UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

August 18, 2017

Commission File Number 1-14728

 

LATAM Airlines Group S.A.

(Translation of Registrant’s Name Into English)

Presidente Riesco 5711, 20th floor

Las Condes

Santiago, Chile

(Address of principal executive offices)

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

Form 20-F  x             Form 40-F  ¨

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

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

 

LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2017

CONTENTS

CLP	-	CHILEAN PESO
ARS	-	ARGENTINE PESO
US$	-	united states dollar
THUS$	-	THOUSANDS OF UNITED STATES DOLLARS
COP	-	COLOMBIAN PESO
brl/R$	-	braZILIAN REAL
thr$	-	Thousands of Brazilian reaL
MXN	-	MEXICAN PESO
VEF	-	STRONG Bolivar

Contents of the notes to the interim consolidated financial statements of LATAM Airlines Group S.A. and Subsidiaries.

Notes	Page
1 - General information	1
2 - Summary of significant accounting policies	4
2.1. Basis of Preparation	4
2.2. Basis of Consolidation	7
2.3. Foreign currency transactions	8
2.4. Property, plant and equipment	9
2.5. Intangible assets other than goodwill	10
2.6. Goodwill	10
2.7. Borrowing costs	11
2.8. Losses for impairment of non-financial assets	11
2.9. Financial assets	11
2.10. Derivative financial instruments and hedging activities	12
2.11. Inventories	13
2.12. Trade and other accounts receivable	13
2.13. Cash and cash equivalents	14
2.14. Capital	14
2.15. Trade and other accounts payables	14
2.16. Interest-bearing loans	14
2.17. Current and deferred taxes	14
2.18. Employee benefits	15
2.19. Provisions	15
2.20. Revenue recognition	16
2.21. Leases	16
2.22. Non-current assets (or disposal groups) classified as held for sale	17
2.23. Maintenance	17
2.24. Environmental costs	17
3 - Financial risk management	18
3.1. Financial risk factors	18
3.2. Capital risk management	31
3.3. Estimates of fair value	31
4 - Accounting estimates and judgments	33
5 - Segmental information	37
6 - Cash and cash equivalents	40
7 - Financial instruments	42
7.1. Financial instruments by category	42
7.2. Financial instruments by currency	44
8 - Trade, other accounts receivable and non-current accounts receivable	45
9 - Accounts receivable from/payable to related entities	48
10 - Inventories	49
11 - Other financial assets	50
12 - Other non-financial assets	51
13 - Non-current assets and disposal group classified as held for sale	52
14 - Investments in subsidiaries	53

15 - Intangible assets other than goodwill	56
16 - Goodwill	57
17 - Property, plant and equipment	59
18 - Current and deferred tax	65
19 - Other financial liabilities	70
20 - Trade and other accounts payables	79
21 - Other provisions	81
22 - Other non-financial liabilities	84
23 - Employee benefits	85
24 - Accounts payable, non-current	87
25 - Equity	87
26 - Revenue	93
27 - Costs and expenses by nature	94
28 - Other income, by function	95
29 - Foreign currency and exchange rate differences	96
30 - Earnings per share	104
31 - Contingencies	105
32 - Commitments	118
33 - Transactions with related parties	124
34 - Share based payments	125
35 - Statement of cash flows	129
36 - The environment	130
37 - Events subsequent to the date of the financial statements	131

LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION

ASSETS

		As of		As of
		June 30,		December 31,
	Note	2017		2016
		ThUS$		ThUS$
		Unaudited
Current assets
Cash and cash equivalents	6 - 7		1,150,553		949,327
Other financial assets	7 - 11		655,040		712,828
Other non-financial assets	12		252,228		212,242
Trade and other accounts receivable	7 - 8		1,209,183		1,107,889
Accounts receivable from related entities	7 - 9		600		554
Inventories	10		233,691		241,363
Tax assets	18		92,776		65,377
Total current assets other than non-current assets (or disposal groups) classified as held for sale or as held for distribution to owners			3,594,071		3,289,580
Non-current assets (or disposal groups) classified as held for sale or as held for distribution to owners	13		311,104		337,195
Total current assets			3,905,175		3,626,775
Non-current assets
Other financial assets	7 - 11		95,014		102,125
Other non-financial assets	12		201,768		237,344
Accounts receivable	7 - 8		7,747		8,254
Intangible assets other than goodwill	15		1,598,041		1,610,313
Goodwill	16		2,671,247		2,710,382
Property, plant and equipment	17		10,283,856		10,498,149
Tax assets	18		19,019		20,272
Deferred tax assets	18		385,320		384,580
Total non-current assets			15,262,012		15,571,419
Total assets			19,167,187		19,198,194

The accompanying Notes 1 to 37 form an integral part of these interim consolidated financial statements.

LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION

LIABILITIES AND EQUITY

		As of			As of
		June 30,			December 31,
LIABILITIES	Note	2017			2016
		ThUS$			ThUS$
		Unaudited
Current liabilities
Other financial liabilities	7 - 19		1,475,538			1,839,528
Trade and other accounts payables	7 - 20		1,475,362			1,593,068
Accounts payable to related entities	7 - 9		2,351			269
Other provisions	21		2,687			2,643
Tax liabilities	18		14,146			14,286
Other non-financial liabilities	22		2,796,463			2,762,245
			5,766,547			6,212,039
Liabilities included in disposal groups classified as held for sale	13		7,182			10,152
Total current liabilities			5,773,729			6,222,191
Non-current liabilities
Other financial liabilities	7 - 19		7,244,858			6,796,952
Accounts payable	7 - 24		450,585			359,391
Other provisions	21		429,877			422,494
Deferred tax liabilities	18		925,364			915,759
Employee benefits	23		85,631			82,322
Other non-financial liabilities	22		182,570			213,781
Total non-current liabilities			9,318,885			8,790,699
Total liabilities			15,092,614			15,012,890
EQUITY
Share capital	25		3,146,265			3,149,564
Retained earnings	25		293,923			366,404
Treasury Shares	25		(178	)		(178	)
Other reserves			545,231			580,870
Parent's ownership interest			3,985,241			4,096,660
Non-controlling interest	14		89,332			88,644
Total equity			4,074,573			4,185,304
Total liabilities and equity			19,167,187			19,198,194

The accompanying Notes 1 to 37 form an integral part of these interim consolidated financial statements.

LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENT OF INCOME BY FUNCTION

		For the 6 months ended						For the 3 months ended
		June 30,						June 30,
	Note	2017			2016			2017			2016
		ThUS$			ThUS$			ThUS$			ThUS$
		Unaudited
Revenue	26		4,504,729			4,200,981			2,144,822			1,966,724
Cost of sales			(3,600,645	)		(3,330,106	)		(1,742,880	)		(1,668,632	)
Gross margin			904,084			870,875			401,942			298,092
Other income	28		246,454			237,269			128,912			143,909
Distribution costs			(339,459	)		(356,500	)		(165,994	)		(180,793	)
Administrative expenses			(412,831	)		(326,828	)		(207,918	)		(144,997	)
Other expenses			(198,210	)		(205,206	)		(109,095	)		(115,682	)
Other gains/(losses)			(1,130	)		(12,421	)		(14,706	)		(15,986	)
Income from operation activities			198,908			207,189			33,141			(15,457	)
Financial income			42,224			31,418			19,300			20,554
Financial costs	27		(198,333	)		(206,632	)		(102,545	)		(103,583	)
Foreign exchange gains/(losses)	29		(10,529	)		143,408			(45,902	)		75,510
Result of indexation units			47			284			35			284
Income (loss) before taxes			32,317			175,667			(95,971	)		(22,692	)
Income (loss) tax expense / benefit	18		(81,507	)		(144,899	)		(28,019	)		(62,572	)
NET INCOME (LOSS) FOR THE PERIOD			(49,190	)		30,768			(123,990	)		(85,264	)
Income (loss) attributable to owners of the parent			(72,481	)		10,133			(138,038	)		(92,075	)
Income (loss) attributable to non-controlling interest	14		23,291			20,635			14,048			6,811
Net income (loss) for the year			(49,190	)		30,768			(123,990	)		(85,264	)
EARNINGS PER SHARE
Basic earnings (losses) per share (US$)	30		(0.11953	)		0.01857			(0.22763	)		(0.16878	)
Diluted earnings (losses) per share (US$)	30		(0.11953	)		0.01857			(0.22763	)		(0.16878	)

The accompanying Notes 1 to 37 form an integral part of these interim consolidated financial statements.

LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		For the 6 months ended						For the 3 months ended
		June 30,						June 30,
	Note	2017			2016			2017			2016
		ThUS$			ThUS$
		Unaudited
NET INCOME (LOSS)			(49,190	)		30,768			(123,990	)		(85,264	)
Components of other comprehensive income that will not be reclassified to income before taxes
Other comprehensive income, before taxes, gains (losses) by new measurements on defined benefit plans	25		4,027			(1,269	)		1,426			304
Total other comprehensive income that will not be reclassified to income before taxes			4,027			(1,269	)		1,426			304
Components of other comprehensive income that will be reclassified to income before taxes
Currency translation differences
Gains (losses) on currency translation, before tax	29		(36,015	)		549,062			(145,137	)		304,086
Other comprehensive income, before taxes, currency translation differences			(36,015	)		549,062			(145,137	)		304,086
Cash flow hedges
Gains (losses) on cash flow hedges before taxes	19		(7,329	)		61,537			(2,450	)		33,563
Other comprehensive income (losses), before taxes, cash flow hedges			(7,329	)		61,537			(2,450	)		33,563
Total other comprehensive income that will be reclassified to income before taxes			(43,344	)		610,599			(147,587	)		337,649
Other components of other comprehensive income (loss), before taxes			(39,317	)		609,330			(146,161	)		337,953
Income tax relating to other comprehensive income that will not be reclassified to income
Income tax relating to new measurements on defined benefit plans	18		(874	)		383			166			(30	)
Accumulate income tax relating to other comprehensive income that will not be reclassified to income			(874	)		383			166			(30	)
Income tax relating to other comprehensive income that will be reclassified to income
Income tax related to cash flow hedges in other comprehensive income			2,005			(16,940	)		2,725			(9,229	)
Income taxes related to components of other comprehensive incomethat will be reclassified to income			2,005			(16,940	)		2,725			(9,229	)
Total Other comprehensive income			(38,186	)		592,773			(143,270	)		328,694
Total comprehensive income (loss)			(87,376	)		623,541			(267,260	)		243,430
Comprehensive income (loss) attributable to owners of the parent			(108,585	)		594,063			(274,918	)		229,702
Comprehensive income (loss) attributable to non-controlling interests			21,209			29,478			7,658			13,728
TOTAL COMPREHENSIVE INCOME (LOSS)			(87,376	)		623,541			(267,260	)		243,430

The accompanying Notes 1 to 37 form an integral part of these interim consolidated financial statements.

LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

		Attributable to owners of the parent
								Change in other reserves
														Actuarial gains or
								Currency			Cash flow			losses on defined			Shares based		Other			Total						Parent's			Non-
		Share			Treasury			translation			hedging			benefit plans			payments		sundry			other			Retained			ownership			controlling			Total
	Note	capital			shares			reserve			reserve			reserve			reserve		reserve			reserve			earnings			interest			interest			equity
		ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$		ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$
Equity as of January 1, 2017			3,149,564			(178	)		(2,086,555	)		1,506			(12,900	)		38,538		2,640,281			580,870			366,404			4,096,660			88,644			4,185,304
Total increase (decrease) in equity
Comprehensive income
Gain (losses)	25		-			-			-			-			-			-		-			-			(72,481	)		(72,481	)		23,291			(49,190	)
Other comprehensive income			-			-			(33,990	)		(5,264	)		3,150			-					(36,104	)		-			(36,104	)		(2,082	)		(38,186	)
Total comprehensive income			-			-			(33,990	)		(5,264	)		3,150			-		-			(36,104	)		(72,481	)		(108,585	)		21,209			(87,376	)
Transactions with shareholders
Dividens	25		-			-			-			-			-			-		-			-			-			-			-			-
Increase (decrease) through transfers and other changes, equity	25-34		(3,299	)		-			-			-			-			739		(274	)		465			-			(2,834	)		(20,521	)		(23,355	)
Total transactions with shareholders			(3,299	)		-			-			-			-			739		(274	)		465			-			(2,834	)		(20,521	)		(23,355	)
Closing balance as of June 30, 2017 (Unaudited)			3,146,265			(178	)		(2,120,545	)		(3,758	)		(9,750	)		39,277		2,640,007			545,231			293,923			3,985,241			89,332			4,074,573

The accompanying Notes 1 to 37 form an integral part of these interim consolidated financial statements.

LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

		Attributable to owners of the parent
							Change in other reserves
													Actuarial gains or
							Currency			Cash flow			losses on defined			Shares based		Other		Total						Parent's			Non-
		Share		Treasury			translation			hedging			benefit plans			payments		sundry		other			Retained			ownership			controlling			Total
	Note	capital		shares			reserve			reserve			reserve			reserve		reserve		reserve			earnings			interest			interest			equity
		ThUS$		ThUS$			ThUS$			ThUS$			ThUS$			ThUS$		ThUS$		ThUS$			ThUS$			ThUS$			ThUS$			ThUS$
Equity as of January 1, 2016			2,545,705		(178	)		(2,576,041	)		(90,510	)		(10,717	)		35,647		2,634,679		(6,942	)		317,950			2,856,535			81,013			2,937,548
Total increase (decrease) in equity
Comprehensive income
Gain (losses)	25		-		-			-			-			-			-		-		-			10,133			10,133			20,635			30,768
Other comprehensive income			-		-			540,961			43,854			(885	)		-				583,930			-			583,930			8,843			592,773
Total comprehensive income			-		-			540,961			43,854			(885	)		-		-		583,930			10,133			594,063			29,478			623,541
Transactions with shareholders
Dividens	25		-		-			-			-			-			-		-		-			(3,040	)		(3,040	)		-			(3,040	)
Increase (decrease) through transfers and other changes, equity	25-34		-		-			-			-			-			1,753		670		2,423			(277	)		2,146			(20,983	)		(18,837	)
Total transactions with shareholders			-		-			-			-			-			1,753		670		2,423			(3,317	)		(894	)		(20,983	)		(21,877	)
Closing balance as of June 30, 2016 (Unaudited)			2,545,705		(178	)		(2,035,080	)		(46,656	)		(11,602	)		37,400		2,635,349		579,411			324,766			3,449,704			89,508			3,539,212

The accompanying Notes 1 to 37 form an integral part of these interim consolidated financial statements.

LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS DIRECT – METHOD

		For the periods ended
		June 30,
	Note	2017			2016
		ThUS$			ThUS$
		Unaudited
Cash flows from operating activities
Cash collection from operating activities
Proceeds from sales of goods and services			5,025,079			4,899,179
Other cash receipts from operating activities			29,562			32,923
Payments for operating activities
Payments to suppliers for goods and services			(3,398,364	)		(3,143,525	)
Payments to and on behalf of employees			(960,316	)		(1,187,656	)
Other payments for operating activities			(112,785	)		(86,060	)
Interest received			10,338			5,508
Income taxes refunded (paid)			(71,703	)		(33,127	)
Other cash inflows (outflows)	35		(41,968	)		(68,147	)
Net cash flows from operating activities			479,843			419,095
Cash flows used in investing activities
Cash flows arising from losing control of subsidiaries or other businesses			6,124			-
Other cash receipts from sales of equity or debt instruments of other entities			1,403,463			1,507,952
Other payments to acquire equity or debt instruments of other entities			(1,372,576	)		(1,355,394	)
Amounts raised from sale of property, plant and equipment			19,706			20,451
Purchases of property, plant and equipment			(189,483	)		(409,770	)
Amounts raised from sale of intangible assets			-			4
Purchases of intangible assets			(38,004	)		(27,835	)
Other cash inflows (outflows)	35		(1,583	)		(2,056	)
Net cash flow from (used in) investing activities			(172,353	)		(266,648	)
Cash flows from (used in) financing activities	35
Amounts raised from long-term loans			908,748			844,282
Amounts raised from short-term loans			100,000			230,000
Loans repayments			(785,901	)		(886,880	)
Payments of finance lease liabilities			(160,546	)		(159,519	)
Dividends paid			(43,394	)		(19,799	)
Interest paid			(181,865	)		(201,684	)
Other cash inflows (outflows)			71,722			(165,390	)
Net cash flows from (used in) financing activities			(91,236	)		(358,990	)
Net increase (decrease) in cash and cash equivalents before effect of exchanges rate change			216,254			(206,543	)
Effects of variation in the exchange rate on cash and cash equivalents			(15,028	)		90,443
Net increase (decrease) in cash and cash equivalents			201,226			(116,100	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	6		949,327			753,497
CASH AND CASH EQUIVALENTS AT END OF PERIOD	6		1,150,553			637,397

The accompanying Notes 1 to 37 form an integral part of these interim consolidated financial statements.

LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF June 30, 2017 (UNAUDITED)

NOTE 1 - GENERAL INFORMATION

LATAM Airlines Group S.A. (the “Company”) is a public company registered with the Chilean Superintendency of Securities and Insurance (SVS), under No.306, whose shares are quoted in Chile on the Stock Brokers - Stock Exchange (Valparaíso) - the Chilean Electronic Stock Exchange and the Santiago Stock Exchange; it is also quoted in the United States of America on the New York Stock Exchange (“NYSE”) in New York in the form of American Depositary Receipts (“ADRs”).

Its principal business is passenger and cargo air transportation, both in the domestic markets of Chile, Peru, Argentina, Colombia, Ecuador and Brazil and in a developed series of regional and international routes in America, Europe and Oceania. These businesses are developed directly or by their subsidiaries in different countries. In addition, the Company has subsidiaries operating in the freight business in Mexico, Brazil and Colombia.

The Company is located in Santiago, Chile, at Avenida Américo Vespucio Sur No. 901, commune of Renca.

Corporate Governance practices of the Company are set in accordance with Securities Market Law the Corporations Law and its regulations, and the regulations of the SVS and the laws and regulations of the United States of America and the U.S. Securities and Exchange Commission (“SEC”) of that country, with respect to the issuance of ADRs.

On July 18, 2016, LATAM received the approval by Comissão de Valores Mobiliários (“CVM”) for a discontinuation of Brazilian LATAM depositary receipts-BDRS level III ("BDRs"), supported by common shares of the Company and, consequently, our registration of the foreign issuer. On May 24, 2016, the Company reported as an Essential Fact the maturity date May 23, 2016 deadline for holders of BDRs to express their option to keep the shares and the blockade by BM&FBOVESPA with the same date of the respective balances of shares of the holders of BDRs who chose to adhere to the procedure for sale of shares through the procedure called Sale Facility and assigned for this purpose a theoretical value of sales in the Santiago Stock Exchange. On June 9, 2016, the Company reported that BTG Pactual Chile S.A. Stockbrokers ("BTG Pactual Chile"), a chilean institution contracted by the Company, made the sale on the Santiago Stock Exchange of the shares of the respective holders who adhered to Sale Facility procedure.

At June 30, 2017, the Company's capital stock is represented by 608,374,525 shares, all common shares, without par value, which is divided into: (a) the 606,407,693 subscribed and paid shares; and (b) 1,966,832 shares pending of subscription and payment, of which: (i) 1,500,000 shares are allocated to compensation stock option plan; And (ii) 466,832 correspond to the balance of shares pending of placement of the last capital increase approved at the extraordinary meeting of shareholders of August 18, 2016.

The Board of the Company is composed of nine members who are elected every two years by the ordinary shareholders' meeting. The Board meets in regular monthly sessions and in extraordinary sessions as the corporate needs demand. Of the nine board members, three form part of its Directors’ Committee which fulfills both the role foreseen in the Corporations Law and the functions of the Audit Committee required by the Sarbanes Oxley Law of the United States of America and the respective regulations of the SEC.

The majority shareholder of the Company is the Cueto Group, which through Costa Verde Aeronáutica S.A., Costa Verde Aeronáutica SpA, Costa Verde Aeronáutica Tres SpA, Inversiones Nueva Costa Verde Aeronáutica Limitada, Inversiones Priesca Dos y Cía. Ltda., Inversiones Caravia Dos y Cía. Ltda., Inversiones El Fano Dos y Cía. Ltda., Inversiones La Espasa Dos S.A., Inversiones, Inversiones La Espasa Dos y Cía. Ltda. and Inversiones Mineras del Cantábrico S.A., owns 28.27% of the shares issued by the Company, and therefore is the controlling shareholder of the Company in accordance with the provisions of the letter b) of Article 97 and Article 99 of the Securities Market Law, given that there is a decisive influence on its administration.

As of June 30, 2017, the Company had a total of 1,528 registered shareholders. At that date approximately 4.49% of the Company’s share capital was in the form of ADRs.

For the period ended June 30, 2017, the Company had an average of 44,282 employees, ending this period with a total of 43,330 employees, spread over 7,261 Administrative employees, 4,718 in Maintenance, 15,273 in Operations, 8,744 in Cabin Crew, 3,801 in Controls Crew, and 3,533 in Sales.

The main subsidiaries included in these consolidated financial statements are as follows:

a) Participation rate

				As June 30, 2017						As December 31, 2016
		Country	Functional
Tax No.	Company	of origin	Currency	Direct		Indirect		Total		Direct		Indirect		Total
				%		%		%		%		%		%
				Unaudited
96.518.860-6	Latam Travel Chile S.A. and Subsidary (*)	Chile	ThU$		99.9900		0.0100		100.0000		99.9900		0.0100		100.0000
96.763.900-1	Inmobiliaria Aeronáutica S.A.	Chile	ThU$		99.0100		0.9900		100.0000		99.0100		0.9900		100.0000
96.969.680-0	Lan Pax Group S.A. and Subsidiaries	Chile	ThU$		99.8361		0.1639		100.0000		99.8361		0.1639		100.0000
Foreign	Lan Perú S.A.	Peru	ThU$		49.0000		21.0000		70.0000		49.0000		21.0000		70.0000
93.383.000-4	Lan Cargo S.A.	Chile	ThU$		99.8939		0.0041		99.8980		99.8939		0.0041		99.8980
Foreign	Connecta Corporation	U.S.A.	ThU$		0.0000		100.0000		100.0000		0.0000		100.0000		100.0000
Foreign	Prime Airport Services Inc. and Subsidary	U.S.A.	ThU$		0.0000		100.0000		100.0000		0.0000		100.0000		100.0000
96.951.280-7	Transporte Aéreo S.A.	Chile	ThU$		0.0000		100.0000		100.0000		0.0000		100.0000		100.0000
96.631.520-2	Fast Air Almacenes de Carga S.A.	Chile	CLP		0.0000		100.0000		100.0000		0.0000		100.0000		100.0000
Foreign	Laser Cargo S.R.L.	Argentina	ARS		0.0000		100.0000		100.0000		0.0000		100.0000		100.0000
Foreign	Lan Cargo Overseas Limited and Subsidiaries	Bahamas	ThU$		0.0000		100.0000		100.0000		0.0000		100.0000		100.0000
96.969.690-8	Lan Cargo Inversiones S.A. and Subsidary	Chile	ThU$		0.0000		100.0000		100.0000		0.0000		100.0000		100.0000
96.575.810-0	Inversiones Lan S.A. and Subsidiaries	Chile	ThU$		99.7100		0.2900		100.0000		99.7100		0.2900		100.0000
96.847.880-K	Technical Trainning LATAM S.A.	Chile	CLP		99.8300		0.1700		100.0000		99.8300		0.1700		100.0000
Foreign	Latam Finance Limited	Cayman Islands	ThU$		100.0000		0.0000		100.0000		0.0000		0.0000		0.0000
Foreign	TAM S.A. and Subsidiaries (**)	Brazil	BRL		63.0901		36.9099		100.0000		63.0901		36.9099		100.0000

(*) In June 2016, Lantours Division de Servicios Terrestres S.A. changes its name to Latam Travel Chile S.A.

(**) As of June 30, 2017, indirect ownership participation on TAM S.A and subsidiaries is from Holdco I S.A., LATAM is entitled to 99,9983% of the economic rights and 49% of the rights politicians product of provisional measure No. 714 of the Brazilian government that allows foreign capital to have up to 49% of the property.

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Thus, since April 2016, LATAM Airlines Group S.A. owns 901 voting shares of Holdco I S.A., equivalent to 49% of the total shares with voting rights of said company and TEP Chile S.A. owns 938 voting shares of Holdco I S.A., equivalent to 51% of the total voting shares of that company.

b) Financial Information

		Statement of financial position														Net Income
																For the periods ended
																June 30,
		As of June 30, 2017							As of December 31, 2016							2017			2016
Tax No.	Company	Assets		Liabilities		Equity			Assets		Liabilities		Equity			Gain /(loss)
		ThUS$		ThUS$		ThUS$			ThUS$		ThUS$		ThUS$			ThUS$			ThUS$
		Unaudited														Unaudited
96.518.860-6	Latam Travel Chile S.A. and Subsidary (*)		5,748		2,113		3,635			5,468		2,727		2,741			894			1,609
96.763.900-1	Inmobiliaria Aeronáutica S.A.		36,483		7,918		28,565			36,756		8,843		27,913			653			519
96.969.680-0	Lan Pax Group S.A. and Subsidiaries (**)		455,688		1,059,007		(595,520	)		475,763		1,045,761		(561,472	)		(39,416	)		(37,915	)
Foreign	Lan Perú S.A.		334,595		324,224		10,371			306,111		294,912		11,199			(828	)		(621	)
93.383.000-4	Lan Cargo S.A.		560,361		344,630		215,731			480,908		239,728		241,180			(26,986	)		(17,103	)
Foreign	Connecta Corporation		34,184		21,429		12,755			31,981		23,525		8,456			4,298			5,615
Foreign	Prime Airport Services Inc. and Subsidary (**)		8,214		11,869		(3,655	)		7,385		11,294		(3,909	)		253			(289	)
96.951.280-7	Transporte Aéreo S.A.		338,796		100,140		238,656			340,940		124,805		216,135			20,798			859
96.631.520-2	Fast Air Almacenes de Carga S.A.		9,732		3,342		6,390			10,023		3,645		6,378			(80	)		389
Foreign	Laser Cargo S.R.L.		21		32		(11	)		21		32		(11	)		1			-
Foreign	Lan Cargo Overseas Limited and Subsidiaries (**)		51,945		29,950		17,386			54,092		35,178		15,737			2,016			1,049
96.969.690-8	Lan Cargo Inversiones S.A. and Subsidary (**)		100,099		112,211		(10,957	)		80,644		95,747		(13,506	)		2,544			2,543
96.575.810-0	Inversiones Lan S.A. and Subsidiaries (**)		12,492		6,621		5,778			10,971		6,452		4,452			1,329			878
59.068.920-3	Technical Trainning LATAM S.A.		1,579		594		985			1,745		284		1,461			(457	)		205
Foreign	Latam Finance Limited		699,314		708,372		(9,058	)		-		-		-			(9,058	)		-
Foreign	TAM S.A. and Subsidiaries (**)		5,033,438		4,515,974		437,286			5,287,286		4,710,308		495,562			(56,902	)		(8,732	)

(*) In June 2016, Lantours Division of Terrestrial Services S.A. Changed its name to Latam Travel Chile S.A.

(**) The Equity reported corresponds to Equity attributable to owners of the parent, it does not include Non-controlling interest.

Additionally, we have proceeded to consolidate the following special purpose entities: 1. Chercán Leasing Limited created to finance the pre-delivery payments on aircraft; 2. Guanay Finance Limited created to issue a bond collateralized with future credit card receivables; 3. Private investment funds and 4. Avoceta Leasing Limited created to finance the pre-delivery payments on aircraft. These companies have been consolidated as required by IFRS 10.

All the entities controlled have been included in the consolidation.

Changes in the scope of consolidation between January 1, 2016 and June 30, 2017, are detailed below:

(1) Incorporation or acquisition of companies

- On January 2016 it was registered at the Public Registry of Commerce, the Increase in Share Capital and statutory modification for the purpose of creating a new class of shares of Lan Argentina S.A., subsidiary of Lan Pax Group S.A., for a total of 90,000,000 Class "C" shares registered non-endorsable and non-voting. Lan Pax Group S.A. participated in this capital increase, changing its ownership to 4.87%, consequently, the indirect participation of LATAM Airlines Group S.A. increases to 95.85660%

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- On April 1, 2016, Multiplus Corretora de Seguros Ltda. was created, the ownership of which corresponds to 99.99% of Multiplus S.A. direct subsidiary of TAM S.A.

- On September 2016, Latam Finance Limited, a wholly-owned subsidiary of LATAM Airlines Group S.A., was created. Company operation started on April 2017.

- As of June 30, 2017, Inversiones LAN S.A., subsidiary of LATAM Airlines Group S.A., acquired 4,951 shares of Aerovías de Integración Regional Aires S.A. a non-controlling shareholder, equivalent to 0.09498%, consequently, the indirect participation of LATAM Airlines Group S.A. increases to 99.19414%

(2) Dissolution of companies

- During the period 2016, Lan Chile Investments Limited, subsidiary of LATAM Airlines S.A.; and Aircraft International Leasing Limited, subsidiary of Lan Cargo S.A., were dissolved.

(3) Disappropriation of companies.

- On May 5, 2017 Lan Pax Group S.A. and Inversiones Lan S.A., both subsidiaries of LATAM Airlines Group S.A., as sellers, and Talma Servicios Aeroportuarios S.A. and Inversiones Talma S.A.C., as purchasers, entered into a purchase agreement with respect to 100% of the capital stock of Rampas Andes Airport Services S.A.

- The sale value of Rampas Andes Airport Services S.A. was ThUS $ 8,624.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following describes the principal accounting policies adopted in the preparation of these consolidated financial statements.

2.1. Basis of Preparation

The consolidated financial statements of LATAM Airlines Group S.A. for the period ended June 30, 2017, have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (“IASB”) incorporated therein and with the interpretations issued by the International Financial Reporting Standards Interpretations Committee (IFRIC).

The consolidated financial statements have been prepared under the historic-cost criterion, although modified by the valuation at fair value of certain financial instruments.

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The preparation of the consolidated financial statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires management to use its judgment in applying the Company’s accounting policies. Note 4 shows the areas that imply a greater degree of judgment or complexity or the areas where the assumptions and estimates are significant to the consolidated financial statements. These interim consolidated financial statements have been prepared under IAS 34.

In order to facilitate comparison, some minor reclassifications have been made to the consolidated financial statements for the previous year.

During 2016 the Company recorded out of period adjustments resulting in an aggregate net decrease of US$ 18.2 million to "Net income (loss) for the period" for the year ended December 31, 2016. These adjustments include US$ 39.5 million (loss) resulting from an account reconciliation process initiated after the Company's afiliate TAM S.A. and its subsidiaries completed the implementation of the SAP system. A further US$ 11.0 million (loss) reflect adjustments related to foreign exchange differences, also relating to the Company's subsidiaries in Brazil. The balance of US$ 32.3 million (gain) includes principally the adjustment of unclaimed fees for expired tickets for the Company and its affiliates outside Brazil. Management of TAM S.A. has concluded that the out of period adjustments that have been identified are material to the 2015 financial statements of TAM S.A., which should therefore require a restatement in Brazil. However, Management of LATAM has evaluated the impact of all out of period adjustments, both individually and in the aggregate, and concluded that due to their relative size and to qualitative factors they are not material to the annual consolidated financial statements for 2016 of Latam Airlines Group S.A. or to any previously reported consolidated financial statements, therefore no restatement or revision is necessary.

(a)          Accounting pronouncements with implementation effective from January 1, 2017:

(i)          Standards and amendments	Date of issue	Mandatory Application: Annual periods beginning on or after
Amendment to IAS 7: Statement of cash flows. Amendment to IAS 12: Income tax	january 2016 january 2016	01/01/2017 01/01/2017
(ii)          Improvements	Date of issue	Mandatory Application: Annual periods beginning on or after
Improvements to International Financial Reporting Standards (2014-2016 cycle): IFRS 12 Disclosure of interests in other entities.	december 2016	01/01/2017

The application of standards, amendments, interpretations and improvements had no material impact on the consolidated financial statements of the Company.

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(b)          Accounting pronouncements not yet in force for financial years beginning on January 1, 2017 and which has not been effected early adoption

(i)          Standards and amendments	Date of issue	Mandatory Application: Annual periods beginning on or after
IFRS 9: Financial instruments.	December 2009	01/01/2018
Amendment to IFRS 9: Financial instruments.	November 2013	01/01/2018
IFRS 15: Revenue from contracts with customers (1).	May 2014	01/01/2018
Amendment to IFRS 15: Revenue from contracts with customers.	April 2016	01/01/2018
Amendment to IFRS 2: Share-based payments	June 2016	01/01/2018
Amendment to IFRS 4: Insurance contracts.	September  2016	01/01/2018
Amendment to IAS 40: Investment property	December 2016	01/01/2018
IFRS 16: Leases (2).	January 2016	01/01/2019
IFRS 17: Insurance Contracts	May 2017	01/01/2021
Amendment to IFRS 10: Consolidated financial statements and IAS 28 Investments in associates and joint ventures.	September 2014	To be determined
(ii)          Improvements
Improvements to International Financial Reporting Standards. (cycle 2014-2016) IFRS 1: First-time adoption of international financial reporting standards and IAS 28 investments in associates and joint ventures.	December 2016	01/01/2018
(iii)          Interpretations
IFRIC 22: Foreign currency transactions and advance consideration	December 2016	01/01/2018
IFRIC 23: Uncertain tax positions	June 2017	01/01/2019

The Company’s management believes that the adoption of the standards, amendments and interpretations described above but not yet effective would not have a significant impact on the Company’s consolidated financial statements in the year of their first application, except for IFRS 15 and IFRS 16:

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(1) IFRS 15 Revenue from Contracts with Customers supersedes actual standard for revenue recognition that actually uses the Company, as IAS 18 Revenue and IFRIC 13 Customer Loyalty Programmes. The core principle of IFRS 15 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This standards supersedes IFRS 15 supersedes, IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers; and SIC-31 Revenue - Barter Transactions Involving Advertising Services.

We are currently evaluating how the adoption of the revenue recognition standard will impact our Consolidated Financial Statements. Interpretations are on-going and could have a significant impact on our implementation. We currently believe the adoption will not have a significant impact on passenger and cargo revenue recognition. However, the impact in revenue and liability for frequent flyer program are still being analyzed.

(2) The IFRS 16 Leases add important changes in the accounting for lessees by introducing a similar treatment to financial leases for all operating leases with a term of more than 12 months. This mean, in general terms, that an asset should be recognized for the right to use the underlying leased assets and a liability representing its present value of payments associate to the agreement. Monthly leases payments will be replace by the asset depreciation and a financial cost in the income statement.

We are currently evaluating how the adoption of the leases recognition standard will impact our Consolidated Financial Statements. Interpretations are on-going and could have a material impact on our implementation. Currently, we expect that the adoption of the new lease standard will have a material impact on our consolidated balance sheet due to the recognition of right-of-use assets and lease liabilities principally for certain leases currently accounted for as operating leases.

LATAM Airlines Group S.A. and subsidiaries are still assessing these standard to determinate the effect on their Financial Statements, covenants and other financial indicators.

2.2. Basis of Consolidation

(a) Subsidiaries

Subsidiaries are all the entities (including special-purpose entities) over which the Company has the power to control the financial and operating policies, which are generally accompanied by a holding of more than half of the voting rights. In evaluating whether the Company controls another entity, the existence and effect of potential voting rights that are currently exercisable or convertible at the date of the consolidated financial statements are considered. The subsidiaries are consolidated from the date on which control is passed to the Company and they are excluded from the consolidation on the date they cease to be so controlled. The results and flows are incorporated from the date of acquisition.

Balances, transactions and unrealized gains on transactions between the Company’s entities are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment loss of the asset transferred. When necessary in order to ensure uniformity with the policies adopted by the Company, the accounting policies of the subsidiaries are modified.

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To account for and identify the financial information to be revealed when carrying out a business combination, such as the acquisition of an entity by the Company, shall apply the acquisition method provided for in IFRS 3: Business combination.

(b)       Transactions with non-controlling interests

The Company applies the policy of considering transactions with non-controlling interests, when not related to loss of control, as equity transactions without an effect on income.

(c)       Sales of subsidiaries

When a subsidiary is sold and a percentage of participation is not retained, the Company derecognizes assets and liabilities of the subsidiary, the non-controlling and other components of equity related to the subsidiary. Any gain or loss resulting from the loss of control is recognized in the consolidated income statement in Other gains (losses).

If LATAM Airlines Group S.A. and Subsidiaries retain an ownership of participation in the sold subsidiary, and does not represent control, this is recognized at fair value on the date that control is lost, the amounts previously recognized in Other comprehensive income are accounted as if the Company had disposed directly from the assets and related liabilities, which can cause these amounts are reclassified to profit or loss. The percentage retained valued at fair value is subsequently accounted using the equity method.

(d)       Investees or associates

Investees or associates are all entities over which LATAM Airlines Group S.A. and Subsidiaries have significant influence but have no control. This usually arises from holding between 20% and 50% of the voting rights. Investments in associates are booked using the equity method and are initially recognized at their cost.

2.3.      Foreign currency transactions

(a)       Presentation and functional currencies

The items included in the financial statements of each of the entities of LATAM Airlines Group S.A. and Subsidiaries are valued using the currency of the main economic environment in which the entity operates (the functional currency). The functional currency of LATAM Airlines Group S.A. is the United States dollar which is also the presentation currency of the consolidated financial statements of LATAM Airlines Group S.A. and Subsidiaries.

