LAN Argentina Sociedad Anónima

Notes on the Financial Statements (Cont.)

As of December 31, 2010 and 2009

NOTE 2 - ACCOUNTING STANDARDS (Cont.)

2.5. Valuation criteria (Cont.)

k) Minimum expected income tax

The Company calculates the minimum expected corporate income tax by applying the current rate of 1% to assets calculable as of the date of closure of the accounting period. This tax is complimentary to the corporate income tax. The Company’s fiscal liability during each accounting period is whichever of the taxes is greater. Nonetheless, if during one accounting period the minimum expected income tax exceeds the corporate income tax, this difference may be entered into accounts as a payment on account of any corporate income tax that may become payable during any of the following ten accounting periods.

1) Contingent provisions

-Bad debt: calculated as a global monthly provision of 0.2% of sales.

-For miscellaneous risks and contingencies: a contingent provision has been constituted in order to cover labor, commercial, and other miscellaneous contingent risks that may lead to liabilities affecting the Company. The sums involved and probability of realization have been determined taking into account the opinion of the Company's legal advisors.

As of the date of issue of these financial statements, the Management of the Company understands that no information exists that could render foreseeable the realization of other contingencies that could generate a negative impact on the financial statements.

m) Income recognition policy

Service revenue for sale of passenger tickets and cargo services are recognized when the service is effectively rendered, and the Company therefore recognizes a liability for tickets sold and not yet flown under the heading Other debts.

LAN Argentina Sociedad Anónima

Notes on the Financial Statements (Cont.)

As of December 31, 2010 and 2009

NOTE 2 - ACCOUNTING STANDARDS (Cont.)

n) Preferred stock

Preferred stock shares have been classified as equity because the Company has no obligation to redeem them, nor to the holders of such shares have the right to request their redemption.

ñ) Cash flow statement

Cash flow statement was drawn up using the indirect method, which requires a series of adjustments to net profit over the accounting period in order to calculate the funds generated by / used in operations. As of December 31, 2010 and 2009, such funds comprise all contents of the accounts "Cash and bank deposits" and "Temporary investments" (investments will expiration dates within 3 months).

NOTE 3 – COMPOSITION OF ITEMS ON THE BALANCE SHEET AND STATEMENT OF PROFIT AND LOSS

	31.12.10		31.12.09
	$
Current Assets \|

a) Cash and bank deposits
Banks		8,488,217		9,565,921
Cash		2,408,825		1,239,118
		10,897,042		10,805,039

LAN Argentina Sociedad Anónima

Notes on the Financial Statements (Cont.)

As of December 31, 2010 and 2009

NOTE 3- COMPOSITION OF ITEMS ON THE BALANCE SHEET AND STATEMENT OF PROFIT AND LOSS (Cont.)

	31.12.10			31.12.09
	$
Current Assets (Cont.)

b) Temporary investments
Mutual fund payments		80,903,155			8,983,334
Fixed term deposits		13,737,127			24,628,130
		94,640,282			33,611,464

e) Sales credits
Sales debtors		29,352,699			65,014,808
Credit card sales debtors		14,346,369			5,898,960
Postdated checks held		655,836			472,985
Debtors in judicial proceedings		370,375			249,773
Minus: provision for bad debt (Annex III)		(4,823,198	)		3,280,953	)
		39,902,081			68,355,571

d) Other credits
Co. Art. 33 Law 19,550 and related parties (Note 5)		136,783,981			92,132,738
Value added tax		28,287,105			17,675,402
Other taxes		7,264,248			6,626,721
Withholding of earnings		3,278,588			2,977,857
Costs in advance – Insurance		2,452,150			2,652,997
Personnel current accounts		2,054,805			1,643,733
Supplier advances		2,008,927			948,168
Costs in advance – other		1,088,418			151,033
Hangar contribution		699,254			755,196
Guarantees provided		525,418			698,050
Misc. debtors		22,698			224,151
		184,465,592			126,486,046

LAN Argentina Sociedad Anónima

Notes on the Financial Statements (Cont.)

as of December 31, 2010 and 2009

NOTE 3- COMPOSITION OF ITEMS ON THE BALANCE SHEET AND STATEMENT OF PROFIT AND LOSS (Cont.)

	31.12.10		31.12.09
	$
e) Exchange goods
Non-technical inventory		2,760,620		1,487,500

Onboard service inventory		784,676		532,691
		3,545,296		2,020,191
Fixed assets

t) Other credits
Minimum expected income tax		12,387,185		8,123,437
Deferred tax asset (Note 9)		11,530,077		18,849,345
Costs in advance – insurance		7,984,980
Deposits as guarantees		42,273		196,566
		31,944,515		27,169,348

Current Liabilities

g) Commercial debts
Provision for invoices pending		74,890,180		63,403,235
Suppliers		74,346,091		38,067,463
Co. Art. 33 Law 19,550 and related parties (Note 5)		11,484,179		7,023,568
Maintenance provision		472,378		1,139,825
		161,192,828		109,634,091

h) Remunerations and social security
Statutory bonus provision		19,456,530		12,590,962
Vacation provision		17,985,383		12,194,776
Social security payable		8,707,379		6,703,831
Remunerations payable		549,986		196,868
Other provisions				7,578,590
		46,699,278		39,265,027

LAN Argentina Sociedad Anónima

Notes on the Financial Statements (Cont.)

as of December 31, 2010 and 2009

NOTE 3 - COMPOSITION OF ITEMS ON THE BALANCE SHEET AND STATEMENT OF PROFIT AND LOSS (Cont.)

	31.12.10		31.12.09
	$
Current liabilities (Cont.)

i) Fiscal costs, retentions, and fees
Boarding fees pending deposit		20,793,492		21,423,593
Retentions pending deposit		3,837,754		3,500,739
Minimum expected income tax provision		2,162,126		1,484,676
Other provisions		1,608,371		1,119,772
		28,401,743		27,528,780

j) Other debts
Tickets sold not yet flown		115,755,692		103,897,824
Other ticket debts		8,630,015		5,352,542
Preferred dividend interest (Note 5)		261,921		75,533
Other income in advance		39,761		38,000
		124,687,389		109,363,899

Long term liabilities

k) Remunerations and social security		2,777,394		1,735,000
Extraordinary retirement bonus		2,777,394		1,735,000

LAN Argentina Sociedad Anónima

Notes on the Financial Statements (Cont.)

As of December 31, 2010 and 2009

NOTE 3 - COMPOSITION OF ITEMS ON THE BALANCE SHEET AND STATEMENT OF PROFIT AND LOSS (Cont.)

	31.12.10			31.12.09
	$
	Profit / (Loss)

1) Service Revenue
Ticket sales		1,470,380,365			1,158,565,749
Cargo service		134,680,750			93,769,963
Other services		83,463,547			58,580,923
		1,688,524,662			1,310,916,635
m) Profit (loss) from net holdings
Net interest		4,617,220			3,973,523
Bad debt		(1,607,946	)		(1,216,506	)
Misc,		(1,896,304	)		(990,189	)
Exchange rate differences		(3,291,285	)		(4,932,412	)
Tax on bank debits and credits		(16,234,209	)		(12,777,519	)
		(18,412,524	)		(15,943,103	)

n) Other expenditure		(859,740	)		(1,304,241	)
Misc. risks and contingencies					(34,736	)
Misc.		(859,740	)		(1,338,977	)

LAN Argentina Sociedad Anónima

Notes on the Financial Statements (Cont.)

As of December 31, 2010 and 2009

NOTE 4- INTEREST RATES, DUE DATES, AND READJUSTMENT SYSTEMS OF CREDITS AND DEBTS

The composition of placements of funds, credits, and debts as of December 31, 2010, by estimated collection or payment period and readjustment system, are specified in the following table:

	Sales		Other credits		Commercial		Remunerations &		Fiscal costs		Contingent		Other debts
Expiry	Credits			(*)	Debts		social security				provisions
	$
To expire
1st quarter		39,902,081		5,516,568	149,706,64?			21,647,133	17,922_220				74,671,18·1
2nd quarter		-		10,599,350		-		24,852,145		8,400,174		-		37,577,634
3rd quarter		-		-		-		-		2,079,349		-		12,438,571
4th quarter				31,565,693		-				-				-
Over 1 year		-		31,944,515		-		-		-		668,468		-
Subtotal		39,902,081		79,626,126		149,708,649		46,699,278		28,401,743		668,468		124,687,389
Established expiry		39,902,081		79,626,126		149,708,649		46,699,278		28,401,743		-		124,687,389
No established expiry				136,183,981		11,484,179		2,711,394		-		668,468		-
Total		39,902,081		216,410,107		161,192,828		49,476,672		28,401,743		668,468		124,687,389
Not accruing interest		39,902,081		187,512,753		161,192,828		49,476,672		28,401,743		668,468		124,687,389
Accruing interest
Fixed rate		-		28,897,354				-		-		-		-
Variable rate		-						-		-		-		-
Total as of 31.12.10		39,902,081		216,410,107		161,192,828		49,476,672		28,401,743		668,468		124,687,389

(*)Accruing interest at a fixed rate of 18.8%

LAN Argentina Sociedad Anónima

Notes on the Financial Statements (Cont.)

As of December 31, 2010 and 2009

NOTE 5- BALANCES AND TRANSACTIONS WITH COMPANIES AS SPECIFIED IN ART. 33 -LAW 19,550 OF THE ARGENTINE REPUBLIC, AND RELATED PARTIES

Balances and transactions with Companies as specified in Art. 33 of Law 19,550 of the Argentine Republic and/or with related parties as of December 31, 2010 and 2009, are as follows:

	31.12.10			31.12.09
	$
Balance

Other credits
Lan Airlines S.A.		134,260,876			65,690,663
Lantours S.A.		1,161,494			1,974,232
Florida West S.A.		1,034,152
Lan Cargo S.A.		125,445
Aerolane Lineas Aéreas Nacionales del Ecuador S.A.		85,945			6,153,653
Laser Cargo S.A.		74,347			65,823
Servicios Aeroportuarios Lan Chile S.A.		41,722			39,857
Lan Perú S.A.					18,174,548
ABSA S.A.					33,962
Total		136,783,981			92,132,738

Commercial debts
Lan Perú S.A.		(5,546,523	)
Transporte Aéreo S.A.		(4,190,439	)		(5,912,369	)
Andes Airport Services S.A.		( 1,527,705	)		(168,439	)
Lufthansa Lan Chile Technical Training S.A.		(134,548	)		(336,148	)
Inmobiliaria Aeronáutica S.A.		(40,437	)		(28,461	)
Línea Aérea Carguera de Colombia S.A.		(23,382	)
ABSA S.A.		(20,572	)
Lan Cargo Repair St.		(573	)
Florida West S.A.					(328,666	)
Lan Cargo S.A.					(249,467	)
Mas Air S.A.					(18	)
Total		(11,484,179	)		(7,023,568	)

LAN Argentina Sociedad Anónima

Notes on the Financial Statements (Cont.)

As of December 31, 2010 and 2009

NOTE 5- BALANCES AND TRANSACTIONS WITH COMPANIES AS SPECIFIED IN ART. 33 -LAW 19,550 OF THE ARGENTINE REPUBLIC, AND RELATED PARTIES (Cont.)

	31.12.10			31.12,09
	$
Other debts
Manuel Benites		(130,961	)		(37,767	)
Jorge Luis Perez Alati		(130,960	)		(37,766	)
Total		(261,921	)		(75,533	)

Service revenue
Related companies		130,284,537			83,092,038

Other services
Related companies		(101,628,108	)		(64,280,463	)

Engine leasing
Related companies		7,947,677			7,628,756

Aircraft leasing
Related companies		(205,648,756	)		(154,001,087	)

Aircraft maintenance
Related companies		(128,829,667	)		(120,525,970	)

Interest
Related companies		4,473,292			2,834,946

Dividends
Shareholders		(186,389	)		(75,533	)

		(293,587,414	)		(245,327,313	)

LAN Argentina Sociedad Anónima

Notes on the Financial Statements (Cont.)

As of December 31, 2010 and 2009

NOTE 6 –RESTRICTED AVAILABILITY ASSETS

A guarantee has been constituted for the rental of offices located at the Costa Salguero site for $105,196, and a further $376,000 correspond to a county provided to the National Transport Department (Secretaría de Transporte de la Nación), recorded as of December 31, 2010, under the heading Other Current Credits. As of December 31, 2009, a guarantee existed for the rental of offices located at the Costa Salguero site for $105,196, and a further $2376 corresponded to a guarantee provided to the Customs Service, which were recorded under the heading Of the Current Credits .

NOTE 7 – SHAREHOLDER CAPITAL

The capital situation as of December 31, 2010 and 2009, was as follows:

	SHAREHOLDER CAPITAL
	31.12.10		31.12.09
Capital subscribed, integrated, and registered at the Inspección General de Justicia		14,693,960		14,693,960

On August 5, 2009, the resolution was passed to update the Companies share structure with the creation of a new class of preferred stock shares, initially comprising 14,692 shares (ordinary class A shares). The shares of the new class are denominated preferred class B shares, and their preference consists of the right to collect a 15% preferential accumulated annual dividend during each annual accounting period on the notional value of US dollars. The class B share certificates shall indicate the notional rate in US dollars to be used in the calculation of the preference. If the Company records a loss, the preference shall be rolled over for the following accounting period. The class B shares shall also be preferential in the event of the liquidation of the Company, at their notional value in US dollars. Thus, shareholder capitalization of the company is as follows:

a) 1,454,704 ordinary, nominative, nonendorsable class A shares of $10 nominal value each, and with one voting rate each, of which 1,395,927 ordinary class A shares are held by the investor Inversora Cordillera S.A.; 58,777 ordinary class A shares are held by the investor LAN PAX Group S.A.

AEROTRANSPORTES MAS DE CARGA, S.A. DE C.V.

