Corporate UpdateDeutsche Bank Global Emerging Markets ConferenceSeptember 2006
The following statements regarding the Company’s business outlook and anticipated financial and operating
results constitute forward-looking comments. These expectations are highly dependent on the
economy, the airline industry and international markets. Therefore, they are subject to change.
Contents
• Strategic Overview
• Financial Overview
• Fuel Strategy & Fleet Plan
• Outlook
2
LAN in a Nutshell
Passenger Business: Breakdown by Route Type
Chile (Dom)19%
Internt.71%
Peru (Dom)7%
Arg. (Dom)3%
Cargo Business: Breakdown by Route Type
Dom.4%
Internat.96%
Cargo Operations•LTM June 2006: US$1.0 billion•Tons: 543,000•Dedicated Freighters: 9•Companies: Chile, Brazil, Mexico
Passenger Operations•LTM June 2006: US$1.6 billion•Passengers: 8.3 Million•Fleet: 68 Aircraft•Companies: Chile, Argentina, Peru & Ecuador
3
BUSINESS MODEL: Distinct blend enhances returns and reduces risk
4
36,3%
25%
23%
15%
6%
6%
6%
3%
3%
14%
12%
8%
16%
10%
15%
6%
5%
58,3%
61%
66%
77%
78%
84%
79%
91%
92%
5,4%
0,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0% 70,0% 80,0% 90,0% 100,0%
LAN
Cathay
Singapore
Air France
Qantas
BA
Iberia
American
Delta
Cargo Others Passenger
% of Total Revenues
Revenue Mix, Selected Companies (1)
20%
57%77%
Load
Fac
tor
BELF w/o Cargo
CargoContribution
BELF w/ Cargo
(2) BELF: Break-even load-factor
BELF Differential (2)
Passenger and Cargo Combination– Lower Break-Even Load Factors– Increased diversification
(1) December 2005 Source: IATA
Unique Business Model
EfficiencyEfficiency
¿Can it be easily replicated?¿Can it be easily replicated?
NetworkNetwork TeamTeam
5
• Optimal fleet solutionfor the size-efficiencytrade-off
• High aircraftutilization
• Extensive regional network
• Alliances with keypartners
• Two equallyimportant businessunits
• Integratedapproach to everydecision
NetworkPassenger
LAN
Madrid
Easter Island
Auckland
Papeete
Sydney
Frankfurt
New York
MiamiLos Angeles
Mexico City
Caracas
Sao Paulo
Buenos AiresMontevideo
Cancun
Bariloche
Pta. Arenas
Arica
La Paz
Pto. Montt
Cuzco
Lima
Bogotá
Santiago
Rio de Janeiro
Rosario
Quito
Pta. Cana
Guayaquil
6
Alliances
TAM
599 destinationsworldwide
Ushuaia
Salta
Rio Gallegos
Com. Rivadavia
Cordoba
Iguazú
IquiqueAntofagasta
CalamaCopiapo
La Serena
Mendoza
Concepcion
Balmaceda
TemucoValdiviaOsorno
TacnaArequipa
Puerto Maldonado
Iquitos
Piura
TarapatoPucalpa
ChiclayoTrujillo
LAN
Codeshare
NetworkCargo
LAN
7
Madrid
Easter Island
Auckland
Papeete
Sydney
Frankfurt
New York
MiamiLos Angeles
Mexico City
Caracas
Sao Paulo
Buenos AiresMontevideo
Cancun
Bariloche
Pta. Arenas
Arica
La Paz
Pto. Montt
Cuzco
Lima
Bogotá
Santiago
Rosario
Quito
Pta. Cana
Guayaquil
Ushuaia
Salta
Rio Gallegos
Com. Rivadavia
Cordoba
Iguazú
IquiqueAntofagasta
CalamaCopiapo
La Serena
Mendoza
Concepcion
Balmaceda
TemucoValdiviaOsorno
TacnaArequipa
Puerto Maldonado
Iquitos
Piura
TarapatoPucalpa
ChiclayoTrujillo
Chicago
Houston
San JosePanama
Merida
Rio de Janeiro
Porto Alegre
VitoriaBelo HorizonteSalvador
Manaos
Paris
Alliances
Efficiency: Maximizing Aircraft UtilizationMaximizing Long Haul Aircraft Utilization:
LAN utilization of 15 hours/day as compared to a typical itinerary of 8 hours/day
Boeing 767 Rotation
LanPeru
LanEcuadorLan Airlines (Chile)
Lima
Santiago
Quito/Guayaquil
New York
Miami
1. Night, Day 1
2. Morning, Day 2
3. Afternoon, Day 2
4. Night, Day 2
5. Morning, Day 3
Schedule
6. Afternoon, Day 3
7. Night, Day 3
8. Morning, Day 4
9. Afternoon, Day 4
10. Night, Day 4
8
Team
9
• Management team– Experienced senior management, with 10-20 years of experience in the industry– Highly qualified unit managers– Executive development program
• Positive labor relations– Stable, long-term contracts– Company growth allows for advancement opportunities– Profitability & performance-linked incentive programs
• 25 Labor Unions:- Administrative personnel 3 Maintenance 3- Cabin crew 5 Pilots 5- Airport services 3 Others 6
Timetable of expiration of main labor agreements:
1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10ADMINISTRATIVECABIN CREWPILOTSMAINTENANCE
Differentsubsidiaries
Market Leadership based on Customer PreferencePassenger
Who is thebest
choice?
