6-K 1 s104646_6k.htm 6-K

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 14, 2016

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

SEPTEMBER 30, 2016

CONTENTS

Interim Consolidated Statement of Financial Position	F-1
Interim Consolidated Statement of Income by Function	F-3
Interim Consolidated Statement of Comprehensive Income	F-4
Interim Consolidated Statement of Changes in Equity	F-5
Interim Consolidated Statement of Cash Flows - Direct Method	F-7
Notes to Interim the Consolidated Financial Statements

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	32
3.3. Estimates of fair value	32
4 - Accounting estimates and judgments	36
5 - Segmental information	39
6 - Cash and cash equivalents	42
7 - Financial instruments	44
7.1. Financial instruments by category	44
7.2. Financial instruments by currency	46
8 - Trade, other accounts receivable and non-current accounts receivable	47
9 - Accounts receivable from/payable to related entities	50
10 - Inventories	51
11 - Other financial assets	51
12 - Other non-financial assets	52
13 - Non-current assets and disposal group classified as held for sale	53
14 - Investments in subsidiaries	53

15 - Intangible assets other than goodwill	56
16 - Goodwill	57
17 - Property, plant and equipment	60
18 - Current and deferred tax	66
19 - Other financial liabilities	72
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	92
27 - Costs and expenses by nature	92
28 - Other income, by function	94
29 - Foreign currency and exchange rate differences	94
30 - Earnings per share	103
31 - Contingencies	104
32 - Commitments	112
33 - Transactions with related parties	117
34 - Share based payments	118
35 - Statement of cash flows	123
36 - The environment	124
37 - Events subsequent to the date of the financial statements	125

LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION

ASSETS

		As of		As of
		September 30,		December 31,
	Note	2016		2015
		ThUS$		ThUS$
		Unaudited
Current assets
Cash and cash equivalents	6 - 7		708,376		753,497
Other financial assets	7 - 11		697,739		651,348
Other non-financial assets	12		289,036		330,016
Trade and other accounts receivable	7 - 8		916,124		796,974
Accounts receivable from related entities	7 - 9		498		183
Inventories	10		222,814		224,908
Tax assets	18		74,572		64,015

Total current assets other than non-current assets (or disposal groups) classified as held for sale or as held for distribution to owners			2,909,159		2,820,941

Non-current assets (or disposal groups) classified as held for sale or as held for distribution to owners	13		40,786		1,960


Total current assets			2,949,945		2,822,901

Non-current assets
Other financial assets	7 - 11		104,777		89,458
Other non-financial assets	12		331,539		235,463
Accounts receivable	7 - 8		8,940		10,715
Intangible assets other than goodwill	15		1,606,451		1,321,425
Goodwill	16		2,723,629		2,280,575
Property, plant and equipment	17		10,899,582		10,938,657
Tax assets	18		25,629		25,629
Deferred tax assets	18		389,666		376,595
Total non-current assets			16,090,213		15,278,517
Total assets			19,040,158		18,101,418

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

F-1

LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION

LIABILITIES AND EQUITY

		As of			As of
		September 30,			December 31,
LIABILITIES	Note	2016			2015
		ThUS$			ThUS$
		Unaudited
Current liabilities
Other financial liabilities	7 - 19		1,877,987			1,644,235
Trade and other accounts payables	7 - 20		1,539,219			1,483,957
Accounts payable to related entities	7 - 9		232			447
Other provisions	21		2,465			2,922
Tax liabilities	18		31,735			19,378
Other non-financial liabilities	22		2,602,206			2,490,033
Total current liabilities			6,053,844			5,640,972

Non-current liabilities
Other financial liabilities	7 - 19		7,234,727			7,532,385
Accounts payable	7 - 24		387,208			417,050
Other provisions	21		515,747			424,497
Deferred tax liabilities	18		958,744			811,565
Employee benefits	23		77,677			65,271
Other non-financial liabilities	22		271,127			272,130
Total non-current liabilities			9,445,230			9,522,898
Total liabilities			15,499,074			15,163,870

EQUITY
Share capital	25		2,541,068			2,545,705
Retained earnings	25		328,070			317,950
Treasury Shares	25		(178	)		(178	)
Other reserves			583,047			(6,942	)
Parent's ownership interest			3,452,007			2,856,535
Non-controlling interest	14		89,077			81,013
Total equity			3,541,084			2,937,548
Total liabilities and equity			19,040,158			18,101,418

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

F-2

LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENT OF INCOME BY FUNCTION

		For the 9 months ended						For the 3 months ended
		September 30,						September 30,
	Note	2016			2015			2016			2015
		ThUS$			ThUS$			ThUS$			ThUS$
		Unaudited

Revenue	26		6,566,882			7,428,919			2,365,901			2,423,464
Cost of sales			(5,154,915	)		(5,868,748	)		(1,824,809	)		(1,905,681	)
Gross margin			1,411,967			1,560,171			541,092			517,783
Other income	28		390,894			289,899			153,625			91,358
Distribution costs			(552,057	)		(588,130	)		(195,557	)		(199,224	)
Administrative expenses			(557,655	)		(658,154	)		(230,827	)		(192,383	)
Other expenses			(321,222	)		(247,846	)		(116,016	)		(97,136	)
Other gains/(losses)			(3,202	)		10,254			9,219			10,636
Income from operation activities			368,725			366,194			161,536			131,034
Financial income			53,147			64,590			21,729			32,706
Financial costs	27		(310,563	)		(313,492	)		(103,931	)		(107,909	)
Share of profit of investments accounted for using the equity method			-			37			-			-
Foreign exchange gains/(losses)	29		132,814			(410,755	)		(10,594	)		(241,533	)
Result of indexation units			309			485			25			9
Income (loss) before taxes			244,432			(292,941	)		68,765			(185,693	)
Income (loss) tax expense / benefit	18		(197,340	)		119,157			(52,441	)		82,204

NET INCOME (LOSS) FOR THE PERIOD			47,092			(173,784	)		16,324			(103,489	)

Income (loss) attributable to owners of the parent			14,875			(203,018	)		4,742			(113,344	)
Income (loss) attributable to non-controlling interest	14		32,217			29,234			11,582			9,855

Net income (loss) for the year			47,092			(173,784	)		16,324			(103,489	)

EARNINGS PER SHARE
Basic earnings (losses) per share (US$)	30		0.02727			(0.37214	)		0.00869			(0.20776	)
Diluted earnings (losses) per share (US$)	30		0.02727			(0.37214	)		0.00869			(0.20776	)

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

F-3

LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		For the 9 months ended						For the 3 months ended
		September 30,						September 30,
	Note	2016			2015			2016			2015
		ThUS$			ThUS$			ThUS$			ThUS$
		Unaudited

NET INCOME (LOSS)			47,092			(173,784	)		16,324			(103,489	)
Components of other comprehensive income that will not be reclassified to income before taxes

Other comprehensive income, before taxes, gain (losses) by remeasurements of post employment benefit obligations	25		(1,418	)		-			(149	)		-

Total other comprehensive income that will not be reclassified to income before taxes			(1,418	)		-			(149	)		-

Components of other comprehensive income that will be reclassified to income before taxes

Currency translation differences
Gains (losses) on currency translation, before tax	29		516,548			(1,437,025	)		(32,514	)		(776,941	)
Other comprehensive income, before taxes, currency translation differences			516,548			(1,437,025	)		(32,514	)		(776,941	)

Cash flow hedges
Gains (losses) on cash flow hedges before taxes	19		101,123			110,051			39,586			(22,452	)
Other comprehensive income (losses), before taxes, cash flow hedges			101,123			110,051			39,586			(22,452	)

Total other comprehensive income that will be reclassified to income before taxes			617,671			(1,326,974	)		7,072			(799,393	)

Other components of other comprehensive income (loss), before taxes			616,253			(1,326,974	)		6,923			(799,393	)

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		427			-			44			-
Accumulate income tax relating to other comprehensive income that will not be reclassified to income			427			-			44			-
Income tax relating to other comprehensive income that will be reclassified to income
Income tax related to cash flow hedges in other comprehensive income			(27,608	)		(28,143	)		(10,668	)		8,252
Income taxes related to components of other comprehensive incomethat will be reclassified to income			(27,608	)		(28,143	)		(10,668	)		8,252
Total Other comprehensive income			589,072			(1,355,117	)		(3,701	)		(791,141	)
Total comprehensive income (loss)			636,164			(1,528,901	)		12,623			(894,630	)
Comprehensive income (loss) attributable to owners of the parent			596,431			(1,537,542	)		2,368			(889,310	)
Comprehensive income (loss) attributable to non-controlling interests			39,733			8,641			10,255			(5,320	)
TOTAL COMPREHENSIVE INCOME (LOSS)			636,164			(1,528,901	)		12,623			(894,630	)

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

F-4

LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

		Attributable to owners of the parent
								Change in other reserves

								Currency			Cash flow			Actuarial gains or losses			Shares based		Other		Total						Parent's			Non-
		Share			Treasury			translation			hedging			on defined 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		-			-			-			-			-			-		-		-			14,875			14,875			32,217			47,092
Other comprehensive income			-			-		509,728				72,819			(991	)		-		-		581,556			-			581,556			7,516			589,072
Total comprehensive income			-			-		509,728				72,819			(991	)		-		-		581,556			14,875			596,431			39,733			636,164
Transactions with shareholders
Dividens	25		-			-			-			-			-			-		-		-			(4,463	)		(4,463	)		-			(4,463	)
Increase (decrease) through transfers and other changes, equity	25-34		(4,637	)		-		-				-			-			2,740		5,693		8,433			(292	)		3,504			(31,669	)		(28,165	)
Total transactions with shareholders			(4,637	)		-		-				-			-			2,740		5,693		8,433			(4,755	)		(959	)		(31,669	)		(32,628	)

Closing balance as of September 30, 2016 (Unaudited)			2,541,068			(178	)	(2,066,313		)		(17,691	)		(11,708	)		38,387		2,640,372		583,047			328,070			3,452,007			89,077			3,541,084

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

F-5

LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

			Attributable to owners of the parent
							Change in other reserves

							Currency			Cash flow			Shares based		Other		Total						Parent's			Non-
		Share		Treasury			translation			hedging			payments		sundry		other			Retained			ownership			controlling			Total
	Note	capital		shares			reserve			reserve			reserve		reserve		reserve			earnings			interest			interest			equity
		ThUS$		ThUS$			ThUS$			ThUS$			ThUS$		ThUS$		ThUS$			ThUS$			ThUS$			ThUS$			ThUS$

Equity as of January 1, 2015			2,545,705		(178	)		(1,193,871	)		(151,340	)		29,642		2,635,748		1,320,179			536,190			4,401,896			101,799			4,503,695
Total increase (decrease) in equity
Comprehensive income Gain (losses)	25		-		-			-			-			-		-		-			(203,018	)		(203,018	)		29,234			(173,784	)
Other comprehensive income			-		-			(1,418,037	)		83,513			-		-		(1,334,524	)		-			(1,334,524	)		(20,593	)		(1,355,117	)
Total comprehensive income			-		-			(1,418,037	)		83,513			-		-		(1,334,524	)		(203,018	)		(1,537,542	)		8,641			(1,528,901	)
Transactions with shareholders
Increase (decrease) through transfers and other changes, equity	25-34		-		-			-			-			3,809		4,250		8,059			1,564			9,623			(31,762	)		(22,139	)
Total transactions with shareholders			-		-			-			-			3,809		4,250		8,059			1,564			9,623			(31,762	)		(22,139	)

Closing balance as of September 30, 2015 (Unaudited)			2,545,705		(178	)		(2,611,908	)		(67,827	)		33,451		2,639,998		(6,286	)		334,736			2,873,977			78,678			2,952,655

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

F-6

LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS DIRECT – METHOD

		For the periods ended
		September 30,
	Note	2016			2015
		ThUS$			ThUS$
		Unaudited

Cash flows from operating activities
Cash collection from operating activities
Proceeds from sales of goods and services			7,284,896			8,546,230
Other cash receipts from operating activities			50,859			69,853
Payments for operating activities
Payments to suppliers for goods and services			(4,895,792	)		(5,316,193	)
Payments to and on behalf of employees			(1,525,978	)		(1,669,876	)
Other payments for operating activities			(130,113	)		(231,010	)
Interest received			8,228			34,465
Income taxes refunded (paid)			(47,483	)		(30,077	)
Other cash inflows (outflows)	35		(126,740	)		(191,865	)
Net cash flows from operating activities			617,877			1,211,527

Cash flows used in investing activities
Other cash receipts from sales of equity or debt instruments of other entities			2,291,190			273,390
Other payments to acquire equity or debt instruments of other entities			(2,167,634	)		(348,301	)
Amounts raised from sale of property, plant and equipment			73,096			45,016
Purchases of property, plant and equipment			(522,454	)		(886,475	)
Amounts raised from sale of intangible assets			4			104
Purchases of intangible assets			(61,454	)		(13,357	)
Other cash inflows (outflows)	35		(3,308	)		15,301
Net cash flow from (used in) investing activities			(390,560	)		(914,322	)

Cash flows from (used in) financing activities
Payments to acquire or redeem the shares of the entity			-			-
Amounts raised from long-term loans			1,655,987			1,161,306
Amounts raised from short-term loans			230,000			115,000
Loans repayments			(1,501,913	)		(949,875	)
Payments of finance lease liabilities			(229,927	)		(241,778	)
Dividends paid
Dividends paid			(30,687	)		(25,683	)
Interest paid			(282,312	)		(237,148	)
Other cash inflows (outflows)	35		(170,667	)		(33,600	)

Net cash flows from (used in) financing activities			(329,519	)		(211,778	)

Net increase (decrease) in cash and cash equivalents before effect of exchanges rate change			(102,202	)		85,427
Effects of variation in the exchange rate on cash and cash equivalents			57,081			(51,897	)
Net increase (decrease) in cash and cash equivalents			(45,121	)		33,530
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	35		753,497			989,396
CASH AND CASH EQUIVALENTS AT END OF PERIOD	35		708,376			1,022,926

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

F-7

LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2016 (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 performed directly or through its 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 2, 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, LATAM 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, LATAM Airlines Group S.A. 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.

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 Puerto Claro Dos Limitada, Inversiones La Espasa Dos y Cía. Ltda., Inversiones Puerto Claro Dos y Cía. Limitada and Inversiones Mineras del Cantábrico S.A. owns 31.47% 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 September 30, 2016, the Company had a total of 1,587 registered shareholders. At that date approximately 4.89 % of the Company’s share capital was in the form of ADRs.

For the period ended September 30, 2016, the Company had an average of 49,031 employees, ending this period with a total of 46,862 employees, spread over 8,342 Administrative employees, 5,032 in Maintenance, 15,987 in Operations, 9,022 in Cabin Crew, 3,937 in Controls Crew, and 4,542 in Sales.

