Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-

By means of this letter and in accordance with that established by General Character Norm No. 30 of this Superintendence, attached hereto are three copies of the Annual Report of Lan Airlines, S.A. signed by the Company’s directors.

Con fecha 9 de diciembre de 2005, las filiales LAN Pax Group S.A. e Inversora Cordillera S.A. participan de un aumento de capital en LAN Argentina S.A. (ex - Aero 2000 S.A.) por MUS$ 3.084, enterando el 25% del aporte en enero 2006, manteniendo sus porcentajes de participación del 2,45% y 95% respectivamente.

Con fecha 16 de noviembre de 2005, se constituyó la sociedad Siventas S.A., donde las filiales LAN Pax Group S.A. e Inversora Cordillera S.A. tienen una participación de un 95% (11.400 acciones) y 5% (600 acciones) equivalente a MUS$ 3,8 y MUS$ 0,2 respectivamente, ambas sociedades pagaron el 25% del total del aporte.

Con fecha 14 de abril de 2005, la filial Inversora Cordillera S.A. adquirió el 95% de participación de la sociedad Aero 2000 S.A. (actualmente LAN Argentina S.A.). Asimismo, LAN Pax Group S.A. adquirió directamente el 2,45% de la referida sociedad. Esta adquisición se efectuó mediante pago de MUS$ 725, y generó un menor valor de MUS$ 717.

Con fecha 13 de abril de 2005, la filial LAN Pax Group S.A. adquirió el 49% de las acciones de la sociedad Inversora Cordillera S.A., por un monto de MUS$ 2, equivalentes a 5.880 acciones. Esta operación generó un menor valor de MUS$ 1.

Con fecha 7 de abril de 2005, LAN Airlines S.A. participó del aumento de capital de su filial LAN Pax Group S.A., por un monto de MUS$ 355 equivalentes a 510 acciones, aumentando de esta forma su porcentaje de participación de un 99% a un 99,83607%.

El menor valor generado en la filial LAN Pax Group S.A. ascendente a un total de MUS$ 1 fue ajustado, al 31 de diciembre de 2005, a MUS$ 4.815, en base a lo descrito en Nota 2 l) y m).

2.- LAN Cargo S.A.

Con fecha 28 de abril de 2006, la filial LAN Cargo S.A realizó una distribución de dividendos por un monto de MUS$ 5.934.

Con fecha 4 de noviembre de 2005, la Sociedad adquirió 15.000 acciones de su filial LAN Cargo S.A., aumentando su porcentaje de participación de un 99,86462% a un 99,88875%.

Con fecha 29 de abril de 2005, la filial LAN Cargo S.A. realizó una distribución de dividendos por un monto de MUS$ 9.007.

3.- LAN Chile Investments Limited

Con fecha 30 de diciembre de 2005, LAN Airlines S.A vendió una acción de su filial LAN Chile Investments Limited, disminuyendo de esta forma su porcentaje de participación de 100,00% a 99,99%. Esta operación generó una utilidad por venta de acciones de MUS$ 1.

4.- Andes Airport Services S.A . (Ex - Servicios Aeroportuarios LAN Chile S.A.)

Con fecha 3 de agosto de 2006, LAN Airlines S.A. vendió el 2% de participación de su filial Andes Airport Services S.A. (ex - Servicios Aeroportuarios LAN Chile S.A.) a su filial LAN Pax Group S.A., por un monto de US$ 117,68 equivalente a una acción.

5.- LAN Courier S.A.

Con fecha 15 de diciembre de 2006, LAN Airlines S.A. vendió el 99,99% de participación de su filial LAN Courier S.A. a sus filiales LAN Cargo S.A. e Inversiones LAN S.A., 99,98% y 0,01% respectivamente, por un monto total de MUS$ 5.638, equivalente a 8.837.860 acciones. Esta transacción generó un resultado no realizado de MUS$ 2.620.

6.- Atlantic Aviation Investments LLC.

Con fecha 29 de septiembre de 2006, se constituyó la sociedad Atlantic Aviation Investments LLC. donde LAN Airlines S.A., tiene una participación de un 1% (10 acciones), equivalente a US$ 10.

7.- Perdiz Leasing Limited

Con fecha 10 de octubre de 2006, se constituyó la sociedad Perdiz Leasing Limited donde LAN Airlines S.A., tiene una participación de un 1% (1 acción), equivalente a US$ 1.

178

La Sociedad ha estimado que el valor libro de las inversiones realizadas a contar del 1 de enero de 2004, constituyen una buena aproximación del valor justo, por tal motivo, se ha utilizado este como base para la valorización de la inversión.

d) Resultados no realizados

La Sociedad ha reconocido Resultados no realizados por:

1.- Asesorías informáticas de terceros , consistentes en el desarrollo de productos informáticos , instalación y capacitación en su uso, con las siguientes filiales:

					Resultado realizado del ejercicio
Filial	Fecha de Transacción		Resultado no realizado MUS$		2006 MUS$		2005 MUS$
Transporte Aéreo S.A.		28-nov- 03		661		156		156
Transportes LAN Chile S.A.		28-nov- 03		19		4		4
Comercial Masterhouse S.A.		28-nov- 03		15		3		3
Sistemas de Distribución Amadeus Chile S.A.		28-nov- 03		10		3		3
LAN Courier S.A.		31-dic- 03		195		46		46

Estos resultados se realizan desde abril 2004, de acuerdo a la vida útil asignada al Activo fijo que los originó.

2.- Venta de participación de su filial LAN Courier S.A.:

Resultado realizado del ejercicio

Filial

Fecha de
Transacción

Resultado
no realizado
MUS$

2006

MUS$

2005

MUS$

LAN Cargo S.A.

15-dic-2006

2.620

Este resultado se realizará a partir de enero 2007, de acuerdo a la amortización del mayor valor de inversión originado en LAN Cargo S.A.

179

e) Detalle de las inversiones

			Moneda		Porcentaje de		Patrimonio				Resultado				Resultado						Resultados			Valor contable de la
			control		participación		Sociedades				del Ejercicio				Devengado				VP / VPP		no realizados			inversión
		País de	de la	Nro. de			2006		2005		2006		2005		2006		2005		2006	2005	2006		2005	2006	2005
RUT	Sociedad	origen	inversión	acciones	2006	2005	MUS$		MUS$		MUS$		MUS$		MUS$		MUS$		MUS$	MUS$	MUS$		MUS$	MUS$	MUS$

93383000- 4	LAN Cargo	Chile	Dólar	62.131.694	99,89394	99,88875	255.366		158.421		102.888		19.802		102.779		19.780		255.098	158.245	(2.620	)	-	257.718	158.245
	S.A.
96763900-1	Inmobiliaria	Chile	Dólar	100	99,01000	99,01000	7.838		6.115		1.724		1.831		1.707		1.813		7.760	6.054	-		-	7.760	6.054
	Aeronáutica
	S.A.
96801150-2	LAN Courier	Chile	-	-	-	99,99000	-		5.881		-		1.752		2.395		1.752		-	5.880	-		-	-	5.880
	S.A.
96575810- 0	Inversiones	Chile	Dólar	345	99,71000	99,71000	3.084		6.913		(3.828	)	(963	)	(3.817	)	(960	)	3.075	6.892	-		-	3.075	6.892
	LAN S.A.
Extranjera	LAN Perú S.A.	Perú	Dólar	64.286	49,00000	49,00000	6.465		4.177		2.288		1.911		1.121		936		3.168	2.047	-		-	3.168	2.047
96921070-3	Austral	Chile	-	352	20,00000	20,00000	4.431		4.397		864		867		173		173		886	879	-		-	886	879
	Sociedad
	Concesionaria
	S.A.
78074340-9	Sistemas de	Chile	Dólar	919	50,00000	50,00000	1.826		1.561		265		77		132		38		913	780	-		-	913	780
	Distribución
	Amadeus
	Chile S.A .
96847880-K	Lufthansa LAN	Chile	-	50	50,00000	50,00000	1.217		1.142		392		304		196		152		609	571	-		-	609	571
	Technical
	Training S.A .
96967400-9	LAN Card S.A.	Chile	Dólar	99	99,00000	99,00000	527		189		339		143		336		142		522	187	-		-	522	187
96778310-2	Concesionaria	Chile	-	167	16,70000	16,70000	1.499		701		808		959		135		160		250	117	-		-	250	117
	Chucumata
	S.A.
96518860- 6	Comercial	Chile	Dólar	10.059	99,99000	99,99000	38		87		(49	)	(138	)	(49	)	(138	)	38	87	-		-	38	87
	Masterhouse
	S.A.
96969670-3	LAN Cargo	Chile	Dólar	99	99,00000	99,00000	-		3		-		(2	)	-		(2	)	-	3	-		-	-	3
	Group S.A.
96969690-8	Línea Aérea	Chile	Dólar	99	99,00000	99,00000	1		3		(2	)	(2	)	(2	)	(2	)	1	3	-		-	1	3
	Nacional Chile
	S.A.
96577310-K	Andes Airport	Chile	-	-	-	2,00000	-		70		-		28		5		1		-	1	-		-	-	1
	Services S.A .
96969680- 0	LAN Pax Group	Chile	Dólar	609	99,83607	99,83607	(22.001	)	(7.154	)	(14.847	)	(7.579	)	(14.823	)	(7.567	)	-	-	-		-	-	-
	S.A.
96645970- 0	Transportes	Chile	-	-	-	0,01000	-		(59	)	-		(259	)	-		-		-	-	-		-	-	-
	LAN Chile S.A.
Extranjera	LAN Chile	Islas	Dólar	9.999	99,99000	100,00000	(7.683	)	(9.124	)	1.440		1.190		1.440		1.190		-	-	-		-	-	-
	Investments	Cayman
	Limited

Total																			272.320	181.746	(2.620	)	-	274.940	181.746

Nota 13. Menor y Mayor valor de inversiones

a) Menor valor de inversiones

2006

2005

Monto amortizado

Saldo menor

Monto amortizado

Saldo menor

en el período

valor

en el período

valor

RUT

Sociedad

MUS$

93383000-4

LAN Cargo S.A.

1.810

19.004

1.810

20.814

Total

1.810

19.004

1.810

20.814

199

Hechos relevantes

Los siguientes Hechos fueron informados en carácter de esenciales a la Superintendencia de Valores y Seguros y a las Bolsas de Valores, hasta la fecha de emisión de esta memoria:

Año 2007

- Con fecha 6 de marzo de 2007 se informó que, en Sesión Extraordinaria de Directorio celebrada el día 6 de marzo de 2007, el Directorio de Lan Airlines S.A. acordó citar a Junta Extraordinaria de Accionistas para el día 5 de abril de 2007 inmediatamente a continuación de la Junta Ordinaria de accionistas de la compañía, la cual se celebrará a las 11:00 horas, para tratar las siguientes materias:

a) Dejar sin efecto el aumento de capital por 7.500.000 (siete millones quinientas mil) acciones de pago, acordado por la Junta Extraordinaria de Accionistas celebrada el día 26 de Enero de 2007.

b) Aumentar el capital social de Lan Airlines S.A. mediante la emisión de 22.090.910 (veintidós millones noventa mil novecientas diez) acciones de pago, al precio y demás condiciones que acuerde la Junta de Accionistas. Se hace presente que el Directorio de la compañía tiene la intención de colocar una parte de este aumento de capital para ser transado en mercados de valores extranjeros, a través del mecanismo de certificados americanos de depósito de acciones, también conocidos como ADRs.

c) Destinar una parte de dicho aumento de capital a planes de compensación en los términos del artículo 24 de la ley 18.046.

d) Modificar los estatutos sociales para ajustarlos a los acuerdos adoptados por la Junta.

e) Facultar al Directorio de la Sociedad para solicitar la inscripción de las acciones representativas del aumento de capital en el Registro de Valores de la Superintendencia de Valores y Seguros; proceder a su colocación; y acordar los términos de los planes de compensación mencionados anteriormente; y

f ) Adoptar los demás acuerdos necesarios para implementar los acuerdos anteriores.

1.- Con fecha 31 de enero de 2007 se informó en carácter de hecho esencial que, el Directorio de Lan Airlines S.A., en sesión del día 30 de enero de 2007, acordó poner en conocimiento público el hecho que desde el mes de septiembre de 2006, Lan Airlines S.A., actuando a través de una sociedad filial, ha concurrido a otorgar financiamientos por un monto total de aproximadamente US$ 17.100.000 (los “Créditos”) a VRG LINHAS AEREAS S.A. (“Nueva Varig”). Los Créditos son convertibles en acciones de Nueva Varig, a sola opción de Lan Airlines S.A.

Aún cuando el monto de la inversión no tiene un efecto significativo para la compañía, se ha acordado hacer pública esta información ya que, de ejercerse la opción de convertibilidad referida, Lan Airlines S.A. podría pasar a tener una participación minoritaria en la Nueva Varig.

Nueva Varig es una sociedad anónima constituida según las leyes de Brasil, la cual fue formada con el objeto de adquirir parte de los activos de la aerolínea Varig S.A., dentro del proceso de quiebra de dicha empresa, y se encuentra actualmente operando conforme a la autorización técnico operativa (“CHETA”) otorgada por la autoridad aeronáutica brasileña.

La compañía mantiene negociaciones con los accionistas de Nueva Varig para eventualmente ejercer su opción de participación en dicha sociedad mediante la capitalización de los Créditos.

De conformidad con lo anterior, el Directorio de la Sociedad ha acordado cesar el carácter de reservado del acuerdo que autorizó el otorgamiento de los Créditos, adoptado con fecha 26 de septiembre de 2006, informado oportunamente a esa Superintendencia con carácter de hecho reservado.

2.- Con fecha 30 de enero de 2007 se informó que, en la Junta Extraordinaria de Accionistas de Lan Airlines S.A., celebrada con fecha 26 de enero de 2007 y con la asistencia de accionistas que representaban un 80,1% del total de las acciones suscritas y pagadas de la Sociedad, se adoptaron los siguientes acuerdos:

- Aumentar el capital social de la cantidad de US$ 134.303.353, dividido en 318.909.090 acciones de una misma serie, nominativas, de carácter ordinario, sin valor nominal, íntegramente suscritas y pagadas, a la cantidad de US$ 206.478.253, dividido en 326.409.090 acciones, mediante la emisión de 7.500.000 acciones de pago de iguales características a las existentes, representativas en total de un aumento de capital por la cantidad de US$ 72.174.900.

- Destinar desde ya un 10% de las acciones representativas del aumento de capital aprobado, esto es, la cantidad de 750.000 acciones, a planes de compensación que el Directorio elaborará al efecto para los trabajadores de la sociedad y de sus filiales, conforme lo dispuesto en los incisos tercero, cuarto y quinto del artículo 24 de la Ley 18.046, mediante un programa de opciones para la suscripción de acciones de la Sociedad, quedando ampliamente facultado para ello.

200

Las acciones no suscritas por los accionistas en ejercicio de su opción preferente o aquellas cuyos derechos de opción preferente sean renunciando total o parcialmente, o las correspondientes a fracciones producidas en el prorrateo entre los accionistas, podrán ser destinadas por el Directorio a los mencionados planes de compensación, y el saldo de acciones que no se hayan aplicado en definitiva a este objeto, podrán ser ofrecidas entonces libremente a los accionistas o terceros.

- Facultar al Directorio de la sociedad para proceder a la determinación final del precio de colocación de las acciones de pago, de conformidad con lo que dispone el inciso segundo del artículo 28 del Reglamento de Sociedades Anónimas. En todo caso, la Junta acordó que el precio para las nuevas acciones no podrá ser inferior a la cantidad de US$ 9,62332 por acción, en su equivalente en pesos de acuerdo con el valor del tipo de cambio denominado Dólar Observado publicado en el Diario Oficial el día en que el Directorio fije el precio de colocación.

Este monto corresponde al valor promedio ponderado de cotización bursátil de las acciones de la Compañía durante los 120 días inmediatamente anteriores a la Junta, en la Bolsa de Comercio de Santiago, bolsa de Valores, esto es, la cantidad de $ 5.187,45 por acción, lo cual, al valor del tipo de cambio Dólar Observado publicado con fecha 25 de enero de 2007, corresponde a la cantidad de dólares antes indicada.

- Facultar al Directorio de la Sociedad para proceder a acordar los términos de la emisión y colocación de las acciones de pago necesarias para la materialización del aumento de capital acordado y de su suscripción y pago, y para solicitar la inscripción de dichas acciones en el Registro de Valores de la Superintendencia de Valores y Seguros y en una o más bolsas de valores autorizadas del país.

- Sustituir los artículos quinto permanente y primero transitorio de los estatutos sociales, a fin de ajustarlos a los acuerdos adoptados por la junta.

3.- Con fecha 10 de enero de 2007 se envió copia de Carta enviada con esta misma fecha a los accionistas de la sociedad, por medio de la cual se les informó sobre la convocatoria a la Junta Extraordinaria de Accionistas de Lan Airlines S.A. a celebrarse el próximo día 26 de enero de 2007 y se les acompañó un modelo del poder que podrán otorgar para hacerse representar en dicha junta.

4.- Con fecha 10 de enero de 2007 se envió copia de la publicación efectuada el 10 de enero de 2007 en el diario La Tercera, del aviso de citación a Junta Extraordinaria de Accionistas de Lan Airlines S.A.

5.- Con fecha 10 de enero de 2007 se informó que en Sesión de Directorio de la sociedad Lan Airlines S.A., se acordó citar a los señores accionistas a Junta Extraodinaria de Accionistas a celebrarse a las 11:00 horas del día 26 de Enero de 2007 en Avenida Américo Vespucio Sur 901, comuna de Renca, Santiago, con el objeto de someter a la consideración de los accionistas las siguientes materias:

a) Aumentar el capital social de Lan Airlines S.A. mediante la emisión de 7.500.000 acciones de pago, al precio y demás condiciones que acuerde la Junta de Accionistas;

b) Destinar una parte de dicho aumento de capital a planes de compensación en los términos del artículo 24 de la ley 18.046;

c) Modificar los estatutos sociales para ajustarlos a los acuerdos adoptados por la Junta;

d) Facultar al Directorio de la Sociedad para solicitar la inscripción de las acciones representativas del aumento de capital en el Registro de Valores de la Superintendencia de Valores y Seguros; proceder a su colocación; y acordar los términos de los planes de compensación mencionados anteriormente; y

e) Adoptar los demás acuerdos necesarios para implementar los acuerdos anteriores.

Año 2006

6.- Con fecha 27 de diciembre de 2006 se informó que, en Sesión Ordinaria del día 26 de diciembre de 2006, el Directorio de Lan Airlines S.A. acordó el reparto de un dividendo provisorio de US$ 0,21256 por acción con cargo a las utilidades del ejercicio 2006, el que será pagado a partir del día 18 de enero de 2007, teniendo derecho a este dividendo todos aquellos accionistas que tengan tal calidad al quinto día hábil anterior a dicha fecha.

201

7.- Con fecha 27 de diciembre de 2006 se informó que el día 26 de diciembre de 2006 el Directorio de Lan Airlines S.A. acordó citar a una Junta Extraordinaria de Accionistas a celebrarse el 26 de enero de 2007, a objeto de que se pronuncie sobre las siguientes materias:

a) Aumentar el capital social de Lan Airlines S.A. mediante la emisión de 7.500.000 (siete millones quinientos mil) acciones, al precio y demás condiciones que acuerde la Junta de Accionistas.

b) Destinar una parte de dicho aumento de capital a planes de compensación en los términos del artículo 24 de la ley 18.046.

c) Modificar los estatutos sociales para ajustarlos a los acuerdos adoptados por la Junta de Accionistas.

e) Adoptar los demás acuerdos necesarios para implementar los acuerdos anteriores.

8.- Con fecha 25 de julio de 2006 se informó que, en la Sesión Ordinaria del día 24 de julio de 2006 el Directorio de Lan Airlines S.A. acordó el reparto de un dividendo provisorio de US$ 0,15071 por acción con cargo a las utilidades del ejercicio 2006, el que será pagado a partir del día 24 de agosto de 2006, teniendo derecho a este dividendo todos aquellos accionistas que tengan tal calidad al quinto día hábil anterior a dicha fecha.

9.- Con fecha 2 de mayo de 2006 se informó que, en la Junta Ordinaria de Accionistas de Lan Airlines S.A., celebrada con fecha 28 de abril de 2006, se acordó el reparto de un dividendo definitivo de US$ 0,00578 por acción con cargo a las utilidades del ejercicio 2005, el que será pagado a partir del día 17 de mayo de 2006, teniendo derecho a este dividendo todos aquellos accionistas que tengan tal calidad al quinto día hábil anterior a dicha fecha.

10.- Con fecha 28 de abril de 2006 se informó en calidad de hecho relevante que, en Junta Ordinaria de Accionistas de Lan Airlines S.A. celebrada el día 28 de abril de 2006 se eligió a los nuevos directores de la Sociedad.

El nuevo Directorio de Lan Airlines S.A. se encuentra integrado por los siguientes directores:

1. Jorge Awad Mehech

2. Darío Calderón González

3. José Cox Donoso

4. Juan José Cueto Plaza

5. Juan Cueto Sierra

6. Ramón Eblen Kadis

7. Bernardo Fontaine Talavera

8. Andrés Navarro Haeussler

9. Sebastián Piñera Echenique

11.- Con fecha 29 de marzo de 2006 se informó, en carácter de hecho relevante, que el día 28 de marzo de 2006, el Directorio de Lan Airlines S.A. autorizó la adquisición de tres aeronaves Boeing 767-300 para ser entregadas los años 2007 y 2008. El monto aproximado de la inversión asciende a US$ 270.000.000 (doscientos setenta millones de dólares de los Estados Unidos de América).

La adquisición antes referida se suma a las ordenes por un total de doce aeronaves Boeing 767-300 informadas oportunamente mediante hecho esencial de fecha 2 de agosto de 2005.

12.- Con fecha 17 de marzo de 2006 se informó en carácter de hecho esencial que el Directorio de Lan Airlines S.A.(LAN), siguiendo una recomendación de la administración, la cual fue analizada y ratificada por los auditores independientes de la Compañía, decidió, con esta fecha, modificar la política de contabilización de los costos de mantenimiento de su flota. Este cambio de política se fundamenta en el crecimiento que han experimentado las operaciones y flota de Lan Airlines S.A.(LAN), a la vez que alinea las prácticas de la Compañía con las de los principales operadores internacionales.

La nueva política se hará efectiva en forma retroactiva desde el 1 de enero de 2006. El cambio generará un beneficio no recurrente de US$ 40,3 millones antes de impuestos, el que será reconocido como un ítem no operacional en el primer trimestre de 2006. Este beneficio se origina en la eliminación de provisiones constituidas bajo el método anterior, las cuales no serán utilizadas bajo la nueva política. La Compañía estima que este cambio de política contable tendrá un efecto positivo de aproximadamente US$ 2 millones en su resultado operacional de 2006.

202

13.- Con fecha 14 de febrero de 2006, se informó en carácter de hecho relevante que con esta fecha se presentó, en las oficinas de Miami de la filial Lan Cargo S.A., personal del gobierno de los Estados Unidos de América requiriendo información, en el marco de una investigación por Antitrust que incluye una serie de líneas aéreas de carga europeas, norteamericanas y asiáticas.

Lan Cargo S.A. ha prestado la máxima colaboración a las autoridades a cargo de la investigación, entregando todos los antecedentes que le han sido solicitados, por lo que espera que esta situación se resuelva a la brevedad.

Las gestiones realizadas corresponden a una etapa preliminar de la investigación, no existiendo formulación de cargos.

Lan Cargo S.A. y sus compañías afiliadas se encuentran operando normalmente.

14.- Con fecha 1 de febrero de 2006 se informó que, en Sesión ordinaria del día 31 de enero de 2006, el Directorio de Lan Airlines S.A. acordó el reparto de un dividendo provisorio de US$ 0,10975 por acción con cargo a las utilidades del ejercicio 2005, el que será pagado a partir del día 1 de marzo de 2006, teniendo derecho a este dividendo todos aquellos accionistas que tengan tal calidad al quinto día hábil anterior a dicha fecha.

15.- Con fecha 2 de enero de 2006, se informó que: se han implementado los siguientes cambios en la administración de Lan Airlines S.A.:

- Ignacio Cueto asumió la Gerencia General de Lan Airlines S.A., liderando los negocios de pasajeros y carga y reportando al señor Enrique Cueto, Vicepresidente Ejecutivo de la compañía.

- Armando Valdivieso asumió la Gerencia General de Pasajeros, encabezando la estructura de este negocio y reportando directamente al señor Ignacio Cueto.

- Cristián Ureta asumió la Gerencia General de Lan Cargo S.A., teniendo bajo su responsabilidad el negocio de carga y reportando directamente al señor Ignacio Cueto.

- La señora Susana Tonda, que hasta el 30 de diciembre de 2005 se desempeñaba como Vicepresidenta de Soporte y Tecnología, ha renunciado a su cargo. El cargo que la señora Susana Tonda desempeñaba no será reemplazado, siendo sus responsabilidades asumidas internamente.

Finalmente, cabe destacar que la representación legal de la compañía continúa siendo ejercida por Alejandro de la Fuente, Vicepresidente de Finanzas Corporativo de Lan Airlines S.A., tal como se informó a la Superintendencia de Valores y Seguros con fecha 1 de junio de 2005.

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Análisis razonado

Análisis comparativo y explicación de las principales tendencias.

1.	Balance General

Al cierre del ejercicio 2006, los activos totales de la Sociedad presentan un aumento de MUS$ 743.262 con respecto al mismo ejercicio anterior, lo que en términos porcentuales equivale a un 39,3%.

El Activo circulante de la sociedad aumenta en MUS$ 114.356 (24,4%) respecto al año anterior, pudiendo observarse las principales variaciones positivas en los rubros Disponible, Depósitos a plazo y Valores negociables (42,5%), Deudores por ventas (26,6 %), Documentos y cuentas por cobrar empresas relacionadas (128,3%), Existencias (17,3%) e Impuestos por recuperar (70,6%). En relación a las disminuciones, se puede mencionar que el rubro que más influye, principalmente, son Deudores varios (12,6%).

El índice de liquidez de la Sociedad muestra una disminución de un 7,8% pasando de 0,76 veces en el año 2005 a 0,70 veces en el año 2006. Los Pasivos circulantes crecieron un 34,9% mientras el Activo circulante sólo lo hizo en un 24,4%. Sin embargo, el índice que muestra la razón ácida presenta una variación positiva (5,6%) pasando de 0,19 veces en el año 2005 a 0,21 veces en el año 2006.

El Activo fijo, que asciende a MUS$ 1.214.066, presenta un aumento neto de 57,0% respecto al mismo período del año anterior, cuyo valor era de MUS$ 773.382. Esta variación se explica, principalmente, por el efecto neto entre los rubros Otros activos fijos y Maquinarias y equipos, producto de la incorporación de cuatro aeronaves A319, de cuatro aeronaves B-767, para el transporte de pasajeros, de nueve motores de repuesto flota B-737, dos motores de repuesto flota A320 y Unidades rotables para soportar la operación de la flota, por la adquisición de equipamiento computacional, equipos de apoyo terrestre, herramientas y otros; y el aumento en la Depreciación acumulada dado por la depreciación del ejercicio.

El rubro Otros activos aumenta de MUS$ 647.959 en el año 2005 a MUS$ 836.181 en el año 2006, lo cual representa un incremento del 29,0%. Las principales variaciones están explicadas por el incremento en los rubros de Inversión en empresas relacionadas (51,3%) y Documentos y cuentas por cobrar empresas relacionadas (65,7%). En relación a las disminuciones, se puede mencionar que el rubro que más influye es Otros (16,5%), dado principalmente por recuperos de anticipos de aviones, por la flota recepcionada y los traspasos al corto plazo de los anticipos por recuperar.

El Pasivo circulante de la Sociedad aumenta en MUS$ 216.999 (34,9%) con lo que cierra el ejercicio 2006 en MUS$ 837.942. La variación se explica, principalmente, por los aumentos en los rubros de Obligaciones con bancos e instituciones financieras de largo plazo - porción corto plazo (137,9%), Dividendos por pagar (93,7%), Documentos y cuentas por pagar empresas relacionadas (49,3%), Ingresos percibidos por adelantado (43,5%) y Provisiones (27,7%).

El indicador de endeudamiento de corto plazo de la Sociedad aumenta en un 8,3% pasando de 1,24 veces en el año 2005 a 1,34 veces en el año 2006 y su participación sobre la deuda total disminuyó en un 6,7%, pasando de 44,7% en el año 2005 a 41,7% en el año 2006.

El Pasivo a largo plazo presenta un aumento de MUS$ 402.656 (52,5%), con lo que cierra el ejercicio 2006 en MUS$ 1.169.529. Esta variación se explica, principalmente por el aumento en el rubro Obligaciones con bancos e instituciones financieras de largo plazo (152,2%), producto de la obtención de financiamiento para la compra de aeronaves. Las principales disminuciones están dadas por los rubros Provisiones largo plazo (58,6%), Otros pasivos a largo plazo (16,8%) y Documentos y cuentas por pagar empresas relacionadas (100,0%).

Al cierre del ejercicio 2006, el 96,0% de las Obligaciones con bancos e instituciones financieras que presenta la Sociedad, están afectas a tasas de interés fijas, considerando los contratos futuro en esta materia.

El indicador de endeudamiento de largo plazo de la Sociedad, aumenta en un 22,4% pasando de 1,53 veces en el año 2005 a 1,87 veces en el año 2006, y su participación sobre la deuda total aumentó en un 5,4%, pasando de 55,3% en el año 2005 a un 58,3% en el año 2006.

Se puede observar que la Sociedad no presenta deuda bancaria de corto plazo.

El indicador de endeudamiento total sobre el patrimonio de la Sociedad aumenta en un 16,1% pasando de 2,76 veces en el año 2005 a 3,21 veces en el año 2006.

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La variación del Patrimonio se explica por los resultados obtenidos durante el ejercicio 2006, por la distribución de dividendos definitivos con cargo a resultados del año 2005 y por la distribución de dividendos provisorios.

2. Estado de Resultados Individual

La utilidad neta al 31 de Diciembre de 2006 alcanza a MUS$ 241.300, lo que representa una variación de MUS$ 94.699, equivalentes a un 64,6% con respecto al ejercicio del año anterior. El significativo aumento en los niveles de rentabilidad es gracias a un modelo de negocios distintivo, una operación eficiente y una sólida posición financiera. El resultado operacional alcanza a MUS$ 202.206 que comparado con el ejercicio del año anterior registró un aumento de 58,5%, equivalentes a MUS$ 74.649. Por otra parte, el resultado no operacional mostró una mejora de MUS$ 30.278 en el ejercicio 2006 en relación con el resultado positivo de MUS$ 44.055 del ejercicio anterior.

Los ingresos de explotación aumentaron un 8,7% con respecto al ejercicio anterior, alcanzando a MUS$ 1.930.196. Esta alza se debe al aumento de 1,0% en los ingresos de pasajeros, de 11,4% en los ingresos de carga y a un crecimiento de 37,6% en el rubro otros ingresos.

Los ingresos de carga aumentan en 11,4% lo que equivale a MUS$ 71.015. Este aumento se debe, principalmente, a mejores tarifas como también a un aumento en las toneladas vendidas que reflejan una mejora global del mercado. Los principales orígenes que marcaron diferencias por el aumento en sus ingresos son los mercados exportadores de Estados Unidos, Brasil y Ecuador. Adicionalmente, los yields aumentaron producto del traspaso a tarifa de venta del alza en el precio de los combustibles.

Finalmente, el ítem otros ingresos se incrementa en MUS$ 73.555 equivalentes a 37,6% de variación, producto, principalmente, de un aumento en el arriendo de aviones a otras compañías del grupo.

Los costos operativos, que corresponden a los costos de explotación más los gastos de administración y ventas, ascienden en el ejercicio 2006 a MUS$ 1.727.990 lo que comparado con el ejercicio del año anterior, representa un aumento de MUS$ 79.363 equivalentes a un 4,8%. La variación de los principales conceptos se explica de la siguiente manera:

a) El gasto en combustible aumenta en MUS$ 21.834 lo que equivale a un 5,3% de incremento con respecto al ejercicio del año anterior. Este mayor costo se explica, principalmente, por el alza del precio internacional del combustible.

b) Las comisiones reflejan un aumento de MUS$ 38.642 equivalentes a un 14,3% de variación. Este aumento se debe, principalmente, al aumento en el tráfico de carga.

c) Los costos de remuneraciones aumentan un 16,3% lo que equivale a MUS$ 34.805. Este aumento se explica, principalmente, por un menor tipo de cambio sobre las remuneraciones denominadas en moneda local y a un aumento por bonos de desempeño.

d) El costo de arriendo de aviones aumenta en MUS$ 5.626 lo que representa un 5,4% de variación.

e) Los gastos de aterrizaje y otras rentas aumentan en MUS$ 23.435 lo que representa un 8,4% de variación con respecto al año 2005, este efecto se explica, principalmente, por el mayor gasto en compras de espacio, y con el aumento en los costos de handling debido a una mayor operación.

f ) El item mantenimiento presenta mayores costos por MUS$6.793 lo que representa un 6,1% de variación.

g) Los gastos de depreciación y amortización aumentaron en un 47,8%, lo que equivale a MUS$ 27.478, esto debido a la incorporación de cuatro aviones a la flota B767 y cuatro a la flota A319, así como también por el cambio de criterio en la contabilización de los costos de mantenimiento de fuselaje y motores de aviones propios.

El resultado no operacional registró una utilidad neta de MUS$ 74.333 que comparada con la utilidad neta del ejercicio anterior de MUS$ 44.055 significa mayores ingresos por MUS$ 30.278.

Este incremento se origina por efectos compensados. Por una parte, por el aumento de MUS$ 84.282 en el ítem utilidad inversión en empresas relacionadas, y compensados por el aumento de MUS$ 10.022 en la pérdida de inversión en empresas relacionadas, el aumento en los gastos financieros en un 60,1% equivalente a MUS$ 19.246, el incremento de los otros egresos fuera de la explotación en MUS$ 15.345 y la disminución de los otros ingresos fuera de la explotación en MUS$ 13.293. Esta disminución en los otros ingresos fuera de la explotación se origina por efectos compensados, por una parte existe un aumento en MUS$ 24.359 producto del efecto en el cambio de criterio en la contabilización de los costos de mantenimiento de fuselaje y motores de aviones propios, compensadocon la disminución de MUS$ 37.004 del efecto del hedge de combustible.

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3. Análisis y explicación flujo neto originado por las actividades de operación, inversión y financiamiento.

El Flujo de operación de la Sociedad, presenta un aumento de MUS$ 170.993, respecto al ejercicio anterior, debido principalmente, al efecto neto entre los mayores ingresos por recaudación de Deudores por venta (34,2%) y los mayores Pagos a proveedores y personal (24,7%). Los Otros ingresos percibidos disminuyeron (63,7%) debido a menores ingresos recibidos por concepto de hedge de combustible, producto del aumento en el precio del combustible, por sobre el precio protegido, lo que provocó que el diferencial entre ambos, fuese favorable a la Sociedad, pero menor al del mismo período del año anterior; a estos menores ingresos se deben agregar los gastos pagados por este mismo concepto durante el ejercicio 2006, lo que explica el aumento de los Otros gastos pagados. Han tenido, también, un efecto importante sobre este flujo el aumento de los Intereses pagados (79,5%).

El Flujo de financiamiento, presenta un aumento de MUS$ 276.708 respecto al ejercicio anterior, debido principalmente a la obtención de financiamiento a través de préstamos de instituciones financieras mayor en MUS$ 496.815, que se ve compensado por el mayor pago de dividendos por MUS$ 41.462 y el mayor Pago de préstamos por MUS$ 179.736, efectuados por la Sociedad.

El Flujo de inversión, presenta una variación negativa de MUS$ 241.361 con respecto al ejercicio anterior; esta variación se explica principalmente por el aumento en la Incorporación de activos fijos de MUS$ 282.297, producto, en su mayor parte, de la compra de cuatro aeronaves de la flota B-767 y cuatro aeronaves de la flota Airbus A319, y por la disminución de las ventas de otras inversiones en MUS$ 50.937, lo cual se ve parcialmente compensado con la disminución de Inversiones en instrumentos financieros por MUS$ 38.978.

Finalmente, el flujo neto de la Sociedad generado durante el ejercicio 2006, presenta una variación positiva de MUS$ 206.340 respecto al ejercicio anterior. El saldo negativo del flujo de inversión ha sido cubierto totalmente por los flujos de operación y financiamiento del ejercicio 2006

4. Análisis de riesgo de mercado

Concentración de riesgo crediticio

Las cuentas por cobrar de la Sociedad provienen en un alto porcentaje de las ventas de pasajes aéreos, servicios de carga a personas y diversas empresas comerciales que están económica y geográficamente dispersas, siendo generalmente de corto plazo. Conforme a ello, la Sociedad no estima que esté expuesta a una concentración importante de riesgo crediticio.

Instrumentos financieros : Administración del riesgo de precio del combustible

La variación en los precios del combustible depende en forma importante de la oferta y demanda de petróleo en el mundo, de las decisiones tomadas por la OPEP, de la capacidad de refinamiento a nivel mundial, de los niveles de inventario mantenidos, de factores como el clima y de factores políticos. Para disminuir el riesgo de variaciones en los precios a que podría estar expuesta la Sociedad, se han suscrito contratos de cobertura de combustible, con diferentes instituciones financieras, por una parte del consumo total de combustible estimado que tendrá la Sociedad para el año 2006. Los tipos de contratos suscritos son (a) el de Swap, que permite fijar el precio, (b) el de opciones Call, que permite limitar el alza del precio y (c) el de bandas de precio, que permiten fijar un precio máximo y un precio mínimo. En el caso del contrato swap cuando el precio de mercado supera el nivel fijado, la Sociedad recibe el diferencial que se produce entre ambos precios por la cantidad de galones de combustible que estipula cada contrato. A la inversa, si el precio de mercado está por debajo del precio fijado, es la Sociedad quien debe proceder a pagar la diferencia de precios establecida. No existen costos asociados al contrato swap. En el caso de la compra de una opción Call cuando el precio de mercado supera el nivel fijado, la Sociedad recibe el diferencial que se produce entre ambos precios por la cantidad de galones de combustible estipulada en el contrato. Si el precio de mercado está por debajo del precio fijado, la Sociedad no ejerce la opción. En el caso de un contrato de bandas de precio, si el precio de mercado está por encima del precio máximo, la Sociedad recibe el diferencial que se produce entre el precio de mercado y el precio máximo multiplicado por la cantidad de galones de combustible estipulada en cada contrato. Si el precio de mercado está por debajo del precio mínimo, es la Sociedad quien debe proceder a pagar la diferencia de precios establecida. Si el precio de mercado está entre los precios máximos y mínimos fijados, la Sociedad no recibe ni paga.

Por estos contratos, durante el ejercicio 2006, la Sociedad reconoció como pérdida neta MUS$ 5.536 Las pérdidas o ganancias producidas por estos contratos se reconocen como componente del Resultado no operacional.

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Instrumentos financieros : Administración del riesgo de tasa de interés.

Con el fin de disminuir el riesgo de una eventual alza en los tipos de interés la Sociedad, suscribió contratos de Swap de tasa de interés durante el primer semestre 2001. Además durante el segundo semestre del año 2003, todo el año 2004 y 2005, la Sociedad ha suscrito contratos de opción Call. Junto con lo anterior, la deuda adquirida durante el año 2006 fue tomada principalmente a tasa fija directamente con el banco acreedor. Adicionalmente, se fijaron anticipadamente la tasa de interés para el financiamiento de 24 aviones Airbus con entrega en el 2007 y 2008 y 8 Boeing 767-300 que se entregarán entre el año 2007 y el año 2008. Para mayor detalle de estas operaciones, ver nota 25 (de contingencias y restricciones). El objetivo que esto persigue es tener una porción de la deuda con (i) tasa fija (como es el caso de los swap) y (ii) otra porción con tasa variable pero limitado a un máximo (como es el caso de las Call). Junto con (iii) limitar la exposición a la tasa de interés en futuros financiamientos. De ésta manera la Sociedad disminuye de manera importante el riesgo del alza de las tasas de interés. Con relación a dichos contratos, la Sociedad (i) paga , recibe, o (ii) solamente recibe dependiendo del caso, la diferencia entre la tasa fija acordada y la tasa flotante calculada sobre el capital insoluto de cada contrato. Por estos contratos, la Sociedad reconoció en el resultado acumulado del período, una pérdida de MUS$ 2.746 Las pérdidas y ganancias por swap de tasa de interés junto con las primas y las ganancias de las Call de tasas de interés se reconocen como un componente del gasto financiero sobre la base de la amortización del préstamo cubierto. Al 31 de Diciembre 2006, el valor de mercado de los contratos swap, call y fijación anticipada de tasas de interés vigentes es de MUS$ 21.731 (negativo) Al 31 de diciembre, aproximadamente un 97% de la deuda está fijada con alguno de los instrumentos anteriormente nombrados.

Efectos de las Fluctuaciones en los Tipos de Cambio

La moneda funcional utilizada por la Sociedad es el dólar estadounidense en términos de fijación de precios de sus productos, de composición de su balance y de efectos sobre los resultados de las operaciones. Vende la mayor parte de sus servicios en dólares estadounidenses o en precios equivalentes al dólar estadounidense, y gran parte de sus gastos están denominados en dólares estadounidenses o equivalentes al dólar estadounidense, en particular costos de combustible, tarifas de vuelo y aterrizaje, arriendo de aeronaves, seguros, y componentes y accesorios para aeronaves. Del total del pasivo, aproximadamente un 95%, incluyendo obligaciones con bancos, pasivos de tráfico aéreo, y algunas cuentas por pagar de proveedores, está expresado en dólares estadounidenses. Por otra parte, aproximadamente un 93% de sus activos, principalmente Efectivo y equivalentes de efectivo, Activo fijo, Cuentas por cobrar e Inversiones también están expresados en dólares estadounidenses.

Aunque generalmente mantiene sus tarifas y precios de carga, en dólares estadounidenses o en precios equivalentes al dólar estadounidense, la Sociedad está expuesta a pérdidas y ganancias por moneda extranjera, debido a las fluctuaciones en los tipos de cambio.

En lo que va del 2006, la Sociedad registró una utilidad neta por estos conceptos de MUS$ 6.284, la que se presenta en el Estado de resultados bajo el rubro Resultados fuera de la explotación.

5. Ambiente Económico Chileno

Con el objetivo de analizar el ambiente económico en el cual está inserta la Sociedad, a continuación se explica brevemente la situación y evolución de las principales economías que la afectan, tanto del ámbito nacional como regional y mundial.

La economía mundial continúa evolucionando favorablemente, principalmente con un crecimiento en la producción y el comercio, esperando un crecimiento cercano al 5,2% para el año 2006 (aproximadamente 5,5% para el año 2007), a pesar de los desequilibrios acumulados en los mercados y en los precios del crudo.

En Europa los indicadores siguen mostrando una recuperación moderada de la economía. Las expectativas sitúan el crecimiento cercano al 2,5% para el 2006 (aproximadamente 2,2% para el año 2007). Los principales factores de recuperación de la economía europea es la mejora en el mercado del trabajo y la disminución del precio de las materias primas, además del dinamismo que experimenta el mercado asiático.

Estados Unidos ha experimentado un cierto debilitamiento, como consecuencia de la disminución del consumo privado, el menor ritmo en la creación de empleos, la reducción en la inversión y el retroceso experimentado en el sector inmobiliario. Esta situación se mantendrá durante el 2007, repercutiendo así en un menor crecimiento mundial. Para el 2006 se espera un crecimiento del 3,3% (2,6% en el año 2007).

En cuanto a la región, se espera que la economía tenga un crecimiento cercano al 4,4% durante el 2007, siendo ligeramente inferior al año 2006 (4,9%). Es importante mencionar el despertar económico experimentado durante el 2006 por Brasil y México, que habrían dejado atrás el letargo del año anterior, obteniendo crecimientos cercanos al 3,3% y el 4,6%, respectivamente. De esta forma se anularía el efecto de desaceleración provocado por Argentina y Venezuela.

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La economía chilena ha mostrado una desaceleración, provocada por la industria en general, sin embargo se le proyecta un crecimiento del orden del 5,3% para el presente año, ligeramente superior al año anterior (4,3%). Las perspectivas inflacionarias se mantienen controladas y existe un importante superávit fiscal, por lo cual se espera que para el 2007 la economía retome su nivel de crecimiento.

Bajo este entorno económico, la industria aeronáutica tanto nacional como internacional ha experimentado una evolución positiva. En este escenario, el modelo de negocios implementado por la compañía ha permitido mantener un contínuo crecimiento logrando un importante resultado tanto para el último trimestre del 2006, como para el ejercicio completo del mismo año.

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6. Indices financieros

a) Se presentan a continuación los principales índices financieros del Balance General Individual:

	31-12-2006		30- 09 -2006		31-12-2005		30- 09 -2005

- Indices de Liquidez

Liquidez corriente (veces)
(Activo circulante /pasivo circulante)		0,70		0,75		0,76		0,91

Razón ácida (veces)
(Fondos disponibles /pasivo circulante)		0,21		0,13		0,19		0,19

- Indices de Endeudamiento

Razón de endeudamiento (veces)
(Pasivo circulante + Pasivo largo plazo /Patrimonio)		3,21		2,86		2,76		2,69
Deuda corto plazo / Deuda total (%)		41,74		36,86		44,74		47,18
Deuda largo plazo / Deuda total (%)		58,26		63,14		55,26		52,82
Cobertura gastos financieros
(R.A.I.I. / gastos financieros)		9,53		8,82		11,12		9,84

- Indices de Actividad

Total de activos		2.633.791		2.315.666		1.890.529		1.798.329
Inversiones		536.451		424.837		152.413		148.339
Enajenaciones		6.313		6.283		1.505		584
Rotación de inventario
(Costo venta / Inventario promedio)		27,58		19,17		30,52		22,15
Permanencia de inventarios
(Inventario promedio / costo venta * 360 )		13,06		18,78		11,79		16,25

- Indices de Rentabilidad

Rentabilidad del patrimonio
(Utilidad neta /Patrimonio promedio)		0,43		0,27		0,31		0,21

Rentabilidad del activo
(Utilidad neta / activos promedio)		0,11		0,07		0,08		0,06

Rendimiento activos operacionales
(Resultado operacional / Activos operacionales promedio)		0,11		0,08		0,08		0,06

Considerando activos operacionales al total de activo menos impuesto diferido, cuentas corrientes del personal, inversiones permanentes y temporales y mayor y menor valor de inversión.