FINANCIAL STATEMENTS AT DECEMBER 31, 2010 AND 2009

AND

AUDITORS’ REPORT

Free Translation of the Original in Spanish

AEROTRANSPORTES MAS DE CARGA, S.A. DE C.V.

FINANCIAL STATEMENTS

AT DECEMBER 31, 2010 AND 2009

TABLE OF CONTENTS

Content		Page

Report of the External Auditors		1

Financial Statements:

General Balance Sheets		2

Statements of Income		3

Statements of Changes in Shareholders’ Equity		4

Statements of Cash Flows		5

Notes to the Financial Statements		6-19

INDEPENDENT AUDITORS’ REPORT

To the General Meeting of Shareholders

Aerotransportes Mas de Carga, S.A. de C.V.:

We have audited the general balance sheets of Aerotransportes Mas de Carga, S.A. de C.V, at December 31, 2010 and 2009, and the statements of income, changes in shareholders’ equity and cash flows for the years ended on those dates. The Company’s Management is responsible for said financial statements. Our responsibility is to issue an opinion on same based on our audits.

Our audits were conducted in accordance with generally accepted auditing standards in Mexico, which require that the audit be planned and performed so as to obtain reasonable assurance that the financial statements do not contain important errors, and that they are prepared in accordance with Mexican Financial Reporting Standards. The audit consists of examining, on a test basis, evidence supporting the amounts and disclosures of the financial statements; it also includes an assessment of the financial reporting standards used, of significant estimates made by Management and the overall presentation of the financial statements. We believe that our audits provide a reasonable basis to support our opinion.

In our opinion, the aforementioned financial statements present fairly, in all the important aspects, the financial position of Aerotransportes Mas de Carga, S.A. de C.V., as of December 31, 2010 and 2009, and the results of its operations, changes in Shareholders’ equity and cash flows for the years ended on those dates, in conformity with Mexican Financial Reporting Standards.

BDO Hernández Marrón y Cia., S.C.

(SIGNATURE)

C.P.C Bernardo Soto Peñafiel

Partner

Mexico, D.F

21 January 2011.

AEROTRANSPORTES MAS DE CARGA, S.A. DE C.V.

GENERAL BALANCE SHEETS AS OF DECEMBER 31, 2010 AND 2009

(Mexican Pesos)

ASSET

	2010		2009
CURRENT
Cash and cash equivalents	$	1,282,370	$	6,611,963

Accounts receivable:
Cargo and services receivable		134,897,310		147,880,150
Inter-companies (Note 6)		68,244,197		82,695,425
Trade receivables		-		4,589,291
Other accounts receivable		213,344		196,695
Accounts receivable, Net		203,354,851		235,361,561

Taxes recoverable		166,408,429		142,062,410
Prepayments		7,827,226		8,000,084
Total current assets		378,872,876		392,036,018

PLANT AND EQUIPMENT, Net (Note 4)		1,313,234		2,828,725

DEFERRED CHARGES, Net (Note 5)		5,805,956		6,238,487

DEFERRED TAXES (Note 8)		5,097,124		3,199,402

Total Assets	$	391,089,190	$	404,302,632

LIABILITY

	2010		2009
SHORT-TERM:
Suppliers	$	42,774,058	$	23,658,389
Creditors by Freight		81,365,517		79,465,001
Sundry Creditors		16,105,383		11,173,521
Inter-companies (Note 6)		115,968,605		175,196,990
Taxes and Fees Payable		880,955		402,823
Other Accounts Payable		35,496,126		21,261,010
Employee Profit Sharing		1,751,314		270,143

Total Short-term Liability:		294,341,958		311,427,877

LABOR LIABILITY (NOTE 7)		2,168,145		2,676,820
Total Liability		296,510,103		314,104,697
SHAREHOLDERS’ EQUITY (Note 9)
SHARE CAPITAL		60,843,308		60,843,308
RETAINED EARNINGS:
Legal Reserve		983,771		936,272
Profit from Previous Years		28,370,856		27,666,635
Profit for the Year		4,381,152		751,720
		33,735,779		29,354,627

Total Shareholders’ Equity		94,579,087		90,197,935

Total Liability and Shareholders’ Equity	$	391,089,190	$	404,302,632

The accompanying notes are an integral part of these financial statements

AEROTRANSPORTES MAS DE CARGA, S.A. DE C.V.

STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

(Mexican Pesos)

	2010			2009
INCOME FROM FREIGHT	$	1,890,622,924		$	1,603,215,161
INCOME FROM SERVICES		53,998,546			58,459,343
Total income		1,944,621,504			1,661,674,504

COST OF SERVICES		474,974,257			450,546,716
		1,469,647,213			1,211,127,788
DIRECT AND INDIRECT COSTS:
Variable direct costs		1,220,171,875			1,016,763,361
Indirect costs		74,520,565			54,092,204
		1,294,692,439			1,070,855,565
Gross margin		174,954,774			140,272,223

FIXED COSTS		174,610,600			140,874,904
Operating Income (Loss)		344,173			(602,681	)
COMPREHENSIVE FINANCING COST:
Interest paid (gained), Net		374,310			(157,503	)
Foreign exchange gains, Net		(6,512,998	)		(2,512,877	)
		(6,138,689	)		(2,670,380	)
Earnings before income taxes		6,482,862			2,067,699
Income taxes (Note 8):
Deferred income tax		(1,897,722	)		954,234
Income tax		3,999,432			361,745
		2,101,710			1,315,979
Net income for the year	$	4,381,152		$	751,720

The accompanying notes are an integral part of these financial statements

AEROTRANSPORTES MAS DE CARGA, S.A. DE C.V.

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

(Mexican Pesos)

			Retained Earnings :
	Share Capital		Legal Reserve		Income for Previous Years		Income for the Year			Total Shareholders’ Equity
BALANCES AT 31 DECEMBER 2008 (Note 9)	$	60,843,308	$	617,263	$	21,605,456	$	6,380,188		$	89,446,215

Transfer to earnings of previous years		-		319,009		6,061,179		(6,380,188	)		-

Comprehensive income for the year		-		-		-		751,720			751,720
BALANCES AT 31 DECEMBER 2009 (Note 9)		60,843,308		936,272		27,666,635		751,720			90,197,935

Transfer to earnings of previous years		-		47,499		704,221		(751,720	)		-

Comprehensive income for the year		-		-		-		4,381,152			4,381,152
BALANCES AT 31 DECEMBER 2010 (Note 9)	$	60,843,308	$	983,771	$	28,370,856	$	4,381,152		$	94,579,087

The accompanying notes are an integral part of these financial statements

AEROTRANSPORTES MAS DE CARGA, S.A. DE C.V.

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

(Mexican Pesos)

	2009			2010
OPERATING ACTIVITIES:
Earnings before income taxes	$	6,482,862		$	2,067,699
Items relating to investing activities:

Depreciation and amortization		1,323,192			2,109,192
Labor liability		2,168,145			2,695,689
Interest expense (income)		374,310			(157,503	)
Total		10,348,509			6,715,077

Decrease(increase) in accounts receivable and others		32,006,710			(42,209,304	)
Increase in taxes recoverable and prepayments		(24,173,161	)		(30,911,710	)
Decrease(increase) in suppliers and other liabilities		(19,762,739	)		74,694,182
Income taxes paid		(3,999,432	)		(3,720,432	)
Net cash flows from operating activities		(5,580,113	)		4,567,813

INVESTING ACTIVITIES:
Interest paid		(374,310	)		157,503
Plant and equipment		624,830			(912,514	)
Net cash flows from investing activities		250,520			(755,011	)
CASH AND CASH EQUIVALENTS:
(Decrease) Increase in cash and cash equivalents		(5,329,593	)		3,812,802
At the beginning of year		6,611,963			2,799,161
At the end of year	$	1,282,370		$	6,611,963

The accompanying notes are an integral part of these financial statements

AEROTRANSPORTES MAS DE CARGA, S.A.A DE C.V.

NOTES TO THE FINANCIAL STATEMENTS

AT DECEMBER 31, 2010 AND 2009

(Amounts expressed in Mexican Pesos, unless another denomination is indicated)

1. INCORPORATION AND PRINCIPAL OPERATIONAL ACTIVITY:

The Company was established as an open-end stock corporation according to notarial instrument number 4822 dated 13 September 1990, with duration of 99 years. Since April 1992, the Company carried out operations arising out of its principal activity.

Its principal operational activity is operating regular air transport services for cargo, passengers, Express mail, national air taxi and mainly specialized air transport.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The accompanying financial statements have been prepared in accordance with Mexican Financial Reporting Standards (FRS). FRS requires Management, using its professional judgment, to make certain estimates and use certain assumptions to determine the valuation of various items included in the financial statements. Even though their final result could differ, the Company's management believes that the estimates and assumptions used are appropriate under the circumstances and for the date of issuance of these financial statements. The following summarizes the principal accounting policies followed by the Company, which are in accordance with the IFRS:

a. Bases for presentation and disclosure:

1. Monetary Units of the Financial Statements-

The financial statements and their notes at December 31, 2010 and 2009 and for the years ended on those dates were set and expressed in pesos of different purchasing power.

2. Comprehensive Income-

The amount of comprehensive income presented in the statement on changes in shareholders’ equity, is the result of the overall performance of the Company during the period and is represented by the net income for the year.

3. Classification of costs-

Costs are expressed based on their function, which makes it possible to recognize the cost of services separately from direct and indirect costs and fixed costs.

4. Operating Income (loss)-

Operating income (loss) is calculated by subtracting the cost of services and direct, indirect and fixed costs from total revenues. Although IFRS B-3 does not require it, this item is included in the statements of income that are presented since it contributes to a better understanding of the Company’s economic and financial performance.

5. Reclassification of Accounts-

The financial statements for 2009 include certain reclassifications, so that they are comparable to the classifications used in 2010.

b. Adoption of new IFRS:

Effective January 1, 2010, the Company adopted the following new IFRS and IFRS Interpretations, whose most important effects and changes are as follows:

1. IFRS C-1, "Cash and cash equivalents”.- The main changes that this IFRS establishes in relation to repealed Bulletin C-1 are: a) modifies the concept of cash to be consistent with IFRS B-2; b) restricted cash is presented in a single item with cash and cash equivalents; and c) incorporates the concepts of acquisition cost, restricted cash, cash equivalents, temporary securities, net realizable value, nominal value and fair value. The adoption of this standard had no impact on the financial statements for the year ended December 31, 2010.

2. "Improvements to IFRS 2010”.- incorporate changes to or clarifications of the IFRS in order to establish a more appropriate regulatory approach for improvement in several aspects as follows:

IFRS that generate accounting changes in valuation, presentation or disclosure in financial statements are: IFRS B-1 Accounting Changes and Error Corrections, IFRS B-7 Business Combinations and IFRS C-13 Related Parties.

IFRS that relate to modifications to make clarifications to help establish a clearer and more understandable regulatory approach and do not generate accounting changes in the financial statements are: IFRS A-5 Basic Elements of Financial Statements; IFRS B-3 Statement of Income and IFRS B-15 Foreign Currency Translation.

The IFRS relating to both types of improvements previously mentioned are: IFRS B-2, Statement of Cash Flows and IFRS C-7 Investments in Associates and Other Permanent Investments.

The main improvements that generate accounting changes which must be recognized retrospectively, which had no impact on the financial statements for the year ended December 31, 2010, are:

IFRS B-1, "Accounting Changes and Error Corrections".- Expands disclosures in case the company implements a particular new rule.

IFRS B-2, "Statement of Cash Flows".- Requires that the effects of fluctuations in the exchange rate used for the translation of cash in foreign currency and movements in the fair value of cash in any precious metal coins other item of cash valued at fair value is shown in a specific line.

IFRS B-7, "Business Combinations".- Requires the recognition of intangible assets or supplies when the acquired business has a favorable or unfavorable contract, respectively, in relation to the market. It only applies if the acquired business is the lessee and the lease is an operating lease.

IFRS C-7, "Investments in Associates and Other Permanent Investments".- Changes how to determine the effects from increases in the percentage of participation in an associate. It also establishes that effects of increases or decreases in the percentage of participation in an associate are recognized in the category of participation in the earnings of associated companies and not in the category of extraordinary items.

IFRS C-13, "Related Parties".- Requires that if the direct controller or principal controller of the reporting entity does not make financial statements available for public use, the reporting entity must immediately disclose the name of the controller, directly or indirectly, that makes financial statements available for public use.

c. Recognition of the effects of inflation:

The cumulative inflation of the three preceding fiscal years is 14.49% for 2010 and 15.01% for 2009, in accordance with the IFRS, the economic environment for both years is non-inflationary, therefore effective January 1, 2008 the Company suspended the recognition of the effects of inflation on financial information. Consequently, assets, liabilities and shareholders' equity at December 31, 2010 and 2009 include the effects of restatement recognized through December 31, 2007, which resulted in gains for inflation on the non-monetary and monetary items.

Inflation rates for the years ended December 31, 2010 and 2009 were 4.40% and 3.57%, respectively.

d. Cash and Cash Equivalents:

Cash and cash equivalents include deposits in bank accounts, foreign currency and other similar equivalents. To date from financial statements interest gained and profits or losses in valuation are included in the results of the exercise as part of the comprehensive financing result.

e. Plant and equipment:

Plant and equipment are recorded at cost. Balances arising from acquisitions realized up to December 31, 2007 were restated by applying factors derived from the National Consumer Price Index (INPC) to that date. Depreciation is calculated using the straight-line method based on the remaining useful lives of the assets, determined by the Company, using the depreciation rates specified in Note 4.

f. Deferred charges:

Deferred charges are recorded at acquisition cost. Until December 31, 2007 they were restated by applying factors from the INPC. Depreciation is calculated using the straight-line method based on the remaining useful lives of assets, determined by the Company.

g. Labor obligations:

Labor obligations are divided into three types of employee benefits; direct short and long term benefits, severance benefits and retirement benefits, which are explained as follows:

Direct benefits to employees.- These are valued in proportion to the services rendered, considering the current wages, and the liability is recognized as it is accrued. Mainly includes employee profit sharing (PTU), compensated absences such as vacations and vacation pay and bonuses.