(b)       Transactions and balances

Foreign currency transactions are translated to the functional currency using the exchange rates on the transaction dates. Foreign currency gains and losses resulting from the liquidation of these transactions and from the translation at the closing exchange rates of the monetary assets and liabilities denominated in foreign currency are shown in the consolidated statement of income by function except when deferred in Other comprehensive income as qualifying cash flow hedges.

8

(c)       Group entities

The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency other than the presentation currency are translated to the presentation currency as follows:

(i)       Assets and liabilities of each consolidated statement of financial position presented are translated at the closing exchange rate on the consolidated statement of financial position date;

(ii)       The revenues and expenses of each income statement account are translated at the exchange rates prevailing on the transaction dates, and

(iii)       All the resultant exchange differences by conversion are shown as a separate component in other comprehensive income.

The exchange rates used correspond to those fixed in the country where the subsidiary is located, whose functional currency is different to the U.S. dollar.

Adjustments to the Goodwill and fair value arising from the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and are translated at the closing exchange rate or period informed.

2.4.      Property, plant and equipment

The land of LATAM Airlines Group S.A. and Subsidiaries is recognized at cost less any accumulated impairment loss. The rest of the Property, plant and equipment are registered, initially and subsequently, at historic cost less the corresponding depreciation and any impairment loss. The amounts of advance payments to aircraft manufacturers are capitalized by the Company under Construction in progress until receipt of the aircraft.

Subsequent costs (replacement of components, improvements, extensions, etc.) are included in the value of the initial asset or shown as a separate asset only when it is probable that the future economic benefits associated with the elements of Property, plant and equipment are going to flow to the Company and the cost of the element can be determined reliably. The value of the component replaced is written off in the books at the time of replacement. The rest of the repairs and maintenance are charged to the results of the year in which they are incurred.

Depreciation of Property, plant and equipment is calculated using the straight-line method over their estimated technical useful lives; except in the case of certain technical components which are depreciated on the basis of cycles and hours flown.

The residual value and useful life of assets are reviewed, and adjusted if necessary, once per year. When the carrying amount of an asset is higher than its estimated recoverable amount, its value is reduced immediately to its recoverable amount (Note 2.8).

Losses and gains on the sale of Property, plant and equipment are calculated by comparing the compensation with the book value and are included in the consolidated statement of income.

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2.5.      Intangible assets other than goodwill

(a)       Airport slots and Loyalty program

Airport slots and the Coalition and Loyalty program are intangible assets of indefinite useful life and are subject to impairment tests annually as an integral part of each CGU, in accordance with the premises that are applicable, included as follows:

Airport slots – Air transport CGU

Loyalty program – Coalition and loyalty program Multiplus CGU (See Note 16)

The airport slots correspond to an administrative authorization to carry out operations of arrival and departure of aircraft at a specific airport, within a specified period.

The Loyalty program corresponds to the system of accumulation and redemption of points that has developed Multiplus S.A., subsidiary of TAM S.A.

The Brands, airport Slots and Loyalty program were recognized in fair values determined in accordance with IFRS 3, as a consequence of the business combination with TAM and Subsidiaries.

(b)       Computer software

Licenses for computer software acquired are capitalized on the basis of the costs incurred in acquiring them and preparing them for using the specific software. These costs are amortized over their estimated useful lives, for which the Company has been defined useful lives between 3 and 10 years.

Expenses related to the development or maintenance of computer software which do not qualify for capitalization, are shown as an expense when incurred. The personnel costs and others costs directly related to the production of unique and identifiable computer software controlled by the Company, are shown as intangible Assets others than Goodwill when they have met all the criteria for capitalization.

(c)       Brands

The Brands were acquired in the business combination with TAM S.A. And Subsidiaries and recognized at fair value under IFRS. During the year 2016, the estimated useful life of the brands change from an indefinite useful life to a five-year period, the period in which the value of the brands will be amortized (See Note 15).

2.6.      Goodwill

Goodwill represents the excess of acquisition cost over the fair value of the Company’s participation in the net identifiable assets of the subsidiary or associate on the acquisition date. Goodwill related to acquisition of subsidiaries is not amortized but tested for impairment annually or each time that there is evidence of impairment. Gains and losses on the sale of an entity include the book amount of the goodwill related to the entity sold.

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2.7.      Borrowing costs

Interest costs incurred for the construction of any qualified asset are capitalized over the time necessary for completing and preparing the asset for its intended use. Other interest costs are recognized in the consolidated income statement when they are accrued.

2.8.       Losses for impairment of non-financial assets

Intangible assets that have an indefinite useful life, and developing IT projects, are not subject to amortization and are subject to annual testing for impairment. Assets subject to amortization are subjected to impairment tests whenever any event or change in circumstances indicates that the book value of the assets may not be recoverable. An impairment loss is recorded when the book value is greater than the recoverable amount. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. In evaluating the impairment, the assets are grouped at the lowest level for which cash flows are separately identifiable (CGUs). Non-financial assets other than goodwill that have suffered an impairment loss are reviewed if there are indicators of reverse losses at each reporting date.

2.9.      Financial assets

The Company classifies its financial instruments in the following categories: financial assets at fair value through profit and loss and loans and receivables. The classification depends on the purpose for which the financial instruments were acquired. Management determines the classification of its financial instruments at the time of initial recognition, which occurs on the date of transaction.

(a)       Financial assets at fair value through profit and loss

Financial assets at fair value through profit and loss are financial instruments held for trading and those which have been designated at fair value through profit or loss in their initial classification. A financial asset is classified in this category if acquired mainly for the purpose of being sold in the near future or when these assets are managed and measured using fair value. Derivatives are also classified as held for trading unless they are designated as hedges. The financial assets in this category and have been designated initial recognition through profit or loss, are classified as Cash and cash equivalents and Other current financial assets and those designated as instruments held for trading are classified as Other current and non-current financial assets.

(b)       Loans and receivables

Loans and receivables are non-derivative financial instruments with fixed or determinable payments not traded on an active market. These items are classified in current assets except for those with maturity over 12 months from the date of the consolidated statement of financial position, which are classified as non-current assets. Loans and receivables are included in trade and other accounts receivable in the consolidated statement of financial position (Note 2.12).

The regular purchases and sales of financial assets are recognized on the trade date – the date on which the Group commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or losses are initially recognized at fair value, and transaction costs are expensed in the income statement. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.

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The financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortized cost using the effective interest rate method.

At the date of each consolidated statement of financial position, the Company assesses if there is objective evidence that a financial asset or group of financial assets may have suffered an impairment loss.

2.10.    Derivative financial instruments and hedging activities

Derivatives are booked initially at fair value on the date the derivative contracts are signed and later they continue to be valued at their fair value. The method for booking the resultant loss or gain depends on whether the derivative has been designated as a hedging instrument and if so, the nature of the item hedged. The Company designates certain derivatives as:

(a) Hedge of the fair value of recognized assets (fair value hedge);

(b) Hedge of an identified risk associated with a recognized liability or an expected highly- Probable transaction (cash-flow hedge), or

(c) Derivatives that do not qualify for hedge accounting.

The Company documents, at the inception of each transaction, the relationship between the hedging instrument and the hedged item, as well as its objectives for managing risk and the strategy for carrying out various hedging transactions. The Company also documents its assessment, both at the beginning and on an ongoing basis, as to whether the derivatives used in the hedging transactions are highly effective in offsetting the changes in the fair value or cash flows of the items being hedged.

The total fair value of the hedging derivatives is booked as Other non-current financial asset or liability if the remaining maturity of the item hedged is over 12 months, and as an other current financial asset or liability if the remaining term of the item hedged is less than 12 months. Derivatives not booked as hedges are classified as Other financial assets or liabilities.

(a) Fair value hedges

Changes in the fair value of designated derivatives that qualify as fair value hedges are shown in the consolidated statement of income, together with any change in the fair value of the asset or liability hedged that is attributable to the risk being hedged.

(b) Cash flow hedges

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is shown in the statement of other comprehensive income. The loss or gain relating to the ineffective portion is recognized immediately in the consolidated statement of income under other gains (losses). Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss.

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In case of variable interest-rate hedges, the amounts recognized in the statement of other comprehensive income are reclassified to results within financial costs at the same time the associated debts accrue interest.

For fuel price hedges, the amounts shown in the statement of other comprehensive income are reclassified to results under the line item Cost of sales to the extent that the fuel subject to the hedge is used.

For foreign currency hedges, the amounts recognized in the statement of other comprehensive income are reclassified to income as deferred revenue resulting from the use of points, are recognized as Income.

When hedging instruments mature or are sold or when they do not meet the requirements to be accounted for as hedges, any gain or loss accumulated in the statement of Other comprehensive income until that moment remains in the statement of other comprehensive income and is reclassified to the consolidated statement of income when the hedged transaction is finally recognized. When it is expected that the hedged transaction is no longer going to occur, the gain or loss accumulated in the statement of other comprehensive income is taken immediately to the consolidated statement of income as “Other gains (losses)”.

(c) Derivatives not booked as a hedge

The changes in fair value of any derivative instrument that is not booked as a hedge are shown immediately in the consolidated statement of income in “Other gains (losses)”.

2.11. Inventories

Inventories, detailed in Note 10, are shown at the lower of cost and their net realizable value. The cost is determined on the basis of the weighted average cost method (WAC). The net realizable value is the estimated selling price in the normal course of business, less estimated costs necessary to make the sale.

2.12. Trade and other accounts receivable

Trade accounts receivable are shown initially at their fair value and later at their amortized cost in accordance with the effective interest rate method, less the allowance for impairment losses. An allowance for impairment loss of trade accounts receivable is made when there is objective evidence that the Company will not be able to recover all the amounts due according to the original terms of the accounts receivable.

The existence of significant financial difficulties on the part of the debtor, the probability that the debtor is entering bankruptcy or financial reorganization and the default or delay in making payments are considered indicators that the receivable has been impaired. The amount of the provision is the difference between the book value of the assets and the present value of the estimated future cash flows, discounted at the original effective interest rate. The book value of the asset is reduced by the amount of the allowance and the loss is shown in the consolidated statement of income in Cost of sales. When an account receivable is written off, it is charged to the allowance account for accounts receivable.

13

2.13. Cash and cash equivalents

Cash and cash equivalents include cash and bank balances, time deposits in financial institutions, and other short-term and highly liquid investments.

2.14. Capital

The common shares are classified as net equity.

Incremental costs directly attributable to the issuance of new shares or options are shown in net equity as a deduction from the proceeds received from the placement of shares.

2.15. Trade and other accounts payables

Trade payables and other accounts payable are initially recognized at fair value and subsequently at amortized cost.

2.16. Interest-bearing loans

Financial liabilities are shown initially at their fair value, net of the costs incurred in the transaction. Later, these financial liabilities are valued at their amortized cost; any difference between the proceeds obtained (net of the necessary arrangement| costs) and the repayment value, is shown in the consolidated statement of income during the term of the debt, according to the effective interest rate method.

Financial liabilities are classified in current and non-current liabilities according to the contractual payment dates of the nominal principal.

2.17. Current and deferred taxes

The expense by current tax is comprised of income and deferred taxes.

The charge for current tax is calculated based on tax laws in force on the date of statement of financial position, in the countries in which the subsidiaries and associates operate and generate taxable income.

Deferred taxes are calculated using the liability method, on the temporary differences arising between the tax bases of assets and liabilities and their book values. However, if the temporary differences arise from the initial recognition of a liability or an asset in a transaction different from a business combination that at the time of the transaction does not affect the accounting result or the tax gain or loss, they are not booked. The deferred tax is determined using the tax rates (and laws) that have been enacted or substantially enacted at the consolidated financial statements close, and are expected to apply when the related deferred tax asset is realized or the deferred tax liability discharged.

Deferred tax assets are recognized when it is probable that there will be sufficient future tax earnings with which to compensate the temporary differences.

14

The tax (current and deferred) is recognized in income by function, unless it relates to an item recognized in other comprehensive income, directly in equity or from business combination. In that case the tax is also recognized in other comprehensive income, directly in income by function or goodwill, respectively.

2.18. Employee benefits

(a) Personnel vacations

The Company recognizes the expense for personnel vacations on an accrual basis.

(b) Share-based compensation

The compensation plans implemented based on the shares of the Company are recognized in the consolidated financial statements in accordance with IFRS 2: Share-based payments, for plans based on the granting of options, the effect of fair value is recorded in equity with a charge to remuneration in a linear manner between the date of grant of said options and the date on which they become irrevocable, for the plans considered as cash settled award the fair value, updated as of the closing date of each reporting period, is recorded as a liability with charge to remuneration.

(c) Post-employment and other long-term benefits

Provisions are made for these obligations by applying the method of the projected unit credit method, and taking into account estimates of future permanence, mortality rates and future wage increases determined on the basis of actuarial calculations. The discount rates are determined by reference to market interest-rate curves. Actuarial gains or losses are shown in other comprehensive income.

(d) Incentives

The Company has an annual incentives plan for its personnel for compliance with objectives and individual contribution to the results. The incentives eventually granted consist of a given number or portion of monthly remuneration and the provision is made on the basis of the amount estimated for distribution.

2.19. Provisions

Provisions are recognized when:

(i) The Company has a present legal or implicit obligation as a result of past events;

(ii) It is probable that payment is going to be necessary to settle an obligation; and

(iii) The amount has been reliably estimated.

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2.20. Revenue recognition

Revenues include the fair value of the proceeds received or to be received on sales of goods and rendering services in the ordinary course of the Company’s business. Revenues are shown net of refunds, rebates and discounts.

(a) Rendering of services

(i) Passenger and cargo transport

The Company shows revenue from the transportation of passengers and cargo once the service has been provided.

Consistent with the foregoing, the Company presents the deferred revenues, generated by anticipated sale of flight tickets and freight services, in heading other non - financial liabilities in the Statement of Financial Position.

(ii) Frequent flyer program

The Company currently has a frequent flyer programs, whose objective is customer loyalty through the delivery of kilometers or points fly whenever the programs holders make certain flights, use the services of entities registered with the program or make purchases with an associated credit card. The kilometers or points earned can be exchanged for flight tickets or other services of associated entities.

The consolidated financial statements include liabilities for this concept (deferred income), according to the estimate of the valuation established for the kilometers or points accumulated pending use at that date, in accordance with IFRIC 13: Customer loyalty programs.

(iii) Other revenues

The Company records revenues for other services when these have been provided.

(b) Dividend income

Dividend income is booked when the right to receive the payment is established.

2.21. Leases

(a) When the Company is the lessee – financial lease

The Company leases certain Property, plant and equipment in which it has substantially all the risk and benefits deriving from the ownership; they are therefore classified as financial leases. Financial leases are initially recorded at the lower of the fair value of the asset leased and the present value of the minimum lease payments.

Every lease payment is separated between the liability component and the financial expenses so as to obtain a constant interest rate over the outstanding amount of the debt. The corresponding leasing obligations, net of financial charges, are included in other financial liabilities. The element of interest in the financial cost is charged to the consolidated statement of income over the lease period so that it produces a constant periodic rate of interest on the remaining balance of the liability for each year. The asset acquired under a financial lease is depreciated over its useful life and is included in Property, plant and equipment.

16

(b) When the Company is the lessee – operating lease

Leases, in which the lessor retains an important part of the risks and benefits deriving from ownership, are classified as operating leases. Payments with respect to operating leases (net of any incentive received from the lessor) are charged in the consolidated statement of income on a straight-line basis over the term of the lease.

2.22. Non-current assets or disposal groups classified as held for sale

Non-current assets (or disposal groups) classified as assets held for sale are shown at the lesser of their book value and the fair value less costs to sell.

2.23. Maintenance

The costs incurred for scheduled heavy maintenance of the aircraft’s fuselage and engines are capitalized and depreciated until the next maintenance. The depreciation rate is determined on technical grounds, according to the use of the aircraft expressed in terms of cycles and flight hours.

In case of own aircraft or under financial leases, these maintenance cost are capitalized as Property, plant and equipment, while in the case of aircraft under operating leases, a liability is accrued based on the use of the main components is recognized, since a contractual obligation with the lessor to return the aircraft on agreed terms of maintenance levels exists. These are recognized as Cost of sales.

Additionally, some leases establish the obligation of the lessee to make deposits to the lessor as a guarantee of compliance with the maintenance and return conditions. These deposits, often called maintenance reserves, accumulate until a major maintenance is performed, once made, the recovery is requested to the lessor. At the end of the contract period, there is comparison between the reserves that have been paid and required return conditions, and compensation between the parties are made if applicable.

The unscheduled maintenance of aircraft and engines, as well as minor maintenance, are charged to results as incurred.

2.24. Environmental costs

Disbursements related to environmental protection are charged to results when incurred.

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NOTE 3 - FINANCIAL RISK MANAGEMENT

3.1. Financial risk factors

The Company is exposed to different financial risks: (a) market risk, (b) credit risk, and (c) liquidity risk. The program overall risk management of the Company aims to minimize the adverse effects of financial risks affecting the company.

(a) Market risk

Due to the nature of its operations, the Company is exposed to market factors such as: (i) fuel-price risk, (ii) exchange -rate risk, and (iii) interest -rate risk.

The Company has developed policies and procedures for managing market risk, which aim to identify, quantify, monitor and mitigate the adverse effects of changes in market factors mentioned above.

For this, the Administration monitors the evolution of price levels and rates, and quantifies their risk exposures (Value at Risk), and develops and implements hedging strategies.

(i) Fuel-price risk:

Exposition:

For the execution of its operations the Company purchases a fuel called Jet Fuel grade 54 USGC, which is subject to the fluctuations of international fuel prices.

Mitigation:

To cover the risk exposure fuel, the Company operates with derivative instruments (swaps and options) whose underlying assets may be different from Jet Fuel, being possible use West Texas Intermediate (“WTI”) crude, Brent (“BRENT”) crude and distillate Heating Oil (“HO”), which have a high correlation with Jet Fuel and high liquidity.

Fuel Hedging Results:

During the period ended at June 30, 2017, the Company recognized losses of US$ 8.1 million on fuel derivative. During the same period of 2016, the Company recognized gains of US$ 31.3 million for the same reason.

At June 30, 2017, the market value of its fuel positions amounted to US$ 6.4 million (negative). At December 31, 2016, this market value was US$ 8.1 million (positive).

The following tables show the level of hedge for different periods:

Positions as of  June 30, 2017  (Unaudited )(*)	Maturities
	Q317			Q417			Total
Percentage of the hedge of expected consumption value		38	%		33	%		36	%

(*) The volume shown in the table considers all the hedging instruments (swaps and options).

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Positions as of  December 31, 2016 (*)	Maturities
	Q117			Q217			Total
Percentage of the hedge of expected consumption value		21	%		16	%		18	%

(*) The volume shown in the table considers all the hedging instruments (swaps and options).

Sensitivity analysis

A drop in fuel price positively affects the Company through a reduction in costs. However, also negatively affects contracted positions as these are acquired to protect the Company against the risk of a rise in price. The policy therefore is to maintain a hedge-free percentage in order to be competitive in the event of a drop in price.

The current hedge positions they are booked as cash flow hedge contracts, so a variation in the fuel price has an impact on the Company’s net equity.

The following table shows the sensitivity analysis of the financial instruments according to reasonable changes in the fuel price and their effect on equity. The term of the projection was defined until the end of the last current fuel hedge contract, being the last business day of the fourth quarter of 2017.

The calculations were made considering a parallel movement of US$ 5 per barrel in the curve of the BRENT and JET crude futures benchmark price at the end of June 2017 and the end of December, 2016.

	Positions as of June 30, 2017	Positions as of December 31, 2016
Benchmark price	effect on equity	effect on equity
(US$ per barrel)	(millions of US$)	(millions of US$)
	Unaudited
+5	+15.1	+3.12
-5	- 11.8	-4.78

Given the fuel hedge structure during the first semester of 2017, which considers a hedge-free portion, a vertical fall by 5 dollars in the JET benchmark price (the monthly daily average), would have meant an impact of approximately US$ 52.0 million in the cost of total fuel consumption for the same period. The first semester of 2017, a vertical rise by 5 dollars in the JET benchmark price (the monthly daily average) would have meant an impact of approximately US$ 48.3 million of increased fuel costs.

(ii) Foreign exchange rate risk:

Exposition:

The functional and presentation currency of the Financial Statements of the Parent Company is the United States dollar, so the risk of Transactional exchange rate and Conversion arises mainly from its own operating activities of the business, strategic and accounting of the Company are denominated in a different currency than the functional currency.

LATAM Subsidiaries are also exposed to currency risk that impacts the consolidated results of the Company.

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Most currency operational exposure of LATAM comes from the concentration of business in Brazil, which are mostly denominated in Brazilian Real (BRL), being actively managed by the company.

In lower concentrations the Company is therefore exposed to fluctuations in others currencies, such as: Euro, Pound Sterling, Australian Dollar, Colombian Peso, Chilean Peso, Argentine Peso, Paraguayan Guaraní, Mexican Peso, Peruvian Sol and New Zealand Dollar.

Mitigation:

The Company mitigates currency risk exposures by contracting derivative instruments or through natural hedges or execution of internal operations.

FX Hedging Results:

With the aim of reducing exposure to exchange rate risk on operating cash flows in 2016 and 2017, and secure the operating margin, LATAM and TAM conduct hedging through FX derivatives.

At June 30, 2017, the market value of its FX positions amounted to US$ 2.3 million (positive). At end of December 2016 the market value was of US$ 1.1 million (negative).

During the period ended at June 30, 2017 the Company recognized losses of US$ 2.8 million on hedging FX. During the same period of 2016 the Company recognized lost of US$ 19.1 million on hedging FX.

At June 30, 2017, the Company has contracted FX derivatives for US$ 130 million to BRL. At end of December 2016, the Company had contracted FX for US$ 60 million to BRL, and US$ 10 million to GBP.

Sensitivity analysis:

A depreciation of exchange rate R$/ US$, affects negatively the Company for a rise of its costs in US$, however, it also affects positively the value of contracted derivate positions.

The FX derivatives are registered for as hedges of cash flow, therefore, a variation in the exchange rate has an impact on the market value of derivatives, whose changes impact on the Company’s net equity.

The following table presents the sensitivity of derivative FX Forward instruments agrees with reasonable changes to exchange rate and its effect on equity. The projection term was defined until the end of the last current contract hedge, being the last business day of the fourth trimester of 2017:

Appreciation (depreciation)*	Effect at June 30, 2017	Effect at December 31, 2016
of  R$ /GBP	Millions of US$	Millions of US$
	Unaudited
-10%	-9	-1.02
+10%	+9	+3.44

In the case of TAM S.A. which operates with the Brazilian Real as its functional currency, a large proportion of the company’s assets liabilities are expressed in United States Dollars. Therefore, this subsidiary’s profit and loss varies when its financial assets and liabilities, and its accounts receivable listed in dollars are converted to Brazilian Reals. This impact on profit and loss is consolidated in the Company.

20

In order to reduce the volatility on the financial statements of the Company caused by rises and falls in the R$/US$ exchange rate, the Company has contracted hedging derivatives has conducted transactions for to reduce the net US$ liabilities held by TAM S.A., whose accounting effects are recorded as economic and non-accounting coverage.

The following table shows the variation of financial performance to appreciate or depreciate 10% exchange rate R$/US$:

Appreciation (depreciation)*	Effect at June 30, 2017	Effect at December 31, 2016
of R$/US$	Millons of US$	Millons of US$
	Unaudited
-10%	+142.4	+119.2
+10%	-142.4	-119.2

(*) Appreciation (depreciation) of US$ regard to the covered currencies.

Effects of exchange rate derivatives in the Financial Statements

The profit or losses caused by changes in the fair value of hedging instruments are segregated between intrinsic value and temporary value. The intrinsic value is the actual percentage of cash flow covered, initially shown in equity and later transferred to income, while the hedge transaction is recorded in income. The temporary value corresponds to the ineffective portion of cash flow hedge which is recognized in the financial results of the Company (Note 19).

Due to the functional currency of TAM S.A. and Subsidiaries is the Brazilian real, the Company presents the effects of the exchange rate fluctuations in Other comprehensive income by converting the Statement of financial position and Income statement of TAM S.A. and Subsidiaries from their functional currency to the U.S. dollar, which is the presentation currency of the consolidated financial statement of LATAM Airlines Group S.A. and Subsidiaries. The Goodwill generated in the Business combination is recognized as an asset of TAM S.A. and Subsidiaries in Brazilian real whose conversion to U.S. dollar also produces effects in other comprehensive income.

The following table shows the change in Other comprehensive income recognized in Total equity in the case of appreciate or depreciate 10% the exchange rate R$/US$:

Appreciation (depreciation)	Effect at June 30, 2017	Effect at December 31, 2016
of R$/US$	Millions of US$	Millions of US$
	Unaudited
-10%	+340.16	+351.04
+10%	-278.32	-287.22

(iii) Interest -rate risk:

Exposition:

The Company is exposed to fluctuations in interest rates affecting the markets future cash flows of the assets, and current and future financial liabilities.

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The Company is exposed in one portion to the variations of London Inter-Bank Offer Rate (“LIBOR”) and other interest rates of less relevance are Brazilian Interbank Deposit Certificate ("ILC"), and the Interest Rate Term of Brazil ("TJLP").

Mitigation:

In order to reduce the risk of an eventual rise in interest rates, the Company has signed interest-rate swap and call option contracts. Currently a 62% (63% at December 31, 2016) of the debt is fixed to fluctuations in interest rate.

Rate Hedging Results:

At June 30, 2017, the market value of the positions of interest rate derivatives amounted to US$ 10.0 million (negative). At end of December 2016 this market value was US$ 17.2 million (negative).

Sensitivity analysis:

The following table shows the sensitivity of changes in financial obligations that are not hedged against interest-rate variations. These changes are considered reasonably possible, based on current market conditions each date.

Increase (decrease)	Positions as of June 30, 2017	Positions as of June 30, 2016
futures curve	effect on profit or loss before tax	effect on profit or loss before tax
in libor 3 months	(millions of US$)	(millions of US$)
	Unaudited	Unaudited
+100 basis points	-33.17	-27.49
-100 basis points	+33.17	+27.49

Much of the current rate derivatives are registered for as hedges of cash flow, therefore, a variation in the exchange rate has an impact on the market value of derivatives, whose changes impact on the Company’s net equity.

The calculations were made increasing (decreasing) vertically 100 basis points of the three-month Libor futures curve, being both reasonably possible scenarios according to historical market conditions.

Increase (decrease)	Positions as of June 30, 2017	Positions as of December 31, 2016
futures curve	effect on equity	effect on equity
in libor 3 months	(millions of US$)	(millions of US$)
	Unaudited
+100 basis points	+2.64	+3.93
-100 basis points	-2.70	-4.03

The assumptions of sensitivity calculation must assume that forward curves of interest rates do not necessarily reflect the real value of the compensation flows. Moreover, the structure of interest rates is dynamic over time.

During the periods presented, the Company has no registered amounts by ineffectiveness in consolidated statement of income for this kind of hedging.

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(b) Credit risk

Credit risk occurs when the counterparty to a financial agreement or instrument fails to discharge an obligation due or financial instrument, leading to a loss in market value of a financial instrument (only financial assets, not liabilities).

The Company is exposed to credit risk due to its operative and financial activities, including deposits with banks and financial institutions, investments in other kinds of instruments, exchange-rate transactions and the contracting of derivative instruments or options.

To reduce the credit risk associated with operational activities, the Company has established credit limits to abridge the exposure of their debtors which are monitored permanently (mainly in case of operational activities in Brazil with travel agents).

As a way to mitigate credit risk related to financial activities, the Company requires that the counterparty to the financial activities remain at least investment grade by major Risk Assessment Agencies. Additionally the company has established maximum limits for investments which are monitored regularly.

(i) Financial activities

Cash surpluses that remain after the financing of assets necessary for the operation are invested according to credit limits approved by the Company’s Board, mainly in time deposits with different financial institutions, private investment funds, short-term mutual funds, and easily-liquidated corporate and sovereign bonds with short remaining maturities. These investments are booked as Cash and cash equivalents and other current financial assets.

In order to reduce counterparty risk and to ensure that the risk assumed is known and managed by the Company, investments are diversified among different banking institutions (both local and international). The Company evaluates the credit standing of each counterparty and the levels of investment, based on (i) their credit rating, (ii) the equity size of the counterparty, and (iii) investment limits according to the Company’s level of liquidity. According to these three parameters, the Company chooses the most restrictive parameter of the previous three and based on this, establishes limits for operations with each counterparty.

The Company has no guarantees to mitigate this exposure.

(ii) Operational activities

The Company has four large sales “clusters”: travel agencies, cargo agents, airlines and credit-card administrators. The first three are governed by International Air Transport Association, international (“IATA”) organization comprising most of the airlines that represent over 90% of scheduled commercial traffic and one of its main objectives is to regulate the financial transactions between airlines and travel agents and cargo. When an agency or airline does not pay their debt, they are excluded from operating with IATA’s member airlines. In the case of credit-card administrators, they are fully guaranteed by 100% by the issuing institutions.

The exposure consists of the term granted, which fluctuates between 1 and 45 days.

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One of the tools the Company uses for reducing credit risk is to participate in global entities related to the industry, such as IATA, Business Sales Processing (“BSP”), Cargo Account Settlement Systems (“CASS”), IATA Clearing House (“ICH”) and banks (credit cards). These institutions fulfill the role of collectors and distributors between airlines and travel and cargo agencies. In the case of the Clearing House, it acts as an offsetting entity between airlines for the services provided between them. A reduction in term and implementation of guarantees has been achieved through these entities. Currently the sales invoicing of TAM Linhas Aéreas S.A. related with travel agents and cargo agents for domestic transportation in Brazil is done directly by TAM Linhas Aéreas S.A.

Credit quality of financial assets

The external credit evaluation system used by the Company is provided by IATA. Internal systems are also used for particular evaluations or specific markets based on trade reports available on the local market. The internal classification system is complementary to the external one, i.e. for agencies or airlines not members of IATA, the internal demands are greater.

To reduce the credit risk associated with operational activities, the Company has established credit limits to abridge the exposure of their debtors which are monitored permanently (mainly in case of operational activities of TAM Linhas Aéreas S.A. with travel agents).The bad-debt rate in the principal countries where the Company has a presence is insignificant.

(c) Liquidity risk

Liquidity risk represents the risk that the Company has no sufficient funds to meet its obligations.

Because of the cyclical nature of the business, the operation, and its investment and financing needs related to the acquisition of new aircraft and renewal of its fleet, plus the financing needs, the Company requires liquid funds, defined as cash and cash equivalents plus other short term financial assets, to meet its payment obligations.

The liquid funds, the future cash generation and the capacity to obtain additional funding, through bond issuance and banking loans, will allow the Company to obtain sufficient alternatives to face its investment and financing future commitments.

At June 30, 2017 is US$ 1,706 million (US$ 1,486 million at December 31, 2016), invested in short term instruments through financial high credit rating levels entities.

In addition to the liquid funds, the Company has access to short term credit line. As of June 30, 2017, LATAM has working capital credit lines with multiple banks and additionally has a US$ 375 million undrawn committed credit line (US$ 325 million at December 31, 2016).

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Class of liability for the analysis of liquidity risk ordered by date of maturity as of June 30, 2017 (Unaudited)

Debtor: LATAM Airlines Group S.A. and Subsidiaries, Tax No. 89.862.200-2 Chile.

						More than		More than		More than
				Up to		90 days		one to		three to		More than
		Creditor		90		to one		three		five		five				Nominal			Effective		Nominal
Tax No.	Creditor	country	Currency	days		year		years		years		years		Total		value		Amortization	rate		rate
				ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$			%		%
Loans to exporters
97.032.000-8	BBVA	Chile	ThU$		75,820		-		-		-		-		75,820		75,000	At Expiration		2.20		2.20
97.032.000-8	BBVA	Chile	UF		-		52,018		-		-		-		52,018		51,385	At Expiration		3.22		2.42
97.030.000-7	ESTADO	Chile	ThU$		40,223		-		-		-		-		40,223		40,000	At Expiration		2.23		2.23
97.003.000-K	BANCO DO BRASIL	Chile	ThU$		102,041		-		-		-		-		102,041		100,000	At Expiration		3.23		3.23
97.951.000-4	HSBC	Chile	ThU$		12,063		-		-		-		-		12,063		12,000	At Expiration		2.08		2.08
Obligations with the public
97.023.000-9	CORPBANCA	Chile	UF		20,779		50,024		46,276		5,573		-		122,652		117,188	Quarterly		3.93		3.93
0-E	BLADEX	U.S.A.	ThUS$		-		16,799		23,699		-		-		40,498		37,500	Semiannual		5.27		5.27
0-E	DVB BANK SE	U.S.A.	ThUS$		64		-		28,911		-		-		28,975		28,911	Quarterly		2.28		2.28
97.036.000-K	SANTANDER	Chile	ThUS$		1,889		4,186		188,861		-		-		194,936		187,978	Quarterly		3.93		3.93
Obligations with the public
0-E	BANK OF NEW YORK	U.S.A.	ThUS$		-		84,375		668,750		96,250		796,250		1,645,625		1,200,000	At Expiration		7.44		7.03
Guaranteed obligations
0-E	CREDIT AGRICOLE	France	ThUS$		10,979		24,936		60,740		24,169		692		121,516		116,136	Quarterly		2.46		2.04
0-E	BNP PARIBAS	U.S.A.	ThUS$		14,159		57,946		145,008		144,152		344,638		705,903		601,884	Quarterly		3.15		3.14
0-E	WELLS FARGO	U.S.A.	ThUS$		30,758		92,291		246,238		246,430		307,202		922,919		863,067	Quarterly		2.46		1.75
0-E	WILMINGTON TRUST COMPANY	U.S.A.	ThUS$		33,734		95,782		254,111		245,781		738,076		1,367,484		1,075,525	Quarterly		4.49		4.49
0-E	CITIBANK	U.S.A.	ThUS$		14,012		42,237		113,412		114,601		127,991		412,253		374,944	Quarterly		3.14		2.31
0-E	BTMU	U.S.A.	ThUS$		3,232		9,770		26,197		26,420		20,737		86,356		80,394	Quarterly		2.53		1.94
0-E	APPLE BANK	U.S.A.	ThUS$		1,587		4,813		12,919		13,048		10,632		42,999		40,004	Quarterly		2.57		1.97
0-E	US BANK	U.S.A.	ThUS$		18,532		55,466		147,037		145,705		194,449		561,189		502,891	Quarterly		4.00		2.81
0-E	DEUTSCHE BANK	U.S.A.	ThUS$		6,255		14,305		32,171		32,218		40,363		125,312		107,194	Quarterly		4.15		4.15
0-E	NATIXIS	France	ThUS$		17,672		53,765		132,774		112,879		185,871		502,961		441,699	Quarterly		3.13		3.10
0-E	PK AirFinance	U.S.A.	ThUS$		2,326		7,135		20,317		23,499		-		53,277		50,716	Monthly		2.85		2.85
0-E	KFW IPEX-BANK	Germany	ThUS$		2,536		7,686		18,312		4,547		-		33,081		31,593	Quarterly		2.98		2.98
0-E	AIRBUS FINANCIAL	U.S.A.	ThUS$		2,011		6,038		16,180		3,722		-		27,951		26,591	Monthly		2.87		2.87
0-E	INVESTEC	England	ThUS$		1,904		10,882		25,716		25,816		17,496		81,814		67,849	Semiannual		5.79		5.79
Other guaranteed obligations
0-E	CREDIT AGRICOLE	France	ThUS$		1,721		5,467		265,790		-		-		272,978		256,860	At Expiration		3.15		3.15
Financial leases
0-E	ING	U.S.A.	ThUS$		5,890		15,805		32,202		4,083		-		57,980		53,453	Quarterly		5.64		4.98
0-E	CREDIT AGRICOLE	France	ThUS$		1,820		1,834		-		-		-		3,654		3,625	Quarterly		2.12		2.12
0-E	CITIBANK	U.S.A.	ThUS$		12,594		37,884		97,163		58,880		14,256		220,777		206,345	Quarterly		3.65		3.04
0-E	PEFCO	U.S.A.	ThUS$		17,558		42,184		44,287		-		-		104,029		98,621	Quarterly		5.42		4.81
0-E	BNP PARIBAS	U.S.A.	ThUS$		13,868		41,831		63,020		10,990		-		129,709		123,913	Quarterly		3.72		3.30
0-E	WELLS FARGO	U.S.A.	ThUS$		10,826		32,609		86,916		77,613		31,797		239,761		224,176	Quarterly		2.89		2.35
0-E	DVB BANK SE	U.S.A.	ThUS$		4,772		-		-		-		-		4,772		4,737	Quarterly		2.85		2.85
97.036.000-K	SANTANDER	Chile	ThUS$		5,965		18,008		48,164		48,403		14,378		134,918		127,849	Quarterly		2.28		1.74
0-E	RRPF ENGINE	England	ThUS$		-		2,145		8,557		8,516		10,933		30,151		25,836	Mensual		1.67		1.67
Other loans
0-E	BOEING	U.S.A.	ThUS$		244		-		39,321		-		-		39,565		39,321	At Expiration		2.43		2.43
0-E	CITIBANK (*)	U.S.A.	ThUS$		25,306		78,253		206,909		52,067		-		362,535		329,169	Quarterly		6.00		6.00
	Total				513,140		966,474		3,099,958		1,525,362		2,855,761		8,960,695		7,724,354

(*) Securitized bond with the future flows from the sales with credit card in United States and Canada.