Utilidad por acción
(Utilidad del ejercicio / n° acciones suscritas y pagadas)		0,76		0,46		0,46		0,30

Retorno de dividendos		0,02		0,03		0,02		0,04
(Dividendos pagados / precio de mercado)

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b) Se presentan a continuación los principales índices financieros del Estado de Resultados Individual:

	31-12-2006		30- 09 -2006		31-12-2005		30- 09 -2005

- Indices De Resultados

Ingresos de explotación		1.930.196		1.399.657		1.776.184		1.295.858
Carga		694.233		505.380		623.218		457.581
Pasajeros		966.743		707.278		957.301		694.107
Otros		269.220		186.999		195.665		144.170

Costos de Explotación y Gastos de administración		1.727.990		1.254.224		1.648.627		1.214.928
Combustibles		430.389		328.951		408.555		291.547
Comisiones		308.230		233.939		269.588		198.854
Gastos de aterrizaje y otras rentas		303.906		209.320		280.471		213.232
Remuneraciones		248.890		176.707		214.085		153.778
Mantención aviones		118.283		78.511		111.490		86.364
Arriendo aviones		109.475		81.336		103.849		77.330
Depreciación y amortización		85.011		63.059		57.533		43.726
Otros gastos de operación		80.417		50.377		160.127		117.873
Servicios pasajeros		43.389		32.024		42.929		32.224

Resultado operacional		202.206		145.433		127.557		80.930

Gastos financieros		32.419		22.926		16.966		12.471

Resultado no operacional		74.333		33.902		44.055		29.307

R.A.I.I.D.A .I.E.		393.974		262.671		242.134		162.721

Utilidad (pérdida) después de impuestos		241.300		147.652		146.601		96.722

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211

LAN AIRLINES S.A. AND SUBSIDIARIES

Management’s Report on Internal Control over Financial Reporting

The management of LAN Airlines S.A. (“LAN Airlines” or 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 Securities Exchange Act of 1934, 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 in the United States. 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.

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, 2006 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, 2006, the Company’s internal control over financial reporting is effective.

Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006 has been audited by PricewaterhouseCoopers Consultores, Auditores y Companía Limitada, an independent registered public accounting firm, as stated in their report which appears herein.

By	Enrique Cueto Plaza
	Chief Executive Officer


	Alejandro de la Fuente Goic Chief Financial Officer

March 14, 2007

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LAN AIRLINES S.A. AND SUBSIDIARIES

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of LAN Airlines S.A.

We have completed an integrated audit of LAN Airlines S.A.´s 2006 consolidated financial statements and of its internal control over financial reporting as of December 31, 2006 and audits of its 2005 and 2004 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated financial statements

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income and of cash flows present fairly, in all material respects, the financial position of LAN Airlines S.A. and its subsidiaries (the “Company”) at December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006 in conformity with accounting principles generally accepted in Chile. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes 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. We believe that our audits provide a reasonable basis for our opinion.

Accounting principles generally accepted in Chile vary in certain significant respects from accounting principles generally accepted in the United States of America (“U.S. GAAP”). Information relating to the nature and effect of such differences is presented in Note 27 to the consolidated financial statements.

As discussed in Note 3, the Company changed its method of accounting for heavy aircraft and engine maintenance costs associated with its owned aircraft in 2006.

Internal control over financial reporting

Also, in our opinion, management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that the Company maintained effective internal control over financial reporting as of December 31, 2006 based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control - Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides 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.

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.

PricewaterhouseCoopers

Santiago, Chile

March 14, 2007.

213

LAN AIRLINES S.A. AND SUBSIDIARIES

Consolidated Balance Sheets

	At December 31,
	2006		2005
	(In thousands of US$)
ASSETS
CURRENT ASSETS
Cash		9,565		11,733
Time deposits		148,977		34,519
Marketable securities (Note 4)		60,069		112,983
Trade accounts receivable and other, net (Note 5)		356,512		310,068
Notes and accounts receivable from related companies (Note 15)		4,765		899
Inventories (Note 6)		46,827		37,283
Prepaid and recoverable taxes		34,048		24,307
Prepaid expenses (Note 7)		26,786		24,278
Deferred income tax assets (Note 14)		6,435		7,670
Other current assets (Note 8)		12,324		13,321
Total current assets		706,308		577,061

PROPERTY AND EQUIPMENT (net) (Note 9)		1,876,027		1,252,270

OTHER ASSETS
Investments in related companies (Note 10)		1,845		1,649
Goodwill (Note 10)		43,469		44,751
Notes and accounts receivable from related companies (Note 15)		51		10,252
Long-term accounts receivable (Note 5)		28,915		9,756
Advances for purchases of aircraft and other deposits (Note 11)		237,853		223,288
Other (Note 12)		34,321		24,592
Total other assets		346,454		314,288
Total assets		2,928,789		2,143,619

The accompanying Notes 1 to 27 form an integral part of these consolidated financial statements.

214

LAN AIRLINES S.A. AND SUBSIDIARIES

Consolidated Balance Sheets

	At December 31,
	2006		2005
	(In thousands of US$)
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Short-term loans from
financial institutions		8,996		11,666
Current portion of long-term loans from
financial institutions (Note 16)		89,883		53,104
Current portion of long-term leasing obligations (Note 18)		43,070		33,870
Securitization obligation (Note 17)		11,970		11,817
Dividends payable		67,789		35,000
Accounts payable		260,947		235,988
Notes and accounts payable to related companies (Note 15)		301		327
Air traffic liability and other unearned income		265,307		175,580
Other current liabilities (Note 13)		128,020		124,899
Total current liabilities		876,283		682,251

LONG-TERM LIABILITIES
Loans from financial institutions (Note 16)		1,031,082		521,974
Securitization obligation (Note 17)		19,578		31,549
Other creditors		22,004		27,755
Provisions (Note 13)		45,892		117,277
Obligations under capital leases (Note 18)		176,433		161,151
Deferred income tax liabilities (Note 14)		126,886		95,576

Total long-term liabilities		1,421,875		955,282

MINORITY INTEREST		4,311		3,373

COMMITMENTS AND CONTINGENCIES (Note 23)

SHAREHOLDERS’ EQUITY (Note 19)
Common stock (318,909,090 shares)		134,303		134,303
Reserves		2,620		2,620
Retained earnings		489,397		365,790
Total shareholders’ equity		626,320		502,713
Total liabilities and shareholders’ equity		2,928,789		2,143,619

The accompanying Notes 1 to 27 form an integral part of these consolidated financial statements.

215

LAN AIRLINES S.A. AND SUBSIDIARIES

Consolidated Statements of Income

	For the years ended
	December 31,
	2006			2005			2004
	(In thousands of US$)
REVENUES
Passenger		1,813,373			1,460,584			1,169,049
Cargo		1,072,730			910,453			799,656
Other (Note 20)		147,857			135,316			124,240
Total operating revenues (Note 25)		3,033,960			2,506,353			2,092,945

EXPENSES
Wages and benefits (Note 21)		(442,967	)		(371,596	)		(292,823	)
Aircraft fuel		(763,951	)		(642,696	)		(414,539	)
Commissions to agents		(403,899	)		(345,387	)		(291,693	)
Depreciation and amortization		(122,802	)		(80,456	)		(77,443	)
Passenger services		(56,077	)		(53,176	)		(44,992	)
Aircraft rentals		(157,681	)		(148,202	)		(132,425	)
Aircraft maintenance		(117,206	)		(132,198	)		(120,818	)
Other rentals and landing fees		(336,821	)		(301,544	)		(287,842	)
Other operating expenses		(329,934	)		(289,462	)		(258,270	)
Total operating expenses		(2,731,338	)		(2,364,717	)		(1,920,845	)

Operating income		302,622			141,636			172,100

OTHER INCOME AND EXPENSES
Interest income		7,897			12,426			10,830
Interest expense		(60,739	)		(39,191	)		(36,459	)
Other income - net (Note 22)		37,113			58,234			45,162
Total other income (expense)		(15,729	)		31,469			19,533

Income before minority interest		286,893			173,105			191,633
Minority interest		1,244			1,754			212
Income before income taxes		288,137			174,859			191,845
Income taxes (Note 14)		(46,837	)		(28,258	)		(28,293	)

NET INCOME		241,300			146,601			163,552

The accompanying Notes 1 to 27 form an integral part of these consolidated financial statements.

216

LAN AIRLINES S.A. AND SUBSIDIARIES

Consolidated Statements Of Cash Flows

	For the years ended December 31,
	2006			2005			2004
	(In thousands of US$)
CASH FLOWS FROM OPERATING ACTIVITIES
Collection of trade accounts receivable		2,951,595			2,213,947			1,989,671
Interest income		6,358			11,679			9,596
Other income received		24,936			65,139			54,171
Payments to suppliers and personnel		(2,371,090	)		(1,938,117	)		(1,638,208	)
Interest paid		(60,107	)		(36,630	)		(37,117	)
Income tax paid		(14,581	)		(1,782	)		(194	)
Other expenses paid		(11,592	)		(1,724	)		(1,806	)
Value-added tax and similar payments		(35,265	)		(35,575	)		(29,360	)

Net cash provided by operating activities		490,254			276,937			346,753

CASH FLOWS FROM FINANCING ACTIVITIES
Loans obtained		821,324			268,501			2,817
Dividend payments		(84,910	)		(43,536	)		(81,577	)
Loans repaid		(223,415	)		(35,481	)		(43,725	)
Other		(9,282	)		(11,596	)		(12,283	)

Net cash provided by (used in) financing activities		503,717			177,888			(134,768	)

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of property and equipment		(920,429	)		(592,410	)		(126,911	)
Proceeds from sales of property and equipmen		7,620			1,694			2,098
Sale of financial instruments and other investments		28,057			77,981			51,725
Other investments		(2,238	)		(5,624	)		(939	)
Investments in financial instruments		-			(38,978	)		(76,800	)
Other		(18,756	)		(3,085	)		(2,042	)
Net cash used in investing activities		(905,746	)		(560,422	)		(152,869	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		88,225			(105,597	)		59,116
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		111,271			216,868			157,752
CASH AND CASH EQUIVALENTS AT END OF YEAR		199,496			111,271			216,868

The accompanying Notes 1 to 27 form an integral part of these consolidated financial statements.

217

LAN AIRLINES S.A. AND SUBSIDIARIES

Reconciliation of Net Income to Net Cash

PROVIDED BY OPERATING ACTIVITIES

	For the years ended December 31,
	2006			2005			2004
	(In thousands of US$)
NET INCOME FOR THE YEAR		241,300			146,601			163,552

ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation		120,810			73,969			68,132
Gain on sales of investments		29			-			422
Gain on sales and retirements of property and equipment		(1,133	)		(1,511	)		(1,289	)
Proportional share of results of equity method investments		(598	)		(583	)		249
Amortization of goodwill		3,318			3,216			3,134
Minority interest		(1,244	)		(1,754	)		(212	)
Write-offs and provisions		20,902			10,827			13,671
Foreign exchange gains		(5,675	)		(6,270	)		(2,437	)
Other		(56,445	)		106			(257	)

CHANGES IN ASSETS AND LIABILITIES
(Increase) decrease in accounts receivable - trade		(47,099	)		(26,083	)		103,262
(Increase) decrease in inventories		(9,175	)		(9,526	)		(8,967	)
(Increase) decrease in other assets		36,640			(29,649	)		(603	)
(Decrease) increase in accounts payable		160,734			99,843			(11,083	)
(Decrease) increase in other liabilities		27,890			17,751			19,179
Net cash provided by operating activities		490,254			276,937			346,753

The accompanying Notes 1 to 27 form an integral part of these consolidated financial statements.

218

LAN AIRLINES S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

AT DECEMBER 31, 2006

Note 1 - The Company

LAN Airlines S.A., formerly LAN Chile S.A., (“LAN” or the “Company”) is the largest domestic and international passenger/cargo air carrier in Chile and one of the largest airlines in Latin America, together with its code-share arrangements and affiliated airlines. Through its own operations and code-share arrangements, the LAN Alliance serves 15 destinations in Chile, 11 destinations in Peru, 9 destinations in Argentina, 2 in Ecuador, 30 destinations in other Latin American countries, 25 in North America, 13 destinations in Europe and 4 in the South Pacific. LAN has alliances with American Airlines, Alaska Airlines, AeroMexico, British Airways, Iberia, Korean Air, Lufthansa Cargo, Mexicana, Qantas and TAM and is an official member of the oneworldTM global alliance.

The Company is a Chilean corporation (“Sociedad Anónima Abierta”) whose common stock is listed on the Santiago Stock Exchange, the Chilean Electronic Stock Exchange, and the Valparaiso Stock Exchange and whose American Depositary Receipts are traded on the New York Stock Exchange. Accordingly, the Company is subject to the regulations of both the Chilean Superintendency of Securities and Insurance (the “Superintendency”) and the U.S. Securities and Exchange Commission.

Note 2 - Summary Of Accounting Policies

a) Presentation

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in Chile, which include the accounting standards of the Superintendency. The preparation of financial statements in accordance with generally accepted accounting principles in Chile (“Chilean GAAP”) requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.

The Company has issued its statutory consolidated financial statements in Spanish and in conformity with accounting principles generally accepted in Chile, which include certain notes and additional information required by the Superintendency for statutory purposes. Management believes that these additional notes and information are not essential for the complete understanding of the consolidated financial statements and, accordingly, these notes and additional information have been excluded from the accompanying financial statements.

180

Nota 14. Otros (Activos)

La composición de este rubro es la siguiente:

	2006		2005
	MUS$		MUS$
a) Depósitos en garantía :

Depósitos en garantía (aeronaves)		7.370		7.380
Otros		45		79
Subtotal		7.415		7.459

b) Otros activos de largo plazo :

Anticipos aviones (1)		155.260		202.834
Resultado no realizado por contratos a futuro (2)		26.828		16.066
Otros		3.276		4.475
Subtotal		185.364		223.375
Total		192.779		230.834

(1) Corresponden, principalmente, a anticipos por compra de aeronaves. De acuerdo con las condiciones pactadas estos importes serán recuperados al momento de la recepción de las aeronaves. Los valores de corto plazo, se incluyen en rubro Deudores varios, según se indica en Nota 5 c).

(2) Corresponde a contratos de cobertura de tasas de interés.

Nota 15. Obligaciones con bancos e instituciones financieras a corto plazo

Largo plazo con vencimiento dentro de un año

			Tipos de Monedas e Indice de Reajuste
			Dólares						Otras monedas extranjeras				Totales
			2006			2005			2006		2005		2006		2005
Rut	Banco o Institución Financiera		MUS$			MUS$			MUS$		MUS$		MUS$		MUS$

Extranjera		Calyon		16.951			16.247			-		-		16.951		16.247
Extranjera		Private Export Funding		30.898			10.995			-		-		30.898		10.995
Corporation
Extranjera		ING		10.325			3.452			-		-		10.325		3.452
Extranjera		BNP Paribas		14.843			-			-		-		14.843		-
		Totales		73.017			30.694			-		-		73.017		30.694
		Monto capital adeudado		67.070			27.964			-		-		67.070		27.964
		Tasa int prom anual		5,2370	%		L+1,0767	%		-		-		-		-

Porcentaje obligaciones moneda extranjera (%)							100,0000
Porcentaje obligaciones moneda nacional (%)							-

181

Nota 16. Obligaciones con bancos e instituciones financieras largo plazo

Fecha cierre

período

Fecha cierre período actual

Total largo

plazo al

cierre

Tasa de

cierre

Años de vencimiento

de los

interés

de los

Banco o

Moneda

Más de 1

Más de 2

Más de 3

Más de 5

Estados

anual

Estados

Institución

Indice de

hasta 2

hasta 3

hasta 5

hasta 10

Más de 10 años

Financieros

promedio

Financieros

RUT

Financiera

Reajuste

MUS$

Plazo

MUS$

Extranjera

Calyon

Dólares

15.900

16.455

34.619

68.935

26.557

162.466

L+ 0,9681

172.885

Extranjera

Private

Dólares

29.723

31.130

66.669

195.858

66.824

390.204

4,5882

142.698

Export

Funding

Corporation

Extranjera

ING

Dólares

9.773

10.300

22.230

37.427

9.001

88.731

5,3589

22.728

Extranjera

BNP Paribas

Dólares

14.820

15.657

34.082

103.711

43.679

211.949

5,5190

Totales

70.216

73.542

157.600

405.931

146.061

853.350

338.311

Porcentaje obligaciones moneda extranjera (%)

100,0000

Porcentaje obligaciones moneda nacional (%)

Nota 17. Provisiones y castigos

a) Provisiones

La composición de este rubro, que se encuentra valorizado según se indica en Nota 2 p), es la siguiente:

	Corto plazo				Largo plazo
	2006		2005		2006		2005
	MUS$		MUS$		MUS$		MUS$

Patrimonio negativo filiales		29.648		16.266		-		-
Mantención aeronaves y motores		27.564		27.029		28.533		83.126
Premios LAN Pass		8.537		6.872		-		-
Vacaciones		6.057		6.213		4.060		4.461
Otros		275		47		6.533		6.846
Total		72.081		56.427		39.126		94.433

b) Castigos

Los castigos efectuados al 31 de diciembre de 2006 y 2005, son los siguientes:

	2006		2005
	MUS$		MUS$

Deudores incobrables		1.191		3.620
Obsolescencia de repuestos y rotables		751		2.121

Total		1.942		5.741

Ambos castigos se efectuaron con cargo a provisiones.

182

Nota 18. Otros pasivos a largo plazo

El detalle de los Otros pasivos a largo plazo es el siguiente:

	2006		2005
	MUS$		MUS$

Obligaciones por leasing (1)		128.141		161.151
Contratos a futuro		19.686		8.112
Anticipo cobranzas ventas U.S.A. (2)		19.578		31.549
Otros		1.783		2.604
Total		169.188		203.416

(1) La porción de corto plazo ascendente a MUS$ 35.864 ( MUS$ 33.861 en 2005), se presenta dentro del rubro Obligaciones largo plazo con vencimiento dentro de un año.

(2) Con fecha 30 de marzo de 1999, LAN Airlines S.A. celebró un contrato de Securitización con la empresa Pelican Finance Ltd. por un monto original de MUS$ 60.000, acordando ceder y vender en Estados Unidos de Norteamérica, los derechos que le corresponden de cobrar y percibir respecto de ciertos emisores de tarjetas de crédito, provenientes de ventas futuras de pasajes efectuadas con tarjetas de crédito de dicho país. La cesión de tales derechos autoriza al adquirente al recupero de la inversión entre los años 2001 y 2006, con un costo financiero de 6,82% anual.

Al 31 de marzo de 2006 se encuentran totalmente cancelados los compromisos adquiridos por la negociación descrita anteriormente con Pelican Finance Ltd.

Con fecha 22 de agosto de 2002, LAN Airlines S.A. celebró un contrato de Securitización con la empresa Pelican Finance Ltd. por un monto original de MUS$ 40.000, acordando ceder y vender en Estados Unidos de Norteamérica, los derechos que le corresponden de cobrar y percibir respecto de ciertos emisores de tarjetas de crédito, provenientes de ventas futuras de pasajes efectuadas con tarjetas de crédito de dicho país. La cesión de tales derechos autoriza al adquirente al recupero de la inversión entre los años 2006 y 2009, con un costo financiero de 6,96% anual.

Los desembolsos por el contrato anteriormente descrito se encuentran reflejados en el ítem Otros desembolsos por financiamiento, en el Estado de Flujos de Efectivo (Nota 23).

Respecto del Estado de resultados, los intereses devengados se encuentran reflejados bajo el rubro Gastos financieros, presentados dentro del resultado fuera de la explotación.

La porción de corto plazo ascendente a MUS$ 11.970 ( MUS$ 11.817 en 2005) se presenta dentro del rubro Obligaciones largo plazo con vencimiento dentro de un año.

Nota 19. Cambios en el patrimonio

a) Dividendos

En Sesión Ordinaria de Directorio celebrada el 26 de diciembre de 2006, se acordó el reparto de un dividendo provisorio de US$ 0,21256 por acción con cargo a los resultados del ejercicio 2006. Al 31 de diciembre de 2006, este monto se presentó en el rubro Dividendos por pagar.

En Sesión Ordinaria de Directorio celebrada el 24 de julio de 2006, se acordó el reparto de un dividendo provisorio de US$ 0,15071 por acción con cargo a los resultados del ejercicio 2006.

En Junta Ordinaria de Accionistas celebrada el 28 de abril de 2006, se acordó el reparto de dividendos definitivos con cargo a los resultados del ejercicio 2005, de US$ 0,22983 por acción, imputando a dicha suma los dividendos provisorios repartidos en los meses de agosto 2005 y enero 2006 de US$ 0,11430 por acción y de US$ 0,10975 por acción spectivamente, quedando por pagar US$ 0,00578 por acción, los cuales se cancelaron durante el mes de mayo 2006.

183

En Sesión Ordinaria de Directorio celebrada el 31 de enero de 2006, se acordó el reparto de un dividendo provisorio de US$ 0,10975 por acción con cargo a los resultados del ejercicio 2005, los cuales se cancelaron durante marzo 2006. Al 31 de diciembre de 2005, este monto se presentó en el rubro Dividendos por pagar.

En Sesión Ordinaria de Directorio celebrada el 2 de agosto de 2005, se acordó el reparto de un dividendo provisorio de US$ 0,11430 por acción con cargo a los resultados del ejercicio 2005.

En Junta Ordinaria de Accionistas celebrada el 29 de abril de 2005, se acordó el reparto de dividendos definitivos con cargo a los resultados del ejercicio 2004, de US$ 0,25642373 por acción, imputando a dicha suma los dividendos provisorios repartidos en los meses de agosto y diciembre 2004 de US$ 0,12475 por acción y de US$ 0,10974 por acción respectivamente, quedando por pagar US$ 0,02192745 por acción, los cuales se cancelaron durante el mes de mayo 2005.

El valor libro de la acción al cierre del ejercicio alcanza la suma de US$ 1,9639 (US$ 1,5764 al 31 de diciembre de 2005).

b) Otras reservas

El saldo de la cuenta Otras reservas, al cierre de cada ejercicio, se compone como sigue:

	2006		2005
	MUS$		MUS$

Reserva por ajuste al valor del activo fijo		2.620		2.620

Total		2.620		2.620

Esta reserva no es distribuible y sólo puede ser capitalizada.

c) Cambios en las cuentas patrimoniales

	31-12-2005
			Reserva		Sobreprecio				Reserva								Déficit
	Capital		revalorización		en venta		Otras		futuros		Resultados			Dividendos			Período de		Resultado
Rubro	pagado		Capital		de acciones		reservas		dividendos		Acumulados			Provisorios			Desarrollo		del Ejercicio


Saldo Inicial		134.303		-		-		2.620		-		208.865			(74.783	)		-		163.552
Distribución resultado ejercicio anterior		-		-		-		-		-		163.552			-			-		(163.552	)
Dividendo definitivo ejercicio anterior		-		-		-		-		-		(81.777	)		74.783			-		-
Aumento del capital con emisión de		-		-		-		-		-		-			-			-		-
acciones de pago
Capitalización reservas y /o utilidades		-		-		-		-		-		-			-			-		-
Déficit acumulado período de desarrollo		-		-		-		-		-		-			-			-		-
Dividendos distribuidos		-		-		-		-		-		-			-			-		-
Revalorización capital propio		-		-		-		-		-		-			-			-		-
Resultado del ejercicio		-		-		-		-		-		-			-			-		146.601
Dividendos provisorios		-		-		-		-		-		-			(71.451	)		-		-
Saldo Final		134.303		-		-		2.620		-		290.640			(71.451	)		-		146.601
Saldos Actualizados		134.303		-		-		2.620		-		290.640			(71.451	)		-		146.601

184

	31-12-2006
Rubro	Capital pagado		Reserva revalorización Capital		Sobreprecio en venta de acciones		Otras reservas		Reserva futuros dividendos		Resultados Acumulados			Dividendos Provisorios			Déficit Período de Desarrollo		Resultado del Ejercicio

Saldo Inicial		134.303		-		-		2.620		-		290.640			(71.451	)		-		146.601
Distribución resultado ejercicio anterior		-		-		-		-		-		146.601			-			-		(146.601	)
Dividendo definitivo ejercicio anterior		-		-		-		-		-		(73.294	)		71.451			-		-
Aumento del capital con emisión de		-		-		-		-		-		-			-			-		-
acciones de pago
Capitalización reservas y /o utilidades		-		-		-		-		-		-			-			-		-
Déficit acumulado período de desarrollo		-		-		-		-		-		-			-			-		-
Dividendos distribuidos		-		-		-		-		-		-			-			-		-
Revalorización capital propio		-		-		-		-		-		-			-			-		-
Resultado del ejercicio		-		-		-		-		-		-			-			-		241.300
Dividendos provisorios		-		-		-		-		-		-			(115.850	)		-		-
Saldo Final		134.303		-		-		2.620		-		363.974			(115.850	)		-		241.300
Saldos Actualizados		-		-		-		-		-		-			-			-		-

d) Número de Acciones

Serie	Nro. acciones suscritas		Nro. acciones pagadas		Nro. acciones con derecho a voto

Unica		318.909.090		318.909.090		318.909.090

e) Capital

	Capital suscrito		Capital pagado
Serie	MUS$		MUS$

Unica		134.303		134.303

185

Nota 20. Otros ingresos y egresos fuera de la explotación

El detalle de los Otros ingresos y egresos fuera de la explotación es el siguiente:

a) Otros ingresos fuera de la explotación

	2006		2005
	MUS$		MUS$

Efecto en cambio contable descrito en Nota Nro.3		24.539		-
Hedge combustible		-		37.004
Utilidad en venta de activos fijos		1.106		1.496
Otros		642		1.080
Total		26.287		39.580

b) Otros egresos fuera de la explotación

	2006		2005
	MUS$		MUS$

Indemnización extraordinaria al personal		6.551		-
Hedge combustible		5.536		-
Provisión abatimiento flota Boeing 737 (*)		3.100		-
Otros		527		369
Total		15.714		369

(*) Ver Nota 10.

Nota 21. Corrección monetaria

			2006		2005
	Indice de reajustabilidad		MUS$		MUS$


Inversiones en empresas relacionadas		I.P.C.		162		261
Otros activos no monetarios		I.P.C.		27		39
(Pérdida) Utilidad por corrección monetaria		-		189		300

186

Nota 22. Diferencia de cambio

	Moneda	2006			2005
Rubro		MUS$			MUS$

Activos (cargos) / abonos
Disponible	Euro		328			(612	)
Disponible	Real brasileño		16			(6	)
Disponible	Peso argentino		99			(125	)
Disponible	$ No reajustable		2.167			(10	)
Disponible	Otras monedas		206			(231	)
Depósitos a plazo	$ No reajustable		(2.894	)		145
Depósitos a plazo	Otras monedas		34			(56	)
Valores negociables	Euro		46			(118	)
Valores negociables	$ No reajustable		(137	)		399
Valores negociables	Otras monedas		(7	)		(66	)
Deudores por venta	Peso colombiano		196			64
Deudores por venta	Euro		(137	)		(716	)
Deudores por venta	Real brasileño		513			361
Deudores por venta	Peso argentino		48			106
Deudores por venta	Dólar australiano		(107	)		(15	)
Deudores por venta	$ No reajustable		1.873			3.273
Deudores por venta	Otras monedas		(1.014	)		(162	)
Documentos por cobrar	$ No reajustable		(430	)		929
Documentos por cobrar	Otras monedas		56			359
Deudores varios	Euro		82			(58	)
Deudores varios	$ No reajustable		(1.764	)		(213	)
Deudores varios	$ Reajustable		(46	)		152
Deudores varios	Otras monedas		193			(179	)
Documentos y cuentas por cobrar EE.RR.	Otras monedas		2			(258	)
Impuestos por recuperar	Peso argentino		8			(21	)
Impuestos por recuperar	Peso mexicano		44			80
Impuestos por recuperar	$ Reajustable		(331	)		526
Impuestos por recuperar	Otras monedas		219			(358	)
Gastos pagados por anticipado	$ No reajustable		(10	)		44
Gastos pagados por anticipado	Otras monedas		8			(1	)
Otros activos circulantes	Euro		19			(23	)
Otros activos circulantes	$ No reajustable		(205	)		455
Otros activos circulantes	$ Reajustable		(11	)		14
Otros activos circulantes	Otras monedas		1			(1	)
Inversiones empresas relacionadas	$ Reajustable		(202	)		567
Inversión en otras sociedades	$ Reajustable		(59	)		93
Deudores a largo plazo	$ Reajustable		(4	)		121
Documentos y cuentas por cobrar EE.RR. largo plazo	$ No reajustable		(182	)		-
Otros	Euro		(17	)		55
Otros	$ No reajustable		(21	)		(36	)
Otros	Otras monedas		(1	)		(11	)

Total (cargos) abonos			(1.421	)		4.467

Pasivos (cargos) / abonos
Cuentas por pagar	$ No reajustable		1.857			(2.191	)
Cuentas por pagar	Otras monedas		(403	)		235
Documentos y cuentas por pagar EE.RR.	$ No reajustable		(104	)		53
Documentos y cuentas por pagar EE.RR.	Otras monedas		-			(2	)
Provisiones	$ No reajustable		(344	)		(191	)
Provisiones	Otras monedas		12			(51	)
Retenciones	Peso argentino		5			(18	)
Retenciones	$ No reajustable		(86	)		(731	)
Retenciones	Otras monedas		(19	)		(145	)
Impuesto a la renta	Otras monedas		(8	)		2
Ingresos percibidos por adelantado	$ No reajustable		6.886			4.042
Ingresos percibidos por adelantado	Otras monedas		(225	)		866
Otros pasivos circulantes	$ No reajustable		1			(1	)
Otros pasivos circulantes	Otras monedas		(4	)		(2	)
Provisiones largo plazo	$ No reajustable		191			(318	)
Provisiones largo plazo	Otras monedas		(54	)		49

Total (cargos) abonos			7.705			1.597
(Pérdida) Utilidad por diferencias de cambio			6.284			6.064

187

Nota 23. Estado de flujo de efectivo

El detalle de Otros desembolsos por financiamiento es el siguiente:

	2006		2005
	MUS$		MUS$

Securitización (1)		11.817		12.908
Total		11.817		12.908

(1) Ver Nota 18.

188

Nota 24. Contratos de derivados

Los contratos de derivados se encuentran valorizados de acuerdo a lo establecido en el Boletín Técnico Nro. 57 del Colegio de Contadores de Chile A.G., según lo descrito en Nota 2 s)

							Descripción de los contratos
			Valor del		Plazo de				Posición		Partida o transacción protegida				Valor de la		Efecto en Resultado
Tipo de	Tipo de		contrato		vencimiento		Item		Compra /				Monto		partida		Realizado			No Realizado
derivado	contrato		MUS$		o expiración		Específico		Venta		Nombre		MUS$		protegida		MUS$			MUS$

S		CCTE		52.664		II 2010		Tasa interés		C		Préstamos		52.664		24.300		(195	)		(280	)
S		CCTE		48.431		II 2010		Tasa interés		C		Préstamos		48.431		22.363		(171	)		(247	)
S		CCTE		50.934		III 2010		Tasa interés		C		Préstamos		50.934		23.859		(174	)		(293	)
S		CCTE		51.462		IV 2010		Tasa interés		C		Préstamos		51.462		24.761		(189	)		(335	)
S		CCTE		58.062		IV 2011		Tasa interés		C		Préstamos		58.062		32.932		(332	)		(668	)
S		CCTE		69.055		III 2012		Tasa interés		C		Préstamos		69.055		41.760		(403	)		(1.074	)
S		CCTE		32.874		IV 2017		Tasa interés		C		Préstamos		32.874		30.841		90			554
S		CCTE		32.874		IV 2017		Tasa interés		C		Préstamos		32.874		30.841		77			490
OE		CCTE		12.750		III 2012		Tasa interés		C		Préstamos		12.750		10.661		(38	)		(78	)
OE		CCTE		12.825		IV 2012		Tasa interés		C		Préstamos		12.825		11.162		(43	)		(94	)
OE		CCTE		11.604		IV 2012		Tasa interés		C		Préstamos		11.604		10.496		(28	)		(40	)
OE		CCTE		31.530		III 2014		Tasa interés		C		Préstamos		31.530		23.658		(202	)		(87	)
OE		CCTE		32.227		IV 2014		Tasa interés		C		Préstamos		32.227		24.331		(199	)		(600	)
OE		CCTE		32.182		IV 2014		Tasa interés		C		Préstamos		32.182		24.348		(193	)		(563	)
OE		CCTE		31.814		IV 2014		Tasa interés		C		Préstamos		31.814		24.440		(217	)		(687	)
OE		CCTE		30.257		IV 2015		Tasa interés		C		Arriendo Aeronaves		30.257		-		(175	)		(43	)
OE		CCTE		30.257		IV 2015		Tasa interés		C		Arriendo Aeronaves		30.257		-		(213	)		445
OE		CCTE		24.500		III 2016		Tasa interés		C		Arriendo Aeronaves		24.500		-		(115	)		(717	)
OE		CCTE		24.500		IV 2016		Tasa interés		C		Arriendo Aeronaves		24.500		-		(114	)		(729	)
S		CCTE		4.693		II 2010		Tasa interés		C		Préstamos		4.693		3.958		14			13
S		CCTE		4.698		II 2010		Tasa interés		C		Préstamos		4.698		3.963		10			13
S		CCTE		5.317		IV 2010		Tasa interés		C		Préstamos		5.317		4.379		7			13
S		CCTE		5.210		III 2010		Tasa interés		C		Préstamos		5.210		4.247		7			12
S		CCTE		6.757		IV 2011		Tasa interés		C		Préstamos		6.757		5.829		9			24
S		CCTE		5.607		III 2012		Tasa interés		C		Préstamos		5.607		4.962		10			19
S		CCTE		7.489		III 2013		Tasa interés		C		Préstamos		7.489		6.527		14			21
S		CCTE		7.772		IV 2013		Tasa interés		C		Préstamos		7.772		6.794		17			24
S		CCTE		70.547		II 2019		Tasa interés		C		Préstamos		70.547		-		-			828
S		CCTE		71.787		IV 2019		Tasa interés		C		Préstamos		71.787		-		-			738
S		CCTE		69.875		IV 2019		Tasa interés		C		Préstamos		69.875		-		-			(1.890	)
S		CCTE		70.103		I 2020		Tasa interés		C		Préstamos		70.103		-		-			713
S		CCTE		71.359		II 2020		Tasa interés		C		Préstamos		71.359		-		-			658
S		CCTE		70.950		III 2020		Tasa interés		C		Préstamos		70.950		-		-			(1.774	)
S		CCTE		71.383		III 2020		Tasa interés		C		Préstamos		71.383		-		-			(1.761	)
S		CCTE		72.396		IV 2020		Tasa interés		C		Préstamos		72.396		-		-			722
S		CCTE		23.441		I1 2019		Tasa interés		C		Préstamos		23.441		-		-			(544	)
S		CCTE		23.441		I1 2019		Tasa interés		C		Préstamos		23.441		-		-			(544	)
S		CCTE		23.666		III 2019		Tasa interés		C		Préstamos		23.666		-		-			(569	)
S		CCTE		23.724		III 2019		Tasa interés		C		Préstamos		23.724		-		-			(578	)
S		CCTE		23.724		III 2019		Tasa interés		C		Préstamos		23.724		-		-			(578	)
S		CCTE		23.724		III 2019		Tasa interés		C		Préstamos		23.724		-		-			(578	)
S		CCTE		23.724		III 2019		Tasa interés		C		Préstamos		23.724		-		-			(578	)
S		CCTE		23.836		IV 2019		Tasa interés		C		Préstamos		23.836		-		-			(581	)
S		CCTE		23.894		IV 2019		Tasa interés		C		Préstamos		23.894		-		-			(592	)
S		CCTE		23.894		IV 2019		Tasa interés		C		Préstamos		23.894		-		-			(592	)
S		CCTE		34.069		I 2020		Tasa interés		C		Préstamos		34.069		-		-			(841	)
S		CCTE		34.069		I 2020		Tasa interés		C		Préstamos		34.069		-		-			(842	)
S		CCTE		24.410		III 2020		Tasa interés		C		Préstamos		24.410		-		-			(612	)
S		CCTE		24.410		III 2020		Tasa interés		C		Préstamos		24.410		-		-			(612	)
S		CCTE		24.410		III 2020		Tasa interés		C		Préstamos		24.410		-		-			(612	)
S		CCTE		24.410		III 2020		Tasa interés		C		Préstamos		24.410		-		-			(612	)
S		CCTE		24.410		III 2020		Tasa interés		C		Préstamos		24.410		-		-			(612	)
S		CCTE		34.636		III 2020		Tasa interés		C		Préstamos		34.636		-		-			(868	)
S		CCTE		34.636		III 2020		Tasa interés		C		Préstamos		34.636		-		-			(868	)
S		CCTE		24.586		IV 2020		Tasa interés		C		Préstamos		24.586		-		-			(569	)
S		CCTE		24.586		IV 2020		Tasa interés		C		Préstamos		24.586		-		-			(569	)
S		CCTE		24.586		IV 2020		Tasa interés		C		Préstamos		24.586		-		-			(569	)
S		CCTE		24.586		IV 2020		Tasa interés		C		Préstamos		24.586		-		-			(569	)
S		CCTE		24.586		IV 2020		Tasa interés		C		Préstamos		24.586		-		-			(569	)
S		CCTE		5.970		I 2007		Combustible		C		Compra de combustible		5.970		-		-			(646	)
S		CCTE		5.960		I 2007		Combustible		C		Compra de combustible		5.960		-		-			(636	)

189

									Descripción de los contratos
											Partida o transacción protegida				Valor de la		Efecto en Resultado
			Valor del		Plazo de				Posición						partida
Tipo de	Tipo de		contrato		vencimiento		Item		Compra /				Monto		protegida		Realizado		No Realizado
derivado	contrato		MUS$		o expiración		Específico		Venta		Nombre		MUS$		MUS$		MUS$		MUS$

S		CCTE		5.835		I 2007		Combustible		C		Compra de combustible		5.835		-		-		(511	)
S		CCTE		5.829		I 2007		Combustible		C		Compra de combustible		5.829		-		-		(505	)
S		CCTE		5.813		I 2007		Combustible		C		Compra de combustible		5.813		-		-		(489	)
S		CCTE		5.652		I 2007		Combustible		C		Compra de combustible		5.652		-		-		(328	)
S		CCTE		2.813		I 2007		Combustible		C		Compra de combustible		2.813		-		-		(151	)
S		CCTE		3.382		I 2007		Combustible		C		Compra de combustible		3.382		-		-		(188	)
S		CCTE		5.610		I 2007		Combustible		C		Compra de combustible		5.610		-		-		(286	)
S		CCTE		2.241		I 2007		Combustible		C		Compra de combustible		2.241		-		-		(111	)
S		CCTE		2.278		I 2007		Combustible		C		Compra de combustible		2.278		-		-		(16	)
S		CCTE		2.276		I 2007		Combustible		C		Compra de combustible		2.276		-		-		(13	)
S		CCTE		886		II 2007		Combustible		C		Compra de combustible		886		-		-		(22	)
S		CCTE		1.758		II 2007		Combustible		C		Compra de combustible		1.758		-		-		(29	)
S		CCTE		2963		II 2007		Combustible		C		Compra de combustible		2.963		-		-		(154	)
S		CCTE		2.940		II 2007		Combustible		C		Compra de combustible		2.940		-		-		(131	)
S		CCTE		2.310		II 2007		Combustible		C		Compra de combustible		2.310		-		-		(63	)
S		CCTE		2.589		II 2007		Combustible		C		Compra de combustible		2.589		-		-		(60	)
S		CCTE		2.421		II 2007		Combustible		C		Compra de combustible		2.421		-		-		(33	)
S		CCTE		2.276		II 2007		Combustible		C		Compra de combustible		2.276		-		-		(29	)
S		CCTE		2.280		II 2007		Combustible		C		Compra de combustible		2.280		-		-		(33	)
S		CCTE		2.474		II 2007		Combustible		C		Compra de combustible		2.474		-		-		(30	)
S		CCTE		2.545		II 2007		Combustible		C		Compra de combustible		2.545		-		-		(17	)
S		CCTE		5.640		II 2007		Combustible		C		Compra de combustible		5.640		-		-		(22	)
S		CCTE		2.432		II 2007		Combustible		C		Compra de combustible		2.432		-		-		(17	)
S		CCTE		2.427		II 2007		Combustible		C		Compra de combustible		2.427		-		-		(11	)
S		CCTE		2.425		II 2007		Combustible		C		Compra de combustible		2.425		-		-		(9	)
S		CCTE		2.252		II 2007		Combustible		C		Compra de combustible		2.252		-		-		(5	)
S		CCTE		2.801		II 2007		Combustible		C		Compra de combustible		2.801		-		-		9
S		CCTE		2.798		II 2007		Combustible		C		Compra de combustible		2.798		-		-		12
S		CCTE		4.158		III 2007		Combustible		C		Compra de combustible		4.158		-		-		(50	)
S		CCTE		4.973		III 2007		Combustible		C		Compra de combustible		4.973		-		-		16
S		CCTE		2.925		III 2007		Combustible		C		Compra de combustible		2.925		-		-		9
S		CCTE		2.918		III 2007		Combustible		C		Compra de combustible		2.918		-		-		17
S		CCTE		2.503		III 2007		Combustible		C		Compra de combustible		2.503		-		-		21
S		CCTE		2.499		III 2007		Combustible		C		Compra de combustible		2.499		-		-		24
S		CCTE		2.883		III 2007		Combustible		C		Compra de combustible		2.883		-		-		51
S		CCTE		5.837		III 2007		Combustible		C		Compra de combustible		5.837		-		-		32
S		CCTE		2.915		III 2007		Combustible		C		Compra de combustible		2.915		-		-		20
S		CCTE		5.046		III 2007		Combustible		C		Compra de combustible		5.046		-		-		(58	)
S		CCTE		3.683		III 2007		Combustible		C		Compra de combustible		3.683		-		-		15
S		CCTE		4.599		IV 2007		Combustible		C		Compra de combustible		4.599		-		-		7
S		CCTE		2.925		IV 2007		Combustible		C		Compra de combustible		2.925		-		-		47
S		CCTE		2.916		IV 2007		Combustible		C		Compra de combustible		2.916		-		-		56
S		CCTE		5.898		IV 2007		Combustible		C		Compra de combustible		5.898		-		-		45
S		CCTE		2.944		IV 2007		Combustible		C		Compra de combustible		2.944		-		-		28
S		CCTE		10.044		I 2007		Dólar		V		Venta de dólares		10.044		-		-		138
S		CCTE		5.049		I 2007		Dólar		V		Venta de dólares		5.049		-		-		57
S		CCTE		5.047		I 2007		Dólar		V		Venta de dólares		5.047		-		-		57
S		CCTE		10.052		I 2007		Dólar		V		Venta de dólares		10.052		-		-		(66	)
S		CCTE		10.052		I 2007		Dólar		V		Venta de dólares		10.052		-		-		(66	)

190

Nota 25. Contingencias y restricciones

a) Juicios

Tribunal	N° Rol de	Origen	Etapa procesal	Montos
	la causa		e instancia	Comprometidos
				MUS$

4º Juzgado Civil de Santiago de Chile	4831-97	Demanda de indemnización de perjuicios	Pendiente que el Tribunal proceda a liquidar	138
		interpuesta por Aerovías DAP / Alex y Andrés	el crédito y se efectúe la notificación del
		Pivcevic R .	cumplimiento del fallo de autos.

Comercial 14 Sec.28, Argentina	108210 / 99	Demanda daños y perjuicios.	Rechazado recurso extraordinario de los	249
			demandantes y pendiente
			recurso de queja.

6° Juzgado Laboral de Santiago de Chile	141- 00	Demanda por supuesto incumplimiento en	Pendiente apelación ante Corte de Apelaciones	Indeterminado
		períodos de servicio de vuelo.

4° Juzgado Laboral de Santiago de Chile	3576-2003	Demanda presentada por el Sindicato de	Pendiente cumplimiento y liquidación por parte	Indeterminado
		Trabajadores de LAN Airlines S.A. por	de SII.
		gratificaciones correspondientes a los
		ejercicios 1998, 1999, 2000, 2001, 2002.

Tribunal competente para conocer	-	Como consecuencia de la investigación por	Presentadas acciones de clase.	Indeterminado
acciones de clase		supuestas prácticas anticompetitivas
		aerolíneas cargueras especialmente
		sobrecargo de combustible (Fuel Surcharge).

En atención al estado procesal de las causas y /o el improbable evento de ser condenados en dichos juicios, al 31 de diciembre de 2006 se ha estimado en cada caso que no corresponde la constitución de provisión alguna por estos juicios.

b) Garantías, otras contingencias y compromisos

Acreedor Garantía	Tipo	Valor	Fecha de
		MUS$	liberación

Fisco de Chile (Aduana)	Cuatro letras en garantía	20.150	A la vista
United Technologies International Corporation, Pratt & Whitney	Dos cartas de crédito	15.000	30-Jul- 07
Division
Private Export Funding Corp.	Carta de crédito	11.000	29-Dic- 07
TAF Venus Lease Limited	Carta de crédito	4.000	11-Dic- 07
TAF Mercury Lease Limited	Carta de crédito	4.000	11-Dic- 07
JP Morgan Chase	Carta de crédito	3.465	30-Ago-07
International Lease Finance Corporation	Siete cartas de crédito	3.280	25-Jul- 07
Orix Aviation System Limited	Carta de crédito	3.265	5-May-07
Deutsche Verkehrsbank AG.	Carta de crédito	3.255	17-Ago-08
CIT Leasing (Bermuda), Limited	Dos cartas de crédito	3.240	10-May-07
Celestial Aviation Trading 35 Limited	Carta de crédito	2.500	13-Jun- 07
MSA V Willmington Trust Company	Carta de crédito	2.200	3-Dic- 07
GE Capital Aviation Services Limited	Dos cartas de crédito	2.054	27-Jul- 07
Washington International Insurance	Tres cartas de crédito	1.750	5-Abr- 07
Metropolitan Dade County	Cinco cartas de crédito	1.504	31-May-07
Atlas Air Inc.	Carta de crédito	1.500	7-Oct- 07
Celestial Aviation Trading 50 Limited	Carta de crédito	1.400	20-Feb- 07

191

b.1) Existen los siguientes contratos de arrendamiento de aeronaves :

Arrendador	Tipo de Aeronave		Cantidad

International Lease Finance Corporation		767		5
CIT Leasing (Bermuda), Limited		767		1
GAP Investment Forty-Five LLC		767		1
Nordea Finance Sweden PLC		767		1
MSA V Willmington Trust Company		767		1
Celestial Aviation Trading 35 Limited		767		1
IA Crane Limited		A320		1
IA Hawk Limited		A320		1
IA Hummingbird Limited		A320		1
Wells Fargo Bank Northwestern, N.A.		A320		1
IA Sparrow Limited		A340		1
Bi Opal Lease Co., Limited		A340		1
IA Mariners Lease Co. Limited		A340		1
IA Cormorant Limited		A340		1
Total				18

Los montos de arriendos anuales comprometidos por contratos de aeronaves y motores ascienden a: MUS$ 87.313 / Año 2007; MUS$ 78.054 / Año 2008; MUS$ 60.385 / Año 2009; MUS$ 51.289 / Año 2010; MUS$ 50.273 / Año 2011; MUS$ 44.460 / Año 2012; MUS$ 18.155 / Año 2013 y siguientes.

b. 2) Compromisos

Con fecha 23 de agosto de 1999, se informó la suscripción de un contrato de compraventa de 7 aeronaves de largo alcance A340-300 con Airbus Industries (actual Airbus S.A.S.). De este total, a la fecha se han recibido cuatro aeronaves, se ha cancelado la entrega de una aeronave y quedan por recibirse dos aeronaves por un monto total aproximado de MUS$ 230.000. La entrega está programada para el año 2008.

