the September 2011 Accelerated Aircraft the Initial Provisioning Meeting called out in paragraph 2.2 of Letter Agreement 3256-01 entitled “Spare Parts Initial Provisioning” was held in March 2010.

7.2.          The September 2011 Accelerated Aircraft configuration is finalized at the time SA-2 is signed.  Therefore, except for paragraphs 1.2.4 and 1.2.5, Letter Agreement 3256-02, “Boeing Model 787 Open Configuration Matters” does not apply to the September 2011 Accelerated Aircraft.  Master changes may still be processed in accordance with Boeing standard processes.

7.3.          Letter Agreement 6-1162-ILK-0310R1 entitled “Special Matters” is revised to address the economic considerations for the September 2011 Accelerated Aircraft.  The revised Letter Agreement 6-1162-ILK-0310R2 is attached hereto.

7.4.          Letter Agreement 6-1162-ILK-0312 entitled “Promotional Support Agreement” is revised and the revised Letter Agreement 6-1162-ILK-0312R1 attached hereto.

7.5.          [***].

7.6.          [***].

7.7.          [***].

7.8.          For the Accelerated Aircraft and the September 2011 Accelerated Aircraft the Planning Conferences called out in Letter Agreement 6-1162-ILK-0323 entitled “Special Matters Customer Support Document”, paragraph 1 revising CS1 Part 1, Art. 2.1 and Part 3, item 2 were in March 2010.

7.9.          Letter Agreement 6-1162-ILK-0326 entitled “Special Matters Customer 787 Fleet” does not apply to the September 2011 Accelerated Aircraft.

7.10.        [***].

7.11.        [***].

7.12.        [***].

7.13.        Letter Agreement 6-1162-KSW-6473 entitled “Delivery Flexibility for September 2011 Accelerated Aircraft” is added to the Purchase Agreement and attached hereto.

8. [***].

8.1.          [***].

8.2.          The parties recognize that if Boeing exercises its right to slide either or both September 2011 Accelerated Aircraft the advance payments owed will change.  Therefore no advance payment is required at the signing of SA-2.  On August 1, 2010 Customer will either pay the advance payment amount called out in paragraph 8.1 if the delivery months remains September 2011 or a revised advance payment amount based on the new delivery positions.

9. Confidential Treatment.

Boeing and Customer understand that the commercial and financial information contained in this Supplemental Agreement is considered by the parties as confidential (Confidential Information) and both agree not to disclose such Confidential Information except as provided herein.  In addition to the parties’ respective officers, directors and employees who need to know the Confidential Information and who understand the obligation to keep it confidential, the parties may disclose Confidential Information (1) to the extent required by law and (2) to its agents, auditors and advisors who need to know the Confidential Information for purposes of enabling each party to understand, perform its obligations under, or receive the benefits of, this Agreement and who have agreed not to use or disclose the Confidential Information for any other purpose without the other party’s prior written consent.  In the event that a party concludes that disclosure of Confidential Information contained in this Supplemental Agreement 2 is required by applicable law, the party will so advise the other party promptly in writing and endeavor to protect the confidentiality of such Confidential Information to the widest extent possible.  In the event of a legal dispute with Boeing, nothing herein will preclude Customer from sharing with its legal counsel information necessary for purposes of enabling counsel to advise or represent Customer provided that so long as Customer causes its legal counsel to maintain the confidentiality of information that is the subject of this Article.  Except as provided in the assignment provisions of Article 10 of the Special Matters Letter Agreement 6-1162-ILK-0310R2, Customer will not disclose this Supplemental Agreement 2 for purposes of financing payments without the prior written consent of Boeing, which consent will be provided once the financier enters into a Non Disclosure Agreement with Boeing in form and substance reasonably satisfactory to Boeing, which will include agreeing not to disclose or use Confidential Information except for the purpose set forth herein. This provision shall not apply to any Confidential Information that is in the public domain except that a party will be liable to the other for breach of its obligations under this provision if the Confidential Information entered the public domain as a consequence of a wrongful act or omission on its part.

The Purchase Agreement shall be deemed amended to the extent herein provided and as amended shall continue in full force and effect.

EXECUTED IN DUPLICATE as of the day and year first above written.

THE BOEING COMPANY		LAN AIRLINES S.A.
By:		By:
	Ms Kathie Weibel	Mr. Roberto Alvo
Its	Attorney-In-Fact	Its:	Sr. Vice President,  Strategic Planning &
			Corporate Development
		By:
			Mr. Alejandro de la Fuente
		Its:	Chief Financial Officer

TABLE OF CONTENTS

Page		ARTICLES	SA NUMBER
	1.	Quantity, Model and Description	SA-1
	2.	Delivery Schedule	SA-1
	3.	Price	SA-1
	4.	Payment
	5.	Additional Terms	SA-1
		TABLE
	1-ROLLS	787-916 Aircraft Information Table	SA-1
	1-GENX	787-916 Aircraft Information Table
10	1-ROLLS	787-816 Aircraft Information Table	SA-2
	1-GENX	787-816 Aircraft Information Table	SA-1
	Table 2	Aircraft Information Table for 2011 Aircraft	SA-1
	Table 3	Aircraft Information Table for 2012-2013 Aircraft	SA-1
	Table 4	Aircraft Information Table for Substitute Aircraft	SA-1
11	Table 5	Aircraft Information Table for September 2011 Accelerated Aircraft	SA-2
		EXHIBIT
	A 787-916	Aircraft Configuration
	A 787-816	Aircraft Configuration	SA-1
3	A1 787-816	Aircraft Configuration for 2011 Aircraft	SA-1 & SA-2 Art. 6.1
	B.	Aircraft Delivery Requirements and Responsibilities
		SUPPLEMENTAL EXHIBITS
	AE1	Escalation Adjustment/Airframe and Optional Features
	BFE1	Buyer Furnished Equipment Variables
3	BFE2	Buyer Furnished Equipment Variables for Accelerated Aircraft	SA-1 & SA-2 Art. 6.2

Page		SUPPLEMENTAL EXHIBITS, continued	SA Number
	CS1	Customer Support Document
		Attachment A to the Customer Support Document
	EE1. ROLLS	Engine Escalation And Engine Warranty
	EE1. GENX	Engine Escalation And Engine Warranty
	SLP1.	Service Life Policy Components
		LETTER AGREEMENTS
3	3256-01	787 Spare Parts Initial Provisioning	SA-1 & SA-2 (Art 7.1)
3	3256-02	Open Configuration Matters	SA-1& SA-2 (Art 7.2)
	3256-03	787 e-Enabling Letter Agreement
	3256-04	787 Spare Parts Commitment
12	6-1162-ILK-0310R2	Special Matters	SA-2
	6-1162-ILK-0310R2	[***]
	6-1162-ILK-0310R2	[***]
	6-1162-ILK-0310R2	[***]
	6-1162-ILK-0310R2	[***]
	6-1162-ILK-0311	787 AGTA Terms Revisions
	6-1162-ILK-0312	Promotional Support
24	6-1162-ILK-0312R1	Promotional Support	SA-2
	6-1162-ILK-0313	EULA Special Matters
3	6-1162-ILK-0314R1	Liquidated Damages	SA-1 & SA-2 (Art 7.5)
3	6-1162-ILK-0315	[***]	SA-1 & SA-2 (Art 7.6)
	6-1162-ILK-0316	Aircraft Model Substitution	SA-1 (Art 7.8)
	6-1162-ILK-0317	Option Aircraft
	6-1162-ILK-0317	Attachment 1 to Option Aircraft

Page		LETTER AGREEMENTS, continued	SA Number
	6-1162-ILK-0318	Alternate Engine Selection	SA-2 (Art 2)1
	6-1162-ILK-0319	[***]
3-4 & 28	6-1162-ILK-0319	[***]	SA-2 (Art 7.7)
	6-1162-ILK-0320	Delivery Flexibility
	6-1162-ILK-0321	Demonstration Flight Waiver
	6-1162-ILK-0322	AGTA Article 8.2 Insurance; Warranty Coverage; and Exhibit B Matters for Certain Boeing Model 787-9 Aircraft Leased from International Lease Finance Corporation by LAN Airlines S.A.
4	6-1162-ILK-0323	Special Matters Customer Support	SA-1 (Art 7.9); SA-2 (Art 7.8)
	6-1162-ILK-0324	Special Matters Warranty
	6-1162-ILK-0325	NOT USED in the Purchase Agreement
4	6-1162-ILK-0326	Special Matters Customer 787 Fleet	SA-1(Art 7.10) SA-2 (Art 7.9)
	6-1162-ILK-0326	Attachment 1, Relevant Dates for First Aircraft
	6-1162-ILK-0326	Attachment 2, Covered Aircraft
4	6-1162-ILK-0327	Performance Guarantees 787-916/-816	SA-2 (Art7.10)
	6-1162-ILK-0328	[***]	SA-1
	6-1162-ILK-0329	Extended Operations (ETOPS) Matters
	6-1162-ILK-0330	[***]
4	6-1162-ILK-0331	[***]	SA-2 (Art 7.11)
	6-1162-KSW-6446	Performance Guarantees 787-816 2011 Aircraft	SA-1
	6-1162-KSW-6447	[***]	SA-1
	6-1162-KSW-6453	[***]	SA-1
4 & 30	6-1162-KSW-6453R1	[***]	SA-2 incl. Art. 7.12
	6-1162-KSW-6458	[***]	SA-1
4 & 45	6-1162-KSW-6473	Delivery Flexibility for September 2011 Accelerated Aircraft	SA-2   incl. Art. 7.13

Table 1 Rev 2

787-816 Aircraft Delivery, Description, Price and Advance Payments

Airframe Model/MTOW:	787-8		***		Detail Specification:	787B1-4102-B (7/9/2007)
Engine Model/Thrust:	TRENT1000-A		***		Airframe Price Base Year/Escalation Formula:		Jul-06	ECI-MFG/CPI
Airframe Price:		***			Engine Price Base Year/Escalation Formula:		Jul-06	787 ECI-MFG CPI Eng
Optional Features:				***
Sub-Total of Airframe and Features:		***			Airframe Escalation Data:
Engine Price (Per Aircraft):		***			Base Year Index (ECI):		180.3
Aircraft Basic Price (Excluding BFE/SPE):		***			Base Year Index (CPI):		195.4
Buyer Furnished Equipment (BFE) Estimate:				***	Engine Escalation Data:
Catalog Selected In Flight Entertainment (IFE) Estimate:				***	Base Year Index (ECI):		180.300
Refundable Deposit/Aircraft at Proposal Accept:				***	Base Year Index (CPI):		195.400

	Number				***	***
Delivery Date	of Aircraft	***	***	Manufacturer Serial Number	*** ***	*** ***	*** ***	*** ***	*** ***
Jun-2013	1	***	***	38461	***	***	***	***	***
Aug-2013	1	***	***	38468	***	***	***	***	***
May-2015	1	***	***	38481	***	***	***	***	***
Jun-2015	1	***	***	38483	***	***	***	***	***
Jul-2015	1	***	***	38469	***	***	***	***	***
Aug-2015	1	***	***	38470	***	***	***	***	***
Total:	6				***	***	***	***	***
							**

LAN PA 3256, SA-2	Page 11
45875-2f.TXT	Boeing Proprietary	7-2010

Table 5 for

September 2011 Accelerated Aircraft

Aircraft Delivery, Description, Price and Advance Payments

Airframe Model/MTOW:	787-8		***		Detail Specification:	D019E001LAN88P-38461/38468
Engine Model/Thrust:	TRENT 1000-A		***		Airframe Price Base Year/Escalation Formula:		Jul-06	Non-Standard
Airframe Price:		***			Engine Price Base Year/Escalation Formula:		Jul-06	787 ECI-MFG CPI Eng
Optional Features:				***
Sub-Total of Airframe and Features:		***			Airframe Escalation Data:
Engine Price (Per Aircraft):		***
Aircraft Basic Price (Excluding BFE/SPE):		***
Buyer Furnished Equipment (BFF) Estimate:				***	Engine Escalation Data:
Seller Purchased Equipment (SPE) Estimate:				***	Base Year Index (ECI):		180.300
Thales IFE Fixed Price		***			Base Year Index (CPI):		195.400
Refundable Deposit/Aircraft at Proposal Accept:				***

		***	***		Escalation Estimate	***	***	***	***
Delivery	Number of	***	***	Manufacturer	Adv Payment Base	***	***	***	***
Date	Aircraft	***	***	Serial Number	Price Per A/P	***	***	***	***
Sep-2011	1	***	***	38471	***	***	***	***	***
Sep-2011	1	***	***	38466	***	***	***	***	***
Total:	1

***

***

LAN PA 3256, SA-2	Page 12	7-2010
LAN- 53510-1F.TXT	Boeing Proprietary	Page 1

6-1162-ILK-0310R2

LAN Airlines S.A.

Avenida Presidente Riesco 5711

Piso 19

Las Condes

Santiago, Chile

Subject:  Special Matters

Reference: Purchase Agreement No. 3256 (the Purchase Agreement) between The Boeing Company (Boeing) and LAN Airlines S.A. (Customer) relating to Boeing Model 787-916/-816 aircraft (Aircraft)

This letter agreement (Letter Agreement) cancels and supercedes Letter Agreement 6-1162-ILK-0310R1 and amends and supplements the Purchase Agreement.  All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement.

14. Definitions.

1.6           “STE” when used specifically in relation to any credit memorandum contained in this letter agreement shall mean that the relevant credit memorandum shall be escalated to the month of delivery in the same manner as the Airframe Price pursuant to escalation factors developed as set forth in the Tailored Escalation Letter Agreement Number 6-1162-ILK-0319 in accordance with the escalation formula reflected in Supplemental Exhibit AE1 to the Purchase Agreement (AE1).

1.7            “Limitations on Use” when used in relation to any credit memorandum contained in this letter agreement shall mean that the applicable credit memorandum may be used for the purchase of Boeing goods and services or applied to the final delivery payment for the Aircraft for which the credit was issued, but that the relevant credit memorandum shall be prohibited from use for satisfaction of any Advance Payment obligation. .

1.8           Accelerated Aircraft” are defined as ten (10) Boeing Model 787-8 Aircraft with accelerated delivery months of (1) April 2011 sn 38464, (1) June 2011 sn 38475, (1) May 2012 sn 38472, (1) June 2012 sn 38473, (1) August 2012 sn 38484, (1) 2nd Quarter 2013 sn 38476, (2) 3rd Quarter 2013 sn 38477 and sn 38478, and (2) 4th Quarter 2013 sn 38480 and sn 38479 which were originally scheduled to deliver in the months of (1) October 2013. (1) November 2013, (1) November 2015, (1) April 2016, (1) June 2016, (1) July 2016, (1) August 2016, (1) September 2016, (1) October 2016 and (1) November 2016. .

1.9           “2011 Aircraft” are defined as the Accelerated Aircraft delivering (1) April 2011 sn 38464 and (1) June 2011 sn 38475 .

1.10         “2012-2013 Aircraft” are defined as the Accelerated Aircraft delivering in (1) May 2012 sn 38472, (1) June 2012 sn 38473, (1) August 2012 sn 38484, (1) 2nd Quarter 2013 sn 38476, (2) 3rd Quarter 2013 sn 38477 and sn 38478, and (2) 4th Quarter 2013 sn 38479 and 38480.

1.11         “Substitute Aircraft” are defined as the Substitution Aircraft 787-816 aircraft delivering in (2) 2nd Quarter 2017 sn 38460 and sn 38462, (2) 3rd Quarter 2017 sn 38463 and sn 38465 which were originally 787-916 aircraft delivering in (1) June 2014, (1) August 2014, (1) September 2014 and (1) October 2014 as shown in Table 1-ROLLS 787-916.  The Substitute Aircraft may be substituted back to 787-916 aircraft.

1.12   “September 2011 Accelerated Aircraft” are defined as two (2) Aircraft delivering in September 2011, sn 34871 and 34866 respectively.

15.     787-9/-8 Credit Memoranda.

Subject to Customer’s adherence to the Limitations on Use, Boeing will provide the Customer a credit memorandum concurrently with the delivery of each 787-916 and each 787-816 Aircraft identified in Tables 1-5 to the Purchase Agreement, in description and in amount identified in the following Article 2 credit memoranda table:

Article 2 [***]

[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]

3.             [***].

[***].

4.            Economic Considerations for Certain Aircraft.

4.1.             [***].

4.1.1.              [***].

4.1.2.           [***].

4.2 [***].

4.2.1           [***].

4.2.2           [***].

5. [***].

5.1.           [***].

6. Economic Considerations for the Option Aircraft.

Subject to Customer’s adherence to the Limitations on Use, Boeing agrees that the Option Aircraft [***].

[***]:

(iii) For 2017 delivery year option aircraft: Customer to provide Boeing with its notice of option exercise rights no later than July 1, 2014; and

(iv) for 2018 delivery year option aircraft: Customer to provide Boeing with its notice of option exercise rights no later than July 1, 2015.

Notwithstanding Article 4.2 of the Option Aircraft Letter, [***].  A sample form of supplemental agreement (illustrative of the contractual documentation incident to implementation of the Customer’s exercise of its rights in respect of the purchase of Option Aircraft) that is acceptable to Boeing is attached as Appendix 1 to this Letter Agreement.  Appendix 1 reflects a Customer exercise of its rights in respect of two (2) Option Aircraft; however, the parties agree that Customer may exercise its rights in respect of a minimum of one (1) Option Aircraft so long as such Customer exercise occurs no later than the applicable Option Exercise Date.

7. Economic Considerations for the Substitution Aircraft.

In the event of substitution of an Aircraft by the Customer pursuant to the Aircraft Model Substitution Letter Agreement to the Purchase Agreement, Boeing agrees to provide Customer with [***].  A sample form of supplemental agreement (illustrative of the contractual documentation incident to implementation of the Customer’s exercise of its substitution rights in respect of one (1) Boeing Model 787-916 Aircraft to replace the purchase of one (1) Boeing Model 787-816 Aircraft) that is acceptable to Boeing is attached as Appendix 2 to this Letter Agreement.

8. Correction Time Objectives.

In the event that Boeing is able to make improvements to Correction Time Objectives as defined in Article 8.3.1 of Exhibit C to the AGTA, Product Assurance Document, then Boeing will revise the referenced Article to reflect the revision, e.g., to reflect subsequent schedule improvement to the extent realized.

9. Fuel Provided by Boeing.

Boeing will provide to Customer, without charge, the amount of fuel shown in U.S. gallons in the table below for the model of Aircraft being delivered and full capacity of engine oil at the time of delivery or prior to the ferry flight of the Aircraft as follows:

Aircraft Model	Fuel Provided
Boeing Model 787 Aircraft,  including all minor models	3,000

10. Assignment.

Any assignment by Customer of any benefits, entitlements, or services described in this Letter Agreement requires Boeing's prior written consent.  Further, Customer will not reveal to any third party the amount of the credit memoranda provided to Customer by Boeing without Boeing’s prior written consent and subject to such circumstances as Boeing may reasonably require.

Boeing will not unreasonably withhold consent to Customer’s request to assign, as security, rights in the Purchase Agreement if done for purposes of obtaining financing or for such other purpose consistent with fulfilling its obligations under the Purchase Agreement.  Boeing’s consent will be conditioned on all parties accepting Boeing’s customary conditions for consenting to an assignment, including, but not limited to, the following: assignor and assignee indemnification of Boeing for any actions taken by an assignee under any assignment agreement; Boeing’s right to exercise the manufacturer’s option to assume Customer’s rights under the Purchase Agreement in the event of a default under an assignment agreement; and confidentiality.  A Party that is

i.       bound by a customary confidentiality agreement;

ii.      neither an airplane manufacturer nor an airline;  and

iii.     responding to a Customer request for proposals to provide financing of Aircraft pursuant to the Purchase Agreement, including pre-delivery payment financing

shall be deemed a “Financing Party”.

Without Boeing’s consent, Customer may represent to any Financing Party that Boeing will provide to that Financing Party, concurrently with the delivery of each of the Aircraft to that Financing Party, [***] each Aircraft escalated to the month of delivery in the same manner as the Airframe Price as described in Supplemental Exhibit AE-1.  Insofar as such Financing Party is concerned, this Financier Credit Memorandum shall be in lieu of any other provision in this Letter Agreement. When the Customer identifies a Financing Party and the preliminary terms of an assignment under which pre-delivery payment financing (PDP) or aircraft purchase financing could be provided, at Customer’s request, Boeing agrees to enter into discussions with the Customer to consider whether an additional credit memorandum can be assigned, with the goal of helping Customer obtain third-party financing.

Boeing will consent to any reasonable request by Customer to assign the Purchase Agreement to an affiliate provided that Boeing is provided with an adequate  guarantee of performance of all obligations under this Purchase Agreement and in a form reasonably satisfactory to Boeing.

Customer understands that Boeing is not required under any circumstances to consent to an assignment that would constitute a novation.

The foregoing provisions are intended to supplement, and not to supersede, the assignment provisions of the AGTA, which address delivery date and post-delivery assignments, merger-type assignments, and other matters.

11.           MTOW and Other Configuration Matters.

Boeing recognizes that Customer requires early notification of Development Changes, incorporated into the Detail Specification, and Manufacturer Changes applicable to the Aircraft so Customer can evaluate, in a timely manner, the effect of such changes on maintenance and operation of the Aircraft.  Boeing will provide to Customer notification of such Developmental Changes and Manufacturer Changes affecting Customer's airplanes through Boeing's standard notification process.

[***]

12. Acknowledgement of Financing Support.

Boeing acknowledges that financing assistance has been requested by Customer and discussions have been held between Customer and Boeing Capital Corporation.

13. Confidential Treatment.

Boeing and Customer understand that the commercial and financial information contained in this Letter Agreement is considered by the parties as confidential (Confidential Information) and both agree not to disclose such Confidential Information except as provided herein.  In addition to the parties’ respective officers, directors and employees who need to know the Confidential Information and who understand the obligation to keep it confidential, the parties may disclose Confidential Information (1) to the extent required by law and (2) to its agents, auditors and advisors who need to know the Confidential Information for purposes of enabling each party to understand, perform its obligations under, or receive the benefits of, this Agreement and who have agreed not to use or disclose the Confidential Information for any other purpose without the other party’s prior written consent.  In the event that a party concludes that disclosure of Confidential Information contained in this Letter Agreement is required by applicable law, the party will so advise the other party promptly in writing and endeavor to protect the confidentiality of such Confidential Information to the widest extent possible.  In the event of a legal dispute with Boeing, nothing herein will preclude Customer from sharing with its legal counsel information necessary for purposes of enabling counsel to advise or represent Customer provided that so long as Customer causes its legal counsel to maintain the confidentiality of information that is the subject of this Article.  Except as provided in the assignment provisions of Article 10 of this Special Matters Letter Agreement, Customer will not disclose this Letter Agreement for purposes of financing payments without the prior written consent of Boeing, which consent will be provided once the financier enters into a Non Disclosure Agreement with Boeing in form and substance reasonably satisfactory to Boeing, which will include agreeing not to disclose or use Confidential Information except for the purpose set forth herein. This provision shall not apply to any Confidential Information that is in the public domain except that a party will be liable to the other for breach of its obligations under this provision if the Confidential Information entered the public domain as a consequence of a wrongful act or omission on its part.

Very truly yours,

THE BOEING COMPANY

By:
	Ms.Kathie S. Weibel
Its:	Attorney-In-Fact

If the foregoing correctly sets forth your understanding of our agreement with respect to the matters treated herein, please indicate your acceptance and approval.

ACCEPTED AND AGREED TO this 8 day of July of 2010

LAN AIRLINES S.A.

By:
	Mr. Roberto Alvo
Its:	Sr. Vice President Strategic Planning
	& Corporate Development
By:
	Mr. Alejandro de la Fuente
Its:	Chief Financial Officer

Airframe Model/MTOW:	787-8	***	Detail Specification:	787B1-4102-B (7/9/2007)
Engine Model/Thrust:	TRENT1000-A	***	Airframe Price Base Year/Escalation Formula:	Jul-06	ECI-MFG/CPI
Airframe Price:		***	Engine Price Base Year/Escalation Formula:	Jul-06	787 ECI-MFG CPI Eng
Optional Features:		***	Airframe Escalation Data:
Sub-Total of Airframe and Features:		***	Base Year Index (ECI):		180.3
Engine Price (Per Aircraft):		***	Base Year Index (CPI):		195.4
Aircraft Basic Price (Excluding BFE/SPE):		***	Engine Escalation Data:
Buyer Furnished Equipment (BFE) Estimate:		***	Base Year Index (ECI):		180.300
Catalog Selected In Flight Entertainment (IFE) Estimate:		***	Base Year Index (CPI):		195.400
Non-Refundable Deposit/Aircraft at Def Agreemt:		***

	Number	***	***		Escalation Estimate	Advance Payment Per Aircraft (Amts. Due/Mos. Prior to Delivery):
	of	***	***	Option Exercise	Adv Payment Base	***	***	***	***
Delivery Date	Aircraft	***	***	Notice Date	Price Per A/P	***	***	***	***
1st Qtr 2017	2	***	***	***	***	***	***	***	***
2nd Qtr 2017	2	***	***	***	***	***	***	***	***
3rd Qtr 2017	2	***	***	***	***	***	***	***	***
4th Qtr 2017	2	***	***	***	***	***	***	***	***
1st Qtr 2018	2	***	***	***	***	***	***	***	***
2nd Qtr 2018	2	***	***	***	***	***	***	***	***
3rd Qtr 2018	1	***	***	***	***	***	***	***	***
4th Qtr 2018	2	***	***	***	***	***	***	***	***
Total	15

Airframe Model/MTOW:	787-8	***	Detail Specification:	787B1-4102-B (7/9/2007)
Engine Model/Thrust:	GENX-1B64	***	Airframe Price Base Year/Escalation Formula:	Jul-06	ECI-MFG/CPI
Airframe Price:		***	Engine Price Base Year/Escalation Formula:	Jul-06	787 ECI-MFG CPI Eng
Optional Features:		***	Airframe Escalation Data:
Sub-Total of Airframe and Features:		***	Base Year Index (ECI):		180.3
Engine Price (Per Aircraft):		***	Base Year Index (CPI):		195.4
Aircraft Basic Price (Excluding BFE/SPE):		***	Engine Escalation Data:
Buyer Furnished Equipment (BFE) Estimate:		***	Base Year Index (ECI):		180.300
Catalog Selected In Flight Entertainment (IFE) Estimate:		***	Base Year Index (CPI):		195.400
Non-Refundable Deposit/Aircraft at Def Agreemt:		***

	Number	***	Escalation		Escalation Estimate	Advance Payment Per Aircraft (Amts. Due/Mos. Prior to Delivery):
	of	***	Factor	Option Exercise	Adv Payment Base	***	***	***	***
Delivery Date	Aircraft	***	(Engine)	Notice Date	Price Per A/P	***	***	***	***
1st Qtr 2017	2	***	1.3514	7/1/2014	***	***	***	***	***
2nd Qtr 2017	2	***	1.3618	7/1/2014	***	***	***	***	***
3rd Qtr 2017	2	***	1.3724	7/1/2014	***	***	***	***	***
4th Qtr 2017	2	***	1.3821	7/1/2014	***	***	***	***	***
1st Qtr 2018	2	***	1.3918	7/1/2015	***	***	***	***	***
2nd Qtr 2018	2	***	1.4013	7/1/2015	***	***	***	***	***
3rd Qtr 2018	1	***	1.411	7/1/2015	***	***	***	***	***
4th Qtr 2018	2	***	1.4208	7/1/2015	***	***	***	***	***
Total	15

[***]

Article 5 Credit Memoranda	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]

6-1162-ILK-0312R1

LAN Airlines S.A.

Avenida Presidente Riesco 5711

Piso 19

Las Condes

Santiago, Chile

Subject:  Promotional Support Agreement

Reference: Purchase Agreement No. 3256 (the Purchase Agreement) between The Boeing Company (Boeing) and LAN Airlines S.A. (Customer) relating to Boeing Model 787-916/-816 aircraft (Aircraft).

This letter agreement (Letter Agreement) cancels and supercedes Letter Agreement 6-1162-ILK-0312 and amends and supplements the Purchase Agreement.  All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement.

Recitals.

Boeing and Customer wish to enter into an agreement pursuant to which Boeing and Customer will each contribute equally to promotional programs in support of the entry into service of the Aircraft as more specifically provided below.

1. Definitions.

1.1           “Covered Aircraft” shall mean those Aircraft with serial numbers: 38459-38484.

1.2           “Promotional Support” shall mean marketing and promotion programs in support of the entry into service of the Covered Aircraft such as marketing research, tourism development, corporate identity, direct marketing, video tape or still photography, planning, design and production of collateral materials, management of promotion programs, advertising campaigns or such other marketing and promotional activities as the parties may mutually agree.

1.3           “Commitment Limit” shall have the meaning set forth in Article 2, below.

1.4           “Performance Period” shall mean the period two (2) years before delivery of the first Covered Aircraft and ending one (1) year after delivery after the last Covered Aircraft.

1.5           “Qualifying Third Party Fees” shall mean fees paid by Customer during the Performance Period to third party providers for Promotional Support provided to Customer during the Performance Period.

2. Promotional Support Agreement Commitment.

As more particularly set forth in this Letter Agreement Boeing agrees to provide Promotional Support to Customer [***] (Promotional Support Commitment Limit).

3. Promotional Support Agreement Methods of Performance.

Subject to the Promotional Support Commitment Limit, Customer may elect to receive the Promotional Support in either or any combination of the following ways:

3.1           At Customer’s request and with respect to a mutually agreed project Boeing will provide Promotional Support during the Performance Period directly to Customer in value equivalent to Qualifying Third Party Fees.

3.2           [***].

4. Commencement Date.

Boeing's obligation to provide Promotional Support will commence when the purchase of the Covered Aircraft becomes firm (not subject to cancellation by either party).

5. Project Approval.

Following the execution of this Letter Agreement, a Boeing Airline Marketing Services representative will meet with Customer’s designated representative to review and approve the extent, selection, scheduling, and funds disbursement process for the Promotional Support to be provided pursuant to this Letter Agreement.

6. Confidentiality.

Boeing and Customer understand that the commercial and financial information contained in this Letter Agreement is considered by the parties as confidential (Confidential Information) and both agree not to disclose such Confidential Information except as provided herein.  In addition to the parties’ respective officers, directors and employees who need to know the Confidential Information and who understand the obligation to keep it confidential, the parties may disclose Confidential Information (1) to the extent required by law and (2) to its agents, auditors and advisors who need to know the Confidential Information for purposes of enabling each party to understand, perform its obligations under, or receive the benefits of, this Agreement and who have agreed not to use or disclose the Confidential Information for any other purpose without the other party’s prior written consent.  In the event that a party concludes that disclosure of Confidential Information contained in this Letter Agreement is required by applicable law, the party will so advise the other party promptly in writing and endeavor to protect the confidentiality of such Confidential Information to the widest extent possible.  In the event of a legal dispute with Boeing, nothing herein will preclude Customer from sharing with its legal counsel information necessary for purposes of enabling counsel to advise or represent Customer provided that so long as Customer causes its legal counsel to maintain the confidentiality of information that is the subject of this Article.  Except as provided in the assignment provisions of Article 10 of the Special Matters Letter Agreement, Customer will not disclose this Letter Agreement for purposes of financing payments without the prior written consent of Boeing, which consent will be provided once the financier enters into a Non Disclosure Agreement with Boeing in form and substance reasonably satisfactory to Boeing, which will include agreeing not to disclose or use Confidential Information except for the purpose set forth herein. This provision shall not apply to any Confidential Information that is in the public domain except that a party will be liable to the other for breach of its obligations under this provision if the Confidential Information entered the public domain as a consequence of a wrongful act or omission on its part.

Very truly yours,
THE BOEING COMPANY
By:
	Ms. Kathie S. Weibel
Its:	Attorney-In-Fact

If the foregoing correctly sets forth your understanding of our agreement with respect to the matters treated herein, please indicate your acceptance and approval.

ACCEPTED AND AGREED TO this 8 day of July of 2010
LAN AIRLINES S.A.
By:
	Mr. Roberto Alvo
Its:	Senior Vice President Strategic Planning
	& Corporate Development
By:
	Mr. Alejandro de la Fuente
Its:	Chief Financial Officer

Table A

[***]

Column 1 Aircraft	Column 2 Delivery  Date	Column 3  Batch per Art. 3.1.1 & 3.1.2 (Delivery Parameters per Forecast)	[***]	[***]	[***]	[***]
1.	[***]	[***]	[***]	[***]	[***]	[***]
2.	[***]	[***]	[***]	[***]	[***]	[***]
3.	[***]	[***]	[***]	[***]	[***]	[***]
4.	[***]	[***]	[***]	[***]	[***]	[***]
5.	[***]	[***]	[***]	[***]	[***]	[***]
6.	[***]	[***]	[***]	[***]	[***]	[***]
7.	[***]	[***]	[***]	[***]	[***]	[***]
8.	[***]	[***]	[***]	[***]	[***]	[***]
9.	[***]	[***]	[***]	[***]	[***]	[***]
10.	[***]	[***]	[***]	[***]	[***]	[***]
11.	[***]	[***]	[***]	[***]	[***]	[***]
12.	[***]	[***]	[***]	[***]	[***]	[***]
13.	[***]	[***]	[***]	[***]	[***]	[***]
14.	[***]	[***]	[***]	[***]	[***]	[***]
15.	[***]	[***]	[***]	[***]	[***]	[***]
16.	[***]	[***]	[***]	[***]	[***]	[***]

Table A

July 2006 Base Year

Column 1 Aircraft	[***]	[***]	[***]	[***]	[***]	[***]
17.	[***]	[***]	[***]	[***]	[***]	[***]
18.	[***]	[***]	[***]	[***]	[***]	[***]
19.	[***]	[***]	[***]	[***]	[***]	[***]
20.	[***]	[***]	[***]	[***]	[***]	[***]
21.	[***]	[***]	[***]	[***]	[***]	[***]
22.	[***]	[***]	[***]	[***]	[***]	[***]
23.	[***]	[***]	[***]	[***]	[***]	[***]
24.	[***]	[***]	[***]	[***]	[***]	[***]
25.	[***]	[***]	[***]	[***]	[***]	[***]
26.	[***]	[***]	[***]	[***]	[***]	[***]

[***].

[***].

6-1162-KSW-6453R1

LAN Airlines S.A.

Av. Presidente Riesco 5711

Piso 19, Las Condes

SANTIAGO

CHILE

Subject: [***]

Reference: Purchase Agreement No. 3256 (the Purchase Agreement) between The Boeing Company (Boeing) and LAN Airlines S.A. (Customer) relating to Boeing Model 787-916/-816 Aircraft (Aircraft).

This Letter Agreement (Letter Agreement) cancels and supersedes Letter Agreement 6-1162-KSW-6453 and amends and supplements the Purchase Agreement.  All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement.

[***].

22. Aircraft Commitment.

For the purposes of this Letter Agreement, the Covered Aircraft (Covered Aircraft) shall be defined as a fleet of not less than Twenty Two (22) new Boeing Model 787-816 aircraft equipped with TRENT1000-A engines delivered by Boeing to Customer whether under direct purchase or leased.

[***].

[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]

[***].

23. [***].

This Letter Agreement shall be applicable to the Covered Aircraft, including the engines installed on the Covered Aircraft, whether purchased from Boeing as installed engines or purchased directly from the engine manufacturer (Engine Manufacturer) as new spare engines [***].

23.1 Delivery Schedule for Covered Aircraft.

For the purposes of this Letter Agreement, it is anticipated that Boeing will deliver the Covered Aircraft to Customer in accordance with the following delivery schedule set forth in the following table.  [***].

Aircraft	Delivery Date	Ownership	Aircraft Model
1	[***]	Direct Purchase	787-8
2	[***]	Direct Purchase	787-8
3	[***]	Direct Purchase	787-8
4	[***]	Direct Purchase	787-8
5	[***]	Direct Purchase	787-8
6	[***]	Direct Purchase	787-8
7	[***]	Direct Purchase	787-8
8	[***]	Direct Purchase	787-8
9	[***]	Direct Purchase	787-8
10	[***]	Direct Purchase	787-8
11	[***]	Direct Purchase	787-8
12	[***]	Direct Purchase	787-8
13	[***]	Direct Purchase	787-8
14	[***]	Direct Purchase	787-8
15	[***]	Direct Purchase	787-8
16	[***]	Direct Purchase	787-8
17	[***]	Direct Purchase	787-8
18	[***]	Direct Purchase	787-8
19	[***]	Direct Purchase	787-8
20	[***]	Direct Purchase	787-8
21	[***]	Direct Purchase	787-8
22	[***]	Direct Purchase	787-8

23.2 [***].

[***].

24. [***].

3.5 Operation and Maintenance.

Customer shall operate and maintain the Covered Aircraft in accordance with the applicable aviation authority’s approved operations and maintenance programs.  Customer shall operate and maintain the engines in accordance with the Operation and Maintenance Manuals and Customer's Maintenance Program and an Engine Management Program mutually defined and agreed to by the Engine Manufacturer and Customer.

3.6 Powerback.

It is specifically agreed that reverse thrust will not be used for normal ground maneuvering (Powerback) of the Covered Aircraft.

3.4 Flight Cycle Utilization and Derate.

[***].

25. [***].

[***].

26. [***].

27. [***].

[***]

27.1 [***].

6.4 [***].

6.5 Weight.

Boeing may request that Customer weigh such Covered Aircraft, in which event Customer agrees to weigh such Covered Aircraft in conjunction with its normally scheduled maintenance and will report its findings to Boeing.

6.6 [***].

[***].

6.5  [***].

28. [***].

28.1 [***].

28.2 [***].

7.3  [***].

7.4.  [***].

7.5  [***].

29. [***]

30. Assignment Prohibited.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer’s becoming the operator of the Aircraft, and cannot be assigned, in whole or in part, without the prior written consent of Boeing; provided, however that Boeing [***].

31. [***].

32. Confidential Treatment.

Boeing and Customer understand that the commercial and financial information contained in this Letter Agreement is considered by the parties as confidential (Confidential Information) and both agree not to disclose such Confidential Information except as provided herein.  In addition to the parties’ respective officers, directors and employees who need to know the Confidential Information and who understand the obligation to keep it confidential, the parties may disclose Confidential Information (1) to the extent required by law and (2) to its agents, auditors and advisors who need to know the Confidential Information for purposes of enabling each party to understand, perform its obligations under, or receive the benefits of, this Agreement and who have agreed not to use or disclose the Confidential Information for any other purpose without the other party’s prior written consent.  In the event that a party concludes that disclosure of Confidential Information contained in this Letter Agreement is required by applicable law, the party will so advise the other party promptly in writing and endeavor to protect the confidentiality of such Confidential Information to the widest extent possible.  In the event of a legal dispute with Boeing, nothing herein will preclude Customer from sharing with its legal counsel information necessary for purposes of enabling counsel to advise or represent Customer provided that so long as Customer causes its legal counsel to maintain the confidentiality of information that is the subject of this Article.  Except as provided in the assignment provisions of Article 10 of the Special Matters Letter Agreement, Customer will not disclose this Letter Agreement for purposes of financing payments without the prior written consent of Boeing, which consent will be provided once the financier enters into a Non Disclosure Agreement with Boeing in form and substance reasonably satisfactory to Boeing, which will include agreeing not to disclose or use Confidential Information except for the purpose set forth herein. This provision shall not apply to any Confidential Information that is in the public domain except that a party will be liable to the other for breach of its obligations under this provision if the Confidential Information entered the public domain as a consequence of a wrongful act or omission on its part.

Very truly yours,

THE BOEING COMPANY

By:
	Ms. Kathie S. Weibel
Its:	Attorney-In-Fact

If the foregoing correctly sets forth your understanding of our agreement with respect to the matters treated herein, please indicate your acceptance and approval.

ACCEPTED AND AGREED TO this 8day of July 2010

LAN AIRLINES S.A.

By:
	. Mr. Roberto Alvo

Its:	Sr. Vice President Strategic Planning & Corporate
	Development

By:
	. Mr. Alejandro de la Fuente

Its: Chief Financial Officer

[***]

Cruise Fuel Mileage Performance Determination

Cruise performance data shall be obtained by using the Airplane Condition Monitoring System (ACMS). This data will be recorded during level flight cruise in steady state conditions.  The following data will be obtained during each such data recording:

Initial C.G.

Initial Takeoff Gross Weight

Zero Fuel Weight

Initial Fuel Quantity for each tank

dVG/dt

Time

Ground Speed

SAT

TAT

Mach

CAS

Altitude

Gross Weight

Primary Power Setting Parameter for each engine

Fuel Flow for each engine

EGT for each engine

Latitude

True Track

Air-conditioning mass flow – left and right

Electrical load for each engine

Fuel used for each engine

Fuel Quantity for each tank

Fuel Density

Fuel Temperature

Fuel Totals; calculated and totalizer

Control Surface Positions

[***].

[***]

(iii) If the U.S. Department of Labor substantially revises the methodology (in contrast to benchmark adjustments or other corrections of previously released data) [***], such substitute to lead in application to the same adjustment result, insofar as possible, as would have been achieved by continuing the use of the original as it may have fluctuated had it not been revised or discontinued.  Appropriate revision of the formula shall be made to accomplish this result.  In the event escalation provisions are made nonenforceable or otherwise rendered null and void by any agency of the United States Government, the parties agree, to the extent they may [***].

NOTE: Any rounding of a number, as required under this Attachment with respect to escalation of the [***], shall be accomplished as follows:  If the first digit of the portion to be dropped from the number to be rounded is five or greater, the preceding digit shall be raised to the next higher number.

6-1162-KSW-6473

LAN Airlines S.A.

Avenida Presidente Riesco 5711

Piso 19

Las Condes

Santiago, Chile

Subject:  Delivery Flexibility for September 2011 Accelerated Aircraft–

References: 1) Purchase Agreement No. 3256 (the Purchase Agreement) between The Boeing Company (Boeing) and LAN Airlines S.A. (Customer) relating to Boeing Model 787-916/-816 aircraft (Aircraft); and

2) Aircraft General Terms Agreement dated as of the 9th of May of 1997 between the parties, identified as AGTA-LAN (AGTA).

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement.  All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement.

7. [***]

[***].

8. Advance Payment Base Price for Deferred Aircraft.

The Advance Payment Base Price for the deferred Aircraft will be adjusted to the escalation factor for the new delivery month.

9. [***].

[***].

10. Supplemental Agreement.

Following Boeing’s notice of deferral, the parties will sign a supplemental agreement within 30 calendar days incorporating the changes related to the deferral.  The supplemental agreement will be in the same form as the Purchase Agreement (as currently amended) subject only to the changes which are necessary to reflect the deferral.

11. Confidential Treatment

Boeing and Customer understand that the commercial and financial information contained in this Letter Agreement is considered by the parties as confidential (Confidential Information) and both agree not to disclose such Confidential Information except as provided herein.  In addition to the parties’ respective officers, directors and employees who need to know the Confidential Information and who understand the obligation to keep it confidential, the parties may disclose Confidential Information (1) to the extent required by law and (2) to its agents, auditors and advisors who need to know the Confidential Information for purposes of enabling each party to understand, perform its obligations under, or receive the benefits of, this Agreement and who have agreed not to use or disclose the Confidential Information for any other purpose without the other party’s prior written consent.  In the event that a party concludes that disclosure of Confidential Information contained in this Letter Agreement is required by applicable law, the party will so advise the other party promptly in writing and endeavor to protect the confidentiality of such Confidential Information to the widest extent possible.  In the event of a legal dispute with Boeing, nothing herein will preclude Customer from sharing with its legal counsel information necessary for purposes of enabling counsel to advise or represent Customer provided that so long as Customer causes its legal counsel to maintain the confidentiality of information that is the subject of this Article.  Except as provided in the assignment provisions of Article 8 of the Special Matters Letter Agreement, Customer will not disclose this Letter Agreement for purposes of financing payments without the prior written consent of Boeing, which consent will be provided once the financier enters into a Non Disclosure Agreement with Boeing in form and substance reasonably satisfactory to Boeing, which will include agreeing not to disclose or use Confidential Information except for the purpose set forth herein. This provision shall not apply to any Confidential Information that is in the public domain except that a party will be liable to the other for breach of its obligations under this provision if the Confidential Information entered the public domain as a consequence of a wrongful act or omission on its part.

Very truly yours,

THE BOEING COMPANY

By
	Ms. Kathie S. Weibel

Its Attorney-In-Fact

If the foregoing correctly sets forth your understanding of our agreement with respect to the matters treated herein, please indicate your acceptance and approval.

3

ACCEPTED AND AGREED TO this 8 day of July 2010

LAN AIRLINES S.A.

By:
	Mr. Roberto Alvo

Its:	Sr Vice President Strategic
	Planning & Corporate Development

By:
	Mr. Alejandro de la Fuente.
Its:	Chief Financial Officer

4

EX-4.6

Exhibit 4.6

General

Terms

Agreement

No. CFM-1-2377460475

PROPRIETARY INFORMATION NOTICE   The information contained in this document is CFM Proprietary Information and is disclosed in confidence. It is the property of CFM and shall not be used, disclosed to others, or reproduced without the express written consent of CFM. If consent is given for reproduction in whole or in part, this notice and the notice set forth on each page of this document shall appear on any such reproduction. Export control laws may also control the information contained in this document. Unauthorized export or re-export is prohibited.

GENERAL TERMS AGREEMENT NO. CFM-1-2377460475

Table of Contents

·	Agreement
	ARTICLE I	-	PRODUCTS
	ARTICLE II	-	PRICES
	ARTICLE III	-	ORDER PLACEMENT
	ARTICLE IV	-	DELIVERY
	ARTICLE V	-	PAYMENT
	ARTICLE VI	-	TAXES
	ARTICLE VII	-	CFM56 PRODUCT SUPPORT PLAN
	ARTICLE VIII	-	EXCUSABLE DELAY
	ARTICLE IX	-	PATENTS
	ARTICLE X	-	INFORMATION AND DATA
	ARTICLE XI	-	FAA AND EASA CERTIFICATION REQUIREMENTS
	ARTICLE XII	-	TERMINATION FOR INSOLVENCY
	ARTICLE XIII	-	LIMITATION OF LIABILITY
	ARTICLE XIV	-	EXPORT SHIPMENT
	ARTICLE XV	-	WAIVER OF IMMUNITY
	ARTICLE XVI	-	GOVERNMENTAL AUTHORIZATION
	ARTICLE XVII	-	NOTICES
	ARTICLE XVIII	-	MISCELLANEOUS
·	Exhibit A – Products
·	Exhibit B – CFM56 Product Support Plan
	SECTION I	-	DEFINITIONS
	SECTION II	-	WARRANTIES
	SECTION III	-	SPARE PARTS PROVISIONING
	SECTION IV	-	TECHNICAL DATA
	SECTION V	-	TECHNICAL TRAINING
	SECTION VI	-	CUSTOMER FACTORY AND FIELD SUPPORT
	SECTION VII	-	PRODUCT SUPPORT ENGINEERING
	SECTION VIII	-	OPERATIONS ENGINEERING
	SECTION IX	-	GROUND SUPPORT EQUIPMENT
	SECTION X	-	GENERAL CONDITIONS – CFM56 PRODUCT SUPPORT PLAN
·	Exhibit C - Payment
·	Exhibit D – Technical Data

CFM PROPRIETARY INFORMATION

(subject to restrictions on cover page)

2

GENERAL TERMS AGREEMENT NO. CFM-1-2377460475

THIS GENERAL TERMS AGREEMENT NO. CFM-1-2377460475 (hereinafter referred to as this "Agreement"), dated as of the 17th day of December, 2010, by and between CFM International, Inc.(hereinafter referred to as "CFM'), a Delaware corporation jointly owned by General Electric Company (hereinafter referred to as "GE"), a New York corporation and Societe Nationale D'Etude et de Construction de Moteurs d'Aviation (hereinafter referred to as "SNECMA"), a French Company, and LAN Airlines S.A. a corporation organized under the laws of Chile (hereinafter referred to as "Airline").

WITNESSETH

WHEREAS, Airline has acquired certain aircraft equipped with CFM56-5B installed engines, and

WHEREAS, the parties hereto desire to enter into this Agreement for the sale and support by CFM and the purchase by Airline from CFM of spare engines, related equipment and spare parts therefore.

NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows:

ARTICLE I - PRODUCTS

CFM shall sell and Airline shall purchase, under the terms and subject to the conditions hereinafter set forth, the equipment identified in the attached Exhibit A, and hereinafter referred to as “Products”.

ARTICLE II - PRICES

A. The selling prices of Products, including spare Parts, shall be the prices as quoted by CFM and as set forth in each Airline purchase order accepted by CFM, as evidenced by CFM acknowledgement. The selling prices of Engines and related equipment therefore shall be quoted by CFM as base prices subject to an adjustment for escalation. The appropriate escalation provisions will be set forth in each applicable letter agreement to this Agreement and CFM will advise Airline in writing [***] in advance of any change thereto.

B. The selling price of spare Parts, except for those which may be quoted by CFM to Airline and which shall be the same then current standard CFM pricing quoted for similar sized orders to other airlines in similar circumstances, shall be those prices set forth in CFM's then current CFM56 Engine spare Parts price catalog ("Spare Parts Catalog") or in Procurement Data issued by CFM in accordance with Airline Transport Association of America (ATA) Specification (Spec) 200. The price of a new spare Part which is first listed by CFM in Procurement Data, may be changed by CFM in subsequent Procurement Data revisions until such time as the Part is included in CFM's Spare Parts Catalog as from time to time revised by CFM.

C. CFM will advise Airline in writing [***] in advance of any changes in prices affecting the prices in CFM's Spare Parts Catalog. During such [***] period, CFM shall not be obligated to accept Airline purchase orders for quantities of spare Parts in excess of [***] normal usage beyond the effective date of the announced price change.

D. The selling prices of all Products shall be expressed in U.S. Dollars.

ARTICLE III - ORDER PLACEMENT

A. This Agreement shall constitute the terms and conditions applicable to all purchase orders which may hereafter be placed by Airline and accepted by CFM for Products in lieu of all printed terms and conditions appearing on Airline's purchase orders, except that the description of Products, price, quantity, delivery dates and shipping instructions shall be as set forth on each purchase order accepted by CFM.

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GENERAL TERMS AGREEMENT NO. CFM-1-2377460475

B. Airline shall place purchase orders for Products quoted by CFM, in accordance with CFM's quotation for said Products.

C. Airline may place purchase orders for spare Parts using various electronic methods or Airline purchase order as prescribed in Spare Parts Catalog or CFM's quotation or any other method agreed to by Airline and CFM.

D. Airline shall place purchase orders for initial provisioning quantities of spare Parts as provided in the attached Exhibit B within one [***] or as otherwise mutually agreed following receipt from CFM of Initial Provisioning Data relating thereto.

E. CFM's acknowledgment of each purchase order shall constitute acceptance thereof.

ARTICLE IV - DELIVERY

A. Except as otherwise provided under Section III.G. of Exhibit B herein, CFM shall deliver Products under each purchase order placed by Airline and accepted by CFM, on a schedule consistent with CFM's lead times or as otherwise mutually agreed and as set forth in each such purchase order. Delivery dates are subject to (1) prompt receipt by CFM of all information necessary to permit CFM to proceed with work immediately and without interruption, and (2) Airline's compliance with the payment terms set forth herein.

B. [***]

C. If any Product cannot be delivered when ready due to any cause within the control of Airline, CFM may make delivery by placing such Product in storage. In such event, (1) all expenses incurred by CFM for activities such as, but not limited to, preparation for and placement into storage and handling, storage, inspection, preservation and insurance shall be paid by Airline upon presentation of CFM's invoices, and (2) CFM shall assist and cooperate with Airline in any reasonable manner with respect to the removal of any such Product from storage. In all other cases, such expenses shall be borne by CFM.

D. Unless otherwise instructed by Airline, CFM shall deliver each Product, except for spare Parts, packaged in accordance with CFM's normal standards for domestic shipment or export shipment. Any special boxing or preparation for shipment specified by Airline shall be for Airline's account and responsibility. The cost of any re-usable shipping stand or container is not included in the price of engines or of equipment and will be paid by Airline if the shipping stand is not returned by Airline, Ex Works the original point of shipment, in re-usable condition within [***] after shipment. CFM may, at its option, use non-reusable shipping stands or containers at no charge to Airline.

E. CFM shall deliver spare Parts packaged and labeled in accordance with ATA Spec 300, Revision No. 4, or to a revision mutually agreed in writing between CFM and Airline. CFM shall notify Airline, when applicable, that certain spare Parts are packed in unit package quantities (UPQ's), or multiples thereof.

ARTICLE V - PAYMENT

Airline shall pay CFM with respect to Products purchased hereunder as set forth in the attached Exhibit C.

ARTICLE VI - TAXES

A. The selling prices include and CFM shall be responsible for the payment of any imposts, duties, fees, taxes, dues or any charges whatsoever imposed or levied in connection with Products prior to their delivery.

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B. Upon delivery, Airline shall be responsible for the payment of all other imposts, duties, taxes, dues whatsoever imposed or levied in connection with such Products and Airline shall pay to CFM, upon demand, or furnish to CFM evidence of exemption there from, any taxes (including without limitation, sales, use, excise, turnover or value added tax) duties, fees, charges or assessments of any nature (but excluding any taxes in the nature of income taxes), legally assessed or levied by any governmental authority against CFM or its employees, its subsidiaries or their employees as a result of any sale, delivery, transfer, use, export, import or possession of such Product, or otherwise in connection with this Agreement ("Taxes"). If claim is made against CFM for any such duties, fees, charges, or assessments, CFM shall immediately notify Airline and, if requested by Airline, CFM shall not pay except under protest, and if payment be made, shall use all reasonable effort to obtain a refund thereof. If all or any part of any such taxes, duties, fees, charges or assessments be refunded, CFM shall repay to Airline such part thereof as Airline shall have paid. Airline shall pay to CFM, upon demand, all expenses (including penalties and interest) incurred by CFM in protesting payment and in endeavoring to obtain such refund. CFM will work with Airline to reduce or eliminate taxes if legally possible.

ARTICLE VII - CFM56 PRODUCT SUPPORT PLAN

The CFM56 Product Support Plan for Airline's operation of Products purchased by Airline from CFM or Engines installed on Airline's aircraft as original equipment, is set forth in the attached Exhibit B.

ARTICLE VIII - EXCUSABLE DELAY

CFM shall not be liable for delays in delivery or failure to perform due to (1) causes beyond its reasonable control, or [***].  As used herein, the term "CFM" shall be deemed to mean CFM, GE and SNECMA. In the event of any such delay, the date of delivery shall be extended for a period equal to the time lost by reason of the delay. This provision shall not, however, relieve CFM from using reasonable efforts to continue performance during the Excusable Delay period and from resuming performance as soon as reasonably practicable whenever such causes are removed. CFM shall promptly notify Airline when such delays occur or impending delays are likely to occur and shall continue to advise it of new shipping schedules and/or changes thereto.  In the event an excusable delay continues for a period of six months or more beyond the scheduled delivery date, Airline or CFM may, upon thirty days written notice to the other, cancel the part of any purchase order so delayed and CFM shall return to Airline all payments relative to the canceled part of the order and Airline shall, if the delay was caused by Airline, pay CFM its reasonable cancellation charges. In the event of a strike by the CFM workforce which causes a delay, any applicable escalation which was to be applied to Airline's payments in respect of such strike period shall be suspended for the period of the strike.

ARTICLE IX - PATENTS

A. CFM shall handle all claims and defend any suit or proceeding brought against Airline insofar as based on a claim that without further combination, any Product furnished under this Agreement constitutes an infringement of any patent of the United States, France or of any patent of any other country that is signatory to the Convention on International Civil Aviation signed by the United States at Chicago on December 7, 1944, in which Airline is authorized to operate or in which another airline pursuant to lawful interchange, lease or similar arrangement, operates aircraft of Airline. This paragraph shall apply only to any Product manufactured to CFM's design.

B. CFM's liability hereunder is conditioned upon Airline promptly notifying CFM in writing and giving CFM authority, information and assistance (at CFM's expense) for the defense of any suit or proceeding. In case such Product is held in such suit or proceeding to constitute infringement and the use of said Product is enjoined, CFM shall expeditiously, at its own expense and at its option, either (1) procure for Airline the right to continue using said Product; (2) replace same with satisfactory and non-infringing Product; or (3) modify same so it becomes satisfactory and non-infringing. CFM shall not be responsible to Airline or to said other airline, for incidental or consequential damages, including, but not limited to, costs, expenses, liabilities and/or loss of profits resulting from loss of use under this Article IX. CFM will reimburse Airline for damages assessed against Airline in a suit or proceeding based on a claim of patents infringement. CFM shall also take whatever reasonable steps are necessary to remove any injunction issued which prevents the usage of Products by Airline.

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C. The foregoing shall constitute the sole remedy of Airline and the sole liability of CFM for patent infringement.

ARTICLE X - INFORMATION AND DATA

A. All information and data (including, but not limited to, designs, drawings, blueprints, tracings, plans, models, layouts, specifications, and memoranda) which may be furnished or made available to Airline directly or indirectly as the result of this Agreement shall remain the property of CFM, GE or SNECMA as the case may be. This information and data is proprietary to CFM and shall neither be used by Airline nor furnished by Airline to any other person, firm or corporation for the design or manufacture of any Product nor permitted out of Airline's possession nor divulged to any other person, firm or corporation, except as stated below, or otherwise agreed in writing. Subject to the conditions set forth in the preceding sentence, manuals furnished to Airline by CFM under this Agreement shall be the property of Airline. The above restriction shall not apply: (1) if the information contained in the Agreement or the information and data is rightfully received by Airline from a third party without any obligation of confidentiality being imposed upon such third party; (2) if this Agreement or any portion thereof or the information and data is (a) in the public domain at the time other than by breach of this Article X; (b) approved for release in writing by CFM; (c) required to be disclosed by Airline to any lending or financial institution or leasing company or other participant (collectively the "Financing Party") in any equipment trust, conditional sale, lease, security agreement, chattel mortgage or other arrangement for the financing or use of the Aircraft or Engines by Airline provided however that the Financing Party first agrees in writing to maintain the confidentiality of this Agreement and/or information and data on the same or similar terms and conditions as set forth herein; or (d) required to be disclosed in the normal course of Airline's business to Airline's attorneys, accountants, insurance brokers and advisors, financial advisors, auditors, rating agencies and underwrites (and underwriters' counsel) on a need-to-know basis provided, however, that such persons first agree in writing to maintain the confidentiality of this Agreement and/or information and data on the same conditions as set forth herein; (3) if this Agreement or any portion thereof or the information and data is required to be released pursuant to any applicable law, regulation, or legal process; provided however, (a) Airline receiving the legal process or subject to the regulation shall take all reasonable steps to preserve the confidentiality of the Agreement and/or information and data and to ensure that the Agreement and/or information and data will be treated confidentially, including without limitation if possible requesting that the Agreement and information and data not be released to the public; (b) Airline gives CFM prompt notice of the legal process or regulation so that CFM may seek an appropriate protective order or pursue such other legal action as is necessary in the opinion of CFM to preserve the confidentiality of the Agreement and information and data and (c) Airline provides reasonable assistance to and cooperates with CFM in its efforts to preserve the confidential nature of the Agreement and/or information and data. Nothing in this Agreement shall preclude Airline from using such information and data for the modification, overhaul, or maintenance work performed by Airline on Airline's Products; except that all repairs or repair processes that require substantiation (including, but not limited to, high technology repairs) will be the subject of a separate license and substantiated repair agreement between CFM and Airline. Airline shall take all steps necessary to ensure compliance by its employees, and agents with this Article X. Airline may provide the Engine Maintenance Manual to a party providing line maintenance for Airline provided such party agrees to return the manual to Airline and agrees in writing to protect such Manual as CFM proprietary information, agrees to preserve the confidentiality of the information and data, and agrees not to copy or otherwise provide the Manual to any third party. Airline shall request that the line maintenance provider enter into an agreement with CFM for the supply of the required data.

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B. In the event Airline transfers or leases any Product provided by CFM hereunder, the instrument by which Airline transfers any such Product may permit the use of the information and data by its transferee, subject to the same limitations set forth in paragraph A above, and shall preserve to CFM the right to enforce such limitations.

C. Nothing in this Agreement shall convey to Airline the right to reproduce or cause the reproduction of any Product of a design identical or similar to that of the Product purchased hereunder or give to Airline a license under any patents or rights owned or controlled by CFM, GE or SNECMA.

D. If computer software is provided by CFM to Airline under this Agreement, it is understood that only CFM owns and/or has the right to license such software product(s) and that Airline shall have no rights in such software; except, as may be explicitly set forth in a separate  written agreement between CFM and Airline.

CFM shall also handle all claims and defend any suit or proceeding against Airline insofar as such claims, suits or proceedings result from any infringement or alleged infringement by CFM of any copyright in respect of any computer software provided to Airline by CFM as part of or in connection with any Product furnished under this Agreement, provided that CFM's obligations in this regard shall be limited to infringements or alleged infringements in any country which at the time of such infringement or alleged infringement is a member of the Berne Union and recognizes computer software as a "work" under the Berne Convention.

ARTICLE XI - FAA AND EASA CERTIFICATION REQUIREMENTS

A. All Products, when required by the U.S. and/or foreign Governments, shall, at time of delivery:

1. Conform to a Type Certificate issued by the FAA and EASA; (CFM will assist Airline in obtaining a Type Certificate from the Chilean DGAC) at no cost to Airline.

2. Conform to applicable regulations issued by the FAA and EASA at the time of delivery of such Products.

B. However, if, subsequent to the date of acceptance of the purchase order for such Products but prior to their delivery by CFM to Airline, the FAA and/or EASA issue changes in regulations covering Products sold under this Agreement and such changes in regulations are promulgated after the date of Airline purchase orders for such Products and such changes were not reasonably foreseeable by CFM and/or were not caused by defects in the Product, then all costs associated with any Product modifications necessitated thereby will be shared equally by CFM and Airline; provided however, that costs associated with any modifications to the airframe required by such Product modifications shall not be borne by CFM.

C. Any delay occasioned by complying with such regulations set forth in Paragraph B above shall be deemed an Excusable Delay under Article VIII hereof, and, in addition, appropriate adjustments shall be made in the specifications to reflect the effect of compliance with such regulations. In the event of such delay, any applicable escalation which was to be applied to Airline's payments in respect of such delay, shall be suspended for the period of such delay.

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ARTICLE XII - TERMINATION FOR INSOLVENCY

A. Upon the commencement of any bankruptcy or reorganization proceeding by or against either party hereto (the "Defaulting Party"), the other party hereto may, upon written notice to the Defaulting Party, cease to perform any and all of its obligations under this Agreement and the purchase orders hereunder (including, without limitation, continuing work in progress and making deliveries or progress payments or down payments) unless the Defaulting Party shall provide adequate assurance, in the reasonable opinion of the other party hereto, that the Defaulting Party will continue to perform all of its obligations under this Agreement and the purchase orders hereunder in accordance with the terms hereof, and will promptly compensate the other party hereto for any actual pecuniary loss resulting from the Defaulting Party being unable to perform in full its obligations hereunder and under the purchase orders. If the Defaulting Party or the trustee thereof shall fail to promptly provide such adequate assurance, upon notice to the Defaulting Party by the other party hereto, this Agreement and all purchase orders hereunder shall be canceled without prejudice to any and all antecedent rights and obligations.

B. Either party, at its option, may cancel this Agreement or any purchase order hereunder with respect to any or all of the Products to be furnished hereunder which are undelivered or not furnished on the effective date of such cancellation by giving the other party written notice, as hereinafter provided, at any time after a receiver of the other's assets is appointed on account of insolvency, or the other makes a general assignment for the benefit of its creditors and such appointment of a receiver shall remain in force undismissed, unvacated or unstayed for a period of sixty days thereafter. Such notice of cancellation shall be given thirty days prior to the effective date of cancellation, except that, in the case of a voluntary general assignment for the benefit of creditors, such notice need not precede the effective date of cancellation. Any such cancellation shall take effect without prejudice to any and all antecedent rights and obligations.

ARTICLE XIII - LIMITATION OF LIABILITY

The liability of CFM to Airline arising out of, connected with, or resulting from the manufacture, sale, possession, use or handling of any Product and Engines installed on Airline's aircraft as original equipment whether in contract, tort (including negligence but excluding gross negligence and willful misconduct) or otherwise, shall be as set forth in this Agreement and the Product Support Plan included in Exhibit B hereof, and shall not in any event exceed [***]. The liability of CFM to Airline for a delay in delivering Products which is not considered an Excusable Delay shall be governed by the Uniform Commercial Code of New York. The foregoing shall constitute the sole remedy of Airline and the sole liability of CFM. In no event shall CFM be liable for special or consequential damages. As used herein, the term "CFM" shall be deemed to include GE, SNECMA and CFM. THE WARRANTIES AND GUARANTEES SET FORTH IN THE PRODUCT SUPPORT PLAN ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES AND GUARANTEES WHETHER WRITTEN, STATUTORY, ORAL, OR IMPLIED (INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR PURPOSE).

ARTICLE XIV - EXPORT SHIPMENT

CFM agrees upon Airline's written request, to assist Airline to arrange for export shipment of Products, Airline shall pay CFM for all fees and expenses including, but not limited to, those covering preparation of consular invoices, freight, storage, and Warehouse to Warehouse (including war risk) insurance, within thirty (30) days of receipt of CFM's invoices. In such event, CFM will assist Airline in applying for any required Export License and in preparing consular documents according to. Airline's instructions or in the absence thereof, according to its best judgment but without liability for error or incorrect declarations including, but not limited to, liability for fines or other charges but excepting errors due to CFM's gross negligence.

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ARTICLE XV - WAIVER OF IMMUNITY

To the extent that Airline or any of its property is or becomes entitled at any time to any immunity on the grounds of sovereignty or otherwise from any legal action, suit or proceeding, from set-off or counterclaim, from the jurisdiction of any competent court, from service of process, from attachment prior to judgment, from attachment in aid of execution, or from execution prior to judgment, or other legal process in any jurisdiction, Airline for itself and its property does hereby irrevocably and unconditionally waive, and agree not to plead or claim, any such immunity with respect to its obligations, liabilities or any other matter under or arising out of or in connection with this Agreement or the subject matter hereof. Such agreement shall be irrevocable and not subject to withdrawal in any and all jurisdictions including, without limitation, under the Foreign Sovereign Immunities Act of 1976 of the United States of America.

ARTICLE XVI - GOVERNMENTAL AUTHORIZATION

Airline shall be responsible for obtaining any required authorization such as an Export License, Import License, Exchange Permit or any other required governmental authorization. Airline shall restrict disclosure of all information and data furnished in connection with such authorization and shall ship the subject matter of the authorization only those destinations which are authorized by the U.S. and/or French Governments. At the request of Airline, CFM will provide Airline with a list of such authorized destinations. CFM shall not be liable if any authorization is delayed, denied, revoked, restricted or not renewed and Airline shall not be relieved of its obligation to pay CFM. It is understood that the Airline is not responsible for obtaining FAA or EASA certification of Products sold by CFM.

ARTICLE XVII - NOTICES

Any acknowledgements by CFM or notices by either party under this Agreement shall become effective upon receipt and shall be in writing and be delivered or sent by personal service, mail or fax to the respective parties at the following addresses, which may be changed by written notice:

To: LAN AIRLINES S.A.	To:	CFM International, Inc.
Av. Presidente Riesco 5711, 20th Floor,		One Neumann Way, Room 450
Las Condes		Cincinnati, Ohio 45215-1988
Santiago, Chile
[***]
Attention:	Attention:
[***]

ARTICLE XVIII - MISCELLANEOUS

A. This Agreement may not be assigned, in whole or in part, by either party without the prior written consent of the other party, except that Airline's consent shall not be required for the substitution of any other company jointly owned by GE and SNECMA in place of CFM as the contracting party (at no cost to Airline and without changing the rights and duties of Airline herein) and the recipient of any or all payments and/or for the assignment of CFM's payment rights to CFM's suppliers. [***]

B. The rights herein granted and this Agreement are for the benefit of the parties hereto and are not for the benefit of any third person, firm or corporation, except as expressly provided herein with respect to GE and SNECMA, and nothing herein contained shall be construed to create any rights in any third parties under, as the result of, or in connection with this Agreement. However, CFM and Airline recognize that Aircraft covered under this Agreement may be operated by an affiliated airline of Airline. In such an event, CFM, Airline and the affiliated airline shall enter into an appropriate agency agreement.

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C. This Agreement contains information specifically for Airline and CFM and nothing herein contained shall be divulged by Airline or CFM to any third person, firm or corporation, without the prior written consent of the other party which consent shall not be unreasonably withheld; except that Airline may disclose this Agreement to professional advisors, auditors and insurers, provided such professional advisors and insurers agree in writing not to disclose the Agreement to third parties.

D. This Agreement shall be construed, interpreted and applied in accordance with the law of the State of New York without reference to its conflict of laws principles. Both parties agree to waive a trial by jury. The Vienna Convention on Contracts for the International Sale of Goods shall not apply to this Agreement.

E. This Agreement and all Letter Agreements relating hereto contain the entire and only agreement between the parties, and it supersedes all pre-existing agreements between such parties, respecting the subject matter hereof; and any representation, promise or condition in connection therewith not incorporated herein shall not be binding upon either party. No modification, renewal, extension, waiver, or termination of this Agreement or any of the provisions herein contained shall be binding upon the party against whom enforcement of such modification, renewal, extension, waiver or termination (except as provided in Article XII hereof) is sought, unless it is made in writing and signed on behalf of CFM and Airline by duly authorized executives.

F. This Agreement shall remain in full force and effect until (1) Airline ceases to operate [***] powered by Products set forth herein, (2) [***] aircraft powered by such Products are in commercial airline service, (3) this Agreement is terminated in whole or in part under either the provisions of Excusable Delay or Termination for Insolvency herein, or (4) by mutual consent of the parties, whichever occurs first.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and the year first above written.

LAN AIRLINES S.A.	CFM INTERNATIONAL, INC.
By:	By:
Typed Name:	Typed Name:
Title:	Title:
Date:	Date:

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EXHIBIT A

CFM56 SERIES PRODUCTS APPLICABLE TO

AIRLINE'S A320 FAMILY AIRCRAFT

[***]

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EXHIBIT B

CFM56 PRODUCT SUPPORT PLAN

SECTION I - DEFINITIONS

These definitions shall apply for all purposes of this Agreement unless the context otherwise requires.

1. "Aircraft" means the aircraft on which the CFM Engine listed in the applicable letter agreement to this Agreement is (are) installed.

2. "Agreement" means the General Terms Agreement between CFM and Airline to which this Exhibit B is attached.

3. "Engine" means the Engine(s) described in the applicable letter agreement(s) to this Agreement.

4. "Expendable Parts" means those parts which must routinely be replaced during Inspection, repair, or maintenance, whether or not such parts have been damaged, and other Parts which are customarily replaced at each such Inspection and maintenance period such as filter inserts and other short-lived items which are not dependent on wear out but replaced at predetermined intervals.

5. "Failed Parts" means those Parts and Expendable Parts suffering a Failure or mutually determined to have caused the Engine to be unserviceable and incapable of continued operation without requiring corrective action and shall include any Part or Expendable Part with a defect in material or workmanship discovered prior to the initial use of a Part or Expendable Part.

6. [***]

7. "Flight Cycle" means the complete running of an Engine from start through any condition of flight and ending at Engine shutdown. A "touch and go landing" used during pilot training shall be considered as a "Flight Cycle."

8. "Flight Hours" means the cumulative number of airborne hours in operation of each Engine computed from the time an aircraft leaves the ground until it touches the ground at the end of a flight.

9. [***]

10. "Inspection" means the observation of an Engine or Parts thereof, through disassembly or other means, for the purpose of determining serviceability.

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11. "Labor Allowance" means a CFM credit calculated by multiplying the established labor rate by man-hours for disassembly, reassembly (when applicable), and for Parts repair. If aLabor Allowance is granted for a repair, it shall not exceed the credit which would have been quoted if the Part had not been repairable. The established labor rate means either (a) the labor rate of [***] (which has been agreed between CFM and Airline) if the work has been performed by Airline or, if Airline elects to establish a new labor rate and CFM does not consent to such increase (such consent not to be unreasonably withheld), the labor rate shall be the rate normally quoted by CFM for such disassembly, reassembly and parts repair or (b) the then current labor rate agreed between CFM and the CFM authorized repair and overhaul shop if the work has been performed by such repair and overhaul shop.

12. "Module" means the Engine Modules described in Exhibit A.

13. "Part" means only those new Engine and Engine Module parts which have been sold originally to Airline by CFM for Airline's commercial use. The term excludes parts which were furnished on new Engines and Modules but are procured directly from vendors by Customer. Such parts are covered by the vendor warranty and the CFM "Vendor Warranty Back Up." Also excluded are Expendable Parts and customary short-lived items such as igniters and filter inserts.

14. "Parts Credit Allowance" means the credit granted by CFM to Airline in connection with the Failure of a Part based on the price of a replacement Part, [***] point of manufacture at the time the Part is removed. This credit may take the form of a replacement Part at CFM's option. Parts Credit Allowance shall be adjusted to include applicable sales, use, VAT and import taxes levied or assessed in connection with a replacement Part upon submittal by Airline of proper documentation therefore; [***].

15. "Part Cycles" means the total number of Flight Cycles accumulated by a Part.

16. "Parts Repair" means the CFM recommended rework or restoration of Failed Parts to a serviceable condition.

17. "Part Time" means the total number of Flight Hours flown by a Part.

18. "Scheduled Inspection" means the inspection of an Engine conducted when an Engine has approximately completed a planned operating interval.

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19. "Scrapped Parts" means those Parts determined to be unserviceable and not economically repairable provided always that any such repair does not adversely affect the future reliability or performance of that Part. Such Parts shall be considered as scrapped if they bear a scrap tag duly countersigned by a CFM representative. [***].

20. “Spare Parts Catalog” shall have the meaning as defined Article II, Section B.

21. "Ultimate Life" of a Part means the approved limitation on use of a Part, in cumulative Flight Hours or Flight Cycles, which either CFM or a U.S. and/or EASA authority establish as the maximum period of allowed operational time for such Parts in Airline service, with any required periodic repair and restoration. The term does not include individual Failure from wear and tear or other cause not related to the total usage capability of all such Parts in Airline service.

SECTION II - WARRANTIES

A.  New Engine Warranty

1. CFM warrants each new Engine and Module against Failure for the initial [***] Flight Hours as follow:

a. Parts Credit Allowance will be granted for any Failed Parts and for vendor parts, Expendable Parts, and Parts which are damaged as a result of the Failed Part.

b. Labor Allowance for disassembly, reassembly, test and Parts repair of any new Engine Part will be granted for replacement of Failed Parts and to parts (vendor or Expendable Parts) and Parts which are damaged as a result of the Failed Part.

c. Such Parts Credit Allowance, test and Labor Allowance will be: [***] from new to [***] Flight Hours and decreasing pro rata from [***] at [***] Flight Hours to zero percent at [***] Flight Hours.

2. As an alternative to the above allowances, CFM shall, upon request of Airline:

a. Promptly arrange to have the Failed Engines and Modules repaired, as appropriate, at a facility mutually agreed to by CFM and Airline, at no charge to Airline for the first [***] Flight Hours and at a charge to Airline increasing pro rata from [***] of CFM’s repair costs at [***] Flight Hours to [***] of such CFM repair costs at [***] Flight Hours.

b. Transportation to and from the designated facility shall be at Airline's expense.

B.  New Parts Warranty

In addition to the warranty granted for new Engines and new Modules, CFM warrants Engine and Module Parts as follows:

1. During the first [***] Flight Hours for such Parts and Expendable Parts, CFM will grant [***] Parts Credit Allowance or Labor Allowance for repair labor for Failed Parts and for Parts and Expendable Parts which are within their respective New Engine or New Parts Warranty coverage period and which suffer damage because of a Failed Part.

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2. CFM will grant a pro rata Parts Credit Allowance for Scrapped Parts decreasing from [***] Flight Hours Part Time to zero percent at the applicable hours designated in Table 1.

C.  Ultimate Life Warranty

1. CFM warrants Ultimate Life limits on the following Parts which are more specifically defined in Chapter 5 of the CFM56 Engine Shop manual:

a.      [***]

2. CFM will grant a pro rata Parts Credit Allowance decreasing from [***] when new to zero percent at [***] Flight Hours or [***] flight Cycles, whichever comes earlier. Credit will be granted only when such Parts are permanently removed from service by a CFM or a FAA and/or EASA imposed Ultimate Life limitation of less than [***].

D.  Campaign Change Warranty

1. A campaign change will be declared by CFM when a new Part design introduction, Part modification, Part Inspection, or premature replacement of an Engine or Module is required by a time compliance CFM Service Bulletin or FAA or EASA Airworthiness Directive. Campaign change may also be declared for CFM Service Bulletins requesting new Part introduction no later than the next Engine or Module shop visit. CFM will grant following Parts Credit Allowances:

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GENERAL TERMS AGREEMENT NO. CFM-1-2377460475

Engines and Modules

(i) [***] for Parts in inventory or removed from service when new or with [***] Flight Hours or less total Part Time.

(ii) [***] for Parts in inventory or removed from service with over [***] Flight Hours since new, regardless of warranty status.

2. Labor Allowance - CFM will grant [***] Labor Allowance for disassembly, reassembly, modification, testing, or Inspection of CFM supplied Engines, Modules, or Parts therefore when such action is required to comply with a mandatory time compliance CFM Service Bulletin or FAA or EASA Airworthiness Directive. A Labor Allowance will be granted by CFM for other CFM issued Service Bulletins if so specified in such Service Bulletins.

3. Life controlled rotating Parts which are set forth in the Ultimate Life Warranty and which are retired by Ultimate Life limits including FAA and/or EASA Airworthiness Directive, are excluded from Campaign Change Warranty.

E.  Warranty Pass-On

If requested by Airline and agreed to by CFM in writing which consent shall not be unreasonably withheld, CFM will extend warranty support for Engines sold or leased by Airline to commercial Airline operators, or to other aircraft operators. Such warranty support will be limited to the unexpired portion of the New Engine Warranty, New Parts Warranty, Ultimate Life Warranty and Campaign Change Warranty and will require such operator(s) to agree, in writing, to be bound by, and comply with, all the terms and conditions, including the limitations, applicable to such warranties as set forth in this Agreement. It is agreed by Airline that Airline will reimburse CFM for the reasonable cost incurred by CFM in producing any legal opinions associated with CFM's consent to the above Warranties.

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GENERAL TERMS AGREEMENT NO. CFM-1-2377460475

TABLE 1

A320

CFM56 WARRANTY PARTS LIST

                                                         [***]

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GENERAL TERMS AGREEMENT NO. CFM-1-2377460475

TABLE 1

A320

CEM56 WARRANTY PARTS LIST

Continue

[***]

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GENERAL TERMS AGREEMENT NO. CFM-1-2377460475

F.  Vendor Warrant Back-Up

1. CFM controls and accessories vendors provide a warranty on their products used on CFM Engines. This warranty applies to controls and accessories sold to CFM for delivery on installed or spare Engines, and controls and accessories sold by the vendor to the Airlines on a direct purchase basis. In the event the controls and accessories suffer a failure during the vendors warranty period, the Airline will submit a claim directly to the vendor in accordance with the terms and conditions of the vendor’s warranty.

2. In the event a controls and accessories vendor fails to provide a warranty at least as favorable as the CFM New Engine Warranty (for complete controls and accessories) or New Parts Warranty (for components thereof), or if provided, rejects a proper claim from the Airline, CFM will promptly intercede on behalf of the Airline to resolve the claim with the vendor. In the event CFM is unable to resolve a proper claim with the vendor, CFM will honor a claim from the Airline under the provisions and limitations of CFM's New Engine or New Parts Warranty, as applicable.

G.  Vendor Interface Warranty

Should any CFM control or accessory develop a problem due to its environment or interface with other controls and accessories or with the Engine, reverser, or equipment supplied by the aircraft manufacturer, CFM will be responsible for initiating prompt corrective action at no cost to Airline. If the vendor disclaims warranty responsibility for parts requiring replacement, CFM will apply the provisions of its New Parts Warranty to such part whether it was purchased originally from CFM or directly from the vendor.

H.  [***]

I.  [***]

SECTION III - SPARE PARTS PROVISIONING

A. Provisioning Data

1. In connection with Airline's initial provisioning of spare Parts, CFM shall furnish Airline with data in accordance with ATA 200 Specification using a revision mutually agreed to in writing by CFM and Airline.

2. It is the intention of the parties hereto to comply with the requirements of the ATA 200 Specification and any future changes thereto, except that the Parties shall negotiate in good faith reasonable changes in the procedures or requirements of the Specification which procedures or requirements, if complied with exactly, would result in an undue operating burden or unnecessary economic penalty.

The data to be provided by CFM to Airline shall encompass all Parts listed in CFM's Illustrated Parts Catalogs. CFM further agrees to become total supplier of Initial Provisioning Data for all vendor spare Parts in accordance with Paragraph 1. above.

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GENERAL TERMS AGREEMENT NO. CFM-1-2377460475

3. Beginning on a date no earlier than [***] months and no later than [***] months prior to delivery of Airline's first Aircraft, or within [***] weeks of execution of this GTA, or as mutually agreed, CFM shall provide to Airline a complete set of Initial Provisioning Data and shall progressively revise this data until [***] days after delivery of the last spare Engine specified in its initial Purchase Order or as mutually agreed. A status report will be issued periodically. Provisioning data will be reinstituted for subsequent spare Engines reflecting the latest modification status. CFM will make available a list of major suppliers as requested by Airline. CFM will provide, or cause to be provided on behalf of its vendors, the same service detailed in this clause.

B. Pre-Provisioning Conference

A pre-provisioning conference, attended by CFM and Airline personnel directly responsible for initial provisioning of spare Parts hereunder, will be held at a mutually agreed time and place prior to the placing by Airline of initial provisioning purchase orders. The purpose of this conference is to discuss systems, procedures and documents available to the Airline for the initial provisioning cycle of the Products.

C.  Changes

CFM shall have the right to make corrections and changes in the Initial Provisioning Data is accordance with Chapter 2 (Initial Provisioning) of ATA 200 Specification or Chapter 1 o ATA 2000 Specification using a revision mutually agreed to in writing by CFM and Airline So long as Airline operates one (1) aircraft powered by CFM56 Engines and there are five (5) such aircraft powered by CFM56 Engines in commercial airline service, CFM will progressively revise Airline's Procurement Data tape in accordance with Chapter 3 (Order Administration) of ATA 200 Specification or Chapter 2 of ATA 2000 Specification entitle( "Integrated Data Processing Supply" using a revision mutually agreed to in writing by CFM and Airline.

D. Return Of Parts

Airline shall have the right to return to CFM, at CFM's expense, any new or unused Par which has been shipped in excess of the quantity ordered or which is not the Part number ordered or which is in a discrepant condition except for damage in transit unless the damage in transit was caused directly by defective packaging on the Part of CFM.

E. Parts Buy-Back

[***]

F. Parts of Modified Design

1. CFM shall have the right to make modifications to design or changes in the spare Parts sold to Airline hereunder.

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GENERAL TERMS AGREEMENT NO. CFM-1-2377460475

2. CFM will from time to time inform Airline in accordance with the means set forth in ATA 200 Specification, when such spare Parts of modified design become available for shipment hereunder.

3. Spare Parts of the modified design will be supplied unless Airline advises CFM in writing of its contrary desire within ninety (90) days of the issuance of the Service Bulletin specifying the change to the modified Parts. CFM will continue to provide the premodified design Part at then current Spare Parts Catalog prices until the stock is exhausted.

G.  [***]

SECTION IV - TECHNICAL DATA

A. CFM shall make available to Airline the technical data, including revisions thereof, at no charge, in the quantities as specified in Exhibit E and at a time and to a location as mutually agreed. If and when such technical data becomes available in CD-Rom format, such will be provided to Airline at no cost.

Such technical data shall be prepared by CFM in accordance with the applicable provisions of ATA 100 or 2100 Specification (including necessary deviations) as the same may be revised from time to time.

If Airline requires CFM to furnish the technical data in a form different from that normally furnished by CFM' pursuant to ATA 100 or 2100 Specification, or in quantities greater than those specified in Exhibit E, CFM will, upon written request from Airline, furnish Airline with a written quotation for furnishing such technical data.

Revisions to the above technical data shall be furnished by CFM to Airline at no charge for quantities equivalent to the quantities specified in Exhibit E for as long as Airline operates [***] powered aircraft and there [***] CFM56 powered aircraft in commercial airline service. Such quantities of revisions may be mutually modified in order to reflect any change in Airline's CFM56 operation.

CFM shall incorporate in the Engine Illustrated Parts Catalog and Engine Shop Manual all appropriate CFM service bulletins for as long as Airline receives revisions to technical data. Premodified and post modified configurations shall be included by CFM unless Airline informs CFM that a configuration is no longer required.

B. CFM will require each vendor to furnish technical data consisting of copies of a component maintenance manual and service bulletins. Such vendor publications shall be furnished by' CFM to Airline in accordance with and subject to the same provisions as those set forth in Paragraph A. above.

C. CFM will also require its ground support equipment vendors, where appropriate, to furnish to Airline, at no charge, technical data determined by CFM to be necessary for Airline to maintain, overhaul and calibrate special tools and test equipment. Such vendor-furnished technical data shall be furnished in accordance with and subject to the same provisions as those set forth in Paragraph A. above, except that the technical data shall be prepared in accordance with the applicable provisions of ATA 101 Specification, as the same may be revised from time to time.

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GENERAL TERMS AGREEMENT NO. CFM-1-2377460475

D. The following technical data, not covered by ATA Specifications, shall be furnished by CFM to Airline in the quantities and at a time and to a location as mutually agreed:

• Installation Manual (if required)

• General Facility Study

• Parts serialization records

E. Where applicable, technical data as described in the above Paragraphs A., B, C and D furnished by CFM or by CFM vendors to Airline hereunder, shall be printed in the simplified English language as defined by AECMA (Association Europeenne des Constructeurs de Material Aerospatial).

F. All technical data furnished herein by CFM to Airline shall be subject to the provisions of Article X, "Information and Data", of this Agreement.

SECTION V - TECHNICAL TRAINING

1.  General

This part describes the current maintenance training to be provided by CFM at CFM's training facility in [***]. CFM will provide [***], except as otherwise provided herein, a number of student days* for maintenance training as defined hereunder:

-      [***]

-      [***]

These days will be selected from the list given in (3), "Standard Maintenance Training Program" on the next page. Any additional training beyond this threshold shall be at Airline's cost.

All instruction, examinations and materials shall be prepared and presented in the English language and in the units of measure used by CFM. Airline will provide interpreters, if required, for Airline's personnel.

[***]

2. Maintenance Training Conference

CFM and Airline will conduct a maintenance training conference call in order to schedule and discuss the maintenance training or, the Airline is welcome to visit CFM's training facilities and discuss training. During the maintenance training conference call or visit, the Airline will indicate the courses selected and arrange a mutually acceptable schedule.

* Student days = # of students X # of class days

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GENERAL TERMS AGREEMENT NO. CFM-1-2377460475

3. Standard Maintenance Training

Standard Maintenance Training will consist of computer based training or classroom presentations supported by training materials and, when applicable, hands-on practice. Training material will be based on ATA 104 guidelines.

[***]

4. Optional Maintenance Training

Non-standard maintenance training courses are described in the current CFM Training Course Syllabus and CFM will provide a quote upon request.

5. Training at a Facility Other Than CFMI's

If requested prior to the conclusion of the maintenance training planning conference call or visit, CFM will conduct the classroom training described in (3), "Standard Maintenance Training" at a mutually acceptable alternate training site, subject to the following conditions.

5.1 Airline will be responsible for providing acceptable classroom space and training equipment required to present the CFM courseware.

5.2 Airline will pay CFM's travel and living charges for each CFM instructor for each day,   or fraction thereof, such instructor is away from [***], including travel time.

5.3 Airline will reimburse CFM for round-trip transportation for CFM's instructors and training materials between [***], and such alternate training site.

5.4 Those portions of the training that require the use of CFM's training devices shall be conducted at CFM designated facilities.

6.  Supplier Training

The standard maintenance training includes sufficient information on the location, operation and servicing of engine equipment, accessories and parts provided by suppliers to support line maintenance functions.