Employee benefits for termination, retirement and other.- Liabilities from seniority premiums, pension plans and severance payments are recognized as they accrue and are calculated by independent actuaries based on the projected unit credit method using nominal interest rates. Therefore, the liability is being recognized that at present value, it is estimated that it will cover the liability for these benefits to the estimated date of retirement of all employees working in the Company.

h. Income tax:

Income tax ("ISR") and the Single Rate Business Tax ("IETU") are recorded in the results of the year they are incurred. Deferred tax is determined based on financial projections, which establish whether the Company will generate ISR or IETU, recognizing the deferred tax which corresponds to the relevant tax it will pay. Deferred tax is calculated by applying the corresponding tax rate to temporary differences resulting from comparing the accounting and fiscal balances of assets and liabilities and including, if any, benefits from fiscal losses through amortization and some tax credits. Deferred tax assets are recorded only when there is a high probability of recovery.

The effect of changes in tax rates on deferred taxes is recognized in results of operations for the period said changes are approved.

The effect of the year of deferred taxes was a credit of $ 1,897,722 to income in 2010 and a charge to 2009 results for $ 954,234 causing an increase and decrease in deferred tax asset amounts, respectively (Note 8).

i. Employee profit sharing (PTU):

Employee profit sharing ("PTU") is recorded in the results of the year in which it is incurred and presented under other income and expenses in the accompanying statement of income. Deferred PTU is calculated by temporary differences resulting from comparing the accounting and fiscal balances of assets and liabilities and is only recognized if the liquidation of a liability or generation of a benefit is probable, and there is no indication that that situation will change in such a way that said liability or benefit will not materialize.

j. Comprehensive financing cost (CFC) and foreign currency transactions:

CFC.- the CFC includes interest and differences in exchange rates.

Foreign currency transactions.- Are recorded at the exchange rate in effect on the date of the transactions. Assets and liabilities are restated at the exchange rate existing on the date of the balance sheet. Differences caused by fluctuations in exchange rates between the date of conclusion of transactions and their liquidation or valuation at year-end are applied to income (Note 3).

k. Revenue recognition:

Revenues from cargo and its related costs are recognized in the period at which the risks and benefits are transferred to customers who purchased the service.

l. Contingencies:

Liabilities or important loss contingencies are recorded when it is likely that their effects may materialize and there are reasonable grounds for their quantification. If these reasonable elements do not exist, its qualitative disclosure is included in the notes to the financial statements. Revenues, earnings or contingent assets are not recognized until the moment it is practically assured of its realization.

m. Impairment of long-lived assets:

The Company reviews the value of Plant and equipment and other long-lived assets so as to recognize a decline in value if events or changes indicate that the book value recorded may not be recoverable. At December 31, 2010 and 2009 the application of this reference standard has no further effects on the company’s financial position and operating results.

n. Provisions:

Are recognized when the Company has a present obligation as a result of a past event, which probably results in the use of economic resources and that can be reasonably estimated.

o. New issued accounting pronouncements - subsequent event:

Effective January 1, 2011 provisions contained in the following IFRS came into effect, it is believed that their adoption will not have important effects on the financial information presented in the financial statements and notes, and which most important changes are as follows:

1. IFRS B-5 "Segment Reporting".- The principal changes that this IFRS B-5 establishes in connection with the repealed Bulletin B-5 are: a) to disclose information used to evaluate the performance of operating segments and not economic segments, geographic areas or homogeneous groups of customers; b) does not require business risks different from each other, so they can qualify as an operating segment; c) business areas in preoperational stage can be classified as operating segments; d) requires separate disclosure of income and expense or net interest income; e) requires disclosure of amounts of liabilities; f) to disclose information on the entity as a whole: about products or services, geographic areas and major clients.

2. IFRS B-9 "Interim Financial Reporting".- The main changes in relation to prior pronouncements are: a) the interim financial report must contain condensed statements: financial position, results or, where appropriate, activities of changes in shareholders' equity, cash flows and notes to financial statements with selected disclosures; b) the information must be compared with the equivalent of the previous year.

3. IFRS C-18 "Obligations associated with the retirement of property, plant and equipment".- This IFRS establishes: a) requirements to be considered for valuation; b) requirement to recognize a provision that increases the acquisition cost of an asset or its components in terms of IFRS C-6; c) how to recognize valuation changes due to revisions to the cash flows, the frequency for liquidation and the discount rate used; d) the use of a discount rate that includes the cost of money and credit risk of the entity; e) the use the expected present value technique to determine fair value, and f) to disclose certain information.

4. IFRS C-5 "Prepayments" .- The main changes and features of this IFRS with respect to Bulletin C-5 are: a) excludes income tax, projected net assets derived from a pension plan and interest paid in advance; b) includes advances for purchase of inventories or property, plant and equipment, as part of their approach; and c) requires that upon receipt of goods or determining loss due to impairment, is applied to income and presented in the current or non-current, in view of the final item.

5. IFRS C-6 “Property, plant and equipment”.- The principal changes and features of this IFRS with respect to Bulletin C-6 are: a) biological assets and mining industries form part of the scope; b) includes the handling of the exchange of assets in view of the commercial substance; c) adds the bases for determining the residual value of a component; d) establishes the obligation to depreciate components that are representative of an item of property, plant and equipment, independently depreciate the rest of the item as if it were a single component; e) indicates that if a component is idle it should continue to be depreciated unless using depreciation methods based on the component’s activity; and f) eliminates the procedure of assigning determined value to property, plant and equipment acquired without cost or at insufficient cost.

6."Improvements to IFRS 2011”.- Include changes to or clarifications of the IFRS in order to establish a more appropriate regulatory approach for improvement in several aspects as follows:

a. The IFRS that generate accounting changes in valuation, presentation or disclosure in financial statements are:

IFRS B-1 must include a statement of the financial position at the start of the oldest period adjusted retroactively and on the statement of changes in the shareholders’ equity for each category of the share capital must be included; beginning balances previously reported; the effects of each item affected in the capital stock, separating the results from error corrections; and initial balances adjusted retroactively.

IFRS B-2 no longer requires the presentation of the category of cash to be applied to obtain financing activities.

Bulletin C-3, interest earned from accounts that are difficult to recover should not be recognized because it is probable that the benefits derived from the transaction would flow to the entity.

Bulletin C-10, excludes the extrinsic value of options of the hedging relationship and the difference with the spot rate, in forward, the coverage between related parties is appropriate only when the functional currencies are different.

IFRS C-13 describes the concept of related party in order to avoid omitting from consideration all persons qualified as such or not to include those who in reality, despite the relationship, are not.

Bulletin D-5, the discount rate to be used in the capital leases is the implied rate of the contract, is described in the disclosures to be made; gain or loss on sale and lease back should be deferred and amortized over the term of contract.

b. IFRS that refer to modifications to make clarifications that help to establish a clearer and more understandable regulatory approach and do not generate accounting changes in the financial statements are: IFRS D-6, Bulletins C-3, C-9, C-12 and C-10, adding the treatment of partially covered items; D-5, expands the examples of indicators of capital leases, and IFRS D-4 which allows substantially enacted laws to be applied.

3. FOREIGN CURRENCY POSITION:

At December 31, 2010, the exchange rate was $ 12.3817 per U.S. dollar ($ 13.0437 at December 31, 2009). At January 21, 2011, the date of issuance of the audited financial statements, the exchange rate was $ 12.0903.

The foreign currency position unaudited at January 21, 2011 is similar to that of year end.

At December 31, 2010 and 2009, the Company had assets and liabilities denominated in U.S. dollars (US$) as shown below:

	2010			2009
Assets	US$	16,639,292		US$	16,550,255
Liabilities		(30,352,942	)		(23,813,005	)
Liability Position	US$	(13,713,650	)	US$	(7,262,750	)

The principal operations carried out by the Company in foreign currency during 2010 and 2009 were as follows:

	2010		2009
Revenues	US$	120,121,737	US$	93,243,180
Costs and expenses	US$	111,028,721	US$	88,749,067

4. PLANT AND EQUIPMENT:

At December 31, 2010 and 2009, this category was comprised in the following manner:

							Annual rate Depreciation
	2010			2009			2010 and 2009
Computer equipment	$	2,368,475		$	2,800,369			10	%
Furniture and office equipment		2,251,975			2,955,920			10	%
Motor vehicles		672,378			1,795,904			10	%
Ground support equipment		522,430			895,160			25	%
Communication equipment		785,220			1,075,430		Various
Plant and equipment		97,298			120,105			10	%
Tools		472,387			611,866			10	%
Smaller assets		138,836			347,698			10	%
		7,308,999			10,602,452
Accumulated depreciation		(5,995,765	)		(7,773,727	)
Plant and equipment, net	$	1,313,234		$	2,828,725

Depreciation charged to income for the year was $621,769 in 2010 and $1,411,830 in 2009.

5. DEFERRED CHARGES:

At December 31, 2010 and 2009, the balance in this category was as follows:

	2010			2009
Deferred charges	$	16,621,148		$	16,477,268
Minus: Accumulated amortization		(10,815,192	)		(10,238,781	)
Deferred charges – net	$	5,805,956		$	6,238,487

Amortization charged to the results for the year was $701,423 in 2010 and $697,362 in 2009.

6. BALANCES AND TRANSACTIONS WITH PARENT AND AFFILIATED COMPANIES:

These amounts represent transactions between companies in the Group and are calculated from commissions on sales of services, as well as services and payments made on behalf of the Company in order to carry out its operations, said debt earns no interest and is payable in United States dollars, converted to local currency at the exchange rate prevailing at year end.

The Company has recorded balances at December 31, 2010 and 2009, with companies in the Group as follows:

	2010			2009
Accounts Receivable
Americonsult Costa Rica, S.A.	$	21,012,430		$	19,020,963
Conecta Corporation, S.A.		8,392			5,092,496
Lan Airlines, S.A		22,248,834			38,884,117
Lan Peru, S.A.		944,980			-
Prime Airport Services Inc.		33,054			-
Americonsult Guatemala, S.A.		9,853,652			8,730,806
Americonsult Mexico, S.A.		13,664,948			10,404,279
Others		477,907			562,764
	$	68,244,197		$	82,695,425
Accounts Payable
Aerolineas Brasileñas, S.A	$	(5,586,279	)	$	(24,136,760	)
Lan Cargo, S.A.		(94,730,734	)		(123,193,060	)
Mas Investment Ltd		(325,879	)		-
Air Cargo Limited		(2,134,129	)		(2,248,233	)
Transporte Aereo, S.A.		(316,857	)		-
Linea Aerea Carguera de Colombia, S.A		(12,532,600	)		(24,510,440	)
Others		(342,127	)		(1,108,497	)
	$	(115,968,605	)	$	(175,196,990	)
Net payable:	$	(47,724,408	)	$	(92,501,565	)

At December 31, 2010 and 2009, the year's operations include transactions with companies from the Group as follows:

	2010		2009
Revenues:
Services in General	$	653,250,730	$	561,474,686
Other revenues		6,582,822		9,765,767
	$	653,250,730	$	561,474,686
Costs:
Lease		513,630,324		447,254,717
Other Services		74,525,334		54,483,779
Commissions		4,464,143		1,586,762
	$	592,619,801	$	503,325,258

7. LABOR OBLIGATIONS:

According to the Federal Labor Law, the company has obligations for seniority premiums and compensation, which are payable to staff in case of separation or death under certain circumstances.

At December 31, 2010 and 2009, the Company has established a reserve to cover liabilities for seniority premium payments, as well as those relating to compensation, said reserve was determined in accordance with actuarial studies carried out by independent experts under the projected unit credit cost method, according to the guidelines of IFRS D-3. The summary for the above mentioned actuarial study is shown below:

2010
	Seniority Premiums			Compensations			Termination of Work Relationship			Total
Obligations by defined benefits	$	615,350		$	11,061,317		$	477,087		$	12,153,754
Assets of the Plan		(138,698	)		(7,191,604	)		-			(7,330,302	)
Liability(asset) of transition pending amortization		(177,054	)		(1,968,375	)		(509,878	)		(2,655,307	)
Projected net liability	$	299,598		$	1,901,338		$	(32,791	)	$	2,168,145
Net cost of the period	$	120,395		$	1,394,250		$	133,305		$	1,647,950
Amortization period	13.8 years			23.9 years			5.8 years
Discount rate		7.7	%		7.7	%		7.7	%
Rate of increase of salaries		5.10	%		5.10	%		5.10	%

2009
	Seniority Premiums			Compensations			Termination of Work Relationship			Total
Obligations by defined benefits	$	501,794		$	8,032,130		$	411,706		$	8,945,630
Assets of the Plan		-			(5,207,611	)		-			(5,207,611	)
Liability(asset) of transition pending amortization		(70,760	)		(786,665	)		(203,774	)		(1,061,199	)
Projected net liability	$	431,034		$	2,037,854		$	207,931		$	2,676,820
Net cost of the period		162,278		$	1,613,450		$	919,961		$	2,695,689
Amortization period	13.2 years			24.1 years			4.7 years
Discount rate		8.7	%		8.7	%		8.7	%
Rate of increase of salaries		6.10	%		6.10	%		6.10	%

8. INCOME TAX:

Under current tax law, companies must pay the tax, whichever is greater between the ISR and IETU. The income tax rate is 30% for 2010 and 28% for 2009. The IETU tax rate is 17.5% for 2010 onwards and 17% for 2009.

a) Income tax

Accounting income differs from taxable income primarily due to the effect of permanent differences, primarily in items included in the income statement to reflect the effects of inflation and temporary differences that affect various exercises accounts-wise or fiscally.