Con fecha 4 de octubre de 2005, la Sociedad suscribió con Airbus S.A.S. una modificación al contrato de compra de aeronaves de fecha 20 de marzo de 1998, en virtud del cual se acordó la compra de nuevas aeronaves de la familia A320, esto es, modelos A320, A319 y A318. En virtud de esta nueva modificación, el total de aeronaves Airbus de la familia A320 que serán adquiridas en los años 2006, 2007 y 2008 asciende a treinta y dos, con la opción de compra de 15 aeronaves adicionales. El valor total aproximado asciende a MUS$ 960.000.

Con fecha 20 de abril de 2004, la Sociedad suscribió un contrato con The Boeing Company, por la compra de 2 aeronaves 767-300F que fueron recibidas en julio y noviembre 2005.

Con fecha 11 de noviembre de 2004, la Sociedad suscribió con The Boeing Company un contrato de compra de 4 aeronaves 767-300, pudiendo ser éstos indistintamente cargueros o pasajeros. Estas aeronaves fueron recibidas durante el año 2006.

Con fecha 28 de abril de 2005, la Sociedad suscribió con The Boeing Company, un contrato de compra de 3 aeronaves 767-300, pudiendo ser éstos indistintamente cargueros o pasajeros. La entrega está programada para los años 2006 y 2007.

Con fecha 20 de julio de 2005, la Sociedad suscribió con The Boeing Company, un contrato de compra de 3 aeronaves 767-300, siendo uno de ellos de pasajeros y pudiendo ser dos indistintamente cargueros o pasajeros. La entrega está programada para los años 2007 y 2008.

Con fecha 31 de marzo de 2006, la Sociedad suscribió con The Boeing Company, un contrato de compra de 3 aeronaves 767-300 para ser entregadas en el período 2007 - 2008.

192

Con fecha 14 de diciembre de 2006, la Sociedad suscribió con The Boeing Company, un contrato de compra de 3 aeronaves 767-300. La entrega está programada para el año 2009.

Al 31 de diciembre de 2006, producto de los distintos contratos de compra con The Boeing Company anteriormente descritos por un total de 18 aeronaves, resta por recibirse un total de 11 aeronaves por un monto total aproximado de MUS$ 1.012.000. De este total, a esta fecha las configuraciones son aeronaves de pasajeros, teniendo una aeronave la posibilidad de conversión a carguero.

c) Restricciones

c.1) En relación con los diversos contratos celebrados por LAN Airlines S.A. para el financiamiento de aeronaves Boeing 767 que cuentan con la garantía del Export - Import Bank de los Estados Unidos de Norteamérica, se han establecido límites a algunos indicadores financieros de la Sociedad, en base consolidada. Por otra parte y relacionado con estos mismos contratos, se establecen restricciones a la gestión de la Sociedad en términos de composición accionaria y disposición de activos.

c.2) En relación con el contrato de Securitización, celebrado con Pelican Finance Ltd., en agosto 2002 se han establecido restricciones a la gestión de la Sociedad en términos de disponer de Cuentas por cobrar similares a las enajenadas.

c.3) Existe un contrato de mutuo, con BBVA, que establece restricciones a la gestión de la Sociedad, en términos de disposición de activos.

c.4) En relación con los diversos contratos celebrados por LAN Airlines S.A. para el financiamiento de aeronaves Airbus A320 que cuentan con la garantía de las Export Credit Agencies Europeas, se han establecido límites a algunos indicadores financieros de la Sociedad. Por otra parte, y relacionado con estos mismos contratos, se establecen restricciones a la gestión de la Sociedad, en términos de composición accionaria y disposición de activos.

d) Garantías directas

	Deudor						Activos comprometidos				Saldos pendiente de pago a la fecha de cierre de los Estados Financieros
Acreedor de la garantía	Nombre		Relación		Tipo de garantía		Tipo		Valor Contable MUS$		2006 MUS$		2005 MUS$

ING Capital LLC		LAN Airlines S.A.		-		Hipoteca garantía		Avión motores contrato de arriendo		88.306		84.755		91.288
Wilmington Trust Company		LAN Airlines S.A.		-		Hipoteca garantía		Avión motores contrato de arriendo		85.930		81.981		88.585
Wilmington Trust Company		LAN Airlines S.A.		-		Hipoteca		Avión motores		85.441		73.396		-
Wilmington Trust Company		LAN Airlines S.A.		-		Hipoteca		Avión motores		80.270		68.783		-
Wilmington Trust Company		LAN Airlines S.A.		-		Hipoteca garantía		Avión motores contrato de arriendo		80.149		66.973		-
Wilmington Trust Company		LAN Airlines S.A.		-		Hipoteca		Avión motores		79.995		68.184		-
ING Capital LLC		LAN Airlines S.A.		-		Hipoteca garantía		Avión motores contrato de arriendo		78.942		76.086		-
BNP Paribas		LAN Airlines S.A.		-		Hipoteca		Avión motores		33.742		28.565		-
BNP Paribas		LAN Airlines S.A.		-		Hipoteca		Avión motores		33.729		28.210		-
BNP Paribas		LAN Airlines S.A.		-		Hipoteca		Avión motores		33.727		28.256		-
BNP Paribas		LAN Airlines S.A.		-		Hipoteca		Avión motores		33.714		28.236		-
BNP Paribas		LAN Airlines S.A.		-		Hipoteca		Avión motores		33.678		28.526		-
BNP Paribas		LAN Airlines S.A.		-		Hipoteca		Avión motores		33.364		28.421		-
BNP Paribas		LAN Airlines S.A.		-		Hipoteca		Avión motores		33.359		28.389		-
BNP Paribas		LAN Airlines S.A.		-		Hipoteca		Avión motores		33.219		28.189		-
Calyon		LAN Airlines S.A.		-		Hipoteca		Avión motores		31.752		31.231		33.208
Calyon		LAN Airlines S.A.		-		Hipoteca		Avión motores		31.365		31.210		33.195
Calyon		LAN Airlines S.A.		-		Hipoteca prenda		Avión contrato arriendo		29.481		28.715		30.190
Calyon		LAN Airlines S.A.		-		Hipoteca prenda		Avión contrato arriendo		28.371		29.353		30.828
Credit Lyonnais		LAN Airlines S.A.		-		Hipoteca prenda		Avión contrato arriendo		28.009		29.381		30.807
Credit Lyonnais		LAN Airlines S.A.		-		Hipoteca prenda		Avión contrato arriendo		27.561		29.527		30.904
GPA Group PLC		LAN Airlines S.A.		-		Prenda		Repuestos		331		-		-

193

e) Garantías indirectas

	Deudor						Activos comprometidos				Saldos pendiente de pago a la fecha de cierre de los Estados Financieros
Acreedor de la garantía	Nombre		Relación		Tipo de garantía		Tipo		Valor Contable MUS$		2006 MUS$		2005 MUS$

ING Capital LLC		LAN Cargo S.A.		Filial		Aval fianza codeuda		-		-		84.755		91.288
Wilmington Trust Company		LAN Cargo S.A.		Filial		Aval fianza codeuda		-		-		81.981		88.585
Wilmington Trust Company		LAN Cargo S.A.		Filial		Aval fianza y codeuda		-		-		73.396		-
Wells Fargo Bank Northwest, National		LAN Cargo S.A.		Filial		Aval fianza codeuda		-		-		63.897		69.593
Association y Eximbank
Wells Fargo Bank Northwest, National		LAN Cargo S.A.		Filial		Aval fianza codeuda		-		-		62.465		68.048
Association y Eximbank
Citibank N.A., Bahrain Branch		LAN Cargo S.A.		Filial		Aval fianza codeuda		-		-		55.498		60.184
Westdeutche Landesbank Girozet
Credit Lyonnais		Inversiones LAN S.A.		Filial		Fianza y codeuda solidaria		-		-		29.527		30.904
Credit Lyonnais		Inversiones LAN S.A.		Filial		Fianza y codeuda solidaria		-		-		29.381		30.807
Calyon		Inversiones LAN S.A.		Filial		Fianza y codeuda solidaria		-		-		29.353		30.828
Calyon		Inversiones LAN S.A.		Filial		Fianza y codeuda solidaria		-		-		28.715		30.190
BNP Paribas		Transporte Aéreo S.A.		Filial indirecta		Aval codeuda solidaria		-		-		28.565		-
BNP Paribas		Transporte Aéreo S.A.		Filial indirecta		Aval codeuda solidaria		-		-		28.526		-
BNP Paribas		Transporte Aéreo S.A.		Filial indirecta		Aval codeuda solidaria		-		-		28.421		-
BNP Paribas		Transporte Aéreo S.A.		Filial indirecta		Aval codeuda solidaria		-		-		28.389		-
C.B.L. Inc.		Transporte Aéreo S.A.		Filial indirecta		Aval fianza y codeuda		-		-		27.898		28.523
M-One Wisteria Lease Co., Limited		Transporte Aéreo S.A.		Filial indirecta		Aval fianza y codeuda		-		-		27.820		28.563
MLD T.I.S. Co., Limited		Transporte Aéreo S.A.		Filial indirecta		Aval fianza y codeuda		-		-		27.586		28.215
Bi Opal Lease Co., Limited		Transporte Aéreo S.A.		Filial indirecta		Aval fianza y codeuda		-		-		22.896		26.334
Bi Opal Lease Co., Limited		Transporte Aéreo S.A.		Filial indirecta		Aval fianza y codeuda		-		-		22.724		26.162
Bi Opal Lease Co., Limited		Transporte Aéreo S.A.		Filial indirecta		Aval fianza y codeuda		-		-		22.433		25.868
BBVA		Inmobiliaria Aeronáutica S.A .		Filial		Fianza y codeuda solidaria		-		-		7.706		8.248
Celestial Aviation Trading 16 Limited		LAN Cargo S.A. y /o Florida		Filial / coligada		Aval fianza y codeuda		-		-		3.500		3.500
		West International
Orix Aviation System Limited		Inversiones LAN S.A.		Filial		Fianza y codeuda solidaria		-		-		3.265		3.265
Banco Estado		Transporte Aéreo S.A.		Filial indirecta		Aval fianza y codeuda		-		-		2.000		2.000
ACL Aviation Limited		Transporte Aéreo S.A.		Filial indirecta		Aval fianza y codeuda		-		-		1.000		1.000
ACL Aviation Limited		Transporte Aéreo S.A.		Filial indirecta		Aval fianza y codeuda		-		-		1.000		1.000

Nota 26. Cauciones

Valor

Tipo de Garantía

Otorgante

Tipo de Operación

Tipo de Relación

2006

MUS$

2005

MUS$

Dos cartas de crédito

Aerovías de México S.A.

Arriendo avión

Cliente

2.620

2.500

194

Nota 27. Moneda nacional y extranjera

Activo

		2006	2005
Rubro	Moneda	MUS$	MUS$
Activos Circulantes
Disponible	Dólar	1.315	712
Disponible	$ No reajustable	1.796	2.119
Disponible	Peso argentino	174	236
Disponible	Otras monedas	215	2.462
Depósitos a plazo	Dólar	90.360	25.315
Depósitos a plazo	$ Reajustable	39.875	-
Depósitos a plazo	Euro	1.253	-
Depósitos a plazo	Otras monedas	10.714	6.190
Valores negociables	Dólar	20.746	77.010
Valores negociables	$ Reajustable	4.754	5.850
Valores negociables	Euro	593	656
Deudores por venta	Dólar	84.945	79.233
Deudores por venta	$ No reajustable	29.439	22.837
Deudores por venta	Euro	16.523	8.148
Deudores por venta	Real brasileño	12.159	5.259
Deudores por venta	Peso colombiano	3.961	2.503
Deudores por venta	Peso argentino	2.932	2.213
Deudores por venta	Dólar australiano	2.601	970
Deudores por venta	Jen japonés	864	160
Deudores por venta	Otras monedas	4.834	3.699
Documentos por cobrar	$ No reajustable	4.670	3.766
Documentos por cobrar	Euro	355	260
Documentos por cobrar	Real brasileño	164	107
Documentos por cobrar	Otras monedas	428	359
Deudores varios	Dólar	98.458	114.323
Deudores varios	$ No reajustable	2.889	3.130
Deudores varios	$ Reajustable	1.957	1.339
Deudores varios	Euro	948	313
Deudores varios	Real brasileño	239	29
Deudores varios	Peso argentino	141	112
Deudores varios	Peso mexicano	1	268
Deudores varios	Otras monedas	533	760
Documentos y cuentas por cobrar EE.RR.	Dólar	50.753	20.498
Documentos y cuentas por cobrar EE.RR.	$ No reajustable	3.093	3.089
Existencias	Dólar	42.515	36.240
Impuestos por recuperar	$ Reajustable	9.930	5.575
Impuestos por recuperar	Peso mexicano	2.171	1.509
Impuestos por recuperar	Peso argentino	753	938
Impuestos por recuperar	Dólar	604	381
Impuestos por recuperar	Otras monedas	2.126	732
Gastos pagados por anticipado	$ No reajustable	2.016	670
Gastos pagados por anticipado	Dólar	12.932	12.380
Gastos pagados por anticipado	Otras monedas	616	135
Impuestos diferidos	Dólar	3.574	4.612
Otros activos circulantes	Dólar	11.176	11.730
Otros activos circulantes	Euro	227	118
Otros activos circulantes	$ Reajustable	81	124
Otros activos circulantes	$ No reajustable	69	69
Otros activos circulantes	Otras monedas	72	50

Activo Fijo
Terrenos	Dólar	5.537	5.537
Construcciones y obras de infraestructura	Dólar	42.247	40.248
Maquinarias y equipos	Dólar	883.476	423.570
Otros activos fijos	Dólar	282.806	304.027

Otros Activos
Inversiones empresas relacionadas	Dólar	273.261	174.417
Inversiones empresas relacionadas	$ Reajustable	1.679	7.329
Inversión en otras sociedades	Dólar	491	-
Inversión en otras sociedades	$ Reajustable	-	1.175
Menor valor inversiones	Dólar	19.004	20.814
Deudores a largo plazo	Dólar	6.820	6.820
Deudores a largo plazo	$ Reajustable	2.364	1.066
Documentos y cuentas por cobrar EE.RR. largo plazo	Dólar	334.247	186.051
Documentos y cuentas por cobrar ER.RR. largo plazo	$ No reajustable	4.330	18.306
Intangibles	Dólar	1.206	1.147
Otros	Dólar	192.747	230.763
Otros	$ No reajustable	-	55
Otros	Otras monedas	32	16

Total activos
	Dólar	2.459.220	1.775.828
	$ No reajustable	48.302	54.041
	Peso argentino	4.000	3.499
	Otras monedas	19.570	14.403
	$ Reajustable	60.640	22.458
	Euro	19.899	9.495
	Real brasileño	12.562	5.395
	Peso colombiano	3.961	2.503
	Dólar australiano	2.601	970
	Jen japonés	864	160
	Peso mexicano	2.172	1.777

195

Pasivos Circulantes

		Hasta 90 días						90 días a 1 año
		2006			2005			2006			2005
			Tasa int.			Tasa int.			Tasa int.			Tasa int.
RUBRO	Moneda	MUS$	prom. anual		MUS$	prom. anual		MUS$	prom. anual		MUS$	prom. anual

Obligaciones con bancos e instituciones	Dólar	22.402	0,05237		9.593	L+1,0767	%	50.615	0,05237		21.101	L+1,0767	%
financieras largo plazo porción corto plazo
Obligaciones largo plazo con vencimiento	Dólar	9.508	L+ 0,2657	%	3.576	L+ 0,2473	%	26.356	L+ 0,2657	%	30.285	L+ 0,2473	%
dentro de un año
Obligaciones largo plazo con vencimiento	Dólar	2.915	6,96	%	3.366	6,95	%	9.055	6,96	%	8.451	6,95	%
dentro de un año
Dividendos por pagar	Dólar	67.787	-		35.000	-		-	-		-	-
Cuentas por pagar	Dólar	68.008	-		64.978	-		224	-		57.744	-
Cuentas por pagar	$ No reajustable	31.793	-		32.543	-		92	-		1.255	-
Cuentas por pagar	Euro	3.990	-		6	-		1.058	-		136	-
Cuentas por pagar	Peso argentino	2.776	-		1.743	-		-	-		21	-
Cuentas por pagar	Real brasileño	1.349	-		406	-		50.878	-		-	-
Cuentas por pagar	Peso mexicano	861	-		751	-		2.113	-		-	-
Cuentas por pagar	Otras monedas	1.440	-		545	-		397	-		239	-
Acreedores varios	Dólar	-	-		322	-		-	-		-	-
Documentos y cuentas por pagar EE.RR.	Dólar	155.695	-		89.818	-		-	-		9.333	-
Documentos y cuentas por pagar EE.RR.	$ Reajustable	62	-		-	-		-	-		-	-
Documentos y cuentas por pagar EE.RR.	$ No reajustable	-	-		5.143	-		-	-		-	-
Provisiones	Dólar	21.067	-		22.039	-		45.469	-		32.904	-
Provisiones	$ No reajustable	1.647	-		-	-		3.898	-		1.484	-
Retenciones	Dólar	23.596	-		17.516	-		2.561	-		3.251	-
Retenciones	$ No reajustable	3.517	-		4.869	-		-	-		-	-
Impuesto a la renta	Dólar	-	-		-	-		-	-		42	-
Impuesto a la renta	Otras monedas	-	-		19	-		-	-		-	-
Ingresos percibidos por adelantado	Dólar	200.279	-		126.950	-		19.166	-		26.022	-
Otros pasivos circulantes	Dólar	4.743	-		34	-		2.499	-		9.438	-
Otros pasivos circulantes	Otras monedas	126	-		-	-		-	-		20	-
Total pasivos circulantes
	Dólar	576.000			373.192			155.945			198.571
	$ No reajustable	36.957			42.555			3.990			2.739
	Euro	3.990			6			1.058			136
	Peso argentino	2.776			1.743			-			21
	Real brasileño	1.349			406			50.878			-
	Peso mexicano	861			751			2.113			-
	Otras monedas	1.566			564			397			259
	$ Reajustable	62			-			-			-

196

Pasivos largo plazo al 31-12-2006

		1 a 3 años					3 a 5 años					5 a 10 años					Más de 10 años
				Tasa int.					Tasa int.					Tasa int.					Tasa int.
Rubro	Moneda	MUS$		prom. anual			MUS$		prom. anual			MUS$		prom. anual			MUS$		prom. anual

Obligaciones con bancos e instituciones	Dólar
financieras			143.758		5,2370	%		157.600		5,2370	%		405.931		5,2370	%		146.061		5,2370	%
Provisiones largo plazo	Dólar		19.925		-			10.046		-			4.967		-			-		-
Provisiones largo plazo	$ No reajustable		3.953		-			70		-			36		-			-		-
Provisiones largo plazo	Otras monedas		129		-			-		-			-		-			-		-
Impuesto diferido a largo plazo	Dólar		-		-			-		-			-		-			107.865		-
Otros pasivos largo plazo	Dólar		76.197		L+ 0,2657	%		39.509		L+ 0,2657	%		12.435		L+ 0,2657	%		-		-
Otros pasivos largo plazo	Dólar		19.578		6,96	%		-		-			-		-			-		-
Otros pasivos largo plazo	Dólar		12.008		-			7.396		-			2.039		-			-		-
Otros pasivos largo plazo	Otras monedas		2		-			-		-			24		-			-		-
Total pasivos a largo plazo
	Dólar		271.466					214.551					425.372					253.926
	$ No reajustable		3.953					70					36					-
	Otras monedas		131					-					24					-

Pasivos largo plazo al 31-12-2005

		1 a 3 años					3 a 5 años					5 a 10 años					Más de 10 años
				Tasa int.					Tasa int.					Tasa int.					Tasa int.
Rubro	Moneda	MUS$		prom. anual			MUS$		prom. anual			MUS$		prom. anual			MUS$		prom. anual

Obligaciones con bancos e	Dólar		59.379		L+1,0767	%		64.409		L+1,0767	%		156.112		L+1,0767	%		58.411		L+1,0767	%
instituciones financieras
Acreedores varios largo plazo	Dólar		16.178		L+2,0000	%		-		-			-		-			-		-
Documentos y cuentas por pagar	Dólar		31.669		-			-		-			-		-			-		-
EE.RR. largo plazo
Provisiones largo plazo	Dólar		30.855		-			21.507		-			36.540		-			-		-
Provisiones largo plazo	$No reajustable		4.124		-			67		-			30		-			-		-
Provisiones largo plazo	Otras monedas		1.310		-			-		-			-		-			-		-
Impuesto diferido a largo plazo	Dólar		-		-			-		-			-		-			82.866		-
Otros pasivos largo plazo	Dólar		71.858		L+ 0,2473	%		69.956		L+ 0,2473	%		8.777		L+ 0,2473	%		10.560		L+ 0,2473	%
Otros pasivos largo plazo	Dólar		24.796		6,96	%		6.753		6,96	%		-		-			-		-
Otros pasivos largo plazo	Dólar		6.935		-			1.771		-			1.867		-			112		-
Otros pasivos largo plazo	Otras monedas		31		-			-		-			-		-			-		-
Total pasivos a largo plazo
	Dólar		241.670					164.396					203.296					151.949
	$ No reajustable		4.124					67					30					-
	Otras monedas		1.341					-					-					-

197

Nota 28. Sanciones

a) De la Superintendencia de Valores y Seguros

No se han aplicado sanciones a la Sociedad, a sus Directores o Administradores, emitidas por parte de la Superintendencia de Valores y Seguros al 31 de diciembre de 2006 y 2005.

b) De Otras autoridades administrativas

No se han aplicado sanciones significativas a la Sociedad, emitidas por otras autoridades administrativas al 31 de diciembre de 2006 y 2005.

Nota 29. Hechos posteriores

a) Con posterioridad al 31 de diciembre de 2006 y hasta la fecha de emisión de estos Estados Financieros, existe el siguiente hecho posterior:

En la Junta Extraordinaria de Accionistas de LAN Airlines S.A., celebrada con fecha 26 de enero de 2007 y con la asistencia de accionistas que representaban un 80,1% del total de las acciones suscritas y pagadas de la Sociedad, se adoptaron los siguientes acuerdos:

- Aumentar el capital social de US$ 134.303.353, dividido en 318.909.090 acciones de una misma serie, nominativas, de carácter ordinario, sin valor nominal, íntegramente suscritas y pagadas, a la cantidad de US$ 206.478.253, dividido en 326.409.090 acciones, mediante la emisión de 7.500.000 de acciones de pago de iguales características a las existentes, representativas en total de un aumento de capital por la cantidad de US$ 72.174.900.

- Destinar un 10% de las acciones representativas del aumento de capital, esto es, la cantidad de 750.000 acciones, a planes de compensación que el Directorio elaborará al efecto para los trabajadores de la Sociedad Matriz y de sus filiales, conforme lo dispuesto en

los incisos tercero, cuarto y quinto del artículo 24 de la Ley 18.046, mediante un programa de opciones para la suscripción de acciones de la Sociedad, quedando ampliamente facultado para ello.

b) Entre el 31 de diciembre de 2006 y la fecha de emisión de estos Estados Financieros, no han ocurrido otros hechos de carácter financiero o de otra índole, que afecten en forma significativa los saldos o interpretación de los mismos.

Nota 30. Medio ambiente

De conformidad con la Ley de Bases sobre el Medio Ambiente y su normativa complementaria, no existen disposiciones que afecten la industria de servicios de transporte aéreo.

198

Nota 31. Gastos pagados por anticipado

La composición de este rubro es la siguiente:

	2006		2005
	MUS$		MUS$

Seguros de aviación y otros		6.271		6.224
Arriendo aeronaves (1)		3.283		3.195
Recepción aeronaves (2)		3.054		1.894
Publicidad no consumida		1.032		91
Oficinas del exterior		593		201
Servicios a bordo		141		529
Otros		1.190		1.051
Total		15.564		13.185

(1) El concepto arriendo de aeronaves, corresponde a valores pagados anticipadamente a los arrendadores, los cuales serán cargados a resultados operacionales una vez que estos se devenguen.

(2) Como recepción de aeronaves, se incluyen todos aquellos costos en que incurre la Sociedad al momento de recepcionar una aeronave, para dejarla en condiciones operativas. Dichos costos no son recuperables y se difieren con cargo a resultados operacionales en los plazos de duración establecidos en los respectivos contratos.

Nota 32. Cuentas por pagar

La composición de este rubro es la siguiente:

	2006		2005
	MUS$		MUS$

Combustible		36.807		40.242
Compras técnicas		13.975		16.830
Tasas aeroportuarias y de sobrevuelo		11.779		12.943
Handling y Ground handling		10.891		8.333
Cumplimiento de metas agencias		10.766		7.606
Asesorías y servicios profesionales		9.230		2.455
Tripulación		8.658		6.978
Publicidad		7.941		5.367
Servicios a bordo		7.321		8.132
Seguros de aviación		6.162		7.895
Arriendo de aeronaves y motores		5.691		6.364
Materiales y servicios de mantenimiento		3.119		5.418
Comunicaciones		1.868		3.102
Mantenciones generales		1.670		1.743
Sistemas de distribución		1.140		6.320
Compañías aéreas interlineales		103		2.026
Otros proveedores		27.858		18.613
Total		164.979		160.367

219

LAN AIRLINES S.A. AND SUBSIDIARIES

b) Consolidation

The consolidated financial statements for the years 2006, 2005 and 2004 include the following subsidiaries:

	December 31
	2006		2005		2004
Percentage of direct and indirect ownership:
LAN Perú S.A.		70.00		70.00		70.00
Inversiones LAN S.A. and subsidiaries		99.71		99.71		99.71
LAN Cargo S.A. (formerly LAN Chile Cargo S.A.) and subsidiaries		99.90		99.89		99.87
Inmobiliaria Aeronáutica S.A.		100.00		100.00		100.00
Comercial Masterhouse S.A.		100.00		100.00		100.00
Sistemas de Distribución Amadeus Chile S.A.		100.00		100.00		100.00
LAN Courier S.A. and subsidiary		100.00		100.00		100.00
LAN Card S.A.		100.00		100.00		100.00
LAN Pax Group S.A. and subsidiaries		100.00		100.00		100.00
LAN Cargo Group S.A.		-		100.00		100.00
Línea Aérea Nacional Chile S.A.		100.00		100.00		100.00
LAN Chile Investments Limited and subsidiaries		100.00		100.00		100.00

The effects of significant transactions between the subsidiaries and subsidiaries with the holding company have been eliminated in the consolidation and the participation of minority shareholders is shown in these financial statements as minority interest in the Consolidated Balance Sheets and Consolidated Statements of Income.

c) Use of estimates

The preparation of the consolidated financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses and the disclosure of contingent liabilities. Management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available to management. Areas where the nature of the estimate makes it reasonably possible that actual results could materially differ from amounts estimated include: impairment assessments on long-lived assets (including goodwill), inventory obsolescence, engine overhaul provisions, tax liabilities and the associated deferred tax effects, contingent liabilities and other liabilities.

d) Price-level restatements

The financial statements of certain subsidiaries have been restated through the application of monetary correction rules in accordance with Chilean GAAP to show the effects of changes in the purchasing power of the Chilean peso, using indicators published by the National Institute of Statistics.

e) Foreign currency transactions

LAN Chile and certain subsidiaries are authorized to maintain their accounting records and prepare their financial statements in US dollars. Because the US dollar is the functional and reporting currency, assets and liabilities denominated in other currencies are remeasured to US dollars at the exchange rates prevailing on December 31 of each year except for inventory, property and equipment, other assets and air traffic liability, which are remeasured at historical exchange rates. Revenues and expenses are generally translated at the exchange rates on the dates of the transactions.

Foreign currency transaction gains and losses are included in the Consolidated Statements of Income in Other income (expense) - net. The Company recorded a net foreign currency gain of ThUS$ 5,536, ThUS$ 6,004 and ThUS$ 2,353 for the years ended 2006, 2005 and 2004, respectively.

220

LAN AIRLINES S.A. AND SUBSIDIARIES

f ) Time deposits

Time deposits are stated at cost plus accrued interest at year-end.

g) Marketable securities

Marketable securities include investments in bonds and mutual funds. Bonds are stated at the lower of cost plus accrued interest or market value plus accrued interest and mutual funds are stated at market value based on year-end quoted values.

h) Allowance for bad debts

The Company maintains an allowance for bad debts based on an analysis of the aging of the outstanding balances as well as other relevant information. Other relevant information includes detailed analysis of our customers’ payment history, an analysis of the current economic and commercial environment and all relevant available public information regarding our clients and the current business environment. Our policy for determining past due accounts focuses on the aging of the receivable balance and the different forms of payment used by the debtor. Receivable balances are written off against the allowance for bad debts once they are deemed uncollectible and all collection efforts and available legal measures have been exhausted.

i ) Inventories

Inventories represent spare parts and materials that are expected to be consumed and used either by the Company or through third-party maintenance services within one year. Inventories are stated at the lower of cost (determined by the average cost method) or market.

j ) Other current assets

Other current assets include primarily the fair value of hedged forecasted jet fuel derivative contracts in unrealized loss positions and restricted funds associated with aircraft leases.

k) Property and equipment

Property and equipment are stated at cost and are depreciated by the straight-line method to their estimated residual values based on the estimated useful lives of the assets. Aircraft and engines are depreciated based on estimated useful life ranging from 10 to 20 years and utilizing a salvage value based on a residual value percentage of the cost of the asset.

The residual values and basis of depreciation used for the principal asset classifications are:

Asset classification	Residual Value (%)	Basis of depreciation
Boeing 767-300 F aircraft	36	Useful life (15 years)
Boeing 767-300 ER aircraft	36	Useful life (15 years)
Boeing 737-200 ADV aircraft	15	Useful life (until December 31, 2008)
Boeing 767-200 ER aircraft	36	Useful life (15 years)
Airbus A-320	20	Useful life (20 years)
Airbus A-319	20	Useful life (20 years)
Engines 767	36	Useful life (15 years)
Engines 737	15	Useful life (until December 31, 2008)
Engines Airbus A-320	20	Useful life (20 years)
Engines Airbus A-340	36	Useful life (15 years)
Rotating parts	20	Useful life (15 years)
Buildings	-	Useful life (10 -50 years)
Communications and computer equipment	-	Useful life (5-10 years)
Furniture and office equipment	-	Useful life (3-10 years)

221

LAN AIRLINES S.A. AND SUBSIDIARIES

Property and equipment include the revaluation increment arising from the technical appraisals of certain assets carried out in prior years in accordance with instructions issued by the Superintendency.

Inventories of materials and spare parts, net of provisions for obsolescence, included under other fixed assets within Property and equipment, are stated at their average cost.

The Company has entered into capital lease agreements related to five aircraft and certain buildings and equipment which have bargain purchase options at the end of each contract. These assets are not the legal property of the Company, because it cannot dispose of them until the purchase option is exercised. The assets are recorded at their fair value on the date of the lease agreement, which is determined by discounting the amounts payable in installments and the purchase option at the interest rate implicit, or explicit, in the contract.

The corresponding leasing obligations are presented under long-term liabilities and under the current portion of long-term leasing obligations.

Disbursements for the development of internal use software are charged to the results of operations as incurred. External direct costs of materials and services rendered in developing an enterprise resource planning system (an SAP R /3 system) and interest costs incurred during development are capitalized. Payroll related costs were not significant and have been expensed. Training costs and data conversion costs are expensed as incurred.

Impairment losses on long-lived assets used in operations are recorded when events and circumstances indicate that the assets may be impaired and the undiscounted future cash flows estimated to be generated by these assets are less than the assets’ net book value. If an impairment occurs, the loss is measured by comparing the fair value of the asset to its carrying amount. Fair values are determined based on quoted market values, discounted cash flows or internal and external appraisals, as applicable.

Under Chilean GAAP, spare parts which are not anticipated to be consumed within the next 12 months are included in property, plant and equipment. Spare parts are not depreciated, irrespective of whether they are included in fixed assets or inventory and they are expensed upon their usage in maintenance. All spare parts are recorded at the lower of cost or market value.

Spare parts included in the Consolidated Balance Sheet are classified as follows:

	At December 31,
	2006		2005		2004
	(In thousands of US$)
Inventories		39,734		34,789		32,070
Property and equipment		18,466		18,330		11,595
Total		58,200		53,119		43,665

l ) Investments in related companies

Investments in related companies are included in Other assets using the equity method when they represent between 20% and 50% of the voting stock of the investee, or when a Company has a significant influence in the operations of the investment. Accordingly, the Company’s proportional share in the net income (or loss) of each investee is recognized on an accrual basis, after eliminating any unrealized profits or losses from transactions with the investees in Other income (expense) - net in the Consolidated Statements of Income.

m) Goodwill

Under Chilean GAAP, effective January 1, 2004, Technical Bulletin N° 72 (“TB 72”) requires the determination of goodwill and negative goodwill based on the fair value of the acquired company. Prior to January 1, 2004, goodwill included the excess of the purchase price of companies acquired over their net book value; negative goodwill was established when the net book value exceeded the purchase price of companies acquired. Goodwill and negative goodwill also arise from the purchase of investments accounted for by the equity method.

Goodwill and negative goodwill are amortized over 20 years considering the expected period of return of the investment. The Company evaluates the recoverability of goodwill on a periodic basis.

222

LAN AIRLINES S.A. AND SUBSIDIARIES

n) Sale leaseback

Gains on sale leaseback transactions are deferred and recognized over the terms of the lease agreements.

o) Air traffic liability and revenue recognition policy

Passenger ticket sales are recorded as a current liability when sold as air traffic liability in the Consolidated Balance Sheets. Air traffic liability at December 31, 2006 and 2005 amounted to ThUS$ 263,620 and ThUS$ 174,587, respectively.

Passenger and cargo revenues are recognized when the transportation service is provided, which, in the case of passenger revenues reduces the air traffic liability. Commissions payable related to such unearned earnings are shown net of the air traffic liability. Other revenues include aircraft leases, courier, logistic and ground services, duty free sales, and storage and customs brokering. These other revenues are recognized when services are provided.

p) Aircraft and engine maintenance costs

Until December 31, 2005, all maintenance provisions were recorded based on technical reviews considering the aircrafts and engines use expressed in cycles and total flight hours of an aircraft. Unscheduled maintenance of aircrafts and engines were charged to income as incurred.

Effective January 1, 2006, for owned aircraft, costs incurred for heavy aircraft and engine maintenance are capitalized and amortized to the next overhaul. For leased aircraft, provisions continue to be accrued in advance based on lease terms and technical reviews considering the aircrafts and engines use expressed in cycles and total flight hours of an aircraft.

q) Lease Aircraft Return Costs

The majority of leased aircraft return costs are maintenance and overhaul costs. The airframe and engine overhaul expenses associated with leased aircraft are accrued as part of our overhaul provision included in Other liabilities and reflected in provisions in the Consolidated Balance Sheet. Such provisions are based on the flight hours incurred by the leased aircraft and also take into consideration the lease terms and the date of incorporation of the aircraft into our fleet. The actual direct costs of physically returning the planes and related administration costs are expensed when incurred.

r) Deferred income tax

Effective January 1, 2000, the effects of deferred income taxes arising from temporary differences between the basis of assets and liabilities for tax and financial statement purposes are recorded in accordance with Technical Bulletin No. 60 of the Chilean Institute of Accountants and based on the enacted income tax rate which will be in effect when the temporary differences reverse. The effects of deferred income taxes at January 1, 2000 which were not previously recorded are recognized in income beginning in 2000 as the temporary differences reverse.

In order to mitigate the effects of recording deferred income taxes that under the prior income tax accounting standard were not expected to be realized, Technical Bulletin No. 60 provided for a period of transition. Under this transition period, the full effect of using the liability method is not recorded in income at the same time the deferred taxes are recorded in the balance sheet. Under this transitional provision, a contra asset or liability account (“complementary accounts”) have been recorded offsetting the effects of the deferred tax assets and liabilities not recorded prior to January 1, 2000. Such complementary accounts are amortized to income over the estimated average reversal periods corresponding to underlying temporary differences to which the deferred tax asset or liability relates.

Deferred income tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The valuation allowance should be sufficient to reduce the deferred income tax asset to an amount that is more likely than not to be realized.

223

LAN AIRLINES S.A. AND SUBSIDIARIES

s) LAN Pass awards and LAN Corporate

The estimated incremental cost of providing free travel awards under the LAN Pass and LAN Corporate programs are accrued based on the accumulated kilometers for each passenger at the end of each year and by the conditions established by the program and are included in Other current liabilities in the Consolidated Balance Sheets.

t) Employee vacations

The cost of employee vacations is recognized as an expense on an accrual basis as the vacations are earned by employees and are included in Other current liabilities in the Consolidated Balance Sheets.

u) Derivative instruments

The Company enters into hedging contracts including interest rate swap agreements, interest rate cap agreements, forward exchange contracts, jet fuel swap agreements, and jet fuel options. The contracts are accounted for in accordance with Technical Bulletin No. 57, “Accounting for Derivative Contracts” (“TB 57”) of the Chilean Institute of Accountants. Under TB 57 all derivative instruments are recognized on the balance sheet at their fair value. Derivative instruments are accounted for as follows:

Hedge forecasted transaction:

The derivative instrument is stated at its fair value on the balance sheet and any change in the fair value is recognized on the balance sheet as an unrealized gain or loss in other assets, other liabilities, current or long term, as applicable. When the contract is settled, the unrealized gain or loss on the instrument is recognized in earnings in Other income (expense) - net in the Consolidated Statements of Income.

Firm commitments hedging contracts:

The hedged item and derivative instrument are measured at fair value on the balance sheet. Unrealized gains and losses are recorded in earnings in Other income (expense) - net in the Consolidated Statements of Income if the net effect is a loss and deferred and recognized when the contract is settled if it is a gain. The unrecognized gains associated with the derivative instrument are included in other liabilities, current or long term, as applicable.

v) Cash and cash equivalents

The Company considers all short-term, highly-liquid investment securities with original maturities of three months or less to be cash equivalents for purposes of the Consolidated Statement of Cash Flows:

	At December 31,
	2006		2005		2004
	(In thousands of US$)
Cash		9,565		11,733		11,620
Time deposits		148,663		34,519		179,715
Marketable securities (see Note 4)		39,654		65,019		25,533
Other current assets		1,614		-		-
Total		199,496		111,271		216,868

Under Chilean GAAP, certain assets (specifically, bonds as of December 31, 2006 and 2005) are classified as marketable securities in the Consolidated Balance Sheet, but are not considered cash and cash equivalents for purposes of the statement of cash flows.

w) Capitalized interest

Interest paid on borrowings used to acquire new aircraft is capitalized as an additional cost of the related assets until the aircraft is received. Interest is capitalized based on the Company’s weighted-average interest rate on long-term debt, or if applicable, the interest rate related to specific borrowings. Interest capitalization ends when the property or equipment is ready for service or its intended use. The Company capitalized ThUS$ 2,193 and ThUS$ 1,575 of interest during 2006 and 2005, respectively. No interest was capitalized for the year ended December 31, 2004.

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LAN AIRLINES S.A. AND SUBSIDIARIES

x) Advertising costs

The Company expenses advertising costs as Other operating expenses in the period incurred. Advertising expense totaled ThUS$ 23,459, ThUS$ 19,490, and ThUS$ 15,607 during 2006, 2005 and 2004, respectively.

y) Reclassifications

Certain 2004 and 2005 amounts in the accompanying financial statements have been reclassified to conform to the 2006 presentation. The reclassifications had no material effect on the previously reported presentation of net income or shareholders’ equity.

Note 3 - Accounting Changes

As indicated in Note 2 p), effective January 1, 2006, the Company changed its method of accounting for heavy aircraft and engine maintenance costs associated with its owned aircraft. Previously, the Company accrued a liability for these costs in its consolidated balance sheet under the caption “Provisions”, for both short and long - term. Such provision was established based on the total cycles and flight hours flown by an aircraft since its incorporation into the Company’s fleet, or since its last repair. Under the new method, the costs incurred in heavy owned aircraft and engine maintenance are capitalized and amortized to the next overhaul.

The cumulative effect of this accounting change at January 1, 2006, increased non- operating income by US$ 40.3 million, as it is described in Note 22. For the accounting year 2006, this change resulted in a ThUS$ 3,121 reduction to Operating expenses in the Consolidated Statement of Income

Note 4 - Marketable Securities

Marketable securities include the following:


	At December 31,
	2006		2005
	(In thousands of US$)
Bonds		20,415		47,964
Defined-term mutual funds		39,654		65,019
Total		60,069		112,983

Bonds recorded at December 31, 2006 are summarized as follows:

At December 31, 2006

Carrying

Market

amount

value

Date of

Interest rate

Purchase

Maturity

(In thousands of US$)

Chilean bonds

09 /10 /2004

11/28 /2007

7.45

3,745

3,746

Foreign bonds

12/13 /2004

09 /30 /2007

7.07

16,670

16,873

Total

20,415

20,619

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LAN AIRLINES S.A. AND SUBSIDIARIES

Note 5 - Accounts Receivable

Accounts receivable are summarized as follows:

	At December 31,
	2006		2005
	(In thousands of US$)
Accounts receivable - passenger services		97,350		61,741
Accounts receivable - cargo services		117,165		103,225
Other accounts receivable		141,997		145,102
Total		356,512		310,068

Accounts receivable are shown net of an allowance for bad debts of ThUS$ 28,364 at December 31, 2006 and ThUS$ 25,800 at December 31, 2005.

Long-term

Long-term accounts receivable at December 31, 2006 and 2005 amounted to ThUS$ 28,915 and ThUS$ 9,756, respectively.

During 2006, the Company provided a total of approximately US$ 17.1 million in financing to the Brazilian company VRG LINHAS AEREAS S.A. (“New Varig”). These loans may be converted into shares of New Varig.

Note 6 - Inventories

Inventories are summarized as follows:

	At December 31,
	2006		2005
	(In thousands of US$)
Spare parts and materials used for maintenance (1)		39,734		34,789
Aircrafts for sale (2)		3,862		-
Duty-free inventories		3,231		2,494
Total		46,827		37,283

(1)	Spare parts and materials for sale are shown net of provision for market value adjustment of ThUS$ 2,121 at December 31, 2006 and ThUS$ 2,058 at December 31, 2005.

(2)	Corresponding to 5 Boeing 737 Aircrafts shown net of a provision for retirement of ThUS$ 1,600 at December 31, 2006.

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LAN AIRLINES S.A. AND SUBSIDIARIES

Note 7 - Prepaid Expenses

Prepaid expenses include the following:

	At December 31,
	2006		2005
	(In thousands of US$)
Prepaid insurance on aircraft		15,030		14,502
Prepaid rentals on aircraft and costs of receiving leased aircraft		8,720		7,471
Prepaid advertising services		1,040		204
Other		1,996		2,101
Total		26,786		24,278

Costs of receiving aircraft include all costs incurred by the Company and its subsidiaries in order for them to be operational. Such costs are deferred and amortized to operating expenses over the term of the specified contract. Costs of returning leased aircraft, excluding maintenance and overhaul, are expensed as incurred.

Note 8 - Other Current Assets

	At December 31,
	2006		2005
	(In thousands of US$)
Restricted funds associated with aircraft leases and purchases and other deposits		357		699
Fair value of derivative contracts		7,778		9,575
Other		4,189		3,047
Total		12,324		13,321

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LAN AIRLINES S.A. AND SUBSIDIARIES

Note 9 - Property And Equipment And Fleet Composition

a) Property and equipment

Property and equipment are summarized as follows:

	At December 31,
	2006			2005
	(In thousands of US$)
Flight equipment :
Boeing 767 aircraft under capital lease		461,845			369,103
Boeing 737 - 200ADV aircraft		27,498			48,368
Boeing 767 - 200ER aircraft		70,574			70,574
Boeing 767 - 300ER aircraft		334,248			-
Boeing 767 - 300F freighter aircraft		459,659			459,034
Airbus A-319 aircraft		342,142			67,448
Airbus A-320 aircraft		145,939			142,469
Engines and rotating parts		277,278			226,385
Spare parts		18,466			18,330
Other		42,662			38,656
Land and buildings :
Land		10,739			10,739
Buildings		62,175			61,953
Other installations		38,175			25,436
Construction in progress		2,270			9,454

Other fixed assets :
Communication and computer equipment		101,799			90,678
Furniture and office equipment		15,910			14,935
Equipment under capital leases		-			31
Other		54,105			42,387

Property and equipment (gross)		2,465,484			1,695,980

Less : Accumulated depreciation		(589,457	)		(443,710	)
Property and equipment (net)		1,876,027			1,252,270

On September 30, 2004, the Company sold its 100% interests in Condor Leasing LLC and Eagle Leasing LLC, who were the owners of 5 Boeing 767 aircraft (3 and 2, respectively). The capital lease agreement under which LAN Airlines S.A. leased these aircraft has remained unchanged. As a result of this, these aircraft retain their balance sheet classification under flight equipment; however, they are now under the caption flight equipment under capital lease. Long-term debt (with its related current portion) associated with these aircraft is included in Obligations under capital leases.

On June 30, 2006, the Company sold its ownership on Seagull Leasing LLC, who owns a Boeing 767-300F aircraft and is leasing the aircraft to LAN Cargo S.A. The existing financial leasing contract between Seagull and LAN Cargo S.A regarding this aircraft remained unchanged. As a result of the sale transaction, this aircraft has been reclassified from owned Property and equipment to Property and equipment under capital lease.

Included in Property and equipment at December 31, 2006 and 2005, are ThUS$ 461,845 and ThUS$ 369,103 of equipment under capital leases with accumulated depreciation aggregating ThUS$ 163,098 and ThUS$ 108,118, respectively.

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LAN AIRLINES S.A. AND SUBSIDIARIES

Depreciation expense for the years ended December 31, 2006, 2005 and 2004, amounted to ThUS$ 120,810, ThUS$ 73,969 and ThUS$ 68,132, respectively.

The balance of spare parts is presented net of a provision for obsolescence amounting to ThUS$ 16,975 at December 31, 2006 and ThUS$ 12,853 at December 31, 2005.