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GENERAL TERMS AGREEMENT NO. CFM-1-2377460475

If Airline requires additional maintenance training with respect to any supplier-provided equipment, accessories or parts, Airline will schedule such training directly with the supplier.

7.  Student Training Material

7.1 Manuals

When required, CFM will provide, at the beginning of each maintenance training  course, one set of training manuals, or equivalent, for each student attending such  course.

7.2  Other Training Material

CFM will provide one set of training material, per course, as applicable and as selected by Airline.

SECTION VI - CUSTOMER SERVICE

A. CFM shall assign to Airline at no charge, a Customer Support Manager located at CFM's factory to provide and coordinate appropriate liaison between the Airline and CFM's factory personnel.

B. CFM shall also make available to Airline, [***], a Field Service Representative as CFM's representative at Airline's maintenance base plus a Shop Specialist to be assigned by CFM to the engine shop facility selected by Airline. The Field Service Representative will be based [***], and his primary responsibility will be assisting Airline. These specialists will assist Airline in areas of unscheduled maintenance action and scrap approval, will provide rapid communication between Airline's maintenance base and CFM's factory personnel. It is agreed that Airline and CFM will continually monitor the reasonable requirements of Airline for a Field Service Representative [***] and that the parties will mutually determine if and when such a Field Service Representative is no longer needed to be based [***].

C. CFM will take reasonable steps to improve the response time to technical questions posed by Airline.

SECTION VII - PRODUCT SUPPORT ENGINEERING

Factory based engineers who are specialized in power plant engineering problems are avail no charge to Airline, to make visits to Airline as mutually agreed when problems encountered. These engineers will coordinate with the CFM56 design engineers and Airline’s power plant engineering group. Where specific design problems require a better understanding Airline's experience, design engineers will work directly with Airline's power plant engineering personnel to solve the problem.

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GENERAL TERMS AGREEMENT NO. CFM-1-2377460475

SECTION VIII - OPERATIONS ENGINEERING

Operations Engineering survey teams are available, at no charge to Airline, to make surveys mutually agreed by Airline maintenance and operating procedures. These survey teams able to provide service to all Airlines operating CFM56 Engines. This group will included experienced operations engineers who will be available for flying jump-seat on CFM56-powered aircraft, and discussing operating procedures with the crews.

SECTION IX - GROUND SUPPORT EQUIPMENT

[***]

SECTION X - GENERAL CONDITIONS - CFM56 PRODUCT SUPPORT PLAN

A. Airline will maintain operational and maintenance records in accordance with FAA or EASA requirements and in accordance with normal industry practices, and make these available for CFM inspection.

B. The warranty and guarantee provisions of this CFM56 Product Support Plan will not apply to any damage to a Product if it has been reasonably determined by CFM that such was caused because the Product:

o Has not been properly installed or maintained unless it has not been properly installed or maintained by CFM; or

o Has been operated contrary to applicable CFM recommendations as contained in its Manual, Bulletins, or other written instructions; or

o Has been repaired or altered outside of CFM facilities in such a way as to impair its safety of operation or efficiency; or

o Has been subjected to misuse, neglect or accident; or

o Has sustained Foreign Object Damage; or

o [***]

o [***]

Furthermore, the warranty and guarantee provisions of this CFM56 Product Support Plan will only apply to Products which have been sold originally by CFM under this Agreement to Airline or Airline's maintenance facility for commercial use.

C. THE EXPRESS PROVISIONS OF THIS CFM56 PRODUCT SUPPORT PLAN SET FORTH THE MAXIMUM LIABILITY OF CFM WITH RESPECT TO CLAIMS OF ANY KIND ARISING OUT OF OR IN CONNECTION WITH THE RIGHTS AND OBLIGATIONS CONTAINED WITH THIS CFM56 PRODUCT SUPPORT PLAN, INCLUDING NEGLIGENCE BUT EXCLUDING GROSS NEGLIGENCE AND WILFUL MISCONDUCT, AND ALSO ARISING OUT OF MANUFACTURE, SALE, POSSESSION, USE OR HANDLING OF THE PRODUCTS OR PARTS THEREOF OR THEREFOR.

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GENERAL TERMS AGREEMENT NO. CFM-1-2377460475

D. Except as provided in the Vendor Warranty Back-up provisions in Paragraph F. of Section II hereof, no Parts Credit Allowance will be granted and no claim for loss or liability will be recognized by CFM for Parts of the Engine whether original, repair, replacement, or otherwise, unless sold originally by CFM to Airline for commercial use; except for Parts purchased by Airline's repair facility from CFM, and for Parts or Expendable Parts suffering resultant damage during the period of the New Engine and Module Warranty, New Parts Warranty or Extended New Engine and New Parts Guarantee, in accordance with such warranty and guarantees.

E. Airline shall apprise CFM of any Failure subject to the conditions of this CFM56 Product Support Plan within sixty (60) days after the discovery of such Failure. Any Part for which a Parts Credit Allowance is requested by Airline shall be returned to CFM upon specific request by CFM. Upon return to CFM, such Part shall become the property of CFM unless CFM directs otherwise. Transportation expenses shall be borne by CFM.

F. The warranty applicable to a replacement Part provided under the terms of the New Engine Warranty or New Parts Warranty shall be the same as the warranty on the original Part. The unexpired portion of the applicable warranty will apply to Parts repaired under the terms of such warranty.

G. Airline will cooperate with all reasonable requests of CFM in the development of Engine operating practices, repair procedures, and the like with the objective of improving Engine operating costs.

H. Except as provided in the Warranty Pass-On provisions in Paragraph E. of Section II hereof, this Product Support Plan applies only to the original purchaser of the CFM56 Engine, except that installed Engines supplied to Airline through the aircraft manufacturer shall be considered as original Airline purchases covered by this Product Support Plan.

1. Airline will provide CFM a report identifying serialized rotating parts which have been scrapped by Airline. Format and frequency of reporting will be mutually agreed to by Airline and CFM.

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GENERAL TERMS AGREEMENT NO. CFM-1-2377460475

EXHIBIT C

PAYMENT TERMS

[***]

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LETTER AGREEMENT NO. 1

TO GTA No. CFM-1-2377460475

LAN AIRLINES S.A.

Ave. Presidente Riesco No. 5711,

Las Condes,

Santiago,

Chile

WHEREAS, CFM International, Inc. (hereinafter individually referred to as “CFM”) and LAN AIRLINES S.A. (hereinafter referred to as “Airline”) (CFM and Airline being hereinafter collectively referred to as the “Parties”) have entered into General Terms Agreement CFM-1-2377460475 dated December 17, 2010 (hereinafter referred to as “GTA”);

WHEREAS, the GTA contains the applicable terms and conditions governing the sale by CFM and the purchase by Airline of spare engines, related equipment and spare parts therefore in support of Airline’s CFM powered fleet of aircraft from Airbus S.A.S (“Airbus” or “Airframer”);

WHEREAS, Airline decided to expand its fleet with the purchase of seventy (70) new CFM 56-5B powered (the “Installed Engines”) A320 family aircraft (the “Aircraft”) from Airframer in accordance with the delivery schedule set forth in Attachment A-1 (the “Aircraft Delivery Schedule”, therefore the Parties intend to further supplement the GTA with this Letter Agreement No. 1 (hereinafter the “Agreement”); and

NOW THEREFORE, in consideration of the mutual covenants herein contained, the Parties agree as follows:

1. Airline agrees to purchase and take delivery of seventy (70) new firm CFM56-5B powered A320 family aircraft and up to ten (10) new CFM56-5B powered (the “Option Engines”) option A320 family aircraft (the “Option Aircraft”) direct from Airframer in accordance with the delivery schedule set forth in Attachment A-1 hereto.

2. Airline agrees to purchase and take delivery of fourteen (14) CFM56-5B spare engines (“Spare Engines” and together with the Installed Engines hereinafter referred to as the “Engines”) from CFM according to the delivery schedule set forth in Attachment A-2 hereto (the “Spare Engine Delivery Schedule”) and has agreed with CFM to maintain a Spare Engine to Installed Engine ratio of not less than [***] in support of its fleet size during the term of the Agreement, as defined in the GTA, Article XVIII, Paragraph F. If Airline firms up any or all of the Option Aircraft, Airline has agreed to purchase and take delivery of additional spare engines (“Option Spare Engines”) from CFM according to the delivery schedule set forth in Attachment A-2 hereto and has agreed with CFM to maintain a spare engine ratio of not less than [***] from during the term of the Agreement.

During the first [***] following delivery of first Aircraft, the installable Spare Engine to Installed Engine ratio shall be reduced to a minimum of [***] (“Spare Engine Ratio”).

PROPRIETARY INFORMATION NOTICE   The information contained in this document is CFM Proprietary Information and is disclosed in confidence. It is the property of CFM and shall not be used, disclosed to others, or reproduced without the express written consent of CFM. If consent is given for reproduction in whole or in part, this notice and the notice set forth on each page of this document shall appear on any such reproduction. Export control laws may also control the information contained in this document. Unauthorized export or re-export is prohibited.

LETTER AGREEMENT NO. 1

3. The obligations set forth in this Agreement are in addition to the obligations set forth in the GTA, except as otherwise provided.  In the event of conflict between the terms of this Agreement and the terms of the GTA, the terms of this Agreement shall take precedence. Terms which are capitalized but not otherwise defined herein shall have the meaning given to them in Section I of Exhibit B of the GTA.

4. In consideration of the above, CFM agrees to the following:

A.  Special Allowances

CFM agrees to provide the following allowances to Airline subject to the conditions set forth in Attachment D hereto:

(i) Aircraft Allowance

For each of the Aircraft scheduled to be delivered by Airframer to Airline pursuant to the Aircraft Delivery Schedule CFM will provide Airline with a per aircraft allowance (“Aircraft Allowance”) for each such Aircraft in the amount of:

[***]

Such Aircraft Allowance is stated in [***], and shall be [***] in accordance with the escalation formula set forth in Attachment D hereto.

[***]. A “Day” shall mean a calendar day (excluding Saturday and Sunday) unless expressly stated otherwise in writing.  If performance is due in a country on a day where that day is a public holiday performance will be postponed until the next day which is not a public holiday or a Saturday or Sunday.

[***].

[***].

(ii) Additional Special Allowance

For each of the Aircraft scheduled to be delivered to Airline by Airframer pursuant to the Aircraft Delivery Schedule, CFM will provide Airline with an additional per aircraft allowance for each Aircraft (“Additional Special Allowance”) in the amount of:

[***]

[***]

[***].

[***].

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LETTER AGREEMENT NO. 1

[***].

(iii) Initial Provisioning Allowance

CFM agrees to provide Airline with an initial provisioning allowance (“Initial Provisioning Allowance”) in the amount of [***] for each Aircraft.  Such allowance is not subject to adjustment for escalation, and will be made available to Airline within [***] Days following delivery of each of the Aircraft as a credit against purchases of goods from CFM.

Option Aircraft: CFM agrees to provide Airline with the same Initial Provisioning Allowance for each of the firmed-up Option Aircraft.

(iv)  Spare Engine Allowance

CFM agrees to provide Airline with a Spare Engine Allowance in the form of a credit of [***] of the Net Basic Spare Engine Program Price as per Attachment C, that credit to be deducted from the final invoice issued by CFM for each of the up to and including [***] Spare Engines purchased by Airline.

[***].

(v) [***]

(vi) [***]

B. Spare Engine Base Price

Base prices for Spare Engines and Option Spare Engines delivered according to the Spare Engine Delivery Schedule, shall be as set forth in Attachment C hereto, and shall be subject to adjustment for escalation in accordance with the escalation formula set forth in Attachment D hereto.

C. Special Guarantees

[***]

1. [***]

2. [***]

3. [***]

4. [***]

5. [***]

6. [***]

7. [***]

8. [***]

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LETTER AGREEMENT NO. 1

9. [***]

10.  [***]

11. [***]

12. [***]

5. Miscellaneous

A. [***]

B. [***].

C. Confidentiality of Information. This Agreement contains information specifically for Airline and CFM, and nothing herein contained shall be divulged by Airline or CFM to any third person, firm or corporation, without the prior written consent of the other Party, which consent shall not be unreasonably withheld; except (i) that Airline’s consent shall not be required for disclosure by CFM of this Agreement to an Engine program participant, joint venture participant, engineering service provider or consultant to CFM so as to enable CFM to perform its obligations under this Agreement; (ii) to the extent required by Government agencies, by law, or to enforce this Agreement; and (iii) to the extent necessary for disclosure to the Parties’ respective insurers, accountants or other professional advisors who must likewise agree to be bound by the provisions of this paragraph.  In the event (i) or (iii) occur, suitable restrictive legends limiting further disclosure shall be applied.  In the event this Agreement, or other information or data exchanged under this Agreement is required to be disclosed or filed by government agencies by law, or by court order, the requested Party shall notify the other Party at least thirty (30) days in advance of such disclosure or filing and shall cooperate fully with such other Party in seeking confidential treatment of sensitive terms of this Agreement.

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4

LETTER AGREEMENT NO. 1

Please indicate your agreement with the foregoing by signing two (2) duplicate originals as provided below.

	Very truly yours,
LAN Airlines S.A.	CFM INTERNATIONAL, INC.
By:	By:
Typed Name:	Typed Name:
Title:	Title:
Date:	Date:
LAN Airlines S.A.
By:
Typed Name:
Title:
Date:

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LETTER AGREEMENT NO. 1

ATTACHMENT A-1

Aircraft Delivery Schedule

[***]

 Option Aircraft Delivery Schedule

[***]

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A-1

LETTER AGREEMENT NO. 1

ATTACHMENT A-2

Spare Engine Delivery Schedule

[***]

Option Spare Engine Delivery Schedule

[***]

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A-2

LETTER AGREEMENT NO. 1

ATTACHMENT B

CONDITIONS FOR SPECIAL ALLOWANCES/DELAY/CANCELLATION

1. Allowance for Initial Aircraft Sale Only

Any allowance described herein applies only to the [***] new firm Aircraft equipped with Installed Engines purchased by Airline directly from the Airframer.

2. Allowance Not Paid

Allowances described herein will become unearned and will not be paid if Installed Engines have been delivered to the Airframer for installation in Aircraft and, thereafter, for any reason within control of Airline, Airline's purchase order with the Airframer is terminated, canceled or revoked, or for any reason delivery of the Aircraft will be prevented or delayed beyond [***] months of the delivery period described in the Aircraft Delivery Schedule herein (“Delivery Period”).

3. Termination of Special Allowances

Airline agrees that all of the Special Allowances, as described in Article 4.a. herein shall expire [***] after delivery of last Aircraft as set forth in the Aircraft Delivery Schedule (the “Expiration Date”).

[***]

4. Adjustment of Allowances

[***]

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B-1

LETTER AGREEMENT NO. 1

[***]

5. Assignability of Allowance

Any allowance described herein is exclusively for the benefit of Airline and is not assignable without CFM's written consent.

6.  Set Off for Outstanding Balance

CFM shall be entitled, with [***] days written notice, to set off any amounts that are due and owing from Airline to CFM (and not subject to a good faith dispute) for goods or services (whether or not in connection with this Letter Agreement and/or GTA), against any amount payable by CFM to Airline in connection with this Letter Agreement and/or GTA.

7. Cancellation of Installed or Spare Engines

[***]

8.  Delay Charge for Installed or Spare Engines

In the event Airline delays the scheduled delivery date of a Spare Engine, or causes the delay of the scheduled delivery date of an installed Engine, for which CFM has received a purchase order from the aircraft manufacturer or Airline, as appropriate, for a period, or cumulative period, of more that [***], such delay shall be considered a cancellation and the applicable provisions hereof regarding the effect of cancellation shall apply.

9.  Offset Requirements

Any allowance described herein is predicated on the assumption that no offset or countertrade requirement will be imposed on CFM in connection with this Agreement [***] the Aircraft are incorporated. If such requirement is imposed, then CFM reserves the right to reduce the allowance commensurate with the cost to CFM of performing such offset or countertrade obligation(s).

10.  Aircraft Not Operated for Minimum Period

If, within the first [***] following delivery of each Aircraft for which a special allowance, of any nature, was provided by CFM pursuant to this Agreement or any resulting GTA/Letter Agreement (the “Minimum Period”), Airline sells, transfers, trades, exchanges, leases, [***] or Airline otherwise fails to operate such Aircraft, the special allowances earned and/or paid on such Aircraft will be proportionately reduced. Airline will reimburse CFM an amount equal to the proportionate share of the special allowances paid with respect to such Aircraft and CFM will cancel a proportion of an earned but not paid special allowance. In each case, the proportion of the special allowance to be reimbursed or canceled will be the percentage of the Minimum Period the Aircraft was owned and operated by Airline with interest on the reimbursed amount.  [***]

CFM PROPRIETARY INFORMATION

(subject to restrictions on cover page)

B-2

LETTER AGREEMENT NO. 1

ATTACHMENT C

BASE PRICES FOR CFM56-5B SPARE ENGINES Prices Applicable to Deliveries through December 31, 2017
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]
[***]

Program Pricing – General Terms and Conditions, applicable to additional spare engines per Attachment C, Paragraph D. above

[***]

1. [***]

2. [***]

CFM PROPRIETARY INFORMATION

C-1

LETTER AGREEMENT NO. 1

ATTACHMENT D

CFM56-5B ESCALATION FORMULA

Spare Engines and Allowances

[***]

I. The base price for Products purchased hereunder shall be adjusted pursuant to the provisions of this Exhibit.

II. For the purpose of this adjustment:

A. Base price shall be the price(s) set forth in the applicable Letter Agreement.

B. The Composite Price Index (CPI) shall be calculated, to the second decimal place, using the following formula:

[***]

[***].

[***].

C. [***]

D. [***]

III. [***]:

IV. [***].

V. [***].

VI. [***]:

a) [***].

b) [***].

c) [***].

d) [***].

Note: [***].

CFM PROPRIETARY INFORMATION

(subject to restrictions on cover page)

D-1

LETTER AGREEMENT NO. 1

ATTACHMENT E

BASIS AND CONDITIONS FOR SPECIAL GUARANTEES

A.  General Conditions

The Special Guarantees have been developed specifically for Airline's Engines.  The General Conditions described in Section X of Exhibit B of the GTA between CFM and Airline apply to the guarantees and such guarantees are offered to Airline contingent upon:

1. Airline accepting delivery of a minimum of [***] CFM56-5B Engine powered Aircraft as per the Aircraft Delivery Schedule;

2. Airline procuring and maintaining the CFM recommended number of Spare Engines;

3. Airline's Engines being identified and maintained separately from other operators' engines at the repair agency, except in the case where the Engines are being maintained by a CFM Designated Repair Station;

4. Agreement between Airline and CFM regarding administration of the guarantees;

5. [***];

6. Airline and CFM agreement upon the Engine restoration workscope necessary during each shop visit. Engine operation and maintenance will be performed in accordance with CFM manuals, bulletins, or other written instructions; and,

CFM PROPRIETARY INFORMATION

(subject to restrictions on cover page)

E-1

LETTER AGREEMENT NO. 1

7. Available on-wing maintenance and performance restoration procedures, including CFM recommendations, if applicable, for Engine water wash, being used to the extent reasonably practicable to avoid unnecessary shop visits.

8. Service bulletins agreed to between Airline and CFM being incorporated in a timely manner.

B.  Exclusions

[***].

C.  Administration

The Special Guarantees are not assignable by either Party without the written consent of  the other Party, such consent not to be unreasonably withheld.

If compensation becomes available to Airline under more than one Special Guarantee, warranty or other engine program consideration, Airline will not receive duplicate compensation but will receive the compensation most beneficial to Airline under a single Special Guarantee, warranty or other program consideration. Unless otherwise stated, the Special Guarantee compensation will be in the form of credits to be used by Airline against the purchase from CFM of Spare Engines, spare Parts, and/or Engine services.

CFM PROPRIETARY INFORMATION

(subject to restrictions on cover page)

E-2

LETTER AGREEMENT NO. 1

ATTACHMENT F

[***]

CFM PROPRIETARY INFORMATION

(subject to restrictions on cover page)

F-1

LETTER AGREEMENT NO. 1

ATTACHMENT G

Performance Retention Guarantee Calculation Method

[***]

CFM PROPRIETARY INFORMATION

(subject to restrictions on cover page)

G-1

EX-4.7

Exhibit 4.7

RATE PER FLIGHT HOUR

ENGINE SHOP MAINTENANCE SERVICES AGREEMENT

BETWEEN

CFM INTERNATIONAL, INC.

AND

LAN AIRLINES S.A.

Service Agreement Number : 1-2227720021

Dated: December 17, 2010

PROPRIETARY INFORMATION NOTICE

The information contained in this document is CFM International, Inc. ("CFM") Proprietary Information and is disclosed in confidence.  It is the property of CFM and will not be used, disclosed to others or reproduced without the express written consent of CFM.  If consent is given for reproduction in whole or in part, this notice and the notice set forth on each page of this document will appear in any such reproduction.  U.S. export control laws may also control the information contained in this document.  Unauthorized export or re-export is prohibited.

TABLE OF CONTENTS

1.	DEFINITIONS	1
2.	SCOPE OF THE SERVICE AGREEMENT	1
3.	TERM OF THE SERVICE AGREEMENT	1
4.	ENGINES AND OPERATING PARAMETERS	1
5.	CFM SERVICE PROGRAM	2
6.	ENGINE SHOP VISIT	5
7.	PRICES	7
8.	INVOICING AND PAYMENT TERMS	9
9.	WARRANTY AND LIMITATION OF LIABILITY	9
10.	DELIVERY – REDELIVERY	11
11.	TURN AROUND TIME	12
12.	ADDITION TO/ REMOVAL FROM SERVICE AGREEMENT	12
13.	COMMUNICATION	13
14.	GENERAL TERMS AND CONDITIONS	13

CFM PROPRIETARY INFORMATION – SUBJECT TO RESTRICTIONS ON THE FIRST PAGE

This Agreement (“Service Agreement”) is made as of December 17, 2010 by and between LAN AIRLINES S.A.  having its principal place of business at Av. Presidente Riesco No. 5711, 20th Floor, Las Condes, Santiago, Chile, (“LAN” or “Customer”) and CFM International, Inc., having its principal place of business at 111 Merchant Street, Cincinnati, Ohio 45246 USA (“CFM”); (Customer and CFM are each a “Party” and collectively the “Parties”).

1. DEFINITIONS

Capitalized terms used in this Service Agreement and not otherwise defined have the meanings set forth in Exhibit A hereto.

2. SCOPE OF THE SERVICE AGREEMENT

This Service Agreement contains the terms and conditions applicable to the sale by CFM and the purchase by LAN of the CFM Service Program that includes Covered Services and Supplemental Services.

Covered Services are charged:

a. on a monthly basis, by multiplying the applicable Popular Rate per Engine Flight Hour by the number of Engine Flight Hours flown during the preceding month of the Term; and

b. at the time of a Qualified Shop Visit in respect of each Engine, by multiplying the applicable Restored Rate per Engine Flight Hour by the number of Engine Flight Hours flown by that Engine since its Entry Into Service or since its previous Qualified Shop Visit (whichever is later),

During the Term of this Service Agreement, CFM shall be the exclusive provider of the CFM Service Program and materials for the Engines.

3. TERM OF THE SERVICE AGREEMENT

This Service Agreement will commence on the date hereof (the “Commencement Date”).

Each Engine will be covered by this Service Agreement for [***], unless sooner terminated as provided herein, commencing on the date of its Entry Into Service (the “Term”).

[***]

[***].
 

[***].

[***].

4. ENGINES AND OPERATING PARAMETERS

The Engines covered by this Service Agreement are set forth in Exhibit B hereto.

The Popular Rate per Engine Flight Hour and the Restored Rate per Engine Flight Hour are predicated on the operating parameters set forth in Exhibit B hereto. For the avoidance of doubt, this Service Agreement shall cover operations by LAN or its affiliates of the Engines identified in Exhibit B (and Exhibit B-1, as applicable), during the Term.

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5. CFM SERVICE PROGRAM

5.1  Covered Services

5.1.1 (i) Qualified Shop Visits

A Qualified Shop Visit is any maintenance or repair of an Engine that, [***] cannot be performed on-wing, in order to:

a. Correct a deficiency or performance deterioration which has created an existing or imminent Unserviceable condition according to criteria defined in the Aircraft Maintenance Manual (“AMM”), and/or the Fault Isolation Manual (“FIM”), and/or the Troubleshooting Manual (“TSM”) and/or CFM Service Bulletins. For the avoidance of doubt, this does include a removal required due to Major FOD,

b. Comply with an Airworthiness Directive (“AD”) issued by the FAA or EASA, and any other off-wing maintenance needed to be carried out on the Engine in order to fully comply with the relevant AD and its requirements,

c. Install LLP due to life expiration,

d. Comply with a written recommendation of the CFM Program Manager, including, but not limited to, incorporation of any published Category 1 to 6 Service Bulletins (as defined in CFM56-5B Service Bulletin SB72-0000) and Campaign Change, that enhance Engine reliability or extend maintenance intervals,

[***].

If an Engine delivered to CFM by LAN is not deemed to be covered as a Qualified Shop Visit the shop visit will be charged to LAN as Supplemental Services.

(ii) The Covered Services for a Qualified Shop Visit include:

a. All labor, material (excluding Life Limited Parts) and material handling charges, taxes and duties for which CFM is responsible per Exhibit I, Article 3, and any vendor fees required to perform Engine reconditioning and repair to return a Serviceable Engine to LAN,

b. Engine test, oil and fuel,

c. Incorporation of Airworthiness Directives, Category 1 to 6 Service Bulletins and Campaign Change items, as referred to in paragraph (i)b and (i)d above,

d. Labor involved in the inspection, replacement and repair of Life Limited Parts,

e. Removal, visual inspection, repair if non-Serviceable, and reinstallation of the LRUs,

f. Removal, visual inspection and reinstallation, if Serviceable, of Quick Engine Change (“QEC”) components that are removed from the Engine for access reasons,

g. Subject to paragraphs c) and d) of the example set out at the end of Article 5.3, correction of Major FOD, which shall include all labor, materials and parts necessary to return the Engine to Serviceable condition, up to a maximum amount for each Engine equal to the lesser of any insurance deductible covering such Major FOD event [***].

5.1.2 Transportation

LAN will ensure Engine transportation both ways to CFM at Miami International Airport, from where CFM will ensure transportation to the CFM Designated Repair Station for each Qualified Shop Visit and back to Miami International Airport. All costs incurred in transportation, storage, or any other cost incurred after Delivery in Miami shall be borne entirely by CFM. For avoidance of doubt, risk of loss shall pass in accordance with the definitions of Delivery and Redelivery.

CFM PROPRIETARY INFORMATION – SUBJECT TO RESTRICTIONS ON THE FIRST PAGE

2

5.1.3 Engine Management Services and Diagnostic Services

CFM will provide the following diagnostics services during the Term:

a. Engine condition data will be automatically processed by diagnostics software 24 hours a day, 7 days a week (“24x7”) when received at the designated CFM facility.  CFM will be responsible for operating and maintaining the diagnostics software and the necessary facilities. LAN shall have access to the web-based tools for reviewing Engine condition data and assessing Engine health.

b. Customer Notification Reports (“CNR”) for Engine condition monitoring trend shift observation, including engineering review, analysis, and recommendations will be provided to LAN, as required, on a 24-hours, 7-days a week basis.

c. Monthly Engine thrust derate report.

d. Access to diagnostics engineers for Engine diagnostic support and consultation as required.

e. Periodic teleconference to review reports and program status as reasonably required by LAN.

f. Weekly Engine health trend summary and analysis reports.

Any information provided to LAN by CFM for use in troubleshooting and managing operations is the responsibility of CFM and is only advisory to LAN. CFM is not responsible for line maintenance, including other actions or consequences, resulting from implementation of such advice. LAN is solely responsible for identifying and resolving any Aircraft or Engine faults or adverse trends. [***].

5.1.4 Lease Engine Coverage

CFM shall use reasonable efforts to provide the following lease engine coverage:

a. If LAN has an aircraft on ground (“AOG”) situation, or will have an AOG situation within the next five (5) days, because the number of Engines which are undergoing or will undergo within five (5) days Qualified Shop Visits or are Unserviceable exceeds the required quantity of spare Engines according to Exhibit B of this Service Agreement, LAN is eligible for the lease engine coverage described in this Article 5.1.4,

b. Within twenty-four (24) hours of being notified by LAN that the above described AOG situation exists, CFM shall use all reasonable efforts to locate an available lease engine and, within that period, shall notify LAN of the location of the closest available lease engine or that no such lease engine is available,

c. CFM shall use reasonable efforts to deliver or cause to be delivered, any such available lease engine to LAN, Ex Works (Incoterms 2000), at the nearest CFM housekeeping facility or other mutually agreed location.  CFM shall endeavor to provide this engine in a neutral QEC configuration.  All transportation costs will be LAN’s responsibility,

d. CFM’s obligation to use reasonable efforts to provide such lease engine will terminate when the AOG condition is corrected by the Redelivery of an Engine to LAN, subject to LAN’s obligation to return the lease engine set forth below,

e. [***]

f. LAN is not required to pay the applicable Rate Per Engine Flight Hour prices for the EFH incurred by the lease engine.

5.1.4.1 Lease Engine Condition

CFM’s provision of such lease engine is predicated upon the following:

a. The Parties have established a Removal Schedule,

b. LAN has shipped the Engines for a Qualified Shop Visit within five (5) Days following removal from the aircraft,

c. LAN is in full compliance with the records requirements of below Article 6.2(c),

d. Existing Master Equipment Lease Agreement dated October 20, 2000, between CFM and LAN, reference CFMI-00-0002, continues to be in place or LAN has formally accepted IATA Document No. 5016-00, MASTER SHORT-TERM ENGINE LEASE AGREEMENT, dated December 1, 2002, and

e. LAN is not in material breach of this Service Agreement.

CFM PROPRIETARY INFORMATION – SUBJECT TO RESTRICTIONS ON THE FIRST PAGE

3

5.1.5 Engine BER

In the event that an Engine is BER due to reason other than those listed in Article 5.3.h, [***].

In the event that LAN requires the repair of the Engine, the Engine will be repaired as Supplemental Services. CFM will bear the cost of repair, up to a maximum of [***]. The remaining cost or repair will be borne by LAN.

[***].

(i) [***].

CFM’s total liability for all BER events for all Engines during the Term shall not exceed [***].

5.2 Additional Services

5.2.1 On-Site Support

CFM will provide or cause to be provided, at no cost to LAN, on-site support (“OSS”, as described in Exhibit J hereto) forscheduled or unscheduled line maintenance Services that are not otherwise considered to be Covered Services, up to a maximum of [***] per installed Engine per year during the term of the Service Agreement. LAN may carry over a [***] of the unused hours from each year to the next year.  LAN shall be entitled to apply the man hours available to it under this Article 5.2.1 in settlement of non-labor related expenses (e.g., travel time, shipping, materials, etc.) incurred by CFM OSS. For this purpose, [***] accrued in such non-labor related expenses shall be deemed to be equivalent to one OSS man hour.

Any OSS Services provided in excess of the hours described in this paragraph will be invoiced at the prices listed in Exhibit J hereto.

5.3 Supplemental Services

Supplemental Services include, but are not limited to:

a. Any and all Services not specifically included as Popular/Restored Rate per Engine Flight Hour Services,

b. Replacement of Life Limited Parts [***],

c. Any Services provided for an Engine shop visit that is not a Qualified Shop Visit,

d. Any labor, material, material handling charges to repair or replace any QEC,

e. Any material, material handling charges and any fees associated with the replacement of LRUs,

f. Subject to Article 5.1.1(ii)g, any correction of Foreign Object Damage over the stated deductible of [***],

g. Any labor, material, material handling charges and any fees associated with upgrade programs or conversion to another thrust rating,

h. Services required as a result of:

i. An Aircraft Accident or Aircraft Incident,

ii. An Act of God, military action or terrorist activity,

iii. Improper or negligent installation, operation, removal, storage or maintenance of an Engine not in conformance with the AMM or CFM manuals unless such improper or negligent act or omission was performed by CFM [***],

iv. Experimental test applied to the Engine, unless performed by CFM [***],

v. The use of a non-CFM approved LRU, part or repair [***], and

i. Maintenance or repair of Engine transportation stands and container.

Supplemental Services will be charged in accordance with Article 7.2.1 of this Service Agreement.

CFM PROPRIETARY INFORMATION – SUBJECT TO RESTRICTIONS ON THE FIRST PAGE

4

[***]

6. ENGINE SHOP VISIT

6.1  CFM Fulfillment

CFM may in CFM’s sole discretion delegate to or purchase from any CFM Designated Repair Station, part or all of any obligation, right or benefit of CFM for the performance of the CFM Service Program in conformance with the Repair Specification. However, such delegation or purchase shall not relieve CFM of any of its obligations under this Service Agreement.

CFM will use GE Celma and Snecma America Engine Services (SAMES) as the primary CFM Designated Repair Stations for this Service Agreement. [***].

CFM will provide the requirements of the Repair Specification to the CFM Designated Repair Station and allow LAN reasonable access to such facilities to perform its duties as the airline operator certificate holder.

The CFM Designated Repair Station shall be any of CFM’s overhaul facilities as set forth in Exhibit H hereto, and appointed as indicated therein. Following execution of this Services Agreement and prior to the entry into service of the first Aircraft, subject to CFM complying with any requirements of the DGAC or any other AAA, LAN shall obtain any approvals and qualifications required from LAN by the DGAC or any other AAA at the primary and secondary GE Engine Services and Snecma facilities being used under this Service Agreement. LAN’s obligations under this Service Agreement will not change wherever the appointed DRS is located.

6.2 Procedure

a) LAN shall Deliver the Engine to CFM as indicated in section 5.1.2 of this Service Agreement.

b) LAN shall issue a purchase order to CFM and, to the extent CFM accepts the purchase order [***], CFM shall carry out the Services in accordance with the LAN requirements specified in such purchase order, provided that, in any event, the terms and conditions of this Service Agreement shall take precedence over any terms and conditions set forth on such purchase order.

c) LAN shall provide all applicable Engine records, as required by the AAA or as reasonably requested by CFM, and the shop visit data listed in Exhibit C hereto.

d) Following Delivery of each Engine by LAN, together with the documents described in Paragraphs (b), and (c) above CFM will inform LAN as to whether the shop visit meets the criteria for a Qualified Shop Visit as soon as reasonably practicable.

e) CFM shall perform or cause to be performed the induction of the Engine and will notify LAN of any components or LRUs missing from the Engine.  CFM will replace such missing items at LAN’s expense as Supplemental Services, unless (i) LAN notifies CFM in writing [***] Days after receiving CFM’s notice that LAN wishes to furnish such missing items; and (ii) LAN delivers such missing items to the CFM Designated Repair Station within [***].

f) CFM shall proceed with the Services requested by such purchase order in accordance with Paragraph (b) above.

g) CFM shall Redeliver the Engine to LAN complying with the Workscope.

h) CFM will prepare and package the Engine in shipping stands or containers provided by LAN at the time of Delivery in accordance with CFM’s standard commercial practices.

i) CFM shall provide LAN with copies of all work records required by AAA and/or as agreed to in writing by CFM and LAN.

6.3 Workscope

For each Qualified Shop Visit, CFM will develop a Workscope consistent with the CFM Workscope Planning Guide [***]. Such Workscope shall include any applicable reliability and performance enhancements and AAA approved repairs. CFM will incorporate additional Workscope elements during the Term to improve Engine operating characteristics and incorporate CFM-approved repairs. CFM may charge LAN for any Workscope requirements from LAN, LAN's specific maintenance manuals or Repair Specifications, if applicable, which exceed the requirements stated in the CFM Workscope Planning Guide, as Supplemental Services.

CFM PROPRIETARY INFORMATION – SUBJECT TO RESTRICTIONS ON THE FIRST PAGE

5

LLP Minimum Build will be [***] cycles.

6.4 Title and Risk of Loss to Parts or Material

CFM furnished parts and material incorporated into an Engine will be deemed to have been sold to LAN and title to such parts and material will pass to LAN upon incorporation into such Engine.  Risk of loss or damage to such parts and material will pass to LAN upon Redelivery of the Engine.

Title to and risk of loss of any Repairable parts removed from the Engine that are replaced by other parts will pass to CFM upon incorporation of replacement parts into the Engine. [***]. The cost for any transportation requested by LAN for the removed LLP shall be LAN’s responsibility. [***].

6.5 Engine Configuration

LAN shall Deliver the Engine as indicated in section 5.1.2 in a basic engine configuration, as defined in Exhibit A of the General Terms Agreement CFM-[***] entered into between LAN and CFM ("GTA"), equipped with the LRUs listed in Exhibit F to this Service Agreement. CFM shall Redeliver the Engine in the same basic engine configuration. In the event an Engine is Delivered with parts or components or QEC equipment in addition to the basic configuration, such Engine shall be Redelivered in the same configuration as Delivered, unless otherwise mutually agreed by the Parties.  Any work performed to return such parts or components or QEC equipment in a Serviceable condition will be charged to LAN as Supplemental Services.

CFM may elect to use used Rotable Parts, and/or repaired parts in Serviceable condition in Engines Redelivered to LAN, and such Rotable Parts and/or repaired parts [***].

6.6 [***]

CFM PROPRIETARY INFORMATION – SUBJECT TO RESTRICTIONS ON THE FIRST PAGE

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7. PRICES

7.1 Covered Services Pricing

CFM will charge LAN for the Covered Services as indicated in Article 2 of the Service Agreement, at the following rates:

a. on a monthly basis by multiplying the applicable Popular Rate per Engine Flight Hour by the number of Engine Flight Hours flown during each month; and

b. at the time of a Qualified Shop Visit in respect of each Engine, by multiplying the applicable Restored Rate per Engine Flight Hour by the number of Engine Flight Hours flown by that Engine since its Entry Into Service or  since its previous Qualified Shop Visit (whichever is the later).

Covered Services Rate	Rate per EFH (January 2010)
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]

CFM will charge LAN for the Flightline LRU Services on a monthly basis at the Popular Rate multiplied by the Engine Flight Hours accumulated during the month, as follows:

Flightline LRU Services Rate	Rate per EFH (January 2010)
[***]	[***]

The Popular Rate(s) shall be adjusted, as set forth in Exhibit D hereto, [***].

The Restored Rate shall be adjusted, as set forth in Exhibit D hereto, at the time of each Qualified Shop Visit.

[***].

In order to facilitate implementation and administration of the CFM Service Program, LAN shall promptly provide data and records as reasonably requested by the CFM Program Manager and provide the CFM Program Manager or his delegate reasonable access, on giving reasonable notice, to such records for inspection or audit [***].

The Popular Rate and Restored Rate shall escalate [*** ]in accordance with the formula set forth in Exhibit E hereto.

CFM PROPRIETARY INFORMATION – SUBJECT TO RESTRICTIONS ON THE FIRST PAGE

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7.2 Supplemental Services Pricing

7.2.1 CFM will charge LAN for Supplemental Services in accordance with the pricing set forth in Exhibit G hereto. The pricing for Supplemental Services shall escalate [***] in accordance with the formula set forth in Exhibit G hereto.

7.3 [***]

7.4 [***]

CFM PROPRIETARY INFORMATION – SUBJECT TO RESTRICTIONS ON THE FIRST PAGE

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8. INVOICING AND PAYMENT TERMS

8.1 Invoicing for Popular and Restored Rate Services

For Popular Rate Services, no later than the fifth (5th) Day of each month, LAN will provide to CFM the time since new, cycles since new and average derate for each Engine serial number.  CFM will provide LAN an invoice no later than the fifteenth (15th) Day of the month for the prior month for services covered under the Popular Rates.

In addition, LAN will pay CFM for services covered and invoiced, in relation to each Engine, under a Restored Rate pursuant to Article 7.1 above [***].

8.2           Invoicing for Supplemental Services

CFM will invoice LAN for Supplemental Services as follows:

Following Redelivery, CFM will issue an invoice to LAN for the actual charges to complete the Supplemental Services.

8.3. Payment terms

LAN will pay all invoices within [***] from the date of the invoice. All payments shall be transmitted electronically to CFM’s bank account as indicated on the invoice. Payment shall be effective upon receipt thereof.

Should LAN fail to make any payment when due, unless reasonably contested, CFM may charge a fee for late payment at a rate equal to the U.S. prime rate, as published in [***], plus [***], compounded daily on any unpaid balance commencing on the next Day after the payment due date until such time as the payment plus the late payment charges are received by CFM in full. Payments will be applied to any late payment fees then to the oldest outstanding amounts in order of succession. If LAN fails to make any payment, which is not the subject of a good faith dispute, when due, and does not cure such failure within [***] of such due date, CFM may terminate or suspend performance of all or any portion of this Service Agreement.  [***]

Should CFM fail to make a cash payment (if any) owed by CFM to LAN under the terms of this Services Agreement when due, unless reasonably contested, LAN may charge for such late payment at a rate equal to the U.S. prime rate, as published in [***], plus [***], compounded daily on any unpaid balance commencing on the next Day after the payment due date until such time as the payment plus the late payment charges are received by LAN in full.

In the event of a bona fide dispute regarding any the amount to be paid pursuant to any invoice, or any portion thereof, LAN shall within [***] of receipt of such invoice give written notice to CFM of such disputed invoice, or dispute portion thereof, together with reasonable substantiation of such dispute and any supporting documentation. CFM and LAN shall use their respective best efforts and allocate sufficient resources to resolve such dispute within [***] or as soon as practicable thereafter.  In the event the Parties fail to resolve any such dispute invoice within such period, the dispute shall be resolved by designating senior managers to reach a resolution. In the event of a resolution, CFM shall credit LAN, or LAN shall pay to CFM, as applicable, settled amount of the disputed portion of the invoice within [***] calendar days. [***].

9. WARRANTY AND LIMITATION OF LIABILITY

For this Article 9, the term “CFM” shall be deemed to include CFM, GE and Snecma, the CFM Designated Repair Station and CFM’s subsidiaries, assigns, Services providers, and their respective directors, officers, employees, and agents.

9.1  Workmanship Warranties.

9.1.1  Services Warranty

All Services performed under this Service Agreement shall be free from defects in workmanship.

CFM PROPRIETARY INFORMATION – SUBJECT TO RESTRICTIONS ON THE FIRST PAGE

9

For Engines repaired and Redelivered within [***] calendar months preceding expiration of this Service Agreement, if LAN claims a defect in workmanship within either [***] calendar months or [***] EFH following Redelivery, whichever comes first, and (a) LAN provides written notice to CFM of such defect within [***] of its discovery, and (b) LAN ships to CFM the part or component which gives rise to the claim, or, in cases in which shipment is commercially impracticable, makes such part or component reasonably available to CFM’s personnel; and (c) [***], CFM will provide or cause to provide the following:

i. Repair or replacement of such defective workmanship or, at LAN’s election [***],

ii. Pay LAN’s reasonable direct costs for such repairs, but in no event shall such costs exceed CFM’s internal costs of repair and,

iii. Reimburse LAN for transportation expenses reasonably incurred and adequately documented by LAN in connection with the warranty claim.

[***].

9.1.2  Conditions and Limitation of Liability

This Services Warranty is applicable only if: the Engine, following Redelivery, (a) has been transported, stored, installed, operated, handled, maintained and repaired in accordance with the then-current AMM or CFM manuals, Airworthiness Directives, Service Bulletins or other relevant written instructions; (b) has not been altered, modified or repaired by anyone other than the CFM Designated Repair Station and its subcontractors; and (c) has not been subjected to accident, misuse, abuse or neglect [***].

Any warranty for Engines or parts, LRUs, components and material thereof, including the design, material or engineering defects of a manufacturer, will be the warranty, if any, of the manufacturer of such Engines or parts, LRUs, components or material thereof. For the avoidance of doubt, the warranties per Exhibit B, Section II of the GTA and the special guarantees per Section C.8 of Letter Agreement #1 to the GTA shall apply to Parts installed by the CFM DRS or its subcontractors under this Service Agreement.

The foregoing will constitute the sole remedy of LAN and the sole liability of CFM for defective workmanship relative to the Engines. The liability of CFM connected with or resulting from the Services warranty shall not in any event exceed the cost of correcting the defect as provided above, and, upon the expiration of the shortest period described therein ([***]), all such liability will terminate.  In no event shall CFM be liable for any special, expectation, consequential, incidental, resultant, indirect, punitive or exemplary damages (including loss of use, loss of profit or loss of revenue in connection with the Engines), other than in any case of gross negligence or willful misconduct on the part of CFM.

THE SERVICES WARRANTY SET FORTH HEREIN IS EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES AND GUARANTEES WHETHER WRITTEN, STATUTORY, ORAL OR IMPLIED (INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY IMPLIED WARRANTY ARISING FROM COURSE OF DEALING, COURSE OF PERFORMANCE, OR USAGE OF TRADE), [***].

9.2  Assignment of Warranties

LAN may not assign the Services warranty without CFM’s prior written consent. However, CFM will consent to a Services warranty assignment to LAN’s lessor and/or lender upon written request, subject to the terms and conditions of a mutually agreed warranty assignment letter.

9.3  Designation of CFM as Warranty Claims Administrator and Beneficiary

LAN will designate CFM as a claims administrator and beneficiary for all applicable Engine warranties and guarantees using the designation letter attached as Exhibit L. Such designation letter will automatically terminate upon the termination of the Agreement.

9.4  Pre-existing Warranties.

LAN will assure that any requested repair of an Engine, accessory or component that is covered under a third party warranty that is not assigned to CFM will be performed directly by that person at no expense to CFM.  Notwithstanding the above, CFM may accept a purchase order for the time and material repair of a warranted item from LAN or the person giving the warranty.

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9.5  Superseding Warranties.

During the Term of this Service Agreement, LAN acknowledges that the obligations undertaken by CFM hereunder supersede any warranties or other commercial obligations undertaken by CFM in any other agreement with LAN, including but not limited to the GTA. Upon termination of this Service Agreement, any such warranties or commercial obligations with remaining life will be restored to LAN.

10. DELIVERY – REDELIVERY

10.1  Delivery

All Engines to be Serviced will be Delivered by LAN to [***] to be designated by CFM or another mutually agreed upon location. Such Engines will shipped within [***] following removal from the aircraft.  LAN will not Deliver parts or components for repair separate from an Engine without CFM’s written consent ([***]).

10.2  Packaging

LAN is responsible for all packaging, labeling and associated documentation of the Engine at Delivery, in accordance with the International Civil Aviation Organization’s (ICAO) Technical Instructions for the Safe Transport of Dangerous Goods by Air, and if the Engine is to be transported over the United States of America, the US Department of Transport Regulations 48 CFR 171-180.  If required by applicable law or regulations, LAN will further provide a material safety data sheet to CFM at Delivery of the Engine indicating any substances contained within the Engine to be consigned.  LAN will indemnify, defend and hold harmless CFM from all or any claims, liabilities, damages, judgments, costs, penalties, fines and/or any punitive damages imposed, alleged, or assessed by any third party against CFM and caused by and to the extent of LAN’s non-compliance with this Article 10.2.

10.3  Shipping Stands

LAN will provide and maintain all shipping stands, shipping containers, mounting adapters, inlet plugs and covers, required to package the Engine for Delivery and CFM will Redeliver the Engines with the shipping stands, shipping containers, mounting adapters, inlet plugs and covers provided by LAN.

10.4  Redelivery

CFM will prepare and package the Engine for Redelivery to LAN and provide a Services records package that complies with AAA regulations. CFM is responsible for all packaging, labeling and associated documentation of the Engine at Redelivery, in accordance with the International Civil Aviation Organizations (ICAO) Technical Instructions for the Safe Transport of Dangerous Goods by Air, and if the Engine is to be transported over the United States of America, the US Department of Transport Regulations 48 CFR 171-180.  If required by applicable law or regulations, CFM will further provide a material safety data sheet to Customer at Redelivery of the Engine indicating any substances contained within the Engine to be consigned. CFM will indemnify, defend and hold harmless LAN from all or any claims, liabilities, damages, judgments, costs, penalties, fines and/or any punitive damages imposed, alleged, or assessed by any third party against LAN and caused by and to the extent of CFM’s non-compliance with this Article 10.4.

Redelivery dates are based upon (i) receipt by CFM of all information from LAN necessary to permit CFM to proceed with the Services immediately and without interruption; and (ii) LAN’s compliance with the payment terms of this Service Agreement.

In the event Redelivery of an Engine cannot occur due to any act or failure to act by LAN, CFM may place such Engine into storage. In such event, CFM will notify LAN and CFM’s Redelivery obligations will be deemed fulfilled and all risk of loss or damage to the Engine shall pass to LAN on the date of such storage (save as to any such loss or damage caused by CFM’s gross negligence or willful misconduct). Any amounts payable to CFM upon Redelivery will be payable [***] days after the date of receipt of CFM’s invoice. Promptly upon receipt of CFM’s invoice, LAN will reimburse CFM for all expenses incurred by CFM, including, but not limited to, preparation for and placement into storage, handling, inspections, preservation and insurance of the Engine. Upon payment of all amounts due hereunder, CFM will assist and cooperate with LAN in the removal of Engine that has been placed in storage.

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11. TURN AROUND TIME

11.1  Qualified Shop Visits

For Qualified Shop Visits, CFM will exercise all reasonable efforts to meet a Turn Around Time (“TAT”) of [***] Days. The Parties agree that there shall be an additional [***] Days to allow for the shipment of the Engine from the point of Delivery to the CFM Designated Repair Station and back, except in case of any delays outside of CFM’s control, including, but not limited, to customs clearance.

11.2  Supplemental Services

The TAT shall be extended by the time taken to perform any Supplemental Services, which cannot be reasonably performed in conjunction with the Covered Services described in Article 5.1.1.(ii) of this Service Agreement. [***] shall be added to the TAT for Engines received with QEC attached.
 

11.3 [***]

11.3.1 [***]

11.3.2 [***]

12. ADDITION TO/ REMOVAL FROM SERVICE AGREEMENT

12.1  Addition of Engines

LAN and CFM may agree to amend Exhibit B to add engines to the Service Agreement after the Commencement Date. For each added engine, LAN will provide information, including, but not limited to, the engine serial number, aircraft tail number (if applicable), previous operator (if any), current owner, operating time and flight cycles since new and, if applicable, the operating time and flight cycles since the last shop visit, shop visit reports, historic thrust and derate information and applicable thrust rating. CFM will evaluate [***] the effect on the Rate Per Flight Hour pricing for that engine, taking into consideration effects on the fleet size, age and condition of the engines and other commercial considerations and may adjust the Rate Per Flight Hour pricing for that engine accordingly.

12.1.1  [***]

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12.2  Removal of Engines

LAN may remove Engines from this Service Agreement upon advance written notice, only if LAN is no longer operating the Engines and is no longer responsible for maintenance of the Engines for the following reasons:

[***]

Any Engine removal will be subject to the reconciliation provisions set forth below, except if otherwise expressly provided.

[***]

Maximum Removals.  If the number of Engines decreases to less than [***] of the number of Engines expected to have been delivered to LAN in accordance with Exhibit B as at the time of any Engine removal, CFM may terminate this Service Agreement upon written notice to LAN. [***].

12.3 EFH Minimum

[***].

13. COMMUNICATION

CFM will assign a program manager, at no cost to LAN, who will be the point of contact for LAN with respect to implementation of the CFM Service Program (the “CFM Program Manager”).

LAN will also designate a point of contact to communicate with the CFM Program Manager.

The CFM Program Manager will:

a. Draft a Procedures Manual following execution of this Service Agreement and prior to first Aircraft delivery to LAN and submit it to LAN for approval, such approval not to be unreasonably withheld;

b. Work with LAN, on a monthly basis, to develop a Removal Schedule which will identify by serial number the Engine(s) to be removed during the following six (6) month period, the anticipated reason for removal of each, and the schedule for Delivery.

c. Work with LAN, on a quarterly basis, to develop the Repair Specification.

d. [***].

e. [***].

14. GENERAL TERMS AND CONDITIONS

General terms and conditions provided in Exhibit I are an integral part of this Service Agreement.

Counterparts: This Service Agreement may be signed by the Parties in separate counterparts, and any single counterpart or set of counterparts, when signed and delivered to the other Parties shall together constitute one and the same document and be an original Service Agreement for all purposes.

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IN WITNESS WHEREOF, the Parties hereto have executed this Service Agreement as of the day and the year first above written.

CFM INTERNATIONAL, Inc.	LAN AIRLINES S.A.
BY: _______________________________	BY: ______________________________
___________________________________	__________________________________
PRINTED NAME: ____________________	PRINTED NAME: ___________________
___________________________________	__________________________________
TITLE: _____________________________	TITLE: ___________________________
___________________________________	__________________________________
	LAN AIRLINES S.A.
	BY: ______________________________
	__________________________________
	PRINTED NAME: ___________________
	__________________________________
	TITLE: ___________________________
	__________________________________

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EXHIBITS

EXHIBIT A:	DEFINITIONS
EXHIBIT B:	ENGINES COVERED AND OPERATIONAL PARAMETERS
EXHIBIT B-1:	OPTION AIRCRAFT
EXHIBIT C:	SHOP VISIT DATA
EXHIBIT D:	PRICE ADJUSTMENT MATRIX
EXHIBIT E:	ESCALATION – RATE PER ENGINE FLIGHT HOUR
EXHIBIT F:	LRU
EXHIBIT G:	SUPPLEMENTAL SERVICES PRICING
EXHIBIT H:	CFM DESIGNATED REPAIR STATION
EXHIBIT I:	GENERAL TERMS AND CONDITIONS
EXHIBIT J:	ON-SITE SUPPORT
EXHIBIT K:	FLIGHTLINE LRU SUPPORT
EXHIBIT L:	DESIGNATION LETTER

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EXHIBIT A: DEFINITIONS

Capitalized terms used in the recitals and elsewhere in the Service Agreement but not otherwise defined in this Service Agreement will have the following meanings:

“Act of God” – An event that directly and exclusively results from the occurrence of natural causes beyond the reasonable control of the Parties.

“Additional Services” - The Services described in Article 5.2.

“Aircraft Accident” - An occurrence caused by the operation of an aircraft in which any person suffers a fatal injury or serious injury as a result of being in or upon the aircraft or by direct contact with the aircraft or anything attached to the aircraft, or in which the aircraft receives damage or a third party’s property is damaged in any way.

“Aircraft Incident” - An occurrence, other than an Aircraft Accident, caused by the operation of an aircraft that affects or could affect the safety of operations and that is investigated and reported. [***].

“Airworthiness Directive” or "AD" - A document issued by the AAA having jurisdiction over the Engines, identifying an unsafe condition relating to such Engines and, as appropriate, prescribing inspections and the conditions and limitations, if any, under which the Engines may continue to operate.

“AMM” – Aircraft Maintenance Manual.

“Approved Aviation Authority” or “AAA” - As applicable, the Federal Aviation Administration of the United States (“FAA”), the European Aviation Safety Authority (“EASA”), the DGAC of Chile (“DGAC”) or such other equivalent foreign aviation authority, [***].

“ATA 300” shall mean Specification for packaging of airlines supplies. Published by the Air Transport Association.

“Beyond Economic Repair” or “BER” - When the cost, calculated on a Supplemental Services basis, to restore an Engine to the requirements of the Repair Specification exceeds [***].

“Campaign Change” – A campaign change will be declared by CFM when a new Part introduction (as a consequence of a design change), Part modification, Part inspection, or premature replacement of an Engine or Module is required by a time compliant CFM Service Bulletin or FAA or or EASA or DGAC Airworthiness Directive.

“CFM Designated Repair Station” or “CFM DRS” or “DRS” - The repair facilities designated by CFM, which are certified by the AAA to perform the Services hereunder and where Services are performed on Engines.

“CFM Service Program” - All off-wing work required on an Engine to restore the Engine to Serviceable condition in accordance with the Repair Specification, the Workscope and the terms of this Service Agreement, including Supplemental Services.

“CLP” - The manufacturer's Current catalog or manufacturer’s Current list price pertaining to a new Engine or part thereof.

“Commencement Date” – Has the meaning provided in Article 3.

“Contracted Hours” - the Annual Utilization, as described in Exhibit B of this Service Agreement, multiplied by number of Engines multiplied by the number of years in the Term for each Engine.

“Covered Services” - The Services described in Article 5.1.

“Current” - As of the time of the applicable Service or determination.

“Day” - Calendar day (excluding Saturday and Sunday) unless expressly stated otherwise in writing.  If performance is due in a country on a day where that day is a public holiday, performance will be postponed until the next day which is not a public holiday or a Saturday or Sunday.

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“Delivery” - The arrival of an Engine together with all applicable records and required data [***], International Chamber of Commerce, Incoterms 2000, [***] or as otherwise agreed by the Parties, whereby LAN fulfills the obligations of seller and CFM fulfills the obligations of buyer.  "Deliver" will mean the act by which LAN accomplishes Delivery.
 

“Delivery Point” – in the case of Flightline LRU Support, [***].

“Dollars” or "U.S. $" - The lawful currency of the United States of America.

“Engine” - Each bare engine assembly or, as applicable, Engine module, which is the subject of this Service Agreement and identified in Exhibit B, including its essential components as described in Exhibit F. For the avoidance of doubt this definition includes both installed engines and spare engines as identified in Exhibit B.

“Engine Flight Hour” or “EFH” - Engine flight hour expressed in hourly increments of aircraft flight [***].

“Entry Into Service” - The date when the Engine is delivered to LAN by the airframer or by CFM, as a New Engine.

“FIM” – Fault Isolation Manual.

[***].

“Induction” - The date work commences on the Engine at the CFM Designated Repair Station when all of the following have taken place: (i) arrival of the Engine and required data at the CFM DRS, (ii) Parties’ approval of the preliminary Workscope, [***].

“Life Limited Part” or "LLP"- A part with a limitation on use established by CFM or the AAA, stated in cumulative EFH or cycles, as listed in Exhibit A of the GTA.

“LLP Minimum Build” - The minimum quantity of cycles and/or EFH that every LLP must have remaining at the completion of a Performance Restoration Shop Visit. The LLP Minimum Build shall be the threshold used to determine which LLP are replaced at a Performance Restoration Shop Visit.

“Line Replaceable Unit” or “LRU” - A control or accessory that is mounted on the external portion of an Engine, as listed in Exhibit F.

“New Engine” - An Engine which has not undergone a shop visit, which has less than [***] EFH since new and which contains only CFM approved parts and CFM approved repairs.

“On-Site Support” or “OSS” - Has the meaning provided in Article 5.2.1.

“Part” - A part originally sold by CFM.

“Performance Restoration Shop Visit” – The Services performed during a shop visit in which, at a minimum, any one of the following modules is exposed, disassembled and subsequently refurbished: the high-pressure compressor, high-pressure turbine, combustor chamber or stage one low pressure turbine nozzle.

“Pool” – means the collective reference to Serviceable LRUs necessary for Standard Exchange as listed in Exhibit K.

“Popular Rate” or “Popular Rate per Engine Flight Hour“ – The Popular Rate per Engine Flight Hour provided in Article 5.1.

“Primary Hub” – The main airport where LAN performs the majority of its engine removal.

“Procedures Manual” - A separate document, not part of this Service Agreement, which provides detailed procedures and guidance for the administration of this Service Agreement.  In case of conflict between the Procedures Manual and this Service Agreement, this Service Agreement will prevail.
 

“Qualified Shop Visit” – Has the meaning provided in Article 5.1.1.

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“QEC” – Quick Engine Change.

“Rate” or “Rate Per Engine Flight Hour” – The rate for Covered Services or Additional Services as set forth in Article 7.

“Redelivery” - The shipment of a Serviceable Engine with legally required certifications, [***], International Chamber of Commerce, Incoterms 2000, at a location in [***] to be designated by CFM or as otherwise agreed by the Parties, whereby LAN fulfills the obligations of buyer and CFM fulfills the obligations of seller.  "Redeliver" will mean the act by which CFM completes Redelivery.

“Removal Schedule” - The schedule jointly developed by CFM and LAN for Engine removal off wing for Services or Engine removal from operation. [***].

[***]

“Repair Specification” - The LAN repair specification which establishes the minimum baseline to which an Engine or part thereof will be inspected, repaired, modified, reassembled and tested to make and Engine Serviceable.  Such Repair Specification will meet or exceed the recommendations of CFM's operational specifications, applicable CFM maintenance or overhaul manuals and LAN's maintenance plan that has been approved by the AAA. [***].

“Repairable” - Capable of being made Serviceable.

[***]

“Rotable Part” - A new or used Serviceable Part drawn from a common pool of Parts used to support one or more customers. A Rotable Part replaces a similar Part removed from an Engine when such removed Part requires repair.

“Scrapped Parts” - Those Parts or parts determined by CFM to be Unserviceable and BER.

“Service(s)” - With respect to an Engine or part thereof, all or any part of those maintenance, repair and overhaul services provided under this Service Agreement as either Covered Services or Supplemental Services.  “Serviced” will be construed accordingly.

“Service Agreement” - This Service Agreement, as the same may be amended or supplemented from time to time, including all its Exhibits.

“Service Bulletin” or "SB" - The document as issued by CFM to notify the operator of modifications, substitution of parts, special inspections, special checks, or conversion of an Engine from one model to another.

“Serviceable” - Meeting all specified standards for airworthiness prescribed by CFM, and AAA. This will also include the standards for airworthiness prescribed by the aviation authority having jurisdiction over the aircraft on which the Engine is installed.

“Standard Exchange” – In the case of Flightline LRU Support, means any exchange of an Unserviceable equipment with a Serviceable one which is available and fully interchangeable with such Unserviceable equipment.

“Supplemental Charges” – Has the meaning provided in Article 7.2.

“Supplemental Services” - Those Services provided pursuant to Article 5.3.

“Term” – Has the meaning provided in Article 3.

“Termination” - The ending of this Service Agreement before the expiration of the Term, as specified in Exhibit I, Article 2 Termination herein below.

“TSM” – Trouble Shooting Manual.

[***]

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“Unserviceable” - Not meeting all specified standards for airworthiness prescribed by CFM and AAA. This will also include the standards for airworthiness prescribed by the aviation authority having jurisdiction over the aircraft on which the Engine is installed.

“Workscope” - Has the meaning provided in Article 6.3.

“Workscope Planning Guide” - The document published by CFM which describes the “on condition” maintenance concept for the Engines.  This document communicates the timing and extent of work required to enable operators to achieve reliability, performance, and maintenance cost goals.

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EXHIBIT B:      ENGINES COVERED AND OPERATIONAL PARAMETERS

The Engines covered by this Service Agreement are set forth below.  [***].

Aircraft Delivery Schedule / Install + Spare Engine

[***]

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[***]

Installed Engines and Spare Engines Operating Parameters:

[***]

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EXHIBIT B-1:    [***]

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EXHIBIT C:   SHOP VISIT DATA

· Engine Operator

· Engine Model

· Engine Serial Number

· Engine Time and Cycles Since New

· Engine Time and Cycles Since last Shop Visit

· Shop Visit Rank

· Reason for Shop Visit

- Prime cause,

- Scheduled/unscheduled,

- More detailed description

· Engine Airworthiness Directive and/or Services Bulletin status

· All Engine information and records, set forth in the Procedures Manual

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EXHIBIT D: PRICE ADJUSTMENT MATRIX

[***]

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[***]

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[***]

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[***]

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EXHIBIT E:  ESCALATION – Rate Per Engine Flight Hour

The Rate Per Engine Flight Hour will be adjusted on a yearly basis for fluctuation of the economy as described below:

[***].

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EXHIBIT F:  LRU

[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]

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EXHIBIT G:     SUPPLEMENTAL SERVICES PRICING

[***]
[***]
[***]
[***]
[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]
[***]	[***]		[***]
[***]	[***]		[***]
[***]
[***]	[***]		[***]
[***]
[***]
[***]
[***]

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EXHIBIT G CONTINUED:  SUPPLEMENTAL SERVICES PRICING – [***]

1. Basis:

All prices are stated in 2010 United States Dollars [***].

[***]

[***]

[***]

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EXHIBIT G CONTINUED:  SUPPLEMENTAL SERVICES PRICING – FIXED PRICE LABOR SCHEDULE

[***]

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EXHIBIT H:  CFM DESIGNATED REPAIR STATION

[***]

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EXHIBIT I: GENERAL TERMS AND CONDITIONS

Table of Contents

ARTICLE 1	-	LIMITATION OF LIABILITY AND INDEMNIFICATION
ARTICLE 2	-	TERMINATION
ARTICLE 3	-	TAXES
ARTICLE 4	-	EXCUSABLE DELAY
ARTICLE 5	-	PATENTS
ARTICLE 6	-	INFORMATION AND DATA
ARTICLE 7	-	GOVERNMENTAL AUTHORIZATION & EXPORT SHIPMENT
ARTICLE 5	-	WAIVER OF IMMUNITY
ARTICLE 9	-	NOTICES
ARTICLE 10	-	LIENS
ARTICLE 11	-	APPLICABLE LAW – DISPUTE RESOLUTION
ARTICLE 12	-	MISCELLANEOUS

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ARTICLE 1 – LIMITATION OF LIABILITY AND INDEMNIFICATION

A. Total Liability.  The total liability of CFM for any and all claims, whether in contract, warranty, tort (including negligence but excluding gross negligence and willful misconduct), product liability, patent infringement or otherwise, for any damages arising out of, connected with or resulting from the Service Agreement or the performance or non-performance of any Service or from the manufacture, sale, Redelivery, resale, repair, overhaul, replacement or use of the Engine or any item or part thereof, will not exceed [***] on which the Service giving rise to the claim was performed. Notwithstanding the foregoing, in no event will either Party have any liability hereunder, whether as a result of breach of contract, warranty, tort (including negligence but excluding gross negligence and willful misconduct), product liability, patent infringement or otherwise, for any special, consequential, incidental, resultant or indirect damages, (including, without limitation, loss of: use, profit, revenue or goodwill) or punitive or exemplary damages. [***].

In no event will CFM have any liability hereunder, whether as a result of breach of contract, warranty, tort (including negligence but excluding gross negligence and willful misconduct), product liability, patent liability, or otherwise, for the design, material, workmanship, engineering defects or product liability and any damages whatsoever, including damages to personal property and for personal injury or death, caused in any way by the manufacturer of the parts, LRU’s, components or material, thereof, or related thereto.

[***].

In the event LAN uses non-CFM parts or non-CFM approved LRU’s, parts or repairs in an Engine and such LRU’s, parts or repairs cause personal injury, death or property damage to third parties, LAN shall indemnify and hold harmless CFM from all claims and liabilities associated therewith. The preceding indemnity shall apply whether or not CFM was provided a right under this Service Agreement to remove such LRU’s, parts or repairs, and irrespective of the exercise by CFM of such right. [***].

B. Definition.  For the purpose of this Article 1, the term "CFM" is deemed to include CFM and its parent and affiliated companies, the subcontractors and suppliers of any Services furnished hereunder, and the directors, officers, employees, agents and representatives of each.

ARTICLE 2 - TERMINATION

A. Termination Events.  The Service Agreement may be terminated as follows:

Late Payment.  In the event that LAN fails to make payments to CFM within the time periods specified herein, CFM may terminate all or any portion of this Service Agreement upon [***] written notice to LAN, unless LAN cures such failure within such period following receipt of this notice.

Insolvency.  Either Party may terminate or suspend performance of all or any portion of this Service Agreement if the other Party: (A) makes any agreement with creditors due to its inability to make timely payments of its debts; (B) enters into bankruptcy or liquidation, whether compulsory or voluntary; (C) becomes insolvent; or (D) becomes subject to the appointment of a receiver of the whole or material part of its assets.

Material Breach.   Either Party may terminate this Service Agreement upon [***] Days written notice to the other for failure to comply with any material provision of this Service Agreement unless the failure has been cured or the Party in breach has substantially effected all acts required to cure the failure prior to such [***] (except for late payment, as described in Paragraph A.1 above).

Maximum Removals.  If at any time during the Term of this Service Agreement, the number of Engines decreases to less than eighty percent (80%) of the number of Engines listed in Exhibit B, CFM may terminate this Service Agreement immediately upon written notice to LAN.

B. Activity After Termination.  In the event the Service Agreement is terminated, the following shall cumulatively apply, in addition to any other right or remedy allowable under this Service Agreement or applicable law:

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Payment for Services Performed.  In the event of termination of this Service Agreement for any reason, LAN will pay CFM for all Services or work performed by or caused to be performed by CFM up to the time of such termination under the applicable terms and prices of this Service Agreement including all costs, fees, and charges incurred by CFM in providing support and material under this Service Agreement, including lease engines to the extent that LAN is responsible for the payment of such sums in accordance with this Service Agreement.  [***].

Reconciliation. In addition to the above, the terms of the reconciliation under the removal of Engines provisions of Article 12 of the Service Agreement will apply.

Work in Process, Redelivery of  LAN’s Engines.  Upon the termination or expiration of this Service Agreement, CFM will complete all work in process in a diligent manner and Redeliver all Engines, parts and related documentation, provided that LAN (a) has paid in full all charges for all such Services and material, plus all costs, fees and penalties, incurred by CFM in providing support, including any lease engines, to the extent that LAN is responsible for the payment of such sums in accordance with this Service Agreement, and (b) has returned all lease engines provided under this Service Agreement.

ARTICLE 3 – TAXES

A. Taxes, Duties, or Charges. In addition to the price for the Services, [***], upon demand, all taxes (including, without limitation, sales, use, excise, turnover or value added taxes), duties, fees, charges or assessments of any nature (but excluding any income taxes) (hereinafter “Taxes”) assessed or levied in connection with performance of this Service Agreement.

B. Reimbursement/Refund. If payment of any such Taxes is made by CFM (or the applicable affiliated company), LAN will reimburse CFM (or the applicable affiliated company) upon demand, such reimbursement including, inter alia, penalties and interest levied on CFM (or the applicable affiliated company). CFM will use all reasonable efforts to obtain a refund thereof. [***].

C. Withholdings. If LAN deducts any Taxes (“Charges”) with respect to any amounts payable to CFM under this Service Agreement, LAN shall pay such additional amounts to CFM so that the payment received by CFM net of all such Charges shall be equal to the payment amounts stated as due to CFM under this Service Agreement. [***]. To facilitate the utilization by CFM of tax credits generated by such withholding, and therefore facilitate remittance of said recovery to LAN, LAN shall provide documentation and assistance in a timely manner to CFM.

D. [***].

ARTICLE 4 - EXCUSABLE DELAY

A. Excusable Delay.   Either Party will be excused from, and will not be liable for, any delay in performance or failure to perform hereunder (except for the obligation to pay money or credit or debit an account which will not be excused hereunder), and will not be deemed to be in default for any delay in or failure of performance hereunder due to causes beyond its reasonable control.  Such causes will be conclusively deemed to include, but not be limited to [***] (including disruption of technology resources), or transportation shortages (each an “Excusable Delay”). [***].

B. Continuing Obligations.  Article 4.A will not, however, relieve either Party from using its commercially reasonable efforts to avoid or remove such causes of delay and continue performance with reasonable dispatch when such causes are removed.  [***].

C. Extended Delay Termination.  If delay resulting from any of the foregoing causes extends for more than [***] and the Parties have not agreed upon a revised basis for continuing the Services, including any adjustment of the price, then either Party, upon [***] written notice to the other, may terminate the purchase order that covers the delayed Services.

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ARTICLE 5 – PATENTS

A. Claims.  CFM shall handle all claims and defend any suit or proceeding brought against LAN insofar as based on a claim that, without further combination, any material or process used in the repair of any items furnished under this Service Agreement constitutes [***]. This paragraph shall apply only to the extent that such material or process is so used to CFM's specification.

B. Liability.  CFM's liability hereunder is expressly conditioned upon LAN promptly notifying CFM in writing and giving CFM exclusive authority, information and assistance (at CFM's expense) for the handling, defense or settlement of any claim, suit or proceeding. In case such material or process is held in such claim, suit or proceeding to constitute infringement and the use of said material or process is enjoined, CFM shall, at its own expense and at its option either (1) settle or defend such claim or suit or proceeding arising therefrom, or (2) procure for LAN the right to continue using said material or process in the item repaired under the Service Agreement, or (3) replace same with an item satisfactory and incorporating non-infringing material or process, or (4) modify same so it becomes satisfactory and non-infringing, or (5) refund the repair price applicable to such material or process. CFM shall not be responsible to LAN or to any third party, for incidental or consequential damages, including, but not limited to, costs, expenses, liabilities and/or loss of profits resulting from loss of use under this Article 5. [***].

C. Indemnification.  The preceding paragraph B shall not apply: (1) to any material or process or part thereof of LAN design or specification, or used at LAN’s direction in any repair under the Service Agreement, or (2) to the use of any material or process furnished under the Service Agreement in conjunction with any other apparatus, article, material or process.  As to any material or process or use described in part (1) of the preceding sentence, CFM assumes no liability whatsoever for patent or copyright infringement, and LAN shall, in the same manner as CFM is obligated to LAN above, indemnify, defend and hold CFM harmless from and against any claim or liability, including costs and expense in defending any such claim or liability in respect thereto.

D. Remedy.  THE FOREGOING SHALL CONSTITUTE THE SOLE AND EXCLUSIVE REMEDY OF  LAN AND THE SOLE LIABILITY OF CFM FOR PATENT OR COPYRIGHT INFRINGEMENT BY ANY MATERIAL OR PROCESS AND IS SUBJECT TO THE LIMITATION OF LIABILITY SET FORTH IN ARTICLE 1, “LIMITATION OF LIABILITY AND INDEMNIFICATION.”  THE PATENT WARRANTY OBLIGATIONS RECITED ABOVE ARE IN LIEU OF ALL OTHER PATENT WARRANTIES WHATSOEVER, WHETHER ORAL, WRITTEN, EXPRESSED, IMPLIED OR STATUTORY (INCLUDING ANY WARRANTY OF MERCHANTABILITY AND FITNESS FOR PARTICULAR PURPOSE OR ANY IMPLIED WARRANTY ARISING FROM COURSE OF DEALING, COURSE OF PERFORMANCE, OR USAGE OF TRADE).

ARTICLE 6 - NON DISCLOSURE

A. Non-Disclosure.  Unless the Parties otherwise agree herein or further in writing, any of the terms of the Service Agreement or any knowledge, information or data which the Parties have or may disclose to each other shall be held in confidence and may not be either disclosed or used for any purpose, except:

1. To the extent required by government agencies and courts for official purposes, disclosure may be made to such agencies and courts. In such event, a suitable restrictive legend limiting further disclosure shall be applied.

2. The existence of the Service Agreement and its general purpose only may be stated to others by either of the Parties without approval from the other.

3. CFM may disclose the same to its parents, affiliates, subsidiaries, joint venture participants, engineering service provider, or consultants as needed to perform the Services provided under this Service Agreement. LAN may disclose the same as required to be disclosed in the normal course of LAN's business to LAN's attorneys, accountants, advisors, auditors and rating agencies on a need-to-know basis [***].

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The preceding clause will not apply to information which (1) is or becomes part of the general public knowledge or literature otherwise than as a result of breach of any confidentiality obligation owed by either Party to the other hereunder, or (2) was, as shown by written records, known to the receiving party prior to receipt from the disclosing Party.

B. Intellectual Property.  Nothing contained in this Service Agreement will convey to either Party the right to use the trademarks of the other, or convey or grant to LAN any license under any patent owned or controlled by CFM.

ARTICLE 7 - GOVERNMENTAL AUTHORIZATION & EXPORT SHIPMENT

LAN shall be the importer and/or exporter of record for Chile; CFM shall act as the importer and exporter of record in the country where the Designated Repair Station is located [***]. The applicable importer or exporter of record shall be responsible for the timely application for, obtaining and maintaining any required authorization, such as export license, import license, exchange permit or any other required governmental authorization relating to the related imported or exported Engine, and shall be responsible for complying with all U.S., French and other foreign government licensing and reporting requirements. At either Party’s request and expense, the other Party will assist the requesting Party in its application for any required export or import licenses. CFM will not be liable if any authorization is not renewed or is delayed, denied, revoked or restricted, and LAN will not thereby be relieved of its obligation to pay for Services performed by CFM. All transported Engines will be subject to (i) all applicable U.S. export laws, including but not limited to the U.S. Export Administration Regulations and International Traffic in Arms Regulations and (ii) the French export control regulations. LAN agrees not to dispose of U.S. or French origin items provided by CFM other than in and to the country of ultimate destination and/or as identified in an approved government license or authorization, except as said laws and regulations may permit.

ARTICLE 8 - WAIVER OF IMMUNITY

[***].

ARTICLE 9 - NOTICES

A. Acknowledgement.  Any notices under this Service Agreement shall be in writing and be delivered or sent by mail, express/shipping service or electronic transmission to the respective Parties at the following addresses, which may be changed by written notice:

TO:

LAN AIRLINES S.A.	CFM INTERNATIONAL SA
[***]	[***]
[***]	[***]

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B. Effect of Notices.  Notices will be effective and will be deemed to have been given to (or “received by”) the recipient: (A) upon delivery, if sent by courier, express mail, or delivered personally; (B) on the next business day following receipt, if sent by facsimile; or (C) on the fifth (5th) day after posting (or on actual receipt, if earlier) in the case of a letter sent prepaid first class mail.

ARTICLE 10 – LIENS

A. Other Liens. LAN: acknowledges that CFM has the legal right to assert mechanic’s liens or other statutory or common law liens under applicable law (foreign or domestic) against Engines following performance of Services under this Service Agreement, With respect to Engines leased to LAN, CFM understands that LAN has been authorized and required by the owners to cause Services to be performed.  CFM may, at its option, notify the owners of the existence of this Service Agreement and CFM’s lien rights arising from performance of Services.

B. Enforcement.  If LAN fails to tender any payment owing under this Service Agreement and CFM initiates foreclosure with respect to any Engine pursuant to a mechanic’s lien, then LAN agrees to supply to CFM all records, log books and other documentation pertaining to the maintenance condition of the Engine, and a certificate either (i) certifying that the Engine has not been involved in any Aircraft Accident or Incident or (ii) specifying the date and facts surrounding any Accident or Incident in which the Engine has been involved and the nature and extent of the damage sustained (such records, log books, certificate and other documentation referred to hereinafter as the “Engine Documents”). The Parties recognize that the failure by LAN to deliver the Engine Documents may have a material, adverse effect on the value of any Engine with respect to which foreclosure has been initiated by CFM and the ability of CFM to sell or lease the Engine.

ARTICLE 11 – APPLICABLE LAW – DISPUTE RESOLUTION

A. Applicable Law. This Service Agreement shall be construed, interpreted and applied, and the legal relations between the Parties determined, in accordance with the laws of the State of New York (U.S.A.). The United Nations Convention on Contracts for the International Sale of Goods shall not apply to this Service Agreement

Dispute Resolution. If any dispute arises relating to this Service Agreement, the Parties will endeavor to resolve the dispute amicably, including by designating senior managers who will meet and use commercially reasonable efforts to resolve any such dispute.  If the Parties’ senior managers do not resolve the dispute within sixty (60) days of first written request, either party may request that the dispute be settled and fully and finally determined by binding arbitration, in accordance with the International Chamber of Commerce pursuant to its rules of Conciliation and Arbitration, by one or more arbitrators appointed in accordance with said rules.  The place of arbitration and hearings shall be New York, USA. The arbitration shall be in English and the opinion shall be rendered in English. The arbitration award shall be final and binding by any Party in any court of competent jurisdiction, and shall waive any claim appeal whatsoever against it, [***]. The arbitrators will have no authority to award punitive damages or any other damages not measured by the prevailing Party's actual damages, and may not, in any event, make any ruling, finding or award that does not conform to the terms and conditions of the Service Agreement. All statements made or materials produced in connection with this dispute resolution process and arbitration are confidential and will not be disclosed to any third party except as required by law or subpoena. The Parties intend that the dispute resolution process set forth in this Article will be their exclusive remedy for any dispute arising under or relating to this Service Agreement or its subject matter.

C. Exception.  Either Party may at any time, without inconsistency with this Article, seek from a court of competent jurisdiction any equitable, interim or provisional relief to avoid irreparable damage.  This Article will not apply to and will not bar litigation regarding claims related to a Party’s proprietary or intellectual property rights, nor will this Article be construed to modify or displace the ability of the Parties to effectuate any termination contemplated in Article 2.

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ARTICLE 12 - MISCELLANEOUS

A. Assignment of Service Agreement.. This Service Agreement, any related purchase order or any rights or obligations hereunder may not be assigned, in whole or in part, without the prior written consent of the other Party, except that LAN’s consent will not be required for an assignment by CFM to one of CFM’s affiliates [***]. However, notwithstanding CFM’s assignment to any such affiliate, CFM shall remain responsible for the performance of any and all obligations so assigned. Any assignment in contradiction of this clause will be considered null and void.

B. Beneficiaries. Except as otherwise expressly provided to the contrary, the rights herein granted and this Service Agreement are for the benefit of the Parties hereto and are not for the benefit of any third person, firm or corporation, except as expressly provided herein.

C. Survival Of Certain Clauses.The rights and obligations of the Parties under the following Articles of this Service Agreement as amended, and related Exhibits shall survive the expiration, termination or completion of this Service Agreement:

- Limitation of Liability and Indemnification

- Taxes

- Patents

- Non Disclosure

- Governmental Authorization & Export Shipment

- Waiver of Immunity

- Applicable Law – Dispute Resolution

- Miscellaneous

D. General Rules of Contract Interpretation.  Article and paragraph headings contained in this Service Agreement are inserted for convenience of reference only and do not limit, affect or restrict in any way the meaning and the interpretation of this Service Agreement.  Words used in the singular shall have a comparable meaning when used in the plural and vice versa, unless the contrary intention appears. Words such as “hereunder”, “hereof” and “herein” and other words beginning with “here” refer to the whole of this Service Agreement, including amendments. References to Articles, Sections, Paragraphs or Exhibits will refer to the specified Article, Section, Paragraph or Exhibit of this Service Agreement unless otherwise specified.

E. Language.  The English language will be used in the interpretation and performance of this Service Agreement.  All correspondence and documentation arising out of or connected with this Service Agreement and any related purchase order(s), including Engine records and Engine logs, will be in the English language.

F. Severability.  The invalidity or unenforceability of any part or provision of this Service Agreement, or the invalidity of its application to a specific situation or circumstance, shall not affect the validity legality and enforceability of the remainder of this Service Agreement, or its application to other situations or circumstances. In addition, if a part of this Service Agreement becomes invalid, the Parties will endeavour in good faith to reach agreement on a replacement provision that will reflect, as nearly as possible, the intent of the original provision.

G. Non-Waiver. Any failure or delay in the exercise of rights or remedies hereunder will not operate to waive or impair such rights or remedies.  Any waiver given will not be construed to require future or further waivers.

H. Currency Judgment.  This is an international transaction in which the specification of United States Dollars is of the essence.  No payments required to be made under this Service Agreement will be discharged by payments in any currency other than United States Dollars, whether pursuant to a judgment, arbitration award or otherwise.

I. No Agency Fees.  LAN represents and warrants that no officer, employee, representative or agent of LAN has been or will be paid a fee or otherwise has received or will receive any personal compensation or consideration by or from CFM in connection with the obtaining, arranging or negotiation of this Service Agreement or other documents entered into or executed in connection herewith.

J. No Agency.  Nothing in this Service Agreement will be interpreted or construed to create a partnership, agency or joint venture between CFM and LAN.

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K. Titles/Subtitles.  The titles and subtitles given to the sections of the Service Agreement are for convenience. They do not limit or restrict the context of the article or section to which they relate.

L. Entire Agreement ; Modification. This Service Agreement, together with its Exhibits and any amendment (or Letter Agreement relating hereto, if any), contains and constitutes the entire understanding and agreement between the Parties respecting the subject matter hereof, and supersedes and cancels all previous negotiations, pre-existing agreements, commitments and writing in connection herewith.  This Service Agreement may not be released, discharged, abandoned, supplemented, modified or waived, in whole or in part, in any manner, orally or otherwise, except by a writing of concurrent or subsequent date signed and delivered by a duly authorized officer or representative of each of the Parties hereto making specific reference to this Service Agreement and the provisions hereof being released, discharged, abandoned, supplemented, modified or waived.

M. Counterparts.  This Service Agreement may be executed in one or more counterparts, all of which counterparts will be treated as the same binding agreement, which will be effective as of the date set forth on the first page hereof, upon execution by both Parties and delivery by each Party hereto to the other Party of one or more such counterparts.

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EXHIBIT J: ON-SITE SUPPORT

SERVICES

CFM On-Site Support will provide on wing support technicians, along with special tooling, to perform flight-line services, on wing and off wing inspection, maintenance, and repair of Engines as specified in a mutually executed work order by LAN. Such Engine support services may be provided, as designated by LAN and agreed by service provider (such agreement not to be unreasonably withheld) at LAN’s facilities or at repair facilities owned by CFM On-Site Support or its affiliates.  All Services provided shall be in accordance with its standard commercial quality control policies, procedures, and practices, that are in accordance with an approved repair station and that are auditable upon contract signature. A turn-time estimate for each workscope for acceptance by LAN prior to beginning of work will be provided.

FIXED WORKSCOPE PRICING

Fixed Prices for workscopes provided by CFM On-Site Support include the labor charges involved in preparation and execution of the workscope requiring normal manpower and tooling in normal work conditions. It does not include consumables or other charges that may be applicable. Prices are stated in Year 2010 U.S. Dollars.

CFM56  Fixed Workscope Pricing
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]

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EXHIBIT K:  FLIGHTLINE LRU SUPPORT

[***]

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EXHIBIT L:      DESIGNATION LETTER

[Customer Letterhead]

[Name and address of Original Engine Manufacturer]

Attn:  Manager Warranty Programs

Re:           Designation of CFM as Claims Administrator and Engine Benefits Recipient.

1. [________________] (“Customer”) and [_________________] (“OEM”) entered into General Terms Agreement Number [____________________] dated [_________] (the “GTA”), for the purchase by Customer of [_________] (“Engine”) equipped [______________] (“Aircraft”) and spare engines. Pursuant to the GTA, OEM provides Customer various warranties, guarantees and other Engine related benefits introduced via Service Bulletins and other special offerings (specifically described in paragraph 3 hereof, the “Engine Benefits”)
 

2. Customer and CFM International, Inc (“CFM”) have entered into a separate agreement, Number [____________________] dated [_________]  ("Maintenance Agreement") for the maintenance, repair and overhaul of Engines.  The Maintenance Agreement specifies that Customer shall, during the term of the Agreement, designate CFM to act as claims administrator and Engine Benefits recipient.  Accordingly, Customer hereby authorizes CFM from and after the date of the Maintenance Agreement to: (a) negotiate and enter into final settlements with OEM for Engine Benefits and (b) receive from OEM in the name of CFM all proceeds of such Engine Benefits.  Customer warrants to OEM that all actions undertaken by CFM pursuant to this authorization shall be binding on Customer and that OEM may rely thereon.

3. Engine Benefits are specifically limited to the following, all as more fully defined in the GTA:
 

a. Standard warranties:  New Engine and Module, New Parts, Campaign Change, Ultimate Life, Vendor Back-Up and Vendor Interface Warranties;

b. Special guarantees:  Extended New Engine and Module, Extended New Parts, Extended Campaign Change, AOG;

c. Industry participation offers on CFM56-5Bengines as set forth in fleet-wide service bulletins;
 

d. Extended warranties, and non-warranty programs offered by OEM pursuant to Service Bulletins or other communications between Customer or CFM.

4. OEM consents to the disclosure by Customer to CFM of Engine Benefits in the GTA, Service Bulletins or other notices.  CFM agrees to hold in confidence all such Engine Benefits information, or other OEM proprietary information, provided to CFM in order to give effect to the Engine Benefits information. This Letter may only be amended or modified by the written agreement of the parties hereto, and shall remain in effect throughout the term (including extensions) of the Maintenance Agreement. This Letter will be interpreted and applied in accordance with the substantive laws of the State of New York.