25

Class of liability for the analysis of liquidity risk ordered by date of maturity as of June 30, 2017 (Unaudited)

Debtor: TAM S.A. and Subsidiaries, Tax No. 02.012.862/0001-60, Brazil.

						More than		More than		More than
				Up to		90 days		one to		three to		More than
		Creditor		90		to one		three		five		five				Nominal			Effective		Nominal
Tax No.	Creditor	country	Currency	days		year		years		years		years		Total		value		Amortization	rate		rate
				ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$			%		%
Bank loans
0-E	NEDERLANDSCHE
	CREDIETVERZEKERING MAATSCHAPPIJ	Holland	ThUS$		178		493		1,331		1,055		-		3,057		2,635	Monthly		6.01		6.01
0-E	CITIBANK	U.S.A.	ThUS$		138,239		-		-		-		-		138,239		137,013	At Expiration		3.55		3.30
Obligation with the public
0-E	THE BANK OF NEW YORK	U.S.A.	ThUS$		-		41,875		83,750		541,875		-		667,500		500,000	At Expiration		8.51		8.38
Financial leases
0-E	AFS INVESTMENT IX LLC	U.S.A.	ThUS$		2,566		7,697		20,520		3,419		-		34,202		31,247	Monthly		1.25		1.25
0-E	DVB BANK SE	U.S.A.	ThUS$		46		-		-		-		-		46		46	Monthly		2.65		2.65
0-E	KFW IPEX-BANK	Germany	ThUS$		581		386		-		-		-		967		965	Monthly/Quarterly		2.98		2.98
0-E	NATIXIS	France	ThUS$		10,281		7,946		23,032		77,146		-		118,405		110,167	Quarterly/Semiannual		5.08		5.08
0-E	WACAPOU LEASING S.A.	Luxemburg	ThUS$		896		2,402		6,483		4,911		-		14,692		13,516	Quarterly		3.15		3.15
0-E	SOCIÉTÉ GÉNÉRALE MILAN BRANCH	Italy	ThUS$		11,402		30,238		84,970		141,530		-		268,140		260,390	Quarterly		4.33		4.26
0-E	BANCO IBM S.A	Brazil	BRL		398		394		-		-		-		792		503	Monthly		10.14		10.14
0-E	SOCIÉTÉ GÉNÉRALE	France	BRL		153		331		-		-		-		484		310	Monthly		10.14		10.14
	Total				164,740		91,762		220,086		769,936		-		1,246,524		1,056,792

26

Class of liability for the analysis of liquidity risk ordered by date of maturity as of June 30, 2017 (Unaudited)

Debtor: LATAM Airlines Group S.A. and Subsidiaries, Tax No. 89.862.200-2, Chile.

						More than		More than		More than
				Up to		90 days		one to		three to		More than
		Creditor		90		to one		three		five		five				Nominal			Effective		Nominal
Tax No.	Creditor	country	Currency	days		year		years		years		years		Total		value		Amortization	rate		rate
				ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$			%		%
Trade and other accounts payables
-	OTHERS	OTHERS	ThUS$		358,164		7,072		-		-		-		365,236		365,236	-		0.00		0.00
			CLP		110,814		-		-		-		-		110,814		110,814	-		0.00		0.00
			BRL		291,020		-		-		-		-		291,020		291,020	-		0.00		0.00
			Other currencies		360,813		9,831		-		-		-		370,644		370,644	-		0.00		0.00
Accounts payable to related parties currents
0-E	Qatar Airways	Qatar	ThUS$		2,023		-		-		-		-		2,023		2,023	-		0.00		0.00
78.997.060-2	Viajes Falabella Ltda.	Chile	CLP		262		-		-		-		-		262		262	-		0.00		0.00
0-E	Inversora Aeronáutica Argentina	Argentina	ThUS$		45		-		-		-		-		45		45	-		0.00		0.00
0-E	TAM Aviação Executiva e Taxi Aéreo S.A.	Brazil	BRL		11		-		-		-		-		11		11	-		0.00		0.00
78.591.370-1	Bethia S.A. y Filiales	Chile	CLP		7		-		-		-		-		7		7	-		0.00		0.00
65.216.000-K	Comunidad Mujer	Chile	CLP		3		-		-		-		-		3		3	-		0.00		0.00
	Total				1,123,162		16,903		-		-		-		1,140,065		1,140,065
	Total consolidated				1,801,042		1,075,139		3,320,044		2,295,298		2,855,761		11,347,284		9,921,211

27

Class of liability for the analysis of liquidity risk ordered by date of maturity as of December 31, 2016

Debtor: LATAM Airlines Group S.A. and Subsidiaries, Tax No. 89.862.200-2 Chile.

						More than		More than		More than
				Up to		90 days		one to		three to		More than
		Creditor		90		to one		three		five		five				Nominal			Effective		Nominal
Tax No.	Creditor	country	Currency	days		year		years		years		years		Total		value		Amortization	rate		rate
				ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$			%		%
Loans to exporters
97.032.000-8	BBVA	Chile	ThUS$		75,212		-		-		-		-		75,212		75,000	At Expiration		1.85		1.85
97.036.000-K	BBVA	Chile	ThUS$		-		52,675		-		-		-		52,675		50,381	At Expiration		5.23		4.43
97.030.000-7	SANTANDER	Chile	ThUS$		30,193		-		-		-		-		30,193		30,000	At Expiration		2.39		2.39
97.004.000-5	ESTADO	Chile	ThUS$		40,191		-		-		-		-		40,191		40,000	At Expiration		1.91		1.91
97.003.000-K	BANCO DO BRASIL	Chile	ThUS$		72,151		-		-		-		-		72,151		70,000	At Expiration		3.08		3.08
97.951.000-4	HSBC	Chile	ThUS$		12,054		-		-		-		-		12,054		12,000	At Expiration		1.79		1.79
Bank loans
97.023.000-9	CORPBANCA	Chile	UF		20,808		61,112		63,188		16,529		-		161,637		153,355	Quarterly		4.06		4.06
0-E	BLADEX	U.S.A.	ThUS$		-		14,579		31,949		-		-		46,528		42,500	Semiannual		5.14		5.14
0-E	DVB BANK SE	U.S.A.	ThUS$		145		199		28,911		-		-		29,255		28,911	Quarterly		1.86		1.86
97.036.000-K	SANTANDER	Chile	ThUS$		1,497		4,308		160,556		-		-		166,361		158,194	Quarterly		3.55		3.55
Obligations with the public
0-E	BANK OF NEW YORK	U.S.A.	ThUS$		-		36,250		72,500		518,125		-		626,875		500,000	At Expiration		7.77		7.25
Guaranteed obligations
0-E	CREDIT AGRICOLE	France	ThUS$		11,728		30,916		65,008		33,062		3,760		144,474		138,417	Quarterly		2.21		1.81
0-E	BNP PARIBAS	U.S.A.	ThUS$		13,805		56,324		142,178		141,965		376,894		731,166		628,118	Quarterly		2.97		2.96
0-E	WELLS FARGO	U.S.A.	ThUS$		35,896		107,830		287,878		288,338		411,076		1,131,018		1,056,345	Quarterly		2.37		1.68
0-E	WILMINGTON TRUST COMPANY	U.S.A.	ThUS$		25,833		79,043		206,952		200,674		733,080		1,245,582		967,336	Quarterly		4.25		4.25
0-E	CITIBANK	U.S.A.	ThUS$		20,224		61,020		164,077		166,165		184,053		595,539		548,168	Quarterly		2.72		1.96
97.036.000-K	SANTANDER	Chile	ThUS$		5,857		17,697		47,519		48,024		26,448		145,545		138,574	Quarterly		1.98		1.44
0-E	BTMU	U.S.A.	ThUS$		3,163		9,568		25,752		26,117		27,270		91,870		85,990	Quarterly		2.31		1.72
0-E	APPLE BANK	U.S.A.	ThUS$		1,551		4,712		12,693		12,891		13,857		45,704		42,754	Quarterly		2.29		1.69
0-E	US BANK	U.S.A.	ThUS$		18,563		55,592		147,357		146,045		230,747		598,304		532,608	Quarterly		3.99		2.81
0-E	DEUTSCHE BANK	U.S.A.	ThUS$		6,147		18,599		31,640		31,833		48,197		136,416		117,263	Quarterly		3.86		3.86
0-E	NATIXIS	France	ThUS$		14,779		44,826		116,809		96,087		206,036		478,537		422,851	Quarterly		2.60		2.57
0-E	PK AirFinance	U.S.A.	ThUS$		2,265		6,980		19,836		25,610		3,153		57,844		54,787	Monthly		2.40		2.40
0-E	KFW IPEX-BANK	Germany	ThUS$		2,503		7,587		18,772		9,178		-		38,040		36,191	Quarterly		2.55		2.55
0-E	AIRBUS FINANCIAL	U.S.A.	ThUS$		1,982		5,972		16,056		7,766		-		31,776		30,199	Monthly		2.49		2.49
0-E	INVESTEC	England	ThUS$		1,880		10,703		25,369		25,569		23,880		87,401		72,202	Semiannual		5.67		5.67
Other guaranteed obligations
0-E	CREDIT AGRICOLE	France	ThUS$		1,501		4,892		268,922		-		-		275,315		256,860	At Expiration		2.85		2.85
Financial leases
0-E	ING	U.S.A.	ThUS$		5,889		17,671		34,067		12,134		-		69,761		63,698	Quarterly		5.62		4.96
0-E	CREDIT AGRICOLE	France	ThUS$		1,788		5,457		-		-		-		7,245		7,157	Quarterly		1.85		1.85
0-E	CITIBANK	U.S.A.	ThUS$		6,083		18,250		48,667		14,262		-		87,262		78,249	Quarterly		6.40		5.67
0-E	PEFCO	U.S.A.	ThUS$		17,558		50,593		67,095		3,899		-		139,145		130,811	Quarterly		5.39		4.79
0-E	BNP PARIBAS	U.S.A.	ThUS$		13,744		41,508		79,165		22,474		-		156,891		149,119	Quarterly		3.69		3.26
0-E	WELLS FARGO	U.S.A.	ThUS$		5,591		16,751		44,615		44,514		1,880		113,351		103,326	Quarterly		3.98		3.54
0-E	DVB BANK SE	U.S.A.	ThUS$		4,773		9,541		-		-		-		14,314		14,127	Quarterly		2.57		2.57
0-E	RRPF ENGINE	England	ThUS$		-		-		8,248		8,248		12,716		29,212		25,274	Monthly		2.35		2.35
Other loans
0-E	BOEING	U.S.A.	ThUS$		163		320		26,214		-		-		26,697		26,214	At Expiration		2.35		2.35
0-E	CITIBANK (*)	U.S.A.	ThUS$		25,802		77,795		207,001		103,341		-		413,939		370,389	Quarterly		6.00		6.00
Hedging derivatives
-	OTROS	-	ThUS$		7,364		15,479		7,846		-		-		30,689		-	-		0.00		0.00
-	Total				508,683		944,749		2,476,840		2,002,850		2,303,047		8,236,169		7,257,368

(*) Securitized bond with the future flows from the sales with credit card in United States and Canada.

28

Class of liability for the analysis of liquidity risk ordered by date of maturity as of December 31, 2016

Debtor: TAM S.A. and Subsidiaries, Tax No. 02.012.862/0001-60, Brazil.

						More than		More than		More than
				Up to		90 days		one to		three to		More than
		Creditor		90		to one		three		five		five				Nominal			Effective		Nominal
Tax No.	Creditor	country	Currency	days		year		years		years		years		Total		value		Amortization	rate		rate
				ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$			%		%
Bank loans
	CREDIETVERZEKERING MAATSCHAPPIJ	Holland	ThUS$		179		493		1,315		1,314		54		3,355		2,882	Monthly		6.01		6.01
0-E	CITIBANK	U.S.A.	ThUS$		1,528		203,150		-		-		-		204,678		200,000	At Expiration		3.39		3.14
Obligation with the public
0-E	BANK OF NEW YORK	U.S.A.	ThUS$		-		352,938		83,750		562,813		-		999,501		800,000	At Expiration		8.17		8.00
Financial leases
0-E	AFS INVESTMENT IX LLC	U.S.A.	ThUS$		2,733		7,698		20,522		8,548		-		39,501		35,448	Monthly		1.25		1.25
0-E	DVB BANK SE	U.S.A.	ThUS$		120		165		-		-		-		285		282	Monthly		2.50		2.50
0-E	GENERAL ELECTRIC CAPITAL CORPORATION	U.S.A.	ThUS$		3,852		5,098		-		-		-		8,950		8,846	Monthly		2.30		2.30
0-E	KFW IPEX-BANK	Germany	ThUS$		592		1,552		-		-		-		2,144		2,123	Monthly/Quarterly		2.80		2.80
0-E	NATIXIS	France	ThUS$		4,290		7,837		22,834		40,968		41,834		117,763		107,443	Quarterly/Semiannual		4.90		4.90
0-E	WACAPOU LEASING S.A.	Luxemburg	ThUS$		833		2,385		6,457		6,542		-		16,217		14,754	Quarterly		3.00		3.00
0-E	SOCIÉTÉ GÉNÉRALE MILAN BRANCH	Italy	ThUS$		11,875		32,116		85,995		171,553		-		301,539		279,335	Quarterly		4.18		4.11
0-E	BANCO IBM S.A	Brazil	BRL		380		1,161		35		-		-		1,576		1,031	Monthly		13.63		13.63
0-E	HP FINANCIAL SERVICE	Brazil	BRL		225		-		-		-		-		225		222	Monthly		10.02		10.02
0-E	SOCIÉTÉ GÉNÉRALE	France	BRL		146		465		176		-		-		787		519	Monthly		13.63		13.63
	Total				26,753		615,058		221,084		791,738		41,888		1,696,521		1,452,885

29

Class of liability for the analysis of liquidity risk ordered by date of maturity as of December 31, 2016

Debtor: LATAM Airlines Group S.A. and Subsidiaries, Tax No. 89.862.200-2, Chile.

						More than			More than		More than
				Up to		90 days			one to		three to		More than
		Creditor		90		to one			three		five		five				Nominal			Effective		Nominal
Tax No.	Creditor	country	Currency	days		year			years		years		years		Total		value		Amortization	rate		rate
				ThUS$		ThUS$			ThUS$		ThUS$		ThUS$		ThUS$		ThUS$			%		%
Trade and other accounts payables
-	OTHERS	OTHERS	ThUS$		549,897		21,215			-		-		-		571,112		571,112	-		0.00		0.00
			CLP		48,842		(30	)		-		-		-		48,812		48,812	-		0.00		0.00
			BRL		346,037		27			-		-		-		346,064		346,064	-		0.00		0.00
			Others currencies		140,471		11,467			-		-		-		151,938		151,938	-		0.00		0.00
Accounts payable to related parties currents
0-E	Consultoría Administrativa Profesional S.A. de C.V.	Mexico	MXN		170		-			-		-		-		170		170	-		0.00		0.00
78.997.060-2	Viajes Falabella Ltda.	Chile	CLP		46		-			-		-		-		46		46	-		0.00		0.00
0-E	TAM Aviação Executiva e Taxi Aéreo S.A.	Brazil	BRL		28		-			-		-		-		28		28	-		0.00		0.00
65.216.000-K	Comunidad Mujer	Chile	CLP		13		-			-		-		-		13		13
78.591.370-1	Bethia S.A. y Filiales	Chile	CLP		6		-			-		-		-		6		6
79.773.440-3	Transportes San Felipe S:A.	Chile	CLP		4		-			-		-		-		4		4	-		0.00		0.00
0-E	Inversora Aeronáutica Argentina	Argentina	ThUS$		2		-			-		-		-		2		2	-		0.00		0.00
	Total				1,085,516		32,679			-		-		-		1,118,195		1,118,195
	Total consolidated				1,620,952		1,592,486			2,697,924		2,794,588		2,344,935		11,050,885		9,828,448

30

The Company has fuel, interest rate and exchange rate hedging strategies involving derivatives contracts with different financial institutions. The Company has margin facilities with each financial institution in order to regulate the mutual exposure produced by changes in the market valuation of the derivatives.

At the end of 2016, the Company provided US$ 30.2 million in derivative margin guarantees, for cash and stand-by letters of credit. At June 30, 2017, the Company had provided US$ 22.0 million in guarantees for Cash and cash equivalent and stand-by letters of credit. The decrease was due at: i) maturity of hedge contracts, ii) acquire of new fuel purchase contracts, and iii) changes in fuel prices, exchange rate and interest rates.

3.2. Capital risk management

The Company’s objectives, with respect to the management of capital, are (i) to comply with the restrictions of minimum equity and (ii) to maintain an optimal capital structure.

The Company monitors its contractual obligations and the regulatory limitations in the different countries where the entities of the group are domiciled to assure they meet the limit of minimum net equity, where the most restrictive limitation is to maintain a positive net equity.

Additionally, the Company periodically monitors the short and long term cash flow projections to assure the Company has adequate sources of funding to generate the cash requirement to face its investment and funding future commitments.

The Company international credit rating is the consequence of the Company capacity to face its long terms financing commitments. As of June 30, 2017 the Company has an international long term credit rating of BB- with stable outlook by Standard & Poor’s, a B+ rating with stable outlook by Fitch Ratings and a B1 rating with stable outlook by Moody’s.

3.3. Estimates of fair value.

At June 30, 2017, the Company maintained financial instruments that should be recorded at fair value. These are grouped into two categories:

1. Hedge Instruments:

This category includes the following instruments:

- Interest rate derivative contracts,

- Fuel derivative contracts,

- Currency derivative contracts.

31

2. Financial Investments:

This category includes the following instruments:

- Investments in short-term Mutual Funds (cash equivalent),

- Private investment funds.

The Company has classified the fair value measurement using a hierarchy that reflects the level of information used in the assessment. This hierarchy consists of 3 levels (I) fair value based on quoted prices in active markets for identical assets or liabilities, (II) fair value calculated through valuation methods based on inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) and (III) fair value based on inputs for the asset or liability that are not based on observable market data.

The fair value of financial instruments traded in active markets, such as investments acquired for trading, is based on quoted market prices at the close of the period using the current price of the buyer. The fair value of financial assets not traded in active markets (derivative contracts) is determined using valuation techniques that maximize use of available market information. Valuation techniques generally used by the Company are quoted market prices of similar instruments and / or estimating the present value of future cash flows using forward price curves of the market at period end.

The following table shows the classification of financial instruments at fair value, depending on the level of information used in the assessment:

	As of June 30, 2017								As of December 31, 2016
			Fair value measurements using values								Fair value measurements using values
			considered as								considered as
	Fair value		Level I		Level II		Level III		Fair value		Level I		Level II		Level III
	Unaudited
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
Assets
Cash and cash equivalents		504,585		504,585		-		-		15,522		15,522		-		-
Short-term mutual funds		504,585		504,585		-		-		15,522		15,522		-		-
Other financial assets, current		564,758		555,241		9,517		-		548,402		536,991		11,411		-
Fair value of fuel derivatives		4,817		-		4,817		-		10,088		-		10,088		-
Fair value of foreign currency derivatives		4,338		-		4,338		-		1,259		-		1,259		-
Interest accrued since the last payment date of Cross Currency Swap		19		-		19		-		64		-		64		-
Foreign currency derivatives not recognized as a hedge		343				343		-		-		-		-		-
Private investment funds		555,241		555,241		-		-		536,991		536,991		-		-
Liabilities
Other financial liabilities, current		23,268		-		23,268		-		24,881		-		24,881		-
Fair value of interest rate derivatives		4,315		-		4,315		-		9,579		-		9,579		-
Fair value of fuel derivatives		12,008		-		12,008		-		-				-
Fair value of foreign currency derivatives		5,937		-		5,937		-		13,155		-		13,155		-
Interest accrued since the last payment date of Currency Swap		1,008		-		1,008		-		2,147		-		2,147		-
Other financial liabilities, non current		4,828		-		4,828		-		6,679		-		6,679		-
Fair value of interest rate derivatives		4,828		-		4,828		-		6,679		-		6,679		-

32

Additionally, at June 30, 2017, the Company has financial instruments which are not recorded at fair value. In order to meet the disclosure requirements of fair values, the Company has valued these instruments as shown in the table below:

	As of June 30, 2017				As of December 31, 2016
	Book		Fair		Book		Fair
	value		value		value		value
	ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited
Cash and cash equivalents		645,968		645,968		933,805		933,805
Cash on hand		13,040		13,040		8,630		8,630
Bank balance		198,958		198,958		255,746		255,746
Overnight		222,864		222,864		295,060		295,060
Time deposits		211,106		211,106		374,369		374,369
Other financial assets, current		90,282		90,282		164,426		164,426
Other financial assets		90,282		90,282		164,426		164,426
Trade and other accounts receivable current		1,209,183		1,209,183		1,107,889		1,107,889
Accounts receivable from related entities		600		600		554		554
Other financial assets, non current		95,014		95,014		102,125		102,125
Accounts receivable		7,747		7,747		8,254		8,254
Other financial liabilities, current		1,452,270		1,686,274		1,814,647		2,022,290
Trade and other accounts payables		1,475,362		1,475,362		1,593,068		1,593,068
Accounts payable to related entities		2,351		2,351		269		269
Other financial liabilities, non current		7,240,030		7,541,329		6,790,273		6,970,375
Accounts payable, non-current		450,585		450,585		359,391		359,391

The book values of accounts receivable and payable are assumed to approximate their fair values, due to their short-term nature. In the case of cash on hand, bank balances, overnight, time deposits and accounts payable, non-current, fair value approximates their carrying values.

The fair value of other financial liabilities is estimated by discounting the future contractual cash flows at the current market interest rate for similar financial instruments (Level II). In the case of Other financial assets, the valuation was performed according to market prices at period end.

NOTE 4 - ACCOUNTING ESTIMATES AND JUDGMENTS

The Company has used estimates to value and record certain assets, liabilities, revenue, expenditure, and commitments. Basically, these estimates relate to:

(a)          Evaluation of possible losses through impairment of goodwill and intangible assets with an indefinite useful life.

As of June 30, 2017 goodwill amounted to ThUS$ 2,671,247 (ThUS$ 2,710,382 at December 31, 2016), while intangible assets with an indefinite useful life comprised airport slots for ThUS$ 964,321 (ThUS$ 978,849 at December 31, 2016), Loyalty Program for ThUS$ 321,402 (ThUS$ 326,262 at December 31, 2016).

33

At least once per year the Company verifies whether goodwill and intangible assets with an indefinite useful life have suffered any losses through impairment. For the purposes of this evaluation, the Company has identified two cash-generating units (CGUs): “Air transport” and “Multiplus loyalty and coalition program.” The book value of goodwill assigned to each CGU as of June 30, 2017, amounted to ThUS$ 2,145,421 and ThUS$ 525,826 (ThUS$ 2,176,634 and ThUS$ 533,748 at December 31, 2016), which included intangible assets with undefined useful life:

	Air Transport CGU				Coalition and loyalty Program Multiplus CGU
	As of		As of		As of		As of
	June 30,		December 31,		June 30,		December 31,
	2017		2016		2017		2016
	ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited				Unaudited
Airport Slots		964,321		978,849		-		-
Loyalty program		-		-		321,402		326,262

The recoverable value of these cash-generating units (CGUs) has been determined based on calculations of their value in use. The principal assumptions used by the management include: growth rate, exchange rate, discount rate, fuel prices, and other economic assumptions. The estimation of these assumptions requires significant judgment by the management, as these variables feature inherent uncertainty; however, the assumptions used are consistent with Company’s internal planning. Therefore, management evaluates and updates the estimates on an annual basis, in light of conditions that affect these variables. The mainly assumptions used as well as, the corresponding sensitivity analyses are showed in Note 16.

(b)          Useful life, residual value, and impairment of property, plant, and equipment

The depreciation of assets is calculated based on the linear model, except for certain technical components depreciated on cycles and hours flown. These useful lives are reviewed on an annual basis according with the Company’s future economic benefits associated with them.

Changes in circumstances such as: technological advances, business model, planned use of assets or capital strategy may render the useful life different to the lifespan estimated. When it is determined that the useful life of property, plant, and equipment must be reduced, as may occur in line with changes in planned usage of assets, the difference between the net book value and estimated recoverable value is depreciated, in accordance with the revised remaining useful life.

Residual values are estimated in accordance with the market value that these assets will have at the end of their useful life. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, once a year. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 2.8).

34

(c)          Recoverability of deferred tax assets

Deferred taxes are calculated in accordance with the liability method, applied over temporary differences that arise between the fiscal based of assets and liabilities, and their book value. Deferred tax assets for tax losses are recognized to the extent that the realization of the related tax benefit through future taxable profits is probable. The Company makes tax and financial projections to evaluate the realization of deferred tax asset over the course of time. Additionally, ensures that these projections are consistent with those used to measure other long-lived assets. As of June 30, 2017, the Company recognized deferred tax assets ThUS$ 385,320 (ThUS$ 384,580 at December 31, 2016), and has ceased to recognize Deferred tax assets on tax losses to ThUS$ 164,418 (ThUS$ 115,801 at December 31, 2016) (Note 18).

(d)          Air tickets sold that are not actually used.

The Company register advance sales of tickets as deferred revenue. Revenue from ticket sales is recognized in the income statement when the service is provided or when the tickets expires unused, reducing the corresponding deferred revenue. The Company evaluates monthly the probability that tickets expiry unused, based on the history of used tickets. Changes in the exchange probability would have an impact our revenue in the year in which the change occurs and in future years. As of June 30, 2017, deferred revenue associated with air tickets sold amounted to ThUS$ 1,575,740 (ThUS$ 1,535,229 as of December 31, 2016). An hypothetical change of 1% in passenger behavior regarding to the ticket usage, - that is, if during the next six months after sells probability of used were 89% rather than 90%, as we consider, it would lead to a change in the expiry period from six to seven months, which, as of June 30, 2017, would have an impact of up to ThUS$ 20,000.

(e)          Valuation of loyalty points and kilometers granted to loyalty program members, pending usage.

As of June 30, 2017, the Company operated the following loyalty programs: LATAM Pass, LATAM Fidelidade and Multiplus, with the objective of enhancing customer loyalty by offering points or kilometers (see Note 22).

When kilometers and points are redeemed for products and services other than the services provided by the Company, revenue is recognized immediately; when they are redeemed for air tickets on airlines from to LATAM Airlines Group S.A. and subsidiaries, revenue is deferred until the transport service is provided or the corresponding tickets expired.

Deferred revenue from loyalty programs at the closing date corresponds to the valuation of points and kilometers granted to loyalty program members, pending of use, and the probability to be redeemed.

 

According to IFRIC-13, kilometers and points value that the Company estimate are not likely to be redeemed (“breakage”), they recognize the associated value proportionally during the period in which the remaining kilometers or points are expected to be redeemed. The Company uses statistical models to estimate the breakage, based on historical redemption patterns Changes in the breakage would have a significant impact on our revenue in the year in which the change occurs and in future years.

35

As of June 30, 2017, deferred revenue associated with the LATAM Pass loyalty program amounted to ThUS$ 893,449 (ThUS$ 896,190 at December 31, 2016). As of June 30, 2017 a hypothetical change of 1% in the probability of usage would result in an impact of approximately ThUS$ 33,000 and ThUS$ 30,000 at the same period of 2016. Meanwhile, deferred revenue associated with the LATAM Fidelidade and Multiplus loyalty programs amounted to ThUS$ 392,933 (ThUS$ 392,107 at December 31, 2016). As of June 30, 2017 a hypothetical change of 2% in the probability of usage would result in an impact of approximately ThUS$ 6,366 and ThUS$ 7,321 at the same period of 2016.

The fair value of kilometers is determined by the Company based in its best estimate of the price at which they have been sold in the past. As of June 30, 2017 a hypothetical change of 1% in the fair value of the unused kilometers would result in an impact of approximately ThUS$ 8,400 and ThUS$ 9,000 at the same period of 2016.

(f)          Provisions needs, and their valuation when required

Known contingencies are recognized when: the Company has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. The Company applies professional judgment, experience, and knowledge to use available information to determine these values, in light of the specific characteristics of known risks. This process facilitates the early assessment and valuation of potential risks in individual cases or in the development of contingent eventualities.

(g)          Investment in subsidiary (TAM)

The management has applied its judgment in determining that LATAM Airlines Group S.A. controls TAM S.A. and Subsidiaries, for accounting purposes, and has therefore consolidated the financial statements.

The grounds for this decision are that LATAM issued ordinary shares in exchange for the majority of circulating ordinary and preferential shares in TAM, except for those TAM shareholders who did not accept the exchange, which were subject to a squeeze out, entitling LATAM to substantially all economic benefits generated by the LATAM Group, and thus exposing it to substantially all risks relating to the operations of TAM. This exchange aligns the economic interests of LATAM and all of its shareholders, including the controlling shareholders of TAM, thus insuring that the shareholders and directors of TAM shall have no incentive to exercise their rights in a manner that would be beneficial to TAM but detrimental to LATAM. Furthermore, all significant actions necessary of the operation of the airlines require votes in favor by the controlling shareholders of both LATAM and TAM.

Since the integration of LAN and TAM operations, the most critical airline operations in Brazil have been managed by the CEO of TAM while global activities have been managed by the CEO of LATAM, who is in charge of the operation of the LATAM Group as a whole and reports to the LATAM Board.

36

The CEO of LATAM also evaluates the performance of LATAM Group executives and, together with the LATAM Board, determines compensation. Although Brazilian law currently imposes restrictions on the percentages of voting rights that may be held by foreign investors, LATAM believes that the economic basis of these agreements meets the requirements of accounting standards in force, and that the consolidation of the operations of LAN and LATAM is appropriate.

These estimates were made based on the best information available relating to the matters analyzed.

In any case, it is possible that events that may take place in the future could lead to their modification in future reporting periods, which would be made in a prospective manner.

NOTE 5 - SEGMENTAL INFORMATION

The Company has determined that it has two operating segments: the air transportation business and the coalition and loyalty program Multiplus.

The Air transport segment corresponds to the route network for air transport and it is based on the way that the business is run and managed, according to the centralized nature of its operations, the ability to open and close routes and reallocate resources (aircraft, crew, staff, etc..) within the network, which is a functional relationship between all of them, making them inseparable. This segment definition is the most common level used by the global airline industry.

The segment of loyalty coalition called Multiplus, unlike LATAM Pass and LATAM Fidelidade, is a frequent flyer programs which operate as a unilateral system of loyalty that offers a flexible coalition system, interrelated among its members, with 17.9 million of members, along with being a regulated entity with a separately business and not directly related to air transport.

37

For the 6 months ended

							Coalition and
	Air						loyalty program
	transportation						Multiplus						Eliminations						Consolidated
	At June 30,						At June 30,						At June 30,						At June 30,
	2017			2016			2017			2016			2017			2016			2017			2016
	ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$
	Unaudited
Income from ordinary activities from external customers (*)		4,274,856			4,008,728			229,873			192,253			-			-			4,504,729			4,200,981
LAN passenger		2,022,012			1,989,806			-			-			-			-			2,022,012			1,989,806
TAM passenger		1,742,587			1,482,945			229,873			192,253			-			-			1,972,460			1,675,198
Freight		510,257			535,977			-			-			-			-			510,257			535,977
Income from ordinary activities from transactions with other operating segments		229,873			192,253			38,343			28,611			(268,216	)		(220,864	)		-			-
Other operating income		125,245			151,524			121,209			85,745			-			-			246,454			237,269
Interest income		16,443			7,931			25,781			27,668			-			(4,181	)		42,224			31,418
Interest expense		(198,333	)		(210,813	)		-			-			-			4,181			(198,333	)		(206,632	)
Total net interest expense		(181,890	)		(202,882	)		25,781			27,668			-			-			(156,109	)		(175,214	)
Depreciation and amortization		(491,691	)		(465,306	)		(4,016	)		(4,851	)		-			-			(495,707	)		(470,157	)
Material non-cash items other than depreciation and amortization		(32,379	)		104,458			(148	)		(421	)		-			-			(32,527	)		104,037
Disposal of fixed assets and inventory losses		(17,776	)		(20,150	)		-			-			-			-			(17,776	)		(20,150	)
Doubtful accounts		(4,124	)		(19,881	)		(145	)		376			-			-			(4,269	)		(19,505	)
Exchange differences		(10,526	)		144,171			(3	)		(763	)		-			-			(10,529	)		143,408
Result of indexation units		47			318			-			(34	)		-			-			47			284
Income (loss) atributable to owners of the parents		(154,516	)		(62,969	)		82,035			73,102			-			-			(72,481	)		10,133
Expenses for income tax		(41,861	)		(110,611	)		(39,646	)		(34,288	)		-			-			(81,507	)		(144,899	)
Segment profit / (loss)		(131,225	)		(42,334	)		82,035			73,102			-			-			(49,190	)		30,768
Assets of segment		17,775,849			17,665,249			1,403,553			1,499,334			(12,215	)		(117,886	)		19,167,187			19,046,697
Amount of non-current asset additions		161,425			862,997			-			-			-			-			161,425			862,997
Property, plant and equipment		123,271			833,714			-			-			-			-			123,271			833,714
Intangibles other than goodwill		38,154			29,283			-			-			-			-			38,154			29,283
Segment liabilities		14,547,271			14,883,748			587,230			659,028			(41,887	)		(35,291	)		15,092,614			15,507,485
Purchase of non-monetary assets of segment		227,487			437,605			-			-			-			-			227,487			437,605

(*) The Company does not have any interest revenue that should be recognized as income from ordinary activities by interest.

38

(b) For the 3 months ended

							Coalition and
	Air						loyalty program
	transportation						Multiplus						Eliminations						Consolidated
	At June 30,						At June 30,						At June 30,						At June 30,
	2017			2016			2017			2016			2017			2016			2017			2016
	ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$
	Unaudited
Income from ordinary activities from external customers (*)		2,035,431			1,869,803			109,391			96,921			-			-			2,144,822			1,966,724
LAN passenger		939,216			904,897			-			-			-			-			939,216			904,897
TAM passenger		839,704			704,896			109,391			96,921			-			-			949,095			801,817
Freight		256,511			260,010			-			-			-			-			256,511			260,010
Income from ordinary activities from transactions with other operating segments		109,391			96,921			19,757			11,018			(129,148	)		(107,939	)		-			-
Other operating income		64,103			92,215			64,809			51,694			-			-			128,912			143,909
Interest income		7,411			7,718			11,889			16,121			-			(3,285	)		19,300			20,554
Interest expense		(102,545	)		(106,868	)		-			-			-			3,285			(102,545	)		(103,583	)
Total net interest expense		(95,134	)		(99,150	)		11,889			16,121			-			-			(83,245	)		(83,029	)
Depreciation and amortization		(241,512	)		(228,106	)		(1,980	)		(2,600	)		-			-			(243,492	)		(230,706	)
Material non-cash items other than depreciation and amortization		(55,555	)		51,299			(143	)		(54	)		-			-			(55,698	)		51,245
Disposal of fixed assets and inventory losses		(9,151	)		(13,137	)		-			-			-			-			(9,151	)		(13,137	)
Doubtful accounts		(540	)		(11,753	)		(140	)		341			-			-			(680	)		(11,412	)
Exchange differences		(45,899	)		75,894			(3	)		(384	)		-			-			(45,902	)		75,510
Result of indexation units		35			295			-			(11	)		-			-			35			284
Income (loss) atributable to owners of the parents		(179,081	)		(133,138	)		41,043			41,063			-			-			(138,038	)		(92,075	)
Expenses for income tax		(9,272	)		(44,184	)		(18,747	)		(18,388	)		-			-			(28,019	)		(62,572	)
Segment profit / (loss)		(165,033	)		(126,327	)		41,043			41,063			-			-			(123,990	)		(85,264	)
Assets of segment		17,775,849			17,665,249			1,403,553			1,499,334			(12,215	)		(117,886	)		19,167,187			19,046,697
Amount of non-current asset additions		93,451			356,742			-			-			-			-			93,451			356,742
Property, plant and equipment		73,841			341,760			-			-			-			-			73,841			341,760
Intangibles other than goodwill		19,610			14,982			-			-			-			-			19,610			14,982
Segment liabilities		14,547,271			14,883,748			587,230			659,028			(41,887	)		(35,291	)		15,092,614			15,507,485
Purchase of non-monetary assets of segment		141,813			134,343			-			-			-			-			141,813			134,343

39

The Company’s revenues by geographic area are as follows:

	For the 6 months ended				For the 3 months ended
	At June 30,				At June 30,
	2017		2016		2017		2016
	ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited
Peru		283,114		287,590		137,013		136,048
Argentina		575,729		505,547		256,432		230,897
U.S.A.		423,361		452,989		199,037		207,814
Europe		301,683		335,360		130,955		148,672
Colombia		150,793		155,567		76,476		76,606
Brasil		1,546,586		1,299,222		754,657		641,803
Ecuador		90,956		101,156		47,555		49,344
Chili		759,529		749,718		354,118		329,784
Asia Pacific and rest of Latin America		372,978		313,832		188,579		145,756
Income from ordinary activities		4,504,729		4,200,981		2,144,822		1,966,724
Other operating income		246,454		237,269		128,912		143,909

The Company allocates revenues by geographic area based on the point of sale of the passenger ticket or cargo. Assets are composed primarily of aircraft and aeronautical equipment, which are used throughout the different countries, so it is not possible to assign a geographic area.