As of December 31, 2006, Property and equipment is shown net of a provision for retirement of ThUS$ 6,500 for the Boeing 737 Aircrafts.

In 2002, the Company entered into a sale-leaseback transaction. Under the arrangement, engines were sold for ThUS$ 13,100 and leased backed over a 7-year operating lease agreement. The gain on the sale of ThUS$ 6,883 is being amortized over the term of the operating lease agreement.

b) Fleet composition

At December 31, 2006, the fleet of the Company consists of 81 aircrafts, of which 37 aircrafts are owned by, or under capital lease to, the Company and 44 aircrafts are leased under operating leases.

Aircraft	Model		Use		2006		2005
Boeing 737		200ADV		Passenger		6		10
Boeing 737		200ADV		Freight		1		1
Boeing 767		300ER		Passenger		7		3
Boeing 767		300F		Freight		8		7
Boeing 767 (*)		200ER		Passenger		1		1
Airbus A-319		100		Passenger		10		2
Airbus A-320		200		Passenger		4		4
Total owned						37		28

(*) Subleased to Aerovías de México S.A. under a 9-year contract beginning June 16, 1996. The sublease expired in the year 2005 and was extended until 2007.

Leased aircraft under operating leases:

Aircraft	Model		Use		2006		2005
Boeing 767		300ER		Passenger		13		13
Boeing 767		300F		Freight		1		1
Boeing 737		200ADV		Passenger		10		11
Airbus A 319		100		Passenger		5		5
Airbus A 320		200		Passenger		11		11
Airbus A 340		300		Passenger		4		4
Total leased						44		45
Total owned and leased						81		73

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LAN AIRLINES S.A. AND SUBSIDIARIES

Note 10 - Investments in Related Companies and Goodwill

a) Investments in related companies

Investments in related companies accounted for by the equity method are summarized as follows:

	Percentage of ownership						Book value of investment		Proportional Share of income (loss)
Company	2006		2005		2004		2006		2005		2006		2005		2004
	%		%		%				(In thousands of US$)
Concesionaria Chucumata S.A.		16,7		16,7		16,7		250		117		135		160		83
CAE Entrenamiento de Vuelo Chile
Ltda. (ExFTCC) (2)		-		-		-		-		-		-		-		(35	)
Lufthansa LAN Chile
Technical Training S.A.		50		50		50		609		571		196		152		53
Austral Sociedad Concesionaria S.A.		20		20		20		886		879		173		173		90
Florida West International
Airways Inc. (1)		25		25		25		-		-		76		79		(49	)
Skypost. Inc. (3)		-		-		-		-		-		-		-		(136	)
Choice Air Courier del Perú S.A.		50		50		50		100		82		18		19		(2	)
Vimalcor S.A. (3)		-		-		-		-		-		-		-		101
Skyworld International Couriers S.A. (3)		-		-		-		-		-		-		-		(226	)
Skybox de Colombia Ltda. (3)		-		-		-		-		-		-		-		(128	)
Total								1,845		1,649		598		583		(249	)

(1) The Company has recorded a provision for investments in related companies with negative equity at year-end totaling ThUS$ 50 at December 31, 2006 and ThUS$ 128 at December 31, 2005 which is included in other current liabilities (See Note 13).

(2) During 2004, this entity was sold.

(3) During 2004, these entities were sold and the operations were dissolved.

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LAN AIRLINES S.A. AND SUBSIDIARIES

b) Goodwill and negative goodwill

The changes in Goodwill and negative goodwill during the years 2006 and 2005 were as follows:

Company	Balance January 1, 2006			Additions and deductions		Amortization			Balance December 31, 2006
	(In thousands of US$)
Goodwill on purchase of:
LAN Cargo S.A. (Ex LAN Chile Cargo S.A.)		20,814			-		(1,810	)		19,004
Prime Airport Service Inc.		440			-		(35	)		405
Mas Investment Limited		2,725			-		(181	)		2,544
Air Cargo Limited		640			-		(43	)		597
Promotora Aérea Latinoamericana S.A.		1,379			-		(84	)		1,295
Inversiones Aéreas S.A. (purchase of interest in LAN Perú S.A.)		4,590			-		(294	)		4,296
Aerolinheas Brasileiras S.A.		2,300			-		(143	)		2,157
Skyworld International Couriers, Inc.		4,078			-		(254	)		3,824
LAN Box, Inc.		1,902			-		(106	)		1,796
SkyBox Services Corp.		693			-		(54	)		639
H.G.A. Rampas y Servicios A. de Guayaquil S.A.		36			-		(2	)		35
H.G.A. Rampas del Ecuador S.A.		36			-		(2	)		34
Inversora Cordillera S.A.		4,633			1,873		(280	)		6,226
LAN Argentina S.A. (Ex - Aero 2000 S.A.)		660			63		(35	)		688
Total Goodwill		44,926			1,936		(3,323	)		43,540
Negative goodwill on purchase of:
Choice Air Courier del Perú S.A		(73	)		-		2			(71	)
Americonsult de Guatemala S.A.		(102	)		99		3			-
Total Negative Goodwill		(175	)		99		5			(71	)
Total		44,751			2,035		(3,318	)		43,469

231

LAN AIRLINES S.A. AND SUBSIDIARIES

Company	Balance January 1, 2005			Additions and deductions		Amortization			Balance December 31, 2005
	(In thousands of US$)
Goodwill on purchase of:
LAN Cargo S.A. (Ex LAN Chile Cargo S.A.)		22,624			-		(1,810	)		20,814
Prime Airport Service Inc.		475			-		(35	)		440
Mas Investment Limited		2,905			-		(180	)		2,725
Air Cargo Limited		683			-		(43	)		640
Promotora Aérea Latinoamericana S.A.		1,463			-		(84	)		1,379
Inversiones Aéreas S.A. (purchase of
interest in LAN Perú S.A.)		4,884			-		(294	)		4,590
Aerolinheas Brasileiras S.A.		2,444			-		(144	)		2,300
Skyworld International Couriers, Inc.		4,332			-		(254	)		4,078
LAN Box, Inc.		2,008			-		(106	)		1,902
Skyworld Internacional Courier S.A.		11			-		(11	)		-
SkyBox Services Corp.		748			-		(55	)		693
H.G.A. Rampas y Servicios A. de
Guayaquil S.A.		38			-		(2	)		36
H.G.A. Rampas del Ecuador S.A.		38			-		(2	)		36
Inversora Cordillera S.A.		-			4,815		(182	)		4,633
LAN Argentina S.A. (Ex Aero 2000 S.A.)		-			684		(24	)		660
Total Goodwill		42,653			5,499		(3,226	)		44,926
Negative goodwill on purchase of:
Choice Air Courier del Perú S.A.		(75	)		-		2			(73	)
Americonsult de Guatemala S.A.		(108	)		-		6			(102	)
Total Negative Goodwill		(183	)		-		8			(175	)
Total		42,470			5,499		(3,218	)		44,751

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LAN AIRLINES S.A. AND SUBSIDIARIES

c) Acquisitions and other information

LanLogistics , Corp.

During April 2004, the Company’s indirect subsidiary LanLogistics Corp. acquired an additional 16% interest in its subsidiary LAN Box Inc. increasing its ownership to 96% This acquisition was paid for through a service credit amounting to ThUS$ 541 and the transfer of 25% of its indirect interest in Skypost Inc. This transaction generated goodwill amounting to ThUS$ 809

Mas Investment Limited (Bahamas)

On February 10, 2006, Aerotransportes Mas de Carga S.A. sold 99% ownership of Sociedad Americonsult de Guatemala S.A.. As a result of this, the negative goodwill originated in the purchase of that investment was reversed to Income.

LAN Cargo Overseas Limited

On April 3, 2002, LAN Cargo Overseas Limited purchased 550,000 shares of Vimalcor S.A., which is incorporated in the Oriental Republic of Uruguay for ThUS$ 400 representing a 50% ownership interest. During December 2004, the entire interest in Vimalcor S.A. was sold, generating a loss of ThUS$ 307.

CAE Entrenamiento de Vuelo Chile Ltda. (formerly Fligth Training Center Chile S.A.)

During April 2004, LAN Airlines S.A., together with its subsidiary LAN Pax Group S.A., sold their interest’s in CAE Entrenamiento de Vuelo Chile S.A. for ThUS$ 1,877. This transaction generated a loss of ThUS$ 27.

LAN Pax Group S.A.

On April 13, 2005, LAN Pax Group S.A. acquired 49% ownership and obtained control of Inversora Cordillera S.A. On April 14, 2005, the newly acquired and consolidated subsidiary Inversora Cordillera S.A. acquired 95% ownership of Aero 2000 S.A. (currently LAN Argentina S.A.). In a separate transaction LAN Pax Group S.A. acquired an additional 2.45% of Aero 2000 S.A.. These transactions were accounted for as purchases resulting in ThUS$ 5,499 in goodwill allocated ThUS$ 4,815 to Inversora Cordillera S.A. and ThUS$ 684 to Aero 2000 S.A.

On November 16, 2005, in a separate transaction, LAN Pax Group S.A. and Inversora Cordillera S.A., both consolidated subsidiaries of the Company, formed the entity Siventas S.A. with LAN Pax Group S.A. having 95% ownership and Inversora Cordillera S.A. having 5% ownership. As of December 31, 2006 the capital for this entity had not been entirely contributed. Both companies are required to make capital contributions prior to 2008.

On December 23, 2005, LAN Pax group S.A. took part in the share increase offering of its consolidated subsidiary Inversora Cordillera S.A. It invested ThUS$ 281 maintaining its current ownership percentage of 49%. No goodwill was recorded.

On August 17, 2006, LAN Pax Group S.A., acquired 1.55% of LAN Argentina S.A. (ex - Aero 2000 S.A.) for ThUS$ 70 equivalent to 29.140 shares, increasing its ownership from 2.45% to 4%. Additionally, LAN Pax Group S.A. made a capital contribution increase of ThUS$ 94. This transaction generated goodwill amounting to ThUS$ 63.

On August 17, 2006, LAN Pax Group S.A. acquired 31% of Inversora Cordillera S.A. for ThUS$ 1,872 equivalent to 4,116,818 shares, increasing its ownership interest from 49% to 80%. In addition it made a contribution for capital increase for ThUS$ 7,488. As a result of this transaction, LAN Pax Group S.A. recorded goodwill amounting to ThUS$ 1,873.

On September 29, 2006, Atlantic Aviation Investments LLC was incorporated, where LAN Pax Group S.A. has 99% ownership (990 shares), equivalent to US$ 990.

On October 10, 2006, Perdiz Leasing Limited was incorporated, where LAN Pax Group S.A. has an ownership of 99% (99 shares), equivalent to US$ 99.

On December 22, 2006, LAN Pax Group S.A. and Inversora Cordillera S.A., both consolidated subsidiaries of the Company, took part in the share increase offering of LAN Argentina S.A. for ThUS$ 296 and ThUS$ 7,026, maintaining their current ownership percentage of 4% and 95%, respectively.

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LAN AIRLINES S.A. AND SUBSIDIARIES

LAN Courier S.A.

On December 15, 2006, LAN Airlines S.A. sold its 99.99% ownership in LAN Courier S.A. to LAN Cargo S.A. and Inversiones LAN S.A. (99.98% and 0.01%, respectively), for ThUS$ 5,638, equivalent to 8,837,860 shares. On a consolidated basis no goodwill or negative goodwill was recognized for this transaction.

LAN Cargo S.A.

On November 4, 2005, LAN Airlines S.A. acquired 15,000 shares from its affiliated LAN Cargo S.A. increasing its ownership interest from 99.86462% to 99.88875%.

Note 11 - Advances for Purchases of Aircraft and other Deposits

Advances for purchases of aircraft and other deposits are summarized as follows:

	At December 31,
	2006		2005
	(In thousands of US$)
Advances for purchases of Boeing 767 and lease of Airbus aircraft		224,520		211,204
Deposits on aircraft leases		10,020		9,037
Other deposits		3,313		3,047
Total		237,853		223,288

Note 12 - Other Assets

Other assets are summarized as follows:

	At December 31,
	2006		2005
	(In thousands of US$)
Unrealized losses on derivative contracts (1)		26,828		16,066
Deposits related to aircraft to be purchased or leased and others		7,493		8,526
Total		34,321		24,592

(1) The corresponding fair value derivative contract liability is recorded in Other current liabilities and in Other creditors long term.

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LAN AIRLINES S.A. AND SUBSIDIARIES

Note 13 - Other Liabilities And Provisions

Other liabilities and provisions are summarized as follows:

a) Other current liabilities

	At December 31,
	2006		2005
	(In thousands of US$)
Engine overhaul provision		44,433		58,737
Withholdings on employee salaries		7,870		8,022
Employee vacations		13,401		12,105
LAN Pass awards and LAN Corporate liability (frequent flyer mileage)		9,770		7,096
Accumulated losses in Florida West International Airways, Inc. (See Note 10)		50		128
Income taxes payable		1,530		481
Boarding fees		34,749		24,866
Others		16,217		13,464
Total		128,020		124,899

b) Provisions (long-term)

	At December 31,
	2006		2005
	(In thousands of US$)
Engine overhaul provision		36,395		101,826
Employee vacations		6,722		6,979
Others		2,775		8,472
Total		45,892		117,277

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LAN AIRLINES S.A. AND SUBSIDIARIES

Note 14 - Income Tax

a) Charges arising from income tax amount to ThUS$ 14,123, ThUS$ 1,261 and ThUS$ 970 in 2006, 2005 and 2004 respectively, and have been determined based on current local tax legislation.

b) Deferred income taxes

At December 31, 2006, the accumulated balances from deferred taxes originating from temporary differences were as follow:

	Deferred tax Assets						Deferred tax Liabilities
	Short-term			Long-term			Short-term		Long-term
	(In thousands of US$)
Allowance for doubtful accounts		4,429			65			-		-
Provision for obsolescence of spare parts		2,960			-			-		-
Provision for vacations		2,099			1,203			-		-
Tax loss carry forwards		2			32,966			-		-
Property and equipment		-			449			-		-
Others		3,818			11,154			-		-
Gross deferred tax assets		13,308			45,837			-		-

Prepaid expenses		-			-			5,043		1,320
Unearned income		-			-			-		16,198
Property and equipment		-			-			-		126,893
Others		-			-			182		23,303

Gross deferred tax liabilities		-			-			5,225		167,714

Less: Complementary accounts		-			-			-		(8,645	)
Deferred tax assets valuation allowance		(1,648	)		(13,654	)		-		-
Total		11,660			32,183			5,225		159,069

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LAN AIRLINES S.A. AND SUBSIDIARIES

At December 31, 2005, the accumulated balances from deferred taxes originating from temporary differences were as follows:

	Deferred tax Assets						Deferred tax Liabilities
	Short-term			Long-term			Short-term		Long-term
	(In thousands of US$)
Allowance for doubtful accounts		4,073			-			-		-
Provision for obsolescence of spare parts		4,593			-			-		-
Provision for vacations		1,636			1,096			-		-
Tax loss carry forwards		8			33,274			-		-
Others		4,513			844			-		-
Gross deferred tax assets		14,823			35,214			-		-
Prepaid expenses		-			-			4,555		1,545
Unearned income		-			-			-		16,295
Property and equipment		-			-			-		97,194
Others		-			-			-		15,856
Gross deferred tax liabilities		-			-			4,555		130,890

Less: Complementary accounts		-			(393	)		-		(8,883	)
Deferred tax assets valuation allowance		(2,598	)		(8,390	)		-		-
Total		12,225			26,431			4,555		122,007

c) Effect on results

	For the years ended December 31,
	2006			2005			2004
	(In thousands of US$)
Current income tax expense		(14,123	)		(1,261	)		(970	)
Deferred income tax expense		(32,545	)		(26,688	)		(27,323	)
Other tax expense		(169	)		(309	)		-
Total		(46,837	)		(28,258	)		(28,293	)

237

Note 15 - Balances and Transactions with Related Companies

a) Accounts receivable and payable with related parties are summarized as follows:

Current assets

Notes and accounts receivable from related companies:

			At December 31,
Company	Relationship		2006		2005
			(In thousands of US$)
San Alberto S.A. and subsidiaries		Common ownership		29		29
Florida West International Airways Inc.		Equity method investee		4,495		237
Choice Air Courier del Perú S.A.		Equity method investee		78		38
Concesionaria Chucumata S.A.		Equity method investee		-		185
Austral Sociedad Concesionaria S.A.		Equity method investee		-		287
Other		Common ownership		163		123
Total				4,765		899

Current liabilities

Notes and accounts payable to related companies:

			At December 31,
Company	Relationship		2006		2005
			(In thousands of US$)
Lufthansa LAN Technical Training S.A.		Equity method investee		211		305
Concesionaria Chucumata S.A.		Equity method investee		4		-
Austral Sociedad Concesionaria S.A.		Equity method investee		58		-
Sociedad Concesionaria Aerosur S.A.		Equity method investee		11		-
Other		Common ownership		17		22
Total				301		327

Long-term assets

Notes and accounts receivable from related companies:

			At December 31,
Company	Relationship		2006		2005
			(In thousands of US$)
Choice Air Courier del Perú S.A.		Equity method investee		51		178
Florida West International Airway Inc.		Equity method investee		-		10,074
Total				51		10,252

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b) The main transactions with related entities are summarized as follows:

			Amount
Company	Relationship	Description of transaction	2006	2005	2004
			(In thousands of US$)
Florida West International Airways Inc.	Equity method investee	Aircraft rents received	40,695	39,540	35,767
	LAN owns 25%	Line aircraft maintenance received	1,885	2,402	187
		Aircraft rents provided	31,401	21,898	20,498
		Others transactions provided	10,757	11,712	6,765
		Jet fuel payments	9,282	10,100	3,817
		Interline collection	7,292	2,568	2,808
		Other payments	3,826	690	3,579

Lufthansa LAN Technical Training S.A.	Equity method investee	Training received	708	905	372
	LAN owns 50%	Prepaid training hours	477	360	375
		Other payments	19	19	19

Inmobiliaria Parque San Luis Dos S.A.	Common ownership	Real estate transaction	-	-	15

The Company’s objective is to transact business with its related companies or individuals at prices and at terms equivalent to those used in transacting business with unrelated parties.

Note 16 - Loans From Financial Institutions (Long-term)

Long-term loans from financial institutions are summarized as follows:

		Interest rate at	At December 31,
	Payable during the years	December 31, 2006 %	2006	2005
			(In thousands of US$)
Loan in US dollars	2001 - 2012 (quarterly)	-	-	60,184
Loan in US dollars	2001 - 2013 (quarterly)	5.5645	126,362	137,641
Loan in US dollars	2002 - 2014 (quartely)	LIBOR+ 0.9707	116,976	122,729
Loan in US dollars	2002 - 2007 (quarterly)	LIBOR+1.4	7,706	8,248
Loan in US dollars	2005 - 2012 (quarterly)	LIBOR+1.25	22,971	26,180
Loan in US dollars	2005 - 2017 (quarterly)	LIBOR+ 0.9632	62,441	66,403
Loan in US dollars	2005 - 2017 (quarterly)	4.6760	143,765	153,693
Loan in US dollars	2006 - 2008 (quarterly)	LIBOR+ 0.4	60,530	-
Loan in US dollars	2006 - 2013 (quarterly)	4.9578	76,086	-
Loan in US dollars	2006 - 2018 (quarterly)	4.9823	504,128	-
Total			1,120,965	575,078

Less - current portion			89,883	53,104

Long - term portion			1,031,082	521,974

All of our loans from financial institutions are collateralized and thus they are secured by the same asset that is subject of the financing. These include nine Boeing aircraft, fourteen Airbus aircraft, spare engines and our corporate building. There are no additional collateral arrangements in connection with these financings.

Information with respect to restrictive covenants is detailed under the heading “Covenants” in Note 23 to the financial statements.

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Scheduled payments of long-term loans from financial institutions at December 31, 2006 are as follows:

Payments during the years
ended December 31,	(In thousands of US$)
2008		153,152
2009		88,619
2010		92,879
2011		97,327
2012 - 2016		439,716
2017 - 2018		159,389
Total		1,031,082

Note 17 - Securitization Obligation

Effective March 30, 1999, the Company signed a contract with Pelican Finance Ltd. for the securitization of future credit card receivables aggregating ThUS$ 60,000 originating from certain ticket agents in the United States. At December 31, 1999, the Company had received the entire proceeds of ThUS$ 60,000 which were reported as a securitization obligation on the balance sheet. The terms of this contract are for the years between 2001 and 2006 with an annual financial cost of 6.82%.

As of March 31, 2006, the commitments regarding the abovementioned contracts with Pelican Finance Ltd. are totally terminated.

On August 22, 2002, the Company signed a new securitization contract with Pelican Finance Ltd. The contract securitizes future credit card receivables aggregating ThUS$ 40,000. The terms of this contract are for the years between 2006 and 2009 with an annual financial cost of 6.96% At December 31, 2002, the Company had received the entire proceeds of ThUS$ 40,000 which were reported as a securitization obligation on the balance sheet.

The principal is payable as follows:


Payments during the years
ended December 31,	(In thousands of US$)
2008		12,826
2009		6,752
Subtotal		19,578
Current portion - 2007		11,970
Total		31,548

Note 18 - Leasing Obligations

As indicated in Note 9, at December 31, 2005, the Company financed forty-four jet aircraft pursuant to operating leases and six jet aircraft pursuant to a capital lease. The Company also leases maintenance facilities, other airport facilities, computer equipment and vehicles pursuant to capital leases.

The future minimum lease payments required under capital leases, together with the present value of such minimum lease payments and future minimum lease payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2006, were as follows:

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	Operating
Payable during the year ending	leases		Capital
December 31,	(aircraft)		leases
	(In thousands of US$)
2007		147,635		51,971
2008		131,910		53,335
2009		105,883		54,392
2010		91,301		44,357
2011		90,849		20,275
2012 - 2016		168,107		21,002
2017 - 2021		-		8,422
Total minimum lease payments		735,685		253,754

Less: Amount representing interest				(34,251	)
Present value of minimum lease payments				219,503
Less: Current portion of obligation				(43,070	)
Long-term portion of leasing obligations				176,433

Aircraft operational lease expenses recorded in the Consolidated Statement of Income amounted to ThUS$ 157,681, ThUS$ 148,202 and ThUS$ 132,425 for the years ended December 31, 2006, 2005 and 2004, respectively.

Note 19 - Shareholders’ Equity

a) Changes in Shareholders’ equity

The changes in shareholders’ equity during 2004, 2005 and 2006 were as follows:

							Retained earnings
	Number		Common				Accumulated			Interim			Net income
	of shares		stock		Reserves		earnings			dividends			for the year			Total
	(In thousands of US$ except Number of shares)
Balances at December 31, 2003		318,909,090		134,303		2,620		167,085			(34,999	)		83,555			352,564
Transfer of net income from prior year		-		-		-		83,555			-			(83,555	)		-
Final dividends paid		-		-		-		(41,775	)		34,999			-			(6,776	)
Interim dividends		-		-		-		-			(74,783	)		-			(74,783	)
Net income for the year 2004		-		-		-		-			-			163,552			163,552
Balances at December 31, 2004		318,909,090		134,303		2,620		208,865			(74,783	)		163,552			434,557

Transfer of net income from prior year		-		-		-		163,552			-			(163,552	)		-
Final dividends paid		-		-		-		(81,777	)		74,783			-			(6,994	)
Interim dividends		-		-		-		-			(71,451	)		-			(71,451	)
Net income for the year 2005		-		-		-		-			-			146,601			146,601
Balances at December 31, 2005		318,909,090		134,303		2,620		290,640			(71,451	)		146,601			502,713

Transfer of net income from prior year		-		-		-		146,601			-			(146,601	)		-
Final dividends paid		-		-		-		(73,294	)		71,451			-			(1,843	)
Interim dividends		-		-		-		-			(115,850	)		-			(115,850	)
Net income for the year 2006		-		-		-		-			-			241,300			241,300
Balances at December 31, 2006		318,909,090		134,303		2,620		363,947			(115,850	)		241,300			626,320

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b) Capital

The authorized and paid-in capital of the Company is ThUS$ 134,303 at both December 31, 2005 and 2006 and corresponds to 318,909,090 shares without par value.

c) Other reserves

Reserves at December 31 of each year were as follows:

	At December 31,
	2006		2005
	(In thousands of US$)
Reserve for adjustment of the value of fixed assets		2,556		2,556
Reserve for adjustment of the value of leased fixed assets		64		64
Total		2,620		2,620

These reserves are not distributable and may only be used for capitalization of the Company.

d) Dividends

At the Annual General Meeting held on April 30, 2004, the shareholders agreed to distribute a final dividend amounting to US$ 0.130995 per share meaning that, after deducting the interim dividends distributed during August and October amounting to US$ 0.03632 and US$ 0.073425 per share respectively, a balance of US$ 0.02125 per share for a total of ThUS$ 6,776 was to be paid during May 2004.

On August 4, 2004, during an Extraordinary Board of Directors meeting, an interim dividend of US$ 0.12475 per share for a total of ThUS$ 39,785 was agreed upon.

On November 30, 2004, the Board of Directors agreed to pay, an interim dividend of US$ 0.10974 per share for a total of ThUS$ 34,998.

At the Annual General Meeting held on April 29, 2005, the shareholders agreed to distribute a final dividend amounting to US$ 0.25642373 per share after deducting the interim dividends distributed during August and December amounting to US$ 0.12475 and US$ 0.10974 per share, respectively. A remaining balance of US$ 0.02192745 per share was paid during May 2005.

At a meeting of the Board of Directors held on August 2, 2005, the directors agreed to distribute an interim dividend of US$ 0.11430 per share with respect to net income for 2005.

At a meeting of the Board of Directors held on January 31, 2006, the directors agreed to distribute an interim dividend of US$ 0.10975 per share with respect to net income for 2005. These dividends will be paid during March, 2006 and they are classified in Dividends Payable at December 31, 2005.

At the Annual General Meeting held on April 28, 2006, the shareholders agreed to distribute a final dividend amounting to US$ 0.22983 per share after deducting the interim dividends distributed during August 2005 and January 2006 amounting to US$ 0.11430 per share and US$ 0.10975 per share, respectively. A remaining balance of US$ 0.00578 per share was paid during May 2006.

At a meeting of the Board of Directors held on July 24, 2006, the directors agreed to distribute an interim dividend of US$ 0.15071 per share with respect to net income for 2006.

At a meeting of the Board of Directors held on December 26, 2006, the directors agreed to distribute an interim dividend of US$ 0.21256 per share with respect to net income for 2006. These dividends are classified in Dividends Payable at December 31, 2006.

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LAN AIRLINES S.A. AND SUBSIDIARIES

e) Major shareholders

The major shareholders of the Company at December 31, 2006, were as follows:

	Percentage of
	Ownership
	%
Inversiones Costa Verde Ltda. y Compañía en Comandita por Acciones		27.01
Axxion S.A.		20.64
The Bank of New York. (on behalf of ADR holders)		13.65
Total		61.30

In July 2004, Inversiones Costa Verde Ltda. y Compañía en Comandita por Acciones, Axxion S.A. and Inversiones Santa Cecilia S.A. (shareholder with 7.34% ownership) entered into a management and control agreement. At December 31, 2006 this agreement is still in effect.

Note 20 - Other Operating Revenues

The Other revenues were comprised of the following:

	For the year ended December 31,
	2006		2005		2004
	(In thousands of US$)
Aircraft leases		30,991		23,806		40,123
Logistics and couriers		44,381		39,932		19,906
Ground services		19,968		18,842		13,468
Duty free		16,701		15,602		12,288
Storage and customs brokerage		10,925		10,689		8,947
Others		24,891		26,445		29,508
Total		147,857		135,316		124,240

Note 21 - Operating Expenses

Wages and benefits are summarized as follows:

	At December 31,
	2006		2005		2004
	(In thousands of US$)
Flight personnel		134,542		110,298		85,739
Maintenance personnel		51,242		41,549		29,635
Ground personnel		69,905		73,800		63,029
Administrative and corporate employees		187,278		145,949		114,420
Total		442,967		371,596		292,823

Other operating expenses include general and administrative expenses such as rents, insurance and other expenses of ThUS$ 139,942 in 2006, ThUS$ 121,618 in 2005 and ThUS$ 97,036 in 2004.

Other operating expenses also include advertising, promotional, and marketing expenses of ThUS$ 23,459 in 2006, ThUS$ 19,490. in 2005 and ThUS$ 15,607 in 2004.

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Note 22 - Other Income (Expense) - Net

Other income (expense) - net for each year are summarized as follows:

	For the year ended December 31,
	2006			2005			2004
	(In thousands of US$)
Non-operating income:
Effect of accounting change mentioned in Note 3		40,344			-			-
Swap fuel contracts		12,903			51,480			46,529
Foreign currency transactions (net)		5,536			6,004			2,353
Earnings on investments (equity method)		598			583			327
Other		3,988			5,296			2,443
Total		63,369			63,363			51,652

Non-operating expenses:
Amortization of goodwill		(3,318	)		(3,218	)		(3,134	)
Losses on investments (equity method)		-			-			(576	)
Non-recurring indemnities paid to employees (1)		(11,747	)		-			-
Provision for retirement of Boeing 737 Aircrafts (2)		(8,100	)		-			-
Other		(3,091	)		(1,911	)		(2,780	)
Total		(26,256	)		(5,129	)		(6,490	)

Other income (expense) - net		37,113			58,234			45,162

(1) During 2006, the Company made the decision to restructure its operations and processes reducing its workforce. This restructuring resulted in non-operating expenses of ThUS$ 11,747 due to the payment of indemnities to terminated employees. The Company does not anticipate any further costs associated with this restructuring.

(2) With regard to these Boeing 737 aircraft, it was determined that it is more likely than not that such aircraft will be disposed of prior to the end of their useful life. Accordingly, a provision was established. See also Notes 6 and 9. The Company performed an impairment test on these aircraft as events and circumstances indicated that the assets may be impaired and undiscounted cashflows estimated to be generated were less than the book values.

Note 23 - Commitments and Contingencies

At December 31, 2006 and 2005, the Company had granted the following mortgages, liens and guarantees: Direct Guarantees (In thousands of US$):

	Assets Pledged as Collateral				Amount outstanding at Balance sheet date
Type of Guarantee	Type		Book Value		2006		2005
Mortgage, and pledge guarantee		Aircraft and motors		1,164,614		1,052,729		566,830
Mortgage		Building		9,038		7,706		8,248
Pledge		Spare parts		331		-		-

Indirect Guarantees:

The Company guaranteed a ThUS$ 3,500 letter of credit dated April 26, 2001, granted in favor of Celestial Aviation Trading 16 Limited due to an Aircraft Lease Agreement (“Lease”) between LAN Cargo S.A. and Celestial Aviation Trading 16 Limited. The Company guarantee is valid until the letter of credit expiration date (April 25, 2007) and was required by Celestial Aviation Trading 16 Limited, the owner of the aircraft. As a result, the Company would be liable for repayment of such letter of credit, should LAN Cargo S.A. not fulfill its obligation under the lease. No liability is carried on the balance sheet for the Company’s obligation under the guarantee.

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LAN AIRLINES S.A. AND SUBSIDIARIES

Commitments

On March 20, 1998, the Company entered into a purchase agreement for twenty Airbus A320 aircraft (with the option to purchase an additional twenty aircraft). The estimated cost of these twenty aircraft is ThUS$ 840,000. This agreement was subsequently amended to require the delivery of A319 aircraft instead of A320 aircraft.

In August 1999, the Company entered into a purchase agreement for seven Airbus A340 aircraft (with an option to purchase an additional fourteen aircraft in the future). As of December 31, 2006, four of these aircraft have been received, one was canceled (see next paragraph). The estimated maximum cost for the two remaining aircraft is ThUS$ 230,000.

During November 2003, the Company agreed with Airbus Industries and a bank syndicate led by Credit Lyonnais to cancel the delivery of one Airbus A340 aircraft which was scheduled for 2005. At the same time, it exercised call options for three Airbus A319 aircraft. Additionally, all future deliveries of Airbus A320’s were changed for Airbus A319’s.

On November 11, 2004, the Company entered into a purchase agreement with The Boeing Company to acquire four additional aircraft of the 767-300 family with delivery during 2006. This purchase agreement provides for flexibility to choose between passenger or freighter aircraft. These aircraft were received during 2006.

On April 28, 2005, the Company entered into a purchase agreement for three Boeing 767-300 aircraft for a total of ThUS$ 450,000. This purchase agreement provides for flexibility to choose between passenger or freighter aircraft. One of this aircraft was received during 2006, the two remaining aircrafts are scheduled for delivery during 2007 and the estimated maximum cost is ThUS$ 300,000.

On July 20, 2005, the Company entered into a purchase agreement for an additional 3 Boeing 767-300 ER aircraft for a total of ThUS$ 450,000. One of these aircraft is for passengers and the Company has the flexibility to choose between passenger or freighter for the remaining two aircraft. The delivery is scheduled for 2007 and 2008.

On October 4, 2005, the Company agreed with Airbus Industries to a new modification with respect to the agreement signed on March 20, 1998. This amendment is related to the purchase of thirty two new Airbus family aircraft (with an option to purchase an additional fifteen aircraft in the future). Such aircraft are expected to be delivered during 2007 and 2008. The approximated cost for this purchase is ThUS$ 960,000.

On March 31, 2006, the Company entered into a purchase agreement for three Boeing 767-300 aircraft for a total of ThUS$ 450,000. These aircraft are scheduled for delivery during 2007 and 2008.

On December 14, 2006, the Company entered into a purchase agreement for three Boeing 767-300 aircraft for a total of ThUS$ 450,000. These aircraft are scheduled for delivery during 2009.

Contingencies

At December 31, 2006, the Company was a defendant in one labor dispute filed by the Pilots’ Union and the Cabin Crew Union, requesting the payment of bonuses for the years ended December 31, 1998, 1999, 2000, 2001 and 2002. The Company has made no provision for these amounts because management believes that the outcome of the suits will be favorable to the Company and any losses incurred will not be material.

At December 31, 2006, the Company was a defendant in a number of commercial lawsuits of the type normally associated with the Company’s business and involving claims for damages for insignificant amounts. The Company has made no provision for these amounts because management believes that most of the resulting judgments will be favorable and any losses incurred will not result in any material liability to the Company.

Covenants

As a result of the various contracts entered into by the Company to finance the Boeing 767 aircraft that are financed by the Export - Import Bank of the United States, the Company is required to comply with certain restrictions regarding shareholder composition and disposal of assets.

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LAN AIRLINES S.A. AND SUBSIDIARIES

The loan agreement with BBVA - Banco Bhif has placed restrictions on the Company’s ability to dispose of certain of its fixed assets.

As a result of the various contracts entered into by the Company to finance the Airbus A320 aircraft that are guaranteed by various European export credit agencies, the Company is required to comply with certain restrictions regarding shareholder composition and disposal of assets.

As a result of the securitization contract with Pelican Finance Ltd. in August 2002, there are certain restrictions on the use of the future cash flows which have been securitized.

As of December 31, 2006, the Company was in compliance with all covenants.

Other

At December 31, 2006, the Company had approved credit lines in the amount of ThUS$ 268,950. These credit lines are used mainly to cover (a) stand-by credit letters issued in favor of aircraft lessors and airports in the United States of America and other countries and (b) bank credit letters issued in favor of the local air administration or the Chilean Government.

Note 24 - Foreign Currencies

Foreign currency assets and liabilities at December 31 of each year are summarized as follows:

	At December 31,
	2006		2005
	(In thousands of US$)
Assets denominated in :
Chilean pesos		131,908		79,881
Other currencies		110,428		66,359
Total		242,336		146,240


Liabilities denominated in:
Chilean pesos		63,302		61,092
Other currencies		101,831		37,469
Total		165,133		98,561

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Note 25 - Segment Reporting

The Company reports segment information in accordance with Statement of Financial Accounting Standard No. 131, “Disclosures About Segments of an Enterprise and Related Information” (“SFAS 131”). SFAS 131 establishes standards for reporting information about operating segments in annual financial statements as well as related disclosures about products and services, geographic areas and major customers. Operating segments are defined as components of an enterprise about which separate financial statement information is available that is evaluated regularly by the chief operating decision maker in making decisions about allocating resources and assessing performance. The Company considers that it has one reportable segment. The Company‘s operating revenues by geographic region are summarized below:

	Year ended December 31,
	2006		2005		2004
	(In thousands of US$)
Domestic (Chile)		414,587		428,644		332,890
North America		1,336,548		1,194,996		1,099,936
South America (excluding Chile)		867,620		619,860		458,594
Europe		266,660		158,544		146,143
Pacific		148,545		104,309		55,382
Total		3,033,960		2,506,353		2,092,945

The Company attributes operating revenues to the geographical area in which the relevant overseas point of the flight lies. The Company’s tangible assets consist primarily of flight equipment which is mobile across geographic markets and, therefore, has not been allocated.

Note 26 - Subsequent Events

a) At an Extraordnary Shareholder’s Meeting held on January 26, 2007, the Shareholders agreed the following:

- Increase capital by issuing 7,500,000 shares, at a price and in accordance with other conditions to be determined;

- Designate a portion of the abovementioned capital increase to compensation plans, in accordance with article 24 of Law 18,046;

- Amend the bylaws of the Company to reflect the resolutions adopted during the above Shareholder´s Meeting;

- Authorize the Board of Directors of the Company to request the registration of the shares representing the capital increase with the Registry of the Superintendent of Securities and Insurance; to proceed with the settlement of the shares; and to agree on the terms pertaining to the compensation plans mentioned above.

b) At an Extraordnary meeting of the Board od Directors held on March 7, 2007, the Board of LAN Airlines S.A. agreed to summon an Extraordinary Shareholders Meeting to take place on April 5, 2007 immediately following the Ordinary Shareholders Meeting of the Company, which takes place at 11:00 a.m., to discuss the following subjects:

- To annul the increase in capital by 7,500,000 (seven million five hundred thousand) payable shares, agreed upon by the Extraordinary Meeting of Shareholders that took place on January 26, 2007.

- To increase the capital stock of LAN Airlines S.A. via the issuance of 22,090,910 (twenty-two million ninety thousand nine hundred ten) payable shares, at the price and additional conditions that the Shareholders Meeting agrees upon. Let it be known that the Board of Directors of the Company intends to place part of this increase in capital in foreign stock markets, by way of the mechanism of American Depository Receipts, also known as ADRs.

- To assign one part of the stated increase in capital to the compensatory plan described in the terms of article 24 of the law 18,046.

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- To modify the bylaws in order to adjust them to the framework adopted by the Meeting.

- To empower the Board of Directors of the Company to request the registration of the shares representative of the increase in capital, in the Registry of Securities of the Superintendence of Securities and Insurance; to proceed with the placement; and to agree to the terms of the compensatory plan previously mentioned.

c) The Company has no other knowledge of any other subsequent events that would have a significant effect on the balances or interpretation of these financials statements.

Note 27 - Differences Between Chilean and United States Generally Accepted Accounting Principles

Accounting principles generally accepted in Chile (“Chilean GAAP”) vary in certain important respects from accounting principles generally accepted in the United States (“US GAAP”). Such differences involve certain methods for measuring the amounts shown in the financial statements, as well as additional disclosures required by US GAAP.

1. Differences in measurement methods

The principal methods applied in the preparation of the accompanying financial statements, which have resulted in amounts which differ from those that would have otherwise been determined under US GAAP, are as follows:

a) Deferred income tax

As discussed in Note 14, effective January 1, 2000, the Company began applying Technical Bulletin No. 60 of the Chilean Institute of Accountants concerning deferred income taxes. Technical Bulletin No. 60 requires the recognition of deferred income taxes for all temporary differences arising after January 1, 2000, whether recurring or not, using an asset and liability approach. For US GAAP purposes, the Company has always applied Statement of Financial Accounting Standard (“SFAS”) No. 109, “Accounting for Income Taxes”, whereby income taxes are also recognized using substantially the same asset and liability approach. Deferred income tax assets and liabilities established for temporary differences between the financial reporting basis and tax basis of the Company’s assets and liabilities are based on enacted rates at the dates that the temporary differences are expected to reverse. The effect of changes in tax rates is included in income for the period that includes the enactment date.

After the year ended December 31, 1999, Chilean GAAP and US GAAP differ due to the recognition for US GAAP purposes of the reversal of deferred income taxes included in the US GAAP reconciliations in years prior to 2000.

Prior to the implementation of Technical Bulletin No. 60, no deferred income taxes were recorded under Chilean GAAP if the related timing differences were expected to be offset in the year that they were projected to reverse by new timing differences of a similar nature.

Furthermore, deferred income tax assets under both Chilean and US GAAP should be reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The valuation allowance should be sufficient to reduce the deferred income tax asset to an amount that is more likely than not to be realized.

The effect of providing for deferred income taxes for the differences between the amounts shown for assets and liabilities in the balance sheet and the tax basis of those assets and liabilities is included in paragraph 1 n) below and certain disclosures required under FAS 109 are set forth under paragraph 2 c) below.

b) Goodwill

Until December 31, 2003, under Chilean GAAP, the excess of cost over the net book value of a purchased company was recorded as goodwill (the book value purchase method), which was then amortized to income over a maximum period of twenty years. Amortization of goodwill may be accelerated if the acquired company generates sufficient income to absorb the additional amortization in any given year. The excess of net book value over the cost of an investment was considered to be negative goodwill under Chilean GAAP and is also amortized to income over a maximum period of twenty years. The amortization of negative goodwill may be accelerated if the acquired company sustains losses.

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Under US GAAP, goodwill and other intangibles are accounted for under SFAS No. 141, “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible Assets”. SFAS No. 141 requires the purchase method of accounting be used for all business combinations initiated after June 30, 2001 and prohibits the use of the pooling-of-interests method of accounting after this date. With respect to the purchase method of accounting, the cost of an investment is assigned to the tangible and identified intangible assets acquired and liabilities assumed on the basis of their fair values at the date of acquisition. Any excess of cost over the fair value of net assets acquired is recorded as goodwill. If an excess of acquired net assets over cost arises, the excess is allocated to reduce proportionally the values assigned to noncurrent assets (except long-term investments in marketable securities) in determining their fair values. If the allocation reduces the noncurrent assets to zero value, the remainder of the excess over cost (negative goodwill) is written off immediately as an extraordinary gain. SFAS No. 141 establishes specific criteria for the recognition of intangible assets separately from goodwill and requires unallocated negative goodwill to be written off immediately as an extraordinary gain (instead of being deferred and amortized).

SFAS No. 142, “Goodwill and Other Intangible Assets” establishes the following:

· The accounting for a recognized intangible asset is based on its useful life to the reporting entity. An intangible asset with a finite useful life is amortized over the life of the asset, but goodwill and other intangible assets with indefinite useful lives are not amortized.

· The remaining useful lives of intangible assets being amortized are evaluated each reporting period to determine whether events and circumstances warrant a revision to the remaining period of amortization. If the estimate of an intangible asset’s remaining useful life is changed, the remaining carrying value of the intangible asset is amortized prospectively over the revised remaining useful life.

· Goodwill and other intangible assets with indefinite useful lives that are not subject to amortization are tested for impairment at least annually.

· All goodwill must be assigned to a reporting unit, which is defined as an operating segment or one level below an operating segment.

SFAS No. 142 became effective for years beginning after December 15, 2001. Accordingly, goodwill amortization was ceased for US GAAP purposes beginning in 2002.

As discussed in Note 10, the Company has made a number of acquisitions. Acquisitions made prior to December 31, 2003, were recorded pursuant to the book value purchase method for Chilean GAAP purposes. For these acquisitions there were no significant differences in the allocation of the purchase price or the determination of goodwill between the book value purchase method in accordance with Ch ilean GAAP and the purchase accounting method required pursuant to SFAS No. 141 in accordance with US GAAP. For acquisitions after December 31, 2003 the fair value purchase method is used for both Chilean GAAP and US GAAP. However, under Chilean GAAP certain differences may occur in the identification of intangible assets and goodwill. The companies acquired since January 1, 2004 are not material to the consolidated financial position of the Company and therefore adjustments to the purchase price allocation and pro forma financial statements showing the effect on operations as if the acquisitions had been completed at the beginning of the period are not presented.

For US GAAP purposes, the reversal of amortization of goodwill from the purchases made by the Company and the purchase accounting adjustments of conforming business acquisitions prior to June 30, 2001 to US GAAP are shown in paragraph 1 m) below. As a result of the annual impairment tests performed by the Company, no adjustment to the book value of goodwill was deemed necessary.

Under Chilean GAAP, the cost of an equity method investment is separated into an investment component (based on the purchase of the proportionate share of equity according to book values) and a goodwill component (based on the difference between the amount paid and the proportional book value of the investment). Under US GAAP, these components are combined in one balance sheet caption as an investment, and goodwill is determined in a manner similar to a consolidated subsidiary based on proportionate ownership. No disclosure has been presented for the effect of the reclassification between goodwill as determined under Chilean GAAP for equity method investments and goodwill determined under US GAAP as the effect of this reclassification is not significant.

The effects of reclassifying negative goodwill for the acquisitions prior to December 31, 2003 as determined under Chilean GAAP to proportionately reduce the values assigned to the non-current assets acquired in accordance with US GAAP are not significant.

c) Revaluation of property and equipment

As mentioned in Note 2 k), certain property and equipment are valued in the financial statements at amounts determined in accordance with a technical appraisal. The revaluation of property and equipment is an accounting principle that is not generally accepted in the United States. Assets that were subjected to appraisals have been fully depreciated or are no longer owned by the Company. Accordingly, there is no impact on US GAAP results and no adjustments recorded.

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d) Minimum dividend

As required by the Chilean Companies Act. unless otherwise decided by the unanimous vote of the issued and subscribed shares, an open stock corporation must distribute a cash dividend in an amount equal to at least 30% of the company’s net income for each year adjusted for the deficit under developing period as determined in accordance with Chilean GAAP. Under Chilean GAAP, even though the minimum dividend is a legal requirement, the dividend is not recorded until it is declared by the Company. For 2006 and 2005, the full amount of the required dividend was declared as interim dividends and recorded by the Company, therefore, no adjustment is necessary.

e) Equity method of accounting and Consolidation

As mentioned in Note 2 l), for Chilean GAAP purposes, beginning in 2005, investments in related companies are accounted for pursuant to the equity method when the company’s investment represents between 20% and 50% of the voting stock of the investee. Prior to 2005, when investments in related companies represented between 10% and 50% of voting rights the equity method was used. For US GAAP purposes prior to February 1, 2003, investments in related companies required the use of the equity method of accounting for investments which give the investor the ability to exercise significant influence over operating and financial policies of the investee. For those companies which were determined to be controlled through the Company’s investment (generally, ownership of over 50% of the outstanding voting shares), US GAAP required consolidation. Subsequent to February 1, 2003, US GAAP requires the determination of whether an entity should be consolidated in accordance with FASB Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”), focused on identifying entities for which a controlling financial interest is achieved through means other that voting rights. Under this interpretation, a variable interest entity must be consolidated if certain consolidation requirements are met. An enterprise should consolidate an entity if that enterprise has a variable interest in the entity that will absorb a majority of the entity´s expected losses, receive a majority of the entity’s expected residual returns, or both. FIN 46, as revised by FIN 46R, was effective on February 1, 2003 for new transactions and effective for reporting periods after March 15, 2005 for transactions entered into prior to February 1, 2003.