At December 31, 2010 and 2009, the net charge to income for income tax is as follows:

	2010
	Cause		Deferred
Income Tax	$	3,999,432	$	(1,897,722	)

	2009
	Cause		Deferred
Income Tax	$	361,745	$	954,234

The reconciliation between the actual and effective rate of the ISR tax, tax expense (benefit) for taxes attributable to income was different from that which would be computed by applying the rate of 30% in 2010 (28% in 2009) of the ISR on income before tax, as a result of the items listed below:

	2010			2009
Income before tax	$	6,482,862		$	2,067,699
Actual rate		30	%		28	%
ISR at the actual rate		1,944,859			578,956
Effect net annual adjustment for inflation		(716,889	)		803,237
Other permanent items		873,740			(66,214	)
Total ISR	$	2,101,710		$	1,315,979
Effective rate		32	%		63	%

The determination of deferred income tax is based on temporary differences between accounting and tax values, to which tax rates are accordingly applied.

At December 31, 2010 and 2009, deferred tax assets are as follows:

	2010		2009
Income tax:
Fixed assets and deferred charges	$	940,214	$	928,206
Provisions		4,156,910		2,271,196
	$	5,097,124	$	3,199,402

b) Single Rate Business Tax ("IETU")

In cases which generate IETU, payment is considered final and not subject to recovery in subsequent years.

Due to that, according to the Company’s estimates, the tax payable in the coming years is the ISR, deferred taxes at December 31, 2010 and 2009 were recorded on the basis of ISR.

During the year ended December 31, 2010 and 2009, the Company did not generate IETU.

9. SHAREHOLDERS’ EQUITY:

a) Share Capital:

The Company's share capital is fixed and variable without limit. The minimum fixed capital is represented by 2,965,000 registered shares with a value of ten pesos each, the variable is represented by 1,107,577 registered shares with a value of ten dollars each.

The share capital at December 31, 2010 and 2009 are as follows:

	Shares		Par Value		Amount
Fixed capital		2,965,000	$	10	$	29,650,000
Variable capital		1,107,577		10		11,075,770
Complement for restatement						20,117,538

					$	60,843,308

The share capital restated for tax purposes, which forms the contributed capital account ascended to $ 65,389,646 at December 31, 2010 ($ 62,633,761 at December 31, 2009).

b) Restrictions on shareholders' equity

Net income for the year is subject to separation of 5% to make up the legal reserve, until it reaches a fifth of the share capital. At December 31, 2010 the legal reserve amounts to $ 983,771 ($ 936.272 in 2009).

The restated amount, on tax bases, of contributions made by shareholders, may be refunded to them without any tax, to the extent that such amount is equal to or higher than equity. At December 31, 2010, the Company had a restated balance of the net tax profit account for

$ 28,817,027 ($ 27,602,516 in 2009).

Earnings over which they have not paid the income tax (ISR), and the other shareholders' equity, shall generate an ISR payment payable by the Company, in case of distribution, at the rate of 30%, for which shareholders may only have 70% of the amounts mentioned.

10. CONTINGENCIES:

According to the Income Tax Law, companies that enter into transactions with related parties are subject to limitations and tax obligations, in terms of pricing agreements, since they must be similar to those used with or between independent parties in comparable transactions.

Should the tax authorities review the price and reject certain amounts, they could also require the collection of tax and corresponding accessories (updating and fees), fines for missed contributions, which could be up to 100% on the updated amount of contributions.

11. APPROVAL OF THE ISSUANCE OF FINANCIAL STATEMENTS:

The issuance of these financial statements dated January 21, 2011 were authorized by CP Alejandro Fernandez Espinosa, Director of Finance and is subject to the approval of the Ordinary Meeting of Shareholders of the Company, who may decide to amend them in accordance with the provisions of the General Law of Commercial Companies.

LAN PERU S.A.

FINANCIAL STATEMENTS

31 DECEMBER 2010 AND 31 DECEMBER 2009

FREE TRANSLATION OF THE ORIGINAL IN SPANISH

LAN PERU S.A.

FINANCIAL STATEMENTS

31 DECEMBER 2010 AND 31 DECEMBER 2009

CONTENTS	Pages

Report of the independent auditors	1 - 2
General balance	3
Profit-loss statement	4
Statement of changes in net assets	5
Cash flow statement	6
Notes to the financial statements	7 - 24

US$ = United States dollar

S/. = Nuevo sol

REPORT OF THE INDEPENDENT AUDITORS

To the Shareholders and Board of Directors of

Lan Perú S.A.

21 January 2010

We have audited the attached financial statements of Lan Perú S.A. (a subsidiary of Lan Airlines S.A., domiciled in Chile), which consist in the general balances as of 31 December 2010 and as of 31 December 2009, in addition to the statements on profits and losses, changes in net assets and cash flow for the years ending on those dates, and a summary of major accounting policies and other explanatory notes.

Management’s responsibility for the financial statements

The Management is responsible for the preparation and reasonable presentation of these financial statements in accordance with accounting principles that are generally accepted in Peru. This responsibility includes: designing, implementing and maintaining significant internal control during the presentation and reasonable preparation of the financial statements, to ensure that they do not contain relatively important misrepresentations, either out of fraud or error; selecting and implementing the appropriate accounting policies, and making reasonable accounting estimates according to circumstances.

Auditor’s responsibility

Our responsibility consists in giving an opinion on these financial statements based on our audits. Our audits were undertaken according to the auditing standards generally accepted in Peru. Said standards require that we fulfill ethical requirements and that we plan and undertake the audit to attain reasonable certainty that the financial statements do not contain relatively important misrepresentations.

An audit consists in undertaking procedures to obtain auditing evidence on balances and the information contained in the financial statements. The procedures chosen depend on the auditor’s criteria, which include assessing the risk that these financial statements might contain relatively important misrepresentations, either as a result of fraud or error. Upon engaging in this risk assessment, the auditor considers the Company’s relevant internal control in the preparation and reasonable presentation of the financial statements to design auditing procedures that are appropriate to the circumstances, but not with the purpose of giving an opinion on the effectiveness of the institution’s internal control. An audit also consists in evaluating the appropriateness of the accounting principles applied, in addition to evaluating the general presentation of the financial statements.

We consider that the auditing evidence that we have obtained is sufficient and appropriate to provide us with a basis for giving our auditing opinion.

21 January 2010

Lan Perú S.A.

Opinion

It is our opinion that the aforementioned financial statements reasonably present - in all significant aspects - the financial situation of Lan Perú S.A. as of 31 December 2010 and as of 31 December 2009, the results of its operations and its cash flows for the years ending on those dates, in keeping with accounting principles generally accepted in Peru.

Countersigned by

__________________________ (partner)

Arnaldo Alvarado L.

Certified Public Accountant

License No.01-007576

- 2 -

LAN PERU S.A.

BALANCE SHEET

ASSETS
	As of December 31,
	2010		2009
	US$000		US$000

Current assets
Cash and cash equivalents (Note 5)		13,361		6,027
Negotiable instruments (Note 6)		51,357		34,301
Commercial accounts receivable (Note 7)		22,344		18,733
Related company accounts receivable (Note 8)		6,771		3,313
Other accounts receivable (Note 9)		18,450		10,036
Inventories		262		236
Costs paid in advance		1,174		1,825
Total current assets		113,719		74,471

Long term assets
Deferred corporate income tax (Note 10)		207		1,322
Land, facilities, moveable goods, and equipment (Note 11)		13,947		8,487
Funds subject to restriction		329		28
Intangible assets		79		9
Total long term assets		14,562		9,846

TOTAL ASSETS		128,281		84,317

LIABILITIES AND NET EQUITIES
	As of December 31,
	2010		2009
	US$000		US$000
Current liabilities
Commercial accounts payable		46,235		36,247
Related company accounts payable (Note 8)		23,180		6,775
Tickets sold and not flown (Note 12)		23,412		15,141
Other accounts payable:
Taxes payable		835		1,588
Boarding fees		6,777		3,502
Misc. provisions (Note 13)		12,897		9,448
Misc.		217		184
Total current liabilities		113,553		72,885

Long term liabilities
Long term provisions (Note 13)		1,021		613
TOTAL LIABILITIES		114,574		73,498

NET EQUITY (Note 14)
Capital		4,341		4,341
Revaluation surplus		3,329		-
Legal reserve		868		868
Accumulated profits		5,169		5,610
TOTAL NET EQUITY		13,707		10,819
TOTAL LIABILITIES AND NET EQUITY		128,281		84,317

The accompanying notes on pages 7 to 24 form an integral part of the financial statements.

- 3 -

LAN PERU S.A.

STATEMENT OF PROFIT AND LOSS

	For the year ending
	December 31,
	2010			2009
	US$000			US$000

Net sales (Note 16)		802,216			710,290
Sales costs (Note 17)		(649,275	)		(566,051	)
Gross profit		152,941			144,239

Operating expenditure and revenue:
Sales costs (Note 18)		(142,095	)		(129,716	)
Administration costs (Note 19)		(8,536	)		(7,146	)
Misc. costs		(236	)		(264	)
Misc. income		41			124
		(150,826	)		(137,002	)
Operating profit		2,115			7,237

Other income (expenditure):
Financial income		165			133
Financial expenditure		(860	)		(807	)
Exchange rate difference, net (Note 3)		746			89
		51			(585	)
Profit before corporate income tax		2,166			6,652
Corporate income tax (Note 15)		(521	)		(1,768	)
Profits during the year		1,645			4,884

The accompanying notes on pages 7 to 24 form an integral part of the financial statements.

- 4 -

LAN PERU S.A.

STATEMENT OF CHANGES IN NET EQUITY

FOR THE YEARS ENDING DECEMBER 31, 2010

AND DECEMBER 31, 2009

			Revaluation			Legal		Accumulated
	Capital		Surplus			Reserve		Profit (loss)			Total
	US$000		US$000			US$000		US$000			US$000

Balance as of January 1, 2009		4,341		-			775		1,862			6,978
Capitalization of profits		-		-			93		(93	)		-
Distribution of profits		-		-			-		(1,043	)		(1,043	)
Profits during the year		-		-			-		4,884			4,884
Balance as of December 31, 2009		4,341		-			868		5,610			10,819
Land revaluation		-		4,756			-		-			4,756
Revaluation deferred tax		-		(1,427	)		-		-			(1,427	)
Distribution of profits		-		-			-		(2,086	)		(2,086	)
Profits during the year		-		-			-		1,645			1,645
Balance as of December 31, 2010		4,341		3,329			868		5,169			13,707

The accompanying notes on pages 7 to 24 form an integral part of the financial statements.

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LAN PERU S.A.

CASH FLOW STATEMENT

	For the year ending
	December 31,
	2010			2009
	US$000			US$000

OPERATING CASH FLOW
Received		953,507			915,608
Other income received		218			126
Payment to suppliers and personnel		(919,742	)		(916,771	)
Corporate income tax paid		(1,347	)		(2,158	)
Other costs paid		(5,025	)		(8,644	)
Cash flow provided for (applied against) operating activities		27,611			(11,839	)

INVESTMENT CASH FLOW
Purchase of installations, movable goods, and equipment		(1,503	)		(837	)
Purchase of intangible assets		(70	)		(9	)
Net effect of investment cash flow		(1,573	)		(846	)

FINANCING CASH FLOW
Distribution of profits		(1,648	)		(1,043	)
Net effect of financing cash flow		(1,648	)		(1,043	)

Net increase (net reduction) in cash and cash equivalents		24,390			(13,728	)
Cash and cash equivalents balance at start of year		40,328			54,056
Cash and cash equivalents balance at end of year		64,718			40,328

RECONCILIATION OF NET PROFIT WITH NET
OPERATING CASH FLOW
Profits during the year		1,645			4,884
Adjustments to net profits that do not affect
operating cash flow:
Provision for doubtful payment accounts		348			496
Depreciation		863			862
Withdrawal and modifications in installations, movable goods and equipment		(64	)		100
Deferred corporate income tax and employee profit sharing		(312	)		116
Net variations in assets and liabilities:
Commercial accounts receivable		(3,959	)		(1,929	)
Related company accounts receivable		(3,458	)		(3,295	)
Other accounts receivable		(8,414	)		(2,301	)
Inventories		(26	)		35
Costs paid in advance		651			(813	)
Funds subject to restriction		(301	)		525
Commercial accounts payable		6,087			11,053
Related company accounts payable (Note 8)		15,967			(13,253	)
Tickets sold and not flown		8,271			(10,422	)
Other accounts payable		2,555			268
Misc. current and long term provisions		7,758			1,835
Net cash flow provided for (applied against) operating activities		27,611			(11,839	)

ELIMINATED TRANSACTIONS THAT DO NOT REPRESENT CASH FLOW
Land revaluation		4,756			-
Land revaluation deferred tax		1,427			-
Dividends pending payment to related company		438			-

The accompanying notes on pages 7 to 24 form an integral part of the financial statements.

- 6 -

LAN PERU S.A.

NOTES TO THE FINANCIAL STATEMENTS

31 DECEMBER 2010 AND 31 DECEMBER 2009

1	ECONOMIC ACTIVITY

Creation and operations -

Lan Perú S.A. (henceforth the Company) was created in Peru on 14 February 1997 with the purpose of dedicating itself to providing passenger, cargo and postal transportation services on a national and international level and in compliance with civil aeronautics legislation, and its operations on national and international routes started in the months of July and November 1999, respectively.

As of December 1010 the domestic route destinations consisted in the cities of Lima, Arequipa, Cusco, Juliaca, Puno, Tacna, Tumbes, Piura, Chiclayo, Trujillo, Iquitos, Tarapoto, Puerto Maldonado, Pucallpa and Cajamarca, while the international routes include Miami, Santiago de Chile, Guayaquil, Quito, Bogota, Caracas, Buenos Aires, Los Angeles, Mexico, Sao Paulo, Medellin, Madrid, Cali, Cartagena, Punta Cana and Cancun. In addition, in 2010 the company added international routes to the cities of Cordoba, Brasilia, San Francisco and Rosario.