Customer	CFM	OEM
By: _______________	By: _______________	By: _______________
Title: ______________	Title: ______________	Title: ______________
Date: ______________	Date: ______________	Date: ______________

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EX-4.8

EX-4.9

Exhibit 4.9

IMPLEMENTATION AGREEMENT

by and among

LAN AIRLINES S.A.,

TAM S.A.,

COSTA VERDE AERONÁUTICA S.A.,

INVERSIONES MINERAS DEL CANTÁBRICO S.A.,

NOEMY ALMEIDA OLIVEIRA AMARO,

MARIA CLÁUDIA OLIVEIRA AMARO,

MAURÍCIO ROLIM AMARO,

JOÃO FRANCISCO AMARO

and

TAM EMPREENDIMENTOS E PARTICIPAÇÕES S.A.

Dated as of January 18, 2011

TABLE OF CONTENTS

		Page
ARTICLE I
THE TRANSACTION
SECTION 1.01.	ANAC	4
SECTION 1.02.	The Transaction	4
SECTION 1.03.	Transaction Recommendations	6
SECTION 1.04.	Incorporation of TEP Chile, Holdco 1, Holdco 2 and Sister Holdco	6
SECTION 1.05.	Subscription for and Issuance of Holdco 1 Stock, Holdco 2 Stock and Sister Holdco Stock	7
SECTION 1.06.	Limitations on Actions	8
SECTION 1.07.	LAN and TAM Board Meetings	8
SECTION 1.08.	Execution and Delivery of Shareholders Agreements	9
SECTION 1.09.	Shareholder Meetings	9
SECTION 1.10.	LAN and TAM Board Meetings	11
SECTION 1.11.	Commencement of the Exchange Offer	12
SECTION 1.12.	Condition Notices; Subscription Payments; Leilão	12
SECTION 1.13.	Consummation of Exchange Offer	13
SECTION 1.14.	LAN Merger Board Meeting	13
SECTION 1.15.	Consummation of Mergers	14
SECTION 1.16.	Directors	15
SECTION 1.17.	Statutory Squeeze Out	15
ARTICLE II
EFFECT OF THE MERGERS
SECTION 2.01.	Conversion and Cancellation of Securities	16
SECTION 2.02.	Treatment of TAM Stock Options	16
SECTION 2.03.	Payment of Merger Consideration; Deposit with Exchange Agent	17
SECTION 2.04.	Stock Transfer Books	17
SECTION 2.05.	Fractional Shares	17
SECTION 2.06.	Withholding	17
SECTION 2.07.	Value of TAM Stock	18
ARTICLE III
COVENANTS
SECTION 3.01.	Conduct of Business Pending the Mergers	18
SECTION 3.02.	No Solicitation	23
SECTION 3.03.	Public Announcements	24
SECTION 3.04.	Stockholder Actions	25

-i-

ARTICLE IV
TERMINATION, AMENDMENT AND WAIVER
SECTION 4.01.	Termination	25
SECTION 4.02.	Effect of Termination	26
SECTION 4.03.	Amendment	29
SECTION 4.04.	Extension; Waiver	29
ARTICLE V
GENERAL PROVISIONS
SECTION 5.01.	Nonsurvival	29
SECTION 5.02.	Fees and Expenses	29
SECTION 5.03.	Notices	29
SECTION 5.04.	Definitions	31
SECTION 5.05.	Interpretation	37
SECTION 5.06.	Consents and Approvals	38
SECTION 5.07.	Counterparts	38
SECTION 5.08.	No Third-Party Beneficiaries	38
SECTION 5.09.	Governing Law	38
SECTION 5.10.	Assignment	38
SECTION 5.11.	Specific Enforcement; Consent to Jurisdiction	39
SECTION 5.12.	Waiver of Jury Trial	39
SECTION 5.13.	Obligations of LAN and of TAM	40
SECTION 5.14.	Language; Portuguese Translation	40
Exhibit 1	Ownership Structure Chart Upon Completion of Transaction Steps
Exhibit 2	TAM Shareholders Agreement
Exhibit 3	Holdco 1 Shareholders Agreement
Exhibit 4	LATAM/TEP Shareholders Agreement
Exhibit 5	Control Group Shareholders Agreement
LAN Disclosure Schedules
TAM Disclosure Schedules
Schedule 1.12	Conditions to Tender
Schedule 5.04(u)	LAN Material Contracts
Schedule 5.04(v)	LAN Stock Options
Schedule 5.04(ii)	TAM Material Contracts
Schedule 5.04(jj)	TAM Stock Options

-ii-

INDEX OF DEFINED TERMS

	Page
Action	32
Affiliate	32
Agreed Courts	39
Agreed Issues	39
Agreement	1
Airline Regulatory Entities	32
Alternative Proposal	24
Amaro Family	1
ANAC	1
ANAC Approval	4
Antitrust Law	32
Appraisal Event	25
Appraisal QuestionedMeeting	10
Appraisal Report	10
Appraiser	9
Appraiser List	9
beneficial ownership	32
Benefit Plans	32
Board Transaction Recommendations	6
Bovespa	10
Brazilian Law	16
business day	33
By-laws	33
Calculation Agent	35
Chilean Corporate Law	12
Chilean Law	6
Commencement Date	33
Competing Proposal	28
Contract	33
Control	33
Control Group Shareholders Agreement	9
Convertible Securities	33
CVM	37
CVM I 361	2
Designated LIBOR Page	35
Disclosure Schedule	18
Dividend Rights	6
Edital	5
Effective Time	15
Eligible Shares	18
Employees	21
Equity Securities	33
Exchange Agent	17
Exchange Fund	17
Exchange Offer	2
Free Float Shares	10
Governmental Entity	33
Holdco 1	2
Holdco 1 Non-Voting Stock	2
Holdco 1 Ordinary Shares	7
Holdco 1 Shareholders Agreement	9
Holdco 1 Stock	2
Holdco 1 Voting Stock	2
Holdco 2	2
Holdco 2 Exchange Ratio	14
Holdco 2 Merger	14
Holdco 2 Merger Matters	11
Holdco 2 Shareholders Meeting	11
Holdco 2 Stock	7
Holdco Subscriptions	8
IFRS	22
Indebtedness	33
Initial Capital Increase	15
Intellectual Property	34
Key Personnel	34
LAN	1
LAN ADRs	14
LAN Aircraft Contracts	34
LAN BDRs	14
LAN Board	6
LAN Board Merger Recommendation	8
LAN Board Recommendations	8
LAN Board Transaction Recommendation	6
LAN Common Stock	2
LAN Condition Notice	12
LAN Controlling Shareholders	1
LAN Financial Reporting Documents	34

-iii-

LAN Material Adverse Effect	34
LAN Material Contract	35
LAN Recommendation Change	26
LAN Reimbursable Expenses	27
LAN Shareholders Meeting	9
LAN Stock Options	35
LAN Stock Plans	35
LAN Termination Fee	27
LATAM/TEP Shareholders Agreement	9
Law	35
Leilão	5
Leilão Date	12
LIBOR	35
Licenses	36
Lien	36
Limited Voting Rights	7
Master Agreement	37
Merger Consideration	16
Mergers	15
Minimum Condition Notice	12
Name Change	8
Non-Tendered Shares	16
Order	36
Ordinary TEP Shares	1
Outside Date	25
Party	18
Person	36
Preferred TEP Shares	1
Quotation Day	36
Ratification of Understanding	4
Relevant Parent Entity	24
Representatives	23
Requisite Holdco 2 Shareholder Approval	11
Requisite LAN Shareholder Approval	10
Requisite Shareholder Approvals	11
Requisite Sister Holdco Shareholder Approval	11
Requisite TAM Shareholder Approval	10
Restraining Orders	Schedule 1.06(a)
SEC	34
Selected Appraiser	10
Shareholders Agreements	9
Sister Holdco	7
Sister Holdco Exchange Ratio	15
Sister Holdco Merger	15
Sister Holdco Merger Matters	11
Sister Holdco Shareholders Meeting	11
Sister Holdco Stock	7
Slots	36
SSE	16
Subscriptions	13
Subsidiary	36
Swap Contract	36
TAM	1
TAM ADRs	14
TAM Aircraft Contracts	37
TAM Board	6
TAM Board Exchange Offer Recommendation	12
TAM Board Recommendations	12
TAM Board Transaction Recommendation	6
TAM Direct Controlling Shareholder	1
TAM Financial Reporting Documents	37
TAM Material Contract	37
TAM Ordinary Stock	1
TAM Preferred Stock	1
TAM Recommendation Change	26
TAM Reimbursable Expenses	27
TAM Shareholders Agreement	9
TAM Shareholders Meeting	10
TAM Stock	1
TAM Stock Options	37
TAM Stock Plans	37
TAM Termination Fee	27
Tax	37
TEP Chile	1
TEP Chile Stock	6
TEP Chile Subscription	13
TEP Condition Notice	13
TEP Holdco 1 Non-Voting Shares	8
TEP Restructuring	2
TEP Shares	1
Transaction Steps	4
U.S. Exchange Act	37
Withdrawal Deadline	12

-iv-

IMPLEMENTATION AGREEMENT

IMPLEMENTATION AGREEMENT, dated as of January 18, 2011 (the “Agreement”), among LAN AIRLINES S.A., a Chilean corporation (“LAN”), COSTA VERDE AERONÁUTICA S.A. and INVERSIONES MINERAS DEL CANTÁBRICO S.A., Chilean corporations that are the controlling shareholders of LAN under the Law of Chile (collectively, the “LANControlling Shareholders”), TAM S.A., a Brazilian corporation (“TAM”), Noemy Almeida Oliveira Amaro, Maria Cláudia Oliveira Amaro, Maurício Rolim Amaro and João Francisco Amaro, all of whom are Brazilian citizens and residents and who, collectively, are the only shareholders of the TAM Direct Controlling Shareholder under the Law of Brazil (all such individuals, collectively, the “Amaro Family”), and TAM EMPREENDIMENTOS E PARTICIPAÇÕES S.A., a Brazilian corporation that is the direct controlling shareholder of TAM under the Law of Brazil (the “TAM Direct Controlling Shareholder”).

WHEREAS, the board of directors of each of LAN and TAM has approved the combination of the two companies on and subject to the terms and conditions set forth in this Agreement;

WHEREAS, if (but only if) the Agência Nacional de Aviação Civil of Brazil (“ANAC”) has approved without any conditions not acceptable to the parties (i) the direct transfer by the TAM Direct Controlling Shareholder to the Amaro Family of all of the shares of ordinary stock, without par value (“TAM Ordinary Stock”), of TAM beneficially owned by the TAM Direct Controlling Shareholder (the “Ordinary TEP Shares”) (which represents 85.3457% of the outstanding shares of TAM Ordinary Stock), (ii) the direct transfer by the TAM Direct Controlling Shareholder to the Amaro Family of all of the shares of non-voting preferred stock, without par value (the “TAM Preferred Stock” and, collectively with the TAM Ordinary Stock, the “TAM Stock”), of TAM beneficially owned by the TAM Direct Controlling Shareholder (the “Preferred TEP Shares” and, collectively with the Ordinary TEP Shares, the “TEP Shares”) (which represents 25.0873% of the outstanding shares of TAM Preferred Stock), (iii) the direct transfer by the Amaro Family to a new Chilean holding company, TEP Chile S.A. (“TEP Chile”) of all of the TEP Shares, (iv) the direct transfers by TEP Chile of the Ordinary TEP Shares to Holdco 1 and the Preferred TEP Shares to Sister Holdco, (v) the direct transfers by the other holders of shares of TAM Ordinary Stock to Holdco 2 pursuant to the Exchange Offer, subsequently to LAN pursuant to the Mergers and finally to Holdco 1 through the contribution by LAN and (vi) the direct transfers by the other holders of shares of TAM Preferred Stock to Holdco 2 pursuant to the Exchange Offer and subsequently to LAN pursuant to the Mergers, which direct transfers will result in the indirect transfers of shares of TAM Linhas Aéreas S.A., Pantanal Linhas Aéreas S.A. and TAM Milor Táxi Aéreo, Representações, Marcas e Patentes S.A., such transfers will be effected as described below;

WHEREAS, after the date of this Agreement and prior to the time at which the TEP Chile Subscription is made and paid pursuant to Section 1.12, the Amaro Family will implement a capital reduction of the TAM Direct Controlling Shareholder, pursuant to which the TAM Direct Controlling Shareholder will transfer all of the TEP Shares to the members of the Amaro Family pro rata in accordance with their relative equity ownership of the TAM Direct Controlling Shareholder (“TEP Restructuring”);

WHEREAS, after the TEP Restructuring and after the TEP Chile Subscription is made pursuant to Section 1.12, the Amaro Family will contribute all of the TEP Shares to TEP Chile and TEP Chile will contribute all of the Ordinary TEP Shares to a new Chilean holding company (“Holdco 1”) in exchange for 100% (other than two shares issued to LAN) of the non-voting stock, no par value (the “Holdco 1 Non-Voting Stock”), of Holdco 1, and (ii) Holdco 1 and its nominee will incorporate a new Chilean company (“Holdco 2”), and the parties agree that the value of the TEP Shares so contributed shall be the net asset value of such TEP Shares as of the date of their contribution;

WHEREAS, after the consummation of the Mergers, the Amaro Family will collectively own 100% of the outstanding shares of TEP Chile, TEP Chile will own at least 80% of the voting stock, no par value (the “Holdco 1 Voting Stock,” and collectively with the Holdco 1 Non-Voting Stock, “Holdco 1 Stock”), of Holdco 1 and LAN will own 100% of the shares of Holdco 1 Non-Voting Stock and no more than 20% of the shares of Holdco 1 Voting Stock;

WHEREAS, Holdco 2 will make a delisting exchange offer (the “Exchange Offer”), pursuant to the terms and conditions of the CVM Instruction 361/2002, as amended from time to time, without taking into consideration the amendments to such instruction brought by CVM Instruction 487/2010 and later amendments (the “CVM I 361”), for all of the outstanding shares of TAM Stock other than the TEP Shares;

WHEREAS, as a result of the Exchange Offer and the Mergers, LAN will acquire substantially all of the remaining outstanding shares of TAM Stock from the holders who elect to participate in the Exchange Offer and will issue shares of common stock, no par value (the “LAN Common Stock”), of LAN to such holders and TEP Chile at the same time and at the same exchange ratio;

WHEREAS, after consummation of the foregoing transactions and assuming (only for purposes of calculating the ownership percentages shown below) that (i) all holders of shares of TAM Stock (other than the TEP Shares) fully participate in the Exchange Offer, (ii) none of the holders of the outstanding shares of LAN Common Stock exercise their appraisal rights (derecho a retiro) under the Law of Chile in respect of the Mergers and (iii) the only shares of LAN Common Stock and TAM Stock that will be outstanding after the consummation of the Mergers are the shares issued in the Mergers and the shares which are subscribed and fully paid for as of the date of the Agreement (which excludes any shares issuable upon future exercises of stock options):

(a) Holdco 1 will own 100% of the shares of TAM Ordinary Stock;

(b) the Amaro Family collectively will own 100% of the shares of TEP Chile;

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(c) TEP Chile will own 80% of the shares of Holdco 1 Voting Stock;

(d) LAN will own 100% of the shares of Holdco 1 Non-Voting Stock, 20% of the shares of Holdco 1 Voting Stock and 100% of the shares of TAM Preferred Stock; and

(e) the Amaro Family collectively will own 13.67% of the outstanding shares of LAN Common Stock through TEP Chile and the other TAM shareholders will own 15.65% of the outstanding shares of LAN Common Stock;

WHEREAS, in connection with the foregoing transactions, LAN, TEP Chile, Holdco 1 and TAM will enter into a shareholder agreement that will set forth their agreements with respect to the governance of, and relationships between, TAM and its subsidiaries;

WHEREAS, in connection with the foregoing transactions, LAN, TEP Chile and Holdco 1 will enter into a shareholder agreement that will set forth their agreements with respect to the governance of Holdco 1;

WHEREAS, in connection with the foregoing transactions, LAN and TEP Chile will enter into a shareholder agreement that will set forth their agreements with respect to the governance of, and relationships between, LAN, Holdco 1 and their respective Subsidiaries;

WHEREAS, in connection with the foregoing transactions, the LAN Controlling Shareholders, as the continuing controlling shareholders of LAN under the Law of Chile, desire to make certain concessions to TEP Chile and the Amaro Family by entering into a shareholder agreement with TEP Chile that will set forth their agreements with respect to the governance of LAN, the voting, sale and transfer of their shares of LAN Common Stock and TEP Chile’s shares of Holdco 1 Voting Stock and certain other matters; and

WHEREAS, the board of directors of each of LAN, TAM, the LAN Controlling Shareholders and the TAM Direct Controlling Shareholder have approved this Agreement and the transactions contemplated hereby upon the terms and subject to the conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the premises and the covenants and agreements contained in this Agreement, and subject to the conditions set forth herein and those relating to the Exchange Offer, the parties hereto agree as follows:

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ARTICLE I

THE TRANSACTION

SECTION 1.01.       ANAC.  On October 20, 2010, the parties hereto submitted to ANAC an application for ANAC’s approval of: (i) the direct transfers by the TAM Direct Controlling Shareholder of the TEP Shares to the Amaro Family, (ii) the direct transfer by the Amaro Family of the TEP Shares to TEP Chile, (iii) the direct transfer by TEP Chile of the Ordinary TEP Shares to Holdco 1 and the Preferred TEP Shares to Sister Holdco, (iv) the direct transfers by the other holders of TAM Ordinary Stock to Holdco 2 pursuant to the Exchange Offer, subsequently to LAN pursuant to the Mergers and finally to Holdco 1 through the contribution by LAN and (v) the direct transfers by the other holders of TAM Preferred Stock to Holdco 2 pursuant to the Exchange Offer and subsequently to LAN pursuant to the Mergers (the “ANAC Approval”), together with a Private Instrument of Ratification of Understanding, dated as of October 12, 2010 and as amended as of December 13, 2010, among the parties (the “Ratification of Understanding”).  Promptly following the date hereof, the parties will amend the Ratification of Understanding to request that ANAC also approve the (i) direct transfers by the TAM Direct Controlling Shareholder of the TEP Shares to the Amaro Family and (ii) the direct transfer by the Amaro Family of the TEP Shares to TEP Chile.   The parties acknowledge and agree that they will take no actions to implement any of the transactions contemplated by this Agreement (other than the actions described in Sections 1.03 and 1.04) unless and until the ANAC Approval has been received or ANAC has expressly approved the taking of such actions prior to receipt of the ANAC Approval.

SECTION 1.02.       The Transaction.  Upon the terms and subject to the conditions set forth in this Agreement and those relating to the Exchange Offer and in accordance with applicable Law, the parties shall take or cause to be taken the following actions (the “Transaction Steps”) in substantially the order listed below; provided, however, that notwithstanding the foregoing none of such steps (other than the actions described in Sections 1.03 and 1.04) shall be taken prior to receipt of the ANAC Approval without the prior consent of ANAC.  Upon completion of the Transaction Steps, and assuming (only for purposes of calculating the ownership percentages shown therein) that (i) all holders of shares of TAM Stock (other than the TEP Shares) fully participate in the Exchange Offer, (ii) none of the holders of the outstanding shares of LAN Common Stock exercise their appraisal rights (derecho a retiro) under Chilean Law in respect of the Mergers and (iii) the only shares of LAN Common Stock and TAM Stock that will be outstanding after the consummation of the Mergers are the shares issued in the Mergers and the shares which are subscribed and fully paid for as of the date of the Agreement (which excludes any shares issuable upon future exercises of stock options), the ownership of LAN, Holdco 1 and TAM will be as set forth in the ownership structure chart attached as Exhibit 1 hereto.

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(a) Make and publicly announce the Board Transaction Recommendations

(b) Incorporate TEP Chile, Holdco 1, Holdco 2 and Sister Holdco

(c) Implement the TEP Restructuring

(d) Subscribe for and issue Holdco 1 Stock, Holdco 2 Stock and Sister Holdco Stock

(e) LAN’s board of directors meets to recommend that the LAN shareholders vote to approve the Mergers and change of LAN’s name

(f) TAM’s board of directors meets to approve a list of appraisal entities to be submitted to TAM’s shareholders

(g) Prior to the calling of the shareholder meeting of LAN, execute and deliver the Shareholders Agreements

(h) Shareholder meeting of LAN to approve the Mergers and change LAN’s name

(i) Shareholder meeting of TAM to select the appraisal entity

(j) Shareholder meetings of Holdco 2 and Sister Holdco to approve the Mergers and related matters

(k) LAN’s board of directors conditionally approves the issuance of the LAN Common Stock issuable in the Mergers

(l) TAM’s board of directors meets to recommend that the TAM shareholders tender their shares into the Exchange Offer

(m) Commence the Exchange Offer

(n) Delivery of the LAN Condition Notice, delivery of the TEP Condition Notice, subscribe for, issue and pay for the TEP Chile Stock and pay the Holdco Subscriptions

(o) Consummate the Exchange Offer by completing the auction (leilão) (the “Leilão”) established in the edital relating to the Exchange Offer (the “Edital”)

(p) LAN’s board of directors approves the issuance of the LAN Common Stock issuable in the Mergers

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(q) Consummate the Mergers

(r) Settle the purchases made in the Exchange Offer with the Merger Consideration

(s) Change LAN’s name to “LATAM Airlines Group S.A.”

(t) Statutory squeeze out

(u) Delist TAM Stock and TAM ADRs

SECTION 1.03.       Transaction Recommendations.  On or prior to the execution and delivery of this Agreement, the board of directors of LAN (the “LAN Board”) shall have unanimously recommended the transactions contemplated by this Agreement to its shareholders (the “LAN Board Transaction Recommendation”).  On or prior to the execution and delivery of this Agreement, the board of directors of TAM (the “TAM Board”) shall have recommended the Exchange Offer to its shareholders (the “TAM Board Transaction Recommendation”and, collectively with the LAN Board Transaction Recommendation, the “Board Transaction Recommendations”).  Promptly after the execution and delivery of this Agreement, each of LAN and TAM shall publicly announce its Board Transaction Recommendation.

SECTION 1.04.       Incorporation of TEP Chile, Holdco 1, Holdco 2 and Sister Holdco.

(a)           The Amaro Family shall incorporate TEP Chile as a new sociedad anónima corporation in Chile, whose only class of capital stock will be ordinary stock, no par value (the “TEP Chile Stock”), of TEP Chile.

(b)          At the time TEP Chile is incorporated, (i) each of Maria Cláudia Oliveira Amaro, Maurício Rolim Amaro, Noemy Almeida Oliveira Amaro and João Francisco Amaro shall subscribe and pay for one share of TEP Chile Stock for nominal consideration, and (ii) the other 72,837,860 authorized shares of TEP Chile Stock shall remain available for subscription and payment.

(c)          TEP Chile and LAN shall incorporate Holdco 1 as a new sociedad anónima corporation in Chile.  Holdco 1 will be authorized to issue only the following two classes of capital stock:

(i)           Holdco 1 Voting Stock, which shall have the exclusive right to vote on, approve or consent to all matters that are subject to any vote of, approval by or consent from the shareholders of Holdco 1 under the applicable Law of Chile (“Chilean Law”) or otherwise (other than the Limited Voting Rights) and which shall have no economic rights other than the right to receive a nominal dividend (collectively, the “Dividend Rights”); and

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(ii)           Holdco 1 Non-Voting Stock, which shall have the exclusive right to receive all dividends, distributions or other amounts payable by Holdco 1 in respect of any shares of its capital stock (including a preference to be repaid in connection with any liquidation, capital reduction, winding up, recapitalization or reorganization) other than the Dividend Rights and which shall have no right to vote on, approve or consent to any matter that is subject to any vote of, approval by or consent from the shareholders of Holdco 1 under Chilean Law or otherwise other than the rights to vote on, approve or consent to matters requiring the approval of the holders of shares of Holdco 1 Non-Voting Stock under Chilean Law or otherwise (collectively, the “Limited Voting Rights”).

(d)           Holdco 1 and its nominee shall incorporate Holdco 2 as a new sociedad anónima corporation in Chile, whose only class of capital stock will be ordinary stock, no par value (the “Holdco 2 Stock”), of Holdco 2.  Holdco 2 shall be authorized to issue all of the shares potentially issuable pursuant to the Exchange Offer based on an exchange ratio of one share of Holdco 2 Stock for each share of TAM Stock.

(e)           TEP Chile and its nominee shall incorporate a new sociedad anónima corporation in Chile (“Sister Holdco”), whose only class of capital stock shall be ordinary stock, no par value (the “Sister Holdco Stock”), of Sister Holdco.

(f)           On or prior to the time at which the TEP Chile Subscription is made and paid pursuant to Section 1.12, the TAM Direct Controlling Shareholder and the Amaro Family shall cause the TEP Restructuring to occur.

SECTION 1.05.       Subscription for and Issuance of Holdco 1 Stock, Holdco 2 Stock and Sister Holdco Stock.

(a)           At the time Holdco 1 is incorporated, (i) TEP Chile shall subscribe and pay for 1,000 shares of Holdco 1 Voting Stock (collectively, the “Holdco 1 Ordinary Shares”) for nominal consideration, (ii) LAN will subscribe and pay for two shares of Holdco 1 Non-Voting Stock for nominal consideration, and (iii) the other 47,652,705 authorized shares of Holdco 1 Non-Voting Stock shall remain available for subscription and payment.

(b)           At the time Holdco 2 is incorporated, (i) Holdco 1 shall subscribe and pay for one share of Holdco 2 Stock for nominal consideration, (ii) a nominee of Holdco 1 shall subscribe and pay for one share of Holdco 2 Stock for nominal consideration, and (iii) the other 85,557,560 authorized shares of Holdco 2 Stock shall remain available for subscription and payment pursuant to the Exchange Offer.

(c)           At the time Sister Holdco is incorporated, (i) TEP Chile shall subscribe and pay for one share of Sister Holdco Stock for nominal consideration, (ii) a nominee of TEP Chile shall subscribe and pay for one share of Sister Holdco Stock for nominal consideration, and (iii) the other 72,837,860 authorized shares of Sister Holdco Stock shall remain available for subscription and payment.

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(d)           Immediately after Holdco 1 and Sister Holdco are incorporated, TEP Chile shall subscribe for (i) 47,652,705 shares of Holdco 1 Non-Voting Stock (the “TEP Holdco 1 Non-Voting Shares”) in exchange for all of the Ordinary TEP Shares, (ii) 72,837,860 shares of Sister Holdco Stock in exchange for 62 Holdco 1 Ordinary Shares, all of the TEP Holdco 1 Non-Voting Shares and all of the Preferred TEP Shares (the subscriptions described in this Section 1.05(d) are collectively referred to herein as, the “Holdco Subscriptions”); provided, however, that notwithstanding the foregoing the Holdco Subscriptions shall be payable only if and when TEP Chile receives the TEP Shares pursuant to Section 1.12 and following such payment TEP Chile will retain 938 Holdco 1 Ordinary Shares.

(e)           The shares of Holdco 1 Non-Voting Stock subscribed and paid for by LAN pursuant to Section 1.05(a)(ii) and subscribed for by TEP Chile pursuant to Section 1.05(d)(i) shall collectively represent all of the issued and outstanding shares of Holdco 1 Non-Voting Stock immediately prior to the consummation of the Mergers.

(f)           The shares of Sister Holdco Stock subscribed and paid for by TEP Chile and its nominee pursuant to Section 1.05(c)(i) and (ii) and subscribed for by TEP Chile pursuant to Section 1.05(d)(ii) shall be equal in number to the TEP Shares plus two shares and shall collectively represent all of the issued and outstanding shares of Sister Holdco Stock immediately prior to the consummation of the Mergers.

SECTION 1.06.       Limitations on Actions. The TAM Direct Controlling Shareholder and the Amaro Family shall take, and shall cause the nominees referred to in this Article I to take, all necessary action to ensure that prior to the consummation of the Mergers none of Holdco 1, Holdco 2 or Sister Holdco will have any assets or liabilities other than those expressly provided for in this Article I and will take no actions other than the actions expressly provided for in this Article I or incidental to such actions or their formation.

SECTION 1.07.       LAN and TAM Board Meetings.

(a)           Prior to the LAN Shareholders Meeting, LAN shall cause a special meeting of the LAN Board to be called and held in accordance with applicable Law and the By-laws of LAN and at such duly called and held meeting the LAN Board shall, by resolutions duly adopted at such meeting, recommend that the holders of shares of LAN Common Stock vote to approve the Mergers, the change of LAN’s name to “LATAM Airlines Group S.A.” (the “Name Change”) and the other transactions contemplated by this Agreement (the “LAN Board Merger Recommendation,” and together with the LAN Board Transaction Recommendation, the “LAN Board Recommendations”) and LAN shall publicly announce the LAN Board Merger Recommendation.

(b)           Prior to the TAM Shareholders Meeting, TAM shall cause a special meeting of the TAM Board to be called and held in accordance with applicable Law and the TAM By-laws and at such duly called and held meeting the TAM Board shall, by resolutions duly adopted at such meeting, approve a list of three independent specialized companies experienced in valuing companies with similar size and operations to TAM (each, an “Appraiser,” and such list, the “Appraiser List”) to be submitted to holders of the Free Float Shares at the TAM Shareholders Meeting.

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SECTION 1.08.       Execution and Delivery of Shareholders Agreements.  Prior to the calling of the LAN Shareholders Meeting referred to in Section 1.09:

(a)           LAN, TEP Chile, Holdco 1 and TAM will enter into a shareholder agreement with respect to the holding of TAM Stock and the governance, management and operations of TAM and its subsidiaries in the form of Exhibit 2 hereto (the “TAM Shareholders Agreement”), which will become effective only upon the consummation of the Mergers.

(b)           LAN, TEP Chile and Holdco 1 will enter into a shareholder agreement with respect to the holding of Holdco 1 Stock and the governance, management and operations of Holdco 1 in the form of Exhibit 3 hereto (the “Holdco 1 Shareholders Agreement”), which will become effective only upon the consummation of the Mergers.

(c)           LAN and TEP Chile will enter into a shareholder agreement with respect to the governance of LAN, Holdco 1 and their respective Subsidiaries in the form of Exhibit 4 hereto (the “LATAM/TEP Shareholders Agreement”), which will become effective only upon the consummation of the Mergers.

(d)           The LAN Controlling Shareholders and TEP Chile will enter into a shareholder agreement with respect to the governance of LAN, the voting, sale and transfer of their shares of LAN Common Stock and TEP Chile’s shares of Holdco 1 Voting Stock and certain other matters in the form of Exhibit 5 hereto (the “Control Group Shareholders Agreement” and, collectively with the TAM Shareholders Agreement, the Holdco 1 Shareholders Agreement and the LATAM/TEP Shareholders Agreement, the “Shareholders Agreements”), which will become effective only upon the consummation of the Mergers.

SECTION 1.09.       Shareholder Meetings.  Prior to the commencement of the Exchange Offer:

(a)           LAN shall, acting through the LAN Board and in accordance with applicable Law and LAN’s By-laws, (i) take all action necessary to establish a record date for, duly call, give notice of, convene and hold a meeting of its shareholders for the purpose of voting to approve the Mergers, the Name Change and the other transactions contemplated hereby (the “LAN Shareholders Meeting”), (ii) cause such vote to be taken and completed and (iii) include the LAN Board Recommendations in the materials distributed to the holders of LAN Common Stock in connection with the LAN Shareholders Meeting.  Under Chilean Law and LAN’s By-laws, the Mergers must be approved by the holders of at least two-thirds of the outstanding shares of LAN Common Stock (the “Requisite LAN Shareholder Approval”).  The Requisite LAN Shareholder Approval shall be expressly conditioned upon, and will become effective only upon, the consummation of the Mergers.

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(b)           TAM shall, acting through the TAM Board and in accordance with applicable Law and TAM’s By-laws, take all action necessary to establish a record date for, duly call, give notice of, convene and hold a meeting of its shareholders solely for the purpose of voting to select an Appraiser from the Appraiser List to prepare the appraisal report to determine the economic value of TAM and LAN (the “Appraisal Report”) in accordance with the terms of TAM’s By-laws and the rules of the BM&FBovespa (the “Bovespa” and, such shareholders meeting and any shareholders meeting called subsequently for the same purpose as provided below, the “TAM Shareholders Meeting”); provided, however, that the foregoing shall not be deemed to require TAM to cause such vote to select an Appraiser to be completed or to select any particular Appraiser.  Under TAM’s By-laws and the rules of the Bovespa the quorum for the first calling of the TAM Shareholders Meeting requires the presence in person or by proxy of holders of shares of TAM Stock (other than the TAM Direct Controlling Shareholder, the Amaro Family, their respective Affiliates and TAM and its Subsidiaries) (collectively, the “Free Float Shares”) representing at least 20% of the outstanding shares of TAM Stock.  Under TAM’s By-laws and the rules of the Bovespa, the selection of an Appraiser is the exclusive responsibility of the holders of the Free Float Shares, and any Appraiser so selected must be approved by a majority of the votes cast by the holders of the Free Float Shares present in person or by proxy at the TAM Shareholders Meeting at which the requisite quorum is present (the “Requisite TAM Shareholder Approval,” and any Appraiser so selected, the “Selected Appraiser”).  If a quorum is not present at the first calling of the TAM Shareholders Meeting, then TAM shall call additional meetings of its shareholders solely for the same purpose until a quorum is established, and under TAM’s By-laws and the rules of the Bovespa the quorum for any such subsequently called meeting shall require the presence in person or by proxy of any holder of at least one Free Float Share.  If at any duly called and held TAM Shareholders Meeting at which a quorum is present the vote of the holders of the Free Float Shares to select an Appraiser is taken and completed but the Requisite TAM Shareholder Approval is not obtained, then TAM shall call additional meetings of its shareholders solely for the same purpose until the Requisite TAM Shareholder Approval is obtained.  Notwithstanding anything in this Agreement to the contrary, in no event shall TAM be required to call more than five shareholder meetings within a period of five months.  If after the Selected Appraiser has issued the Appraisal Report the holders of Free Float Shares exercise their right under Brazilian Law to request that TAM call a special meeting of the shareholders of TAM to vote upon whether or not to request a new Appraisal Report and to appoint a new Appraiser to prepare a new Appraisal Report (the “Appraisal Questioned Meeting”), then TAM shall, acting through the TAM Board and in accordance with applicable Law and TAM’s By-laws, take all action necessary to establish a record date for, duly call, give notice of, convene and hold the Appraisal Questioned Meeting no later than 45 days after such election is made.  If the holders of Free Float Shares vote to request a new Appraisal Report and to appoint a new Appraiser at the Appraisal Questioned Meeting, then such new Appraiser shall be deemed to be the Selected Appraiser and its new Appraisal Report shall be deemed to be the Appraisal Report for all purposes of this Agreement other than this sentence and the immediately preceding sentence.

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(c)           The Amaro Family shall cause Holdco 2, acting through its board of directors and in accordance with applicable Law and Holdco 2’s By-laws, to (i) take all action necessary to establish a record date for, duly call, give notice of, convene and hold a special meeting of the shareholders of Holdco 2 (the “Holdco 2 Shareholders Meeting”) for the purpose of voting to approve (i) the Holdco 2 Merger and the other transactions contemplated hereby, (ii) the relevant audited financial statements and appraisal report and (iii) the By-laws of the surviving corporation of the Holdco 2 Merger (collectively, the “Holdco 2 Merger Matters”).  Under Chilean Law and Holdco 2’s By-laws, the Holdco 2 Merger Matters must be approved by the holders of at least two-thirds of the outstanding shares of Holdco 2 Stock (the “Requisite Holdco 2 Shareholder Approval”).  The Requisite Holdco 2 Shareholder Approval shall be expressly conditioned upon, and will become effective only upon, the consummation of the Mergers.

(d)           The Amaro Family shall cause Sister Holdco, acting through its board of directors and in accordance with applicable Law and Sister Holdco’s By-laws, to take all action necessary to establish a record date for, duly call, give notice of, convene and hold a special meeting of the shareholders of Sister Holdco (the “Sister Holdco Shareholders Meeting”) for the purpose of voting to approve (i) the Sister Holdco Merger and the other transactions contemplated hereby, (ii) the relevant audited financial statements and appraisal report and (iii) the By-laws of the surviving corporation of the Sister Holdco Merger (collectively, the “Sister Holdco Merger Matters”).  Under Chilean Law and Sister Holdco’s By-laws, the Sister Holdco Merger Matters must be approved by the holders of at least two-thirds of the outstanding shares of Sister Holdco Stock (the “Requisite Sister Holdco Shareholder Approval” and, collectively with the Requisite LAN Shareholder Approval, the Requisite TAM Shareholder Approval and the Requisite Holdco 2 Shareholder Approval, the “Requisite Shareholder Approvals”).  The Requisite Sister Holdco Shareholder Approval shall be expressly conditioned upon, and will become effective only upon, the consummation of the Mergers.

(e)           Each of the LAN Shareholders Meeting, the Holdco 2 Shareholders Meeting and the Sister Holdco Shareholders Meeting shall occur on the same day.

SECTION 1.10.       LAN and TAM Board Meetings.

(a)           Prior to the commencement of the Exchange Offer, LAN shall cause a special meeting of the LAN Board to be called and held in accordance with applicable Law and the By-laws of LAN and at such duly called and held meeting the LAN Board shall, by resolutions duly adopted at such meeting, approve the issuance of the shares of LAN Common Stock issuable pursuant to the Mergers, which approval shall be expressly conditioned upon, and will become effective only upon, the consummation of the Exchange Offer.

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(b)           Prior to the commencement of the Exchange Offer, TAM shall cause a special meeting of the TAM Board to be called and held in accordance with applicable Law and the TAM By-laws and at such duly called and held meeting the TAM Board shall, by resolutions duly adopted at such meeting, recommend that the holders of shares of TAM Stock tender and sell such shares in the Exchange Offer (the “TAM Board Exchange Offer Recommendation” and, collectively with the TAM Board Transaction Recommendation, the “TAM Board Recommendations”), and promptly after such meeting TAM shall publicly announce the TAM Board Exchange Offer Recommendation.

SECTION 1.11.       Commencement of the Exchange Offer.  Subject to the satisfaction or waiver of the conditions relating to the commencement of the Exchange Offer (which shall include the satisfaction of the Appraisal Condition (as defined in the Exchange Offer) and the Requisite Shareholder Approvals having been obtained and recorded and published in accordance with Law No. 18,046 of Chilean Corporations (the “Chilean Corporate Law”) and any other applicable Laws), Holdco 2 will commence the Exchange Offer in accordance with the terms of this Agreement and as otherwise agreed among the parties.

SECTION 1.12.       Condition Notices; Subscription Payments; Leilão.  The last time at which the holders of shares of TAM Stock shall be able to withdraw their acceptance to tender their shares of TAM Stock into the Exchange Offer will be 12:00p.m., São Paulo, Brazil time (the “Withdrawal Deadline”), on the date on which the Leilãowill occur as specified in the Edital, as such date may be changed from time to time in accordance with Brazilian Law (the “Leilão Date”).  At 2:00 p.m., São Paulo, Brazil time, on the Leilão Date, the Bovespa shall inform LAN, Holdco 2 and the Amaro Family whether or not the Minimum Conditions (as defined in the Exchange Offer) have been satisfied (the “Minimum Condition Notice”).  Promptly after receiving the Minimum Condition Notice but in no event later than 2:10 p.m., São Paulo, Brazil time, on the Leilão Date LAN shall deliver to the Amaro Family a written notice stating whether or not all of the conditions to the consummation of the Exchange Offer (other than the conditions relating to the consummation of the TEP Chile Subscription) have been satisfied or irrevocably waived by LAN (the “LANCondition Notice”).  If the LAN Condition Notice states that all such conditions have been so satisfied or waived, then promptly after they receive the LAN Condition Notice but in no event later than 2:20 p.m., São Paulo, Brazil time, on the Leilão Date the Amaro Family shall deliver to LAN a written notice stating whether or not all of the conditions set forth in Schedule 1.12 and the mutual conditions to the consummation of the Exchange Offer have been satisfied or irrevocably waived by the them (the “TEPCondition Notice”).  If the TEP Condition Notice states that all such conditions have been so satisfied or waived, then (i) promptly after they have delivered the TEP Condition Notice to LAN but in no event later than 2:30 p.m., São Paulo, Brazil time, on the Leilão Date (A) the Amaro Family, collectively, shall subscribe for 72,837,860 shares of TEP Chile Stock in exchange for all of the TEP Shares (the “TEP Chile Subscription” and, collectively with the Holdco Subscriptions, the “Subscriptions”), such Subscriptions to be made in such proportions so that immediately after the TEP Chile Subscription is paid the percentage equity ownership of each member of the Amaro Family in TEP Chile shall be the same as the percentage equity ownership that such member has in the TAM Direct Controlling Shareholder as of the date hereof, and pay the TEP Chile Subscription by delivering the TEP Shares to TEP Chile, and (B) TEP Chile shall pay the Holdco Subscriptions by delivering all of the Ordinary TEP Shares to Holdco 1 and the 62 Holdco 1 Ordinary Shares, all of the TEP Holdco 1 Non-Voting Shares and all of the Preferred TEP Shares to Sister Holdco and (ii) promptly after all such payments have been made but in no event later than 2:40 p.m., São Paulo, Brazil time, on the Leilão Date, LAN and the Amaro Family shall issue a press release announcing that all of the conditions to the Exchange Offer have been satisfied or irrevocably waived. The LAN Condition Notice shall be conclusive and binding upon LAN for all purposes of this Agreement and the TEP Condition Notice shall be conclusive and binding upon the Amaro Family for all purposes of this Agreement and the TEP Chile Subscription.  Notwithstanding the foregoing, if the Leilão commences at any time other than 3:00 p.m., São Paulo, Brazil time, on the Leilão Date, then each of the times specified above in this Section 1.12 (except for the Withdrawal Deadline) shall be adjusted by the same amount that the actual time of the commencement of the Leilão differs from 3:00 p.m., São Paulo, Brazil time.  If (x) either the LAN Condition Notice or the TEP Condition Notice does not state that all of the conditions it is required to address have been satisfied or irrevocably waived or (y) the TEP Chile Subscription or any of the payments required pursuant to the Subscriptions are not made in full when required by this Section 1.12, then the Leilão shall not occur and the Exchange Offer shall expire without the purchase of any shares of TAM Stock.

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SECTION 1.13.       Consummation of Exchange Offer.  If (i) each of the LAN Condition Notice and the TEP Condition Notice states that all of the conditions it is required to address have been satisfied or irrevocably waived and (ii) the TEP Chile Subscription and all of the payments required pursuant to the Subscriptions have been made in full when required by Section 1.12, then the Leilão shall commence at 3:00 p.m., São Paulo, Brazil time (or such other time as the Bovespa may determine) on the Leilão Date, and Holdco 2 will consummate the Exchange Offer on the Leilão Date in accordance with the terms and conditions of the Exchange Offer.  For all purposes of this Agreement, the consummation of the Exchange Offer shall be deemed to be the purchases of TAM Stock pursuant to the Leilão.  Such purchases will be settled on the third business day following the Leilão Date in accordance with the applicable procedures of Bovespa.

SECTION 1.14.       LAN Merger Board Meeting.  As soon as practicable (but in no event later than two business days) following the consummation of the Exchange Offer, LAN shall cause a special meeting of the LAN Board to be called and held in accordance with applicable Law and the By-laws of LAN and at such duly called and held meeting the LAN Board shall, by resolutions duly adopted at such meeting, approve the issuance of the shares of LAN Common Stock issuable pursuant to the Mergers.

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SECTION 1.15.       Consummation of Mergers.  If (but only if) the Exchange Offer is consummated, then after such consummation and prior to the settlement of the purchases made pursuant to the Exchange Offer:

(a)           Holdco 2 will merge with and into LAN (the “Holdco 2 Merger”) and the separate corporate existence of Holdco 2 shall thereupon cease.  LAN shall be the surviving corporation of the Holdco 2 Merger and the separate corporate existence of LAN, with all its rights, privileges, powers and franchises, shall continue unaffected by the Holdco 2 Merger.  The Holdco 2 Merger shall have the effects specified in the Chilean Corporate Law.  Pursuant to the Holdco 2 Merger, each share of Holdco 2 Stock (including those issuable pursuant to the settlement of the purchases made pursuant to the Leilão) shall be converted into 0.90 of a share of LAN Common Stock (the “Holdco 2Exchange Ratio”).  Holders of American Depositary Receipts representing shares of TAM Preferred Stock (“TAM ADRs”) that are tendered and sold in the Exchange Offer shall receive the shares of LAN Common Stock issuable to them pursuant to the Holdco 2 Merger in the form of American Depositary Receipts representing such shares (“LAN ADRs”) issued pursuant to the Deposit Agreement, dated as of March 25, 2003, among LAN, The Bank of New York, as Depositary, and the record holders and beneficial owners of LAN ADRs from time to time.  Holders of shares of TAM Stock registered under Resolution 2689 of January 26, 2000 enacted by the Brazilian National Monetary Council that are tendered and sold in the Exchange Offer shall receive the shares of LAN Common Stock issuable to them pursuant to the Holdco 2 Merger in the form of LAN BDRs or LAN ADRs, as permitted by applicable Law.  In the case of the holders of all other shares of TAM Stock tendered and sold in the Exchange Offer, such holders shall receive the shares of LAN Common Stock issuable to them pursuant to the Holdco 2 Merger in the form of Brazilian Depositary Receipts representing such shares (“LAN BDRs”) to be issued pursuant to a deposit agreement in customary form among LAN, a depositary agent to be selected by LAN and reasonably acceptable to TAM, and the holders of LAN BDRs from time to time.  LAN shall pay or cause to be paid all deposit fees and other expenses payable in connection with the issuance of such LAN ADRs and LAN BDRs.  Immediately after the consummation of the Holdco 2 Merger, LAN will contribute any shares of TAM Ordinary Stock beneficially owned by Holdco 2 immediately prior to such merger with and into LAN, to Holdco 1 in exchange for new shares of Holdco 1 Non-Voting Stock on a one-for-one basis. After such contribution, LAN will increase its ownership percentage of the outstanding shares of Holdco 1 Voting Stock by converting shares of Holdco 1 Non-Voting Stock into Holdco 1 Voting Stock to (A) 100% minus (B) 80% divided by the percentage of the outstanding shares of TAM Ordinary Stock owned by Holdco 1 determined on a primary basis after giving effect to such contribution.

(b)           Sister Holdco will merge with and into LAN (the “Sister Holdco Merger” and, collectively with the Holdco 2 Merger, the “Mergers”) and the separate corporate existence of Sister Holdco shall thereupon cease.  LAN shall be the surviving corporation of the Sister Holdco Merger and the separate corporate existence of LAN, with all its rights, privileges, powers and franchises, shall continue unaffected by the Sister Holdco Merger.  The Sister Holdco Merger shall have the effects specified in the Chilean Corporate Law.  Pursuant to the Sister Holdco Merger, each share of Sister Holdco Stock will be converted into 0.90 of a share of LAN Common Stock (the “Sister Holdco Exchange Ratio”).  LAN shall pay or cause to be paid all deposit fees and other expenses payable in connection with the issuance of such LAN BDRs.

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(c)           When the shareholders of LAN approve the Mergers, the share capital of LAN shall be increased by an aggregate amount equal to the sum of the share capital of Holdco 2 and the share capital of Sister Holdco at such time (the “Initial Capital Increase”). After the consummation of the Mergers, the share capital of LAN shall be increased by the amount by which the net asset value of the shares of TAM Stock determined pursuant to Section 2.07 exceeds, or decreased by the amount by which such net asset value is less than, the Initial Capital Increase.  The time at which the Mergers become effective is referred to herein as the “Effective Time.”

SECTION 1.16.       Directors.  As soon as practicable following the date of this Agreement, LAN and the Amaro Family shall discuss in good faith and agree upon the individuals who shall be directors of LAN, Holdco 1, TAM and their Subsidiaries as of the Effective Time.  The parties shall take all necessary action to ensure that immediately following, and on the same day as, the Effective Time, the individuals selected for election to the board of directors of LAN, Holdco 1, TAM and their Subsidiaries by each of LAN and TEP Chile pursuant to the Holdco 1 Shareholders Agreement, by each of LAN and TEP Chile pursuant to the TAM Shareholders Agreement and by each of the LAN Controlling Shareholders and TEP Chile pursuant to the Control Group Shareholders Agreement shall be the directors of LAN, Holdco 1, TAM and their Subsidiaries; provided, however, that notwithstanding the foregoing if any such individual is unwilling or unable to serve in such capacity, then he or she shall be replaced, directly or indirectly, by LAN, the LAN Controlling Shareholders or TEP Chile, as the case may be, if it is entitled pursuant to the Holdco 1 Shareholders Agreement, the TAM Shareholders Agreement and/or the Control Group Shareholders Agreement to elect or select for election, as applicable, to the relevant board of directors the individual who was so unwilling or unable to serve.

SECTION 1.17.       Statutory Squeeze Out.  After the consummation of the Exchange Offer, if it is permitted to do so under the applicable Law of Brazil (“Brazilian Law”), LAN (as the surviving corporation of the Holdco 2 Merger) shall effect a statutory squeeze out of any holders of shares of TAM Stock (other than the TEP Shares) that did not accept the Exchange Offer (the “Non-Tendered Shares”).  In this statutory squeeze out, the holders of Non-Tendered Shares shall have the right to receive cash in an amount equal to the product of (i) the number of shares of LAN Common Stock that it would have received pursuant to the Exchange Offer in respect of such Non-Tendered Shares (assuming it could have received fractional Exchange Offer Equivalent Shares) (as to each such holder, its “Exchange Offer Equivalent Shares”) and (ii) the closing price of the LAN Common Stock on the Santiago Stock Exchange (“SSE”) on the day on which the Exchange Offer is consummated. After the squeeze out of all of the remaining shares of TAM Ordinary Stock, LAN will increase its ownership percentage of the outstanding shares of Holdco 1 Voting Stock to 20% by converting shares of Holdco 1 Non-Voting Stock into shares of Holdco 1 Voting Stock.

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ARTICLE II

EFFECT OF THE MERGERS

SECTION 2.01.       Conversion and Cancellation of Securities.  At the Effective Time, by virtue of the Mergers and without any action on the part of the holder of any shares of the capital stock of LAN, Holdco 2 or Sister Holdco:

(a)           Conversion of Holdco 2 Stock.  Each share of Holdco 2 Stock issued and outstanding immediately prior to the Effective Time shall cease to be issued and outstanding, shall be cancelled and retired, shall cease to exist and shall be converted into the right to receive a fraction of a validly issued, fully paid and non-assessable share of LAN Common Stock equal to the Holdco 2 Exchange Ratio.

(b)           Conversion of Sister Holdco Stock.  Each share of Sister Holdco Stock issued and outstanding immediately prior to the Effective Time shall cease to be issued and outstanding, shall be cancelled and retired, shall cease to exist and shall be converted into the right to receive a fraction of a validly issued, fully paid and non-assessable share of LAN Common Stock equal to the Sister Holdco Exchange Ratio.

(c)           Merger Consideration. The shares of LAN Common Stock issuable as a result of the Mergers together with the amount of any cash in lieu of fractional shares of LAN Common Stock payable pursuant to Section 2.05 are collectively referred to herein as the “Merger Consideration.”  All shares of LAN Common Stock to be issued pursuant to the Mergers shall be deemed issued and outstanding as of the Effective Time.

SECTION 2.02.       Treatment of TAM Stock Options. On or prior to the Commencement Date, TAM and the TAM Board, as applicable, shall adopt any resolutions and take any actions necessary to ensure that (a) from and after the Effective Time each TAM Stock Option outstanding immediately prior to the Effective Time, whether vested or unvested, shall be exercisable only when vested and only for an amount in cash equal to the product of (i) the total number of shares of TAM Stock in respect of which such TAM Stock Option is exercisable and (ii) the amount (if any) by which (x) the product of the Holdco 2 Exchange Ratio and the closing price per share of the LAN Common Stock on the SSE on the last business day prior to the date on which such TAM Stock Option was exercised exceeds (y) the exercise price per share of TAM Stock under such TAM Stock Option less any applicable Taxes required to be withheld with respect to such payment, and (b) none of execution, delivery or performance of this Agreement or the consummation of the Mergers or any other transactions contemplated by this Agreement shall, directly or indirectly, cause or result in any acceleration of the vesting of any TAM Stock Options, whether prior to, on or after the Effective Time.

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SECTION 2.03.       Payment of Merger Consideration; Deposit with Exchange Agent.  Prior to the Effective Time, LAN will appoint an exchange agent reasonably acceptable to TAM (the “Exchange Agent”) and deposit or cause to be deposited with the Exchange Agent, for the benefit of the holders of Holdco 2 Stock and Sister Holdco Stock, certificates or, at LAN’s option, evidence of shares in book entry form, representing shares of LAN Common Stock in such denominations as the Exchange Agent may reasonably specify, including any cash to be paid in lieu of fractional shares of LAN Common Stock pursuant to Section 2.05.  Such certificates or evidence of book-entry form, as the case may be, for shares of LAN Common Stock and such cash are hereinafter referred to collectively as the “Exchange Fund.”  The Exchange Agent shall invest any cash deposited with the Exchange Agent by LAN as directed by LAN; provided that no such investment or losses thereon shall affect the cash payable to holders of Holdco 2 Stock or Sister Holdco Stock in lieu of fractional shares of LAN Common Stock pursuant to Section 2.05, and LAN shall promptly provide additional funds to the Exchange Agent for the benefit of holders of shares of Holdco 2 Stock and Sister Holdco Stock entitled to receive such amounts equal to the amount of any such losses.  Any interest or income produced by such investments shall not be deemed part of the Exchange Fund and shall be payable to LAN.

SECTION 2.04.       Stock Transfer Books.  At the Effective Time, the stock transfer books of each of Holdco 2 and Sister Holdco shall be closed and thereafter there shall be no further registration of transfers of any shares of the capital stock of such companies that were outstanding immediately prior to the Effective Time.

SECTION 2.05.       Fractional Shares.  Notwithstanding anything in this Agreement to the contrary, no certificates or scrip representing fractional shares of LAN Common Stock shall be issued in the Mergers or pursuant to the statutory squeeze out and such fractional shares will not entitle the owner thereof to vote or to any rights of a shareholder of LAN.  In lieu of such fractional shares, LAN shall pay each holder thereof an amount in cash in U.S. Dollars equal to the product of (a) the fractional shares of LAN Common Stock to which such holder would otherwise be entitled after taking into account all shares of Holdco 2 Stock or Sister Holdco Stock owned of record by such holder immediately prior to the Effective Time (collectively as to each record holder, its “Eligible Shares”) and (b) the closing price of the shares of LAN Common Stock on the SSE on the last trading day immediately preceding the Effective Time (as reported in www.bolsadesantiago.com or, if not reported therein, by another authoritative source).

SECTION 2.06.       Withholding.  Each of LAN and the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable incash pursuant to this Agreement to any holder of Eligible Shares such amounts as it is required to deduct and withhold with respect to the making of such payment under applicable Tax Law.  To the extent that amounts are so withheld by LAN or the Exchange Agent with respect to any Eligible Shares, such withheld amounts shall be remitted to the applicable Governmental Entity and shall be treated for all purposes of this Agreement as having been paid to the holder of such Eligible Shares in respect of which such deduction and withholding was made by LAN or the Exchange Agent.

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SECTION 2.07.       Value of TAM Stock.  The parties agree that the monetary value of the subscriptions and payments for the shares of TEP Chile Stock, Holdco 1 Stock, Holdco 2 Stock and Sister Holdco Stock pursuant to each of the Subscriptions shall be equivalent to the net asset value of the shares contributed as payment  for such subscription when such payment is made.

ARTICLE III

COVENANTS

SECTION 3.01.       Conduct of Business Pending the Mergers.  Each of LAN and TAM is sometimes referred to in this Article III as a “Party.”  During the period from the date of this Agreement until the Effective Time, except as specifically set forth in Schedule 3.01 hereto with respect to such Party (to the extent such Schedule relates to a Party, its “Disclosure Schedule”), as consented to in writing in advance by the other Party or as otherwise expressly required by this Agreement or required by applicable Law, each Party shall, and shall cause each of its Subsidiaries to, carry on its business in the ordinary course consistent with past practice and, to the extent consistent therewith, use its commercially reasonable efforts to preserve intact its current business organizations, keep available the services of its current officers, employees and consultants and maintain all Licenses necessary for it and its Subsidiaries to own, lease or operate their properties, rights and other assets and to carry on their business and operations conducted at the date of this Agreement and its existing relationships and goodwill with its employees, customers, suppliers, licensors, licensees, strategic partners and any other Person with whom it conducts business.  Notwithstanding and without limiting the generality of the foregoing, during the period from the date of this Agreement until the Effective Time, except as otherwise set forth in Section 3.01 of such Party’s Disclosure Schedule or as otherwise expressly required pursuant to this Agreement or by applicable Law, each Party shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, without the other Party’s prior written consent:

(a)           (i) make, declare or pay any dividend, or make any other distribution (whether in cash, stock or property), on or in respect of any of its Equity Securities, other than (A) dividends or distributions paid or made by a direct or indirect wholly owned Subsidiary of such Party to such Party or another direct or indirect wholly owned Subsidiary of such Party and (B) regular dividends paid to such Party’s shareholders in accordance with the dividend policy approved at the last regular meeting of its shareholders in an amount not to exceed 50% (in the case of LAN) and 25% (in the case of TAM) of such Party’s net income for the year in respect of which the dividends are paid, (ii) adjust, split, combine, subdivide or reclassify any of its Equity Securities or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for its Equity Securities or (iii) purchase, redeem or otherwise acquire any Equity Securities or Convertible Securities of such Party or any of its Subsidiaries or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities, except for any such purchases, redemptions or other acquisitions (A) required by the terms of the TAM Stock Plans or LAN Stock Plans (as applicable) or (B) required by the terms of any plans, arrangements or Contracts existing on the date of this Agreement between such Party or any of its Subsidiaries, on the one hand, and any director or employee of such Party or any of its Subsidiaries, on the other hand, if (but only if) complete and accurate copies of which have been provided to the other Party prior to the date of this Agreement (for this purpose each Party shall be deemed to have provided to the other Party copies of all documents made available to the other Party at least three business days prior to the date of this Agreement by inclusion in the electronic data room used by the Parties in connection with the transactions contemplated by this Agreement);

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(b)           issue, deliver, sell, grant, pledge or otherwise encumber or subject to any Lien any Equity Securities or Convertible Securities of such Party or any of its Subsidiaries, or any “phantom” stock, “phantom” stock rights, stock option, stock purchase or appreciation rights or stock-based performance units relating to or permitting the purchase of any such Equity Securities or Convertible Securities, including pursuant to Contracts as in effect on the date of this Agreement, other than any (i) issuance of Equity Securities of such Party upon the exercise of TAM Stock Options or LAN Stock Options (as applicable) outstanding as of the date of this Agreement and in accordance with their terms and the TAM Stock Plans or LAN Stock Plans (as applicable) as in effect on the date of this Agreement or (ii) issuances of Equity Securities or Convertible Securities by any direct or indirect wholly owned Subsidiary of such Party to such Party or any other direct or indirect wholly owned Subsidiary of such Party;

(c)           except as otherwise expressly contemplated in this Agreement, amend such Party’s By-laws in any way or amend any of the TAM Subsidiary By-laws or LAN Subsidiary By-laws (as applicable) in any way that is or would reasonably be expected to be materially adverse to such Party and its Subsidiaries, taken as a whole;

(d)           other than in the ordinary course of business consistent with past practice, directly or indirectly make, or agree to directly or indirectly make, any acquisition or investment either by merger, consolidation, purchase of stock or securities, contributions to capital, property transfers, or by purchase of any property or assets of any other Person, or make any capital expenditures, in each case other than (i) investments in existing wholly owned Subsidiaries of such Party, (ii) acquisitions of, or improvements to, assets used in the operations of such Party and its Subsidiaries in the ordinary course of business, (iii) short-term investments of cash in marketable securities in the ordinary course of business, (iv) capital expenditures disclosed in such Party’s capital plans for 2010 and 2011 provided to the other Party prior to the date of this Agreement (provided that such Party shall be permitted to reallocate all or any portion of any capital expenditures set forth in its 2010 capital plan to its 2011 capital plan and, without duplication, all or any portion of any capital expenditures set forth in its 2011 capital plan to its 2010 capital plan) plus capital expenditures (other than with respect to the purchase or lease of aircraft or engines) in any year that do not in the aggregate exceed 10% of the aggregate amount set forth in the capital budget set forth in Section (d) of such Party’s Disclosure Schedule in respect of such year, and (v) acquisitions of properties or assets that are not material to such Party and its Subsidiaries, taken as a whole;

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(e)           sell, lease, assign, license, grant, extend, amend, subject to Liens, waive or modify any material rights in or to, cancel, abandon or allow to lapse, or otherwise transfer or dispose of, or agree to take or permit any such action, all or any part of its assets, rights (including, in the case of TAM, the Multiplus S.A. brand name) or properties (including Equity Securities or Convertible Securities of any Subsidiary of such Party or any Indebtedness of others owed to such Party or any of its Subsidiaries) which are material, individually or in the aggregate, to such Party and its Subsidiaries, taken as a whole, other than (i) internal reorganizations or consolidations involving only such Party and one or more of its existing wholly owned Subsidiaries that would not present a material risk of any material delay in the receipt of any regulatory approval required in connection with the consummation of the transactions contemplated hereby, (ii) dispositions disclosed in such Party’s Disclosure Schedule, (iii) any Liens securing Indebtedness permitted pursuant to this Agreement, dispositions of surplus aircraft, engines, flight simulators and terminations of leases relating to surplus aircraft and engines (including mainline and regional aircraft) consistent with past practice, and (iv) other dispositions of assets, properties or rights if the fair market value of the total consideration received therefrom does not exceed in the aggregate the amount set forth in Section (e) of such Party’s Disclosure Schedule;

(f)           incur any Indebtedness, or make any loan or advance other than (i) Indebtedness incurred in the ordinary course of business consistent with past practice (it being agreed that any financing (including any sale-leaseback transaction) of aircraft or equipment used in the operations of such Party or its Subsidiaries (including engines, spare parts, simulators, technology, gates, routes, Slots, tangible property and ground equipment) and any renewal or refinancing of any such financing shall be deemed to be in the ordinary course; provided that any such financing is entered into on terms reflecting prevailing market conditions at that time), (ii) Indebtedness that does not exceed $10 million in the aggregate, (iii) refinancings, prepayments, repurchases and redemptions in the ordinary course of business consistent with past practice of any Indebtedness outstanding as of the date of this Agreement or permitted to be incurred under this Agreement, (iv) employee loans or advances made in the ordinary course of business consistent with past practice not to exceed $5 million individually or $10 million in the aggregate in any 12-month period, or (v) loans or advances made solely among such Party and any of its wholly owned Subsidiaries or solely among wholly owned Subsidiaries of such Party;

(g)           settle or compromise any Action other than settlements or compromises of Actions where the amount paid (less the amount reserved for such matters by such Party) in settlement or compromise, in each case, does not exceed the amount set forth in Section (g) of such Party’s Disclosure Schedule;

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(h)         other than in the ordinary course of business, (i) enter into any Contract which if it existed on the date of this Agreement would have been a TAM Material Contract or LAN Material Contract (as applicable), (ii) terminate, amend, supplement or modify in any material respect any TAM Material Contract or LAN Material Contract (as applicable) or rights or obligations thereunder or (iii) waive, release, cancel, convey, encumber or otherwise transfer any material rights or claims thereunder;

(i)           make any material changes to the policies or work rules applicable to any group of employees or labor union;

(j)           except as required (x) by applicable Law or (y) by any Benefit Plan specifically listed on Section (j) of such Party’s Disclosure Schedule, (i) adopt, enter into, terminate, modify, amend or grant any waiver or consent in respect of any material Benefit Plan or, other than with respect to the hiring of any Person whose annual compensation (including target bonus payments) does not exceed $500,000, any other Benefit Plan, Contract, plan or policy involving such Party or any of its Subsidiaries and any current or former employee, independent consultant, officers or directors of such Party or any of its Subsidiaries (collectively as to such Party, its “Employees”), except in the ordinary course of business consistent with past practice with respect to Employees who are not Key Personnel, (ii) grant any severance or termination payment to any Employee or increase the compensation of any Employee except for increases in compensation of Employees who are not Key Personnel made in the ordinary course of business consistent with past practice, (iii) remove any existing restrictions in any Benefit Plans or awards made thereunder, (iv) take any action to fund or in any other way secure the payment of compensation or benefits (including in respect of TAM Stock Options or LAN Stock Options (as applicable)) under any Benefit Plan, (v) take any action to accelerate the vesting or payment of any compensation or benefit (including in respect of TAM Stock Options or LAN Stock Options (as applicable)) under any Benefit Plan or awards made thereunder, (vi) except as required by any Benefit Plan as in effect as of the date of this Agreement and except for normal payments, awards and increases in the ordinary course of business consistent with past practice, increase in any manner the compensation or fringe benefits of any Employee or pay any amount or benefit (including in respect of TAM Stock Options or LAN Stock Options (as applicable)) not required by any Benefit Plan as in effect as of the date of this Agreement or (vii) grant any retention, stay, transaction or similar bonuses, payments or rights to any Employee;

(k)           (i) except as required by applicable Law, the International Financial Reporting Standards issued by the International Accounting Standards Board (“IFRS”) or regulatory guidelines, make any material change in its accounting methods, principles or practices, (ii) make or change any material Tax election, settle or compromise any material Tax liability, amend any material Tax return, change any material method of Tax accounting, enter into any material closing agreement with respect to any Tax or surrender any right to claim a material Tax refund, or (iii) replace or change its current independent auditors;

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(l)           enter into (i) any new line of business that is material to such Party and its Subsidiaries, taken as a whole, or (ii) any agreement or arrangements that would be required to be disclosed by such Party pursuant to Item 404 of Regulation S-K promulgated under the U.S. Securities Act of 1933, as amended (including the rules and regulations promulgated thereunder);

(m)          adopt a plan of complete or partial liquidation or resolutions providing for or authorizing such a liquidation or a dissolution or any restructuring, recapitalization or reorganization;

(n)           enter into, amend or otherwise become bound by any Contract if (i) such Contract would, after the Effective Time, restrict or limit the ability of LAN, TAM or any of their respective Subsidiaries to engage in any business or line of business in any manner, with any other Person or in any geographic area; (ii) such Contract would reasonably be expected to prevent or materially impede, interfere with, hinder or delay the commencement of the Exchange Offer or the consummation the Exchange Offer, the Mergers or the other transactions contemplated by this Agreement or to adversely affect in a material respect the expected benefits (taken as a whole) of the Exchange Offer and the Mergers; or (iii) the consummation of the Exchange Offer, the Mergers or any of the other transactions contemplated hereby would conflict with, or result in any violation or breach of, or default (with or without notice, lapse of time or both) under, or result in any termination or modification of or acceleration under, or any change in any right, obligation or benefit under, or result in any Lien on any property or assets of such Party or any of its Subsidiaries under, any provisions of such Contract;

(o)           take or fail to take any action for the purpose of preventing or delaying, or that would reasonably be expected to prevent or delay, the satisfaction of any of the conditions to the commencement of the Exchange Offer or the consummation of the Exchange Offer, the Mergers or the other transactions contemplated by this Agreement, including any action that would reasonably be expected to prevent or delay the ability of the parties hereto to obtain any required approval, consent or other authorization of or from any Airline Regulatory Entities or other Governmental Entity;

(p)           cancel, terminate or amend any binding financing commitment to fund the acquisition by such Party or any of its Subsidiaries of the aircraft covered under any TAM Aircraft Contract or LAN Aircraft Contract (as applicable) unless, in the case of any cancellation or termination of such financing commitment, (i) it is replaced by another financing with substantially equivalent (or more favorable) terms and in an amount not less than the amount of such commitment or (ii) in return therefor, such Party and/or its Subsidiaries receives equivalent value from the manufacturer of the applicable aircraft;

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(q)           enter into (i) any aircraft purchase agreement, engine purchase agreement or engine maintenance agreement that involves or is reasonably expected to involve aggregate payments by or to such Party or any of its Subsidiaries in excess of $25 million in any twelve-month period or (ii) any amendment to an existing aircraft purchase agreement, engine purchase agreement or engine maintenance agreement that is material to such agreement;

(r)           enter into, amend or otherwise become bound by, cancel or terminate any (i) alliance or brand alliance agreement, (ii) code sharing agreement, (iii) frequent flyer participation agreement, (iv) capacity purchase or similar agreement, (v) cooperation, joint venture, profit or revenue sharing agreement, (vi) special prorate agreement or (vii) interlining agreement with any Person; or

(s)           authorize any of, or commit, resolve, propose or agree to take any of, the foregoing actions.

Notwithstanding the foregoing limitations, the parties intend that each Party and its Subsidiaries shall at all times prior to the Effective Time conduct their business in compliance with all applicable Antitrust Laws, and the limitations set forth in this Section 3.01 are not intended to, and shall not be interpreted as, contravening any applicable Antitrust Laws.

SECTION 3.02.       No Solicitation.  (a)  Each of the parties to this Agreement agrees that it will not, and it will cause each of its Subsidiaries, each of its and their directors, officers, employees, Affiliates, financial advisors, attorneys, accountants or other advisors, agents and representatives and each of the individuals who ultimately beneficially own it (collectively as to each party, its “Representatives”) not to, directly or indirectly, (i) solicit, initiate or encourage any inquiries or the making or consummation of any proposal or offer that constitutes, or is reasonably likely to lead to, an Alternative Proposal with respect to its Relevant Parent Entity, (ii) engage in, continue or otherwise participate in any discussions or negotiations regarding, or provide to any Person any non-public information or data in connection with, or otherwise cooperate in any way with, any such Alternative Proposal, (iii) waive, terminate, modify or fail to enforce any provision of any “standstill” or similar obligation of any Person, (iv) enter into any binding or non-binding Contract with respect to any such Alternative Proposal or (v) otherwise knowingly facilitate any effort or attempt to make any such Alternative Proposal.  Each party shall notify its Representatives of the restrictions imposed by the preceding sentence and instruct them to comply with those restrictions, and any failure by any of them to so comply will be a breach of this Agreement by such party.  Each party shall, and shall cause its Representatives to, immediately cease and cause to be terminated all existing activities, discussions or negotiations with any Person conducted prior to the date of this Agreement with respect to any Alternative Proposal relating to its Relevant Parent Entity and request the prompt return or destruction of all confidential information previously furnished in connection therewith.

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The term “Alternative Proposal” means, with respect to each Relevant Parent Entity, any of the following actions or any proposal or offer (including any proposal or offer to or from any Representative of any party) by any Person or group (as defined in Rule 13d-3 or 13d-5 promulgated under the U.S. Exchange Act) relating to, or that could reasonably be expected to lead to, any of the following: (i) any direct or indirect acquisition, purchase, lease, license or outsourcing, in one transaction or a series of related transactions, of any assets (including Equity Securities of any Subsidiary of such Relevant Parent Entity), rights, properties, services or businesses of such Relevant Parent Entity or any of its Subsidiaries collectively representing more than 25% of the fair market value of the Relevant Parent Entity’s total assets or collectively generating or contributing 25% or more of the Relevant Parent Entity’s total consolidated revenues or operating income during the last fiscal year, (ii) any tender offer or exchange offer that, if consummated, would result in any Person or group beneficially owning any Equity Securities of such Relevant Parent Entity, or (iii) any merger, consolidation, business combination, recapitalization, issuance or amendment of securities, liquidation, dissolution, joint venture, share exchange or similar transaction involving such Relevant Parent Entity or any of its Subsidiaries.

The term “Relevant Parent Entity” means (i) with respect to TAM, the TAM Direct Controlling Shareholder and the Amaro Family, TAM, and (ii) with respect to LAN and the LAN Controlling Shareholders, LAN.

(b)           In addition to the foregoing obligations, each party agrees that it shall (i) as promptly as practicable (and in any event within 24 hours after receipt) advise the other parties orally and in writing of the receipt of any Alternative Proposal relating to its Relevant Parent Entity, the material terms and conditions of such Alternative Proposal (including any changes thereto) and the identity of the Person making such Alternative Proposal, (ii) keep the other parties fully informed in all material respects of the status and details (including any changes to the terms) of such Alternative Proposal and (iii) provide to the other parties as soon as practicable after receipt or delivery thereof copies of all correspondence and other written material sent or provided to it, such Relevant Parent Entity or any of their Representatives from any Person that describes any of the terms or conditions of such Alternative Proposal.

(c)           Nothing contained in this Section 3.02 shall prohibit any Relevant Parent Entity from complying with its disclosure obligations under any applicable Law.

SECTION 3.03.       Public Announcements.  Each party shall consult with the other parties before issuing, and give each other party the opportunity to review and comment upon, any press release or other public statements with respect to the transactions contemplated by this Agreement, including the Exchange Offer and Mergers, and shall not issue any such press release or make any such public statement prior to such consultation, except as such party may reasonably conclude is required by applicable Law, court process or by obligations pursuant to any listing agreement with, or rules of, any national securities exchange or national securities quotation system on which such party’s securities are listed or quoted.  The parties agree that the initial press release to be issued with respect to the execution and delivery of this Agreement shall be in the form heretofore agreed to by the parties.

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SECTION 3.04.       Stockholder Actions.  Each Relevant Parent Entity shall give the other the opportunity to participate in the defense or settlement of any stockholder Action against such Relevant Parent Entity and/or its directors or officers relating to the transactions contemplated by this Agreement, and no such settlement shall be agreed to without the other Relevant Parent Entity’s prior written consent.

ARTICLE IV

TERMINATION, AMENDMENT AND WAIVER

SECTION 4.01.       Termination.  This Agreement shall terminate and the Mergers shall be abandoned automatically if and when (i) the Exchange Offer expires in accordance with its terms or is revoked with the permission of the CVM, in each case without the purchase of any shares of TAM Stock or (ii) the product of 0.9 and the high end of the range of economic value of LAN per share of LAN Common Stock as determined by the Appraiser at any time is less than the low end of the range of economic value of TAM per share of TAM Stock as determined by the Appraiser at such time (an “Appraisal Event”).  In addition, this Agreement may be terminated and the Exchange Offer and the Mergers may be abandoned at any time prior to the commencement of the Exchange Offer, whether before or after receipt of any Requisite Shareholder Approvals:

(a)          by mutual written consent of LAN and the Amaro Family;

(b)          by either LAN or the Amaro Family:

(i)           if the ANAC Approval has not been obtained or for any other reason the Exchange Offer shall not have commenced on or before December 30, 2011 (the “Outside Date”); or

(ii)          if the vote of the holders of LAN Common Stock at the LAN Shareholders Meeting to approve the Mergers and the other transactions contemplated hereby shall have been taken and completed and the Requisite LAN Shareholder Approval shall not have been obtained;

provided, however, that the right to terminate this Agreement under this Section 4.01(b) or Section 4.01(e) shall not be available to any party whose breach of a covenant in this Agreement has been a principal cause of the failure of the Exchange Offer to commence by the Outside Date or the failure of the condition giving rise to such termination right, as applicable;

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(c)           by LAN, if (i) the TAM Board fails to make and publicly announce the TAM Board Transaction Recommendation promptly after the date of this Agreement or the TAM Board Exchange Offer Recommendation prior to the first TAM Shareholders Meeting, (ii) the TAM Board or any committee thereof (x) withholds, withdraws or modifies or qualifies in any manner adverse to LAN either of the TAM Board Recommendations, (y) approves, adopts, or recommends any Alternative Proposal, or (z) makes, causes to be made or resolves to make or cause to be made any public statement proposing or announcing an intention to take any of the foregoing actions (collectively, a “TAM Recommendation Change”) or (iii) the TAM Board shall have failed to publicly reaffirm the TAM Board Recommendations as promptly as practicable (but in any event within two business days) after receipt of a written request by LAN to provide such reaffirmation, and in either such case all of the directors designated for election to the TAM Board by the TAM Direct Controlling Shareholder and/or the Amaro Family did not vote against the TAM Recommendation Change or in favor of reaffirming the TAM Board Recommendations;

(d)           by the Amaro Family, if (i) the LAN Board fails to make the LAN Board Transaction Recommendation promptly after the date of this Agreement or the LAN Board Merger Recommendation on or prior to the LAN Shareholder Meeting, (ii) the LAN Board or any committee thereof (x) withholds, withdraws or modifies or qualifies in any manner adverse to TAM either of the LAN Board Recommendations, (y) approves, adopts, or recommends any Alternative Proposal, or (z) makes, causes to be made or resolves to make or cause to be made any public statement proposing or announcing an intention to take any of the foregoing actions (collectively, a “LAN Recommendation Change”) or (iii) the LAN Board shall have failed to publicly reaffirm the LAN Board Recommendations as promptly as practicable (but in any event within two business days) after receipt of a written request by TAM to provide such reaffirmation, and in either such case all of the directors designated for election to the LAN Board by the LAN Controlling Shareholders did not vote against the LAN Recommendation Change or in favor of reaffirming the LAN Board Recommendations; or

(e)           by either LAN or the Amaro Family if TAM has called five TAM Shareholders Meetings pursuant to Section 1.09(b) and a quorum has not been present at any such meeting or if a quorum was present and the vote of the holders of the Free Float Shares at the TAM Shareholders Meeting to select an Appraiser shall have been taken and completed but the Requisite TAM Shareholder Approval shall not have been obtained.

SECTION 4.02.       Effect of Termination.  (a)  In the event of termination of this Agreement by either LAN or the Amaro Family as provided in Section 4.01, this Agreement shall forthwith become void and have no effect, without any liability or obligation on the part of LAN, TAM or any other party hereto under this Agreement, other than Section 4.01, this Section 4.02, Section 4.04 and Article V, which provisions shall survive such termination.  Notwithstanding the foregoing or any termination or anything to the contrary in this Agreement, no party to this Agreement shall be relieved or released from liability for damages of any kind (whether or not communicated or contemplated at the time of execution of this Agreement), including consequential damages and including as damages any value lost by shareholders of LAN or TAM, as the case may be, based on the consideration that would otherwise have been paid and the benefits that would otherwise have accrued to such shareholders, which arise out of or result from any deliberate breach of any covenant of this Agreement.  No party claiming that any such breach has occurred will have any duty or otherwise be obligated to mitigate any such damages.  For purposes of this Section 4.02, a “deliberate” breach of any covenant of a party shall be deemed to have occurred only if such party or its Representatives took the action or failed to take the action that constituted a breach with actual knowledge that the action so taken or omitted to be taken constituted a breach of such covenant.

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(b)           In the event that this Agreement is terminated by LAN pursuant to Section 4.01(c), then TAM shall pay LAN a fee equal to $200 million (the “TAM Termination Fee”) by wire transfer of same-day funds no later than the second business day following the date of such termination and shall reimburse LAN for all documented out-of-pocket expenses incurred by it or any of its Subsidiaries in connection with this Agreement and the transactions contemplated hereby up to a maximum amount of $25 million (collectively, the “LAN Reimbursable Expenses”) by wire transfer of same-day funds no later than the second business day after TAM receives the documentation therefor.

(c)           In the event that this Agreement is terminated by the Amaro Family pursuant to Section 4.01(d), then LAN shall pay TAM a fee equal to $200 million (the “LAN Termination Fee”) by wire transfer of same-day funds no later than the second business day following the date of such termination and shall reimburse TAM for all documented out-of-pocket expenses incurred by it or any of its Subsidiaries in connection with this Agreement and the transactions contemplated hereby up to a maximum amount of$25 million (collectively, the “TAM Reimbursable Expenses”) by wire transfer of same-day funds no later than the second business day after LAN receives the documentation therefor.

(d)           In the event that any Person shall have made an Alternative Proposal with respect to TAM or LAN (any Alternative Proposal with respect to TAM or LAN, a “Competing Proposal”) to any party hereto or any Representative of any party hereto, a Competing Proposal by any Person shall have become publicly known or any Person shall have publicly announced an intention (whether or not conditional) to make a Competing Proposal and thereafter:

(i)           (A) this Agreement is terminated by either LAN or the Amaro Family pursuant to Section 4.01(b)(ii) or Section 4.01(e) or automatically terminates pursuant to the first sentence of Section 4.01 solely because either of the Minimum Conditions (as defined in the terms of the Exchange Offer) is not satisfied or because an Appraisal Event occurs and (B) at any time prior to the date that is 12 months after the date of any such termination, TAM or any of its Subsidiaries consummates any transaction with such Person or any of its Affiliates that constitutes a Competing Proposal, enters into any binding or non-binding Contract with such Person or any of its Affiliates providing for a transaction that constitutes a Competing Proposal or the TAM Board approves or recommends to its shareholders or does not oppose any Competing Proposal made by such Person or any of its Affiliates (in each case regardless of whether such Competing Proposal was made or announced or became publicly known before or after termination of this Agreement), then TAM shall pay to LAN, by wire transfer of same-day funds, the TAM Termination Fee on the date of the first to occur of the event(s) referred to above in clause (B) of this Section 4.02(d)(i) and shall reimburse LAN for all of the LAN Reimbursable Expenses by wire transfer of same-day funds no later than the second business day after TAM receives the documentation therefor.

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(ii)           (A) this Agreement is terminated by either LAN or the Amaro Family pursuant to Section 4.01(b)(ii) or Section 4.01(e) or automatically terminates pursuant to the first sentence of Section 4.01 solely because either of the Minimum Conditions (as defined in the terms of the Exchange Offer) is not satisfied or because an Appraisal Event occurs and (B) at any time prior to the date that is 12 months after the date of any such termination, LAN or any of its Subsidiaries consummates any transaction with such Person or any of its Affiliates that constitutes a Competing Proposal, enters into any binding or non-binding Contract with such Person or any of its Affiliates providing for a transaction that constitutes a Competing Proposal or the LAN Board approves or recommends to its shareholders or does not oppose any Competing Proposal made by such Person or any of its Affiliates (in each case regardless of whether such Competing Proposal was made, announced or became publicly known before or after termination of this Agreement), then LAN shall pay to TAM, by wire transfer of same-day funds, the LAN Termination Fee on the date of the first to occur of the event(s) referred to above in clause (B) of this Section 4.02(d)(ii) and shall reimburse TAM for all of the TAM Reimbursable Expenses by wire transfer of same-day funds no later than the second business day after LAN receives the documentation therefor.

(e)           TAM and LAN acknowledge and agree that the agreements contained in Section 4.02(b), Section 4.02(c) and Section 4.02(d) are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, neither party would enter into this Agreement; accordingly if any party fails promptly to pay the amount due pursuant to any such Section and, in order to obtain such payment, the other party commences a suit that results in a judgment against such party for all or a portion of the TAM Termination Fee or the LAN Termination Fee, as applicable, such party shall pay to the other party its costs and expenses (including reasonable attorneys’ fees and expenses) in connection with such suit, together with interest on the amount of the TAM Termination Fee or the LAN Termination Fee, as applicable, accruing from the date such payment was required to be made pursuant to Section 4.02 until the date of payment at the six-month LIBOR rate in effect on the date such payment wasrequired to be made plus 3%.  The right to receive the fees and expenses payable pursuant to Section 4.02(b), Section 4.02(c) and Section 4.02(d) shall be in addition to, and not in lieu of, any other remedies a party may have at law or in equity with respect to breaches of this Agreement by the other party.

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SECTION 4.03.       Amendment.  This Agreement may be amended by the parties hereto at any time prior to the commencement of the Exchange Offer but only by an instrument in writing signed by all of the parties hereto.

SECTION 4.04.       Extension; Waiver.  At any time prior to the Effective Time, the parties may (but shall not be under any obligation to) (a) extend the time for the performance of any of the obligations or other acts of the other parties or (b) waive compliance with any of the agreements of the other parties or any of the conditions for its benefit contained herein, in each case to the extent permitted by applicable Law.  Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed by such party.  The failure of any party to this Agreement to assert any of its rights under this Agreement or applicable Law shall not constitute a waiver of such rights and, except as otherwise expressly provided in this Agreement, no single or partial exercise by any party to this Agreement of any of its rights under this Agreement shall preclude any other or further exercise of such rights or any other rights under this Agreement or applicable Law.

ARTICLE V

GENERAL PROVISIONS

SECTION 5.01.       Nonsurvival.  None of the covenants contained in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time; provided, however, that notwithstanding the foregoing, this Article V and the covenants and agreements of the parties in Article I and Article II to the extent they contemplate performance after the Effective Time shall survive the Effective Time.

SECTION 5.02.       Fees and Expenses.  Except as provided in Section 4.02, all fees and expenses incurred in connection with this Agreement, the Exchange Offer, the Mergers and the other transactions contemplated by this Agreement shall be paid by the party incurring such fees or expenses, whether or not the Exchange Offer is commenced or the Exchange Offer and the Mergers are consummated.

SECTION 5.03.       Notices.  Except for notices that are specifically required by the terms of this Agreement to be delivered orally, all notices, requests, claims, demands, instructions and other communications or documents given hereunder shall be in writing and shall be delivered personally or sent by registered or certified mail (postage prepaid), facsimile or overnight courier to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

If to LAN or the LAN Controlling Shareholders, to:

Claro y Cia.

Apoquindo 3721, piso 13,

Santiago, Chile

Attention:  José María Eyzaguirre B.

Fax:  +562 3673003

jmeyzaguirre@claro.cl

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with copies (which shall not constitute notice) to:

Sullivan & Cromwell LLP

125 Broad Street

New York, NY  10004

United States of America

Attention:  Sergio Galvis and Duncan McCurrach

Fax: +1 212-558-3588

galviss@sullcrom.com

mccurrachd@sullcrom.com

If to TAM to:

TAM S.A.

Av. Jurandir, 856, Lote 4

04072-000

São Paulo – SP

Brasil

Attention: Marco Antonio Bologna

Fax: +55 (11) 5582-9879

marco.bologna@tam.com.br

with a copy (which shall not constitute notice) to:

Turci Advogados

Rua Dr. Renato Paes de Barros, 778

-1◦ andar – cj.12

04530-0001

São Paulo – SP

Brasil

Attention: Flavia Turci

Fax: +55 11 2177 2197

turci@turci.com

Clifford Chance US LLP

31 West 52nd Street

New York, NY 10019

Attention: Sarah Jones and Anand Saha

Fax: +1 212 878 8375

Sarah.Jones@CliffordChance.com

Anand.Saha@CliffordChance.com

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If to the TAM Direct Controlling Shareholder or the Amaro Family to:

Turci Advogados

Rua Dr. Renato Paes de Barros, 778

-1◦ andar – cj.12

04530-0001

São Paulo – SP

Brasil

Attention: Flavia Turci

Fax: +55 11 2177 2197

turci@turci.com

with a copy (which shall not constitute notice) to:

Clifford Chance US LLP

31 West 52nd Street

New York, NY 10019

Attention: Sarah Jones and Anand Saha

Fax: +1 212 878 8375

Sarah.Jones@CliffordChance.com

Anand.Saha@CliffordChance.com

Any notice, request, claim, instruction or other communication or document given as provided above shall be deemed given to the receiving party (i) if delivered personally, upon actual receipt, (ii) if sent by registered or certified mail, three business days after deposit in the mail, (iii) if sent by facsimile, upon confirmation of successful transmission if within one business day after such facsimile has been sent such notice, request, claim, instruction or other communication or document is also given by one of the other methods described above and (iv) if sent by overnight courier, on the next business day after deposit with the overnight courier.

SECTION 5.04.       Definitions.  For the purposes of this Agreement, the following terms shall have the meanings assigned below:

(a)           “Action” means actions, suits, claims, allegations, hearings, proceedings, arbitrations, mediations, audits, inquiries or investigations (whether civil, criminal, administrative or otherwise).

(b)           “Affiliate” shall have the meaning assigned to such term in Rule 12b-2 promulgated under the U.S. Exchange Act.

(c)           “Airline Regulatory Entities” means ANAC, the Dirección General de Aeronáutica Civil, the Junta de Aeronáutica Civil, the U.S. Federal Aviation Administration, the U.S. Department of Transportation, the Federal Communications Commission and the U.S. Department of Homeland Security, including the U.S. Transportation Security Administration.

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(d)           “Antitrust Law” means any statutes, rules, regulations, orders, decrees, administrative and judicial doctrines and other Laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or lessening of competition through mergers, acquisitions, business combinations or similar transactions.

(e)           “beneficial ownership” (and its correlative phrases) shall have the meanings assigned to such phrases in Rule 13d-3 promulgated under the U.S. Exchange Act.