Relative to the Company’s investments in related companies, there are no differences in the application of the equity method or consolidation between Chilean GAAP and US GAAP.

f ) Monetary correction of subsidiaries

As indicated in Note 2 d), the Chilean peso financial statements of certain of the Company’s Chilean subsidiaries are restated through the application of price-level restatements in accordance with Chilean GAAP to show the effects of changes in the purchasing power of the Chilean peso, using indicators published by the National Institute of Statistics. The financial statements of such Chilean subsidiaries are then remeasured to US dollars at the exchange rates prevailing on December 31 of each year.

The inclusion of price-level restatements when the US dollar is the reporting currency is not permitted under US GAAP. However, in the case of the Company, the effects of including price-level restatement at the subsidiary level are not significant and accordingly the effects of reversing the price-level restatement are not included in the reconciliation of net income and net equity accounts to US GAAP in paragraph 1 n) below.

g) Investment securities

Under Chilean GAAP, investments in bonds held by the Company are carried at the lower of cost plus accrued interest or market value.

Under Chilean GAAP, mutual funds are stated at market value based on year-end quoted values and unrealized gains and losses are recorded in the current year Consolidated Statement of Income. Under SFAS No. 115, “Accounting for Certain Investments in Debt and Equity

Securities”, investment securities, which include debt and certain equity securities, are accounted for as follows:

- Debt securities that the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity securities and are reported at amortized cost.

- Debt and equity securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and are reported at fair value, with unrealized gains and losses included in earnings.

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LAN AIRLINES S.A. AND SUBSIDIARIES

- Debt and equity securities not classified as either held-to-maturity or trading securities are classified as available-for-sale securities and reported at fair value, with unrealized gains and losses excluded from earnings and reported in a separate component of shareholders’ equity.

The Company’s investments in bonds are classified as available for sale securities for the purposes of SFAS No. 115. The effect of the difference between Chilean GAAP and US GAAP in accounting for the Company’s investment in bonds is included in the reconciliation of reported Net income to Comprehensive income in accordance with US GAAP in paragraph 1 n) below. There is no difference between Chilean GAAP and US GAAP for the Company’s investments in mutual funds as they are classified as trading securities for the purpose of SFAS No. 115.

h) Presentation in Statement of cash flows

Under Chilean GAAP, payments of leasing obligations subsequent to the date of purchase are treated in the Consolidated Statement of Cash Flows as additions of property and equipment and classified as cash outflows from investing activities. Under US GAAP, incurring directlyrelated debt to the seller of property and equipment is a financing transaction and subsequent payments of principal on that debt are thus considered to be cash outflows from financing activities.

As a result of these differences, the Consolidated Statement of Cash Flows under Chilean GAAP would have to be adjusted as follows to present the statement in accordance with US GAAP:

	Increase (decrease) in cash flow
	2006			2005			2004
	(In thousands of US$)
Net cash provided by (used in) financing activities under Chilean GAAP		503,717			177,888			(134,768	)
Loans repaid		(33,559	)		(38,180	)		(11,504	)
Net cash provided by (used in) financing activities under US GAAP		470,158			139,708			(146,272	)
Net cash provided by (used in) investing activities under Chilean GAAP		905,746			(560,422	)		(152,869	)
Acquisitions of property and equipment		33,559			38,180			11,504
Net cash provided by (used in) investing activities under US GAAP		939,305			(522,242	)		(141,365	)

Net cash and cash equivalents at the end of year under US GAAP is as follows:

	At December 31,
	2006		2005		2004
	(In thousands of US$)
Cash		9,565		11,733		11,620
Time deposits		148,663		34,519		179,715
Defined-term mutual funds (included in Marketable Securities)		39,654		65,019		25,533
Other current assets		1,614		-		-
Total		199,496		111,271		216,868

There are no significant non-cash investing or financing transactions in the three years ended December 31, 2006. The Company made cash payments for interest of ThUS$ 60,107, ThUS$ 39,740 and ThUS$ 38,689 for the years ended 2006, 2005 and 2004, respectively. The Company made tax payments of ThUS$ 49,846, ThUS$ 37,357 and ThUS$ 29,554 for the years ended 2006, 2005 and 2004, respectively.

i ) Classification of income and expenses

Under Chilean GAAP, the following income and expenses arising during the years 2006, 2005 and 2004 are classified as Other income (expense) - net whereas under US GAAP they would be recorded within continuing operations:

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LAN AIRLINES S.A. AND SUBSIDIARIES

	Year ended December 31,
	2006		2005		2004
			(In thousands of US$)
Non-operating income (1):
Swap fuel contracts		12,903		51,480		46,529
Total		12,903		51,480		46,529

Non-operating expenses:
Provision for retirement of Boeing 737 Aircraft (2)		8,100		-		-
Non-recurring indemnities paid to employees (2)		11,747		-		-
Total		19,847		-		-

(1) The Company recorded a ThUS$ 40.3 cumulative effect for a change in accounting principles as Non-operating income in 2006 for Chilean GAAP. This is adjusted for and included in the US GAAP reconciliation in Note 2 (n).

(2) See Note 22

j ) Internal use software

As mentioned in Note 2 k), under Chilean GAAP all disbursements for the development of internal use software are charged to the results of operations as incurred. Under US GAAP, certain costs related to internal use software are capitalized while others are charged to the results of operations. External direct costs of materials and services consumed in developing or obtaining internal use computer software, payroll and payroll-related costs for employees who are directly associated with and who devote time to the internal use computer software project and interest costs incurred while developing internal use computer software are capitalized. Maintenance, training, data conversion and reengineering costs are charged to the results of operations as incurred. However, in the case of the Company, the costs relating to internal use software are not significant and accordingly, these costs are not included in the reconciliation to US GAAP of net income and net equity accounts in paragraph 1 n) below.

k) Recognition of tax loss carryforwards

At December 31, 2000, LAN Perú had tax loss carryforwards of ThUS$ 7,590 resulting in a deferred tax asset of ThUS$ 2,326. A valuation allowance of ThUS$ 2,326 was provided to offset the entire deferred tax asset because at that time it appeared unlikely that these tax losses would be utilized in future years. LAN Perú was an equity method investee at December 31, 2000 and during 2001 the Company acquired an additional 21% ownership interest and LAN Perú became a consolidated subsidiary. No deferred tax asset was recognized under Chilean GAAP on the date of purchase. During 2001, LAN Perú had taxable income and utilized ThUS$ 1,673 of the deferred tax asset, leaving a balance of ThUS$ 653 which expired without being utilized. In accordance with US GAAP, when tax loss carryforwards that were not recognized at the acquisition date are recognized in a subsequent period, they first reduce to zero any positive goodwill related to the acquisition; then they reduce to zero all other noncurrent intangible assets; and finally, they reduce income tax expense. For Chilean GAAP purposes, the tax loss was used to reduce income tax expense without first reducing existing goodwill, As a result, the US GAAP reconciliation in paragraph 1 n) below includes an adjustment to decrease goodwill on the purchase of LAN Perú in 2001 by ThUS$ 488 and increase the current income provision by the same amount. The adjustment is based on the acquired ownership interest of 21% applied to the deferred tax asset of ThUS$ 2,326 recognized in 2001.

l ) Derivative financial instruments

The Company uses interest rate swap and cap agreements to reduce its exposure from variable interest bearing liabilities and commitments. It also enters into commodity (jet fuel and West Texas intermediate) swap and call contracts to fix the price for a given quantity of the aforementioned commodity, and “costless collars” which are a combination of call and put options so as to ensure a price range for jet fuel. In order to reduce the impact of foreign exchange rate fluctuations, the Company enters into foreign exchange hedge contracts.

Under Chilean GAAP, derivatives are accounted for in accordance with Technical Bulletin 57, “Accounting for Derivative Contracts” (TB 57). Under TB 57, all derivative financial instruments should be recognized on the balance sheet at their fair value. In addition, TB 57 requires that derivative financial instruments be classified as non-hedging (investment) instruments and hedging instruments, the latter further divided into those covering recognized assets or liabilities or an unrecognized firm commitment and those covering forecasted transactions.

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LAN AIRLINES S.A. AND SUBSIDIARIES

Contracts to cover recognized assets or liabilities or an unrecognized firm commitment act as hedging instruments against the risk of a change in the fair value of a hedged item. The differences resulting from the changes in the fair value of both the hedged item and the derivative instrument should be accounted for as follows:

a) If the net effect is a loss, it should be recognized in earnings in the period of change.

b) If the net effect is a gain, it should be recognized when the contract is closed and accordingly deferred on the balance sheet.

c) If the net effect is a gain and net losses were recorded on the transaction in prior years, a gain should be recognized in earnings in the current period up to the amount of net losses recorded previously.

d) If the effect is a net loss and net gains were recorded (as a deferred revenue) on the transaction in prior years, the gain should be utilized to offset the net loss before recording the remaining loss in the results of operations for the year.

Contracts to cover forecasted transactions are those that have the objective of protecting cash flow risks of a transaction expected to occur in the future (a cash flow hedge). The hedging instrument should be recorded at its fair value and the changes in fair value should be stated on the balance sheet as unrealized gains or losses. When the contract is closed, the unrealized gains or losses on the derivative instrument should be recognized in earnings without affecting the cost or sales price of the asset acquired or sold in the transaction. However, probable losses arising from purchase commitments should not be deferred.

Non-hedging (investment) instruments should also be presented at their fair value, with changes in fair value reflected in the earnings of the period in which the change in fair value occurs. For US GAAP reconciliation purposes only, the Company has adopted SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS 137 and SFAS 138 on the same matter (collectively referred to herein as “SFAS 133”). SFAS 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the Consolidated Balance Sheet and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as (a) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows of a forecasted transaction or to the variability of the cash flows that are to be received or paid in connection with a recognized asset or liability or (c) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security, a foreign-currency-denominated forecasted transaction or a recognized asset or liability.

As indicated below in paragraph 2 f), the accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation.

The effect of the differences in accounting for derivative financial instruments under Chilean and US GAAP is included in paragraph 1 n) below. Additional information concerning derivative financial instruments that is required to be disclosed under SFAS 133 is set forth below in paragraph 2 f).

m) Change in accounting policy for maintenance costs

As mentioned in Note 2 p), the Company changed its method of accounting for heavy aircraft and engine maintenance costs associated with its owned aircraft. This change in accounting principle for Chilean GAAP was preferable, and in line with industry practice. The effect of this change was recorded prospectively under Chilean GAAP and resulted in an approximate US$ 40.3 million increase in Non-operating income for 2006.

For Chilean GAAP, the Company effectively changed the accounting for heavy aircraft and engine maintenance costs on owned aircraft from the accrual method to the deferral method. In the recently issued FASB Staff Position No. AUG AIR-1 (“FSP AIR-1”), the FASB also eliminates the use of the accrual method for US GAAP effective January 1, 2007. This FSP AIR-1 allows for early adoption. The Company also changed its accounting principle for heavy aircraft and engine maintenance costs on owned aircraft to the deferral method. The Company will adopt the FSP AIR-1 for leased aircraft in 2007, and is still evaluating the impact of this adoption to the US GAAP results of operation and financial position.

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LAN AIRLINES S.A. AND SUBSIDIARIES

For US GAAP, the Company has retrospectively applied the use of the deferral method to prior periods´ financial statements. The cumulative effect of the accounting change on periods prior to the fiscal year ended December 31, 2004 are reflected in the carrying amounts of assets and liabilities as of the beginning as of January 1, 2004. An offsetting adjustment has been made to the opening balance of retained earnings as of January 1, 2004. The effects of this change in accounting policy are shown below and under paragraph 1 n). The effect of this change on the 2006 US GAAP results was a decrease in net income of approximately US$ 40.3 million. The cumulative effect on the 2004 beginning Shareholders´equity balance was an increase of US$ 38.7 million.

The following financial data show the effect of the retrospective application of this change in accounting principle under US GAAP:

	2004
	(as adjusted)			(as reported)
	(In thousands of US$)
Balance sheet :
Property and equipment (net)		958,667			978,974
Provisions		(100,679	)		(159,615	)

Income statement:
Depreciation and amortization		(76,840	)		(77,443	)
Aircraft maintenance		(116,621	)		(120,818	)
Total operating expenses		(1,874,314	)		(1,874,316	)
Operating income		218,631			218,629
Income tax		(34,895	)		(34,079	)
Net Income		164,689			160,703

	2005
	(as adjusted)		(as reported)
	(In thousands of US$)
Balance sheet :
Property and equipment (net)	1,232,829		1,252,270
Provisions	(102,118	)	(160,563	)

Income statement:
Depreciation and amortization	(72,111	)	(80,456	)
Aircraft maintenance	(96,682	)	(132,198	)
Total operating expenses	(2,355,481	)	(2,313,237	)
Operating income	150,872		193,116
Income tax	(25,610	)	(25,335	)
Net Income	156,312		154,970

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n) Effects of conforming to US GAAP

The adjustments to reported net income required to conform with US GAAP are as follows:

	For the year ended December 31,
	2006			2005			2004
	(In thousands of US$)
Net income in accordance with Chilean GAAP financial statements		241,300			146,601			163,552
Deferred income tax provision (par. 1 a)		8,311			2,648			(6,602	)
Purchase accounting adjustments of property and equipment on LAN Cargo S.A (Ex LAN Chile Cargo		(64	)		(64	)		(64	)
S.A.) acquisition (par. 1 b)
Fair value of derivative not considered to be a hedge (par. 1 l and par. 2 f)		120			-			414
Ineffectiveness of cash flow hedges of forecasted jet fuel purchases (par. 1 l and par. 2 f)		(2,080	)		2,233			(606	)
Ineffectiveness of cash flow hedges of interest rate cap contracts (par. 1 l and par. 2 f)		(890	)		-			-
Ineffectiveness of cash flow hedges of forecasted securitization (net of amortization) (par. 1 l and par.		59			59			59
2 f)
Reversal of goodwill and its amortization (par. 1 b)		3,318			3,218			3,134
Effect of change in accounting policy (par. 1 m)		(40,344	)		1,617			4,802
Net income in accordance with US GAAP		209,730			156,312			164,689

	For the year ended December 31,
	2006			2005			2004
	(In thousands of US$)
Comprehensive income (loss):
Fair value of cash flow hedges:
Interest rate contracts (par. 1 l and par. 2 f )		(11,259	)		9,441			4,179
Jet fuel swaps (par. 1 l and par. 2 f)		(12,454	)		(6,344	)		446
Treasury rate lock (par. 1 l and par. 2 f)		471			471			471
Unrealized gain on investment (par. 2 b)		(8,205	)		(2,233	)		10,565
Other comprehensive income (loss) before taxes		(31,447	)		1,335			15,661
Income tax (expense) benefit related to items of other
comprehensive income (par. 1 a)		5,346			(227	)		(2,663	)
Comprehensive income in accordance with US GAAP		183,629			157,420			177,687

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The adjustments required to conform Total Shareholders’ equity to US GAAP are as follows:

	For the year ended December 31,
	2006			2005			2004
	(In thousands of US$)
Total Shareholders’ Equity in accordance with Chilean GAAP financial statements		626,320			502,713			434,557
Deferred income tax provision (par. 1 a)		(14,496	)		(22,807	)		(25,455	)
Purchase accounting adjustments of property and equipment arising from LAN Cargo S.A. (Ex LAN Chile Cargo S.A.) acquisition (par. 1 b)		428			492			556
Reversal of utilization of tax loss carryovers in Perú (par. 1 k)		(488	)		(488	)		(488	)
Fair value of derivative not considered to be a hedge (par. 1 l and par. 2 f)		120			-			-
Ineffectiveness of cash flow hedges of forecasted jet fuel purchases (par. 1 l and par. 2 f)		(890	)		2,080			(153	)
Ineffectiveness of cash flow hedge of forecasted securitization (net of amortization ) (par. 1 l and par. 2 f)		(147	)		(206	)		(265	)
Difference in purchase accounting adjustments (par. 1 b)		(20,814	)		(20,814	)		(20,814	)
Amortization of goodwill basis differences pre-SFAS 141 (par. 1 b)		8,201			8,201			8,201
Reversal of amortization of goodwill under chilean gaap subsequent to implementation of SFAS 141 (par. 1 b)		16,085			12,767			9,549
Effect of change in accounting principle (par. 1 m)		-			40,344			38,727

Shareholders’ Equity in accordance with US GAAP		614,319			522,282			444,415

	For the year ended December 31,
	2006			2005		2004
	(In thousands of US$)
Beginning accumulated other comprehensive loss		4,471			3,363		(9,635	)
Other comprehensive income (loss), net of income tax		(26,101	)		1,108		12,998
Accumulated other comprehensive income (loss) in accordance with US GAAP		(21,630	)		4,471		3,363

Total shareholder ’s equity in accordance with US GAAP including accumulated other comprehensive income (loss)		592,689			526,753		447,778

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The changes in Total Shareholders’ equity determined under US GAAP are summarized as follows:

	In thousands
	of US$
Balance at December 31, 2003		351,650
Distribution of final 2003 dividend		(6,776	)
Distribution of interim 2004 dividend		(74,783	)

Other comprehensive income :
Gain from fair value of cash flow hedges		5,096
Unrealized gain on investment		10,565
Income tax expense related to items of other comprehensive income		(2,663	)
Net income for the year		164,689
Balance at December 31, 2004		447,778

Balance at December 31, 2004		447,778
Distribution of final 2004 dividend		(6,994	)
Distribution of interim 2005 dividend		(71,451	)

Other comprehensive income :
Gain from fair value of cash flow hedges		3,568
Unrealized gain on investment		(2,233	)
Income tax expense related to items of other comprehensive loss		(227	)
Net income for the year		156,312
Balance at December 31, 2005		526,753

Balance at December 31, 2005		526,753
Distribution of final 2005 dividend		(1,843	)
Distribution of interim 2006 dividend		(115,850	)

Other comprehensive income :
Gain from fair value of cash flow hedges		(23,242	)
Unrealized gain on investment		(8,205	)
Income tax expense related to items of other comprehensive loss		5,346
Net income for the year		209,730
Balance at December 31, 2006		592,689

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2. Additional US GAAP disclosure requirements

The information set forth below is required under US GAAP but not under Chilean GAAP.

a) Earnings per share

The following disclosure of earnings per share information is not generally required for presentation in financial statements under Chilean GAAP but is required under US GAAP:

	Year ended December 31,
	2006		2005		2004
					(In US$)
Earnings per share under Chilean GAAP		0.76		0.46		0.51
Basic and diluted earnings per share under US GAAP		0.66		0.49		0.52

Weighted-average number of shares of common stock outstanding for basic and diluted earnings per share (in thousands)		318,909		318,909		318,909

The earnings per share data shown above is determined by dividing net income for both Chilean GAAP and US GAAP purposes by the weighted-average number of shares of common stock outstanding during each year.

b) Investment securities

Shown below are the cost, gross unrealized gain and losses and approximate fair value of marketable securities under US GAAP (see paragraph 1g):

	Cost				Gross Unrealized gains				Gross Unrealized losses				Fair Value
	2006		2005		2006		2005		2006		2005		2006		2005
	(In thousands of US$)
Bonds		20,415		47,964		204		8,409		-		-		20,619		56,373

Total securities available for sale		20,415		47,964		204		8,409		-		-		20,619		56,373

c) Income tax

The provision for income taxes charged to the results of operations under US GAAP was as follows:

	Year ended December 31,
	2006			2005			2004
	(In thousands of US$)
Current income tax expense		(14,123	)		(1,261	)		(970	)
Deferred income tax expense		(24,403	)		(24,349	)		(33,925	)
Total provision under US GAAP		(38,526	)		(25,610	)		(34,895	)

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Deferred tax assets (liabilities) are summarized as follows:

	Year ended December 31,
	2006			2005			2004
	(In thousands of US$)
Unearned income		(16,198	)		(16,295	)		(11,480	)
Prepaid expenses		(6,363	)		(6,100	)		(7,405	)
Property and equipment		(156,405	)		(120,509	)		(113,055	)
Others		-			(7,774	)		(7,272	)
Gross deferred tax liabilities		(178,966	)		(150,678	)		(139,212	)

Allowance for doubtful accounts		4,494			4,073			3,735
Tax loss carryforwards		32,968			33,282			46,752
Provision for vacations		3,302			2,732			2,517
Provisions for obsolescence of spare parts		2,960			4,593			3,814
Other		20,178			5,357			5,835
Gross deferred tax assets		63,902			50,037			62,653
Deferred tax assets valuation allowance		(15,302	)		(10,988	)		(10,803	)
Net deferred tax liabilities		(130,366	)		(111,629	)		(87,362	)

The provision for income taxes differs from the amount of income tax determined by applying the applicable Chilean statutory income tax rates of 17% to pretax accounting income on a US GAAP basis as a result of the following differences:

	Year ended December 31,
	2006			2005			2004
	(In thousands of US$)
Provision for income taxes at statutory Chilean tax rate		(42,204	)		(30,573	)		(33,929	)
Increase (decrease) in rates resulting from :
Non-taxable income		5,618			5,967			2,400
Non-deductible items		(1,371	)		(334	)		(271	)
Change in valuation allowance		(4,314	)		(185	)		(3,305	)
International income tax differences		3,022			(313	)		548
Increase in Chilean tax rates (effect on deferred income tax)		-			-			-
Other		723			(172	)		(338	)
Provision for income taxes at effective tax rates		(38,526	)		(25,610	)		(34,895	)

In accordance with Chilean law, the Company and each of its subsidiaries compute and pay taxes on a separate return basis and not on a consolidated basis.

The Company and certain of the Chilean subsidiaries (principally LAN Cargo S.A.) have tax loss carryforwards aggregating ThUS$ 79,589 at December 31, 2006 which have no expiration date. These tax losses have resulted in a deferred tax asset at that date of ThUS$ 13,530.

Inversora Cordillera S.A. and its subsidiary have tax loss carryforwards aggregating ThUS$ 32,678 at December 31, 2006 which have an expiration date of five years beginning in the first year that a loss is incurred. The related deferred tax asset was ThUS$ 11,437 at December 31, 2006 and a 55% valuation allowance has been provided.

LanLogistics, Corp. and its subsidiaries have tax loss carryforwards aggregating ThUS$ 10,662 at December 31, 2006 which have expiration dates of twenty years after the year of the loss. The related deferred tax asset is ThUS$ 3,625 and a 100% valuation allowance has been provided because at the present time it appears unlikely that these tax losses will be utilized in future years.

259

LAN AIRLINES S.A. AND SUBSIDIARIES

LAN Chile Investment Limited and its subsidiaries have tax loss carryforwards aggregating ThUS$ 6,607 at December 31, 2006 which have expiration dates between three and five years after the year of the loss. The related deferred tax asset is ThUS$ 1,651 and a 100 % valuation allowance has been provided because at the present time it appears unlikely that these tax losses will be utilized in future years .

Aerolinheas Brasileiras has tax loss carryforwards aggregating ThUS$ 4,789 at December 31, 2006 which have no expiration date. However, a 100% valuation allowance has been provided against the related deferred tax asset of ThUS$ 1,628 because at the present time it appears unlikely that these tax losses will be utilized in future years.

South Florida Air Cargo Inc. has tax loss carryforwards of ThUS$ 3,227 at December 31, 2006 which have expiration dates of twenty years after the year of the loss. The related deferred tax asset was ThUS$ 1,097 at December 31, 2006.

d) Fair value of financial instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments at December 31, 2006, 2005 and 2004 for which it is practicable to estimate that value.

Cash, time deposits and Marketable securities:

Cash, time deposits and marketable securities are stated at their carrying amount, which is equivalent to fair value.

Other assets:

The fair value of long-term accounts receivable included within Other assets was estimated using the interest rate the Company would pay for similar credit.

Short and long-term debt:

The fair value of short and long-term debt was based on rates currently available to the Company for debt with similar terms and remaining maturities.

Financial instruments:

The fair value of swap fuel contracts (used in hedging of fuel prices) is the estimated amount that the Company would receive or pay to terminate the agreements at the balance sheet date taking into account current fuel prices and the current creditworthiness of the counterparties.

The fair value of the interest rate agreements is based on estimated mid-market valuations. Such mid-market values attempt to approximate the economic value at the balance sheet date of a position using prices and rates at the average of the estimated bid and offer for the respective underlying assets or reference rates and /or mathematical models, as deemed appropriate by the Company. In the absence of sufficient or meaningful market information, such valuations or components thereof may be theoretical in whole or in part.

260

LAN AIRLINES S.A. AND SUBSIDIARIES

The estimated fair values of the Company’s financial instruments on a US GAAP basis are as follows:

	At December 31, 2006						At December 31, 2005
	US GAAP			Fair			US GAAP			Fair
	Carrying amount			Value			Carrying amount			Value
	(In thousands of US$)
Cash		9,565			9,565			11,733			11,733
Time deposits		148,977			148,977			34,519			34,519
Marketable securities		60,273			60,273			121,392			121,392
Current portion of long-term loans		89,883			125,946			53,104			68,351
Current portion of other long-term obligations		55,040			49,607			45,687			52,209
Bank loans (long-term)		1,031,082			928,302			521,974			479,416
Other liabilities (long-term)		196,011			170,417			192,700			164,075


Financial instruments :
Interest rate Derivatives		(21,731	)		(21,731	)		(10,472	)		(10,472	)
Swap fuel contracts		(4,244	)		(4,244	)		11,180			11,180

e) Concentration of credit risk

The Company’s accounts receivable are generated primarily from airline ticket and cargo service sales to individuals and various commercial enterprises that are economically and geographically dispersed, and the accounts receivable are generally short-term in duration. Accordingly, the Company does not believe that it is subject to any significant concentration of credit risk.

f ) Financial instruments

Accounting for Derivatives and Hedging Activities

All derivatives are recognized on the balance sheet at their fair value. On the date that the Company enters into a derivative contract, it designates the derivative as (1) a hedge of (a) the fair value of a recognized asset or liability or (b) an unrecognized firm commitment (a “fair value” hedge); (2) a hedge of (a) a forecasted transaction or (b) the variability of cash flows that are to be received or paid in connection with a recognized asset or liability (a “cash flow” hedge); (3) a foreign currency fair value or cash flow hedge (a “foreign currency” hedge); (4) a hedge of a net investment in a foreign operation; or (5) an instrument that is held for trading or non-hedging purposes (a “trading” or “non-hedging” instrument). Changes in the fair value of a derivative that is highly effective as, and that is designated and qualifies as, a fair value hedge, along with changes in the fair value of the hedged asset or liability that are attributable to the hedged risk (including changes that reflect losses or gains on firm commitments), are recorded in current period earnings. Changes in the fair value of a derivative that is highly effective as, and that is designated and qualifies as, a cash flow hedge, to the extent that the hedge is effective, are recorded in other comprehensive income, until earnings are affected by the variability of cash flows of the hedged transaction (e.g., until periodic settlements of a variable rate asset or liability are recorded in earnings).

Any hedge ineffectiveness (which represents the amount by which the changes in the fair value of the derivative exceed the variability in the cash flows of the forecasted transaction) is recorded in current period earnings. Changes in the fair value of a derivative that is highly effective as, and that is designated and qualifies as, a foreign currency hedge is recorded in either current period earnings or other comprehensive income, depending on whether the hedging relationship satisfies the criteria for a fair value or cash flow hedge. If, however, a derivative is used as a hedge of a net investment in a foreign operation, the changes in the derivative’s fair value, to the extent that the derivative is effective as a hedge, are recorded in the cumulative translation adjustment account within other comprehensive income. Changes in the fair value of derivative trading and non-hedging instruments are reported in current period earnings.

Upon purchasing a financial instrument, the Company must determine whether a derivative instrument is “embedded” therein and if so, it must assess the economic characteristics of the embedded derivative to determine if they are clearly and closely related to the economic characteristics of the remaining component of the financial instrument (i.e., the host contract) and whether a separate, non-embedded instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. When it is determined that (1) the embedded derivative possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract and (2) a separate, stand-alone instrument with the same terms would qualify as a derivative instrument, the embedded derivative is separated from the host contract, carried at fair value, and designated as either (1) a fair value, cash flow, or foreign currency hedge or (2) a trading or non-hedging derivative instrument. However, if the entire contract were to be measured at fair value, with changes in fair value reported in current earnings, or if the Company could not reliably identify and measure the embedded derivative for purposes of separating that derivative from its host contract, the entire contract would be carried on the balance sheet at fair value and not be designated as a hedging instrument.

261

LAN AIRLINES S.A. AND SUBSIDIARIES

The Company documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives that are designated as fair value, cash flow, or foreign currency hedges to (1) specific assets and liabilities on the balance sheet or (2) specific firm commitments or forecasted transactions. The Company also formally assesses (both at the hedge’s inception and on an ongoing basis) whether the derivatives that are used in hedging transactions have been highly effective in offsetting changes in the fair value or cash flows of hedged items and whether those derivatives may be expected to remain highly effective in future periods.

The Company discontinues hedge accounting prospectively when (1) it determines that the derivative is no longer effective in offsetting changes in the fair value or cash flows of a hedged item (including hedged items such as firm commitments or forecasted transactions); (2) the derivative expires or is sold, terminated, or exercised; (3) it is no longer probable that the forecasted transaction will occur; (4) a hedged firm commitment no longer meets the definition of a firm commitment; or (5) management determines that designating the derivative as a hedging instrument is no longer appropriate.

Derivative instruments and hedging activities

The Company’s activities expose it to a variety of market risks, including risks related to the effects of changes in foreign-currency exchange rates, interest rates, and commodity prices. These financial exposures are monitored and managed by the Company as an integral part of its overall risk management program. The Company’s risk management program focuses on the unpredictability of financial markets and seeks to reduce the potentially adverse effects that the volatility of these markets may have on its operating results.

Financial instruments: fuel price risk management

Jet fuel price fluctuations are largely dependent on supply and demand for crude oil in the world, OPEC decisions, refinery capacities, stock levels of crude and global political factors. In order to minimize the risk of jet fuel price fluctuations, the Company enters into swap and option contracts in the jet fuel market or the West Texas intermediate (WTI) market. The decision to enter into hedge contracts in the jet fuel or WTI market depends on the relative price of each commodity at the supposed trade date.

The Company enters into swap, call and put option contracts in order to fix or limit (depending on the case) the market price at a certain level for a given quantity of the above mentioned commodities. Pursuant to such contracts, the Company pays or receives, depending on the case, the difference between the agreed fixed price and the floating market price calculated on the notional amounts of such contracts. These contracts are classified as cash flow hedges for US GAAP purposes and as forecasted transactions for Chilean GAAP purposes.

As of December 31, 2006, the Company had no ineffectiveness with regard to its cash flow hedges of forecasted purchases of jet fuel outstanding as of year end. At December 31, 2005 the Company had ineffective hedges amounting to ThUS$ 2,080 which were recorded directly in earnings. This ineffectiveness was based on the correlation of the projected market price of the underlying asset against the projected price of future fuel purchases and was recorded in earnings for US GAAP purposes in 2005.

The notional fuel hedged, the realized results on such contracts and the fair value for the years ending December 31, 2006, 2005 and 2004 are as follows:

	2006			2005		2004
Hedged Gallons (million gallons)		149			176		118
Gain on fuel hedge contracts (ThUS$)		12,903			51,480		46,529
Fair value of fuel hedge contacts (ThUS$)		(4,244	)		11,180		15,291

For Chilean GAAP purposes, gains and losses on the hedging contracts referred to above are recognized as a component of Other income (expense) -net when the underlying fuel being hedged is consumed. For US GAAP purposes, such gains and losses would be classified as Operating expenses under the caption Aircraft fuel when the fuel being hedged is consumed.

262

LAN AIRLINES S.A. AND SUBSIDIARIES

Financial instruments: Interest rate risk management

The Company is exposed to the fluctuactions of the LIBOR interest rates, due to the financing of certain aircraft. In order to reduce this exposure, the company decided to hedge a high percentage of its debt through the use of interest rate swaps and interest rate options.

In May 1999, the Company entered into an interest rate swap contract with a financial institution for a notional amount of ThUS$50,000 to convert from floating rate (Libor based) to fixed rate for a period of five years. Pursuant to the contract, the Company paid or received, depending on the case, the difference between the agreed fixed rate and the floating rate calculated on the notional amount of the contract. This contract expired in 2004. The loss on the contract during 2003 was ThUS$ 1,531 and the fair value at December 31, 2003, was estimated at a loss of ThUS$ 414. This swap was not considered to qualify for a hedge relationship and accordingly was not designated as a hedge. Therefore, the fair value of the swap at December 31, 2003, of ThUS$ (414) was charged to the results of operations for US GAAP purposes instead of as a charge to Other comprehensive income (loss) (see paragraph 1 n).

In May 2001 the Company also entered into six receive-floating, pay-fixed interest rate swap contracts in order to hedge the variable interest payments on existing debt of ThUS$ 330,608. Pursuant to these contracts, the Company pays or receives, depending on the case, the difference between the agreed fixed rate and the floating rate calculated on the notional amount of each contract. There is no associated cost to these contracts. The critical terms of these swap contracts, namely notional amounts and dates, have been negotiated to match the terms of the designated variable-rate debt; therefore, there is no ineffectiveness. In October 2005, the Company entered into two interest rate swap contracts in order to hedge the Libor exposure of the financing of two A319-100 aircraft delivered in 2005. During the first quarter of 2006 the Company also entered into ten receive-floating, pay-fixed interest rate swap contracts in order to hedge the variable interest payments on existing debt of approximately ThUS$ 46,697. Additionally, in May 2006 the Company entered into 24 interest rate swap contracts in order to hedge the Libor exposure of the financing of 20 A318-100 and 4 A320-200 aircraft to be delivered in 2007 and 2008. In June 2006, the Company entered into 8 interest rate swap contracts in order to hedge the Libor exposure of the financing of 8 B767-300 ER aircraft to be delivered in 2007 and 2008.

The fair value and the losses of these swap contracts for the years ending December 31, 2006, 2005 and 2004, are as follows:

	2006			2005			2004
Losses on interest rate swap contracts (ThUS$)		(1,138	)		(5,783	)		(10,969	)
Fair value of interest rate swap contracts (ThUS$)		(18,538	)		(4,719	)		(13,608	)

During July 2003, the company entered into four interest rate cap contracts for a total notional amount of ThUS$ 127,753. These caps are intended to limit the Company’s exposure arising from variable-rate debt. Under Chilean and US GAAP, 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. The fair value of these contracts has been estimated at ThUS$ 1,484.

During the same month, the Company entered into an additional two interest rate cap contracts. These caps are intended to limit the exposure of LIBOR-linked operational lease payments on aircraft received during 2004. The fair value of these contracts at year end amounted to ThUS$ 890.

During April 2004, the Company entered into an additional two interest rate cap contracts. These caps are intended to limit the exposure of LIBOR-linked operational lease payments on aircraft received during 2005. The fair value of these contracts at year end amounted to ThUS$ 278.

During 2005, the Company entered into three additional interest rate Cap contracts. These contracts are intended to limit the exposure of LIBOR-linked financing on aircraft delivered in 2005 and one delivered in 2006. The fair value of these contracts at year end amounted ThUS$ 324.

Under FAS 133, 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. The amount of ineffectiveness was ThUS$ 890 and is recorded in earnings for US GAAP purposes. Under Chilean GAAP, the caps are accounted for as cash flow hedges and no ineffectiveness was determined.

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LAN AIRLINES S.A. AND SUBSIDIARIES

At December 31, 2006, the Company received payment from some of the eleven aforementioned caps. The premium on the caps is being amortized throughout the term of each contract for Chilean and US GAAP purposes.

In April 2002, the Company entered into a Treasury rate lock for a notional amount of ThUS$ 45,000 in order to “lock in” a desired interest rate and hedge the variability in the cash proceeds attributable to changes in the benchmark interest rate to be received from the forecasted securitization of future credit card receivables originating from certain ticket agents in the United States, as described in Note 17 to these financial statements. The contract was classified as a cash flow hedge of a forecasted transaction for US GAAP purposes and as a hedge of an forecasted transaction for Chilean GAAP purposes.

The forecasted transaction referred to above occurred on August 22, 2002. At that time the Company recognized a deferred loss of ThUS$ 3,622 under Chilean GAAP for the settlement of the Treasury rate lock contract. During 2002 and for US GAAP purposes, the Company recognized a net loss of ThUS$ 402 which represented the total ineffectiveness of the cash flow hedge of the forecasted securitization and debited Other comprehensive income for the remaining ThUS$ 3,219, which is being amortized over the life of the securitization contract (82 months). During 2006, the Company recognized an amortization charge for this concept amounting to ThUS$ 471 under US GAAP, (ThUS$ 471 during 2005 and ThUS$ 471 during 2004). The deferred loss on the hedging contract referred to above is included in the balance sheet under the captions Prepaid expenses and Other assets (current and non-current portions, respectively) and the corresponding amortization is included in Interest expense both for Chilean and US GAAP purposes. The effect of recording the ineffectiveness of cash flow hedge (net of amortization) in accordance with US GAAP is included in paragraph l n) above

As a result of those hedging activities, the Company has 95.8% of its interest rate exposure hedged.

Financial instruments: foreign currency exchange rates

The company conducts business in local currencies in several countries and accordingly faces the risk of variation in foreign currency exchange rates. A depreciation of the Chilean peso, the Brazilian real, Argentine peso, Mexican nuevo peso, Peruvian nuevo sol or the European euro against the U.S. dollar could have a material adverse effect on the Company because it has revenues and receivables denominated in those currencies. As a part of its risk management policy, the Company regularly monitors its exposure to variations in the exchange rates of these different currencies. In order to reduce the impact of the foreign exchange rate fluctuations, the Company enters from time to time into foreign exchange hedging contracts. Under these forward contracts, for any rate above or below the fixed rate, the Company receives or pays the difference between the spot rate and the fixed rate for the given amount at the settlement date.

As of December 31, 2006 and 2005, the Company has no outstanding exchange forward contracts for hedging purposes.

In order to have a better yield on its investments in 2006, the Company entered into bank deposits in Chilean Peso together with a US dollarChilean pesos foreign exchange swap in order to receive US dollars at maturity. The mark to market value of these foreign exchange swaps amounted to a gain of US$ 0.5 million and is recorded in earnings under both Chilean and US GAAP.

Other information on derivative instruments

By using derivative financial instruments to hedge exposures to changes in exchange rates, interest rates, and jet fuel prices, the Company exposes itself to credit risk and market risk.

Credit risk is the risk that the counterparty might fail to fulfill its performance obligations under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates repayment risk for the Company. When the fair value of a derivative contract is negative, the Company owes the counterparty and, therefore, does not assume repayment risk. The Company minimizes its credit (or repayment) risk in derivative instruments by (1) entering into transactions with high-quality counterparties (2) limiting the amount of its exposure to each counterparty, and (3) monitoring the financial condition of its counterparties. The Company also maintains a policy of requiring that derivative contracts be governed by an ISDA Master Agreement. Market risk is the risk that the value of a financial instrument might be adversely affected by a change in interest rates, currency exchange rates, or jet fuel prices. The Company manages the market risk associated with interest rate, jet fuel price, and foreign-exchange contracts by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.

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LAN AIRLINES S.A. AND SUBSIDIARIES

g) Comprehensive income (loss)

Comprehensive income (loss) is the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. The fair value of cash flow hedges were considered to be Other comprehensive income during 2006, 2005 and 2004 and the unrealized gain on available for sale securities has been included in 2006.

h) Recent Accounting Pronouncements

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 requires that the Company recognize in the financial statements the impact of a tax position if that position will more likely than not be sustained on audit, based on the technical merits of the position. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition provisions. Any transition adjustment recognized on the date of adoption will be recorded as an adjustment to retained earnings as of the beginning of the adoption period. FIN 48 is effective for fiscal years beginning after December 15, 2006. Based on current evaluation, the Company does not expect the adoption of this interpretation to have a material impact on its financial position or results of operations.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. This statement does not require any new fair value measurements; rather, it applies to other accounting pronouncements that require or permit fair value measurements. The provisions of this statement are to be applied prospectively as of the beginning of the fiscal year in which this statement is initially applied, with any transition adjustment recognized as a cumulative-effect adjustment to the opening balance of retained earnings. The provisions of SFAS No. 157 are effective for the fiscal years beginning after November 15, 2007; therefore, the Company anticipates adopting this standard as of January 1, 2008. It has not determined the effect, if any, the adoption of this statement will have on its financial condition or results of operations.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 provides guidance on how prior year misstatements should be taken into consideration when quantifying misstatements in current year financial statements for purposes of determining whether the current year’s financial statements are materially misstated. SAB 108 permits registrants to record the cumulative effect of initial adoption by recording the necessary “correcting” adjustments to the carrying values of assets and liabilities as of the beginning of that year with the offsetting adjustment recorded to the opening balance of retained earnings only if material under the dual method. SAB 108 is effective for fiscal years ending on or after November 15, 2006. The adoption of SAB 108 had no impact on the Company´s financial condition or results of operations.

265

LAN AIRLINES S.A. AND SUBSIDIARIES

266

Lan Airlines S.A.

Nombre: Lan Airlines S.A., R.U.T. 89.862.200 -2

Constitución: Se constituye como sociedad de responsabilidad limitada, por escritura pública de fecha 30 de diciembre de 1983, otorgada en la Notaría de Eduardo Avello Arellano, habiéndose inscrito un extracto de ella en el Registro de Comercio de Santiago a fojas 20.341 número 11.248 del año 1983 y publicado en el Diario Oficial del día 31 de diciembre de 1983.

Por escritura pública de fecha 20 de agosto de 1985, otorgada en la Notaría de Miguel Garay Figueroa, la sociedad se transforma en una sociedad anónima, bajo el nombre de Línea Aérea Nacional Chile S.A. (hoy Lan Airlines S.A.), la que por expresa disposición de la Ley N°18.400, tiene la calidad de continuadora legal de la empresa pública del Estado creada en el año 1929 bajo el nombre de Línea Aérea Nacional de Chile, en lo relativo a las concesiones aeronáuticas y de radio comunicaciones, derechos de tráfico y otras concesiones administrativas.

La Junta Extraordinaria de Lan Chile S.A. de 23 de julio de 2004 acordó cambiar el nombre de la compañía a “Lan Airlines S.A.” Un extracto de dicha la escritura a la que se redujo el Acta de dicha Junta fue inscrito en el Registro de Comercio del Conservador de Bienes Raíces a fojas 25.128 número 18.764 correspondiente al año 2004 y se publicó en el Diario Oficial de 21 de agosto de 2004. La fecha efectiva del cambio de nombre fue el 8 de septiembre de 2004.

Lan Airlines S.A. se rige por las normas aplicables a las sociedades anónimas abiertas, encontrándose inscrita para estos efectos bajo el N° 0306, de 22 de enero de 1987, en el Registro de Valores de la Superintendencia de Valores y Seguros.

Nota: Los Estados financieros de las filiales se presentan en este informe en forma resumida, los antecedentes completos se encuentran a disposición del público en nuestras oficinas y en la Superintendencia de Valores y Seguros.

Lan Cargo S.A. y Filiales

Constitución : Constituida como sociedad anónima cerrada por escritura pública de fecha 22 de mayo de 1970, otorgada en la Notaría de Sergio Rodríguez Garcés, constitución que se materializó con el aporte de los activos y pasivos de la sociedad Línea Aérea del Cobre Limitada (Ladeco Limitada), constituida con fecha 3 de Septiembre de 1958 en la Notaría de Jaime García Palazuelos. La sociedad ha experimentado diversas reformas, siendo la última aquella que consta en la escritura pública de fecha 20 de Noviembre de 1998, y cuyo extracto fue inscrito a fojas 30.091 número 24.117 del Registro de Comercio de Santiago y publicado en Diario Oficial de fecha 3 de Diciembre de 1998, en virtud de la cual Ladeco S.A. fusionó por incorporación a la filial de Lan Chile S.A. denominada Fast Air Carrier S.A.

Por escritura pública de 22 de octubre de 2001 a la que se redujo el acta de la Junta Extraordinaria de Accionistas de Ladeco S.A. de misma fecha, se modificó la razón social a “Lan Chile Cargo S.A.” Un extracto de dicha escritura se inscribió en el Registro de Comercio del Conservador de Bienes Raíces de Santiago a fojas 27.746 número 22.624 correspondiente al año 2001 y se publicó en el Diario Oficial de 5 de Noviembre de 2001. El cambio de nombre tuvo vigencia a contar del 10 de diciembre de 2001.

Por escritura pública de 23 agosto de 2004 a la que se redujo el acta de la Junta Extraordinaria de Accionistas de Lan Chile Cargo S.A. de 17 de agosto de 2004, se modificó la razón social a “Lan Cargo S.A.” Un extracto de dicha escritura se inscribió en el Registro de Comercio del Conservador de Bienes Raíces de Santiago a fojas 26.994 número 20.082 correspondiente al año 2004 y se publicó en el Diario Oficial de 30 de agosto de 2004.

Objeto: Realizar y desarrollar por cuenta propia o ajena el transporte en general en cualquiera de sus formas y, en particular, el transporte aéreo de pasajeros, carga y correspondencia, dentro y fuera del país; compra, venta, fabricación y /o integración, mantenimiento, arrendamiento o cualquier otra forma de uso o goce, sea por cuenta propia o de terceros de aviones, repuestos y equipos aeronáuticos, y la explotación de ellos a cualquier titulo. Prestación de servicios y asesorías relacionadas con el transporte en general, y en particular con el transporte aéreo en cualquiera de sus formas, sea de apoyo terrestre, de mantenimiento, de asesoría técnica o de otra especie, dentro o fuera del país, y toda clase de actividades y servicios relacionados con el turismo, hotelería y demás actividades y bienes antes referidos.

