6 th Annual FAA International Aviation Safety Forum 6 th Annual FAA International Aviation Safety Forum Safety in times of crisis, a permanent challenge Enrique Rosende Director of Safety, LAN Airlines September 10, 2009

6th Annual FAA International Aviation Safety Forum Safety in times of crisis, a permanent challenge Economic and aviation policy in Chile Role of the authorities in the region LANs business strategy Economic crisis and its consequences Existing safety programs Future challenges

6th Annual FAA International Aviation Safety Forum Safety in times of crisis, a permanent challenge Economic and aviation policy in Chile Role of the authorities in the region LANs business strategy Economic crisis and its consequences Existing safety programs Future challenges

The pillars of Chilean economic policy: I. Economy open to international trade & commerce…

…Focused on becoming a goods and services distribution center & gateway for Asian imports into the region The pillars of Chilean economic policy:

II. Commercial agreements with main economies worldwide These nations represent 87% of the world total GDP USA Canada Bolivia Panama Mexico Colombia Cuba Ecuador Venezuela EU Norway Switzerland India Brunei Singapore Australia New Zealand China South Korea Japan The pillars of Chilean economic policy:

Source: Banco Central de Chile The pillars of Chilean economic policy: III. Export oriented economy +11% Compound Annual Growth Rate

Aviation Policy in Chile OBJECTIVE: To achieve the largest number of aviation services, with the best quality and efficiency, and at the lowest cost THIS IS ACHIEVED THROUGH: Non regulated fares Limited intervention of the authorities Free access to markets

No legal barriers to entry. No limits regarding property or control of the airline. No subsidies. Bilateral agreements with 45 countries. Of these, 35 are open to 3rd and 4th freedoms for Chile and 7 are open skies including cabotage. Chile has an Open Skies Policy

Airport Concessions Investment of US$ million

6th Annual FAA International Aviation Safety Forum Safety in times of crisis, a permanent challenge Economic and aviation policy in Chile Role of the authorities in the region LANs business strategy Economic crisis and its consequences Existing safety programs Future challenges

Accident Rate is Higher in Regions Without a Common Norm Source: IATA Safety Report

Total Fatalities - Last 10 Years 95% of accidents occur in passenger aircraft

Administrative and Regulation Issues in Europe and North America Security Efficiency Europe 50 Countries 30% of world traffic SINGLE REGULATION North America 3 Countries 45% of world traffic SINGLE REGULATION

Administrative and Regulation Issues in Latin America 22 Countries 7% of world traffic SEVERAL REGULATIONS

6th Annual FAA International Aviation Safety Forum Safety in times of crisis, a permanent challenge Economic and aviation policy in Chile Role of the authorities in the region LANs business strategy Economic crisis and its consequences Existing safety programs Future challenges

Safety Efficiency SAFETY: AN ESSENTIAL AND NON NEGOTIABLE VALUE Improvement Warmth

18 LAN's Regional Strategy – Passenger Hubs Santiago 1929 Lima 1999 Guayaquil 2003 Buenos Aires 2005

LAN Business Strategy Passenger Operations – Low cost model for domestic markets Lower Fares -20% Lower Costs -30% More Capacity +20% More seats: More direct flights: 70% Higher aircraft utilization: 12 hrs More Passengers +40% New fare structure Discounts of up to 35% Demand stimulation Load factor: 75% Fuel: Modern & fuel efficient fleet Maintenance: Longer flight leg Sales costs: Internet penetration >50% Self check in, OBS, others

20 LAN's Regional Strategy – Cargo Hubs

LAN Business Strategy Cargo Operations Source: Boeing World Air Cargo Northbound Fish, flowers and vegetables dominate Northbound Flows Consumer electronics, machinery, spare parts and automotive parts dominate Southbound Flows Operational efficiencies must be obtained by managing unbalanced flows and seasonal fluctuations Southbound 21

Sources: DGAC Chile, DGAC Peru, Undersecretary of Transportation Argentina, DAC Ecuador, LAN Estimates. * International market shares for December 2008; Domestic market shares for June Leading Presence in South American Markets Peru International: 39% Domestic: 90% Argentina International: 17% Domestic: 28% Chile International: 50% Domestic: 81% Ecuador International: 27% Domestic: 13% Buenos Aires Santiago Guayaquil Lima 22 Cargo Latin America 40%

Solid Revenue Growth CAGR 24% CAGR 1% CAGR 20% Operating Revenues 1993 – LTM Jun 09