(f)           “Benefit Plans” means all employee benefit plans and all profit-sharing plans, stock purchase, stock option, stock appreciation right, restricted stock, restricted stock unit, severance, employment, change-in-control, fringe benefit, collective bargaining, bonus, incentive, deferred compensation, employee loan and all other employee benefit plans, agreements, programs, policies or other arrangements maintained for the benefit of any current or former employee, independent consultant, officer or director of TAM or LAN, as the case may be, or any of its Subsidiaries by TAM or LAN, as the case may be, or any of its Subsidiaries or by any trade or business, whether or not incorporated, which together with TAM or LAN, as the case may be.

(g)          “business day” means any day that is not a Saturday, Sunday or a day on which banking institutions are required or authorized by law or executive order to be closed in Santiago, Chile, São Paulo, Brazil or New York, New York.

(h)          “By-laws” means the by-laws or comparable organizational documents of a company.

(i)           “Commencement Date” means the date and time at which the Edital relating to the Exchange Offer is published in Brazil in accordance with Brazilian Law, which is the date and time at which the Exchange Offer shall commence.

(j)           “Contract” means any loan, credit agreement, bond, debenture, note, mortgage, indenture, lease, supply agreement, license agreement, development agreement or other contract, agreement, obligation, commitment or instrument.

(k)           “Control”(and its correlative terms) shall have the meanings assigned to such terms in Rule 12b-2 promulgated under the U.S. Exchange Act.

(l)           “Convertible Securities” means, with respect to any Person, any securities, options, warrants or other rights of, or granted by, such Person or any of its Affiliates that are, directly or indirectly, convertible into, or exercisable or exchangeable for, any Equity Securities of such Person or any of its Affiliates.

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(m)          “Equity Securities” means, with respect to any Person, any capital stock of, or other equity interests in such Person.

(n)           “Governmental Entity” means any governmental, quasi-governmental or regulatory authority, body, department, commission, board, bureau, agency, division, court, organized securities exchange or other legislative, executive or judicial governmental entity or instrumentality of any country, nation, republic, federation or similar entity or any state, county, parish or municipality, jurisdiction or other political subdivision thereof.

(o)           “Indebtedness” means, with respect to any Person, without duplication, (i) all obligations of such Person for borrowed money, or with respect to deposits or advances of any kind to such Person, (ii) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (iii) all aircraft operating leases of such Person, (iv) all capitalized lease obligations of such Person, (v) all guarantees and arrangements having the economic effect of a guarantee of such Person of any Indebtedness described in clauses (i) through (iv) above of any other Person, (vi) all obligations or undertakings of such Person to maintain or cause to be maintained the financial position or covenants of others or to purchase the obligations or property of others and (vii) indebtedness in respect of Swap Contracts designed to hedge against interest rates, foreign exchange rates or commodities pricing risks incurred in the ordinary course of business and not for speculative purposes.

(p)           “Intellectual Property” means, collectively, all (i) trademarks, service marks, brand names, certification marks, collective marks, d/b/as, internet domain names, logos, symbols, trade dress, assumed names, fictitious names, trade names and other indicia of origin, all applications and registrations for the foregoing, and all goodwill associated therewith and symbolized thereby, including all renewals of same; (ii) inventions and discoveries, whether patentable or not, and all patents, registrations, invention disclosures and applications therefor, including divisionals, continuations, continuations-in-part and renewal applications, and including renewals, extensions and reissues; (iii) trade secrets and confidential information and know-how, including confidential processes, schematics, business methods, formulae, drawings, prototypes, models, designs, customer lists and supplier lists; (iv) all rights in published and unpublished works of authorship, whether copyrightable or not (including computer software and databases (including source code, object code and all related documentation)), and other compilations of information, copyrights therein and thereto, and registrations and applications therefor, and all renewals, extensions, restorations and reversions thereof; (v) moral rights, rights of publicity and rights of privacy; and (vi) all other intellectual property or proprietary rights.

(q)           “Key Personnel” means any director, officer or other employee of TAM or any Subsidiary of TAM with an annual base compensation in excess of $250,000.

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(r)           “LAN Aircraft Contracts” means all Contracts (other than (x) existing aircraft leases or (y) Contracts that may be terminated or canceled by LAN or any of its Subsidiaries without incurring any penalty or other material liability except for the forfeiture of any previously made prepayment or deposit) pursuant to which LAN or any of its Subsidiaries has a binding obligation to purchase or lease aircraft.

(s)          “LAN Financial Reporting Documents” means all reports, schedules, forms, statements, certifications and other documents (including exhibits and other information incorporated therein) with or to, as applicable, the Superintendencia de Valores y Seguros or the U.S. Securities and Exchange Commission (the “SEC”) that were required to be so filed or furnished by LAN since December 31, 2006 and any documents so filed or furnished during such period by LAN on a voluntary basis.

(t)           “LAN Material Adverse Effect” means any change, effect, occurrence or circumstance which, individually or in the aggregate, (i) has had or would reasonably be expected to have a material adverse effect on the business, financial condition, results of operations, assets or liabilities of LAN and its Subsidiaries, taken as a whole, other than (x) any such change, effect, occurrence or circumstance to the extent resulting from (A) any changes after the date of this Agreement in general economic or financial market conditions, (B) any changes after the date of this Agreement generally affecting the industries in which LAN and its Subsidiaries operate, (C) changes after the date of this Agreement in IFRS or the interpretation thereof, (D) geopolitical conditions, the outbreak of a pandemic or other widespread health crisis, the outbreak or escalation of hostilities, any acts of war, sabotage or terrorism, or any escalation or worsening of any such acts of war, sabotage or terrorism threatened or underway as of the date of this Agreement or (E) any hurricane, tornado, flood, earthquake, volcanic eruption or natural disaster; provided, however, that the foregoing clauses (A), (B), (D) and (E) shall not apply to the extent that any such change, effect, occurrence or circumstance disproportionately impacts LAN and its Subsidiaries compared to other participants in the industries in which LAN and its Subsidiaries participate, or (y) any failure, in and of itself, of LAN to meet any internal or analyst projections, forecasts or estimates of revenue or earnings or any decrease in the market price or trading volume of the shares of LAN Common Stock (it being understood, however, that the exception in this clause (y) shall not apply to the underlying causes of any such failure or decrease or prevent any of such underlying causes from being taken into account in determining whether a LAN Material Adverse Effect has occurred); or (ii) impairs or would reasonably be expected to impair in any material respect the ability of LAN to consummate the transactions contemplated by this Agreement or to perform its obligations hereunder on a timely basis.

(u)            “LAN Material Contract” means any Contract described on Schedule 5.04(u).

(v)           “LAN Stock Options” means all of the outstanding options to purchase LAN Common Stock (whether vested or unvested, exercisable or unexercisable) issued under the stock option plans listed on Schedule 5.04(v) (“LAN Stock Plans”).

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(w)          “Law” means any statute, common law, ordinance, rule, regulation, agency requirement or Order of, or issued, promulgated or entered into by or with, any Governmental Entity.

(x)           “LIBOR” means (i) the rate of interest per annum determined on the basis of the rate for deposits in U.S. Dollars for a period equal to six months (or the closest period if such period is not available) which appears on the Reuters Page LIBOR01, or its successor page, at approximately 11:00 a.m. (London time) (the “Designated LIBOR Page”) two business days prior to the Quotation Day (rounded to the nearest 1/100th of 1%); or (ii) (if the rate referred to in subparagraph (a) is not available) the arithmetic mean of the rate per annum at which deposits in U.S. Dollars would be quoted by three major banks in New York City selected by BTG Pactual, the calculation agent (the “Calculation Agent” ), to first class banks in the London interbank market (rounded to the nearest 1/100th of 1%) at approximately 11:00 a.m. (London time) two (2) business days prior to the Quotation Day for a period equal to six months (or the closest period if such period is not available); provided that if less than two of these banks provide a quotation as mentioned above, then the Calculation Agent will compute LIBOR based on the last available LIBOR rate published on the Designated LIBOR Page, as determined by the Calculation Agent in its sole discretion.

(y)           “Licenses” means all approvals, authorizations, registrations, certifications, filings, franchises, licenses, consents, variances, concessions, exemptions, orders, notices, permits, operating certificates, Slots and air service designations of, with or granted by all Governmental Entities and third parties, including all licenses, certificates and permits from all Governmental Entities to act as an air carrier, as applicable.

(z)           “Lien” means all pledges, liens, charges, encumbrances or security interests of any kind or nature whatsoever.

(aa)         “Order” means any order, decision, writ, injunction, decree, judgment, legal or arbitration award, stipulation, license, permit or agreement issued, promulgated or entered into by or with (or settlement or consent agreement subject to) any Governmental Entity.

(bb)         “Person” means any natural person, firm, corporation, partnership, company, limited liability company, joint venture, association, trust, unincorporated organization, Governmental Entity or other entity.

(cc)          “Quotation Day” means, in relation to any period for which an interest rate is to be determined pursuant to this Agreement, two business days before the first day of that period, unless market practice differs in the London interbank market, in which case the Quotation Day for that currency and interest rate will be determined by the Calculation Agent in accordance with market practice in the London interbank market.

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(dd)          “Slots” means all takeoff and landing slots, operating authorizations from any Governmental Entity and other similar designated takeoff and landing rights.

(ee)          “Subsidiary” means, with respect to any Person, any other Person (whether or not incorporated) as to which such Person and/or any one or more of its other Subsidiaries, directly or indirectly, (i) own a majority of the general partner interests in such other Person, (ii) own a majority of the outstanding securities of, or other equity interests in, such other Person which by their terms has ordinary voting power to elect the members of the board of directors (or comparable governing body) of such other Person, or (iii) otherwise have the right to elect or appoint a majority of such members.

(ff)            “Swap Contract” means (a) any and all interest rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

(gg)          “TAM Aircraft Contracts” means all Contracts (other than (x) existing aircraft leases or (y) Contracts that may be terminated or canceled by TAM or any of its Subsidiaries without incurring any penalty or other material liability except for the forfeiture of any previously made prepayment or deposit) pursuant to which TAM or any of its Subsidiaries has a binding obligation to purchase or lease aircraft.

(hh)          “TAM Financial Reporting Documents” means all reports, schedules, forms, statements, certifications and other documents (including exhibits and other information incorporated therein) with or to, as applicable, the Comissão de Valores Mobiliários (the “CVM”) or the SEC that were required to be so filed or furnished by TAM since December 31, 2006 and any documents so filed or furnished during such period by TAM on a voluntary basis.

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(ii)           “TAM Material Contract” means any Contract described on Schedule 5.04(ii).

(jj)           “TAM Stock Options” means all of the outstanding options to purchase shares of capital stock of TAM (whether vested or unvested, exercisable or unexercisable) issued under the stock option plans listed on Schedule 5.04(jj) (“TAM Stock Plans”).

(kk)         “Tax” means any and all taxes, charges, fees, levies or other assessments, including income, gross receipts, excise, real or personal property, sales, withholding, social security, occupation, use, service, service use, value added, license, net worth, payroll, franchise, transfer and recording taxes, fees and charges, imposed by any taxing authority (whether domestic or foreign including any state, local or foreign government or any subdivision or taxing agency thereof), whether computed on a separate, consolidated, unitary, combined or any other basis; and such term shall include any interest, penalties or additional amounts attributable to, or imposed upon, or with respect to, any such taxes, charges, fees, levies or other assessments.

(ll)           “U.S. Exchange Act” shall mean the U.S. Securities Exchange Act of 1934.

SECTION 5.05.       Interpretation.  When a reference is made in this Agreement to an Article, a Section, Exhibit or Schedule, such reference shall be to an Article of, a Section of, or an Exhibit or Schedule to this Agreement unless otherwise indicated.  The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”  The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  References to “this Agreement” shall include Schedule 3.01 and the Exhibits and Schedules to this Agreement, all of which are incorporated herein and made a part of this Agreement.  All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.  The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term.  Any Contract, instrument or Law defined or referred to herein or in any Contract or instrument that is referred to herein means such Contract, instrument or Law as from time to time amended, modified or supplemented, including (in the case of Contracts or instruments) by waiver or consent and (in the case of Laws) by succession of comparable successor Laws and references to all attachments thereto and instruments incorporated therein.  References to a Person are also to its permitted successors and assigns.  Except as otherwise expressly provided herein, references to “parties” in this Agreement refers to the parties to this Agreement.  Except as otherwise expressly provided herein, all remedies provided herein shall be in addition to any other remedies they may otherwise have under applicable Law.  Any reference in this Agreement to a “day” or a number of “days” (without the explicit qualification of “business”) shall be interpreted as a reference to a calendar day or number of calendar days.  This Agreement is the product of negotiation by the parties having the assistance of counsel and other advisers, and the parties and their counsel and other advisers have participated jointly in negotiating and drafting this Agreement.  If an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

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SECTION 5.06.       Consents and Approvals.  For any matter under this Agreement requiring the consent or approval of any party to be valid and binding on the parties hereto, such consent or approval must be in writing and signed by such party.

SECTION 5.07.       Counterparts.  This Agreement may be executed in one or more counterparts (including by facsimile), each of which shall be considered an original instrument and all of which shall together constitute the same agreement.  This Agreement shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties.

SECTION 5.08.       No Third-Party Beneficiaries.  Except as otherwise expressly stated herein, the parties hereby agree that the agreements and covenants set forth herein are solely for the benefit of the other parties in accordance with, and subject to the terms of, this Agreement and that this Agreement is not intended to, and does not, confer upon any Person other than the parties any rights or remedies hereunder, including the right to rely upon the representations and warranties set forth herein. The parties hereto hereby agree that their respective covenants set forth herein are solely for the benefit of the other parties hereto in accordance with, and subject to the terms of, this Agreement and that this Agreement is not intended to, and does not, confer upon any Person other than the parties hereto any rights or remedies hereunder.

SECTION 5.09.       Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF; PROVIDED, HOWEVER, THAT NOTWITHSTANDING THE FOREGOING THE AUTHORIZATION AND EXECUTION OF THIS AGREEMENT BY EACH PARTY SHALL BE GOVERNED BY THE LAWS OF ITS JURISDICTION OF INCORPORATION.

SECTION 5.10.       Assignment.  Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, in whole or in part, by operation of Law or otherwise by any of the parties hereto without the prior written consent of the other parties, and any purported assignment without such consent shall be null and void.  Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors, heirs and permitted assigns.

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SECTION 5.11.       Specific Enforcement; Consent to Jurisdiction.  The parties agree that irreparable damage would occur and that the parties would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, this being in addition to any other remedy to which they are entitled at law or in equity, without the necessity of proving the inadequacy of monetary damages or of posting bond or other undertaking, as a remedy and to obtain injunctive relief against any breach or threatened breach hereof.  In the event that any action is brought in equity to enforce the provisions of this Agreement, no party hereto shall allege, and each party hereto waives the defense or counterclaim that there is an adequate remedy at Law.  Each of the parties hereto hereby irrevocably consents and submits itself to the personal jurisdiction of the courts of the State of New York and the federal courts of the United States of America located in the Borough of Manhattan, The City of New York (collectively, the “Agreed Courts”) solely in respect of the interpretation and enforcement of the provisions of this Agreement, and the documents referred to herein and the transactions contemplated by this Agreement (collectively, the “Agreed Issues”), waives, and agrees not to assert, as a defense in any action, suit or proceeding in an Agreed Court with respect to the Agreed Issues that such party is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in such Agreed Court or that the venue thereof may not be appropriate or that this Agreement or any such document may not be enforced in or by such Agreed Court, and the parties hereto irrevocably agree that all claims with respect to any action, suit or proceeding with respect to the Agreed Issues shall be heard and determined only in an Agreed Court.  The parties hereby consent to and grant to each Agreed Court jurisdiction over the Person of such parties and, to the extent permitted by Law, over the subject matter of any dispute with respect to the Agreed Issues and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 5.03 or in such other manner as may be permitted by Law shall be valid and sufficient service thereof.

SECTION 5.12.       Waiver of Jury Trial.  EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.  EACH PARTY HERETO (I) CERTIFIES THAT IT HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER AND MADE IT VOLUNTARILY AND THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY ACTION, SUIT OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 5.12.

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SECTION 5.13.       Obligations of LAN and of TAM.  Whenever this Agreement requires a Subsidiary of LAN to take any action, such requirement shall be deemed to include an undertaking on the part of LAN to cause such Subsidiary to take such action.  Whenever this Agreement requires the Amaro Family or any Subsidiary of TAM, the TAM Direct Controlling Shareholder or TEP Chile to take any action, such requirement shall be deemed to include an undertaking on the part of each member of the Amaro Family, the TAM Controlling Shareholder and TAM  to cause such action to be taken.

SECTION 5.14.       Language; Portuguese Translation.  A sworn Portuguese translation of this Agreement will be prepared by a tradutor juramentado.  Such translation and no other may be filed with, or furnished to, any applicable Governmental Entity and public registries in Brazil or used in any proceeding in Brazil.  For all purposes, the English language version of this Agreement shall be the only binding agreement between the parties hereto and shall control if there is any conflict between it and the Portuguese translation.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, LAN, LAN Controlling Shareholders, TAM Direct Controlling Shareholder, the Amaro Family and TAM have caused this Agreement to be signed by their respective officers hereunto duly authorized, all as of the date first written above.

LAN AIRLINES S.A.
By:
	Name:
	Title:
TAM S.A.
By:
	Name:
	Title:
COSTA VERDE AERONÁUTICA S.A.
By:
	Name:
	Title:
INVERSIONES MINERAS DEL CANTÁBRICO S.A.
By:
	Name:
	Title:
TAM EMPREENDIMENTOS E PARTICIPAÇÕES S.A.
By:
	Name:
	Title:
NOEMY ALMEIDA OLIVEIRA AMARO

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MARIA CLÁUDIA OLIVEIRA AMARO

MAURÍCIO ROLIM AMARO

JOÃO FRANCISCO AMARO

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Exhibit 1

Ownership Structure Chart Upon Completion of Transaction Steps

1-1

Exhibit 2

TAM Shareholders Agreement

2-1

Exhibit 3

Holdco 1 Shareholders Agreement

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Exhibit 4

LATAM/TEP Shareholders Agreement

 

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Exhibit 5

Control Group Shareholders Agreement

3-1

Schedule 1.12

Conditions to Subscription

(i)           Governmental Consents.  Since the Commencement Date, none of the consents, approvals, authorizations or other actions or non-actions required to be received or obtained from any Governmental Entity in order to commence or consummate the Exchange Offer, the Mergers or the other transactions contemplated by this Agreement or in connection therewith and that were conditions to the commencement of the Exchange Offer shall have been revoked or amended, modified or supplemented subsequent to the Commencement Date in any way that could reasonably be expected to materially impede or interfere with, delay, postpone or materially and adversely affect the consummation of the transactions contemplated by this Agreement.

(ii)          No Injunctions or Restraints.  Since the Commencement Date, no court or other Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Law or Order or taken any other action (whether temporary, preliminary or permanent) that is in effect and (i) makes illegal, restrains, enjoins or otherwise prohibits the commencement of the Exchange Offer or the consummation of the Exchange Offer, the Mergers or the other transactions contemplated by this Agreement and the Implementation Agreement on the terms contemplated hereby and thereby or (ii) limits or impairs the ability of LAN, the TAM Direct Controlling Shareholder, TEP Chile and/or the Amaro Family to jointly (A) own or operate all or any material portion of the assets of TAM and its Subsidiaries or (B) exercise full ownership rights with respect to equity interests in Holdco 1, TAM and its Subsidiaries in a manner consistent with the terms of the LATAM-TEP Shareholders Agreement, the Holdco 1 Shareholders Agreement and the TAM Shareholders Agreement (collectively, “Restraining Orders”).

(iii)         No Litigation.  No Action commenced since the Commencement Date by any Governmental Entity or other Person seeking (i) a Restraining Order or (ii) to limit or impair the ability of LAN and the Amaro Family to jointly (A) own or operate all or any material portion of the assets of TAM and its Subsidiaries or (B) exercise all the rights and receive all the benefits of full ownership of each of Holdco 1, TAM and its Subsidiaries in a manner consistent with the terms of the LATAM-TEP Shareholders Agreement, the Holdco 1 Shareholders Agreement and the TAM Shareholders Agreement other than any such Action by any Person other than a Governmental Entity that could not reasonably be expected to succeed on its merits, shall remain pending.

(iv)         Business Continuity.  None of the following actions, events or circumstances shall have occurred after the Commencement Date (or prior thereto if no executive officer of TAM had actual knowledge of any such action, event or circumstance as of the Commencement Date) that, individually or in the aggregate, have had an adverse effect on the businesses, revenues, operations or financial condition of LAN and its Subsidiaries in any material respect:

3-1

(A)          Any change in, or termination of, any Licenses that are currently held by LAN or any of its Subsidiaries and used to conduct air domestic or international cargo or passenger transport services or any such Governmental Entity or other Person shall have threatened or taken any action seeking any such change or termination;

(B)           Any loss of 10% or more of the total takeoff and landing scheduled operations of LAN and its Subsidiaries to operate at any of the following airports:  Arturo Merino Benitez International Airport of Santiago de Chile and the Jorge Chavez International Airport of Lima, Perú;

(C)           Any loss of 15% or more of the permits or air traffic rights held by LAN and its Subsidiaries to operate to the United States of America;

(D)           Any termination or expiration of any aeronautical insurance policy that currently covers LAN or any of its Subsidiaries unless such policy is reinstated or replaced by a substantially equivalent policy within 24 hours of such termination or expiration;

(E)           Any initiation of any inquiry or investigation of LAN or any of its Subsidiaries by any Airline Regulatory Entity relating to safety issues that could be expected to result in the total or partial revocation of any License currently held by LAN or any of its Subsidiaries or to be detrimental to the public image of LAN;

(F)           Any event that occurs at Arturo Merino Benitez International Airport of Santiago de Chile or the Jorge Chavez International Airport of  Lima, Perú and that (1) prevents LAN and its Subsidiaries from operating at least 50% of their normally scheduled flights from such airport during the period from the date on which such event occurs to the expiration of the Exchange Offer or (2) if such period is less than 30 days, could be expected to prevent such percentage of such flights during the 30-day period commencing on the date on which such event occurs;

(G)          Any inability of Chile or Perú to adequately and safely control its airspace through its air traffic control system that (1) prevents LAN and its Subsidiaries from being able to conduct their normal operations during the period through the expiration of the Exchange Offer or (2) if such period is less than 30 days, could be expected to prevent such normal operations for a period of at least 30 days;

(H)         Any aircraft accident that involves any loss of life or the total loss of any aircraft;

(I)          Any issuance of any Law or Order:

(1)             fixing or otherwise regulating international passenger airline fares affecting 15% or more of the revenues of the international operations of LAN and its Subsidiaries;

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(2)             challenging, restricting, limiting or impairing the ability of Holdco 2 to make or consummate the Exchange Offer; LAN to consummate the Mergers; Holdco 2, LAN or Holdco 1 to own, hold or exercise the rights inherent in TAM Stock; or LAN and the TAM Direct Controlling Shareholder, TEP Chile and/or the Amaro Family to jointly own or operate all or any material portion of the assets of TAM and its Subsidiaries or exercise all the rights and receive all the benefits of full ownership of each of Holdco 1, TAM and its Subsidiaries in a manner consistent with the terms of the LATAM-TEP Shareholders Agreement, the Holdco 1 Shareholders Agreement and the TAM Shareholders Agreement;

(3)             providing for any expropriation or confiscation of any assets of LAN or any of its Subsidiaries or limiting the ability of LAN or any of its Subsidiaries to freely dispose of any of their assets;

(4)             suspending, restricting or limiting the ability to engage in currency exchange transactions in Chile or by Chilean corporations or residents or changing the current regulations relating to the transfer of funds into or out of Chile; or

(5)             changing the current regulations applicable to the capital markets in Brazil or Chile or increasing any taxes or tax rates that adversely impacts the shareholders who tender into, or the consummation by Holdco 2 of, the Exchange Offer;

(J)             Any natural disaster or similar event that causes damage to any infrastructure or airspace used by, or any industry affecting, LAN or any of its Subsidiaries or any assets used by LAN or any of its Subsidiaries in the ordinary course of business; or

(K)             Any other event that (1) prevents LAN and its Subsidiaries from operating at least 50% of their regularly scheduled flights during the period from the date on which such event occurs to the expiration of the Exchange Offer or (2) if such period is less than 30 days, could be expected to prevent such percentage of such flights during the 30-day period commencing on the date on which such event occurs.

(v)           No Default Under Relevant Agreements.  Since the Commencement Date, there shall not have occurred any default in the performance or breach, or any event that with notice, lapse of time or both would result in such a default or breach, by LAN or any of its Subsidiaries contained in any Contract to which any of them is a party under which the aggregate consideration provided or received, or to be provided or received, is greater than US$10,000,000 that continues to exist, in each case after giving effect to any waivers granted by any other party to such Contract and regardless of whether or not any event of default, acceleration or other enforcement action shall have been declared or taken by any such other party.

(vi)           No Market Disruptions.  Since the Commencement Date, there shall have been no (i) general suspension of, or limitation on trading in securities on, the SSE, the Bovespa or the NYSE (other than a shortening of trading hours or any coordinated trading halt triggered solely as a result of a specified increase or decrease in a market index), (ii) declaration of a banking moratorium or any suspension of payments in respect of banks in Chile, the European Union or the United States, or (iii) commencement of a war or armed hostilities or airline industry events, which, in the case of clauses (ii) and (iii), could reasonably be expected to have a LAN Material Adverse Effect.

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Schedule 5.04(u)

LAN Material Contracts

Any contract, (i) that is a “material contract” (as defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this Agreement that has not been filed as such in a LAN Financial Reporting Document prior to the date of this Agreement; (ii) that limits or purports to limit in any material respect any type or line of business in which LAN or any of its Subsidiaries (whether before or after the consummation of the Mergers) may engage or any manner or locations in which any of them may so engage in any business; (iii) that is a(n) (A) alliance or other brand alliance agreement, (B) code sharing agreement, (C) frequent flyer participation agreement, (D) capacity purchase or similar agreement, (E) cooperation, joint venture, partnership, profit or revenue sharing agreement, (F) special prorate agreement or (G) interlining agreement with any air carrier (including all material amendments to each of the foregoing agreements), in each case that is material to the business, financial condition, results of operations or prospects of LAN and its Subsidiaries, taken as a whole; (iv) pursuant to which any Indebtedness of LAN or any of its Subsidiaries in excess of $50 million is outstanding or may be incurred that has not been filed in a LAN Financial Reporting Document prior to the date of this Agreement; (v) that involves or could reasonably be expected to involve aggregate payments by or to LAN and/or its Subsidiaries in excess of $30 million in any twelve-month period, except for any Contract that may be canceled without penalty or termination payments by LAN and/or its Subsidiaries upon notice of 60 days or less; (vi) any aircraft purchase agreement, engine purchase agreement or engine maintenance agreement that involves or is reasonably expected to involve aggregate payments by or to LAN or any of its Subsidiaries in excess of $30 million in any twelve-month period; or (vii) pursuant to which it is licensed to use Intellectual Property of a third party that is material to the operation of its business, or licenses to a third party rights in the Intellectual Property it owns.

Schedule 5.04(v)

LAN Stock Options

Schedule 5.04(ii)

TAM Material Contracts

Any contract (i) that is a “material contract” (as defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this Agreement that has not been filed as such in a TAM Financial Reporting Document prior to the date of this Agreement; (ii) that limits or purports to limit in any material respect any type or line of business in which TAM or any of its Subsidiaries (whether before or after the consummation of the Mergers) may engage or any manner or locations in which any of them may so engage in any business; (iii) that is a(n) (A) alliance or other brand alliance agreement, (B) code sharing agreement, (C) frequent flyer participation agreement, (D) capacity purchase or similar agreement, (E) cooperation, joint venture, partnership, profit or revenue sharing agreement, (F) special prorate agreement or (G) interlining agreement with any air carrier (including all material amendments to each of the foregoing agreements), in each case that is material to the business, financial condition, results of operations or prospects of TAM and its Subsidiaries, taken as a whole; (iv) pursuant to which any Indebtedness of TAM or any of its Subsidiaries in excess of $50 million is outstanding or may be incurred that has not been filed in a TAM Financial Reporting Document prior to the date of this Agreement; (v) that involves or could reasonably be expected to involve aggregate payments by or to TAM and/or its Subsidiaries in excess of $30 million in any twelve-month period, except for any contract that may be canceled without penalty or termination payments by TAM and/or its Subsidiaries upon notice of 60 days or less; (vi) any aircraft purchase agreement, engine purchase agreement or engine maintenance agreement that involves or is reasonably expected to involve aggregate payments by or to TAM or any of its Subsidiaries in excess of $30 million in any twelve-month period; or (vii) pursuant to which it is licensed to use Intellectual Property of a third party that is material to the operation of its business, or licenses to a third party rights in the Intellectual Property it owns.

Schedule 5.04(jj)

TAM Stock Options

 

EX-4.10

Exhibit 4.10

EXCHANGE OFFER AGREEMENT

by and among

LAN AIRLINES S.A.,

COSTA VERDE AERONÁUTICA S.A.,

INVERSIONES MINERAS DEL CANTÁBRICO S.A.,

TAM S.A.,

NOEMY ALMEIDA OLIVEIRA AMARO,

MARIA CLÁUDIA OLIVEIRA AMARO,

MAURÍCIO ROLIM AMARO,

JOÃO FRANCISCO AMARO

and

TAM EMPREENDIMENTOS E PARTICIPAÇÕES S.A.

Dated as of January 18, 2011

TABLE OF CONTENTS

		Page
ARTICLE I
THE EXCHANGE OFFER
SECTION 1.01.	ANAC Approval	4
SECTION 1.02.	Pre-Commencement Closing	4
SECTION 1.03.	Commencement	5
SECTION 1.04.	Filings and Actions	5
SECTION 1.05.	Terms and Conditions	8
SECTION 1.06.	Extensions and Amendments	9
SECTION 1.07.	By-laws	9
SECTION 1.08.	Listing and Delisting	9
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TAM
SECTION 2.01.	Organization, Standing and Corporate Power; Subsidiaries	10
SECTION 2.02.	By-laws	11
SECTION 2.03.	Capitalization	11
SECTION 2.04.	Authority	12
SECTION 2.05.	No Conflict; Required Filings and Consents	13
SECTION 2.06.	TAM Financial Reporting Documents; Financial Statements; No Undisclosed Liabilities	14
SECTION 2.07.	Absence of Certain Changes or Events	17
SECTION 2.08.	Litigation	17
SECTION 2.09.	Material Contracts	18
SECTION 2.10.	Licenses; Compliance with Laws	19
SECTION 2.11.	Environmental Matters	21
SECTION 2.12.	Labor and Employment Matters	22
SECTION 2.13.	Aircraft	22
SECTION 2.14.	TAM Slots and Operating Rights	24
SECTION 2.15.	Major TAM Airports	24
SECTION 2.16.	Employee Benefits	25
SECTION 2.17.	Taxes	26
SECTION 2.18.	Intellectual Property	27
SECTION 2.19.	Information Supplied	28
SECTION 2.20.	Voting Requirements	29
SECTION 2.21.	Affiliate Transactions	29
SECTION 2.22.	Brokers and Other Advisors	29
SECTION 2.23.	Fairness Opinion	29

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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LAN
SECTION 3.01.	Organization, Standing and Corporate Power; Subsidiaries	30
SECTION 3.02.	By-laws	31
SECTION 3.03.	Capitalization	31
SECTION 3.04.	Authority	32
SECTION 3.05.	No Conflict; Required Filings and Consents	33
SECTION 3.06.	LAN Financial Reporting Documents; Financial Statements; No Undisclosed Liabilities	34
SECTION 3.07.	Absence of Certain Changes or Events	37
SECTION 3.08.	Litigation	37
SECTION 3.09.	Material Contracts	38
SECTION 3.10.	Licenses; Compliance with Laws	39
SECTION 3.11.	Environmental Matters	40
SECTION 3.12.	Labor and Employment Matters	41
SECTION 3.13.	Aircraft	41
SECTION 3.14.	LAN Slots and Operating Rights	43
SECTION 3.15.	Major LAN Airports	44
SECTION 3.16.	Employee Benefits	44
SECTION 3.17.	Taxes	45
SECTION 3.18.	Intellectual Property	46
SECTION 3.19.	Information Supplied	47
SECTION 3.20.	Voting Requirements	47
SECTION 3.21.	Affiliate Transactions	47
SECTION 3.22.	Brokers and Other Advisors	48
SECTION 3.23.	Fairness Opinion	48
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE CONTROLLING
SHAREHOLDERS
SECTION 4.01.	Organization; Ownership	49
SECTION 4.02.	Authority	49
SECTION 4.03.	No Conflict; Required Filings and Consents	50
SECTION 4.04.	No Successor Liability	50
SECTION 4.05.	Litigation	50
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01.	Access to Information; Confidentiality	51
SECTION 5.02.	Further Action; Efforts	53
SECTION 5.03.	Advice of Changes	56

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SECTION 5.04.	Covenants of the Controlling Shareholders	56
ARTICLE VI
CONDITIONS TO THE COMMENCEMENT OF THE EXCHANGE OFFER
SECTION 6.01.	Mutual Conditions to the Commencement of the Exchange Offer	59
SECTION 6.02.	LAN’s Conditions to the Commencement of the Exchange Offe	61
SECTION 6.03.	Amaro Family’s Conditions to the Commencement of the Exchange Offer	63
SECTION 6.04.	Commencement of the Exchange Offer	64
ARTICLE VII
CONDITIONS TO THE CONSUMMATION OF THE EXCHANGE OFFER
SECTION 7.01.	Conditions to the Consummation of the Exchange Offer	64
SECTION 7.02.	Mutual Conditions to the Consummation of the Exchange Offer	64
SECTION 7.03.	LAN Conditions to the Consummation of the Exchange Offer	65
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01.	Termination	68
SECTION 8.02.	Effect of Termination	70
SECTION 8.03.	Amendment	70
SECTION 8.04.	Extension; Waiver	71
SECTION 8.05.	Indemnification.	71
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01.	Survival	72
SECTION 9.02.	Fees and Expenses	73
SECTION 9.03.	Notices	73
SECTION 9.04.	Definitions	75
SECTION 9.05.	Interpretation	79
SECTION 9.06.	Consents and Approvals	80
SECTION 9.07.	Counterparts	80
SECTION 9.08.	Entire Agreement; No Third-Party Beneficiaries	80
SECTION 9.09.	Governing Law	80
SECTION 9.10.	Assignment	81

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SECTION 9.11.	Specific Enforcement; Consent to Jurisdiction	81
SECTION 9.12.	Waiver of Jury Trial	82
SECTION 9.13.	Severability	82
SECTION 9.14.	Obligations of LAN and of TAM	82
SECTION 9.15.	Language; Portuguese Translation	82

Exhibit 1	–	By-laws of TAM as of the Effective Time
Exhibit 2	–	By-laws of Holdco 1
Exhibit 3	–	By-laws of Sister Holdco
Exhibit 4	–	By-laws of Holdco 2
Exhibit 5	–	Current By-laws of TAM
Exhibit 6	–	Current By-laws of LAN

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INDEX OF DEFINED TERMS

	Page
Actions	17
Adverse Actions	60
Affiliate	75
Agreed Courts	81
Agreed Issues	81
Agreement	1
Airline Affiliate	75
Amaro Family	1
ANAC	1
ANAC Approval	4
Antitrust Law	75
Appraisal Condition	61
beneficial ownership	75
Bovespa	5
Brazilian Aeronautical Code	13
Brazilian Exchange Offer Documents	6
business day	75
Chilean Corporate Law	59
Chilean Law	3
Commencement Date	5
Condition Date	4
Confidential Information	52
Consents	54
Contract	13
Control	75
Control Group Shareholders Agreement	3
Convertible Securities	76
Corrupt Practices Laws	20
CVM	5
CVM I 361	2
CVM I 480	5
Delisting Condition	65
Depositary	5
DGAC	13
DHS	13
Disclosing Party	52
Distribution Date	28
DOT	13
Edital	5, 8
Effective Time	8
Eligible TAM Shares	5
Environmental Laws	21
Equity Securities	76
Exchange Offer	2
Exchange Offer Conditions	8
executive officer	70
FAA	13
FCC	13
Form F-4	6
Free Float Shares	5
Governmental Entity	13
Hazardous Materials	21
Holdco 1	2
Holdco 1 Non-Voting Stock	2
Holdco 1 Shareholders Agreement	3
Holdco 1 Stock	2
Holdco 1 Voting Stock	2
Holdco 2	2
Holdco 2 Stock	5
IASB	15
IATA	21
IFRS	15
Implementation Agreement	1
Indebtedness	76
Indemnified Party	72
Indemnifying Party	72
Intellectual Property	76
IT Assets	77
JAC	13
Key Personnel	76
Knowledge	76
LAN	1
LAN Aircraft	41
LAN Aircraft Contracts	41
LAN Airline Regulatory Entities	33
LAN BDRs	5
LAN Benefit Plans	44
LAN Board	32

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LAN By-laws	31
LAN Capitalization Date	31
LAN Common Stock	2
LAN Condition Notice	57
LAN Contract Flight Agreements	43
LAN Controlling Shareholders	1
LAN Controlling Shareholders Disclosure Schedule	48
LAN Disclosure Schedule	30
LAN Employees	44
LAN Financial Reporting Documents	34
LAN Indemnified Parties	71
LAN Licenses	39
LAN Material Adverse Effect	77
LAN Material Contract	38
LAN Slots	43
LAN Stock Exchanges	33
LAN Stock Options	31
LAN Stock Plans	31
LAN Stock-Based Awards	32
LAN Subsidiary By-laws	31
LATAM/TEP Shareholders Agreement	3
Law	77
Leilão	8
Leilão Date	57
Licenses	19
Liens	10
Losses	71
Major LAN Airport	44
Major TAM Airport	24
Master Agreement	78
Mergers	2
Minimum Condition Notice	57
Minimum Conditions	65
Minimum Tender Condition	65
NYSE	7
Offer to Exchange/Prospectus	28
Order	77
Ordinary TEP Shares	1
Outside Date	69
Parent	51
Person	77
Pre-Commencement Closing	4
Pre-Commencement Closing Date	4
Preferred TEP Shares	1
Ratification of Understanding	4
Receiving Party	52
Regulatory Documents	7
Regulatory Entities	7
Release	21
Relevant Agreements	68
Relevant Parent Entity	56
Representatives	52
Required Listings	9
Requisite LAN Shareholder Approval	32
Restraining Orders	60
Sarbanes-Oxley Act	14
Schedule 14D-9	7
Schedule TO	7
SEC	6
Securities Registry	5
Sister Holdco	2
Slots	24
SSE	5
Subscriptions	57
Subsidiary	78
SVS	5
Swap Contract	78
TAM	1
TAM ADRs	5
TAM Aircraft	22
TAM Aircraft Contracts	22
TAM Airline Regulatory Entities	13
TAM Benefit Plans	25
TAM Board	12
TAM By-laws	11
TAM Capitalization Date	11
TAM Contract Flight Agreements	23
TAM Direct Controlling Shareholder	1
TAM Direct Controlling Shareholder Disclosure Schedule	48
TAM Disclosure Schedule	10
TAM Employees	25
TAM Financial Reporting Documents	14
TAM Licenses	19
TAM Material Adverse Effect	78

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TAM Material Contract	18
TAM Ordinary Stock	1
TAM Preferred Stock	1
TAM Shareholders Agreement	3
TAM Slots	24
TAM Stock	1
TAM Stock Exchanges	13
TAM Stock Plans	11
TAM Stock-Based Awards	11
TAM Subsidiary By-laws	11
Tax	27
Tax Return	27
TEP Chile	1
TEP Chile Subscription	57
TEP Condition Notice	57
TEP Indemnified Parties	71
TEP Restructuring	2
TEP Shares	1
Third Party	71
Transaction Agreements	79
TSA	13
U.S. Exchange Act	6
U.S. Exchange Offer Documents	7
U.S. Offering Documents	6
U.S. Securities Act	6
U.S. Securities Laws	6
U.S. Shareholders	5
Withdrawal Deadline	57

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EXCHANGE OFFER AGREEMENT

EXCHANGE OFFER AGREEMENT, dated as of January 18, 2011 (the “Agreement”), among LAN AIRLINES S.A., a Chilean corporation (“LAN”), COSTA VERDE AERONÁUTICA S.A. and INVERSIONES MINERAS DEL CANTÁBRICO S.A., Chilean corporations that are the controlling shareholders of LAN under the Law of Chile (collectively, the “LANControlling Shareholders”), TAM S.A., a Brazilian corporation (“TAM”), Noemy Almeida Oliveira Amaro, Maria Cláudia Oliveira Amaro, Maurício Rolim Amaro and João Francisco Amaro, all of whom are Brazilian citizens and residents and who, collectively, are the only shareholders of the TAM Direct Controlling Shareholder under the Law of Brazil (all such individuals, collectively, the “Amaro Family”) and TAM EMPREENDIMENTOS E PARTICIPAÇÕES S.A., a Brazilian corporation that is the controlling shareholder of TAM under the Law of Brazil (the “TAM Direct Controlling Shareholder”).

WHEREAS, the board of directors of each of LAN and TAM has approved the combination of the two companies on and subject to the terms and conditions set forth in this Agreement and an implementation agreement being entered into by the parties to this Agreement at the same time as this Agreement (the “Implementation Agreement”);

WHEREAS, if (but only if) the Agência Nacional de Aviação Civil of Brazil (“ANAC”) has approved without any conditions not acceptable to the parties (i) the direct transfer by the TAM Direct Controlling Shareholder to the Amaro Family of all of the shares of ordinary stock, without par value (“TAM Ordinary Stock”), of TAM beneficially owned by the TAM Direct Controlling Shareholder (the “Ordinary TEP Shares”) (which represents 85.3457% of the outstanding shares of TAM Ordinary Stock), (ii) the direct transfer by the TAM Direct Controlling Shareholder to the Amaro Family of all of the shares of non-voting preferred stock, without par value (the “TAM Preferred Stock” and, collectively with the TAM Ordinary Stock, the “TAM Stock”), of TAM beneficially owned by the TAM Direct Controlling Shareholder (the “Preferred TEP Shares” and, collectively with the Ordinary TEP Shares, the “TEP Shares”) (which represents 25.0873% of the outstanding shares of TAM Preferred Stock), (iii) the direct transfer by the Amaro Family to a new Chilean holding company, TEP Chile S.A. (“TEP Chile”), of all of the TEP Shares, (iv) the direct transfers by TEP Chile of the Ordinary TEP Shares to Holdco 1 and the Preferred TEP Shares to Sister Holdco, (v) the direct transfers by the other holders of shares of TAM Ordinary Stock to Holdco 2 pursuant to the Exchange Offer, subsequently to LAN pursuant to the Mergers and finally to Holdco 1 through the contribution by LAN and (vi) the direct transfers by the other holders of shares of TAM Preferred Stock to Holdco 2 pursuant to the Exchange Offer and subsequently to LAN pursuant to the Mergers, which direct transfers will result in the indirect transfers of shares of TAM Linhas Aéreas S.A., Pantanal Linhas Aéreas S.A. and TAM Milor Táxi Aéreo, Representações, Marcas e Patentes S.A., such transfers will be effected as described below;

WHEREAS, after the date of this Agreement and prior to the time at which the TEP Chile Subscription is made and paid pursuant to Section 5.04(b),  the Amaro Family will implement a capital reduction of the TAM Direct Controlling Shareholder, pursuant to which the TAM Direct Controlling Shareholder will transfer all of the TEP Shares to the members of the Amaro Family pro rata in accordance with their relative equity ownership of the TAM Direct Controlling Shareholder (“TEP Restructuring”);

WHEREAS, after the TEP Restructuring and after the TEP Chile Subscription is made pursuant to Section 5.04(b),  the Amaro Family will contribute all of the TEP Shares to TEP Chile and TEP Chile will contribute all of the Ordinary TEP Shares to a new Chilean holding company (“Holdco 1”) in exchange for 100% (other than two shares issued to LAN) of the non-voting stock, no par value (the “Holdco 1 Non-Voting Stock”), of Holdco 1, and (ii) Holdco 1 and its nominee will incorporate a new Chilean company (“Holdco 2”), and the parties agree that the value of the TEP Shares so contributed shall be the net asset value of such TEP Shares as of the date of their contribution;

WHEREAS, after the consummation of the Mergers, the Amaro Family will collectively own 100% of the outstanding shares of TEP Chile, TEP Chile will own at least 80% of the voting stock, no par value (the “Holdco 1 Voting Stock,” and collectively with the Holdco 1 Non-Voting Stock, “Holdco 1 Stock”), of Holdco 1, and LAN will own 100% of the shares of Holdco 1 Non-Voting Stock and no more than 20% of the shares of Holdco 1 Voting Stock;

WHEREAS, Holdco 2 will make a delisting exchange offer (the “Exchange Offer”) pursuant to the terms and conditions of the CVM Instruction 361/2002, as amended from time to time, without taking into consideration the amendments to such instruction brought by CVM Instruction 487/2010 and later amendments (the “CVM I 361”) for all of the outstanding shares of TAM Stock other than the TEP Shares pursuant to the terms and conditions set forth in this Agreement;

WHEREAS, simultaneously with the consummation of the Exchange Offer, Holdco 2 and another newly formed Chilean company (“Sister Holdco”) will merge with and into LAN (collectively, the “Mergers”) pursuant to the Implementation Agreement;

WHEREAS, as a result of the Exchange Offer and the Mergers, LAN will acquire substantially all of the remaining outstanding shares of TAM Stock from the holders who elect to participate in the Exchange Offer and will issue shares of common stock, no par value (the “LAN Common Stock”), of LAN to such holders and to TEP Chile at the same time and at the same exchange ratio;

WHEREAS, after consummation of the foregoing transactions and assuming (only for the purposes of calculating the ownership percentages shown below) that (i) all holders of shares of TAM Stock (other than the TEP Shares) fully participate in the Exchange Offer, (ii) none of the holders of the outstanding shares of LAN Common Stock exercise their appraisal rights (derecho a retiro) under the Law of Chile in respect of the Mergers and (iii) the only shares of LAN Common Stock and TAM Stock that will be outstanding after the consummation of the Mergers are the shares issued in the Mergers and the shares which are subscribed and fully paid for as of the date of the Agreement (which excludes any shares issuable upon future exercises of stock options):

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(a) Holdco 1 will own 100% of the shares of TAM Ordinary Stock;

(b) the Amaro Family collectively will own 100% of the shares of TEP Chile;

(c) TEP Chile will own 80% of the shares of Holdco 1 Voting Stock;

(d) LAN will own 100% of shares of Holdco 1 Non-Voting Stock, 20% of shares of the Holdco 1 Voting Stock and 100% of the shares of TAM Preferred Stock; and

(e) the Amaro Family collectively will own 13.67% of the outstanding shares of LAN Common Stock through TEP Chile and the other TAM shareholders will own 15.65% of the outstanding shares of LAN Common Stock;

WHEREAS, in connection with the foregoing transactions, LAN, TEP Chile, Holdco 1 and TAM will enter into a shareholder agreement (the “TAM Shareholders Agreement”) that will set forth their agreements with respect to the governance of, management and relationships between, TAM and its subsidiaries;

WHEREAS, in connection with the foregoing transactions, LAN, TEP Chile and Holdco 1 will enter into a shareholder agreement, dated the date hereof (the “Holdco 1 Shareholders Agreement”), to set forth their agreement with respect to the governance of Holdco 1;

WHEREAS, in connection with the foregoing transactions, LAN and TEP Chile will enter into a shareholder agreement (the “LATAM/TEP Shareholders Agreement”) that will set forth their agreements with respect to the governance of, and relationships between, LAN, Holdco 1 and their respective Subsidiaries;

WHEREAS, in connection with the foregoing transactions, the LAN Controlling Shareholders, as the continuing controlling shareholders of LAN under the Law of Chile (“Chilean Law”), desire to make certain concessions to TEP Chile and the Amaro Family by entering into a shareholder agreement with TEP Chile (the “Control Group Shareholders Agreement”) that will set forth their agreements with respect to the governance of LAN, the voting, sale and transfer of their shares of LAN Common Stock and TEP Chile’s shares of Holdco 1 Voting Stock and certain other matters; and

WHEREAS, the board of directors of each of LAN, TAM, the LAN Controlling Shareholders and the TAM Direct Controlling Shareholder have approved this Agreement and the Implementation Agreement and the transactions contemplated hereby and thereby upon the terms and subject to the conditions set forth in this Agreement and the Implementation Agreement.

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NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements contained in this Agreement and the Implementation Agreement, and subject to the conditions set forth herein, the parties hereto agree as follows:

ARTICLE I

THE EXCHANGE OFFER

SECTION 1.01.     ANAC Approval.  On October 20, 2010, the parties hereto submitted to ANAC an application for ANAC’s approval of: (i) the direct transfer by TEP Chile of the Ordinary TEP Shares to Holdco 1 and the Preferred TEP Shares to Sister Holdco, (ii) the direct transfers by the other holders of TAM Ordinary Stock to Holdco 2 pursuant to the Exchange Offer, subsequently to LAN pursuant to the Mergers and finally to Holdco 1 through the contribution by LAN and (iii) the direct transfers by the other holders of TAM Preferred Stock to Holdco 2 pursuant to the Exchange Offer and subsequently to LAN pursuant to the Mergers (the “ANAC Approval”), together with a Private Instrument of Ratification of Understanding, dated as of October 12, 2010 and as amended as of December 13, 2010, among the parties (the “Ratification of Understanding”).  Promptly following the date hereof, the parties will amend the Ratification of Understanding to request that ANAC also approve the (i) direct transfers by the TAM Direct Controlling Shareholder of the TEP Shares to the Amaro Family and (ii) the direct transfer by the Amaro Family of the TEP Shares to TEP Chile.  The parties acknowledge and agree that they will take no actions to implement any of the transactions contemplated by this Agreement unless and until the ANAC Approval has been received or ANAC has expressly approved the taking of such actions prior to receipt of the ANAC Approval.

SECTION 1.02.     Pre-Commencement Closing.  Unless otherwise agreed in writing by LAN and the TAM Direct Controlling Shareholder and the Amaro Family, a meeting (the “Pre-Commencement Closing”) shall take place at the offices of Pinheiro Neto Advogados located at Rua Hungria, 1.100 São Paulo, SP, Brasil at 9:00 A.M., São Paulo time, on the first business day (the “Pre-Commencement Closing Date”) following the first day on which all of the conditions set forth in Article VI are satisfied or waived in accordance with this Agreement (other than any such conditions that by their nature are to be satisfied at the Pre-Commencement Closing, but subject to the satisfaction or waiver of those conditions) (the “Condition Date”).

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SECTION 1.03.     Commencement.  As promptly as practicable on the first business day after the Pre-Commencement Closing Date, Holdco 2 will make a delisting tender offer in the form of the Exchange Offer to acquire (i) all of the outstanding shares of TAM Preferred Stock other than the Preferred TEP Shares (including those represented by American Depositary Receipts (“TAM ADRs”) issued pursuant to the Deposit Agreement, dated as of March 9, 2006, among TAM, JPMorgan Chase Bank, N.A., as Depositary (the “Depositary”), and the holders of TAM ADRs from time to time), and (ii) all of the outstanding shares of TAM Ordinary Stock other than the Ordinary TEP Shares (the shares of TAM Stock described in clauses (i) and (ii) are collectively referred to herein as the “Eligible TAM Shares” and the Eligible TAM Shares not beneficially owned by the TAM Direct Controlling Shareholder and/or the Amaro Family, any of their Affiliates, TAM or any of its Subsidiaries are referred to herein as, the “Free Float Shares”), in each case for the same number of shares of ordinary stock, no par value (“Holdco 2 Stock”), of Holdco 2.  The Exchange Offer shall commence when the Edital relating thereto (the “Edital”) is published in Brazil in accordance with Brazilian Law (the date and time at which such publication occurs is referred to herein as the “Commencement Date”).  In connection with the Exchange Offer, TAM shall promptly furnish or cause to be furnished to Holdco 2 and LAN (x) a list of the names and addresses of the record holders and beneficial owners of Free Float Shares located in the United States and the record holders and beneficial owners of TAM ADRs (collectively, the “U.S. Shareholders”), in each case as of the most recent practicable date, as well as mailing labels containing such names and addresses, and (y) security position lists, computer files and any other information identifying such record holders and beneficial owners as of the most recent practicable date which TAM, its transfer agent or the Depositary have in their possession or control or can obtain without unreasonable effort or expense.  TAM will furnish or cause to be furnished to Holdco 2 and LAN such additional information (including updates of the items provided pursuant to the preceding sentence) and such other assistance as Holdco 2 or LAN may reasonably request in communicating the Exchange Offer and the Mergers to the record holders and beneficial owners of the Eligible TAM Shares.

SECTION 1.04.    Filings and Actions.

(a)           Chilean Filings and Actions.  Only to the extent required by the CVM, prior to the Commencement Date, the TAM Direct Controlling Shareholder and the Amaro Family shall cause Holdco 2 to (i) (A) register as an issuer in the Securities Registry (the “Securities Registry”) of the Superintendencia de Valores y Seguros (the “SVS”), (B) register a sufficient number of shares of Holdco 2 Stock as securities subject to oferta pública in the Securities Registry and with the Santiago Stock Exchange (the “SSE”) and (C) obtain waivers of any applicable preemptive rights, in each case in order to consummate the Exchange Offer on the terms contemplated in this Agreement, and (ii) file and submit all disclosures with the SVS and the SSE that are required under applicable Law in connection with the Exchange Offer, including Norma de Carácter General Nº 30 of the SVS and the rules and regulations of the SSE.

(b)           Brazilian Filings and Actions.

 (i)           Prior to the Commencement Date, LAN shall (A) file with the Comissão de Valores Mobiliários (the “CVM”) and the BM&FBovespa (the “Bovespa”), under the terms of CVM Instruction 480/2009 (“CVM I 480”), a draft form of its Formulário de Referência and a request to register LAN as a publicly traded company (companhia estrangeira com valores mobiliários negociados em mercados regulamentados); (B) apply for the registration of a Level II BDR Program under the terms of CVM I 480 and CVM Instruction 332, as amended; and (C) apply with the Bovespa to list the Brazilian Depositary Receipts (“LAN BDRs”) to be issued pursuant to a deposit agreement in customary form to be entered into among LAN, the depositary agent and the holders of LAN BDRs from time to time.

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 (ii)           Prior to the Commencement Date, Holdco 2 shall file with the CVM, under the terms of CVM Instruction I 361, a Tender Offer Statement with respect to TAM’s delisting procedure and the exchange of the shares of Holdco 2 Stock and LAN BDRs pursuant to the Exchange Offer and the Mergers, which shall include an Offer to Exchange/Prospectus as well as any other documents required to be included therein under applicable Law pursuant to which the Exchange Offer will be made, together with any supplements or amendments thereto that may be requested by the CVM or the Bovespa (the “Brazilian Exchange Offer Documents”).

 (iii)           The TAM Direct Controlling Shareholder and the each of the members of the Amaro Family agrees to take, and to cause TEP Chile, Holdco 1, Holdco 2 and Sister Holdco, as applicable, to take, to the extent required under Brazilian Law, any action required by any Governmental Entity or the Bovespa in order to implement and consummate the Exchange Offer, the Mergers or any of the other transactions contemplated by this Agreement and the Implementation Agreement.

(c)           U.S. Filings and Actions.

 (i)           Prior to the Commencement Date, (A) LAN, TAM, the TAM Direct Controlling Shareholder and the Amaro Family and Holdco 2 shall prepare, and LAN and Holdco 2 shall file with the U.S. Securities and Exchange Commission (the “SEC”), pursuant to and in accordance with the U.S. Securities Act of 1933, as amended (including the rules and regulations promulgated thereunder, the “U.S. Securities Act”), and the U.S. Securities Exchange Act of 1934, as amended (including the rules and regulations promulgated thereunder, the “U.S. Exchange Act” and, collectively with the U.S. Securities Act, the “U.S. Securities Laws”), a registration statement on Form F-4 with respect to the Exchange Offer and the Mergers and the offer and sale (as defined under the U.S. Securities Act) of shares of Holdco 2 Stock and shares of LAN Common Stock pursuant thereto (as amended and supplemented from time to time, the “Form F-4”), which shall include an Offer to Exchange/Prospectus and a related letter of transmittal and summary advertisement (as amended or supplemented from time to time, the “U.S. Offering Documents”); and (B) LAN and Holdco 2 shall cause the U.S. Offering Documents to be disseminated to the U.S. Shareholders as and to the extent required by the U.S. Securities Laws.  Each of LAN, TAM, the TAM Direct Controlling Shareholder and the Amaro Family and Holdco 2 shall use all reasonable efforts to have the Form F-4 declared effective under the U.S. Securities Act as promptly as practicable after such filing and to cause the Offer to Exchange/Prospectus and the related letter of transmittal included in the Form F-4 to be mailed to the U.S. Shareholders as promptly as practicable after the Commencement Date.  Each of LAN, TAM, the TAM Direct Controlling Shareholder, the Amaro Family and Holdco 2 shall also take any action required to be taken under any applicable state securities Law in connection with the issuance of shares of Holdco 2 Stock pursuant to the Exchange Offer and shares of LAN Common Stock pursuant to the Mergers, and each of LAN, TAM, the TAM Direct Controlling Shareholder, the Amaro Family and Holdco 2 shall furnish all information as may be reasonably requested by the other parties in connection with any such action, the Form F-4 or the Offer to Exchange/Prospectus.  LAN and Holdco 2 shall notify each other party promptly after it shall become aware that (A) the Form F-4 has been declared effective by the SEC, and (B) any stop order has been issued by the SEC with respect to the Form F-4 or the qualification of the offer and sale (as defined under the U.S. Securities Act) of the shares of Holdco 2 Stock or shares of LAN Common Stock pursuant to the Exchange Offer or the Mergers has been suspended in any jurisdiction.

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 (ii)           On the Commencement Date, LAN and Holdco 2 shall file with the SEC, pursuant to and in accordance with Rule 14d-3 and Regulation M-A promulgated under the U.S. Exchange Act, a Tender Offer Statement on Schedule TO (as amended and supplemented from time to time, the “Schedule TO”) with respect to the Exchange Offer (the Schedule TO, Form F-4 and the U.S. Offering Documents, together with any supplements or amendments thereto, the “U.S. Exchange Offer Documents”).  TAM hereby consents to the inclusion in the U.S. Exchange Offer Documents of the TAM Board Recommendations.

 (iii)           On the Commencement Date, TAM shall file with the SEC a Tender Offer Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the Exchange Offer containing the TAM Board Recommendations (together with all amendments, supplements and exhibits thereto, the “Schedule 14D-9”) and shall cause the Schedule 14D-9 to be disseminated to the U.S. Shareholders with the U.S. Offering Documents, in each case in a manner that complies with Rule 14d-9 under the U.S. Exchange Act and other applicable U.S. Securities Laws.

(d)           Further Action.  All of the written documents filed with, or submitted to, ANAC, the SVS, the SSE, the CVM, the Bovespa, the New York Stock Exchange, Inc. (the “NYSE”), the SEC or any other Governmental Entity pursuant to the securities laws of any jurisdiction by any party hereto in connection with the Exchange Offer or the Mergers (such written documents, together with any amendments or supplements thereto, are collectively referred to herein the “Regulatory Documents” and the entities with which the Regulatory Documents are filed or to which they are submitted are collectively referred to herein as the “Regulatory Entities”) shall comply in all material respects with applicable Law of the jurisdiction in which they are filed or submitted.  Each of LAN, TAM, the TAM Direct Controlling Shareholder, the Amaro Family and Holdco 2 agrees to use all reasonable efforts to respond promptly to comments or inquiries from any Regulatory Entity or its staff with respect to any Regulatory Documents it filed with or submitted to such Regulatory Entity, and to promptly correct any information provided by it for inclusion in any Regulatory Document if and to the extent that such information shall contain any untrue statement of any material fact, omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading or shall otherwise become false or misleading in any material respect or otherwise require amendment under applicable Law.  Each of LAN, TAM, the TAM Direct Controlling Shareholder, the Amaro Family and Holdco 2 shall take all steps necessary to amend or supplement all Regulatory Documents filed or submitted by it and to cause all such Regulatory Documents so amended or supplemented to be filed with the relevant Regulatory Entity and to be disseminated to the holders of Eligible TAM Shares, in each case as and to the extent required by applicable Law.  Each of TAM, the TAM Direct Controlling Shareholder, the Amaro Family and LAN and their respective counsels shall be given reasonable opportunity to review and comment on each Regulatory Document (including any amendments or supplements thereto) before it is filed with or submitted to the relevant Regulatory Entity or disseminated to the holders of Eligible TAM Shares.  Each of LAN, Holdco 2, TAM, the TAM Direct Controlling Shareholder, the Amaro Family and their respective counsels shall provide the others with copies of any written comments, and shall inform them of any oral comments, that it or its counsel receives from any Regulatory Entity or its staff with respect to any Regulatory Document promptly after the receipt of such comments and shall give the other parties a reasonable opportunity to review and comment on any written or oral responses to such comments before they are filed with or submitted to such Regulatory Entity.  Without limiting the foregoing, the parties hereby acknowledge and agree that all Regulatory Documents filed with or submitted to any Regulatory Entity or its staff shall be in form and substance reasonably acceptable to each of LAN, TAM, the TAM Direct Controlling Shareholder and the Amaro Family before they are filed with or submitted to such Regulatory Entity or its staff.

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SECTION 1.05.     Terms and Conditions.  The terms and conditions of the Exchange Offer shall comply with applicable Law.  The consummation of the Exchange Offer will be subject only to the conditions set forth in Article VII (the “Exchange Offer Conditions”), including the Minimum Conditions.  For all purposes of this Agreement, the consummation of the Exchange Offer shall be deemed to be the purchases of TAM Stock pursuant to the auction (leilão) (the “Leilão”) established in the edital relating to the Exchange Offer (the “Edital”).  In order to accept the Exchange Offer, the holders of Eligible TAM Shares will have to tender and not withdraw their shares in accordance with the requirements of the Exchange Offer.  If the Exchange Offer is required to be consummated pursuant to Section 5.04(b), then the Amaro Family will cause Holdco 2 to purchase and pay (with shares of LAN Common Stock issuable in the Mergers) for all of the Eligible TAM Shares validly tendered and not withdrawn pursuant to the Exchange Offer that Holdco 2 is obligated to purchase pursuant to the terms of the Exchange Offer on the Expiration Date.    Whenever this Agreement requires the TAM Direct Controlling Shareholder, TEP Chile, Holdco 2 or Sister Holdco to take any action, such requirement shall be deemed to include an undertaking on the part of the Amaro Family or the TAM Direct Controlling Shareholder, as applicable, to cause them to take such action.  The time at which the Mergers become effective is referred to herein as the “Effective Time.”

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SECTION 1.06.     Extensions and Amendments.  Subject to the parties’ right to cause Holdco 2 to request permission from the CVM to extend the expiration time for the Exchange Offer or to revoke the Exchange Offer as provided below, the Exchange Offer shall initially expire on the date provided in the Edital.  If all of the Exchange Offer Conditions are not satisfied at, or waived by the parties entitled to grant such waivers as provided in Article VII prior to, any then scheduled expiration time for the Exchange Offer, then LAN or the Amaro Family (but only if they are so entitled to grant a waiver of any unsatisfied or unwaived conditions) may, from time to time in its or their sole discretion, cause Holdco 2 to request permission from the CVM to extend the expiration time for the Exchange Offer in maximum increments of 30 days to no later than 28 days after the Commencement Date.  If both LAN and the Amaro Family agree to request a modification to the terms and conditions of the Exchange Offer or revocation of the Exchange Offer, the Amaro Family shall cause Holdco 2 to request permission from the CVM to modify the terms and conditions of the Exchange Offer or to revoke the Exchange Offer; provided, however, that the Amaro Family shall not unreasonably withhold or delay their agreement to request any such amendment that is not adverse to the Amaro Family or the holders of Eligible TAM Shares.  LAN and the Amaro Family shall cause Holdco 2 to request permission from the CVM to revoke the Exchange Offer if this Agreement and the Implementation Agreement terminate in accordance with their terms.

SECTION 1.07.     By-laws.  The parties shall take all necessary action so that immediately following the Effective Time, the by-laws of TAM shall be amended so that they will be in the form attached hereto as Exhibit 1 and the by-laws of Holdco 1, Sister Holdco and Holdco 2 shall be in the forms attached hereto as Exhibits 2, 3 and 4, respectively.

SECTION 1.08.     Listing and Delisting.  LAN shall use its commercially reasonable efforts to cause the following listings to be approved as soon as practicable, and to cause such listings to become effective, no later than the Commencement Date: (i) LAN BDRs representing the shares of LAN Common Stock to be issued in the Mergers to be approved for listing on the Bovespa, (ii) LAN ADRs representing shares of LAN Common Stock to be issued in the Mergers to be approved for listing on the New York Stock Exchange, Inc., subject to notice of issuance, and (iii) the shares of LAN Common Stock to be issued in the Mergers to be approved for listing on the SSE (collectively with each other and any other listings required by any Governmental Entity, the “Required Listings”).  Each of TAM and the Amaro Family shall use its or their commercially reasonable efforts to cause (i) each of the TAM Ordinary Stock and TAM Preferred Stock to be delisted from the Bovespa, in each case if the Delisting Condition was satisfied with respect to such class of TAM Stock, and (ii) the TAM ADRs to be delisted from the NYSE and deregistered under the U.S. Exchange Act, in each case as soon as practicable following the Effective Time.

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ARTICLE II

REPRESENTATIONS AND WARRANTIES OF TAM

Except as set forth in the TAM Financial Reporting Documents filed with the SEC or the CVM, as the case may be, and made publicly available after December 31, 2009 and prior to the date of this Agreement (excluding, in each case, any disclosures set forth in any risk factor section or in any other section to the extent that they are forward-looking statements or cautionary, predictive or forward-looking in nature) or in the corresponding sections or subsections of the disclosure letter delivered by TAM to LAN not less than 24 hours prior to entering into this Agreement (the “TAM Disclosure Schedule”) (it being agreed that (i) the disclosure of any fact or item in any section or subsection of the TAM Disclosure Schedule whose relevance to any other section or subsection of this Agreement is reasonably apparent from the face of such disclosure shall also be deemed to be disclosed in the section or subsection of the TAM Disclosure Schedule that corresponds to such other section or subsection of this Agreement and (ii) the exclusion with respect to the TAM Financial Reporting Documents shall not apply to Section 2.03, Section 2.06(a) or Section 2.06(b)), TAM hereby represents and warrants to LAN as follows:

SECTION 2.01.     Organization, Standing and Corporate Power; Subsidiaries.  (a) Each of TAM and its Subsidiaries has been duly organized and is validly existing and (with respect to jurisdictions that recognize such concept) in good standing under the Law of the jurisdiction of its incorporation or organization, as the case may be, and has all requisite power and authority and possesses all governmental licenses, permits, authorizations and approvals necessary to enable it to own, lease or otherwise hold and use its properties, rights and other assets and to carry on its business and operations as currently conducted, other than any such failures to have such power, authority, governmental licenses, permits, authorizations or approvals or any such failures of Subsidiaries of TAM to be duly organized, validly existing or in good standing that, individually or in the aggregate, have not had and would not reasonably be expected to have a TAM Material Adverse Effect.  Each of TAM and its Subsidiaries is duly qualified or licensed to do business and (with respect to jurisdictions that recognize such concept) is in good standing in each jurisdiction in which the nature of its business or operations or its ownership, leasing, holding or use of its properties, rights or other assets makes such qualification, licensing or good standing necessary, other than any such failures to be so qualified, licensed or in good standing that, individually or in the aggregate, have not had and would not reasonably be expected to have a TAM Material Adverse Effect.  Each of TAM’s Airline Affiliates is an air carrier duly authorized to act as such by the Governmental Entity of competent jurisdiction with which it holds its operating authority.

(b)           Section 2.01(b) of the TAM Disclosure Schedule lists, as of the date of this Agreement, each of TAM’s “significant subsidiaries,” as such term is defined in Section 1-02 of Regulation S-X promulgated by the SEC.  All of the Equity Securities and Convertible Securities of each Subsidiary of TAM are owned of record and beneficially, directly or indirectly, by TAM.  All the issued and outstanding Equity Securities of each Subsidiary of TAM have been validly issued and are fully paid and nonassessable and are owned of record and beneficially, directly or indirectly, by TAM free and clear of all pledges, liens, charges, encumbrances or security interests of any kind or nature whatsoever (collectively, “Liens”), and free of any restriction on the right to vote, sell or otherwise dispose of such Equity Securities.  Except for the Equity Securities of the Subsidiaries of TAM, TAM does not own, directly or indirectly, any Equity Securities or Convertible Securities of any Person.

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SECTION 2.02.    By-laws.  TAM has made available to LAN prior to the date of this Agreement a complete and accurate copy of the by-laws of TAM (the “TAM By-laws”) in the form attached as Exhibit 5 and the by-laws or comparable organizational documents of each of TAM’s “significant subsidiaries,” as such term is defined in Section 1-02 of Regulation S-X promulgated by the SEC (collectively, the “TAM Subsidiary By-laws”), in each case as amended to the date of this Agreement.  Each of the TAM By-laws and the TAM Subsidiary By-laws is in full force and effect and no other organizational documents are applicable to, or binding upon, TAM or any Subsidiary of TAM.

SECTION 2.03.    Capitalization.  (a)  The authorized capital stock of TAM is  R$ 1,200,000,000.  At the close of business on January 11, 2011 (the “TAM Capitalization Date”):

(i)           55,816,683 shares of TAM Ordinary Stock were issued and outstanding and no shares of TAM Ordinary Stock were held by TAM in its treasury; and

(ii)           100,390,098 shares of TAM Preferred Stock were issued and outstanding and 223,176 shares of TAM Preferred Stock were held by TAM in its treasury.

(b)           Section 2.03(a) of the TAM Disclosure Schedule contains a correct and complete list as of the date of this Agreement of all of the outstanding TAM Stock Options issued under the TAM stock option plan (the “TAM Stock Plans”), including the date of grant, vesting terms, term, number of shares of TAM Preferred Stock issuable upon exercise and the exercise price per share of TAM Preferred Stock.

(c)           Except as set forth above in Section 2.03(a), at the close of business on the TAM Capitalization Date, no Equity Securities or Convertible Securities of TAM were issued, reserved for issuance or outstanding.  At the close of business on the TAM Capitalization Date, (i) no shares of TAM Stock were owned by any Subsidiary of TAM and (ii) there were no outstanding stock options, stock appreciation rights, “phantom” stock rights, performance units, rights to receive shares of TAM Stock or any other Equity Securities of TAM on a deferred basis or other rights that are linked to the value of the shares of TAM Stock or any other Equity Securities of TAM (collectively, “TAM Stock-Based Awards”) other than the TAM Stock Options specified in Section 2.03(a).  All outstanding shares of TAM Stock are, and all shares of TAM Preferred Stock which may be issued pursuant to the TAM Stock Options will be, when issued in accordance with the terms thereof, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights.  There are no bonds, debentures, notes or other Indebtedness of TAM having the right to vote (or convertible into, or exercisable or exchangeable for, securities having the right to vote) with the shareholders of TAM on any matters.  Except as set forth above in Section 2.03(a) and for issuances of shares of TAM Preferred Stock issuable pursuant to the TAM Stock Options specified in Section 2.03(a) or as may otherwise be permitted under the Implementation Agreement, (x) there are not issued, reserved for issuance or outstanding (A) any Equity Securities of TAM or any of its Subsidiaries, (B) any Convertible Securities of TAM or any of its Subsidiaries, (C) any obligations of TAM or any of its Subsidiaries to issue any Equity Securities or Convertible Securities of TAM or any of its Subsidiaries or (D) any TAM Stock-Based Awards and (y) there are not any outstanding obligations of TAM or any of its Subsidiaries to repurchase, redeem or otherwise acquire any Equity Securities or Convertible Securities of TAM or any of its Subsidiaries or to issue, deliver or sell, or cause to be issued, delivered or sold, any such securities, and neither TAM nor any of its Subsidiaries is a party to any voting Contract with respect to the voting of any such securities.

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(d)           Each TAM Stock Option was properly accounted for on the books and records of TAM and qualifies for the tax and accounting treatment afforded thereto in TAM’s Tax Returns and financial statements, respectively.  Each grant of TAM Stock Options was made in accordance with the terms of the applicable TAM Stock Plan and any applicable Law and regulatory rules or requirements and has a grant date identical to the date on which it was actually granted or awarded by TAM’s board of directors (the “TAM Board”) or the compensation committee thereof.  The per share exercise price of each TAM Stock Option was determined in accordance with the applicable TAM Stock Plan.

SECTION 2.04.    Authority.  TAM has all requisite corporate power and authority to execute, deliver and perform this Agreement and the other Transaction Agreements to which it is a party and to consummate the transactions contemplated hereby and thereby; provided, however, that TAM shall not have the power and authority to consummate the Mergers unless the Requisite TAM Shareholder Approval is obtained.  The execution, delivery and performance of this Agreement and such other Transaction Agreements by TAM and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of TAM (other than the Requisite TAM Shareholder Approval), and no other corporate proceedings on the part of TAM or its shareholders (other than the Requisite TAM Shareholder Approval) are necessary to authorize this Agreement and such other Transaction Agreements or to consummate the transactions contemplated hereby and thereby.  This Agreement and the other Transaction Agreements to which TAM is a party have been duly executed and delivered by TAM and constitute legal, valid and binding obligations of TAM, enforceable against TAM in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or similar Law of general applicability relating to or affecting the rights of creditors and to the availability of equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at Law).  The TAM Board has unanimously, by resolutions duly adopted at a meeting duly called and held, approved this Agreement and the other Transaction Agreements, the Exchange Offer and the other transactions contemplated hereby and thereby and recommended the Exchange Offer to the holders of the Free Float Shares, which resolutions have not as of the date of this Agreement been subsequently rescinded, modified or withdrawn in any way, and prior to the Commencement Date will recommend that they tender their shares of TAM Stock into the Exchange Offer.

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SECTION 2.05.    No Conflict; Required Filings and Consents.  (a)  The execution and delivery of this Agreement and the other Transaction Agreements to which TAM is a party by TAM do not, and the performance of this Agreement and the other Transaction Agreements  by TAM and consummation of the transactions contemplated hereby and thereby will not, conflict with, or result in any violation or breach of, or default (with or without notice, lapse of time or both) under, or result in any termination or modification of or acceleration under, or any change in any right, obligation or benefit under, or result in any Lien on any property or assets of TAM or any of its Subsidiaries pursuant to (i) the TAM By-laws or any TAM Subsidiary By-laws, (ii) any loan, credit agreement, bond, debenture, note, mortgage, indenture, lease, supply agreement, license agreement, development agreement or other contract, agreement, obligation, commitment or instrument (each, a “Contract”) to which TAM or any of its Subsidiaries is a party or by which any of them or any of their respective properties, rights or other assets is bound or subject or (iii) assuming the consents, approvals, filings and other matters referred to in Section 2.05(b) are duly obtained or made, any Law or Order applicable to TAM, any of its Subsidiaries or their respective properties, rights or other assets, other than, in the case of clause (ii), any such conflicts, violations, breaches, defaults, terminations, modifications, accelerations, changes or Liens that, individually or in the aggregate, would not reasonably be expected to have a TAM Material Adverse Effect.

(b)           The execution, delivery and performance of this Agreement and the other Transaction Agreements to which TAM is a party by TAM, the consummation of the transactions contemplated hereby and thereby and the continuing operation of the businesses of TAM and its Subsidiaries after the Effective Time do not and will not require any consent, approval, order, authorization or permit of, action by, filing or registration with or notification to any governmental, quasi-governmental or regulatory authority, body, department, commission, board, bureau, agency, division, court, organized securities exchange or other legislative, executive or judicial governmental entity or instrumentality of any country, nation, republic, federation or similar entity or any state, county, parish or municipality, jurisdiction or other political subdivision thereof (each, a “Governmental Entity”), other than (i) any application, filing or submission required to be made and any consent, approval, authorization or authority required to be made or obtained under Law 7,565/86, as amended (the “Brazilian Aeronautical Code”), the Chilean Aeronautical Code, Title 49 of the U.S. Code or under any regulation, rule, order, notice or policy of ANAC, Dirección General de Aeronáutica Civil (the “DGAC”), the Junta de Aeronáutica Civil (the “JAC”), the U.S. Federal Aviation Administration (the “FAA”), the U.S. Department of Transportation (the “DOT”), the Federal Communications Commission (the “FCC”) and the U.S. Department of Homeland Security (the “DHS”), including the U.S. Transportation Security Administration (the “TSA”) and any similar Governmental Entity in the E.U., (ii) the filing of the Schedule TO, the Form F-4 and the other Exchange Offer Documents and the Schedule 14D-9 with the SEC, the declaration of effectiveness of the Form F-4 by the SEC, and the filing with the SEC of such reports under, and such other compliance with, the U.S. Securities Laws in connection with the Exchange Offer and Mergers, (iii) the filing of the Formulário de Referência of LAN with the CVM, the Brazilian Exchange Offer Documents with the CVM and the Level II BDR Program for the LAN BDRs with the CVM and the Bovespa, and the filings with the SVS and the SSE in connection with the Exchange Offer and the Mergers, (iv) any notices, filings or approvals under the competition, merger control, antitrust or similar Law listed in Section 2.05(b) of the TAM Disclosure Schedule, (v) such filings and approvals as are required to be made or obtained under the securities or “blue sky” laws of various states of the United States in connection with the Exchange Offer and Mergers, (vi) any consent, approval, order, authorization, authority, transfer, waiver, disclaimer, registration, declaration or filing required to be made or obtained from any other Governmental Entity that regulates any aspect of airline operations or business, including environmental (e.g., noise, air emissions and water quality), aircraft, air traffic control and airport communications, agricultural, export/import, immigration and customs (collectively with the Governmental Entities referred to in clause (i) above, the “TAM Airline Regulatory Entities”), (vii) any filings required under the rules and regulations of Bovespa or the NYSE (NYSE and Bovespa collectively, the “TAM Stock Exchanges”), and (viii) such other consents, approvals, orders, authorizations, permits, actions, notifications, registrations, declarations and filings which, if not obtained or made, individually or in the aggregate, would not reasonably be expected to have a TAM Material Adverse Effect.

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SECTION 2.06.     TAM Financial Reporting Documents; Financial Statements; No Undisclosed Liabilities.  (a)  TAM has filed or furnished, as applicable, on a timely basis, all reports, schedules, forms, statements, certifications and other documents (including exhibits and other information incorporated therein) with or to, as applicable, the CVM or the SEC that were required to be so filed or furnished by TAM since December 31, 2006 (such documents, together with any documents so filed or furnished during such period by TAM on a voluntary basis, the “TAM Financial Reporting Documents”).  On the date on which it was filed with or furnished to the CVM or the SEC, as the case may be, each TAM Financial Reporting Document so filed or furnished prior to the date of this Agreement complied in all material respects with the applicable requirements of the U.S. Securities Laws or other applicable securities Laws and on the date on which it will be filed with or furnished to the CVM or the SEC, as the case may be, each TAM Financial Reporting Document so filed or furnished on or after the date of this Agreement will comply in all material respects with such requirements.  On the date on which it was filed with or furnished to the CVM or the SEC, as the case may be, no TAM Financial Reporting Document so filed or furnished prior to the date of this Agreement contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.  On the date on which it will be filed with or furnished to the CVM or the SEC, as the case may be, no TAM Financial Reporting Document so filed or furnished on or after the date of this Agreement will contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.  Since December 31, 2006, TAM has complied in all material respects with all applicable requirements of the U.S. Securities Laws or other applicable securities Law including the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), and the rules and regulations thereunder with respect thereto, and the TAM Stock Exchanges.

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(b)           Each of the consolidated statements of financial position included in or incorporated by reference into the TAM Financial Reporting Documents fairly presents, or in the case of TAM Financial Reporting Documents filed with or furnished to the CVM or the SEC, as the case may be, on or after the date of this Agreement, will fairly present, in each case in all material respects, the consolidated financial position of TAM as of its date and each consolidated income statement, consolidated cash flow statement, consolidated statement of changes in equity, consolidated statement of comprehensive income (loss) included in or incorporated by reference in the TAM Financial Reporting Documents fairly presents, or in the case of TAM Financial Reporting Documents filed with or furnished to the CVM or the SEC, as the case may be, on or after the date of this Agreement, will fairly present, in each case in all material respects, the results of their operations, cash flows, changes in equity and comprehensive income, respectively, for the periods covered thereby (subject, in the case of unaudited statements, to notes and normal year-end audit adjustments that will not be material in amount or effect), and each of the foregoing financial statements was prepared or, in the case of TAM Financial Reporting Documents filed with or furnished to the CVM or the SEC, as the case may be, on or after the date of this Agreement, will be prepared, in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) applied on a consistent basis.  To TAM’s Knowledge, there is no applicable accounting rule, consensus or pronouncement that has been adopted by the CVM or the SEC, as the case may be, the IASB or any similar body as of, but is not in effect as of, the date of this Agreement that, if implemented, would reasonably be expected to have a TAM Material Adverse Effect (it being agreed that for purposes of this Section 2.06(b), effects resulting from or arising in connection with the matters set forth in clause (c) of the definition of the term “TAM Material Adverse Effect” shall not be excluded in determining whether a TAM Material Adverse Effect would reasonably be expected to occur).

(c)           Each of TAM and its Subsidiaries has timely filed all submissions, reports, registrations, schedules, forms, statements and other documents, together with any amendments required to be made with respect thereto, that they were required to file since December 31, 2006 with the CVM, any TAM Stock Exchange, any TAM Airline Regulatory Entity and any other non-U.S. Governmental Entity, and has paid all fees and assessments due and payable in connection therewith, in each case other than any failures to file such reports, registrations, schedules, forms, statements or other documents, or to pay such fees and assessments, that individually or in the aggregate, have not had and would not reasonably be expected to have a TAM Material Adverse Effect.

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(d)           Neither TAM nor any of its Subsidiaries has any liability or obligation of any nature (whether accrued, absolute, contingent or otherwise), other than those (i) reflected, reserved for or disclosed in the most recent balance sheet of TAM included in TAM’s Annual Report on Form 20-F for the year ended December 31, 2009, as filed with the SEC prior to the date of this Agreement, (ii) incurred in the ordinary course of business consistent with past practice since December 31, 2009, (iii) incurred pursuant to the transactions contemplated in this Agreement or the Implementation Agreement, or (iv) that, individually or in the aggregate, have not had and would not reasonably be expected to have a TAM Material Adverse Effect.  Neither TAM nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture, off-balance sheet partnership or any similar Contract or arrangement (including any Contract or arrangement relating to any transaction or relationship between or among TAM and any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, including any structured finance, special purpose or limited purpose entity or Person, on the other hand, or any “off-balance sheet arrangement” (as defined in Item 303(a) of Regulation S-K of the SEC)), where the result, purpose or intended effect of such Contract or arrangement is to avoid disclosure of any material transaction involving, or material liabilities of, TAM or any of its Subsidiaries in the financial statements of TAM or any of its Subsidiaries or the TAM Financial Reporting Documents.  None of TAM’s Subsidiaries are, or have at any time since January 1, 2006 been, subject to the reporting requirements of Section 13(a) or 15(d) of the U.S. Exchange Act.

(e)           TAM and its Subsidiaries maintain disclosure controls and procedures required by Rule 13a-15 or 15d-15 under the U.S. Exchange Act.  Such disclosure controls and procedures are effective to ensure that information required to be disclosed by TAM is recorded and reported on a timely basis to the individuals responsible for the preparation of TAM’s filings with the SEC and other public disclosure documents.  TAM and its Subsidiaries maintain internal control over financial reporting (as defined in Rule 13a-15 or 15d-15, as applicable, under the U.S. Exchange Act).  Such internal control over financial reporting is effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS and includes policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of TAM and its consolidated Subsidiaries, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that receipts and expenditures of TAM and its consolidated Subsidiaries are being made only in accordance with authorizations of management and directors of TAM and its consolidated  Subsidiaries, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the assets of TAM and its consolidated Subsidiaries that could have a material effect on its financial statements.  TAM has disclosed, based on its most recent evaluation prior to the date of this Agreement, to TAM’s auditors and the audit committee of TAM’s board of directors (A) any significant deficiencies or material weaknesses in the design or operation of its internal controls over financial reporting that are reasonably likely to adversely affect TAM’s ability to record, process, summarize and report financial information and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in TAM’s internal control over financial reporting.  TAM has made available to LAN (i) a summary of any such disclosure made by management to TAM’s auditors and audit committee since January 1, 2006 and (ii) any communication since January 1, 2006 made by management or TAM’s auditors to the audit committee required or contemplated by listing standards of the TAM Stock Exchanges, the audit committee’s charter or professional standards of the IASB or Public Company Accounting Oversight Board.

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(f)           Since December 31, 2006, no material complaints from any source regarding accounting, internal controls or auditing matters, and no concerns from employees of TAM or any of its Subsidiaries regarding questionable accounting or auditing matters, have been received by TAM or any of its Subsidiaries.  TAM has made available to LAN a summary of all material complaints or concerns relating to other matters made since December 31, 2006 through TAM’s whistle-blower hot-line or equivalent system for receipt of employee concerns regarding possible violations of Law.  No attorney representing TAM or any of its Subsidiaries, whether or not employed by TAM or any of its Subsidiaries, has reported evidence of a violation of securities Laws, breach of fiduciary duty or similar violation by TAM or any of its officers, directors, employees or agents to TAM’s chief legal officer, the audit committee (or other committee designated for the purpose) of the board of directors of TAM or the board of directors of TAM pursuant to the rules adopted pursuant to Section 307 of the Sarbanes-Oxley Act or any TAM policy contemplating such reporting, including in instances not required by those rules.

SECTION 2.07.    Absence of Certain Changes or Events.  (i) Since December 31, 2009, there has not been any change in the business, results of operations, financial condition, assets or liabilities of TAM and its Subsidiaries, taken as a whole, or any other change, event, condition, development or occurrence (including any adverse change or development with respect to any such matters that existed on or prior to December 31, 2009) that, individually or in the aggregate, has had or would reasonably be expected to have a TAM Material Adverse Effect and (ii) since December 31, 2009, (A) each of TAM and its Subsidiaries has conducted its business in the ordinary course consistent with past practice and (B) neither TAM nor any of its Subsidiaries has taken any action which, if taken after the date of this Agreement, would require the consent of LAN under the Implementation Agreement.

SECTION 2.08.    Litigation.  Except for any such matters that, individually or in the aggregate, have not had and would not reasonably be expected to have a TAM Material Adverse Effect:  (a) there are no actions, suits, claims, allegations, hearings, proceedings, arbitrations, mediations, audits, inquiries or investigations (whether civil, criminal, administrative or otherwise) (collectively, “Actions”) pending or, to the Knowledge of TAM, threatened against TAM or any of its Subsidiaries, (b) neither TAM nor any of its Subsidiaries nor any of their respective properties, rights or assets is subject to, or bound by, any Order, and (c) there are no inquiries or investigations by any Governmental Entity or any whistle-blower complaints pending or, to the Knowledge of TAM, threatened against TAM or any of its Subsidiaries.

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SECTION 2.09.    Material Contracts.  (a)  As of the date of this Agreement, neither TAM nor any of its Subsidiaries is a party to or bound by any Contract (i) that is a “material contract” (as defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this Agreement that has not been filed as such in a TAM Financial Reporting Document prior to the date of this Agreement; (ii) that limits or purports to limit in any material respect any type or line of business in which TAM or any of its Subsidiaries (including, after giving effect to the Mergers, LAN or any of its Subsidiaries) may engage or any manner or locations in which any of them may so engage in any business; (iii) that is a(n) (A) alliance or other brand alliance agreement, (B) code sharing agreement, (C) frequent flyer participation agreement, (D) capacity purchase or similar agreement, (E) cooperation, joint venture, partnership, profit or revenue sharing agreement, (F) special prorate agreement or (G) interlining agreement with any air carrier (including all material amendments to each of the foregoing agreements), in each case that is material to the business, financial condition, results of operations or prospects of TAM and its Subsidiaries, taken as a whole; (iv) pursuant to which any Indebtedness of TAM or any of its Subsidiaries in excess of $50 million is outstanding or may be incurred that has not been filed in a TAM Financial Reporting Document prior to the date of this Agreement; (v) that involves or could reasonably be expected to involve aggregate payments by or to TAM and/or its Subsidiaries in excess of $30 million in any twelve-month period, except for any Contract that may be canceled without penalty or termination payments by TAM and/or its Subsidiaries upon notice of 60 days or less; (vi) any aircraft purchase agreement, engine purchase agreement or engine maintenance agreement that involves or is reasonably expected to involve aggregate payments by or to TAM or any of its Subsidiaries in excess of $30 million in any twelve-month period; or (vii) pursuant to which it is licensed to use Intellectual Property of a third party that is material to the operation of its business, or licenses to a third party rights in the Intellectual Property it owns.  Each such Contract described in clauses (i) through (vii) (whether or not disclosed in the TAM Disclosure Schedule) is referred to herein as a “TAM Material Contract.”