Patrimonio:		MUS$ 255.369
Utilidad (perdida):		MUS$ 102.888
Participación:		99,8939%

267

Directorio
Presidente:		José Cox Donoso
Directores:		Juan José Cueto Plaza
		Ramón Eblen Kadis
		Ignacio Cueto Plaza
		Enrique Cueto Plaza

Sociedades Filiales de Lan Cargo S.A. y Participación

- Laser Cargo S.R.L.	99,99	%
- Sociedad de Seguridad Aérea S.A.	90,00	%
- Terminal de Exportación Internacional S.A.	99,96	%
- Aircraft Internacional Leasing Limited	99,98	%
- Ediciones Ladeco América S.A.	99,00	%
- Ladeco Cargo S.A. (Ex Ladeco Turismo S.A.)	99,01	%
- Southflorida Air Cargo Inc.	100,00	%
- Fast Air Almacenes de Carga S.A.	99,90	%
- Prime Airport Services Inc.	100,00	%
- Lan Cargo Overseas Limited (Ex-Ladeco Overseas S.L.) and Subsidiaries	99,98	%
- Transporte Aéreo S.A.	99,99	%
- Consorcio Fast Air Almacenes de Carga S.A. - Laser Cargo S.R.L. Unión	100,00	%
Transitoria de Empresas
- LanLogistics, Corp. (Ex- Lan Express, Inc.) and Subsidiaries	100,00	%
- Lan Courier S.A. y filial	99,99	%

LAN CARGO S.A. Y FILIALES

(Sociedad anónima cerrada)

Al 31 de Diciembre	2006			2005
Balance General Consolidado	MUS$			MUS$
(en miles de dólares)
Activos		823.665			629.140
Pasivos		568.296			470.719
Patrimonio		255.369			158.421
Pasivos y patrimonio		823.665			629.140

Al 31 de Diciembre		2006			2005
Estado Consolidado de Resultados		MUS$			MUS$
(en miles de dólares)
Ingreso de Explotación		841.769			564.144
Resultado Operacional		106.760			29.102
Resultado no Operacional		15.101			(3.454	)
Impuesto a la Renta		(18.763	)		(5.756	)
Amortización mayor valor de inversiones		5			9
Interés minoritario		(215	)		(99	)
Utilidad (Pérdida) del Ejercicio		102.888			19.802

Al 31 de Diciembre		2006			2005
Estado Consolidado de Flujos de Efectivo		MUS$			MUS$
(en miles de dólares)
Flujo neto originado por actividades de la		74.924			15.792
operación
Flujo neto originado por actividades de		159.296			168.203
financiamiento
Flujo neto originado por actividades de inversión		(234.256	)		(186.943	)
Efecto de la inflación sobre el efectivo y efectivo		(9	)		2
equivalente
Variación neta del efectivo y efectivo equivalente		(45	)		(2.946	)

268

Lan Perú S.A.

Constitución : Sociedad anónima constituida en el Perú el 14 de Febrero de 1997.

Objeto: Prestación de servicios de transporte aéreo de pasajeros, carga y correo, a nivel nacional e internacional, de conformidad con la legislación de aeronáutica civil.

Patrimonio:		MUS$ 6.465
Utilidad (perdida):		MUS$ 2.288
Participación:		70,00%

Directorio
Presidente:		Emilio Rodríguez Larraín Salinas
Directores:		Enrique Cueto Plaza
		Ignacio Cueto Plaza
		Alejandro de la Fuente Goic
		Jorge Harten Costa
		Alejandro García Vargas
		Luis Enrique Gálvez de la Puente

LAN PERU S.A.

(Sociedad anónima cerrada)

Al 31 de Diciembre	2006			2005
Balance General Consolidado (en miles de dólares)	MUS$			MUS$

Activos		66.151			52.624
Pasivos		59.686			48.447
Patrimonio		6.465			4.177
Pasivos y patrimonio		66.151			52.624

Al 31 de Diciembre		2006			2005
Estado Consolidado de Resultados (en miles de dólares)		MUS$			MUS$

Ingreso de Explotación		362.245			276.777
Resultado Operacional		3.849			(5.900	)
Resultado No Operacional		149			9.738
Impuesto a la Renta		(1.710	)		(1.927	)
Utilidad (Pérdida) del Ejercicio		2.288			1.911

Al 31 de Diciembre		2006			2005
Estado Consolidado de Flujos de Efectivo (en miles de dólares)		MUS$			MUS$

Flujo neto originado por actividades de la operación		6.899			22.247
Flujo neto originado por actividades de financiamiento		-			-
Flujo neto originado por actividades de inversión		(1.363	)		(1.377	)
Efecto de la inflación sobre el efectivo y efectivo equivalente		-			-
Variación neta del efectivo y efectivo equivalente		5.536			20.870

Inversiones Lan S.A. y Filiales

Constitución : Constituida como sociedad anónima cerrada por escritura pública de fecha 23 de enero de 1990, otorgada en la Notaría de Humberto Quezada M., inscrita en el Registro de Comercio de Santiago a fjs. 3.462 N°1.833 del año 1990, y publicada en el Diario Oficial del día 2 de febrero de 1990.

Objeto: Realizar inversiones en toda clase de bienes, sean éstos muebles o inmuebles, corporales o incorporales. Además, la Sociedad podrá formar otros tipos de sociedades, de cualquier especie; adquirir derechos en sociedades ya formadas, administrarlas, modificarlas y liquidarlas..

Patrimonio:		MUS$ 3.085
Utilidad (perdida):		MUS$ (3.828)
Participación:		99,71%

Directorio
Presidente:		Enrique Cueto Plaza
Directores:		Ignacio Cueto Plaza
		Luis Ernesto Videla Berguecio
		Alejandro de la Fuente Goic
		Marco Jofré Marín

Sociedades Chilenas Filiales de Inversiones LAN S.A. y

Participación:

- Transport Aviation Leasing Limited	100,00	%
- Hawk Aviation Management Ltd	100,00	%
- Falcon Aviation Management Ltd	100,00	%
- Aviation Administration Services Ltd	100,00	%
- Cargo Aircraft Leasing Limited	100,00	%
- Passenger Aircraft Leasing Limited	100,00	%
- Andes Airport Services S.A.	98,00	%

269

INVERSIONES LAN S.A. Y FILIALES

(Sociedad anónima cerrada)

Al 31 de Diciembre	2006			2005
Balance General Consolidado (en miles de dólares)	MUS$			MUS$

Activos		9.400			21.615
Pasivos		6.315			14.702
Patrimonio		3.085			6.913
Pasivos y patrimonio		9.400			21.615

Al 31 de Diciembre		2006			2005
Estado Consolidado de Resultados (en miles de dólares)		MUS$			MUS$

Ingreso de Explotación		15.214			23.828
Resultado Operacional		517			(1.113	)
Resultado no Operacional		(5.156	)		18
Impuesto a la Renta		814			133
Interés minoritario		(3	)		(1	)
Utilidad (Pérdida) del Ejercicio		(3.828	)		(963	)

Al 31 de Diciembre		2006			2005
Estado Consolidado de Flujos de Efectivo (en miles de dólares)		MUS$			MUS$

Flujo neto originado por actividades de la operación		(23	)		96
Flujo neto originado por actividades de financiamiento		(4	)		-
Flujo neto originado por actividades de inversión		-			(100	)
Efecto de la inflación sobre el efectivo y efectivo		-			(2	)
equivalente
Variación neta del efectivo y efectivo equivalente		(27	)		(6	)

Sistemas de Distribución Amadeus Chile S.A.

Constitución : Se constituyó como una sociedad de responsabilidad limitada bajo el nombre de “Sistemas de Distribución y Reservas System One Chile Limitada”, por escritura pública de fecha 28 de Enero de 1991, otorgada en la Notaría Aliro Veloso Muñoz. Posteriormente, por escritura pública de fecha 31 de mayo de 1996 otorgada en la Notaría de Gonzalo De la Cuadra Fabres, la sociedad se transformó en sociedad anónima cerrada denominada “Sistemas de Distribución Amadeus Chile S.A.”, inscribiéndose un extracto de ella a fjs. 16.138 N° 12.532 del Registro de Comercio de Santiago y publicada en el Diario Oficial de fecha 5 de Julio de 1996.

Objeto: Contratar, administrar, implementar y comercializar sistemas computacionales y, en especial, sistemas de reserva, ya sea por cuenta propia o de terceros.

Patrimonio:		MUS$ 1.826
Utilidad (perdida):		MUS$ 265
Participación:		100,00%

Directorio
Presidente:		Pedro Margozinni M.
Directores:		Bruno Francia Wims
		Raquel Galarza Ossa

Directores Suplentes:		Andrés del Valle Eitel
		David Jhom Brett
		Marco Jofré Marín

270

SISTEMAS DE DISTRIBUCION AMADEUS CHILE S.A.

(Sociedad anónima cerrada)

Al 31 de Diciembre	2006			2005
Balance General Consolidado (en miles de dólares)	MUS$			MUS$

Activos		2.722			2.479
Pasivos		896			918
Patrimonio		1.826			1.561
Pasivos y patrimonio		2.722			2.479

Al 31 de Diciembre		2006			2005
Estado Consolidado de Resultados (en miles de dólares)		MUS$			MUS$

Ingreso de Explotación		3.267			2.730
Resultado Operacional		252			84
Resultado no Operacional		11			15
Impuesto a la Renta		2			(22	)
Utilidad (Pérdida) del Ejercicio		265			77

Al 31 de Diciembre		2006			2005
Estado Consolidado de Flujos de Efectivo (en miles de dólares)		MUS$			MUS$

Flujo neto originado por actividades de la operación		25			196
Flujo neto originado por actividades de financiamiento		-			(117	)
Flujo neto originado por actividades de inversión		(19	)		(88	)
Efecto de la inflación sobre el efectivo y efectivo equivalente		-			22
Variación neta del efectivo y efectivo equivalente		6			13

Inmobiliaria Aeronáutica S.A.

Constitución : Constituida como sociedad anónima cerrada por escritura pública de fecha 01 de agosto de 1995. otorgada en la Notaría de Gonzalo de la Cuadra Fabres e inscrita en el Registro de Comercio de Santiago a fjs. 21.690 bajo el N° 17.549 del año 1995 y publicado en el Diario Oficial el día 14 de septiembre de 1995.

Objeto: Realizar adquisiciones y enajenaciones de bienes raíces y de derechos sobre ellos; el desarrollo, planificación, enajenación y construcción de inmuebles y proyectos inmobiliarios; el arrendamiento, administración y cualquier otra forma de explotación de bienes raíces, ya sea por cuenta propia o de terceros.

Patrimonio:		MUS$ 7.838
Utilidad (perdida):		MUS$ 1.724
Participación:		100,00%

Directorio
Presidente:		Enrique Cueto Plaza
Directores:		Luis Ernesto Videla Berguecio
		Alejandro de la Fuente Goic

INMOBILIARIA AERONÁUTICA S.A.

(Sociedad anónima cerrada)

Al 31 de Diciembre	2006			2005
Balance General Consolidado (en miles de dólares)	MUS$			MUS$

Activos		30.627			32.383
Pasivos		22.789			26.269
Patrimonio		7.838			6.114
Pasivos y patrimonio		30.627			32.383

Al 31 de Diciembre		2006			2005
Estado Consolidado de Resultados (en miles de dólares)		MUS$			MUS$

Ingreso de Explotación		3.789			3.486
Resultado Operacional		2.660			2.075
Resultado No Operacional		(597	)		(154	)
Impuesto a la Renta		(339	)		(90	)
Utilidad (Pérdida) del Ejercicio		1.724			1.831

Al 31 de Diciembre		2006			2005
Estado Consolidado de Flujos de Efectivo (en miles de dólares)		MUS$			MUS$

Flujo neto originado por actividades de la operación		982			1.798
Flujo neto originado por actividades de financiamiento		(543	)		(544	)
Flujo neto originado por actividades de inversión		(434	)		(1.247	)
Efecto de la inflación sobre el efectivo y efectivo equivalente		-			-
Variación neta del efectivo y efectivo equivalente		5			7

271

Comercial Masterhouse S.A.

Constitución: Constituida como sociedad anónima cerrada por escritura pública de fecha 22 de Junio de 1987, otorgada en la Notaría de Santiago de don Raúl Undurraga Laso, inscrita en el Registro de Comercio de Santiago a fs. 13.139 N°8495 del año 1987 y publicada en el Diario Oficial del día 2 de Julio de 1987. La sociedad ha experimentado diversas reformas, siendo la última aquella que consta en la escritura pública de fecha 24 de Agosto de 1999 otorgada en la Notaría de Santiago de don Eduardo Pinto Peralta inscrita en el Registro de Comercio de Santiago a fjs. 21.042 N°16.759 del año 1999 y publicada en el Diario Oficial del día 8 de Septiembre de 1999.

Objeto: Explotación, administración y representación de empresas o negocios nacionales o extranjeros dedicados a actividades hoteleras, navieras, aéreas y turismo; explotación por cuenta propia o de terceros, arrendamiento automóviles; importación, exportación, producción, comercialización y distribución por cuenta propia o ajena, en mercados nacionales e internacionales cualquiera clase mercaderías, sean materias primas, insumos o productos terminados.

Patrimonio:		MUS$38
Utilidad (perdida):		MUS$(49)
Participación:		100,00%

Directorio
Presidente:		Abel Bouchon Silva
Directores:		Jorge Pinochet Salamanca
		Andrés del Valle Eitel

COMERCIAL MASTERHOUSE S.A.

(Sociedad anónima cerrada)

Al 31 de Diciembre	2006			2005
Balance General Consolidado (en miles de dólares)	MUS$			MUS$

Activos		891			1.008
Pasivos		853			921
Patrimonio		38			87
Pasivos y patrimonio		891			1.008

Al 31 de Diciembre		2006			2005
Estado Consolidado de Resultados (en miles de dólares)		MUS$			MUS$

Ingreso de Explotación		2.856			2.880
Resultado Operacional		(108	)		(125	)
Resultado No Operacional		(9	)		(11	)
Impuesto a la Renta		68			(2	)
Utilidad (Pérdida) del Ejercicio		(49	)		(138	)

Al 31 de Diciembre		2006			2005
Estado Consolidado de Flujos de Efectivo (en miles de dólares)		MUS$			MUS$

Flujo neto originado por actividades de la operación		(53	)		218
Flujo neto originado por actividades de financiamiento		-			(32	)
Flujo neto originado por actividades de inversión		(5	)		(116	)
Efecto de la inflación sobre el efectivo y efectivo equivalente		-			-
Variación neta del efectivo y efectivo equivalente		(58	)		70

272

Lan Pax Group S.A. y Filiales

Constitución: Constituida como sociedad anónima cerrada por escritura pública de fecha 27 de Septiembre de 2001, otorgada en la Notaría de Santiago de don Patricio Zaldivar Mackenna, inscrita en el Registro de Comercio de Santiago a fjs. 25.636 N° 20.794 de 04 de octubre del año 2001 y publicada en el Diario Oficial del día 6 de Octubre de 2001.

Objeto: Realizar inversiones en toda clase de bienes , sean estos muebles o inmuebles, corporales o incorporales. Dentro de su giro, la sociedad podrá formar todo tipo de sociedades, de cualquier especie; adquirir derechos en sociedades ya formadas, administrarlas, modificarlas, liquidarlas. En general podrá adquirir y enajenar todo tipo de bienes y explotarlos, sea por cuenta propia o ajena, así como realizar todo tipo de actos y celebrar toda clase de contratos que sean conducentes a sus finalidades.

Patrimonio:		MUS$ (22.001)
Utilidad (perdida):		MUS$ (14.847)
Participación:		100,00%

Directorio
Presidente:		Ignacio Cueto Plaza
Directores:		Alejandro de la Fuente Goic
		Luis Ernesto Videla Berguecio

Sociedades Filiales de LAN Pax Group S.A. y Participación

Inversora Cordillera S.A. y filiales	80,00	%
Siventas S..A.	95,00	%
Atlantic Aviation Investment LLC	99,00	%
Perdiz Leasing LLC	99,00	%

LAN PAX GROUP S.A. Y FILIALES

(Sociedad anónima cerrada)

Al 31 de Diciembre	2006			2005
Balance General Consolidado (en miles de dólares)	MUS$			MUS$

Activos		134.163			26.067
Pasivos		156.164			33.221
Patrimonio		(22.001	)		(7.154	)
Pasivos y patrimonio		134.163			26.067

Al 31 de Diciembre		2006			2005
Estado Consolidado de Resultados (en miles de dólares)		MUS$			MUS$

Ingreso de Explotación		83.075			21.336
Resultado Operacional		(18.596	)		(14.342	)
Resultado No Operacional		(7.286	)		(618	)
Impuesto a la Renta		9.065			4.938
Interés minoritario		1.970			2.443
Utilidad (Pérdida) del Ejercicio		(14.847	)		(7.579	)

Al 31 de Diciembre		2006			2005
Estado Consolidado de Flujos de Efectivo (en miles de dólares)		MUS$			MUS$

Flujo neto originado por actividades de la operación		(3.330	)		(7.908	)
Flujo neto originado por actividades de financiamiento		88.878			21.552
Flujo neto originado por actividades de inversión		(82.733	)		(8.531	)
Efecto de la inflación sobre el efectivo y efectivo equivalente		(36	)		1
Variación neta del efectivo y efectivo equivalente		2.779			5.114

273

Línea Aérea Nacional Chile S.A.

Constitución: Constituida como sociedad anónima cerrada por escritura pública de fecha 27 de Septiembre de 2001, otorgada en la Notaría de Santiago de don Patricio Zaldivar Mackenna, inscrita en el Registro de Comercio de Santiago a fjs. 25.668 N° 20.829 de 04 de octubre del año 2001 y publicada en el Diario Oficial del día 6 de Octubre de 2001.

Objeto: Comercio del transporte aéreo en cualquiera de sus formas, sea de pasajeros, correo y /o carga, y todo cuanto tenga relación directa o indirecta con dicha actividad, dentro y fuera del país, por cuenta propia o ajena; prestación de servicios relacionados con arrendamiento, mantenimiento y reparación de aeronaves, propias o de terceros; comercio y desarrollo de actividades relacionadas con viajes turismo y hotelería; desarrollo y explotación de toda otra actividad derivada del objeto social.

Patrimonio:		MUS$ 1
Utilidad (perdida):		MUS$ (2)
Participación:		100,00%

Directorio
Presidente:		Ignacio Cueto Plaza
Directores:		Alejandro de la Fuente Goic
		Luis Ernesto Videla Berguecio

LINEA AEREA NACIONAL CHILE S.A.

(Sociedad anónima cerrada)

Al 31 de Diciembre	2006			2005
Balance General Consolidado (en miles de dólares)	MUS$			MUS$

Activos		3			5
Pasivos		2			2
Patrimonio		1			3
Pasivos y patrimonio		3			5

Al 31 de Diciembre		2006			2005
Estado Consolidado de Resultados (en miles de dólares)		MUS$			MUS$

Ingreso de Explotación		-			-
Resultado Operacional		(3	)		(2	)
Resultado No Operacional		1			-
Impuesto a la Renta		-			-
Utilidad (Pérdida) del Ejercicio		(2	)		(2	)

Al 31 de Diciembre		2006			2005
Estado Consolidado de Flujos de Efectivo (en miles de dólares)		MUS$			MUS$

Flujo neto originado por actividades de la operación		-			-
Flujo neto originado por actividades de financiamiento		-			-
Flujo neto originado por actividades de inversión		-			-
Efecto de la inflación sobre el efectivo y efectivo equivalente		-			-
Variación neta del efectivo y efectivo equivalente		-			-

Lan Card S.A.

Constitución: Constituida como sociedad anónima cerrada por escritura pública de fecha 26 de Septiembre de 2001, otorgada en la Notaría de Santiago de don Patricio Zaldivar Mackenna, inscrita en el Registro de Comercio de Santiago a fjs. 26.400 N° 21.462 de 12 de octubre del año 2001 y publicada en el Diario Oficial del día 17 de Octubre de 2001.

Objeto: La emisión, operación y administración directamente por sí o a través de sociedades de las cuales forme parte, o en las cuales tenga interés, de tarjetas de crédito cualquiera sea su naturaleza; la organización, puesta en marcha, desarrollo, administración y explotación, directamente por sí o a través de sociedades de las cuales forme parte, o en las que tenga interés, de sistemas de prestación de todas clases de servicios, destinados a los consumidores, comercio y sectores productivos en general; la organización, puesta en marcha, desarrollo, administración y explotación, por sí o a través de las sociedades de las cuales forme parte o en las que tenga interés, de todo tipo de otorgamiento de créditos y de financiamientos para la adquisición de toda clase de bienes y servicios, por cuenta propia o ajena, quedando comprendido en lo anterior, el otorgamiento directo o indirecto de créditos; el comercio y desarrollo de actividades relacionadas con viajes, turismo y hotelería; la inversión en todo tipo de sociedades o entidades, de cualquier especie.

Patrimonio:		MUS$ 528
Utilidad (perdida):		MUS$ 339
Participación:		100,00%

Directorio
Presidente:		Luis Ernesto Videla Berguecio
Directores:		Alejandro de la Fuente Goic
		Andrés del Valle Eitel

274

LAN CARD S.A.

(Sociedad anónima cerrada)

Al 31 de Diciembre	2006			2005
Balance General Consolidado (en miles de dólares)	MUS$			MUS$

Activos		5.617			4.562
Pasivos		5.089			4.373
Patrimonio		528			189
Pasivos y patrimonio		5.617			4.562

Al 31 de Diciembre		2006			2005
Estado Consolidado de Resultados (en miles de dólares)		MUS$			MUS$

Ingreso de Explotación		1.583			1.118
Resultado Operacional		426			140
Resultado No Operacional		(1	)		6
Impuesto a la Renta		(86	)		(3	)
Utilidad (Pérdida) del Ejercicio		339			143

Al 31 de Diciembre		2006			2005
Estado Consolidado de Flujos de Efectivo (en miles de dólares)		MUS$			MUS$

Flujo neto originado por actividades de la operación		22			3
Flujo neto originado por actividades de financiamiento		-			-
Flujo neto originado por actividades de inversión		-			-
Efecto de la inflación sobre el efectivo y efectivo equivalente		-			-
Variación neta del efectivo y efectivo equivalente		22			3

Lan Chile Investments Limited y Filiales

Constitución: Constituida como sociedad limitada por escritura pública de fecha 30 de julio de 1999 en Islas Cayman, procediendo a su inscripción en el Registro de Compañías de Islas Cayman, en la misma fecha.

Objeto: Su objeto social es el de realizar inversiones en toda clase de bienes, sean estos muebles o inmuebles, corporales o incorporales.

Patrimonio:		MUS$ (7.684)
Utilidad (perdida):		MUS$ 1.440
Participación:		100,00%

Directorio
Presidente:		Enrique Cueto Plaza
Directores:		Alejandro de la Fuente Goic
		Luis Ernesto Videla Berguecio

Sociedades Filiales de LAN Chile Investments Limited y Participación

Aerolane Líneas Aéreas Nacionales del Ecuador S.A. y filiales	45,00	%
Puerto Montt Holding S.A. y filiales	100,00	%
Inversiones La Burguería S.A. y filial	99,90	%

LAN CHILE INVESTMENTS LIMITED Y FILIALES

(Sociedad Limitada)

Al 31 de Diciembre	2006			2005
Balance General Consolidado (en miles de dólares)	MUS$			MUS$

Activos		32.121			21.413
Pasivos		39.805			30.537
Patrimonio		(7.684	)		(9.124	)
Pasivos y patrimonio		32.121			21.413

Al 31 de Diciembre		2006			2005
Estado Consolidado de Resultados (en miles de dólares)		MUS$			MUS$

Ingreso de Explotación		170.588			113.145
Resultado Operacional		2.263			1.713
Resultado No Operacional		(723	)		(364	)
Impuesto a la Renta		(368	)		(159	)
Interés minoritario		268			-
Utilidad (Pérdida) del Ejercicio		1.440			1.190

Al 31 de Diciembre		2006			2005
Estado Consolidado de Flujos de Efectivo (en miles de dólares)		MUS$			MUS$

Flujo neto originado por actividades de la operación		1.320			(2.245	)
Flujo neto originado por actividades de financiamiento		(572	)		-
Flujo neto originado por actividades de inversión		(757	)		(770	)
Efecto de la inflación sobre el efectivo y efectivo equivalente		-			-
Variación neta del efectivo y efectivo equivalente		(9	)		(3.015	)

275

Lan Airlines S.A.

NAME LAN AIRLINES S.A., TAXPAYER

IDENTIFICATION Nº : 89.862.200 -2

CHARTER AND BYLAWS:

Chartered as a limited liability company by public deed dated December 30, 1983, witnessed and certified in the Notary Offices of Eduardo Avello Arellano, recorded in Folios 20,341 Nº11248 of the Santiago Business Registry of the same year, and announced in the Official Gazette on December 31, 1983.

By public deed dated August 20, 1985, witnessed and certified in the Notary Offices of Miguel Garay Figueroa, the corporation was converted to a joint stock company under the name Línea Aérea Nacional S.A. (today called Lan Airlines S.A.). This latter company is, with respect to aeronautic and radio communication concessions, traffic rights, and other administrative grants and as expressly provided for by Corporation Law Nº : 18,400, the legal successor of the State enterprise formed in 1929 as the Línea Aérea Nacional de Chile.

The Extraordinary Shareholders Meeting held on July 23, 2004 agreed on the change of name of the company to “Lan Airlines S.A.”. An abstract of the relevant public deed was registered with the Chilean Commerce Registry on page 25128 number 18764 and was published in the Official Gazette on August 21, 2004. The effective date of the change of name was September 8, 2004.

Lan Airlines S.A. is governed by regulations pertaining to publicly held corporations in Chile. In conformity therewith, the company is listed in the Securities Register of the Superintendency of Securities and Insurance, pursuant to register Nº0306, of January 22, 1987.

Note: The Financial Information presented here has been summarized for presentation purposes. The complete financial statements of these entities are available for the public at LanChile´s corporate headquarters or at the the Superintendency of Securities and Insurance in Chile.

Lan Cargo S.A. and Subsidiaries

Incorporation History: Chartered by public deed dated May 22, 1970, witnessed and certified in the Notary Offices of Sergio Rodríguez Garcés. This entity was formed with the assets and liabilities of the entity Línea Aerea del Cobre Limitada (Ladeco Limitada) which was chartered by public deed dated September 3, 1958, witnessed and certified in the Notary Offices of Jaime García Palazuelos. The Company’s bylaws have since been amended on a number of occasions, the most recent change being effected by public deed dated November 20, 1998, recorded in Folios 30091 Nº24117 of the Santiago Business Registry, and announced in the Official Gazette on December 3, 1998, where Ladeco S.A., merged with, through incorporation of, Fast Air Carrier S.A., another subsidiary of Lan Chile S.A.

The Extraordinary Shareholders Meeting of Ladeco S.A. held on October 22, 2001 agreed on the change of name of the company to “Lan Chile Cargo S.A.” An abstract of the relevant public deed was registered with the Chilean Commerce Registry on page 27746 number 22624 and was published in the Official Gazette on November 5, 2001. The change of name was effective from December 10, 2001.

The Extraordinary Shareholders Meeting of Lan Chile Cargo S.A. held on August 17, 2004 agreed on the change of name of the company to “Lan Cargo S.A.” An abstract of the relevant public deed was registered with the Chilean Commerce Registry on page 26994 number 20082 and was published in the Official Gazette on August 30, 2004.

Business Purpose : To engage in and conduct on its own account or on behalf of others general transportation activities in any form and, in particular, the carriage of passengers, cargo and mail by air within and beyond Chile; to purchase, sell, manufacture and / or integrate, maintain, lease or exercise the use or possession of aircraft, spare parts, and aeronautic equipment and the operation of the same by way of any title, whether on its won account or on behalf of third parties; to perform services and provide consultation related to transportation in general and to air transport in particular, in any of its forms, whether these activities consist of ground support, maintenance, technical assistance or some other pursuit, within and beyond Chile; and to engage in every class of activity and service related to tourism, the catering trade, and to the other activities, and property mentioned above.

SHAREHOLDER EQUITY:		ThUS$ 255,369
NET INCOME:		ThUS$ 102,888
LAN AIRLINES S.A. INTEREST:		99.8939%

276

BOARD OF DIRECTORS
CHAIRMAN:		José Cox Donoso
DIRECTORS:		Juan José Cueto Plaza
		Ramón Eblen Kadis Ignacio Cueto Plaza Enrique Cueto Plaza

SUBSIDIARIES AND LAN CARGO S.A. SHAREHOLDING THEREIN:

Laser Cargo S.R.L.	99.99	%
Sociedad de Seguridad Aérea S.A.	90.00	%
Terminal de Exportación Internacional S.A.	99.96	%
Aircraft Internacional Leasing Limited	99.98	%
Ediciones Ladeco América S.A.	99.00	%
Ladeco Cargo S.A. (Ex Ladeco Turismo S.A.)	99.01	%
Southflorida Air Cargo Inc.	100.00	%
Fast Air Almacenes de Carga S.A.	99.90	%
Prime Airport Services Inc.	100.00	%
Lan Cargo Overseas Limited (Ex-Ladeco Overseas S.L.) and Subsidiaries	99.98	%
Transporte Aéreo S.A.	99.99	%
Consorcio Fast Air Almacenes de Carga S.A. - Laser Cargo S.R.L.	100.00	%
Unión Transitoria de Empresas
LanLogistics, Corp. (Ex- Lan Express, Inc.) and Subsidiaries	100.00	%
Lan Courier and subsidiarie	99.99	%

LAN CARGO S.A. AND SUBSIDIARES

(CLOSED CORPORATION)

AT DECEMBER 31	2006		2005
CONSOLIDATED BALANCE SHEET (in thousands of Dollars)	ThUS$		ThUS$
Assets		823,665		629,140
Liabilities		568,296		470,719
Shareholder equity		255,369		158,421
Liabilities and shareholder equity		823,665		629,140

AT DECEMBER 31	2006		2005
INCOME STATEMENT (in thousands of Dollars)	ThUS$		ThUS$
Operating Revenues	841,769		564,144
Operating Profit	106,760		29,102
Non-Operating Income (Loss)	15,101		(3,454	)
Income Tax	(18,763	)	(5,756	)
Amortization of Negative Goodwill	5		9
Minority Interests	(215	)	(99	)
Net Income (Loss)	102,888		19,802

AT DECEMBER 31	2006			2005
CONSOLIDATED STATEMENT OF CASH FLOWS	ThUS$			ThUS$
(in thousands of Dollars)
Net Cash flow from Operating Activities		74,924			15,792
Net Cash flow from Financing Activities		159,296			168,203
Net Cash flow from Investing Activities		(234,256	)		(186,943	)
Inflation Effect on Cash and Cash Equivalents		(9	)		2
Net Increase (Decrease) in Cash and Cash Equivalents		(45	)		(2,946	)

277

Lan Perú S.A.

Incorporation History: Chartered as a closed corporation in Peru on February 14, 1997.

SHAREHOLDER EQUITY:		ThUS$ 6,465
NET INCOME:		ThUS$ 2,288
LAN AIRLINES S.A. INTEREST:		70.00%

BOARD OF DIRECTORS
CHAIRMAN:		Emilio Rodríguez Larraín Salinas
DIRECTORS:		Enrique Cueto Plaza
		Ignacio Cueto Plaza Alejandro de la Fuente Goic Jorge Harten Costa Alejandro García Vargas Luis Enrique Gálvez de la Puente

LAN PERÚ S.A.

(CLOSED CORPORATION)

AT DECEMBER 31	2006		2005
CONSOLIDATED BALANCE SHEET (in thousands of Dollars)	ThUS$		ThUS$
Assets		66,151		52,624
Liabilities		59,686		48,447
Shareholder equity		6,465		4,177
Liabilities and shareholder equity		66,151		52,624

AT DECEMBER 31	2006			2005
INCOME STATEMENT (in thousands of Dollars)	ThUS$			ThUS$
Operating Revenues		362,245			276,777
Operating Profit		3,849			(5,900	)
Non-Operating Income (Loss)		149			9,738
Income Tax		(1,710	)		(1,927	)
Net Income (Loss)		2,288			1,911

AT DECEMBER 31	2006			2005
CONSOLIDATED STATEMENT OF CASH FLOWS	ThUS$			ThUS$
(in thousands of Dollars)
Net Cash flow from Operating Activities		6,899			22,247
Net Cash flow from Financing Activities		-			-
Net Cash flow from Investing Activities		(1,363	)		(1,377	)
Inflation Effect on Cash and Cash Equivalents		-			-
Net Increase (Decrease) in Cash and Cash Equivalents		5,536			20,870

Inversiones Lan S.A. and Subsidiaries

Incorporation History: Chartered by public deed dated January 23, 1990, witnessed and certified in the Notary Offices of Humberto Quezada M., recorded in Folios 3,462 Nº. 1,833 of the Santiago Business Registry of the same year, and announced in the Official Gazette on February 2, 1990.

Business Purpose: To invest in all manner of property, whether movable or real estate, tangible or intangible; to establish all manner of other corporations; and to acquire shareholdings in, administer, reorganize, and liquidate existing companies

SHAREHOLDER EQUITY:		ThUS$ 3,085
NET INCOME:		ThUS$ (3,828)
LAN AIRLINES S.A. INTEREST:		99.71%

BOARD OF DIRECTORS
CHAIRMAN:		Enrique Cueto Plaza
DIRECTORS:		Ignacio Cueto Plaza
		Luis Ernesto Videla Berguecio Alejandro de la Fuente Goic Marco Jofré Marín

SUBSIDIARIES AND INVERSIONES LAN S.A.

SHAREHOLDING THEREIN:

Transport Aviation Leasing Limited	100.00	%
Hawk Aviation Management Ltd	100.00	%
Falcon Aviation Management Ltd	100.00	%
Aviation Administration Services Ltd	100.00	%
Cargo Aircraft Leasing Limited	100.00	%
Passenger Aircraft Leasing Limited	100.00	%
Andes Airport Services S.A.	98.00	%

278

INVERSIONES LAN S.A. AND SUBSIDIARIES

(CLOSED CORPORATION

AT DECEMBER 31	2006		2005
CONSOLIDATED BALANCE SHEET (in thousands of Dollars)	ThUS$		ThUS$
Assets		9,400		21,615
Liabilities		6,315		14,702
Shareholder equity		3,085		6,913
Liabilities and shareholder equity		9,400		21,615

AT DECEMBER 31	2006			2005
INCOME STATEMENT (in thousands of Dollars)	ThUS$			ThUS$
Operating Revenues		15,214			23,828
Operating Profit		517			(1,113	)
Non-Operating Income (Loss)		(5,156	)		18
Income Tax		814			133
Minority Interest		(3	)		(1	)
Net Income (Loss)		(3,828	)		(963	)

AT DECEMBER 31	2006			2005
CONSOLIDATED STATEMENT OF CASH FLOWS	ThUS$			ThUS$
(in thousands of Dollars)
Net Cash flow from Operating Activities		(23	)		96
Net Cash flow from Financing Activities		(4	)		-
Net Cash flow from Investing Activities		-			(100	)
Inflation Effect on Cash and Cash Equivalents		-			(2	)
Net Increase (Decrease) in Cash and Cash Equivalents		(27	)		(6	)

Sistemas de Distribución Amadeus Chile S.A.

Incorporation History: Chartered as the limited liability company “Sistemas de Distribución y Reservas System One Chile Limitada” by public deed dated January 28, 1991, witnessed and certified in the Notary Offices of Aliro Veloso Muñoz. The firm was thereafter converted to the closed corporation “Sistemas de Distribución Amadeus Chile S.A.” by public deed date May 31, 1996, witnessed and certified in the Notary Offices of Gonzalo de la Cuadra Fabres, recorded in Folios 16,138 Nº.12,532 of the Santiago Business Registry, and announced in the Official Gazette on July 5, 1996.

Business Purpose: To hire out, administer, implement, and sell computer systems and computerized reservation systems in particular.

SHAREHOLDER EQUITY:		ThUS$ 1,826
NET INCOME:		ThUS$ 265
LAN AIRLINES S.A. INTEREST:		100.00%

BOARD OF DIRECTORS
CHAIRMAN:		Pedro Margozinni M.
DIRECTORS:		Bruno Francia Wims

AT DECEMBER 31	2006		2005
CONSOLIDATED BALANCE SHEET (in thousands of Dollars)	ThUS$		ThUS$
Assets		2,722		2,479
Liabilities		896		918
Shareholder equity		1,826		1,561
Liabilities and shareholder equity		2,722		2,479

AT DECEMBER 31	2006		2005
INCOME STATEMENT (in thousands of Dollars)	ThUS$		ThUS$
Operating Revenues		3,267		2,730
Operating Profit		252		84
Non-Operating Income (Loss)		11		15
Income Tax		2		(22	)
Net Income (Loss)		265		77

AT DECEMBER 31	2006			2005
CONSOLIDATED STATEMENT OF CASH FLOWS	ThUS$			ThUS$
(in thousands of Dollars)
Net Cash flow from Operating Activities		25			196
Net Cash flow from Financing Activities		-			(117	)
Net Cash flow from Investing Activities		(19	)		(88	)
Inflation Effect on Cash and Cash Equivalents		-			22
Net Increase (Decrease) in Cash and Cash Equivalents		6			13

279

Inmobiliaria Aeronáutica S.A.

Incorporation History: Chartered as a closed corporation by public deed dated August 1, 1995, witnessed and certified in the Notary Offices of Gonzalo De la Cuadra Fabres, recorded in Folios 21,690 Nº.17,549 of the Santiago Business Registry of the same year, and announced in the Official Gazette on September 14, 1995.

Business Purpose : To acquire and dispose of real estate and rights therein; to plan, develop, assemble, and sell real estate holdings and projects; and to lease and administer real estate and have the use thereof in any other manner, whether on its own account or on behalf of third parties.

SHAREHOLDER EQUITY:		ThUS$ 7,838
NET INCOME:		ThUS$ 1,724
LAN AIRLINES S.A. INTEREST:		100.00%

BOARD OF DIRECTORS
CHAIRMAN:		Enrique Cueto Plaza
DIRECTORS:		Luis Ernesto Videla Berguecio Alejandro de la Fuente Goic

INMOBILIARIA AERONAUTICA S.A.

(CLOSED CORPORATION)

AT DECEMBER 31	2006		2005
CONSOLIDATED BALANCE SHEET (in thousands of Dollars)	ThUS$		ThUS$
Assets		30,627		32,383
Liabilities		22,789		26,269
Shareholder equity		7,838		6,114
Liabilities and shareholder equity		30,627		32,383

AT DECEMBER 31	2006			2005
INCOME STATEMENT (in thousands of Dollars)	ThUS$			ThUS$
Operating Revenues		3,789			3,486
Operating Profit		2,660			2,075
Non-Operating Income (Loss)		(597	)		(154	)
Income Tax		(339	)		(90	)
Net Income (Loss)		1,724			1,831

AT DECEMBER 31	2006			2005
CONSOLIDATED STATEMENT OF CASH FLOWS	ThUS$			ThUS$
(in thousands of Dollars)
Net Cash flow from Operating Activities		982			1,798
Net Cash flow from Financing Activities		(543	)		(544	)
Net Cash flow from Investing Activities		(434	)		(1,247	)
Inflation Effect on Cash and Cash Equivalents		-			-
Net Increase (Decrease) in Cash and Cash Equivalents		5			7

Comercial Masterhouse S.A..

Incorporation History: Chartered by public deed dated June 22, 1987, witnessed and certified in the Santiago Notary Offices of Raul Undurraga Laso, recorded in Folios 13.139 N°8495 of the Santiago Business Registry of the same year and announced in the Official Gazette on July 2, 1987. The Company’s bylaws have since been amended, the most recent change being effected by public deed dated August 24, 1999 witnessed and certified in the Santiago Notary Offices of Eduardo Pinto Peralta, recorded in Folios 21.042 N°16759 of the Santiago Business Registry of the same year and announced in the Official Gazette on September 8, 1999.

Business Purpose : The development, administration and representation of businesses (national or foreign) dedicated to hotel, shipping, air transport or tourism activities; the development on its own behalf or for third parties of car rentals; the importation, exportation, production, commercialization and distribution in domestic and /or international markets on its own behalf or for third parties of any merchandize (be it raw materials, intermediary or finished products.

SHAREHOLDER EQUITY:		ThUS$ 38
NET INCOME:		ThUS$ (49)
LAN AIRLINES S.A. INTEREST:		100.00%

BOARD OF DIRECTORS		Abel Bouchon Silva
CHAIRMAN:		Jorge Pinochet Salamanca
DIRECTORS:		Andrés del Valle Eitel

COMERCIAL MASTERHOUSE S.A.

(CLOSED CORPORATION)

AT DECEMBER 31	2006		2005
CONSOLIDATED BALANCE SHEET (in thousands of Dollars)	ThUS$		ThUS$
Assets		891		1,008
Liabilities		853		921
Shareholder equity		38		87
Liabilities and shareholder equity		891		1,008

AT DECEMBER 31	2006			2005
INCOME STATEMENT (in thousands of Dollars)	ThUS$			ThUS$
Operating Revenues		2,856			2,880
Operating Profit		(108	)		(125	)
Non-Operating Income (Loss)		(9	)		(11	)
Income Tax		68			(2	)
Net Income (Loss)		(49	)		(138	)

AT DECEMBER 31	2006			2005
CONSOLIDATED STATEMENT OF CASH FLOWS	ThUS$			ThUS$
(in thousands of Dollars)
Net Cash flow from Operating Activities		(53	)		218
Net Cash flow from Financing Activities		-			(32	)
Net Cash flow from Investing Activities		(5	)		(116	)
Inflation Effect on Cash and Cash Equivalents		-			-
Net Increase (Decrease) in Cash and Cash Equivalents		(58	)		70

280

Lan Pax Group S.A. and Subsidiaries

Incorporation History: Chartered as a closed corporation by public deed dated September 27, 2001, witnessed and certified in the Notary Offices of Patricio Zaldivar Mackenna, recorded in Folios 25.636 Nº20.794 of the Santiago Business Registry of the same year, and announced in the Official Gazette on October 6, 2001.

Business Purpose: To invest in all manner of property, whether movable or real estate, tangible or intangible; to establish all manner of other corporations; to acquire shareholdings in, administer, reorganize, and liquidate existing companies. In general, this entity could acquire or engage the manufacturing or commercialization of all types of goods and services on its own accord or for third parties; and it could perform any acts or enter into any kind of contract related to its ultimate goals.

SHAREHOLDER EQUITY:		ThUS$(22,001)
NET INCOME:		ThUS$(14,847)
LAN AIRLINES S.A. INTEREST:		100.00%

BOARD OF DIRECTORS
CHAIRMAN:	Ignacio Cueto Plaza
DIRECTORS:	Alejandro de la Fuente Goic

SUBSIDIARIES AND LAN PAX GROUP S.A.
SHAREHOLDING THEREIN:
Inversora Cordillera S.A. and Subsidiaries	80.00	%
Siventas S.A.	95.00	%
Atlantic Aviation Investment LLC	99.00	%
Perdiz Leasing LLC	99.00	%

LAN PAX GROUP S.A. AND SUBSIDIARIES

(CLOSED CORPORATION

AT DECEMBER 31	2006			2005
CONSOLIDATED BALANCE SHEET (in thousands of Dollars)	ThUS$			ThUS$
Assets		134,163			26,067
Liabilities		156,164			33,221
Shareholder equity		(22,001	)		(7,154	)
Liabilities and shareholder equity		134,163			26,067

AT DECEMBER 31	2006		2005
INCOME STATEMENT (in thousands of Dollars)	ThUS$		ThUS$
Operating Revenues	83,075		21,336
Operating Profit	(18,596	)	(14,342	)
Non-Operating Income (Loss)	(7,286	)	(618	)
Income Tax	9,065		4,938
Minority Interest	1,970		2,443
Net Income (Loss)	(14,847	)	(7,579	)

AT DECEMBER 31	2006		2005
CONSOLIDATED STATEMENT OF CASH FLOWS	ThUS$		ThUS$
(in thousands of Dollars)
Net Cash flow from Operating Activities	(3,330	)	(7,908	)
Net Cash flow from Financing Activities	88,878		21,552
Net Cash flow from Investing Activities	(82,733	)	(8,531	)
Inflation Effect on Cash and Cash Equivalents	(36	)	1
Net Increase (Decrease) in Cash and Cash Equivalents	2,779		5,114

281

Línea Aérea Nacional Chile S.A.

Incorporation History: Chartered as a closed corporation by public deed dated September 27, 2001, witnessed and certified in the Notary Offices of Patricio Zaldivar Mackenna, recorded in Folios 25.668 Nº20.829 of the Santiago Business Registry of the same year, and announced in the Official Gazette on October 6, 2001.

Business Purpose: To engage in and conduct on its own account or on behalf of others general transportation activities in any direct or indirect form and, in particular, the carriage of passengers, cargo and mail by air within and beyond Chile; to purchase, sell, manufacture and /or integrate, maintain, lease or exercise the use or possession of aircraft, spare parts, and aeronautic equipment and the operation of the same by way of any title, whether on its won account or on behalf of third parties; and to engage in every class of activity and service related to tourism, the catering trade, and to the other activities, and property mentioned above

SHAREHOLDER EQUITY:		ThUS$ 1
NET INCOME:		ThUS$ (2)
LAN AIRLINES S.A. INTEREST:		100.00%

BOARD OF DIRECTORS
CHAIRMAN:	Ignacio Cueto Plaza
DIRECTORS:	Alejandro de la Fuente Goic
	Luis Ernesto Videla Berguecio

LINEA AEREA NACIONAL CHILE S.A.

(CLOSED CORPORATION)

AT DECEMBER 31	2006		2005
CONSOLIDATED BALANCE SHEET (in thousands of Dollars)	ThUS$		ThUS$
Assets		3		5
Liabilities		2		2
Shareholder equity		1		3
Liabilities and shareholder equity		3		5

AT DECEMBER 31	2006		2005
INCOME STATEMENT (in thousands of Dollars)	ThUS$		ThUS$
Operating Revenues	-		-
Operating Profit	(3	)	(2	)
Non-Operating Income (Loss)	1		-
Income Tax	-		-
Net Income (Loss)	(2	)	(2	)

AT DECEMBER 31	2006	2005
CONSOLIDATED STATEMENT OF CASH FLOWS	ThUS$	ThUS$
(in thousands of Dollars)
Net Cash flow from Operating Activities	-	-
Net Cash flow from Financing Activities	-	-
Net Cash flow from Investing Activities	-	-
Inflation Effect on Cash and Cash Equivalents	-	-
Net Increase (Decrease) in Cash and Cash Equivalents	-	-

Lan Card S.A.

Incorporation History: Chartered as a closed corporation by public deed dated September 26, 2001, witnessed and certified in the Notary Offices of Patricio Zaldivar Mackenna, recorded in Folios 26.400 Nº21.462 of the Santiago Business Registry of the same year, and announced in the Official Gazette on October 17, 2001.

Business Purpose: The emission, operation and administration directly or on behalf of other entities of which it is a part or in which it maintains a financial stake, of any sort of credit cards regardless of the organization the development, administration or exploitation for or on behalf of entities of which it is a part or in which it maintains a financial stake; the offering of all types of service oriented towards the consumer, business or manufacturing sectors in general; the organization, forming, development, administration and exploitation of credit or financing for acquisitions of all types of goods or services for or on behalf of entities of which it is a part or in which it maintains a financial stake; the engagement in every class of activity and service related to tourism, travel, hotels; and the investment in all types of entities of any type.