The Company has no customers that individually represent more than 10% of sales.

NOTE 6 - CASH AND CASH EQUIVALENTS

	As of		As of
	June 30,		December 31,
	2017		2016
	ThUS$		ThUS$
	Unaudited
Cash on hand		13,040		8,630
Bank balances		198,958		255,746
Overnight		222,864		295,060
Total Cash		434,862		559,436
Cash equivalents
Time deposits		211,106		374,369
Mutual funds		504,585		15,522
Total cash equivalents		715,691		389,891
Total cash and cash equivalents		1,150,553		949,327

40

Cash and cash equivalents are denominated in the following currencies:

	As of		As of
Currency	June 30,		December 31,
	2017		2016
	ThUS$		ThUS$
	Unaudited
Argentine peso		15,991		7,871
Brazilian real		110,058		97,401
Chilean peso		30,052		30,758
Colombian peso		6,032		4,336
Euro		9,052		1,695
US Dollar		960,228		780,124
Strong bolivar		30		61
Other currencies		19,110		27,081
Total		1,150,553		949,327

41

NOTE 7 - FINANCIAL INSTRUMENTS

7.1. Financial instruments by category

As of June 30, 2017 (Unaudited)

Assets							Initial designation
	Loans				Held		as fair value
	and		Hedge		for		through
	receivables		derivatives		trading		profit and loss		Total
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
Cash and cash equivalents		645,968		-		-		504,585		1,150,553
Other financial assets, current (*)		90,282		9,517		-		555,241		655,040
Trade and others accounts receivable, current		1,209,183		-		-		-		1,209,183
Accounts receivable from related entities, current		600		-		-		-		600
Other financial assets, non current (*)		94,390		-		624		-		95,014
Accounts receivable, non current		7,747		-		-		-		7,747
Total		2,048,170		9,517		624		1,059,826		3,118,137

Liabilities	Other		Held
	financial		Hedge
	liabilities		derivatives		Total
	ThUS$		ThUS$		ThUS$
Other liabilities, current		1,452,270		23,268		1,475,538
Trade and others accounts payable, current		1,475,362		-		1,475,362
Accounts payable to related entities, current		2,351		-		2,351
Other financial liabilities, non-current		7,240,030		4,828		7,244,858
Accounts payable, non-current		450,585		-		450,585
Total		10,620,598		28,096		10,648,694

(*)          The value presented as initial designation as fair value through profit and loss, corresponds mainly to private investment funds; and loans and receivables corresponds to guarantees given.

42

As of December 31, 2016

							Initial designation
	Loans				Held		as fair value
	and		Hedge		for		through
Assets	receivables		derivatives		trading		profit and loss		Total
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
Cash and cash equivalents		933,805		-		-		15,522		949,327
Other financial assets, current (*)		164,426		11,411		-		536,991		712,828
Trade and others accounts receivable, current		1,107,889		-		-		-		1,107,889
Accounts receivable from related entities, current		554		-		-		-		554
Other financial assets, non current (*)		101,603		-		522		-		102,125
Accounts receivable, non current		8,254		-		-		-		8,254
Total		2,316,531		11,411		522		552,513		2,880,977

	Other		Held
	financial		Hedge
Liabilities	liabilities		derivatives		Total
	ThUS$		ThUS$		ThUS$
Other liabilities, current		1,814,647		24,881		1,839,528
Trade and others accounts payable, current		1,593,068		-		1,593,068
Accounts payable to related entities, current		269		-		269
Other financial liabilities, non-current		6,790,273		6,679		6,796,952
Accounts payable, non-current		359,391		-		359,391
Total		10,557,648		31,560		10,589,208

(*)       The value presented as initial designation as fair value through profit and loss, corresponds mainly to private investment funds; and loans and receivables corresponds to guarantees given.

43

7.2.       Financial instruments by currency

	As of		As of
	June 30,		December 31,
a)   Assets	2017		2016
	ThUS$		ThUS$
	Unaudited
Cash and cash equivalents		1,150,553		949,327
Argentine peso		15,991		7,871
Brazilian real		110,058		97,401
Chilean peso		30,052		30,758
Colombian peso		6,032		4,336
Euro		9,052		1,695
US Dollar		960,228		780,124
Strong bolivar		30		61
Other currencies		19,110		27,081
Other financial assets (current and non-current)		750,054		814,953
Argentine peso		323		337
Brazilian real		618,088		686,501
Chilean peso		679		668
Colombian peso		596		1,023
Euro		7,374		6,966
US Dollar		120,483		117,346
Strong bolivar		19		76
Other currencies		2,492		2,036
Trade and other accounts receivable, current		1,209,183		1,107,889
Argentine peso		53,752		82,770
Brazilian real		685,046		551,260
Chilean peso		112,569		92,791
Colombian peso		4,709		16,454
Euro		47,234		21,923
US Dollar		224,102		312,394
Strong bolivar		31		43
Other currencies (*)		81,740		30,254
Accounts receivable, non-current		7,747		8,254
Brazilian real		4		4
Chilean peso		7,743		8,250
Accounts receivable from related entities, current		600		554
Chilean peso		519		554
Other currencies (*)		81		-
Total assets		3,118,137		2,880,977
Argentine peso		70,066		90,978
Brazilian real		1,413,196		1,335,166
Chilean peso		151,562		133,021
Colombian peso		11,337		21,813
Euro		63,660		30,584
US Dollar		1,304,813		1,209,864
Strong bolivar		80		180
Other currencies		103,423		59,371

(*)       See the composition of the others currencies in Note 8 Trade, other accounts receivable and non-current accounts receivable.

b) Liabilities

Liabilities information is detailed in the table within Note 3 Financial risk management.

44

NOTE 8 - TRADE AND OTHER ACCOUNTS RECEIVABLE CURRENT, AND NON-CURRENT ACCOUNTS RECEIVABLE

	As of			As of
	June 30,			December 31,
	2017			2016
	ThUS$			ThUS$
	Unaudited
Trade accounts receivable		1,171,793			1,022,933
Other accounts receivable		125,054			170,264
Total trade and other accounts receivable		1,296,847			1,193,197
Less: Allowance for impairment loss		(79,917	)		(77,054	)
Total net trade and accounts receivable		1,216,930			1,116,143
Less: non-current portion – accounts receivable		(7,747	)		(8,254	)
Trade and other accounts receivable, current		1,209,183			1,107,889

The fair value of trade and other accounts receivable does not differ significantly from the book value.

The maturity of these accounts at the end of each period is as follows:

	As of		As of
	June 30,		December 31,
	2017		2016
	ThUS$		ThUS$
	Unaudited
Fully performing		1,039,832		896,040
Matured accounts receivable, but not impaired
Expired from 1 to 90 days		36,743		38,969
Expired from 91 to 180 days		12,543		9,303
More than 180 days overdue (*)		2,758		1,567
Total matured accounts receivable, but not impaired		52,044		49,839
Matured accounts receivable and impaired
Judicial, pre-judicial collection and protested documents		35,330		34,909
Debtor under pre-judicial collection process and portfolio sensitization		44,587		42,145
Total matured accounts receivable and impaired		79,917		77,054
Total		1,171,793		1,022,933

(*) Value of this segment corresponds primarily to accounts receivable that were evaluated in their ability to recover, therefore not requiring a provision.

45

Currency balances that make up the Trade and other accounts receivable and non-current accounts receivable are the following:

	As of		As of
	June 30,		December 31,
Currency	2017		2016
	ThUS$		ThUS$
	Unaudited
Argentine Peso		53,752		82,770
Brazilian Real		685,050		551,264
Chilean Peso		120,312		101,041
Colombian peso		4,709		16,454
Euro		47,234		21,923
US Dollar		224,102		312,394
Strong bolivar		31		43
Other currency (*)		81,740		30,254
Total		1,216,930		1,116,143
(*) Other currencies
Australian Dollar		18,672		5,487
Chinese Yuan		1,040		271
Danish Krone		255		151
Pound Sterling		7,609		3,904
Indian Rupee		1,401		303
Japanese Yen		8,699		2,601
Norwegian Kroner		245		184
Swiss Franc		3,106		1,512
Korean Won		8,575		4,241
New Taiwanese Dollar		1,339		662
Other currencies		30,799		10,938
Total		81,740		30,254

The Company records allowances when there is evidence of impairment of trade receivables. The criteria used to determine that there is objective evidence of impairment losses are the maturity of the portfolio, specific acts of damage (default) and specific market signals.

Maturity	Impairment
Judicial and pre-judicial collection assets		100	%
Over 1 year		100	%
Between 6 and 12 months		50	%

46

Movement in the allowance for impairment loss of Trade and other accounts receivables are the following:

	Opening					(Increase)			Closing
	balance			Write-offs		Decrease			balance
Periods	ThUS$			ThUS$		ThUS$			ThUS$
From January 1 to June 30, 2016 (Unaudited)		(60,072	)		12,837		(27,337	)		(74,572	)
From July 1 to December 31, 2016		(74,572	)		8,073		(10,555	)		(77,054	)
From January 1 to June 30, 2017 (Unaudited)		(77,054	)		1,745		(4,608	)		(79,917	)

Once pre-judicial and judicial collection efforts are exhausted, the assets are written off against the allowance. The Company only uses the allowance method rather than direct write-off, to ensure control.

Historic and current re-negotiations are not relevant and the policy is to analyze case by case in order to classify them according to the existence of risk, determining whether it is appropriate to re-classify accounts to pre-judicial recovery. If such re-classification is justified, an allowance is made for the account, whether overdue or falling due.

The maximum credit-risk exposure at the date of presentation of the information is the fair value of each one of the categories of accounts receivable indicated above.

As of June 30, 2017

As of December 31, 2016

Gross exposure

Gross

Exposure net

Gross exposure

Gross

Exposure net

according to

impaired

of risk

according to

Impaired

of risk

balance

exposure

concentrations

balance

exposure

concentrations

ThUS$

ThUS$

ThUS$

ThUS$

ThUS$

ThUS$

Unaudited

Trade accounts receivable

1,171,793

(79,917

)

1,091,876

1,022,933

(77,054

)

945,879

Other accounts receivable

125,054

-

125,054

170,264

-

170,264

There are no relevant guarantees covering credit risk and these are valued when they are settled; no materially significant direct guarantees exist. Existing guarantees, if appropriate, are made through IATA.

47

NOTE 9 - ACCOUNTS RECEIVABLE FROM/PAYABLE TO RELATED ENTITIES

(a)       Accounts Receivable

					As of		As of
			Country		June 30,		December 31,
Tax No.	Related party	Relationship	of origin	Currency	2017		2016
					ThUS$		ThUS$
					Unaudited
78.591.370-1	Bethia S.A. y Filiales	Related director	Chile	CLP		507		538
Foreign	Consultoría Administrativa Profesional S.A. de C.V.	Related company	México	MXN		81		-
87.752.000-5	Granja Marina Tornagaleones S.A.	Common shareholder	Chile	CLP		12		14
96.810.370-9	Inversiones Costa Verde Ltda. y CPA.	Related director	Chile	CLP		-		2
	Total current assets					600		554

(b)       Accounts payable

					As of		As of
			Country		June 30,		December 31,
Tax No.	Related party	Relationship	of origin	Currency	2017		2016
					ThUS$		ThUS$
					Unaudited
Foreign	Qatar Airways	Indirect Shareholder	Qatar	ThUS$		2,023		-
78.997.060-2	Viajes Falabella Ltda.	Related director	Chile	CLP		262		46
Foreign	Inversora Aeronáutica Argentina S.A.	Related director	Argentina	ThUS$		45		2
Foreign	TAM Aviação Executiva e Taxi Aéreo S.A.	Related director	Brazil	BRL		11		28
78.591.370-1	Bethia S.A. y Filiales	Related director	Chile	CLP		7		6
65.216.000-K	Comunidad Mujer	Related director	Chile	CLP		3		13
79.773.440-3	Transportes San Felipe S.A	Common property	Chile	CLP		-		4
Foreign	Consultoría Administrativa Profesional S.A. de C.V.	Related company	México	MXN		-		170
	Total current liabilities					2,351		269

Transactions between related parties have been carried out on free-trade conditions between interested and duly-informed parties. The transaction times are between 30 and 45 days, and the nature of settlement of the transactions is monetary.

48

NOTE 10 -INVENTORIES

The composition of Inventories is as follows:

	As of		As of
	June 30,		December 31,
	2017		2016
	ThUS$		ThUS$
	Unaudited
Technical stock		184,606		191,864
Non-technical stock		49,085		49,499
Total		233,691		241,363

The items included in this heading are spare parts and materials that will be used mainly in consumption in in-flight and maintenance services provided to the Company and third parties, which are valued at average cost, net of provision for obsolescence, as per the following detail:

	As of		As of
	June 30,		December 31,
	2017		2016
	ThUS$		ThUS$
	Unaudited
Provision for obsolescence Technical stock		28,073		31,647
Provision for obsolescenceNon-technical stock		6,208		3,429
Total		34,281		35,076

The resulting amounts do not exceed the respective net realization values.

As of June 30, 2017, the Company recorded ThUS$ 68,257 (ThUS$ 66,432 at June 30, 2016) within the income statement, mainly due to in-flight consumption and maintenance, which forms part of Cost of sales.

49

NOTE 11 - OTHER FINANCIAL ASSETS

The composition of other financial assets is as follows:

	Current Assets				Non-current assets				Total Assets
	As of		As of		As of		As of		As of		As of
	June 30,		December 31,		June 30,		December 31,		June 30,		December 31,
	2017		2016		2017		2016		2017		2016
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited				Unaudited				Unaudited
(a)    Other financial assets
Private investment funds		555,241		536,991		-		-		555,241		536,991
Deposits in guarantee (aircraft)		17,508		16,819		48,694		56,846		66,202		73,665
Certificate of deposit (CBD)		-		-		-		-		-		-
Guarantees for margins of derivatives		4,183		939		-		-		4,183		939
Other investments		-		-		624		522		624		522
Domestic and foreign bonds		-		-		-		-		-		-
Other guarantees given		68,591		140,733		45,696		44,757		114,287		185,490
Other		-		5,935		-		-		-		5,935
Subtotal of other financial assets		645,523		701,417		95,014		102,125		740,537		803,542
(b)   Hedging assets
Interest accrued since the last payment date
of Cross currency swap		19		64		-		-		19		64
Fair value of interest rate derivatives		-		-		-		-		-		-
Fair value of foreign currency derivatives		4,338		1,259		-		-		4,338		1,259
Fair value of fuel price derivatives		4,817		10,088		-		-		4,817		10,088
Subtotal of hedging assets		9,174		11,411		-		-		9,174		11,411
(c)   Derivatives not recognized as a hedge
Foreign currency derivatives not recognized as a hedge		343		-		-		-		343		-
Subtotal of hedging assets		343		-		-		-		343		-
Total Other Financial Assets		655,040		712,828		95,014		102,125		750,054		814,953

The types of derivative hedging contracts maintained by the Company at the end of each period are described in Note 19.

50

NOTE 12 - OTHER NON-FINANCIAL ASSETS

The composition of other non-financial assets is as follows:

	Current assets				Non-current assets				Total Assets
	As of		As of		As of		As of		As of		As of
	June 30,		December 31,		June 30,		December 31,		June 30,		December 31,
	2017		2016		2017		2016		2017		2016
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited				Unaudited				Unaudited
(a)   Advance payments
Aircraft leases		33,739		37,560		9,459		14,065		43,198		51,625
Aircraft insurance and other		30,803		14,717		-		-		30,803		14,717
Others		11,706		4,521		1,304		1,573		13,010		6,094
Subtotal advance payments		76,248		56,798		10,763		15,638		87,011		72,436
(b)   Other assets
Aircraft maintenance reserve (*)		60,545		51,576		51,026		90,175		111,571		141,751
Sales tax		113,149		102,351		40,893		40,232		154,042		142,583
Other taxes		1,705		500		-		-		1,705		500
Contributions to Société Internationale de Télécommunications Aéronautiques ("SITA")		406		406		591		591		997		997
Judicial deposits		-		-		98,100		90,604		98,100		90,604
Others		175		611		395		104		570		715
Subtotal other assets		175,980		155,444		191,005		221,706		366,985		377,150
Total Other Non - Financial Assets		252,228		212,242		201,768		237,344		453,996		449,586

(*) Aircraft maintenance reserves reflect prepayment deposits made by the group to lessors of certain aircraft under operating lease agreements in order to ensure that funds are available to support the scheduled heavy maintenance of the aircraft.

These amounts are calculated based on performance measures, such as flight hours or cycles, are paid periodically (usually monthly) and are contractually required to be repaid to the lessee upon the completion of the required maintenance of the leased aircraft. At the end of the lease term, any unused maintenance reserves are either returned to the Company in cash or used to offset amounts that we may owe the lessor as a maintenance adjustment.

In some cases (five lease agreements), if the maintenance cost incurred by LATAM is less than the corresponding maintenance reserves, the lessor is entitled to retain those excess amounts at the time the heavy maintenance is performed. The Company periodically reviews its maintenance reserves for each of its leased aircraft to ensure that they will be recovered, and recognizes an expense if any such amounts are less than probable of being returned. Since the association with TAM S.A., in June 2012, the cost of aircraft maintenance has been higher than the related maintenance reserves for all aircraft.

As of June 30, 2017, LATAM had ThUS$ 111,571 in maintenance reserves (ThUS$ 141,751 at December 31, 2016), corresponding to one aircraft with contracts that establish periodic payments and whose expiration date is in 2017 and 17 aircraft that maintains remaining balances, which will be liquidated in the next maintenance or return.

51

Aircraft maintenance reserves are classified as current or non-current depending on the dates when the related maintenance is expected to be performed (Note 2.23)

NOTE 13 - NON-CURRENT ASSETS AND DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE

Non-current assets and in disposal groups held for sale at June 30, 2017 and December 31, 2016 are detailed below:

	As of		As of
	June 30,		December 31,
	2017		2016
	ThUS$		ThUS$
	Unaudited
Current assets
Aircraft		273,705		281,158
Engines and rotables		16,756		29,083
Other assets		20,643		26,954
Total		311,104		337,195
Current liabilities
Other liabilities		7,182		10,152
Total		7,182		10,152

The balances are presented at the lower of book value and fair value less cost to sell. The fair value of these assets were determined based on quoted prices in active markets for similar assets or liabilities. This is a level II measurement as per the fair value hierarchy set out in note 3.3 (2). There were no transfers between levels for recurring fair value measurements during the year.

(a) Assets reclassified from Property, plant and equipment to Non-current assets or groups of assets for disposal classified as held for sale

During the 2016 fiscal year, two Airbus A320 aircraft, two Airbus A330 aircraft, five Airbus A330 aircraft, two Boeing 777 aircraft, eight spare A330 engines, A330 rotables and two non-current assets Or disposal groups classified as held for sale.

As a result, as of December 31, 2016, an adjustment of US $ 55 million was recorded to write down these assets to their net

During fiscal year 2017, an adjustment of US $ 10 million was recognized to record these assets at their net realizable value.

In addition, during the 2017 financial year, seven Airbus A330 Spare engines were sold.

52

The detail of fleet classified as non-current assets or groups of assets for disposal classified as held for sale is the following:

	As of			As of
	June 30,			December 31,
	2017			2016
Aircraft	Unaudited
Boeing 777 Freighter		2	(*)		2	(*)
Airbus A330-200		3			3
Airbus A320-200		1			1
ATR42-300		1			1
Total		7			7

(*) One aircraft leased to DHL.

(b) Assets reclassified from Inventories to Non-current assets or groups of assets for disposal classified as held for sale

During in the first quarter of 2017, stocks of the fleet Airbus A330, were reclassified from Inventories to Non-current assets or groups of assets for disposal classified as held for sale.

NOTE 14 - INVESTMENTS IN SUBSIDIARIES

(a) Investments in subsidiaries

The Company has investments in companies recognized as investments in subsidiaries. All the companies defined as subsidiaries have been consolidated within the financial statements of LATAM Airlines Group S.A. and Subsidiaries. The consolidation also includes special-purpose entities.

Detail of significant subsidiaries and summarized financial information:

			Ownership
			As of		As of
	Country of	Functional	June 30,		December 31,
Name of significant subsidiary	incorporation	currency	2017		2016
			%		%
			Unaudited
Lan Perú S.A.	Peru	US$		70.00000		70.00000
Lan Cargo S.A.	Chile	US$		99.89803		99.89803
Lan Argentina S.A.	Argentina	ARS		95.85660		95.85660
Transporte Aéreo S.A.	Chile	US$		100.00000		100.00000
Aerolane Líneas Aéreas Nacionales del Ecuador S.A.	Ecuador	US$		100.00000		100.00000
Aerovías de Integración Regional, AIRES S.A.	Colombia	COP		99.19414		99.19061
TAM S.A.	Brazil	BRL		99.99938		99.99938

The consolidated subsidiaries do not have significant restrictions for transferring funds to controller.

53

Summary financial information of significant subsidiaries

													Results for the period
	Statement of financial position as of June 30, 2017												ended June 30, 2017
	Total		Current		Non-current		Total		Current		Non-current				Net
Name of significant subsidiary	Assets		Assets		Assets		Liabilities		Liabilities		Liabilities		Revenue		Income
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited												Unaudited
Lan Perú S.A.		334,595		312,595		22,000		324,224		322,808		1,416		498,798		(828	)
Lan Cargo S.A.		560,361		227,773		332,588		344,630		257,128		87,502		117,519		(26,986	)
Lan Argentina S.A.		198,979		168,068		30,911		204,881		202,729		2,152		184,340		(25,063	)
Transporte Aéreo S.A.		338,796		39,852		298,944		100,140		34,265		65,875		157,063		20,798
Aerolane Líneas Aéreas Nacionales del Ecuador S.A.		101,076		69,131		31,945		96,201		90,236		5,965		98,300		(3,691	)
Aerovías de Integración Regional, AIRES S.A.		115,712		37,575		78,137		82,340		70,936		11,404		110,780		(12,260	)
TAM S.A. (*)		5,033,438		1,892,792		3,140,646		4,515,974		2,370,468		2,145,506		2,169,627		(56,902	)

													Results for the period
	Statement of financial position as of December 31, 2016												ended June 30, 2016
	Total		Current		Non-current		Total		Current		Non-current				Net
Name of significant subsidiary	Assets		Assets		Assets		Liabilities		Liabilities		Liabilities		Revenue		Income
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
													Unaudited
Lan Perú S.A.		306,111		283,691		22,420		294,912		293,602		1,310		463,348		(621	)
Lan Cargo S.A.		480,908		144,309		336,599		239,728		211,395		28,333		123,414		(17,103	)
Lan Argentina S.A.		216,331		194,306		22,025		200,172		197,330		2,842		178,773		(26,489	)
Transporte Aéreo S.A.		340,940		36,986		303,954		124,805		59,668		65,137		140,033		859
Aerolane Líneas Aéreas Nacionales del Ecuador S.A.		89,667		56,064		33,603		81,101		75,985		5,116		102,596		(1,598	)
Aerovías de Integración Regional, AIRES S.A.		129,734		55,132		74,602		85,288		74,160		11,128		125,746		(9,132	)
TAM S.A. (*)		5,287,286		1,794,189		3,493,097		4,710,308		2,837,620		1,872,688		1,854,843		(8,732	)

(*) Correspond to consolidated information of TAM S.A. and Subsidiaries.

54

(b)       Non-controlling interest

			As of		As of		As of			As of
		Country	June 30,		December 31,		June 30,			December 31,
Equity	Tax No.	of origin	2017		2016		2017			2016
			%		%		ThUS$			ThUS$
			Unaudited				Unaudited
Lan Perú S.A	0-E	Peru		30.00000		30.00000		3,112			3,360
Lan Cargo S.A. and Subsidiaries	93.383.000-4	Chile		0.10196		0.10196		1,247			957
Promotora Aérea Latinoamericana S.A. and Subsidiaries	0-E	Mexico		51.00000		51.00000		4,226			3,162
Inversora Cordillera S.A. and Subsidiaries	0-E	Argentina		0.70422		0.70422		1,381			515
Lan Argentina S.A.	0-E	Argentina		0.13440		0.13440		(532	)		(311	)
Americonsult de Guatemala S.A.	0-E	Guatemala		1.00000		1.00000		2			1
Americonsult Costa Rica S.A.	0-E	Costa Rica		1.00000		1.00000		12			12
Linea Aérea Carguera de Colombiana S.A.	0-E	Colombia		10.00000		10.00000		(619	)		(905	)
Aerolíneas Regionales de Integración Aires S.A.	0-E	Colombia		0.80586		0.80944		325			436
Transportes Aereos del Mercosur S.A.	0-E	Paraguay		5.02000		5.02000		1,313			1,104
Multiplus S.A.	0-E	Brazil		27.26000		27.26000		78,865			80,313
Total								89,332			88,644

			For the period ended				For the 6 months ended						For the 3 months ended
		Country	June 30,				June 30,						June 30,
Incomes	Tax No.	of origin	2017		2016		2017			2016			2017			2016
			%		%		ThUS$			ThUS$			ThUS$			ThUS$
			Unaudited				Unaudited						Unaudited
Lan Perú S.A	0-E	Peru		30.00000		30.00000		(248	)		(186	)		1,987			(4,121	)
Lan Cargo S.A. and Subsidiaries	93.383.000-4	Chile		0.10196		0.10605		4			(8	)		(11	)		(13	)
Promotora Aerea Latinoamericana S.A. and Subsidiaries	0-E	Mexico		51.00000		51.00000		1,064			424			830			(98	)
Inversora Cordillera S.A. and Subsidiaries	0-E	Argentina		0.70422		0.70422		117			180			27			90
Lan Argentina S.A.	0-E	Argentina		0.13440		0.13440		24			38			6			19
Linea Aérea Carguera de Colombiana S.A.	0-E	Colombia		10.00000		10.00000		299			299			393			(62	)
Aerolíneas Regionales de Integración Aires S.A.	0-E	Colombia		0.80586		0.80939		(99	)		(90	)		(40	)		(61	)
Transportes Aereos del Mercosur S.A.	0-E	Paraguay		5.02000		5.02000		53			50			(46	)		(137	)
Multiplus S.A.	0-E	Brazil		27.26000		27.26000		22,077			19,928			10,902			11,194
Total								23,291			20,635			14,048			6,811

55

NOTE 15 - INTANGIBLE ASSETS OTHER THAN GOODWILL

The details of intangible assets are as follows:

	Classes of intangible assets				Classes of intangible assets
	(net)				(gross)
	As of		As of		As of		As of
	June 30,		December 31,		June 30,		December 31,
	2017		2016		2017		2016
	ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited				Unaudited
Airport slots		964,321		978,849		964,321		978,849
Loyalty program		321,420		326,262		321,420		326,262
Computer software		169,020		157,016		492,214		419,652
Developing software		91,684		91,053		91,684		91,053
Trademarks (1)		51,596		57,133		62,536		63,730
Other assets		-		-		808		808
Total		1,598,041		1,610,313		1,932,983		1,880,354

Movement in Intangible assets other than goodwill:

	Computer									Trademarks
	software			Developing			Airport			and loyalty
	Net			software			slots (2)			program (1) (2)			Total
	ThUS$			ThUS$			ThUS$			ThUS$			ThUS$
Opening balance as of January 1, 2016		104,258			74,887			816,987			325,293			1,321,425
Additions		5,566			23,717			-			-			29,283
Withdrawals		(736	)		(147	)		-			-			(883	)
Transfer software		47,211			(46,209	)		-			-			1,002
Foreing exchange		6,682			7,452			176,897			70,434			261,465
Amortization		(20,536	)		-			-			-			(20,536	)
Closing balance as of June 30, 2016 (Unaudited)		142,445			59,700			993,884			395,727			1,591,756
Opening balance as of July 1, 2016		142,445			59,700			993,884			395,727			1,591,756
Additions		1,122			59,955			-			-			61,077
Withdrawals		-			(44	)		-			-			(44	)
Transfer software		37,818			(28,167	)		-			-			9,651
Foreing exchange		(993	)		(391	)		(15,035	)		(5,987	)		(22,406	)
Amortization		(23,376	)		-			-			(6,345	)		(29,721	)
Closing balance as of December 31, 2016		157,016			91,053			978,849			383,395			1,610,313
Opening balance as of January 1, 2017		157,016			91,053			978,849			383,395			1,610,313
Additions		1,848			36,306			-			-			38,154
Withdrawals		(231	)		(670	)		-			-			(901	)
Transfer software		34,801			(34,639	)		-			-			162
Foreing exchange		(1,068	)		(366	)		(14,528	)		(5,586	)		(21,548	)
Amortization		(23,346	)		-			-			(4,793	)		(28,139	)
Closing balance as of June 30, 2017 (Unaudited)		169,020			91,684			964,321			373,016			1,598,041

(1) In 2016, after the extensive work of integration after the association between LAN and TAM, during which there has been solid progress in the homologation of the optimization processes of its air connections, in addition to the restructuring and modernization of the fleet of aircraft, the Company has resolved adopt a unique name and identity, and announce that the brand of the group will be LATAM ", which would unite all companies under a single image.

56

Given the above, we have proceeded to review the brands useful life, concluding that these should go from an indefinite to defined useful life. The estimated new useful life is 5 years, equivalent to the period for finishing all the image changes necessary.

(2) See Note 2.5

The amortization of the period is shown in the consolidated statement of income in administrative expenses. The accumulated amortization of computer programs and brands as of June 30, 2017, amounts to ThUS$ 334,942 (ThUS$ 270,041 at December 31, 2016).

NOTE 16 – GOODWILL

The Goodwill amount at June 30, 2017 is ThUS$ 2,671,247 (ThUS$ 2,710,382 at December 31, 2016). Movement of Goodwill separated by CGU it includes the following:

				Coalition
Movement of Goodwill, separated by CGU:				and loyalty
	Air			program
	Transport			Multiplus			Total
	ThUS$			ThUS$			ThUS$
Opening balance as of January 1, 2016		1,835,088			445,487			2,280,575
Increase (decrease) due to exchange rate differences		375,101			96,459			471,560
Closing balance as of June 30, 2016 (Unaudited)		2,210,189			541,946			2,752,135
Opening balance as of July 1, 2016		2,210,189			541,946			2,752,135
Increase (decrease) due to exchange rate differences		(33,288	)		(8,198	)		(41,486	)
Others		(267	)		-			(267	)
Closing balance as of December 31, 2016		2,176,634			533,748			2,710,382
Opening balance as of January 1, 2017		2,176,634			533,748			2,710,382
Increase (decrease) due to exchange rate differences		(31,213	)		(7,922	)		(39,135	)
Closing balance as of June 30, 2017 (Unaudited)		2,145,421			525,826			2,671,247

The Company has two cash- generating units (CGUs), “Air transportation” and, “Coalition and loyalty program Multiplus”. The CGU "Air transport" considers the transport of passengers and cargo, both in the domestic markets of Chile, Peru, Argentina, Colombia, Ecuador and Brazil, and in a developed series of regional and international routes in America, Europe and Oceania, while the CGU "Coalition and loyalty program Multiplus” works with an integrated network associated companies in Brazil.

The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of expected cash flows, 5 years after tax, which are based on the budget approved by the Board. Cash flows beyond the budget period are extrapolated using the estimated growth rates, which do not exceed the average rates of long-term growth.

57

Management establish rates for annual growth, discount, inflation and exchange for each cash generating, as well as fuel prices, based on their key assumptions. The annual growth rate is based on past performance and management's expectations over market developments in each country where it operates. The discount rates used are in American Dollars for the CGU "Air transportation" and Brazilian Reals for CGU "Program coalition loyalty Multiplus", both after taxes and reflect specific risks related to each country where the Company operates. Inflation and exchange rates are based on available data for each country and the information provided by the Central Bank of each country, and the fuel price is determined based on estimated production levels, competitive environment market in which they operate and its business strategy.

As of December 31, 2016 the recoverable values were determined using the following assumptions presented below:

		Air transportation	Coalition and loyalty
		CGU	program Multiplus CGU (2)
Annual growth rate (Terminal)	%	1.0 - 2.0	4.0 - 5.0
Exchange rate (1)	R$/US$	3.9 - 4.4	3.9 - 4.4
Discount rate based on the weighted average cost of capital (WACC)	%	8.27 - 9.27	-
Discount rate based on cost of equity (Ke)	%	-	12.3 - 13.3
Fuel Price from futures price curves commodities markets	US$/barril	61-76	-

(1) In line with the expectations of the Central Bank of Brazil

(2) The flow, as well as annual growth rte and discount, are denominated in real.

The result of the impairment test, which includes a sensitivity analysis of the main variables, showed that the estimated recoverable amount is higher than carrying value of the book value of net assets allocated to the cash generating unit, and therefore impairment was not detected.

CGU´s are sensitive to rates for annual growth, discount and exchanges rates. The sensitivity analysis included the individual impact of changes in estimates critical in determining the recoverable amounts, namely:

					Decrease
	Increase		Increase		Minimum
	Maximum		Maximum		terminal
	WACC		Ke		growth rate
	%		%		%
Air transportation CGU		9.27		-		1.0
Coalition and loyalty program Multiplus CGU		-		13.3		4.0

In none of the previous cases impairment in the cash- generating unit was presented.

As of June 30, 2017, no signs of deterioration have been identified for the CGU Multiplus Coalition and Loyalty Program and for the UGE Transporte Aéreo that require a deterioration test.

58

NOTE 17 - PROPERTY, PLANT AND EQUIPMENT

The composition by category of Property, plant and equipment is as follows:

	Gross Book Value				Acumulated depreciation						Net Book Value
	As of		As of		As of			As of			As of		As of
	June 30,		December 31,		June 30,			December 31,			June 30,		December 31,
	2017		2016		2017			2016			2017		2016
	ThUS$		ThUS$		ThUS$			ThUS$			ThUS$		ThUS$
	Unaudited				Unaudited						Unaudited
Construction in progress (*)		530,405		470,065		-			-			530,405		470,065
Land		49,787		50,148		-			-			49,787		50,148
Buildings		195,366		190,771		(66,391	)		(60,552	)		128,975		130,219
Plant and equipment		8,925,639		10,099,587		(2,137,458	)		(2,350,045	)		6,788,181		7,749,542
Own aircraft		8,272,163		9,436,684		(1,901,881	)		(2,123,025	)		6,370,282		7,313,659
Other (**)		653,476		662,903		(235,577	)		(227,020	)		417,899		435,883
Machinery		39,369		39,246		(27,975	)		(26,821	)		11,394		12,425
Information technology equipment		163,249		163,695		(129,702	)		(123,981	)		33,547		39,714
Fixed installations and accessories		186,178		178,363		(100,433	)		(94,451	)		85,745		83,912
Motor vehicles		96,370		96,808		(70,646	)		(67,855	)		25,724		28,953
Leasehold improvements		181,119		192,100		(89,700	)		(87,559	)		91,419		104,541
Other property, plants and equipment		4,061,920		3,005,981		(1,523,241	)		(1,177,351	)		2,538,679		1,828,630
Financial leasing aircraft		3,970,021		2,905,556		(1,496,963	)		(1,152,190	)		2,473,058		1,753,366
Other		91,899		100,425		(26,278	)		(25,161	)		65,621		75,264
Total		14,429,402		14,486,764		(4,145,546	)		(3,988,615	)		10,283,856		10,498,149

(*) As of June 30, 2017, includes pre-delivery payments to aircraft manufacturers for ThUS$ 511,108 (ThUS$ 434,250 as of December 31, 2016)

(**) Mainly considers rotable and tools.