(b)           Each TAM Material Contract is, and after the consummation of the transactions contemplated by this Agreement and the Implementation Agreement will continue to be, a valid and binding obligation of TAM and its Subsidiaries (to the extent they are parties thereto or bound thereby) enforceable against TAM and, to TAM’s Knowledge, each other party thereto in accordance with its terms and is in full force and effect, and each of TAM and each of its Subsidiaries (to the extent they are party thereto or bound thereby) and, to TAM’s Knowledge, each other party thereto has performed in all material respects all obligations required to be performed by it under each TAM Material Contract.  Neither TAM nor any of its Subsidiaries has received notice, nor does it have Knowledge, of any material violation or default in respect of any material obligation under (or any condition which with the passage of time or the giving of notice or both would result in such a violation or default), or any intention to cancel, terminate, change the scope of rights and obligations under or not to renew, any TAM Material Contract.

(c)           Section 2.09(c) of the TAM Disclosure Schedule sets forth a true and complete list of all (i) alliance or brand alliance agreements, (ii) code sharing agreements, (iii) frequent flyer participation agreements, (iv) capacity purchase or similar agreements, (v) cooperation, joint venture, partnership, profit or revenue sharing agreements, (vi) special prorate agreements and (vii) interlining agreements with any air carrier to which TAM or any of its Subsidiaries is a party or is otherwise bound.

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SECTION 2.10.    Licenses; Compliance with Laws.  (a)  Section 2.10(a) of the TAM Disclosure Schedule sets forth a true and complete list of all of its (i) operating certificates, including the issuing Governmental Entity, date of issuance and date of expiration, and (ii) air traffic rights, including the issuing Governmental Entity, date of issuance and date of expiration, for both scheduled and non-scheduled operations of each of TAM and its Subsidiaries in effect as of the date of this Agreement.

(b)           Each of TAM and its Subsidiaries has in effect all approvals, authorizations, registrations, certifications, filings, franchises, licenses, consents, variances, concessions, exemptions, orders, notices, permits, operating certificates, Slots and air service designations of, with or granted by all Governmental Entities and third parties including all licenses, certificates and permits from all Governmental Entities to act as an air carrier, as applicable (collectively, “Licenses”) necessary for it to own, lease or operate its properties, rights and other assets and to carry on its business and operations as currently conducted (collectively, the “TAM Licenses”).  Each of TAM and its Subsidiaries is, and since December 31, 2006 has been, in compliance with (i) its obligations under each TAM License applicable to it and (ii) the rules and regulations of the Governmental Entity which issued such TAM License, in each case other than any failures to be in such compliance that, individually or in the aggregate, have not had and would not reasonably be expected to have a TAM Material Adverse Effect.  There is not pending nor, to TAM’s Knowledge, threatened by or before any Governmental Entity any material proceeding, notice of violation, order of forfeiture or complaint or investigation against TAM or any of its Subsidiaries relating to any TAM License, other than any such proceedings, notices, orders, complaints or investigations that, individually or in the aggregate, have not had and would not reasonably be expected to have a TAM Material Adverse Effect.  No action of any Governmental Entity in granting any TAM License has been reversed, stayed, enjoined, annulled or suspended, and there is not pending or, to TAM’s Knowledge, threatened, any material application, petition, objection or other pleading with any Governmental Entity that challenges or questions the validity of, or any rights of the holder under, any TAM License, in each case other than any such action, application, petition, objection or pleading that, individually or in the aggregate, has not had and would not reasonably be expected to have a TAM Material Adverse Effect.  The consummation of the Exchange Offer and/or Mergers will not cause, and there is no basis for, any revocation, modification, cancelation or transfer of any TAM Licenses that, individually or in the aggregate, would reasonably be expected to have a TAM Material Adverse Effect.

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(c)           Except for those matters that, individually or in the aggregate, have not had and would not reasonably be expected to have a TAM Material Adverse Effect, (i) each of TAM and its Subsidiaries is, and since December 31, 2006 has been, in compliance with all applicable Law and Orders and all applicable operating certificates, air carrier obligations, airworthiness directives, aviation regulations and other rules, regulations, directives, orders and policies of any TAM Airline Regulatory Entity applicable to it, its properties, rights or other assets or its businesses or operations and (ii) to TAM’s Knowledge, none of the officers, directors, or agents (in their capacity as such) of TAM or any of its Subsidiaries is, or since December 31, 2006 has been, in violation of any Law applicable to its properties, rights or other assets or its businesses or operations relating to (A) the use of corporate funds for political activity or for the purpose of obtaining or retaining business, (B) payments to government officials from corporate funds, or (C) bribes, rebates, payoffs, influence payments, kickbacks or the provision of similar benefits.  No investigation or review by any Governmental Entity with respect to TAM or any of its Subsidiaries is pending or, to TAM’s Knowledge, threatened, nor has any Governmental Entity indicated an intention to conduct the same, other than any such investigations or reviews that, individually or in the aggregate, have not had and would not reasonably be expected to have a TAM Material Adverse Effect.

(d)           Each of TAM and its Subsidiaries is, and since December 31, 2006 has been, in compliance in all material respects with the U.S. Foreign Corrupt Practices Act and all other applicable non-U.S. Laws concerning bribery or corrupt payments (collectively, “Corrupt Practices Laws”).  Since December 31, 2006, (i) neither TAM nor any of its Subsidiaries has made any voluntary disclosure of any actual or alleged violation or breach of any Corrupt Practices Law, (ii) no Governmental Entity has notified TAM or any of its Subsidiaries in writing of any actual or alleged violation or breach of any Corrupt Practices Law, (iii) to the Knowledge of TAM, neither TAM nor any of its Subsidiaries has undergone or is undergoing any audit, review, inspection, investigation, survey or examination of records, in each case conducted by a Governmental Entity and relating to TAM’s or any of its Subsidiary’s compliance with any Corrupt Practices Law and there is no basis for any such audit, review, inspection, investigation, survey or examination of records, (iv) neither TAM nor any of its Subsidiaries has been or is now under any administrative, civil or criminal charge or indictment or, to the Knowledge of TAM, investigation alleging noncompliance with any Corrupt Practices Law nor, to the Knowledge of TAM, is there any basis for any such charge, indictment or investigation, and (v) neither TAM nor any of its Subsidiaries has been or is now a party to any administrative or civil litigation or proceeding alleging noncompliance with any Corrupt Practices Law nor, to the Knowledge of TAM, is there any basis for any such Action.

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SECTION 2.11.    Environmental Matters.  (a)  Except for those matters that, individually or in the aggregate, have not had and would not reasonably be expected to have a TAM Material Adverse Effect:  (i) TAM and its Subsidiaries have complied at all times with all applicable Environmental Laws; (ii) there have been no Releases of Hazardous Materials and Hazardous Materials are not otherwise present in, on, under, from or affecting any properties or facilities currently or formerly owned, leased or operated by TAM, any of its Subsidiaries or any predecessor of any of them; provided, however, that TAM may handle and transport dangerous goods as detailed in, and in accordance with, International Air Transport Association’s (“IATA”) Dangerous Goods Regulations; (iii) neither TAM nor any of its Subsidiaries nor, to the Knowledge of TAM, any other Person whose conduct could result in liability to TAM or any of its Subsidiaries has Released any Hazardous Materials at any other location; (iv) neither TAM nor any of its Subsidiaries nor, to the Knowledge of TAM, any predecessor of any of them is subject to Order of or with any Governmental Entity or any indemnity obligation or other Contract with any other Person relating to obligations or liabilities under Environmental Laws or concerning Hazardous Materials; (v) neither TAM nor any of its Subsidiaries has received any claim, notice or complaint, or is subject to any proceeding, relating to noncompliance with or liability under Environmental Laws or to Hazardous Materials, and no such matter has been threatened to the Knowledge of TAM; (vi) to the best knowledge of TAM, there are no other circumstances or conditions involving TAM or any of its Subsidiaries that could reasonably be expected to result in any claim, liability, investigation, cost or restriction on the ownership, use, or transfer of any property pursuant to any Environmental Law; and (vii) TAM has delivered to LAN copies of all environmental reports, studies, assessments, sampling data, analyses, memoranda and other environmental information in its possession relating to TAM or its Subsidiaries or their respective current and former properties, facilities or operations.

(b)         For the purposes of this Agreement, the following terms shall have the meanings assigned below:

(i)           “Environmental Laws” means any federal, state, local or foreign statute, Law or Order relating to:  (A) the protection, investigation or restoration of the environment, health, safety, or natural resources, (B) the handling, use, presence, disposal, release or threatened release of any Hazardous Materials or (C) noise, odor, indoor air, employee exposure, wetlands, pollution, contamination or any injury or threat of injury to Persons or property relating to any Hazardous Materials.

(ii)           “Hazardous Materials” means (A) petroleum, petroleum products and by-products, asbestos and asbestos-containing materials, urea formaldehyde foam insulation, electronic, medical or infectious wastes, polychlorinated biphenyls, radon gas, mold, radioactive substances, chlorofluorocarbons and all other ozone-depleting substances and (B) any other chemical, material, substance, waste, pollutant, contaminant or any dangerous goods generally that could result in liability under, or that is prohibited, limited or regulated by or pursuant to, any Environmental Law.

(iii)           “Release” means any spilling, leaking, pumping, pouring, emitting, placing, emptying, discharging, injecting, escaping, leaching, dumping, disposing or arranging for disposal or migrating into or through the environment or any natural or man-made structure.

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SECTION 2.12.    Labor and Employment Matters.   TAM and its Subsidiaries have complied in all material respects with all applicable labor, social security and health and safety Law in connection with all of the employees of TAM and its Subsidiaries.  The salaries and other compensation payable to the senior management and other employees of TAM and all of its Subsidiaries have been and are currently being paid in accordance with applicable Laws and all Contracts with any employees of TAM or any of its Subsidiaries.  As of the date of this Agreement, Section 2.12 of the TAM Disclosure Schedule sets forth a true and complete list of collective bargaining or other labor union Contracts applicable to any employees of TAM or any of its Subsidiaries.  Since December 31, 2006, there have been no strikes, work stoppages or lockouts by or with respect to any employee of TAM or any of its Subsidiaries, other than any such strikes, work stoppages or lockouts that, individually or in the aggregate, have not had and would not reasonably be expected to have a TAM Material Adverse Effect.  Neither TAM nor any of its Subsidiaries has breached or otherwise failed to comply with any provision of any collective bargaining or other labor union Contract applicable to any employees of TAM or any of its Subsidiaries, and there are no written grievances or written complaints outstanding or, to TAM’s Knowledge, threatened against TAM or any of its Subsidiaries under any such Contract other than any such breaches, failures to comply, grievances or complaints that, individually or in the aggregate, have not had and would not reasonably be expected to have a TAM Material Adverse Effect.  TAM has made available to LAN and its Representatives true and complete copies of all Contracts set forth in Section 2.12 of the TAM Disclosure Schedule, including all amendments applicable to such Contracts.  There are no illegal labor practice complaints or other material labor Actions pending against TAM or any of its Subsidiaries and, to TAM’s Knowledge, no circumstances exist that could be the legitimate basis of such complaint or Action except for any complaints or Actions that, individually or in the aggregate, have not had and would not reasonably be expected to have a TAM Material Adverse Effect.

SECTION 2.13.    Aircraft.  (a) Section 2.13(a)(i) of the TAM Disclosure Schedule sets forth a true and complete list of (i) all aircraft operated under the operating certificate of TAM or any of its Subsidiaries and (ii) all aircraft owned or leased by TAM or any of its Subsidiaries, in each case as of October 15, 2010 (collectively, the “TAM Aircraft”), including a description of the type and manufacturer serial number of each such aircraft.  Section 2.13(a)(ii) of the TAM Disclosure Schedule sets forth a true and complete list, as of the date of this Agreement, containing all Contracts (other than (x) existing aircraft leases or (y) Contracts that may be terminated or canceled by TAM or any of its Subsidiaries without incurring any penalty or other material liability except for the forfeiture of any previously made prepayment or deposit) pursuant to which TAM or any of its Subsidiaries has a binding obligation to purchase or lease aircraft (collectively, regardless of whether they are listed in the TAM Disclosure Schedule, the “TAM Aircraft Contracts”), including for each TAM Aircraft Contract the manufacturer and model of all aircraft subject thereto, the nature of the purchase or lease obligation (e.g., firm commitment, subject to reconfirmation or otherwise) and the anticipated year of delivery of each aircraft thereunder.  Except as identified in writing by TAM to LAN prior to the date of this Agreement, TAM has delivered or made available to LAN redacted (as to pricing and other commercially sensitive terms) copies of all TAM Aircraft Contracts, including all amendments, modifications and supplements thereto.

(b)         Except for any such matters that, individually or in the aggregate, have not had and would not reasonably be expected to have a TAM Material Adverse Effect:

(i)           each TAM Aircraft has a validly issued, current individual aircraft Certificate of Airworthiness and Nationality issued by ANAC and, if required by applicable Law, operation specifications approved by the FAA and the competent department of Paraguay with respect to such TAM Aircraft and all requirements for the effectiveness of each such certificate and operation specifications have been satisfied;

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(ii)           other than any grounded TAM Aircraft, each TAM Aircraft’s structure, systems and components are functioning in accordance with their respective intended uses as set forth in any applicable TAM Airline Regulatory Entity, manufacturer or otherwise contractually approved maintenance program (or are in the process of repair or maintenance), including any applicable manuals, technical standard orders or parts manufacturing approval certificates, and all grounded TAM Aircraft are being stored in accordance with any applicable TAM Airline Regulatory Entity, manufacturer or otherwise contractually approved maintenance program;

(iii)          all deferred maintenance items and temporary repairs with respect to each such TAM Aircraft have been or will be made materially in accordance with any applicable TAM Airline Regulatory Entity, manufacturer or otherwise contractually approved maintenance programs;

(iv)          each TAM Aircraft is properly registered on the aircraft registry of each applicable TAM Airline Regulatory Entity;

(v)           neither TAM nor any of its Subsidiaries is a party to any interchange or pooling agreements with respect to its TAM Aircraft, except for interchange or pooling agreements among TAM’s Subsidiaries, other than parts pooling agreements entered into in the ordinary course of business; and

(vi)          neither TAM nor any of its Subsidiaries has retained any maintenance obligations with respect to any TAM Aircraft that has been leased by TAM or any of its Subsidiaries to a third-party lessee.

(c)         Section 2.13(c)(i) of the TAM Disclosure Schedule sets forth a true and complete list, as of October 15, 2010, of all aircraft operated pursuant to a capacity purchase or prorate agreement (collectively, and regardless of whether they are listed in the TAM Disclosure Schedule, the “TAM Contract Flight Agreements”), including a description of the operator, type and number of each such aircraft and any minimum utilization requirements applicable to such aircraft.  Section 2.13(c)(ii) of the TAM Disclosure Schedule sets forth a true and complete list, as of the date of this Agreement, containing all TAM Contract Flight Agreements.  Except as identified in writing by TAM to LAN prior to the date of this Agreement, TAM has delivered or made available to LAN redacted (as to pricing and other commercially sensitive terms) copies of all TAM Contract Flight Agreements, including all amendments thereto.

(d)         Except for any such matters that, individually or in the aggregate, have not had and would not reasonably be expected to have a TAM Material Adverse Effect, to TAM’s Knowledge, as of the date of this Agreement there is no ongoing strike, work stoppage or lockout by or with respect to any employee of any counterparty to a TAM Contract Flight Agreement.

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SECTION 2.14.     TAM Slots and Operating Rights.  Section 2.14 of the TAM Disclosure Schedule sets forth a true, correct and complete list of all takeoff and landing slots, operating authorizations from any Governmental Entity and other similar designated takeoff and landing rights (collectively, “Slots”) used or held by TAM or any of its Subsidiaries (collectively, the “TAM Slots”) on the date of this Agreement at any domestic or international airport and such list indicates any TAM Slots that have been permanently allocated to another air carrier and in which TAM and its Subsidiaries hold only temporary use rights.  Except for any such matters that, individually or in the aggregate, have not had and would not reasonably be expected to have a TAM Material Adverse Effect, (a) each of TAM and its Subsidiaries has complied in all material respects with the requirements of all of the rules and regulations issued by any Governmental Entity and all Laws relating to the TAM Slots, (b) neither TAM nor any of its Subsidiaries has received any notice of any proposed withdrawal of any TAM Slots by any Governmental Entity, (c)(i) the TAM Slots have not been designated for the provision of essential air service under the regulations of the FAA, were not acquired pursuant to 14 C.F.R. Section 93.219 and have not been designated for international operations, as more fully detailed in 14 C.F.R. Section 93.217 and (ii) to the extent covered by 14 C.F.R. Section 93.227 or any order, notice or requirement of the FAA or any other Governmental Entity, TAM and its Subsidiaries have used the TAM Slots (or the TAM Slots have been used by other operators) either at least 80% of the maximum amount that each TAM Slot could have been used during each full reporting period (as described in 14 C.F.R. Section 93.227(i) or any such order, notice or requirement) or such greater or lesser amount of minimum usage as may have been required to protect such TAM Slot’s authorization from termination or withdrawal under regulations or waivers established by any Governmental Entity or airport authority, (d) all reports required by any Governmental Entity relating to the TAM Slots have been filed in a timely manner and (e) neither TAM nor any of its Subsidiaries has agreed to any future TAM Slot slide, TAM Slot trade (except for seasonal swaps), TAM Slot purchase, TAM Slot sale, TAM Slot exchange, TAM Slot lease or TAM Slot transfer of any of the TAM Slots that has not been consummated or otherwise reflected on Section 2.14 of the TAM Disclosure Schedule.

SECTION 2.15.     Major TAM Airports.  As of the date of this Agreement, no airport authority at International Airport of São Paulo – Guarulhos, Congonhas Airport – São Paulo or Santos Dumont Airport (each such airport, a “Major TAM Airport”) has taken or, to TAM’s Knowledge, threatened to take any action that would reasonably be expected to materially interfere with the ability of TAM and its Subsidiaries to conduct their respective operations at any Major TAM Airport in the same manner as currently conducted in all material respects.

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SECTION 2.16.    Employee Benefits.  (a)  Section 2.16(a) of the TAM Disclosure Schedule sets forth a list of all employee benefit plans and all profit-sharing plans, stock purchase, stock option, stock appreciation right, restricted stock, restricted stock unit, severance, employment, change-in-control, fringe benefit, collective bargaining, bonus, incentive, deferred compensation, employee loan and all other employee benefit plans, agreements, programs, policies or other arrangements maintained for the benefit of any current or former employee, independent consultant, officer or director of TAM or any of its Subsidiaries (collectively, “TAM Employees”) by TAM or its Subsidiaries or by any trade or business, whether or not incorporated (such plans, “TAM Benefit Plans”).  True and complete copies of all TAM Benefit Plans listed in Section 2.16(a) of the TAM Disclosure Schedule, including any trust instruments, insurance contracts, the most recent actuarial report and, with respect to any employee stock ownership plan, loan agreements forming a part of any TAM Benefit Plans, and all amendments thereto have been made available or provided to LAN.  All the obligations with respect to the TAM Benefit Plans granted to TAM Employees have been timely paid, and TAM and its Subsidiaries are not in default of any material obligations under the TAM Benefit Plans.  All benefits are being administered, in all material aspects, in accordance with their respective terms, and also comply, in all material aspects, with the provisions of applicable Law, as well as with IFRS.  There are no pending issues or Actions against TAM and its Subsidiaries involving these benefits, except for routine indemnity claims in respect of the benefits up to the date of execution of this Agreement.

(b)           With respect to each TAM Benefit Plan:  (i) no disputes are pending or threatened and (ii) neither TAM nor any of its Subsidiaries has incurred any current or projected liability in respect of post-employment or post-retirement health, medical or life insurance benefits for current, former or retired TAM Employees.

(c)           To the extent required by applicable Law or IFRS, all contributions required to be made under each TAM Benefit Plan, as of the date hereof, have been timely made and all obligations in respect of each TAM Benefit Plan have been properly accrued and reflected in the TAM Financial Reporting Documents.  There has been no amendment to, announcement by TAM or any of its Subsidiaries relating to, or change in employee participation or coverage under, any TAM Benefit Plan which would increase materially the expense of maintaining such plan above the level of the expense incurred therefor for the most recent fiscal year.  No TAM Benefit Plan exists that, as a result of the execution of this Agreement or the transactions contemplated by this Agreement (whether alone or in connection with any subsequent event(s)), could reasonably be expected to (i) entitle any TAM Employee to severance pay or any increase in severance pay upon any termination of employment after the date of this Agreement, (ii) accelerate the time of payment or vesting or result in any payment or funding (through a grantor trust or otherwise) of compensation, benefits or awards (including TAM Stock-Based Awards) under, increase the amount payable or result in any other material obligation pursuant to, any of the TAM Benefit Plans, (iii) limit or restrict the right of TAM or, after the consummation of the transactions contemplated hereby, LAN to merge, amend or terminate any of the Benefit Plans or (iv) cause TAM to record additional compensation expense on its income statement with respect to any outstanding stock option or other equity-based award.

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SECTION 2.17.    Taxes.  (a)  Each of TAM and its Subsidiaries has (i) timely filed all material Tax Returns required to be filed by any of them (taking into account applicable extensions) and all such Tax Returns were true, correct and complete in all material respects when filed, (ii) timely paid or accrued (in accordance with Brazilian Law) all material Taxes for all Tax periods whether or not shown to be due on such Tax Returns, and (iii) withheld from its employees, creditors or other third parties and, to the extent required to be paid, have timely paid to the appropriate Governmental Entities or set aside in an account for such purpose proper and accurate amounts in compliance with all Tax withholding provisions (including income, social security and employment Tax withholding for all types of compensation).

(b)           TAM has made available to LAN true and correct copies of the Corporate Economic and Tax Information Statement (DIPJ) and related Tax Returns filed by TAM and its Subsidiaries for each of the three most recent fiscal years.

(c)           There are no pending, and neither TAM nor any Subsidiary has received written notice of any, material national, local or foreign Tax audits or examinations of TAM or its Subsidiaries.  No material deficiency for any Taxes has been proposed, asserted or assessed against TAM or any Subsidiary that has not been resolved and paid in full.

(d)           There are no outstanding waivers to extend the statutory period of limitations applicable to the assessment of any material Taxes or material Tax deficiencies against TAM or any of its Subsidiaries.

(e)           Neither TAM nor any of its Subsidiaries is a party to any agreement providing for the allocation or sharing of Taxes.

(f)           No rulings (autos de infração) have been entered into or issued by any Tax authority with respect to TAM or any of its Affiliates.

(g)           There are no material Liens for Taxes upon the assets, properties or rights of TAM or any of its Subsidiaries that are not provided for in the TAM Financial Reporting Documents, except Liens for Taxes not yet due and payable and Liens for Taxes that are being contested in good faith, which contest, if determined adversely to TAM, would not individually or in the aggregate have or reasonably be expected to have a TAM Material Adverse Effect.

(h)           Neither TAM nor any of its Subsidiaries has been a member of an affiliated group filing a consolidated Corporate Economic and Tax Information Statement (other than a group in common with LAN), or has any liability for Taxes of any Person (other than TAM or its Subsidiaries), as a transferee or successor, by contract or otherwise.

(i)           There are no pending obligations or any non-compliance by TAM with respect to any tax installment programs or tax amnesties of TAM or any of its Subsidiaries.

(j)           Section 2.17(j) of the TAM Disclosure Schedule sets forth a current list of each partnership, joint venture and limited liability company in which TAM beneficially owns a material interest.

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(k)         For the purposes of this Agreement, the following terms shall have the meanings assigned below:

(i)           “Tax” means any and all taxes, charges, fees, levies or other assessments, including income, gross receipts, excise, real or personal property, sales, withholding, social security, occupation, use, service, service use, value added, license, net worth, payroll, franchise, transfer and recording taxes, fees and charges, imposed by the Federal Revenue Office (FRO) or any other taxing authority (whether domestic or foreign, including any state, local or foreign government or any subdivision or taxing agency thereof), whether computed on a separate, consolidated, unitary, combined or any other basis, and such term shall include any interest, penalties or additional amounts attributable to, or imposed upon, or with respect to, any such taxes, charges, fees, levies or other assessments.

(ii)           “Tax Return” means any report, return, document, declaration or other information or filing (including any attachments or schedules thereto and any amendments thereof) required to be supplied to any Person, Governmental Entity or jurisdiction (foreign or domestic) with respect to Taxes.

SECTION 2.18.    Intellectual Property.  (a)  Section 2.18(a) of the TAM Disclosure Schedule sets forth a true and complete list of all Intellectual Property owned by TAM or its Subsidiaries as of the date of this Agreement that is currently registered with or subject to a pending application for registration before any Governmental Entity or internet domain name registrar.  All of such Intellectual Property is owned exclusively by TAM or any of its Subsidiaries free and clear of any Liens, is subsisting and, to the Knowledge of TAM, is valid and enforceable, and is not subject to any outstanding order, judgment, decree or agreement adversely affecting TAM’s or any of its Subsidiaries’ use of, or its rights to, such Intellectual Property, except in the case of any Liens, failures to be subsisting, valid and enforceable, or any order, judgment, decree or agreement that, individually or in the aggregate, have not had and would not reasonably be expected to have a TAM Material Adverse Effect.

(b)           TAM and its Subsidiaries own or hold exclusive or non-exclusive licenses in or have sufficient rights to use all Intellectual Property used in their business as presently conducted, all of which rights shall survive unchanged the consummation of the transactions contemplated by this Agreement.

(c)           TAM and its Subsidiaries, as a result of the acquisition by its Subsidiary TAM Milor Táxi Aéreo, Representações, Marcas e Patentes S.A., exclusively owns all rights, title and interest in and to the “TAM” name and trademark and all goodwill associated therewith, free and clear of any Liens, all of which rights are subsisting and, to the Knowledge of TAM, valid and enforceable, and are not subject to any outstanding order, judgment, decree or agreement adversely affecting TAM’s or its Subsidiaries’ use thereof, or its rights thereto.

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(d)           TAM and its Subsidiaries have not granted any licenses or other rights to third parties to use their Intellectual Property other than non-exclusive licenses granted in the ordinary course of business pursuant to standard terms which have been previously provided to LAN.  Consummation of the transactions contemplated by this Agreement will not create any license under or Liens on any Intellectual Property owned by TAM or its Subsidiaries.

(e)           To the Knowledge of TAM, the conduct of business as currently conducted by TAM and its Subsidiaries does not infringe, misappropriate or otherwise violate the Intellectual Property rights of any Person, and since December 31, 2006 there has been no such claim, action or proceeding asserted or, to TAM’s Knowledge, threatened against TAM or any of its Subsidiaries or any Person seeking indemnity therefor from TAM or any of its Subsidiaries, in each case other than any such matters that, individually or in the aggregate, have not had and would not reasonably be expected to have a TAM Material Adverse Effect.  There is no claim, action or proceeding pending or, to the Knowledge of TAM, threatened against TAM or any of its Subsidiaries or any indemnitee thereof concerning the ownership, validity, registerability, enforceability, infringement, use or licensed right to use any Intellectual Property rights claimed to be owned by TAM or any of its Subsidiaries or used or alleged to be used in the business of TAM or any of its Subsidiaries other than any such claims, actions or proceedings that, individually or in the aggregate, have not had and would not reasonably be expected to have a TAM Material Adverse Effect.  To the Knowledge of TAM, no Person is infringing, misappropriating or otherwise violating in any material manner the Intellectual Property rights owned by TAM or any of its Subsidiaries.

(f)           The IT Assets used by TAM and its Subsidiaries in the operation of their respective businesses (i) perform sufficiently as required by TAM and its Subsidiaries for the operation of their respective businesses as currently conducted and (ii) since December 31, 2008 have not malfunctioned or failed, other than any such failures to operate and perform or any such malfunctions or failures that, individually or in the aggregate, have not had and would not reasonably be expected to have a TAM Material Adverse Effect.  Since December 31, 2006, TAM and its Subsidiaries have maintained backup and disaster recovery technologies that is reasonable and consistent with industry practices in all material respects.

SECTION 2.19.    Information Supplied.  None of the information supplied or to be supplied by or on behalf of TAM or any of its Subsidiaries specifically for inclusion or incorporation by reference into (i) the Form F-4 will, at the time the Form F-4 is filed with the SEC and at the time it becomes effective under the U.S. Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading or (ii) the Schedule TO or the offer to exchange/prospectus included in the Form F-4 (as amended or supplemented from time to time, the “Offer to Exchange/Prospectus”) or the Brazilian Exchange Offer Documents will, at the date on which the Offer to Exchange/Prospectus and the Brazilian Exchange Offer Documents are first distributed to the holders of Free Float Shares (the “Distribution Date”), contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading.  The Offer to Exchange/Prospectus and the Brazilian Exchange Offer Documents will, on the Distribution Date, comply as to form in all material respects with the requirements of applicable Law; provided, however, that the foregoing representation and warranty shall not apply with respect to any information supplied by or on behalf of LAN or any of its Subsidiaries which is contained or incorporated by reference into the Offer to Exchange/Prospectus or the Brazilian Exchange Offer Documents.

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SECTION 2.20.    Voting Requirements.  The Requisite TAM Shareholder Approval is the only vote of the holders of any class or series of capital stock of TAM necessary to approve the transactions contemplated by this Agreement and the other Transaction Agreements other than any additional vote that may be required by the CVM or the Bovespa.  The Requisite Sister Holdco Shareholder Approval is the only vote of the holders of any class or series of capital stock of Sister Holdco necessary to approve the Mergers and the other transactions contemplated by this Agreement and the other Transaction Agreements other than any additional vote that may be required by the SVS.  The Requisite Holdco 2 Shareholder Approval is the only vote of the holders of any class or series of capital stock of Holdco 2 necessary to approve the Mergers and the other transactions contemplated by this Agreement and the other Transaction Agreements other than any additional vote that may be required by SVS.

SECTION 2.21.    Affiliate Transactions.  There are no transactions, Contracts, arrangements, commitments or understandings between TAM or any of its Subsidiaries, on the one hand, and any of their Affiliates (other than TAM or any of its Subsidiaries), on the other hand, that would be required to be disclosed by TAM under Item 404 of Regulation S-K under the Securities Act.

SECTION 2.22.    Brokers and Other Advisors.  No broker, investment banker, financial advisor or other Person (other than BTG Pactual) is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of TAM or any of its Subsidiaries.  TAM has shown to LAN complete and accurate copies of all Contracts under which any such fees or expenses are payable and all indemnification and other Contracts related to the engagement of the Persons to whom such fees are payable.

SECTION 2.23.    Fairness Opinion.  Prior to the execution of this Agreement, the TAM Board received the oral opinion (which was subsequently confirmed in writing) of BTG Pactual to the effect that, as of the date thereof and based upon and subject to the matters and limitations set forth in such written opinion, each of the Holdco 2 Exchange Ratio and the Sister Holdco Exchange Ratio is fair from a financial point of view to TAM.  Such opinion has not been amended or rescinded as of the date of this Agreement.    TAM shall deliver to LAN a copy of the written opinion of BTG Pactual for informational purposes only promptly following receipt thereof.

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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF LAN

Except as set forth in the LAN Financial Reporting Documents filed with the SEC or the SVS, as the case may be, and made publicly available after December 31, 2009 and prior to the date of this Agreement (excluding, in each case, any disclosures set forth in any risk factor section or in any other section to the extent that they are forward-looking statements or cautionary, predictive or forward-looking in nature) or in the corresponding sections or subsections of the disclosure letter delivered by LAN to TAM not less than 24 hours prior to entering into this Agreement (the “LAN Disclosure Schedule”) (it being agreed that (i) the disclosure of any fact or item in any section or subsection of the LAN Disclosure Schedule whose relevance to any other section or subsection of this Agreement is reasonably apparent from the face of such disclosure shall also be deemed to be disclosed in the section or subsection of the LAN Disclosure Schedule that corresponds to such other section or subsection of this Agreement and (ii) the exclusion with respect to the LAN Financial Reporting Documents shall not apply to Section 3.03, Section 3.06(a) or Section 3.06(b)), LAN hereby represents and warrants to TAM as follows:

SECTION 3.01.    Organization, Standing and Corporate Power; Subsidiaries.  (a) Each of LAN and its Subsidiaries has been duly organized and is validly existing and (with respect to jurisdictions that recognize such concept) in good standing under the Laws of the jurisdiction of its incorporation or organization, as the case may be, and has all requisite power and authority and possesses all governmental licenses, permits, authorizations and approvals necessary to enable it to own, lease or otherwise hold and use its properties, rights and other assets and to carry on its business and operations as currently conducted, other than any such failures to have such power, authority, governmental licenses, permits, authorizations or approvals or any such failures of Subsidiaries of LAN to be duly organized, validly existing or in good standing, that, individually or in the aggregate, have not had and would not reasonably be expected to have a LAN Material Adverse Effect.  Each of LAN and its Subsidiaries is duly qualified or licensed to do business and (with respect to jurisdictions that recognize such concept) is in good standing in each jurisdiction in which the nature of its business or operations or its ownership, leasing, holding or use of its properties, rights or other assets makes such qualification, licensing or good standing necessary, other than any such failures to be so qualified, licensed or in good standing that, individually or in the aggregate, have not had and would not reasonably be expected to have a LAN Material Adverse Effect.  Each of LAN and its Airline Affiliates is an air carrier duly authorized to act as such by the Governmental Entity of competent jurisdiction with which it holds its operating authority.

(b)           Section 3.01(b) of the LAN Disclosure Schedule lists, as of the date of this Agreement, each of LAN’s “significant subsidiaries,” as such term is defined in Section 1-02 of Regulation S-X promulgated by the SEC.  All of the Equity Securities and Convertible Securities of each Subsidiary of LAN are owned of record and beneficially, directly or indirectly, by LAN.  All the issued and outstanding Equity Securities of each Subsidiary of LAN have been validly issued and are fully paid and nonassessable and are owned of record and beneficially, directly or indirectly, by LAN free and clear of all Liens and free of any restriction on the right to vote, sell or otherwise dispose of such Equity Securities.  Except for the Equity Securities of the Subsidiaries of LAN, LAN does not own, directly or indirectly, any Equity Securities or Convertible Securities of any Person.

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SECTION 3.02.    By-laws.  LAN has made available to TAM, prior to the date of this Agreement, a complete and accurate copy of the by-laws of LAN (the “LAN By-laws”) in the form attached as Exhibit 6 and the by-laws or comparable organizational documents of each of LAN’s “significant subsidiaries,” as such term is defined in Section 1-02 of Regulation S-X promulgated by the SEC (collectively, the “LAN Subsidiary By-laws”), in each case as amended to the date of this Agreement.  Each of the LAN By-laws and the LAN Subsidiary By-laws is in full force and effect and no other organizational documents are applicable to, or binding upon, LAN or any Subsidiary of LAN.

SECTION 3.03.    Capitalization.  (a)  The authorized capital stock of LAN consists of 341 million shares of LAN Common Stock.  At the close of business on January 18, 2011 (the “LAN Capitalization Date”):

(i)           338,790,909 shares of LAN Common Stock were issued and outstanding and no shares of LAN Common Stock were held by LAN in its treasury; and

(ii)          2,209,091 shares of LAN Common Stock were reserved and available for issuance pursuant to outstanding options to purchase LAN Common Stock (whether vested or unvested, exercisable or unexercisable) (collectively, the “LAN Stock Options”).

Section 3.03(a) of the LAN Disclosure Schedule contains a correct and complete list as of the date of this Agreement of all of the outstanding LAN Stock Options issued under a resolution passed by the board of directors of LAN on November 5, 2009 (the “LAN Stock Plans”), including the date of grant, vesting terms, term, number of shares of LAN Common Stock issuable upon exercise and the exercise price per share of LAN Common Stock.

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(b)           Except as set forth above in Section 3.03(a), at the close of business on the LAN Capitalization Date, no Equity Securities or Convertible Securities of LAN were issued, reserved for issuance or outstanding.  At the close of business on the LAN Capitalization Date, (i) no shares of LAN Common Stock were owned by any Subsidiary of LAN and (ii) there were no outstanding stock options, stock appreciation rights, “phantom” stock rights, performance units, rights to receive shares of LAN Common Stock or any other Equity Securities of LAN on a deferred basis or other rights that are linked to the value of the shares of LAN Common Stock or any other Equity Securities of LAN (collectively, “LAN Stock-Based Awards”) other than the LAN Stock Options specified in Section 3.03(a).  All outstanding shares of LAN Common Stock are, and all shares of LAN Common Stock which may be issued pursuant to the LAN Stock Options will be, when issued in accordance with the terms thereof, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights.  There are no bonds, debentures, notes or other Indebtedness of LAN having the right to vote (or convertible into, or exercisable or exchangeable for, securities having the right to vote) with the shareholders of LAN on any matters.  Except as set forth above in Section 3.03(a) and for issuances of shares of LAN Common Stock issuable pursuant to the LAN Stock Options specified in Section 3.03(a) or as may otherwise be permitted under the Implementation Agreement, (x) there are not issued, reserved for issuance or outstanding (A) any Equity Securities of LAN or any of its Subsidiaries, (B) any Convertible Securities of LAN or any of its Subsidiaries, (C) any obligations of LAN or any of its Subsidiaries to issue any Equity Securities or Convertible Securities of LAN or any of its Subsidiaries or (D) any LAN Stock-Based Awards and (y) there are not any outstanding obligations of LAN or any of its Subsidiaries to repurchase, redeem or otherwise acquire any Equity Securities or Convertible Securities of LAN or any of its Subsidiaries or to issue, deliver or sell, or cause to be issued, delivered or sold, any such securities, and neither LAN nor any of its Subsidiaries is a party to any voting Contract with respect to the voting of any such securities.

(c)           Each LAN Stock Option was properly accounted for on the books and records of LAN and qualifies for the Tax and accounting treatment afforded thereto in LAN’s Tax Returns and financial statements, respectively.  Each grant of LAN Stock Options was made in accordance with the terms of the applicable LAN Stock Plan and any applicable Law and regulatory rules or requirements and has a grant date identical to the date on which it was actually granted or awarded by LAN’s board of directors or the compensation committee thereof.  The per share exercise price of each LAN Stock Option was determined in accordance with the applicable LAN Stock Plan.

SECTION 3.04.    Authority.  LAN has all requisite corporate power and authority to execute, deliver and perform this Agreement and the other Transaction Agreements to which it is a party and to consummate the transactions contemplated hereby and thereby; provided, however, that LAN shall not have the power and authority to consummate the Mergers unless and until the holders of at least two-thirds of the outstanding shares of LAN Common Stock vote to approve the Mergers and the other transactions contemplated by this Agreement at a duly called and held meeting of the shareholders of LAN (such approval, the “Requisite LAN Shareholder Approval”).  The execution, delivery and performance of this Agreement and such other Transaction Agreements by LAN and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of LAN other than the Requisite LAN Shareholder Approval and no other corporate proceedings on the part of LAN or its shareholders other than the Requisite LAN Shareholder Approval are necessary to authorize this Agreement and such other Transaction Agreements or to consummate the transactions contemplated hereby and thereby.  This Agreement and the other Transaction Agreements to which LAN is a party have been duly executed and delivered by LAN and constitute legal, valid and binding obligations of LAN, enforceable against LAN in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or similar Law of general applicability relating to or affecting the rights of creditors and to the availability of equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at Law).  The board of directors of LAN (the “LAN Board”) has unanimously, by resolutions duly adopted at a meeting duly called and held, approved this Agreement, the other Transaction Agreements, the Mergers and the other transactions contemplated by this Agreement and the other Transaction Agreements subject to receipt of the Requisite LAN Shareholder Approval, which resolutions have not as of the date of this Agreement been subsequently rescinded, modified or withdrawn in any way.

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SECTION 3.05.    No Conflict; Required Filings and Consents.  (a)  The execution and delivery of this Agreement and the other Transaction Agreements to which LAN is a party by LAN do not, and the performance of this Agreement and the other Transaction Agreements by LAN and consummation of the transactions contemplated by this Agreement and the other Transaction Agreements will not, conflict with, or result in any violation or breach of, or default (with or without notice, lapse of time or both) under, or result in any termination or modification of or acceleration under, or any change in any right, obligation or benefit under, or result in any Lien on any property or assets of LAN or any of its Subsidiaries pursuant to, (i) the LAN By-laws or any LAN Subsidiary By-laws, (ii) any Contract to which LAN or any of its Subsidiaries is a party or by which any of them or any of their respective properties, rights or other assets is bound or subject or (iii) assuming the consents, approvals, filings and other matters referred to in Section 3.05(b) are duly obtained or made, any Law or Order applicable to LAN, any of its Subsidiaries or their respective properties, rights or other assets, other than, in the case of clause (ii), any such conflicts, violations, breaches, defaults, terminations, modifications, accelerations, changes or Liens that, individually or in the aggregate, would not reasonably be expected to have a LAN Material Adverse Effect.

(b)           The execution, delivery and performance of this Agreement and and the other Transaction Agreements to which LAN is a party by LAN, the consummation of the transactions contemplated hereby and thereby and the continuing operation of the businesses of LAN and its Subsidiaries after the Effective Time do not and will not require any consent, approval, order, authorization or permit of, action by, filing or registration with or notification to any Governmental Entity other than (i) any application, filing or submission required to be made and any consent, approval, authorization or authority required to be made or obtained under the Brazilian Aeronautical Code, the Chilean Aeronautical Code, Title 49 of the U.S. Code or under any regulation, rule, order, notice or policy of ANAC, DGAC, JAC, the FAA, the DOT, the FCC and the DHS, including the TSA, and any similar Governmental Authority in the E.U., (ii) the filing of the Schedule TO, the Form F-4 and the other Exchange Offer Documents and the Schedule 14D-9 with the SEC, the declaration of effectiveness of the Form F-4 by the SEC, and the filing with the SEC of such reports under, and such other compliance with, the U.S. Securities Laws in connection with the Exchange Offer and Mergers, (iii) the filing of the Formulário de Referência of LAN with the CVM, the Brazilian Exchange Offer Documents with the CVM, the Level II BDR Program for the LAN BDRs with the CVM and the Bovespa and the filings with the SVS and the SSE in connection with the Exchange Offer and the Mergers, (iv) any notices, filings or approvals under the competition, merger control, antitrust or similar Law listed in Section 3.05(b) of the LAN Disclosure Schedule, (v) such filings and approvals as are required to be made or obtained under the securities or “blue sky” laws of various states of the United States in connection with the Exchange Offer and Mergers, (vi) any consent, approval, order, authorization, authority, transfer, waiver, disclaimer, registration, declaration or filing required to be made or obtained from any other Governmental Entity that regulates any aspect of airline operations or business, including environmental (e.g., noise, air emissions and water quality), aircraft, air traffic control and airport communications, agricultural, export/import, immigration and customs (collectively with the Governmental Entities referred to in clause (i) above, the “LAN Airline Regulatory Entities”), (vii) any filings required under the rules and regulations of the SSE or the NYSE (together with the SSE, the “LAN Stock Exchanges”) or the Bovespa and (viii) such other consents, approvals, orders, authorizations, permits, actions, notifications, registrations, declarations and filings which, if not obtained or made, individually or in the aggregate, would not reasonably be expected to have a LAN Material Adverse Effect.

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SECTION 3.06.    LAN Financial Reporting Documents; Financial Statements; No Undisclosed Liabilities.  (a)  LAN has filed or furnished, as applicable, on a timely basis, all reports, schedules, forms, statements, certifications and other documents (including exhibits and other information incorporated therein) with or to, as applicable, the SVS or the SEC that were required to be so filed or furnished by LAN since December 31, 2006 (such documents, together with any documents so filed or furnished during such period by LAN on a voluntary basis, the “LAN Financial Reporting Documents”).  On the date on which it was filed with or furnished to the SVS or the SEC, as the case may be, each LAN Financial Reporting Document so filed or furnished prior to the date of this Agreement complied in all material respects with the applicable requirements of the U.S. Securities Laws or other applicable securities Laws, and on the date on which it will be filed with or furnished to the SVS or the SEC, as the case may be, each LAN Financial Reporting Document so filed or furnished on or after the date of this Agreement will comply in all material respects with such requirements.  On the date on which it was filed with or furnished to the SVS or the SEC, as the case may be, no LAN Financial Reporting Document so filed or furnished prior to the date of this Agreement contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.  On the date on which it will be filed with or furnished to the SVS or the SEC, as the case may be, no LAN Financial Reporting Document so filed or furnished on or after the date of this Agreement will contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.  Since December 31, 2006, LAN has complied in all material respects with all applicable requirements of the U.S. Securities Laws or other applicable securities Law, including the Sarbanes-Oxley Act, and the rules and regulations thereunder with respect thereto, and the LAN Stock Exchanges.

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(b)           Each of the consolidated statements of financial position included in or incorporated by reference into the LAN Financial Reporting Documents fairly presents, or in the case of LAN Financial Reporting Documents filed with or furnished to the SVS or the SEC, as the case may be, on or after the date of this Agreement, will fairly present, in each case in all material respects, the consolidated financial position of LAN as of its date and each consolidated statement of income by function, consolidated statement of comprehensive income by function, statement of changes in net equity and consolidated statement of net cash flows, included in or incorporated by reference in the LAN Financial Reporting Documents fairly presents, or in the case of LAN Financial Reporting Documents filed with or furnished to the SVS or the SEC, as the case may be, on or after the date of this Agreement, will fairly present, in each case in all material respects, the results of their operations, comprehensive income by function, changes in net equity and net cash flows, respectively, for the periods covered thereby (subject, in the case of unaudited statements, to notes and normal year-end audit adjustments that will not be material in amount or effect), and each of the foregoing financial statements was prepared or, in the case of LAN Financial Reporting Documents filed with or furnished to the SVS or the SEC, as the case may be, on or after the date of this Agreement other than those prepared under the generally acceptable accounting principles in Chile and those reconciled to the generally acceptable accounting principles in the United States until December 31, 2008, will be prepared, in accordance with IFRS as issued by the IASB applied on a consistent basis.  To LAN’s Knowledge, there is no applicable accounting rule, consensus or pronouncement that has been adopted by the SVS or the SEC, as the case may be, the IASB or any similar body as of, but is not in effect as of, the date of this Agreement that, if implemented, would reasonably be expected to have a LAN Material Adverse Effect (it being agreed that for purposes of this Section 3.06(b), effects resulting from or arising in connection with the matters set forth in clause (c) of the definition of the term “LAN Material Adverse Effect” shall not be excluded in determining whether a LAN Material Adverse Effect would reasonably be expected to occur).

(c)           Each of LAN and its Subsidiaries has timely filed all submissions, reports, registrations, schedules, forms, statements and other documents, together with any amendments required to be made with respect thereto, that they were required to file since December 31, 2006 with the SVS, any LAN Stock Exchange, any LAN Airline Regulatory Entity and any other non-U.S. Governmental Entity, and has paid all fees and assessments due and payable in connection therewith, in each case, other than any failures to file such reports, registrations, schedules, forms, statements or other documents, or to pay such fees and assessments, that individually or in the aggregate, have not had and would not reasonably be expected to have a LAN Material Adverse Effect.

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(d)           Neither LAN nor any of its Subsidiaries has any liability or obligation of any nature (whether accrued, absolute, contingent or otherwise), other than those (i) reflected, reserved for or disclosed in the most recent balance sheet of LAN included in LAN’s Annual Report on Form 20-F for the year ended December 31, 2009, as filed with the SEC prior to the date of this Agreement, (ii) incurred in the ordinary course of business consistent with past practice since December 31, 2009, (iii) incurred pursuant to the transactions contemplated in this Agreement or the Implementation Agreement, or (iv) that, individually or in the aggregate, have not had and would not reasonably be expected to have a LAN Material Adverse Effect.  Neither LAN nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture, off-balance sheet partnership or any similar Contract or arrangement (including any Contract or arrangement relating to any transaction or relationship between or among LAN and any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, including any structured finance, special purpose or limited purpose entity or Person, on the other hand, or any “off-balance sheet arrangement” (as defined in Item 303(a) of Regulation S-K of the SEC)), where the result, purpose or intended effect of such Contract or arrangement is to avoid disclosure of any material transaction involving, or material liabilities of, LAN or any of its Subsidiaries in the financial statements of LAN or any of its Subsidiaries or the LAN Financial Reporting Documents.  None of LAN’s Subsidiaries are, or have at any time since January 1, 2006 been, subject to the reporting requirements of Section 13(a) or 15(d) of the U.S. Exchange Act.

(e)           LAN and its Subsidiaries maintain disclosure controls and procedures required by Rule 13a-15 or 15d-15 under the U.S. Exchange Act.  Such disclosure controls and procedures are effective to ensure that information required to be disclosed by LAN is recorded and reported on a timely basis to the individuals responsible for the preparation of LAN’s filings with the SEC and other public disclosure documents.  LAN and its Subsidiaries maintain internal control over financial reporting (as defined in Rule 13a-15 or 15d-15, as applicable, under the U.S. Exchange Act).  Such internal control over financial reporting is effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS and includes policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of LAN and its consolidated Subsidiaries, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that receipts and expenditures of LAN and its consolidated Subsidiaries are being made only in accordance with authorizations of management and directors of LAN and its consolidated  Subsidiaries, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the assets of LAN and its consolidated Subsidiaries that could have a material effect on its financial statements.  LAN has disclosed, based on its most recent evaluation prior to the date of this Agreement, to LAN’s auditors and the audit committee of LAN’s board of directors (A) any significant deficiencies or material weaknesses in the design or operation of its internal controls over financial reporting that are reasonably likely to adversely affect LAN’s ability to record, process, summarize and report financial information and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in LAN’s internal control over financial reporting.  LAN has made available to TAM (i) a summary of any such disclosure made by management to LAN’s auditors and audit committee since January 1, 2006 and (ii) any communication since January 1, 2006 made by management or LAN’s auditors to the audit committee required or contemplated by listing standards of the LAN Stock Exchanges, the audit committee’s charter or professional standards of the IASB or Public Company Accounting Oversight Board.

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(f)           Since December 31, 2006, no material complaints from any source regarding accounting, internal controls or auditing matters, and no concerns from employees of LAN or any of its Subsidiaries regarding questionable accounting or auditing matters, have been received by LAN or any of its Subsidiaries.  LAN has made available to TAM a summary of all material complaints or concerns relating to other matters made since December 31, 2006 through LAN’s whistleblower hot-line or equivalent system for receipt of employee concerns regarding possible violations of Law.  No attorney representing LAN or any of its Subsidiaries, whether or not employed by LAN or any of its Subsidiaries, has reported evidence of a violation of securities Laws, breach of fiduciary duty or similar violation by LAN or any of its officers, directors, employees or agents to LAN’s chief legal officer, the audit committee (or other committee designated for the purpose) of the board of directors of LAN or the board of directors of LAN pursuant to the rules adopted pursuant to Section 307 of the Sarbanes-Oxley Act or any LAN policy contemplating such reporting, including in instances not required by those rules.

SECTION 3.07.    Absence of Certain Changes or Events.  (i) Since December 31, 2009, there has not been any change in the business, results of operations, financial condition, assets or liabilities of LAN and its Subsidiaries, taken as a whole, or any other change, event, condition, development or occurrence (including any adverse change or development with respect to any such matters that existed on or prior to December 31, 2009) that, individually or in the aggregate, has had or would reasonably be expected to have a LAN Material Adverse Effect and (ii) since December 31, 2009, (A) each of LAN and its Subsidiaries has conducted its business in the ordinary course consistent with past practice and (B) neither LAN nor any of its Subsidiaries has taken any action which, if taken after the date of this Agreement, would require the consent of TAM under the Implementation Agreement.

SECTION 3.08.    Litigation.  Except for any such matters that, individually or in the aggregate, have not had and would not reasonably be expected to have a LAN Material Adverse Effect:  (a) there are no Actions pending or, to the Knowledge of LAN, threatened against LAN or any of its Subsidiaries, (b) neither LAN nor any of its Subsidiaries nor any of their respective properties, rights or assets is subject to, or bound by, any Order, and (c) there are no inquiries or investigations by any Governmental Entity or any whistle-blower complaints pending or, to the Knowledge of LAN, threatened against LAN or any of its Subsidiaries.

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SECTION 3.09.    Material Contracts.  (a)  As of the date of this Agreement, neither LAN nor any of its Subsidiaries is a party to or bound by any Contract (i) that is a “material contract” (as defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this Agreement that has not been filed as such in a LAN Financial Reporting Document prior to the date of this Agreement; (ii) that limits or purports to limit in any material respect any type or line of business in which LAN or any of its Subsidiaries (including, after giving effect to the Mergers, TAM or any of its Subsidiaries) may engage or any manner or locations in which any of them may so engage in any business; (iii) that is a(n) (A) alliance or other brand alliance agreement, (B) code sharing agreement, (C) frequent flyer participation agreement, (D) capacity purchase or similar agreement, (E) cooperation, joint venture, partnership, profit or revenue sharing agreement, (F) special prorate agreement or (G) interlining agreement with any air carrier  (including all material amendments to each of the foregoing agreements), in each case that is material to the business, financial condition, results of operations or prospects of LAN and its Subsidiaries, taken as a whole; (iv) pursuant to which any Indebtedness of LAN or any of its Subsidiaries in excess of $50 million is outstanding or may be incurred that has not been filed in a LAN Financial Reporting Document prior to the date of this Agreement; (v) that involves or could reasonably be expected to involve aggregate payments by or to LAN and/or its Subsidiaries in excess of $30 million in any twelve-month period, except for any Contract that may be canceled without penalty or termination payments by LAN and/or its Subsidiaries upon notice of 60 days or less; (vi) any aircraft purchase agreement, engine purchase agreement or engine maintenance agreement that involves or is reasonably expected to involve aggregate payments by or to LAN or any of its Subsidiaries in excess of $30 million in any twelve-month period; or (vii) pursuant to which it is licensed to use Intellectual Property of a third party that is material to the operation of its business, or licenses to a third party rights in the Intellectual Property it owns.  Each such Contract described in clauses (i) through (vii) (whether or not disclosed in the LAN Disclosure Schedule) is referred to herein as a “LAN Material Contract.”

(b)           Each LAN Material Contract is, and after the consummation of the transactions contemplated by this Agreement and the Implementation Agreement will continue to be, a valid and binding obligation of LAN and its Subsidiaries (to the extent they are parties thereto or bound thereby) enforceable against LAN and, to LAN’s Knowledge, each other party thereto in accordance with its terms and is in full force and effect, and each of LAN and its Subsidiaries (to the extent they are party thereto or bound thereby) and, to LAN’s Knowledge, each other party thereto has performed in all material respects all obligations required to be performed by it under each LAN Material Contract.  Neither LAN nor any of its Subsidiaries has received notice, nor does it have Knowledge, of any material violation or default in respect of any material obligation under (or any condition which with the passage of time or the giving of notice or both would result in such a violation or default), or any intention to cancel, terminate, change the scope of rights and obligations under or not to renew, any LAN Material Contract.

(c)           Section 3.09(c) of the LAN Disclosure Schedule sets forth a true and complete list of all (i) alliance or brand alliance agreements, (ii) code sharing agreements, (iii) frequent flyer participation agreements, (iv) capacity purchase or similar agreements, (v) cooperation, joint venture, partnership, profit or revenue sharing agreements, (vi) special prorate agreements and (vii) interlining agreements with any air carrier to which LAN or any of its Subsidiaries is a party or is otherwise bound.

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SECTION 3.10.    Licenses; Compliance with Laws.  (a)  Section 3.10(a) of the LAN Disclosure Schedule sets forth a true and complete list of all of its (i) operating certificates, including the issuing Governmental Entity, date of issuance and date of expiration, and (ii) air traffic rights, including the issuing Governmental Entity, date of issuance and date of expiration, for both scheduled and non-scheduled operations of each of LAN and its Subsidiaries in effect as of the date of this Agreement.

(b)           Each of LAN and its Subsidiaries has in effect all Licenses necessary for it to own, lease or operate its properties, rights and other assets and to carry on its business and operations as currently conducted (collectively, the “LAN Licenses”).  Each of LAN and its Subsidiaries is, and since December 31, 2006 has been, in compliance with (i) its obligations under each LAN License applicable to it and (ii) the rules and regulations of the Governmental Entity which issued such LAN License, in each case other than any failures to be in such compliance that, individually or in the aggregate, have not had and would not reasonably be expected to have a LAN Material Adverse Effect.  There is not pending nor, to LAN’s Knowledge, threatened by or before any Governmental Entity any material proceeding, notice of violation, order of forfeiture or complaint or investigation against LAN or any of its Subsidiaries relating to any LAN License, other than any such proceedings, notices, orders, complaints or investigations that, individually or in the aggregate, have not had and would not reasonably be expected to have a LAN Material Adverse Effect.  No action of any Governmental Entity in granting any LAN License has been reversed, stayed, enjoined, annulled or suspended, and there is not pending or, to LAN’s Knowledge, threatened, any material application, petition, objection or other pleading with any Governmental Entity that challenges or questions the validity of, or any rights of the holder under, any LAN License, in each case other than any such action, application, petition, objection or pleading that, individually or in the aggregate, has not had and would not reasonably be expected to have a LAN Material Adverse Effect.  The consummation of the Exchange Offer and/or Mergers will not cause, and there is no basis for, any revocation, modification, cancelation or transfer of any LAN Licenses that, individually or in the aggregate, would reasonably be expected to have a LAN Material Adverse Effect.

(c)           Except for those matters that, individually or in the aggregate, have not had and would not reasonably be expected to have a LAN Material Adverse Effect, (i) each of LAN and its Subsidiaries is, and since December 31, 2006 has been, in compliance with all applicable Laws and Orders and all applicable operating certificates, air carrier obligations, airworthiness directives, aviation regulations and other rules, regulations, directives, orders and policies of any LAN Airline Regulatory Entity applicable to it, its properties, rights or other assets or its businesses or operations and (ii) to LAN’s Knowledge, none of the officers, directors, or agents (in their capacity as such) of LAN or any of its Subsidiaries is, or since December 31, 2006 has been, in violation of any Law applicable to its properties, rights or other assets or its businesses or operations relating to (A) the use of corporate funds for political activity or for the purpose of obtaining or retaining business, (B) payments to government officials from corporate funds, or (C) bribes, rebates, payoffs, influence payments, kickbacks or the provision of similar benefits.  No investigation or review by any Governmental Entity with respect to LAN or any of its Subsidiaries is pending or, to LAN’s Knowledge, threatened, nor has any Governmental Entity indicated an intention to conduct the same, other than any such investigations or reviews that, individually or in the aggregate, have not had and would not reasonably be expected to have a LAN Material Adverse Effect.

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(d)           Each of LAN and its Subsidiaries is, and since December 31, 2006 has been, in compliance in all material respects with all applicable Corrupt Practices Laws.  Since December 31, 2006, (i) neither LAN nor any of its Subsidiaries has made any voluntary disclosure of any actual or alleged violation or breach of any Corrupt Practices Law, (ii) no Governmental Entity has notified LAN or any of its Subsidiaries in writing of any actual or alleged violation or breach of any Corrupt Practices Law, (iii) to the Knowledge of LAN, neither LAN nor any of its Subsidiaries has undergone or is undergoing any audit, review, inspection, investigation, survey or examination of records, in each case conducted by a Governmental Entity and relating to LAN’s or any of its Subsidiary’s compliance with any Corrupt Practices Law and there is no basis for any such audit, review, inspection, investigation, survey or examination of records, (iv) neither LAN nor any of its Subsidiaries has been or is now under any administrative, civil or criminal charge or indictment or, to the Knowledge of LAN, investigation alleging noncompliance with any Corrupt Practices Law nor, to the Knowledge of LAN, is there any basis for any such charge, indictment or investigation, and (v) neither LAN nor any of its Subsidiaries has been or is now a party to any administrative or civil litigation or proceeding alleging noncompliance with any Corrupt Practices Law nor, to the Knowledge of LAN, is there any basis for any such Action.

SECTION 3.11.    Environmental Matters.  Except for those matters that, individually or in the aggregate, have not had and would not reasonably be expected to have a LAN Material Adverse Effect:  (i) LAN and its Subsidiaries have complied at all times with all applicable Environmental Laws; (ii) there have been no Releases of Hazardous Materials and Hazardous Materials are not otherwise present in, on, under, from or affecting any properties or facilities currently or formerly owned, leased or operated by LAN, any of its Subsidiaries or any predecessor of any of them; provided, however, that LAN may handle and transport dangerous goods as detailed in, and in accordance with, IATA’s Dangerous Goods Regulations; (iii) neither LAN nor any of its Subsidiaries nor, to the Knowledge of LAN, any other Person whose conduct could result in liability to LAN or any of its Subsidiaries has Released any Hazardous Materials at any other location; (iv) neither LAN nor any of its Subsidiaries nor, to the Knowledge of LAN, any predecessor of any of them is subject to Order of or with any Governmental Entity or any indemnity obligation or other Contract with any other Person relating to obligations or liabilities under Environmental Laws or concerning Hazardous Materials; (v) neither LAN nor any of its Subsidiaries has received any claim, notice or complaint, or is subject to any proceeding, relating to noncompliance with or liability under Environmental Laws or to Hazardous Materials, and no such matter has been threatened to the Knowledge of LAN; (vi) to the best Knowledge of LAN, there are no other circumstances or conditions involving LAN or any of its Subsidiaries that could reasonably be expected to result in any claim, liability, investigation, cost or restriction on the ownership, use, or transfer of any property pursuant to any Environmental Law; and (vii) LAN has delivered to TAM copies of all environmental reports, studies, assessments, sampling data, analyses, memoranda and other environmental information in its possession relating to LAN or its Subsidiaries or their respective current and former properties, facilities or operations.

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SECTION 3.12.    Labor and Employment Matters.  LAN and its Subsidiaries have complied in all material respects with all applicable labor, social security and health and safety Law in connection with all of the employees of LAN and its Subsidiaries.  The salaries and other compensation payable to the senior management and other employees of LAN and all of its Subsidiaries have been and are currently being paid in accordance with applicable Laws.  As of the date of this Agreement, Section 3.12 of the LAN Disclosure Schedule sets forth a true and complete list of collective bargaining or other labor union Contracts applicable to any employees of LAN or any of its Subsidiaries.  Since December 31, 2006, there have been no strikes, work stoppages or lockouts by or with respect to any employee of LAN or any of its Subsidiaries, other than any such strikes, work stoppages or lockouts that, individually or in the aggregate, have not had and would not reasonably be expected to have a LAN Material Adverse Effect.  Neither LAN nor any of its Subsidiaries has breached or otherwise failed to comply with any provision of any collective bargaining or other labor union Contract applicable to any employees of LAN or any of its Subsidiaries, and there are no written grievances or written complaints outstanding or, to LAN’s Knowledge, threatened against LAN or any of its Subsidiaries under any such Contract other than any such breaches, failures to comply, grievances or complaints that, individually or in the aggregate, have not had and would not reasonably be expected to have a LAN Material Adverse Effect.  LAN has made available to TAM and its Representatives true and complete copies of all Contracts set forth in Section 3.12 of the LAN Disclosure Schedule, including all amendments applicable to such Contracts.  There are no illegal labor practice complaints or other material labor Actions pending against LAN or any of its Subsidiaries and, to LAN’s Knowledge, no circumstances exist that could be the legitimate basis of such complaint or Action except for any complaints or Actions that, individually or in the aggregate, have not had and would not reasonably be expected to have a LAN Material Adverse Effect.

SECTION 3.13.    Aircraft.  (a)  Section 3.13(a)(i) of the LAN Disclosure Schedule sets forth a true and complete list of (i) all aircraft operated under the operating certificate of LAN or any of its Subsidiaries and (ii) all aircraft owned or leased by LAN or any of its Subsidiaries, in each case as of October 15, 2010 (collectively, the “LAN Aircraft”), including a description of the type and manufacturer serial number of each such aircraft.  Section 3.13(a)(ii) of the LAN Disclosure Schedule sets forth a true and complete list, as of the date of this Agreement, containing all Contracts (other than (x) existing aircraft leases or (y) Contracts that may be terminated or canceled by LAN or any of its Subsidiaries without incurring any penalty or other material liability except for the forfeiture of any previously made prepayment or deposit) pursuant to which LAN or any of its Subsidiaries has a binding obligation to purchase or lease aircraft (collectively, regardless of whether they are listed in the LAN Disclosure Schedule, the “LAN Aircraft Contracts”), including, for each LAN Aircraft Contract, the manufacturer and model of all aircraft subject thereto, the nature of the purchase or lease obligation (e.g., firm commitment, subject to reconfirmation or otherwise) and the anticipated year of delivery of each aircraft thereunder.  Except as identified in writing by LAN to TAM prior to the date of this Agreement, LAN has delivered or made available to TAM redacted (as to pricing and other commercially sensitive terms) copies of all LAN Aircraft Contracts, including all amendments, modifications and supplements thereto.

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(b)         Except for any such matters that, individually or in the aggregate, have not had and would not reasonably be expected to have a LAN Material Adverse Effect:

(i)           each LAN Aircraft has a validly issued, current individual aircraft Certificate of Airworthiness issued by the FAA, DGAC and a comparable certificate from any other LAN Airline Regulatory Entity, with respect to such LAN Aircraft and all requirements for the effectiveness of each such certificate of airworthiness have been satisfied;

(ii)          other than any grounded LAN Aircraft, each LAN Aircraft’s structure, systems and components are functioning in accordance with their respective intended uses as set forth in any applicable LAN Airline Regulatory Entity, manufacturer or otherwise contractually approved maintenance program (or are in the process of repair or maintenance), including any applicable manuals, technical standard orders or parts manufacturing approval certificates, and all grounded LAN Aircraft are being stored in accordance with any applicable LAN Airline Regulatory Entity, manufacturer or otherwise contractually approved maintenance program;

(iii)         all deferred maintenance items and temporary repairs with respect to each such LAN Aircraft have been or will be made materially in accordance with any applicable LAN Airline Regulatory Entity, manufacturer or otherwise contractually approved maintenance programs;

(iv)         each LAN Aircraft is properly registered on the aircraft registry of each applicable LAN Airline Regulatory Entity;

(v)          neither LAN nor any of its Subsidiaries is a party to any interchange or pooling agreements with respect to its LAN Aircraft, except for interchange or pooling agreements among LAN’s Subsidiaries and Florida West International, Inc., other than parts pooling agreements entered into in the ordinary course of business; and

(vi)         neither LAN nor any of its Subsidiaries has retained any maintenance obligations with respect to any LAN Aircraft that has been leased by LAN or any of its Subsidiaries to a third-party lessee.

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(c)           Section 3.13(c)(i) of the LAN Disclosure Schedule sets forth a true and complete list, as of October 15, 2010, of all aircraft operated pursuant to a capacity purchase or prorate agreement (collectively, and regardless of whether they are listed in the LAN Disclosure Schedule, the “LAN Contract Flight Agreements”), including a description of the operator, type and number of each such aircraft and any minimum utilization requirements applicable to such aircraft.  Section 3.13(c)(ii) of the LAN Disclosure Schedule sets forth a true and complete list, as of the date of this Agreement, containing all LAN Contract Flight Agreements.  Except as identified in writing by LAN to TAM prior to the date of this Agreement, LAN has delivered or made available to TAM redacted (as to pricing and other commercially sensitive terms) copies of all LAN Contract Flight Agreements, including all amendments thereto.

(d)           Except for any such matters that, individually or in the aggregate, have not had and would not reasonably be expected to have a LAN Material Adverse Effect, to LAN’s Knowledge, as of the date of this Agreement there is no ongoing strike, work stoppage or lockout by or with respect to any employee of any counterparty to a LAN Contract Flight Agreement.

SECTION 3.14.    LAN Slots and Operating Rights.  Section 3.14 of the LAN Disclosure Schedule sets forth a true, correct and complete list of all Slots used or held by LAN or any of its Subsidiaries (collectively, the “LAN Slots”) on the date of this Agreement at any domestic or international airport and such list indicates any LAN Slots that have been permanently allocated to another air carrier and in which LAN and its Subsidiaries hold only temporary use rights.  Except for any such matters that, individually or in the aggregate, have not had and would not reasonably be expected to have a LAN Material Adverse Effect, (a) each of LAN and its Subsidiaries has complied in all material respects with the requirements of all of the rules and regulations issued by any Governmental Entity and all Laws relating to the LAN Slots, (b) neither LAN nor any of its Subsidiaries has received any notice of any proposed withdrawal of any LAN Slots by any Governmental Entity, (c)(i) the LAN Slots have not been designated for the provision of essential air service under the regulations of the FAA, were not acquired pursuant to 14 C.F.R. Section 93.219 and have not been designated for international operations, as more fully detailed in 14 C.F.R. Section 93.217 and (ii) to the extent covered by 14 C.F.R. Section 93.227 or any order, notice or requirement of the FAA or any other Governmental Entity, LAN and its Subsidiaries have used the LAN Slots (or the LAN Slots have been used by other operators) either at least 80% of the maximum amount that each LAN Slot could have been used during each full reporting period (as described in 14 C.F.R. Section 93.227(i) or any such order, notice or requirement) or such greater or lesser amount of minimum usage as may have been required to protect such LAN Slot’s authorization from termination or withdrawal under regulations or waivers established by any Governmental Entity or airport authority, (d) all reports required by any Governmental Entity relating to the LAN Slots have been filed in a timely manner and (e) neither LAN nor any of its Subsidiaries has agreed to any future LAN Slot slide, LAN Slot trade (except for seasonal swaps), LAN Slot purchase, LAN Slot sale, LAN Slot exchange, LAN Slot lease or LAN Slot transfer of any of the LAN Slots that has not been consummated or otherwise reflected on Section 3.14 of the LAN Disclosure Schedule.

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SECTION 3.15.    Major LAN Airports.  As of the date of this Agreement, no airport authority at Arturo Merino Benitez International Airport of Santiago de Chile and the Jorge Chavez International Airport of Lima, Perú (each such airport, a “Major LAN Airport”) has taken or, to LAN’s Knowledge, threatened to take any action that would reasonably be expected to materially interfere with the ability of LAN and its Subsidiaries to conduct their respective operations at any Major LAN Airport in the same manner as currently conducted in all material respects.

SECTION 3.16.    Employee Benefits. (a)  Section 3.16(a) of the LAN Disclosure Schedule sets forth a list of all employee benefit plans and all profit-sharing plans, stock purchase, stock option, stock appreciation right, restricted stock, restricted stock unit, severance, employment, change-in-control, fringe benefit, collective bargaining, bonus, incentive, deferred compensation, employee loan and all other employee benefit plans, agreements, programs, policies or other arrangements maintained for the benefit of any current or former employee, independent consultant, officer or director of LAN or any of its Subsidiaries (collectively, “LAN Employees”) by LAN or its Subsidiaries or by any trade or business, whether or not incorporated (such plans, “LAN Benefit Plans”).  True and complete copies of all LAN Benefit Plans listed in Section 3.16(a) of the LAN Disclosure Schedule, including any trust instruments, insurance contracts, the most recent actuarial report and, with respect to any employee stock ownership plan, loan agreements forming a part of any LAN Benefit Plans, and all amendments thereto have been made available or provided to TAM.  All the obligations with respect to the LAN Benefit Plans granted to LAN Employees have been timely paid, and LAN and its Subsidiaries are not in default of any material obligations under the LAN Benefit Plans.  All benefits are being administered, in all material respects, in accordance with their respective terms, and also comply, in all material respects, with the provisions of applicable Law, as well as with IFRS.  There are no pending issues or Actions against LAN and its Subsidiaries involving these benefits, except for routine indemnity claims in respect of the benefits up to the date of execution of this Agreement.

(b)           With respect to each LAN Benefit Plan:  (i)  no disputes are pending or threatened, and (ii) neither LAN nor any of its Subsidiaries has incurred any current or projected liability in respect of post-employment or post-retirement health, medical or life insurance benefits for current, former or retired LAN Employees.

(c)           To the extent required by applicable Law or IFRS, all contributions required to be made under each LAN Benefit Plan, as of the date hereof, have been timely made and all obligations in respect of each LAN Benefit Plan have been properly accrued and reflected in the LAN Financial Reporting Documents.  There has been no amendment to, announcement by LAN or any of its Subsidiaries relating to, or change in employee participation or coverage under, any LAN Benefit Plan which would increase materially the expense of maintaining such plan above the level of the expense incurred therefor for the most recent fiscal year.

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(d)           No LAN Benefit Plan exists that, as a result of the execution of this Agreement or the transactions contemplated by this Agreement (whether alone or in connection with any subsequent event(s)), could reasonably be expected to (i) entitle any LAN Employee to severance pay or any increase in severance pay upon any termination of employment after the date of this Agreement, (ii) accelerate the time of payment or vesting or result in any payment or funding (through a grantor trust or otherwise) of compensation, benefits or awards (including LAN Stock-Based Awards) under, increase the amount payable or result in any other material obligation pursuant to, any of the LAN Benefit Plans, (iii) limit or restrict the right of LAN to merge, amend or terminate any of the LAN Benefit Plans, or (iv) cause LAN to record additional compensation expense on its income statement with respect to any outstanding stock option or other equity-based award.

SECTION 3.17.    Taxes.  (a)  Each of LAN and its Subsidiaries has (i) timely filed all material Tax Returns required to be filed by any of them (taking into account applicable extensions) and all such Tax Returns were true, correct and complete in all material respects when filed, (ii) timely paid or accrued (in accordance with Chilean Law) all material Taxes for all Tax periods whether or not shown to be due on such Tax Returns, and (iii) withheld from its employees, creditors or other third parties and, to the extent required to be paid, have timely paid to the appropriate Governmental Entities or set aside in an account for such purpose proper and accurate amounts in compliance with all Tax withholding provisions (including income, social security and employment Tax withholding for all types of compensation).

(b)           LAN has made available to TAM true and correct copies of the Annual Income Tax Statement (Formulario N° 22) and related Tax Returns filed by LAN and its Subsidiaries for each of the three most recent fiscal years.

(c)           There are no pending, and neither LAN nor any Subsidiary has received written notice of any, material national, local or foreign Tax audits or examinations of LAN or its Subsidiaries.  No material deficiency for any Taxes has been proposed, asserted or assessed against LAN or any Subsidiary that has not been resolved and paid in full.

(d)           There are no outstanding waivers to extend the statutory period of limitations applicable to the assessment of any material Taxes or material Tax deficiencies against LAN or any of its Subsidiaries.

(e)           Neither LAN nor any of its Subsidiaries is a party to any agreement providing for the allocation or sharing of Taxes.

(f)           No rulings have been entered into or issued by any Tax authority with respect to LAN or any of its Affiliates.

(g)           There are no material Liens for Taxes upon the assets, properties or rights of LAN or any of its Subsidiaries that are not provided for in the LAN Financial Reporting Documents, except Liens for Taxes not yet due and payable and Liens for Taxes that are being contested in good faith, which contest, if determined adversely to LAN, would not individually or in the aggregate have or reasonably be expected to have a LAN Material Adverse Effect.

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(h)           Section 3.17(h) of the LAN Disclosure Schedule sets forth a current list of each partnership, joint venture and limited liability company in which LAN beneficially owns a material interest.

SECTION 3.18.    Intellectual Property.  (a)  Section 3.18(a) of the LAN Disclosure Schedule sets forth a true and complete list of all Intellectual Property owned by LAN or its Subsidiaries as of the date of this Agreement that is currently registered with or subject to a pending application for registration before any Governmental Entity or internet domain name registrar.  All of such Intellectual Property is owned exclusively by LAN or any of its Subsidiaries free and clear of any Liens, is subsisting and, to the Knowledge of LAN, is valid and enforceable, and is not subject to any outstanding order, judgment, decree or agreement adversely affecting LAN’s or any of its Subsidiaries’ use of, or its rights to, such Intellectual Property, except in the case of any Liens, failures to be subsisting, valid and enforceable, or any order, judgment, decree or agreement that, individually or in the aggregate, have not had and would not reasonably be expected to have a LAN Material Adverse Effect.

(b)           LAN and its Subsidiaries own or hold exclusive or non-exclusive licenses in or have sufficient rights to use all Intellectual Property used in their business as presently conducted, all of which rights shall survive unchanged the consummation of the transactions contemplated by this Agreement.

(c)           LAN and its Subsidiaries have not granted any licenses or other rights to third parties to use their Intellectual Property other than non-exclusive licenses granted in the ordinary course of business pursuant to standard terms which have been previously provided to TAM.  Consummation of the Transactions contemplated by this Agreement will not create any license under or Liens on any Intellectual Property owned by LAN and its Subsidiaries.

(d)           To the Knowledge of LAN, the conduct of business as currently conducted by LAN and its Subsidiaries does not infringe, misappropriate or otherwise violate the Intellectual Property rights of any Person, and since December 31, 2006 there has been no such claim, action or proceeding asserted or, to LAN’s Knowledge, threatened against LAN or any of its Subsidiaries or Person seeking indemnity, therefor from TAM or any of its Subsidiaries, in each case other than any such matters that, individually or in the aggregate, have not had and would not reasonably be expected to have a LAN Material Adverse Effect.  There is no claim, action or proceeding pending or, to the Knowledge of LAN, threatened against LAN or any of its Subsidiaries or any indemnitee thereof concerning the ownership, validity, registerability, enforceability, infringement, use or licensed right to use any Intellectual Property rights claimed to be owned by LAN or any of its Subsidiaries or used or alleged to be used in the business of LAN or any of its Subsidiaries other than any such claims, actions or proceedings that, individually or in the aggregate, have not had and would not reasonably be expected to have a LAN Material Adverse Effect. To the Knowledge of LAN, no Person is infringing, misappropriating or otherwise violating in any material manner the Intellectual Property rights owned by LAN or any of its Subsidiaries.

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(e)           The IT Assets used by LAN and its Subsidiaries in the operations of their respective businesses (i) perform sufficiently as required by LAN and its Subsidiaries for the operation of their respective businesses as currently conducted and (ii) since December 31, 2008 have not malfunctioned or failed, other than any such failures to operate and perform or any such malfunctions or failures that, individually or in the aggregate, have not had and would not reasonably be expected to have a LAN Material Adverse Effect.  Since December 31, 2006, LAN and its Subsidiaries have maintained backup and disaster recovery technologies that are reasonable and consistent with industry practices in all material respects.

SECTION 3.19.    Information Supplied.  None of the information supplied or to be supplied by or on behalf of LAN or any of its Subsidiaries specifically for inclusion or incorporation by reference into (i) the Form F-4 will, at the time the Form F-4 is filed with the SEC and at the time it becomes effective under the U.S. Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading or (ii) the Schedule TO, the Offer to Exchange/Prospectus or the Brazilian Exchange Offer Documents will, at the Distribution Date, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading.  The Offer to Exchange/​Prospectus and the Brazilian Exchange Offer Documents will, on the Distribution Date, comply as to form in all material respects with the requirements of applicable Law; provided, however, that the foregoing representation and warranty shall not apply with respect to any information supplied by or on behalf of TAM or any of its Subsidiaries or the TAM Direct Controlling Shareholder or the Amaro Family which is contained or incorporated by reference into the Offer to Exchange/Prospectus or the Brazilian Exchange Offer Documents.

SECTION 3.20.    Voting Requirements.  Requisite LAN Shareholder Approval is the only vote of the holders of any class or series of capital stock of LAN necessary to approve the Mergers and the other transactions contemplated by this Agreement and the other Transaction Agreements other than any additional vote that may be required by the SVS.

SECTION 3.21.    Affiliate Transactions.  There are no transactions, Contracts, arrangements, commitments or understandings between LAN or any of its Subsidiaries, on the one hand, and any of their Affiliates (other than LAN or any of its Subsidiaries), on the other hand, that would be required to be disclosed by LAN under Item 404 of Regulation S-K under the Securities Act.

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SECTION 3.22.    Brokers and Other Advisors.  No broker, investment banker, financial advisor or other Person (other than J.P. Morgan Securities LLC) is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of LAN.  LAN has shown to TAM complete and accurate copies of all Contracts under which any such fees or expenses are payable and all indemnification and other Contracts related to the engagement of the Persons to whom such fees are payable.

SECTION 3.23.    Fairness Opinion.  Prior to the execution of this Agreement, the LAN Board received the oral opinion (which was subsequently confirmed in writing) of J.P. Morgan Securities LLC to the effect that, as of the date thereof and based upon and subject to the matters and limitations set forth in such written opinion, each of the Holdco 2 Exchange Ratio and the Sister Holdco Exchange Ratio is fair from a financial point of view to LAN.  Such opinion has not been amended or rescinded as of the date of this Agreement.  LAN shall deliver to TAM a copy of the written opinion of J.P. Morgan Securities LLC for informational purposes only promptly following receipt thereof.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE CONTROLLING

SHAREHOLDERS

Except as set forth in the disclosure letter delivered by each of (i) the LAN Controlling Shareholders and (ii) the TAM Direct Controlling Shareholder and the Amaro Family (in the case of the TAM Direct Controlling Shareholder and the Amaro Family, the “TAM Direct Controlling Shareholder Disclosure Schedule,” and in the case of the LAN Controlling Shareholders, the “LAN Controlling Shareholders Disclosure Schedule”) (it being agreed that the disclosure of any fact or item in any section or subsection of the TAM Direct Controlling Shareholder Disclosure Schedule or the LAN Controlling Shareholders Disclosure Schedule, as the case may be, whose relevance to any other section or subsection of this Agreement is reasonably apparent from the face of such disclosure shall also be deemed to be disclosed in the section or subsection of the TAM Direct Controlling Shareholder Disclosure Schedule or the LAN Controlling Shareholders Disclosure Schedule, as the case may be, that corresponds to such other section or subsection of this Agreement).  The TAM Direct Controlling Shareholder and each of the members of the Amaro Family hereby represent and warrant to LAN and the LAN Controlling Shareholders on behalf of each of them and TEP Chile, as applicable, and each LAN Controlling Shareholder hereby represents and warrants to TAM, the TAM Direct Controlling Shareholder and the Amaro Family, as follows:

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SECTION 4.01.    Organization; Ownership.  In the case of the LAN Controlling Shareholders and the TAM Direct Controlling Shareholder only, it has been duly organized and is validly existing and (with respect to jurisdictions that recognize such concept) in good standing under the Law of the jurisdiction of its incorporation or organization, and in the case of TEP Chile only, it will be duly organized and validly existing and (with respect to jurisdictions that recognize such concept) in good standing under the Law of the jurisdiction of its incorporation or organization as of the Commencement Date and as of the Leilao Date.  In the case of the TAM Direct Controlling Shareholder only, as of the date of this Agreement, it is the sole record and beneficial owner of 44,883,754 shares of TAM Ordinary Stock and 24,768,755 shares of TAM Preferred Stock and it has the sole power to vote and sell such shares, in each case free and clear of all Liens.  In the case of the Amaro Family only, after the TEP Restructuring and prior to the payment of the TEP Chile Subscription, they will be the sole record and beneficial owners of 47,652,705 shares of TAM Ordinary Stock and 25,185,155 shares of TAM Preferred Stock and they will have the sole power to vote and sell such shares, in each case free and clear of all Liens, and after the payment of the TEP Chile Subscription, they will be the sole record and beneficial owners of 100% shares of TEP Chile Stock and they will have the sole power to vote and sell such shares, in each case free and clear of all Liens.  In the case of TEP Chile, following the payment of the TEP Chile Subscription and immediately prior to the payment of the Holdco Subscriptions, it will be the sole record and beneficial owner of 47,652,705 shares of TAM Ordinary Stock and 25,185,155 shares of TAM Preferred Stock and it will have the sole power to vote and sell such shares, in each case free and clear of all Liens.  In the case of the LAN Controlling Shareholders only, they and their respective Affiliates collectively are the sole record and beneficial owners of 115,399,502 shares of LAN Common Stock, and they collectively have the sole power to vote and sell such shares, in each case free and clear of all Liens.

SECTION 4.02.    Authority.  In the case of the TAM Direct Controlling Shareholder and the LAN Controlling Shareholders only, it has or, in the case of TEP Chile, will have all requisite corporate power and authority to execute, deliver and perform each of the Transaction Agreements to which it is a party.  In the case of the members of the Amaro Family only, each of them has all requisite power and authority to execute, deliver and perform each of the Transaction Agreements to which he or she is a party. In the case of the TAM Direct Controlling Shareholder, TEP Chile  and the LAN Controlling Shareholders only, the execution, delivery and performance by it of the Transaction Agreements to which it is a party have been, or, in the case of TEP Chile, will be duly authorized by all necessary corporate action by it, and no other corporate proceedings by it or its shareholders are necessary to authorize the execution, delivery, performance of such agreements.  All of the Transaction Agreements to which it is a party have been or, in the case of TEP Chile, will be duly executed and delivered by it and do constitute or, in the case of TEP Chile, will constitute legal, valid and binding obligations of it, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or similar Law of general applicability relating to or affecting the rights of creditors and to the availability of equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at Law).

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SECTION 4.03.    No Conflict; Required Filings and Consents.  (a)  The execution, delivery and performance by it of the Transaction Agreements to which it is a party do not and will not conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, or result in any termination or modification of or acceleration under, or any change in any right, obligation or benefit under, or result in any Lien on the property or assets of it or any of its Subsidiaries or on any property or assets of TAM, LAN or any of their respective Subsidiaries pursuant to, (i) in the case of the TAM Direct Controlling Shareholder, TEP Chile and the LAN Controlling Shareholders only, its by-laws, (ii) any Contract to which it is a party or by which it or any of its properties, rights or other assets is bound or subject or (iii) assuming the consents, approvals, filings and other matters referred to in Sections 2.05(b) and 3.05(b) are duly obtained or made, any Law or Order applicable to it or any of its properties, rights or other assets, other than, in the case of clause (ii), any such conflicts, violations, breaches, defaults, terminations, modifications, accelerations, changes or Liens that, individually or in the aggregate, would not reasonably be expected to have a material adverse effect on its ability to perform its obligations under any of such agreements.

(b)           The execution, delivery and performance by it of the Transaction Agreements to which it is a party do not and will not require any consent, approval, order, authorization or permit of, action by, filing or registration with or notification to, any Governmental Entity other than those described in Section 2.05(b) and Section 3.05(b).

SECTION 4.04.    No Successor Liability.  In the case of the TAM Direct Controlling Shareholder, TEP Chile and the Amaro Family only, Holdco 1 will not acquire as a result of the distribution by the TAM Direct Controlling Shareholder of the TEP Shares to the Amaro Family or the contribution by the Amaro Family of TEP Shares to TEP Chile and the contribution by TEP Chile of the TEP Shares to Holdco 1 any debt, liability or obligation of any nature of any of the TAM Direct Controlling Shareholder, the Amaro Family or TEP Chile, whether known or unknown, asserted or unasserted, determined or determinable, whether accrued, absolute, contingent or otherwise, and whether due or to become due.

SECTION 4.05.    Litigation.  There are no Actions pending or, to its Knowledge, threatened against it that would reasonably be expected to prevent it from performing its obligations under the Transaction Agreements to which it is a party.