Consistent Profitability Despite Industry Crises Operating Income and Net Income 1993 – LTM Jun 09 Operating Income Net Income (US$ millions) Recession 9/11 & Argentine Crisis Increasing Fuel Prices LAN Airlines has been consistently profitable under the current management

LAN Consistently Receives International Recognition Best South American Airline Best Latin American Airline Best Latin American Airline Best Airline in South America, Central America and Caribbean Best South American Airline Airline Business Strategy Awards – Executive Leadership 2009

LAN's Fleet – September 2009 Average fleet age of 5.4 years Boeing Airbus Airbus Airbus Airbus Boeing 767-F 9 Boeing 777-F 2 PASSENGER CARGO

LAN Continues to Invest in Fleet Expansion and Renewal Total Projected Investment of US$5.3 Billion ( ) Cargo Aircraft Passenger Aircraft CAPEX (US$ millions) ,380

6th Annual FAA International Aviation Safety Forum Safety in times of crisis, a permanent challenge Economic and aviation policy in Chile Role of the authorities in the region LANs business strategy Economic crisis and its consequences Existing safety programs Future challenges

Strong Impact in Cargo and Passenger Traffic Source: IATA Passenger Traffic Growth (%RPKs) Jun 09 9% Aug 08 -3% 12% 6% Sep 08 -1% 11% 3% Oct 08 -5% 10% 3% Nov 08 -5% 11% 3% Dec 08 -6% May 09 Industry Lan Total Lan International 11% 4% 15% Jan 08 9% 16% 11% Feb 08 6% 14% 11% 10% 4% 9% Mar 08 3% 8% 5% Apr 08 6% 14% 9% May 08 4% 10% 4% Jun 08 2% 11% 5% Jul 08 1% 16% -7% 3% Jan % 8% 0% Feb % 8% 2% Mar 09 -3% 20% 13% Apr 09 -9% 12% 5%

Source: IATA -16% -17% 5% 9% Jan 08 6% 12% Feb 08 3% 10% Mar 08 4% 11% Apr 08 1% 12% May 08 -1% 14% Jun 08 -2% 16% Jul 08 -3% 14% Aug 08 -8% 9% Sep 08 -8% 9% Oct % -2% Nov % -16% Dec % -16% Jan 09Jun % Feb % -24% Mar % Apr % May 09 Industry Lan -25% Cargo Traffic Growth (%RTKs) Strong Impact in Cargo and Passenger Traffic

IATA Projections Actual 8, ,4% 8, ,0% 8, ,3% 3, ,8% -13, ,6% -11, ,5% -7, ,9% -5, ,0% -4, ,9% ,9% 12, ,3% -10, ,4% 2009E 5,6% -6% -4% -3% -5% 2% 3% 4% 5% 6% -1% -2% 1% 0% Source: IATA Net Result (US$bn) Operating Margin (%) The Industry Worldwide is Facing Significant Losses

6th Annual FAA International Aviation Safety Forum Safety in times of crisis, a permanent challenge Economic and aviation policy in Chile Role of the authorities in the region LANs business strategy Economic crisis and its consequences Existing safety programs Future challenges

Safety Efficiency SAFETY: AN ESSENTIAL AND NON NEGOTIABLE VALUE Improvement Warmth

LANs Operational Safety, Quality and Environment Policy Motivates and requires compliance with safety standards. Safety is everyones responsibility, and starts with the CEO. Encourages safety reports. Mistakes are an opportunity for improvement. Safety goals and objectives are well defined, measured and rewarded.

Industry and Internal Analysis Risk and Change management analysis LOSA (Line Operations Safety Audit) Operational Security audit A & D AVSIS (Aviation Safety Information System) Operational Security Investigations FAST (Fatigue Avoidance Scheduling Tool) FDM (Flight Data Management) LAN's Safety Management System process Proactive Predictive Reactive

Flight Data Management: Investment in Technology to monitor all flights since 2003

6th Annual FAA International Aviation Safety Forum Safety in times of crisis, a permanent challenge Economic and aviation policy in Chile Role of the authorities in the region LANs business strategy Economic crisis and its consequences Existing safety programs Future challenges

Future Challenges Cooperation between Operators and Authorities Operators' Creativity and Innovation Authorities' Flexibility and Stringency

Efficiency Service Safety Aeronautical Regulation Lan Businnes Estrategic

6 th Annual FAA International Aviation Safety Forum 6 th Annual FAA International Aviation Safety Forum Safety in times of crisis, a permanent challenge Enrique Rosende Director of Safety, LAN Airlines September 10, 2009