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

Participation rate

		Country	Functional	As September 30, 2016						As December 31, 2015
Tax No.	Company	of origin	Currency	Direct		Indirect		Total		Direct		Indirect		Total
				%		%		%		%		%		%
				Unaudited
96.518.860-6	Lantours Division Servicios Terrestres S.A. and Subsidary	Chile	US$		99.9900		0.0100		100.0000		99.9900		0.0100		100.0000
96.763.900-1	Inmobiliaria Aeronáutica S.A.	Chile	US$		99.0100		0.9900		100.0000		99.0100		0.9900		100.0000
96.969.680-0	Lan Pax Group S.A. and Subsidiaries	Chile	US$		99.8361		0.1639		100.0000		99.8361		0.1639		100.0000
Foreign	Lan Perú S.A.	Peru	US$		49.0000		21.0000		70.0000		49.0000		21.0000		70.0000
Foreign	Lan Chile Investments Limited and Subsidiary	Cayman Insland	US$		99.9900		0.0100		100.0000		99.9900		0.0100		100.0000
93.383.000-4	Lan Cargo S.A.	Chile	US$		99.8939		0.0041		99.8980		99.8939		0.0041		99.8980
Foreign	Connecta Corporation	U.S.A.	US$		0.0000		100.0000		100.0000		0.0000		100.0000		100.0000
Foreign	Prime Airport Services Inc. and Subsidary	U.S.A.	US$		0.0000		100.0000		100.0000		0.0000		100.0000		100.0000
96.951.280-7	Transporte Aéreo S.A.	Chile	US$		0.0000		100.0000		100.0000		0.0000		100.0000		100.0000
Foreign	Aircraft International Leasing Limited	U.S.A.	US$		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	US$		0.0000		100.0000		100.0000		0.0000		100.0000		100.0000
96.969.690-8	Lan Cargo Inversiones S.A. and Subsidary	Chile	US$		0.0000		100.0000		100.0000		0.0000		100.0000		100.0000
96.575.810-0	Inversiones Lan S.A. and Subsidiaries	Chile	US$		99.7100		0.2900		100.0000		99.7100		0.2900		100.0000
59.068.920-3	Technical Trainning LATAM S.A.	Chile	CLP		99.8300		0.1700		100.0000		99.8300		0.1700		100.0000
Foreign	TAM S.A. and Subsidiaries (*)	Brazil	BRL		63.0901		36.9099		100.0000		63.0901		36.9099		100.0000

(*)

As of September 30, 2016, 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 in TAM. Additionally LATAM Airlines owns 226 voting shares, equivalent as of 19,42% of total of voting shares. Additionally on March 29, 2016, LATAM Airlines Group S.A. has changed 675 series B shares by 675 series A shares, according to the provisional measure No. 714 of the Brazilian government.

Thus LATAM Airlines Group S.A. is owns 901 shares with voting rights of Holdco I S.A., equivalent to 49% of total shares with voting rights of that company.

Statement of financial position

		Statement of financial position														Net Income
																For the periods ended
																September 30,
		As of September 30, 2016							As of December 31, 2015							2016			2015
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	Lantours Division Servicios Terrestres S.A. and Subsidary		4,259		2,025		2,234			5,613		5,522		91			2,143			2,543
96.763.900-1	Inmobiliaria Aeronáutica S.A.		37,339		12,069		25,270			39,302		14,832		24,470			800			1,339
96.969.680-0	Lan Pax Group S.A. and Subsidiaries (*)		452,861		1,016,984		(555,945	)		519,588		1,049,232		(521,907	)		(40,342	)		(21,433	)
Foreign	Lan Perú S.A.		337,474		322,264		15,210			255,691		240,938		14,753			1,847			(1,793	)
Foreign	Lan Chile Investments Limited and Subsidiary (*)		2,014		-		2,014			2,015		13		2,002			12			(1	)
93.383.000-4	Lan Cargo S.A.		448,372		201,337		247,035			483,033		217,037		265,966			(19,086	)		(56,973	)
Foreign	Connecta Corporation		32,565		26,222		6,343			37,070		38,298		(1,228	)		7,571			(8,845	)
Foreign	Prime Airport Services Inc. and Subsidary (*)		8,334		13,086		(4,752	)		6,683		11,180		(4,497	)		(255	)		305
96.951.280-7	Transporte Aéreo S.A.		321,072		109,321		211,751			331,117		122,666		208,451			3,177			8,395
Foreign	Aircraft International Leasing Limited		-		-		-			-		4		(4	)		-			-
96.631.520-2	Fast Air Almacenes de Carga S.A.		8,030		2,674		5,356			8,985		4,641		4,344			557			(4	)
Foreign	Laser Cargo S.R.L.		22		54		(32	)		27		39		(12	)		-			(1	)
Foreign	Lan Cargo Overseas Limited and Subsidiaries (*)		62,293		41,712		17,166			62,406		43,759		15,563			1,605			69
96.969.690-8	Lan Cargo Inversiones S.A. and Subsidary (*)		65,776		80,174		(12,905	)		54,179		68,220		(12,601	)		(309	)		3,207
96.575.810-0	Inversiones Lan S.A. and Subsidiaries (*)		10,547		6,975		3,524			16,512		14,676		1,828			1,608			2,823
59.068.920-3	Technical Trainning LATAM S.A.		2,529		580		1,949			1,527		266		1,261			522			427
Foreign	TAM S.A. and Subsidiaries (*)		5,442,326		4,845,623		514,883			4,711,316		4,199,223		437,953			22,345			(171,609	)

(*)

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

Additionally, we have proceeded to consolidate the following special purpose entities: 1. JOL (Japanese Operating Lease) created in order to finance the purchase of certain aircraft; 2. Chercán Leasing Limited created to finance the pre-delivery payments on aircraft; 3. Guanay Finance Limited created to issue a bond collateralized with future credit card receivables; 4. Private investment funds and 5. 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, 2015 and September 30, 2016, are detailed below:

(1)

Incorporation or acquisition of companies

At September, Inversiones LAN S.A., subsidiary of LATAM Airlines Group S.A., acquired 4,767 shares of Aerovías de Integración Regional Aires S.A. a non-controlling shareholder, equivalent to 0.0914%, consequently, the indirect participation of LATAM Airlines Group S.A. increases to 99.19061%

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%

On October 2015, Rampas Airport Services S.A., subsidiary of Lan Pax Group S.A. increases its capital and paid in the amount of MUS $ 6,000 by issuing new shares, changing the property of the company as follows: Lan Pax Group S.A. increased its share to 99.99738%, Inversiones Lan S.A. decreased its stake to 0.00002% and Aerolane Líneas Aéreas Nacionales del Ecuador S.A. acquires stake for 0.0026%.

(2)

Dissolution of companies

In July 2015, the Company Ladeco Cargo S.A. subsidiary of Lan Cargo S.A. was dissolved.

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 interim consolidated financial statements of LATAM Airlines Group S.A. for the period ended September 30, 2016, 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).

Law No. 20,780 issued on September 29, 2014, introduced modifications to the income tax system in Chile and other tax matters. On October 17, 2014 the Chilean Superintendence of Securities and Insurance (the “SVS”) issued Circular No. 856, which established that the effects of the change in the income tax rates on deferred tax assets and liabilities must be recognized directly within “Retained earnings” instead of the income statement as required by IAS 12. In order to comply with IAS 12, the financial statements for the period ended December 31, 2014 are different from those presented to the SVS as the modifications introduced by Law No. 20,780 and Circular No. 856 have been recognized within the income statement.

As from the year 2016, the differences between the financial statements presented to the Chilean regulator and those prepared to comply with IAS 12 no longer exist so no adjustment is necessary.

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

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 “Interim Financial Reporting”.

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

(a)

Accounting pronouncements with implementation effective from January 1, 2016:

		Mandatory
		Application:
		Annual periods
(i) Standards and amendments	Date of issue	beginning on or after

Amendment to IFRS 11: Joint arrangements.	May 2014	01/01/2016

Amendment IAS 1: Presentation of Financial Statements.	December 2014	01/01/2016

Amendment to IFRS 10: Consolidated financial statements, IFRS 12: Disclosure of Interests in other entities and IAS 28: Investments in associates and joint ventures.	December 2014	01/01/2016

Amendment to IAS 16: Property, plant and equipment, and IAS 38: Intangible assets.	May 2014	01/01/2016

Amendment to IAS 27: Separate financial statements.	August 2014	01/01/2016

		Mandatory
		Application:
		Annual periods
(ii) Improvements	Date of issue	beginning on or after

Improvements to International Financial Reporting Standards (2012-2014 cycle): IFRS 5 Non-current assets held for sale and discontinued operations; IFRS 7 Financial instruments: Disclosures; IAS 19 Employee benefits and IAS 34 Interim financial reporting.	September 2014	01/01/2016

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

(b) Accounting pronouncements not yet in force for financial years beginning on January 1, 2016 and which has not been effected early adoption

		Mandatory
		Application:
		Annual periods
(i) Standards and amendments	Date of issue	beginning on or after

Amendment to IFRS 4: Insurance Contracts.	September 2016	01/01/2018

Amendment to IAS 7: Statement of Cash Flows.	January 2016	01/01/2017

Amendment to IAS 12: Income Taxes.	January 2016	01/01/2017

IFRS 9: Financial instruments.	December 2009	01/01/2018

IFRS 15: Revenue from contracts with customers (1).	May 2014	01/01/2018

Amendment to IFRS 9: Financial instruments.	November 2013	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

IFRS 16: Leases (2).	January 2016	01/01/2019

Amendment to IFRS 10: Consolidated financial statements and IAS 28 Investments in associates and joint ventures.	September 2014	To be determined

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

(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.

(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.

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.

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.

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.

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.

2.5. Intangible assets other than goodwill

(a) Brands, Airport slots and Loyalty program

Brands, Airport slots and 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

Brand – Air transport 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.

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.

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.

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

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.

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)”.

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.

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.

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.

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.

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.

(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.

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 are highly liquid.

Fuel Hedging Results:

During the period ended at September 30, 2016, the Company recognized losses of US$ 52.5 million on fuel derivative. During the same period of 2015, the Company recognized losses of US$ 198.9 million for the same reason.

At September 30, 2016, the market value of its fuel positions amounted to US$ 3.3 million (positive). At December 31, 2015, this market value was US$ 56.4 million (negative).

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

Positions as of September 30, 2016 (*) (Unaudited)	Maturities
	Q416			Q117			Q217			Total
Percentage of the hedge of expected consumption value		48	%		20	%		15	%		28	%

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

Positions as of December 31, 2015 (*)	Maturities
	Q116			Q216			Q316			Q416			Total
Percentage of the hedge of expected consumption value		63	%		27	%		27	%		11	%		32	%

(*) 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 last 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 September 2016 and the end of December, 2015.

		Positions as of September 30, 2016		Positions as of December 31, 2015
Benchmark price		effect on equity		effect on equity
(US$ per barrel)		(millions of US$)		(millions of US$)
		(Unaudited)
	+5		+8.97		+5.41
	-5		-8.78		-2.78

Given the fuel hedge structure during the first three quarters of 2016, 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$ 91.7 million in the cost of total fuel consumption for the same period. For the first three quarters of 2016, a vertical rise by 5 dollars in the JET benchmark price (the monthly daily average) would have meant an impact of approximately US$ 91.2 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.

Most currency 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.

Additionally, the company manages the economic exposure to operating revenues in Euro (EUR), Pound Sterling (GBP), Australian Dollar (AUD), Colombian Peso (COP) and Chilean Peso (CLP).

In lower concentrations the Company is therefore exposed to fluctuations in others currencies, such as: 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 September 30, 2016, the market value of its FX positions amounted to US$ 4.8 million (negative). At end of December 2015 the market value was of US$ 8.0 million (positive).

During the period ended at September 30, 2016 the Company recognized losses of US$ 37.9 million on hedging FX. During the same period of 2015 the Company recognized gains of US$ 12.9 million on hedging FX.

At end of September 2016, the Company has contracted FX derivatives for US$ 150 million to BRL, US$ 40 million to EUR, US$ 30 million to GBP, US$ 20 million to AUD, US$ 21 million to COP and US$ 15 million to CLP. At end of December 2015, the Company had contracted FX for US$ 270 million to BRL, US$ 30 million to EUR and US$ 15 million to GBP. For AUD, COP and CLP there were no current positions.

Sensitivity analysis:

A depreciation of exchange rate R$/ US$, US$/EUR, US$/GBP, US$/AUD, COP$/US$ and CLP$/US$ 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 last quarter of 2016:

Appreciation (depreciation)*	Effect at September 30, 2016	Effect at December 31, 2015
of R$//EUR/GBP/AUD/CLP/COP	Millions of US$	Millions of US$
	(Unaudited)
-10%	-7.10	-21.28
+10%	+10.70	+16.71

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.

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 conducted transactions for to reduce the net US$ liabilities held by TAM S.A.

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

Appreciation (depreciation)*	Effect at September 30, 2016	Effect at September 30, 2015
of R$/US$	Millons of US$	Millons of US$
	(Unaudited)
-10%	+140.0	+54.9
+10%	-140.0	-54.9

(*) 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 September 30, 2016	Effect at December 31, 2015
of R$/US$	Millions of US$	Millions of US$
	(Unaudited)
-10%	+354.36	+296.41
+10%	-289.93	-242.52

(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.

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 63% (71% at December 31, 2015) of the debt is fixed to fluctuations in interest rate.

Rate Hedging Results:

At September 30, 2016, the market value of the positions of interest rate derivatives amounted to US$ 24.0 million (negative). At end of December 2015 this market value was US$ 39.8 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 September 30, 2016	Positions as of September 30, 2015
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)
+100 basis points	-33.92	-26.98
-100 basis points	+33.92	+26.98

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 September 30, 2016	Positions as of December 31, 2015
futures curve	effect on equity	effect on equity
in libor 3 months	(millions of US$)	(millions of US$)
	(Unaudited)
+100 basis points	+5.04	+8.71
-100 basis points	-5.18	-9.02

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.

(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.

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.

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.

(ii)

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.

The liquid funds balance as of September 30, 2016 is US$1,359 million (US$ 1,361 million at December 31, 2015), 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 September 30, 2016, LATAM has working capital credit lines with multiple banks.

Class of liability for the analysis of liquidity risk ordered by date of maturity as of September 30, 2016 (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	US$	100,417	-	-	-	-	100,417	100,000	At Expiration	1.65	1.65
97.036.000-K	SANTANDER	Chile	US$	-	30,193	-	-	-	30,193	30,000	At Expiration	2.39	2.39
97.030.000-7	ESTADO	Chile	US$	40,161	-	-	-	-	40,161	40,000	At Expiration	1.65	1.65
97.003.000-K	BANCO DO BRASIL	Chile	US$	-	71,969	-	-	-	71,969	70,000	At Expiration	2.82	2.82
97.951.000-4	HSBC	Chile	US$	12,041	-	-	-	-	12,041	12,000	At Expiration	1.35	1.35

Bank loans

97.023.000-9	CORPBANCA	Chile	UF	21,287	62,529	78,723	22,410	-	184,949	174,747	Quarterly	4.10	4.10
0-E	BLADEX	U.S.A.	US$	6,122	6,021	32,514	7,679	-	52,336	47,500	Semiannual	4.80	4.80
0-E	DVB BANK SE	U.S.A.	US$	126	291	28,911	-	-	29,328	28,911	Quarterly	1.77	1.77
97.036.000-K	SANTANDER	Chile	US$	1,579	3,898	228,223	-	-	233,700	225,117	Quarterly	3.65	3.65

Obligations with the public

0-E	BANK OF NEW YORK	E.E.U.U.	US$	18,125	18,125	72,500	536,250	-	645,000	500,000	At Expiration	7.77	7.25