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ARTICLE V

ADDITIONAL AGREEMENTS

SECTION 5.01.    Access to Information; Confidentiality.  (a)  To the extent permitted by applicable Law, each of LAN and TAM (each, a “Parent”) shall afford to the other Parent and its officers, employees, accountants, counsel, financial advisors and other advisors reasonable access (including for the purpose of planning for post-merger integration activities and transition planning) during normal business hours and upon reasonable prior notice to such Parent until the earlier of the consummation of the Exchange Offer and the termination of this Agreement pursuant to Section 8.01 to all of the properties, books, Contracts, commitments, Key Personnel and records of such Parent as the other Parent may from time to time reasonably request, but only to the extent that such access does not unreasonably interfere with the business or operations of such Parent or any of its Subsidiaries, and, during such period, such Parent shall furnish promptly to the other Parent all information concerning the business, properties and Key Personnel of such Parent as the other Parent may reasonably request; provided, however, that no access or information pursuant to this Section 5.01 shall affect or be deemed to modify any representation or warranty made or deemed made by such Parent in this Agreement; and, provided, further, that no Parent shall be required to (or to cause any of its Subsidiaries to) so confer, afford such access or furnish such copies or other information to the extent that doing so would violate applicable Law or any Contract or obligation of confidentiality owing to a third-party or result in the loss of attorney-client privilege if, in the case of any such Contract or confidentiality obligation, such Parent shall have used its reasonable best efforts to have obtained the consent of such third-party to such access, copies or information.  If any of the information or material furnished pursuant to this Section 5.01 includes materials or information subject to the attorney-client privilege, work product doctrine or any other applicable privilege concerning pending or threatened Actions, each Parent understands and agrees that the parties to this Agreement have a commonality of interest with respect to such matters and it is the desire, intention and mutual understanding of the parties that the sharing of such material or information is not intended to, and shall not, waive or diminish in any way the confidentiality of such material or information or its continued protection under the attorney-client privilege, work product doctrine or other applicable privilege.  All such information provided by a Parent that is entitled to protection under the attorney-client privilege, work product doctrine or other applicable privilege shall remain entitled to such protection under these privileges, this Agreement, and under the joint defense doctrine.  If, notwithstanding the foregoing, disclosure of certain information would result in the loss of attorney-client privilege or violate applicable Law or any Contract or obligation of confidentiality owing to a third-party, the Parents will use commercially reasonable efforts to make appropriate substitute disclosure arrangements.

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(b)           Each party agrees to, and shall cause its Subsidiaries and their respective directors, officers, employees, Affiliates (including the individuals who ultimately beneficially own such party), financial advisors, attorneys, accountants and other advisors or representatives (as to each party, its “Representatives”) to, treat and hold as confidential (and not disclose or provide access to any Person) any and all confidential or proprietary information, knowledge and data relating to any Disclosing Party or any of its Affiliates or their business and affairs (collectively, “Confidential Information”) by using the same degree of care, but no less than a reasonable standard of care, to prevent the unauthorized use, dissemination or disclosure of Confidential Information as it and its Affiliates use with respect to their own Confidential Information, unless the Disclosing Party provides its prior written consent to such use or disclosure and except as otherwise permitted in this Section 5.01(b).  The parties hereby acknowledge and agree that the information provided or made available to any party pursuant to Sections 2.22, 3.22 and 5.01(a) shall be deemed to be “Confidential Information” for purposes of this Section 5.01(b).  Notwithstanding the foregoing, in the event that a Receiving Party or any of its Representatives becomes legally compelled by Order or is required by Law to disclose any Confidential Information, disclosure in compliance with this Section 5.01(b) shall be permitted and, to the extent reasonably practicable and permitted by applicable Law, the Receiving Party agrees to, and shall cause its Representatives to, (i) provide the Disclosing Party with reasonable written notice of such requirement so that the Disclosing Party may seek a protective order or other remedy, (ii) in the event that such protective order or other remedy is not obtained, furnish only that portion of such Confidential Information which is legally required to be provided and exercise its reasonable best efforts to obtain assurances that confidential treatment will be afforded to such Confidential Information and (iii) use commercially reasonable efforts to promptly furnish to the Disclosing Party a copy (in whatever form or medium) of such Confidential Information that it intends to furnish or has furnished; provided, however, that the foregoing shall not apply to any information (A) that at the time of disclosure, is available publicly or becomes publicly available through no act or omission of the party owing a duty of confidentiality, or becomes available on a non-confidential basis from a source other than the party owing a duty of confidentiality, so long as such source is not known by such party to be bound by a confidentiality agreement with or other obligations of secrecy to the other party, (B) that is developed independently by the Receiving Party without the use of Confidential Information or (C) that is disclosed to any Representatives of the Receiving Party to whom such disclosure is necessary or desirable in the conduct of the business of the Receiving Party if such Persons are informed by the Receiving Party of the confidential nature of such Confidential Information and are directed by the Receiving Party to comply with the provisions of this Section 5.01(b) (it being agreed that a Receiving Party shall be responsible for any breach of this Section 5.01(b) by its Representatives).  Each party agrees and acknowledges that remedies at Law for any breach of their obligations under this Section 5.01(b) are inadequate and that in addition thereto the Disclosing Party shall be entitled to seek equitable relief, including injunction and specific performance, in the event of any such breach.  For purposes of this Section 5.01(b),  the term “Receiving Party” means the party to whom Confidential Information is furnished, disclosed or shown or otherwise made available by or on behalf of another party hereto, which disclosing party is referred to as the “Disclosing Party.”

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SECTION 5.02.    Further Action; Efforts.  (a)  Subject to the terms and conditions of this Agreement and the Implementation Agreement, each party shall use its reasonable best efforts to take, or cause to be taken, all actions and to use its reasonable best efforts to do, or cause to be done, and assist and cooperate with the other parties in doing, all things reasonably necessary, proper or advisable under this Agreement, the Implementation Agreement and applicable Law to satisfy the conditions to the commencement of the Exchange Offer and the conditions to the consummation of the Exchange Offer, and to consummate as soon as reasonably practicable the Exchange Offer, the Mergers and the other transactions contemplated by this Agreement and the Implementation Agreement in accordance with the terms hereof and thereof.  Without limitation of the foregoing, promptly after the execution and delivery of this Agreement LAN and the TAM Direct Controlling Shareholder and/or the Amaro Family shall meet jointly with CVM to discuss the contents of the Edital and shall use their commercially reasonable effort to obtain CVM’s consent to the inclusion of the Exchange Offer Conditions therein.  Without limitation of the foregoing, whenever this Agreement or the Implementation Agreement requires the TAM Direct Controlling Shareholder or the Amaro Family, as applicable, TEP Chile or the LAN Controlling Shareholders to take any action, such requirement shall be deemed to include an undertaking on the part of the individuals who ultimately beneficially own the TAM Direct Controlling Shareholder, TEP Chile or the LAN Controlling Shareholders, as the case may be, to cause them to take such action.

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(b)           In connection with and without limiting the foregoing, each party shall provide, or cause to be provided, all necessary notices, applications, requests and information to, and enter into discussions with, each Governmental Entity or third-party from whom any consent, approval, authorization or other action or non-action is required to be obtained in order to commence the Exchange Offer or consummate the Exchange Offer, the Mergers or the other transactions contemplated by this Agreement or the Implementation Agreement or in connection therewith (collectively, the “Consents”), use its commercially reasonable efforts to obtain all such Consents and to eliminate each and every other impediment that may be asserted by any Governmental Entity or other Person with respect to the Exchange Offer and the Mergers, in each case so as to enable the Exchange Offer and the Mergers to occur as soon as reasonably practicable.  Each party shall use reasonable efforts to obtain the consent of any third party to a Contract that would otherwise be breached by any covenant, representation or warranty or any other obligation of this Agreement.

(c)           In connection with and without limiting the generality of the foregoing, each party shall (i) make or cause to be made, in consultation and cooperation with the other parties and as promptly as practicable after receipt of ANAC Approval, all necessary and appropriate registrations, declarations, notices and filings relating to the Exchange Offer, the Mergers and the other transactions contemplated by this Agreement and the Implementation Agreement with the relevant Governmental Entities under all applicable Antitrust Laws; (ii) use its reasonable best efforts to furnish to the other parties all assistance, cooperation and information required for any such registration, declaration, notice or filing and in order to achieve the effects set forth in Section 5.02(b); (iii) give the other parties reasonable prior notice of any such registration, declaration, notice or filing and, to the extent reasonably practicable, of any communication with any Governmental Entity regarding the Exchange Offer, the Mergers or the other transactions contemplated hereby or by the Implementation Agreement (including with respect to any of the actions referred to in Section 5.02(b)), and permit the other parties to review and discuss in advance, and consider in good faith the views of, and secure the participation of, the other parties in connection with, any such registration, declaration, notice, filing or communication; (iv) respond as promptly as practicable under the circumstances to any inquiries received from any Governmental Entity regarding the Exchange Offer, the Mergers or the other transactions contemplated hereby or by the Implementation Agreement; (v) unless prohibited by applicable Law or by the applicable Governmental Entity, (A) to the extent reasonably practicable, not participate in or attend any meeting, or engage in any substantive conversation with any Governmental Entity regarding the Exchange Offer, the Mergers or the other transactions contemplated hereby or by the Implementation Agreement (including with respect to any of the actions referred to in Section 5.02(b)) without the other parties, (B) to the extent reasonably practicable, give the other parties reasonable prior notice of any such meeting or conversation, (C) in the event one party is prohibited by applicable Law or by the applicable Governmental Entity from participating or attending any such meeting or engaging in any such conversation, keep the other parties reasonably apprised with respect thereto, (D) cooperate in the filing of any substantive memoranda, white papers, filings, correspondence or other written communications explaining or defending this Agreement, the Implementation Agreement, the Exchange Offer, the Mergers or the other transactions contemplated hereby and thereby, articulating any regulatory or competitive argument, and/or responding to requests or objections made by any Governmental Entity, and (E) furnish the other parties with copies of all correspondence, filings and communications (and memoranda setting forth the substance thereof) between it and its Representatives, on the one hand, and any Governmental Entity or members of any Governmental Entity’s staff, on the other hand, with respect to this Agreement, the Implementation Agreement, the Exchange Offer, the Mergers or the other transactions contemplated hereby and thereby.

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(d)           In the event that any Action is instituted (or threatened to be instituted) by a Governmental Entity or private party challenging any transaction contemplated by this Agreement or the Implementation Agreement, each party shall (i) cooperate in all respects with the other parties and use its respective reasonable best efforts to contest and resist any such Action and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other Order, whether temporary, preliminary or permanent, that is in effect and that prohibits, prevents or restricts consummation of the transactions contemplated by this Agreement and/or so as to permit such consummation by the fifth business day before the Outside Date, and (ii) at its cost and expense, defend any such Actions against it or its Affiliates in connection with the transactions contemplated by this Agreement and the Implementation Agreement.

(e)           Notwithstanding anything in this Section 5.02 to the contrary, nothing in this Section 5.02 or otherwise in this Agreement or the Implementation Agreement shall require, or be construed to require, either Parent or any of its Affiliates to (i) (A) sell, lease, license, transfer, dispose of, divest or otherwise encumber, or to hold separate pending any such action or (B) proffer, propose, negotiate, offer to effect or consent, commit or agree to any sale, divestiture, lease, licensing, transfer, disposal, divestment or other encumbrance of, or to hold separate, in each case before or after the Effective Time, any assets, licenses, operations, rights, product lines, businesses or interest of either Parent or any of its Affiliates or (ii) take or agree to take any other action, or agree or consent to any limitations or restrictions on freedom of actions with respect to, or its ability to own, retain or make changes in, any assets, licenses, operations, rights, product lines, businesses or interests of either Parent or any of its Affiliates or LAN’s ability to receive and exercise full voting, economic and ownership rights with respect to its interests in Holdco 1, TAM and its Subsidiaries, subject only to the rights of TEP Chile in respect of its shares of Holdco 1 Voting Stock and under the LATAM/TEP Shareholders Agreement, the Holdco 1 Shareholders Agreement and the TAM Shareholders Agreement.

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SECTION 5.03.    Advice of Changes.  Each of the parties hereto shall each promptly advise the other parties orally and in writing if (i) any representation or warranty made by it contained in this Agreement becomes untrue or inaccurate in a manner that would or would be reasonably expected to result in the failure of the condition set forth in Section 6.02(a) or Section 6.03(a), (ii) it fails to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement or the Implementation Agreement, (iii) any of the conditions set forth in (a) Section 7.02 other than the Delisting Condition (in the case of LAN and the Amaro Family), (b) Schedule 1.12 of the Implementation Agreement (in the case of LAN only), or (c) Section 7.03 other than the Minimum Tender Condition (in the case of the Amaro Family only) fails or ceases to be satisfied or (iv) an Appraisal Event occurs; provided, however, that no such notification shall affect the representations, warranties, covenants or agreements of the parties (or remedies with respect thereto) or the conditions to the obligations of the parties under this Agreement.  This Section 5.03 shall not constitute a covenant or agreement for purposes of Section 6.02(b) or 6.03(b).

SECTION 5.04.    Covenants of the Controlling Shareholders.

(a)           Agreements to Vote.  Except as otherwise provided in this Agreement, each of the LAN Controlling Shareholders agrees that it will, and the Amaro Family agrees that it will cause TEP Chile to, from and after the date of this Agreement and until the earlier of the Effective Time and the termination of this Agreement pursuant to Section 8.01, attend each meeting of the shareholders of its Relevant Parent Entity in person or by proxy and vote or cause to be voted all shares of capital stock of its Relevant Parent Entity beneficially owned by it on the record date for such meeting (i) in the case of the LAN Controlling Shareholders only, in favor of the approval of the Mergers, the Name Change and the other transactions contemplated by the Implementation Agreement, (ii) against any action, agreement or transaction submitted for approval of the shareholders of its Relevant Parent Entity that would reasonably be expected to result in a breach of any covenant, representation or warranty or any other obligation or agreement of its Relevant Parent Entity, and (iii) against any Alternative Proposal relating to its Relevant Parent Entity.  The term “Relevant Parent Entity” means (i) with respect to TAM, the Amaro Family, TEP Chile and the TAM Direct Controlling Shareholder, TAM, and (ii) with respect to LAN and the LAN Controlling Shareholders, LAN.  The Amaro Family agrees that they will cause TEP Chile to attend the Sister Holdco Shareholders Meeting in person or by proxy and to vote the shares of Sister Holdco Stock they beneficially own in favor of the approval of the Sister Holdco Merger Matters. The Amaro Family agrees that they will cause TEP Chile to cause Holdco 1 to attend the Holdco 2 Shareholders Meeting in person or by proxy and to vote the shares of Holdco 2 Stock they beneficially own in favor of the approval of the Holdco 2 Merger Matters.

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(b)           Condition Notices; Subscription Payments; Leilão.  The last time at which the holders of shares of TAM Stock shall be able to withdraw their acceptance to tender their shares of TAM Stock into the Exchange Offer will be 12:00 p.m., São Paulo, Brazil time (the “Withdrawal Deadline”), on the date on which the Leilãowill occur as specified in the Edital, as such date may be changed from time to time in accordance with Brazilian Law (the “Leilão Date”).   Prior to 2:00 p.m., São Paulo, Brazil time, on the Leilão Date, each of LAN and the Amaro Family shall cause one of its representatives who is authorized on its behalf to waive the conditions set forth in Section 7.02 (in the case of both LAN and the Amaro Family), Section 7.03 (in the case of LAN only) or Schedule 1.12 of the Implementation Agreement (in the case of the Amaro Family) to be present at the offices of the Bovespa for purposes of informing the Bovespa as to whether the mutual conditions to the consummation of the Exchange Offer set forth in Section 7.02 (in the case of both LAN and the Amaro Family), Section 7.03 (in the case of LAN only) and Schedule 1.12 of the Implementation Agreement (in the case of the Amaro Family) have been satisfied or waived in accordance with this Agreement.  At 2:00 p.m., São Paulo, Brazil time, on the Leilão Date, the Bovespa shall inform LAN, Holdco 2 and the Amaro Family whether or not the Minimum Conditions have been satisfied (the “Minimum Condition Notice”).  Promptly after receiving the Minimum Condition Notice but in no event later than 2:10 p.m., São Paulo, Brazil time, on the Leilão Date LAN shall deliver to the Amaro Family a written notice stating whether or not all of the conditions to the consummation of the Exchange Offer (other than the conditions in Section 7.03(h)) have been satisfied or irrevocably waived by LAN (the “LANCondition Notice”).  If the LAN Condition Notice states that all such conditions have been so satisfied or waived, then promptly after they receive the LAN Condition Notice but in no event later than 2:20 p.m., São Paulo, Brazil time, on the Leilão Date the Amaro Family shall deliver to LAN a written notice stating whether or not all of the conditions to the consummation of the Exchange Offer set forth in Section 7.02 and all of the conditions set forth in Schedule 1.12 to the Implementation Agreement have been satisfied or irrevocably waived by them (the “TEPCondition Notice”).  If the TEP Condition Notice states that all such conditions have been so satisfied or waived, then (i) promptly after they have delivered the TEP Condition Notice to LAN but in no event later than 2:30 p.m., São Paulo, Brazil time, on the Leilão Date (A) the Amaro Family shall subscribe for 72.837.860 shares of TEP Chile Stock in exchange for all of the TEP Shares (the “TEP Chile Subscription” and, collectively with the Holdco Subscriptions, the “Subscriptions”), such Subscriptions to be made in such proportions so that immediately after the TEP Chile Subscription is paid the percentage equity ownership of each member of the Amaro Family in TEP Chile shall be the same as the percentage equity ownership that such member has in the TAM Direct Controlling Shareholder as of the date hereof and pay the TEP Chile Subscription by delivering the TEP Shares to TEP Chile, and (B) TEP Chile shall pay the Holdco Subscriptions by delivering all of the Ordinary TEP Shares to Holdco 1 and the 62 Holdco 1 Ordinary Shares, all of the TEP Holdco 1 Non-Voting Shares and all of the Preferred TEP Shares to Sister Holdco and (ii) promptly after all such payments have been made but in no event later than 2:40 p.m., São Paulo, Brazil time, on the Leilão Date, LAN and the Amaro Family shall issue a press release announcing that all of the conditions to the Exchange Offer have been satisfied or irrevocably waived. The LAN Condition Notice shall be conclusive and binding upon LAN for all purposes of this Agreement and the TEP Condition Notice shall be conclusive and binding upon the Amaro Family for all purposes of this Agreement and the TEP Chile Subscription.  If (x) each of the LAN Condition Notice and the TEP Condition Notice states that all of the conditions it is required to address have been satisfied or irrevocably waived and (y) the TEP Chile Subscription and all of the payments required pursuant to the Subscriptions have been made in full when required by this Section 5.04(b), then the Leilão shall commence at 3:00 p.m., São Paulo, Brazil time (or such other time as the Bovespa may determine), on the Leilão Date, and Holdco 2 will consummate the Exchange Offer on the Leilão Date in accordance with the terms and conditions of the Exchange Offer.  For all purposes of this Agreement, the consummation of the Exchange Offer shall be deemed to be the purchases of TAM Stock pursuant to the Leilão.  Notwithstanding the foregoing, if the Leilão commences at any time other than 3:00 p.m., São Paulo, Brazil time, on the Leilão Date, then each of the times specified above in this Section 5.04(b) (except for the Withdrawal Deadline) shall be adjusted by the same amount that the actual time of the commencement of the Leilão differs from 3:00 p.m., São Paulo, Brazil time.  If (x) either the LAN Condition Notice or the TEP Condition Notice does not state that all of the conditions it is required to address have been satisfied or irrevocably waived or (y) the TEP Chile Subscription or any of the payments required pursuant to the Subscriptions are not made in full when required by this Section 5.04(b), the Leilão shall not occur and the Exchange Offer shall expire without the purchase of any shares of TAM Stock.

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(c)           Restrictions on Transfers.  Except as otherwise expressly provided in this Agreement, from and after the date of this Agreement and until the earlier of the Effective Time and the termination of this Agreement pursuant to Section 8.01, none of LAN Controlling Shareholders, the TAM Direct Controlling Shareholder, the Amaro Family or TEP Chile shall Transfer or permit the Transfer of any shares of the capital stock of its Relevant Parent Entity, the TAM Direct Controlling Shareholder, TEP Chile, Holdco 1, Holdco 2 or Sister Holdco that it beneficially owns or enter into any Contract, arrangement or understanding with respect to any such Transfer (whether by actual disposition or effective economic disposition due to hedging, cash settlement or otherwise); provided however, that the LAN Controlling Shareholders, the TAM Direct Controlling Shareholder, the Amaro Family and TEP Chile may Transfer all or any portion of their shares of capital stock of its Relevant Parent Entity to (i) any of their direct or indirect wholly owned Subsidiaries, (ii) any Person wholly-owned by Enrique, Juan José and/or Ignacio Cueto (in the case of the LAN Controlling Shareholders) or (iii) any Person that has no direct or indirect owners other than Maria Cláudia Oliveira Amaro, Maurício Rolim Amaro, Noemy Almeida Oliveira Amaro and/or João Francisco Amaro and that is directly or indirectly majority owned and controlled by Maria Cláudia Oliveira Amaro and Maurício Rolim Amaro (in the case of the Amaro Family, the TAM Direct Controlling Shareholder or TEP Chile) and that each of the LAN Controlling Shareholders, the TAM Direct Controlling Shareholder, TEP Chile and the Amaro Family may Transfer a percentage of any shares of the capital stock of its Relevant Parent Entity, TEP Chile, Holdco 1, Holdco 2 or Sister Holdco that it beneficially owns to each of Enrique, Juan José and Ignacio Cueto (in the case of the LAN Controlling Shareholders) or Maria Cláudia Oliveira Amaro, Maurício Rolim Amaro, Noemy Almeida Oliveira Amaro and João Francisco Amaro (in the case of the TAM Direct Controlling Shareholder and TEP Chile) or to any Person wholly owned by any such individual equal to the percentage of such capital stock that such individual indirectly owns through his or her ownership of shares in the LAN Controlling Shareholders (in the case of Enrique, Juan José and Ignacio Cueto) or the TAM Direct Controlling Shareholder or TEP Chile (in the case of Maria Cláudia Oliveira Amaro, Maurício Rolim Amaro, Noemy Almeida Oliveira Amaro and João Francisco Amaro); provided further that the LAN Controlling Shareholders, the TAM Direct Controlling Shareholder and the Amaro Family shall continue to be bound by the terms of this Agreement for all purposes following any such Transfer and any transferee of shares Transferred pursuant to this Section 5.04(c) shall agree to be bound by all the terms and conditions of this Section 5.04 by executing and delivering to the parties hereto a joinder agreement so providing in form and substance reasonably acceptable to such parties.

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(d)           No Inconsistent Agreements.  Each of the LAN Controlling Shareholders hereby covenants and agrees that, and each of the TAM Direct Controlling Shareholder and the members of the Amaro Family hereby covenants and agrees on its or their behalf and on behalf of TEP Chile that, except for actions contemplated by this Section 5.04 taken in furtherance of this Agreement, it (i) has not entered into, and shall not enter into at any time while this Agreement remains in effect, any voting agreement, voting trust or any other agreement, arrangement or obligations (whether or not legally binding) with respect to any of the shares of capital stock of its Relevant Parent Entity, the TAM Direct Controlling Shareholder, TEP Chile, Holdco 1, Holdco 2 or Sister Holdco that it beneficially owns and (ii) has not granted, and shall not grant at any time while this Agreement remains in effect, a proxy, a consent or power of attorney with respect to any such shares.

(e)           Further Assurances.  Each of the LAN Controlling Shareholders, the TAM Direct Controlling Shareholder and the Amaro Family (i) shall use reasonable best efforts to take or cause to be taken all actions, and do or cause to be done all things, reasonably necessary, proper or advisable on their part under this Agreement and applicable Law to consummate the transactions contemplated by this Agreement and the other Transaction Agreements as promptly as reasonably practicable and (ii) shall not, and they shall cause their respective Representatives not to, take any action that could be reasonably expected to materially impede or interfere with, delay, postpone or materially and adversely affect the consummation of the transactions contemplated by this Agreement and the other Transaction Agreements.

ARTICLE VI

CONDITIONS TO THE COMMENCEMENT OF THE EXCHANGE OFFER

SECTION 6.01.    Mutual Conditions to the Commencement of the Exchange Offer.  Holdco 2 shall not commence the Exchange Offer unless and until all of the conditions set forth in this Section 6.01 are satisfied or waived in writing by LAN and the Amaro Family.

(a)           Requisite Shareholder Approval.  The Requisite LAN Shareholder Approval shall have been obtained and recorded and published in accordance with Law No. 18,046 of Chilean Corporations (the “Chilean Corporate Law”) and the Requisite TAM Shareholder Approval shall have been obtained and recorded and published in accordance with Brazilian Law.

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(b)           Governmental Consents.  All of the Consents from Governmental Entities set forth on Schedule 6.01(b) shall have been obtained and all other Consents from Governmental Entities shall have been obtained other than those which the failure to obtain, individually or in the aggregate, would not reasonably be expected to have a TAM Material Adverse Effect or LAN Material Adverse Effect or to result in criminal or civil sanctions against any party hereto, any Affiliate of any such party or any director or employee of any of the foregoing.

(c)           No Injunctions or Restraints.  No court or other Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Law or Order or taken any other action (whether temporary, preliminary or permanent) that is in effect and (i) makes illegal, restrains, enjoins or otherwise prohibits the commencement of the Exchange Offer or the consummation of the Exchange Offer, the Mergers or the other transactions contemplated by this Agreement and the Implementation Agreement on the terms contemplated hereby and thereby or (ii) limits or impairs the ability of LAN and the TAM Direct Controlling Shareholder, TEP Chile and/or the Amaro Family to jointly (A) own or operate all or any material portion of the assets of TAM and its Subsidiaries or (B) exercise full ownership rights with respect to equity interests in Holdco 1, TAM and its Subsidiaries in a manner consistent with the terms of the TAM Shareholders Agreement, the Holdco 1 Shareholders Agreement and/or the LATAM/TEP Shareholders Agreement, as applicable (collectively, “Restraining Orders”); provided, however, that notwithstanding the foregoing the occurrence of the Appraisal Condition shall not cause this condition not to be satisfied.

(d)           No Litigation.  There shall not be pending any Action commenced by any Governmental Entity or other Person seeking (i) a Restraining Order or (ii) to limit or impair the ability of LAN and the TAM Direct Controlling Shareholder, TEP Chile and/or the Amaro Family to jointly (A) own or operate all or any material portion of the assets of TAM and its Subsidiaries or (B) exercise all the rights and receive all the benefits of full ownership of each of Holdco 1, TAM and its Subsidiaries in a manner consistent with the terms of the LATAM-TEP Shareholders Agreement, Holdco 1 Shareholders Agreement and the TAM Shareholders Agreement other than any such Action by any Person other than a Governmental Entity that could not reasonably be expected to succeed on its merits (collectively, “Adverse Actions”).

(e)           LAN BDRs. CVM shall have granted the registrations of LAN and the LAN BDRs described in clauses (A) and (B) of Section 1.04(b)(i).

(f)           Required Listings.  Each of the Required Listings shall have been approved by the CVM, the NYSE and the SSE, as applicable, and under the terms of such approval shall become effective no later than the Effective Time.

(g)           Form F-4.  The Form F-4 shall have been declared effective by the SEC under the U.S. Securities Act.  No stop order suspending the effectiveness of the Form F-4 shall have been issued by the SEC, and no proceeding for that purpose shall have been initiated or threatened by the SEC.

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(h)           Completion of Pre-Commencement Transaction Steps.  Each of the Transaction Steps described in Section 1.01, and Sections 1.03 through 1.10 of the Implementation Agreement shall have been taken and completed; provided, however, that, notwithstanding the foregoing, no party whose failure to take any action that it is required to be taken pursuant to the Implementation Agreement caused the failure of any such Transaction Step to be taken shall be entitled to the benefit of the condition in respect of such Transaction Step (treating each of (x) LAN and the LAN Controlling Shareholders, collectively, and (y) TAM, the TAM Direct Controlling Shareholder and the Amaro Family, collectively, as a single party for purposes of this Section 6.01(h)).

(i)           Appraisal Condition.  The product of 0.9 and the high end of the range of economic value of LAN per share of LAN Common Stock most recently determined by the Appraiser shall be greater than or equal to the low end of the range of economic value of TAM per share of TAM Stock determined by the Appraiser at the same time and, if such determinations are made in the Appraisal Report, the Appraisal Report has not been replaced by a new Appraisal Report by a new Appraiser at the request of the holders of the outstanding Free Float Shares in accordance with Brazilian Law (the “Appraisal Condition”).

SECTION 6.02.    LAN’s Conditions to the Commencement of the Exchange Offer.  Holdco 2 shall not commence the Exchange Offer unless and until all of the conditions set forth in this Section 6.02 are satisfied or waived in writing by LAN.

(a)           Representations and Warranties.  The representations and warranties of TAM contained in Section 2.03(a), Section 2.03(b) and in clause (i) of Section 2.07 of this Agreement shall have been true and correct on the date of this Agreement and shall be true and correct on the Condition Date as though made on and as of the Condition Date (except to the extent that any such representation and warranty expressly relates to a specified earlier date, in which case such representation and warranty need only be true and correct as of such specified earlier date), except for any failures of any representations and warranties in Section 2.03(a) or Section 2.03(b) that, individually or in the aggregate, are de minimis in nature and amount.  All other representations and warranties of TAM contained in this Agreement shall have been true and correct on the date of this Agreement and shall be true and correct on the Condition Date as though made on and as of the Condition Date (except to the extent any such representations and warranties expressly relate to a specified earlier date, in which case such representation and warranty need only be true and correct as of such specified earlier date) in each case without giving effect to any TAM Material Adverse Effect or any other materiality exception, qualification or limitation contained therein, other than any failures of such representations and warranties to be so true and correct to the extent that such failures and the underlying causes thereof, individually or in the aggregate, have not had and would not reasonably be expected to have a TAM Material Adverse Effect.  LAN shall have received a certificate signed on behalf of TAM by the chief executive officer of TAM to such effect.  The representations and warranties of the TAM Direct Controlling Shareholder and the Amaro Family set forth in Article IV shall have been true and correct on the date of this Agreement and shall be true and correct on the Condition Date as though made on and as of the Condition Date.

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(b)           Performance of Obligations.  TAM shall have performed in all material respects all obligations it is required to perform under this Agreement and the Implementation Agreement on or prior to the Condition Date, and LAN shall have received a certificate signed on behalf of TAM by the chief executive officer of TAM to such effect.  The TAM Direct Controlling Shareholder and the Amaro Family shall have performed in all material respects all obligations it is required to perform under this Agreement and the Implementation Agreement on or prior to the Condition Date.

(c)           No MAE.  No change, event, circumstance or development shall have occurred since December 31, 2009 (including any adverse change or development with respect to any such matters that occurred or existed on or prior to such date) that, individually or in the aggregate, has had or would reasonably be expected to have a TAM Material Adverse Effect.

(d)           No Market Disruptions.  Since the date of this Agreement, there shall have been no (i) general suspension of, or limitation on trading in securities on, the SSE, the Bovespa or the NYSE (other than a shortening of trading hours or any coordinated trading halt triggered solely as a result of a specified increase or decrease in a market index), (ii) declaration of a banking moratorium or any suspension of payments in respect of banks in Chile, Brazil or the United States, or (iii) commencement of a war or armed hostilities or airline industry events which, in the case of clauses (ii) and (iii), could reasonably be expected to have a TAM Material Adverse Effect.

(e)           Requisite Shareholder Approvals.  All of the Requisite Shareholder Approvals (other than the Requisite LAN Shareholder Approval and the Requisite TAM Shareholder Approval) shall have been obtained and recorded and published in accordance with the Chilean Corporate Law or other applicable Law.

(f)           Appraisal.  The holders of not more than 2.5% of the outstanding shares of LAN Common Stock shall have exercised their appraisal rights (derecho a retiro) under Chilean Law with respect to the Mergers.

(g)           Shareholders Agreements.  TEP Chile S.A. shall have duly executed and/or delivered to LAN copies of the TAM Shareholders Agreement, Holdco 1 Shareholders Agreement, the LATAM/TEP Shareholders Agreement and the Control Group Shareholders Agreement.  Holdco 1 shall have duly executed and/or delivered to LAN copies of the Holdco 1 Shareholders Agreement and the TAM Shareholders Agreement.  TAM shall have duly executed and/or delivered to LAN a copy of the TAM Shareholders Agreement.  The LAN Controlling Shareholders shall have duly executed and/or delivered to LAN a copy of the Control Group Shareholders Agreement.

(h)           Other Conditions. CVM shall have approved the inclusion in the Edital of all of the conditions set forth in Section 7.03, and none of the events described in paragraphs (f) and (g) of Section 7.03 shall have occurred since the date of this Agreement (without giving effect to any references to the Commencement Date contained therein).

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SECTION 6.03.    Amaro Family’s Conditions to the Commencement of the Exchange Offer.  Holdco 2 shall not commence the Exchange Offer unless and until all of the conditions set forth in this Section 6.03 are satisfied or waived in writing by the Amaro Family.

(a)           Representations and Warranties.  The representations and warranties of LAN contained in Section 3.03(a), Section 3.03(b) and in clause (i) of Section 3.07 of this Agreement shall have been true and correct on the date of this Agreement and shall be true and correct on the Condition Date as though made on and as of the Condition Date (except to the extent that any such representation and warranty expressly relates to a specified earlier date, in which case such representation and warranty need only be true and correct as of such specified earlier date), except for any failures of any representations and warranties in Section 3.03(a) or Section 3.03(b) that, individually or in the aggregate, are de minimis in nature and amount.  All other representations and warranties of LAN contained in this Agreement shall have been true and correct on the date of this Agreement and shall be true and correct on the Condition Date as though made on and as of the Condition Date (except to the extent any such representations and warranties expressly relate to a specified earlier date, in which case such representation and warranty need only be true and correct as of such specified earlier date), in each case without giving effect to any LAN Material Adverse Effect or any other materiality exception, qualification or limitation contained therein, other than any failures of such representations and warranties to be so true and correct to the extent that such failures and the underlying causes thereof, individually or in the aggregate, have not had and would not reasonably be expected to have a LAN Material Adverse Effect.  TAM shall have received a certificate signed on behalf of LAN by the chief executive officer of LAN to such effect.  The representations and warranties of the LAN Controlling Shareholders set forth in Article IV shall have been true and correct on the date of this Agreement and shall be true and correct on the Condition Date as though made on and as of the Condition Date.

(b)           Performance of Obligations.  LAN shall have performed in all material respects all obligations it is required to perform under this Agreement or the Implementation Agreement on or prior to the Condition Date, and TAM shall have received a certificate signed on behalf of LAN by the chief executive officer of LAN to such effect.  The LAN Controlling Shareholders shall have performed in all material respects all obligations they are required by this Agreement or the Implementation Agreement to perform on or prior to the Condition Date.

(c)           No MAE.  No change, event, circumstance or development shall have occurred since December 31, 2009 (including any adverse change or development with respect to any such matters that occurred or existed on or prior to such date) that, individually or in the aggregate, has had or would reasonably be expected to have a LAN Material Adverse Effect.

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(d)           No Market Disruptions.  Since the date of this Agreement there shall have been no (i) general suspension of, or limitation on trading in securities on, the SSE, the Bovespa or the NYSE (other than a shortening of trading hours or any coordinated trading halt triggered solely as a result of a specified increase or decrease in a market index), (ii) declaration of a banking moratorium or any suspension of payments in respect of banks in Chile, Brazil or the United States, or (iii) commencement of a war or armed hostilities or airline industry events which, in the case of clauses (ii) and (iii), could reasonably be expected to have a LAN Material Adverse Effect.

(e)           Shareholders Agreements.  LAN shall have duly executed and/or delivered to the Amaro Family copies of the Holdco 1 Shareholders Agreement, the TAM Shareholders Agreement and the LATAM/TEP Shareholders Agreement.  The LAN Controlling Shareholders shall have duly executed and/or delivered to the Amaro Family a copy of the Control Group Shareholders Agreement.

(f)           Other Conditions. None of the events described in Schedule 1.12 of the Implementation Agreement shall have occurred since the date of this Agreement (without giving effect to any references to the Commencement Date contained therein).

SECTION 6.04.    Commencement of the Exchange Offer.  If all of the conditions set forth in this Article VI are satisfied or waived in accordance with the requirements of this Article, then Holdco 2 shall commence the Exchange Offer.

ARTICLE VII

CONDITIONS TO THE CONSUMMATION OF THE EXCHANGE OFFER

SECTION 7.01.    Conditions to the Consummation of the Exchange Offer.  The only conditions to the consummation of the Exchange Offer shall be the conditions set forth in Section 7.02 and Section 7.03.  Holdco 2 shall not be obligated to, and shall not, purchase or pay for any of the Eligible TAM Shares validly tendered and not withdrawn pursuant to the Exchange Offer unless all of such conditions are satisfied or waived by Holdco 2.  Holdco 2 shall only waive the conditions set forth in the Section 7.02 and 7.03 in accordance with the requirements set forth in Section 7.02 and Section 7.03 below (as applicable).

SECTION 7.02.    Mutual Conditions to the Consummation of the Exchange Offer.  Holdco 2 shall only waive a condition to the consummation of the Exchange Offer set forth in this Section 7.02 if such condition has been waived by LAN in the LAN Condition Notice and by the Amaro Family in the TEP Condition Notice, and Holdco 2 shall promptly waive all such conditions that have been so waived by LAN and the Amaro Family.

(a)           Required Listings.  Since the Commencement Date, none of the Bovespa, the NYSE or the SSE shall have revoked or suspended its approval of any of its Required Listings and under the terms of each such approval the relevant Required Listing shall become effective no later than the Effective Time.

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(b)           Form F-4.  Since the Commencement Date, no stop order suspending the effectiveness of the Form F-4 shall have been issued by the SEC and no proceeding for that purpose shall have been initiated or threatened by the SEC.

(c)           Delisting Condition.  The number of Free Float Shares that are validly tendered into and not withdrawn from, or that otherwise approve, the Exchange Offer shall be at least equal to the number of Free Float Shares required to permit the delisting of each of the TAM Ordinary Stock and the TAM Preferred Stock from the Bovespa under the rules of the CVM and Brazilian Law (the “Delisting Condition”).

(d)           Appraisal.  Since the Commencement Date, no Appraisal Event shall have occurred, the holders of the Free Float Shares shall not have requested a new Appraisal Report and a new Appraiser in accordance with Brazilian Law and the holders of the outstanding Free Float Shares shall no longer have the right to select a new Appraiser and to cause the Appraisal Report to be replaced with a new Appraisal Report.

SECTION 7.03.    LAN Conditions to the Consummation of the Exchange Offer. Holdco 2 shall only waive a condition to the consummation of the Exchange Offer set forth in this Section 7.03 if such condition has been waived by LAN in the LAN Condition Notice, and Holdco 2 shall promptly waive all such conditions that have been so waived by LAN.

(a)           Minimum Tender Condition.  The number of Eligible TAM Shares that are validly tendered into and not withdrawn from the Exchange Offer shall be at least equal to the number of Eligible TAM Shares that need to be acquired so that, if Holdco 2 or LAN owned the TEP Shares, it would have the right and ability to effect a statutory squeeze-out under Brazilian Law of all Eligible TAM Shares that do not accept the Exchange Offer and the Amaro Family shall have stated in the Subscription Condition Notice that all of the conditions set forth in Schedule 1.12 of the Implementation Agreement have been satisfied or irrevocably waived by the Amaro Family (the “Minimum Tender Condition” and, together with the Delisting Condition, the “Minimum Conditions”).

(b)           Governmental Consents.  Since the Commencement Date, none of the Consents received or obtained from Governmental Entities that were a condition to the commencement of the Exchange Offer shall have been revoked or amended, modified or supplemented in any way that could reasonably be expected to materially impede or interfere with, delay, postpone or materially and adversely affect the consummation of the transactions contemplated by this Agreement or the Implementation Agreement.

(c)           No Injunctions or Restraints.  Since the Commencement Date, no court or other Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Restraining Order.

(d)           No Litigation.  No Adverse Action commenced since the Commencement Date shall remain pending.

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(e)         Business Continuity.  None of the following actions, events or circumstances shall have occurred since the Commencement Date (or prior thereto if no executive officer of LAN had actual knowledge of any such action, event or circumstance as of the Commencement Date) that, individually or in the aggregate, have had an adverse effect on the businesses, revenues, operations or financial condition of TAM and its Subsidiaries in any material respect:

(i)           Any change in, or termination of, any License from any Governmental Entity or other Person that are currently held by TAM or any of its Subsidiaries and used to conduct air domestic or international cargo or passenger transport servicesor any such Governmental Entity or other Person shall have threatened or taken any action seeking any such change or termination;

(ii)          Any loss of 5% or more of the total number of Slots currently granted to TAM and its Subsidiaries at Congonhas Airport – São Paulo, or any loss of 10% or more of the total takeoff and landing scheduled operations of TAM and its Subsidiaries at any of the following airports: the International Airport of São Paulo - Guarulhos, Santos Dumont Airport, International Airport of Rio de Janeiro – Antônio Carlos Jobim, International Airport Juscelino Kubitschek (Brasília)  and International Airport Salgado Filho (Porto Alegre);

(iii)         Any loss of 15% or more of the permits or air traffic rights held by TAM and its Subsidiaries to operate in any country in the European Union;

(iv)         Any termination or expiration of any aeronautical insurance policy that currently covers TAM or any of its Subsidiaries unless such policy is reinstated or replaced by a substantially equivalent policy within 24 hours of such termination or expiration;

(v)          Any initiation of any inquiry or investigation of TAM or any of its Subsidiaries by any Airline Regulatory Entity relating to safety issues that could be expected to result in the total or partial revocation of any License currently held by TAM or any of its Subsidiaries or to be detrimental to the public image of TAM;

(vi)         Any event that occurs at the International Airport of São Paulo – Guarulhos, Congonhas Airport – São Paulo or Santos Dumont Airport and that (1) prevents TAM and its Subsidiaries from operating at least 50% of their normally scheduled flights from such airport during the period from the date on which such event occurs to the expiration of the Exchange Offer or (2) if such period is less than 30 days, could be expected to prevent such percentage of such flights during the 30-day period commencing on the date on which such event occurs;

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(vii)       Any inability of Brazil to adequately and safely control its airspace through its air traffic control system that (1) prevents TAM and its Subsidiaries from being able to conduct their normal operations during the period through the expiration of the Exchange Offer or (2) if such period is less than 30 days, could be expected to prevent such normal operations for a period of at least 30 days;

(viii)      Any aircraft accident that involves any loss of life or the total loss of any aircraft;

(ix)         Any issuance of any Law or Order:

(A) fixing or otherwise regulating domestic Brazilian passenger airline fares;

(B) challenging, restricting, limiting or impairing the ability of Holdco 2 to make or consummate the Exchange Offer; LAN to consummate the Mergers; Holdco 2, LAN or Holdco 1 to own, hold or exercise the rights inherent in their shares of TAM Stock; or LAN and the TAM Direct Controlling Shareholder, TEP Chile and/or the Amaro Family to jointly own or operate all or any material portion of the assets of TAM and its Subsidiaries or exercise all the rights and receive all the benefits of full ownership of each of Holdco 1, TAM and its Subsidiaries in a manner consistent with the terms of the LATAM-TEP Shareholders Agreement, the Holdco 1 Shareholders Agreement and the TAM Shareholders Agreement;

(C) providing for any expropriation or confiscation of any assets of TAM or any of its Subsidiaries or limiting the ability of TAM or any of its Subsidiaries to freely dispose of any of their assets;

(D) suspending, restricting or limiting the ability to engage in currency exchange transactions in Brazil or by Brazilian corporations or residents or changing the current regulations relating to the transfer of funds into or out of Brazil; or

(E) changing the current regulations applicable to the capital markets in Brazil or Chile or increasing any taxes or tax rates that adversely impacts the shareholders of TAM who tender into, or the consummation by Holdco 2 of, the Exchange Offer;

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(x)          Any natural disaster or similar event that causes damage to any infrastructure or airspace used by, or any industry affecting, TAM or any of its Subsidiaries or any assets used by TAM or any of its Subsidiaries in the ordinary course of business; or

(xi)         Any other event that (1) prevents TAM and its Subsidiaries from operating at least 50% of their regular scheduled flights during the period from the date on which such event occurs to the expiration of the Exchange Offer or (2) if such period is less than 30 days, could be expected to prevent such percentage of such flights during the 30-day period commencing on the date on which such event occurs.

(f)          No Default Under Relevant Agreements. Since the Commencement Date, there shall not have occurred any default in the performance or breach, or any event that with notice, lapse of time or both would result in such a default or breach, by TAM or any of its Subsidiaries of any covenant or agreement contained in any Contract to which any of them is a party under which the aggregate consideration provided or received, or to be provided or received, is greater than US$10,000,000 (collectively, “Relevant Agreements”) that continues to exist, in each case after giving effect to any waivers granted by any other party to such Contract and regardless of whether or not any event of default, acceleration or other enforcement action shall have been declared or taken by any such other party.

(g)         No Market Disruptions.  Since the Commencement Date, there shall have been no (i) general suspension of, or limitation on trading in securities on, the SSE, the Bovespa or the NYSE (other than a shortening of trading hours or any coordinated trading halt triggered solely as a result of a specified increase or decrease in a market index), (ii) declaration of a banking moratorium or any suspension of payments in respect of banks in Brazil, the United States or the European Union, or (iii) commencement of a war or armed hostilities or airline industry events, which, in the case of clauses (ii) and (iii), could reasonably be expected to have a TAM Material Adverse Effect.

(h)         Subscriptions.  The Subscriptions shall have been fully paid in each case in accordance with Section 5.04(b) of this Agreement.

ARTICLE VIII

TERMINATION, AMENDMENT AND WAIVER

SECTION 8.01.    Termination.  This Agreement shall terminate automatically if and when: (i) the Exchange Offer expires in accordance with its terms or is revoked with the permission of the CVM, in each case without the purchase of any shares of TAM Stock or (ii) the Implementation Agreement is terminated in accordance with its terms or the terms of this Agreement.  In addition to the circumstances provided in Section 4.01 of the Implementation Agreement, the Implementation Agreement may be terminated and the Exchange Offer and the Mergers may be abandoned at any time prior to the commencement of the Exchange Offer, whether before or after receipt of any Requisite Shareholder Approvals:

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(a)         by either LAN or the Amaro Family:

(i)           if the ANAC Approval has not been obtained or for any other reason the Exchange Offer shall not have commenced on or before December 31, 2011 (as it may be extended as set forth below, the “Outside Date”); provided, however, that if the condition set forth in Section 6.01(b) shall not have been satisfied on or before December 31, 2011 and/or the condition set forth in Section 6.01(d) is not satisfied on December 31, 2011, then, if all other conditions to commencement of the Exchange Offer (other than conditions that by their nature are to be satisfied at the Pre-Commencement Closing) set forth in Article VI shall have been satisfied the Outside Date may be extended until June 30, 2012 at the election of the Amaro Family or LAN by written notice to the other party;

(ii)           if any Governmental Entity of competent jurisdiction has refused to grant any Consent described in Section 6.01(b) (other than any Consent required from CVM with respect to the inclusion in the Edital of any of the conditions set forth in Section 7.03) and such refusal has become final and nonappealable or any Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Restraining Order that has become final and nonappealable, in each case that would give rise to the failure of a condition set forth in Section 6.01(b) or Section 6.01(c);

provided, however, that the right to terminate the Implementation Agreement under this Section 8.01(a) shall not be available to any party whose material breach of a representation, warranty or covenant in this Agreement or the Implementation Agreement has been a principal cause of the failure of the Exchange Offer to commence by the Outside Date or the failure of the condition giving rise to such termination right, as applicable;

(b)           by LAN, if TAM, the TAM Direct Controlling Shareholder or the Amaro Family shall have breached or failed to perform any of their representations, warranties, covenants or agreements set forth in this Agreement or the Implementation Agreement or any of such representations and warranties shall have become untrue as of any date subsequent to the date of this Agreement, which breach or failure to perform or untruth (i) would give rise to the failure of a condition set forth in Section 6.02(a) or 6.02(b) (assuming, in the case of any untruth, that such subsequent date was the Condition Date) and (ii) is not capable of being cured or, if capable of being cured, shall not have been cured by TAM, the TAM Direct Controlling Shareholder or the Amaro Family, as applicable, by the earlier of (A) the day before the Outside Date and (B) the 30th calendar day following receipt of written notice of such breach or failure to perform from LAN;

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(c)           by the Amaro Family, if LAN or the LAN Controlling Shareholders shall have breached or failed to perform any of their representations, warranties, covenants or agreements set forth in this Agreement or the Implementation Agreement or any of such representations and warranties shall have become untrue as of any date subsequent to the date of this Agreement, which breach or failure to perform (i) would give rise to the failure of a condition set forth in Section 6.03(a) or 6.03(b) (assuming, in the case of any untruth, that such subsequent date was the Condition Date) and (ii) is not capable of being cured or, if capable of being cured, shall not have been cured by LAN by the earlier of (A) the day before the Outside Date and (B) the 30th calendar day following receipt of written notice of such breach or failure to perform from TAM or the Amaro Family; and

(d)           by LAN prior to the commencement of the Exchange Offer if CVM shall have refused to grant its Consent to the inclusion in the Edital of any of the conditions set forth in Section 7.03.

SECTION 8.02.    Effect of Termination.  In the event of termination of this Agreement as provided in Section 8.01, this Agreement shall forthwith become void and have no effect, without any liability or obligation on the part of LAN, TAM or any other party hereto under this Agreement, other than the provisions of Sections 2.22 and 3.22, the second and third sentences of Section 5.01(a), Section 5.01(b), Section 8.01, this Section 8.02, Section 8.04, Section 8.05 and Article IX, which provisions shall survive such termination.  Notwithstanding the foregoing or any termination or anything to the contrary in this Agreement, no party to this Agreement shall be relieved or released from liability for damages of any kind (whether or not communicated or contemplated at the time of execution of this Agreement), including consequential damages and including as damages any value lost by shareholders of LAN or TAM, as the case may be, based on the consideration that would otherwise have been paid and the benefits that would otherwise have accrued to such shareholders, which arise out of or result from any (i) knowing breach of any of the representations and warranties in this Agreement or (ii) deliberate breach of any covenant of this Agreement.  No party claiming that any such breach has occurred will have any duty or otherwise be obligated to mitigate any such damages.  For purposes of this Section 8.02, (i) a “knowing” breach of a representation and warranty of a party shall be deemed to have occurred only if an executive officer of such party had actual knowledge of such breach as of the date of this Agreement or would have had such actual knowledge if such individual had made a reasonable investigation and (ii) a “deliberate” breach of any covenant of a party shall be deemed to have occurred only if such party or its Representatives took or failed to take an action constituting a breach with actual knowledge that the action so taken or omitted to be taken constituted a breach of such covenant.  For purposes of this Agreement, an “executive officer” shall have the meaning given to the term “officer” in Rule 16a-1(f) promulgated under the U.S. Exchange Act.

SECTION 8.03.    Amendment.  This Agreement may be amended by the parties hereto at any time prior to the commencement of the Exchange Offer but only by an instrument in writing signed by all of the parties hereto.

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SECTION 8.04.    Extension; Waiver.  At any time prior to the Effective Time, the parties may (but shall not be under any obligation to) (a) extend the time for the performance of any of the obligations or other acts of the other parties, (b) waive any inaccuracies in the representations and warranties of the other parties contained herein or in any document delivered pursuant hereto or (c) waive compliance with any of the agreements of the other parties or any of the conditions for its benefit contained herein, in each case to the extent permitted by applicable Law.  Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed by such party.  The failure of any party to this Agreement to assert any of its rights under this Agreement or applicable Law shall not constitute a waiver of such rights and, except as otherwise expressly provided in this Agreement, no single or partial exercise by any party to this Agreement of any of its rights under this Agreement shall preclude any other or further exercise of such rights or any other rights under this Agreement or applicable Law.

SECTION 8.05.    Indemnification.

(a)           Indemnification by LAN.  LAN shall indemnify and defend and hold the TAM Direct Controlling Shareholder, its Affiliates and their respective directors, officers, employees and shareholders (collectively, the “TEP Indemnified Parties”) harmless from and against any and all any damages, losses, charges, liabilities, claims, demands, actions, suits, proceedings, payments, judgments, settlements, assessments, deficiencies, taxes, interest, penalties, and costs and expenses (including reasonable attorneys’ fees and disbursement) (collectively, “Losses”) incurred by any TEP Indemnified Party (whether or not involving a claim by any Person other than a party hereto or an Affiliate of such a party (each, a “Third Party ”) arising out of or resulting from (i) the failure of the Exchange Offer to be consummated solely as a result of any failure by LAN to confirm in the LAN Condition Notice that any condition to the consummation of the Exchange Offer set forth in Section 7.03 (other than the Minimum Tender Condition) was satisfied if (but only if) such condition was in fact satisfied or (ii) any failure of the Exchange Offer to be consummated after the Amaro Family has paid for the TEP Chile Subscription as required by Section 5.04(b).

(b)           Indemnification by the TAM Controlling Shareholders.  The TAM Direct Controlling Shareholder and the members of the Amaro Family, jointly and severally, shall indemnify and defend and hold LAN, its Affiliates and their respective directors, officers, employees and shareholders (collectively, the “LAN Indemnified Parties”) harmless from and against any and all Losses incurred by any LAN Indemnified Party (whether or not involving a claim by a Third Party) arising out of or resulting from any failure by the Amaro Family to state in the TEP Condition Notice that any condition set forth in Schedule 1.12 of the Implementation Agreement was satisfied if (but only if) such condition was in fact satisfied.

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(c)           Third Party Claims.  If any claim or action by a Third Party is made in writing against a TEP Indemnified Party or a LAN Indemnified Party (each, an “Indemnified Party”) for which indemnification is provided under this Agreement and such Indemnified Party intends to seek such indemnity, then such Indemnified Party shall promptly notify the party from whom indemnification may be sought hereunder (the “Indemnifying Party”) in writing of such claim or action; provided, however, that any failure by such Indemnified Party to give such notice promptly will not relieve the Indemnifying Party of any of its indemnification obligations hereunder except to the extent that the Indemnifying Party is actually prejudiced by such failure.  In case any such action shall be brought against any Indemnified Party, the Indemnifying Party shall be entitled to participate therein or, at its election, to assume the defense thereof with counsel reasonably satisfactory to the Indemnified Party; provided, however, that the Indemnifying Party shall not have the right to assume the defense of any claim of a Third Party to the extent (a) the claim relates to any actual or alleged criminal proceeding, action, indictment, allegation or investigation, (b) seeks an injunction or equitable relief against the Indemnified Party or (c) upon petition by the Indemnified Party, the appropriate court rules that the Indemnifying Party has failed or is failing to prosecute or defend such claim.  After notice from the Indemnifying Party to the Indemnified Party of its election so to assume the defense thereof, the Indemnifying Party shall not be liable to the Indemnified Party under this Section 8.05 for any legal expenses of other counsel or any other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof (other than reasonable costs of investigation) unless the representation of the Indemnified Party by counsel provided by the Indemnifying Party would be inappropriate due to actual or potential conflicting interests between the Indemnified Party and the Indemnifying Party, including situations in which there are one or more material legal defenses available to the Indemnified Party that are not available to the Indemnifying Party; provided, however, that notwithstanding the foregoing the Indemnifying Party shall not at any time, in connection with any one such action or separate but substantially similar actions arising out of the same general allegations, be liable for the fees and expenses of more than one separate set of counsel for all Indemnified Parties, except to the extent that local counsel, in addition to their regular counsel, is reasonably required in order to effectively defend against such action.  No indemnification shall be available in respect of any settlement of any action or claim effected by an Indemnified Party without the prior written consent of the Indemnifying Party.  If the Indemnifying Party shall have assumed the defense of a third-party claim, the Indemnifying Party shall not enter into any settlement of or otherwise compromise or discharge such claim without the Indemnified Party’s prior written consent unless such settlement, compromise or discharge irrevocably releases the Indemnified Party from all liabilities and obligations with respect to such claim and does not impose any injunctive or other equitable relief against the Indemnified Party.

ARTICLE IX

GENERAL PROVISIONS

SECTION 9.01.    Survival.  None of the representations, warranties or covenants contained in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time; provided, however, that notwithstanding the foregoing, this Article IX and the covenants and agreements of the parties in the last sentence of Section 1.08 shall survive the Effective Time.

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SECTION 9.02.    Fees and Expenses.  Except as provided in Section 8.02, all fees and expenses incurred in connection with this Agreement, the Implementation Agreement, the Mergers and the other transactions contemplated hereby and thereby shall be paid by the party incurring such fees or expenses, whether or not the Exchange Offer is commenced or the Exchange Offer and the Mergers are consummated, except that expenses incurred in connection with the printing and mailing of the Offer to Exchange/Prospectus and the filing fee for the Form F-4 shall be shared equally by LAN, on the one hand, and the TAM Direct Controlling Shareholder and the Amaro Family, on the other hand.

SECTION 9.03.    Notices.  Except for notices that are specifically required by the terms of this Agreement to be delivered orally, all notices, requests, claims, demands, instructions and other communications or documents given hereunder shall be in writing and shall be delivered personally or sent by registered or certified mail (postage prepaid), facsimile or overnight courier to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

If to LAN or the LAN Controlling Shareholders, to:

Claro y Cia.

Apoquindo 3721, piso 13,

Santiago, Chile

Attention: José María Eyzaguirre B.

Fax: +562 3673003

jmeyzaguirre@claro.cl

with copies (which shall not constitute notice) to:

Sullivan & Cromwell LLP

125 Broad Street

New York, NY 10004

United States of America

Attention: Sergio Galvis and Duncan McCurrach

Fax: +1 212-558-3588

galviss@sullcrom.com

mccurrachd@sullcrom.com

If to TAM to:

TAM S.A.

Av. Jurandir, 856, Lote 4

04072-000

São Paulo – SP

Brasil

Attention: Marco Antonio Bologna

Fax: +55 (11) 5582-9879

marco.bologna@tam.com.br

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with a copy (which shall not constitute notice) to:

Turci Advogados

Rua Dr. Renato Paes de Barros, 778

-1◦ andar – cj.12

04530-0001

São Paulo – SP

Brasil

Attention: Flavia Turci

Fax: +55 11 2177 2197

turci@turci.com

Clifford Chance US LLP

31 West 52nd Street

New York, NY 10019

Attention: Sarah Jones and Anand Saha

Fax: +1 212 878 8375

Sarah.Jones@CliffordChance.com

Anand.Saha@CliffordChance.com

If to the TAM Direct Controlling Shareholder or the Amaro Family to:

Turci Advogados

Rua Dr. Renato Paes de Barros, 778

-1◦ andar – cj.12

04530-0001

São Paulo – SP

Brasil

Attention: Flavia Turci

Fax: +55 11 2177 2197

turci@turci.com

with a copy (which shall not constitute notice) to:

Clifford Chance US LLP

31 West 52nd Street

New York, NY 10019

Attention: Sarah Jones and Anand Saha

Fax: +1 212 878 8375

Sarah.Jones@CliffordChance.com

Anand.Saha@CliffordChance.com

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Any notice, request, claim, instruction or other communication or document given as provided above shall be deemed given to the receiving party (i) if delivered personally, upon actual receipt, (ii) if sent by registered or certified mail, three business days after deposit in the mail, (iii) if sent by facsimile, upon confirmation of successful transmission if within one business day after such facsimile has been sent such notice, request, claim, instruction or other communication or document is also given by one of the other methods described above and (iv) if sent by overnight courier, on the next business day after deposit with the overnight courier.

SECTION 9.04.    Definitions.  For the purposes of this Agreement, the following terms shall have the meanings assigned below.  In addition, all capitalized terms used but not defined herein that are defined in the Implementation Agreement shall have the meanings assigned to such terms in the Implementation Agreement.

(a)           “Affiliate” shall have the meaning assigned to such term in Rule 12b-2 promulgated under the U.S. Exchange Act.

(b)           “Airline Affiliate” means, with respect to either LAN or TAM, (i) any of its Subsidiaries that operates scheduled air services, (ii) any airline with which it maintains a franchise agreement permitting that airline to operate air services for the own account of that airline with its own aircraft, but in LAN’s or TAM’s livery, as the case may be, and subject to certain service standards, and (iii) any airline that operates scheduled airline services under the IATA designator code of such airline or that of TAM, in TAM’s livery and under TAM’s service standards, or in the case of LAN, in LAN’s livery and under LAN’s service standards, as applicable, with respect to which LAN or TAM, as applicable, demonstrates that it currently and continually exercises a substantial influence in the direction of its management and policies.

(c)           “Antitrust Law” means any statutes, rules, regulations, orders, decrees, administrative and judicial doctrines and other Laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or lessening of competition through mergers, acquisitions, business combinations or similar transactions.

(d)           “beneficial ownership” (and its correlative phrases) shall have the meanings assigned to such phrases in Rule 13d-3 promulgated under the U.S. Exchange Act.

(e)           “business day” means any day that is not a Saturday, Sunday or a day on which banking institutions are required or authorized by law or executive order to be closed in Santiago, Chile, São Paulo, Brazil or New York, New York.

(f)           “Control”(and its correlative terms) shall have the meanings assigned to such terms in Rule 12b-2 promulgated under the U.S. Exchange Act.

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(g)           “Convertible Securities” means, with respect to any Person, any securities, options, warrants or other rights of, or granted by, such Person or any of its Affiliates that are, directly or indirectly, convertible into, or exercisable or exchangeable for, any Equity Securities of such Person or any of its Affiliates.

(h)           “Equity Securities” means, with respect to any Person, any capital stock of, or other equity interests in such Person.

(i)           “Indebtedness” means, with respect to any Person, without duplication, (i) all obligations of such Person for borrowed money, or with respect to deposits or advances of any kind to such Person, (ii) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (iii) all aircraft operating leases of such Person, (iv) all capitalized lease obligations of such Person, (v) all guarantees and arrangements having the economic effect of a guarantee of such Person of any Indebtedness described in clauses (i) through (iv) above of any other Person, (vi) all obligations or undertakings of such Person to maintain or cause to be maintained the financial position or covenants of others or to purchase the obligations or property of others and (vii) indebtedness in respect of Swap Contracts designed to hedge against interest rates, foreign exchange rates or commodities pricing risks incurred in the ordinary course of business and not for speculative purposes.

(j)           “Intellectual Property” means, collectively, all (i) trademarks, service marks, brand names, certification marks, collective marks, d/b/as, internet domain names, logos, symbols, trade dress, assumed names, fictitious names, trade names and other indicia of origin, all applications and registrations for the foregoing, and all goodwill associated therewith and symbolized thereby, including all renewals of same; (ii) inventions and discoveries, whether patentable or not, and all patents, registrations, invention disclosures and applications therefor, including divisionals, continuations, continuations-in-part and renewal applications, and including renewals, extensions and reissues; (iii) trade secrets and confidential information and know-how, including confidential processes, schematics, business methods, formulae, drawings, prototypes, models, designs, customer lists and supplier lists; (iv) all rights in published and unpublished works of authorship, whether copyrightable or not (including computer software and databases (including source code, object code and all related documentation)), and other compilations of information, copyrights therein and thereto, and registrations and applications therefor, and all renewals, extensions, restorations and reversions thereof; (v) moral rights, rights of publicity and rights of privacy; and (vi) all other intellectual property or proprietary rights.

(k)           “IT Assets” means all computer software and databases (including source code, object code and all related documentation), computers, firmware, middleware, servers, workstations, routers, hubs, switches, data communications lines and all other information technology equipment and elements and all associated documentation.

(l)           “Key Personnel” means any director, officer or other employee of TAM or any Subsidiary of TAM with annual base compensation in excess of $250,000.

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(m)           “Knowledge” means, with respect to any matter in question, with respect to TAM, the actual knowledge of any of the executive officers of TAM and such actual knowledge as they would have had if they had made a reasonable inquiry and, with respect to LAN, the actual knowledge of any of the executive officers of LAN and such actual knowledge as they would have had if they had made a reasonable inquiry.

(n)           “LAN Material Adverse Effect” means any change, effect, occurrence or circumstance which, individually or in the aggregate, (i) has had or would reasonably be expected to have a material adverse effect on the business, financial condition, results of operations, assets or liabilities of LAN and its Subsidiaries, taken as a whole, other than (x) any such change, effect, occurrence or circumstance to the extent resulting from (A) any changes after the date of this Agreement in general economic or financial market conditions, (B) any changes after the date of this Agreement generally affecting the industries in which LAN and its Subsidiaries operate, (C) changes after the date of this Agreement in IFRS or the interpretation thereof, (D) geopolitical conditions, the outbreak of a pandemic or other widespread health crisis, the outbreak or escalation of hostilities, any acts of war, sabotage or terrorism, or any escalation or worsening of any such acts of war, sabotage or terrorism threatened or underway as of the date of this Agreement or (E) any hurricane, tornado, flood, earthquake, volcanic eruption or natural disaster; provided, however, that the foregoing clauses (A), (B), (D) and (E) shall not apply to the extent that any such change, effect, occurrence or circumstance disproportionately impacts LAN and its Subsidiaries compared to other participants in the industries in which LAN and its Subsidiaries participate, or (y) any failure, in and of itself, of LAN to meet any internal or analyst projections, forecasts or estimates of revenue or earnings or any decrease in the market price or trading volume of the shares of LAN Common Stock (it being understood, however, that the exception in this clause (y) shall not apply to the underlying causes of any such failure or decrease or prevent any of such underlying causes from being taken into account in determining whether a LAN Material Adverse Effect has occurred); or (ii) impairs or would reasonably be expected to impair in any material respect the ability of LAN to consummate the transactions contemplated by this Agreement or the Implementation Agreement or to perform its obligations hereunder or thereunder on a timely basis.

(o)           “Law” means any statute, common law, ordinance, rule, regulation, agency requirement or Order of, or issued, promulgated or entered into by or with, any Governmental Entity.

(p)           “Order” means any order, decision, writ, injunction, decree, judgment, legal or arbitration award, stipulation, license, permit or agreement issued, promulgated or entered into by or with (or settlement or consent agreement subject to) any Governmental Entity.

(q)           “Person” means any natural person, firm, corporation, partnership, company, limited liability company, joint venture, association, trust, unincorporated organization, Governmental Entity or other entity.

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(r)           “Subsidiary” means, with respect to any Person, any other Person (whether or not incorporated) as to which such Person and/or any one or more of its other Subsidiaries, directly or indirectly, (i) own a majority of the general partner interests in such other Person, (ii) own a majority of the outstanding securities of, or other equity interests in, such other Person which by their terms has ordinary voting power to elect the members of the board of directors (or comparable governing body) of such other Person, or (iii) otherwise have the right to elect or appoint a majority of such members.

(s)           “Swap Contract” means (a) any and all interest rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

(t)           “TAM Material Adverse Effect” means any change, effect, occurrence or circumstance which, individually or in the aggregate, (i) has had or would reasonably be expected to have a material adverse effect on the business, financial condition, results of operations, assets or liabilities of TAM and its Subsidiaries, taken as a whole, other than (x) any such change, effect, occurrence or circumstance to the extent resulting from (A) any changes after the date of this Agreement in general economic or financial market conditions, (B) any changes after the date of this Agreement generally affecting the industries in which TAM and its Subsidiaries operate, (C) changes after the date of this Agreement in IFRS or the interpretation thereof, (D) geopolitical conditions, the outbreak of a pandemic or other widespread health crisis, the outbreak or escalation of hostilities, any acts of war, sabotage or terrorism, or any escalation or worsening of any such acts of war, sabotage or terrorism threatened or underway as of the date of this Agreement or (E) any hurricane, tornado, flood, earthquake, volcanic eruption or natural disaster; provided, however, that the foregoing clauses (A), (B), (D) and (E) shall not apply to the extent that any such change, effect, occurrence or circumstance disproportionately impacts TAM and/or its Subsidiaries compared to other participants in the industries in which TAM and its Subsidiaries participate, or (y) any failure, in and of itself, of TAM to meet any internal or analyst projections, forecasts or estimates of revenue or earnings or any decrease in the market price or trading volume of the shares of TAM Preferred Stock (it being understood, however, that the exception in this clause (y) shall not apply to the underlying causes of any such failure or decrease or prevent any of such underlying causes from being taken into account in determining whether a TAM Material Adverse Effect has occurred); or (ii) impairs or would reasonably be expected to impair in any material respect the ability of TAM to consummate the transactions contemplated by this Agreement or the Implementation Agreement or to perform its obligations hereunder or thereunder on a timely basis.

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(u)           “Transaction Agreements” means this Agreement and the Implementation Agreement, the Control Group Shareholders Agreement, the LATAM-TEP Shareholders Agreement, the Holdco 1 Shareholders Agreement and the TAM Shareholders Agreement.

Any terms not defined in this Section 9.04 or otherwise in this Agreement shall have the meanings given to such terms in the Implementation Agreement.

SECTION 9.05.    Interpretation.  When a reference is made in this Agreement to an Article, a Section, Exhibit or Schedule, such reference shall be to an Article of, a Section of, or an Exhibit or Schedule to this Agreement unless otherwise indicated.  The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”  The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  References to “this Agreement” shall include the TAM Disclosure Schedule and the LAN Disclosure Schedule and the Exhibits and Schedules to this Agreement, all of which are incorporated herein and made a part of this Agreement.  Except as otherwise expressly provided herein, references to “parties” in this Agreement refers to the parties to this Agreement.  All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.  The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term.  Any Contract, instrument or Law defined or referred to herein or in any Contract or instrument that is referred to herein means such Contract, instrument or Law as from time to time amended, modified or supplemented, including (in the case of Contracts or instruments) by waiver or consent and (in the case of Laws) by succession of comparable successor Laws and references to all attachments thereto and instruments incorporated therein.  References to a Person are also to its permitted successors and assigns.  Any reference in this Agreement to a “day” or a number of “days” (without the explicit qualification of “business”) shall be interpreted as a reference to a calendar day or number of calendar days.  Except as otherwise expressly provided herein, all remedies provided herein shall be in addition to any other remedies they may otherwise have under applicable Law.  This Agreement is the product of negotiation by the parties having the assistance of counsel and other advisers, and the parties and their counsel and other advisers have participated jointly in negotiating and drafting this Agreement.  If an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

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SECTION 9.06.    Consents and Approvals.  For any matter under this Agreement requiring the consent or approval of any party to be valid and binding on the parties hereto, such consent or approval must be in writing and signed by such party.

SECTION 9.07.    Counterparts.  This Agreement may be executed in one or more counterparts (including by facsimile), each of which shall be considered an original instrument and all of which shall together constitute the same agreement.  This Agreement shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties.

SECTION 9.08.    Entire Agreement; No Third-Party Beneficiaries.  (a)  Notwithstanding anything in this Agreement or in the other Transaction Agreements to the contrary or the placement of any provisions in, or the allocation of any provisions between, this Agreement and the other Transaction Agreements, including the Exhibits and Schedules hereto and thereto, constitute the entire agreement, and supersede all prior agreements, understandings, representations and warranties, both written and oral, among the parties with respect to the subject matter of this Agreement and the other Transaction Agreements.

(b)           Except for the provisions of Section 8.05 relating to LAN Indemnified Parties and TAM Indemnified Parties, the parties hereto hereby agree that their respective representations, warranties and covenants set forth herein are solely for the benefit of the other parties hereto in accordance with, and subject to the terms of, this Agreement and the other Transaction Agreements and that neither this Agreement nor any other Transaction Agreement is intended to, or does, confer upon any Person other than the parties hereto and thereto any rights or remedies hereunder or thereunder, including the right to rely upon the representations and warranties set forth herein. The representations and warranties in this Agreement are the product of negotiations among the parties hereto, and are for the sole benefit of the parties hereto.  Any inaccuracies in such representations and warranties are subject to waiver by the parties hereto in accordance with Section 8.04 without notice or liability to any other Person.  In some instances, the representations and warranties in this Agreement may represent an allocation among the parties hereto of risks associated with particular matters regardless of the knowledge of any of the parties hereto.  Consequently, Persons other than the parties hereto may not rely upon the representations and warranties in this Agreement as characterizations of actual facts or circumstances as of the date of this Agreement or as of any other date.

SECTION 9.09.    Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF; PROVIDED, HOWEVER, THAT NOTWITHSTANDING THE FOREGOING THE AUTHORIZATION AND EXECUTION OF THIS AGREEMENT BY EACH PARTY SHALL BE GOVERNED BY THE LAWS OF ITS JURISDICTION OF INCORPORATION.

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SECTION 9.10.    Assignment.  Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, in whole or in part, by operation of Law or otherwise by any of the parties hereto without the prior written consent of the other parties, and any purported assignment without such consent shall be null and void.  Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and permitted assigns.

SECTION 9.11.    Specific Enforcement; Consent to Jurisdiction.  The parties agree that irreparable damage would occur and that the parties would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, this being in addition to any other remedy to which they are entitled at law or in equity, without the necessity of proving the inadequacy of monetary damages or of posting bond or other undertaking, as a remedy and to obtain injunctive relief against any breach or threatened breach hereof.  In the event that any action is brought in equity to enforce the provisions of this Agreement, no party hereto shall allege, and each party hereto waives the defense or counterclaim that there is an adequate remedy at Law.  Each of the parties hereto hereby irrevocably consents and submits itself to the personal jurisdiction of the courts of the State of New York and the federal courts of the United States of America located in the Borough of Manhattan, The City of New York (collectively, the “Agreed Courts”) solely in respect of the interpretation and enforcement of the provisions of this Agreement and the Implementation Agreement, the documents referred to herein and the transactions contemplated by this Agreement and the Implementation Agreement (collectively, the “Agreed Issues”), waives, and agrees not to assert, as a defense in any action, suit or proceeding in an Agreed Court with respect to the Agreed Issues that such party is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in such Agreed Court or that the venue thereof may not be appropriate or that this Agreement or any such document may not be enforced in or by such Agreed Court, and the parties hereto irrevocably agree that all claims with respect to any action, suit or proceeding with respect to the Agreed Issues shall be heard and determined only in an Agreed Court.  The parties hereby consent to and grant to each Agreed Court jurisdiction over the Person of such parties and, to the extent permitted by Law, over the subject matter of any dispute with respect to the Agreed Issues and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 9.03 or in such other manner as may be permitted by Law shall be valid and sufficient service thereof.

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SECTION 9.12.    Waiver of Jury Trial.  EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE IMPLEMENTATION AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THIS AGREEMENT OR THE IMPLEMENTATION AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY HERETO (I) CERTIFIES THAT IT HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER AND MADE IT VOLUNTARILY AND THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY ACTION, SUIT OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 9.12.

SECTION 9.13.    Severability.  The provisions of this Agreement and the Implementation Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions of this Agreement or the Implementation Agreement.  If any provision of this Agreement or the Implementation Agreement, or the application of such provision to any Person or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the Implementation Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application of such provision, in any other jurisdiction.

SECTION 9.14.    Obligations of LAN and of TAM.  Whenever this Agreement requires a Subsidiary of LAN to take any action, such requirement shall be deemed to include an undertaking on the part of LAN to cause such Subsidiary to take such action.  Whenever this Agreement requires a Subsidiary of TAM to take any action, such requirement shall be deemed to include an undertaking on the part of TAM to cause such Subsidiary to take such action.

SECTION 9.15.    Language; Portuguese Translation.  A sworn Portuguese translation of this Agreement will be prepared by a tradutor juramentado.  Such translation and no other may be filed with, or furnished to, any applicable Governmental Entity and public registries in Brazil or used in any proceeding in Brazil.  For all purposes, the English language version of this Agreement shall be the only binding agreement between the parties hereto and shall control if there is any conflict between it and the Portuguese translation.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, each of the parties have caused this Agreement to be signed by their respective officers hereunto duly authorized, all as of the date first written above.

LAN AIRLINES S.A.
By:
	Name:
	Title:
COSTA VERDE AERONÁUTICA S.A.
By:
	Name:
	Title:
INVERSIONES MINERAS DEL
CANTÁBRICO S.A.
By:
	Name:
	Title:
TAM S.A.
By:
	Name:
	Title:
NOEMY ALMEIDA OLIVEIRA AMARO
MARIA CLÁUDIA OLIVEIRA AMARO
MAURÍCIO ROLIM AMARO
JOÃO FRANCISCO AMARO

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TAM EMPREENDIMENTOS E
PARTICIPAÇÕES S.A.
By:
	Name:
	Title:
NOEMY ALMEIDA OLIVEIRA AMARO
MARIA CLÁUDIA OLIVEIRA AMARO
MAURÍCIO ROLIM AMARO
JOÃO FRANCISCO AMARO

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Exhibit 1

By-laws of TAM as of the Effective Time

Exhibit 2

By-laws of Holdco 1

Exhibit 3

By-laws of Sister Holdco

Exhibit 4

By-laws of Holdco 2

Exhibit 5

Current By-laws of TAM

Exhibit 6

Current By-laws of LAN

EX-4.11

Exhibit 4.11

SHAREHOLDERS AGREEMENT

Among

COSTA VERDE AERONÁUTICA S.A.,

INVERSIONES MINERAS DEL CANTÁBRICO S.A.

and

TEP CHILE S.A.

Dated as of ______, 2011

TABLE OF CONTENTS

		Page
ARTICLE I
SCOPE OF AGREEMENT
SECTION 1.01	Scope of Agreement	2
SECTION 1.02	Effectiveness	3
ARTICLE II
GOVERNANCE
SECTION 2.01	Composition of the LATAM Board	3
SECTION 2.02	Meetings of the LATAM Board	4
SECTION 2.03	Shareholder Votes on Non-Supermajority Actions	4
SECTION 2.04	Supermajority Matters	5
ARTICLE III
TRANSFER RESTRICTIONS
SECTION 3.01	Restrictions on Transfers	6
SECTION 3.02	TEP Permitted Transfers	7
SECTION 3.03	LATAM Controlling Shareholders Permitted Transfers	9
SECTION 3.04	Additional Permitted Transfers	10
SECTION 3.05	Right of First Offer	11
SECTION 3.06	Additional Requirements	13
SECTION 3.07	Assignment of Rights	13
ARTICLE IV
GENERAL PROVISIONS
SECTION 4.01	Term of Agreement	13
SECTION 4.02	Fees and Expenses	13
SECTION 4.03	Governing Law	14
SECTION 4.04	Definitions	14
SECTION 4.05	Severability	16
SECTION 4.06	Amendment; Waiver	16
SECTION 4.07	Assignment	17
SECTION 4.08	Entire Agreement; No Third Party Beneficiaries	17

i

SECTION 4.09	Notices	17
SECTION 4.10	Specific Enforcement; Consent to Jurisdiction	18
SECTION 4.11	WAIVER OF JURY TRIAL	19
SECTION 4.12	Counterparts	19
SECTION 4.13	Interpretation	20
SECTION 4.14	Relationship of Shareholders	20
SECTION 4.15	Filing Requirement	20

Exhibit A –    Organizational Structure of the LATAM Group

ii

INDEX OF DEFINED TERMS

	Page
Acceptance Notice	12
Adverse Effect	8
Affiliate	14
Affiliate Transfer	10
Agreed Courts	19
Agreed Issues	19
Agreement	1
Amaro Family	1
beneficial ownership	14
Block Sale	8
Board Pre-Meeting	4
business day	15
By-laws	15
Chilean Corporate Law	4
Convertible Securities	15
CVA	1
Dividend Rights	15
Effective Time	3
Equity Securities	15
Exchange Act	15
Exchange Offer	1
Exchange Offer Agreement	1
Exempted Shares	6
Forced Vote Sale	9
Forced Vote Sale Period	9
Full Ownership Trigger Date	8
Governmental Entity	15
Holdco 1	1
Holdco 1 Non-Voting Stock	15
Holdco 1 Shareholders Agreement	2
Holdco 1 Voting Stock	15
IMDC	1
Implementation Agreement	1
Institutional Lender	16
LATAM	1
LATAM Board	3
LATAM Common Stock	1
LATAM Controlling Shareholder Directed Action	6
LATAM Controlling Shareholder Directors	3
LATAM Controlling Shareholders	1
LATAM-TEP Shareholders Agreement	2
Law	16
Limited Voting Rights	15
Mediation Period	5
Mergers	1
Non-Selling Shareholder	12
Offer Notice	12
Offer Period	12
Order	16
Ownership Control Sale	8
Partial Sale	7
Person	16
Prohibited Transfer	13
Proposed Purchase Price	12
Purchaser	13
Release Event	9
Restricted Common Stock	16
Restricted Shares	16
ROFO Right	12
Sale Period	12
Second Meeting Date	9
Selling Shareholder	12
Shareholder Pre-Meeting	4
Shareholders	1
Shareholders	16
Shareholders Agreements	2
Subject Securities	12
Subject Shares	3
Subsidiary	16
Supermajority Action	4
TAM	1
TAM Shareholders Agreement	2
Tenth Anniversary	7
TEP	1
TEP Directors	3
TEP Parent	1
Third Anniversary	7
Transfer	6
Voting Securities	17
Whole Block Sale	11

iii

SHAREHOLDERS AGREEMENT, dated as of [●], 2011 (this “Agreement”), among COSTA VERDE AERONÁUTICA S.A., a company organized under the Law of Chile (“CVA”), INVERSIONES MINERAS DEL CANTÁBRICO S.A., a company organized under the Law of Chile (“IMDC,” and together with CVA, the “LATAM Controlling Shareholders”), and TEP CHILE S.A., a company organized under the Law of Chile (“TEP,” and together with the LATAM Controlling Shareholders, the “Shareholders”).

WITNESSTH

WHEREAS, as of the date of this Agreement Maria Cláudia Oliveira Amaro, Maurício Rolim Amaro, Noemy Almeida Oliveira Amaro and João Francisco Amaro (the “Amaro Family”) collectively own 100% of the outstanding shares of TEP;

WHEREAS, the LATAM Controlling Shareholders are the controlling shareholders of LATAM Airlines S.A., a company organized under the Law of Chile (“LATAM”), and currently collectively own [·] shares of the common stock, no par value (the “LATAM Common Stock”), of LATAM;

WHEREAS, as of the date of this Agreement TAM Empreendimentos e Participações S.A., a company organized under the Law of Brazil (“TEP Parent”), is the controlling shareholder of TAM S.A., a company organized under the Law of Brazil (“TAM”), and currently owns ordinary shares and preferred shares of TAM representing [·]% of the total voting power of the capital stock of TAM currently issued and outstanding;

WHEREAS, LATAM, TAM, the LATAM Controlling Shareholders, TEP Parent and the Amaro Family have entered into an Implementation Agreement, dated as of January 18, 2011 (the “Implementation Agreement”), and an Exchange Offer Agreement, dated as of January 18, 2011 (the “Exchange Offer Agreement”), pursuant to which the outstanding shares of capital stock of TAM will be acquired by LATAM and [Holdco 1], a newly formed company to be organized under the Law of Chile (“Holdco 1”), pursuant to the contribution transaction, the delisting exchange offer (the “Exchange Offer”) and the mergers described therein (the “Mergers”) in exchange for shares of LATAM Common Stock;

WHEREAS, after the Mergers, TEP will own at least 80% of the Holdco 1 Voting Stock and LATAM will own 100% of the Holdco 1 Non-Voting Stock, no more than 20% of the Holdco 1 Voting Stock and 100% of the preferred shares of TAM;

WHEREAS, immediately following the consummation of the transactions contemplated by the Implementation Agreement and the Exchange Offer Agreement and assuming (only for purposes of calculating the ownership percentages set forth therein) (i) none of the holders of the outstanding shares of LATAM Common Stock exercise their appraisal rights (derecho a retiro) under the Law of Chile in respect of the Mergers, (ii) all TAM shareholders other than TEP fully participate in the Exchange Offer and (iii) the only shares of LATAM Common Stock and shares of TAM that will be outstanding after such consummation are the shares issued in Mergers and the shares which are subscribed and fully paid for as of the date of the Implementation Agreement (which excludes any shares issuable upon future exercises of stock options) and, the ownership structure of LATAM, Holdco 1, TAM and their Subsidiaries will be as set forth in Exhibit A hereto;

WHEREAS, the LATAM Controlling Shareholders, as the continuing controlling shareholders of LATAM under the Law of Chile, desire to make the concessions to TEP and the Amaro Family provided herein, and the LATAM Controlling Shareholders and TEP desire to enter into this Agreement to set forth their agreements with respect to the governance of LATAM, the voting of their shares of LATAM Common Stock, the sale and transfer of their Restricted Shares and certain other matters;

WHEREAS, concurrently with the execution and delivery of this Agreement, LATAM, TEP, TAM and Holdco 1 are entering into a shareholders agreement, dated the date hereof (the “TAM Shareholders Agreement”), to set forth their agreement with respect to the governance, management and operation of TAM and its Subsidiaries;

WHEREAS, concurrently with the execution and delivery of this Agreement, LATAM, TEP and Holdco 1 are entering into a shareholders agreement, dated the date hereof (the “Holdco 1 Shareholders Agreement”), to set forth their agreement with respect to the governance, management and operation of Holdco 1;

WHEREAS, concurrently with the execution and delivery of this Agreement, LATAM and TEP are entering into a shareholders agreement, dated the date hereof (the “LATAM-TEP Shareholders Agreement,” and together with this Agreement, the TAM Shareholders Agreement and the Holdco 1 Shareholders Agreement, the “Shareholders Agreements”), to set forth their agreement with respect to the governance, management and operation of, and the relationship among, LATAM, Holdco 1, TAM and their respective Subsidiaries; and

WHEREAS, the execution and delivery of this Agreement and the other Shareholders Agreements are conditions to the commencement of the Exchange Offer and consummation of the Mergers.

NOW, THEREFORE, in consideration of the representations and warranties, covenants and agreements contained herein and in the Implementation Agreement and the Exchange Offer Agreement and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Shareholders hereby agree as follows:

ARTICLE I

SCOPE OF AGREEMENT

SECTION 1.01                     Scope of Agreement.  The Shareholders desire to set forth in this Agreement certain terms and conditions upon which they have agreed to hold their Restricted Shares and their agreements with respect to the governance, control and operation of LATAM, Holdco 1, TAM and their respective Subsidiaries.  All actions required to be taken or performed under this Agreement shall be taken or performed in accordance with applicable Law.  The Shareholders agree that the specific provisions of this Agreement shall not be limited by any inconsistent or conflicting provisions of the By-laws and accordingly, as between parties, such specific provisions shall prevail over such provisions of the By-laws.

2

SECTION 1.02                     Effectiveness.  This Agreement shall become effective only if, and at that time at which, Holdco 1 becomes a holder of at least 80% of the outstanding ordinary shares of TAM (the “Effective Time”).

ARTICLE II

GOVERNANCE

SECTION 2.01                     Composition of the LATAM Board.  (a) The LATAM Controlling Shareholders and TEP each agree to exercise or cause to be exercised all voting rights in respect of all shares of LATAM Common Stock beneficially owned by it (as to each Shareholder at any time, its “Subject Shares”), and to use its commercially reasonable efforts to cause the LATAM Controlling Shareholder Directors (in the case of the LATAM Controlling Shareholders) or the TEP Directors (in the case of TEP) to take all actions within their power that are necessary or appropriate to:

(i)           in the case of TEP, assist in the removal and replacement of the directors elected to the board of directors of LATAM (the “LATAM Board”) by the LATAM Controlling Shareholders through the vote of their Subject Shares (the “LATAM Controlling Shareholder Directors”);

(ii)           in the case of the LATAM Controlling Shareholders, assist in the removal and replacement of the director(s) elected to the LATAM Board by TEP through the vote of its Subject Shares and, if applicable, the director elected to the LATAM Board by the vote of the LATAM Controlling Shareholders pursuant to Section 2.01(b) (the “TEP Directors”);

(iii)         maintain the size of the LATAM Board at a total of nine directors; and

(iv)         maintain the quorum required for action by the LATAM Board at a majority of the total number of directors of the LATAM Board.

(b)          Until such time as TEP consummates any Partial Sale, unless TEP beneficially owns enough shares of LATAM Common Stock to elect two directors to the LATAM Board by voting such shares, the LATAM Controlling Shareholders agree to vote their Subject Shares for the election to the LATAM Board of any individual designated by TEP in a written notice delivered to the LATAM Controlling Shareholders no later than thirty days prior to the relevant election date.

3

(c)           Until the Full Ownership Trigger Date, TEP will take all necessary action to ensure that at all times when any individual is a TEP Director, such individual will also be a member of the board of directors of each of Holdco 1 and TAM.