59

(a) Movement in the different categories of Property, plant and equipment:

																									Other
													Information			Fixed									property,			Property,
										Plant and			technology			installations			Motor			Leasehold			plant and			Plant and
	Construction						Buildings			equipment			equipment			& accessories			vehicles			improvements			equipment			equipment
	in progress			Land			net			net			net			net			net			net			net			net
	ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$
Opening balance as of January 1, 2016		1,142,812			45,313			91,491			7,341,075			43,889			88,958			1,525			54,088			2,129,506			10,938,657
Additions		9,433			-			20			786,672			3,990			58			5			24,154			9,382			833,714
Disposals		-			-			-			(13,789	)(1)		(1	)		-			-			-			-			(13,790	)
Retirements		(114	)		-			-			(26,556	)		(44	)		(696	)		-			-			(4,297	)		(31,707	)
Depreciation expenses		-			-			(2,662	)		(278,222	)		(7,834	)		(6,771	)		(148	)		(10,678	)		(67,478	)		(373,793	)
Foreing exchange		5,827			5,345			2,798			56,673			3,299			10,102			232			3,151			100,657			188,084
Other increases (decreases)		(465,727	)		-			27,240			(51,505	)		116			8,805			-			24,485			(87,473	)		(544,059	)
Changes, total		(450,581	)		5,345			27,396			473,273			(474	)		11,498			89			41,112			(49,209	)		58,449
Closing balance as of June 30, 2016 (Unaudited)		692,231			50,658			118,887			7,814,348			43,415			100,456			1,614			95,200			2,080,297			10,997,106
Opening balance as of July 1, 2016		692,231			50,658			118,887			7,814,348			43,415			100,456			1,614			95,200			2,080,297			10,997,106
Additions		5,048			-			252			514,421			3,402			234			1			30,027			3,631			557,016
Disposals		-			-			-			(3,129	)(1)		(58	)		-			(32	)		-			(2,972	)		(6,191	)
Retirements		(170	)		-			(68	)		(13,260	)		(11	)		(562	)		-			-			1,693			(12,378	)
Depreciation expenses		-			-			(3,572	)		(283,909	)		(7,075	)		(6,893	)		(145	)		(12,605	)		(56,560	)		(370,759	)
Foreing exchange		(746	)		(510	)		(260	)		(4,903	)		(375	)		(718	)		(9	)		(302	)		(7,274	)		(15,097	)
Other increases (decreases)		(226,298	)		-			14,980			(233,693	)(2)		416			(8,605	)		(384	)		(7,779	)		(190,185	)		(651,548	)
Changes, total		(222,166	)		(510	)		11,332			(24,473	)		(3,701	)		(16,544	)		(569	)		9,341			(251,667	)		(498,957	)
Closing balance as of December 31, 2016		470,065			50,148			130,219			7,789,875			39,714			83,912			1,045			104,541			1,828,630			10,498,149
Opening balance as of January 1, 2017		470,065			50,148			130,219			7,789,875			39,714			83,912			1,045			104,541			1,828,630			10,498,149
Additions		6,024			-			-			95,753			1,531			96			-			1,165			18,702			123,271
Disposals		-			-			-			(7,295	)		(1	)		(3	)		(43	)		-			(11	)		(7,353	)
Retirements		(8	)		-			-			(9,780	)		(435	)		(122	)		-			2			(1,407	)		(11,750	)
Depreciation expenses		-			-			(4,318	)		(245,416	)		(7,049	)		(7,388	)		(96	)		(13,569	)		(98,213	)		(376,049	)
Foreing exchange		47			(361	)		(341	)		(4,460	)		(209	)		(1,066	)		(4	)		(264	)		(5,015	)		(11,673	)
Other increases (decreases)		54,277			-			3,415			(794,280	)		(4	)		10,316			-			(456	)		795,993			69,261
Changes, total		60,340			(361	)		(1,244	)		(965,478	)		(6,167	)		1,833			(143	)		(13,122	)		710,049			(214,293	)
Closing balance as of June 30, 2017 (Unaudited)		530,405			49,787			128,975			6,824,397			33,547			85,745			902			91,419			2,538,679			10,283,856

(1) During 2016 the sale of two Airbus A330 aircraft was materialized.

(2) During 2016 the reclassification to non-current assets or groups of assets for disposal classified as held for sale (see Note 13) of two Airbus A319 aircraft, two Airbus A320 aircraft, six Airbus A330 aircraft and two Boeing 777 aircraft was materialized.

60

(b)          Composition of the fleet:

		Aircraft included
		in Property,						Operating					Total
		plant and equipment						leases					fleet
		As of			As of			As of			As of		As of			As of
		June 30,			December 31,			June 30,			December 31,		June 30,			December 31,
Aircraft	Model	2017			2016			2017			2016		2017			2016
		Unaudited						Unaudited					Unaudited
Boeing 767	300ER		34			34			2			3		36			37
Boeing 767	300F		8	(1)		8	(1)		2			3		10	(1)		11	(1)
Boeing 777	300ER		4			4			6			6		10			10
Boeing 777	Freighter		-			-			2			2		2			2
Boeing 787	800		6			6			4			4		10			10
Boeing 787	900		4			4			9			8		13			12
Airbus A319	100		36			36			11			12		47			48
Airbus A320	200		93	(2)		93			45			53		138	(2)		146
Airbus A320	NEO		1			1			1			1		2			2
Airbus A321	200		30			30			17			17		47			47
Airbus A350	900		5	(3)		5			2	(3)		2		7			7
Total			221			221			101			111		322			332

(1) Three aircraft leased to FEDEX

(2) Three aircraft leased to Salam Air

(3) Four aircraft leased to Qatar Air. Two in operating leases and two in Properties, plant and equipment.

(c)          Method used for the depreciation of Property, plant and equipment:

		Useful life (years)
	Method	minimum		maximum
Buildings	Straight line without residual value		20		50
Plant and equipment	Straight line with residual value of 20% in the short-haul fleet and 36% in the long-haul fleet. (*)		5		23
Information technology equipment	Straight line without residual value		5		10
Fixed installations and accessories	Straight line without residual value		10		10
Motor vehicle	Straight line without residual value		10		10
Leasehold improvements	Straight line without residual value		5		5
Other property, plant and equipment	Straight line with residual value of 20% in the short-haul fleet and 36% in the long-haul fleet. (*)		10		23

(*)          Except for the Boeing 767 300ER and Boeing 767 300F fleets which consider a lower residual value due to the extension of their useful life to 22 and 23 years respectively. Additionally certain technical components, which are depreciated based on the basis of cycles and flight hours.

The aircraft with remarketing clause (**) under modality of financial leasing, which are depreciated according to the duration of their contracts, between 12 and 18 years. Its residual values are estimated according to market value at the end of such contracts.

(**)       Aircraft with remarketing clause are those that are required to sell at the end of the contract.

61

As of June 30, 2017, the deferred charge for the period, which is included in the consolidated statement of income, amounts to ThUS $ 376,049 (ThUS $ 373,793 as of June 30, 2016). This charge is recognized in the items of cost of sales and administrative expenses of the consolidated statement of income.

(d) Additional information regarding Property, plant and equipment:

(i) Property, plant and equipment pledged as guarantee:

Description of Property, plant and equipment pledged as guarantee:

			As of				As of
			June 30,				December 31,
			2017				2016
Creditor of	Assets		Existing		Book		Existing		Book
guarantee	committed	Fleet	Debt		Value		Debt		Value
			ThUS$		ThUS$		ThUS$		ThUS$
			Unaudited
Wilmington	Aircraft and engines	Airbus A321 / A350		662,847		742,038		596,224		722,979
Trust Company		Boeing 767		633,025		917,783		811,723		1,164,364
		Boeing 787		758,496		859,703		739,031		899,445
Banco Santander S.A.	Aircraft and engines	Airbus A319		-		-		50,671		91,889
		Airbus A320		212,276		303,019		462,950		709,788
		Airbus A321		31,085		41,796		32,853		44,227
BNP Paribas	Aircraft and engines	Airbus A319		91,276		141,246		134,346		228,384
		Airbus A320		119,284		183,019		128,173		181,838
Credit Agricole	Aircraft and engines	Airbus A319		23,457		40,171		26,014		37,389
		Airbus A320		57,179		146,708		71,794		144,157
		Airbus A321		35,500		90,582		40,609		93,110
Wells Fargo	Aircraft and engines	Airbus A320		238,682		317,820		252,428		333,419
Bank of Utah	Aircraft and engines	Airbus A320 / A350		642,968		685,596		670,826		709,280
Natixis	Aircraft and engines	Airbus A320		40,249		75,619		45,748		66,738
		Airbus A321		401,450		492,637		377,104		514,625
Citibank N. A.	Aircraft and engines	Airbus A320		103,116		147,014		111,243		166,370
		Airbus A321		39,475		70,704		42,867		70,166
KfW IPEX-Bank	Aircraft and engines	Airbus A319		6,552		5,800		7,494		6,360
		Airbus A320		25,041		31,962		28,696		36,066
Airbus Financial Services	Aircraft and engines	Airbus A319		26,591		29,481		30,199		33,823
PK AirFinance US, Inc.	Aircraft and engines	Airbus A320		50,716		59,472		54,786		46,341
Banco BBVA	Land and buildings			51,385		68,169		50,381		69,498
Total direct guarantee				4,250,650		5,450,339		4,766,160		6,370,256

The amounts of existing debt are presented at nominal value. Book value corresponds to the carrying value of the goods provided as guarantees.

Additionally, there are indirect guarantees related to assets recorded in Property, plant and equipment whose total debt at June 30, 2017 amounted to ThUS$ 1,039,895 (ThUS$ 913,494 at December 31, 2016). The book value of assets with indirect guarantees as of June 30, 2017 amounts to ThUS$ 2,454,041 (ThUS$ 1,740,815 as of December 31, 2016).

62

(ii)           Commitments and others

Fully depreciated assets and commitments for future purchases are as follows:

	As of		As of
	June 30,		December 31,
	2017		2016
	ThUS$		ThUS$
	Unaudited
Gross book value of fully depreciated property, plant and equipment still in use		127,753		116,386
Commitments for the acquisition of aircraft (*)		15,400,000		15,100,000

(*) Acording to the manufacturer’s price list.

Purchase commitment of aircraft

	Year of delivery
Manufacturer	2017		2018		2019		2020		2021		2022		Total
Airbus S.A.S.		2		19		14		16		21		2		74
A320-NEO		2		8		8		8		8		-		34
A321		-		1		-		-		-		-		1
A321-NEO		-		6		2		6		5		-		19
A350-1000		-		-		2		2		8		2		14
A350-900		-		4		2		-		-		-		6
The Boeing Company		1		-		6		2		2		-		11
Boeing 777		-		-		2		-		-		-		2
Boeing 787-9		1		-		4		2		2		-		9
Total		3		19		20		18		23		2		85

In April 2016 the change of four Airbus A320 NEO aircraft to four Airbus A321 NEO aircraft was signed. In August 2016 a cancellation of 12 Airbus A320 NEO aircraft and the change of two Airbus A350-900 to two Airbus A350-1000 were signed.

As of June 30, 2017, as a result of the different aircraft purchase agreements signed with Airbus S.A.S., 54 aircraft Airbus A320 family, with deliveries between 2017 and 2021, and 20 Airbus aircraft A350 family with deliveries between 2018 and 2022 remain to be received.

The approximate amount is ThUS$ 12,600,000, according to the manufacturer’s price list.

In May 2016 the change of four Boeing 787-8 aircraft for four Boeing 787-9 aircraft was signed.

As of June 30, 2017, and as a result of different aircraft purchase contracts signed with The Boeing Company, a total of nine Boeing 787 Dreamliner aircraft, with delivery dates between 2017 and 2021, and two Boeing 777 with delivery expected for 2019 remain to be received. The approximate amount, according to the manufacturer's price list, is ThUS$ 2,800,000.

63

(iii)         Capitalized interest costs with respect to Property, plant and equipment.

		For the periods ended
		June 30,
		2017		2016
		Unaudited
Average rate of capitalization of capitalized interest costs	%		3.75		3.59
Costs of capitalized interest	ThUS$		7,845		2,289

(iv)        Financial leases

The detail of the main financial leases is as follows:

			As of		As of
			June 30,		December 31,
Lessor	Aircraft	Model	2017		2016
			Unaudited
Bandurria Leasing Limitd	Airbus A319	100		3		-
Bandurria Leasing Limitd	Airbus A320	200		4		-
Becacina Leasing LLC	Boeing 767	300ER		1		1
Caiquen Leasing LLC	Boeing 767	300F		1		1
Cernicalo Leasing LLC	Boeing 767	300F		2		2
Cisne Leasing LLC	Boeing 767	300ER		2		2
Codorniz Leasing Limited	Airbus A319	100		2		2
Conure Leasing Limited	Airbus A320	200		2		2
Flamenco Leasing LLC	Boeing 767	300ER		1		1
FLYAFI 1 S.R.L.	Boeing 777	300ER		1		1
FLYAFI 2 S.R.L.	Boeing 777	300ER		1		1
FLYAFI 3 S.R.L.	Boeing 777	300ER		1		1
Garza Leasing LLC	Boeing 767	300ER		1		1
General Electric Capital Corporation	Airbus A330	200		-		3
Intraelo BETA Corpotation (KFW)	Airbus A320	200		1		1
Jilguero Leasing LLC	Boing B767	300ER		3		-
Loica Leasing Limited	Airbus A319	100		2		2
Loica Leasing Limited	Airbus A320	200		2		2
Mirlo Leasing LLC	Boeing 767	300ER		1		1
NBB Rio de Janeiro Lease CO and Brasilia Lease LLC (BBAM)	Airbus A320	200		1		1
NBB São Paulo Lease CO. Limited (BBAM)	Airbus A321	200		1		1
Osprey Leasing Limited	Airbus A319	100		8		8
Patagon Leasing Limited	Airbus A319	100		3		-
Petrel Leasing LLC	Boeing 767	300ER		1		1
Pilpilen Leasing Limited	Airbus A320	200		4		4
Pochard Leasing LLC	Boeing 767	300ER		2		2
Quetro Leasing LLC	Boeing 767	300ER		3		3
SG Infraestructure Italia S.R.L.	Boeing 777	300ER		1		1
SL Alcyone LTD (Showa)	Airbus A320	200		1		1
Torcaza Leasing Limited	Airbus A320	200		8		-
Tricahue Leasing LLC	Boeing 767	300ER		3		3
Wacapou Leasing S.A	Airbus A320	200		1		1
Total				68		50

64

Financial leasing contracts where the Company acts as the lessee of aircrafts establish duration between 12 and 18 year terms and semi-annual, quarterly and monthly payments of obligations.

Additionally, the lessee will have the obligation to contract and maintain active the insurance coverage for the aircrafts, perform maintenance on the aircrafts and update the airworthiness certificates at their own cost.

The assets acquired under financial leasing are classified in Other properties, plants and equipment. As of June 30, 2017, the Company registers under this modality sixty-eight aircraft (fifty aircraft as of December 31, 2016).

The book value of assets under financial leases as of June 30, 2017 amounts to ThUS$ 2,473,058 (ThUS$ 1,753,366 at December 31, 2016).

The minimum payments under financial leases are as follows:

	As of June 30, 2017							As of December 31, 2016
	Gross					Present		Gross					Present
	Value		Interest			Value		Value		Interest			Value
	ThUS$		ThUS$			ThUS$		ThUS$		ThUS$			ThUS$
	Unaudited
No later than one year		331,249		(35,119	)		296,130		285,168		(32,365	)		252,803
Between one and five years		933,730		(37,190	)		896,540		704,822		(43,146	)		661,676
Over five years		60,432		(692	)		59,740		43,713		(120	)		43,593
Total		1,325,411		(73,001	)		1,252,410		1,033,703		(75,631	)		958,072

NOTE 18 - CURRENT AND DEFERRED TAXES

In the period ended June 30, 2017, the income tax provision was calculated for such period, applying the rate of 25.5% for the business year 2017, in accordance with the Law No. 20,780 published in the Official Journal of the Republic of Chile on September 29, 2014.

Among the main changes is the progressive increase of the First Category Tax which will reach 27% in 2018 if the "Partially Integrated Taxation System" is chosen. Alternatively, if the Company chooses the "Attributed Income Taxation System" the top rate would reach 25% in 2017.

As LATAM Airlines Group S.A. is a public company, by default it must choose the "Partially Integrated Taxation System"(*), unless a future Extraordinary Meeting of Shareholders of the Company agrees, by a minimum of 2/3 of the votes, to choose the "Attributed Income Taxation System"(*). This decision was taken in the last quarter of 2016.

On February 8, 2016, an amendment to the abovementioned Law was issued (as Law 20,899) stating, as its main amendments, that Companies such Latam Airlines Group S.A. had to mandatorily choose the "Partially Integrated Taxation System"(*) and could not elect to use the other system.

Assets and deferred tax liabilities are offset if there is a legal right to offset the assets and liabilities always correspond to the same entity and tax authority.

65

(*) The Partially Integrated Taxation System is based on the taxation by the perception of profits and the Attributed Income Taxation System is based on the taxation by the accrual of profits.

(a) Current taxes

(a.1) The composition of the current tax assets is the following:

	Current assets				Non-current assets				Total assets
	As of		As of		As of		As of		As of		As of
	June 30,		December 31,		June 30,		December 31,		June 30,		December 31,
	2017		2016		2017		2016		2017		2016
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited				Unaudited				Unaudited
Provisional monthly payments (advances)		73,213		43,821		-		-		73,213		43,821
Other recoverable credits		19,563		21,556		19,019		20,272		38,582		41,828
Total assets by current tax		92,776		65,377		19,019		20,272		111,795		85,649

(a.2) The composition of the current tax liabilities are as follows:

	Current liabilities				Non-current liabilities				Total liabilities
	As of		As of		As of		As of		As of		As of
	June 30,		December 31,		June 30,		December 31,		June 30,		December 31,
	2017		2016		2017		2016		2017		2016
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited				Unaudited				Unaudited
Income tax provision		12,720		9,632		-		-		12,720		9,632
Additional tax provision		1,426		4,654		-		-		1,426		4,654
Total liabilities by current tax		14,146		14,286		-		-		14,146		14,286

(b) Deferred taxes

The balances of deferred tax are the following:

	Assets						Liabilities
	As of			As of			As of			As of
	June 30,			December 31,			June 30,			December 31,
Concept	2017			2016			2017			2016
	ThUS$			ThUS$			ThUS$			ThUS$
	Unaudited						Unaudited
Depreciation		12,312			11,735			1,320,935			1,387,760
Leased assets		(31,620	)		(35,922	)		255,355			203,836
Amortization		(1,919	)		(15,820	)		50			61,660
Provisions		172,701			222,253			(36,712	)		(59,096	)
Revaluation of financial instruments		2,868			-			(1,945	)		(3,223	)
Tax losses		232,476			202,536			(1,051,562	)		(1,126,200	)
Intangibles		-			-			354,841			430,705
Others		(1,498	)		(202	)		84,402			20,317
Total		385,320			384,580			925,364			915,759

66

The balance of deferred tax assets and liabilities are composed primarily of temporary differences to be reversed in the long term.

Movements of Deferred tax assets and liabilities

(a)  From January 1 to June 30, 2016 (Unaudited)

	Opening			Recognized in			Recognized in			Exchange					Ending
	balance			consolidated			comprehensive			rate					balance
	Assets/(liabilities)			income			income			variation			Others		Asset (liability)
	ThUS$			ThUS$			ThUS$			ThUS$			ThUS$		ThUS$
Depreciation		(1,130,991	)		(157,402	)		-			(3,934	)		-		(1,292,327	)
Leased assets		(251,302	)		52,242			-			(3,594	)		-		(202,654	)
Amortization		(71,164	)		(151	)		-			(2,122	)		-		(73,437	)
Provisions		378,537			(159,016	)		383			58,413			-		278,317
Revaluation of financial instruments		8,284			12,827			(16,940	)		1,464			-		5,635
Tax losses (*)		1,009,782			182,537			-			15,368			-		1,207,687
Revaluation propety, plant and equipment		4,081			(10,860	)		-			6,779			-		-
Intangibles		(364,314	)		(1,989	)		-			(77,072	)		-		(443,375	)
Others		(17,883	)		(16,325	)		-			20,259			1,420		(12,529	)
Total		(434,970	)		(98,137	)		(16,557	)		15,561			1,420		(532,683	)

(b)  From July 1 to December 31, 2016

	Opening			Recognized in			Recognized in			Exchange						Ending
	balance			consolidated			comprehensive			rate						balance
	Assets/(liabilities)			income			income			variation			Others			Asset (liability)
	ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$
Depreciation		(1,292,327	)		(84,033	)		-			335			-			(1,376,025	)
Leased assets		(202,654	)		(37,409	)		-			305			-			(239,758	)
Amortization		(73,437	)		(4,224	)		-			181			-			(77,480	)
Provisions		278,317			9,047			538			(4,965	)		(1,568	)		281,369
Revaluation of financial instruments		5,635			15,467			(17,755	)		(124	)		-			3,223
Tax losses (*)		1,207,687			122,355			-			(1,306	)		-			1,328,736
Intangibles		(443,375	)		6,120			-			6,550			-			(430,705	)
Others		(8,448	)		(13,860	)		-			1,975			(206	)		(20,539	)
Total		(528,602	)		13,463			(17,217	)		2,951			(1,774	)		(531,179	)

(c)  From January 1 to June 30, 2017 (Unaudited)

	Opening			Recognized in			Recognized in			Exchange			Ending
	balance			consolidated			comprehensive			rate			balance
	Assets/(liabilities)			income			income			variation			Asset (liability)
	ThUS$			ThUS$			ThUS$			ThUS$			ThUS$
Depreciation		(1,376,025	)		67,070			-			332			(1,308,623	)
Leased assets		(239,758	)		(47,521	)		-			304			(286,975	)
Amortization		(77,480	)		17,063			-			179			(60,238	)
Provisions		281,369			(66,147	)		(874	)		(4,935	)		209,413
Revaluation of financial instruments		3,223			1,714			2,005			(124	)		6,818
Tax losses (*)		1,328,736			(45,405	)		-			(1,298	)		1,282,033
Intangibles		(430,705	)		69,353			-			6,511			(354,841	)
Others		(20,539	)		(6,763	)		-			(329	)		(27,631	)
Total		(531,179	)		(10,636	)		1,131			640			(540,044	)

67

Deferred tax assets not recognized:	As of		As of
	June 30,		December 31,
	2017		2016
	ThUS$		ThUS$
	Unaudited
Tax losses		164,418		115,801
Total Deferred tax assets not recognized		164,418		115,801

Deferred tax assets on tax loss, are recognized to the extent that it is likely probable the realization of future tax benefit By the above at June 30, 2017, the Company has not recognized deferred tax assets of ThUS$ 164,418 (ThUS$ 115,801 at December 31, 2016) according with a loss of ThUS$ 498,353 (ThUS$ 340,591 at December 31, 2016).

Deferred tax expense and current income taxes:

	For the 6 months ended						For the 3 months ended
	June 30,						June 30,
	2017			2016			2017			2016
	ThUS$			ThUS$			ThUS$			ThUS$
	Unaudited
Current tax expense
Current tax expense		70,901			46,938			47,086			22,448
Adjustment to previous period’s current tax		(30	)		(176	)		(1,297	)		(2,297	)
Total current tax expense, net		70,871			46,762			45,789			20,151
Deferred tax expense
Deferred expense for taxes related to the creation and reversal of temporary differences		10,636			98,137			(17,751	)		42,421
Reduction (increase) in value of deferred tax assets during the evaluation of its usefulness		-			-			(19	)		-
Total deferred tax expense, net		10,636			98,137			(17,770	)		42,421
Income tax expense		81,507			144,899			28,019			62,572

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Composition of income tax expense (income):

	For the 6 months ended					For the 3 months ended
	June 30,					June 30,
	2017			2016		2017		2016
	ThUS$			ThUS$		ThUS$		ThUS$
	Unaudited
Current tax expense, net, foreign		33,256			40,904		9,289		15,217
Current tax expense, net, Chile		37,615			5,858		9,741		4,934
Total current tax expense, net		70,871			46,762		19,030		20,151
Deferred tax expense, net, foreign		(1,852	)		95,144		6,722		46,405
Deferred tax expense, net, Chile		12,488			2,993		2,267		(3,984	)
Deferred tax expense, net, total		10,636			98,137		8,989		42,421
Income tax expense		81,507			144,899		28,019		62,572

Profit before tax by the legal tax rate in Chile (25.5% and 24.0% at June 30, 2017 and 2016, respectively)

	For the period ended						For the period ended
	June 30,						June 30,
	2017			2016			2017			2016
	ThUS$			ThUS$			%			%
	Unaudited
Tax expense using the legal rate (*)		8,241			37,208			25.50			24.00
Tax effect for change of legal rate		11,640			-			36.02			-
Tax effect of rates in other jurisdictions		(60,514	)		16,424			(187.25	)		10.59
Tax effect of non-taxable operating revenues		43,456			(21,530	)		134.47			(13.89	)
Tax effect of disallowable expenses		73,956			105,148			228.85			67.82
Other increases (decreases) in legal tax charge		4,728			7,649			14.63			4.93
Total adjustments to tax expense using the legal rate		73,266			107,691			226.72			69.45
Tax expense using the effective rate		81,507			144,899			252.22			93.45

(*) On September 29, 2014, Law No. 20,780 "Amendment to the system of income taxation and introduces various adjustments in the tax system." was published in the Official Journal of the Republic of Chile. Within major tax reforms that this law contains, the First- Category Tax rate is gradually modified from 2014 to 2018 and should be declared and paid in tax year 2015.

Thus, at June 30, 2017 the Company presents the reconciliation of income tax expense and legal tax rate considering the rate increase.

69

Deferred taxes related to items charged to net equity:

	For the 6 months ended					For the 3 months ended
	June 30,					June 30,
	2017		2016			2017		2016
	ThUS$		ThUS$			ThUS$		ThUS$
	Unaudited					Unaudited
Aggregate deferred taxation of components of other comprehensive income		1,131		(16,557	)		2,891		(9,259	)
Aggregate deferred taxation related to items charged to net equity		-		(807	)		-		(403	)

NOTE 19 - OTHER FINANCIAL LIABILITIES

The composition of other financial liabilities is as follows:

	As of		As of
	June 30,		December 31,
	2017		2016
	ThUS$		ThUS$
	Unaudited
Current
(a) Interest bearing loans		1,452,270		1,814,647
(b) Hedge derivatives		23,268		24,881
Total current		1,475,538		1,839,528
Non-current
(a) Interest bearing loans		7,240,030		6,790,273
(b) Hedge derivatives		4,828		6,679
Total non-current		7,244,858		6,796,952

70

(a) Interest bearing loans

Obligations with credit institutions and debt instruments:

	As of		As of
	June 30,		December 31,
	2017		2016
	ThUS$		ThUS$
	Unaudited
Current
Loans to exporters		279,630		278,164
Bank loans (1)		220,674		290,810
Guaranteed obligations		533,571		578,014
Other guaranteed obligations		2,134		1,908
Subtotal bank loans		1,036,009		1,148,896
Obligation with the public (2)		18,104		312,043
Financial leases		309,594		268,040
Other loans		88,563		85,668
Total current		1,452,270		1,814,647
Non-current
Bank loans		290,170		294,477
Guaranteed obligations (3)		3,750,188		4,180,538
Other guaranteed obligations		255,153		254,512
Subtotal bank loans		4,295,511		4,729,527
Obligation with the public (4)		1,695,461		997,302
Financial leases		969,903		754,321
Other loans		279,155		309,123
Total non-current		7,240,030		6,790,273
Total obligations with financial institutions		8,692,300		8,604,920

(1) On September 29, 2016 TAM Linhas Aéreas S.A. obtained financing for US$ 200 million, guaranteed with 18% of the shares of Multiplus S.A., percentage adjustable depending on the shares price. Additionally, TAM obtained a hedging economic (Cross Currency Swap) for the same amount and period, in order to convert the commitment currency from US$ to BRL.

On March 30, 2017, TAM Linhas Aéreas S.A. restructured the financing mentioned in the previous paragraph, modifying the nominal amount of the transaction to US $ 137 million.

(2) On April 25, 2017, the payment of the principal plus interest on the long-term bonds issued by the company TAM Capital Inc. for an amount of US$ 300,000,000 at an interest rate of 7.375% annual. The payment consisted of 100% of the capital, ThUS $ 300,000, and interest accrued as of the date of payment for ThUS $ 11,063.

All interest-bearing liabilities are recorded according to the effective rate method. Under IFRS, in the case of fixed rate loans, the effective rate determined does not vary over the duration of the loan, whereas in variable rate loans, the effective rate changes to the date of each payment of interest.

(3) On April 10, 2017, the issuance and private placement of debt securities in the amount of US$ 140,000,000 was made under the current structure of the Enhanced Equipment Trust Certificates ("EETC") issued and placed the year 2015 to finance the acquisition of 11 Airbus A321-200, two Airbus A350-900 and four Boeing 787-9 with arrivals between July 2015 and April 2016. The offer is made up of Class C Certificates, which are subordinate to the Current Class A Certificates and Class B Certificates held by the Company. The term of the Class C Certificates is six years and expires in 2023.

71

(4) On April 11, 2017, LATAM Finance Limited, a company incorporated in the Cayman Islands with limited liability and exclusively owned by LATAM Airlines Group SA, has issued and placed on the international market, pursuant to Rule 144 -A and Regulation S of the securities laws of the United States of America, long-term unsecured bonds in the amount of US$ 700,000,000, maturing in 2024 at an annual interest rate of 6.875%.

As reported in the essential fact of April 6, 2017, the Issue and placement of the 144-A Bonds will be intended to finance general corporate purposes of LATAM.

Currency balances that make the interest bearing loans:

	As of		As of
	June 30,		December 31,
Currency	2017		2016
	ThUS$		ThUS$
	Unaudited
Brazilian real		813		1,253
Chilean peso (U.F.)		168,207		203,194
US Dollar		8,523,280		8,400,473
Total		8,692,300		8,604,920

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Interest-bearing loans due in installments to June 30, 2017 (Unaudited)

Debtor: LATAM Airlines Group S.A. and Subsidiaries, Tax No. 89.862.200-2, Chile.

				Nominal values												Accounting values
						More than		More than		More than								More than		More than		More than
				Up to		90 days		one to		three to		More than		Total		Up to		90 days		one to		three to		More than		Total
		Creditor		90		to one		three		five		five		nominal		90		to one		three		five		five		accounting			Effective		Nominal
Tax No.	Creditor	country	Currency	days		year		years		years		years		value		days		year		years		years		years		value		Amortization	rate		rate
				ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$			%		%
Loans to exporters
97.032.000-8	BBVA	Chile	ThUS$		75,000		-		-		-		-		75,000		75,724		-		-		-		-		75,724	At Expiration		2.20		2.20
97.032.000-8	BBVA	Chile	UF		-		51,385		-		-		-		51,385		-		51,377		-		-		-		51,377	At Expiration		3.22		2.42
97.030.000-7	ESTADO	Chile	ThUS$		40,000		-		-		-		-		40,000		40,052		-		-		-		-		40,052	At Expiration		2.23		2.23
97.003.000-K	BANCO DO BRASIL	Chile	ThUS$		50,000		50,000		-		-		-		100,000		50,219		50,256		-		-		-		100,475	At Expiration		3.23		3.23
97.951.000-4	HSBC	Chile	ThUS$		12,000		-		-		-		-		12,000		12,002		-		-		-		-		12,002	At Expiration		2.08		2.08
Bank loans
97.023.000-9	CORPBANCA	Chile	UF		19,612		47,842		44,208		5,526		-		117,188		20,015		47,842		43,469		5,504		-		116,830	Quarterly		3.93		3.93
0-E	BLADEX	U.S.A.	ThUS$		-		15,000		22,500		-		-		37,500		-		15,146		22,187		-		-		37,333	Semiannual		5.27		5.27
0-E	DVB BANK SE	U.S.A.	ThUS$		-		-		28,911		-		-		28,911		2		-		28,911		-		-		28,913	Quarterly		2.28		2.28
97.036.000-K	SANTANDER	Chile	ThUS$		-		-		187,978		-		-		187,978		345		-		187,978		-		-		188,323	Quarterly		3.93		3.93
Obligations with the public
0-E	BANK OF NEW YORK	U.S.A.	ThUS$		-		-		500,000		-		700,000		1,200,000		-		12,904		491,324		-		697,750		1,201,978	At Expiration		7.44		7.03
Guaranteed obligations
0-E	CREDIT AGRICOLE	France	ThUS$		10,360		23,328		58,192		23,570		686		116,136		10,719		23,329		56,723		22,836		686		114,293	Quarterly		2.46		2.04
0-E	BNP PARIBAS	U.S.A.	ThUS$		10,721		43,251		113,334		119,735		314,843		601,884		13,006		43,861		109,743		117,694		311,728		596,032	Quarterly		3.15		3.14
0-E	WELLS FARGO	U.S.A.	ThUS$		26,980		81,668		223,215		231,347		299,857		863,067		30,087		81,668		199,774		221,108		293,457		826,094	Quarterly		2.46		1.75
0-E	WILMINGTON TRUST	U.S.A.	ThUS$		20,600		60,990		171,964		180,057		641,914		1,075,525		27,763		60,990		165,832		177,021		637,929		1,069,535	Quarterly		4.49		4.49
0-E	CITIBANK	U.S.A.	ThUS$		11,821		35,990		99,792		105,655		121,686		374,944		13,101		35,990		93,400		102,643		118,726		363,860	Quarterly		3.14		2.31
0-E	BTMU	U.S.A.	ThUS$		2,823		8,580		23,693		24,953		20,345		80,394		3,042		8,581		22,536		24,541		20,233		78,933	Quarterly		2.53		1.94
0-E	APPLE BANK	U.S.A.	ThUS$		1,385		4,220		11,669		12,308		10,422		40,004		1,565		4,220		11,092		12,101		10,364		39,342	Quarterly		2.57		1.97
0-E	US BANK	U.S.A.	ThUS$		14,986		45,472		125,120		130,943		186,370		502,891		17,372		45,472		107,172		122,730		180,431		473,177	Quarterly		4.00		2.81
0-E	DEUTSCHE BANK	U.S.A.	ThUS$		5,121		11,152		25,263		27,589		38,069		107,194		5,675		11,152		24,561		27,120		37,511		106,019	Quarterly		4.15		4.15
0-E	NATIXIS	France	ThUS$		14,523		43,916		111,461		98,372		173,427		441,699		15,449		43,915		109,337		97,303		171,472		437,476	Quarterly		3.13		3.10
0-E	PK AIRFINANCE	U.S.A.	ThUS$		2,089		6,491		19,067		23,069		-		50,716		2,147		6,491		19,066		23,069		-		50,773	Monthly		2.85		2.85
0-E	KFW IPEX-BANK	Germany	ThUS$		2,338		7,186		17,593		4,476		-		31,593		2,368		7,186		17,593		4,476		-		31,623	Quarterly		2.98		2.98
0-E	AIRBUS FINANCIAL	U.S.A.	ThUS$		1,825		5,565		15,507		3,694		-		26,591		1,869		5,564		15,507		3,694		-		26,634	Monthly		2.87		2.87
0-E	INVESTEC	England	ThUS$		1,345		7,746		19,850		22,313		16,595		67,849		1,786		7,940		19,152		22,059		16,529		67,466	Semiannual		5.79		5.79
-	SWAP Aviones llegados	-	ThUS$		357		906		1,212		27		-		2,502		357		906		1,212		27		-		2,502	Quarterly		-		-
Other guaranteed obligations
0-E	CREDIT AGRICOLE	France	ThUS$		-		-		256,860		-		-		256,860		2,134		-		255,153		-		-		257,287	Quarterly		3.15		3.15
Financial leases
0-E	ING	U.S.A.	ThUS$		5,218		14,178		30,051		4,006		-		53,453		5,673		14,178		29,601		3,998		-		53,450	Quarterly		5.64		4.98
0-E	CREDIT AGRICOLE	France	ThUS$		1,801		1,824		-		-		-		3,625		1,816		1,824		-		-		-		3,640	Quarterly		2.12		2.12
0-E	CITIBANK	U.S.A.	ThUS$		10,982		33,623		90,442		57,157		14,141		206,345		11,867		33,624		88,127		56,671		14,106		204,395	Quarterly		3.65		3.04
0-E	PEFCO	U.S.A.	ThUS$		16,365		39,695		42,561		-		-		98,621		17,024		39,695		42,000		-		-		98,719	Quarterly		5.42		4.81
0-E	BNP PARIBAS	U.S.A.	ThUS$		12,829		39,447		60,755		10,882		-		123,913		13,360		39,447		59,877		10,860		-		123,544	Quarterly		3.72		3.30
0-E	WELLS FARGO	U.S.A.	ThUS$		9,501		28,876		79,758		74,698		31,343		224,176		10,304		28,876		76,958		73,893		31,174		221,205	Quarterly		2.89		2.35
0-E	DVB BANK SE	U.S.A.	ThUS$		4,737		-		-		-		-		4,737		4,749		-		-		-		-		4,749	Quarterly		2.85		2.85
97.036.000-K	SANTANDER	Chile	ThUS$		5,399		16,377		44,936		46,881		14,256		127,849		5,752		16,377		43,350		46,436		14,217		126,132	Quarterly		2.28		1.74
0-E	RRP ENGINE	England	ThUS$		-		1,613		6,654		7,258		10,311		25,836		-		1,613		6,654		7,258		10,311		25,836	Monthly		1,67		1.67
Other loans
0-E	BOEING	U.S.A.	ThUS$		-		-		39,321		-		-		39,321		641		-		39,321		-		-		39,962	At Expiration		2.43		2.43
0-E	CITIBANK (*)	U.S.A.	ThUS$		20,679		66,371		190,454		51,665		-		329,169		21,551		66,371		188,197		51,637		-		327,756	Quarterly		6.00		6.00
	Total				411,397		792,692		2,662,321		1,266,181		2,594,265		7,726,856		439,536		806,795		2,575,807		1,234,679		2,566,624		7,623,441

(*) Securitized bond with the future flows from the sales with credit card in United States and Canada.

73

Interest-bearing loans due in installments to June 30, 2017 (Unaudited)

Debtor: TAM S.A. and Subsidiaries, Tax No. 02.012.862/0001-60, Brazil.