Guaranteed obligations

0-E	CREDIT AGRICOLE	Francia	US$	17,127	38,891	324,354	39,118	5,563	425,053	399,776	Quarterly	2.44	2.29
0-E	BNP PARIBAS	U.S.A.	US$	15,468	47,975	129,792	124,931	282,038	600,204	524,645	Trimestral	2.74	2.70
0-E	WELLS FARGO	U.S.A.	US$	35,834	107,645	287,462	288,060	447,050	1,166,051	1,087,654	Trimestral	2.35	1.66
0-E	WILMINGTON TRUST COMPANY	U.S.A.	US$	27,690	78,923	206,971	202,183	757,505	1,273,272	984,563	Quarterly	4.25	4.25
0-E	CITIBANK	U.S.A.	US$	20,060	60,522	162,969	165,401	204,813	613,765	565,542	Quarterly	2.63	1.88
97.036.000-K	SANTANDER	Chile	US$	5,809	17,515	47,124	47,768	32,437	150,653	143,885	Quarterly	1.88	1.34
0-E	BTMU	U.S.A.	US$	3,126	9,452	25,488	25,928	30,493	94,487	88,757	Quarterly	2.19	1.59
0-E	APPLE BANK	U.S.A.	US$	1,534	4,651	12,559	12,795	15,447	46,986	44,114	Quarterly	2.14	1.54
0-E	US BANK	U.S.A.	US$	18,586	55,646	147,517	146,212	248,928	616,889	547,341	Quarterly	3.99	2.81
0-E	DEUTSCHE BANK	U.S.A.	US$	6,103	18,439	33,582	31,596	52,044	141,764	122,197	Quarterly	3.76	3.76
0-E	NATIXIS	France	US$	14,570	44,136	118,800	95,734	216,625	489,865	434,702	Quarterly	2.51	2.48
0-E	HSBC	U.S.A.	US$	825	2,484	6,651	6,692	10,121	26,773	24,561	Quarterly	2.88	2.07
0-E	PK AirFinance	U.S.A.	US$	2,248	6,892	19,605	24,414	6,933	60,092	56,769	Monthly	2.23	2.23
0-E	KFW IPEX-BANK	Germany	US$	2,486	7,535	18,991	11,471	-	40,483	38,449	Quarterly	2.36	2.36
0-E	AIRBUS FINANCIAL	E.E.U.U.	US$	1,973	5,927	15,974	9,774	-	33,648	31,981	Mensual	2.73	2.73
0-E	INVESTEC	England	US$	1,808	5,648	15,116	15,210	15,317	53,099	44,000	Semestral	5.47	5.47

Otras obligaciones garantizadas

0-E	CITIBANK	U.S.A.	US$	2,097	6,305	325,669	-	-	334,071	313,000	At Expiration	3.35	2.85
0-E	DVB Bank SE	U.S.A.	US$	6,153	-	-	-	-	6,153	6,113	Quarterly	2.61	2.61

Financial leases

0-E	ING	U.S.A.	US$	7,567	17,671	35,932	16,158	-	77,328	70,374	Quarterly	5.53	4.89
0-E	CREDIT AGRICOLE	France	US$	1,770	5,408	1,832	-	-	9,010	8,889	Quarterly	1.66	1.66
0-E	CITIBANK	U.S.A.	US$	6,083	18,250	48,667	20,346	-	93,346	83,122	Quarterly	6.40	5.67
0-E	PEFCO	U.S.A.	US$	17,558	52,673	78,692	7,779	-	156,702	146,600	Quarterly	5.38	4.78
0-E	BNP PARIBAS	U.S.A.	US$	11,505	34,725	67,440	16,261	-	129,931	122,825	Quarterly	4.12	3.68
0-E	WELLS FARGO	U.S.A.	US$	5,590	16,759	44,627	44,528	7,438	118,942	107,961	Quarterly	3.98	3.54
0-E	DVB BANK SE	U.S.A.	US$	4,770	14,305	-	-	-	19,075	18,779	Quarterly	2.48	2.48

Other loans

0-E	CITIBANK (*)	U.S.A.	US$	26,905	76,711	207,042	130,186	-	440,844	391,738	Quarterly	6.00	6.00

Hedging derivatives

-	OTROS	-	US$	7,816	17,460	12,428	(942)	100	36,862	-	-	0.00	0.00

	Total			472,919	965,574	2,836,155	2,047,942	2,332,852	8,655,442	7,636,612

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

Class of liability for the analysis of liquidity risk ordered by date of maturity as of September 30, 2016 (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	Holand	US$	179	493	1,315	1,314	219	3,520	3,002	Monthly	6.01	6.01
0-E	CITIBANK	U.S.A.	US$	1,516	204,678	-	-	-	206,194	200,000	At Expiration	3.25	3.00

Obligation with the public

0-E	THE BANK OF NEW YORK	U.S.A.	US$	32,000	332,000	83,750	583,750	-	1,031,500	800,000	At Expiration	8.17	8.00

Financial leases

0-E	AFS INVESTMENT IX LLC	U.S.A.	US$	2,743	7,699	20,523	11,113	-	42,078	37,505	Monthly	1.25	1.25
0-E	DVB BANK SE	U.S.A.	US$	121	284	-	-	-	405	401	Monthly	2.35	2.35
0-E	GENERAL ELECTRIC CAPITAL			-	-	-	-	-		-
	CORPORATION	U.S.A.	US$	3,853	9,050	-	-	-	12,903	12,712	Monthly	2.14	2.14
0-E	KFW IPEX-BANK	Germany	US$	597	1,754	386	-	-	2,737	2,701	Monthly/Quarterly	2.64	2.64
0-E	NATIXIS	France	US$	2,645	9,088	22,879	42,658	41,966	119,236	108,553	Quarterly/Semiannual	4.74	4.74
0-E	PK AIRFINANCE US, INC.	U.S.A.	US$	19,212	-	-	-	-	19,212	19,164	Monthly	2.60	2.60
0-E	WACAPOU LEASING S.A.	Luxemburg	US$	831	2,379	6,441	6,536	2,098	18,285	16,691	Quarterly	2.85	2.85
0-E	SOCIÉTÉ GÉNÉRALE MILAN BRANCH	Italy	US$	11,928	32,053	85,934	182,320	-	312,235	287,788	Quarterly	4.03	3.97
0-E	BANCO IBM S.A	Brazil	BRL	368	1,176	402	-	-	1,946	1,296	Monthly	14.13	14.13
0-E	HP FINANCIAL SERVICE	Brazil	BRL	226	226	-	-	-	452	440	Monthly	10.02	10.02
0-E	SOCIÉTÉ GÉNÉRALE	France	BRL	142	453	340	-	-	935	624	Monthly	14.13	14.13

	Total			76,361	601,333	221,970	827,691	44,283	1,771,638	1,490,877

Class of liability for the analysis of liquidity risk ordered by date of maturity as of September 30, 2016 (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		VARIOS	US$	361,265	24,938	-	-	-	386,203	386,203	-	-	-
				CLP	38,559	-	-	-	-	38,559	38,559	-	-	-
				BRL	354,461	-	-	-	-	354,461	354,461	-	-	-
				Others currencies	253,028	11,489	-	-	-	264,517	264,517	-	-	-

Accounts payable to related parties currents
78.997.060-2	Viajes Falabella Ltda.	Chile		CLP	126	-	-	-	-	126	126	-	-	-
0-E	Consultoría Administrativa Profesional S.A. de C.V.	Mexico		MXN	76	-	-	-	-	76	76	-	-	-
65.216.000-K	Comunidad Mujer	Chile		CLP	14	-	-	-	-	14	14	-	-	-
0-E	TAM Aviação Executiva e Taxi Aéreo S.A.	Brazil		BRL	10	-	-	-	-	10	10	-	-	-
78.591.370-1	Bethia S.A. y Filiales	Chile		CLP	5	-	-	-	-	5	5	-	-	-
0-E	Inversora Aeronáutica Argentina	Argentina		US$	1	-	-	-	-	1	1	-	-	-

	Total				1,007,545	36,427	-	-	-	1,043,972	1,043,972

	Total consolidated				1,556,825	1,603,334	3,058,125	2,875,633	2,377,135	11,471,052	10,171,461

Class of liability for the analysis of liquidity risk ordered by date of maturity as of December 31, 2015

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	US$	100,253	-	-	-	-	100,253	100,000	At Expiration	1.00	1.00
97.036.000-K	SANTANDER	Chile	US$	100,363	-	-	-	-	100,363	100,000	At Expiration	1.44	1.44
97.030.000-7	ESTADO	Chile	US$	55,172	-	-	-	-	55,172	55,000	At Expiration	1.05	1.05
97.004.000-5	BANCO DE CHILE	Chile	US$	50,059	-	-	-	-	50,059	50,000	At Expiration	1.42	1.42
97.003.000-K	BANCO DO BRASIL	Chile	US$	70,133	-	-	-	-	70,133	70,000	At Expiration	1.18	1.18
97.951.000-4	HSBC	Chile	US$	12,020	-	-	-	-	12,020	12,000	At Expiration	0.66	0.66

Bank loans

97.023.000-9	CORPBANCA	Chile	UF	19,873	58,407	112,252	35,953	-	226,485	211,135	Quarterly	4.18	4.18
0-E	BANCO BLADEX	U.S.A.	US$	-	9,702	30,526	15,514	-	55,742	50,000	Semiannual	4.58	4.58
0-E	DVB BANK SE	U.S.A.	US$	146	430	154,061	-	-	154,637	153,514	Quarterly	1.67	1.67
97.036.000-K	SANTANDER	Chile	US$	1,053	-	226,712	-	-	227,765	226,712	Quarterly	2.24	2.24

Obligations with the public

0-E	BANK OF NEW YORK	U.S.A.	US$	-	36,250	72,500	554,375	-	663,125	500,000	At Expiration	7.77	7.25

Guaranteed obligations

0-E	CREDIT AGRICOLE	Francia	US$	31,813	92,167	210,541	55,381	12,677	402,579	389,027	Quarterly	1.83	1.66
0-E	BNP PARIBAS	U.S.A.	US$	9,899	29,975	82,094	83,427	148,904	354,299	319,397	Quarterly	2.29	2.22
0-E	WELLS FARGO	U.S.A.	US$	35,636	106,990	285,967	286,959	554,616	1,270,168	1,180,751	Quarterly	2.27	1.57
0-E	WILMINGTON TRUST	U.S.A.	US$	6,110	69,232	135,334	133,363	539,019	883,058	675,696	Quarterly	4.25	4.25
0-E	CITIBANK	U.S.A.	US$	19,478	58,741	158,957	162,459	266,273	665,908	617,002	Quarterly	2.40	1.64
97.036.000-K	SANTANDER	Chile	US$	5,585	16,848	45,653	46,740	50,124	164,950	159,669	Quarterly	1.47	0.93
0-E	BTMU	U.S.A.	US$	2,992	9,035	24,541	25,214	39,930	101,712	96,954	Quarterly	1.82	1.22
0-E	APPLE BANK	U.S.A.	US$	1,471	4,445	12,079	12,431	20,099	50,525	48,142	Quarterly	1.72	1.12
0-E	US BANK	U.S.A.	US$	18,643	55,824	147,994	146,709	303,600	672,770	591,039	Quarterly	3.99	2.81
0-E	DEUTSCHE BANK	U.S.A.	US$	5,923	17,881	39,185	30,729	63,268	156,986	136,698	Quarterly	3.40	3.40
0-E	NATIXIS	France	US$	13,740	41,730	115,026	100,617	249,194	520,307	469,423	Quarterly	2.08	2.05
0-E	HSBC	U.S.A.	US$	1,590	4,790	12,908	13,112	25,175	57,575	53,583	Quarterly	2.40	1.59
0-E	PK AirFinance	U.S.A.	US$	2,172	6,675	18,928	20,812	18,104	66,691	62,514	Monthly	2.04	2.04
0-E	KFW IPEX-BANK	Germany	US$	728	2,232	5,684	4,131	1,658	14,433	13,593	Quarterly	2.45	2.45

Other guaranteed obligations

0-E	DVB BANK SE	U.S.A.	US$	8,225	24,695	-	-	-	32,920	32,492	Quarterly	2.32	2.32

Financial leases

0-E	ING	U.S.A.	US$	9,214	26,054	41,527	28,234	-	105,029	94,998	Quarterly	5.13	4.57
0-E	CREDIT AGRICOLE	France	US$	1,711	5,236	7,216	-	-	14,163	13,955	Quarterly	1.28	1.28
0-E	CITIBANK	U.S.A.	US$	6,083	18,250	48,667	38,596	-	111,596	97,383	Quarterly	6.40	5.67
0-E	PEFCO	U.S.A.	US$	17,556	52,674	115,934	23,211	-	209,375	192,914	Quarterly	5.37	4.77
0-E	BNP PARIBAS	U.S.A.	US$	11,368	34,292	86,206	31,782	-	163,648	153,107	Quarterly	4.08	3.64
0-E	WELLS FARGO	U.S.A.	US$	5,594	16,768	44,663	44,565	24,125	135,715	121,628	Quarterly	3.98	3.54
0-E	DVB BANK SE	U.S.A.	US$	4,732	14,225	14,269	-	-	33,226	32,567	Quarterly	2.06	2.06
0-E	BANC OF AMERICA	U.S.A.	US$	703	2,756	-	-	-	3,459	2,770	Monthly	1.41	1.41

Other loans

0-E	BOEING	U.S.A.	US$	655	533	151,362	-	-	152,550	151,362	At Expiration	1.80	1.80
0-E	CITIBANK (*)	U.S.A.	US$	25,820	77,850	207,190	206,749	-	517,609	450,000	Quarterly	6.00	6.00

Hedging derivatives

-	OTROS	-	US$	12,232	33,061	40,986	3,688	16	89,983	85,653	-	-	-

	Total			668,745	927,748	2,648,962	2,104,751	2,316,782	8,666,988	7,770,678

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

Class of liability for the analysis of liquidity risk ordered by date of maturity as of December 31, 2015

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	US$	181	493	1,315	1,314	712	4,015	3,353	Monthly	6.01	6.01

Obligation with the public

0-E	BANK OF NEW YORK	U.S.A.	US$	440	65,321	397,785	86,590	521,727	1,071,863	800,000	At Expiration	8.17	8.00

Financial leases

0-E	AFS INVESTMENT IX LLC	U.S.A.	US$	2,771	7,700	20,527	18,808	-	49,806	43,505	Monthly	1.25	1.25
0-E	AIRBUS FINANCIAL	U.S.A.	US$	3,715	11,054	21,830	15,730	-	52,329	49,995	Monthly	1.43	1.43
0-E	CREDIT AGRICOLE -CIB	France	US$	4,542	-	-	-	-	4,542	4,500	Quarterly/Semiannual	3.25	3.25
0-E	DVB BANK SE	U.S.A.	US$	123	361	284	-	-	768	755	Monthly	1.64	1.64
0-E	GENERAL ELECTRIC CAPITAL
	CORPORATION	U.S.A.	US$	3,834	11,437	9,050	-	-	24,321	23,761	Monthly	1.25	1.25
0-E	KFW IPEX-BANK	Germany	US$	3,345	6,879	15,973	12,429	-	38,626	36,899	Monthly/Quarterly	1.72	1.72
0-E	NATIXIS	France	US$	4,338	7,812	22,635	23,030	70,925	128,740	115,020	Quarterly/Semiannual	3.85	3.85
0-E	PK AIRFINANCE US, INC.	U.S.A.	US$	1,428	21,992	-	-	-	23,420	23,045	Monthly	1.75	1.75
0-E	WACAPOU LEASING S.A.	Luxemburg	US$	520	1,386	3,198	14,567	-	19,671	18,368	Quarterly	2.00	2.00
0-E	SOCIÉTÉ GÉNÉRALE MILAN BRANCH	Italy	US$	11,993	31,874	85,695	214,612	-	344,174	312,486	Quarterly	3.63	3.55
0-E	BANCO IBM S.A	Brazil	BRL	267	846	1,230	-	-	2,343	1,728	Monthly	14.14	14.14
0-E	HP FINANCIAL SERVICE	Brazil	BRL	188	564	188	-	-	940	882	Monthly	10.02	10.02
0-E	SOCIÉTÉ GÉNÉRALE	France	BRL	104	330	626	-	-	1,060	775	Monthly	14.14	14.14

	Total			37,789	168,049	580,336	387,080	593,364	1,766,618	1,435,072

Class of liability for the analysis of liquidity risk ordered by date of maturity as of December 31, 2015

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	US$		442,320		14,369		-		-		-		456,689		456,689		-		0.00		0.00
			CLP		39,823		114		-		-		-		39,937		39,937		-		0.00		0.00
			BRL		301,569		16		-		-		-		301,585		301,585		-		0.00		0.00
			Others currencies		218,347		9,016		-		-		-		227,363		227,363		-		0.00		0.00

Accounts payable to related parties currents
65.216.000-K	COMUNIDAD MUJER	Chile	CLP		10		-		-		-		-		10		10		-		0.00		0.00
78.591.370-1	BETHIA S.A. Y FILIALES	Chile	CLP		5		-		-		-		-		5		5		-		0.00		0.00
78.997.060-2	Viajes Falabella Ltda.	Chile	CLP		68										68		68		-		0.00		0.00
0-E	Consultoría Administrativa Profesional	Mexico	MXN		342		-		-		-		-		342		342		-		0.00		0.00
0-E	INVERSORA AERONÁUTICA ARGENTINA	Argentina	US$		22		-		-		-		-		22		22		-		0.00		0.00
	Total				1,002,506		23,515		-		-		-		1,026,021		1,026,021

	Total consolidado				1,709,040		1,119,312		3,229,298		2,491,831		2,910,146		11,459,627		10,231,771

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 2015, the Company provided US$ 49.6 million in derivative margin guarantees, for cash and stand-by letters of credit. At September 30, 2016, the Company had provided US$ 38.85 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 September 30, 2016 the Company has an international long term credit rating of BB- with negative outlook by Standard & Poor’s, a B+ rating with negative outlook by Fitch Ratings and a B1 rating with stable outlook by Moody’s.