As mentioned in Note 8 to the financial statements, the company rented planes from related companies to develop its operations, with a total of 26 in 2010 and 23 in 2009.

The Company is a Subsidiary of Lan Airlines, which directly and indirectly holds a 70% share of its social capital.

The company is a limited corporation created and domiciled in Peru. Its main office address is registered as: Av. José Pardo No.513, Miraflores. The staff employed in the development of its activities as of 31 December 2010 totaled 3,118 workers (2,598 workers in 2009).

Approval of financial statements -

The financial statements for the year ending on 31 December 2010 have been issued with the authorization of the Company Management and will be presented to the board to approve its publication before being put to the Shareholder’s Meeting for its consideration when it is held within the period stipulated by law for its definitive approval. The financial statements as of 31 December 2009 were approved at the General Shareholders Meeting on 10 March 2010.

2	ACCOUNTING PRINCIPLES AND PRACTICES

The main accounting principles and practices applied in the preparation of the financial statements are detailed below. These principles and practices have been uniformly applied in the years presented, unless indicated otherwise:

- 7 -

Bases of presentation -

The Company’s financial statements have been prepared according to accounting principles generally accepted in Peru. The accounting principles generally accepted in Peru correspond to the International Financial Reporting Standards (IFRS) approved by the National Public Accountancy Office via resolutions issued by the Accounting Regulation Council. The financial statements have been prepared according to the principle of historic cost, modified by the revaluation of properties.

The preparation of these financial statements according to IFRS requires using certain critical accounting estimates. It also requires that management use its judgment in the process of implementing the company’s accounting policies. The areas that involve a greater degree of judgment or complexity, or areas in which the premises and estimations are significant for the financial statements are described in Note 4.

Modifications to regulations issued and interpretations approved by the Accounting Regulation not implemented by the Company -

Accounting Regulation Council Resolution No. 044-2010-EF/94, published on 28 August 2010, approved the application of the of the International Accounting Standards Board (IASB) version of the International Financial Reporting Standards (IFRS) of 2009 and its amendments published internationally until May 2010 for the preparation of financial statements for fiscal years starting on 1 January 2011and recommending its anticipated implementation.

The regulations that will be in force as of 1 January 2011 correspond to the 2009 versions of: i) the International Accounting Standards (IAS) from 1 to 41; ii) International Financial Reporting Standards (IFRS) from 1 to 8; iii) the interpretations of the SIC Committee from 7 to 32; iv) the interpretations of the IFRIC Interpretations Committee from 1 to 19, and amendments through May 2010 of the IFRS 1, 3 and 7; of the IAS 1 and 34; and the IFRIC 13.

b) Conversion of foreign currency -

Functional currency and presentation currency

The items included in the financial statements are expressed in the currency of the primary economic environment where the institution operates (functional currency). The financial statements are presented in US dollars, which is the Company’s functional currency and presentation currency.

Transactions and balances -

Transactions in foreign currency are converted to functional currency using the exchange rates valid on the dates of the transactions or the valuation when the items are recorded. The profits or losses for exchange rate differences that might be produced from the payment of said transactions and the conversion to exchange rates of monetary assets and liabilities denominated in foreign currency as of the end of the year are recognized in the profit-loss statement.

c) Cash and cash equivalents -

Cash and cash equivalents correspond to the cash available and demand deposits with original issues of three months and negotiable values.

- 8 -

d) Derivative financial instruments and coverage activities -

Derivatives are initially recognized at their reasonable value on the date upon which the derivative instrument contract is celebrated and they are permanently readjusted to their reasonable value. The method for recognizing the resulting profit or loss from the change in the reasonable values of the derivatives depends on whether or not they have been designated as coverage instruments and, should that be the case, the nature of the item being covered. In the Company’s particular case it has derivative like those for the coverage of reasonable value corresponding to the use of fuel (reasonable value coverage).

At the start of the transaction the company documents the relationship between the coverage instruments and the covered elements. The Company also documents its assessment, both at the start of the coverage as well as continually, of whether the derivatives used in the coverage transactions are highly effective at compensating the changes in the reasonable values or the cash flows of the elements covered.

Reasonable value coverage -

The changes in the reasonable value of derivatives that are designated and which qualify as reasonable value coverage are registered in the profit-loss statement along with any other change in the reasonable value of the covered asset or liability that is attributable to the risk covered.

e) Commercial accounts pending and provision for accounts of doubtful collection -

Accounts pending are initially recognized for their reasonable value, less the provision for deterioration. The provision for deterioration of pending accounts is established when there is objective evidence that the Company will be unable to collect all of the overdue amounts under the original conditions. The provision for uncollectable accounts is determined on a monthly basis and based on a predetermined factor applied to average sales from the last three months.

The amount of the provision is recognized in the profit-loss statement. When a pending account is considered uncollectable it is eliminated from the financial statements against the previously recognized provision. The subsequent recovery of amounts previously eliminated from the financial statements is recognized with a credit to the profit-loss statement.

Existences -

Existences are valued at cost or at their net realizable value, whichever is lower. The cost is determined based on the first in - first out method. The valued determined in this way do not exceed the respective realizable values.

g) Financial assets -

The Company classifies its financial assets in the following categories: negotiable securities and loans and accounts pending. The classification depends on the purpose for which the investments were made. The Management determines the classification of its financial assets up to the date of their initial recognition and reevaluates this classification on every closing date.

Negotiable securities -

Negotiable securities correspond to mutual funds that are registered at market value. Profits or losses from fluctuations in the market value of mutual funds are registered in the results of the year when they become known.

- 9 -

Loans and accounts pending -

Loans and accounts pending are non-derived financial assets with payments that are fixed or can be determined and which are not traded in an active market. They arise when the Company directly provides money, goods, or services to a debtor without any intention of negotiating the pending account. These items have regular maturity dates. Loans and pending accounts are included in accounts pending to related companies and in other accounts pending in the general balance.

h) Land, facilities, furniture, and equipment

Land is reflected at its reasonable value based on a valuation undertaken by an independent valuator. The other items reflecting facilities, furniture and equipment are registered at their historic cost less their accumulated depreciation. The historic cost includes disbursements directly attributable to the acquisition of these items. The subsequent costs attributable to the fixed asset goods that increase the original capacity of the goods beings are capitalized, while the remaining costs are recognized in the results.

The increases in book value as a result of a revaluation are accredited to the surplus account of asset revaluation, net with the future tax effect with regard to the deferred d income tax. Reductions that reverse previous increased in the same asset are charged directly to the surplus account of asset revaluation and its corresponding effect on the balance of deferred income tax. All other reductions are charged to the results.

Lands are not depreciated. The depreciation of fixed asset goods is calculated using the straight line method to assign their cost or revaluation, less their residual value, during their estimated lifespan, as follows:

	Years

Facilities	10
Computer equipment	5
Diverse equipment	10
Furniture and appliances	10
Tools	5
Transport units	10

The residual values and the useful lifespan of the fixed assets are reviewed and adjusted, when necessary, to the date of each general balance. The book value of an asset is immediately cut to its recoverable value if the book value of the asset is greater than its estimated recoverable value.

Profits and losses for the sale of assets correspond to the difference between the income from the transaction and the book value of the assets. These are included in the results statement.

i) Commercial accounts pending -

Commercial accounts pending are payment obligations for goods or services acquired from suppliers as part of the normal course of business. Accounts pending are classified as current liabilities if mature within a year or less. Otherwise they are presented as non-current liabilities.

Accounts pending are initially recognized at their reasonable value and are subsequently readjusted to the amortized cost using the effective interest method.

- 10 -

Provisions -

Provisions are recognized when the Company has a present legal obligation or one assumed as the results of past events and it is likely that resources will have to be disbursed to pay off the obligation and the amount can be estimated reliably. Provisions for future operative losses are not recognized.

Annual staff vacations are recognized on the accrued base. The provision for the estimated annual staff vacation obligation that results from the services that employees provide is recognized through the date of the general balance.

The provision for compensation by staff service time consists in the entire compensation rights considered under current legislation and is shown under the Miscellaneous provisions segment of the general balance, net after deposits made to pay in keeping with the legislation in force.

k) Income tax -

Spending on income tax for the period corresponds to current income tax and deferred income tax. Income tax is recognized in the profit-loss statement.

The charge for current income tax is calculated based on the tax laws passed or substantially passed as of the date of the general balance. The management periodically assesses the position taken in the sworn tax statement with regard to situations in which tax laws are subject to interpretation. Where appropriate, the Company will make provisions for the amounts that it expects to pay to the tax authorities.

With deferred income tax, provisions are made using the passive method, based on the temporary differences that emerge between the tax bases of assets and liabilities and their respective values as shown on the financial statements. The deferred income tax is determined using the tax rates in force on the date of the general balance and which are expected to be applicable when the active deferred income tax is realized or the passive income tax is paid.

Deferred income taxes are recognized when they are likely to produce tax benefits, against which temporary differences can be used.

l) Participation in profits -

The Company recognizes a liability and an expense for workers’ participation in profits equivalent to 5% of the taxable material as determined according to the tax legislation in force.

The expenditure for workers’ participation is registered in the area of sales cost, administration expenses and sales expenses, in the same way that staff salaries are distributed in these areas.

m) Flights sold but not flown -

The amount presented under this segment corresponds to the obligation that is generated by the sale of air travel tickets, the income from which is recognized when the service is provided after the close of financial statements. The expenses for commissions associated with these sales are presented by cutting the revenues received in advance and will be recognized as an expense on the profit-loss statement when the sold tickets are used.

Unused flight tickets that are older than seven months from their sales date are recognized as revenues in the Company’s results.

- 11 -

n) Operative rentals -

The rentals where a significant portion of the risks and benefits in terms of the property are retained by the lessor are classified as operative rentals. The payments made under an operative rental arrangement (net after any incentive received by the lessor) are charged to the results statement based on the method established in the contract during the rental period.

o) Distribution of dividends -

The distribution of dividends is recognized as a liability in the financial statements in the period that they are approved by the Company’s shareholders.

p) Capital -

Common shares are classified as assets.

q) Recognition of revenues -

Revenues consist in the reasonable value of the services sold, net after sales taxes, rebates and discounts.

The Company recognizes its revenues when their amount can be measured reliably; it is likely that economic benefits will be accrued to the institution in the future, and the transaction fulfils specific criteria for each of the Company’s activities.

Revenue for passenger transport and cargo sales is recognized once the service has been provided.

r) Recognition of costs and expenses -

Costs and expenses related to sales are recognized when the risks and benefits inherent in the services sold are transferred to the buyer.

Revenues and expenses from interest are recognized based on the proportional time that has passed, applying the interest rates that were agreed upon. Remaining expenses are recognized based on the accrued amount.

s) Contingent liabilities and assets -

Contingent liabilities are not recognized in the financial statements and are presented in notes, unless their occurrence is remote. Contingent assets are not recognized in the financial statements and are only revealed if their realization is likely.

The accumulated balance of deferred participation is US$ 130,000 in the 2009 general balance, an amount that the Management does not consider material on the financial statements taken as a whole and for that reason it has made the accounting change prospectively, affecting said total in the 2010 results.

- 12 -

Accounting change -

Until 2009 the company recognized workers’ participation in profits by following the criteria considered in IAS 12, “Income tax.” Furthermore, by convention in Peru workers’ participation in profits was shown in the profit-loss statement on the line before income tax. The IFRIC interpretations committee issued a staff paper in September 2010 indicating that legal workers’ participation in profits should be recognized in the financial statements in accordance with the criteria contained in IAS 19, “Employee benefits.”

Since 2010 the Company management has changed its accounting policy to recognize workers’ participations in profits according to the criteria contained in IAS 19. The effect of the change in accounting policy due to the balance of deferred participations in the 2009 general balance is US$139,000, an amount that was noted on the 2010 results instead of doing so retroactively, given that it is not significant.

u) Reclassifications -

The following reclassifications have been incorporated into the 2009 financial statements so they can be compared with the 2010 financial statements:

- Commercial accounts pending to third parties for US$3,910,000 are shown as other accounts pending.

- US$278,000 in workers’ current participation in 2009 has been reclassified as administration expenses.

3	ADMINSITRATION OF FINANCIAL RISKS

3.1

Financial risk factors -

The Company’s activities expose it to a variety of financial risks: market risks (including exchange rate risk, price risk, cash flow risk, and reasonable value of interest rate risk), credit risk, and liquidity risk, the adverse effects of which are evaluated by the Company Management so they can be minimized. The main financial risks that the Company is exposed to are presented below:

Market risks-

Exchange rate risks -

The Company’s exposure to a currency other than its functional one is considerably low, meaning that the transactions that it mainly makes in nuevos soles do not present a significant exchange rate risk. The Company engages in transactions in the following currencies: Argentine pesos, Bolivian pesos, Chilean pesos, Colombian pesos, euros and Mexican pesos, which were converted into nuevos soles because it is the most-used currency.

The balance in nuevos soles as of 31 December is summarized as follows:

	2010		2009
	S/.000		S/.000

Asset:
Cash and cash equivalents		6,834		2,797
Commercial accounts pending		5,813		1,763
Other accounts pending		17,012		16,758
Total:		29,659		21,318

- 13 -

	2010			2009
	S/.000			S/.000

Brought forward:		29,659			21,318

Liability:
Commercial accounts pending		( 142,004	)		( 88,900	)
Other accounts pending		( 14,778	)		( 13,549	)
		( 156,782	)		( 102,449	)
Net liability		( 127,123	)		( 81,131	)

As of 31 December 2010 the exchange rate used by the Company to register the balance in nuevos soles has been S/.2.809 per US$1 for assets and liabilities (compared to S/.2.891 per US$1 for assets and liabilities through 31 December 2009).

As of 31 December 2010 and 2009 the Company registered net exchange profits and losses of US$746,000 and US$89,000, respectively.

