September 2009
NAVIGATING CHALLENGING OPERATING CONDITIONS
Andres del Valle, LAN Airlines
This presentation may include forward-looking comments regarding the Company’s business outlook and
anticipated financial and operating results. These expectations are highly dependent on the
economy, the airline industry, commodity prices, international markets and external events.
Therefore, they are subject to change and we undertake no obligation to publicly update or revise
any forward looking statements to reflect events or circumstances that may arise after the date of
this presentation. More information on the risk factors that could affect our results are contained on
our Form 20-F for the year ended December 31, 2008.
Information, tables and logos contained in this presentation may not be used without consent from LAN
I. CURRENT ENVIRONMENT: WEATHERING
THE STORM
II. BUSINESS INITIATIVES
III. FLEET PLANNING: LOW COST &
FLEXIBILITY
Contents
Passenger Traffic Growth (%RPKs)
-3%
12%
9%
Aug 08
1%
16%
5%
Jul 08
2%
11%
4%
Jun 08 Sep 08
6%
8%
-10%
Jan 09
3%
11%
-6%
Dec 08
3%
11%
-5%
Nov 08
3%
10%
-5%
Oct 08
3%
11%
-1%
Jul-09
-3%
7%
2%
Jun-09
4%
9%
12%
-9%
-7%
May 09
5%
Apr 09
13%
20%
-3%
Mar 09
2%
8%
-11%
Feb 09
0%
10%
4%
May 08
9%
14%
6%
Apr 08
5%
8%
3%
Mar 08
11%
14%
6%
Feb 08
11%
16%
9%
Jan 08
10%
15%
4%
Lan International
Lan Total
Industry
Note: Industry figures as published by IATA
3
Passenger Traffic Statistics LAN showed 11% traffic growth in the first half 2009
-1%
May 08
12%
1%
Apr 08
11%
4%
Mar 08
10%
3%
Feb 08
12%
6%
Jan 08
9%
5%
Jul-09
-11%-10%
Jun-09
-16%-17%
May 09
-17%-17%
Apr 09
-25%
-22%
Mar 09
-24%
-21%
Feb 09
-20%
-22%
Jan 09
-16%
-23%
Dec 08
-16%
-23%
Nov 08
-2%
-14%
Oct 08
9%
-8%
Sep 08
9%
-8%
Aug 08
14%
-3%
Jul 08
16%
-2%
Jun 08
14%
Lan
Industry Cargo Traffic Growth (%RTKs)
4
Cargo Traffic StatisticsLAN Cargo traffic declines in line with the industry
Note: Industry figures as published by IATA
7%
12%
19%
34%
41%
21%
16%
7%
8%
11%
6%
88%
90%
73%
79%
86%
80%
70%
60%
59%
53%
3%
4%
6%
6%
22%
29%
9%
6%
19%
12%
3% 64%
Delta
American
Iberia
Qantas
BA
Air France-KLM
Singapore
Cathay
Korean Air
LAN
EVA
Cargo Others Passenger
LAN Business Model: Distinct blend enhances returns and reduces risk
Revenue Mix, Selected Companies
79%
14%
65%
BELF w/o
Cargo
Cargo
Contribution
BELF w/
CargoL
oa
d F
acto
r
Note: BELF = Break-even load factor
BELF Differential for passenger + cargo routes
(LTM Jun09)
Passenger and Cargo Combination
– Lower Break-Even Load Factors
– Increased diversification
Source: Companies - Last Full Year reported / LAN as of Dec08.5
BELF w/o
Cargo
Cargo
Contribution
BELF w/
Cargo
6
LAN's Regional Strategy
LAN Airlines
Santiago, 1929
LAN Peru
Lima, 1999
LAN Ecuador
Guayaquil, 2003
LAN Argentina
Buenos Aires, 2005
Mexico, 1997
Santiago 1995/
Miami, 2001
Colombia, 2009
Brazil, 2000
•Sources: DGAC Chile, DGAC Peru, Undersecretary of Transportation Argentina, DAC Ecuador, LAN Estimates.
• International market shares for December 2008; Domestic market shares for July 2009.