3.3.

Estimates of fair value.

At September 30, 2016, the Company maintained financial instruments that should be recorded at fair value. These are grouped into two categories:

Hedge Instruments:

This category includes the following instruments:

Interest rate derivative contracts,

Fuel derivative contracts,

Currency derivative contracts.

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 September 30, 2016								As of December 31, 2015
			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
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited
Assets
Cash and cash equivalents		37,735		37,735		-		-		26,600		26,600		-		-
Short-term mutual funds		37,735		37,735		-		-		26,600		26,600		-		-

Other financial assets, current		663,289		650,659		12,630		-		624,200		607,622		16,578		-
Fair value of fuel derivatives		10,252		-		10,252		-		6,293		-		6,293		-
Fair value of foreign currency derivatives		2,286		-		2,286		-		9,888		-		9,888		-
Interest accrued since the last payment date of Cross Currency Swap		92		-		92		-		397		-		397		-
Private investment funds		593,493		593,493		-		-		448,810		448,810		-		-
Domestic and foreign bonds		57,166		57,166		-		-		158,812		158,812		-		-
Other investments		-		-		-		-		-		-		-		-

Liabilities
Other financial liabilities, current		37,255		-		37,255		-		134,089		-		134,089		-
Fair value of interest rate derivatives		13,546		-		13,546		-		33,518		-		33,518		-
Fair value of fuel derivatives		2,743		-		2,743		-		39,818				39,818
Fair value of foreign currency derivatives		18,147		-		18,147		-		56,424		-		56,424		-
Interest accrued since the last payment date of Currency Swap		2,819		-		2,819		-		4,329		-		4,329		-
Interest rate derivatives not recognized as a hedge		-		-		-		-		-				-

Other financial liabilities, non current		9,742		-		9,742		-		16,128		-		16,128		-
Fair value of interest rate derivatives		9,742		-		9,742		-		16,128		-		16,128		-

Additionally, at September 30, 2016, 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 September 30, 2016				As of December 31, 2015
	Book		Fair		Book		Fair
	value		value		value		value
	ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited
Cash and cash equivalents		670,641		670,641		726,897		726,897
Cash on hand		7,647		7,647		10,656		10,656
Bank balance		341,165		341,165		302,696		302,696
Overnight		257,262		257,262		267,764		267,764
Time deposits		64,567		64,567		145,781		145,781

Other financial assets, current		34,450		34,450		27,148		27,148
Other financial assets		34,450		34,450		27,148		27,148

Trade and other accounts receivable current		916,124		916,124		796,974		796,974
Accounts receivable from related entities		498		498		183		183
Other financial assets, non current		104,777		104,777		89,458		89,458
Accounts receivable		8,940		8,940		10,715		10,715

Other financial liabilities, current		1,840,732		2,053,296		1,510,146		1,873,552
Trade and other accounts payables		1,539,219		1,539,219		1,483,957		1,483,957
Accounts payable to related entities		232		232		447		447
Other financial liabilities, non current		7,224,985		7,615,509		7,516,257		7,382,221
Accounts payable, non-current		387,208		387,208		417,050		417,050

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 September 30, 2016 goodwill amounted to ThUS$ 2,723,629 (ThUS$ 2,280,575 at December 31, 2015), while intangible assets with an indefinite useful life comprised airport slots for ThUS$ 982,740 (ThUS$ 816,987 at December 31, 2015), and Trademarks and Loyalty Program for ThUS$ 391,289 (ThUS$ 325,293 at December 31, 2015).

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 September 30, 2016, amounted to ThUS$ 2,187,760 and ThUS$ 535,869 (ThUS$ 1,835,088 and ThUS$ 445,487 at December 31, 2015), 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
	September 30,		December 31,		September 30,		December 31,
	2016		2015		2016		2015
	ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited				Unaudited
Airport Slots		982,740		816,987		-		-
Trade marks		63,730		52,981		-		-
Loyalty program		-		-		327,559		272,312

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).

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, these projections are ensured to be consistent with those used to measure other long term assets. As of September 30, 2016 the company recognized deferred tax assets amounting to ThUS$ 389,666 (ThUS$ 376,595 at December 31, 2015), and had ceased to recognize deferred tax assets for tax losses amounting to ThUS$ 65,363 (ThUS$ 15,513 at December 31, 2015) (Note 18).

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

The Company 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 September 30, 2016, deferred revenue associated with air tickets sold amounted to ThUS$ 1,391,604 (ThUS$ 1,223,886 as of December 31, 2015). An hypothetical change of 1% in passenger behavior regarding to the ticket usage, - that is, if during the next 6 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 6 to 7 months, which, as of September 30, 2016, would have an impact of up to ThUS$ 25,000.

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

As of September 30, 2016 and December 31, 2015, 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.

As of September 30, 2016, deferred revenue associated with the LATAM Pass loyalty program amounted to ThUS$ 896,798 (ThUS$ 973,264 at December 31, 2015). As of September 30, 2016 a hypothetical change of 1% in the probability of usage would result in an impact of approximately ThUS$ 29,427 and ThUS$ 25.475 at the same period of 2015. Meanwhile, deferred revenue associated with the LATAM Fidelidade and Multiplus loyalty programs amounted to ThUS$ 442,826 (ThUS$ 452,264 at December 31, 2015). As of September 30, 2016 a hypothetical change of 2% in the probability of usage would result in an impact of approximately ThUS$ 11,351 and ThUS$ 10,112 at the same period of 2015.

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 September 30, 2016 a hypothetical change of 1% in the fair value of the unused kilometers would result in an impact of approximately ThUS$ 8,900 and ThUS$ 9,200 at the same period of 2015.

(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.

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 15.6 million of members, along with being a regulated entity with a separately business and not directly related to air transport.

(a) For the 9 months ended

							Coalition and
	Air						loyalty program
	transportation						Multiplus						Eliminations						Consolidated
	At September 30,						At September 30,						At September 30,						At September 30,
	2016			2015			2016			2015			2016			2015			2016			2015
	ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$
	Unaudited
Income from ordinary activities from external customers (*)		6,272,248			7,060,894			294,635			368,025			-			-			6,566,883			7,428,919

LAN passenger		3,051,064			3,169,485			-			-			-			-			3,051,064			3,169,485
TAM passenger		2,419,613			2,896,861			294,635			368,025			-			-			2,714,248			3,264,886
Freight		801,571			994,548			-			-			-			-			801,571			994,548

Income from ordinary activities from transactions with other operating segments		294,635			368,025			46,963			49,758			(341,598	)		(417,783	)		-			-

Other operating income		258,687			172,980			132,209			116,919			-			-			390,896			289,899

Interest income		17,450			23,632			44,036			51,388			(8,339	)		(10,430	)		53,147			64,590
Interest expense		(318,902	)		(323,922	)		-			-			8,339			10,430			(310,563	)		(313,492	)

Total net interest expense		(301,452	)		(300,290	)		44,036			51,388			-			-			(257,416	)		(248,902	)

Depreciation and amortization		(706,175	)		(692,616	)		(7,588	)		(12,969	)		-			-			(713,763	)		(705,585	)

Material non-cash items other than depreciation and amortization		78,623			(446,299	)		(214	)		1,129			-			-			78,409			(445,170	)

Disposal of fixed assets and inventory losses		(33,526	)		(25,559	)		-			-			-			-			(33,526	)		(25,559	)
Doubtful accounts		(21,492	)		(8,270	)		304			(1,071	)		-			-			(21,188	)		(9,341	)
Exchange differences		133,295			(412,955	)		(481	)		2,200			-			-			132,814			(410,755	)
Result of indexation units		346			485			(37	)		-			-			-			309			485

Income (loss) atributable to owners of the parents		(99,045	)		(304,705	)		113,920			101,687			-			-			14,875			(203,018	)

Participation of the entity in the income of associates		-			37			-			-			-			-			-			37
Expenses for income tax		(142,885	)		174,044			(54,455	)		(54,887	)		-			-			(197,340	)		119,157
Segment profit / (loss)		(66,828	)		(275,471	)		113,920			101,687			-			-			47,092			(173,784	)
Assets of segment		17,695,949			16,839,969			1,458,767			1,145,684			(114,558	)		(10,626	)		19,040,158			17,975,027

Amount of non-current asset additions		1,157,355			831,672			-			-			-			-			1,157,355			831,672

Property, plant and equipment		1,094,269			800,165			-			-			-			-			1,094,269			800,165
Intangibles other than goodwill		63,086			31,507			-			-			-			-			63,086			31,507

Segment liabilities		14,913,843			14,629,948			620,844			426,398			(35,613	)		(33,974	)		15,499,074			15,022,372
Purchase of non-monetary assets of segment		678,466			899,832			-			-			-			-			678,466			899,832

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

(b) For the 3 months ended

							Coalition and
	Air						loyalty program
	transportation						Multiplus						Eliminations						Consolidated
	At September 30,						At September 30,						At September 30,						At September 30,
	2016			2015			2016			2015			2016			2015			2016			2015
	ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$
	Unaudited
Income from ordinary activities from external customers (*)		2,263,520			2,310,076			102,382			113,388			-			-			2,365,902			2,423,464

LAN passenger		1,061,258			1,058,136			-			-			-			-			1,061,258			1,058,136
TAM passenger		936,668			942,159			102,382			113,388			-			-			1,039,050			1,055,547
Freight		265,594			309,781			-			-			-			-			265,594			309,781

Income from ordinary activities from transactions with other operating segments		102,382			113,388			18,352			14,049			(120,734	)		(127,437	)		-			-
Other operating income		107,163			58,477			46,464			32,881			-			-			153,627			91,358

Interest income		9,519			9,147			16,368			25,598			(4,158	)		(2,039	)		21,729			32,706
Interest expense		(108,089	)		(109,948	)		-			-			4,158			2,039			(103,931	)		(107,909	)

Total net interest expense		(98,570	)		(100,801	)		16,368			25,598			-			-			(82,202	)		(75,203	)

Depreciation and amortization		(240,869	)		(227,701	)		(2,737	)		(5,351	)		-			-			(243,606	)		(233,052	)

Material non-cash items other than depreciation and amortization		(25,835	)		(251,660	)		207			(129	)		-			-			(25,628	)		(251,789	)

Disposal of fixed assets and inventory losses		(13,376	)		(7,146	)		-			-			-			-			(13,376	)		(7,146	)
Doubtful accounts		(1,611	)		(2,009	)		(72	)		(1,110	)		-			-			(1,683	)		(3,119	)
Exchange differences		(10,876	)		(242,514	)		282			981			-			-			(10,594	)		(241,533	)
Result of indexation units		28			9			(3	)		-			-			-			25			9

Income (loss) atributable to owners of the parents		(36,076	)		(146,375	)		40,818			33,031			-			-			4,742			(113,344	)

Expenses for income tax		(32,274	)		102,653			(20,167	)		(20,449	)		-			-			(52,441	)		82,204
Segment profit / (loss)		(24,494	)		(136,520	)		40,818			33,031			-			-			16,324			(103,489	)
Assets of segment		17,695,949			16,839,969			1,458,767			1,145,684			(114,558	)		(10,626	)		19,040,158			17,975,027

Amount of non-current asset additions		320,658			505,142			-			-			-			-			320,658			505,142

Property, plant and equipment		260,555			491,317			-			-			-			-			260,555			491,317
Intangibles other than goodwill		60,103			13,825			-			-			-			-			60,103			13,825

Segment liabilities		14,913,843			14,629,948			620,844			426,398			(35,613	)		(33,974	)		15,499,074			15,022,372
Purchase of non-monetary assets of segment		240,861			399,116			-			-			-			-			240,861			399,116

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

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

	For the 9 months ended				For the 3 months ended
	At September 30,				At September 30,
	2016		2015		2016		2015
	ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited
Peru		457,375		502,093		169,785		179,655
Argentina		779,596		720,921		274,049		254,579
U.S.A.		698,432		768,812		245,443		245,855
Europe		516,830		520,162		181,470		173,102
Colombia		245,561		263,191		89,994		78,977
Brazil		2,112,749		2,761,112		813,527		869,570
Ecuador		150,497		181,765		49,341		59,125
Chili		1,120,763		1,185,981		371,045		388,118
Asia Pacific and rest of Latin America		485,079		524,882		171,247		174,483
Income from ordinary activities		6,566,882		7,428,919		2,365,901		2,423,464
Other operating income		390,894		289,899		153,625		91,358

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
	September 30,		December 31,
	2016		2015
	ThUS$		ThUS$
	Unaudited

Cash on hand		7,647		10,656
Bank balances		341,165		302,696
Overnight		257,262		267,764
Total Cash		606,074		581,116

Cash equivalents
Time deposits		64,567		145,781
Mutual funds		37,735		26,600
Total cash equivalents		102,302		172,381
Total cash and cash equivalents		708,376		753,497

Cash and cash equivalents are denominated in the following currencies:

	As of		As of
	September 30,		December 31,
Currency	2016		2015
	ThUS$		ThUS$
	Unaudited

Argentine peso		7,728		18,733
Brazilian real		234,045		106,219
Chilean peso		38,572		17,978
Colombian peso		6,360		14,601
Euro		8,059		10,663
US Dollar		389,939		564,214
Strong bolivar (*)		175		2,986
Other currencies		23,498		18,103
Total		708,376		753,497

(*) At December 31, 2015, the Company reflected an exchange rate loss of ThUS$ 40,968 consequence change in the SICAD rate of Venezuela (13.5 VEF/US$) at the SIMADI rate equivalent to 198.70 VEF/US$. As of September 30, 2016, the DICOM rate, which replaces SIMADI (February 2016), and to this date is 658.89 VEF/US$, Applied to cash and cash equivalents in VEF, represented ThUS$ 175 (ThUS$ 2,986 at December 31, 2015)

NOTE 7 - FINANCIAL INSTRUMENTS

7.1.

Financial instruments by category

As of September 30, 2016 (Unaudited)

							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		670,641		-		-		37,735		708,376
Other financial assets, current (*)		34,450		12,630		57,166		593,493		697,739
Trade and others accounts receivable, current		916,124		-		-		-		916,124
Accounts receivable from related entities, current		498		-		-		-		498
Other financial assets, non current (*)		104,183		-		594		-		104,777
Accounts receivable, non current		8,940		-		-		-		8,940
Total		1,734,836		12,630		57,760		631,228		2,436,454

	Other		Held
	financial		Hedge
Liabilities	liabilities		derivatives		Total
	ThUS$		ThUS$		ThUS$
Other liabilities, current		1,840,732		37,255		1,877,987
Trade and others accounts payable, current		1,539,219		-		1,539,219
Accounts payable to related entities, current		232		-		232
Other financial liabilities, non-current		7,224,985		9,742		7,234,727
Accounts payable, non-current		387,208		-		387,208
Total		10,992,376		46,997		11,039,373

(*) 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.