SECTION 2.02                     Meetings of the LATAM Board.  Prior to each meeting of the LATAM Board, the LATAM Controlling Shareholders and TEP shall convene a meeting (each, a “Board Pre-Meeting”) to consult with each other and use their good faith efforts to reach agreement on all matters to come before the LATAM Board at such meeting (including the matters set forth in Article 56 of the Chilean Corporations Act (the “Chilean Corporate Law”)  No. 18.046) other than any action that would require the approval of two-thirds of the shareholders of LATAM under Article 67 of the Chilean Corporate Law (each, a “Supermajority Action”) and shall record their agreement, if any, on each such matter in the minutes of such Board Pre-Meeting.  Unless otherwise agreed between the LATAM Controlling Shareholders and TEP, each Board Pre-Meeting shall be held on the third business day prior to any regular meeting of the LATAM Board and on the business day prior to any special meeting of the LATAM Board.  If the LATAM Controlling Shareholders and TEP cannot reach agreement on any such matter prior to such meeting of the LATAM Board, then such matter shall be resolved by the LATAM Board at such meeting.  Nothing in this Section 2.02 shall be construed to prevent the LATAM Controlling Shareholder Directors or the TEP Directors from participating in any meeting of the LATAM Board or voting or participating in any such meeting.

SECTION 2.03                     Shareholder Votes on Non-Supermajority Actions.  Prior to each meeting of the shareholders of LATAM, the LATAM Controlling Shareholders and TEP shall convene a meeting (each, a “Shareholder Pre-Meeting”) to discuss and agree upon all matters to be submitted to a vote of the shareholders of LATAM other than any Supermajority Action and shall record their agreement, if any, on any such matter in the minutes of such Shareholder Pre-Meeting.  At each meeting of the shareholders of LATAM, each of the LATAM Controlling Shareholders and TEP shall vote or cause to be voted all of their Subject Shares in the same manner as a block on all matters submitted to a vote of the shareholders of LATAM other than a Supermajority Action and in favor of any such matter that has been approved by the LATAM Controlling Shareholder Directors and the TEP Directors (if any) or, in the absence of such approval, in accordance with the proposal of the LATAM Board to the shareholders of LATAM (without regard to the views or positions of the LATAM Controlling Shareholder Directors or any TEP Directors).  Unless otherwise agreed between the Shareholders, each Shareholder Pre-Meeting shall be held on the third business day prior to any regular meeting of the shareholders of LATAM and on the business day prior to any special meeting of the shareholders of LATAM.  If any shareholder of LATAM other than any Shareholder requests that any matter other than a Supermajority Action be submitted to a vote of the shareholders of LATAM at any meeting of the shareholders of LATAM, then the LATAM Controlling Shareholders shall cause the LATAM Controlling Shareholder Directors, and TEP shall cause the TEP Directors, to request that the LATAM Board consider such matter and make a proposal to the shareholders of LATAM with respect to such matter prior to such shareholder meeting.

4

SECTION 2.04                     Supermajority Matters. The LATAM Controlling Shareholders and TEP shall not vote on or take any action, and shall instruct the LATAM Controlling Shareholder Directors, in the case of the LATAM Controlling Shareholders, and the TEP Directors, in the case of TEP, not to vote on or take any action, in respect of any Supermajority Action except in compliance with this Section 2.04.  With respect to any proposed Supermajority Action, each of the LATAM Controlling Shareholders and TEP shall consult with each other, shall give due consideration to all views expressed by the other with respect to such Supermajority Action and shall use their good faith efforts to agree upon whether or not to approve any such Supermajority Action.  If, notwithstanding the foregoing, the LATAM Controlling Shareholders and TEP cannot reach an agreement with respect to such Supermajority Action, then the LATAM Controlling Shareholders, on the one hand, and TEP, on the other hand, will each appoint a senior representative thereof who will negotiate in good faith with the senior representative appointed by the other for a period of 30 days, which initial period may be extended for one additional 30-day period by either the LATAM Controlling Shareholders or TEP by delivering a written notice to the other (such period, as it may be extended or shortened pursuant to this Section 2.04 or by mutual agreement of the Shareholders, the “Mediation Period”).  If a special meeting of the shareholders of LATAM has been called to vote on a Supermajority Action other than as a result of any action by a Shareholder or any LATAM Controlling Shareholder Director or TEP Director, the LATAM Controlling Shareholders shall cause the LATAM Controlling Shareholder Directors, and TEP shall cause the TEP Directors, to try to convince the LATAM Board to call such meeting of shareholders of LATAM so that there will be sufficient time for a thirty-day Mediation Period prior to such shareholders meeting unless such directors’ fiduciary duties require that such shareholders meeting be held earlier.  Notwithstanding the foregoing, if a special meeting of the shareholders of LATAM has been called to vote on a Supermajority Action other than as a result of any action by a Shareholder or any LATAM Controlling Shareholder Director or TEP Director and such special meeting will occur prior to the date when the Mediation Period would otherwise end, then the Mediation Period shall end on the second business day prior to the date on which such special meeting will be held.  During the Mediation Period the senior representatives selected by the LATAM Controlling Shareholders and TEP shall meet with a mediator jointly selected by them, together with any relevant experts and advisors that they agree to retain and include in the mediation process, in an attempt to resolve their disagreement with respect to such Supermajority Action.  The fees and expenses of each mediator, expert or advisor shall be shared equally between the LATAM Controlling Shareholders, on the one hand, and TEP, on the other hand.  Each senior representative shall give due consideration to the positions, views and arguments of the other senior representative and shall negotiate in good faith with the other senior representative in an attempt to reach a mutually acceptable position or alternative with respect to such Supermajority Action.  If the Shareholders’ disagreement with respect to such Supermajority Action remains unresolved after the Mediation Period, then each of the LATAM Controlling Shareholders and TEP will vote or cause to be voted all of their Subject Shares with respect to such Supermajority Action as directed by the LATAM Controlling Shareholders to TEP in writing prior to the relevant shareholder meeting (each, a “LATAM Controlling Shareholder Directed Action”).  The LATAM Controlling Shareholders will vote or cause to be voted all of their Subject Shares to approve, and will cause the LATAM Controlling Shareholder Directors to approve and implement, and TEP will vote or cause to be voted all of its Subject Shares to approve, and will cause the TEP Directors to approve and implement, each Supermajority Action that has been approved by agreement of the LATAM Controlling Shareholders and TEP or, in the case of a LATAM Controlling Shareholder Directed Action, as directed by the LATAM Controlling Shareholders.  Unless otherwise agreed between the Shareholders, no Shareholder will vote or cause to be voted any of its Subject Shares to approve any amendment to the By-laws that would require any action, other than any Supermajority Action, to be approved by the holders of shares constituting more than a simple majority of the issued and outstanding shares of LATAM Common Stock at a duly called meeting of the shareholders of LATAM at which a quorum is present and acting throughout.

5

ARTICLE III

TRANSFER RESTRICTIONS

SECTION 3.01                     Restrictions on Transfers.  No Shareholder will, or will permit any of its Affiliates (including the ultimate beneficial owners of such Shareholder) to, directly or indirectly, by operation of law or otherwise, sell, exchange, transfer, convey, assign, mortgage, pledge, encumber or otherwise dispose of any direct or indirect interest in, or beneficial ownership of (each, a “Transfer”), all or any portion of such Shareholder’s Restricted Shares to any Person except in compliance with this Article III.  The LATAM Controlling Shareholders and TEP each shall have the right, exercisable at any time or from time to time by written notice delivered to the other Shareholder(s), to exempt from the provisions of this Article III all or any portion of its shares of Restricted Common Stock not to exceed [·] shares1 (any such shares so exempted by a Shareholder at any time, its “Exempted Shares”).  Except pursuant to Section 3.04 or as otherwise expressly provided herein, prior to the Third Anniversary, no Shareholder will, or will permit any of its Affiliates (including the ultimate beneficial owners of such Shareholder) to, directly or indirectly, Transfer all or any portion of its Restricted Shares to any Person, unless the other Shareholder(s) has or have given its or prior written consent to such Transfer.  On and after the Third Anniversary, the Shareholders shall have the right to Transfer, or to permit any of its Affiliates (including the ultimate beneficial owners of such Shareholder) to Transfer, their Restricted Shares only pursuant to and in compliance with the terms of Sections 3.02, 3.03 and 3.04.  Any Transfer made other than in compliance with the terms of this Article III shall be null and void and of no force or effect.  The Shareholders shall be entitled to specific performance (to the extent permitted by applicable Law) of their rights under this Article III, in addition to any other legal and equitable remedies to which they may be entitled under applicable Law.

1 Insert the number of shares of LATAM Common Stock which, if they were Exempted Shares of TEP, would make TEP’s Restricted Common Stock represent 12.5% of the outstanding shares of LATAM Common Stock determined on a fully diluted basis immediately after the Effective Time.

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SECTION 3.02                     TEP Permitted Transfers.

(a)          Sales Prior to the Tenth Anniversary.  On and after the third anniversary of the Effective Time (the “Third Anniversary”) and prior to the tenth anniversary of the Effective Time (the “Tenth Anniversary”), TEP shall have the right to sell or transfer its shares of Restricted Common Stock to any Person (each, a “Partial Sale”) if (but only if) such Partial Sale complies with all of the requirements set forth in this Section 3.02(a).

(i)           No Partial Sale shall be permitted if the number of shares of Restricted Common Stock of TEP immediately after such Partial Sale would be less than 10% of the total number of shares of LATAM Common Stock then issued and outstanding.

(ii)         Each Partial Sale shall be subject to the rights of first offer pursuant to Section 3.05.

(iii)         No Partial Sale of more than 2% of the total number of shares of LATAM Common Stock then issued and outstanding shall be permitted.

(iv)         No Partial Sale shall be permitted if TEP has sold or transferred any of its shares of Restricted Common Stock in the twelve-month period ending on the date on which such Partial Sale would otherwise be consummated.

(b)          Partial Sales After the Tenth Anniversary.  On and after the Tenth Anniversary, TEP shall have the right to make a Partial Sale if (but only if) such Partial Sale complies with all of the requirements set forth in this Section 3.02(b).

(i)           No Partial Sale shall be permitted if the number of shares of Restricted Common Stock of TEP immediately after such Partial Sale would be less than 5% of the total number of shares of LATAM Common Stock then issued and outstanding.

(ii)          Each Partial Sale shall be subject to the rights of first offer pursuant to Section 3.05.

(iii)         No Partial Sale shall be permitted if TEP has sold or transferred any of its shares of Restricted Common Stock in the twelve-month period ending on the date on which such Partial Sale would otherwise be consummated.

(c)           Block Shares Sales.  (i) On and after the Tenth Anniversary and prior to the Full Ownership Trigger Date, TEP may sell or transfer all (but not less than all) of its Restricted Shares (other than any shares of Restricted Common Stock of TEP that could be sold in the future pursuant to Section 3.02(b)) to any Person in a single block sale (a “Block Sale”) if (but only if) such Block Sale complies with all of the requirements set forth in this Section 3.02(c)(i).

(A)           A Block Sale must include all of the shares of Holdco 1 Voting Stock beneficially owned by TEP.

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(B)           Prior to a Block Sale, the Person to whom such Restricted Shares are to be sold or transferred shall have been approved by a resolution duly adopted by the LATAM Board as a buyer of the shares of Holdco 1 Voting Stock beneficially owned by TEP; it being agreed that the LATAM Board shall grant such approval without unreasonable delay unless it has a bona fide business objection to such Person being the transferee of such shares or if a Transfer of such shares to such Person would, in the reasonable determination of the LATAM Board, be inconsistent with applicable Law in Brazil.

(C)           No Block Sale shall be permitted if it would have a material adverse effect on the ability of (x) LATAM or Holdco 1 to own, or to receive the full benefits of ownership of, TAM and its Subsidiaries or (y) TAM or its Subsidiaries to operate their airline businesses worldwide (each, an “Adverse Effect”).

(D)           A Block Sale shall be subject to the rights of first offer pursuant to Section 3.05.

The LATAM Controlling Shareholders agree for the benefit of LATAM (who shall be a third-party beneficiary of this sentence) that if they acquire any shares of Holdco 1 Voting Stock pursuant to Section 3.05 in connection with a Block Sale, then they will transfer such shares to LATAM or to any nominee of LATAM immediately following the sale or transfer of such shares to them by TEP for the same consideration as the LATAM Controlling Shareholders paid to TEP in respect of such shares.

(ii)           On and after the Tenth Anniversary and after the first date on which LATAM would be permitted under applicable Law in Brazil and other applicable Law to fully convert all of the shares of Holdco 1 Non-Voting Stock beneficially owned by LATAM and its Affiliates into shares of Holdco 1 Voting Stock and such conversion would not have any Adverse Effect (the “Full Ownership Trigger Date”), then TEP may sell or transfer all or any portion of its shares of Restricted Common Stock (each, an “Ownership Control Sale”) if (but only if) such Ownership Control Sale complies with all of the requirements set forth in this Section 3.02(c)(ii).

(A)           No Ownership Control Sale shall include any shares of Holdco 1 Voting Stock beneficially owned by TEP.

(B)           Each Ownership Control Sale shall be subject to the rights of first offer pursuant to Section 3.05.

(C)           No Ownership Control Sale shall be permitted if TEP has sold or transferred any shares of Restricted Common Stock in the twelve-month period ending on the date on which such Ownership Control Sale would otherwise be consummated.

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(d)         Forced Vote Sales.  On and after the Third Anniversary, if during any twenty-four month period TEP is required to vote its Subject Shares with respect to one or more LATAM Controlling Shareholder Directed Actions at two meetings (consecutive or not) of the shareholders of LATAM held at least twelve months apart, then after the second such shareholder meeting TEP shall have the right to sell or transfer all (but not less than all) of its Restricted Shares (each, a “Forced Vote Sale”) if (i) TEP delivers a written notice to LATAM within 30 days after the date on which such second meeting was held that it intends to make a Forced Vote Sale (the “Second Meeting Date”), (ii) such Forced Vote Sale complies with the requirements of Section 3.02(c)(i) or Section 3.02(c)(ii), as applicable, but without giving effect to the phrase “On and after the Tenth Anniversary and” at the beginning of such sections and (iii) such Forced Vote Sale is completed within eighteen months after the Second Meeting Date (such period, as it may be extended pursuant to this Section 3.02(d), the “Forced Vote Sale Period”); provided that if TEP has made a bona fide and reasonably diligent effort to complete a Forced Vote Sale within the Forced Vote Sale Period but has been unable to do so, then the Forced Vote Sale Period shall be extended for twelve months.  If a Forced Vote Sale is not completed within the Forced Vote Sale Period, then thereafter this Section 3.02(d) shall only apply with respect to votes taken on LATAM Controlling Shareholder Directed Actions after such date.

(e)          Release Event Sales.  If a Release Event occurs and TEP has not sold or transferred any of its Restricted Shares prior to such Release Event, then at any time after such Release Event TEP shall have the right to sell or transfer all (but not less than all) of its Restricted Shares; provided, however, that if the sale or transfer occurs prior to the Full Ownership Trigger Date it must comply with the requirements of Section 3.02(c)(i) or Section 3.02(c)(ii), as applicable, but without giving effect to the phrase “On and after the Tenth Anniversary and,” at the beginning of such sections.  A “Release Event” shall be deemed to have occurred only if and when each of the following events shall have occurred: (i) a capital increase (as defined under the Law of Chile) in LATAM is completed after the Effective Time, (ii) TEP does not fully exercise the preemptive rights granted to it under applicable Law in Chile with respect to such capital increase in respect of all of its shares of Restricted Common Stock, and (iii) after such capital increase is completed, the individual designated by TEP for election to the LATAM Board with the assistance of the LATAM Controlling Shareholders pursuant to Section 2.01(b) is not elected to the LATAM Board.

SECTION 3.03                     LATAM Controlling Shareholders Permitted Transfers.

(a)          Sales Prior to the Tenth Anniversary.  On and after the Third Anniversary and prior to the Tenth Anniversary, the LATAM Controlling Shareholders shall have the right to sell or transfer their shares of Restricted Common Stock if (but only if) any such sale or transfer complies with all of the requirements set forth in this Section 3.03(a).

(i)           Such sale or transfer shall be subject to the rights of first offer pursuant to Section 3.05; provided, however, that notwithstanding the foregoing such rights of first offer shall not apply from and after the first date on which the shares of Restricted Common Stock of TEP represent less than 10% of the total number of shares of LATAM Common Stock then issued and outstanding.

(ii)           No such sale or transfer shall be permitted if the LATAM Controlling Shareholders have sold or transferred any shares of Restricted Common Stock in the twelve-month period ending on the date on which such sale or transfer would otherwise be consummated.

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(iii)         No such sale or transfer of more than 2% of the total number of shares of LATAM Common Stock then issued and outstanding shall be permitted.

(b)           Sales After the Tenth Anniversary.  On and after the Tenth Anniversary, the LATAM Controlling Shareholders may sell or transfer any of their shares of Restricted Common Stock; provided, however, that notwithstanding the foregoing (i) each such sale or transfer shall be subject to the rights of first offer pursuant to Section 3.05 until the first date on which the shares of Restricted Common Stock of TEP represent less than 10% of the total number of shares of LATAM Common Stock then issued and outstanding and (ii) the LATAM Controlling Shareholders shall not sell or transfer any of their shares of Restricted Common Stock if they have sold any shares of Restricted Common Stock in the twelve-month period ending on the date in which such sale or transfer would otherwise be consummated.

SECTION 3.04                     Additional Permitted Transfers.  Notwithstanding anything in this Article III to the contrary, each Shareholder may pledge or grant a security interest in all or any portion of its shares of Restricted Common Stock to an Institutional Lender to secure a loan made in whole or in part to that Shareholder in order to (i) finance the acquisition of Equity Securities of LATAM or (ii) refinance any loan made to such Shareholder that is outstanding as of the date of this Agreement, and any Transfer of shares of Restricted Common Stock pursuant to any such pledge or security interest in effect as of the Effective Time shall be deemed to be a permitted Transfer under this Section 3.04.  In addition, the LATAM Controlling Shareholders and TEP may Transfer all or a portion of their shares of Restricted Common Stock to (i) any of their direct or indirect wholly-owned Subsidiaries, (ii) to any entity wholly-owned by Enrique, Juan José and/or Ignacio Cueto (in the case of the LATAM Controlling Shareholders) or (iii) any entity that has no direct or indirect owners other than Maria Cláudia Oliveira Amaro, Maurício Rolim Amaro, Noemy Almeida Oliveira Amaro and/or João Francisco Amaro and that is directly or indirectly majority owned and controlled by Maria Cláudia Oliveira Amaro and Maurício Rolim Amaro (each, an “Affiliate Transfer”);  provided that the LATAM Controlling Shareholders and TEP shall continue to be bound by the terms of this Agreement for all purposes following such Transfer.  In addition, each of the LATAM Controlling Shareholders and TEP may Transfer a percentage of its shares of Restricted Common Stock to each of Enrique, Juan José and Ignacio Cueto (in the case of the LATAM Controlling Shareholders) or Maria Cláudia Oliveira Amaro, Maurício Rolim Amaro, Noemy Almeida Oliveira Amaro and João Francisco Amaro (in the case of TEP) or to any Person wholly owned by any such individual equal to the percentage of its Restricted Common Stock that such individual indirectly owns through his or her ownership of shares in the LATAM Controlling Shareholders (in the case of Enrique, Juan José and Ignacio Cueto) or TEP (in the case of Maria Cláudia Oliveira Amaro, Maurício Rolim Amaro, Noemy Almeida Oliveira Amaro and João Francisco Amaro); provided that following any such transfer of Restricted Common Stock by the LATAM Controlling Shareholders, all references to the LATAM Controlling Shareholders shall deemed to refer collectively to the LATAM Controlling Shareholders and the transferee of such Restricted Common Stock and the LATAM Controlling Shareholders and such transferee shall be jointly and severally liable for all obligations of the LATAM Controlling Shareholders under this Agreement; provided further that following any such transfer of Restricted Common Stock by TEP, all references to TEP shall deemed to refer collectively to TEP and the transferee of such Restricted Common Stock and TEP and such transferee shall be jointly and severally liable for all obligations of TEP under this Agreement.  In addition, each Shareholder may issue its Equity Securities if (i) the net proceeds of such issuance is used solely to purchase Equity Securities of LATAM and pay related expenses or to refinance any loan made to such Shareholder that is outstanding as of the date of this Agreement, (ii) immediately after such issuance the beneficial owners of Equity Securities of such Shareholder as of the date of this Agreement collectively own a majority of the outstanding Equity Securities of such Shareholder that are entitled to vote generally in the election of directors of such Shareholder and control such Shareholder, and (iii) in the case of TEP, immediately after such issuance Maria Cláudia Oliveira Amaro and Maurício Rolim Amaro collectively control TEP and collectively own a majority of the outstanding Equity Securities of TEP that are entitled to vote generally in the election of directors of TEP and such issuance is permitted under Brazilian Law (including those relating to foreign ownership and control of Brazilian airlines) and would not have an Adverse Effect.  In addition, TEP may issue its Equity Securities regardless of the use of the proceeds thereof if immediately prior to such issuance the subscriber of those Equity Securities is a holder of shares issued by TEP and immediately after such issuance TEP remains majority-owned and controlled by Maria Cláudia Oliveira Amaro and Maurício Rolim Amaro.  No Transfer made in accordance with this Section 3.04 shall require the consent of any Shareholder, shall be subject to any rights of first offer in favor of any other Shareholder pursuant to Section 3.05 or shall be counted for purposes of determining whether Transfers by any Shareholder in any 12-month period have exceeded the limitations set forth in Sections 3.02(a)(iii) and (iv), 3.02(b)(iii) and 3.03(a)(ii) and (iii) and 3.03(b).

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SECTION 3.05                     Right of First Offer.

(a)           If a Shareholder elects to sell or transfer all or any portion of its shares of Restricted Common Stock as permitted by the applicable provisions of Section 3.02 or 3.03, such sale or transfer (and, in the case of a sale or transfer pursuant to Section 3.02(c)(i), Section 3.02(d) or Section 3.02(e) (each, a “Whole Block Sale”), the related sale or transfer of shares of Holdco 1 Voting Stock) shall be subject to the right of first offer provided in this Section 3.05 except to the extent that Section 3.02 or 3.03 expressly provides that such right of first offer shall not apply to such sale or transfer.  Unless the context otherwise requires, each Shareholder and its Affiliates shall be deemed to be a single Shareholder for purposes of this Section 3.05.  The Shareholder electing to make any such sale or transfer (the “Selling Shareholder”) shall give written notice thereof (each, an “Offer Notice”) to the other Shareholder (the “Non-Selling Shareholder”), which notice shall set forth the number of shares of Restricted Common Stock (and, if applicable, shares of Holdco 1 Voting Stock) proposed to be sold or transferred (collectively, the “Subject Securities”), a single price in cash that Selling Shareholder is willing to accept for the Subject Securities (the “Proposed Purchase Price,” of which an amount equal to the Non-Selling Shareholder’s then current tax basis in such shares and any costs that it is required to incur to effect such sale shall be allocated to any Holdco 1 Voting Stock included in the Subject Securities) and any other material terms and conditions of the proposed sale or transfer.  The Non-Selling Shareholder shall have the right to purchase the Subject Securities at the Proposed Purchase Price and on the other terms and conditions set forth in the Offer Notice (“ROFO Right”).  The Non-Selling Shareholder may exercise its ROFO Right in whole but not in part by delivering written notice of such election (each, an “Acceptance Notice”) to the Selling Shareholder within 30 days after the date on which it received the Offer Notice (the “Offer Period”).  If the Non-Selling Shareholder does not deliver an Acceptance Notice to the Selling Shareholder by the end of the Offer Period, it will no longer be able to exercise its ROFO Right with respect to the Subject Securities.  For all sales or transfers pursuant to Section 3.02 (other than Sections 3.02(a) and (b)), the Non-Selling Shareholder shall have the right (but not the obligation) to assign its ROFO Rights in whole or in part to any Person; provided, however, that, notwithstanding the foregoing, in the case of a Whole Block Sale the LATAM Controlling Shareholders may only assign its ROFO Rights to a Person approved in advance by the LATAM Board and whose purchase would not have an Adverse Effect.  If the Non-Selling Shareholder elects to assign any ROFO Right pursuant to this Section 3.05(a) to any Person, then the Non-Selling Shareholder shall describe such assignment in its Acceptance Notice, including the identity of the assignee and the Subject Securities that are the subject of the assignment, and the Selling Shareholder shall sell or transfer such Subject Securities to such assignee in lieu of the Non-Selling Shareholder.

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(b)           If the Non-Selling Shareholder (i) does not deliver an Acceptance Notice during the Offer Period or (ii) delivers an Acceptance Notice during the Offer Period in which it (and/or any assignee) elects to purchase less than all of the Subject Securities, then the Selling Shareholder shall have the right to market and sell all of the Subject Securities to a third party for an all-cash purchase price no less than the Proposed Purchase Price and on terms and conditions no more favorable to the purchaser than those contained in the Offer Notice during the 90-day period commencing on the day immediately following, in the case of clause (i), the last day of the Offer Period or, in the case of clause (ii), the date on which such Acceptance Notice was delivered (such period, the “Sale Period”).  If the Subject Securities are not sold during the Sale Period or if Selling Shareholder seeks to reduce the sale price below the Proposed Purchase Price or to offer other sale terms and conditions that are more favorable to the purchaser than those contained in the Offer Notice, all of the provisions of this Section 3.05 shall again apply with respect to any sale or transfer of such Subject Securities.

(c)           If the Non-Selling Shareholder delivers an Acceptance Notice to the Selling Shareholder during the Offer Period in which it (and/or any assignee) elects to purchase all of the Subject Securities, then there shall be deemed a valid, legally binding and enforceable agreement between the Selling Shareholder, on the one hand, and the Non-Selling Shareholder (and/or any such assignee) (each, a “Purchaser”), on the other hand, for the sale or transfer of the Subject Securities for the Proposed Purchase Price and on the other terms and conditions set forth in the Offer Notice.  The closing of any such sale or transfer shall take place at 10 a.m., New York time, on the later of (A) the 30th business day after the day on which such Acceptance Notice was received by Selling Shareholder and (B) the first date on which all of the consents, approvals or authorizations required by Law from any Governmental Entity for such sale or transfer are obtained at the principal office of LATAM or on such other date or at such other place as may be agreed to between the Selling Shareholder and the Purchaser(s), and the following provisions shall apply:

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(i)           the Selling Shareholder shall execute such instruments of transfer as are customarily executed and reasonably requested to evidence and consummate the sale or transfer of the Subject Securities to each Purchaser; and

(ii)          each party shall bear its own legal fees and expenses in connection with such sale or transfer.

SECTION 3.06                   Additional Requirements.  Each Shareholder agrees that it will not Transfer any of its Restricted Shares if such Transfer would violate any applicable Law (each, a “Prohibited Transfer”).  If and to the extent permitted by applicable Law, LATAM and Holdco 1, as applicable, may refuse to register any Prohibited Transfer, and each Shareholder hereby waives any rights it may have in the future to object to or challenge any such refusal in respect of any Transfer that is determined to be a Prohibited Transfer by a final and non-appealable order of a court of competent jurisdiction.

SECTION 3.07                   Assignment of Rights.   Any transferee of Restricted Shares Transferred pursuant to Sections 3.02(c), (d) or (e) or Section 3.04 shall execute a counterpart to this Agreement agreeing to be bound by all the terms and conditions hereof.  Except for Affiliate Transfers made pursuant to Section 3.04 or as otherwise contemplated in this Article III, no Shareholder shall have the right to assign any of its rights under this Agreement to any permitted transferee of such Shareholder’s Restricted Shares. 

ARTICLE IV

GENERAL PROVISIONS

SECTION 4.01                   Term of Agreement.  Except as otherwise provided under applicable Law, this Agreement shall continue in effect as to each Shareholder until (i) it is terminated as to such Shareholder by the written consent of all Shareholders or (ii) the first day on which such Shareholder and its Affiliates no longer beneficially own any shares of LATAM Common Stock, whichever is sooner to occur.  The termination of this Agreement as to any Shareholder shall not affect any of the rights and obligations of the other Shareholders, hereunder, if any, with respect to each other.  In the event this Agreement terminates as to any Shareholder, thereafter such Shareholder shall have no further liability to the other Shareholders or to any of their respective shareholders, directors, officers, employees or other Affiliates and such other Shareholders shall have no further liability to such Shareholder, in each case solely in respect of this Agreement; provided, however, that the foregoing shall not apply to any provisions hereof that expressly survive the termination of this Agreement (including Section 4.02); and provided, further, that nothing herein shall relieve any Shareholder of any liability for any breach of this Agreement that occurred prior to such termination.

SECTION 4.02                   Fees and Expenses.  All fees and expenses incurred in connection with this Agreement shall be paid by the Shareholder incurring such fees or expenses.  The provisions of this Section 4.02 shall survive any termination of this Agreement.

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SECTION 4.03                     Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF; PROVIDED, HOWEVER, THAT NOTWITHSTANDING THE FOREGOING THE AUTHORIZATION AND EXECUTION OF THIS AGREEMENT BY EACH PARTY SHALL BE GOVERNED BY THE LAW OF ITS JURISDICTION OF INCORPORATION.

SECTION 4.04                     Definitions.  For the purposes of this Agreement, the following terms shall have the meanings assigned below:

(a)           “Affiliate” shall have the meaning assigned to such term in Rule 12b-2 under the Exchange Act; provided, however, that for all purposes of this Agreement (i) neither LATAM, Holdco 1, TAM nor any of their respective Subsidiaries shall be deemed to be an Affiliate of any Shareholder and (ii) no Shareholder shall be deemed to be an Affiliate of any other Shareholder or any of its Affiliates solely by reason of this Agreement.

(b)           “beneficial ownership” (and its correlative phrases) shall have the meanings assigned to such phrases in Rule 13d-3 promulgated under the U.S. Exchange Act; provided, however that, notwithstanding the foregoing, for all purposes of this Agreement a Shareholder shall be deemed to beneficially own all Restricted Shares beneficially owned by it and its Affiliates.

(c)           “business day” shall mean any day that is not a Saturday, Sunday or a day on which banking institutions are required or authorized by Law or executive order to be closed in Santiago, Chile or São Paulo, Brazil.

(d)           “By-laws” means the By-laws of LATAM in effect as of the date hereof, as they may be amended from time to time.

(e)           “Convertible Securities” means, with respect to any Person, any securities, options, warrants or other rights of, or granted by, such Person or any of its Affiliates that are, directly or indirectly, convertible into, or exercisable or exchangeable for, any Equity Securities of such Person or any of its Affiliates.

(f)           “Equity Securities” means, with respect to any Person, any capital stock of, or other equity interests in, such Person.

(g)           “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

(h)           “Governmental Entity” means any governmental, quasi-governmental or regulatory authority, body, department, commission, board, bureau, agency, division, court, organized securities exchange or other legislative, executive or judicial governmental entity or instrumentality of any country, nation, republic, federation or similar entity or any state, county, parish or municipality, jurisdiction or other political subdivision thereof.

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(i)           “Holdco 1 Non-Voting Stock” shall mean the non-voting stock, no par value, of Holdco 1, which, pursuant to the by-laws of Holdco 1, shall have the exclusive right to receive all dividends, distributions or other amounts payable by Holdco 1 in respect of any shares of its capital stock (including a preference to be paid in connection with any liquidation, capital reduction, winding up, recapitalization or reorganization) other than the Dividend Rights and which shall have no right to vote on, approve or consent to any matter that is subject to any vote of, approval by or consent from the shareholders of Holdco 1 under the Law of Chile or otherwise other than the rights to vote on, approve or consent to matters requiring the approval of the holders of shares of Holdco 1 Non-Voting Stock under the Law of Chile or otherwise (collectively, the “Limited Voting Rights”).

(a)           “Holdco 1 Voting Stock” shall mean the voting stock, no par value, of Holdco 1, which, pursuant to the by-laws of Holdco 1, shall have the exclusive right to vote on, approve or consent to all matters that are subject to any vote of, approval by or consent from the shareholders of Holdco 1 under the Law of Chile or otherwise (other than the Limited Voting Rights) and which shall have no economic rights other than the right to receive a nominal dividend (collectively, “Dividend Rights”).

(j)           “Institutional Lender” means any savings bank, savings and loan association, commercial bank or trust company, insurance company subject to regulation by any Governmental Entity, merchant or investment bank or any other entity generally viewed as an institutional lender.

(k)           “Law” means any statute, common law, ordinance, rule, regulation, agency requirement or Order of, or issued, promulgated or entered into by or with, any Governmental Entity.

(l)           “Order” means any order, decision, writ, injunction, decree, judgment, legal or arbitration award, stipulation, license, permit or agreement issued, promulgated or entered into by or with (or settlement or consent agreement subject to) any Governmental Entity.

(m)           “Person” means any natural person, firm, corporation, partnership, company, limited liability company, joint venture, association, trust, unincorporated organization, Governmental Entity or other entity.

(n)           “Restricted Common Stock” means, with respect to any Shareholder at any time, all shares of LATAM Common Stock that were beneficially owned by such Shareholder immediately after the Effective Time and that are beneficially owned by, and not Exempted Shares of, such Shareholder at such time.

(o)           “Restricted Shares” means (i) with respect to the LATAM Controlling Shareholders at any time, all of their shares of Restricted Common Stock at such time and (ii) with respect to TEP at any time, all of its shares of Restricted Common Stock at such time and all shares of Holdco 1 Voting Stock beneficially owned by it at such time, including all Equity Securities or Convertible Securities issued in respect of, in exchange for or upon reclassification of such shares of Restricted Common Stock or Holdco 1 Voting Stock pursuant to any dividend, distribution, share exchange, reclassification, recapitalization, consolidation, merger, stock split, reverse stock split or otherwise.

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(p)           “Shareholders” initially shall have the meaning set forth in the Preamble to this Agreement and after any Transfer of shares of Restricted Common Stock by any Shareholder to any Person pursuant to Sections 3.02(c), (d) or (e) or any Affiliate Transfer pursuant to Section 3.04 shall mean the non-transferring Shareholder, the transferring Shareholder and any Person to whom such Transfer was made and who became a party to this Agreement as required by this Agreement.

(q)           “Subsidiary” means, with respect to any Person, (i) a corporation in which such Person, together with its Subsidiaries, beneficially owns Voting Securities of such corporation which entitle them, collectively, to cast more than 50% of all the votes entitled to be cast by the holders of all Voting Securities of such corporation then outstanding in a general election of directors of such corporation or (ii) any Person that is not a corporation in which such Person, and/or one or more other Subsidiaries of such Person, directly or indirectly, has a majority equity or voting interest or the power to direct the policies, management and affairs thereof.

(r)           “Voting Securities” means, with respect to any Person, any securities or other equity or ownership interests in such Person which are entitled to vote generally in the election of directors of such Person (or, if such Person is not a corporation, the individuals who perform a similar function for such Person).

SECTION 4.05                     Severability.  The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions of this Agreement.  If any provision of this Agreement, or the application of such provision to any Person or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application of such provision, in any other jurisdiction.

SECTION 4.06                     Amendment; Waiver.  This Agreement may be amended and any performance, term or condition waived in whole or in part only by a writing signed by all Shareholders affected by the amendment (in the case of an amendment) or by the Shareholder against whom the waiver is to be effective (in the case of a waiver).  No failure or delay by any Shareholder in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any singular partial exercise of such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  Waiver by any Shareholder of any breach or failure to comply with any provision of this Agreement by another Shareholder shall not be construed as, nor shall constitute, a continuing waiver of such provisions, or a waiver of any other breach of or failure to comply with any other provisions of this Agreement.

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SECTION 4.07                     Assignment.  Subject to Article III of this Agreement, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, in whole or in part, by operation of Law or otherwise by any Shareholder without the prior written consent of the other Shareholders, and any purported assignment without such consent shall be null and void and of no force or effect.  Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the Shareholders and their respective successors and permitted assigns.

SECTION 4.08                     Entire Agreement; No Third Party Beneficiaries.  This Agreement, the other Shareholders Agreements, the Implementation Agreement and the Exchange Offer Agreement, including the Exhibits and Schedules hereto and thereto, constitute the entire agreement, and supersede all prior agreements and understandings, both written and oral, among the Shareholders with respect to the subject matter hereof and thereof.  Except as otherwise expressly stated herein, the Shareholders hereby agree that the agreements and covenants set forth herein are solely for the benefit of the other Shareholders in accordance with, and subject to the terms of, this Agreement and that this Agreement is not intended to, and does not, confer upon any Person other than the Shareholders any rights or remedies hereunder, including the right to rely upon the representations and warranties set forth herein.

SECTION 4.09                     Notices.  All notices, requests, claims, demands, instructions and other communications or documents given hereunder shall be in writing and shall be delivered personally or sent by registered or certified mail (postage prepaid), facsimile or overnight courier to the Shareholders at the following addresses (or at such other address for a Shareholder as shall be specified by like notice):

If to the LATAM Controlling Shareholders, to:

Claro y Cia

Apoquindo 3721, piso 13,

Santiago, Chile

Attention: José María Eyzaguirre B.

Fax: +562 3673003

jmeyzaguirre@claro.cl

with copies (which shall not constitute notice) to:

Sullivan & Cromwell LLP

125 Broad Street

New York, NY 10004

United States of America

Attention: Sergio Galvis and Duncan McCurrach

Fax: +1 212-558-3588

galviss@sullcrom.com

mccurrachd@sullcrom.com

17

If to TEP to:

Turci Advogados

Rua Dr. Renato Paes de Barros, 778

-1◦ andar – cj.12

04530-0001

São Paulo – SP

Brasil

Attention: Flavia Turci

Fax: +55 11 2177 2197

turci@turci.com

with a copy (which shall not constitute notice) to:

Clifford Chance US LLP

31 West 52nd Street

New York, NY 10019

Attention: Sarah Jones and Anand Saha

Fax: +1 212 878 8375

Sarah.Jones@CliffordChance.com

Anand.Saha@CliffordChance.com

Any notice, request, claim, instruction or other communication or document given as provided above shall be deemed given to the receiving party (i) if delivered personally, upon actual receipt, (ii) if sent by registered or certified mail, three business days after deposit in the mail, (iii) if sent by facsimile, upon confirmation of successful transmission if within one business day after such facsimile has been sent such notice, request, claim, instruction or other communication or document is also given by one of the other methods described above and (iv) if sent by overnight courier, on the next business day after deposit with the overnight courier.

SECTION 4.10                     Specific Enforcement; Consent to Jurisdiction.  The Shareholders agree that irreparable damage would occur and that the Shareholders would not have any adequate remedy at Law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the Shareholders shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, this being in addition to any other remedy to which they are entitled at Law or in equity, without the necessity of proving the inadequacy of monetary damages or of posting bond or other undertaking, as a remedy and to obtain injunctive relief against any breach or threatened breach hereof.  In the event that any action is brought in equity to enforce the provisions of this Agreement, no Shareholder shall allege, and each Shareholder waives the defense or counterclaim that there is an adequate remedy at Law.  Each of the Shareholders hereby irrevocably consents and submits itself to the personal jurisdiction of the courts of the State of New York and the federal courts of the United States of America located in the Borough of Manhattan, The City of New York (collectively, the “Agreed Courts”) solely in respect of the interpretation and enforcement of the provisions of this Agreement, and the documents referred to herein and the transactions contemplated by this Agreement (collectively, the “Agreed Issues”), waives, and agrees not to assert, as a defense in any action, suit or proceeding in an Agreed Court with respect to the Agreed Issues that such Shareholder is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in such Agreed Court or that the venue thereof may not be appropriate or that this Agreement or any such document may not be enforced in or by such Agreed Court, and the Shareholders irrevocably agree that all claims with respect to any action, suit or proceeding with respect to the Agreed Issues shall be heard and determined only in an Agreed Court.  The Shareholders hereby consent to and grant to each Agreed Court jurisdiction over the Person of such Shareholders and, to the extent permitted by Law, over the subject matter of any dispute with respect to the Agreed Issues and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 4.09 or in such other manner as may be permitted by Law shall be valid and sufficient service thereof.

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SECTION 4.11                     WAIVER OF JURY TRIAL.  EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.  EACH PARTY HERETO (I) CERTIFIES THAT IT HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER AND MADE IT VOLUNTARILY AND THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY ACTION, SUIT OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 4.11.

SECTION 4.12                     Counterparts.  This Agreement may be executed in one or more counterparts (including by facsimile), each of which shall be considered an original instrument and all of which shall together constitute the same agreement.  This Agreement shall become effective when one or more counterparts have been signed by each of the Shareholders and delivered to the other Shareholders.

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SECTION 4.13                     Interpretation.  When a reference is made in this Agreement to an Article, a Section, Exhibit or Schedule, such reference shall be to an Article of, a Section of, or an Exhibit or Schedule to this Agreement unless otherwise indicated.  The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”  The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.  The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms.  Any contract, instrument or Law defined or referred to herein or in any contract or instrument that is referred to herein means such contract, instrument or Law as from time to time amended, modified or supplemented, including (in the case of contracts or instruments) by waiver or consent and (in the case of Laws) by succession of comparable successor Law and references to all attachments thereto and instruments incorporated therein.  References to a Person are also to its permitted successors and assigns.  Except as otherwise expressly provided herein, all remedies provided herein shall be in addition to any other remedies that the Shareholders may otherwise have under applicable Law.  Any reference in this Agreement to a “day” or a number of “days” (without the explicit qualification of “business”) shall be interpreted as a reference to a calendar day or number of calendar days.  This Agreement is the product of negotiation between the Shareholders having the assistance of counsel and other advisers, and between the Shareholders and their counsel and other advisers having participated jointly in negotiating and drafting this Agreement.  If an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly between the Shareholders, and no presumption or burden of proof shall arise favoring or disfavoring any Shareholder by virtue of the authorship of any provision of this Agreement.

SECTION 4.14                     Relationship of Shareholders.  Nothing herein is intended to constitute the Shareholders as members of any partnership, joint venture, association, syndicate, or other entity, or shall be deemed to confer on any of them any express, implied, or apparent authority to incur any obligation or liability on behalf of another Shareholder or any obligation to assume any obligation or responsibility of any other Shareholder, except as otherwise expressly provided herein.  Notwithstanding the foregoing, the LATAM Controlling Shareholders shall be treated as a single Shareholder for all purposes of this Agreement.

SECTION 4.15                     Filing Requirement.  A copy of this Agreement shall be filed at the headquarters of LATAM and Holdco 1 for all purposes of applicable Law.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers thereunto duly authorized as of the date first above written.

COSTA VERDE AERONÁUTICA S.A.
By:
	Name:
	Title:
INVERSIONES MINERAS DEL CANTÁBRICO S.A.
By:
	Name:
	Title:
TEP CHILE S.A.
By:
	Name:
	Title:

Exhibit A

Ownership Structure of the LATAM Group

EX-4.12

Exhibit 4.12

SHAREHOLDERS AGREEMENT

Between

LAN AIRLINES S.A.

and

TEP CHILE S.A.

Dated as of [•], 2011

TABLE OF CONTENTS

		Page
ARTICLE I
GOVERNANCE
SECTION 1.01	Scope of the Agreement	3
SECTION 1.02	Composition of the LATAM Board	3
SECTION 1.03	Chairman of LATAM Board	3
SECTION 1.04	LATAM Committees	3
SECTION 1.05	Roles of the LATAM CEO, the LATAM COO and the TAM CEO	4
SECTION 1.06	Recommendations to Shareholders of LATAM	6
SECTION 1.07	Other Key Executives of the LATAM Group	6
SECTION 1.08	Group Structure	7
SECTION 1.09	Further Action; Efforts	7
ARTICLE II
GENERAL PROVISIONS
SECTION 2.01	Term of Agreement	7
SECTION 2.02	Fees and Expenses	7
SECTION 2.03	Governing Law	7
SECTION 2.04	Definitions	7
SECTION 2.05	Severability	9
SECTION 2.06	Amendment; Waiver	9
SECTION 2.07	Assignment	9
SECTION 2.08	Entire Agreement; No Third-Party Beneficiaries	10
SECTION 2.09	Notices	10
SECTION 2.10	Specific Enforcement; Consent to Jurisdiction	11
SECTION 2.11	WAIVER OF JURY TRIAL	12
SECTION 2.12	Counterparts	12
SECTION 2.13	Interpretation	13
SECTION 2.14	Filing Requirement.	13
Exhibit A	LATAM Group Ownership Structure and Organizational Structure	A-1

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INDEX OF DEFINED TERMS

	Page
Affiliate	7
Agreed Courts	11
Agreed Issues	11
Agreement	1
Amaro Family	1
beneficial ownership	8
business day	8
Control	8
Control Group Shareholders Agreement	2
CVA	1
Departure	3
Effective Time	3
Exchange Offer	1
Exchange Offer Agreement	1
Governmental Entity	8
Holdco 1	1
Holdco 1 Board	3
Holdco 1 Group	5
Holdco 1 Group Boards	3
Holdco 1 Shareholders Agreement	2
IMDC	1
Implementation Agreement	1
LATAM	1
LATAM Board	3
LATAM Board Committee	3
LATAM CEO	4
LATAM Chairman	3
LATAM Common Stock	1
LATAM Controlling Shareholders	1
LATAM COO	5
LATAM Group	2
Law	8
Mergers	1
Order	8
Organizational Documents	8
Parties	1
Person	8
Second Anniversary	3
Shareholders	1
Shareholders Agreements	2
Subsidiary	8
Supermajority Action	6
TAM	1
TAM Board	3
TAM CEO	6
TAM Shareholders Agreement	2
TEP	1
TEP Director	3
TEP Parent	1
Transaction Agreements	9
U.S. Exchange Act	9
Voting Securities	9

ii

SHAREHOLDERS AGREEMENT, dated as of ________, 2011 (this “Agreement”), between LAN AIRLINES S.A., a company organized under the Law of Chile (“LATAM”), and TEP Chile S.A., a company organized under the Law of Chile (“TEP”  and together with LATAM, the “Shareholders” or the “Parties”).

WITNESSETH

WHEREAS, as of the date of this Agreement Maria Cláudia Oliveira Amaro, Maurício Rolim Amaro, Noemy Almeida Oliveira Amaro and João Francisco Amaro (all such individuals, collectively, the “Amaro Family”) collectively own 100% of the outstanding shares of TEP;

WHEREAS, as of the date of this Agreement TAM Empreendimentos e Participações S.A., a company organized under the Law of Brazil (“TEP Parent”), is the controlling shareholder of TAM S.A., a company organized under the Law of Brazil (“TAM”), under the Law of Brazil and currently owns, directly or indirectly, ordinary shares and preferred shares of TAM, which collectively constitute [•]% of the issued and outstanding shares of capital stock of TAM and [•]% of the total voting power of such capital stock;

WHEREAS, LATAM, TAM, Costa Verde Aeronáutica S.A., a company organized under the Law of Chile (“CVA”), Inversiones Mineras del Cantábrico S.A., a company organized under the Law of Chile (“IMDC” and, together with CVA, the “LATAM Controlling Shareholders”), TEP Parent and the Amaro Family  have entered into an Implementation Agreement, dated as of January 18, 2011 (the “Implementation Agreement”), and an Exchange Offer Agreement, dated as of January 18, 2011 (the “Exchange Offer Agreement”), pursuant to which the outstanding shares of capital stock of TAM will be acquired by LATAM and [Holdco 1], a newly formed company to be organized under the Law of Chile (“Holdco 1”), pursuant to the contribution transaction, delisting exchange offer (the “Exchange Offer”) and the mergers described therein (collectively, the “Mergers”) in exchange for shares of common stock, no par value (the “LATAM Common Stock”), of LATAM;

WHEREAS, after the Mergers, TEP will own at least 80% of the outstanding voting shares of Holdco 1 and LATAM will own 100% of the outstanding non-voting shares of Holdco 1, no more than 20% of the outstanding voting shares of Holdco 1 and 100% of the outstanding preferred shares of TAM;

WHEREAS, immediately following the consummation of the transactions contemplated by the Implementation Agreement and the Exchange Offer Agreement and assuming (only for purposes of calculating the ownership percentages set forth therein) (i) all TAM shareholders other than TEP fully participate in the Exchange Offer, (ii) none of the holders of the outstanding shares of LATAM Common Stock exercise their appraisal rights (derecho a retiro) under the Law of Chile in respect of the Mergers and (iii) the only shares of LATAM Common Stock and shares of TAM that will be outstanding after such consummation are the shares issued in the Mergers and the shares which are subscribed and fully paid for as of the date of the Implementation Agreement (which excludes any shares issuable upon future exercises of stock options), the ownership structure of LATAM, Holdco 1, TAM and their respective Subsidiaries will be as set forth in Exhibit Ahereto;

WHEREAS, the Parties desire to enter into this Agreement to set forth their agreements with respect to governance, management and operation of, and the relationship among, LATAM, Holdco 1, TAM and their respective Subsidiaries (collectively, the “LATAM Group”) and certain other matters;

WHEREAS, concurrently with the execution and delivery of this Agreement, LATAM, TEP, TAM and Holdco 1 are entering into a shareholders agreement, dated the date hereof (the “TAM Shareholders Agreement”), to set forth their agreement with respect to the governance, management and operation of TAM and its Subsidiaries;

WHEREAS, concurrently with the execution and delivery of this Agreement, LATAM, TEP and Holdco 1 are entering into a shareholders agreement, dated the date hereof (the “Holdco 1 Shareholders Agreement”), to set forth their agreement with respect to the governance, management and operation of Holdco 1;

WHEREAS, contemporaneously with the execution and delivery of this Agreement, TEP and the LATAM Controlling Shareholders are entering into a shareholders agreement, dated the date hereof (the “Control Group Shareholders Agreement,” and collectively with this Agreement, the TAM Shareholders Agreement and the Holdco 1 Shareholders Agreement, the “Shareholders Agreements”), pursuant to which the LATAM Controlling Shareholders, as the continuing controlling shareholders of LATAM under the Law of Chile, will make the concessions described therein to TEP;

WHEREAS, the execution and delivery of this Agreement and the other Shareholders Agreements are conditions to the commencement of the Exchange Offer and consummation of the Mergers; and

WHEREAS, LATAM has determined and declared that the execution and delivery of this Agreement is in the best interests of LATAM, and the execution, delivery and performance of this Agreement by LATAM have been duly authorized by the LATAM Board and all other necessary corporate action on the part of LATAM.

NOW, THEREFORE, in consideration of the representations and warranties, covenants and agreements contained herein and in the Implementation Agreement and the Exchange Offer Agreement, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Parties agree as follows:

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ARTICLE I

GOVERNANCE

SECTION 1.01            Scope of the Agreement; Effective Time.  The Parties desire to set forth in this Agreement, their agreements with respect to governance, management and operation of, and the relationship among, LATAM and the other members of the LATAM Group and certain other matters.  In the event of any inconsistency or conflict between the provisions of this Agreement and the Organizational Documents of Holdco 1, TAM or any of their Subsidiaries, this Agreement shall control and the Parties shall use their commercially reasonable efforts to amend any such Organizational Documents to conform to the provisions of this Agreement and to exercise their rights under such Organizational Documents to give effect to such provisions.  The Parties agree that the specific provisions of this Agreement shall not be limited by any inconsistent or conflicting provisions of the by-laws of LATAM and accordingly, as between parties, such specific provisions shall prevail over such provisions of the by-laws of LATAM.  This Agreement shall become effective only if, and at that time at which, Holdco 1 becomes a holder of at least 80% of the outstanding ordinary shares of TAM (the “Effective Time”).  All actions required to be taken or performed under this Agreement shall be taken or performed in accordance with applicable Law.

SECTION 1.02            Composition of the LATAM Board.  TEP agrees that it will take all necessary action to ensure that at all times any individual who is a member of the board of directors of LATAM (the “LATAM Board”) and who was elected by it or designated to the LATAM Controlling Shareholders by it for such election and elected by it and/or the LATAM Controlling Shareholders (each, a “TEP Director”) shall also be a member of the board of directors of each of Holdco 1 and TAM.  In the event of any vacancy on the board of directors of Holdco 1 (the “Holdco 1 Board”) or the board of directors of TAM (the “TAM Board” and, together with the Holdco 1 Board, the “Holdco 1 Group Boards”)”) resulting from the resignation, incapacity, retirement, death or removal (each, a “Departure”) of any member of such Holdco 1 Group Board who is a TEP Director, TEP shall cause such TEP Director to resign from the LATAM Board within five calendar days after the occurrence of such Departure, and the LATAM Board shall replace such TEP Director with an individual designated by TEP who shall serve on the LATAM Board until the next annual meeting of the shareholders of LATAM.

SECTION 1.03            Chairman of LATAM Board.  Until the second anniversary of the Effective Time (the “Second Anniversary”), the chairman of the LATAM Board (the “LATAM Chairman”) shall be Maurício Rolim Amaro.  If there is a Departure of the LATAM Chairman prior to the Second Anniversary, then the LATAM Board shall appoint another TEP Director selected by TEP to serve as the LATAM Chairman.  On and after the Second Anniversary, the LATAM Board shall appoint any of its members as the LATAM Chairman from time to time in accordance with the Organizational Documents of LATAM.

SECTION 1.04            LATAM Committees.  (a)  Promptly following the Effective Time, the LATAM Board shall establish the following four committees to review, discuss and make recommendations to the LATAM Board (each, a “LATAM Board Committee”):

(i)           A Strategy Committee, which shall focus on (A) corporate strategy (e.g., vision, mission, business portfolio and relative priorities/resource allocation, mergers, acquisitions and divestures); (B) current strategic issues (e.g., global crisis and short-term capacity strategy, acquisitions of direct competitors, etc.); and (C) the three-year plans and budgets for the main business units and functional areas and high-level competitive strategy reviews;

3

(ii)          a Leadership Committee, which shall focus on (A) culture and values; (B) people policies; (C) high-level organizational structure; (D) appointment of the chief executive officer (Vice Presidente Ejecutivo) of LATAM (the “LATAM CEO”) and his or her other reports; (E) corporate compensation philosophy (e.g., role of variable compensations, scope of stock option/grant program, etc.); (F) compensation structures and levels for the LATAM CEO and other key executives; (G) annual variable compensation structure and targets for the LATAM CEO and other key executives; (H) succession or contingency planning for the LATAM CEO; and (I) performance assessment of the LATAM CEO;

(iii)         a Finance Committee, which shall focus on (A) financial policies and strategy; (B) capital structure; (C) monitoring policy compliance; (D) tax optimization strategy; and (E) the quality and reliability of financial information; and

(iv)         a Brand, Product and Frequent Flyer Program Committee, which shall focus on (A) brands strategies and brand building initiatives for the corporate and main business unit brands (e.g., imaging, key messages and brand voice); (B) the main characteristics of products and services for each of the main business units; (C) Frequent Flyer Program strategy and key program features; and (D) regular audit of brand performance.

(b)           Each of the LATAM Board Committees shall be comprised of two or more members of the LATAM Board, at least one of whom shall be a TEP Director at all times when TEP is entitled to elect, and elects, at least one TEP Director.  No LATAM Board Committee shall have authority to approve any matters required to be approved by the LATAM Board pursuant to the Organizational Documents of LATAM or under applicable Law, which approval authority shall rest solely with the LATAM Board, unless and to the extent such authority is expressly delegated by it as permitted by applicable Law.

SECTION 1.05            Roles of the LATAM CEO, the LATAM COO and the TAM CEO.

(a)           LATAM CEO.  The LATAM CEO shall be Enrique Cueto as of the Effective Time.  After any departure of the LATAM CEO and receipt of the recommendation of the Leadership Committee, the LATAM Board shall appoint a new LATAM CEO in accordance with the Organizational Documents of LATAM.  The LATAM CEO will be the highest ranked officer of the LATAM Group and shall report directly to the LATAM Board.  The LATAM CEO shall have general supervision, direction and control of the business of the LATAM Group; provided that the LATAM COO and the TAM CEO shall have the responsibilities set forth in Sections 1.05(b) and (c), respectively.  The LATAM CEO shall carry out all orders and resolutions of the LATAM Board.  Without limitation of the foregoing, the LATAM CEO shall have the following responsibilities:

4

(i)          conducting the day-to-day management of the LATAM Group;

(ii)         leading LATAM’s efforts to combine LATAM and its Subsidiaries and TAM and its Subsidiaries and to achieve synergies among them;

(iii)        defining and proposing strategies for the LATAM Group and ensuring due execution of business plans;

(iv)        ensuring performance of the LATAM Group executive teams;

(v)         together with the LATAM Chairman and the chief financial officer of LATAM representing the LATAM Group before all major external stakeholders, all Governmental Entities, the International Air Transport Association (IATA), alliances and investors; and

(vi)        serving as a senior participant in all business unit and function committees of the LATAM Group.

(b)           LATAM COO.  The president and chief operating officer (Gerente General) of LATAM (the “LATAM COO”) shall be Ignacio Cueto as of the Effective Time.  After any Departure of the LATAM COO, a new LATAM COO shall be appointed by the LATAM CEO.  The LATAM COO shall report directly to the LATAM CEO and shall have general supervision, direction and control of the passenger and cargo operations of the LATAM Group, excluding those conducted by (x) Holdco 1, TAM and their Subsidiaries, excluding the international passenger business of the LATAM Group (collectively, the “Holdco 1 Group”) and (y) the international passenger business of the LATAM Group.  Without limitation of the foregoing, the LATAM COO shall have the following responsibilities:

(i)          conducting the day-to-day management of all cargo operations and operations of the LATAM Group;

(ii)         together with the TAM CEO, recommending a candidate to the LATAM CEO to serve as the head of the international passenger business of the LATAM Group (including both long haul and regional operations), who shall report jointly to the LATAM COO  and the TAM CEO;

(iii)        coordinating between cargo and international;

(iv)        together with the TAM CEO and the LATAM CEO, implementing the integration of LATAM and its Subsidiaries and TAM and its Subsidiaries; and

5

(v)         serving as a senior participant in all business unit and function committees of the LATAM Group.

(c)           TAM CEO.  As of the Effective Time, Marco Bologna will be the chief executive officer (Diretor Presidente) of the Holdco 1 Group (the “TAM CEO”).  The TAM CEO shall have general supervision, direction and control of the business and operations of Holdco 1 Group and shall carry out all orders and resolutions of the Holdco 1 Board and the TAM Board.  Without limitation of the foregoing, the TAM CEO shall have the following responsibilities:

(i)          conducting the day-to-day management of the Holdco 1 Group;

(ii)         serving as the company officer of the Holdco 1 Group and as the representative of the LATAM Group before all Governmental Entities in Brazil, including the Brazilian government and National Civil Aviation Agency of Brazil (Agência Nacional de Aviação, or ANAC);

(iii)        together with the LATAM COO, recommending a candidate to the LATAM CEO for appointment as the head of international passenger business of the LATAM Group (including both long haul and regional operations), who shall report jointly to the LATAM COO and the TAM CEO;

(iv)        together with the LATAM CEO and the LATAM COO, implementing the integration of LATAM and its Subsidiaries and TAM and its Subsidiaries; and

(v)         serving as a senior participant in all business unit and function committees of the LATAM Group.

SECTION 1.06            Recommendations to Shareholders of LATAM.  If (a) TEP and the LATAM Controlling Shareholders cannot reach agreement on any matter to be submitted to a vote of the shareholders of LATAM at any meeting of the shareholders of LATAM (other than an action that would require the approval of two-thirds of the shareholders of LATAM under Article 67 of the Chilean Corporations Act (Ley Sobre Sociedades Anónimas) (each, a “Supermajority Action”)prior to such meeting of the shareholders of LATAM or (b) any shareholder of LATAM (other than TEP and the LATAM Controlling Shareholders) requests that any matter other than a Supermajority Action be submitted to a vote of the shareholders of LATAM at any meeting of the shareholders of LATAM, then, in either such case, upon written request of TEP or the LATAM Controlling Shareholders (which shall be third-party beneficiaries for purposes of this Section 1.06), the LATAM Board will consider and make a proposal to the shareholders of LATAM with respect to such matter prior to such shareholder meeting.

SECTION 1.07            Other Key Executives of the LATAM Group.  The key executives of the LATAM Group (excluding the LATAM CEO and those in the Holdco 1 Group) shall be appointed by, and shall report, directly or indirectly, to the LATAM CEO.  In making such appointments, the LATAM CEO shall be guided by the following principles:  (a) alignment with the strongest performing leader, i.e., the best of breed; (b) maximization of synergy value capture; (c) conforming to local regulations and culture; and (d) simplest and easiest execution.

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SECTION 1.08            Group Structure.  The organizational structure of the LATAM Group shall be in substantially the form set forth in Exhibit A attached hereto, as it may be amended or modified by the Parties from time to time.

SECTION 1.09            Further Action; Efforts.  For the benefit of TEP, LATAM agrees to take all necessary action to implement the agreements with respect to the management and governance of LATAM set forth in Sections 1.03 through 1.08.

ARTICLE II

GENERAL PROVISIONS

SECTION 2.01            Term of Agreement.  Except as otherwise provided under applicable Law, this Agreement shall continue in effect as to each of the Parties until (i) it is terminated as to any Party by the written consent of all the Parties or (ii) with respect to any Shareholder, the first day on which such Shareholder no longer beneficially owns any shares of LATAM Common Stock, whichever is sooner to occur.  The termination of this Agreement as to any Shareholder shall not affect any of the rights and obligations of any of the other Parties with respect to each other.  In the event that this Agreement terminates as to any Shareholder, thereafter such Shareholder shall have no further liability to the other Parties or to any of their respective shareholders, directors, officers, employees or other Affiliates and such other Parties shall have no further liability to such Shareholder, in each case solely in respect of this Agreement; provided, however, that the foregoing shall not apply to any provisions hereof that expressly survive the termination of this Agreement (including Section 2.02); and provided, further, that nothing herein shall relieve any Party of any liability for any breach of this Agreement that occurred prior to such termination.

SECTION 2.02            Fees and Expenses.  All fees and expenses incurred in connection with this Agreement shall be paid by the Party incurring such fees or expenses.  The provisions of this Section 2.02 shall survive any termination of this Agreement.

SECTION 2.03            Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF; PROVIDED, HOWEVER,THAT NOTWITHSTANDING THE FOREGOING THE AUTHORIZATION AND EXECUTION OF THIS AGREEMENT BY EACH PARTY SHALL BE GOVERNED BY THE LAW OF ITS JURISDICTION OF INCORPORATION.

SECTION 2.04            Definitions.  For the purposes of this Agreement, the following terms shall have the meanings assigned below:

(a)            “Affiliate” shall have the meaning assigned to such term in Rule 12b-2 under the U.S. Exchange Act; provided, however, that no Shareholder shall be deemed to be an Affiliate of any other Shareholder or any of its Affiliates solely by reason of this Agreement.

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(b)           “beneficial ownership” (and its correlative phrases) shall have the meanings assigned to such phrases in Rule 13d-3 promulgated under the U.S. Exchange Act (without taking into account any rights of such Person or any of its Affiliates under Section 2.04 hereof) if the references to “within 60 days” in Rule 13d-3(d)(1)(i) were omitted.  For all purposes of this Agreement, a Shareholder shall be deemed to beneficially own all shares of LATAM Common Stock beneficially owned by it and its Affiliates, including the beneficial owners of such Shareholder.

(c)           “business day” shall mean any day that is not a Saturday, Sunday or a day on which banking institutions are required or authorized by Law or executive order to be closed in Santiago, Chile or São Paulo, Brazil.

(d)            “Control”(and its correlative terms) shall have the meanings assigned to such terms in Rule 12b-2 promulgated under the U.S. Exchange Act.

(e)           “Governmental Entity” means any governmental, quasi-governmental or regulatory authority, body, department, commission, board, bureau, agency, division, court, organized securities exchange or other legislative, executive or judicial governmental entity or instrumentality of any country, nation, republic, federation or similar entity or any state, county, parish or municipality, jurisdiction or other political subdivision thereof.

(f)           “Law” means any statute, common law, ordinance, rule, regulation, agency requirement or Order of, or issued, promulgated or entered into by or with, any Governmental Entity.

(g)           “Order” means any order, decision, writ, injunction, decree, judgment, legal or arbitration award, stipulation, license, permit or agreement issued, promulgated or entered into by or with (or settlement or consent agreement subject to) any Governmental Entity.

(h)           “Organizational Documents” shall mean (i) with respect to Holdco 1, this Agreement, the Holdco 1 Shareholders Agreement and the by-laws of Holdco 1, (ii) with respect to LATAM, this Agreement, the Control Group Shareholders Agreement and the by-laws or other comparable governing documents of LATAM and (iii) with respect to TAM and its Subsidiaries, this Agreement, the TAM Shareholders Agreement, the Holdco 1 Shareholders Agreements and the by-laws or other comparable governing documents of such Persons.

(i)           “Person” means any natural person, firm, corporation, partnership, company, limited liability company, joint venture, association, trust, unincorporated organization, Governmental Entity or other entity.

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(j)            “Subsidiary” means, with respect to any Person, (i) a corporation in which such Person, together with its Subsidiaries, beneficially owns Voting Securities of such corporation which entitle them, collectively, to cast more than 50% of all the votes entitled to be cast by the holders of all Voting Securities of such corporation then outstanding in a general election of directors of such corporation or (ii) any Person that is not a corporation in which such Person, and/or one or more other Subsidiaries of such Person, directly or indirectly, has a majority equity or voting interest or the power to direct the policies, management and affairs thereof.

(k)           “Transaction Agreements” means this Agreement, the Implementation Agreement, the Exchange Offer Agreement and the other Shareholders Agreements.

(l)             “U.S. Exchange Act” shall mean the U.S. Securities Exchange Act of 1934.

(m)           “Voting Securities” means, with respect to any Person, any securities or other equity or ownership interests in such Person which are entitled to vote generally in the election of directors of such Person (or, if such Person is not a corporation, the individuals who perform a similar function for such Person).

SECTION 2.05             Severability.  The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions of this Agreement.  If any provision of this Agreement, or the application of such provision to any Person or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application of such provision, in any other jurisdiction.

SECTION 2.06             Amendment; Waiver.  This Agreement may be amended and any performance, term or condition waived in whole or in part only by a writing signed by all Parties affected by the amendment (in the case of an amendment) or by the Party against whom the waiver is to be effective (in the case of a waiver).  No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any singular partial exercise of such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  Waiver by any Party of any breach or failure to comply with any provision of this Agreement by another Party shall not be construed as, nor shall constitute, a continuing waiver of such provisions, or a waiver of any other breach of or failure to comply with any other provisions of this Agreement.

SECTION 2.07             Assignment.  Subject to the provisions of the Holdco 1 Shareholders Agreement and the Control Group Shareholders Agreement, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, in whole or in part, by operation of Law or otherwise by any of the Parties without the prior written consent of the other Parties, and any purported assignment without such consent shall be null and void and of no force or effect.  Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and permitted assigns.

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SECTION 2.08             Entire Agreement; No Third-Party Beneficiaries.

(a)           This Agreement and the other Transaction Agreements, including the Exhibits and Schedules hereto and thereto, constitute the entire agreement, and supersede all prior agreements and understandings, both written and oral, among the Parties with respect to the subject matter hereof and thereof.

(b)           Except as otherwise expressly stated herein, the Parties hereby agree that the agreements and covenants set forth herein are solely for the benefit of the other Parties in accordance with, and subject to the terms of, this Agreement and that this Agreement is not intended to, and does not, confer upon any Person other than the Parties any rights or remedies hereunder, including the right to rely upon the representations and warranties set forth herein.

SECTION 2.09             Notices.  All notices, requests, claims, demands, instructions and other communications or documents given hereunder shall be in writing and shall be delivered personally or sent by registered or certified mail (postage prepaid), facsimile or overnight courier to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice):

If to LATAM, to:

Claro y Cia.

Apoquindo 3721, piso 13,

Santiago, Chile

Attention: José María Eyzaguirre B.

Fax: +56 2 367 3003

jmeyzaguirre@claro.cl

with copies (which shall not constitute notice) to:

Sullivan & Cromwell LLP

125 Broad Street

New York, NY 10004

United States of America

Attention: Sergio Galvis and Duncan McCurrach

Fax: +1 212 558 3588

galviss@sullcrom.com

mccurrachd@sullcrom.com

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If to TEP to:

Turci Advogados

Rua Dr. Renato Paes de Barros, 778

-1◦ andar – cj.12

04530-0001

São Paulo – SP

Brasil

Attention: Flavia Turci

Fax: +55 11 2177 2197

turci@turci.com

with a copy (which shall not constitute notice) to:

Clifford Chance US LLP

31 West 52nd Street

New York, NY 10019

Attention: Sarah Jones and Anand Saha

Fax: +1 212 878 8375

Sarah.Jones@CliffordChance.com

Anand.Saha@CliffordChance.com

Any notice, request, claim, instruction or other communication or document given as provided above shall be deemed given to the receiving party (i) if delivered personally, upon actual receipt, (ii) if sent by registered or certified mail, three business days after deposit in the mail, (iii) if sent by facsimile, upon confirmation of successful transmission if within one business day after such facsimile has been sent such notice, request, claim, instruction or other communication or document is also given by one of the other methods described above and (iv) if sent by overnight courier, on the next business day after deposit with the overnight courier.

SECTION 2.10            Specific Enforcement; Consent to Jurisdiction.  The Parties agree that irreparable damage would occur and that the Parties would not have any adequate remedy at Law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the Parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, this being in addition to any other remedy to which they are entitled at Law or in equity, without the necessity of proving the inadequacy of monetary damages or of posting bond or other undertaking, as a remedy and to obtain injunctive relief against any breach or threatened breach hereof.  In the event that any Action is brought in equity to enforce the provisions of this Agreement, no Party shall allege, and each Party waives the defense or counterclaim that there is an adequate remedy at Law.  Each of the Parties hereby irrevocably consents and submits itself to the personal jurisdiction of the courts of the State of New York and the federal courts of the United States of America located in the Borough of Manhattan, The City of New York (collectively, the “Agreed Courts”) solely in respect of the interpretation and enforcement of the provisions of this Agreement, and the documents referred to herein and the transactions contemplated by this Agreement (collectively, the “Agreed Issues”), waives, and agrees not to assert, as a defense in any Action, suit or proceeding in an Agreed Court with respect to the Agreed Issues that such Party is not subject thereto or that such Action, suit or proceeding may not be brought or is not maintainable in such Agreed Court or that the venue thereof may not be appropriate or that this Agreement or any such document may not be enforced in or by such Agreed Court, and the Parties irrevocably agree that all claims with respect to any Action, suit or proceeding with respect to the Agreed Issues shall be heard and determined only in an Agreed Court.  The Parties hereby consent to and grant to each Agreed Court jurisdiction over the Person of such parties and, to the extent permitted by Law, over the subject matter of any dispute with respect to the Agreed Issues and agree that mailing of process or other papers in connection with any such Action or proceeding in the manner provided in Section 2.09 or in such other manner as may be permitted by Law shall be valid and sufficient service thereof.

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SECTION 2.11            WAIVER OF JURY TRIAL.  EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO (I) CERTIFIES THAT IT HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER AND MADE IT VOLUNTARILY AND THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY ACTION, SUIT OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 2.11.

SECTION 2.12            Counterparts.  This Agreement may be executed in one or more counterparts (including by facsimile), each of which shall be considered an original instrument and all of which shall together constitute the same agreement.  This Agreement shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Parties.

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SECTION 2.13            Interpretation.  When a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference shall be to an Article of, a Section of, or an Exhibit or Schedule to this Agreement unless otherwise indicated.  The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”.  The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.  The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms.  Any contract, instrument or Law defined or referred to herein or in any contract or instrument that is referred to herein means such contract, instrument or Law as from time to time amended, modified or supplemented, including (in the case of contracts or instruments) by waiver or consent and (in the case of Laws) by succession of comparable successor Law and references to all attachments thereto and instruments incorporated therein.  References to a Person are also to its permitted successors and assigns.  Except as otherwise expressly provided herein, all remedies provided herein shall be in addition to any other remedies that the Parties may otherwise have under applicable Law.  Any reference in this Agreement to a “day” or a number of “days” (without the explicit qualification of “business”) shall be interpreted as a reference to a calendar day or number of calendar days.  This Agreement is the product of negotiation by the Parties having the assistance of counsel and other advisers, and the Parties and their counsel and other advisers having participated jointly in negotiating and drafting this Agreement.  If an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement.

SECTION 2.14            Filing Requirement.  A copy of this Agreement shall be filed at the headquarters of LATAM for all purposes of applicable Law.

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed by their respective officers thereunto duly authorized as of the date first above written.

LAN AIRLINES S.A.
By:
	Name:
	Title:
TEP CHILE S.A.
By:
	Name:
	Title:

EXHIBIT A

LATAM Group Ownership Structure and Organizational Structure

A-1

EX-4.13

Exhibit 4.13

SHAREHOLDERS AGREEMENT

Among

LAN AIRLINES S.A.,

TEP CHILE S.A.,

and

[HOLDCO 1]

Dated as of  ______, 2011

TABLE OF CONTENTS

		Page
ARTICLE I
GOVERNANCE OF HOLDCO 1
SECTION 1.01	Scope of the Agreement	2
SECTION 1.02	Formation of Holdco 1	2
SECTION 1.03	Role and Composition of the Holdco 1 Board	2
SECTION 1.04	Removal and Vacancies	3
SECTION 1.05	Enabling Provisions	3
SECTION 1.06	Holdco 1 Chairman	4
SECTION 1.07	Meetings of the Holdco 1 Board	4
SECTION 1.08	Quorum	4
SECTION 1.09	Holdco 1 Board Voting Requirements	5
SECTION 1.10	Board Supermajority Matters	5
SECTION 1.11	Shareholder Required Vote	6
SECTION 1.12	Shareholder Supermajority Matters	6
SECTION 1.13	Required Actions	7
SECTION 1.14	Management of Holdco 1	7
ARTICLE II
ACCOUNTING, BOOKS AND RECORDS
SECTION 2.01	Fiscal Year	8
SECTION 2.02	Accountants	8
SECTION 2.03	Books and Records	8
SECTION 2.04	Access to Information, Audit and Inspection	9
SECTION 2.05	Annual Budget and Business Plan	9
ARTICLE III
TRANSFERS AND CONVERSION OF STOCK
SECTION 3.01	Restrictions on Certain Transfers	10
SECTION 3.02	Ownership Control Events	12
ARTICLE IV
GENERAL PROVISIONS
SECTION 4.01	Term of Agreement	13
SECTION 4.02	Fees and Expenses	13
SECTION 4.03	Governing Law	13
SECTION 4.04	Definitions	13

SECTION 4.05	Severability	16
SECTION 4.06	Amendment; Waiver	16
SECTION 4.07	Assignment	17
SECTION 4.08	No Third-Party Beneficiaries	17
SECTION 4.09	After-Acquired Holdco 1 Voting Stock	17
SECTION 4.10	Notices	17
SECTION 4.11	Specific Enforcement; Consent to Jurisdiction	19
SECTION 4.12	WAIVER OF JURY TRIAL	19
SECTION 4.13	Counterparts	19
SECTION 4.14	Interpretation	20
SECTION 4.15	Filing Requirement.	20
Exhibit A	LATAM Group Ownership Structure and Organizational Structure	\
Exhibit B	By-laws of Holdco 1

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INDEX OF DEFINED TERMS

	Page
Accountants	8
Actions	14
Adverse Effect	10
Affiliate	14
Agreed Courts	19
Agreed Issues	19
Agreement	1
beneficial ownership	14
Block Sale	10
Board Supermajority Matter	5
business day	14
Call Option	13
contract	14
Control	14
Control Group Shareholders Agreement	14
Conversion Option	12
Convertible Securities	14
Director ElectionNotice	12
Director Representatives	2
Dividend Rights	15
Effective Time	2
Equity Securities	14
Fiscal Year	8
Forced Vote Sale	11
Forced Vote Sale Period	11
Full Conversion Date	10
Full Ownership Conversion Date	12
Governmental Entity	14
Holdco 1	1
Holdco 1 Board	2
Holdco 1 By-Laws	2
Holdco 1 CEO	7
Holdco 1 Chairman	4
Holdco 1 Non-Voting Stock	15
Holdco 1 Plans	9
Holdco 1 Stock	1
Holdco 1 Voting Stock	15
IFRS	8
LATAM	1
LATAM Board	1
LATAM Common Stock	11
LATAM Restricted Shares	11
LATAM Shares	10
Law	15
Limited Voting Rights	15
Order	15
Organizational Documents	15
Ownership Notice	12
Parties	1
Person	15
Related Party	15
Release Event	11
Representatives	16
Second Meeting Date	11
Shareholder Supermajority Matter	6
Shareholders	1
Subsidiary	16
Supermajority Board Vote	5
Supermajority Shareholder Vote	6
TAM	1
TAM Board	2
TAM Chairman	3
TAM Ordinary Stock	1
TAM Preferred Stock	1
TAM Stock	1
Tax Return	9
Tenth Anniversary	10
TEP	1
Transfer	10
U.S. Exchange Act	16
Voting Securities	16

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SHAREHOLDERS AGREEMENT, dated as of ________, 2011 (this “Agreement”), among LAN AIRLINES S.A., a company organized under the Law of Chile (“LATAM”), TEP Chile S.A., a company organized under the Law of Chile (“TEP”  and together with LATAM, the “Shareholders”), and [HOLDCO1], a company organized under the Law of Chile (“Holdco 1” and, together with the Shareholders, the “Parties”).

WITNESSETH

WHEREAS, as of the date of this Agreement Maria Cláudia Amaro, Maurício Amaro, Noemy Amaro and João Francisco Amaro collectively own 100% of the outstanding shares of TEP;

WHEREAS, TAM Empreendimentos E Participações S.A., a Brazilian corporation, is the controlling shareholder of TAM S.A., a company organized under the Law of Brazil (“TAM”), under the Law of Brazil and currently owns, directly or indirectly, shares of the ordinary stock, no par value (the “TAM Ordinary Stock”), of TAM and shares of the non-voting preferred stock, no par value (the “TAM Preferred Stock” and, together with the TAM Ordinary Stock, the “TAM Stock”), of TAM, which collectively constitute [•]% of the issued and outstanding shares of capital stock of TAM and [•]% of the total voting power of such capital stock;

WHEREAS, as of the Effective Time, TEP will own at least 80% of the outstanding shares of Holdco 1 Voting Stock and LATAM will own 100% of the outstanding shares of Holdco 1 Non-Voting Stock, no more than 20% of the outstanding shares of Holdco 1 Voting Stock and 100% of the outstanding TAM Preferred Stock, as reflected in the ownership structure chart attached as Exhibit A hereto;

WHEREAS, TEP, as the continuing controlling shareholder of TAM under the Law of Brazil as of the Effective Time by virtue of its indirect ownership of at least 80% of the issued and outstanding shares of Holdco 1 Voting Stock and Holdco 1’s ownership of at least 85.3457% of the issued and outstanding shares of TAM Ordinary Stock, desires to make the concessions to LATAM provided herein, and the Parties desire to enter into this Agreement to set forth the terms and conditions upon which they have agreed to hold their shares of Holdco 1 Voting Stock and Holdco 1 Non-Voting Stock (collectively, the “Holdco 1 Stock”), including with respect to the disposition and voting thereof, as well as their agreements with respect to governance, management and operation of, and the relationship among, Holdco 1 and its Subsidiaries and certain other matters; and

WHEREAS, LATAM has determined and declared that the execution and delivery of this Agreement is in the best interests of LATAM, and the execution, delivery and performance of this Agreement by LATAM have been duly authorized by the board of directors of LATAM (the “LATAM Board”) and all other necessary corporate action on the part of LATAM.

NOW, THEREFORE, in consideration of the representations and warranties, covenants and agreements contained herein, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Parties agree as follows:

ARTICLE I

GOVERNANCE OF HOLDCO 1

SECTION 1.01                  Scope of the Agreement; Effective Time.  The Parties desire to set forth in this Agreement certain terms and conditions upon which they have agreed to hold their shares of Holdco 1 Stock, including with respect to disposition and voting thereof, as well as their agreements with respect to governance, management and operation of, and the relationship among, Holdco 1 and its Subsidiaries and certain other matters.  In the event of any inconsistency or conflict between the provisions of this Agreement and the other Organizational Documents of Holdco 1 or any of its Subsidiaries, this Agreement shall control and the Parties shall use their commercially reasonable efforts to amend any such Organizational Documents to conform to the provisions of this Agreement and to exercise their rights under such Organizational Documents to give effect to such provisions.  This Agreement shall become effective only if, and at that time at which, Holdco 1 becomes a holder of at least 80% of the outstanding shares of TAM Ordinary Stock (the “Effective Time”).  All actions required to be taken or performed under this Agreement shall be taken or performed in accordance with applicable Law.

SECTION 1.02                  Formation of Holdco 1.  Prior to the date of this Agreement, TEP and LATAM incorporated Holdco 1 as a closed sociedad anónima under the Law of Chile with the by-laws in the form attached as Exhibit B hereto (the “Holdco 1 By-Laws”) for the sole purpose of owning the shares of TAM Ordinary Stock to be contributed by TEP.  From and after the Effective Time, the parties agree that all acquisitions of TAM Ordinary Stock by any member of the LATAM Group shall be made by Holdco 1.

SECTION 1.03                  Role and Composition of the Holdco 1 Board.  The business and affairs of Holdco 1 shall be managed under the direction of the board of directors of Holdco 1 (the “Holdco 1 Board”) in accordance with the applicable provisions of the Organizational Documents of Holdco 1.  At all times, the Holdco 1 Board shall be comprised of the same number of directors as the number of directors that then comprise the board of directors of TAM (the “TAM Board”) and the directors of Holdco 1 shall be the same individuals that then are directors of TAM.  The Holdco 1 Board shall be comprised of six directors and initially LATAM shall have the right to elect two individuals to the Holdco 1 Board and TEP shall have the right to elect four individuals to the Holdco 1 Board. Whenever LATAM or TEP so elects or appoints any individual as a director of Holdco 1, it will select, and Holdco 1 will elect or appoint, the same individual as a director of TAM.  Each person so elected by LATAM or TEP as a director of Holdco 1 is referred to herein as one of such Shareholder’s “Director Representatives”).  The term of office for the directors of the Holdco 1 Board shall be two years.

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SECTION 1.04                  Removal and Vacancies.  In the event of any vacancy on the Holdco 1 Board resulting from the resignation, incapacity, retirement, death or removal of any Director Representative of any Shareholder, such Shareholder shall have the right to designate another individual to replace such Director Representative on the Holdco 1 Board.  In such event, the Shareholders shall cause their Director Representatives to request that the Holdco 1 Chairman call a special meeting of the Holdco 1 Board in order to appoint such designee to the Holdco 1 Board and to serve until the next annual meeting of the shareholders of Holdco 1 and at such meeting shall cause their Director Representatives to make such appointment. At the same time, LATAM and TEP shall cause their Director Representatives in their capacity as directors of TAM to request that the chairman of the TAM Board (the “TAM Chairman”) call a special meeting of the shareholders of TAM to elect such designee to the TAM Board and Holdco 1 shall elect such designee to the TAM Board to serve until the next annual meeting of the shareholders of TAM.  If at any time any Director Representative of any Shareholder ceases to be a member of the TAM Board, such Shareholder shall promptly cause him or her to resign or to be removed from the Holdco 1 Board and the Shareholders will replace such Director Representative on the Holdco 1 Board pursuant to the foregoing procedures.

SECTION 1.05                  Enabling Provisions.

(a)           Each Shareholder agrees that it shall vote, or cause to be voted or execute written consents for, as the case may be, all shares of Holdco 1 Voting Stock beneficially owned by it, and each Party shall take all other action reasonably necessary (including by causing Holdco 1 or TAM to call a special meeting of shareholders or the Holdco 1 Chairman or the TAM Chairman to call a special meeting of the Holdco 1 Board or the TAM Board, as applicable) so as to give effect to the agreements with respect to representation on the Holdco 1 Board and the TAM Board contained in this Article I and to ensure that the other Organizational Documents of Holdco 1 and TAM (i) facilitate, enable and do not at any time conflict with any provision of this Agreement and (ii) permit each Shareholder to receive the full benefits to which each Shareholder is entitled under this Agreement.  Each Party further agrees that it shall not take any action directly as a shareholder of Holdco 1 or TAM, indirectly through any of its Director Representatives as members of the Holdco 1 Board or the TAM Board, or otherwise that would contravene or frustrate the implementation of these agreements, and that it shall cause all of its Director Representatives as members of the Holdco 1 Board or the TAM Board to act at all times in conformity with, and to take such action as may reasonably be required of and available to them to ensure the fulfillment of, the terms of this Agreement and the other Organizational Documents of Holdco 1 and TAM.  Holdco 1 agrees not to take, or to cause or permit TAM to take, any action that would conflict with or subvert the operation or enforcement of any provision of this Agreement or that would impede any Shareholder’s ability to receive the full benefits to which such Shareholder is entitled under this Agreement.

(b)           Each Shareholder shall cause any and all shares of Holdco 1 Voting Stock beneficially owned by it and entitled to vote at any meeting of shareholders of Holdco 1 to be present in person or represented by proxy at all annual and special meetings of shareholders of Holdco 1 to the extent necessary so that all shares of Holdco 1 Voting Stock beneficially owned by it shall be counted as present for the purpose of determining the presence of a quorum at such meeting.  Each Shareholder further agrees to execute from time to time in the future any document or documents required by Law to keep the agreements contained in this Section 1.05 in full force and effect at all times throughout the term of this Agreement.  Each Shareholder agrees that it will take all necessary actions (including amending the Holdco 1 By-Laws) to effect and implement any stock splits or reverse stock splits of the Holdco 1 Non-Voting Stock at such times and in such proportions as any holder thereof shall request if (but only if) such split is necessary or advisable to permit or preserve the ability of TAM or any of its Subsidiaries to conduct operations in any market worldwide.

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SECTION 1.06                  Holdco 1 Chairman.  For so long as TEP is entitled to elect at least one director to the Holdco 1 Board, TEP shall have the right to designate from time to time one of its Director Representatives to serve as chairman of the Holdco 1 Board (the “Holdco 1 Chairman”), who at all times shall be the same individual who is then serving as the TAM Chairman.  After such designation, each Shareholder shall cause its Director Representatives to cause  the Holdco 1 Board to appoint such Director Representative as the Holdco 1 Chairman in accordance with the Organizational Documents of Holdco 1. Each time an individual is so appointed as the Holdco 1 Chairman, LATAM and TEP shall cause their Director Representatives in their capacity as directors of TAM, and Holdco 1 shall cause the directors of TAM, to appoint the same individual as the TAM Chairman in accordance with the Organizational Documents of TAM (as defined in the TAM Shareholders Agreement).  As of the Effective Time and for a minimum period of two years, the Holdco 1 Chairman shall be Maria Cláudia Oliveira Amaro.  In no event shall the Holdco 1 Chairman have a casting vote with respect to any matter before the Holdco 1 Board.

SECTION 1.07                  Meetings of the Holdco 1 Board.

(a)           Regular meetings of the Holdco 1 Board shall be held on a monthly basis, and each regular monthly meeting of the Holdco 1 Board shall occur on the same day as, and promptly before the regular monthly meeting of the TAM Board and within three business days after the regular monthly meeting of the board of directors of LATAM.

(b)           Special meetings of the Holdco 1 Board may be called by the Holdco 1 Chairman on not less than 48 hours’ notice to each director of the Holdco 1 Board, and such meetings shall be called by the Holdco 1 Chairman with like notice and like manner promptly after receipt of a written request for a special meeting of the Holdco 1 Board by any one director of the Holdco 1 Board; provided, however, that notwithstanding the foregoing a special meeting of the Holdco 1 Board may be so called on any shorter notice permitted by applicable Law if necessary or desirable in the particular circumstances.

(c)           The Holdco 1 By-Laws shall provide that the directors of the Holdco 1 Board shall be permitted to participate in, and shall be deemed to be present at, any meeting of the Holdco 1 Board using teleconference or any other means pursuant to which all the directors participating in such meeting can speak to and hear one another.

SECTION 1.08                  Quorum.  The quorum for any meeting of the Holdco 1 Board to be validly held shall be five directors of Holdco 1.

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SECTION 1.09                  Holdco 1 Board Voting Requirements.  Each director of the Holdco 1 Board shall have one vote on all matters before the Holdco 1 Board.  Any action by the Holdco 1 Board concerning a Board Supermajority Matter as well as any other action required by applicable Law or this Agreement to be approved by directors constituting more than a simple majority of the Holdco 1 Board must be approved by the affirmative vote of five directors of Holdco 1 at a duly called meeting of the Holdco 1 Board at which a quorum is present and acting throughout (each, a “Supermajority Board Vote”).  All actions by the Holdco 1 Board other than with respect to Board Supermajority Matters must be approved by the affirmative vote of a simple majority of the directors of the Holdco 1 Board at a duly called meeting of the Holdco 1 Board at which a quorum is present and acting throughout.