						Nominal values												Accounting values
						More than		More than		More than								More than		More than		More than
				Up to		90 days		one to		three to		More than		Total		Up to		90 days		one to		three to		More than		Total
		Creditor		90		to one		three		five		five		nominal		90		to one		three		five		five		accounting			Effective		Nominal
Tax No.	Creditor	country	Currency	days		year		years		years		years		value		days		year		years		years		years		value		Amortization	rate		rate
				ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$			%		%
Bank loans
0-E	NEDERLANDSCHE
	CREDIETVERZEKERING MAATSCHAPPIJ	Holland	ThUS$		126		389		1,127		993		-		2,635		139		389		1,128		993		-		2,649	Monthly		6.01		6.01
0-E	CITIBANK	U.S.A	ThUS$		-		137,013		-		-		-		137,013		-		136,796		-		-		-		136,796	At Expiration		3.55		3.30
Obligation with the public
0-E	THE BANK OF NEW YORK	U.S.A	ThUS$		-		-		-		500,000		-		500,000		2,629		2,571		2,864		503,523		-		511,587	At Expiration		8.17		8.00
Financial leases
0-E	AFS INVESTMENT IX LLC	U.S.A	ThUS$		2,146		6,621		19,085		3,395		-		31,247		2,146		6,621		19,085		3,395		-		31,247	Monthly		1.25		1.25
0-E	DVB BANK SE	U.S.A	ThUS$		46		-		-		-		-		46		46		-		-		-		-		46	Monthly		2.65		2.65
0-E	KFW IPEX-BANK	Germany	ThUS$		579		386		-		-		-		965		579		386		-		-		-		965	Monthly/Quarterly		2.98		2.98
0-E	NATIXIS	France	ThUS$		9,568		5,974		19,071		75,554		-		110,167		9,568		5,973		19,071		75,554		-		110,166	Quarterly/Semiannual		5.08		5.08
0-E	WACAPOU LEASING S.A.	Luxemburg	ThUS$		781		2,085		5,891		4,759		-		13,516		781		2,085		5,891		4,759		-		13,516	Quarterly		3.15		3.15
0-E	SOCIÉTÉ GÉNÉRALE MILAN BRANCH	Italy	ThUS$		8,768		24,965		77,225		149,432		-		260,390		9,452		24,965		77,225		149,432		-		261,074	Quarterly		4.33		4.26
0-E	BANCO IBM S.A	Brazil	BRL		256		247		-		-		-		503		256		247		-		-		-		503	Monthly		10.14		10.14
0-E	SOCIETE GENERALE	France	BRL		101		209		-		-		-		310		101		209		-		-		-		310	Monthly		10.14		10.14
	Total				22,371		177,889		122,399		734,133		-		1,056,792		25,697		180,242		125,264		737,656		-		1,068,859
	Total consolidado				433,768		970,581		2,784,720		2,000,314		2,594,265		8,783,648		465,233		987,037		2,701,071		1,972,335		2,566,624		8,692,300

74

Interest-bearing loans due in installments to December 31, 2016

Debtor: LATAM Airlines Group S.A. and Subsidiaries, Tax No. 89.862.200-2, Chile.

				Nominal values												Accounting values
						More than		More than		More than								More than		More than		More than
				Up to		90 days		one to		three to		More than		Total		Up to		90 days		one to		three to		More than		Total
		Creditor		90		to one		three		five		five		nominal		90		to one		three		five		five		accounting			Effective		Nominal
Tax No.	Creditor	country	Currency	days		year		years		years		years		value		days		year		years		years		years		value		Amortization	rate		rate
				ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$			%		%
Loans to exporters
97.032.000-8	BBVA	Chile	ThUS$		75,000		-		-		-		-		75,000		75,234		-		-		-		-		75,234	At Expiration		1.85		1.85
97.032.000-8	BBVA	Chile	UF		-		50,381		-		-		-		50,381		-		50,324		-		-		-		50,324	At Expiration		5.23		4.43
97.036.000-K	SANTANDER	Chile	ThUS$		30,000		-		-		-		-		30,000		30,183		-		-		-		-		30,183	At Expiration		2.39		2.39
97.030.000-7	ESTADO	Chile	ThUS$		40,000		-		-		-		-		40,000		40,098		-		-		-		-		40,098	At Expiration		1.91		1.91
97.003.000-K	BANCO DO BRASIL	Chile	ThUS$		70,000		-		-		-		-		70,000		70,323		-		-		-		-		70,323	At Expiration		3.08		3.08
97.951.000-4	HSBC	Chile	ThUS$		12,000		-		-		-		-		12,000		12,002		-		-		-		-		12,002	At Expiration		1.79		1.79
Bank loans
97.023.000-9	CORPBANCA	Chile	UF		19,229		57,686		60,186		16,254		-		153,355		19,819		57,686		59,176		16,189		-		152,870	Quarterly		4.06		4.06
0-E	BLADEX	U.S.A.	ThUS$		-		12,500		30,000		-		-		42,500		-		12,667		29,625		-		-		42,292	Semiannual		5.14		5.14
0-E	DVB BANK SE	U.S.A.	ThUS$		-		-		28,911		-		-		28,911		3		-		28,911		-		-		28,914	Quarterly		1.86		1.86
97.036.000-K	SANTANDER	Chile	ThUS$		-		-		158,194		-		-		158,194		542		-		158,194		-		-		158,736	Quarterly		3.55		3.55
Obligations with the public
0-E	BANK OF NEW YORK	U.S.A.	ThUS$		-		-		-		500,000		-		500,000		2,291		-		-		489,885		-		492,176	At Expiration		7.77		7.25
Guaranteed obligations
0-E	CREDIT AGRICOLE	France	ThUS$		11,073		29,252		62,209		32,172		3,711		138,417		11,454		29,252		60,781		31,221		3,631		136,339	Quarterly		2.21		1.81
0-E	BNP PARIBAS	U.S.A.	ThUS$		10,496		42,401		111,962		118,181		345,078		628,118		12,792		43,023		108,271		116,067		341,481		621,634	Quarterly		2.97		2.96
0-E	WELLS FARGO	U.S.A.	ThUS$		31,448		95,186		260,112		269,512		400,087		1,056,345		35,211		95,186		233,012		257,387		391,253		1,012,049	Quarterly		2.37		1.68
0-E	WILMINGTON TRUST	U.S.A.	ThUS$		15,554		49,236		135,254		140,848		626,444		967,336		20,997		49,236		130,792		138,455		622,153		961,633	Quarterly		4.25		4.25
0-E	CITIBANK	U.S.A.	ThUS$		17,495		53,162		146,932		154,774		175,805		548,168		19,059		53,162		138,257		150,891		172,087		533,456	Quarterly		2.72		1.96
97.036.000-K	SANTANDER	Chile	ThUS$		5,347		16,204		44,472		46,386		26,165		138,574		5,680		16,204		42,707		45,815		26,063		136,469	Quarterly		1.98		1.44
0-E	BTMU	U.S.A.	ThUS$		2,787		8,470		23,393		24,635		26,705		85,990		3,001		8,470		22,132		24,149		26,519		84,271	Quarterly		2.31		1.72
0-E	APPLE BANK	U.S.A.	ThUS$		1,364		4,167		11,516		12,146		13,561		42,754		1,538		4,166		10,889		11,902		13,464		41,959	Quarterly		2.29		1.69
0-E	US BANK	U.S.A.	ThUS$		14,817		44,958		123,705		129,462		219,666		532,608		17,298		44,958		104,709		120,509		211,895		499,369	Quarterly		3.99		2.81
0-E	DEUTSCHE BANK	U.S.A.	ThUS$		4,992		15,365		24,725		26,984		45,197		117,263		5,570		15,365		24,023		26,515		44,522		115,995	Quarterly		3.86		3.86
0-E	NATIXIS	France	ThUS$		12,289		37,388		98,873		82,066		192,235		422,851		13,038		37,388		97,469		81,130		190,048		419,073	Quarterly		2.60		2.57
0-E	PK AIRFINANCE	U.S.A.	ThUS$		2,018		6,268		18,413		24,944		3,144		54,787		2,071		6,269		18,412		24,944		3,144		54,840	Monthly		2.40		2.40
0-E	KFW IPEX-BANK	Germany	ThUS$		2,288		7,015		17,869		9,019		-		36,191		2,319		7,015		17,869		9,019		-		36,222	Quarterly		2.55		2.55
0-E	AIRBUS FINANCIAL	U.S.A.	ThUS$		1,797		5,476		15,262		7,664		-		30,199		1,841		5,477		15,261		7,664		-		30,243	Monthly		2.49		2.49
0-E	INVESTEC	England	ThUS$		1,298		7,526		19,290		21,667		22,421		72,202		1,771		7,733		18,533		21,368		22,309		71,714	Semiannual		5.67		5.67
-	SWAP Aviones llegados	-	ThUS$		403		1,067		1,658		158		-		3,286		403		1,067		1,658		158		-		3,286	Quarterly		-		-
Other guaranteed obligations
0-E	CREDIT AGRICOLE	France	ThUS$		-		-		256,860		-		-		256,860		1,908		-		254,512		-		-		256,420	Quarterly		2.85		2.85
Financial leases
0-E	ING	U.S.A.	ThUS$		5,089		15,653		31,151		11,805		-		63,698		5,641		15,652		30,577		11,771		-		63,641	Quarterly		5.62		4.96
0-E	CREDIT AGRICOLE	France	ThUS$		1,754		5,403		-		-		-		7,157		1,780		5,403		-		-		-		7,183	Quarterly		1.85		1.85
0-E	CITIBANK	U.S.A.	ThUS$		4,956		15,312		44,177		13,804		-		78,249		5,622		15,312		43,413		13,762		-		78,109	Quarterly		6.40		5.67
0-E	PEFCO	U.S.A.	ThUS$		15,979		47,048		63,957		3,827		-		130,811		16,852		47,048		63,072		3,819		-		130,791	Quarterly		5.39		4.79
0-E	BNP PARIBAS	U.S.A.	ThUS$		12,520		38,494		75,958		22,147		-		149,119		13,122		38,494		74,776		22,079		-		148,471	Quarterly		3.69		3.26
0-E	WELLS FARGO	U.S.A.	ThUS$		4,678		14,261		39,862		42,663		1,862		103,326		5,018		14,260		38,834		42,430		1,861		102,403	Quarterly		3.98		3.54
0-E	DVB BANK SE	U.S.A.	ThUS$		4,680		9,447		-		-		-		14,127		4,713		9,448		-		-		-		14,161	Quarterly		2.57		2.57
0-E	RRP ENGINE	England	ThUS$		-		-		6,402		6,955		11,917		25,274		-		-		6,402		6,955		11,917		25,274	Monthly		2.35		2.35
Other loans
0-E	BOEING	U.S.A.	ThUS$		-		-		26,214		-		-		26,214		185		-		26,214		-		-		26,399	At Expiration		2.35		2.35
0-E	CITIBANK (*)	U.S.A.	ThUS$		20,555		63,942		184,866		101,026		-		370,389		21,541		63,942		182,043		100,866		-		368,392	Quarterly		6.00		6.00
	Total				451,906		753,268		2,122,383		1,819,099		2,113,998		7,260,654		480,920		754,207		2,040,524		1,774,950		2,082,347		7,132,948

(*) Securitized bond with the future flows from the sales with credit card in United States and Canada.

75

Interest-bearing loans due in installments to December 31, 2016

Debtor: TAM S.A. and Subsidiaries, Tax No. 02.012.862/0001-60, Brazil.

						Nominal values													Accounting values
						More than		More than		More than									More than		More than		More than
				Up to		90 days		one to		three to		More than		Total		Up to			90 days		one to		three to		More than		Total
		Creditor		90		to one		three		five		five		nominal		90			to one		three		five		five		accounting			Effective		Nominal
Tax No.	Creditor	country	Currency	days		year		years		years		years		value		days			year		years		years		years		value		Amortization	rate		rate
				ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$			ThUS$		ThUS$		ThUS$		ThUS$		ThUS$			%		%
Bank loans
0-E	NEDERLANDSCHE
	CREDIETVERZEKERING MAATSCHAPPIJ	Holland	ThUS$		122		378		1,094		1,234		54		2,882		137			378		1,094		1,233		55		2,897	Monthly		6.01		6.01
0-E	CITIBANK	U.S.A	ThUS$		-		200,000		-		-		-		200,000		(151	)		199,729		-		-		-		199,578	At Expiration		3.39		3.14
Obligation with the public
0-E	THE BANK OF NEW YORK	U.S.A	ThUS$		-		300,000		-		500,000		-		800,000		8,173			301,579		4,119		503,298		-		817,169	At Expiration		8.17		8.00
Financial leases
0-E	AFS INVESTMENT IX LLC	U.S.A	ThUS$		2,086		6,437		18,556		8,369		-		35,448		2,253			6,437		18,556		8,369		-		35,615	Monthly		1.25		1.25
0-E	DVB BANK SE	U.S.A	ThUS$		118		164		-		-		-		282		119			164		-		-		-		283	Monthly		2.50		2.50
0-E	GENERAL ELECTRIC CAPITAL CORPORATION	U.S.A	ThUS$		3,771		5,075		-		-		-		8,846		3,794			5,075		-		-		-		8,869	Monthly		2.30		2.30
0-E	KFW IPEX-BANK	Germany	ThUS$		579		1,544		-		-		-		2,123		583			1,544		-		-		-		2,127	Monthly/Quarterly		2.80		2.80
0-E	NATIXIS	France	ThUS$		2,675		5,732		18,485		38,820		41,731		107,443		3,533			5,732		18,485		38,820		41,731		108,301	Quarterly/Semiannual		4.90		4.90
0-E	WACAPOU LEASING S.A.	Luxemburg	ThUS$		668		2,038		5,768		6,280		-		14,754		709			2,038		5,768		6,280		-		14,795	Quarterly		3.00		3.00
0-E	SOCIÉTÉ GÉNÉRALE MILAN BRANCH	Italy	ThUS$		8,547		26,275		74,783		169,730		-		279,335		9,779			26,275		74,783		169,730		-		280,567	Quarterly		4.18		4.11
0-E	BANCO IBM S.A	Brazil	BRL		260		749		22		-		-		1,031		260			749		21		-		-		1,030	Monthly		13.63		13.63
0-E	HP FINANCIAL SERVICE	Brazil	BRL		222		-		-		-		-		222		222			-		-		-		-		222	Monthly		10.02		10.02
0-E	SOCIETE GENERALE	France	BRL		102		307		110		-		-		519		102			307		110		-		-		519	Monthly		13.63		13.63
	Total				19,150		548,699		118,818		724,433		41,785		1,452,885		29,513			550,007		122,936		727,730		41,786		1,471,972
	Total consolidated				471,056		1,301,967		2,241,201		2,543,532		2,155,783		8,713,539		510,433			1,304,214		2,163,460		2,502,680		2,124,133		8,604,920

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(b) Hedge derivatives

									Total hedge
	Current liabilities				Non-current liabilities				derivatives
	As of		As of		As of		As of		As of		As of
	June 30,		December 31,		June 30,		December 31,		June 30,		December 31,
	2017		2016		2017		2016		2017		2016
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited				Unaudited				Unaudited
Accrued interest from the last date of interest rate swap		1,008		2,148		-		-		1,008		2,148
Fair value of interest rate derivatives		4,315		9,578		4,828		6,679		9,143		16,257
Fair value of fuel derivatives		12,008		-		-		-		12,008		-
Fair value of foreign currency derivatives		5,937		13,155		-		-		5,937		13,155
Total hedge derivatives		23,268		24,881		4,828		6,679		28,096		31,560

The foreign currency derivatives correspond to options, forwards and swaps.

Hedging operation

The fair values of net assets/ (liabilities), by type of derivative, of the contracts held as hedging instruments are presented below:

	As of			As of
	June 30,			December 31,
	2017			2016
	ThUS$			ThUS$
	Unaudited
Cross currency swaps (CCS) (1)		(2,441	)		(12,286	)
Interest rate swaps (2)		(10,016	)		(16,926	)
Fuel options (3)		(7,191	)		10,088
Currency forward - options US$/GBP$ (4)		-			618
Currency forward - options US$/EUR$ (4)		-			109
Currency options R$/US$ (4)		2,343			(1,752	)
Currency options CLP/US$ (4)		(1,617	)		-

(1) Covers the significant variations in cash flows associated with market risk implicit in the changes in the 3-month LIBOR interest rate and the exchange rate US$/UF of bank loans. These contracts are recorded as cash flow hedges and fair value.

(2) Covers the significant variations in cash flows associated with market risk implicit in the increases in the 3 months LIBOR interest rates for long-term loans incurred in the acquisition of aircraft and bank loans. These contracts are recorded as cash flow hedges.

(3) Covers significant variations in cash flows associated with market risk implicit in the changes in the price of future fuel purchases. These contracts are recorded as cash flow hedges.

(4) Covers the foreign exchange risk exposure of operating cash flows caused mainly by fluctuations in the exchange rate R$/US$, US$/EUR and US$/GBP. These contracts are recorded as cash flow hedges.

77

During the periods presented, the Company only maintains cash flow hedges and fair value (in the case of CCS). In the case of fuel hedges, the cash flows subject to such hedges will impact results in the next six months from the consolidated statement of financial position date, meanwhile in the case of interest rate hedging, the hedges will impact results over the life of the related loans, which are valid initially for 12 years. In the case of currency hedges through a CCS, are generated two types of hedge accounting, a cash flow component by US$/UF, and other fair value by US$ floating rate component.

During the periods presented, no hedging operations of future highly probable transaction that have not been realized have occurred.

Since none of the coverage resulted in the recognition of a non-financial asset, no portion of the result of the derivatives recognized in equity was transferred to the initial value of such assets.

The amounts recognized in comprehensive income during the period and transferred from net equity to income are as follows:

	For the 6 months ended						For the 3 months ended
	June 30,						June 30,
	2017			2016			2017			2016
	ThUS$			ThUS$			ThUS$			ThUS$
	Unaudited
Debit (credit) recognized in comprehensive income during the period		(7,329	)		61,537			2,450			33,563
Debit (credit) transferred from net equity to income during the period		(26,731	)		(63,578	)		(8,078	)		(26,157	)

78

NOTE 20 - TRADE AND OTHER ACCOUNTS PAYABLES

The composition of Trade and other accounts payables is as follows:

	As of		As of
	June 30,		December 31,
	2017		2016
	ThUS$		ThUS$
	Unaudited
Current
(a) Trade and other accounts payables		1,137,714		1,117,926
(b) Accrued liabilities at the reporting date		337,648		475,142
Total trade and other accounts payables		1,475,362		1,593,068

(a) Trade and other accounts payable:

	As of		As of
	June 30,		December 31,
	2017		2016
	ThUS$		ThUS$
	Unaudited
Trade creditors		931,643		876,163
Leasing obligation		3,765		10,446
Other accounts payable		202,306		231,317
Total		1,137,714		1,117,926

79

The details of Trade and other accounts payables are as follows:

	As of		As of
	June 30,		December 31,
	2017		2016
	ThUS$		ThUS$
	Unaudited
Boarding Fee		254,717		170,053
Aircraft Fuel		139,904		188,276
Handling and ground handling		94,614		87,406
Other personnel expenses		80,552		81,632
Professional services and advisory		80,373		79,270
Airport charges and overflight		77,208		77,484
Suppliers technical purchases		76,761		40,305
Marketing		52,711		61,053
Services on board		50,823		44,589
Land services		49,582		74,260
Leases, maintenance and IT services		41,011		44,287
Achievement of goals		33,895		17,801
Aviation insurance		28,227		7,694
Crew		17,496		29,074
Maintenance		13,132		25,962
Communications		7,920		7,500
Airlines		4,807		21,197
SEC agreement (*)		4,719		4,719
Aircraft and engines leasing		4,169		10,446
Others		25,093		44,918
Total trade and other accounts payables		1,137,714		1,117,926

(*) Provision made for payments of fines, on July 25, 2016 LATAM reached agreements with the U.S. Department of Justice ("DOJ") U.S. and the Securities and Exchange Commission ("SEC") both authorities of the United States of America, in force as of this date, regarding the investigation on payments by LAN Airlines S.A. made in 2006-2007 to a consultant who advised on the resolution of labor matters in Argentina. The amount to the SEC agreement is ThUS$ 6,744 plus interests of ThUS$ 2,694.

As of June 30, the balance payable to the SEC is ThUS $ 4,719.

80

(b) Liabilities accrued:

	As of		As of
	June 30,		December 31,
	2017		2016
	ThUS$		ThUS$
	Unaudited
Aircraft and engine maintenance		158,418		244,949
Accrued personnel expenses		148,088		113,785
Accounts payable to personnel (*)		7,071		89,523
Others accrued liabilities		24,071		26,885
Total accrued liabilities		337,648		475,142

(*) Profits and bonds participation (Note 23 letter b)

NOTE 21 - OTHER PROVISIONS

Other provisions:

	Current liabilities				Non-current liabilities				Total Liabilities
	As of		As of		As of		As of		As of		As of
	June 30,		December 31,		June 30,		December 31,		June 30,		December 31,
	2017		2016		2017		2016		2017		2016
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited				Unaudited				Unaudited
Provision for contingencies (1)
Tax contingencies		1,424		1,425		319,973		313,064		321,397		314,489
Civil contingencies		951		993		58,360		56,413		59,311		57,406
Labor contingencies		312		225		27,109		29,307		27,421		29,532
Other		-		-		15,051		15,046		15,051		15,046
Provision for European
Commision investigation (2)		-		-		9,384		8,664		9,384		8,664
Total other provisions (3)		2,687		2,643		429,877		422,494		432,564		425,137

(1) Provisions for contingencies:

The tax contingencies correspond to litigation and tax criteria related to the tax treatment applicable to direct and indirect taxes, which are found in both administrative and judicial stage.

The civil contingencies correspond to different demands of civil order filed against the company.

The labor contingencies correspond to different demands of labor order filed against the company.

81

The Provisions are recognized in the consolidated income statement in administrative expenses or tax expenses, as appropriate.

(2) Provision made for proceedings brought by the European Commission for possible breaches of free competition in the freight market.

(3) Total other provision at June 30, 2017, and at December 31, 2016, include the fair value correspond to those contingencies from the business combination with TAM S.A and subsidiaries, with a probability of loss under 50%, which are not provided for the normal application of IFRS enforcement and that only must be recognized in the context of a business combination in accordance with IFRS 3.

Movement of provisions:

				European
	Legal			Commission
	claims (1)			Investigation (2)			Total
	ThUS$			ThUS$			ThUS$
Opening balance as of January 1, 2016		418,453			8,966			427,419
Increase in provisions		41,620			-			41,620
Provision used		(15,632	)		-			(15,632	)
Difference by subsidiaries conversion		86,770			-			86,770
Reversal of provision		(17,410	)		-			(17,410	)
Exchange difference		248			131			379
Closing balance as of June 30, 2016 (Unaudited)		514,049			9,097			523,146
Opening balance as of July 1, 2016		514,049			9,097			523,146
Increase in provisions		100,177			-			100,177
Provision used		(6,365	)		-			(6,365	)
Difference by subsidiaries conversion		(7,374	)		-			(7,374	)
Reversal of provision		(184,015	)		-			(184,015	)
Exchange difference		1			(433	)		(432	)
Closing balance as of December 31, 2016		416,473			8,664			425,137
Opening balance as of January 1, 2017		416,473			8,664			425,137
Increase in provisions		42,418			-			42,418
Provision used		(7,412	)		-			(7,412	)
Difference by subsidiaries conversion		(5,853	)		-			(5,853	)
Reversal of provision		(22,322	)		-			(22,322	)
Exchange difference		(124	)		720			596
Closing balance as of June 30, 2017 (Unaudited)		423,180			9,384			432,564

(1) The accumulated balance includes ThUS$ 107 million as judicial deposit granted as guarantee, related to the “Fundo Aeroviário” (FA). This deposit was made with the purpose of suspending the application of the tax credit. The company is discussing over the Tribunal the constitutionality about the requirement made by FA in a legal action. Initially it was covered by the effects of a precautionary measure, meaning that, the company was not the obligation to collect the tax as long as there no judicial decision in this regard. However, the decision taken by a judge in the first instance was publicized in an unfavorable published, reversing the precautionary measure. As the legal claim is still in progress (TAM appealed this first decision), the company needed to make the judicial deposit for the suspension of the enforceability of the tax credit; it deposit was classified in this category deducting the existing provision for that purpose. Finally, if the final decision is favorable to the company, the deposit already made will return to TAM. On the other hand, if the tribunal confirms the first decision, such deposit will be converted in a definitive payment in favor of the Brazilian Government. The procedural stage at June 30, 2017 is disclosed in Note 31 in the case role N° 2001.51.01.012530-0.

82

(2) European Commission Provision:

This provision was established because of the investigation brought by the Directorate General for Competition of the European Commission against more than 25 cargo airlines, including Lan Cargo S.A., as part of a global investigation that began in December 2007 regarding possible unfair competition on the air cargo market. This was a joint investigation done by the European and U.S.A. authorities.

Regard to Europe, the General Direction of Competition it imposed fines totaling € 799,445,000 (seven hundred and ninety nine million four hundred and forty-five thousand Euros) for infringement of European Union regulations on free competition against eleven (11) airlines, among which you can find LATAM Airlines Group S.A. and Lan Cargo S.A. Jointly, LATAM Airlines Group S.A. and Lan Cargo S.A., have been fined in the amount of € 8,220,000 (eight million two hundred twenty thousand Euros) for said infractions, which was provisioned in the financial statements of LATAM Airlines Group S.A. On January 24, 2011, LATAM Airlines Group S.A. and Lan Cargo S.A. appealed the decision before the Court of Justice of the European Union. On December 16, 2015, the European Court upheld the appeal and annulled the Commission's decision. The European Commission did not appeal the judgment, but on 17 March 2017 the European Commission again adopted its original decision to impose on the eleven original areas lines, the same fine previously imposed, amounting to a total of 776,465,000 Euros. In the case of LAN Cargo and its parent company, LATAM Airlines Group S.A. imposed the same fine of 8.2 million Euros. The procedural stage as of June 30, 2017 is described in Note 31 in item (ii) judgments received by LATAM Airlines Group S.A. and Subsidiaries.

83

NOTE 22 - OTHER NON-FINANCIAL LIABILITIES

	Current liabilities				Non-current liabilities				Total Liabilities
	As of		As of		As of		As of		As of		As of
	June 30,		December 31,		June 30,		December 31,		June 30,		December 31,
	2017		2016		2017		2016		2017		2016
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited				Unaudited				Unaudited
Deferred revenues (*)		2,719,453		2,655,086		182,570		213,781		2,902,023		2,868,867
Sales tax		10,856		19,402		-		-		10,856		19,402
Retentions		36,532		45,542		-		-		36,532		45,542
Others taxes		6,176		7,465		-		-		6,176		7,465
Dividends payable		-		20,766		-		-		-		20,766
Other sundry liabilities		23,446		13,984		-		-		23,446		13,984
Total other non-financial liabilities		2,796,463		2,762,245		182,570		213,781		2,979,033		2,976,026

(*) Note 2.20.

The balance comprises, mainly, deferred income by services not yet rendered and programs such as: LATAM Pass, LATAM Fidelidade y Multiplus:

LATAM Pass is the frequent flyer program created by LAN to reward the preference and loyalty of its customers with many benefits and privileges, by the accumulation of kilometers that can be exchanged for free flying tickets or a wide range of products and services. Customers accumulate LATAM Pass kilometers every time they fly with LAN, TAM, in companies that are members of oneworld® and other airlines associated with the program, as well as when they buy on the stores or use the services of a vast network of companies that have an agreement with the program around the world.

Thinking on people who travel constantly, TAM created the program LATAM Fidelidade, in order to improve the passenger attention and give recognition to those who choose the company. By using this program, customers accumulate points in a variety of programs loyalty in a single account and can redeem them at all TAM destinations and related airline companies, and even more, participate in the Red Multiplus Fidelidade.

Multiplus is a coalition of loyalty programs, aiming to operate activities of accumulation and redemption of points. This program has an integrated network by associates including hotels, financial institutions, retail companies, supermarkets, vehicle rentals and magazines, among many other partners from different segments.

84

NOTE 23 - EMPLOYEE BENEFITS

	As of		As of
	June 30,		December 31,
	2017		2016
	ThUS$		ThUS$
	Unaudited
Retirements payments		49,658		49,680
Resignation payments		9,087		10,097
Other obligations		26,886		22,545
Total liability for employee benefits		85,631		82,322

(a) The movement in retirements and resignation payments and other obligations:

			Increase (decrease)					Actuarial
	Opening		current service		Benefits			(gains)			Closing
	balance		provision		paid			losses			balance
	ThUS$		ThUS$		ThUS$			ThUS$			ThUS$
From January 1 to June 30, 2016 (Unaudited)		65,271		12,446		(1,046	)		(300	)		76,371
From July 1 to December 31, 2016		76,371		7,454		(3,490	)		1,987			82,322
From January 1 to June 30, 2017 (Unaudited)		82,322		7,303		(2,538	)		(1,456	)		85,631

The principal assumptions used in the calculation to the provision in Chile are presented below:

	As of
	June 30,
Assumptions	2017			2016
	Unaudited
Discount rate		4.44	%		4.64	%
Expected rate of salary increase		4.50	%		4.50	%
Rate of turnover		6.98	%		6.16	%
Mortality rate		RV-2014			RV-2009
Inflation rate		2.87	%		2.86	%
Retirement age of women		60			60
Retirement age of men		65			65

The discount rate is determined by reference to free risk 20 years Central Bank of Chile BCP bond. Mortality table RV-2014, established by Chilean Superintendency of Securities and Insurance and inflation rate performance curve of Central Bank of Chile instruments long term BCU and BCP.

The obligation is determined based on the actuarial value of the accrued cost of the benefit and it is sensibility to main actuarial assumptions used for the calculation. The Following is a sensitivity analysis based on increased (decreased) on the discount rate, increased wages, rotation and inflation.

85

The sensitivity analysis for these variables is presented below:

	Effect on the liability
	As of			As of
	June 30,			December 31,
	2017			2016
	ThUS$			ThUS$
	Unaudited
Discount rate
Change in the accrued liability an closing for increase in 100 p.b.		(5,348	)		(5,665	)
Change in the accrued liability an closing for decrease of 100 p.b.		6,122			5,952
Rate of wage growth
Change in the accrued liability an closing for increase in 100 p.b.		5,936			6,334
Change in the accrued liability an closing for decrease of 100 p.b.		(5,315	)		(5,644	)

(b) The liability for short-term:

	As of		As of
	June 30,		December 31,
	2017		2016
	ThUS$		ThUS$
	Unaudited
Profit-sharing and bonuses (*)		7,071		89,523

(*) Accounts payables to employees (Note 20 letter b)

The participation in profits and bonuses correspond to an annual incentives plan for achievement of objectives.

(c) Employment expenses are detailed below:

	For the 6 months ended				For the 3 months ended
	June 30,				June 30,
	2017		2016		2017			2016
	ThUS$		ThUS$		ThUS$			ThUS$
	Unaudited
Salaries and wages		809,450		758,088		388,953			397,875
Short-term employee benefits		31,705		46,948		(7,154	)		(25,118	)
Termination benefits		43,494		41,406		23,530			28,151
Other personnel expenses		93,211		88,681		47,313			45,499
Total		977,860		935,123		452,642			446,407

86

NOTE 24 - ACCOUNTS PAYABLE, NON-CURRENT

	As of		As of
	June 30,		December 31,
	2017		2016
	ThUS$		ThUS$
	Unaudited
Aircraft and engine maintenance		438,008		347,085
Provision for vacations and bonuses		12,229		12,080
Other sundry liabilities		348		226
Total accounts payable, non-current		450,585		359,391

NOTE 25 - EQUITY

(a) Capital

The Company’s objective is to maintain an appropriate level of capitalization that enables it to ensure access to the financial markets for carrying out its medium and long-term objectives, optimizing the return for its shareholders and maintaining a solid financial position.

The paid capital of the Company at June 30, 2017 amounts to ThUS$ 3,146,265 (*) divided into 606,407,693 common stock of a same series (ThUS$ 3,149,564 (**) divided into 606,407,693 shares as of December 31, 2016), a single series nominative, ordinary character with no par value. There are no special series of shares and no privileges. The form of its stock certificates and their issuance, exchange, disablement, loss, replacement and other similar circumstances, as well as the transfer of the shares, is governed by the provisions of Corporations Law and its regulations.

(*) Includes deduction of issuance costs for ThUS $ 3,299 and adjustment for placement of 10,282 shares for ThUS $ 156, approved at the Extraordinary Shareholders Meeting of the Company on April 27, 2017.

(**) Includes adjustment for placement of the aforementioned 10,282 shares for ThUS $ 156.

(b) Subscribed and paid shares

On August 18, 2016, the Company held an extraordinary meeting of shareholders in which it was approved to increase the capital by issuing 61,316,424 shares of payment, all ordinary shares, without par value. As of June 30, 2017, 60,849,592 shares had been placed against this increase, according to the following breakdown: (a) 30,499,685 shares subscribed and paid at the end of the preferred subscription period, which expired on, December 2016, raising the equivalent of US$ 304,996,850; and (b) 30,349,907 additional shares subscribed on December 28, 2016, earning the equivalent of US$ 303,499,070.

As a result of the last placement, as of June 30, 2017, the number Company shares subscribed and paid amounts to 606,407,693.

87

At June 30, 2017, the Company's capital stock is represented by 608,374,525 shares, all of the same and unique series, nominative, ordinary, with no par value, which is divided into: (a) the 606,407,693 subscribed and paid shares mentioned above; And (b) 1,966,832 shares pending subscription and payment, of which: (i) 1,500,000 shares are allocated to compensation stock option plans; And (ii) 466,832 correspond to the balance of shares pending placement of the last capital increase.

During 2016, the Company's capital stock was expressed in 613,164,243 shares, all of the same and unique series, nominative, ordinary, with no par value, that is, 551,847,819 shares already authorized at the beginning of the year and 61,316,424 shares authorized in the last Capital increase dated August 18, 2016. However, on December 21, 2016, the deadline for the subscription and payment of 4,789,718 shares that were destined to compensation plans for workers expired, so that the Company's capital stock was reduced to 608,374,525 shares.

The following table shows the movement of the authorized and fully paid shares described above:

Movement of authorized shares	Nro. Of
	shares
Autorized shares as of January 1, 2016		551,847,819
Increase capital approved at Extraordinary Shareholders meeting dated August 18, 2016		61,316,424
Full capital decrease due to maturity of the subscription and payment period of the compensation plan 2011, December 21, 2016 (*)		(4,789,718	)
Authorized shares as of December 31, 2016		608,374,525
Autorized shares as of January 1, 2017		608,374,525
There is no movement of authorized shares during the period 2017		-
Autorized shares as of June 30, 2017 (Unaudited)		608,374,525

(*) See Note 34 (a.1)

88

Movement fully paid shares

			Movement
			value		Cost of issuance
			of shares		and placement			Paid- in
	N° of		(1)		of shares (2)			Capital
	shares		ThUS$		ThUS$			ThUS$
Paid shares as of January 1, 2016		545,547,819		2,552,066		(6,361	)		2,545,705
Approved at Extraordinary Shereholders meeting dated August 18, 2016		60,849,592		608,496		-			608,496
Capital reserve		-		-		(4,793	)		(4,793	)
Increase (decrease) by transfers and other changes (4)		10,282		156		-			156
Paid shares as of December 31, 2016		606,407,693		3,160,718		(11,154	)		3,149,564
Paid shares as of January 1, 2017		606,407,693		3,160,718		(11,154	)		3,149,564
Capital reserve		-		-		(3,299	)		(3,299	)
Paid shares as of June 30, 2017 (Unaudited)		606,407,693 (3)		3,160,718		(14,453	)		3,146,265

(1)          Amounts reported represent only those arising from the payment of the shares subscribed.

(2)          Decrease of capital by capitalization of reserves for cost of issuance and placement of shares established according to Extraordinary Shareholder´s Meetings, where such decreases were authorized.

(3)          At June 30, 2017, the difference between authorized shares and fully paid shares are 1,966,832 shares, of which 1,500,000 correspond to compensation plans for executives of LATAM Airlines Group S.A. and subsidiaries (see Note 34(a.2)) and 466,832 correspond to the shares issued and unsubscribed from the capital increase approved at the Extraordinary Shareholders Meeting held on August 18, 2016.

(4)          These 10,282 shares were placed in January 2014 and charged to the Compensation plan 2011 (See Note 34 (a.1))

(c)          Treasury stock

At June 30, 2017, the Company held no treasury stock, the remaining of ThUS$ (178) corresponds to the difference between the amount paid for the shares and their book value, at the time of the full right decrease of the shares which held in its portfolio.

89

(d)          Reserve of share- based payments

Movement of Reserves of share- based payments:

			Stock
	Opening		option		Deferred			Net movement		Closing
Periods	balance		plan		tax			of the period		balance
	ThUS$		ThUS$		ThUS$			ThUS$		ThUS$
From January 1 to June 30, 2016 (Unaudited)		35,647		2,560		(807	)		1,753		37,400
From July 1 to December 31, 2016		37,400		1,138		-			1,138		38,538
From January 1 to June 30, 2017 (Unaudited)		38,538		739		-			739		39,277

These reserves are related to the “Share-based payments” explained in Note 34.

(e)          Other sundry reserves

Movement of Other sundry reserves:

	Opening		Legal			Closing
Periods	balance		reserves			balance
	ThUS$		ThUS$			ThUS$
From January 1 to June 30, 2016 (Unaudited)		2,634,679		670			2,635,349
From July 1 to December 31, 2016		2,635,349		4,932			2,640,281
From January 1 to June 30, 2017 (Unaudited)		2,640,281		(274	)		2,640,007

Balance of Other sundry reserves comprises the following:

	As of			As of
	June 30,			December 31,
	2017			2016
	ThUS$			ThUS$
	Unaudited
Higher value for TAM S.A. share exchange (1)		2,665,692			2,665,692
Reserve for the adjustment to the value of fixed assets (2)		2,620			2,620
Transactions with non-controlling interest (3)		(25,911	)		(25,911	)
Cost of issuance and placement of shares		-			(9	)
Others		(2,394	)		(2,111	)
Total		2,640,007			2,640,281

(1) Corresponds to the difference in the shares value of TAM S.A. acquired (under subscriptions) by Sister Holdco S.A. and Holdco II S.A. (under the Exchange Offer), as stipulated in the Declaration of Posting of Merger by Absorption and the fair value of these exchange shares of LATAM Airlines Group S.A. at June 22, 2012.