As of 31 December 2010 the sensitivity to possible reasonable changes in the nuevo sol-US dollar exchange rate (drop increased by 10%) while keeping all other variables constant on the Company’s pretax results, would have been US$75,000 more/less (US$9,000 more/less as of 31 December 2009).

ii) Price risk -

Due to the fact that the Company’s activities are not subject to a price regulation institution, they vary according to the local market’s supply and demand. The Company Management considers that it does not face significant price risks.

iii) Cash flow risks and reasonable value of interest rate -

The cash flow risk is considered low inasmuch as the Company’s revenues and operative cash flows are considerably independent of changes in market interest rates. The Company reduces the risk of unfavorable changes in interest rates by maintaining surplus cash deposits in top-notch financial institutions.

As of 31 December 2010 the Company had no bank loans and consequently no interest rate risks.

b) Credit risk -

The Company does not have significant credit concentration risks. The Company has established policies to ensure that the sale of commercial air services is done through travel agencies that are backed by an industry system known as BSB, a system that is backed by guarantees in the event of any adverse event.

c) Liquidity risk -

The prudent administration of liquidity risk implies maintaining sufficient cash and cash equivalents, in addition to the possibility of committing and/or having financing committed via an adequate number of credit sources. The Administration and Finance Department makes cash flow projections to ensure that there is enough cash for the Company’s operational needs.

The surplus cash maintained by the Company and the balances above what is required for the administration of work capital is invested in negotiable securities. See Note 6.

Commercial accounts pending, accounts pending to related companies, and other accounts pending mostly have term durations of less than a year.

- 14 -

3.2

Administration of capital risk -

The Company’s objectives in administering capital are to safeguard its capacity to continue as an operating company with the purpose of generating returns for its shareholders, benefits for other groups of stakeholders, and to maintain an optimal capital structure to reduce the cost of capital.

The Company monitors its capital based on the leveraging ratio. The Company’s strategy in 2010 did not vary with regard to 2009, which was to maintain a leveraging ratio in the range of 0.8% to 0.9%.

3.3 Estimation of reasonable value -

The reasonable value of the financial instruments is the amount that an asset can be exchanged for between a duly informed buyer and vendor, or it can be used to pay an obligation between a debtor and a creditor with sufficient information under the terms of a transaction with free competition.

The Management believes that the book values of financial instruments as of 21 December 2010 and 2009 do not differ significantly from their reasonable value due to their short maturity periods, meaning that revealing said information is not relevant for an adequate interpretation of the Company’s financial situation on those dates. The accounting policies on recognition and valuation of these items are revealed in the respective accounting polices described in Note 2.

4	ESTIMATES AND CRITICAL ACCOUNTING CRITERIA

Management continually evaluates the estimates and accounting criteria used, which are based on historic experience and other factors, including expectations regarding the occurrence of future events that are considered reasonable according to the circumstances.

Estimates and critical accounting criteria -

The Company elaborates estimates and suppositions regarding the future. Thus, by definition very few of the accounting estimates that result from these will be the same as the respective real results. However, in the Management’s opinion, the estimates and suppositions made by the Company do not present a significant risk of a material adjustment of the balances of assets and liabilities next year.

The estimates and suppositions that run the risk of adjustments to the balances of assets and liabilities reported are presented below.

Air commerce provisions -

The Company makes provisions from its air commerce activities related to agency commissions, flyover rates, airport taxes, aircraft maintenance, information systems for passenger distribution and reservations, among others, which are made based on operative information and from third parties. In the Management’s opinion these provisions represent the obligations for such concepts on the date of the general balance.

Taxes -

The determination of tax obligations and expenditures requires interpretations of the applicable tax legislation. The Company seeks professional advice on tax matters before making any decision on tax issues. Even when the Management considers its estimates to be prudent and appropriate, differences in interpretation can arise regarding tax administration that might affect future tax payments.

- 15 -

5	CASH AND CASH EQUIVALENTS

As of 31 December, this segment consisted in:

	2010		2009
	US$000		US$000

Cash and fixed funds		575		283
Current accounts		1,432		1,356
Certificates of deposit		11,354		4,388
		13,361		6,027

6	NEGOTIABLE SECURITIES

Negotiable securities consist in deposits made in mutual funds administered by a foreign financial institution, which the Company keeps with the intention of cashing them in over the short term. The market value of negotiable securities has not shown significant fluctuations since the date of the financial statements.

In 2010 and 2009 these negotiable securities generated US$2,000 and US$11,000 in interests, respectively. These sums are included in the segment on Financial revenues in the results statement.

7	COMMERCIAL ACCOUNTS PENDING

As of 31 December, this segment consisted in:

	2010			2009
	US$000			US$000

Ticket sales		6,383			6,761
Cargo service		1,296			910
Inter-airline ticket sales		15,291			11,418
		22,970			19,089
Provision for accounts of doubtful collection		(626	)		( 356	)
		22,344			18,733

The accounts pending for inter-airline ticket sales correspond to airplane tickets on the part of other airlines. Collection is via the Clearing House system, which consists in a process of operation compensations between airlines.

As of 31 December 2010 the antiquity of commercial accounts pending was up to 90 days in ticket sales and 60 days for cargo services.

Commercial accounts pending are considered current maturity accounts and do not accrue interest.

- 16 -

The movement in provisions for accounts of doubtful collection was as follows:

	2010			2009
	US$000			US$000

Initial balance		356			454
Additions		348			496
Write-offs		(97	)		(184	)
Adjustments		19			(410	)
Final Balance		626			356

8	ACCOUNTS PENDING COLLECTION AND PENDING PAYMENT TO RELATED COMPANIES

The balances of the accounts pending collection and those pending payment to related companies as of 31 December were as follows:

	2010		2009
	US$000		US$000

Pending collection -
Lan Cargo S.A.		4,102		-
Lan Argentina S.A.		1,372		-
Lan Ecuador S.A.		1,290		-
Prime Airport Services Inc.		3		-
Lan Airlines S.A.		-000		3,230
Transporte Aéreo S.A.		-		81
Others		4		2
		6,771		3,313
Pending payment-
Lan Argentina S.A.		-		5,095
Lan Airlines S.A.		19,510		-
Inversiones Aéreas S.A. (Note 14)		1,173		747
Transporte Aereo S.A.		828		-
Lan Cargo Repair Station LLC		761		-
Andes Airport S.A.		599		261
Aerolineas Brasileñas S.A.		115		8
Aerotransporte Mas de Carga S.A.		76		21
Lufthansa Lan Chile Technical Training S.A.		47		-
Linea Aerea Carguera de Colombia		35		-
HGA Rampas del Ecuador S.A.		22		51
Inmobiliaria Aeronáutica S.A.		7		28
HGA Rampas y Servicios Aeroportuarios de Guayaquil S.A.		-		46
Florida Lan Cargo S.A.		-		274
Lan Ecuador S.A.		-		195
Others		7		49
		23,180		6,775

The balances pending collection and pending payment to related companies are of current maturity and do not accrue interest and have not specific guarantees.

The main transactions with related companies in 2010 and 2009 are detailed as follows:

- 17 -

Related companies	Concept	2010		2009
		US$000		US$000

Revenues -

Lan Airlines S.A.	General agent service for ground assistance in Peru and other minor services.		13,257		9,693

Lan Cargo S.A.	Rental of spaces for cargo in aircraft bellies.		26,274		8,329
			39,531		18,022

Expenses -

Lan Airlines S.A.	Aircraft rental, general ground assistance service agent and other minor services.		158,262		142,868

	Major aircraft maintenance services.		55,396		55,655

Transporte Aéreo S.A.	Aircraft and pilot rental.		34,519		36,638
			248,177		235,161

Main payments -

Lan Airlines S.A.	Payments made by Lan Airlines S.A. on behalf of the Company.		132,699		137,588

Lan Ecuador S.A.	Payments made by Lan Ecuador S.A.
	on behalf of the company.		-		7,392

Inversiones Aéreas S.A.	Payments made by the Company on behalf of
	Inversiones Aéreas S.A.		12		11
			132,711		144,991

Transfers received -

Lan Airlines S.A.	Cash transfers received by the company from
	Lan Airlines S.A.		222,270		215,644

Transfers made-

Lan Airlines S.A.	Cash transfers made by the Company
	to Lan Airlines S.A.		532,636		558,660

Aircraft rental contracts -

As of 31 December 2010 the Company had signed aircraft rental contracts with the related companies LAN Airlines S.A. and Transportes Aéreos S.A. for the Airbus A319-200 and Boeing 767-300 models to cover its domestic and international routes.

The main characteristics of these contracts are as follows:

Signed under the Dry modality, which implies operative control and technical management of the aircraft, in addition to operation with its own crew. There are also aircraft rental contracts for rental by the hour (interchange).

The rental contract rates are variable and fixed. The variable rates are established as a function of the block hours calculated from the moment when the aircrafts engines are turned on for takeoff until the actual moment that they are shut down upon the conclusion of each flight.

- 18 -

Elapsed contracts are automatically renewed.

Aircraft maintenance contract -

On 1 January 2007 the Company signed two maintenance guarantee contracts of indefinite duration with the related company Lan Airlines S.A. for the maintenance of the aircraft Airbus A320-200 and A319-200 and Boeing 767-300, which includes support for aircraft maintenance and the maintenance and reconditioning of aircraft and engines.

With regard to these contracts, in 2010 the Sales costs segment registered major aircraft maintenance costs for US$ 55.0 million (US$ 56.0 million en el 2009).

9	OTHER ACCOUNTS PENDING COLLECTION

As of 31 December, this segment consisted in:

	2010		2009
	US$000		US$000

Staff loans		1,715		1,191
Advances to suppliers		2,180		1,031
General sales tax		12,784		7,056
Payments toward income tax		968		303
Guarantee deposits		148		133
Miscellaneous		655		322
		18,450		10,036

10	DEFERRED INCOME TAX

As of 31 December 2010 and 2009, the deferred income tax resulted from the following temporary items:

	2010			2009
	US$000			US$000

Assets (liabilities) temporary items:
Vacation provision		5,446			3,931
Pre-operative expenses		-			15
Land revaluations		(4,756	)		-
		690			3,946

Income tax rate (*)		30.0	%		33.5	%

Asset for deferred income tax		207			1,322

(*)

There was an accounting change in 2010 for registering deferred income tax. Until 2009 the deferred income tax included the 5% workers’ participation, which produced an effective rate of 33.5%. Precisely as is mentioned in Note 2-5 to the financial statements, the effect of this accounting change is not significant.

The movement of the deferred income tax account for the years ending on 31 December 2010 and 2009 is as follows:

- 19 -

	2010			2009
	US$000			US$000
Initial balance of deferred income tax		1,322			1,438
Movement in the year:
Deferred income tax from land revaluation
Affected to assets		(1,427	)		-
Credit (debit) to year’s results (Note 15)		244			(210	)
Effect from exchange rate variation		68			94
Final balance of deferred income tax.		207			1,322

11	LAND, FACILITIES, FURNITURE AND EQUIPMENT

The movement in the area of Land, facilities, furniture and equipment and their corresponding accumulated depreciation for the years ending on 31 December 2010 and 2009 is as follows:

	Initial									Reclassifica-			Final
	balances		Additions		Withdrawal			Revaluation		tions & adjustmts.			balance
	US$000		US$000		US$000			US$000		US$000			US$000

Year: 2010 -
Cost -
Land		3,804		-		-			4,756		-			8,560
Facilities		3,554		431		-			-		-			3,985
Computer equipment		1,897		402		(136	)		-		(6	)		2,157
Miscellaneous equipment		1,781		173		-			-		-			1,954
Furniture and appliances		615		74		-			-		-			689
Tools		519		7		-			-		-			526
Transport units		154		22		-			-		-			176
Works under way		66		394		-			-		122			582
		12,390		1,503		(136	)		4,756		116			18,629

Accumulated depreciation-
Facilities		1,241		356		-			-		(78	)		1,519
Computer equipment		1,337		234		(6	)		-		-			1,565
Miscellaneous equipment		696		166		-			-		-			862
Furniture and appliances		322		56		-			-		-			378
Tools		238		37		-			-		-			275
Transport units		69		14		-			-		-			83
		3,903		863		(6	)		-		(78	)		4,682
		8,487												13,947

	Initial									Reclassifica-	Final
	balances		Additions		Withdrawal			Revaluation		tions & adjustmts.	balance
	US$000		US$000		US$000			US$000		US$000	US$000
Year: 2009 -
Cost -
Land		3,763		41		-			-			3,804
Facilities		3,258		296		-			-			3,554
Computer equipment		1,911		180		(194	)		-			1,897
Miscellaneous equipment		1,689		95		(3	)		-			1,781
Furniture and appliances		581		34		-			-			615
Tools		497		22		-			-			519
Transport units		142		12		-			-			154
Works under way		-		157		(125	)		34			66
		11,841		837		(322	)		34			12,390

Accumulated depreciation -
Facilities		910		331		-			-			1,241
Computer equipment		1,272		259		(194	)		-			1,337
Miscellaneous equipment		533		163		-			-			696
Furniture and appliances		261		55		-			6			322
Tools		196		42		-			-			238
Transport units		57		12		-			-			69
		3,229		862		(194	)		6			3,903
		8,612										8,487

- 20 -

The Company revalued its land in 2010 based on a technical valuation undertaken by an independent assessor, generating a revaluation surplus of US$4,756,000. The revaluation surplus was credited to net assets (Note 14-b) after the effect of deferred income tax for US$1,427,000.

As of 31 December 2010 the facilities, furniture and equipment included totally depreciated assets whose cost totals US$1,142,000 (US$1,335,000 as of 31 December 2009).