• Service to main long-haul gateways• Regional hub provides unparalleled regional coverage
• Excellent safety record• High quality operations and maintenance; multiple certifications• World class training programs for flight and ground crews• Fleet renewal program• Multiple safety audits by various authorities (i.e. FAA/JAA) and partners
• Reliable operations: high completion and punctuality statistics• Customer-focused itineraries• Professional and friendly service• Leading in-flight product: seats, IFE, catering• Streamlined airport procedures for short-haul flights• Valuable frequent flyer program• Alliances with key partners
• Competitive pricing• New, simplified fare structure
Who issafe?
Product
Pricing
Who flieswhere I’m
going?
10
Contents
• Strategic Overview
• Financial Overview
• Fuel Strategy & Fleet Plan
• Outlook
11
Consistent Profitability despite Multiple ShocksUnique Business Model
Operating and Net Income, 1993 – LTM 2006
12
163170
142
172
112
62
11 15
34
46
80
4451
83
50
147
164
84
31
11
48
31
0 6
25
38
64
48
0
30
60
90
120
150
180
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 LTM06
US
$ M
illion
Operating Income Net Income
Recession9/11 &
Argentine Crisis Fuel Prices
Strong Revenue GrowthUnique Business Model
Operating Revenues, 1993 – LTM 2006
2.7472.506
2.093
1.6391.4541.4281.425
1.2371.083
972
694600407
318
0
400
800
1.200
1.600
2.000
2.400
2.80019
93
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
LTM
JU
N06
US$
Mill
ion
CAGR24%
CAGR1%
CAGR23%
13
First Semester Results – Net Income
Net Income, First Half 2005 vs First Half 2006
74
9673
11
8
81
3231
18
0
50
100
150
200
250
1H2005 Capacity Yield Pax Yield Carg LoadFactor
CostEfficiency
Others Fuel Price 1H2006
14
First Semester Results - Revenue
Passenger
823
684
47-13 105
400
450
500
550
600
650
700
750
800
850
1H05 Capacit y Load Fact or Yield 1H06
• Strong demand in key markets
• Expansion in intercontinental routes toUS and Asia-Pacific
• Consolidation of regional routes
• Improved segmentation
• Fuel cost pass through
15
Cargo
435
523
52-1
37
420
440
460
480
500
520
540
2004 Capacity Load Factor Yield 2005
US$
Mill
ion
1H05 1H06
• Southbound demand continues togrow
• Northbound demand weakenedmainly due to weaker exports fromBrazil and Chile
• Fuel cost pass through
First Semester Results – Operating Costs
Total Cost per ATK, 1H05 vs 1H06
37.0
41.6
1.0 0.1 0.2
0.9
2.4
30
32
34
36
38
40
42
44
1H2005 Wages &Benef
Sales & Dist Dep &AircraftMaint
Other Fuel 1H2006
US
Cen
ts /
ATK
16
Liquidity Position
Cash & Cash Equivalents Evolution 2000-1H06
• Investment Grade Credit Rating
• Strong Balance Sheet– High liquidity
• B767 Predelivery payments funded internally
– Long-term debt finances only aircraft• Low interest rates• Long repayment profiles• Minimum refinancing risk
– US$150 million in available credit lines
• Active Risk Control– Fuel
• Hedging• Fuel Cost Pass Through
– Interest rates• Over 90% of interest bearing
debt is hedged
0
50
100
150
200
250
300
350
400
450
500
2000 2001 2002 2003 2004 2005 1H06
US$ M
illi
on
Cash PDP Boeing PDP Airbus
17
Contents
• Strategic Overview
• Financial Overview
• Fuel Strategy & Fleet Plan
• Outlook
18
Fuel Oil Strategy: LAN’s Response to actual price scenario
Fuel Hedging Fuel Cost Fuel EfficiencyPass-Through
19
Fuel Oil Strategy: LAN’s Response to actual price scenario
Fuel PricesHigh Crude Prices + Higher Crack Spreads
Fuel PricesHigh Crude Prices + Higher Crack Spreads
Fuel Hedging Cost Pass-Through
Passenger• Before: Follower of fares increases by international competitors• Now: New transparent passenger fuel surcharge system on all routes
Cargo• Continued implementation of cargo fuel surcharges although caps on certainroutes, esp northbound
Sho
rt Te
rm
0%2%4%6%8%
10%12%14%16%18%20%
3Q06 4Q06
% T
otal
Con
sum
ptio
n
00,20,40,60,811,21,41,61,8
US$
/ G
allo
n
% Hedged Hedged Price
Long
Ter
m
• Strong Financial Position• High liquidity• Positive cash flow
• Fuel Efficient Fleet• Highly efficient long-haul passenger fleet• Extremely efficient freighter fleet
20
Fleet Plan
Fleet Plan, 2006-2008
• Competitive prices on both Boeing 767 and Airbus A320-family order
• Backlog adjusted to new price
• Benefits from launch-customer status for P&W’s A318 engine
• Options for additional aircraft
• Attractive financing terms
Passenger 1H06 2006 2007 2008Boeing 737-200 24 25 20 10 Airbus A318 / A319 / A320 22 30 42 54 Boeing 767-300ER 18 21 24 29 Airbus A340-300 4 4 5 7 Total 68 80 91 100
Cargo 1H06 2006 2007 2008Boeing 737-200F 1 1 1 1 Boeing 767-300F 8 9 9 9 Total 9 10 10 10
Grand Total 77 90 101 110
32 new short-haulAirbus aircraft
11 new Boeing 767-300 aircraft
21
Current financing needs have already been covered
502
89
656
553
97
116
0
100
200
300
400
500
600
700
800
900
1.000
2006 2008
US
$ M
illio
n .