90

(2) Corresponds to the technical revaluation of fixed assets authorized by the Superintendence of Securities and Insurance in 1979, in Circular N° 1529. The revaluation was optional and could be taken only once, the reserve is not distributable and can only be capitalized.

(3) The balance at June 30, 2017, correspond to the loss generated by the participation of Lan Pax Group S.A. and Inversiones Lan S.A. in the acquisition of shares of Aerovías de Integración Regional Aires of ThUS$ (3,480) and ThUS$ (20), respectively; the acquisition of TAM S.A. of the minority holding of Aerolinhas Brasileiras S.A. of ThUS$ (885) and the acquisition of minority interest of Aerolane S.A. by Lan Pax group S.A. through Holdco Ecuador S.A. for US$ (21,526).

(f) Reserves with effect in other comprehensive income.

Movement of Reserves with effect in other comprehensive income:

	Currency			Cash flow			Actuarial gain
	translation			hedging			or loss on defined
	reserve			reserve			benefit plans reserve			Total
	ThUS$			ThUS$			ThUS$			ThUS$
Opening balance as of January 1, 2016		(2,576,041	)		(90,510	)		(10,717	)		(2,677,268	)
Derivatives valuation gains (losses)		-			60,411			-			60,411
Deferred tax		-			(16,557	)		-			(16,557	)
Actuarial reserves by employee benefit plans		-			-			(1,267	)		(1,267	)
Deferred tax actuarial IAS by employee benefit plans		-			-			382			382
Difference by subsidiaries conversion		540,961			-			-			540,961
Closing balance as of June 30, 2016 (Unaudited)		(2,035,080	)		(46,656	)		(11,602	)		(2,093,338	)
Opening balance as of July 1, 2016		(2,035,080	)		(46,656	)		(11,602	)		(2,093,338	)
Derivatives valuation gains (losses)		-			65,949			-			65,949
Deferred tax		-			(17,787	)		-			(17,787	)
Actuarial reserves by employee benefit plans		-			-			(1,837	)		(1,837	)
Deferred tax actuarial IAS by employee benefit plans		-			-			539			539
Difference by subsidiaries conversion		(51,475	)		-			-			(51,475	)
Closing balance as of December 31, 2016		(2,086,555	)		1,506			(12,900	)		(2,097,949	)
Opening balance as of January 1, 2017		(2,086,555	)		1,506			(12,900	)		(2,097,949	)
Derivatives valuation gains (losses)		-			(7,237	)		-			(7,237	)
Deferred tax		-			1,973			-			1,973
Actuarial reserves by employee benefit plans		-			-			4,023			4,023
Deferred tax actuarial IAS by employee benefit plans		-			-			(873	)		(873	)
Difference by subsidiaries conversion		(33,990	)		-			-			(33,990	)
Closing balance as of June 30, 2017 (Unaudited)		(2,120,545	)		(3,758	)		(9,750	)		(2,134,053	)

91

(f.1)        Currency translation reserve

These originate from exchange differences arising from the translation of any investment in foreign entities (or Chilean investment with a functional currency different to that of the parent), and from loans and other instruments in foreign currency designated as hedges for such investments. When the investment (all or part) is sold or disposed and loss of control occurs, these reserves are shown in the consolidated statement of income as part of the loss or gain on the sale or disposal. If the sale does not involve loss of control, these reserves are transferred to non-controlling interests.

(f.2)        Cash flow hedging reserve

These originate from the fair value valuation at the end of each period of the outstanding derivative contracts that have been defined as cash flow hedges. When these contracts expire, these reserves should be adjusted and the corresponding results recognized.

(f.3)         Reserves of actuarial gains or losses on defined benefit plans

Correspond to the increase or decrease in the obligation present value for defined benefit plan due to changes in actuarial assumptions, and experience adjustments, which is the effects of differences between the previous actuarial assumptions and what has actually occurred.

(g)          Retained earnings

Movement of Retained earnings:

			Result						Other
	Opening		for the						increase			Closing
Periods	balance		period			Dividends			(decreases)			balance
	ThUS$		ThUS$			ThUS$			ThUS$			ThUS$
From January 1 to June 30, 2016 (Unaudited)		317,950		10,133			(3,040	)		(277	)		324,766
From July 1 to December 31, 2016		324,766		59,087			(17,726	)		277			366,404
From January 1 to June 30, 2017 (Unaudited)		366,404		(72,481	)		-			-			293,923

92

(h)          Dividends per share

	Minimum mandatory		Final dividend
	dividend		dividend
Description of dividend	2017		2016
Date of dividend		06/30/2017		12/31/2016
Amount of the dividend (ThUS$)		-		20,766	(*)
Number of shares among which the dividend is distributed		606,407,693		606,407,693
Dividend per share (US$)		0.0000		0.0342

(*) In accordance with the Material Fact issued on April 27, 2017, LATAM Airlines Group S.A. shareholders approved the distribution of the final dividend proposed by the board of directors in the Ordinary Session of April 4, 2017, amounting to ThUS $ 20,766, which corresponds to 30% of the profits for the year corresponding to the year 2016.

The payment was made on May 18, 2017.

NOTE 26 - REVENUE

The detail of revenues is as follows:

	For the 6 months ended				For the 3 months ended
	June 30,				June 30,
	2017		2016		2017		2016
	ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited
Passengers LAN		2,022,012		1,989,806		939,216		904,897
Passengers TAM		1,972,460		1,675,198		949,095		801,817
Cargo		510,257		535,977		256,511		260,010
Total		4,504,729		4,200,981		2,144,822		1,966,724

93

NOTE 27 - COSTS AND EXPENSES BY NATURE

(a)          Costs and operating expenses

The main operating costs and administrative expenses are detailed below:

	For the 6 months ended				For the 3 months ended
	June 30,				June 30,
	2017		2016		2017		2016
	ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited
Aircraft fuel		1,105,658		929,437		510,627		468,004
Other rentals and landing fees		550,569		521,653		272,350		260,601
Aircraft rentals		303,527		272,157		153,131		138,554
Aircraft maintenance		208,007		181,744		122,821		86,949
Comissions		119,195		127,186		57,503		60,557
Passenger services		136,392		140,276		62,076		62,824
Other operating expenses		654,230		640,907		351,245		355,502
Total		3,077,578		2,813,360		1,529,753		1,432,991

(b) Depreciation and amortization

Depreciation and amortization are detailed below:

	For the 6 months ended				For the 3 months ended
	June 30,				June 30,
	2017		2016		2017		2016
	ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited
Depreciation (*)		467,568		449,621		229,181		219,730
Amortization		28,139		20,536		14,311		10,976
Total		495,707		470,157		243,492		230,706

(*) Include the depreciation of Property, plant and equipment and the maintenance cost of aircraft held under operating leases. The amount of maintenance cost included within the depreciation line item at June 30, 2017 is ThUS$ 83,498 and ThUS$ 76,861 for the same period of 2016.

(c)          Personnel expenses

The costs for personnel expenses are disclosed in Note 23 liability for employee benefits.

94

(d)          Financial costs

The detail of financial costs is as follows:

	For the 6 months ended				For the 3 months ended
	June 30,				June 30,
	2017		2016		2017		2016
	ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited
Bank loan interest		173,865		167,424		90,940		83,220
Financial leases		20,461		17,775		9,625		8,282
Other financial instruments		4,007		21,433		1,980		12,081
Total		198,333		206,632		102,545		103,583

Costs and expenses by nature presented in this note plus the Employee expenses disclosed in Note 23, are equivalent to the sum of cost of sales, distribution costs, administrative expenses, other expenses and financing costs presented in the consolidated statement of income by function.

NOTE 28 - OTHER INCOME, BY FUNCTION

Other income by function is as follows:

	For the 6 moths ended				For the 3 months ended
	June 30,				June 30,
	2017		2016		2017		2016
	ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited
Coalition and loyalty program Multiplus		121,209		85,745		64,809		51,694
Tours		51,124		48,884		24,592		24,922
Aircraft leasing		40,963		32,477		24,338		17,069
Customs and warehousing		12,248		10,615		6,814		5,399
Duty free		3,694		4,768		1,346		2,375
Maintenance		2,958		10,809		1,325		8,688
Other miscellaneous income		14,258		43,971		5,688		33,762
Total		246,454		237,269		128,912		143,909

95

NOTE 29 - FOREIGN CURRENCY AND EXCHANGE RATE DIFFERENCES

The functional currency of LATAM Airlines Group S.A. is the US dollar, also it has subsidiaries whose functional currency is different to the US dollar, such as the chilean peso, argentine peso, colombian peso, brazilian real and guaraní.

The functional currency is defined as the currency of the primary economic environment in which an entity operates and in each entity and all other currencies are defined as foreign currency. Considering the above, the balances by currency mentioned in this note correspond to the sum of foreign currency of each of the entities that make LATAM Airlines Group S.A. and Subsidiaries.

(a)Foreign currency

The foreign currency detail of balances of monetary items in current and non-current assets is as follows:

	As of		As of
	June 30,		December 31,
Current assets	2017		2016
	ThUS$		ThUS$
	Unaudited
Cash and cash equivalents		153,027		201,416
Argentine peso		10,406		4,438
Brazilian real		11,394		9,705
Chilean peso		29,792		30,221
Colombian peso		1,975		1,137
Euro		9,052		1,695
U.S. dollar		73,866		128,694
Strong bolivar		30		61
Other currency		16,512		25,465
Other financial assets, current		12,429		14,573
Argentine peso		12		12
Brazilian real		16		734
Chilean peso		595		585
Colombian peso		148		-
U.S. dollar		11,274		12,879
Strong bolivar		19		76
Other currency		365		287

96

	As of		As of
	June 30,		December 31,
Current assets	2017		2016
	ThUS$		ThUS$
	Unaudited
Other non - financial assets, current		90,592		107,789
Argentine peso		15,469		16,086
Brazilian real		19,705		20,158
Chilean peso		708		1,619
Colombian peso		460		713
Euro		1,741		1,563
U.S. dollar		35,727		50,157
Strong bolivar		1		3
Other currency		16,781		17,490
Trade and other accounts receivable, current		379,879		251,204
Argentine peso		52,055		54,356
Brazilian real		31,838		30,675
Chilean peso		110,530		90,482
Colombian peso		992		9,720
Euro		47,234		21,923
U.S. dollar		56,737		14,086
Strong bolivar		31		43
Other currency		80,462		29,919
Accounts receivable from related entities, current		600		554
Chilean peso		519		554
Other currency		81		-
Tax current assets		30,295		28,198
Argentine peso		905		1,798
Brazilian real		2,857		2,462
Chilean peso		2,568		6,333
Colombian peso		1,761		1,418
Euro		115		273
U.S. dollar		257		177
Peruvian sol		20,390		14,387
Other currency		1,442		1,350
Total current assets		666,822		603,734
Argentine peso		78,847		76,690
Brazilian real		65,810		63,734
Chilean peso		144,712		129,794
Colombian peso		5,336		12,988
Euro		58,142		25,454
U.S. Dollar		177,861		205,993
Strong bolivar		81		183
Other currency		136,033		88,898

97

	As of		As of
	June 30,		December 31,
Non-current assets	2017		2016
	ThUS$		ThUS$
	Unaudited
Other financial assets, non-current		24,950		26,772
Brazilian real		3,346		2,769
Chilean peso		84		83
Colombian peso		282		285
Euro		7,374		6,966
U.S. dollar		11,737		14,920
Other currency		2,127		1,749
Other non - financial assets, non-current		14,237		19,069
Argentine peso		135		142
Brazilian real		5,839		6,029
U.S. dollar		3,514		8,309
Other currency		4,749		4,589
Accounts receivable, non-current		7,011		7,356
Chilean peso		7,011		7,356
Deferred tax assets		2,370		2,110
Colombian peso		372		117
Other currency		1,998		1,993
Total non-current assets		48,568		55,307
Argentine peso		135		142
Brazilian real		9,185		8,798
Chilean peso		7,095		7,439
Colombian peso		654		402
Euro		7,374		6,966
U.S. dollar		15,251		23,229
Other currency		8,874		8,331

98

The foreign currency detail of balances of monetary items in current liabilities and non-current is as follows:

	Up to 90 days					91 days to 1 year
	As of		As of			As of		As of
	June 30,		December 31,			June 30,		December 31,
Current liabilities	2017		2016			2017		2016
	ThUS$		ThUS$			ThUS$		ThUS$
	Unaudited					Unaudited
Other financial liabilities, current		80,521		287,175			279,984		455,086
Chilean peso		56,161		55,962			99,218		108,010
U.S. dollar		24,360		231,213			180,766		347,076
Trade and other accounts payables, current		684,605		585,149			20,301		16,097
Argentine peso		27,837		20,838			857		907
Brazilian real		45,329		40,740			-		27
Chilean peso		110,730		60,701			11,368		12,255
Colombian peso		14,402		9,049			321		578
Euro		34,014		23,445			-		5
U.S. dollar		382,558		374,431			-		962
Strong bolivar		251		761			-		-
Peruvian sol		39,381		33,701			7,569		1,093
Mexican peso		3,125		1,535			-		-
Pound sterling		4,655		1,769			-		246
Uruguayan peso		5,331		6,899			-		-
Other currency		16,992		11,280			186		24
Accounts payable to related entities, current		317		220			-		-
Chilean peso		272		23			-		-
U.S. dollar		45		8			-		-
Other currency		-		189			-		-
Other provisions, current		-		-			510		511
Chilean peso		-		-			28		28
Other currency		-		-			482		483
Tax liabilities, current		105		(204	)		-		2,501
Argentine peso		105		-			-		2,501
Brazilian real		-		(3	)		-		-
Chilean peso		-		(25	)		-		-
U.S. dollar		-		-			-		-
Other currency		-		(176	)		-		-

99

	Up to 90 days				91 days to 1 year
	As of		As of		As of		As of
	June 30,		December 31,		June 30,		December 31,
Current liabilities	2017		2016		2017		2016
	ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited
Other non-financial liabilities, current		24,064		33,439		-		-
Argentine peso		397		13,463		-		-
Brazilian real		661		430		-		-
Chilean peso		4,117		14,999		-		-
Colombian peso		113		578		-		-
Euro		2,711		168		-		-
U.S. dollar		2,066		684		-		-
Strong bolivar		1		2		-		-
Other currency		13,998		3,115		-		-
Total current liabilities		789,612		905,779		300,795		474,195
Argentine peso		28,339		34,301		857		3,408
Brazilian real		45,990		41,167		-		27
Chilean peso		171,280		131,660		110,614		120,293
Colombian peso		14,515		9,627		321		578
Euro		36,725		23,613		-		5
U.S. dollar		409,029		606,336		180,766		348,038
Strong bolivar		252		763		-		-
Other currency		83,482		58,312		8,237		1,846

100

	More than 1 to 3 years				More than 3 to 5 years				More than 5 years
	As of		As of		As of		As of		As of		As of
	June 30,		December 31,		June 30,		December 31,		June 30,		December 31,
Non-current liabilities	2017		2016		2017		2016		2017		2016
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited				Unaudited				Unaudited
Other financial liabilities, non-current		168,619		178,793		743,274		747,218		-		41,785
Chilean peso		43,469		59,177		5,504		16,189		-		-
U.S. dollar		125,150		119,616		737,770		731,029		-		41,785
Accounts payable, non-current		309,713		195,629		-		-		-		-
Chilean peso		10,570		10,474		-		-		-		-
U.S. dollar		297,878		183,904		-		-		-		-
Other currency		1,265		1,251		-		-		-		-
Other provisions, non-current		39,205		39,513		-		-		-		-
Argentine peso		622		635		-		-		-		-
Brazillian real		22,529		23,541		-		-		-		-
Chilean peso		38		38		-		-		-		-
Colombian peso		542		569		-		-		-		-
Euro		9,384		8,664		-		-		-		-
U.S. dollar		6,090		6,066		-		-		-		-
Provisions for employees benefits, non-current		68,136		68,774		-		-		-		-
Brazilian real		28		28		-		-		-		-
Chilean peso		65,931		68,380		-		-		-		-
U.S. dollar		2,177		366		-		-		-		-
Other non-financial liabilities, non-current		3		3		-		-		-		-
Colombian peso		3		3		-		-		-		-
Total non-current liabilities		585,676		482,712		743,274		747,218		-		41,785
Argentine peso		622		635		-		-		-		-
Brazilian real		22,557		23,569		-		-		-		-
Chilean peso		120,008		138,069		5,504		16,189		-		-
Colombian peso		545		572		-		-		-		-
Euro		9,384		8,664		-		-		-		-
U.S. dollar		431,295		309,952		737,770		731,029		-		41,785
Other currency		1,265		1,251		-		-		-		-

101

	As of			As of
	June 30,			December 31,
General summary of foreign currency:	2017			2016
	ThUS$			ThUS$
	Unaudited
Total assets		715,390			659,041
Argentine peso		78,982			76,832
Brazilian real		74,995			72,532
Chilean peso		151,807			137,233
Colombian peso		5,990			13,390
Euro		65,516			32,420
U.S. dollar		193,112			229,222
Strong bolivar		81			183
Other currency		144,907			97,229
Total liabilities		2,419,357			2,651,689
Argentine peso		29,818			38,344
Brazilian real		68,547			64,763
Chilean peso		407,406			406,211
Colombian peso		15,381			10,777
Euro		46,109			32,282
U.S. dollar		1,758,860			2,037,140
Strong bolivar		252			763
Other currency		92,984			61,409
Net position
Argentine peso		49,164			38,488
Brazilian real		6,448			7,769
Chilean peso		(255,599	)		(268,978	)
Colombian peso		(9,391	)		2,613
Euro		19,407			138
U.S. dollar		(1,565,748	)		(1,807,918	)
Strong bolivar		(171	)		(580	)
Other currency		51,923			35,820

102

(b)Exchange differences

Exchange differences recognized in income, except for financial instruments measured at fair value through profit or loss, for the period ended June 30, 2017 and 2016, amounted to ThUS $ 10,529 and a credit of ThUS $ 143,408, respectively. In the second quarter of 2017 and 2016 they represented a charge of ThUS $ 45,902 and a payment of ThUS $ 75,510, respectively.

Exchange differences recognized in equity as reserves for exchange differences for conversion, for the period ended June 30, 2017 and 2016, amounted to ThUS $ 36,015 and a credit of ThUS $ 549,062, respectively. In the second quarter of 2017 and 2016, they represented a charge of ThUS $ 145,137 and a credit of ThUS $ 304,086, respectively.

The following shows the current exchange rates for the U.S. dollar, on the dates indicated:

	As of
	June 30,		As of December 31,
	2017		2016		2015		2014
	Unaudited
Argentine peso		16.62		15.84		12.97		8.55
Brazilian real		3.31		3.25		3.98		2.66
Chilean peso		664.29		669.47		710.16		606.75
Colombian peso		3,044.62		3,000.25		3,183.00		2,389.50
Euro		0.88		0.95		0.92		0.82
Strong bolivar		2,640.00		673.76		198.70		12.00
Australian dollar		1.30		1.38		1.37		1.22
Boliviano		6.86		6.86		6.85		6.86
Mexican peso		18.14		20.63		17.34		14.74
New Zealand dollar		1.37		1.44		1.46		1.28
Peruvian Sol		3.25		3.35		3.41		2.99
Uruguayan peso		28.40		29.28		29.88		24.25

103

NOTE 30 - EARNINGS / (LOSS) PER SHARE

	For the 6 months ended					For the 3 months ended
	June 30,					June 30,
Basic earnings / (loss) per share	2017			2016		2017			2016
	Unaudited
Earnings / (loss) attributable to owners of the parent (ThUS$)		(72,481	)		10,133		(138,038	)		(92,075	)
Weighted average number of shares, basic		606,407,693			545,547,819		606,407,693			545,547,819
Basic earnings / (loss) per share (US$)		(0.11953	)		0.01857		(0.22763	)		(0.16878	)

	For the 6 months ended						For the 3 months ended
	June 30,						June 30,
Diluted earnings / (loss) per share	2017			2016			2017			2016
	Unaudited
Earnings / (loss) attributable to owners of the parent (ThUS$)		(72,481	)		10,133			(138,038	)		(92,075	)
Weighted average number of shares, basic		606,407,693			545,547,819	(*)		606,407,693			545,547,819	(*)
Weighted average number of shares, diluted		606,407,693			545,547,819			606,407,693			545,547,819
Diluted earnings / (loss) per share (US$)		(0.11953	)		0.01857			(0.22763	)		(0.16878	)

(*) In the calculation of diluted earnings per share have not been considered the compensation plan disclosed in Note 34 (a.1), because the average market price is lower than the price of options.

104

NOTE 31 – CONTINGENCIES

I. Lawsuits

1) Lawsuits filed by LATAM Airlines Group S.A. and Subsidiaries

Company	Court	Case Number	Origin	Stage of trial	Amounts Committed (*) ThUS$
Atlantic Aviation Investments LLC (AAI).	Supreme Court of the State of New York County of New York.	07-6022920	Atlantic Aviation Investments LLC. ("AAI"), an indirect subsidiary LATAM Airlines Group S.A., incorporated under the laws of the State of Delaware, sued in August 29th , 2007  Varig Logistics S.A. ("Variglog") for non-payment of four documented loans in credit agreements governed by New York law. These contracts establish the acceleration of the loans in the event of sale of the original debtor, VRG Linhas Aéreas S.A.	The decision ordering Variglog to pay principal, interest and costs to AAI is in the enforcement stage in Switzerland.  A settlement for CHF 24,541,781.45 was reached in Brazil for the Swiss funds, and it was agreed that it would be divided as follows:  (i) 54.6% of Variglog’s assets for the Swiss funds; and (ii) 45.4% to AAI, subject to approval of the Brazilian Bankruptcy Commission.  Variglog also filed a petition in Switzerland for recognition of the decision declaring its condition of being in judicial recovery, and subsequently, of being declared in bankruptcy.  The Brazilian courts approved the AAI settlement and Variglog’s bankruptcy on April 11, 2016, which were confirmed by those courts on September 21, 2016.  The final decision approving the agreement was certified September 23, 2016.  US$8.9 million have been recovered thus far to date, leaving a balance of US$2.08 million pending.  Variglog funds remain under embargo by AAII in Switzerland.	10,976 Plus interests and costs

105

Company	Court	Case Number	Origin	Stage of trial	Amounts Committed (*) ThUS$
LATAM Airlines Group S.A. y Lan Cargo S.A.	European Commission.	-	Investigation of alleged infringements to free competition of cargo airlines, especially fuel surcharge. On December 26th , 2007, the General Directorate  for Competition of the European Commission notified Lan Cargo S.A. and LATAM Airlines Group S.A. the instruction process against twenty five cargo airlines, including Lan Cargo S.A., for alleged breaches of competition in the air cargo market in Europe, especially the alleged fixed fuel surcharge and freight.	On April 14th, 2008, the notification of the European Commission was replied. The appeal was filed on January 24, 2011. On May 11, 2015, we attended a hearing at which we petitioned for the vacation of the Decision based on discrepancies in the Decision between the operating section, which mentions four infringements (depending on the routes involved) but refers to Lan in only one of those four routes; and the ruling section (which mentions one single conjoint infraction). On November 9th, 2010, the General Directorate for Competition of the European Commission notified Lan Cargo S.A. and LATAM Airlines Group S.A. the imposition of a fine in the amount of THUS$ 9,384 (8.220.000 Euros) This fine is being appealed by Lan Cargo S.A. and LATAM Airlines Group S.A. On December 16, 2015, the European Court of Justice revoked the Commission’s decision because of discrepancies. The European Commission did not appeal the decision, but presented a new one on March 17, 2017 reiterating the imposition of the same fine on the eleven original airlines. The fine totals 776,465,000 Euros. It imposed the same fine as before on Lan Cargo and its parent, LATAM Airlines Group S.A., totaling 8.2 million Euros. On May 31, 2017 Lan Cargo S.A. and LATAM Airlines Group S.A. filed a petition with the General Court of the European Union seeking vacation of this decision.	9,384

106

Company	Court	Case Number	Origin	Stage of trial	Amounts Committed (*) ThUS$
Lan Cargo S.A. y LATAM Airlines Group S.A.	In the High Court of Justice Chancery División (England) Ovre Romerike District Court (Norway)  y Directie Juridische Zaken Afdeling Ceveil Recht (Netherlands) , Cologne Regional Court (Landgerich Köln Germany).	-	Lawsuits filed against European airlines by users of freight services in private lawsuits as a result of the investigation into alleged breaches of competition of cargo airlines, especially fuel surcharge. Lan Cargo S.A. and LATAM Airlines Group S.A., have been sued in court proceedings directly and/or in third party, based in England, Norway, the Netherlands and Germany.	Cases are in the uncovering evidence stage.	-0-
Aerolinhas Brasileiras S.A.	Federal Justice.	0008285-53.2015.403.6105	An action seeking to quash a decision and petioning for early protection in order to obgain a revocation of the penalty imposed by the Brazilian Competition Authority (CADE) in the investigation of cargo airlines alleged fair trade violations, in particular the fuel surcharge.	This action was filed by presenting a guaranty – policy – in order to suspend the effects of the CADE’s decision regarding the payment of the following fines:  (i) ABSA: ThUS$10,438; (ii) Norberto Jochmann: ThUS$201; (iii) Hernan Merino: ThUS$ 102; (iv) Felipe Meyer :ThUS$ 102. The action also deals with the affirmative obligation required by the CADE consisting of the duty to publish the condemnation in a widely circulating newspaper.  This obligation had also been stayed by the court of federal justice in this process.  Awaiting CADE’s statement. ABSA began a judicial review in search of an additional reduction in the fine amount.  At this time we cannot predict the final amount of the fine as the judicial review by the Federal Court Judge is still pending.	15,154
Aerolinhas Brasileiras S.A.	Federal Justice.	0001872-58.2014.4.03.6105	An annulment action with a motion for preliminary injunction, was filed on 28/02/2014, in order to cancel tax debts of PIS, CONFINS, IPI and II, connected with the administrative process 10831.005704/2006.43.	We have been waiting since August 21, 2015 for a statement by Serasa on TAM’s letter of indemnity and a statement by the Union. The statement was authenticated  on January 29, 2016. A petition on evidence and replications were filed on June 20, 2016. A new insurance policy was submitted on March 3, 2016 with the change to the guarantee requested by PGFN, which was declared on June 3, 2016.  A decision is pending.	18,190

107

Company	Court	Case Number	Origin	Stage of trial	Amounts Committed (*) ThUS$
Tam Linhas Aéreas S.A.	Department of Federal Revenue of  Brazil	19515.722556/2012-21	Alleged irregularities in the SAT payments for the periods 01/2009 to 13/2009.	A judgment by the Administrative Council of Tax Appeals (CARF) has been pending since February 27, 2015.	3,181
Tam Linhas Aéreas S.A.	Department of Federal Revenue of  Brazil	19515.720476/2015-83	Alleged irregularities in the SAT payments for the periods 01/2011 to 12/2012	A judgment by CARF is pending since April 12, 2016.	64,597
Tam  Linhas Aéreas S.A.	Court of the Second Region.	2001.51.01.012530-0	Ordinary judicial action brought for the purpose of declaring the nonexistence of legal relationship obligating the company to collect the Air Fund.	Unfavorable court decision in first instance. Currently expecting the ruling on the appeal filed by the company. In order to suspend chargeability of Tax Credit a Guaranty Deposit to the Court was delivered for MUS$106. The court decision requesting that the Expert make all clarifications requested by the parties in a period of 30 days was published on March 29, 2016. The plaintiffs’ submitted a petition on June 21, 2016 requesting acceptance of the opinion of their consultant and an urgent ruling on the dispute. No amount additional to the deposit that has already been made is required if this case is lost.	106,578

108

Company	Court	Case Number	Origin	Stage of trial	Amounts Committed (*) ThUS$
Tam Linhas Aéreas S.A.	Administrative Council of Tax Appeals	19.515.002963/2009-12, 19515.722555/2012-86, 19515.721154/2014-71, 19515.720475/2015-39	Collection of contributions to the Aviation Fund for the periods from 01/2004 to 12/2004, from 12/2006 to 12/2008, from 01/2009 to 12/2010, and from 01/2011 to 10/2012.	A judgment is pending by CARF since February 5, 2016.	75,728
Tam Linhas Aéreas S.A.	Internal Revenue Service of Brazil.	16643.000087/2009-36	This is an administrative proceeding arising from an infraction notice issued on 15.12.2009, by which the authority aims to request social contribution on net income (CSL) on base periods 2004 to 2007, due to the deduction of expenses related to suspended taxes.	The appeal filed by the company was dismissed in 2010. In 2012 the voluntary appeal was also dismissed. Consequently, the special appeal filed by the company awaits judgment of admissibility, since 2012. The company received notice of the decision dismissing the remedy on October 21, 2016.  The proceedings will end soon in favor of TAM even though Uniao Federal has already filed a foreclosure against TAM.  We are awaiting notification to submit a guarantee and defense.	39,139
Tam Linhas Aéreas S.A.	Internal Revenue Service of Brazil.	10880.725950/2011-05	Compensation credits of the Social Integration Program (PIS) and Contribution for Social Security Financing (COFINS) Declared on DCOMPs.	The objection (manifestação de inconformidade) filed by the company was rejected, which is why the voluntary appeal was filed.  The case was assigned to the 1st Ordinary Group of Brazil’s Administrative Council of  Tax Appeals  (CARF)  on  June 8, 2015.  TAM’s appeal was included in the CARF session held August 25, 2016. An agreement that converted the proceedings into a formal case was published on October 7, 2016.	62,870

109

Company	Court	Case Number	Origin	Stage of trial	Amounts Committed (*) ThUS$
Aerovías de Integración Regional, AIRES S.A.	United States  Court of Appeals for the Eleventh Circuit, Florida, U.S.A.	2013-20319 CA 01	The July 30th , 2012 Aerovías de Integración Recional, Aires S.A. ( LATAM AIRLINES COLOMBIA) initiated a legal process in Colombia against Regional One INC and Volvo Aero Services LLC, to declare that these companies are civilly liable for moral and material damages caused to LATAM AIRLINES COLOMBIA arising from breach of contractual obligations of the aircraft HK-4107. The June 20th , 2013 AIRES SA And / Or LATAM AIRLINES COLOMBIA was notified of the lawsuit filed in U.S. for Regional One INC and Dash 224 LLC for damages caused by the aircraft HK-4107 arguing failure of LATAM AIRLINES COLOMBIA customs duty to obtain import declaration when the aircraft in April 2010 entered Colombia for maintenance required by Regional One.	This case is being heard by the 45th Civil Court of the Bogotá Circuit in Colombia.  The court issued an order on August 16, 2016 setting the hearing date pursuant to Article 101 for February 2, 2017.  At that hearing, a reconciliation should have been attempted, the facts in dispute determined, interrogatories made and evidence admitted.  At the petition of Regional One’s attorneys on January 27, 2017, which was accepted by the respondent, the hearing to be held on February 2, 2017 was postponed.  A reconciliation hearing was held on June 14, 2017 that failed.  This commenced the evidentiary stage in which the legal representative of LATAM Airlines Colombia was interrogated.  The judge must now decree which evidence must be presented and analyzed.  The U.S. Federal Court for the State of Florida rendered a decision on March 26, 2014 sustaining the petition of Lan Colombia Airlines to stay the proceedings in the U.S. as long as the lawsuit in Colombia was pending.  The U.S. Court also closed the case administratively.  The Federal Court of Appeals confirmed the closing of the U.S. case on April 1, 2015.  On October 13, 2015, Regional One filed a petition with the U.S. Court seeking a reopening of the case.  Lan Colombia Airlines presented its arguments for keeping the case closed, which were sustained by the Court on August 23, 2016.  The case in the U.S. continues to be closed.	12,443

110

Company	Court	Case Number	Origin	Stage of trial	Amounts Committed (*) ThUS$
Tam Linhas Aéreas S.A.	Internal Revenue Service of Brazil	10880.722.355/2014-52	On August 19th , 2014 the Federal Tax Service issued a notice of violation stating  that compensation credits Program (PIS) and the Contribution for the Financing of Social Security COFINS by TAM are not directly related to the activity of air transport.	An administrative objection was filed on September 17th, 2014. A first-instance ruling was rendered on June 1, 2016 that was partially favorable.  The separate fine was revoked. A voluntary appeal was filed on June 30, 2016, which is pending a decision by CARF. On September 9, 2016, the case was referred to the Second Division, Fourth Chamber, of the Third Section of the Administrative Council of Tax Appeals (CARF).	71,991
Tam Viagens S.A.	Department of Finance to the municipality of São Paulo.	67.168.795 / 67.168.833 / 67.168.884 / 67.168.906 / 67.168.914 / 67.168.965	A claim was filed alleging infraction and seeking a fine because of a deficient basis for calculation of the service tax (ISS) because the company supposedly made incorrect deductions.	We received notice of the petition on December 22, 2015. The objection was filed on January 19, 2016.  The company was notified on November 23, 2016 of the decision that partially sustained the interim infringement ruling.  An ordinary appeal was filed on December 19, 2016 before the Municipal Tax Council of Sao Paulo and a judgment is pending.	105,206
Tam Linhas Aéreas S.A.	Labor Court of São Paulo.	0001734-78.2014.5.02.0045	Action filed by the Ministry of Labor, which requires compliance with legislation on breaks, extra hours and others.	This case is in the initial stages.  It could possibly impact both operations and employee work shift control.  TAM won in the first instance, but the Prosecutor’s Office has appealed the trial court’s decision.  That decision was sustained by the appellate court.  A petition by the Prosecutor’s Office for clarification is now pending before the courts.	16,044

111

Company	Court	Case Number	Origin	Stage of trial	Amounts Committed (*) ThUS$
TAM S.A.	Conselho Administrativo de Recursos Fiscais.	13855.720077/2014-02	Notice of an alleged infringement presented by Secretaria da Receita Federal do Brasil requiring the payment of IRPJ and CSLL, taxes related to the income earned by TAM on March, 2011, in relation of the reduction of the statute capital of Multiplus S.A.	On January 12, 2014, it was filed an appeal against the object of the notice of infringement. Currently, the company is waiting for the court judgment regarding the appeal filed in the Conselho Administrativo de Recursos Fiscais (CARF) The case will be put into the system again for re-assignment for hearing and reporting because of the departure of Eduardo de Andrade, a CARF council member.	145,370
Tam Linhas Aereas S.A.	1° Civil Court of  Comarca of Bauru/SP.	0049304-37.2009.8.26.0071/1	That action is filed by the current complainants against the defendant, TAM Linhas Aéreas S / A, for receiving compensation for material and moral damages suffered as a result of an accident with one of its aircraft, which landed on adjacent lands to the Bauru airport, impacting the vehicle of Ms. Savi Gisele Marie de Seixas Pinto and William Savi de Seixas Pinto, causing their death. The first was the wife and mother of the complainants and the second, son and brother, respectively.	Currently under the enforcement phase of the sentence. ThUS$4.770 in cash was deposited in guarantee.  A settlement was reached on September 23, 2016 for R$23 million (KUS$7,057) that was paid in December 2016.	7,057
Aerolinhas Brasileiras S.A.	Labor Court of Campinas.	0010498-37.2014.5.15.0095	Lawsuit filed by the National Union of aeronauts, requiring weekly rest payment   (DSR) scheduled stopovers, displacement and moral damage.	An agreement for ThUS$2,732 (R$8.656,6)  was reached with the Union on August 2, 2016.   The payment under the agreement has been made, but the proceedings have not yet been ended, which must be done by the Forum administration. This lawsuit was quashed by the Court’s administration on May 3, 2017.	16,365

112

Company	Court	Case Number	Origin	Stage of trial	Amounts Committed (*) ThUS$
TAM Linhas Aéreas S.A.	Sao Paulo Labor Court, Sao Paulo	1001531-73.2016.5.02.0710	The Ministry of Labor filed an action seeking that the company adapt the ergonomics and comfort of seats.	In August 2016, the Ministry of Labor filed a new lawsuit before the competent Labor Court in Sao Paulo, in the same terms as case 0000009-45.2016.5.02.090, as previously reported. The judgment is pending.	16,230
LATAM Airlines Group S.A.	22° Civil Court of Santiago	C-29.945-2016	The Company received notice of a civil liability claim by Inversiones Ranco Tres S.A. on January 18, 2017.  It is represented by Mr. Jorge Enrique Said Yarur.  It was filed against LATAM Airlines Group S.A. for an alleged contractual default by the Company and against Ramon Eblen Kadiz, Jorge Awad Mehech, Juan Jose Cueto Plaza, Enrique Cueto Plaza and Ignacio Cueto Plaza, directors and officers, for alleged breaches of their duties.  In the case of Juan Jose Cueto Plaza, Enrique Cueto Plaza and Ignacio Cueto Plaza, it alleges a breach, as controllers of the Company, of their duties under the incorporation agreement.  LATAM has retained legal counsel specializing in this area to defend it.	The claim was answered on March 22, 2017 and the plaintiff filed its replication on April 4, 2017.  LATAM filed its rejoinder on April 13, 2017, which concluded the argument stage of the lawsuit.  A reconciliation hearing was held on May 2, 2017, but the parties did not reach an agreement.   The Court issued the evidentiary decree on May 12, 2017.  We filed a petition for reconsideration because we disagreed with certain points of evidence.  That petition was partially sustained by the Court on June 27, 2017.  The evidentiary stage commenced and then concluded on July 20, 2017.  Observations to the evidence must now be presented.  That period expires August 1, 2017.	19,965
TAM Linhas Aéreas S.A.	10th Jurisdiction of Federal Tax Enforcement of Sao Paulo	0020869-47.2017.4.03.6182	Tax Enforcement Lien No. 0061196-68.2016.4.03.6182 on Profit-Based Social Contributions from 2004 to 2007.	This tax enforcement was referred to the 10th Federal Jurisdiction on February 16, 2017.  A petition reporting our request to submit collateral was recorded on April 18, 2017.  At this time, the period is pending for the plaintiff to respond to our petition.	43,291
TAM Linhas Aéreas S.A.	Federal Revenue Bureau	10880.900360/2017-55	A claim regarding the negative Company Income Tax (IRPJ) balance.  Appraisals of compensation that were not accepted.	The case was referred to the National Claims Management Center of the Federal Revenue Bureau for Sao Paulo on May 11, 2017.	16,079

113

Company	Court	Case Number	Origin	Stage of trial	Amounts Committed (*) ThUS$
TAM  Linhas Aéreas S.A.	Internal Revenue Service of Brazil	16643.000085/2009-47	Notice of claim to recover income taxes and social contributions paid on the basis of net profits (SCL) according to the royalty expenses and use of the TAM trademark.	Before the Internal Revenue Service of Brazil.  A service of process is expected in the lawsuit on admissibility of the special appeal, filed by the General Counsel of the National Treasury, as well as notification of the decision rendered by the Administrative Council of Tax Appeals (CARF).	18,886
TAM Linhas Aéreas S.A.	Internal Revenue Service of Brazil	10831.012344/2005-55	Notice of an infringement filed by the Company to request the import tax (II), the Social Integration Program (PIS) of the Social Security Funding Contribution (COFINS) as a result of an unidentified international cargo loss.	Before the Internal Revenue Service of Brazil.  The administrative decision was against the company.  The matter is pending a decision by the CARF.	19,157
TAM Linhas Aéreas S.A.	Treasury Department of the State of Sao Paulo	3.123.785-0	Notice of an infringement to demand payment of the tax on the circulation of merchandise and services (ICMS) assessable on aircraft imports.	Before the Treasury Department of the State of Sao Paulo.  A decision is now pending on the appeal that the company has filed with the Federal Supreme Court (STF).	15,665
TAM Linhas Aéreas S.A.	Treasury Department of the State of Sao Paulo	4.037.054	Action brought by the Treasury Department of the State of Sao Paulo because of non-payment of the tax on the circulation of merchandise and services (ICMS) in relation to telecommunications services.	Before the Treasury Department of the State of Sao Paulo.  Defensive arguments have been presented.  The first-instance decision sustained all parts of the notice.  We filed an ordinary appeal on which a decision is pending by the Sao Paulo Tax Court.	11,495
TAM Linhas Aéreas S.A.	DERAT SPO  (Delegacía de Receita Federal)	13808.005459/2001-45	Collection of the Social Security Funding Contribution (COFINS) based on gross revenue of the company in the period 1999-2000.	The decision on collection was pending through June 2, 2010.	26,938
Fidelidade Viagens e Turismo S.A.	Administrative Council of  Tax Appeals	19515.002894/2010-81	The lawsuit is about the PIS/COFINS, seeking to add third parties to the basis for calculation.	The Legal Department is handling the case.	10,655

114

Company	Court	Case Number	Origin	Stage of trial	Amounts Committed (*) ThUS$
Pantanal Linhas Aéreas S.A.	Tax Enforcement Court	0253410-30.2012.8.26.0014	A lawsuit seeking enforcement of the fine and ICMS.	A decision is pending on the appeal.	10,655
TAM Linhas Aéreas S.A.	Federal Revenue Bureau	10880.938.664/2016-12	An administrative lawsuit about compensation not being proportional to the negative corporate income tax balance.	A decision is pending by CARF on the appeal.	26,612

- In order to deal with any financial obligations arising from legal proceedings in effect at June 30, 2017, whether civil, tax, or labor, LATAM Airlines Group S.A. and Subsidiaries, has made provisions, which are included in Other non-current provisions that are disclosed in Note 21.