12	TICKETS SOLD AND NOT FLOWN

As of 31 December, this segment consisted in:

	2010			2009
	US$000			US$000

Tickets for use on domestic routes		6,433			4,184
Tickets for use on international routes		12,628			8,214
Inter-airline tickets		4,765			3,100
		23,826			15,498
Commissions for tickets not flown		(414	)		(357	)
		23,412			15,141

13	DIVERSE CURRENT AND LONG TERM PROVISIONs

As of 31 December, this segment consisted in:

	2010		2009
	US$000		US$000

Vacations		5,467		4,089
Performance bonus provision		5,372		3,901
Reward programs		1,775		1,165
Compensation for service time		1,058		835
Minor maintenance		144		71
Others		102		-
		13,918		10,061

By maturity:
Short term		12,897		9,448
Long term		1,021		613
		13,918		10,061

14	NET ASSETS

Capital -

The Company’s capital as of 31 December 2010 and 2009 is represented by 156,000 shares at a nominal value of S./ 100 each, which have been subscribed and paid for in their entirety.

As of 31 December 2010, the structure of the Company partnership is as follows:

			Total percentage
Percentage of individual	Number of		of
participation in capital	shareholders		participation

From 20.01 to 30		2		51.00
From 40.01 to 50		1		49.00
		3		100.00

- 21 -

Revaluation surplus -

This account is the result of a land revaluation process undertaken in December 2010, the total value of which was determined based on a technical valuation undertaken by an independent assessor. The revaluation surplus is transferred to the accumulated results when it is realized, either through its depreciation or when the assets that gave rise to it are withdrawn or sold.

Legal reserve -

According to the General Law on Limited Companies, the legal reserve is created with the transfer of 10% of net profits until reaching a total that is equivalent to 20% of the capital paid. In the absence of profits that were not distributed or freely available reserves, the legal reserve can be applied to the compensation of losses and will have to be replaced with the profits of coming years. This reserve can be capitalized but its replacement will be equally obligatory.

As of 31 December 2010 and 2009 the legal reserve had reached the limit established by the General Law on Limited Companies.

Accumulated results -

The dividends that are distributed to different shareholders of domiciled legal entities are subject to a 4.1% income tax that must be withheld by the Company.

In 2010 the Company distributed US$2,086,000 in dividends to its shareholders; said payment is currently pending payment of US$ 438,000 to the related company Inversiones Aéreas S.A.

15	TAX SITUATION

The Management considers that it has determined the tax result under the general income tax system according to the tax legislation in force, which requires that the results shown in the financial statements add and deduct items that the aforementioned legislation considers taxable and nontaxable, respectively.

The income tax rate has been set at 30%. Taxable material has been determined as follows:

	2010			2009
	US$000			US$000

Profit before income tax		2,166			6,652
Plus workers’ participation		225			273
Profit before participations and income tax		2,391			6,925
Plus (minus):
Non-deductible expenses		690			2,306
Vacations		1,238			3,931
Amortization of pre-operative expenses		(353	)		(373	)
Miscellaneous Provisions		534			(7,323	)
Taxable income before workers’ participation		4,500			5,466
Workers’ participation (5%)		(225	)		(273	)
Taxable income		4,275			5,193

Income tax (30%)		(1,282	)		(1,558	)
2009 income tax surplus		517			-
Income tax		(765	)		(1,558	)

- 22 -

Spending on income tax consists in:

	2010			2009
	US$000			US$000

Income tax -
Current		(765	)		(1,558	)
Deferred (Note 10)		244			(210	)
		(521	)		(1,768	)

Income tax on before-tax profits differs from the theoretical amount that would have resulted from the application of the income tax rate on the Company’s incomes is as follows:

	2010			2009
	US$000			US$000

Profit before income tax		2,166			6,652

Tax calculated applying 30% rate		(650	)		(1,996	)
Non-deductible expenses and untaxed protections, net		(163	)		501
Excess income tax in 2009		517			-
Workers’ participation (5%)		(225	)		(273	)
Income tax for the year		(521	)		(1,768	)

The Tax Administration is empowered to review and, should that be the case, to correct the income tax that the Company has determined over the last four years, starting as of 1 January on the year following the presentation of the corresponding sworn tax statement (years subject to oversight). The years subject to oversight are 2006 to 2010. Due to the fact that differences can emerge in the interpretation on the part of the Tax Administration regarding the regulations that apply to the Company, it is not possible at this date to anticipate whether additional tax liabilities will be produced as a result of eventual reviews. Any additional tax, fines and interest, if produced, will be recognized in the results of the year in which the difference of criteria with the Tax Administration has been resolved. The Management considers that no significant liabilities will emerge as a result of these potential reviews.

SALES

Sales for the year ending on 31 December consist in the following:

	2010		2009
	US$000		US$000

Sales for tickets flown		747,201		678,592
Cargo transport		41,971		44123,095
Others		13,044		8,603
		802,216		710,290

17	SALES COSTS

The sales costs for the year ending on 31 December consist in the following:

- 23 -

	2010		2009
	US$000		US$00

Fuels		243,334		213,266
Airport rates		48,254		43,017
Aircraft rental		125,944		111,698
Command and cabin crew services		19,651		14,997
Airport services (ramp handling)		33,711		28,078
Aircraft maintenance and repair (Note 8)		60,203		59,421
Staff expenses		72,463		52,041
Onboard services and sales		17,662		15,499
Depreciation		79		79
Others		27,974		27,955
		649,275		566,051

In 2010 the item fuel in the Sales cost segment included revenues for price coverage for US$7,490,703 (in 2009 it included losses for US$34,517,000) related to a contract that the Company had for said concept with its related firm Lan Airlines S.A. and which was in force from January to December 2010. In addition, the latter company entered into fuel coverage contracts with one or more foreign financial institutions so it could set the price at which Lan Airlines S.A. or its related firms could buy determined amounts of fuel for use in their fleet of aircraft in advance within a determined period.

18	SALES EXPENSES

The sales expenses for the year ending on 31 December consist in the following:

	2010		2009
	US$000		US$000

Data processing		30,834		35,303
Commissions paid for ticket sales		49,636		42,061
Services provided by third parties		1,576		1,516
Staff expenses		30,418		25,546
Depreciation		703		709
Service commissions		327		891
Publicity and marketing		5,888		3,956
Administrative services		14,191		12,421
Others		8,522		7,313
		142,095		129,716

19	ADMINISTRATIVE EXPENSES

The administrative expenses for the year ending on 31 December consist in the following:

	2010		2009
	US$000		US$000

Services provided by third parties		175		151
Staff expenses		3,380		3,112
Depreciation		81		78
Rentals		3,956		2,975
Others		944		830
		8,536		7,146

- 24 -

Re:	Lan Airlines S.A.
	Form 20-F for the Fiscal Year Ended December 31, 2010
	Filed May 5, 2011, File No. 001-14728

	Sincerely,

	Alejandro de la Fuente G.
	Chief Financial Officer
	LAN Airlines S.A.

Lan Pax Group S.A.	4.0	%
Manuel Benites	0.5	%
Jorge Perez Alati	0.5	%

	Current		Previous
Current Assets		333,450,293		241,278,313
Fixed Assets		118,467,981		121,673,171
TOTAL ASSETS		451,918,274		362,951,484
Current Liabilities		360,981,238		286,057,721
Long Term Liabilities		3,445,862		2,555,033
Subtotal		364,427,100		288,612,754
Net Equity		87,491,174		74,338,730
TOTAL LIABILITIES PLUS NET EQUITY		451,918,274		362,951,484

	Current			Previous
Earnings through operating activities		36,150,513			142,670,611
Expenditure on investment activities		(2,279,692	)		(38,250,434	)
Earnings (expenditure) from financing activities		27,250,000			(105,221,971	)
Total funds earned or expended during the operating period		61,120,821			(801,794	)

	Current			Previous
Ordinary Operating Revenue		39,743,976			49,063,468
Profit (loss) from net holdings		(18,412,524	)		(15,943,103	)
Other expenditure		(859,740	)		(1,338,977	)
Profit before corporate income tax		20,471,712			31,781,388
Corporate income tax		(7,319,268	)		(11,415,758	)
Net profit		13,152,444			20,365,630

Legal domicile:	Av. Rafael Obligado s/n y Jerónimo Salguero Complejo Costa Salguero (C1425DAA) - Ciudad Autónoma de Buenos Aires

Principal activity:	Regular and/or charter domestic and international air transport of persons or items, correspondence; and all related activities

Corporate statute:	August 19, 1998

Modifications (latest):	November 05, 2010

Inspección General de Justicia Registry Number:	1.654.138

Date of finalization of corporate statutes:	August 19, 2007

Name of controlling company:	Inversora Cordillera S.A.

Equity holdings of controlling company	95%
Voting right holdings of controlling company	95%

	Subscribed, inscribed
Stock classes	and integrated
	$
1,454,704 Ordinary non-endorsable class A shares with a face value of $10 and one vote each		14,547,040
14,692 Preferred non-endorsable class B shares with a face value of $10 and one vote each		146,920
Total		14,693,960

	31.12.10			31.12.09
	$
Service revenue (Note 3 1))		1,688,524,662			1,310,916,635
Cost of services rendered (Annex V)		(1,236,674,680	)		(976,163,808	)
Gross profit		451,849,982			334,752,827
Administration costs (Annex V)		(45,463,839	)		(33,795,433	)
Marketing costs (Annex V)		(366,642,167	)		(251,893,926	)
Ordinary Operating Profit		39,743,976			49,063,468
Other expenditure (Note 3 n))		(859,740	)		(1,338,977	)
Financial profit and loss, and net holdings (Note 3 m))		(18,412,524	)		(15,943,103	)
Profit before corporate income tax		20,471,712			31,781,388
Corporate income tax and deferred taxes (Note 9)		(7,319,268	)		(11,415,758	)
Profit during the accounting period		13,152,444			20,365,630

	CONTRIBUTIONS BY SHAREHOLDERS
	Corporate capital						Earnings not
	(Note 7)		Legal reserve		Special reserve		assigned			Total net equity
	$
Balance as of December 31, 2008		14,693,960		-		-		39,279,140			53,973,100
											,
Constitution of legal reserve in accordance with shareholders meeting of August 5, 2009		-		2,331,306		-		(2,331,306	)	,'

Constitutional special reserve in accordance with shareholders meeting of August 5, 2009		-		-		36,947,834		(36,947,834	)		-
Net profit over the accounting period		-		-		-		20,365,630
Balance as of December 31, 2009		14,693,960		2,331,306		36,947,834		20,365,630			74,338,730

Constitution of legal reserve in accordance with shareholders meeting of May 26, 2010		-		607,486		-		(607,486	)	'
Constitution of voluntary reserve as per shareholders’ meeting of May 26, 2010		-		-		19,758,144		(19,758,144	)		-
Net profit over the accounting period		-		-		-		13,152,444
Balance as of December 31, 2010		14,693,960		2,938,792		56,705,978		13,152,444			; 87,491,174

	31.12.10			31.12.09
	$
VARIATIONS IN CASH RESERVES
Cash at start of period		44,416,503			45,218,297
Cash at end of period		105,537,324			44,416,503
Increase/(decrease) in cash		61,120,821			(801,794	)

CAUSES OF CASH VARIATIONS
Operating activities
· Profit or loss over the accounting period		13,152,444			20,365,630
-Corporate income tax (Note 9)		7,319,268			11,415,758
-Interest accrued on credits and debits		(327,647	)		(3,973,523	)
Adjustments for the calculation of net operating cash flow

-Capped appreciation of goods in use and goods for lease (Annex l)		9,802,901			8,731,0•11
- Increase in bad debt provision		1,607,946			1,033,322
Amortization of intangible assets (Annex II)		457,148			671,499
-Increase in misc. Provisions		39,931,756			15,630,203
-Sale of goods for use and goods for lease (Annex l)		-			74,384

Changes in operating liabilities
-Production/(Increase) in sales credit		26,845,548			(35,210,252	)
-(Increase)/Decrease in other credits		(96,996,335	)		53,692,849
-Increase in exchange goods		(1,525,105	)		(1,046,579	)
-Increase in commercial debts		32,985,646			37,820,619
-Reduction in remunerations and welfare costs		(12,022,280	)		(1,567,190	)
-Increase in fiscal costs		872,963			4,938,559
-Increase in other debts		14,046,260			30,094,291
Operating cash flow		36,150,513			142,670,611

Investment activities
- Incorporation of goods for use and goods for lease (Annex I)		(1,955,501	)		(37,980,756	)
-Incorporation of intangible goods (Annex II)		(324,494	)		(269,678	)
Net cash flow used in investment activities		(2,279,692	)		(38,250,434	)

Financing activities
-Integration capital		-			1,315,166
-Repayment of loans obtained		-			(74,887,137	)
-Collection of loans provided		27,250,000			2,000,000
-(Increase) in loans provided		-			(33,650,000	)
Net cash flow generated from (used in) financing activities		27,250,000			(105,221,971	)
Net cash Increase/(Decrease)		61,120,821			(801,794	)

	31.12.09		Change			31.12.10
	$		$			$

Deferred tax
Bad debt provision	1,148,334			539,785		1,688,119
Pure contingency provision	501,666			(133,876	)	367,790
Other provisions	770,470			201,618		972,088
Statutory bonuses	367,186			(367,186	)	—
Tax loss carried forward	18,197,667			(7,696,685	)	10,500,982
Pre-operational costs as assets	(438,574	)		145,353		(293,221	)
Goods for use	(1,697,437	)		(131,321	)	(1,828,758	)
Other	33			123,044		123,077
Total deferred tax	18,849,345			(7,319,268	)	11,530,077

Year generated	Amount		Year of expiry
	$
Dec-06		7,689,552	Dec-11
Dec-07		22.313.252	Dec-12