SHAREHOLDER EQUITY:		ThUS$ 528
NET INCOME:		ThUS$ 339
LAN AIRLINES S.A. INTEREST:		100.00%

BOARD OF DIRECTORS
CHAIRMAN:	Luis Ernesto Videla Berguecio
DIRECTORS:	Alejandro de la Fuente Goic
	Andrés del Valle Eitel

282

LAN CARD S.A.
(CLOSED CORPORATION)

AT DECEMBER 31	2006		2005
CONSOLIDATED BALANCE SHEET (in thousands of Dollars)	ThUS$		ThUS$
Assets		5,617		4,562
Liabilities		5,089		4,373
Shareholder equity		528		189
Liabilities and shareholder equity		5,617		4,562

AT DECEMBER 31	2006		2005
INCOME STATEMENT (in thousands of Dollars)	ThUS$		ThUS$
Operating Revenues	1,583		1,118
Operating Profit	426		140
Non-Operating Income (Loss)	(1	)	6
Income Tax	(86	)	(3	)
Net Income (Loss)	339		143

AT DECEMBER 31	2006	2005
CONSOLIDATED STATEMENT OF CASH FLOWS	ThUS$	ThUS$
(in thousands of Dollars)
Net Cash flow from Operating Activities	22	3
Net Cash flow from Financing Activities	-	-
Net Cash flow from Investing Activities	-	-
Inflation Effect on Cash and Cash Equivalents	-	-
Net Increase (Decrease) in Cash and Cash Equivalents	22	3

Lan Chile Investments Limited and Subsidiaries

Incorporation History: Chartered as a closed corporation in Cayman Islands by public deed dated July 30, 1999, in the Cayman Registry of Companies the same year.

Business Purpose : To invest in all manner of property, whether movable or real estate, tangible or intangible.

SHAREHOLDER EQUITY:		ThUS$ (7,684)
NET INCOME:		ThUS$ 1,440
LAN AIRLINES S.A. INTEREST:		100.00%

BOARD OF DIRECTORS
CHAIRMAN:	Enrique Cueto Plaza
DIRECTORS:	Alejandro de la Fuente Goic
	Luis Ernesto Videla Berguecio

SUBSIDIARIES AND LAN CHILE INVESTMENTS LIMITED
SHAREHOLDING THEREIN:
Líneas Aéreas Nacionales del Ecuador S.A. and Subsidiaries	45.00	%
Puerto Montt Holding and Subsidiaries	100.00	%
Inversiones La Burguería S.A. and Subsidiary	99.90	%

LAN CHILE INVESTMENTS LIMITED AND SUBSIDIARIES
(CLOSED CORPORATION)

AT DECEMBER 31	2006			2005
CONSOLIDATED BALANCE SHEET (in thousands of Dollars)	ThUS$			ThUS$
Assets		32,121			21,413
Liabilities		39,805			30,537
Shareholder equity		(7,684	)		(9,124	)
Liabilities and shareholder equity		32,121			21,413

AT DECEMBER 31	2006			2005
INCOME STATEMENT (in thousands of Dollars)	ThUS$			ThUS$
Operating Revenues		170,588			113,145
Operating Profit		2,263			1,713
Non-Operating Income (Loss)		(723	)		(364	)
Income Tax		(368	)		(159	)
Minority Interest		268			-
Net Income (Loss)		1,440			1,190

AT DECEMBER 31	2006			2005
CONSOLIDATED STATEMENT OF CASH FLOWS	ThUS$			ThUS$
(in thousands of Dollars)
Net Cash flow from Operating Activities		1,320			(2,245	)
Net Cash flow from Financing Activities		(572	)		-
Net Cash flow from Investing Activities		(757	)		(770	)
Inflation Effect on Cash and Cash Equivalents		-			-
Net Increase (Decrease) in Cash and Cash Equivalents		(9	)		(3,015	)

283

284

Gobierno Corporativo


Directorio

Directores	Posición	Profesión	RUT
Jorge Awad Mehech	Presidente	Ingeniero Comercial	4.756.185-K
Darío Calderón González	Director	Abogado	5.078.327-8
José Cox Donoso	Director	Ingeniero Comercial	6.065.868- 4
Juan José Cueto Plaza	Director	Ingeniero Comercial	6.694.240-6
Juan Cueto Sierra	Director	Empresario	3.246.727-K
Ramón Eblen Kadis	Director	Ingeniero Comercial	4.346.062-5
Bernardo Fontaine Talavera	Director	Economista	6.371.763- 0
Andrés Navarro Haeussler	Director	Ingeniero Civil Industrial	5.078.702-8
Sebastián Piñera Echenique	Director	Economista	5.126.663-3

Comité de Directores

El Comité de Directores está compuesto por tres miembros que el Directorio elige por períodos de dos años con derecho a ser reeligidos. Las funciones del Comité de Directores incluyen, entre otras, examinar los informes de los auditores externos y los estados financieros, examinar los sistemas de remuneraciones y planes de compensación a los ejecutivos principales y examinar los antecedentes relativos a operaciones con entidades relacionadas, y verificar la implementación de los procedimientos para la recepción, radicación y trámite de quejas relacionadas con la contabilidad o con los controles contables internos.

El Comité de Directores está integrado por los señores Jorge Awad Mehech, Ramón Eblen Kadis y José Cox Donoso, quien preside el Comité. Durante el año 2006 el Comité de Directores se reunió en trece ocasiones.

Para efectos de su funcionamiento, la Junta Ordinaria de Accionistas estableció un presupuesto anual para este comité, para el ejercicio 2006, de UF 1.200

Remuneraciones del Directorio

El Directorio de la Sociedad percibió durante el ejercicio 2006, por concepto de Dieta, la cantidad de US$ 119.586,17 según el siguiente detalle:

Miembros Directorio	Dieta Directorio (US$)		Dieta Comité de Directores (US$)
Jorge Awad Mehech		22,934.09		8,998.63
Darío Calderón González		8,998.63		0.00
José Cox Donoso		9,007.77		9,007.77
Juan José Cueto Plaza		9,007.77		0.00
Juan Cueto Sierra		7,359.41		0.00
Ramón Eblen Kadis		9,828.90		9,828.90
Bernardo Fontaine Talavera		9,828.90		0.00
Andrés Navarro Haeussler		8,190.23		0.00
Sebastián Piñera Echeñique		6,595.16		0.00
Total		91,750.87		27,835.30
TOTAL		119,586.17

Nota: La suma de las cantidades individuales puede diferir del total producto de aproximaciones

285

Principales Ejecutivos

Ejecutivos	Posición	Profesión	RUT
Enrique Cueto Plaza	Vicepresidente Ejecutivo LAN	Ingeniero Comercial	6.694.239-2
Ignacio Cueto Plaza	Gerente General LAN	Empresario	7.040.324-2
Armando Valdivieso Montes	Gerente General Pasajeros	Ingeniero Comercial	8.321.934-3
Cristián Ureta Larraín	Gerente General Carga	Ingeniero Civil	9.488.819- 0
Alejandro de la Fuente Goic	Vicepresidente Finanzas Corporativas	Ingeniero Comercial / Ingeniero Agrónomo	6.947.715-1
Marco Jofré Marín	Vicepresidente Técnico	Ingeniero Civil	7.502.352-9
Carlos Prado Cánepa	Vicepresidente Negocios Corporativos	Piloto	5.193.770-8
Emilio del Real Sota	Vicepresident Personas	Psicólogo	9.908.112- 0
Enrique Elsaca Hirmas	Vicepresidente Planificación Estratégica	Ingeniero Comercial	8.732.095-2

El año 2006, la Compañía pagó al conjunto de sus ejecutivos un total de USD 41,5 millones y la Compañía pagó además USD 10,6 millones en incentivos. Por otro lado, en el mismo año, la Compañía pagó a sus ejecutivos un total de USD 1,9 millones por concepto de indemnizaciones.

286

Evolución Precio Acción & ADR 2006

Estadística Trimestral Acción LAN (Bolsa de Comercio de Santiago)

	N° Acciones Transadas		Precio Promedio (CH$)		Monto Total (CH$)
2004
Primer Trimestre		16,169,037		2,181		35,584,483,460
Segundo Trimestre		27,258,060		2,325		62,817,197,228
Tercer Trimestre		50,662,986		2,665		135,996,629,827
Cuarto Trimestre		40,164,284		3,156		128,104,861,000

2005
Primer Trimestre		20,785,758		3,937		81,535,841,666
Segundo Trimestre		20,817,293		4,172		86,077,156,710
Tercer Trimestre		36,456,318		3,782		132,502,371,222
Cuarto Trimestre		37,907,161		3,632		137,794,150,122

2006
Primer Trimestre		15,137,981		4,083		61,535,699,453
Segundo Trimestre		16,361,971		3,774		61,207,501,057
Tercer Trimestre		49,545,952		3,645		180,429,240,868
Cuarto Trimestre		55,052,056		4,914		273,046,834,223

Estadística Trimestral ADR LAN (Bolsa de Valores Nueva York)

	N° ADRs Transados		Precio Promedio (US$		Monto Total (US$)
2004
Primer Trimestre		3,487,900		18.53		64,096,226
Segundo Trimestre		3,177,200		18.55		58,458,033
Tercer Trimestre		3,704,200		21.32		81,136,720
Cuarto Trimestre		7,464,600		26.76		204,360,986

2005
Primer Trimestre		5,753,900		33.96		194,161,851
Segundo Trimestre		4,187,200		35.86		150,441,522
Tercer Trimestre		7,231,900		34.14		240,539,354
Cuarto Trimestre		7,100,800		34.70		246,516,467

2006
Primer Trimestre		4,177,200		38.83		161,504,413
Segundo Trimestre		4,662,700		35.73		164,123,315
Tercer Trimestre		6,860,400		33.83		232,448,520
Cuarto Trimestre		8,047,800		46.26		375,044,925

Nota: Un ADR representa cinco acciones ordinarias

287

Corporate Governance

Board of Directors

Director	Position	Profession	National ID Number
Jorge Awad Mehech	Chairman	Commercial Engineer	4.756.185-K
Darío Calderón González	Director	Lawyer	5.078.327-8
José Cox Donoso	Director	Commercial Engineer	6.065.868- 4
Juan José Cueto Plaza	Director	Commercial Engineer	6.694.240-6
Juan Cueto Sierra	Director	Businessman	3.246.727-K
Ramón Eblen Kadis	Director	Commercial Engineer	4.346.062-5
Bernardo Fontaine Talavera	Director	Economist	6.371.763- 0
Andrés Navarro Haeussler	Director	Industrial Engineer	5.078.702-8
Sebastián Piñera Echenique	Director	Economist	5.126.663-3

Directors Committee

The Directors Committee consists of three members independent of the controlling shareholder who are elected every two years and may be reelected. The duties of the committee include, but are not limited to, examining the external auditor’s reports, the balance sheet and other financial statements; examining the compensation of senior executives and managers; reviewing operations with related parties, and overseeing the implementation of complaint procedures related to accounting and internal accounting controls.

The current members of the Directors Committee are Jorge Awad Mehech, Ramon Eblen Kadis and its president, Jose Cox Donoso. In 2006 the Committee met on thirteen occasions.

The Committee’s operating costs are established on a yearly budget by the Annual General Meeting of Shareholders. In 2006, the budget amounted to UF 1,200.

Director’s Remuneration

Total remuneration paid to the company’s Board of Directors in 2006 amounted to US$119,586.17 as detailed in the following table:

Miembros Directorio:	Director’s Fees (US$)		Directors Committee Member’s Fees
			(US$)
Jorge Awad Mehech		22,934.09		8,998.63
Darío Calderón González		8,998.63		0.00
José Cox Donoso		9,007.77		9,007.77
Juan José Cueto Plaza		9,007.77		0.00
Juan Cueto Sierra		7,359.41		0.00
Ramón Eblen Kadis		9,828.90		9,828.90
Bernardo Fontaine Talavera		9,828.90		0.00
Andrés Navarro Haeussler		8,190.23		0.00
Sebastián Piñera Echeñique		6,595.16		0.00
Total		91,750.87		27,835.30
TOTAL		119,586.17

Note: The sums of the items may differ from the total amount due to rounding.

288

Main Executives

Executives	Position	Profession	National ID Number
Enrique Cueto Plaza	Chief Executive Officer LAN	Commercial Engineer	6.694.239-2
Ignacio Cueto Plaza	President and COO LAN	Businessman	7.040.324-2
Armando Valdivieso Montes	CEO Passengers	Commercial Engineer	8.321.934-3
Cristián Ureta Larraín	CEO Cargo	Civil Engineer	9.488.819- 0
Alejandro de la Fuente Goic	Chief Financial Officer	Commercial Engineer / Agronomist Engineer	6.947.715-1
Marco Jofré Marín	Senior Vice President Operations, Engineering and Maintenance	Civil Engineer	7.502.352-9
Carlos Prado Cánepa	Senior Vice President Corporate Investment	Pilot	5.193.770-8
Emilio del Real Sota	Senior Vice President Human Resources	Psychologist	9.908.112- 0
Enrique Elsaca Hirmas	Senior Vice President Strategic Planning	Commercial Engineer	8.732.095-2

Total remuneration paid to company executives in 2006 was US$41.5 million, plus a further US$10.6 million in incentive payments. Severance compensation during 2006 amounted to US$1.9 million.

289

Common Share & ADR Price Trend 2006

LAN Shares, Quarterly Statistics (Santiago Stock Exchange)

	Shares Traded		Average Price (CH$)		Total Volume (CH$)
2004
First Quarter		16,169,037		2,181		35,584,483,460
Second Quarter		27,258,060		2,325		62,817,197,228
Third Quarter		50,662,986		2,665		135,996,629,827
Fourth Quarter		40,164,284		3,156		128,104,861,000

2005
First Quarter		20,785,758		3,937		81,535,841,666
Second Quarter		20,817,293		4,172		86,077,156,710
Third Quarter		36,456,318		3,782		132,502,371,222
Fourth Quarter		37,907,161		3,632		137,794,150,122

2006
First Quarter		15,137,981		4,083		61,535,699,453
Second Quarter		16,361,971		3,774		61,207,501,057
Third Quarter		49,545,952		3,645		180,429,240,868
Fourth Quarter		55,052,056		4,914		273,046,834,223

LAN ADRs, Quaterly Statistics (NYSE)

	ADRs Trades		Average Price (US$)		Total Volume (US$)
2004
First Quarter		3,487,900		18.53		64,096,226
Second Quarter		3,177,200		18.55		58,458,033
Third Quarter		3,704,200		21.32		81,136,720
Fourth Quarter		7,464,600		26.76		204,360,986

2005
First Quarter		5,753,900		33.96		194,161,851
Second Quarter		4,187,200		35.86		150,441,522
Third Quarter		7,231,900		34.14		240,539,354
Fourth Quarter		7,100,800		34.70		246,516,467

2006
First Quarter		4,177,200		38.83		161,504,413
Second Quarter		4,662,700		35.73		164,123,315
Third Quarter		6,860,400		33.83		232,448,520
Fourth Quarter		8,047,800		46.26		375,044,925

Note: One ADR represents five common shares

290

291

Política Financiera

La política financiera de LAN tiene los siguientes objetivos:

- Preservar y mantener niveles de caja adecuados al nivel de operación.

- Mantener el endeudamiento de mediano y largo plazo en una proporción que sea razonable en función del crecimiento de las operaciones y considerando el objetivo de mantener una clasificación de riesgo “Grado de Inversión”.

- No mantener deuda de corto plazo, salvo para operaciones puntuales.

- Efectuar inversiones apropiadas para maximizar el flujo futuro de caja y permitir operaciones eficientes.

- Efectuar inversiones financieras con los excedentes de caja según la política establecida por el Directorio.

- Responder efectivamente a las condiciones externas sobre las cuales la Compañía no tiene ningún control, y de este modo mantener un flujo de fondos estable, protegiendo a LAN de riesgos de mercado tales como variaciones en los tipos de cambio, en el precio del combustible y en la tasa de interés.

- Mantener un nivel adecuado de líneas de crédito con bancos locales y extranjeros.

- Mantener un adecuado nivel de riesgo de crédito, a través de un control permanente de la distribución de dicho riesgo a nivel de países y negocios.

Liquidez

Durante 2006 LAN mantuvo su política de mantener una liquidez significativa, a fin de resguardarse de potenciales shocks externos. De esta forma, a fin de año la Compañía contaba con US$218 millones en caja y valores de fácil liquidación. Sin desmedro de ello, LAN buscó alternativas para utilizar dichos recursos en la forma más efectiva y es así como durante este año la Compañía continuó financiando internamente la gran mayoría de los pre-delivery payments (los anticipos asociados a la fabricación de los aviones), vinculados a las aeronaves que la Compañía recibirá en el futuro tanto de Boeing como de Airbus. Con el objetivo de mantener una posición de liquidez saludable, LAN consiguió líneas de crédito comprometidas que a diciembre de 2006 alcanzaban US$62 millones.

Inversiones y Financiamiento

La gran mayoría de las inversiones de LAN corresponde a los programas de adquisición de flota, los que en general son financiados mediante la combinación de deuda financiera estructurada de largo plazo y recursos propios.

Programa Boeing 767-300

Entre 2004 y 2005 LAN ordenó 12 aviones Boeing 767-300s para ser entregados entre 2005 y 2008. Este plan contempla la compra de siete Boeing 767-300ER de pasajeros y cinco Boeing 767-300Fs cargueros y permite cierta flexibilidad en torno a los tipos de aviones a ser recibidos. En 2004 LAN estructuró un nuevo crédito sindicado por US$250 millones, a través del cual financió la totalidad de los dos Boeing 767 recibidos en 2005 así como la primera entrega de 2006. Este crédito cuenta con una garantía de Ex-Im Bank por el 85% del valor de la compra y tiene un plazo de 12 años.

Durante 2005 LAN cerró dos nuevos créditos sindicados mediante los cuales financiará los aviones Boeing 767-300ER que recibirá en el período 2006-2008. Ambos créditos contarán con garantías de ExIm Bank, tienen un plazo de 12 años y cuentan con tasas de interés sub-LIBOR. El primer crédito, por US$280 millones, cubre el 85% del valor de las cuatro últimas entregas de 2006. El segundo crédito financiará el 85% de las cinco entregas finales, programadas para 2007 y 2008, en condiciones similares al crédito mencionado anteriormente.

En el mes de Diciembre de 2006, LAN ordenó 3 aviones Boeing 767-300s para ser entregados durante el último trimestre del año 2009. A la fecha, LAN no ha solicitado financiamiento para estas aeronaves. También durante el mes de Diciembre, LAN refinanció ciertos pre-delivery payments asociados a la compra de tres aeronaves con entrega en los años 2007-2008. A la fecha, restan por entregar 3 aviones Boeing 767-300s en 2007, 5 aviones Boeing 767-300s en 2008 y 3 aviones Boeing 767-300s en 2009.

292

Programas Airbus Familia A320 y Airbus A340

En 1998 y 1999 LAN firmó dos órdenes de compra por un total de 20 aeronaves de la familia Airbus A320 y siete Airbus A340 -300s. Este paquete -que posteriormente fue modificado por 23 aviones A320s y seis A340s-, fue financiado a través de un crédito sindicado por US$ 1.311 millones liderado por Credit Lyonnais y entregado por un grupo de bancos europeos. Este financiamiento fue apoyado por una garantía de las Agencias Europeas de fomento a la Exportación (Export Credit Agencies) por el 85% del valor de cada aeronave, y tiene un perfil de pago de hasta 18 años. Además, este crédito también podía ser utilizado para estructurar otros tipos de financiamiento, como tax leases. Entre 2000 y 2005 LAN utilizó este crédito para apoyar la incorporación a su flota de 14 Airbus A320, 7 Airbus A319 y 4 Airbus A340-300. A diciembre de 2005, a LAN le restaba recibir dos Airbus A319 en 2006, como parte de la orden original, y cinco aviones similares entre 2007 y 2008, cuyas opciones de compra fueron ejercidas durante 2001 y que no estaban incluidos en el crédito original.

Este plan de entrega fue modificado tras la suscripción de una nueva orden de compra por 25 aviones de la familia A320, en octubre de 2005. Fruto de la combinación de ambas órdenes, LAN planea recibir 20 Airbus A318, ocho Airbus A319s y cuatro Airbus A320s entre 2006 y 2008. Con posterioridad a la firma de esta orden, LAN inició las gestiones para financiar las aeronaves a ser recibidas entre 2006 y 2008 a través de un nuevo crédito sindicado. Las negociaciones referidas a este plan de financiamiento fueron finalizadas a principios de 2006. En la actualidad, según el programa de entregas se recibirán un total de 5 A318s y 2 A320s en el 2007 y 15 A318s y 2 A320s en el 2008.

Cobertura de Riesgos Financieros

Los principales riesgos financieros a los que está expuesta una línea aérea corresponden a los de tipo de cambio, tasas de interés y precio del combustible.

En el primer caso, la naturaleza de las operaciones de LAN se traduce en un hedge natural, dado que aproximadamente el 85% de los ingresos y el 76% de los costos están denominados en dólares. Respecto al segundo ítem, LAN ha utilizado swaps y calls de tasa de interés, con el objetivo de reducir su riesgo a tasas flotantes. Es así como a diciembre de 2006 el 95,8% de su exposición vigente se encontraba cubierta y ya se había procedido a fijar las tasas asociadas a los créditos que financiarán las entregas de aeronaves Boeing en los años 2006, 2007 y 2008.

Para reducir su exposición al precio del combustible, la Compañía utiliza varios mecanismos. Estos incluyen, además de sistemas de traspaso de costo al cliente, el uso de instrumentos como swaps, calls y zero-cost collars. Durante 2006 LAN cubrió aproximadamente el 40% de sus necesidades de combustible.

293

Proveedores, Seguros y Otros

Proveedores

Durante el año 2006, y al igual que en años anteriores, los principales proveedores de LAN correspondieron a los fabricantes de aviones, Airbus y Boeing. Junto con éstos, LAN cuenta con una serie de otros proveedores, fundamentalmente relacionados con accesorios, repuestos y componentes para aviones, tales como: Pratt & Whitney, IAE International Aero Engines AG, General Electric Commercial Aviation Services Limited, (motores); Honneywell (entretenimiento a bordo); SICMA (asientos); Teledine (aviónica); Goodrich (frenos). A esto deben agregarse nuestros proveedores de combustibles, tales como Repsol YPF, Copec, Shell, Terpel, Chevron, Glencore, Exxon, entre otros.

Propiedades y Edificios

LAN explota, tanto en calidad de propietario como de arrendatario o concesionario, diversos inmuebles para el desarrollo de sus actividades en Chile y en el extranjero, sean éstos destinados a actividades administrativas, de ventas, de mantenimiento, entre otras.

Equipos y Maquinarias

Tratándose de una línea aérea, los principales equipos y maquinarias con que cuenta LAN para el desarrollo de su negocio son los aviones que componen su flota, y que son explotados por LAN tanto en calidad de propietario como de arrendatario.

Seguros

LAN, considerando todas aquellas áreas que involucran un riesgo potencial, ha contratado seguros para el 2006 y 2007 que pueden ser clasificados en cuatro principales categorías:

Seguros de Aviación, Casco y Responsabilidades Legales

Este ámbito del seguro, cubre todos los riesgos inherentes a la actividad de la aeronavegación comercial, tales como aeronaves, motores, repuestos y seguros de Responsabilidad Civil hacia terceros: Pasajeros, Carga, Equipajes, Productos, Aeropuertos, etc. Estos seguros son contratados en conjunto por LAN, y son reasegurados en el mercado de Londres. Adicionalmente, durante la última renovación la Compañía llegó a acuerdo con Bristish Airways para negociar términos conjuntos para los Seguros de Casco y Responsabilidades Legales, lo cual contribuye a la obtención de rebajas de primas y mejorías en las condiciones de cobertura.

Con relación a los cambios producidos tras los sucesos del 11 de Septiembre de 2001 en Estados Unidos (respecto a los riesgos de Responsabilidades Legales por Guerra y Terrorismo), LAN ha continuado comprando las coberturas en exceso necesarias para cubrir adecuadamente las exigencias en materia de Seguros, complementando de esta manera las coberturas bases estipuladas en la cláusula AVN52-E. Cabe mencionar que respecto a estas coberturas la Compañía también ha obtenido significativas rebajas en las primas durante los últimos cuatro años.

Seguros Generales

Este grupo de seguros permite cubrir todos aquellos riesgos que puedan afectar el patrimonio de la sociedad, particularmente bienes físicos y financieros, los que se resguardan a través de seguros multirriesgos (que incluye riesgos de incendio, robo, equipos de computación, remesas de valores, cristales y otros basados en coberturas de todo riesgo), junto a coberturas tradicionales de vehículos motorizados, transportes aéreo y marítimo, responsabilidad civil de empresa, etc. Estos seguros, al igual que los anteriores, son contratados en conjunto por LAN y sus compañías asociadas.

294

Seguros de Vida y Accidentes

Este grupo de seguros cubre todo el personal de la empresa: ejecutivos, funcionarios en general y tripulaciones de vuelo.

Seguros de Postas Internacionales

LAN ha ido incorporando gradualmente bajo una cobertura centralizada, y en la medida que la legislación de cada país lo permite, los seguros generales de las oficinas internacionales de la Compañía, con cobertura de los siguientes riesgos: incendio, robo y equipos electrónicos en general. La particularidad de este seguro es que, bajo una sola póliza, se logra asegurar las oficinas corporativas a lo largo del mundo disminuyendo así la carga administrativa y financiera.

Marcas y Patentes

La Compañía y sus filiales utilizan diversas marcas comerciales, que se encuentran debidamente registradas ante los organismos competentes en los diversos países en los cuales tienen base sus operaciones o constituyen destino de las mismas, con el objeto de distinguir y comercializar sus productos en dichos países.

295

Factores de Riesgo

Riesgos Vinculados con nuestras Operaciones y la Industria del Transporte Aéreo

Nuestras operaciones se encuentran sujetas a las fluctuaciones en el suministro y costo del combustible de aviación; nuestro desempeño es muy dependiente de las condiciones económicas en los países donde realizamos negocios; cualquier futuro incidente similar al de los ataques terroristas del 11 de septiembre del 2001 en los Estados Unidos, o en otros países, podría tener un severo impacto en la industria del transporte aéreo y afectar adversamente nuestros ingresos; nuestro negocio podría verse afectado adversamente por un período recesivo en la industria del transporte aéreo; una parte significativa de nuestros ingresos por carga proviene de relativamente unos cuantos tipos de productos y pueden ser impactados por sucesos que afecten su producción o comercio; los altos niveles de competencia en la industria del transporte aéreo pueden afectar adversamente nuestras operaciones; nuestro negocio puede verse adversamente afectado por un elevado nivel de endeudamiento y de obligaciones de arrendamiento de aeronaves comparadas con nuestro capital social; cambios futuros en la condición de los permisos y licencias gubernamentales extranjeros y chilenos podrían afectar adversamente nuestro negocio; nuestros planes de expansión regional en América Latina depende de factores regulatorios y comerciales esenciales; los incrementos en costos laborales, que constituyen una parte sustancial de nuestros costos operacionales totales, podrían tener un impacto directo en nuestros resultados.

Riesgos Vinculados con Chile y Otros Países de Mercados Emergentes

Las fluctuaciones del peso chileno y de otras monedas extranjeras con relación al dólar estadounidense. pueden afectar adversamente nuestros ingresos y rentabilidad; los sucesos en países latinoamericanos y otros países de mercados emergentes podrían afectar adversamente a la economía chilena, impactar negativamente nuestro negocio y los resultados de las operaciones, además de originar que el precio en el mercado de nuestras acciones comunes y ADSs se reduzca.

Riesgos Vinculados con nuestras Acciones Comunes y ADSs

Nuestros accionistas controladores pueden tener intereses que difieran de los de otros accionistas; la transacción de nuestros ADSs y acciones comunes en los mercados de valores se encuentra limitada y podría experimentar mayor iliquidez y volatilidad de precio; los titulares de ADSs pueden verse adversamente afectados por las devaluaciones de la moneda y las fluctuaciones en las tasas de cambio de moneda extranjera; los cambios futuros en los controles de inversión extranjera chilena y en los impuestos de retención podrían afectar negativamente a los residentes que no sean chilenos y que inviertan en nuestras acciones; nuestros titulares de ADSs pueden no ser capaces de ejercitar derechos de preferencia en ciertas circunstancias.

296

Información de Dividendos

Política de Dividendos

En materia de dividendos, la Compañía ha establecido que éstos sean iguales al mínimo exigido por la ley, es decir un 30% de las utilidades de acuerdo a la normativa vigente. Ello no se contrapone con que eventualmente se puedan repartir dividendos sobre dicho mínimo obligatorio atendiendo a las particularidades y circunstancias de hecho que se puedan percibir durante el transcurso del año.

El siguiente cuadro muestra los dividendos por acción pagados durante los últimos tres años.

Dividendos con Cargo a las Utilidades del Año	Fecha de Pago	Tipo	Total Pago de Dividendo (US$)	Número de Acciones	Dividendo por Acción (US$)

2004	8 /30 / 04	Provisorio	39,786,605	318,909,090	0.12476
	12/29 / 04	Provisorio	34,997,084	318,909,090	0.10974
	5/18 / 05	Definitivo	6,992,865	318,909,090	0.02193

2005	9 /2/ 05	Provisorio	36,452,425	318,909,090	0.11430
	3/1/ 06	Provisorio	35,000,000	318,909,090	0.10975
	5/17/ 06	Definitivo	1,849,186	318,909,090	0.00580

2006	8 /24 / 06	Provisorio	48,061,644	318,909,090	0.15071
	1/18 / 07	Provisorio	67,787,211	318,909,090	0.21256

Nota: La utilidad distribuible del ejercicio 2006 para el pago de dividendos correspondió al monto de la utilidad neta del mismo período.

297

Hechos Esenciales

1. Cambios en la administración de la Compañía: Comunicado con fecha 2 de Enero de 2006, señala que don Ignacio Cueto asumió la Gerencia General de Lan Airlines, Armando Valdivieso la Gerencia General de Pasajeros y Cristián Ureta la Gerencia General de Carga. Se informa, además, la salida de la Compañía de doña Susana Tonda, hasta ese momento Vicepresidenta de Soporte y Tecnología.

2. Reparto de Dividendo Provisorio: Comunicado con fecha 1 de Febrero de 2006, informa que el Directorio de la Compañía acordó en su sesión ordinaria de fecha 31 de Enero de 2006 el reparto de un Dividendo Provisorio por la cantidad de US$0,10975 por acción con cargo a las utilidades del ejercicio 2005.

3. Requerimiento de Información en investigación por antitrust: Comunicado con fecha 14 de Febrero de 2006, informa sobre el requerimiento del gobierno de los Estados Unidos de información en el marco de una investigación por antitrust respecto de una serie de líneas aéreas de carga europeas, norteamericanas y asiáticas.

4. Modificación política de contabilización de costos de mantenimiento de la flota: Comunicado con fecha 17 de Marzo de 2006, el referido cambio se funda en el crecimiento de las operaciones y flota de Lan Airlines, alineando las prácticas de la Compañía con la de los principales operadores internacionales.

5. Citación a Junta Ordinaria de Accionistas para el día 28 de Abril de 2006 : Comunicado con fecha 20 de Marzo de 2006, enumera los puntos a tratar en la referida Junta entre los que se cuenta el reparto de un dividendo definitivo y la elección del Directorio de la Sociedad.

6. Adquisición de tres aeronaves Boeing 767-300 : Comunicado con fecha 29 de Marzo de 2006, señala que las referidas aeronaves serán entregadas los años 2007 y 2008 e implican una inversión aproximada de US$270.000.000. Estas tres aeronaves se suman a las doce informadas con fecha 2 de Agosto de 2005.

7. Nueva composición del Directorio: Comunicado con fecha 28 de Abril de 2006, informa la nueva integración del Directorio, según el acuerdo adoptado al respecto por la Junta Ordinaria de Accionistas celebrada con igual fecha.

8. Reparto de Dividendo Definitivo: Comunicado con fecha 2 de Mayo de 2006, la Junta Ordinaria de Accionistas de fecha 28 de Abril de 2006 acordó el reparto de dicho dividendo por la cantidad de US$0,00578 por acción con cargo a las utilidades del ejercicio 2005.

9. Reparto de Dividendo Provisorio: Comunicado con fecha 25 de Julio de 2006, informa que el Directorio de la Compañía acordó en su sesión ordinaria de fecha 24 de Julio de 2006 el reparto de un Dividendo Provisorio por la cantidad de US$0,15071 por acción con cargo a las utilidades del ejercicio 2006.

10. Reparto de Dividendo Provisorio: Comunicado con fecha 27 de Diciembre de 2006, informa que el Directorio de la Compañía acordó en su sesión ordinaria de fecha 26 de Diciembre de 2006 el reparto de un Dividendo Provisorio por la cantidad de US$0,21256 por acción con cargo a las utilidades del ejercicio 2006.

11. Citación a Junta Extraordinaria de Accionistas para el día 26 de Enero de 2007: Comunicado con fecha 27 de Diciembre de 2006, cita a la referida Junta a fin de que ésta se pronuncie respecto de una proposición del Directorio tendiente a aumentar el capital social, destinando una parte de dicho aumento a planes de compensación en los términos del artículo 24 de la ley 18.046.

12. LAN anuncia financiamiento a VRG Linhas Aereas S.A. : Comunicado con fecha 31 de Enero de 2007, informa que el Directorio de la Compañía acordó poner en conocimiento público el hecho que desde el mes de Septiembre de 2006 LAN, actuando a través de una sociedad filial, ha concurrido a otorgar financiamientos por un monto total de aproximadamente US$17.100.000 a VRG LINHAS AEREAS S.A. (“Nueva Varig”), los cuales son convertibles en acciones de Nueva Varig, a sola opción de LAN.

298

13. Citación a Junta Ordinaria de Accionistas para el día 5 de Abril de 2007: Comunicado con fecha 6 de Marzo de 2007, enumera los puntos a tratar en la referida Junta entre los que se cuenta el reparto de un dividendo definitivo.

14. Citación a Junta Extraordinaria de Accionistas para el día 5 de Abril de 2007: Comunicado con fecha 6 de Marzo de 2007, cita a la referida Junta a fin de que ésta se pronuncie respecto de una proposición del Directorio tendiente a dejar sin efecto el aumento de capital por 7.500.000 acciones de pago acordado por la Junta Extraordinaria de Accionistas celebrada el día 26 de Enero de 2007, aumentar el capital social mediante la emisión de 22.090.910 acciones de pago, destinando una parte de dicho aumento a planes de compensación en los términos del artículo 24 de la ley 18.046.

299

Transacciones de Acciones por Personas Relacionadas

Durante el ejercicio 2006, se realizaron las siguientes transacciones por personas relacionadas:

Vendedor	Comprador	Acciones

BCI Corredor de Bolsa S.A.	Leon Délano, Cristián	13,500
Inversiones Los Lagos S.A.	Inversiones L.L. S.A.	11,022,385
Inversiones Santa Blanca II S.A.	Inversiones S.B. S.A.	11,024,921
Leon Délano, Cristián	BCI Corredor de Bolsa S.A.	2,315
Inhen Aravena, Jorge Esteban	Valores Security S.A. Corredores de Bolsa	824
Banchile Corredores de Bolsa S.A.	Leon Délano, Cristián	13,815
Euroamérica Corredores de Bolsa S.A.	Inversiones y Asesorías Fabiola S.A.	25,000
Banchile Corredores de Bolsa S.A.	Inversiones Santa Cecilia S.A.	3,000,000
Leon, Délano, Cristián	BCI Corredor de Bolsa S.A.	11,185
Leon Délano, Cristián	Banchile Corredores de Bolsa S.A.	2,500
BCI Corredor de Bolsa S.A.	Leon Délano, Cristián	9,785
Inversiones Santa Blanca S.A.	Banchile Corredores de Bolsa S.A.	6,519,097
Inversiones L.L. S.A.	Banchile Corredores de Bolsa S.A.	11,022,385
Inversiones S.B. S.A.	Banchile Corredores de Bolsa S.A.	11,024,921
Comercial Los Lagos Limitada	Banchile Corredores de Bolsa S.A.	3,211,646
Banchile Corredores de Bolsa S.A.	Inversiones Andes S.A.	22,288,695
Inversiones Andes S.A.	Banchile Corredores de Bolsa S.A.	1,000,000
BCI Corredor de Bolsa S.A.	Leon Délano, Cristián	3,500

300

Financial Policy

The objectives of LAN’s financial policy are as follows:

- Maintain cash balances that are adequate for operating levels.

- Maintain medium-term and long-term debt at levels that are in reasonable proportion to growth in operations, and which will preserve the company’s “Investment Grade” credit rating

- Carry no short-term debt except for certain specific operations.

- Make appropriate investments that maximize future cash flows and facilitate efficient operations.

- Invest cash surpluses in financial instruments in accordance with policies established by the Board of Directors

- Respond effectively to external conditions beyond the company’s control in order to maintain stable cash flows and protect LAN from market risks such as exchange rate, fuel price and interest rate fluctuations

- Maintain adequate credit lines with Chilean and foreign banks.

- Maintain an appropriate risk rating through ongoing control of the distribution of risk among countries and businesses.

Liquidity

In 2006 LAN continued its policy of maintaining a significant degree of liquidity to guard against possible external shocks. Thus, at year end the company held US$218 million in cash balances and highly liquid securities. While remaining committed to this policy LAN has nevertheless sought alternatives for making the best use of these resources, and last year continued to internally finance the great majority of predelivery payments on future aircraft acquisitions from Boeing and Airbus. In order to maintain its solid liquidity position LAN obtained committed credit lines totaling US$62 million as of December 2006.

Investment and Financing

The great majority of LAN’s investments are concentrated in its fleet acquisition programs, which are generally financed through a combination of long-term financial debt and the company’s own resources.

Boeing 767 Program

Between 2004 and 2005 LAN ordered twelve Boeing 767-300s for delivery between 2005 and 2008. Although the plan specifies the purchase of seven Boeing 767-300ER passenger planes and five Boeing 767-300F freighters, there is a certain margin of flexibility regarding aircraft types. In 2004 LAN structured a new syndicated loan for US$250 million to finance the entire cost of the two Boeing 767s received in 2005 and the first delivery in 2006. This loan is guaranteed by Ex-Im Bank for 85% of the amount with a term of 12 years.

In 2005 LAN finalized two new syndicated loans to finance the Boeing 767-300ERs slated for delivery between 2006 and 2008. Both loans are backed by Ex-Im Bank guarantees with 12-year terms and belowLIBOR interest rates. The first loan, which is for US$280 million, covers 85% of the last four deliveries in 2006, while the second will finance 85% of the five final deliveries scheduled for 2007 and 2008 under conditions similar to those for the previous one.

In December 2006 LAN ordered three Boeing 767-300s for delivery during the last quarter of 2009, but has yet to solicit financing for the purchase. Also in December LAN refinanced certain pre-delivery payments for three aircraft to be received in 2007-2008. Three Boeing 767-300s remain to be delivered during 2007, with five more of the same model earmarked for arrival in 2008 and a further three in 2009.

Airbus A320 Family and Airbus A340 Programs

In 1998 and 1999 LAN signed purchase orders for a total of twenty aircraft of the Airbus A320 family and seven Airbus A340-300s. This package, later changed to twenty-three A320s and six A340s, was financed through a syndicated loan of US$ 1,311 million from a group of European banks led by Credit Lyonnais. Backed by guarantees from the European Export Credit Agencies for 85% of the value of each plane, the loan has a payment profile of up to eighteen years. It may also be used to structure other types of financing such as tax leases. Between 2000 and 2005 LAN made use of this loan to support the acquisition of fourteen Airbus A320s, seven Airbus A319s and four Airbus A340-300s. Still to come as of December 2005 were two Airbus A319s scheduled for delivery in 2006, plus five more for reception between 2007 and 2008 whose purchase options were exercised in 2001 and which were not included in the original credit arrangement.

301

This delivery program was modified as a result of a new purchase order for twenty-five planes from the A320 family agreed in October 2005. With the two orders together LAN now expects to receive twenty Airbus A318s, eight Airbus A319s and four Airbus A320s between 2006 and 2008. Negotiations to finance the planes scheduled for reception between 2006 and 2008 via a new syndicated loan were finalized early in 2006. Under the program as it currently stands, a total of five A318s and two A320s will be received in 2007, with fifteen A318s and two A320s to be delivered in 2008.

Hedging of Financial Risk

The main financial risks facing firms in the airline industry are posed by foreign exchange rates, interest rates and the price of fuel.

As regards exchanges rates, the nature of LAN’s operations constitute a natural hedge given that approximately 85% of revenues and 76% of costs are denominated in dollars. In the case of interest rates, LAN has used swaps and calls to reduce floating rate risk. Thus, 95.8% of its current exposure was covered as of December 2006, and the interest rates for the financing of the Boeing aircraft to be delivered in 2006, 2007 and 2008 have already been set.

To reduce exposure to fuel price fluctuations, LAN resorts to various mechanisms including cost passthrough to customers and financial instruments such as swaps, calls and zero-cost collars. In 2006 the company hedged approximately 40% of its fuel needs.

302

Suppliers, Insurance and Others

Suppliers

In 2006 as in previous years, LAN’ principal suppliers were the aircraft manufacturers Airbus and Boeing. Supplies are also acquired from a number of other firms, mainly dealing in aircraft accessories, parts and components, such as Pratt & Whitney, IAE International Aero Engines AG, General Electric Commercial Aviation Services Limited, (engines); Honeywell (on-board entertainment); SICMA (seats); Teledine (avionics); and Goodrich (brakes). Our suppliers of jet fuel include Repsol YPF, Copec, Shell, Terpel, Chevron, Glencore and Exxon.

Property and buildings

LAN occupies a variety of properties both in Chile and abroad, whether as owner, renter or concession holder, for use in carrying out administrative, sales, maintenance and other activities.

Machinery and equipment

As an airline, the main items of machinery or equipment employed by LAN in the performance of its business activities are the various aircraft that make up its fleet. They are operated by LAN either as their owner or under lease.

Insurance

In consideration of all aspects of its operations that may involve potential risk, LAN has taken out various insurance policies for 2006 and 20067. They may be classified in four main categories as follows:

Aviation, Hull and Liability Insurance

This type of insurance covers all risks inherent in commercial aviation activity, including aircraft, engines, spare parts and third-party liability, the latter including passengers, cargo, baggage, merchandise, airports, etc. These policies are taken jointly by LAN and reinsured in the London market. In addition, during the last renewal process LAN reached and agreement with British Airways to negotiate joint terms for Hull and Liability Insurance, which contributed to lower premiums and improved coverage.

In view of the changes in war and terrorism liability risks since the events of September 11, 2001 in the United States, LAN continues to purchase insurance over and above what is strictly required to provide adequate coverage, thus complementing the basic coverage under the terms of Clause AVN52E. The company has obtained significant premium discounts over the last four years.

General Insurance

This group of policies covers all risks that could affect the company’s assets, particularly those of a physical or financial nature. They consist of multi-risk policies (covering fire, theft, computer equipment, securities in transit, broken windows, and other items included in all-risk insurance) as well as traditional coverage for motor vehicles, air and maritime transport, corporate civil liability, etc. As with the previous category of insurance, these policies are taken out by LAN and its associated companies as a group.

Life and Accident Insurance

This group of insurance policies covers all company employees, including executives, general personnel and airline crews.

Global Offices Insurance

To the extent permitted by the laws of each country concerned, Lan Airlines has been gradually bringing under one centralized policy the general insurance coverage on its international offices for fire, theft and general electronic equipment. The advantage of having a single policy for our corporate offices around the world is that it reduces the administrative and financial load.

303

Trademarks and Patents

Lan Airlines and its subsidiaries use a number of commercial trademarks that are duly registered with the competent authorities in the various countries served by the companies or where their operations are based, in order to differentiate and market them.

304

Risk Factors

Risks Related to our Operations and the Airline Industry

Our operations are subject to fluctuations in the supply and cost of jet fuel; our performance is heavily dependent on economic conditions in the countries in which we do business; a future incident similar to the September 11, 2001 terrorist attacks in the United States could have a severe impact on the airline industry and adversely affect our revenue; our business may be adversely affected by a downturn in the airline industry; a significant portion of our cargo revenues comes from relatively few product types and may be impacted by events affecting their production or trade; high levels of competition in the airline industry may adversely affect our level of operation; our business may be adversely affected if we are unable to meet our significant future financing requirements; future changes in the status of Chilean and foreign governmental authorizations and licenses could adversely affect our business; our regional expansion plans in Latin America depend on regulatory and commercial essential factors; increases in our labor costs, which constitute a substantial portion of our total operating costs, would directly impact our earnings.

Risks Related to Chile and Other Emerging Market Countries

Fluctuations in the Chilean peso and other foreign currencies relative to the U.S. dollar may adversely affect our revenues and profitability; 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.

Risks Related to our Common Shares and ADSs

Our majority shareholders may have interests that differ from those of our other shareholders; trading of our ADSs and common shares in the securities markets is limited and could experience further illiquidity and price volatility; holders of ADSs may be adversely affected by currency devaluations and foreign exchange fluctuations; future changes in Chilean foreign investment controls and withholding taxes could negatively affect non-Chilean residents that invest in our shares; our ADS holders may not be able to exercise preemptive rights in certain circumstances.

305

Dividend Information

Dividend Policy

The Company has determined its dividend policy to be equal to the current legal minimum of 30% of earnings. However, the Company may distribute dividends in addition to this amount after considering conditions at that time.

The following table shows the per-share dividends paid during the last three years.

			Total Dividend		Number of Common		Cash Dividend per
Charge to Net		Dividend	Payment		Shares Entitled to		Common
Income for Year	Payment Date (s)	Type	(US dollars)		Dividend (million)		Share (US dollars)

2004	August 30, 2004	Provisional		39,786,605		318,909,090		0.12476
	December 29, 2004	Provisional		34,997,084		318,909,090		0.10974
	May 18, 2005	Definitive		6,992,865		318,909,090		0.02193

2005	September 2, 2005	Provisional		36,452,425		318,909,090		0.11430
	March 1, 2006	Provisional		35,000,000		318,909,090		0.10975
	May 17, 2006	Definitive		1,849,186		318,909,090		0.00580

2006	August 24, 2006	Provisional		48,061,644		318,909,090		0.15071
	January 18, 2007	Provisional		67,787,211		318,909,090		0.21256

Note: Distributable income for dividend purposes for 2006 was equal to the net income for the period.

306

Relevant Facts

1. Changes in corporate officers : Reported January 2, 2006. Ignacio Cueto was appointed President and Chief Operating Officer, Armando Valdivieso was appointed Chief Executive Officer, Passengers and Cristian Ureta was appointed Chief Executive Officer, Cargo. Susana Tonda stepped down from the position of Vice President of Support and Technology.