As of December 31, 2015

							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		726,897		-		-		26,600		753,497
Other financial assets, current (*)		27,148		16,578		158,812		448,810		651,348
Trade and others accounts receivable, current		796,974		-		-		-		796,974
Accounts receivable from related entities, current		183		-		-		-		183
Other financial assets, non current (*)		88,820		-		638		-		89,458
Accounts receivable, non current		10,715		-		-		-		10,715
Total		1,650,737		16,578		159,450		475,410		2,302,175

	Other		Held
	financial		Hedge
Liabilities	liabilities		derivatives		Total
	ThUS$		ThUS$		ThUS$
Other liabilities, current		1,510,146		134,089		1,644,235
Trade and others accounts payable, current		1,483,957		-		1,483,957
Accounts payable to related entities, current		447		-		447
Other financial liabilities, non-current		7,516,257		16,128		7,532,385
Accounts payable, non-current		417,050		-		417,050
Total		10,927,857		150,217		11,078,074

(*) 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.

7.2.

Financial instruments by currency

	As of		As of
	September 30,		December 31,
a) Assets	2016		2015
	ThUS$		ThUS$
	Unaudited

Cash and cash equivalents		708,376		753,497
Argentine peso		7,728		18,733
Brazilian real		234,045		106,219
Chilean peso		38,572		17,978
Colombian peso		6,360		14,601
Euro		8,059		10,663
US Dollar		389,939		564,214
Strong bolivar		175		2,986
Other currencies		23,498		18,103

Other financial assets (current and non-current)		802,516		740,806
Argentine peso		57,302		157,281
Brazilian real		594,286		449,934
Chilean peso		691		640
Colombian peso		475		1,670
Euro		7,458		614
US Dollar		139,928		128,620
Strong bolivar		78		22
Other currencies		2,298		2,025

Trade and other accounts receivable, current		916,124		796,974
Argentine peso		70,558		71,438
Brazilian real		335,876		191,037
Chilean peso		66,896		57,755
Colombian peso		5,130		13,208
Euro		29,333		30,006
US Dollar		352,484		344,153
Strong bolivar		27		7,225
Other currencies (*)		55,820		82,152

Accounts receivable, non-current		8,940		10,715
Brazilian real		627		521
Chilean peso		8,177		5,041
US Dollar		-		5,000
Other currencies (*)		136		153

Accounts receivable from related entities, current		498		183
Brazilian real		-		2
Chilean peso		498		181

Total assets		2,436,454		2,302,175
Argentine peso		135,588		247,452
Brazilian real		1,164,834		747,713
Chilean peso		114,834		81,595
Colombian peso		11,965		29,479
Euro		44,850		41,283
US Dollar		882,351		1,041,987
Strong bolivar		280		10,233
Other currencies		81,752		102,433

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

Liabilities

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

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

	As of			As of
	September 30,			December 31,
	2016			2015
	ThUS$			ThUS$
	Unaudited
Trade accounts receivable		827,877			685,733
Other accounts receivable		168,666			182,028
Total trade and other accounts receivable		996,543			867,761
Less: Allowance for impairment loss		(71,479	)		(60,072	)
Total net trade and accounts receivable		925,064			807,689
Less: non-current portion – accounts receivable		(8,940	)		(10,715	)
Trade and other accounts receivable, current		916,124			796,974

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
	September 30,		December 31,
	2016		2015
	ThUS$		ThUS$
	Unaudited
Fully performing		728,901		577,902
Matured accounts receivable, but not impaired
Expired from 1 to 90 days		20,482		28,717
Expired from 91 to 180 days		4,178		10,995
More than 180 days overdue (*)		2,837		8,047
Total matured accounts receivable, but not impaired		27,497		47,759

Matured accounts receivable and impaired
Judicial, pre-judicial collection and protested documents		37,394		24,304
Debtor under pre-judicial collection process and portfolio sensitization		34,085		35,768
Total matured accounts receivable and impaired		71,479		60,072
Total		827,877		685,733

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

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

	As of		As of
	September 30,		December 31,
Currency	2016		2015
	ThUS$		ThUS$
	Unaudited

Argentine Peso		70,558		71,438
Brazilian Real		336,503		191,558
Chilean Peso		75,073		62,796
Colombian peso		5,130		13,208
Euro		29,333		30,006
US Dollar		352,484		349,153
Strong bolivar		27		7,225
Other currency (*)		55,956		82,305
Total		925,064		807,689

(*) Other currencies
Australian Dollar		13,084		26,185
Chinese Yuan		956		4,282
Danish Krone		341		164
Pound Sterling		6,763		7,228
Indian Rupee		2,671		3,070
Japanese Yen		5,489		4,343
Norwegian Kroner		393		221
Swiss Franc		1,693		1,919
Korean Won		4,236		4,462
New Taiwanese Dollar		764		3,690
Other currencies		19,566		26,741
Total		55,956		82,305

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	%

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 September 30, 2015 (Unaudited)		(71,042	)		613		7,255			(63,174	)
From October 1 to December 31, 2015		(63,174	)		9,507		(6,405	)		(60,072	)
From January 1 to September 30, 2016 (Unaudited)		(60,072	)		18,052		(29,459	)		(71,479	)

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 September 30, 2016

As of December 31, 2015

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$

Unaudited

Trade accounts receivable

827,877

(71,479

)

756,398

685,733

(60,072

)

625,661

Other accounts receivable

168,666

182,028

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.

NOTE 9 - ACCOUNTS RECEIVABLE FROM/PAYABLE TO RELATED ENTITIES

(a)

Accounts Receivable

As of

Country

September 30,

December 31,

Tax No.

Related party

Relationship

of origin

Currency

2016

ThUS$

Unaudited

78.591.370-1

Bethia S.A. and Subsidiaries

Related director

Chile

CLP

486

167

87.752.000-5

Granja Marina Tornagaleones S.A.

Common shareholder

Chile

CLP

Foreign

TAM Aviação Executiva e Taxi Aéreo S.A.

Related director

Brazil

BRL

Total

498

183

(b)

Accounts payable

As of

Country

September 30,

December 31,

Tax No.

Related party

Relationship

of origin

Currency

2016

2015

ThUS$

Unaudited

65.216.000-K

Viajes Falabella Ltda.

Related director

Chile

CLP

126

Foreign

Consultoría Administrativa Profesional S.A. de C.V.

Associate

Mexico

MXN

342

65.216.000-K

Comunidad Mujer

Related director

Chile

CLP

79.773.440-3

TAM Aviação Executiva e Taxi Aéreo S.A.

Related director

Chile

BRL

78.591.370-1

Bethia S.A. and Subsidiaries

Related director

Chile

CLP

Foreign

Inversora Aeronaútica Argentina

Related director

Argentina

US$

Total

232

447

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.

NOTE 10 -INVENTORIES

	As of		As of
	September 30,		December 31,
	2016		2015
	ThUS$		ThUS$
	Unaudited

Technical stock		186,410		192,930
Non-technical stock		36,404		31,978
Total		222,814		224,908

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 that as of September 30, 2016 amounts to ThUS$ 25,464 (ThUS$ 15,892 at December 31, 2015). The resulting amounts do not exceed the respective net realizable values.

As of September 30, 2016, the Company recorded ThUS$ 102,344 (ThUS$ 122,248 at September 30, 2015) within the income statement, mainly due to in-flight consumption and maintenance, which forms part of Cost of sales.

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
	September 30,		December 31,		September 30,		December 31,		September 30,		December 31,
	2016		2015		2016		2015		2016		2015
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited				Unaudited				Unaudited
(a) Other financial assets

Private investment funds		593,493		448,810		-		-		593,493		448,810
Deposits in guarantee (aircraft)		14,843		16,532		59,265		58,483		74,108		75,015
Guarantees for margins of derivatives		3,848		4,456		-		-		3,848		4,456
Other investments		-		-		594		638		594		638
Domestic and foreign bonds		57,166		158,812		-		-		57,166		158,812
Other guarantees given		15,759		6,160		44,918		30,337		60,677		36,497
Subtotal of other financial assets		685,109		634,770		104,777		89,458		789,886		724,228

(b) Hedging assets

Interest accrued since the last payment date of Cross currency swap		92		397		-		-		92		397
Fair value of foreign currency derivatives (*)		2,286		9,888		-		-		2,286		9,888
Fair value of fuel price derivatives		10,252		6,293		-		-		10,252		6,293
Subtotal of hedging assets		12,630		16,578		-		-		12,630		16,578
Total Other Financial Assets		697,739		651,348		104,777		89,458		802,516		740,806

(*) The foreign currency derivatives correspond to forward and combination of options.

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

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
	September 30,		December 31,		September 30,		December 31,		September 30,		December 31,
	2016		2015		2016		2015		2016		2015
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited				Unaudited				Unaudited
(a) Advance payments

Aircraft leases		49,424		33,305		16,424		22,569		65,848		55,874
Aircraft insurance and other		21,505		12,408		-		-		21,505		12,408
Others		7,753		16,256		27,616		33,781		35,369		50,037
Subtotal advance payments		78,682		61,969		44,040		56,350		122,722		118,319

(b) Other assets

Aircraft maintenance reserve (*)		53,345		99,112		117,104		64,366		170,449		163,478
Sales tax		152,650		158,134		43,932		45,061		196,582		203,195
Other taxes		2,946		4,295		-		-		2,946		4,295
Contributions to Société Internationale de Télécommunications Aéronautiques ("SITA")		450		505		547		547		997		1,052
Judicial deposits		-		-		124,114		67,980		124,114		67,980
Others		963		6,001		1,802		1,159		2,765		7,160
Subtotal other assets		210,354		268,047		287,499		179,113		497,853		447,160
Total Other Non - Financial Assets		289,036		330,016		331,539		235,463		620,575		565,479

(*) 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 (5 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 acquisition of TAM in June 2012, the cost of aircraft maintenance has been higher than the related maintenance reserves for all aircraft.

As of September 30, 2016, LATAM had ThUS$ 170,449 in maintenance reserves (ThUS$ 163,478 at December 31, 2015), corresponding to 9 aircraft out of a total fleet of 339 (9 aircraft out of a total fleet of 331 at December 31, 2015). All of the Company’s aircraft leases containing provisions for maintenance reserves will expire fully by 2023.

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 September 30, 2016 and December 31, 2015 are detailed below:

	As of		As of
	September 30,		December 31,
	2016		2015
	ThUS$		ThUS$
	Unaudited
Aircraft		23,947		263
Engines		15,144		272
Rotables		1,081		1,060
Scrapped aircraft		614		365
Total		40,786		1,960

During the first quarter of 2016, two Airbus A319 aircraft, two Airbus A320 aircraft, two Airbus A330 aircraft and six spare engines were reclassified from Property, plant and equipment to Non-current assets or groups of assets for disposal classified as held for sale. As a result, an adjustment of US$ 5 million was recorded to write down these assets to their net realizable value.

During the third quarter of 2016, two Airbus A319 aircraft, one Airbus A320 aircraft and two Airbus A330 aircraft were sold.

The balances are presented at the lower of book value and fair value less cost to sell.

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

Country of

Functional

September 30,

December 31,

Name of significant subsidiary

incorporation

currency

2016

2015

Unaudited

Lan Perú S.A.

Peru

US$

70.00000

Lan Cargo S.A.

Chile

US$

99.89803

Lan Argentina S.A.

Argentina

ARS

95.85660

94.99055

Transporte Aéreo S.A.

Chile

US$

99.89804

Aerolane Líneas Aéreas Nacionales del Ecuador S.A.

Ecuador

US$

100.00000

Aerovías de Integración Regional, AIRES S.A.

Colombia

COP

99.19061

99.01646

TAM S.A.

Brazil

BRL

99.99938

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

Summary financial information of significant subsidiaries

	Statement of financial position as of September 30, 2016										Results for the period ended September 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.		337,474		315,682		21,792		322,264		320,927		1,337		727,869		1,847
Lan Cargo S.A.		448,372		107,685		340,687		201,337		164,949		36,388		186,072		(19,086	)
Lan Argentina S.A.		166,369		148,987		17,382		172,162		169,724		2,438		276,530		(25,413	)
Transporte Aéreo S.A.		321,072		29,267		291,805		109,321		43,292		66,029		211,424		3,177
Aerolane Líneas Aéreas Nacionales del Ecuador S.A.		105,133		62,386		42,747		92,676		87,603		5,073		164,361		2,614
Aerovías de Integración Regional, AIRES S.A.		131,501		55,793		75,708		88,195		76,828		11,367		201,806		(17,370	)
TAM S.A. (*)		5,442,326		1,725,555		3,716,771		4,845,623		2,849,228		1,996,395		2,977,791		22,345

	Statement of financial position as of December 31, 2015										Results for the period ended September 30, 2015
	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.		255,691		232,547		23,144		240,938		239,521		1,417		815,691		(1,793	)
Lan Cargo S.A.		483,033		159,294		323,739		217,037		147,423		69,614		207,538		(56,973	)
Lan Argentina S.A.		195,756		180,558		15,198		170,384		168,126		2,258		328,172		10,152
Transporte Aéreo S.A.		331,117		41,756		289,361		122,666		44,495		78,171		247,727		8,395
Aerolane Líneas Aéreas Nacionales del Ecuador S.A.		126,001		80,641		45,360		116,153		111,245		4,908		186,160		1,813
Aerovías de Integración Regional, AIRES S.A.		130,039		62,937		67,102		75,003		64,829		10,174		215,385		(28,670	)
TAM S.A. (*)		4,711,316		1,350,377		3,360,939		4,199,223		1,963,400		2,235,823		3,601,767		(171,609	)

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

(b)

Non-controlling interest

			As of		As of		As of			As of
Equity		Country	September 30,		December 31,		September 30,			December 31,
	Tax No.	of origin	2016		2015		2016			2015
			%		%		ThUS$			ThUS$
			Unaudited				Unaudited
Lan Perú S.A	0-E	Peru		30.00000		30.00000		4,563			4,426
Lan Cargo S.A. and Subsidiaries	93.383.000-4	Chile		0.10605		0.10605		621			974
Promotora Aérea Latinoamericana S.A. and Subsidiaries	0-E	Mexico		51.00000		51.00000		3,415			3,084
Inversora Cordillera S.A. and Subsidiaries	0-E	Argentina		0.70422		0.70422		(2,590	)		(1,386	)
Lan Argentina S.A.	0-E	Argentina		0.13440		1.00000		1,657			29
Americonsult de Guatemala S.A.	0-E	Guatemala		1.00000		1.00000		2			5
Americonsult Costa Rica S.A.	0-E	Costa Rica		1.00000		1.00000		11			12
Linea Aérea Carguera de Colombiana S.A.	0-E	Colombia		10.00000		10.00000		(847	)		(811	)
Aerolíneas Regionales de Integración Aires S.A.	0-E	Colombia		0.80939		0.98307		425			540
Transportes Aereos del Mercosur S.A.	0-E	Paraguay		5.02000		5.02000		1,736			1,256
Multiplus S.A.	0-E	Brazil		27.26000		27.26000		80,084			72,884
Total								89,077			81,013