Total tax loss carryforward as of December 31, 2010		30. 002. 804

	ORIGINAL VALUE												DEPRECIATION
Principal account	At start of period		Increases		Transfers			Write downs			At close of period		Accumulated at start of period		Write downs			Over the period (1)		Accumulated at close of period		Net result: as of 31.12.10		Net result: as of 31.12.09
	$
Goods for usage		—
Installations		16,304,560		115,982		172,018			-,			16,592,560		3,028,715		-			1,555,616		4,584,331		12,008,229		13,275,845
Machinery and equipment		7,485,975		842,746		44,284			-,			8,373,006		3,712,728		-			1,020,040		4,732,768		3,640,238		3,773,248
Ground vehicles		313,022		65,573		-			-			378,595		117,026		-			36,593		153,619		224,976		195,996
Furniture and office items		3,825,337		212,086		81,506			-			4,138,929		1,359,362		-			465,294		1,824,556		2,294,373		2,466,075
Tools		1,073,807		672,737		-			-			1,746,544		514,817		-			247,021		761,833		984,706		558,990
Works in progress		352,663		46,377		(297,808	)		-			101,232		-		-			-		-		101,232		352,663
Total goods for usage		29,355,365		1,955501		-			-			31,310,866		8,732,548		-			3,324,564		12,057,112		19,253,754		20,622,817
Goods for lease Engines		79,614,738		-		-			-			79,614,738		6,409,366		-			6,478,337		12,887,703		66,727,035		73,205,372
Total goods for lease		79,614,738		-		-			-			79,614,738		6,409,366		-			6,478,337		12,887,703		66,727,035		73,205,372
Total as of 31.12.10		108,970,103		1,955,501		-			-			110,925,604		15,141,914		-			9,802,901		24,944,815		85,980,789		-
Total as of 31.12.09		71,106,791		37,980,756		-			(117,444	)		108,970,103		6,453,933		(43,060	)		8,731,041		15,141,914		-		93,838,189

		Current				Previous
Solvency			0.24				0.26

		Current				Previous
Capital immobility			0.26				0.34

		Current				Previous
1. Return on Equity			0.15				0.27

	ORIGINAL VALUE						AMORTIZATIONS
Principal account	Start of period		Increases		Close of period		Accumulated at start of period		Write downs		Over the period (1)		Accumulated at close of period		Net result as of 31.12.10		Net result as of 31.12.09
	$
Pre-operational costs		1,394,054		-		1,394,054		1,277,883				116,171		1,394,054		-		116,171
International preoperational costs		1,582,312		-		1,582,312		1,178,513				243,184		1,421,697		160,615		403,799
Software		269,673		324,191		593,869		114,014		-		97,793		211,807		382,062		155,664
Balances as of 31.12.10		3,246,044		324,191		3,570235		2,570,410		-		457,148		3,027,558		542,677		-
Balances as of 31.12.09		2,976,366		269,678		3,246,044		1,898,911		-		671,499		2,570,410		-		675,634

	Starting								Total as of		Total as of
Item	balance			Increases		Decreases			31.12.10		31.12.09
	$
Deducted from assets

Bad debt provision		3,280,953	(1)		1,607,946		(65,701	)		4,823,198		3,280,953

Included in liabilities

Provision for misc. contingencies and risks		1,085,957	(2)		859,740		(1,277,229	)		668,468		1,085,957
Total as of 31.12.10		4,366,910			2,467,686		(1,342,930	)		5,491,666		-
Total as of 31.12.09		2,537,481			2,337,563		(508,134	)		-		4,366,910

					Amount in local currency
	Type and amount in				Total as of			Total as of
Item	foreign currency (1)		Exchange rate		31.12.10			31.12.09
					$
CURRENT ASSETS
Cash and bank deposits	US$	15,739,698		3.936		61,951,450			6,711,301
	CH$	2,915,250		0.008		23,322			100
	PEN	52,316		0.700		36,621			91,203
	Reales	39,868		2.309		92,055			16,622
Temporary investments	US$	3,486,567		3.936		13,723,127			24,628,130
Sales credits	US$	2,716,707		3.936		10,692,959			11,988,606
Other credits	US$	33,702,443		3.936		132,652,816			67,133,450
	CH$	409,470,500		0.008		3,275,764			61,422
	PEN	5,735,524		0.700		4,014,867			49,995
	Reales	471,832		2.309		1,089,461			1,019,985
Total current assets						227,566,442			111,700,814

FIXED ASSETS

Other credits	US$	330,000		3.936		1,298,880			-
Total fixed assets						1,298,880			-
Total Assets						228,865,322			111,700,814

CURRENT LIABILITIES
Commercial debts	US$	17,161,437		3.976		(68,233,872	)		(37,659,653	)
	CH$	3,219,444		0.009		(28,975	)		(2,739	)
	PEN	1,343,727		0.707		(950,015	)		(98,637	)
	Reales	923,295		2.417		(2,231,603	)		(1.182,072	)
Other debts	US$					-			(14,727,820	)
Total current liabilities						(71,444,465	)		(53,670,921	)

Net assets positions						157,420,857			58,029,893


	Cost of
	services		Administration				Total		Total
Description	rendered		costs		Marketing costs		31.12.10		31.12.09
	$
Fuel		405,014,225		,		-		405,014,225		291,154,987
Personnel costs		210,241,304		24,559,299		74,806,807		309,607,410		235,540,470
Agency incentives and commissions				-		202,011,633		202,011,633		159,639,999
Aircraft leases		205,648,756						205,648,756		154,001,087
Aircraft maintenance		136,698,381		-				136,698,381		128,042,097
Civil aviation taxes		45,497,630		-		-		45,497,630		53,484,660
Passenger service		72,556,896				-		12,556,896		47,256,253
Ramp service		69,847,183		-		-		69,847,183		38,855,485
Distribution systems		-		13,846,600		41,580,053		41,580,053		37,104,275
Service payments and fees		6,608,089		-		15,829,690		36,284,379		27,678,305
Crew costs		32,965,370				-		32,965,370		23,726,166
Publicity and marketing costs		-		272,903		25,383,816		25,383,816		9,763,017
Depreciations assets in use		8,390,995		1,421,319		1,139,003		9,802,901		8,731,041
Taxes, fees, contributions		10,290,370		126,326		55,461		11,768,150		8,346,893
General insurance		8,000,630		998,438		16,905		8,143,861		7,238,608
Plant and equipment lease		2,527,079		91,363		1,131,783		4,657,300		6,504,356
Training costs		6,384,733		28,237		304,212		6,780,308		5,816,386
Plant and equipment maintenance		3,672,839		236,913		2,015,816		5,716,892		4,506,889
Service commissions costs		3,939,608		93,211		733,071		4,909,592		3,808,307
Telephone costs		4,132,613		220,944		14,088		4,239,912		3,073,579
Office equipment		789,492		421,089		76,283		1,086,719		1,261,597
Intangible asset amortization		19,294		6,368		16,765		457,148		671,499
Freight		473,810		362,409		34,195		514,373		377,973
Bank costs				13,854				362,409		306,481
Import costs		299,531		15,047		79,841		393,226		267,707
Subscriptions		190,295		2,748,519		33,703		239,045		212,351
Misc. costs		2,485,557				1,379,042		6,613,118		4,482,699
Total as of 31.12.10		1,236,674,680		45,463,839		366,642,167		1,648,780,686		-
Total as of 31.12.09		976,163,808		33,795,433		251,893,926		-		1,261,853,167

	As of December 31, 2010 ThUS$		As of December 31, 2009 ThUS$
ASSETS
Current assets		18,930		14,680
Other financial assets, current		5,558		7,238
Other non-financial assets, current		5,563		5,225
Trade and other accounts receivable, current		90,780		60,745
Accounts receivable from related entities, current		292,191		288,204
Inventories		132		87
Tax assets, current		31,149		15,770
Total current assets other than assets (or disposal groups) held for sale or to distribute to owners		444,303		391,949
Non-current assets (or disposal groups) held for sale		2,318		4,139
Total current assets		446,621		396,088
Non-current assets
Other financial assets, non-current		6,635		2,216
Other non-financial assets, non-current		3,325		5,140
Rights receivable, non-current		2,833		2,641
Trade and other accounts receivable, non-current		5		5
Intangible assets other than goodwill		2,788		2,273
Goodwill		15,669		15,670
Property, plant and equipment		508,020		531,608
Deferred tax assets		1,965		2,837
Total non-current assets		541,240		562,390

	2010 ThUS$			2009 ThUS$
Income from ordinary activities		1,025,685			746,934
Cost of sales		(991.985	)		(720,806	)
Gross margin		33,700			26,128
Other income, by function		254,093			266,494
Distribution costs		(46,970	)		(37,742	)
Administrative costs		(96,578	)		(70,130	)
Other expenses, by function		(49,186	)		(39,923	)
Other losses		(5,860	)		(167	)
Financial income		2,484			3,236
Financial costs		(18,073	)		(19,486	)
Share of profits from associated businesses using the participation method		-			1,014
Foreign exchange differences		465			(119	)
Result of indexation units		92			(575	)
Profit before taxes		74,167			128,730
Income tax expenditure		(9,282	)		(22,553	)
PROFIT FOR THE YEAR		64,885			106,177
Profit attributable to owners of the parent		65,260			105,387
Profit (loss) attributable to non-controlling interests		(375	)		790
Profit for the year		64,885			106,177
EARNINGS PER SHARE
Basic and diluted earnings per share (US$)		0.00			0.00

	2010 ThUS$			2009 ThUS$
PROFIT		64,885			106,177
Currency translation differences
Gains (losses) on currency translation, before taxes		1.923			4.220
Other comprehensive income, before taxes, currency translation differences		1,923			4,220
Sum of income taxes related to components of other comprehensive income		(329	)		(1	)
Other comprehensive income		1,594			4,219
Total comprehensive income		66,479			110,396
Comprehensive income attributable to:
Comprehensive income attributable to owners of the parent		66,853			109,604
Comprehensive income attributable to non-controlling interests		(374	)		792
TOTAL COMPREHENSIVE INCOME		66,479			110,396

	Share capital ThUS$		Other equity interests ThUS$		Currency translation reserve ThUS$		Cash flow hedging reserve ThUS$		Retained earnings ThUS$			Equity attributable to owners of the parent ThUS$			Non- controlling interest ThUS$			Total equity ThUS$
Initial balance, January 1, 2010		83,225		16,681		8				320,467			420,381			3,391			423,772
Changes in equity
Comprehensive income
Profit		-		-		-		-		65,260			65,260			(375	)		64,885
Other comprehensive income		-		-		1,593				-			1,593			1			1,594
Dividends		-		-		-		-		(31,584	)		(31,584	)		-			(31,584	)
Increase (reduction) due to transfers and other changes										456			456			(265	)		191
Final balance current year, December 31, 2010		83,225		16,681		1,601		-		354,599			456,106			2,752			458,858

	2010 ThUS$			2009 ThUS$
Cash flow from operating activities
Cash collection from operating activities
Proceeds from sales of goods and services		1,165,061			958,931
Other cash receipts from operating activities
Payments for operating activities
Payments to suppliers for goods and services		(862,793	)		(716,818	)
Payments to and on behalf of employees		(159,924	)		(142,544	)
Other payments for operating activities		(22,307	)		(21,265	)
Interest paid		(387	)
Interest received		152			37
Income taxes refunded (paid)		(7,807	)		1,355
Other cash inflows (outflows)		(3,123	)		306
Net cash flows from operating activities		108,872			80,002
Cash flows used in investing activities
Cash flows from disposal of subsidiaries, other businesses		1,491			1,568
Other cash receipts from sales of equity or debt instruments of other entities					(992	)
Amounts raised from sale of property, plant and equipment		95
Purchases of property, plant and equipment		(10,689	)		(13,614	)
Purchases of intangible assets		(531	)		(393	)
Dividends received		438			219
Interest received
Other cash inflows (outflows)
Net cash flow used in investing activities		(9,196	)		(13,212	)
Cash flows from (used in) financing activities
Loans from related entities		1,303			3,877
Amounts raised from long-term loans		30,106			-
Loan payments		(30,106	)		-
Payments of finance lease liabilities		(18,042	)		(17,875	)
Loan payments to related entities		(28,395	)		(26,719	)
Dividends paid		(31,584	)		-
Interest paid		(18,055	)		(20,429	)
Other cash inflows (outflows)		(34	)		-
Net cash flows from (used in) financing activities		(94,807	)		(61,146	)
Net increase (decrease) in cash and cash equivalents before the effect of changes in the exchange rate		4,869			5,644
Effects of variation in the exchange rate on cash and cash equivalents		(619	)		1,169
Net increase (decrease) in cash and cash equivalents		4,250			6,813
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		14,680			7,867
CASH AND CASH EQUIVALENTS AT END OF PERIOD		18,930			14,680

Standards and amendments		Mandatory application: years beginning
Revised IFRS 3: Combinations of businesses		01/07/2009
Amendment to IAS 27: Consolidated and separate financial statements		01/07/2009
Amendment to IAS 39: Financial instruments: recognition and measurement		01/01/2010
Amendment to IFRS 2: Payment based on actions		01/07/2010
Amendment to IAS 38: Intangible assets		01/01/2010
Amendment to IAS 1: presentation of financial statements		01/01/2010
Amendment to IFRS 5: Non-current assets maintained for sale and discontinued operations		01/01/2010
Amendment to IAS 38: impairment of assets		01/01/2010

Interpretations		Mandatory application: years beginning
IFRIC 17: Distributions to owners of non-monetary assets		01/07/2009
IFRIC 18: Transfer of assets from client		01/07/2009
IFRIC 9: Revaluation of implicit derivatives		01/07/2009
IFRIC 16: Coverage of a net investment of a foreign operation		01/07/2009

Standards and amendments		Mandatory application: years beginning starting on:
Amendment to IAS 32: Classification of issuing rights		01/02/2010
IAS 24 revised: Disclosure of related parties		01/01/2011
IRFS 9: Financial instruments: Classification and measurement		01/01/2013

Interpretations		Mandatory application: years beginning starting on:
IFRIC 19: Liquidation of financial liabilities with equity instruments		01/07/2010
Amendment to IFRIC 14: Anticipatory payments of the obligation to maintain a minimum level of financing		01/01/2011