Leading Presence in South American Markets
Peru
International: 39%
Domestic: 89%
Argentina
International: 17%
Domestic: 26%
Chile
International: 50%
Domestic: 80%
Ecuador
International: 27%
Domestic: 14%
Buenos AiresSantiago
Guayaquil
Lima
Cargo
Latin America 40%
LAN’s Passenger Operations are Geographically Diversified
International
(Long Haul)
Regional
Dom. Chile
Dom. Perú
Dom. Argentina
Diversified Passenger Capacity(% ASKs)
1H091998
Dom. Chile
International
2003
Regional
International
(Long Haul)
Dom. Perú
Dom. Chile
8
Dom. Ecuador
0.2%
Growth in ASK (1H09 vs. 1H08): +11%International (Long Haul) +2%Regional +8%Chile domestic +11%Peru domestic +33%Argentina domestic +89%
28%
72%
3%
18%59%
20% 9%
8%
24%
46%13%
LAN Operates with High Efficiency Levels
EBITDAR Margin Industry comparison
Source: LAN, COPA, Singapore, US & European Companies LTM June 09; TAM & GOL LTM March 09
1.5%4.7% 4.9% 6.1% 7.5% 8.2%
13.1% 14.8% 16.4% 17.5%
22.7%26.3%
0%
5%
10%
15%
20%
25%
30%
Amer
ican
Unite
d
Iber
ia
AirF
ranc
e
British
Cont
inen
tal
GOL
TAM
Sing
apor
e
Ryan
air
LAN
COPA
Eb
itd
ar
Mg
. (%
)
9
I. CURRENT ENVIRONMENT: WEATHERING
THE STORM
II. BUSINESS INITIATIVES
III. FLEET PLANNING: LOW COST &
FLEXIBILITY
Contents
1. Promotions
2. Network /
Itineraries
3. Efficiency
Passenger Business Initiatives
Growth in markets less impacted or poorly served (Europe-Peru, Lima-Cartagena and Peru)
Shift capacity according to demand patterns (domestic vs. international; leisure vs. business)
Change in schedules to access new markets
Postponement of new routes.
Redefine mix of sales channels
12
New Premium Business cabin and modern on boardentertainment system
100% of Boeing 767 and Airbus A340 fleet reconfiguredby 2008 (total of 30 aircraft)
Investment of US$120 million
International recognition
Passenger Initiatives: Service
New Long Haul Cabins
13
Short haul fleet (A320 family) 100% renovated as of May 2008
New leather seats, with greater recline as well as comfort
New Premium Economy class for regional flights, launched in September 2008
Passenger Initiatives: Service
Renovation of Short Haul Fleet
Cargo Business Initiatives
1. Fleet
Utilization
3. Customer
Relations
Decrease of wet lease capacity (from 18% of total freighter capacity in 2008 to 7% in 2009)
Evaluating charter operation
Domestic operation in Brazil
Launch of new cargo subsidiary in Colombia
2. Operational
EfficienciesRenegotiate contracts, handling efficiencies
Focus on customer service
Redefine sales channel and call center process
1. Operating Costs
3. General Savings
Improvement of operating processes/ increase efficiencies
Freezing of new recruitment
Delay of non-core business projects
2. Renegotiations
with suppliers
Contracts renegotiations with third party suppliers
Reducing external services, business trips, employees transportations, etc
Reducing marketing costs.
Cost Savings Initiatives
0.0
10.0
20.0
30.0
40.0
50.0
60.0
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09
CATK CATK ex-Fuel
CATK
US
$ c
en
ts/A
TK
16
Winglets will be installed on all of LAN's B767 fleet (9 freighters and 28 passenger aircrafts)
Project to be completed in August 2010
Represents an investment of US$ 70 million.
On average, 5% more fuel efficiency on long haul flights, as well as 320 miles additional autonomy
Winglets Project
Other Initiatives: Fleet Efficiency
Regional Expansion:New Domestic Operation LAN Ecuador
New operation started in April 2009 operating
with 2 A318 aircraft.
LAN will provide the best connectivity between
domestic and international markets.
Authorization granted to operate the following
routes:
Guayaquil-Quito-Guayaquil
Guayaquil-Cuenca-Guayaquil
Quito-Cuenca-Quito
Quito/Guayaquil-Galapagos-
Guayaquil/Quito
Lan Ecuador Destinations Highlights
Cuenca
Quito
Guayaquil
Galápagos
17
18
New Colombian affiliate started
operations in March 2009
Colombia is the largest air cargo
market in Latin America in terms of
exports to USA (Estimated volume of 200
thousand tons annually)
This new operation will increase
connectivity between Colombia and the
rest of the region, USA and Europe
Regional Expansion:New Cargo Subsidiary in Colombia
BogotáMedellín
Miami
During March 2009, ABSA began
domestic operations in Brazil
Sao Paulo – Manaus is the first
domestic route operated by ABSA
Domestic operations in Brazil will
consolidate LAN Cargo's network in the
region
Regional Expansion:New Domestic Cargo Operation in Brazil
MANAUS
SAO PAULO
Arrived during April and May
2009
Most modern freighter in the
region
Competitive advantage in
CATK v/s competitors
New B777 Freighter to Strengthen European Cargo Operation
MIA
AMS
FRA
VCP
EZESCL
UIO
BOG
LIM
CCS
1H09
1H08Pax Yield (US$ cents)
8,410,2
-17,6%
Pax Capacity (mill ASK)
18.78416.834
11,6%
Pax Load Factor
75,9%76,3%
-0,4 pp.