			As of				For the 9 months ended						For the 3 months ended
Incomes		Country	September 30,				September 30,						September 30,
	Tax No.	of origin	2016		2015		2016			2015			2016			2015
			%		%		ThUS$			ThUS$			ThUS$			ThUS$
			Unaudited
Lan Perú S.A	0-E	Peru		30.00000		30.00000		554			(538	)		741			114
Lan Cargo S.A. and Subsidiaries	93.383.000-4	Chile		0.10605		0.10605		(7	)		(53	)		-			(35	)
Promotora Aerea Latinoamericana S.A. and Subsidiaries	0-E	Mexico		51.00000		51.00000		337			1,829			(87	)		322
Inversora Cordillera S.A. and Subsidiaries	0-E	Argentina		0.70422		0.70422		272			202			92			68
Lan Argentina S.A.	0-E	Argentina		0.13440		1.00000		58			44			19			15
Americonsult de Guatemala S.A.	0-E	Guatemala		1.00000		1.00000		(4	)		1			(4	)		-
Americonsult Costa Rica S.A.	0-E	Costa Rica		1.00000		1.00000		-			4			-			1
Linea Aérea Carguera de Colombiana S.A.	0-E	Colombia		10.00000		10.00000		(36	)		332			(335	)		379
Aerolíneas Regionales de Integración Aires S.A.	0-E	Colombia		0.80939		0.98307		(171	)		(282	)		(81	)		(145	)
Transportes Aereos del Mercosur S.A.	0-E	Paraguay		5.02000		5.02000		160			(26	)		110			132
Multiplus S.A.	0-E	Brazil		27.26000		27.26000		31,054			27,721			11,127			9,004
Total								32,217			29,234			11,582			9,855

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
	September 30,		December 31,		September 30,		December 31,
	2016		2015		2016		2015
	ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited				Unaudited
Airport slots		982,740		816,987		982,740		816,987
Loyalty program		327,559		272,312		327,559		272,312
Computer software		160,725		104,258		412,649		324,043
Developing software		71,697		74,887		71,697		74,887
Trademarks		63,730		52,981		63,730		52,981
Other assets		-		-		808		808
Total		1,606,451		1,321,425		1,859,183		1,542,018

Movement in Intangible assets other than goodwill:

	Computer									Trademarks
	software			Developing			Airport			and loyalty
	Net			software			slots (*)			program (*)			Total
	ThUS$			ThUS$			ThUS$			ThUS$			ThUS$
Opening balance as of January 1, 2015		126,797			74,050			1,201,028			478,204			1,880,079
Additions		4,218			27,289			-			-			31,507
Withdrawals		(3,429	)		-			-			-			(3,429	)
Transfer software		15,552			(15,750	)		-			-			(198	)
Foreing exchange		(15,480	)		(17,383	)		(398,046	)		(158,486	)		(589,395	)
Amortization		(31,903	)		-			-			-			(31,903	)
Closing balance as of September 30, 2015 (Unaudited)		95,755			68,206			802,982			319,718			1,286,661

Opening balance as of October 1, 2015		95,755			68,206			802,982			319,718			1,286,661
Additions		736			20,981			-			-			21,717
Withdrawals		(1,183	)		(162	)		-			(1	)		(1,346	)
Transfer software		13,174			(14,676	)		-			-			(1,502	)
Foreing exchange		609			538			14,005			5,576			20,728
Amortization		(4,833	)		-			-			-			(4,833	)
Closing balance as of December 31, 2015		104,258			74,887			816,987			325,293			1,321,425

Opening balance as of January 1, 2016		104,258			74,887			816,987			325,293			1,321,425
Additions		6,082			57,004			-			-			63,086
Withdrawals		(736	)		(185	)		-			-			(921	)
Transfer software		78,003			(67,150	)		-			-			10,853
Foreing exchange		6,066			7,141			165,753			65,996			244,956
Amortization		(32,948	)		-			-			-			(32,948	)
Closing balance as of September 30, 2016 (Unaudited)		160,725			71,697			982,740			391,289			1,606,451

The amortization of the period is shown in the consolidated statement of income in administrative expenses. The accumulated amortization of computer programs as of September 30, 2016 amounts to ThUS$ 252,732 (ThUS$ 220,593 at December 31, 2015).

(*) See Note 2.5

NOTE 16 – GOODWILL

The Goodwill amount at September 30, 2016 is ThUS$ 2,723,629 (ThUS$ 2,280,575 at December 31, 2015). 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, 2015		2,658,503			654,898			3,313,401
Increase (decrease) due to exchange rate differences		(851,485	)		(217,047	)		(1,068,532	)
Closing balance as of September 30, 2015 (Unaudited)		1,807,018			437,851			2,244,869

Opening balance as of October 1, 2015		1,807,018			437,851			2,244,869
Increase (decrease) due to exchange rate differences		28,070			7,636			35,706
Closing balance as of December 31, 2015		1,835,088			445,487			2,280,575

Opening balance as of January 1, 2016		1,835,088			445,487			2,280,575
Increase (decrease) due to exchange rate differences		352,672			90,382			443,054
Closing balance as of September 30, 2016 (Unaudited)		2,187,760			535,869			2,723,629

The Company has two cash- generating units (CGUs), confirming the existence of two cash- generating units: “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, before 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. Base on growth expectation and long-term investment cycles, usually in the industry, these calculations use projections or ten years.

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 of them before tax 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, 2015 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)	%	1.5 and 2.5	4.7 and 6.4
Exchange rate (1)	R$/US$	4.15 and 5.21	4.15 and 5.21
Discount rate based on the weighted average cost of capital (WACC)	%	10.5 and 11.5	-
Discount rate based on cost of equity (CoE)	%	-	19.0 and 23.0
Fuel Price from futures price curves commodities markets	US$/barril	60-70	-

(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		CoE		growth rate
	%		%		%
Air transportation CGU		11.5		-		1.5
Coalition and loyalty program Multiplus CGU		-		23.0		4.4

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

As of September 30, 2016 have been identified impairment indications for the Air Transportation CGU. The recoverable value was determined using the following assumptions presented below:

		Air transportation
		CGU
Annual growth rate (Terminal)	%	1.7 and 2.0
Exchange rate (1)	R$/US$	3.73 and 4.40
Discount rate based on the weighted average cost of capital (WACC)	%	8.56 and 9.56
Fuel Price from futures price curves commodities markets	US$/barril	53-76

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

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

			Decrease
	Increase		Minimum
	Maximum		terminal
	WACC		growth rate
	%		%
Air transportation CGU		9.56		1.7

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

At June 30, 2016, have not been any indications of impairment requiring an impartment test for Coalition and loyalty program Multiplus CGU.

At September 30, 2016, have not been any indications of impairment requiring an impartment test.

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
	September 30,		December 31,		September 30,			December 31,			September 30,		December 31,
	2016		2015		2016			2015			2016		2015
	ThUS$		ThUS$		ThUS$			ThUS$			ThUS$		ThUS$
	Unaudited				Unaudited						Unaudited
Construction in progress (*)		561,153		1,142,812		-			-			561,153		1,142,812
Land		50,340		45,313		-			-			50,340		45,313
Buildings		163,220		131,816		(45,861	)		(40,325	)		117,359		91,491
Plant and equipment		9,897,407		9,683,764		(2,070,110	)		(2,392,463	)		7,827,297		7,291,301
Own aircraft		9,239,991		9,118,396		(1,851,216	)		(2,198,682	)		7,388,775		6,919,714
Other (**)		657,416		565,368		(218,894	)		(193,781	)		438,522		371,587
Machinery		42,663		36,569		(27,338	)		(21,220	)		15,325		15,349
Information technology equipment		163,405		154,093		(122,376	)		(110,204	)		41,029		43,889
Fixed installations and accessories		211,694		179,026		(107,384	)		(90,068	)		104,310		88,958
Motor vehicles		106,762		99,997		(74,095	)		(64,047	)		32,667		35,950
Leasehold improvements		166,862		124,307		(80,989	)		(70,219	)		85,873		54,088
Other property, plants and equipment		3,317,583		3,279,902		(1,253,354	)		(1,150,396	)		2,064,229		2,129,506
Financial leasing aircraft		3,152,986		3,151,405		(1,217,856	)		(1,120,682	)		1,935,130		2,030,723
Other		164,597		128,497		(35,498	)		(29,714	)		129,099		98,783
Total		14,681,089		14,877,599		(3,781,507	)		(3,938,942	)		10,899,582		10,938,657

(*) It includes pre-delivery payments to aircraft manufacturers for ThUS$ 523,455 (ThUS$ 1,016,007 as of December 31, 2015)

(**) Mainly considers rotable and tools.

(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, 2015		937,279			57,988			167,006			6,954,089			51,009			43,783			1,965			56,523			2,503,434			10,773,076
Additions		26,970			-			-			706,106			9,978			1,334			228			11,408			44,141			800,165
Disposals		-			-			(500	)		(73,019	)(1)		(26	)		-			(6	)		-			(11	)		(73,562	)
Retirements		(38	)		-			-			(26,188	)		(87	)		(207	)		(4	)		-			(5,876	)		(32,400	)
Depreciation expenses		-			-			(6,385	)		(382,418	)		(12,578	)		(8,155	)		(280	)		(10,751	)		(134,464	)		(555,031	)
Foreing exchange		104			(12,160	)		(19,311	)		(151,242	)		(5,946	)		(12,442	)		(453	)		(2,458	)		(243,467	)		(447,375	)
Other increases (decreases)		129,268			(1,066	)		(54,745	)		(30,248	)		(330	)		62,890			308			(3,069	)		(9,871	)		93,137
Changes, total		156,304			(13,226	)		(80,941	)		42,991			(8,989	)		43,420			(207	)		(4,870	)		(349,548	)		(215,066	)
Closing balance as of September 30, 2015 (Unaudited)		1,093,583			44,762			86,065			6,997,080			42,020			87,203			1,758			51,653			2,153,886			10,558,010
Opening balance as of October 1, 2015		1,093,583			44,762			86,065			6,997,080			42,020			87,203			1,758			51,653			2,153,886			10,558,010
Additions		12,741			-			439			598,093			5,344			358			52			1,780			20,085			638,892
Disposals		-			-			-			(3,656	)		(1	)		-			(2	)		-			-			(3,659	)
Retirements		(1,224	)		-			(956	)		(12,052	)		(17	)		(269	)		-			-			(3,026	)		(17,544	)
Depreciation expenses		-			-			(776	)		(139,270	)		(3,618	)		(3,494	)		(98	)		(3,222	)		(40,010	)		(190,488	)
Foreing exchange		(1,036	)		374			1,063			21,309			(180	)		(827	)		(185	)		799			(9,242	)		12,075
Other increases (decreases)		38,748			177			5,656			(120,429	)		341			5,987			-			3,078			7,813			(58,629	)
Changes, total		49,229			551			5,426			343,995			1,869			1,755			(233	)		2,435			(24,380	)		380,647
Closing balance as of December 31, 2015		1,142,812			45,313			91,491			7,341,075			43,889			88,958			1,525			54,088			2,129,506			10,938,657
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		12,479			-			272			1,037,644			5,288			99			5			28,224			10,258			1,094,269
Disposals		-			-			-			(16,908	)(2)		(59	)		-			-			-			-			(16,967	)
Retirements		(117	)		-			-			(35,371	)		(47	)		(696	)		-			-			(4,318	)		(40,549	)
Depreciation expenses		-			-			(4,304	)		(418,814	)		(11,733	)		(10,335	)		(224	)		(16,656	)		(97,831	)		(559,897	)
Foreing exchange		5,140			5,027			2,653			53,119			3,076			9,796			230			2,925			95,314			177,280
Other increases (decreases)		(599,161	)		-			27,247			(86,992	)(3)		615			16,488			-			17,292			(68,700	)		(693,211	)
Changes, total		(581,659	)		5,027			25,868			532,678			(2,860	)		15,352			11			31,785			(65,277	)		(39,075	)
Closing balance as of September 30, 2016 (Unaudited)		561,153			50,340			117,359			7,873,753			41,029			104,310			1,536			85,873			2,064,229			10,899,582

(1)

During the first half of 2015 three Airbus A340 aircraft were sold.

During the second half of 2015 seven Dash-200 aircraft were sold.

During the second half of 2015 two Airbus A319 aircraft were sold.

(2)

During the first quarter of 2016 one Airbus A330 aircraft were sold.

(3)

During the first half of 2016 two Airbus A319 aircraft, two Airbus A320 aircraft and two Airbus A330 aircraft were reclassified to non-current assets and disposal group classified as held for sale (See Note 13).

(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
		September 30,			December 31,			September 30,		December 31,		September 30,			December 31,
Aircraft	Model	2016			2015			2016		2015		2016			2015
		Unaudited						Unaudited				Unaudited
Boeing 767	300ER		34			34			3		4		37			38
Boeing 767	300F		8	(1)		8	(1)		3		3		11	(1)		11	(1)
Boeing 777	300ER		4			4			6		6		10			10
Boeing 777	Freighter		2	(2)		2	(2)		2		2		4	(2)		4	(2)
Boeing 787	800		6			6			4		4		10			10
Boeing 787	900		4			3			8		4		12			7
Airbus A319	100		36			38			12		12		48			50
Airbus A320	200		93			95			56		59		149			154
Airbus A320	NEO		-			-			1		-		1			-
Airbus A321	200		30			26			16		10		46			36
Airbus A330	200		4			8			2		2		6			10
Airbus A350	900		4			1			1		-		5			1
Total			225			225			114		106		339			331

(1) Three aircraft leased to FEDEX

(2) One aircraft leased to DHL

	Method	Useful life (years)
		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		20
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		20

(*) Except for certain technical components, which are depreciated 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.

The depreciation charged to income in the period, which is included in the consolidated statement of income, amounts to ThUS$ 559,897 (ThUS$ 555,031 at September 30, 2015). Depreciation charges for the year are recognized in Cost of sales and administrative expenses in the consolidated statement of income.

(d)

Additional information regarding Property, plant and equipment:

(i)

Property, plant and equipment pledged as guarantee:

In the period ended September 30, 2016, direct guarantees by five Airbus A319-100 aircraft, four Airbus A321-200 aircraft, two Airbus A320-200 aircraft, one Boeing 787-9 aircraft and three Airbus A350-941aircraft were added.

Description of Property, plant and equipment pledged as guarantee:

			As of				As of
			September 30,				December 31,
			2016				2015
Creditor of	Assets		Existing		Book		Existing		Book
guarantee	committed	Fleet	Debt		Value		Debt		Value
			ThUS$		ThUS$		ThUS$		ThUS$
			Unaudited
Wilmington Trust	Aircraft and engines	Airbus A321 / A350		605,110		731,650		374,619		478,667
Company		Boeing 767		835,790		1,181,712		907,356		1,220,541
		Boeing 787		758,269		910,249		712,059		834,567
Banco Santander S.A.	Aircraft and engines	Airbus A319		52,640		93,431		58,527		95,387
		Airbus A320		478,515		721,585		524,682		749,192
		Airbus A321		33,731		44,705		36,334		45,380
BNP Paribas	Aircraft and engines	Airbus A319		139,523		231,480		154,828		229,798
		Airbus A320 / A350		132,555		185,160		145,506		192,957
Credit Agricole	Aircraft and engines	Airbus A319		27,791		72,815		37,755		84,129
		Airbus A320		82,811		203,380		115,339		214,726
		Airbus A321		43,130		94,147		50,591		97,257
JP Morgan	Aircraft and engines	Boeing 777		198,357		255,175		215,265		263,366
Wells Fargo	Aircraft and engines	Airbus A320		259,245		340,155		279,478		348,271
Bank of Utah	Aircraft and engines	Airbus A320		499,166		545,442		240,094		312,573
Natixis	Aircraft and engines	Airbus A320		48,425		67,551		56,223		81,355
		Airbus A321		386,278		520,979		413,201		542,594
Citibank N. A.	Aircraft and engines	Airbus A320		115,260		168,007		127,135		172,918
		Airbus A321		44,536		70,905		49,464		73,122
HSBC	Aircraft and engines	Airbus A320		-		-		53,583		64,241
KfW IPEX-Bank	Aircraft and engines	Airbus A319		7,959		6,707		-		-
		Airbus A320		30,490		36,559		13,593		16,838
Airbus Financial Services	Aircraft and engines	Airbus A319		31,981		33,360		-		-
PK AirFinance US, Inc.	Aircraft and engines	Airbus A320		56,769		46,929		62,514		48,691
Total direct guarantee				4,868,331		6,562,083		4,628,146		6,166,570

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 September 30, 2016 amounted to ThUS$ 1,024,501 (ThUS$ 1,311,088 at December 31, 2015). The book value of assets with indirect guarantees as of September 30, 2016 amounts to ThUS$ 1,900,475 (ThUS$ 2,001,605 as of December 31, 2015).