SECTION 1.10                  Board Supermajority Matters.  Notwithstanding any provision of this Agreement or the other Organizational Documents of Holdco 1 to the contrary and without prejudice to any statutory limitations requiring additional shareholder approvals, Holdco 1 shall not engage in or take, directly or indirectly, any of the following actions (each, a “Board Supermajority Matter”) unless approved by a Supermajority Board Vote:

(i)           to create (including by the acquisition of shares), dispose of or admit new shareholders to any Subsidiary of Holdco 1;

(ii)          to approve or effect the acquisition, disposal, modification or encumbrance of (a) any Equity Securities or Convertible Securities in TAM, or (b) any other asset with a value greater than US$15,000,000;

(iii)         to approve investments in any assets not related to the corporate purpose of Holdco 1;

(iv)         to execute any kind of agreement or to enter into any kind of transaction in an amount greater than US$15,000,000;

(v)         to terminate, modify or waive any rights or claims of Holdco 1 under contracts or other arrangements in any amount greater than US$15,000,000;

(vi)         to commence, participate in, compromise or settle any material action with respect to any litigation, judicial, administrative or arbitration proceeding relating to Holdco 1 in an amount greater than US$15,000,000;

(vii)        to approve the execution, amendment, termination or ratification of acts or agreements with Related Parties;

(viii)       to approve any financial statements of Holdco 1 or any amendments thereto or to any dividend, accounting or tax policy or principles of Holdco 1;

(ix)         to approve the grant of any kind of security interest or guarantee to secure obligations of third parties (including Related Parties);

(x)          to appoint any executive other than the Holdco 1 CEO; and

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(xi)         to approve any vote to be cast by Holdco 1, in its capacity as the holder of shares of TAM Ordinary Stock, in any shareholders meeting of TAM, including any vote relating to any appointment or removal of any director of TAM or any TAM Shareholder Supermajority Matter (as defined in the TAM Shareholders Agreement).

SECTION 1.11                  Shareholder Required Vote.  Any action by the shareholders of Holdco 1 concerning a Shareholder Supermajority Matter as well as any other action required by applicable Law or this Agreement to be approved by more than a simple majority of the holders of the then issued and outstanding shares of Holdco 1 Voting Stock must be approved by the affirmative vote of the holders of shares representing at least 95% of the total number of shares of Holdco 1 Voting Stock then issued and outstanding at a duly called meeting of the shareholders of Holdco 1 at which a quorum is present and acting throughout (each, a “Supermajority Shareholder Vote”).  All actions other than Shareholder Supermajority Matters must be approved by the affirmative vote of the holders of shares constituting a simple majority of the issued and outstanding shares of Holdco 1 Voting Stock at a duly called meeting of the shareholders of Holdco 1 at which a quorum is present and acting throughout.

SECTION 1.12                  Shareholder Supermajority Matters.  Notwithstanding any provision of this Agreement or the Organizational Documents of Holdco 1 to the contrary, Holdco 1 shall not engage in or take, directly or indirectly, any of the following actions (each, a “Shareholder Supermajority Matter”) unless approved by a Supermajority Shareholder Vote:

(i)           to approve any amendments to the by-laws of Holdco 1 in respect to the following matters: (A) the corporate purpose, (B) the corporate capital, (C) the rights inherent to each class of shares and to the shareholders of Holdco 1, (D) the attributions of the shareholders regular meeting or any limitation to attributions of the Holdco 1 Board, (E) increase or decrease of the number of directors and officers, (F) dividends or other distributions, (G) the term of Holdco 1, (H) any change in the Fiscal Year of Holdco 1 and (I) the change of the headquarters of Holdco 1;

(ii)          to approve the dissolution, liquidation and winding-up of Holdco 1;

(iii)         to approve the transformation, merger, spin-up, or any kind of corporate reorganization of Holdco 1;

(iv)        to approve mechanisms for paying or making, or to approve, declare or pay, any dividends or other kinds of distributions to the shareholders of Holdco 1;

(v)         to approve the issuance, redemption, purchase or amortization of any Equity Securities or Convertible Securities of Holdco 1;

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(vi)        to approve the disposal by sale, encumbrance or otherwise of 50% or more of the assets, including or not the liabilities, of Holdco 1, as determined by the balance sheet of the previous year, or to approve a plan contemplating the disposal by sale, encumbrance or otherwise of 50% or more of the assets of Holdco 1;

(vii)       to approve the disposal by sale, encumbrance or otherwise of 50% or more of the assets of a Subsidiary of Holdco 1 representing at least 20% of the assets of Holdco 1, or to approve the disposal by sale, encumbrance or otherwise of the Equity Securities of such Subsidiary of Holdco 1 which has the effect of making Holdco 1 lose control over it;

(viii)      to approve the grant of any security interest or guarantee to secure obligations of third parties (including Related Parties) in excess of 50% of the assets of Holdco 1;

(ix)         to approve the execution, amendment, termination or ratification of acts or agreements with Related Parties, exclusively in the cases that a statutory limitation requires that these matters be approved by the shareholders; and

(x)          to appoint or remove the Accountants.

SECTION 1.13                  Required Actions.  Each of Holdco 1 and each of its Subsidiaries shall exercise all rights it has as a shareholder of each of its respective Subsidiaries in an effort to cause such Subsidiary to comply with the requirements of this Agreement; provided, however, that the foregoing sentence shall not be construed to require Holdco 1 or any of its Subsidiaries to take, and in exercising such rights none of them will take, any action that would cause any director of each such respective Subsidiary to breach his or her fiduciary duties.    In selecting the candidates that TEP will propose pursuant to Section 2.02 of the TAM Shareholders Agreement, TEP shall be guided by the following principles:  (a) alignment with the strongest performing leader, i.e., the best of breed; (b) maximization of synergy value capture; (c) conforming to local regulations and culture; and (d) simplest and easiest execution.

SECTION 1.14                  Management of Holdco 1.  The day-to-day business and affairs of Holdco 1 shall be managed by the chief executive officer of Holdco 1 (the “Holdco 1 CEO”) under the oversight of the Holdco 1 Board.  At all times the individual serving as the Holdco 1 CEO shall be the same individual that is then serving as the Chief Executive Officer of TAM pursuant to Section 2.02 of the TAM Shareholders Agreement.  The term of office of the Holdco 1 CEO shall be two years.

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ARTICLE II

ACCOUNTING, BOOKS AND RECORDS

SECTION 2.01                  Fiscal Year.  Unless and until changed by an amendment of the Holdco 1 By-Laws, the fiscal year of Holdco 1 shall end on December 31 in each year (the “Fiscal Year”) and Holdco 1, LATAM and TEP shall take, Holdco 1 shall cause the directors of TAM to take and LATAM and TEP shall cause their Director Representatives acting in their capacity as directors of TAM to take all necessary action to ensure that the fiscal years of TAM and each of its Subsidiaries are at all times identical to the Fiscal Year.

SECTION 2.02                  Accountants.  Unless and until removed or changed by Supermajority Shareholder Vote, the independent public accountants for Holdco 1 shall be PricewaterhouseCoopers LLP (the “Accountants”) and Holdco 1, LATAM and TEP shall take, Holdco 1 shall cause the directors of TAM to take and LATAM and TEP shall cause their Director Representatives acting in their capacity as directors of TAM to take, all necessary action to ensure that the Accountants are at all times the independent public accountants of TAM and each of its Subsidiaries.

SECTION 2.03                  Books and Records.

(a)           Holdco 1 shall keep, and shall cause its Subsidiaries to keep, in all material respects, at their respective principal offices, full, complete and accurate books and records with respect to the business and affairs of Holdco 1 and its Subsidiaries.  The books and records shall be maintained in a manner that provides Shareholders with sufficient information so as to permit (i) the preparation of consolidated financial statements for TAM and its Subsidiaries and financial statements for Multiplus S.A. on a stand-alone basis, in each case in accordance with IFRS, (ii) the Shareholders to account for their interests in Holdco 1 and its Subsidiaries in their respective financial statements in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board (“IFRS”), and (iii) the preparation of all required tax returns of Holdco 1, TAM and its Subsidiaries and of the Shareholders.

(b)           Holdco 1 shall, as and when reasonably requested by any Shareholder, prepare and furnish (or cause to be prepared and furnished) to such Shareholder, at the expense of Holdco 1, such financial and other data concerning the business and affairs of Holdco 1 and its Subsidiaries as may be reasonably required by such Shareholder for tax, accounting, reporting, oversight, or other legitimate business purposes of such Shareholder, such information to be prepared on the basis and in the format that such Shareholder may reasonably request in order to meet the requirements of its accounting, tax and oversight and reporting systems or the requirements of Law.

(c)           Holdco 1 shall, and shall cause its Subsidiaries to, retain for not less than ten years and for such longer period as required by Law, all of their respective books and records (including the books and records of predecessor businesses, including those relating to periods prior to the Effective Time).

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SECTION 2.04                  Access to Information, Audit and Inspection.

(a)           Each Shareholder and its Representatives shall have (and Holdco 1 shall cause its Subsidiaries to provide such Shareholder and its Representatives with) full access at reasonable times and during normal business hours to all books and records for Holdco 1 and its Subsidiaries and their respective businesses (including those books and records pertaining to periods prior to the Effective Time), including the right to examine and audit any of such books and records and to make copies and extracts therefrom.  Each Shareholder shall bear all expenses incurred by it and its Representatives in making any such examination on its behalf.  Holdco 1 shall, and shall cause each of its Subsidiaries to, make arrangements for each Shareholder and its Representatives to have prompt access at reasonable times and during normal business hours to its officers, directors and employees to discuss the business and affairs of Holdco 1 and its Subsidiaries and the books and records pertaining thereto.  The provisions of this Section 2.04(a) shall survive any termination of this Agreement and shall continue to apply to Holdco 1 and its Subsidiaries and be enforceable by a Shareholder regardless of whether such Shareholder ceases to beneficially own any shares of Holdco 1 Voting Stock but only to the extent that such books and records and such access to officers, directors and other employees are reasonably requested by a Shareholder in connection with any pending Action involving such Shareholder or any of its Affiliates insofar as such matter relates to the business or affairs of Holdco 1 and its Subsidiaries (including any matters relating to the business and affairs of any predecessor businesses, including matters relating to periods prior to the Effective Time).

(b)           Holdco 1 shall provide each Shareholder with copies of each completed annual tax return required by Law to be filed by Holdco 1 or any of its Subsidiaries (each, a “Tax Return”) at least twenty business days prior to the due date (including any extensions of such due date) of the filing of such Tax Return, and each Shareholder may review any such Tax Return prior to its filing with the appropriate Governmental Entity.  Holdco 1 shall consult with the Shareholders and negotiate in good faith to resolve any issues arising as a result of the Shareholders’ review of any such Tax Return.  The Shareholders and Holdco 1 and its Subsidiaries shall use all reasonable good faith efforts to resolve any issue in dispute as promptly as practicable but in any event prior to the due date for the filing of any such Tax Return.  In the event that an issue resulting from the review by a Shareholder of any such Tax Return remains in dispute as of the due date for the filing of such Tax Return, such Tax Return shall be filed with the appropriate Governmental Entity in accordance with the recommendation of the Accountants.

SECTION 2.05                  Annual Budget and Business Plan.

The annual budget and business plan for the current Fiscal Year and the business plan for the next five Fiscal Years of Holdco 1 (collectively, the “Holdco 1 Plans”) at all times shall be identical to the annual budget and business plan and the five-year business plan for the next five fiscal years then in effect for TAM and its Subsidiaries.  The Holdco 1 Board shall cause Holdco 1 and its Subsidiaries to operate in accordance with, and the officers and employees of Holdco 1 and its Subsidiaries to implement, the Holdco 1 Plans and shall conduct, or cause to be conducted, the business of Holdco 1 and its Subsidiaries in accordance with any such Holdco 1 Plans.

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ARTICLE III

TRANSFERS AND CONVERSION OF STOCK

SECTION 3.01                  Restrictions on Certain Transfers.  No holder of any shares of Holdco 1 Voting Stock (other than LATAM) will, or will permit any of its Affiliates (including the ultimate beneficial owners of such holder) to, directly or indirectly, by operation of law or otherwise, sell, exchange, transfer, convey, assign, mortgage, pledge, encumber or otherwise dispose of any direct or indirect interest in or beneficial ownership of (each, a “Transfer”) all or any portion of the shares of Holdco 1 Voting Stock beneficially owned by it to any Person except in compliance with this Section 3.01.  Any Transfer made other than in compliance with the terms of this Section 3.01 shall be null and void and of no force or effect.  LATAM shall be entitled to specific performance (to the extent permitted by Law) of its rights under this Section 3.01, in addition to any other legal and equitable remedies to which it may be entitled under Law.  Without limitation of the foregoing, TEP shall not vote its shares of Holdco 1 Voting Stock, or take any other action, in support of any Transfer by Holdco 1 of any Equity Securities or any Convertible Securities issued by it or by any of TAM or its Subsidiaries without the prior written consent of LATAM.

(a)           Block Sales.  On and after the tenth anniversary of the Effective Time (the “Tenth Anniversary”) and prior to the first date on which LATAM would be permitted under applicable Law in Brazil and other applicable Law to fully convert all of the shares of Holdco 1 Non-Voting Stock beneficially owned by LATAM and its Affiliates into shares of Holdco 1 Voting Stock and such conversion would not have any Adverse Effect (the “Full Conversion Date”), TEP may sell or transfer all (but not less than all) of its shares of Holdco 1 Voting Stock to any Person in a single block sale (a “Block Sale”) if (but only if) such Block Sale complies with all of the requirements set forth in this Section 3.01(a).

(i)           A Block Sale must include all of the shares of LATAM Common Stock that TEP is contractually obligated to transfer along with its shares of Holdco 1 Voting Stock (collectively, “LATAM Shares”) in such Block Sale.

(ii)           Prior to a Block Sale, the Person to whom such shares are to be sold or transferred has been approved by a resolution duly adopted by the LATAM Board as a buyer of such shares of Holdco 1 Voting Stock; it being agreed that the LATAM Board shall grant such approval without unreasonable delay unless it has a bona fide business objection to such Person being the transferee of such shares or if a transfer of such shares to such Person would, in the reasonable determination of the LATAM Board, be inconsistent with applicable Law in Brazil.

(iii)         No Block Sale shall be permitted if it would have a material adverse effect on the ability of (x) LATAM or Holdco 1 to own, or to receive the full benefits of ownership of, TAM and its Subsidiaries or (y) TAM or its Subsidiaries to operate their airline businesses worldwide (each, an “Adverse Effect”).

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(b)           Forced Vote Sales.  On and after the third anniversary of the Effective Time, if during any twenty-four month period TEP is required to vote its shares of common stock, no par value (the “LATAM Common Stock”), of LATAM as directed by the LATAM Controlling Shareholders at two meetings (consecutive or not) of the shareholders of LATAM held at least twelve months apart, then after the second such shareholder meeting TEP shall have the right to sell or transfer all (but not less than all) of its shares of Holdco 1 Voting Stock together with its LATAM Shares (each, a “Forced Vote Sale”) if (i) TEP delivers a written notice to LATAM within 30 days after the date on which such second meeting was held that it intends to make a Forced Vote Sale (the “Second Meeting Date”), (ii) if such Forced Vote Sale is made prior to the Full Conversion Date it complies with the requirements of Section 3.01(a), but without giving effect to the phrase “On and after the Tenth Anniversary and” at the beginning of such section and (iii) such Forced Vote Sale is completed within eighteen months after the Second Meeting Date (such period, as it may be extended pursuant to this Section 3.01(b), the “Forced Vote Sale Period”); provided that if TEP has made a bona fide and reasonably diligent effort to complete a Forced Vote Sale within the Forced Vote Sale Period but has been unable to do so, then the Forced Vote Sale Period shall be extended for twelve months.  If a Forced Vote Sale is not completed within the Forced Vote Sale Period, then this Section 3.01(b) shall only apply with respect to instances that TEP is required to vote its LATAM Shares as directed by the LATAM Controlling Shareholders after such date.

(c)           Release Event Sales.  If a Release Event occurs and prior to such Release Event TEP has not sold or transferred any shares of Holdco 1 Voting Stock and/or any shares of LATAM Common Stock that were (i) beneficially owned by TEP immediately after the Effective Time and (ii) not exempted from the provisions of Article III of the Control Group Shareholders Agreement at the time of such sale or transfer (collectively, “LATAM Restricted Shares”), then at any time after such Release Event, TEP shall have the right to sell or transfer all (but not less than all) of its shares of Holdco 1 Voting Stock together with its LATAM Restricted Shares; provided, however, that if the sale or transfer occurs prior to the Full Conversion Date it must comply with the requirements of Section 3.01(a) but without giving effect to the phrase “On and after the Tenth Anniversary and,” at the beginning of such section.  A “Release Event” shall be deemed to have occurred only if and when each of the following events shall have occurred: (i) a capital increase (as defined under the Law of Chile) in LATAM is completed after the Effective Time, (ii) TEP does not fully exercise the preemptive rights granted to it under applicable Law in Chile with respect to such capital increase in respect of all of its LATAM Restricted Shares, (iii) after such capital increase is completed, the individual designated by TEP for election to the LATAM Board with the assistance of the LATAM Controlling Shareholders is not elected to such board.

(d)           LATAM Transfers.  LATAM shall not sell or transfer any shares of TAM Stock to any Person (other than an Affiliate of LATAM) at any time when TEP owns any shares of Holdco 1 Voting Stock; provided, however, that, notwithstanding the foregoing LATAM will have the right to effect such a sale or transfer if LATAM (or its assignee) acquires all the shares of Holdco 1 Voting Stock beneficially owned by TEP for an amount equal to TEP’s then current tax basis in such shares and any costs TEP is required to incur to effect such sale or transfer at the same time as such sale or transfer. TEP hereby irrevocably grants LATAM the assignable right to purchase all of the shares of Holdco 1 Voting Stock beneficially owned by TEP in connection with any sale pursuant to the proviso in the immediately preceding sentence.

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SECTION 3.02                  Ownership Control Events.  If at any time LATAM is permitted under the Law of Brazil and other applicable Law to beneficially own a greater percentage of the issued and outstanding shares of Holdco 1 Voting Stock than it currently beneficially owns, then LATAM shall have the right, exercisable in its sole discretion, in whole or in part, at any time or from time to time, to convert the shares of Holdco 1 Non-Voting Stock beneficially owned by it into shares of Holdco 1 Voting Stock on a 1:1 basis or at another conversion ratio agreed to by LATAM and TEP in writing prior to such conversion, in each case to the maximum extent allowable under applicable Law (the “Conversion Option”) by providing written notice of such election to TEP and Holdco 1 (each, an “Ownership Notice”); provided, however, that notwithstanding the foregoing LATAM may exercise the Conversion Option only if and to the extent that the consummation of such exercise would not have any Adverse Effect.  If at any time LATAM is permitted under applicable Law to have more than two Director Representatives on the Holdco 1 Board, then LATAM shall have the right, exercisable in its sole discretion, in whole or in part, at any time or from time to time, to appoint additional Director Representatives to the Holdco 1 Board in accordance with Section 1.03 by providing written notice of such election to TEP and Holdco 1 (each, a “Director Election Notice”); provided, however, that notwithstanding the foregoing LATAM shall not have the right to deliver any Director Election Notice that would result in it appointing half or a majority of the members of any Holdco 1 Board unless at such time LATAM is permitted under applicable Law in Brazil and other applicable Law to own a majority of the outstanding shares of Holdco 1 Voting Stock.  Promptly following delivery of any Ownership Notice or Director Election Notice to TEP and Holdco 1, each of Holdco 1 and TEP shall cooperate with LATAM and shall take or cause to be taken all actions (including by calling a special meeting of shareholders of Holdco 1 to remove all the directors of the Holdco 1 and to relect such directors and elect the additional individuals designated by LATAM to the Holdco 1 Board), and do or cause to be done all things, reasonably necessary, proper or advisable on its part under the Organizational Documents of Holdco 1 and applicable Law to permit LATAM to increase its representation on the Holdco 1 Board and/or to convert such shares of Holdco 1 Non-Voting Stock into shares of Holdco 1 Voting Stock pursuant to this Section 3.02.  Without limitation of the foregoing, TEP agrees to cause one or more of its Director Representatives to resign from each Holdco 1 Board promptly following request therefor from LATAM in order to effectuate the purpose of this Section 3.02.  LATAM and Holdco 1 shall take all necessary action to ensure that at the same time that any individuals are added or removed from the Holdco 1 Board as a result of this Section 3.02 the same individuals are added or removed from the TAM Board.  On and after the Tenth Anniversary and after LATAM has fully converted all of the shares of Holdco 1 Non-Voting Stock beneficially owned by it into shares of Holdco 1 Voting Stock as permitted by applicable Law in Brazil and other applicable Law (the “Full Ownership Conversion Date”), then LATAM shall have the right to purchase all of the shares of Holdco 1 Voting Stock held by all holders of such shares for an amount equal to TEP’s then current tax basis in such shares and any costs TEP is required to incur to effect such sale (the “Call Option”).  If LATAM does not exercise the Call Option within 30 days following the occurrence of the Full Ownership Conversion Date or if, after the Tenth Anniversary, LATAM has the right under applicable Law in Brazil and other applicable Law to fully convert all the shares of Holdco 1 Non-Voting Stock beneficially owned by it into shares of Holdco 1 Voting Stock, such conversion would not have an Adverse Effect and LATAM has not fully exercised such right within 30 days after the first date on which LATAM has such right, then each of the holders of the shares of Holdco 1 Voting Stock shall have the right to put its shares to LATAM for an amount equal to its then current tax basis in such shares and any costs that it is required to incur to effect such sale.

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ARTICLE IV

GENERAL PROVISIONS

SECTION 4.01                  Term of Agreement.  Except as otherwise provided under applicable Law, this Agreement shall continue in effect as to each of the Parties until (i) it is terminated as to any Party by the written consent of all the Parties or (ii) with respect to any Shareholder, the first day on which such Shareholder no longer beneficially owns any shares of Holdco 1 Voting Stock, whichever is sooner to occur.  This Agreement shall not terminate solely due to any dissolution, liquidation or winding up of Holdco 1.  The termination of this Agreement as to any Shareholder shall not affect any of the rights and obligations of any of the other Parties with respect to each other.  In the event that this Agreement terminates as to any Shareholder, thereafter such Shareholder shall have no further liability to the other Parties or to any of their respective shareholders, directors, officers, employees or other Affiliates and such other Parties shall have no further liability to such Shareholder, in each case solely in respect of this Agreement; provided, however, that the foregoing shall not apply to any provisions hereof that expressly survive the termination of this Agreement (including Sections 2.04 and 4.02); and provided, further, that nothing herein shall relieve any Party of any liability for any breach of this Agreement that occurred prior to such termination.

SECTION 4.02                  Fees and Expenses.  All fees and expenses incurred in connection with this Agreement shall be paid by the Party incurring such fees or expenses.  The provisions of this Section 4.02 shall survive any termination of this Agreement.

SECTION 4.03                  Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF; PROVIDED, HOWEVER,THAT NOTWITHSTANDING THE FOREGOING THE AUTHORIZATION AND EXECUTION OF THIS AGREEMENT BY EACH PARTY SHALL BE GOVERNED BY THE LAW OF ITS JURISDICTION OF INCORPORATION.

SECTION 4.04                  Definitions.  For the purposes of this Agreement, the following terms shall have the meanings assigned below:

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(a)           “Actions” means any actions, suits, claims, allegations, hearings, proceedings, arbitrations, mediations, audits, inquiries or investigations (whether civil, criminal, administrative or otherwise).

(b)           “Affiliate” shall have the meaning assigned to such term in Rule 12b-2 under the U.S. Exchange Act; provided, however, that (i) no Shareholder shall be deemed to be an Affiliate of any other Shareholder or any of its Affiliates solely by reason of this Agreement and (ii) the restrictions on Transfers in Article III shall apply to the holders of shares of Holdco 1 Voting Stock and their Affiliates, including the ultimate beneficial owners of such holders.

(c)           “beneficial ownership” (and its correlative phrases) shall have the meanings assigned to such phrases in Rule 13d-3 promulgated under the U.S. Exchange Act (without taking into account any rights of such Person or any of its Affiliates under Section 1.05 hereof) if the references to “within 60 days” in Rule 13d-3(d)(1)(i) were omitted.  For all purposes of this Agreement, a Shareholder shall be deemed to beneficially own all shares of LATAM Common Stock and Holdco 1 Voting Stock beneficially owned by it and its Affiliates, including the beneficial owners of such Shareholder.

(d)           “business day” shall mean any day that is not a Saturday, Sunday or a day on which banking institutions are required or authorized by Law or executive order to be closed in Santiago, Chile or São Paulo, Brazil.

(e)           “contract” shall mean any loan, credit agreement, bond, debenture, note, mortgage, indenture, lease, supply agreement, license agreement, development agreement or other contract, agreement, obligation, commitment or instrument or other legally binding arrangement or understanding, whether written or oral.

(f)           “Control”(and its correlative terms) shall have the meanings assigned to such terms in Rule 12b-2 promulgated under the U.S. Exchange Act.

(g)           “Control Group Shareholders Agreement ” means the shareholders agreement, dated as of the date hereof, among the LATAM Controlling Shareholders and TEP Chile.

(h)           “Convertible Securities” means, with respect to any Person, any securities, options, warrants or other rights of, or granted by, such Person or any of its Affiliates that are, directly or indirectly, convertible into, or exercisable or exchangeable for, any Equity Securities of such Person or any of its Affiliates.

(i)           “Equity Securities” means, with respect to any Person, any capital stock of, or other equity interests in such Person.

(j)            “Governmental Entity” means any governmental, quasi-governmental or regulatory authority, body, department, commission, board, bureau, agency, division, court, organized securities exchange or other legislative, executive or judicial governmental entity or instrumentality of any country, nation, republic, federation or similar entity or any state, county, parish or municipality, jurisdiction or other political subdivision thereof.

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(k)           “Holdco 1 Non-Voting Stock” shall mean the non-voting stock, no par value, of Holdco 1, which, pursuant to the Holdco 1 By-Laws, shall have the exclusive right to receive all dividends, distributions or other amounts payable by Holdco 1 in respect of any shares of its capital stock (including a preference to be paid in connection with any liquidation, capital reduction, winding up, recapitalization or reorganization) other than the Dividend Rights and which shall have no right to vote on, approve or consent to any matter that is subject to any vote of, approval by or consent from the shareholders of Holdco 1 under the Law of Chile or otherwise other than the rights to vote on, approve or consent to matters requiring the approval of the holders of shares of Holdco 1 Non-Voting Stock under the Law of Chile or otherwise (collectively, the “Limited Voting Rights”).

(l)           “Holdco 1 Voting Stock” shall mean the voting stock, no par value, of Holdco 1, which, pursuant to the Holdco 1 By-Laws, shall have the exclusive right to vote on, approve or consent to all matters that are subject to any vote of, approval by or consent from the shareholders of Holdco 1 under the Law of Chile or otherwise (other than the Limited Voting Rights) and which shall have no economic rights other than the right to receive a nominal dividend (collectively, “Dividend Rights”).

(m)           “Law” means any statute, common law, ordinance, rule, regulation, agency requirement or Order of, or issued, promulgated or entered into by or with, any Governmental Entity.

(n)           “Order” means any order, decision, writ, injunction, decree, judgment, legal or arbitration award, stipulation, license, permit or agreement issued, promulgated or entered into by or with (or settlement or consent agreement subject to) any Governmental Entity.

(o)           “Organizational Documents” shall mean (i) with respect to Holdco 1, this Agreement, the TAM Shareholders Agreement and the Holdco 1 By-Laws and (ii) with respect to TAM and its Subsidiaries, this Agreement and the TAM Shareholders Agreement and the by-laws or other comparable governing documents of such Persons.

(p)           “Person” means any natural person, firm, corporation, partnership, company, limited liability company, joint venture, association, trust, unincorporated organization, Governmental Entity or other entity.

(q)           “Related Party”  means (a) any Person that, individually or jointly with other(s), directly or indirectly (i) controls Holdco 1 or any of its Subsidiaries; (ii) is controlled by Holdco 1 or any of its Subsidiaries; or (iii) is controlled by any Person that controls, individually or jointly with other(s), Holdco 1 or any of its Subsidiaries; (b) any successor of the controlling shareholder of Holdco 1 or any of its Subsidiaries, in the event of dissolution, capital decrease by the delivery of shares to shareholders, spin-off and any other corporate transaction; and (c) any board member, officer or manager of the companies mentioned above.

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(r)            “Representatives,” with respect to any Person, shall mean the directors, officers, employees, auditors, accountants, legal counsel, financial advisors and other agents or representatives of or to such Person and its Subsidiaries.

(s)           “Subsidiary” means, with respect to any Person, (i) a corporation in which such Person, together with its Subsidiaries, beneficially owns Voting Securities of such corporation which entitle them, collectively, to cast more than 50% of all the votes entitled to be cast by the holders of all Voting Securities of such corporation then outstanding in a general election of directors of such corporation or (ii) any Person that is not a corporation in which such Person, and/or one or more other Subsidiaries of such Person, directly or indirectly, has a majority equity or voting interest or the power to direct the policies, management and affairs thereof.

(t)            “U.S. Exchange Act” shall mean the U.S. Securities Exchange Act of 1934.

(u)           “Voting Securities” means, with respect to any Person, any securities or other equity or ownership interests in such Person which are entitled to vote generally in the election of directors of such Person (or, if such Person is not a corporation, the individuals who perform a similar function for such Person).

SECTION 4.05                  Severability.  The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions of this Agreement.  If any provision of this Agreement, or the application of such provision to any Person or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application of such provision, in any other jurisdiction.

SECTION 4.06                  Amendment; Waiver.  This Agreement may be amended and any performance, term or condition waived in whole or in part only by a writing signed by all Parties affected by the amendment (in the case of an amendment) or by the Party against whom the waiver is to be effective (in the case of a waiver).  No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any singular partial exercise of such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  Waiver by any Party of any breach or failure to comply with any provision of this Agreement by another Party shall not be construed as, nor shall constitute, a continuing waiver of such provisions, or a waiver of any other breach of or failure to comply with any other provisions of this Agreement.

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SECTION 4.07                  Assignment.  Subject to the provisions of Section 3.01 and the Control Group Shareholders Agreement, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, in whole or in part, by operation of Law or otherwise by any of the Parties without the prior written consent of the other Parties, and any purported assignment without such consent shall be null and void and of no force or effect.  Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and permitted assigns.

SECTION 4.08                  No Third-Party Beneficiaries.  Except as otherwise expressly stated herein, the Parties hereby agree that the agreements and covenants set forth herein are solely for the benefit of the other Parties in accordance with, and subject to the terms of, this Agreement and that this Agreement is not intended to, and does not, confer upon any Person other than the Parties any rights or remedies hereunder, including the right to rely upon the representations and warranties set forth herein.

SECTION 4.09                  After-Acquired Holdco 1 Voting Stock.  All of the provisions of this Agreement shall apply to all shares of Holdco 1 Voting Stock now owned by any Shareholder and to all shares of Holdco 1 Voting Stock which may be issued or transferred hereafter to any Shareholder in consequence of any additional issuance, purchase, exchange, or reclassification of shares, corporate reorganization, or any other form of recapitalization, or consolidation, merger, amalgamation or share split, or share dividend, or which are acquired by any Shareholder in any other manner.

SECTION 4.10                  Notices.  All notices, requests, claims, demands, instructions and other communications or documents given hereunder shall be in writing and shall be delivered personally or sent by registered or certified mail (postage prepaid), facsimile or overnight courier to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice):

If to LATAM, to:

Claro y Cia.

Apoquindo 3721, piso 13,

Santiago, Chile

Attention: José María Eyzaguirre B.

Fax: +56 2 367 3003

jmeyzaguirre@claro.cl

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with copies (which shall not constitute notice) to:

Sullivan & Cromwell LLP

125 Broad Street

New York, NY 10004

United States of America

Attention: Sergio Galvis and Duncan McCurrach

Fax: +1 212 558 3588

galviss@sullcrom.com

mccurrachd@sullcrom.com

If to Holdco 1 or TEP to:

Turci Advogados

Rua Dr. Renato Paes de Barros, 778

-1◦ andar – cj.12

04530-0001

São Paulo – SP

Brasil

Attention: Flavia Turci

Fax: +55 11 2177 2197

turci@turci.com

with a copy (which shall not constitute notice) to:

Clifford Chance US LLP

31 West 52nd Street

New York, NY 10019

Attention: Sarah Jones and Anand Saha

Fax: +1 212 878 8375

Sarah.Jones@CliffordChance.com

Anand.Saha@CliffordChance.com

Any notice, request, claim, instruction or other communication or document given as provided above shall be deemed given to the receiving party (i) if delivered personally, upon actual receipt, (ii) if sent by registered or certified mail, three business days after deposit in the mail, (iii) if sent by facsimile, upon confirmation of successful transmission if within one business day after such facsimile has been sent such notice, request, claim, instruction or other communication or document is also given by one of the other methods described above and (iv) if sent by overnight courier, on the next business day after deposit with the overnight courier.

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SECTION 4.11                  Specific Enforcement; Consent to Jurisdiction.  The Parties agree that irreparable damage would occur and that the Parties would not have any adequate remedy at Law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the Parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, this being in addition to any other remedy to which they are entitled at Law or in equity, without the necessity of proving the inadequacy of monetary damages or of posting bond or other undertaking, as a remedy and to obtain injunctive relief against any breach or threatened breach hereof.  In the event that any Action is brought in equity to enforce the provisions of this Agreement, no Party shall allege, and each Party waives the defense or counterclaim that there is an adequate remedy at Law.  Each of the Parties hereby irrevocably consents and submits itself to the personal jurisdiction of the courts of the State of New York and the federal courts of the United States of America located in the Borough of Manhattan, The City of New York (collectively, the “Agreed Courts”) solely in respect of the interpretation and enforcement of the provisions of this Agreement, and the documents referred to herein and the transactions contemplated by this Agreement (collectively, the “Agreed Issues”), waives, and agrees not to assert, as a defense in any Action, suit or proceeding in an Agreed Court with respect to the Agreed Issues that such Party is not subject thereto or that such Action, suit or proceeding may not be brought or is not maintainable in such Agreed Court or that the venue thereof may not be appropriate or that this Agreement or any such document may not be enforced in or by such Agreed Court, and the Parties irrevocably agree that all claims with respect to any Action, suit or proceeding with respect to the Agreed Issues shall be heard and determined only in an Agreed Court.  The Parties hereby consent to and grant to each Agreed Court jurisdiction over the Person of such parties and, to the extent permitted by Law, over the subject matter of any dispute with respect to the Agreed Issues and agree that mailing of process or other papers in connection with any such Action or proceeding in the manner provided in Section 4.10 or in such other manner as may be permitted by Law shall be valid and sufficient service thereof.

SECTION 4.12                  WAIVER OF JURY TRIAL.  EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.  EACH PARTY HERETO (I) CERTIFIES THAT IT HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER AND MADE IT VOLUNTARILY AND THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY ACTION, SUIT OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 4.12.

SECTION 4.13                  Counterparts.  This Agreement may be executed in one or more counterparts (including by facsimile), each of which shall be considered an original instrument and all of which shall together constitute the same agreement.  This Agreement shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Parties.

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SECTION 4.14                  Interpretation.  When a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference shall be to an Article of, a Section of, or an Exhibit or Schedule to this Agreement unless otherwise indicated.  The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”.  The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.  The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms.  Any contract, instrument or Law defined or referred to herein or in any contract or instrument that is referred to herein means such contract, instrument or Law as from time to time amended, modified or supplemented, including (in the case of contracts or instruments) by waiver or consent and (in the case of Laws) by succession of comparable successor Law and references to all attachments thereto and instruments incorporated therein.  References to a Person are also to its permitted successors and assigns.  Except as otherwise expressly provided herein, all remedies provided herein shall be in addition to any other remedies that the Parties may otherwise have under applicable Law.  Any reference in this Agreement to a “day” or a number of “days” (without the explicit qualification of “business”) shall be interpreted as a reference to a calendar day or number of calendar days.  This Agreement is the product of negotiation by the Parties having the assistance of counsel and other advisers, and the Parties and their counsel and other advisers having participated jointly in negotiating and drafting this Agreement.  If an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement.

SECTION 4.15                  Filing Requirement.  A copy of this Agreement shall be filed at the headquarters of LATAM and Holdco 1 for all purposes of applicable Law.

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed by their respective officers thereunto duly authorized as of the date first above written.

LAN AIRLINES S.A.
By:
	Name:
	Title:
[HOLDCO 1]
By:
	Name:
	Title:
TEP CHILE S.A.
By:
	Name:
	Title:

EXHIBIT A

LATAM Group Ownership Structure and Organizational Structure

EXHIBIT B

By-laws of Holdco 1

EX-4.14

Exhibit 4.14

SHAREHOLDERS AGREEMENT

Among

LAN AIRLINES S.A.,

TAM S.A.,

TEP CHILE S.A.

and

[HOLDCO 1]

Dated as of  ______, 2011

TABLE OF CONTENTS

		Page
ARTICLE I
GOVERNANCE OF TAM
SECTION 1.01	Scope of the Agreement	1
SECTION 1.02	Role and Composition of the TAM Board	2
SECTION 1.03	Removal and Vacancies	2
SECTION 1.04	Enabling Provisions	3
SECTION 1.05	TAM Chairman	3
SECTION 1.06	Meetings of the TAM Board	3
SECTION 1.07	Quorum	4
SECTION 1.08	TAM Board Voting Requirements	4
SECTION 1.09	Board Supermajority Matters	4
SECTION 1.10	Shareholder Required Vote	6
SECTION 1.11	Shareholder Supermajority Matters	6
SECTION 1.12	TAM Subsidiaries	6
SECTION 1.13	Required Actions	7
ARTICLE II
TAM GROUP DIRETORIA
SECTION 2.01	Role of Management	8
SECTION 2.02	TAM Chief Executive Officer	8
SECTION 2.03	TAM Chief Financial Officer	9
SECTION 2.04	Other Members of the TAM Diretoria	9
SECTION 2.05	TAM Linhas Aereas S.A.	9
ARTICLE III
ACCOUNTING, BOOKS AND RECORDS
SECTION 3.01	Fiscal Year	9
SECTION 3.02	Accountants	10
SECTION 3.03	Financial Statements	10
SECTION 3.04	Books and Records	10
SECTION 3.05	Access to Information, Audit and Inspection	11
SECTION 3.06	Annual Budget and Business Plan	12
ARTICLE IV
GENERAL PROVISIONS
SECTION 4.01	Term of Agreement	13

- i -

SECTION 4.02	Fees and Expenses	13
SECTION 4.03	Governing Law	13
SECTION 4.04	Definitions	13
SECTION 4.05	Severability	15
SECTION 4.06	Amendment; Waiver	16
SECTION 4.07	Assignment	16
SECTION 4.08	No Third-Party Beneficiaries	16
SECTION 4.09	Notices	16
SECTION 4.10	Specific Enforcement; Consent to Jurisdiction	18
SECTION 4.11	WAIVER OF JURY TRIAL	18
SECTION 4.12	Counterparts	18
SECTION 4.13	Interpretation	19
SECTION 4.14	Filing Requirement.	19
Schedule 4.06	Annual Budget and Business Plan Requirements

INDEX OF DEFINED TERMS

	Page
Accountants	10
Actions	13
Affiliate	13
Agreed Courts	18
Agreed Issues	18
Agreement	1
Airline Subsidiaries	7
Annual Budget and Business Plan	12
Approved Plans	4
beneficial ownership	14
board member	14
Board Representative Election Notice	2
Board Representatives	2
Board Supermajority Matter	4
business day	14
contract	14
Control	14
Convertible Securities	14
Departure	2
Effective Time	2
Equity Securities	14
Fiscal Year	10
Foreign Ownership Control Laws	14
Governmental Entity	14
Holdco 1	1
IFRS	10
LATAM	1
LATAM Group	14
Law	14
Majority Board Vote	4
Multi-Year Business Plan	12
Order	15
Organizational Documents	15
Parties	1
Person	15
Related Party	15
Representatives	15
Shareholder Supermajority Matter	6
Shareholders	1
Subsidiary	15
Supermajority Board Vote	4
Supermajority Shareholder Vote	6
TAM	1
TAM Board	2
TAM CCO	9
TAM CEO	8
TAM CFO	9
TAM Chairman	3
TAM Company	4
TAM COO	9
TAM Diretoria	8
TAM Group	8
TAM Ordinary Stock	1
TAM Preferred Stock	1
TAM Stock	1
Tax Return	11
TEP	1
U.S. Exchange Act	15
Voting Securities	15

SHAREHOLDERS AGREEMENT, dated as of ________, 2011 (this “Agreement”), among LAN AIRLINES S.A., a company organized under the Law of Chile (“LATAM”), [HOLDCO1], a company organized under the Law of Chile (“Holdco 1” and, together with LATAM, the “Shareholders”), TEP Chile S.A., a company organized under the Law of Chile (“TEP”),and TAM S.A., a company organized under the Law of Brazil (“TAM” and, together with the Shareholders and TEP, the “Parties”).

W I T N E S S E T H

WHEREAS, as of the Effective Time (as defined below),  Holdco 1 will own 100% of the shares of ordinary stock, no par value (the “TAM Ordinary Stock”), of TAM and LATAM will own 100% of the shares of the non-voting preferred stock, no par value (the “TAM Preferred Stock” and, together with the TAM Ordinary Stock, the “TAM Stock”), of TAM, which collectively will constitute all of the issued and outstanding shares of capital stock of TAM;

WHEREAS, as of the Effective Time, TEP and LATAM collectively will own 100% of the outstanding voting shares of Holdco 1;

WHEREAS, the Parties desire to enter into this Agreement to set forth the terms and conditions upon which they have agreed to hold their shares of TAM Stock, including with respect to the voting thereof, as well as their agreements with respect to governance, management and operation of TAM and its Subsidiaries and certain other matters; and

WHEREAS, each of LATAM and Holdco 1 has determined and declared that the execution and delivery of this Agreement is in its best interests, and the execution, delivery and performance of this Agreement by it have been duly authorized by its board of directors and all other necessary corporate action on the part of it.

NOW, THEREFORE, in consideration of the covenants and agreements contained herein and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Parties agree as follows:

ARTICLE I

GOVERNANCE OF TAM

SECTION 1.01                     Scope of the Agreement; Effective Time.  The Parties desire to set forth in this Agreement certain terms and conditions upon which the shares of TAM Stock will be held, including with respect to the voting thereof, as well as their agreements with respect to governance, management and operation of TAM and its Subsidiaries and certain other matters.  In the event of any inconsistency or conflict between the provisions of this Agreement and the other Organizational Documents of TAM or any of its Subsidiaries, this Agreement shall control and the Parties shall use their commercially reasonable efforts to amend any such Organizational Documents to conform to the provisions of this Agreement and to exercise their rights under such Organizational Documents to give effect to such provisions.  This Agreement shall become effective only if, and at that time at which, Holdco 1 becomes a holder of at least 80% of the outstanding shares of TAM Ordinary Stock (the “Effective Time”).  All actions required to be taken or performed under this Agreement shall be taken or performed in accordance with applicable Law.

SECTION 1.02                     Role and Composition of the TAM Board.  The business and affairs of TAM shall be managed under the direction of the board of directors of TAM (the “TAM Board”) in accordance with the applicable provisions of the Organizational Documents of TAM.  The TAM Board shall be comprised of six board members to be elected by Holdco 1. Holdco 1 agrees to elect two individuals selected by LATAM and four individuals selected by TEP as the six board members of TAM (each person so selected by LATAM or TEP is referred to herein as one of their “Board Representatives”).  The term of office for the board members of TAM shall be two years.  If at any time LATAM is permitted under applicable Law to select more than two Board Representatives on the TAM Board, then LATAM shall have the right, exercisable in its sole discretion, in whole or in part, at any time or from time to time, to cause Holdco 1 to elect additional Board Representatives to the TAM Board by providing written notice of such election to Holdco 1 (each, a “Board Representative Election Notice”); provided, however, that notwithstanding the foregoing LATAM shall not have the right to deliver any Board Representative Election Notice that would result in it selecting half or a majority of the members of the TAM Board unless at such time LATAM is permitted under applicable Law in Brazil and other applicable Law to own a majority of the outstanding voting shares of Holdco 1.  Promptly following delivery of any Board Representative Election Notice to Holdco 1, Holdco 1 shall cooperate with LATAM and shall take or cause to be taken all actions (including by calling a special meeting of shareholders of TAM to elect the additional individuals selected by LATAM for election to the TAM Board), and do or cause to be done all things reasonably necessary, proper or advisable on its part under the other Organizational Documents of TAM and applicable Law to permit LATAM to increase its representation on the TAM Board pursuant to this Section 1.02.  Without limitation of the foregoing, Holdco 1 agrees to cause one or more of TEP’s Board Representatives to resign from the TAM Board promptly following request therefor from LATAM in order to effectuate the purpose of this Section 1.02.

SECTION 1.03                     Removal and Vacancies.  In the event of any vacancy on the TAM Board resulting from the resignation, incapacity, retirement, death or removal (each, a “Departure”) of any Board Representative of LATAM or TEP, such party shall have the right to select another individual to replace such Board Representative on the TAM Board.  In such event, Holdco 1 shall cause a special meeting of the shareholders of TAM to be held to elect such replacement to the TAM Board and at such meeting shall elect such replacement to the TAM Board to serve until the next annual meeting of the shareholders of TAM.  If at any time any Board Representative of LATAM or TEP ceases to be a board member of Holdco 1, Holdco 1 shall promptly cause him or her to resign or to be removed from the TAM Board and Holdco 1 will replace such Board Representative on the TAM Board pursuant to the foregoing procedures.

– 2 –

SECTION 1.04                     Enabling Provisions.

(a)           Holdco 1 agrees that it shall vote, or cause to be voted or execute written consents for, as the case may be, all shares of TAM Ordinary Stock beneficially owned by it, and shall take all other action reasonably necessary (including by causing TAM to call a special meeting of shareholders or the TAM Chairman to call a special meeting of the TAM Board, as applicable) so as to give effect to the agreements with respect to representation on the TAM Board contained in this Article I and to ensure that the by-laws of TAM (i) facilitate, enable and do not at any time conflict with any provision of this Agreement and (ii) permit each of LATAM and TEP to receive the full benefits to which it is entitled under this Agreement.  Holdco 1 further agrees that it shall not take any action directly as a shareholder of TAM, and each of LATAM and TEP agree it shall not take any action indirectly through any of its Board Representatives, or otherwise that would contravene or frustrate the implementation of these agreements. Each of LATAM and TEP shall cause all of its Board Representatives, and Holdco 1 shall cause each board member of TAM, to act at all times in conformity with, and to take such action as may reasonably be required of and available to them to ensure the fulfillment of, the terms of this Agreement and the by-laws of TAM.  TAM agrees not to take any action that would conflict with or subvert the operation or enforcement of any provision of this Agreement or that would impede any party’s ability to receive the full benefits to which such party is entitled under this Agreement.

(b)           Holdco 1 shall cause any and all shares of TAM Ordinary Stock beneficially owned by it and entitled to vote at any meeting of shareholders of TAM to be present in person or represented by proxy at all annual and special meetings of shareholders of TAM to the extent necessary so that all shares of TAM Ordinary Stock beneficially owned by it shall be counted as present for the purpose of determining the presence of a quorum at such meeting.  Each party agrees to execute from time to time in the future any document or documents required by Law to keep the agreements contained in this Section 1.04 in full force and effect at all times throughout the term of this Agreement.

SECTION 1.05                     TAM Chairman.  For so long as TEP is entitled to select at least one individual to be elected as a board member of TAM, TEP shall have the right to designate from time to time one of its Board Representatives to serve as the chairman of the TAM Board (the “TAM Chairman”).  After any such designation, Holdco 1 shall cause the TAM Board to appoint such Board Representative as the TAM Chairman in accordance with the Organizational Documents of TAM.  From and after the Effective Time until the second anniversary of the Effective Time, the TAM Chairman shall be Maria Cláudia Oliveira Amaro.  In no event shall the TAM Chairman have a casting vote with respect to any matter before the TAM Board.

SECTION 1.06                     Meetings of the TAM Board.  Regular meetings of the TAM Board shall be held on a monthly basis.  Special meetings of the TAM Board may be called by the TAM Chairman on not less than 48 hours’ notice to each board member of TAM, and such meetings shall be called by the TAM Chairman with like notice and like manner promptly after receipt of a written request for a special meeting of the TAM Board by any one board member of  TAM; provided, however, that notwithstanding the foregoing a special meeting of the TAM Board may be so called on any shorter notice permitted by applicable Law if necessary or desirable in the particular circumstances.

– 3 –

SECTION 1.07                     Quorum.  The quorum for any meeting of the TAM Board to be validly held shall be five board members of TAM.

SECTION 1.08                     TAM Board Voting Requirements.  Each board member of TAM shall have one vote on all matters before the TAM Board.  Any action by the TAM Board concerning a Board Supermajority Matter as well as any other action required by applicable Law or this Agreement to be approved by board members of TAM constituting more than a simple majority of the board members of TAM must be approved by the affirmative vote of five board members of TAM at a duly called meeting of the TAM Board at which a quorum is present and acting throughout (each, a “Supermajority Board Vote”).  All actions by the TAM Board other than with respect to Board Supermajority Matters must be approved by the affirmative vote of a simple majority of the board members of TAM at a duly called meeting of the TAM Board at which a quorum is present and acting throughout (each, a “Majority Board Vote”).

SECTION 1.09                     Board Supermajority Matters.  Notwithstanding any provision of this Agreement or the other Organizational Documents of TAM or any of its Subsidiaries to the contrary, neither TAM nor any of its Subsidiaries shall, and TAM shall not permit any of its Subsidiaries to, engage in or take, directly or indirectly, any of the following actions (each, a “Board Supermajority Matter”), unless approved by a Supermajority Board Vote:

(i)             to approve the Annual Budget and Business Plan and the Multi-Year Business Plan as well as any amendment to any of the foregoing (collectively, to the extent so approved, the “Approved Plans”);

(ii)            take any action or agree to take any action that, individually or in the aggregate,  causes or is reasonably likely to cause any capital, operating or other expense of TAM or any of its Subsidiaries (TAM and each such Subsidiary, a “TAM Company”) to be greater than (A) with respect to any action that would affect the profit and loss statement, the lesser of 1% of revenue or 10% of profit as set forth in the Approved Plans then in effect or (B) with respect to any action that affects the cash flow statement, the lesser of 2% of assets or 10% of cash and cash equivalents (as defined by IFRS) as set forth in the Approved Plans then in effect;

(iii)           to create (including by the acquisition of shares), dispose of or admit new shareholders to any Subsidiary of any TAM Company, except to the extent expressly contemplated in the Approved Plans then in effect;

(iv)           to approve the acquisition, disposal, modification or encumbrance by any TAM Company of (a) any Equity Securities or Convertible Securities of any TAM Company or any other companies, consortia, joint ventures or group of companies, or (b) any other asset with a value greater than US$15,000,000, in each case except to the extent expressly contemplated in the Approved Plans then in effect;

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(v)            to approve investments in any assets not related to the corporate purpose of any TAM Company, except to the extent expressly contemplated in the Approved Plans then in effect;

(vi)           to execute any kind of agreement or to enter into any kind of transaction in an amount greater than US$15,000,000, except to the extent expressly contemplated in the Approved Plans then in effect;

(vii)          to execute any kind of agreement or to enter into any kind of transaction, agreement or arrangement related to revenue or profit sharing agreements and any other agreement for the implementation of joint ventures or business collaborations, alliance memberships, codesharing agreements or other arrangements of such nature whatsoever, except to the extent expressly contemplated in the Approved Plans then in effect;

(viii)         to terminate, modify or waive any rights or claims of any TAM Company under contracts or other arrangements in any amount greater than US$15,000,000, except to the extent expressly contemplated in the Approved Plans then in effect;

(ix)           to commence, participate in, compromise or settle any material action with respect to any litigation, judicial, administrative or arbitration proceeding relating to any TAM Company, in an amount greater than US$15,000,000, except to the extent expressly contemplated in the Approved Plans then in effect;

(x)            to approve the execution, amendment, termination or ratification of acts or agreements with Related Parties, except to the extent expressly contemplated in the Approved Plans then in effect;

(xi)           to approve the financial statements of any TAM Company or any amendments thereto or any dividend, accounting and tax policy or principles of any TAM Company, as well as the appointment and removal of the Accountants;

(xii)          to approve the grant of any kind of security interest or guarantees to secure obligations of third parties (including Related Parties);

(xiii)         to appoint any executive other than the TAM Diretoria or to re-elect the then current TAM CEO or TAM CFO; and

(xiv)        approve any vote to be cast by any TAM Company in the shareholders meetings, quotaholder meetings and board meetings of its Subsidiaries, including approval of any of the matters set forth in Section 1.11 involving any Subsidiary of TAM (being any reference to TAM thereunder applicable to the respective TAM Company).

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SECTION 1.10                   Shareholder Required Vote.  Any action by the shareholders of TAM concerning a Shareholder Supermajority Matter as well as any other action required by applicable Law or this Agreement to be approved by more than a simple majority of the holders of the then issued and outstanding shares of TAM Ordinary Stock or TAM Stock must be approved by the affirmative vote of the holders of shares representing at least 85% of the total number of shares of TAM Ordinary Stock or TAM Stock, as the case may be, then issued and outstanding at a duly called meeting of the shareholders of TAM at which a quorum is present and acting (each, a “Supermajority Shareholder Vote”).  All actions other than Shareholder Supermajority Matters must be approved by the affirmative vote of the holders of shares constituting a simple majority of the issued and outstanding shares of TAM Ordinary Stock at a duly called meeting of the shareholders of TAM at which a quorum is present and acting throughout.

SECTION 1.11                   Shareholder Supermajority Matters.  Notwithstanding any provision of this Agreement or the Organizational Documents of TAM or any of its Subsidiaries to the contrary, neither TAM nor any of its Subsidiaries shall, and TAM shall not permit any of its Subsidiaries to, engage in or take, directly or indirectly, any of the following actions unless approved by a Supermajority Shareholder Vote (each, a “Shareholder Supermajority Matter”):

(i)           to approve any amendments to the by-laws of any TAM Company in respect of the following matters: (A) the corporate purpose, (B) the corporate capital, (C) the rights inherent to each class of shares and to the shareholders of any TAM Company, (D) the attributions of the shareholders regular meetings or any limitation to attributions of the board of directors of any TAM Company, (E) increase or decrease in the number of board members and officers of any TAM Company, (F) the term of any TAM Company, (G) the change of the corporate headquarters of any TAM Company, (H) preemptive rights, (I) the composition, attributions and liabilities of the management of any TAM Company, and (J) dividends and other distributions;

(ii)          to approve the dissolution, liquidation and winding up of TAM;

(iii)         to approve the transformation, merger, spin-up, or any kind of corporate reorganization of TAM;

(iv)         to pay or distribute dividends or any other kind of distributions, including interest on capital, to the shareholders of TAM; and

(v)          to approve the issuance, redemption or amortization of any debt securities, Equity Securities or Convertible Securities into shares of TAM.

SECTION 1.12                   TAM Subsidiaries.

(a)           Airline Subsidiaries.  With respect to each Subsidiary of TAM that is subject to the Foreign Ownership Control Laws (collectively, “Airline Subsidiaries”), all provisions relating to the governance and operations of such Subsidiary shall be identical to the provisions contained herein relating to the governance and operations of TAM, including, in the case of any such Subsidiaries that are managed by a board of directors, the provisions governing the composition and operation of such boards of directors (excluding those provisions relating to the dates for and frequency of meetings and actions requiring a Supermajority Board Vote or a Supermajority Shareholder Vote).

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(b)           Other Subsidiaries.  Except as otherwise specified in this Section 1.12(b), with respect to each Subsidiary of TAM other than an Airline Subsidiary, the provisions relating to the governance and operations of such Subsidiary shall be identical to the provisions contained herein relating to the governance and operations of TAM, including, in the case of any such Subsidiaries that are managed by a board of directors, the provisions governing the composition and operation of such boards of directors (excluding those provisions relating to the dates for and frequency of meetings and actions requiring a Supermajority Board Vote or a Supermajority Shareholder Vote).  With respect to any such Subsidiaries that are wholly-owned by TAM, the board of directors of any such Subsidiary shall be comprised of an equal number of board members of such Subsidiary selected by each of LATAM and TEP and all actions of the board of directors of any such Subsidiary must be approved by the affirmative vote of a majority of the board members of such Subsidiary thereof at a duly called meeting of such board of directors at which a quorum is present and acting throughout.  With respect to any such Subsidiary that is not wholly owned by TAM, each of LATAM and TEP shall have the right to elect an equal number of board members of any such Subsidiary (unless TAM and/or its Subsidiaries have the right to elect an odd number of board members of such Subsidiary, in which case LATAM shall have the right to select the last board member), and the board members elected to any such Subsidiary shall not take any action unless and until all of such board members selected by LATAM and TEP have been elected and agree to take such action.

(c)           Notwithstanding the foregoing provisions of this Section 1.12, if any requirement in clause (a) or (b) in this Section 1.12 would conflict with applicable Law as it applies to any Subsidiary of TAM or materially limit the business or operations of any such Subsidiary, then the Shareholders shall discuss and agree how to modify such requirements in respect of such Subsidiary in order to comply with Law or avoid such material limitation.

SECTION 1.13                     Required Actions.  Each of TAM and each of its Subsidiaries shall exercise all rights it has as a shareholder of each of its respective Subsidiaries in an effort to cause such Subsidiary to comply with the requirements of this Agreement; provided, however, that the foregoing sentence shall not be construed to require TAM or any of its Subsidiaries to take, and in exercising such rights none of them will take, any action that would cause any board member of each such respective Subsidiary to breach his or her fiduciary duties.

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ARTICLE II

TAM GROUP DIRETORIA

SECTION 2.01                     Role of Management.

(a)           Management of TAM.   The day-to-day business and affairs of TAM shall be managed by the TAM Diretoria (as defined below) under the oversight of the TAM Board.  The Diretoria of TAM shall be comprised of the TAM CEO, the TAM CFO, the TAM COO and the TAM CCO (collectively, the “TAM Diretoria”).  The term of office for each of the members of the TAM Diretoria shall be two years.

SECTION 2.02                     TAM Chief Executive Officer.  As of the Effective Time, Marco Bologna will be the chief executive officer (Diretor Presidente) of TAM and its Subsidiaries (collectively, the “TAM Group”, and such chief executive officer, the “TAM CEO”).  The TAM CEO shall have general supervision, direction and control of the business and operations of the TAM Group and shall carry out all orders and resolutions of the TAM Board.  Without limitation of the foregoing, the TAM CEO shall have the following responsibilities:

(i)           conducting the day-to-day management of the TAM Group;

(ii)          serving as the company officer of the TAM Group and as the representative of the LATAM Group before all Governmental Entities in Brazil, including the Brazilian government and National Civil Aviation Agency of Brazil (Agência Nacional de Aviação, or ANAC);

(iii)         together with the chief executive officer (Vice Presidente Ejecutivo) of LATAM and the chief operating officer (Gerente General) of LATAM, implementing the integration of LATAM and its Subsidiaries and TAM and its Subsidiaries; and

(iv)         serving as a senior participant in all business unit and function committees of the LATAM Group.

The term of the TAM CEO shall be two years.  Subject to Section 1.09(xiii), the TAM CEO shall be reelected at the end of his or her current term unless a Departure of the TAM CEO occurs prior to the end of such current term.  In the case of any election other than a re-election of the then current TAM CEO, TEP shall recommend to LATAM in writing three potential candidates for appointment by the TAM Board as the TAM CEO.  Any potential candidates for the office of the TAM CEO shall be recommended by, or shall have received a favorable evaluation from, one of the three then-leading executive search companies in Brazil.  Prior to the next regular meeting of the TAM Board, LATAM shall notify TEP and Holdco 1 in writing of its selection of one individual from among the list of three potential candidates provided by TEP for appointment as the TAM CEO, and promptly thereafter TEP and LATAM shall each cause their respective Board Representatives, and Holdco 1 shall cause the board members of TAM, to approve the candidate as the next TAM CEO.

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SECTION 2.03                     TAM Chief Financial Officer.  The TAM CFO shall be in charge of all financial matters pertaining to TAM and its Subsidiaries and shall have such other duties as may be determined, from time to time, by the TAM Board or the TAM CEO.  The TAM CFO shall report directly to the TAM CEO.  Prior to the Effective Time, LATAM and TEP shall agree upon the individual to serve as the initial chief financial officer of TAM (the “TAM CFO”).  The term of the TAM CFO shall be two years. Subject to Section 1.09(xiii), the TAM CFO shall be reelected at the end of his or her current term unless a Departure of the TAM CFO occurs prior to the end of such current term.  In the case of any election other than the re-election of the then current TAM CFO, LATAM shall recommend to TEP in writing three potential candidates for appointment by the TAM Board as the TAM CFO.  Any potential candidates for the office of the TAM CFO shall be recommended by, or shall have received a favorable evaluation from, one of the three then-leading executive search companies in Brazil and in selecting such candidates, LATAM shall be guided by the following principles:  (a) alignment with the strongest performing leader, i.e., the best of breed; (b) maximization of synergy value capture; (c) conforming to local regulations and culture; and (d) simplest and easiest execution.  Prior to the next regular meeting of the TAM Board, TEP shall notify Holdco 1 and LATAM in writing of its selection of one individual from among the list of three potential candidates provided by LATAM for appointment as the TAM CFO, and promptly thereafter each of LATAM and TEP shall each cause their respective Board Representatives, and Holdco 1 shall cause the board members of TAM, to vote to approve the candidate as the next TAM CFO.

SECTION 2.04                     Other Members of the TAM Diretoria.  Prior to the Effective Time, LATAM and TEP shall agree upon the individuals to serve as the initial chief operating officer of TAM (“TAM COO”) and the chief commercial officer of TAM (“TAM CCO”).  From and after the Effective Time, potential candidates for offices of each of the TAM COO and TAM CCO shall be jointly selected and recommended to the TAM Board by the TAM CEO and the TAM CFO and shall be approved by a Majority Board Vote of the TAM Board.  LATAM and TEP each agrees to cause their respective Board Representatives, and Holdco 1 agrees to cause the board members of TAM, to act through the relevant governing body to vote to approve the candidates for the offices of TAM COO and TAM CCO selected jointly by the TAM CEO and the TAM CFO.

SECTION 2.05                     TAM Linhas Aereas S.A.  The Diretoria of TAM Linhas Aereas S.A. shall be comprised of the same individuals who comprise the TAM Diretoria and two other officers who shall be selected and appointed in accordance with Section 2.04, mutatis mutandis.

ARTICLE III

ACCOUNTING, BOOKS AND RECORDS

SECTION 3.01                     Fiscal Year.  The fiscal year of TAM and its Subsidiaries shall end on December 31 in each year (the “Fiscal Year”).

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SECTION 3.02                     Accountants.  Unless and until removed or changed by Supermajority Board Vote, the independent public accountants for the TAM Group shall be PricewaterhouseCoopers LLP (the “Accountants”).

SECTION 3.03                     Financial Statements.  From and after the Effective Time, TAM shall prepare and deliver (or cause to be prepared and delivered) to each Shareholder the following financial reports with respect to TAM and its Subsidiaries on a consolidated basis and for Multiplus S.A. on a stand-alone basis:

(i)             within five business days after the end of each calendar month, monthly management reports in a format approved by the TAM Board;

(ii)            within ten business days after the end of any of the first three fiscal quarters of each Fiscal Year, an unaudited balance sheet as of the end of such fiscal quarter and the related unaudited statements of operations, changes in stockholders’ equity and cash flows for the fiscal quarter then ended and for the period from the beginning of the then-current Fiscal Year to the end of such fiscal quarter, in each case with comparative statements for the prior Fiscal Year; and

(iii)           within thirty business days after the end of each Fiscal Year, an annual report, including (x) a balance sheet as of the end of such Fiscal Year and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the Fiscal Year then-ended and audited in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board (“IFRS”) or such other accounting principles as the TAM Board may approve, in each case with comparative statements for the prior Fiscal Year, and (y) a discussion of the implementation of the Approved Plans as it relates to business strategy, achievement of basic goals, revenues, expenses, executive compensation, capital expenditures, financing, insurance, cash flows, appointment of agents or advisers and strategic alliances.

SECTION 3.04                     Books and Records.

(a)           TAM shall keep, and shall cause each of its Subsidiaries to keep, in all material respects, at their respective principal offices, full, complete and accurate books and records with respect to the business and affairs of the TAM Group.  The books and records shall be maintained in a manner that provides Shareholders with sufficient information so as to permit (i) the preparation of consolidated financial statements for TAM and its Subsidiaries and financial statements for Multiplus S.A. on a stand-alone basis, in each case in accordance with IFRS, (ii) the Shareholders to account for their interests in  TAM and its Subsidiaries in their respective financial statements in accordance with IFRS, and (iii) the preparation of all required tax returns of  TAM and its Subsidiaries and of the Shareholders.

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(b)           TAM shall, as and when reasonably requested by any Shareholder, prepare and furnish (or cause to be prepared and furnished) to such Shareholder, at the expense of TAM, such financial and other data concerning the business and affairs of the TAM Group as may be reasonably required by such Shareholder for tax, accounting, reporting, oversight, or other legitimate business purposes of such Shareholder, such information to be prepared on the basis and in the format that such Shareholder may reasonably request in order to meet the requirements of its accounting, tax and oversight and reporting systems or the requirements of Law.

(c)           TAM shall, and shall cause each of its Subsidiaries to, retain for not less than ten years and for such longer period as required by Law, all of their respective books and records (including the books and records of predecessor businesses, including those relating to periods prior to the Effective Time).

SECTION 3.05                     Access to Information, Audit and Inspection.

(a)           Each Shareholder and its Representatives shall have (and TAM shall cause its Subsidiaries to provide such Shareholder and its Representatives with) full access at reasonable times and during normal business hours to all books and records for the TAM Group and their respective businesses (including those books and records pertaining to periods prior to the Effective Time), including the right to examine and audit any of such books and records and to make copies and extracts therefrom.  Each Shareholder shall bear all expenses incurred by it and its Representatives in making any such examination on its behalf.  TAM shall, and shall cause each of its Subsidiaries to, make arrangements for each Shareholder and its Representatives to have prompt access at reasonable times and during normal business hours to its officers, board members and employees to discuss the business and affairs of the TAM Group and the books and records pertaining thereto.  The provisions of this Section 3.05(a) shall survive any termination of this Agreement and shall continue to apply to TAM and its Subsidiaries and be enforceable by any Shareholder regardless of whether such Shareholder ceases to beneficially own any shares of TAM Stock but only to the extent that such books and records and such access to officers, board members and other employees are reasonably requested by a Shareholder in connection with any pending Action involving such Shareholder or any of its Affiliates insofar as such matter relates to the business or affairs of TAM and its Subsidiaries (including any matters relating to the business and affairs of any predecessor businesses, including matters relating to periods prior to the Effective Time).

(b)           TAM shall provide each Shareholder with copies of each completed annual tax return required by Law to be filed by TAM or any of its Subsidiaries (each, a “Tax Return”) at least twenty business days prior to the due date (including any extensions of such due date) of the filing of such Tax Return, and each Shareholder may review any such Tax Return prior to its filing with the appropriate Governmental Entity.  TAM shall consult with the Shareholders and negotiate in good faith to resolve any issues arising as a result of the Shareholders’ review of any such Tax Return.  The Shareholders and TAM and its Subsidiaries shall use all reasonable good faith efforts to resolve any issue in dispute as promptly as practicable but in any event prior to the due date for the filing of any such Tax Return.  In the event that an issue resulting from the review by a Shareholder of any such Tax Return remains in dispute as of the due date for the filing of such Tax Return, such Tax Return shall be filed with the appropriate Governmental Entity in accordance with the recommendation of the Accountants.

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SECTION 3.06                     Annual Budget and Business Plan.

(a)           On or prior to October 31st of each calendar year, the TAM CEO and the TAM CFO shall prepare or cause to be prepared, and shall submit for approval of the TAM Board, (i) a proposed annual budget and business plan (each, an “Annual Budget and Business Plan”) for the upcoming Fiscal Year and (ii) a proposed five-year business plan for the next five Fiscal Years (each, a “Multi-Year Business Plan”), in each case for TAM and its Subsidiaries on a consolidated basis and for Multiplus S.A. on a stand-alone basis.  Each of the proposed Annual Budget and Business Plan and Multi-Year Business Plan shall include all of the applicable items set forth in Schedule 3.06 and be in a format acceptable to the TAM Board.

(b)           The TAM Board shall convene a meeting within fifteen business days after receipt of the proposed Annual Budget and Business Plan and Multi-Year Business Plan for the upcoming Fiscal Year from the TAM CEO to discuss whether and to what extent to approve each of the foregoing for the upcoming Fiscal Year.  If all or any portion of any of the proposed Annual Budget and Business Plan or Multi-Year Business Plan is not approved in all respects by a Supermajority Board Vote of the TAM Board at any such meeting of the TAM Board or any adjournment thereof, the TAM Chairman shall notify the TAM CEO in reasonable detail of the TAM Board’s objections to the proposed Annual Budget and Business Plan and/or Multi-Year Business Plan, as the case may be, and within thirty days following the TAM CEO’s receipt of such notice, the TAM CEO and the TAM CFO shall collaborate with two board members of TAM, one selected by TEP and another selected by LATAM, to modify such Annual Budget and Business Plan and/or Multi-Year Business Plan to address the comments and concerns of the TAM Board.  Within ten business days after receipt of any revised Annual Budget and Business Plan and/or Multi-Year Business Plan from the TAM CEO, the TAM Board shall convene a second meeting to discuss whether or not to approve the same.  If the TAM Board does not approve the adoption of any such proposed Annual Budget and Business Plan and/or Multi-Year Business Plan in its entirety because of disagreement on one or more line items set forth in the proposed Annual Budget and Business Plan and/or Multi-Year Business Plan, as the case may be, then the Multi-Year Business Plan for the current Fiscal Year shall be deemed adopted as the Annual Budget and Business Plan for the upcoming Fiscal Year.

(c)           The TAM Board shall cause TAM and its Subsidiaries to operate in accordance with, and the officers and employees of TAM and its Subsidiaries to implement, any Annual Budget and Business Plan and Multi-Year Business Plan for the then-upcoming Fiscal Year approved by a Supermajority Board Vote of the TAM Board and shall conduct, or cause to be conducted, the business of TAM and its Subsidiaries in accordance with any such Annual Budget and Business Plan and/or Multi-Year Business Plan, as the case may be.

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ARTICLE IV

GENERAL PROVISIONS

SECTION 4.01                     Term of Agreement.  Except as otherwise provided under applicable Law, this Agreement shall continue in effect as to each of the Parties until (i) it is terminated as to any Party by the written consent of all the Parties or (ii) with respect to any Shareholder, the first day on which such Shareholder no longer beneficially owns any shares of TAM Stock, whichever is sooner to occur.  The termination of this Agreement as to any Shareholder shall not affect any of the rights and obligations of any of the other Parties with respect to each other.  In the event that this Agreement terminates as to any Shareholder, thereafter such Shareholder shall have no further liability to the other Parties or to any of their respective shareholders, board members, officers, employees or other Affiliates and such other Parties shall have no further liability to such Shareholder, in each case solely in respect of this Agreement; provided, however, that the foregoing shall not apply to any provisions hereof that expressly survive the termination of this Agreement (including Sections 3.05 and 4.02); and provided, further, that nothing herein shall relieve any Party of any liability for any breach of this Agreement that occurred prior to such termination.

SECTION 4.02                     Fees and Expenses.  All fees and expenses incurred in connection with this Agreement shall be paid by the Party incurring such fees or expenses.  The provisions of this Section 4.02 shall survive any termination of this Agreement.

SECTION 4.03                     Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF; PROVIDED, HOWEVER,THAT NOTWITHSTANDING THE FOREGOING THE AUTHORIZATION AND EXECUTION OF THIS AGREEMENT BY EACH PARTY SHALL BE GOVERNED BY THE LAW OF ITS JURISDICTION OF INCORPORATION.

SECTION 4.04                     Definitions.  For the purposes of this Agreement, the following terms shall have the meanings assigned below:

(a)           “Actions” means any actions, suits, claims, allegations, hearings, proceedings, arbitrations, mediations, audits, inquiries or investigations (whether civil, criminal, administrative or otherwise).

(b)           “Affiliate” shall have the meaning assigned to such term in Rule 12b-2 under the U.S. Exchange Act; provided, however, that no Shareholder shall be deemed to be an Affiliate of any other Shareholder or any of its Affiliates solely by reason of this Agreement.

(c)           “beneficial ownership” (and its correlative phrases) shall have the meanings assigned to such phrases in Rule 13d-3 promulgated under the U.S. Exchange Act (without taking into account any rights of such Person or any of its Affiliates under Section 1.04 hereof) if the references to “within 60 days” in Rule 13d-3(d)(1)(i) were omitted.

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(d)           “board member” shall mean, with respect to any Person, any member of the board of directors (or comparable governing body) of such Person.

(e)            “business day” shall mean any day that is not a Saturday, Sunday or a day on which banking institutions are required or authorized by Law or executive order to be closed in Santiago, Chile or São Paulo, Brazil.

(f)           “contract” shall mean any loan, credit agreement, bond, debenture, note, mortgage, indenture, lease, supply agreement, license agreement, development agreement or other contract, agreement, obligation, commitment or instrument or other legally binding arrangement or understanding, whether written or oral.

(g)           “Control”(and its correlative terms) shall have the meanings assigned to such terms in Rule 12b-2 promulgated under the U.S. Exchange Act.

(h)           “Convertible Securities” means, with respect to any Person, any securities, options, warrants or other rights of, or granted by, such Person or any of its Affiliates that are, directly or indirectly, convertible into, or exercisable or exchangeable for, any Equity Securities of such Person or any of its Affiliates.

(i)           “Equity Securities” means, with respect to any Person, any capital stock of, or other equity interests in such Person.

(j)           “Foreign Ownership Control Laws” shall mean any Law of Brazil or of any other applicable jurisdiction that establishes limitations on equity ownership or control by foreign nationals in respect of a Brazilian carrier or a foreign airline which is a subsidiary of a Brazilian carrier.

(k)           “Governmental Entity” means any governmental, quasi-governmental or regulatory authority, body, department, commission, board, bureau, agency, division, court, organized securities exchange or other legislative, executive or judicial governmental entity or instrumentality of any country, nation, republic, federation or similar entity or any state, county, parish or municipality, jurisdiction or other political subdivision thereof.

(l)           “LATAM Group” means LATAM, Holdco 1, TAM and their respective Subsidiaries.

(m)           “Law” means any statute, common law, ordinance, rule, regulation, agency requirement or Order of, or issued, promulgated or entered into by or with, any Governmental Entity.

(n)           “Order” means any order, decision, writ, injunction, decree, judgment, legal or arbitration award, stipulation, license, permit or agreement issued, promulgated or entered into by or with (or settlement or consent agreement subject to) any Governmental Entity.

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(o)           “Organizational Documents” shall mean, with respect to TAM and its Subsidiaries, this Agreement and the by-laws or other comparable governing documents of such Persons.

(p)           “Person” means any natural person, firm, corporation, partnership, company, limited liability company, joint venture, association, trust, unincorporated organization, Governmental Entity or other entity.

(q)           “Related Party”  means (a) any Person that, individually or jointly with other(s), directly or indirectly (i) controls TAM or any of its Subsidiaries; (ii) is controlled by TAM or any of its Subsidiaries; or (iii) is controlled by any Person that controls, individually or jointly with other(s), TAM or any of its Subsidiaries; (b) any successor of the controlling shareholder of TAM or any of its Subsidiaries, in the event of dissolution, capital decrease by the delivery of shares to shareholders, spin-off and any other corporate transaction; and (c) any board member, officer or manager of the companies mentioned above.

(r)           “Representatives,” with respect to any Person, shall mean the board members, officers, employees, auditors, accountants, legal counsel, financial advisors and other agents or representatives of or to such Person and its Subsidiaries.

(s)           “Subsidiary” means, with respect to any Person, (i) a corporation in which such Person, together with its Subsidiaries, beneficially owns Voting Securities of such corporation which entitle them, collectively, to cast more than 50% of all the votes entitled to be cast by the holders of all Voting Securities of such corporation then outstanding in a general election of board members of such corporation or (ii) any Person that is not a corporation in which such Person, and/or one or more other Subsidiaries of such Person, directly or indirectly, has a majority equity or voting interest or the power to direct the policies, management and affairs thereof.

(t)            “U.S. Exchange Act” shall mean the U.S. Securities Exchange Act of 1934.

(u)           “Voting Securities” means, with respect to any Person, any securities or other equity or ownership interests in such Person which are entitled to vote generally in the election of board members of such Person (or, if such Person is not a corporation, the individuals who perform a similar function for such Person).

SECTION 4.05                     Severability.  The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions of this Agreement.  If any provision of this Agreement, or the application of such provision to any Person or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application of such provision, in any other jurisdiction.

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SECTION 4.06                     Amendment; Waiver.  This Agreement may be amended and any performance, term or condition waived in whole or in part only by a writing signed by all Parties affected by the amendment (in the case of an amendment) or by the Party against whom the waiver is to be effective (in the case of a waiver).  No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any singular partial exercise of such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  Waiver by any Party of any breach or failure to comply with any provision of this Agreement by another Party shall not be construed as, nor shall constitute, a continuing waiver of such provisions, or a waiver of any other breach of or failure to comply with any other provisions of this Agreement.

SECTION 4.07                     Assignment.  Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, in whole or in part, by operation of Law or otherwise by any of the Parties without the prior written consent of the other Parties, and any purported assignment without such consent shall be null and void and of no force or effect.  Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and permitted assigns.

SECTION 4.08                     No Third-Party Beneficiaries.  Except as otherwise expressly stated herein, the Parties hereby agree that the agreements and covenants set forth herein are solely for the benefit of the other Parties in accordance with, and subject to the terms of, this Agreement and that this Agreement is not intended to, and does not, confer upon any Person other than the Parties any rights or remedies hereunder, including the right to rely upon the representations and warranties set forth herein.

SECTION 4.09                     Notices.  All notices, requests, claims, demands, instructions and other communications or documents given hereunder shall be in writing and shall be delivered personally or sent by registered or certified mail (postage prepaid), facsimile or overnight courier to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice):

If to LATAM, to:

Claro y Cia.

Apoquindo 3721, piso 13,

Santiago, Chile

Attention: José María Eyzaguirre B.

Fax: +56 2 367 3003

jmeyzaguirre@claro.cl

– 16 –

with copies (which shall not constitute notice) to:

Sullivan & Cromwell LLP

125 Broad Street

New York, NY 10004

United States of America

Attention: Sergio Galvis and Duncan McCurrach

Fax: +1 212 558 3588

galviss@sullcrom.com

mccurrachd@sullcrom.com

If to TAM or Holdco 1 to:

Turci Advogados

Rua Dr. Renato Paes de Barros, 778

-1◦ andar – cj.12

04530-0001

São Paulo – SP

Brasil

Attention: Flavia Turci

Fax: +55 11 2177 2197

turci@turci.com

with a copy (which shall not constitute notice) to:

Clifford Chance US LLP

31 West 52nd Street

New York, NY 10019

Attention: Sarah Jones and Anand Saha

Fax: +1 212 878 8375

Sarah.Jones@CliffordChance.com

Anand.Saha@CliffordChance.com

Any notice, request, claim, instruction or other communication or document given as provided above shall be deemed given to the receiving party (i) if delivered personally, upon actual receipt, (ii) if sent by registered or certified mail, three business days after deposit in the mail, (iii) if sent by facsimile, upon confirmation of successful transmission if within one business day after such facsimile has been sent such notice, request, claim, instruction or other communication or document is also given by one of the other methods described above and (iv) if sent by overnight courier, on the next business day after deposit with the overnight courier.

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SECTION 4.10                     Specific Enforcement; Consent to Jurisdiction.  The Parties agree that irreparable damage would occur and that the Parties would not have any adequate remedy at Law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the Parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, this being in addition to any other remedy to which they are entitled at Law or in equity, without the necessity of proving the inadequacy of monetary damages or of posting bond or other undertaking, as a remedy and to obtain injunctive relief against any breach or threatened breach hereof.  In the event that any Action is brought in equity to enforce the provisions of this Agreement, no Party shall allege, and each Party waives the defense or counterclaim that there is an adequate remedy at Law.  Each of the Parties hereby irrevocably consents and submits itself to the personal jurisdiction of the courts of the State of New York and the federal courts of the United States of America located in the Borough of Manhattan, The City of New York (collectively, the “Agreed Courts”) solely in respect of the interpretation and enforcement of the provisions of this Agreement, and the documents referred to herein and the transactions contemplated by this Agreement (collectively, the “Agreed Issues”), waives, and agrees not to assert, as a defense in any Action, suit or proceeding in an Agreed Court with respect to the Agreed Issues that such Party is not subject thereto or that such Action, suit or proceeding may not be brought or is not maintainable in such Agreed Court or that the venue thereof may not be appropriate or that this Agreement or any such document may not be enforced in or by such Agreed Court, and the Parties irrevocably agree that all claims with respect to any Action, suit or proceeding with respect to the Agreed Issues shall be heard and determined only in an Agreed Court.  The Parties hereby consent to and grant to each Agreed Court jurisdiction over the Person of such parties and, to the extent permitted by Law, over the subject matter of any dispute with respect to the Agreed Issues and agree that mailing of process or other papers in connection with any such Action or proceeding in the manner provided in Section 4.09 or in such other manner as may be permitted by Law shall be valid and sufficient service thereof.

SECTION 4.11                     WAIVER OF JURY TRIAL.  EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.  EACH PARTY HERETO (I) CERTIFIES THAT IT HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER AND MADE IT VOLUNTARILY AND THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY ACTION, SUIT OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 4.11.

SECTION 4.12                     Counterparts.  This Agreement may be executed in one or more counterparts (including by facsimile), each of which shall be considered an original instrument and all of which shall together constitute the same agreement.  This Agreement shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Parties.

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SECTION 4.13                     Interpretation.  When a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference shall be to an Article of, a Section of, or an Exhibit or Schedule to this Agreement unless otherwise indicated.  The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”.  The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.  The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms.  Any contract, instrument or Law defined or referred to herein or in any contract or instrument that is referred to herein means such contract, instrument or Law as from time to time amended, modified or supplemented, including (in the case of contracts or instruments) by waiver or consent and (in the case of Laws) by succession of comparable successor Law and references to all attachments thereto and instruments incorporated therein.  References to a Person are also to its permitted successors and assigns.  Except as otherwise expressly provided herein, all remedies provided herein shall be in addition to any other remedies that the Parties may otherwise have under applicable Law.  Any reference in this Agreement to a “day” or a number of “days” (without the explicit qualification of “business”) shall be interpreted as a reference to a calendar day or number of calendar days.  This Agreement is the product of negotiation by the Parties having the assistance of counsel and other advisers, and the Parties and their counsel and other advisers having participated jointly in negotiating and drafting this Agreement.  If an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement.

SECTION 4.14                     Filing Requirement.  A copy of this Agreement shall be filed at the headquarters of TAM for all purposes of applicable Law.

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed by their respective officers thereunto duly authorized as of the date first above written.

LAN AIRLINES S.A.
By:
	Name:
	Title:
TAM S.A.
By:
	Name:
	Title:
TEP CHILE S. A.
By:
	Name:
	Title:
[HOLDCO 1]
By:
	Name:
	Title:

SCHEDULE 3.06

Annual Budget and Business Plan Requirements

1. A summary of the most important objectives and strategic goals for the upcoming Fiscal Year, including a summary of the direction of the business and all relevant macroeconomic and industry assumptions

2. Detailed P&L Statement for the upcoming Fiscal Year

3. Detailed list of targets for the most relevant operational and financial indicators of TAM and its Subsidiaries, for the upcoming Fiscal Year and compared to the current Fiscal Year

4. Detailed cash flow projections for the upcoming Fiscal Year, including at least the following:

a. Cash flow from operations

b. Cash flow from working capital variations, by item

c. Detailed CAPEX plan separating fleet by type and other investments, including, in the case of fleet, a buy vs. lease analysis

d. Financing, including detailed debt repayment under existing obligations, fleet financing and other sources of financing by type

e. Dividend policy and assumptions

f. Any equity increase or reduction requirements

5. A detailed marketing plan

6. A risk management and hedging strategy

7. Any other relevant analysis or information that the circumstances at the time may require or that will be deemed necessary by management of TAM in order to present a business plan according to best business practices

Multi-Year Business Plan Requirements

1. A description of the current trends in the airline industry regionally and worldwide and an analysis of the potential impact of these trends on Holdco 1, TAM and its Subsidiaries

2. A summary of the most important macroeconomic and industry assumptions for the five upcoming Fiscal Years, including inflation rate for each such year

3. A detailed competitor analysis

4. A detailed description of the goals and objectives for the five upcoming Fiscal Years describing their rationale

5. Five-year financial projections detailing the following:

a. P&L statement

b. A detailed list of all operational and financial indicators

c. Cash flow projections, which must include all the line items provided above for in the Annual Budget and Business Plan

6. Any other relevant analysis or information that the circumstances at the time may require or that will be deemed necessary by management of TAM in order to present a business plan according to best business practices.

EX-8.1

Exhibit 8.1

	Subsidiaries
Legal Name	Place of Incorporation	Doing Business As	Ownership %1
Lan Argentina S.A.	Argentina	Lan Argentina		99	%
Aerolinhas Brasileras S.A.	Brazil	ABSA		73.3	%
Inmobiliaria Aeronáutica S.A.	Chile	Inmobiliaria Aeronáutica		100	%
Inversiones Lan S.A.	Chile	Inverlan		99.7	%
Lan Cargo S.A.	Chile	Lan Chile Cargo		99.89	%
Lan Pax Group S.A.	Chile	Lan Pax Group		100	%
Transporte Aéreo S.A.	Chile	LanExpress		100	%
Aerolane, Líneas Aéreas Nacionales del Ecuador S.A.	Ecuador	Lan Ecuador		71.92	%
Aerotransporte Mas de Carga S.A.	Mexico	Mas Air		69.15	%
Lan Perú S.A.	Peru	Lan Perú		70	%
Comercial Masterhouse SA	Chile	Comercial Masterhouse		100	%
Linea Aerea Nacional Chile S.A.	Chile	Lan Chile		100	%
Línea Aérea Carguera de Colombia	Colombia	LANCO		90	%
Aerovías de Integración Regional S.A.	Colombia	Aires		94.99	%

1 Percentage of equity owned by Lan Airlines S.A. directly or indirectly through subsidiaries or affiliates

EX-12.1

Exhibit 12.1

CEO Certification

I, Enrique Cueto Plaza, certify that:

1. I have reviewed this annual report on Form 20-F of Lan Airlines S.A.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: May 5, 2011
	/s/ Enrique Cueto Plaza
	Name: Enrique Cueto Plaza
	Title: Chief Executive Officer

 

EX-12.2

Exhibit 12.2

CFO Certification

I, Alejandro de la Fuente Goic, certify that:

1. I have reviewed this annual report on Form 20-F of Lan Airlines S.A.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: May 5, 2011
	/s/ Alejandro de la Fuente Goic
	Name: Alejandro de la Fuente Goic
	Title: Chief Financial Officer

 

EX-13.1

Exhibit 13.1

Officer Certifications

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Lan Airlines S.A. (the “Company”), does hereby certify to such officer’s knowledge that:

The annual report on Form 20-F for the year ended December 31, 2010 (the “Form 20-F”) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 20-F fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 5, 2011	/s/ Enrique Cueto Plaza
	Name: Enrique Cueto Plaza
	Title: Chief Executive Officer
Dated: May 5, 2011	/s/ Alejandro de la Fuente Goic
	Name: Alejandro de la Fuente Goic
	Title: Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 

EX-15.1

Exhibit 15.1

Consent of Independent Registered Public Accounting Firm

We hereby consent to the incorporation by reference in the Registration Statement on Form F-3 (No. 333-142665) of Lan Airlines S.A. of our report dated March 1, 2011, relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 20-F.

     /s/ PricewaterhouseCoopers

Santiago, Chile

May 5, 2011