- The Company has not disclosed the individual probability of success for each contingency in order to not negatively affect its outcome.

(*) The Company has reported the amounts involved only for the lawsuits for which a reliable estimation can be made of the financial impacts and of the possibility of any recovery, pursuant to Paragraph 86 of IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

115

II. Governmental Investigations.

1) On July 25, 2016, LATAM reached agreements with the U.S. Department of Justice (“DOJ”) and the U.S. Securities and Exchange Commission (“SEC”) regarding the investigation of payments for US$1,150,000 by Lan Airlines S.A. in 2006-2007 to a consultant advising it in the resolution of labor matters in Argentina.

The purpose of the investigation was to determine whether these payments violated the U.S. Foreign Corrupt Practices Act (“FCPA”) that: (i) forbids bribery of foreign government authorities in order to obtain a commercial advantage; and (ii) requires the companies that must abide by the FCPA to keep appropriate accounting records and implant an adequate internal control system. The FCPA is applicable to LATAM because of its ADR program in effect on the U.S. securities market.

After an exhaustive investigation, the DOJ and SEC concluded that there was no violation of the bribery provisions of the FCPA, which is consistent with the results of LATAM’s internal investigation. However, the DOJ and SEC consider that LAN accounted for these payments incorrectly and, consequently, infringed the part of the FCPA requiring companies to keep accurate accounting records. These authorities also consider that LAN’s internal controls in 2006-2007 were weak, so LAN would have also violated the provisions in the FCPA requiring it to maintain an adequate internal control system.

The agreements signed, included the following:

(a) The agreement with the DOJ involves: (i) entering into a Deferred Prosecution Agreement (“DPA”), which is a public contract under which the DOJ files public charges alleging an infringement of the FCPA accounting regulations. LATAM is not obligated to answer these charges, the DOJ will not pursue them for a period of 3 years, and the DOJ will dismiss the charges after expiration of that 3-year period provided LATAM complies with all terms of the DPA. In exchange, LATAM must admit to the negotiated events described in the DPA and agree to pay the negotiated fine explained below and abide by other terms stipulated in the agreement; (ii) clauses in which LATAM admits that the payments to the consultant in Argentina were incorrectly accounted for and that at the time those payments were made (2006-2007), it did not have adequate internal controls in place; (iii) LATAM’s agreement to have an outside consultant monitor, evaluate and report to the DOJ on the effectiveness of LATAM’s compliance program for a period of 27 months; and LATAM’s agreement to continue evaluating and reporting directly to the DOJ on the effectiveness of its compliance program for a period of 9 months after the consultant’s work concludes; and (iv) paying a fine estimated to total approximately ThUS$ 12,750.

(b) The agreement with the SEC involves: (i) accepting a Cease and Desist Order, which is an administrative resolution of the SEC closing the investigation, in which LATAM will accept certain obligations and statements of fact that are described in the document; (ii) accepting the same obligations regarding the consultant mentioned above; and (iii) paying the sum of ThUS$ 6,744, plus interest of ThUS$ 2,694.

116

Nothing is owed to the SEC at this time as MUS$4,719 was paid in July 2017.

LATAM continued to cooperate with the Chilean authorities on this matter. The investigation continues.

2) LATAM received five Requests for Information from the Central-North Metropolitan Region Legal Division, on October 25, 2016, on November 11, 2016, on March 8, 2017, on March 22, 2017 and the last on July 7, 2017. It requested information related to the investigation of payments made by LAN Airlines in 2006 and 2007 to a consultant who advised it on the resolution of labor matters in Argentina. It also requested an explanation of information provided to the market. The five requests have already been answered and the requested information has been provided.

3) The ecuatorian airline affiliate, LATAM Airlines Ecuador was given notice on August 26, 2016 of an investigation of LATAM Airlines Ecuador and two other airlines begun, at its own initiative, by one of the Investigative Departments of the Ecuadoran Market Power Control Commission, limited to alleged signs of conscious parallelism in relation to specific fares on one domestic route in Ecuador from August 2012 to February 2013. The Investigative Prefecture has 180 days (through February 21, 2017) to issue a report on whether to quash the investigation or file charges against two or more of the parties involved. That period can be extended for another 180 days. A proceeding would begin only if the decision is made to file charges. The Commission extended the term of the investigation for another 180 days (through August 18, 2017)LATAM Airlines Ecuador is cooperating with the authority and has retained a law firm and economist expert in the subject to advise the company during this process and any additional information requested will be furnished.

117

NOTE 32 – COMMITMENTS

(a)Loan covenants

With respect to various loans signed by the Company for the financing of Boeing 767, 767F, 777F and 787 aircraft, which carry the guarantee of the United States Export–Import Bank, limits have been set on some of the Company’s financial indicators on a consolidated basis. Moreover, and related to these same contracts, restrictions are also in place on the Company’s management in terms of its ownership and disposal of assets.

The Company and its subsidiaries do not maintain financial credit contracts with banks in Chile that indicate some limits on financial indicators of the Company or its subsidiaries.

The Revolving Credit Facility ("Revolving Credit Facility") with guaranteed aircraft, engines, spare parts and supplies for a total amount of US $ 375 million includes restrictions of minimum liquidity measured at the level of the Consolidated Company and measured at the individual level For the companies LATAM Airlines Group SA And TAM Linhas Aéreas S.A.

As of June 30, 2017, the Company is in compliance with all the indicators detailed above.

118

(b)Commitments under operating leases as lessee

Details of the main operating leases are as follows:

		As of		As of
		June 30,		December 31,
Lessor	Aircraft	2017		2016
		Unaudited
Aircraft 76B-26329 Inc.	Boeing 767		1		1
Aircraft 76B-27615 Inc.	Boeing 767		-		1
Aircraft 76B-28206 Inc.	Boeing 767		1		1
Aviación Centaurus, A.I.E.	Airbus A319		3		3
Aviación Centaurus, A.I.E.	Airbus A321		1		1
Aviación Real A.I.E.	Airbus A319		1		1
Aviación Real A.I.E.	Airbus A320		1		1
Aviación Tritón A.I.E.	Airbus A319		3		3
Avolon Aerospace AOE 19 Limited	Airbus A320		-		1
Avolon Aerospace AOE 20 Limited	Airbus A320		-		1
Avolon Aerospace AOE 6 Limited	Airbus A320		-		1
Avolon Aerospace AOE 62 Limited	Boeing 777		1		1
AWAS 5234 Trust	Airbus A320		1		1
Baker & Spice Aviation Limited	Airbus A320		1		1
Bank of America	Airbus A321		2		2
Bank of Utah	Boeing 787		1		-
CIT Aerospace International	Airbus A320		2		2
ECAF I 1215 DAC	Airbus A320		-		1
ECAF I 2838 DAC	Airbus A320		1		1
ECAF I 40589 DAC	Boeing 777		1		1
Eden Irish Aircr Leasing MSN 1459	Airbus A320		1		1
GECAS Sverige Aircraft Leasing Worldwide AB	Airbus A320		1		1
GFL Aircraft Leasing Netherlands B.V.	Airbus A320		1		1
IC Airlease One Limited	Airbus A321		1		1
JSA Aircraft 38484, LLC	Boeing 787		1		1
JSA Aircraft 7126, LLC	Airbus A320		1		1
JSA Aircraft 7128, LLC	Airbus A321		1		1
JSA Aircraft 7239, LLC	Airbus A321		1		1
JSA Aircraft 7298, LLC	Airbus A321		1		1
Macquarie Aerospace Finance 5125-2 Trust	Airbus A320		1		1
Macquarie Aerospace Finance 5178 Limited	Airbus A320		1		1
Magix Airlease Limited	Airbus A320		-		1
MASL Sweden (8) AB	Airbus A320		-		1

119

		As of		As of
		June 30,		December 31,
Lessor	Aircraft	2017		2016
		Unaudited
Merlin Aviation Leasing (Ireland) 18 Limited	Airbus A320		1		1
Merlin Aviation Leasing (Ireland) 7 Limited	Airbus A320		1		-
NBB Cuckoo Co., Ltd	Airbus A321		1		1
NBB Grosbeak Co., Ltd	Airbus A321		1		1
NBB Redstart Co. Ltd	Airbus A321		1		1
NBB-6658 Lease Partnership	Airbus A321		1		1
NBB-6670 Lease Partnership	Airbus A321		1		1
Orix Aviation Systems Limited	Airbus A320		5		5
PAAL Aquila Company Limited	Airbus A321		2		2
PAAL Gemini Company Limited	Airbus A321		1		1
SASOF II (J) Aviation Ireland Limited	Airbus A319		-		1
Shenton Aircraft Leasing Limited	Airbus A320		1		1
Sky High XXIV Leasing Company Limited	Airbus A320		5		5
Sky High XXV Leasing Company Limited	Airbus A320		2		2
SMBC Aviation Capital Limited	Airbus A320		5		6
SMBC Aviation Capital Limited	Airbus A321		2		2
TC-CIT Aviation Ireland Limited	Airbus A320		1		1
Volito Aviation August 2007 AB	Airbus A320		2		2
Volito Aviation November 2006 AB	Airbus A320		2		2
Volito November 2006 AB	Airbus A320		2		2
Wells Fargo Bank North National Association	Airbus A319		3		3
Wells Fargo Bank North National Association	Airbus A320		1		2
Wells Fargo Bank Northwest National Association	Airbus A320		6		7
Wells Fargo Bank Northwest National Association	Boeing 767		2		3
Wells Fargo Bank Northwest National Association	Boeing 777		6		6
Wells Fargo Bank Northwest National Association	Boeing 787		11		11
Wells Fargo Bank Northwest National Association	Airbus A350		2		2
Wilmington Trust Company	Airbus A319		1		1
Total			101		111

The rentals are shown in results for the period for which they are incurred.

120

The minimum future lease payments not yet payable are the following:

	As of		As of
	June 30,		December 31,
	2017		2016
	ThUS$		ThUS$
	Unaudited
No later than one year		508,480		533,319
Between one and five years		1,487,008		1,459,362
Over five years		1,238,888		1,262,509
Total		3,234,376		3,255,190

The minimum lease payments charged to income are the following:

	For the 6 months ended				For the 3 months ended
	June 30,				June 30,
	2017		2016		2017		2016
	ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited
Minimum operating lease payments		303,527		272,157		153,131		138,554
Total		303,527		272,157		153,131		138,554

In the first quarter of 2016, two Boeing 787-9 aircraft were leased for a period of twelve years each. On the other hand, two Airbus A320-200 aircraft were returned. In the second quarter of 2016, three aircraft were added Airbus A321-200 for a period of 10 years each and two aircraft Boeing 787-9 for a period of 12 years each. On the other hand, one Airbus A320-200 aircraft and one Boeing 767-300ER aircraft were returned. In the third quarter of 2016, three Airbus A321-200 aircraft and one Airbus A320 NEO aircraft were leased for a period of ten years each, and one Airbus A350-900 aircraft leased for a period of 12 years. On the other hand, one Airbus A320-200 aircraft was returned. In the fourth quarter of 2016, is added a leased A350-900 aircraft for a period of 12 years and an Airbus A321-200 leased aircraft for a period of 10 years. On the other hand, three Airbus A320-200 aircraft and two Airbus A330-200 aircraft were returned.

In the first semester of 2017, a Boeing 787-9 aircraft is added for a period of twelve years. On the other hand, three Airbus A320-200 aircraft and a Boeing 767F Aircraft were returned.

In the second quarter of 2017, one aircraft Airbus A319-100, five aircraft A320-200 and one aircraft B767-300ER.

The operating lease agreements signed by the Company and its subsidiaries state that maintenance of the aircraft should be done according to the manufacturer’s technical instructions and within the margins agreed in the leasing agreements, a cost that must be assumed by the lessee. The lessee should also contract insurance for each aircraft to cover associated risks and the amounts of these assets. Regarding rental payments, these are unrestricted and may not be netted against other accounts receivable or payable between the lessor and lessee.

121

At June 30, 2017 the Company has existing letters of credit related to operating leasing as follows:

			Value		Release
Creditor Guarantee	Debtor	Type	ThUS$		date
GE Capital Aviation Services Limited	Lan Cargo S.A.	Two letter of credit		7,530	Sep 17, 2017
Wells Fargo Bank North N.A.	Lan Cargo S.A.	One letter of credit		5,000	Sep 30, 2017
AerCap	LATAM Airlines Group S.A.	Two letter of credit		7,143	Dec 13, 2017
Bank of America	LATAM Airlines Group S.A.	Three letter of credit		1,044	Jul 2, 2017
Engine Lease Finance Corporation	LATAM Airlines Group S.A.	One letter of credit		4,750	Oct 8, 2017
GE Capital Aviation Services Ltd.	LATAM Airlines Group S.A.	Six letter of credit		22,105	Oct 14, 2017
ICBC	LATAM Airlines Group S.A.	Four letter of credit		2,740	Jan 19, 2018
International Lease Finance Corp	LATAM Airlines Group S.A.	Three letter of credit		1,450	Jan 27, 2018
Bank of Utah	LATAM Airlines Group S.A.	One letter of credit		2,000	Mar 24, 2018
ORIX Aviation Systems Limited	LATAM Airlines Group S.A.	One letter of credit		3,255	Aug 31, 2017
SMBC Aviation Capital Ltd.	LATAM Airlines Group S.A.	Two letter of credit		11,601	Dec 31, 2017
Wells Fargo Bank	LATAM Airlines Group S.A.	Nine letter of credit		15,160	Sep 30, 2017
CIT Aerospace International	Tam Linhas Aéreas S.A.	One letter of credit		6,000	Oct 25, 2017
Wells Fargo Bank North N.A.	Tam Linhas Aéreas S.A.	One letter of credit		5,500	Jul 14, 2017
				95,278

122

(c)   Other commitments

At June 30, 2017 the Company has existing letters of credit, certificates of deposits and warranty insurance policies as follows:

			Value		Release
Creditor Guarantee	Debtor	Type	ThUS$		date
Servicio Nacional de Aduana del Ecuador	Líneas Aéreas Nacionales del Ecuador S.A.	Three letter of credit		1,645	Aug 5, 2017
Corporación Peruana de Aeropuertos y Aviación Comercial	Lan Perú S.A.	Ten letter of credit		1,769	Jul 26, 2017
Lima Airport Partners S.R.L.	Lan Perú S.A.	Twenty-two letter of credit		1,401	Dec 31, 2017
Superintendencia Nacional de Aduanas y de Administración Tributaria	Lan Perú S.A.	Six letter of credit		51,000	Jul 2, 2017
Aena Aeropuertos S.A.	LATAM Airlines Group S.A.	Four letter of credit		2,552	Nov 15, 2017
American Alternative Insurance Corporation	LATAM Airlines Group S.A.	Six letter of credit		3,490	Apr 5, 2018
Comisión Europea	LATAM Airlines Group S.A.	One letter of credit		8,956	Jun 16, 2018
Deutsche Bank A.G.	LATAM Airlines Group S.A.	One letter of credit		15,000	Mar 31, 2018
Dirección General de Aeronáutica Civil	LATAM Airlines Group S.A.	Fifty four letter of credit		19,058	Aug 22, 2017
Empresa Pública de Hidrocarburos del Ecuador EP Petroecuador	LATAM Airlines Group S.A.	One letter of credit		5,500	Jun 18, 2018
Metropolitan Dade County	LATAM Airlines Group S.A.	Nine letter of credit		2,521	Aug 14, 2017
4ª Vara Mista de Bayeux	Tam Linhas Aéreas S.A.	One insurance policies guarantee		1,044	Mar 25, 2021
6ª Vara Federal da Subseção	Tam Linhas Aéreas S.A.	Two insurance policies guarantee		24,598	Jan 4, 2018
8ª Vara Federal da Subseção de Campinas SP	Tam Linhas Aéreas S.A.	One insurance policies guarantee		12,703	May 19, 2020
Conselho Administrativo de Conselhos Federais	Tam Linhas Aéreas S.A.	One insurance policies guarantee		6,604	Oct 20, 2021
Fundação de Proteão de Defesa do
Consumidor Procon	Tam Linhas Aéreas S.A.	One insurance policies guarantee		1,584	Apr 1, 2021
União Federal Vara Comarca de DF	Tam Linhas Aéreas S.A.	One insurance policies guarantee		1,105	Nov 9, 2020
União Federal Vara Comarca de DF	Tam Linhas Aéreas S.A.	One insurance policies guarantee		1,551	Sep 28, 2021
União Federal Vara Comarca de SP	Tam Linhas Aéreas S.A.	One insurance policies guarantee		19,267	Feb 22, 2021
				181,348

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NOTE 33 - TRANSACTIONS WITH RELATED PARTIES

(a)Details of transactions with related parties as follows:

						Transaction amount
		Nature of		Nature of		with related parties
		relationship with	Country	related parties		As of June 30,
Tax No.	Related party	related parties	of origin	transactions	Currency	2017			2016
						ThUS$			ThUS$
						Unaudited
96.810.370-9	Inversiones Costa Verde Ltda. y CPA.	Related director	Chile	Tickets sales	CLP		15			1
65.216.000-K	Comunidad Mujer	Related director	Chile	Tickets sales	CLP		10			5
				Services received from advertising	CLP		-			(12	)
78.591.370-1	Bethia S.A and subsidiaries	Related director	Chile	Cargo transportation services	CLP		913			1,103
				Services received from national and international Courier	CLP		(183	)		(449	)
				Services received from cargo transportation	CLP		(76	)		(527	)
78.997.060-2	Viajes Falabella Ltda.	Related director	Chile	Sales commissions	CLP		(238	)		(367	)
79.773.440-3	Transportes San Felipe S.A	Common property	Chile	Services received of transfer of passengers	CLP		-			(57	)
				Services provided	CLP		1			-
87.752.000-5	Granja Marina Tornagaleones S.A.	Common shareholder	Chile	Income from services rendered	CLP		50			47
Foreign	Consultoría Administrativa Profesional S.A. de C.V.	Associate	Mexico	Professional counseling services received	MXN		(1,108	)		(1,246	)
Foreign	Inversora Aeronáutica Argentina S.A.	Related director	Argentina	Leases of real estate received	ThUS$		(134	)		(134	)
Foreign	TAM Aviação Executiva e Taxi Aéreo S/A	Related director	Brazil	Services provided	BRL		2			12
				Services received	BRL		(23	)		(69	)
Foreign	Qatar Airways	Indirect Shareholder	Qatar	Aircraft rental services	ThUS$		10,620			-
				Services received interlinear	ThUS$		(7,975	)		-
				Services provided interlinear	ThUS$		7,666			-
				Services provided Handling	ThUS$		354			-

124

The balances of Accounts receivable and accounts payable to related parties are disclosed in Note 9.

Transactions between related parties have been carried out on free-trade conditions between interested and duly-informed parties.

(b)Compensation of key management

The Company has defined for these purposes that key management personnel are the executives who define the Company’s policies and major guidelines and who directly affect the results of the business, considering the levels of Vice-Presidents, Chief Executives and Directors (Senior).

	For the 6 months ended				For the 3 months ended
	June 30,				June 30,
	2017		2016		2017		2016
	ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited
Remuneration		10,911		8,908		5,417		4,264
Management fees		194		246		120		180
Non-monetary benefits		439		414		220		283
Short-term benefits		21,824		15,054		11,181		4,447
Share-based payments		5,637		2,988		2,029		1,494
Total		39,005		27,610		18,967		10,668

NOTE 34 - SHARE-BASED PAYMENTS

(a)Compensation plan for increase of capital

Compensation plans implemented by providing options for the subscription and payment of shares that have been granted by LATAM Airlines Group S.A. to employees of the Company and its subsidiaries, are recognized in the financial statements in accordance with the provisions of IFRS 2 "Share-based Payment”, showing the effect of the fair value of the options granted under compensation in linear between the date of grant of such options and the date on which these irrevocable.

(a.1)Compensation plan 2011

On December 21, 2016, the subscription and payment period of the 4,800,000 shares corresponding to the compensation plan approved at the Extraordinary Shareholders' Meeting held on December 21, 2011, expired.

Of the total shares allocated to the 2011 Compensation Plan, only 10,282 shares were subscribed and paid, having been placed on the market in January 2014. In view of the above, at the expiration date, the 2011 Compensation Plan had a balance of 4,789,718 shares pending of subscription and payment, which was deducted from the authorized capital of the Company.

125

	Number of Stock Options
	In share-based payment arrangements
			Options			Expired
	Opening		waived by			Action			Closing
Periods	balance		executives			Options			Balance
From January 1 to June 30, 2016 (Unaudited)		4,518,000		-			-			4,518,000
From 1 July to 31 December 2016		4,518,000		(4,172,000	)		(346,000	)		-
From January 1 to June 30, 2017 (Unaudited)		-		-			-			-

These options was valued and recorded at fair value at the grant date, determined by the "Black-Scholes-Merton”. No result has been recognized as of June 2017 (ThUS$ 2,989 at December 31, 2016).

(a.2)Compensation plan 2013

At the Extraordinary Shareholders’ Meeting held on June 11, 2013, the Company’s shareholders approved motions including increasing corporate equity, of which 1,500,000 shares were allocated to compensation plans for employees of the Company and its subsidiaries, in conformity with the stipulations established in Article 24 of the Corporations Law. With regard to this compensation, a defined date for implementation does not exist.

(b)Compensation plan 2016-2018

The company implemented a retention plan long-term for executives, which lasts until December 2018, with a vesting period between October 2018 and March 2019, which consists of an extraordinary bonus whose calculation formula is based on the variation the value to experience the action of LATAM Airlines Group S.A. for a period of time.

This benefit is recognized in accordance with the provisions of IFRS 2 "Share-based Payments" and has been considered as cash settled award and therefore recorded at fair value as a liability, which is updated to the closing date of each financial statement with effect on profit or loss.

	Base Units
	Opening										Closing
Periods	balance		Granted		Annulled			Exercised			Balance
From January 1 to December 31, 2016		4,719,720		-		-			-			4,719,720
From January 1 to June 30, 2017 (Unaudited)		4,719,720		37,359		(91,056	)		(515,480	)		4,150,543

The fair value has been determined on the basis of the best estimate of the future value of the Company share multiplied by the number of units granted bases.

At June 30, 2017, the carrying amount of ThUS$ 5,637, is classified under "Administrative expenses" in the Consolidated Statement of Income by Function.

126

(c)Subsidiaries compensation plans

(c.1)Stock Options

Multiplus S.A., subsidiaries of TAM S.A., have outstanding stock options at June 30, 2017, which amounted to 326,173 shares (at December 31, 2016, the distribution of outstanding stock options amounted to 394,698 for Multiplus S.A.).

Multiplus S.A.
					4nd Extraordinary
	3rd Grant		4th Grant		Grant
Description	03/21/2012		04/03/2013		11/20/2013		Total
Outstanding option number as December 31, 2016		84,249		173,399		137,050		394,698
Outstanding option number as June 30, 2017 (Unaudited)		84,249		173,399		68,525		326,173

For Multiplus S.A., the plan's terms provide that the options granted to the usual prizes are divided into three equal parts and employees may exercise one-third of their two, three and four, options respectively, as long as they keep being employees of the company. The agreed term of the options is seven years after the grant of the option. The first extraordinary granting was divided into two equal parts, and only half of the options may be exercised after three years and half after four years. The second extraordinary granting was also divided into two equal parts, which may be exercised after one and two years respectively.

The acquisition of the share's rights, in both companies is as follows:

	Number of shares				Number of shares
	Accrued options				Non accrued options
	As of		As of		As of		As of
	June 30,		December 31,		June 30,		December 31,
Company	2017		2016		2017		2016
	Unaudited				Unaudited
Multiplus S.A.		-		-		326,173		394,698

In accordance with IFRS 2 - Share-based payments, the fair value of the option must be recalculated and recorded as a liability of the Company once payment is made in cash (cash-settled). The fair value of these options was calculated using the “Black-Scholes-Merton” method, where the cases were updated with information LATAM Airlines Group S.A. There is no value recorded in liabilities and in income at June 30, 2017 (at December 31, 2016 not exist value recorded in liabilities and in incomes).

(c.2)Payments based on restricted stock

In May of 2014 the Management Council of Multiplus S.A. approved a plan to grant restricted stock, a total of 91,103 ordinary, registered book entry securities with no face value, issued by the Company to beneficiaries.

127

The quantity of restricted stock units was calculated based on employees’ expected remunerations divided by the average price of shares in Multiplus S.A. traded on the BM&F Bovespa exchange in the month prior to issue, April of 2014. This benefits plan will only grant beneficiaries the right to the restricted stock when the following conditions have been met:

a.          Compliance with the performance goal defined by this Council as return on Capital Invested.

b.          The Beneficiary must remain as an administrator or employee of the Company for the period running from the date of issue to the following dates described, in order to obtain rights over the following fractions: (i) 1/3 (one third) after the 2nd year from the issue date; (ii) 1/3 (one third) after the 3rd year from the issue date; (iii) 1/3 (one third) after the 4th year from the issue date.

Number shares in circulation

								Not acquired due
	Opening							to breach of employment			Closing
	balance		Granted		Exercised			retention conditions			balance
From January 1 to December 31, 2016		175,910		138,282		(29,840	)		(60,525	)		223,827
From January 1 to June 30, 2017 (Unaudited)		223,827		129,218		(27,772	)		(7,668	)		317,605

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NOTE 35 - STATEMENT OF CASH FLOWS

(a)       The Company has done significant non-cash transactions mainly with financial leases, which are detailed in Note 17 letter (d), additional information in numeral (iv) Financial leases.

(b)       Other inflows (outflows) of cash:

	For the periods ended
	June 30,
	2017			2016
	ThUS$			ThUS$
	Unaudited
Fuel hedge		15,269			(33,208	)
Return of vale vista		110			3,470
Tax paid on bank transaction		(2,028	)		(4,180	)
Fuel derivatives premiums		(2,832	)		(4,529	)
Hedging margin guarantees		(3,658	)		(4,195	)
Guarantees		(9,498	)		4,581
Bank commissions, taxes paid and other		(2,862	)		(2,754	)
Currency hedge		(7,245	)		(10,496	)
Change reservation systems		(16,120	)		-
Court deposits		(13,104	)		(16,836	)
Total Other inflows (outflows) Operation flow		(41,968	)		(68,147	)
Tax paid on bank transaction		(1,971	)		(2,056	)
Others		388			-
Total Other inflows (outflows) Investment flow		(1,583	)		(2,056	)
Loan guarantee		79,051			-
Aircraft Financing advances		13,107			(151,363	)
Settlement of derivative contracts		(20,436	)		(14,027	)
Total Other inflows (outflows) Financing flow		71,722			(165,390	)

(c)Dividends:

	For the periods ended
	June 30,
	2017			2016
	ThUS$			ThUS$
	Unaudited
LATAM Airlines Group S.A.		(20,766	)		-
Multiplus S.A. (*)		(22,628	)		(19,399	)
Lan Perú S.A. (*)		-			(400	)
Total Dividends Paid		(43,394	)		(19,799	)

(*) Dividends paid to minority shareholders

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d)Reconciliation of liabilities arising from financing activities:

	As of		Cash flows								Non-Flow Movements					As of
Obligations with	December 31,		Obtainment		Payment						Interest accrued					June 30,
financial institutions	2016		Capital		Capital			Interest			and others		Reclassifications			2017
	ThUS$		ThUS$		ThUS$			ThUS$			ThUS$		ThUS$			ThUS$
																Unaudited
Loans to exporters		278,164		100,000		(99,863	)		(3,953	)		5,283		-			279,631
Bank loans		585,287		29,133		(107,023	)		(12,312	)		15,759		-			510,844
Guaranteed obligations		4,758,552		181,865		(239,530	)		(74,814	)		75,849		(418,162	)		4,283,760
Other guaranteed obligations		256,420		-		124			(4,342	)		4,730		355			257,287
Obligation with the public		1,309,345		697,750		(299,388	)		(50,908	)		56,766		-			1,713,565
Financial leases		1,022,361		-		(160,247	)		(24,034	)		23,608		417,807			1,279,495
Other loans		394,791		13,107		(40,520	)		(11,502	)		11,842		-			367,718
Total Obligations with financial institutions		8,604,920		1,021,855		(946,447	)		(181,865	)		193,837		-			8,692,300

NOTE 36 - THE ENVIRONMENT

LATAM Airlines Group S.A. manages environmental issues at the corporate level, centralized in Environmental Management. There is a commitment to the highest level to monitor the company and minimize their impact on the environment, where continuous improvement and contribute to the solution of global climate change problems, generating added value to the company and the region, are the pillars of his administration.

One function of Environmental Management, in conjunction with the various areas of the Company, is to ensure environmental compliance, implementing a management system and environmental programs that meet the increasingly demanding requirements globally; well as continuous improvement programs in their internal processes that generate environmental and economic benefits and to join the currently completed.

The Environment Strategy LATAM Airlines Group S.A. is called Climate Change Strategy and it is based on the aim of being a world leader in Climate Change and Eco-efficiency, which is implemented under the following pillars:

i. Carbon Footprint

ii. Eco-Efficiency

iii. Sustainable Alternative Energy

iv. Standards and Certifications

For 2017, were established the following topics:

1. Advance in the implementation of an Environmental Management System;

2. Manage the Carbon Footprint of our emissions by ground operations;

3. Corporate Risk Management;

4. Corporate strategy to meet the global target of aviation to have a carbon neutral growth by 2020.

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Thus, during 2017, we have worked in the following initiatives:

- Advance in the implementation of an Environmental Management System for main operations of the Company, with an emphasis on Santiago. It is highlighted that the company during 2016 has recertified a certified management system, under ISO 14.001 at its facility in Miami.

- Certification of stage 2 of IATA Environmental Assestment (IEnvA), the most advanced of this certification, been the third airline in the world to achieve this certification.

- Preparation of the environmental chapter for reporting sustainability of the Company, to measure progress on environmental issues.

- Answer to the Dow Jones Sustainability Index 2016 questionnaire, which the company responds annually.

- Measurement and external verification of the Corporate Carbon Footprint.

It is highlighted that in the 2016 LATAM Airlines Group maintained its selection in the index Dow Jones Sustainability in the global category, being the only two airlines that belong to this select group.

NOTE 37 - EVENTS SUBSEQUENT TO THE DATE OF THE FINANCIAL STATEMENTS

On July 28, 2017, in accordance with the provisions of Articles 9 and 10 of Law No. 18,045 on Securities Market, and in General Rule No. 30 of the Securities and Insurance Commission (the "SVS"), the undersigned, duly authorized for the purpose as agreed at the extraordinary session of Directory No. 128 (the "Board Session") of LATAM Airlines Group S.A. ("LATAM") held on April 21, 2017, reports the following material fact regarding LATAM, its businesses, its public offering values or the offer of them, as applicable, the following:

On this date TAM Capital 3 Inc., a company indirectly controlled by TAM S.A. through its subsidiary TAM Linhas Aereas S.A., which consolidates its financial statements with LATAM, has announced the total anticipated redemption of the bonds placed abroad on June 3, 2011, for an amount of 500 million dollars of the United States of America at a rate of 8.375% and with a maturity date of June 3, 2021.

Also, as agreed at the Board Session, LATAM will place, within the next few days in the local market (Santiago Stock Exchange), the Series A Bonds (BLATM-A), Series B (BLATM- B), Series C (BLATM-C) and Series D (BLATM-D), which correspond to the first bond issuance charged to the line registered in the Securities Registry of the SVS under the number N° 862 for a total amount of UF 9,000,000.

The total amount of the Series A Bond will be UF 2,500,000. The total amount of the Series B Bond will be UF 2,500,000. The total amount of the Series C Bond will be UF 1,850,000 and the total amount of the Series D Bond will be UF 1,850,000, totaling UF 8,700,000.

The Series A Bonds will have a maturity date of June 1, 2022 and an interest rate of 5.25% per year. The Series B Bonds will have a maturity date of January 1, 2028 and an interest rate of 5.75% per year. The Series C Bonds will have a maturity date of June 1, 2022 and an interest rate of 5.25% per year, and the Series D Bonds will have a maturity date of January 1, 2028 and an interest rate of 5.75% % per year.

131

The proceeds from the placement of the Series A, Series B, Series C and Series D Bonds will be used entirely for the partial financing of the early redemption of the total of the TAM Capital 3 Inc. bonds described above.

On August 17, 2017, LATAM placed the Series A, Series B, Series C and Series D Bonds described above.

Subsequent at June 30, 2017 until the date of issuance of these financial statements, there is no knowledge of financial facts or otherwise, that could significantly affect the balances or interpretation thereof.

The consolidated financial statements of LATAM Airlines Group S.A. And Subsidiaries as of June 30, 2017, have been approved in the Extraordinary Session of the Board of Directors of August 17, 2017.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date:  August 18, 2017	LATAM AIRLINES GROUP S.A.
	By:	/s/ Enrique Cueto
	Name:	Enrique Cueto
	Title:	Latam Airlines Group CEO