(ii)

Commitments and others

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

	As of		As of
	September 30,		December 31,
	2016		2015
	ThUS$		ThUS$
	Unaudited
Gross book value of fully depreciated property, plant and equipment still in use		112,511		129,766
Commitments for the acquisition of aircraft (*)		16,100,000		19,800,000

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

Purchase commitment of aircraft

	Year of delivery
Manufacturer	2016		2017		2018		2019		2020		2021		2022		Total
Airbus S.A.S.		5		5		16		14		16		21		2		79
A320-NEO		1		5		5		8		8		8		-		35
A321		2		-		1		-		-		-		-		3
A321-NEO		-		-		6		2		6		5		-		19
A350-1000		-		-		-		2		2		8		2		14
A350-900		2		-		4		2		-		-		-		8
The Boeing Company		-		1		4		6		-		-		-		11
B777		-		-		-		2		-		-		-		2
B787-9		-		1		4		4		-		-		-		9
Total		5		6		20		20		16		21		2		90

In September 2015 the change of 6 Airbus A350-900 aircraft for 6 Airbus A350-1000 aircraft was signed. Additionally, in November 2015 the change of 6 Airbus A350-900 aircraft to 6 Airbus A350-1000 aircraft was signed. In April 2016 the change of 4 Airbus A320 NEO aircraft to 4 Airbus A321 NEO aircraft was signed. In August 2016 a cancellation of 12 Airbus A320 NEO aircraft and the change of 2 Airbus A350-900 to 2 Airbus A350-1000 were signed.

As of September 30, 2016, as a result of the different aircraft purchase agreements signed with Airbus S.A.S., 57 aircraft Airbus A320 family, with deliveries between 2016 and 2021, and 22 Airbus aircraft A350 family with deliveries between 2016 and 2022 remain to be received.

The approximate amount is ThUS$ 13,300,000, according to the manufacturer’s price list. Additionally, the Company has valid purchase options for 4 Airbus A350 aircraft.

In April 2015 the change of 8 Boeing 787-8 aircraft for 8 Boeing 787-8 aircraft was signed. In May 2016 the change of 4 Boeing 787-8 aircraft for 4 Boeing 787-9 aircraft was signed.

As of September 30, 2016, and as a result of different aircraft purchase contracts signed with The Boeing Company, a total of 9 Boeing 787 Dreamliner aircraft, with delivery dates between 2017 and 2019, and 2 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.

(iii)

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

		For the periods ended
		September 30,
		2016		2015
		Unaudited
Average rate of capitalization of capitalized interest costs	%		3.38		2.92
Costs of capitalized interest	ThUS$		4,034		15,835

(iv)

Financial leases

The detail of the main financial leases is as follows:

			As of		As of
			September 30,		December 31,
Lessor	Aircraft	Model	2016		2015
			Unaudited
Agonandra Statutory Trust	Airbus A320	200		-		2
Becacina Leasing LLC	Boeing 767	300ER		1		1
Caiquen Leasing LLC	Boeing 767	300F		1		1
Cernicalo Leasing LLC	Boeing 767	300F		2		2
Chirihue Leasing Trust	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
Forderum Holding B.V. (GECAS)	Airbus A320	200		2		2
Garza Leasing LLC	Boeing 767	300ER		1		1
General Electric Capital Corporation	Airbus A330	200		3		3
Intraelo BETA Corpotation (KFW)	Airbus A320	200		1		1
Juliana Leasing Limited	Airbus A320	200		-		2
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
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
TMF Interlease Aviation B.V.	Airbus A330	200		-		1
TMF Interlease Aviation II B.V.	Airbus A319	100		-		5
TMF Interlease Aviation II B.V.	Airbus A320	200		-		2
Tricahue Leasing LLC	Boeing 767	300ER		3		3
Wacapou Leasing S.A	Airbus A320	200		1		1

Total				54		66

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.

Fixed assets acquired under financial leases are classified as Other property, plant and equipment. As of September 30, 2016 the Company had fifty four aircrafts (sixty six aircraft as of December 31, 2015).

As of September 30, 2016, as a result of the transfer plan fleet of TAM Linhas Aéreas S.A. to LATAM Airlines Group S.A., the Company declined its number of aircraft leasing in five Airbus A319-100, six Airbus A320-200 and one Airbus A330-200 aircraft.

The book value of assets under financial leases as of September 30, 2016 amounts to ThUS$ 1,935,130 (ThUS$ 2,030,723 at December 31, 2015).

The minimum payments under financial leases are as follows:

	As of September 30, 2016 (Unaudited)							As of December 31, 2015
	Gross					Present		Gross					Present
	Value		Interest			Value		Value		Interest			Value
	ThUS$		ThUS$			ThUS$		ThUS$		ThUS$			ThUS$
No later than one year		318,868		(37,095	)		281,773		360,862		(47,492	)		313,370
Between one and five years		761,052		(49,937	)		711,115		1,003,237		(75,363	)		927,874
Over five years		51,502		(324	)		51,178		95,050		(1,406	)		93,644
Total		1,131,422		(87,356	)		1,044,066		1,459,149		(124,261	)		1,334,888

NOTE 18 - CURRENT AND DEFERRED TAXES

In the period ended September 30, 2016, the income tax provision was calculated at the rate of 24% for the business year 2016, in accordance with the recently enacted 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 must be taken at the latest 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.

(*) The Partially Integrated Taxation System is one of the tax regimes approved through the Tax Reform previously mentioned, which 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
	September 30,		December 31,		September 30,		December 31,		September 30,		December 31,
	2016		2015		2016		2015		2016		2015
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited				Unaudited				Unaudited
Provisional monthly payments (advances)		49,317		43,935		-		-		49,317		43,935
Other recoverable credits		25,255		20,080		25,629		25,629		50,884		45,709
Total assets by current tax		74,572		64,015		25,629		25,629		100,201		89,644

(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
	September 30,		December 31,		September 30,		December 31,		September 30,		December 31,
	2016		2015		2016		2015		2016		2015
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited				Unaudited				Unaudited
Income tax provision		27,092		19,001		-		-		27,092		19,001
Additional tax provision		4,643		377		-		-		4,643		377
Total liabilities by current tax		31,735		19,378		-		-		31,735		19,378

(b)

Deferred taxes

The balances of deferred tax are the following:

	Assets						Liabilities
	As of			As of			As of			As of
	September 30,			December 31,			September 30,			December 31,
Concept	2016			2015			2016			2015
	ThUS$			ThUS$			ThUS$			ThUS$
	Unaudited						Unaudited
Depreciation		(35,394	)		(14,243	)		1,343,868			1,116,748
Leased assets		(5,023	)		(25,299	)		193,192			226,003
Amortization		(5,779	)		(5,748	)		64,330			65,416
Provisions		180,789			210,992			(28,457	)		(167,545	)
Revaluation of financial instruments		-			709			(4,385	)		(7,575	)
Tax losses		250,812			212,067			(1,064,664	)		(797,715	)
Revaluation property, plant and equipment		-			-			-			(4,081	)
Intangibles		-			-			437,573			364,314
Others		4,261			(1,883	)		17,287			16,000
Total		389,666			376,595			958,744			811,565

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 September 30, 2015 (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		(871,640	)		(183,881	)		-			8,852			-		(1,046,669	)
Leased assets		(185,775	)		(18,844	)		-			8,087			-		(196,532	)
Amortization		(160,100	)		33,333			-			4,774			-		(121,993	)
Provisions		351,077			54,213			-			(131,437	)		-		273,853
Revaluation of financial instruments		12,806			28,743			(28,143	)		(3,295	)		-		10,111
Tax losses (*)		722,749			264,091			-			(34,581	)		-		952,259
Revaluation propety, plant and equipment		5,999			13,265			-			(15,253	)		-		4,011
Intangibles		(523,275	)		-			-			173,423			-		(349,852	)
Others		3,588			(1,769	)		-			(24,774	)		6,184		(16,771	)
Total		(644,571	)		189,151			(28,143	)		(14,204	)		6,184		(491,583	)

(b) From October 1 to December 31, 2015

	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		(1,046,669	)		(84,010	)		-		(312	)		-			(1,130,991	)
Leased assets		(196,532	)		(54,486	)		-		(284	)		-			(251,302	)
Amortization		(121,993	)		50,997			-		(168	)		-			(71,164	)
Provisions		273,853			96,149			3,911		4,624			-			378,537
Revaluation of financial instruments		10,111			(8,983	)		7,040		116			-			8,284
Tax losses (*)		952,259			56,306			-		1,217			-			1,009,782
Revaluation propety, plant and equipment		4,011			(466	)		-		536			-			4,081
Intangibles		(349,852	)		(8,362	)		-		(6,100	)		-			(364,314	)
Others		(16,771	)		34,608			-		(22,691	)		(13,029	)		(17,883	)
Total		(491,583	)		81,753			10,951		(23,062	)		(13,029	)		(434,970	)

	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	)		(244,585	)		-			(3,686	)		-		(1,379,262	)
Leased assets		(251,302	)		56,455			-			(3,368	)		-		(198,215	)
Amortization		(71,164	)		3,043			-			(1,988	)		-		(70,109	)
Provisions		378,537			(224,451	)		427			54,733			-		209,246
Revaluation of financial instruments		8,284			22,337			(27,608	)		1,372			-		4,385
Tax losses (*)		1,009,782			291,294			-			14,400			-		1,315,476
Revaluation propety, plant and equipment		4,081			(10,433	)		-			6,352			-		-
Intangibles		(364,314	)		(1,042	)		-			(72,217	)		-		(437,573	)
Others		(17,883	)		(16,903	)		-			20,536			1,224		(13,026	)
Total		(434,970	)		(124,285	)		(27,181	)		16,134			1,224		(569,078	)

Deferred tax assets not recognized:

	As of		As of
	September 30,		December 31,
	2016		2015
	ThUS$		ThUS$
	Unaudited
Tax losses		65,363		15,513
Total Deferred tax assets not recognized		65,363		15,513

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 September 30, 2016, the Company has not recognized deferred tax assets of ThUS$ 65,363 (ThUS$ 15,513 at December 31, 2015) according with a loss of ThUS$ 192,243 (ThUS$ 45,628 at December 31, 2015).

Deferred tax expense and current income taxes:

	For the 9 months ended					For the 3 months ended
	September 30,					September 30,
	2016		2015			2016		2015
	ThUS$		ThUS$			ThUS$		ThUS$
	Unaudited
Current tax expense
Current tax expense		71,083		69,672			24,145		28,163
Adjustment to previous period’s current tax		1,972		322			2,148		279
Total current tax expense, net		73,055		69,994			26,293		28,442

Deferred tax expense
Deferred expense for taxes related to the creation and reversal of temporary differences		124,285		(189,151	)		26,148		(110,646	)
Total deferred tax expense, net		124,285		(189,151	)		26,148		(110,646	)
Income tax expense		197,340		(119,157	)		52,441		(82,204	)

Composition of income tax expense (income):

	For the 9 months ended					For the 3 months ended
	September 30,					September 30,
	2016		2015			2016		2015
	ThUS$		ThUS$			ThUS$		ThUS$
	Unaudited
Current tax expense, net, foreign		66,395		68,044			25,491		27,713
Current tax expense, net, Chile		6,660		1,950			802		729
Total current tax expense, net		73,055		69,994			26,293		28,442

Deferred tax expense, net, foreign		97,199		(171,035	)		2,055		(95,815	)
Deferred tax expense, net, Chile		27,086		(18,116	)		24,093		(14,831	)
Deferred tax expense, net, total		124,285		(189,151	)		26,148		(110,646	)
Income tax expense		197,340		(119,157	)		52,441		(82,204	)

Profit before tax by the legal tax rate in Chile (24% and 22.5% at September 30, 2016 and 2015, respectively)

	For the 9 months ended						For the 3 months ended
	September 30,						September 30,
	2016			2015			2016			2015
	ThUS$			ThUS$			%			%
	Unaudited						Unaudited
Tax expense using the legal rate (*)		58,665			(72,489	)		24.00			22.50
Tax effect of rates in other jurisdictions		21,987			(24,946	)		9.00			7.74
Tax effect of non-taxable operating revenues		(41,683	)		(48,029	)		(17.05	)		14.91
Tax effect of disallowable expenses		149,584			26,825			61.20			(8.33	)
Other increases (decreases) in legal tax charge		8,787			(518	)		3.59			0.16
Total adjustments to tax expense using the legal rate		138,675			(46,668	)		56.74			14.48
Tax expense using the effective rate		197,340			(119,157	)		80.74			36.98

(*) 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 September 30, 2016 the Company presents the reconciliation of income tax expense and legal tax rate considering the rate increase.

Deferred taxes related to items charged to net equity:

	For the 9 months ended						For the 3 months ended
	September 30						September 30
	2016			2015			2016			2015
	ThUS$			ThUS$			ThUS$			ThUS$
	Unaudited
Aggregate deferred taxation of components of other comprehensive income		(27,181	)		(28,143	)		(10,624	)		8,252
Aggregate deferred taxation related to items charged to net equity		(467	)		2,139			1,280			713

NOTE 19 - OTHER FINANCIAL LIABILITIES

The composition of Other financial liabilities is as follows:

	As of		As of
	September 30,		December 31,
	2016		2015
	ThUS$		ThUS$
	Unaudited
Current
(a) Interest bearing loans		1,840,732		1,510,146
(b) Hedge derivatives		37,255		134,089
Total current		1,877,987		1,644,235

Non-current
(a) Interest bearing loans		7,224,985		7,516,257
(b) Hedge derivatives		9,742		16,128
Total non-current		7,234,727		7,532,385

(a) Interest bearing loans

Obligations with credit institutions and debt instruments:

	As of		As of
	September 30,		December 31,
	2016		2015
	ThUS$		ThUS$
	Unaudited
Current
Loans to exporters		252,696		387,409
Bank loans		288,543		80,188
Guaranteed obligations		582,819		591,148
Other guaranteed obligations		6,317		32,513
Subtotal bank loans		1,130,375		1,091,258

Obligation with the public		337,290		10,999
Financial leases		288,845		324,859
Other loans		84,222		83,030
Total current		1,840,732		1,510,146

Non-current
Bank loans		389,213		564,128
Guaranteed obligations		4,466,744		4,122,995
Other guaranteed obligations (1)		309,788		-
Subtotal bank loans		5,165,745		4,687,123
Obligation with the public (2)		996,387		1,294,882
Financial leases		757,726		1,015,779
Other loans		305,127		518,473
Total non-current		7,224,985		7,516,257
Total obligations with financial institutions		9,065,717		9,026,403

(1) On March 29, May 12 and September 8, 2016, LATAM Airlines Group S.A. performed the closing of a new financing - Revolving Credit Facility (RCF). The credit line will be guaranteed by TAM Linhas Aereas S.A. and Transporte Aereo S.A.

The total amount committed and disbursed to September 30, 2016 was for a total of MUS $ 313,000. The financing term is 3 years.

The line is secured with collateral asset basis; such collateral is composed of: aircraft, engines and spare parts

This funding requires must compliance with liquidity ratio and certain ratios of collateral.

(2) On June 9, 2015 LATAM Airlines Group S.A. has issued and placed on the international market under Rule 144-A and Regulation S of the securities laws of the United States of America, unsecured long-term bonds in the amount of US$ 500,000,000, maturing 2020, interest rate of 7.25% per annum.