2. Payment of provisional dividend : Reported February 1, 2006. The Board of Directors at its regular meeting of January 31, 2006 agreed to a provisional dividend amounting to US$ 0.10975 per share, to be paid out of net income earned in 2005.

3. Disclosure of Information to Antitrust Investigation: Reported February 14, 2006. Disclosure of information required by the United States government as part of an antitrust investigation of a number of European, American and Asian cargo airlines.

4. Modification of accounting treatment of fleet maintenance costs: Reported March 17, 2006. The change was necessitated by the growth of Lan Airlines’ operations and fleet, and aligns company accounting practices with those of major international carriers.

5. Notice of the Annual General Meeting of Shareholders to be held on April 28, 2006: Reported March 20, 2006. Lists the items of business at the meeting, including the payment of a definitive dividend and the election of company directors.

6. Acquisition of three Boeing 767-300 aircraft: Reported March 29, 2006. The three planes are to be delivered in 2007 and 2008, and represent an investment of approximately US$270,000,000. They are in addition to the acquisition of 12 planes reported August 2, 2005.

7. New members of Board of Directors: Reported April 28, 2006. Reports on the composition of the new Board of Directors as agreed at the Annual General Meeting of Shareholders held on the same date.

8. Payment of definitive dividend : Reported May 2, 2006. The Annual General Meeting of Shareholders held on April 28, 2006 agreed to a definitive dividend amounting to US$ 0.00578 per share, to be paid out of net income earned in 2005.

9. Payment of provisional dividend : Reported July 25, 2006. The Board of Directors at its regular meeting of July 24, 2006 agreed to a provisional dividend amounting to US$ 0.15071 per share, to be paid out of net income earned in 2006.

10. Payment of provisional dividend : Reported December 27, 2006. The Board of Directors at its regular meeting of December 26, 2006 agreed to a provisional dividend amounting to US$ 0.21256 per share, to be paid out of net income earned in 2006.

11. Notice of the Extraordinary General Meeting of Shareholders to be held on January 26, 2007:Reported December 27, 2006. Announcement of a meeting to decide upon the proposal by the Board of Directors to increase the capital stock, part of which would be devoted to stock option plans as provided for in Article 24 of Law 18.046 (Chile Companies Act).

12. LAN announces financing to VRG Linhas Aereas S.A. : Reported January 31, 2007. The Board of Directors at its regular meeting of January 30, 2007 agreed to announce that LAN, through one of its related companies, (“LAN” or “the Company”) has provided a total of approximately US$ 17.1 million in financing to Brazilian company VRG LINHAS AEREAS S.A. (“New Varig”). These loans may be converted into shares of New Varig and if LAN were to exercise its option to convert the loans into stock, the Company would then have a minority stake in New Varig.

307

13. Notice of the Annual General Meeting of Shareholders to be held on April 5, 2007: Reported March 6, 2007. Lists the items of business at the meeting, including the payment of a definitive dividend.

14. Notice of the Extraordinary General Meeting of Shareholders to be held on April 5, 2007:Reported April 6, 2007. Announcement of a meeting to decide upon the proposal by the Board of Directors to annul the increase in capital by 7,500,000 payable shares, agreed upon by the Extraordinary Meeting of Shareholders that took place on January 26, 2007, increase the capital stock via the issuance of 22,090,910 payable shares, part of which would be devoted to remuneration plans as provided for in Article 24 of Law 18.046 (Chile Companies Act).

308

Related Party Transactions

Related parties performed the following transactions during 2006

Seller	Buyer	Shares

BCI Corredor de Bolsa S.A.	Leon Délano, Cristián	13,500
Inversiones Los Lagos S.A.	Inversiones L.L. S.A.	11,022,385
Inversiones Santa Blanca II S.A.	Inversiones S.B. S.A.	11,024,921
Leon Délano, Cristián	BCI Corredor de Bolsa S.A.	2,315
Inhen Aravena, Jorge Esteban	Valores Security S.A. Corredores de Bolsa	824
Banchile Corredores de Bolsa S.A.	Leon Délano, Cristián	13,815
Euroamérica Corredores de Bolsa S.A.	Inversiones y Asesorías Fabiola S.A.	25,000
Banchile Corredores de Bolsa S.A.	Inversiones Santa Cecilia S.A.	3,000,000
Leon, Délano, Cristián	BCI Corredor de Bolsa S.A.	11,185
Leon Délano, Cristián	Banchile Corredores de Bolsa S.A.	2,500
BCI Corredor de Bolsa S.A.	Leon Délano, Cristián	9,785
Inversiones Santa Blanca S.A.	Banchile Corredores de Bolsa S.A.	6,519,097
Inversiones L.L. S.A.	Banchile Corredores de Bolsa S.A.	11,022,385
Inversiones S.B. S.A.	Banchile Corredores de Bolsa S.A.	11,024,921
Comercial Los Lagos Limitada	Banchile Corredores de Bolsa S.A.	3,211,646
Banchile Corredores de Bolsa S.A.	Inversiones Andes S.A.	22,288,695
Inversiones Andes S.A.	Banchile Corredores de Bolsa S.A.	1,000,000
BCI Corredor de Bolsa S.A.	Leon Délano, Cristián	3,500

309

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 22, 2007

Lan Airlines S.A.

/s/ Alejandro de la Fuente Goic

Alejandro de la Fuente Goic

Chief Financial Officer

DESTACADOS / HIGHLIGHTS			4

CARTA DEL PRESIDENTE DEL DIRECTORIO / LETTER FROM THE CHAIRMAN OF THE BOARD			6

CARTA DEL VICEPRESIDENTE EJECUTIVO / LETTER FROM THE CEO			12

GOBIERNO CORPORATIVO / CORPORATE GOVERNANCE			18

LA EMPRESA / THE COMPANY			24

Historia de la Sociedad / History of the Company			25
Negocio de Pasajeros / Passenger Business			28
Negocio de Carga / Cargo Business			4 0
Flota, Mantenimiento y Operaciones / Fleet, Maintenance and Operations			48
Resultados Financieros / Financial Results			53

PERSONAS / HUMAN RESOURCES			64

NUESTRO COMPROMI SO SOCIAL / OUR SOCIAL COMMITMENT			70

INFORMACIÓN FINANCIERA CONSOLIDADA / CONSOLIDATED FINANCIAL INFORMATION			80

DECLARACIÓN JURADA / RESPONSIBILITY STATEMENT			91

Al 31 de diciembre / As of December 31	2001		2002		2003		2004		2005		2006
Ingresos pasajeros / Passenger revenues		803.0		803.7		918.4		1169.0		1460.6		1813.4
Ingresos carga / Cargo revenues		539.5		520.8		602.0		799.7		910.5		1072.7
Otros ingresos / Other revenues		85.8		127.9		118.4		124.2		135.3		147.9
Ingresos total / Total revenues		1,428.3		1,452.4		1,638.8		2,092.9		2,506.4		3,034.0
EBITDAR / EBITDAR1		248.6		289.7		323.5		382.0		370.3		583.1
EBITDA / EBITDA 2		102.2		129.9		184.3		249.5		222.1		425.4
Resultado operacional / Operating income		50.3		62.1		111.7		172.1		141.6		302.6
Utilidad neta del ejercicio / Net income		10.8		30.8		83.6		163.6		146.6		241.3
Utilidad neta por acción / Net income per common share (US$)		0.03		0.10		0.26		0.51		0.46		0.76
Total activos circulantes / Total current assets		335		415.8		499.2		652.4		579.2		706.3
Total activos fijos / Total fixed assets		985.8		1026.4		1009.5		979		1,252.3		1,876.0
Total otros activos / Total other assets		114.7		143.2		132.3		197.9		314.3		346.5
Total activos / Total assets		1,435.5		1,585.4		1,641.0		1,829.3		2,145.8		2,928.8
Total pasivos circulantes / Total current liabilities		422.6		459.2		581.9		582.0		684.4		876.3
Total pasivos a largo plazo / Total long-term liabilities		722.2		813.5		765.4		809		955.3		1421.9
Interés minoritario / Minority interest		2.2		3.9		4.1		3.7		3.4		4.3
Total patrimonio / Total shareholder’s equity		288.5		308.9		352.6		434.6		502.7		626.3
Total pasivos y patrimonio / Total liabilities and shareholder´s equity		1,435.5		1,585.4		1,641.0		1,829.3		2,145.8		2,928.8

Al 31 de diciembre / As of December 31	2001			2002			2003			2004			2005			2006

SISTEM A /SYSTEM

ATKs (millones / million) 3		4,237.1			4,281.8			4,539.2			5,256.2			5,810.8			6,349.8
RTKs (millones / million) 4		2,877.3			2,836.4			3,052.2			3,620.7			3,967.9			4,333.8
Factor de ocupación sistema / System load factor 5		67.9	%		66.2	%		67.2	%		68.9	%		68.3	%		68.3	%
Factor de ocupación de equilibrio / Break-even load factor		66.9	%		65.0	%		63.8	%		63.8	%		65.0	%		62.3	%
Yield (basado en RTKs -US¢ ) / Yield (based on RTKs -US¢)		46.66			46.70			49.81			54.37			59.76			66.59
Ingresos operacionales / ATK (US¢) / Operating revenue per ATK (US¢) 6		31.68			30.93			33.50			37.45			40.80			45.45
Costos operacionales / ATK (US¢) / Operating cost per ATK (US¢) 7		31.32			30.35			31.76			34.67			38.83			41.52
Precio promedio combustible (US$/galón) / Average fuel price (US$/gallon)		0.91			0.84			0.99			1.35			1.90			2.09
Número de aviones / Number of aircraft		60			56			55			63			72			80

PASAJEROS /PASSENGER

Pasajeros transportados (miles) / Passengers boarded (thousands)		5,236.4			5,316.5			5,509.1			6.578.9			7,966.9			8,881.3
ASKs (millones / million) 8		16,901.7			17,066.8			18,323.9			21,147.4			23,687.3			26,400.0
RPKs (millones / million) 9		11,279.8			11,139.5			12,671.0			15,125.3			17,490.8			19,495.5
Factor de ocupación (basado en ASKs) / Passenger load factor (based on ASKs)		66.7	%		65.3	%		69.1	%		71.5	%		73.8	%		73.8	%
Yield (basado en RPKs -US¢) / Yield (based on RPKs -US¢)		7.12			7.22			7.25			7.73			8.35			9.30
Ingreso por ASK (US¢) - Revenue per ASK (US¢)		4.75			4.71			5.01			5.53			6.17			6.87

CARGA /CARGO

Toneladas transportadas (miles) / Tons carried (thousands)		391.5			421.0			424.2			506.3			529.0			564.1
ATKs (millones / million)		2,676.4			2,731.0			2,848.7			3,288.4			3,599.7			3,861.3
RTKs (millones / million)		1,853.2			1,833.8			1,911.9			2,259.4			2,392.3			2,579.2
Factor de ocupación (basado en ATKs) / Cargo load factor (based on ATKs)		69.2	%		67.1	%		67.1	%		68.7	%		66.5	%		66.8	%
Yield (basado en RTKs -US¢) / Yield (based on RTKs -US¢)		29.11			28.40			31.49			35.39			38.06			41.59
Ingreso por ATK (US¢) - Revenue per ATK (US¢)		20.16			19.07			21.13			24.32			25.29			27.78

Ejecutivos / *Executives*		Posición / *Position*
Enrique Cueto Plaza		Vicepresidente Ejecutivo LAN / CEO LAN
Ignacio Cueto Plaza		Gerente General LAN / President and COO LAN
Armando Valdivieso Montes		Gerente General Pasajeros / CEO Passenger
Cristián Ureta Larraín		Gerente General Carga / CEO Cargo
Alejandro de la Fuente Goic		Vicepresidente Finanzas Corporativas / Chief Financial Officer
Marco Jofré Marín		Vicepresidente Técnico / Senior Vice President Operations, Engineering and Maintenance
Carlos Prado Cánepa		Vicepresidente Negocios Corporativos / Senior Vice President Corporate Investment
Emilio del Real Sota		Vicepresidente Personas / Senior Vice President Human Resources
Enrique Elsaca Hirmas		Vicepresidente Planificación Estratégica / Senior Vice President Strategic Planning

	2006					2005
	Acciones		% del Total			Acciones		% del Total
Principales Accionistas / *Main Shareholders*	*Shares*		*% of Total*			*Shares*		*% of Total*
INV COSTA VERDE LTDA. Y CIA. EN COMANDITA POR ACCIONES		86,133,567		27.0	%		86,133,567		27.0	%
AXXION S.A.		65,827,874		20.6	%		65,827,874		20.6	%
THE BANK OF NEW YORK		43,542,425		13.7	%		52,999,770		16.6	%
INVERSIONES SANTA CECILIA S.A.		23,417,920		7.3	%		20,417,920		6.4	%
INVERSIONES ANDES S.A.		21,288,695		6.7	%		-		-
BOLSA ELECTRONICA DE CHILE BOLSA DE VALORES		10,862,175		3.4	%		146,770		0.0	%
TRES MARES S.A.		6,590,598		2.1	%		15,090,598		4.7	%
LARRAIN VIAL S.A. CORREDORA DE BOLSA		5,241,616		1.6	%		7,266,200		2.3	%
CELFIN CAPITAL S.A. CORREDORES DE BOLSA		3,450,017		1.1	%		1,170,235		0.4	%
SERGIO REISS GREENWOOD		3,338,858		1.0	%		3,121,906		1.0	%
URETA Y BIANCHI CORREDORES DE BOLSA S.A.		2,690,419		0.8	%		38,352		0.0	%
INVERSIONES Y ASESORIAS ICULPE LTDA.		2,654,325		0.8	%		2,654,325		0.8	%

Jorge Awad Mehech		Presidente/Chairman
Dario Calderón González		Director
José Cox Donoso		Director
Juan José Cueto Plaza		Director
Juan Cueto Sierra		Director
Ramón Eblen Kadis		Director
Bernardo Fontaine Talavera		Director
Andrés Navarro Haeussler		Director
Sebastián Piñera Echenique		Director

Primer vuelo	1929	First flight
Primer vuelo a Argentina	1946	First flight to Argentina
Primer vuelo a Estados Unidos	1958	First flight to the United States
Primeros aviones Jet	1964	First Jet Aircraft
Primer vuelo a Europa	1970	First flight to Europe
Privatización	1989	Privatized
Adquirida por los actuales accionistas mayoritarios	1994	Acquired by current majority shareholders
Listada en la Bolsa de Comercio de Nueva York (“LFL”)	1997	Listed on the New York Stock Exchange (“LFL”)
Inicio del programa de renovación de flota de Carga	1998	Initiation of Boeing 767 freighter fleet replacement
Boeing 767		program
Alianza con American Airlines	1999	Alliance with American Airlines
Lanzamiento de LAN Perú		Launch of LAN Peru
Incorporación a oneworld	2000	Incorporation into *one*world
Inicio del programa de renovación de flota de pasajeros		Initiation of Airbus passenger fleet renewal program
Airbus que incluye 27 aviones		including 27 aircraft
Alianza con Iberia	2001	Alliance with Iberia
Inauguración del terminal de carga en Miami		Inauguration of Miami Cargo facility
Alianza con Qantas	2002	Alliance with Qantas
Alianza con Lufthansa Cargo		Alliance with Lufthansa Cargo
Lanzamiento LAN Ecuador	2003	Launch of LAN Ecuador
Cambio de imagen corporativa: LAN Airlines S.A (“LAN”)	2004	Change in corporate image: LAN Airlines S.A. (“LAN”)
Lanzamiento LAN Argentina	2005	Launch of LAN Argentina
Aprobación órdenes de compra por 44 aviones		Approval of purchase orders for 44 aircraft
Lanzamiento nueva clase Premium Business	2006	Launch of new Premium Business Class

		Airbus A340-300 Longitud / Length: 63,7 m (208 feet 11 inches) Envergadura / Width: 60,3 m (197 feet 10 inches) Asientos / Seats: 5F - 36J - 222Y

		Boeing 767-300 ER /F Longitud / Length: 54,2 m (178 feet) Envergadura / Width: 47,6 m (156 feet 2 inches) Asientos / Seats: 5F - 28J - 181Y Asientos / Seats: 30J - 191Y (Versión Pasajeros / Passenger Version) Capacidad / Payload: 54 tons (Versión Carguero / Freighter Version)

		Airbus A320-20 0 Longitud / Length: 37,57 m (123 feet 3 inches) Envergadura / Width: 34,1 m (111 feet 10 inches) Asientos / Seats: 12J - 144Y / 156Y

		Airbus A319-100 Longitud / Length: 33,8 m (110 feet 11 inches) Envergadura / Width: 34,1 m (111 feet 10 inches) Asientos / Seats: 144Y

		Boeing 737-200 Longitud / Length: 30,53 m (100 feet 2 inches) Envergadura / Width: 28,35 m (93 feet 7 inches) Asientos / Seats: 120Y

	Al 31 de diciembre de 2006
	Arrendados		Propios		Total
Pasajros
Boeing 737-200		10		6		16
Airbus A319-100		5		10		15
Airbus A320 -200		11		4		15
Boeing 767-300		13		7		20
Airbus A340 -300		4		0		4
TOTAL		43		27		70

Carga
Boeing 737-200C		0		1		1
Boeing 767-300F		1		8		9
TOTAL		1		9		10

TOTAL FLOTA		44		36		80

	2006		2005
Administración / Administrative		2,928		3,222
Mantenimiento / Maintenance		1,892		1,977
Operaciones / Operations		4,826		4,727
Tripulantes de Cabina / Cabin Crew		2,043		2,101
Tripulantes de Mando / Cockpit Crew		1,029		1,015
Ventas / Sales		1,906		2,057
Total		14,624		15,099

	Por los ejercicios terminados Al 31 de diciembre
	2006			2005
	MUS$			MUS$

Resultado de Explotación		302.622			141.636

Margen de Explotación		1.222.895			939.744

Ingresos de explotación		3.033.960			2.506.353
Costos de explotación (menos)		(1.811.065	)		(1.566.609	)
Gastos de administración y ventas (menos)		(920.273	)		(798.108	)

Resultado Fuera de Explotación		(15.734	)		31.460

Ingresos fi nancieros		7.897			12.426
Utilidad inversiones empresas relacionadas		598			583
Otros ingresos fuera de la explotación		57.096			56.510
Amortización menor valor de inversiones (menos)		(3.323	)		(3.225	)
Gastos fi nancieros (menos)		(60.739	)		(39.191	)
Otros egresos fuera de la explotación (menos)		(22.938	)		(1.913	)
Corrección monetaria		139			266
Diferencias de cambio		5.536			6.004

Resultado antes de Impuesto a la Renta e Itemes Extraordinarios		286.888			173.096

Impuesto a la renta		(46.837	)		(28.258	)

Utilidad (Pérdida ) antes de Interés Minoritario		240.051			144.838

Interés Minoritario		1.244			1.754

Utilidad (Pérdida ) Líquida		241.295			146.592

Amortización mayor valor de inversiones		5			9

Utilidad del Ejercicio		241.300			146.601

	For the years ended December 31,
	2006			2005			2004
	(In thousands of US$)
REVENUES
Passenger		1,813,373			1,460,584			1,169,049
Cargo		1,072,730			910,453			799,656
Other		147,857			135,316			124,240
Total operating revenues		3,033,960			2,506,353			2,092,945

EXPENSES
Wages and benefits		(442,967	)		(371,596	)		(292,823	)
Aircraft fuel		(763,951	)		(642,696	)		(414,539	)
Commissions to agents		(403,899	)		(345,387	)		(291,693	)
Depreciation and amortization		(122,802	)		(80,456	)		(77,443	)
Passenger services		(56,077	)		(53,176	)		(44,992	)
Aircraft rentals		(157,681	)		(148,202	)		(132,425	)
Aircraft maintenance		(117,206	)		(132,198	)		(120,818	)
Other rentals and landing fees		(336,821	)		(301,544	)		(287,842	)
Other operating expenses		(329,934	)		(289,462	)		(258,270	)
Total operating expenses		(2,731,338	)		(2,364,717	)		(1,920,845	)

Operating income		302,622			141,636			172,100

OTHER INCOME AND EXPENSES
Interest income		7,897			12,426			10,830
Interest expense		(60,739	)		(39,191	)		(36,459	)
Other income - net		37,113			58,234			45,162
Total other income (expense)		(15,729	)		31,469			19,533

Income before minority interest		286,893			173,105			191,633
Minority interest		1,244			1,754			212
Income before income taxes		288,137			174,859			191,845
Income taxes		(46,837	)		(28,258	)		(28,293	)

NET INCOME		241,300			146,601			163,552

	PricewaterhouseCoopers RUT:81.513.400-1
INFORME DE LOS AUDITORES INDEPENDIENTES	Santiago de Chile
	Av. Andrés Bello 2711
	Torre Costanera - Pisos 2, 3, 4 y 5 Las Condes
	Teléfono [56] (2) 940 0000

			Por los ejercicios terminados Al 31 de diciembre
			2006			2005
	NOTA		MUS$			MUS$

Resultado de Explotación				302.622			141.636

Margen de Explotación				1.222.895			939.744

Ingresos de explotación				3.033.960			2.506.353
Costos de explotación (menos)				(1.811.065	)		(1.566.609	)
Gastos de administración y ventas (menos)				(920.273	)		(798.108	)

Resultado Fuera de Explotación				(15.734	)		31.460

Ingresos financieros				7.897			12.426
Utilidad inversiones empresas relacionadas		Nota 12		598			583
Otros ingresos fuera de la explotación		Nota 21		57.096			56.510
Amortización menor valor de inversiones (menos)		Nota 13		(3.323	)		(3.225	)
Gastos financieros (menos)				(60.739	)		(39.191	)
Otros egresos fuera de la explotación (menos)		Nota 21		(22.938	)		(1.913	)
Corrección monetaria		Nota 22		139			266
Diferencias de cambio		Nota 23		5.536			6.004

Resultado antes de Impuesto a la Renta e Itemes				286.888			173.096
Extraordinarios

Impuesto a la renta		Nota 08		(46.837	)		(28.258	)

Utilidad (Pérdida) antes Interés Minoritario				240.051			144.838

Interés Minoritario		Nota 19		1.244			1.754

Utilidad (Pérdida) Líquida				241.295			146.592

Amortización mayor valor de inversiones		Nota 13		5			9

Utilidad (Pérdida) del Ejercicio				241.300			146.601

		Porcentaje de participación
		31-12-2006			31-12-2005
RUT	Nombre Sociedad		Directo	Indirecto		Total	Total
96518860-6	Comercial Masterhouse S.A.		99,9900	0,0100		100,0000	100,0000
96763900-1	Inmobiliaria Aeronáutica S.A.		99,0100	0,9900		100,0000	100,0000
96967400-9	LAN Card S.A.		99,0000	1,0000		100,0000	100,0000
96969680-0	LAN Pax Group S.A. y Filiales		99,8361	0,1639		100,0000	100,0000
96969670-3	LAN Cargo Group S.A.		99,0000	1,0000		100,0000	100,0000
96969690-8	Línea Aérea Nacional Chile S.A.		99,0000	1,0000		100,0000	100,0000
78074340-9	Sistemas de Distribución Amadeus Chile S.A.		50,0000	50,0000		100,0000	100,0000
Extranjera	LAN Perú S.A.		49,0000	21,0000		70,0000	70,0000
96801150-2	LAN Courier S.A.		0,0000	100,0000		100,0000	100,0000
96938840-5	LAN Courier Staff S.A.		0,0000	100,0000		100,0000	100,0000
Extranjera	LAN Chile Investments Limited y Filiales		99,9900	0,0100		100,0000	100,0000
93383000-4	LAN Cargo S.A.		99,8939	0,0041		99,8980	99,8928
Extranjera	South Florida Air Cargo Inc.		0,0000	100,0000		100,0000	100,0000
Extranjera	Prime Airport Services Inc.		0,0000	100,0000		100,0000	100,0000
96951280-7	Transporte Aéreo S.A.		0,0000	100,0000		100,0000	100,0000
96634020-7	Ediciones Ladeco América S.A.		0,0000	100,0000		100,0000	100,0000
Extranjera	Consorcio Fast Air Almacenes de Carga S.A. - Laser Cargo		0,0000	100,0000		100,0000	100,0000
Extranjera	Aircraft International Leasing Limited		0,0000	100,0000		100,0000	100,0000
96631520-2	Fast Air Almacenes de Carga S.A.		0,0000	100,0000		100,0000	100,0000
96631410-9	Ladeco Cargo S.A.		0,0000	100,0000		100,0000	100,0000
Extranjera	Laser Cargo S.R.L.		0,0000	100,0000		100,0000	100,0000
78005760-2	Sociedad de Seguridad Aérea S.A.		0,0000	90,0000		90,0000	90,0000
96854560-4	Terminal de Exportación Internacional. S.A.		0,0000	100,0000		100,0000	100,0000
Extranjera	LanLogistics, Corp. y Filiales		0,0000	100,0000		100,0000	100,0000
Extranjera	LAN Cargo Overseas Limited y Filiales		0,0000	100,0000		100,0000	100,0000
96575810-0	Inversiones LAN S.A.		99,7100	0,0000		99,7100	99,7100
96577310-K	Andes Airport Services S.A.		0,0000	100,0000		100,0000	100,0000
96645970-0	Transportes LAN Chile S.A.		0,0100	99,9900		100,0000	100,0000

	31.12.06		31.12.05
	Por dólar		Por dólar
	Estadounidense		Estadounidense
Peso chileno		532,39		512,50
Unidad de fomento (Chile)		0,03		0,03
Peso argentino		3,06		3,03
Real brasileño		2,14		2,34
Nuevo sol peruano		3,20		3,42
Dólar australiano		1,27		1,36
Franco polinésico		90,69		101,27
Bolívar venezolano		2.144,60		2.144,60
Boliviano		7,94		7,95
Peso uruguayo		24,42		23,50
Peso mexicano		10,80		10,61
Dólar canadiense		1,16		1,16
Corona danesa		5,65		6,31
Guaraní paraguayo		5.130,00		6.050,00
Peso colombiano		2.239,00		2.285,05
Yen japonés		119,09		118,04
Dólar neozelandés		1,42		1,47
Euro (Comunidad europea)		0,76		0,85
Peso Dominicano		33,51		34,70

	Valor Contable
	2005		2006
Instrumentos		MUS$		MUS$

Bonos		20.415		47.964

Cuotas de fondos mutuos		39.654		65.019

Total Valores Negociables		60.069		112.983

	Valor						Contable				Valor de
	Fecha		Fecha		Valor Par		Monto				Mercado		Provisión
Instrumento		Compra		Vencimiento		MUS$		MUS$	Tas MUS$			MUS$		MUS$
Bonos nacionales		10- 09-2004		28-11-2007		3.767		3.745	7,45	%		3.746		-
Bonos extranjeros		13-12-2004		30- 09-2007		16.689		16.670	7,07	%		16.873		-

	Circulantes														Largo plazo
	Hasta 90 días				Mas de 90 hasta 1 año				Subtotal		Total Circulante (neto)
	2006		2005		2006		2005		2006		2006		2005		2006		2005
Rubro		MUS$		MUS$		MUS$		MUS$		MUS$		MUS$		MUS$		MUS$		MUS$
Deudores por Ventas		241.037		182.355		13.561		11.640		254.598		235.263		178.242		-		-
Est.deud.incobrables		-		-		-		-		19.335		-		-		-		-
Doctos. por cobrar		13.348		13.399		1.829		1.661		15.177		6.148		5.013		-		-
Est.deud.incobrables		-		-		-		-		9.029		-		-		-		-
Deudores varios		24.148		41.382		90.953		85.431		115.101		115.101		126.813		28.915		9.756
Est.deud.incobrables		-		-		-		-		-		-		-		-		-
Total deudores largo plazo																28.915		9.756

En Chile	5.938	96,58	4.807	95,89	-	-	-	-
En el exterior	210	3,42	206	4,11	-	-	-	-
Total	6.148	100,00	5.013	100,00	-	-	-	-

Anticipo Aviones (1)	91.234	79,26	104.345	82,28	-	-	-	-
Cuentas corrientes personal	5.246	4,56	4.728	3,73	3.436	11,88	2.328	23,86
Anticipo a proveedores	5.002	4,35	3.351	2,64	-	-	-	-
Cobertura de combustible por	1.008	0,87	1.021	0,81	-	-	-	-
recuperar
Deudores cobranding y LAN Pass	870	0,76	1.138	0,90	-	-	-	-
Deudores por devolución de aviones (2)	817	0,71	411	0,32	2.479	8,57	2.885	29,57
Deudores por venta activos	-	-	800	0,63	-	-	-	-
Albatros Leasing LLC (3)	-	-	-	-	4.341	15,02	4.341	44,50
Otros (4)	10.924	9,49	11.019	8,69	18.659	64,53	202	2,07
Total	115.101	100,00	126.813	100,00	28.915	100,00	9.756	100,00

	2006								2005
	Impuesto Diferido Activo				Impuesto Diferido Pasivo				Impuesto Diferido Activo				Impuesto Diferido Pasivo
	Corto plazo		Largo plazo		Corto plazo		Largo plazo		Corto plazo		Largo plazo		Corto plazo		Largo plazo
Conceptos	MUS$		MUS$		MUS$		MUS$		MUS$		MUS$		MUS$		MUS$


Diferencias Temporarias
Provisión cuentas incobrables		4.429		65		-		-		4.073		-		-		-
Provisión de vacaciones		2.099		1.203		-		-		1.636		1.096		-		-
Amortización intangibles		53		360		-		271		390		66		-		-
Activos en leasing		-		-		-		23.032		171		657		-		15.856
Depreciación Activo Fijo		-		-		-		104.596		-		-		-		90.232
Otros eventos		3.762		10.134		182		-		3.952		121		-		-
Provisión obsolescencia		2.960		-		-		-		4.593		-		-		-
Pérdidas tributarias acumuladas		2		31.338		-		-		8		33.274		-		-
Comisiones activadas		-		-		1.589		-		-		-		1.518		-
Caducidad de pasajes		-		-		-		16.198		-		-		-		16.295
Gastos activados		-		-		3.454		1.320		-		-		3.037		1.545
Intereses activados de aeronaves		-		-		-		10.672		-		-		-		6.962
Provisión desahucio		3		660		-		-		-		-		-		-
Provisión de mantenimiento		-		449		-		11.625		-		-		-		-
Otros
Cuentas complementarias-neto de		-		-		-		8.645		-		393		-		8.883
amortización
Provisión de valuación		1.648		12.026		-		-		2.598		8.390		-		-


Totales		11.660		32.183		5.225		159.069		12.225		26.431		4.555		122.007

2006	2005	Aeronave	Modelo	Uso
6	10	Boeing 737	200ADV	Pasajero
1	1	Boeing 737	200ADV	Carguero
7	3	Boeing 767	300ER	Pasajero
8	7	Boeing 767	300F	Carguero
1	1	Boeing 767	200ER	Pasajero (*)
10	2	Airbus A319	100	Pasajero
4	4	Airbus A320	200	Pasajero
37	28	Total Flota Propia

					Moneda control		Nro.		Porcentaje de				Patrimonio Sociedades						Resultado del Ejercicio				Resultado Devengado				VP / VPP				Valor contable de la Inversión
			País de		de la		Sociedades		Participación				2006			2005			2006		2005		2006		2005		2006		2005		2006		2005
RUT	Sociedad		origen		inversión		acciones		2006		2005		MUS$			MUS$			MUS$		MUS$		MUS$		MUS$		MUS$		MUS$		MUS$		MUS$
96921070-3		Austral Sociedad		Chile		-		352		20,00000		20,00000		4.431			4.397			864		867		173		173		886		879		886		879
		Concesionaria S.A.

96847880-K		Lufthansa LAN Technical		Chile		-		50		50,00000		50,00000		1.217			1.142			392		304		196		152		609		571		609		571
		Training S.A .

96778310-2		Concesionaria		Chile		-		167		16,00000		16,00000		1.499			701			808		959		135		160		250		117		250		117
		Chucumata S.A.

Extranjera		Choice Air Courier del Perú S.A.		Perú		Dólar		118.054		50,00000		50,00000		200			164			36		38		18		19		100		82		100		82

Extranjera		Florida West		E.E.U.U.		Dólar		250		25,00000		25,00000		(200	)		(512	)		304		316		76		79		-		-		-		-
		International Airways Inc.
Totales																												1.845		1.649		1.845		1.649

		Tipos de Monedas e Indice de Reajuste
		Dólares						Otras monedas extranjeras				Totales
Rut	Banco o Institución Financiera	2006 MUS$			2005 MUS$			2006 MUS$		2005 MUS$		2006 MUS$		2005 MUS$
Extranjera	ING		26.519			19.008			-		-		26.519		19.008
Extranjera	Calyon		16.951			16.247			-		-		16.951		16.247
Extranjera	Private Export Funding Corporation		30.898			10.995			-		-		30.898		10.995
Extranjera	Citibank (Crédito Sindicado)		-			6.703			-		-		-		6.703
97032000-8	BBVA		566			151			-		-		566		151
Extranjera	BNP Paribas		14.843			-			-		-		14.843		-
Extranjera	ABN’ Amro		106			-			-		-		106		-
	Totales		89.883			53.104			-		-		89.883		53.104
	Monto capital adeudado		82.428			48.624			-		-		82.428		48.624
	Tasa int. prom. anual		5,3131	%		L+1,0083	%		-		-		-		-

			Interés Minoritario del Pasivo
			2006		2005
RUT	Empresa		MUS$		MUS$

Extranjera		LAN Cargo Overseas Limited		2.018		1.853
Extranjera		LAN Perú S.A.		1.940		1.253
93.383.000- 4		LAN Cargo S.A.		260		170
Extranjera		LanLogistics, Corp.		82		85
96.575.810- 0		Inversiones LAN S.A.		9		20
78.005.760-2		Sociedad de Seguridad Aérea S.A.		2		(8	)
		Total		4.311		3.373

			Interés Minoritario del Resultado
RUT	Empresa		2006 MUS$			2005 MUS$
96.969.680- 0		LAN Pax Group S.A.		1.970			2.443
Extranjera		LAN Investment Limited		268			-
96.575.810- 0		Inversiones LAN S.A.		11			3
Extranjera		LAN Perú S.A.		(686	)		(573	)
Extranjera		LAN Cargo Overseas Limited		(165	)		(111	)
93.383.000- 4		LAN Cargo S.A.		(105	)		(21	)
Extranjera		LanLogistics, Corp.		(39	)		(15	)
78.005.760-2		Sociedad de Seguridad Aérea S.A.		(10	)		28
		Total		1.244			1.754

	Moneda MUS$		2006 MUS$			2005
Pasivos (cargos) / abonos
Obligaciones con bancos e instituciones financieras a corto plazo		Peso argentino		124			148
Obligaciones con bancos e instituciones financieras a corto plazo		Dólar		-			235
Obligaciones con bancos e instituciones financieras largo plazo porción corto plazo		$ No reajustable		2			-
Obligaciones largo plazo con vencimiento dentro de un año		$ Reajustable		-			(8	)
Dividendos por pagar		Dólar		-			(1	)
Cuentas por pagar		Euro		(38	)		216
Cuentas por pagar		Real brasileño		(169	)		(123	)
Cuentas por pagar		Peso argentino		77			(190	)
Cuentas por pagar		Peso mexicano		28			(102	)
Cuentas por pagar		$ No reajustable		1.986			(2.928	)
Cuentas por pagar		Otras monedas		(1.250	)		256
Documentos por pagar		Otras monedas		-			(10	)
Acreedores varios		$ No reajustable		-			(2	)
Acreedores varios		Otras monedas		-			2
Documentos y cuentas por pagar EE.RR.		$ No reajustable		(3	)		(193	)
Provisiones		Real brasileño		(103	)		(147	)
Provisiones		$ No reajustable		(48	)		(402	)
Provisiones		Otras monedas		(156	)		55
Retenciones		Peso argentino		(57	)		(86	)
Retenciones		$ No reajustable		(8	)		(896	)
Retenciones		Otras monedas		137			5
Impuesto a la renta		Peso mexicano		3			(6	)
Impuesto a la renta		Otras monedas		(32	)		(1	)
Ingresos percibidos por adelantado		$ No reajustable		6.892			4.038
Ingresos percibidos por adelantado		Otras monedas		(134	)		862
Otros pasivos circulantes		$ No reajustable		1			(2	)
Otros pasivos circulantes		Otras monedas		(8	)		(2	)
Provisiones largo plazo		Real brasileño		(127	)		(321	)
Provisiones largo plazo		Peso argentino		4			15
Provisiones largo plazo		$ No reajustable		59			(468	)
Provisiones largo plazo		Otras monedas		(77	)		43
Impuesto diferido a largo plazo		Otras monedas		30			(82	)
Otros pasivos largo plazo		Otras monedas		16			12
Total (cargos) abonos				7.149			(83	)
(Pérdida) Utilidad por diferencias de cambio				5.536			6.004

	2006 MUS$		2005 MUS$
Securitization (1)		11.817		12.908
Total		11.817		12.908

Sociedad	Tribuna	N° Rol de la causa	Origen	Etapa procesal e instancia	Montos Comprometidos MUS$
Aerolíneas Brasileiras S.A .	Secretaría da Fazenda del Estado de Río de Janeiro	2003	La autoridad administrativa de Rio de Janeiro, Brasil , notificó de un auto de infracción o multa por el supuesto no pago de ICMS (IVA) por importación de aeronave B-767 matrícula PR-ABB.	Pendiente resolución de la junta de revisores para la anulación de la multa.	3.000

LAN Airlines S.A.	4º Juzgado Civil de Santiago de Chile	4831-97	Demanda de indemnización de perjuicios interpuesta por Aerovías DAP/ Alex y Andrés Pivcevic R.	Pendiente que el Tribunal proceda a liquidar el crédito y se efectúe la notificación del cumplimiento del fallo de autos.	138

LAN Airlines S.A.	Comercial 14 Sec.28, Argentina	108210 / 99	Demanda daños y perjuicios.	Rechazado recurso extraordinario de los demandantes y pendiente recurso de queja.	249

LAN Airlines S.A.	6° Juzgado Laboral de Santiago de Chile	141- 00	Demanda por supuesto incumplimiento en períodos de servicio de vuelo	Pendiente apelación ante Corte de Apelaciones	Indeterminado
		.
LAN Airlines S.A.	4° Juzgado Laboral de Santiago de Chile	3576-2003	Demanda presentada por el Sindicato de Trabajadores de LAN Airlines S.A. por gratificaciones correspondientes a los ejercicios 1998, 1999, 2000, 2001, 2002.	Pendiente cumplimiento y liquidación por parte de SII.	Indeterminado

LAN Cargo S.A.	Departamento Justicia USA y	-	Investigación por supuestas prácticas anticompetitivas aerolíneas cargueras	Investigación Pendiente..	Indeterminado
	Comisión Europea		especialmente sobrecargo de combustible (Fuel Surcharge).




LAN Airlines S.A.	Tribunal competente para conocer acciones de clase	-	Como consecuencia de la investigación por supuestas prácticas anticompetitivas aerolíneas cargueras especialmente sobrecargo de combustible (Fuel Surcharge).	Presentadas acciones de clase.	Indeterminado

LAN Cargo S.A.	Tribunal competente para conocer acciones de clase	-	Como consecuencia de la investigación por supuestas prácticas anticompetitivas aerolíneas cargueras especialmente sobrecargo de combustible (Fuel Surcharge).	Presentadas acciones de clase.	Indeterminado

Rubro	Moneda	2006 MUS$	2005 MUS$
Activos circulantes
Disponible	Dólar	5.028	3.986
Disponible	$No reajustable	2.345	3.322
Disponible	Peso argentino	896	1.252
Disponible	Euro	5	634
Disponible	Real brasileño	691	565
Disponible	Otras monedas	600	1.974
Depósitos a plazo	Dólar	96.589	27.703
Depósitos a plazo	$Reajustable	39.875	-
Depósitos a plazo	Euro	1.253	-
Depósitos a plazo	Real brasileño	531	253
Depósitos a plazo	Nuevo sol	-	373
Depósitos a plazo	Otras monedas	10.729	6.190
Valores negociables	Dólar	53.220	103.230
Valores negociables	$Reajustable	4.754	5.850
Valores negociables	Peso argentino	1.502	3.247
Valores negociables	Euro	593	656
Deudores por venta	Dólar	131.844	116.339
Deudores por venta	$No reajustable	45.966	36.575
Deudores por venta	Euro	16.523	8.154
Deudores por venta	Real brasileño	12.159	5.259
Deudores por venta	Peso argentino	10.386	2.124
Deudores por venta	Peso colombiano	9.866	2.673
Deudores por venta	Dólar australiano	2.601	970
Deudores por venta	Otras monedas	5.918	6.148
Documentos por cobrar	$No reajustable	4.991	4.091
Documentos por cobrar	Euro	355	260
Documentos por cobrar	Dólar	192	171
Documentos por cobrar	Real brasileño	164	107
Documentos por cobrar	Peso argentino	13	168
Documentos por cobrar	Otras monedas	433	216
Deudores varios	Dólar	103.966	116.798
Deudores varios	$No reajustable	4.016	4.622
Deudores varios	$Reajustable	2.853	2.102
Deudores varios	Real brasileño	1.703	1.180
Deudores varios	Euro	995	313
Deudores varios	Nuevo sol	639	497
Deudores varios	Peso argentino	347	203
Deudores varios	Otras monedas	582	1.098
Documentos y cuentas por cobrar EE.RR. largo plazo	Dólar	4.602	304
Documentos y cuentas por cobrar EE.RR. largo plazo	$No reajustable	163	595
Existencias	Dólar	45.576	37.182
Existencias	$Reajustable	1.251	101
Impuestos por recuperar	$Reajustable	10.653	9.103
Impuestos por recuperar	Peso argentino	9.711	5.523
Impuestos por recuperar	Dólar	6.158	5.049
Impuestos por recuperar	Peso mexicano	2.321	1.748
Impuestos por recuperar	Real brasileño	971	2.111
Impuestos por recuperar	Otras monedas	4.234	773
Gastos pagados por anticipado	Dólar	23.854	23.234
Gastos pagados por anticipado	$No reajustable	2.044	729
Gastos pagados por anticipado	Otras monedas	888	315
Impuestos diferidos	Dólar	4.289	5.272
Impuestos diferidos	Peso mexicano	1.049	1.066
Impuestos diferidos	Nuevo sol	795	1.054
Impuestos diferidos	$Reajustable	302	278
Otros activos circulantes	Dólar	11.718	12.935
Otros activos circulantes	Euro	227	118
Otros activos circulantes	$No reajustable	87	72
Otros activos circulantes	$Reajustable	81	124
Otros activos circulantes	Otras monedas	211	72

Dólar	275.098	220.212	271.264	176.000
$ No reajustable	5.249	67	30	-
Real brasileño	1.425	-	-	-
Nuevo sol	933	3.452	-	-
Peso mexicano	201	-	-	-
Otras monedas	1.351	-	-	-

	31-12-2006		30- 09-2006		31-12-2005		30- 09-2005
- Indices de liquidez

Liquidez corriente (veces)
(Activo circulante /pasivo circulante)		0,81		0,82		0,85		0,98

Razón ácida (veces)
(fondos disponibles /pasivo circulante)		0,25		0,18		0,23		0,24

- Indices de endeudamiento

Razón de endeudamiento (veces)
(Pasivo circulante + Pasivo largo plazo /Patrimonio)		3,67		3,30		3,26		2,99

Deuda corto plazo / Deuda total (%)		38,13		36,04		41,66		42,71

Deuda largo plazo / Deuda total (%)		61,87		63,96		58,34		57,29

Cobertura gastos financieros
(R.A.I.I. / gastos financieros)		6,43		5,71		7,47		7,46

- Indices de actividad

Total de activos		2.928.789		2.585.393		2.143.619		1.948.048
Inversiones		786.655		582.648		354.093		183.866
Enajenaciones		9.006		8.758		2.067		825

Rotación de inventario
(Costo venta / Inventario Promedio)		43,06		31,09		43,15		31,22

Permanencia de inventarios
(Inventario promedio / costo venta * 360)		8,36		11,58		8,34		11,53

- Indices de rentabilidad

Rentabilidad del patrimonio
(Utilidad neta /Patrimonio promedio)		0,43		0,27		0,31		0,21

Rentabilidad del activo
(Utilidad neta / activos promedio)		0,10		0,07		0,07		0,05

Rendimiento activos operacionales
(Resultado operacional / Activos operacionales promedio)		0,12		0,07		0,07		0,05

Considerando activos operacionales al total de activos menos impuestos diferidos, cuentas corrientes del personal, inversiones permanentes y temporales, mayor valor de inversión y menor valor de inversión.

Utilidad por acción
(Utilidad del ejercicio / n° acciones suscritas y pagadas)		0,76		0,46		0,46		0,30

Retorno de dividendos
(Dividendos pagados / precio de mercado)		0,02		0,03		0,02		0,04

PricewaterhouseCoopers	RUT:81.513.400-1
	INFORME DE LOS AUDITORES INDEPENDIENTES Santiago de Chile
	Av. Andrés Bello 2711
	Torre Costanera - Pisos 2, 3, 4 y 5
	Las Condes
	Teléfono [56] (2) 940 0000

			Por los ejercicios terminados Al 31 de diciembre
			2006			2005
	NOTA		MUS$			MUS$

Resultado de Explotación				202.206			127.557

Margen de Explotación				844.347			687.979

Ingresos de explotación				1.930.196			1.776.184
Costos de explotación (menos)				(1.085.849	)		(1.088.205	)
Gastos de administración y ventas (menos)				(642.141	)		(560.422	)

Resultado Fuera de Explotación				74.333			44.055

Ingresos financieros				18.826			15.033
Utilidad inversiones empresas relacionadas		Nota 12		110.419			26.137
Otros ingresos fuera de la explotación		Nota 20		26.287			39.580
Pérdida inversión empresas relacionadas (menos)		Nota 12		(18.903	)		(8.881	)
Amortización menor valor de inversiones (menos)		Nota 13		(1.810	)		(1.810	)
Gastos financieros (menos)				(51.245	)		(31.999	)
Otros egresos fuera de la explotación (menos)		Nota 20		(15.714	)		(369	)
Corrección monetaria		Nota 21		189			300
Diferencias de cambio		Nota 22		6.284			6.064

Resultado antes de Impuesto a la Renta e Itemes				276.539			171.612
Extraordinarios

Impuesto a la renta		Nota 08		(35.239	)		(25.011	)

Utilidad (Pérdida) antes Interés Minoritario				241.300			146.601

Interés Minoritario				-			-

Utilidad (Pérdida) Líquida				241.300			146.601

Amortización mayor valor de inversiones				-			-

Utilidad (Pérdida) del Ejercicio				241.300			146.601