LATAM Airlines : reports operating income of US$17 million in the second quarter 2015

Highlights

· The second quarter of 2015 marks the third anniversary of the association between LAN and TAM, a historic milestone for our companies and a strategic decision that placed us at the forefront of the aviation industry in Latin America. With significant achievements during this year, including cost efficiencies on multiple fronts, the negotiation of our Passenger Service System and the announcement of our new unified brand, we continue to make progress towards our long term objective of consolidating LATAM's leadership position within the region. However, we have not been immune to the challenging macroeconomic conditions that have affected South American economies, especially Brazil, and which have led us to make certain adjustments. These adjustments, including capacity reductions in the Brazilian domestic market, are a necessary response to the current challenges but in no way alter our long term strategic plans. We firmly believe that, with the best and most diversified network, LATAM Airlines Group is the best positioned airline to respond to a weaker macroeconomic scenario in South America, a position we continue to strengthen through cost efficiencies, enhancement of our key hubs and consistently providing the best experience to our passengers.

· LATAM Airlines Group reported operating income of US$17.2 million with an operating margin of 0.7% for second quarter 2015, an increase of 0.2 percentage points as compared to the second quarter 2014. This result was driven by a strong 20.7% reduction in the Company's cost per ASK equivalent, including the effect of lower fuel prices. Excluding fuel, cost per ASK equivalent decreased by 13.8%, reflecting efficiencies related to our already announced cost savings plan, as well as the effect of local currency depreciations on our costs denominated in those currencies.

· Total revenues during the second quarter 2015 declined by 20.8%, reflecting a weak macroeconomic environment in Brazil and significant devaluations of Latin American currencies. The challen ging economic scenario in Brazil, caused by an increase in inflation, GDP decline -estimated between 1.5% to 2.0% for 2015- and a significant depreciation of the Brazilian real versus the U.S. dollar, has resulted in a slowdown in demand for domestic and international passenger operations, as well as cargo operations.

· Passenger and cargo demand in all of the Group's operations outside of Brazil, including its affiliates domestic operations in the Spanish Speaking Countries and international operations throughout LATAM's network outside of Brazil, has generally proved resilient to local currency devaluations. As a result, and in addition to cost efficiencies, profitability in all these operations shows positive trends as compared to 2014.

· Considering the impact of the current economic scenario in Brazil, TAM is adjusting its domestic network and reducing domestic capacity by approximately 8% to 10% by year-end. As a result, the Company has revised its capacity (ASK) growth for this year for the domestic market in Brazil from 0% growth to a contraction of 2 to 4% as compared to 2014. This adjustment in no the way affects the Company's long-term strategy, which includes the feasibility study for the Northeastern hub and the continuous strengthening of our hubs in Brasília and São Paulo/Guarulhos.

· Furthermore , LATAM Airlines Group is reviewing its fleet plan and fleet requirements for the coming years, and is currently evaluating whether to postpone a number of wide body passenger aircraft currently scheduled for delivery in 2017 and 2018, as well as to sublease at least one freighter aircraft.

· During the second quarter 2015, LATAM Airlines Group completed two significant financial transactions through which we raised a total of US$1.5 billion. With this, we have completed approximately 57% of our fleet financing requirements for 2016, and strengthened our debt profile and financial position. As of June 30, 2015, the Company has US$1.6 billion in cash and cash and equivalents, and has reduced its net leverage to 5.1x.

· On August 6, LATAM Airlines Group took an important step towards enhancing our value proposition by announcing the union of our brands under one name: "LATAM". The new brand will be implemented over a three year period, gradually becoming visible starting in 2016, and will allow us to offer an improved, consistent service throughout our network, which in turn strengthens our position in the region.

· LATAM continues to work on enhancing its passenger experience by providing better service before and during the flight. As of the end of the quarter, the Company had installed Wireless entertainment system for personal devices in 68 single-aisle airplanes, and we expect to complete the implementation in all of our narrow body fleet by the first quarter 2016. Regarding ground services, the Company is unifying check-in counters between LAN and TAM, and is also testing a Self-Bag Tag service at the Guarulhos and Brasilia airports, expecting to implement this service at other main airports of our network by 2016. In addition, we are improving our contingency channels such as Live Chat and Flight Status.

· The Company ended the quarter with 88.9% of its flights on time, increasing 4.8 p.p. as compared to the same quarter of last year. These record punctuality indicators, together with the optimization of our fleet, renewed cabin design and harmonization of processes and services, have resulted in a renewed customer experience and have led LAN and TAM to be recognized for the seventh consecutive year as the leaders in the World Airline Survey in the categories "Best Airline in South America" and "Best Service in South America". This survey is considered the main reference for satisfaction levels for the industry globally.

· In line with LATAM's focus on creating the best connectivity within, to and from South America, during the second quarter 2015 the Company launched a new service from Lima to Orlando, from Brasilia to Orlando, from Brasilia to Buenos Aires and from New York to Toronto, as a continuation of its flight from Guarulhos to New York. In addition, in November 2015, LAN will launch a daily flight between Santiago de Chile and Milan (via Sao Paulo) operated with the new Boeing 787 and TAM will launch a new service from Guarulhos to Barcelona. The Company will also launch operations from Antofagasta, Chile, and from Montevideo, Uruguay to Lima, Peru in December 2015 and January 2016, respectively.