Debt Cash
CAPEX (Aircraft only) and Financing Structure, 2006 - 2008
2007
22
Contents
• Strategic Overview
• Financial Overview
• Fuel Strategy & Fleet Plan
• Outlook
23
South American Air Transport Market
• LAN has domestic operations in Chile, Argentina and Peru• Of these, Argentina is the largest market in terms of both domestic andinternational traffic
0,2 0,6
0,3 0,9
0,4 1,5
0 0,5 1 1,5 2
US$ Million
Peru
Chile
Argentina
Domestic International
Revenues per Market
2,2 2,1
2,9 3,0
5,1 5,1
0 2 4 6 8 10 12
Passenger (Million)
Peru
Chile
Argentina
Domestic International
Passengers per Market
US$ Billion
24
Opportunities: LAN Argentina
• Accelerated growth plans given positive results and current opportunities
• First international flight (Miami) launched August 06
• Replacement of B737 fleet for new A320
• Load Factors over 70%
• Slightly lower-than-expected yields
• Accelerated growth plans given positive results and current opportunities
• First international flight (Miami) launched August 06
• Replacement of B737 fleet for new A320
• Load Factors over 70%
• Slightly lower-than-expected yields
Buenos Aires
IguazúCordoba
Mendoza
Rio Gallegos
Bariloche
Miami
LAN Argentina
Destinations
LAN Argentina
Destinations
Com. Rivadavia
Sao Paulo
Domestic market share 9%Domestic market share 9%
Current Routes
25
Projected Routes
26
Consolidation: LAN Peru
• Consolidation of Peruvianoperations
• 11 domestic destinations
• Increasing frequencies ofinternational flights
• Change A320 fleet for newA319 – more efficient for thePeruvian market
• Consolidation of Peruvianoperations
• 11 domestic destinations
• Increasing frequencies ofinternational flights
• Change A320 fleet for newA319 – more efficient for thePeruvian market
LAN Peru DestinationsLAN Peru Destinations
Lima
Santiago
Miami
QuitoGuayaquil
Buenos Aires
Sao Paulo
Caracas
Bogotá
México
Los Angeles
Chiclayo
Trujillo
Piura
Arequipa
Tacna
Iquitos
Tarapoto
Cuzco
Puerto Maldonado
Juliaca
DomesticInternational
New York
Santa cruz
La Paz
Santiago
Projected
Domestic market share 63%
International market share 29%
Domestic market share 63%
International market share 29%
New Regional Model
• New model will be applied to domestic operations in Chile, Argentina and Peru as well as narrow-bodyregional operations• Implementation will begin during 2006 - 2007 to be fully completed by early 2008
Aircraft utilization• 11.5 hours
• Increased average flight leg, more point-to-point
• Longer days, less peaks
• Overnight flights
• Faster turnarounds
Aircraft utilization• 11.5 hours
• Increased average flight leg, more point-to-point
• Longer days, less peaks
• Overnight flights
• Faster turnarounds
Sales & Distribution• Internet penetration 60%Sales & Distribution• Internet penetration 60%
Product/Service level• Light Service On Board
• 70% self check-in at airport
Product/Service level• Light Service On Board
• 70% self check-in at airport
Fleet• Single family fleetA320 family
• Densification ofaircraft
Fleet• Single family fleetA320 family
• Densification ofaircraft
DemandStimulation
• Reduce / simplify fares to increase demand by approx 40%
DemandStimulation
• Reduce / simplify fares to increase demand by approx 40%
Costs• 1% base comissions
• 30% reduction in overheadcosts
Costs• 1% base comissions
• 30% reduction in overheadcosts
27