Passenger Business Revenue Decreases 8.5% Traffic growth of 11.0% offset by 17.6% decrease in yields.
Pax Revenue (MM of US$)
1.198,51.310,1
-8,5%
1H09
1H08Cargo Yield (US$ cents)
34,244,4
-23,0%
Cargo Capacity
(mill ATK)
1.7742.015
-11,9%
Cargo Load Factor
65,5%72,1%
-6,6 pp.
Cargo Business Revenue Decreases 38.4%Traffic decrease of 20.0% compounded with a 23.0% decrease in yields.
Cargo Revenue
(MM of US$)
397,4
645,3
-38,4%
0
50
100
150
200
250
300
350
400
0%
5%
10%
15%
20%
25%
30%
1H09 Highlights
* EBITDAR = Op income + depreciation & amortization + aircraft rentals23
US$ 110.6 million realized fuel hedging losses in 1H09
US$ 30.7 million realized fuel hedging gain in 1H08
Op./EBITDAR Margin
Op./EBITDAR Margin ex Fuel Hedge
9.2%10.0%
15.8%
19.4%20.1%
17.9%
26.8%
US
$ M
illi
on
s
Operating Income &Operating Margin
EBITDAR &EBITDAR Margin
1H08
11.5%
1H09 1H08 1H09
% M
g235
153
336396
19% 20%
10%
10%
10% 10% 10%
28%
2%
0%
10%
20%
30%
40%
50%
60%
% T
ota
l C
on
su
mp
tio
n H
ed
ge
d
20%
19%
10%
Fuel Hedging
Fuel Hedging Program 2009-2010
3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
ZCC US$ 140-93/Bbl 19% 20% 10% - - -
Call Option US$ 70/Bbl 19% - - - - -
Collar US$ 70-55/Bbl - 28% - - - -
Collar US$ 80-50/Bbl - - 10% - - -
Swap US$ 64/Bbl 2% - - - - -
Swap US$ 79/Bbl - - 10% 10% 10% 10%
Total Hedge 40% 48% 30% 10% 10% 10%
I. CURRENT ENVIRONMENT: WEATHERING
THE STORM
II. BUSINESS INITIATIVES
III. FLEET PLANNING: LOW COST &
FLEXIBILITY
Contents
Increasing Liquidity to 18% of Revenues
2Q09 Cash Balance: US$700 million, representing 18% of LTM revenues.
The Company raised US$250 million in bilateral loans in the Chilean market during first half of 2009.
LAN is one of the few investment grade airlines in the world. Fitch has recently affirmed the company's rating at “BBB”.
Capex 2009 already committed at attractive interest rates, with EX-IM guarantees.
Liquidity
26
350
400
450
500
550
600
650
700
8
6
4
2
18
16
14
12
10%
0Jun 09
700
18%
Mar 09
477
11%
Dec 08
472
9%
Cash/Sales
US$MM
50 53 59 68 68 68
26 2728
30 33 345 5
5
99
9
10 10
10
2 3
3
32
5
5
0
30
60
90
120
150
2008 2009 2010 2011 2012 2013-2019
Boeing 777-200FCargo
Boeing 767-300FCargo
Airbus 340-300
Boeing 787
Boeing 767-300ER
AirbusA320/A319/A318
Fleet Plan
Average Fleet Age (Jun 09): 5.4 years
CAPEX 2009 2010 2011 2012 2013-19
Aircraft 351 408 705 433 3.380
Non Aircraft 165 124 109 84
+7
+7+12
9096
103
115119
+4
147
Cargo
Passenger
Long Haul
Passenger
Short Haul
27
Fleet Flexibility
Total
Aircraft
Arrivals Expirations (*) Financial
Leasing
end
Flexibility
per year
(%)
Acumulated
Flexibility
(%)
2009 32 2 1 0 3%
2010 33 1 3 4 21% 24%
2011 35 2 3 1 11% 34%
2012 38 3 3 1 11% 42%
(*) Expirations include JOL Options
Passenger Long Haul Fleet Flexibility (Includes B767 and A340)
28
6 B767 orders for 2011 and 2012 may be converted into freighters at LAN's option
In Conclusion: LAN has the flexibility to adjust to a challenging environment
29
Fleet Staggered lease expirations and unencumbered assets as of 2010
Operating Costs Initiatives to improve operating processes/ increase efficiencies
Network / Itineraries
Ability to redeploy capacity according to demand patterns, based on geographical diversification in cargo and passenger ops
FinancingLAN has a strong Balance Sheet and Investment Grade rating, keeping access to multiple financing options
September 2009
NAVIGATING CHALLENGING OPERATING CONDITIONS
Andres del Valle, LAN Airlines
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