As reported in the Essential Matter of May 20 and June 5, 2015, the Issuance and placement of the Bonds 144-A shall be: (i) finance the repurchase, conversion and redemption of secured long-term bonds issued by the company TAM Capital 2 Inc., under Rule 144-A and Regulation S of the securities laws of the United States of America, maturing 2020; (ii) in the event there is any remnant fund other general corporate purposes. The aforementioned bonds TAM Capital 2 Inc. were redeemed in whole (US$ 300,000,000) through a process of exchange for new bonds dated June 9, 2015 and then the remaining bonds were redeemed by running the prepay dated June 18, 2015.

(3) On September 29, TAM S.A. realizes financing amounting to US $ 200 million with the guarantee of approximately 18% ownership of the shares of Multiplus S.A., percentage subject to adjustment depending on the value of the stock as collateral. In conjunction with the structuring of the USD credit, the company executed a Cross Currency Swap for the same amount and term as the aforementioned financing to change the commitment currency from US$ to BRL.

All interest-bearing liabilities are recorded using the effective interest rate method. Under IFRS, the effective interest rate for loans with a fixed interest rate does not vary throughout the loan, while in the case of loans with variable interest rates, the effective rate changes on each date of reprising of the loan.

Currency balances that make the interest bearing loans:

	As of		As of
	September 30,		December 31,
	2016		2015
Currency	ThUS$		ThUS$
	Unaudited
Brazilian real		2,359		3,387
Chilean peso (U.F.)		174,170		210,423
US Dollar		8,889,188		8,812,593
Total		9,065,717		9,026,403

Interest-bearing loans due in installments to September 30, 2016 (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	US$	100,000	-	-	-	-	100,000	100,307	-	-	-	-	100,307	At Expiration	1.65	1.65
97.036.000-K	SANTANDER	Chile	US$	-	30,000	-	-	-	30,000	-	30,000	-	-	-	30,000	At Expiration	2.39	2.39
97.030.000-7	ESTADO	Chile	US$	40,000	-	-	-	-	40,000	40,079	-	-	-	-	40,079	At Expiration	1.65	1.65
97,003,000-K	BANCO DO BRASIL	Chile	US$	70,000	-	-	-	-	70,000	70,308	-	-	-	-	70,308	At Expiration	2.82	2.82
97.951.000-4	HSBC	Chile	US$	12,000	-	-	-	-	12,000	12,002	-	-	-	-	12,002	At Expiration	1.35	1.35

Bank loans
97.023.000-9	CORPBANCA	Chile	UF	19,470	58,409	74,924	21,944	-	174,747	20,149	58,409	73,757	21,855	-	174,170	Quarterly	4.10	4.10
0-E	BLADEX	U.S.A.	US$	5,000	5,000	30,000	7,500	-	47,500	5,762	5,000	29,625	7,438	-	47,825	Semiannual	4.80	4.80
0-E	DVB BANK SE	U.S.A.	US$	-	-	28,911	-	-	28,911	1	-	28,911	-	-	28,912	Quarterly	1.77	1.77
97.036.000-K	SANTANDER	Chile	US$	-	-	225,117	-	-	225,117	-	-	225,117	-	-	225,117	Quarterly	3.65	3.65

Obligations with the public
0-E	BANK OF NEW YORK	U.S.A.	US$	-	-	-	500,000	-	500,000	12,068	-	-	488,455	-	500,523	At Expiration	7.77	7.25

Guaranteed obligations
0-E	CREDIT AGRICOLE	France	US$	15,316	32,641	308,256	38,090	5,473	399,776	17,442	32,641	306,036	38,090	5,473	399,682	Quarterly	2.44	2.29
0-E	BNP PARIBAS	U.S.A.	US$	12,380	37,980	106,735	107,431	260,119	524,645	14,876	38,325	104,538	106,406	258,488	522,633	Quarterly	2.74	2.70
0-E	WELLS FARGO	U.S.A.	US$	31,309	94,764	258,960	268,319	434,302	1,087,654	35,160	94,764	233,719	257,408	427,042	1,048,093	Quarterly	2.35	1.66
0-E	WILMINGTON TRUST	U.S.A.	US$	17,227	48,595	133,842	140,850	644,049	984,563	22,667	48,596	129,295	138,398	639,485	978,441	Quarterly	4.25	4.25
0-E	CITIBANK	U.S.A.	US$	17,374	52,830	145,974	153,767	195,597	565,542	18,914	52,830	137,366	149,916	192,055	551,081	Quarterly	2.63	1.88
97.036.000-K	SANTANDER	Chile	US$	5,311	16,124	44,239	46,139	32,072	143,885	5,641	16,124	42,385	45,507	31,925	141,582	Quarterly	1.88	1.34
0-E	BTMU	U.S.A.	US$	2,767	8,419	23,243	24,474	29,854	88,757	2,971	8,418	21,931	23,951	29,624	86,895	Quarterly	2.19	1.59
0-E	APPLE BANK	U.S.A.	US$	1,360	4,134	11,440	12,065	15,115	44,114	1,527	4,134	10,787	11,803	14,995	43,246	Quarterly	2.14	1.54
0-E	US BANK	U.S.A.	US$	14,733	44,703	123,004	128,728	236,173	547,341	17,281	44,703	106,291	121,277	230,672	520,224	Quarterly	3.99	2.81
0-E	DEUTSCHE BANK	U.S.A.	US$	4,935	15,189	26,689	26,687	48,697	122,197	5,505	15,189	26,689	26,687	48,697	122,767	Quarterly	3.76	3.76
0-E	NATIXIS	France	US$	12,116	37,257	96,191	76,900	212,238	434,702	12,840	37,257	96,191	76,899	212,239	435,426	Quarterly	2.51	2.48
0-E	HSBC	U.S.A.	US$	695	2,118	5,837	6,130	9,781	24,561	760	2,118	5,837	6,130	9,781	24,626	Quarterly	2.88	2.07
0-E	PK AIRFINANCE	U.S.A.	US$	1,983	6,160	18,094	23,631	6,901	56,769	2,034	6,160	18,094	23,631	6,901	56,820	Quarterly	2.23	2.23
0-E	KFW IPEX-BANK	Germany	US$	2,259	6,935	18,002	11,253	-	38,449	2,288	6,935	18,002	11,253	-	38,478	Quarterly	2.36	2.36
0-E	AIRBUS FINANCIAL	U.S.A.	US$	1,782	5,433	15,140	9,626	-	31,981	1,832	5,433	15,140	9,626	-	32,031	Monthly	2.73	2.73
0-E	INVESTEC	England	US$	1,297	3,988	11,494	12,858	14,363	44,000	1,765	4,118	10,996	12,660	14,283	43,822	Semiannual	5.47	5.47
-	SWAP Aviones llegados	-	US$	429	1,142	1,878	267	-	3,716	429	1,142	1,878	267	-	3,716	Quarterly	-	-

Other guaranteed obligations
0-E	CITIBANK	U.S.A.	US$	-	-	313,000	-	-	313,000	199	-	309,788	-	-	309,987	Quarterly	3.35	2.85
0-E	DVB BANK SE	U.S.A.	US$	6,113	-	-	-	-	6,113	6,118	-	-	-	-	6,118	Quarterly	2.61	2.61

Financial leases
0-E	ING	U.S.A.	US$	6,675	15,463	32,605	15,631	-	70,374	7,281	15,463	31,983	15,577	-	70,304	Quarterly	5.53	4.89
0-E	CREDIT AGRICOLE	France	US$	1,732	5,333	1,824	-	-	8,889	1,761	5,333	1,824	-	-	8,918	Quarterly	1.66	1.66
0-E	CITIBANK	U.S.A.	US$	4,874	15,100	43,545	19,603	-	83,122	5,579	15,100	42,718	19,537	-	82,934	Quarterly	6.40	5.67
0-E	PEFCO	U.S.A.	US$	15,790	48,554	74,646	7,610	-	146,600	16,771	48,554	73,598	7,595	-	146,518	Quarterly	5.38	4.78
0-E	BNP PARIBAS	U.S.A.	US$	10,352	31,922	64,550	16,001	-	122,825	10,819	31,922	63,581	15,953	-	122,275	Quarterly	4.12	3.68
0-E	WELLS FARGO	U.S.A.	US$	4,636	14,143	39,525	42,302	7,355	107,961	4,990	14,143	38,433	42,022	7,345	106,933	Quarterly	3.98	3.54
0-E	DVB BANK SE	U.S.A.	US$	4,652	14,127	-	-	-	18,779	4,692	14,127	-	-	-	18,819	Quarterly	2.48	2.48

Other loans
0-E	CITIBANK (*)	U.S.A.	US$	21,350	61,898	182,134	126,356	-	391,738	22,324	61,898	179,034	126,093	-	389,349	Quarterly	6.00	6.00
	Total			465,917	718,361	2,459,799	1,844,162	2,152,089	7,640,328	505,142	718,836	2,383,544	1,804,434	2,129,005	7,540,961

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

Interest-bearing loans due in installments to September 30, 2016 (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	Holanda	US$	120	372	1,078	1,215	217	3,002	135	372	1,078	1,215	217	3,017	Monthly	6.01	6.01
0-E	CITIBANK	U.S.A	US$	-	200,000	-	-	-	200,000	(148)	198,863	-	-	-	198,715	Monthly	3.25	3.00
Obligation with the public
0-E	THE BANK OF NEW YORK	U.S.A	US$	-	300,000	-	500,000	-	800,000	23,646	301,576	4,119	503,813	-	833,154	At Expiration	8.17	8.00
Financial leases
0-E	AFS INVESTMENT IX LLC	U.S.A	US$	2,057	6,347	18,296	10,805	-	37,505	2,233	6,347	18,296	10,805	-	37,681	Monthly	1.25	1.25
0-E	DVB BANK SE	U.S.A	US$	119	282	-	-	-	401	119	282	-	-	-	401	Monthly	2.35	2.35
0-E	GENERAL ELECTRIC CAPITAL CORPORATION	U.S.A	US$	3,742	8,970	-	-	-	12,712	3,774	8,970	-	-	-	12,744	Monthly	2.14	2.14
0-E	KFW IPEX-BANK	Germany	US$	579	1,736	386	-	-	2,701	584	1,737	386	-	-	2,707	Monthly/Quarterly	2.64	2.64
0-E	NATIXIS	France	US$	1,424	6,896	18,294	40,208	41,731	108,553	1,867	6,896	18,294	40,208	41,731	108,996	Quarterly/Semiannual	4.74	4.74
0-E	PK AIRFINANCE US, INC.	U.S.A	US$	19,164	-	-	-	-	19,164	19,196	-	-	-	-	19,196	Monthly	2.60	2.60
0-E	WACAPOU LEASING S.A.	Luxemburg	US$	660	2,019	5,706	6,214	2,092	16,691	703	2,019	5,706	6,214	2,093	16,735	Quarterly	2.85	2.85
0-E	SOCIÉTÉ GÉNÉRALE MILAN BRANCH	Italy	US$	8,453	25,973	73,895	179,467	-	287,788	9,716	25,973	73,895	179,467	-	289,051	Quarterly	4.03	3.97
0-E	BANCO IBM S.A	Brazil	BRL	261	783	252	-	-	1,296	261	783	252	-	-	1,296	Monthly	14.13	14.13
0-E	HP FINANCIAL SERVICE	Brazil	BRL	218	222	-	-	-	440	217	222	-	-	-	439	Monthly	10.02	10.02
0-E	SOCIETE GENERALE	France	BRL	103	308	213	-	-	624	103	308	213	-	-	624	Monthly	14.13	14.13

	Total			36,900	553,908	118,120	737,909	44,040	1,490,877	62,406	554,348	122,239	741,722	44,041	1,524,756

	Total consolidado			502,817	1,272,269	2,577,919	2,582,071	2,196,129	9,131,205	567,548	1,273,184	2,505,783	2,546,156	2,173,046	9,065,717

Interest-bearing loans due in installments to December 31, 2015

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	US$	100,000	-	-	-	-	100,000	100,183	-	-	-	-	100,183	At Expiration	1.00	1.00
97.036.000-K	SANTANDER	Chile	US$	100,000	-	-	-	-	100,000	100,067	-	-	-	-	100,067	At Expiration	1.44	1.44
97.030.000-7	ESTADO	Chile	US$	55,000	-	-	-	-	55,000	55,088	-	-	-	-	55,088	At Expiration	1.05	1.05
97.004.000-5	CHILE	Chile	US$	50,000	-	-	-	-	50,000	50,006	-	-	-	-	50,006	At Expiration	1.42	1.42
97,003,000-K	BANCO DO BRASIL	Chile	US$	70,000	-	-	-	-	70,000	70,051	-	-	-	-	70,051	At Expiration	1.18	1.18
97.951.000-4	HSBC	Chile	US$	12,000	-	-	-	-	12,000	12,014	-	-	-	-	12,014	At Expiration	0.66	0.66

Bank loans

97.023.000-9	CORPBANCA	Chile	UF	17,631	52,893	105,837	34,774	-	211,135	18,510	52,892	104,385	34,635	-	210,422	Quarterly	4.18	4.18
0-E	BLADEX	U.S.A.	US$	-	7,500	27,500	15,000	-	50,000	134	7,500	27,125	14,875	-	49,634	Semiannual	4.58	4.58
0-E	DVB BANK SE	U.S.A.	US$	-	-	153,514	-	-	153,514	14	-	153,514	-	-	153,528	Quarterly	1.67	1.67
97.036.000-K	SANTANDER	Chile	US$	-	-	226,712	-	-	226,712	650	-	226,712	-	-	227,362	Quarterly	2.24	2.24

Obligations with the public
0-E	BANK OF YORK	U.S.A.	US$	-	-	-	500,000	-	500,000	2,383	-	-	486,962	-	489,345	At Expiration	7.77	7.25

Guaranteed obligations

0-E	CREDIT AGRICOLE	France	US$	29,633	88,188	204,722	54,074	12,410	389,027	30,447	88,189	203,286	54,074	12,410	388,406	Quarterly	1.83	1.66
0-E	BNP PARIBAS	U.S.A.	US$	8,162	25,012	70,785	75,028	140,410	319,397	9,243	25,012	70,335	74,917	140,407	319,914	Quarterly	2.29	2.22
0-E	WELLS FARGO	U.S.A.	US$	30,895	93,511	255,536	264,770	536,039	1,180,751	34,933	93,511	227,704	252,054	525,257	1,133,459	Quarterly	2.27	1.57
0-E	WILMINGTON TRUST	U.S.A.	US$	-	48,264	85,183	90,694	451,555	675,696	5,691	48,263	81,867	88,977	448,016	672,814	Quarterly	4.25	4.25
0-E	CITIBANK	U.S.A.	US$	17,042	51,792	143,168	150,792	254,208	617,002	18,545	51,792	133,740	146,362	249,406	599,845	Quarterly	2.40	1.64
97.036.000-K	SANTANDER	Chile	US$	5,233	15,862	43,552	45,416	49,606	159,669	5,514	15,862	41,434	44,599	49,281	156,690	Quarterly	1.47	0.93
0-E	BTMU	U.S.A.	US$	2,714	8,250	22,801	24,007	39,182	96,954	2,897	8,250	21,336	23,376	38,789	94,648	Quarterly	1.82	1.22
0-E	APPLE BANK	U.S.A.	US$	1,333	4,055	11,211	11,828	19,715	48,142	1,478	4,056	10,483	11,513	19,515	47,045	Quarterly	1.72	1.12
0-E	US BANK	U.S.A.	US$	14,483	43,948	120,924	126,550	285,134	591,039	17,232	43,948	102,607	117,968	277,195	558,950	Quarterly	3.99	2.81
0-E	DEUTSCHE BANK	U.S.A.	US$	4,767	14,667	32,449	25,826	58,989	136,698	5,342	14,666	32,448	25,826	58,989	137,271	Quarterly	3.40	3.40
0-E	NATIXIS	France	US$	11,698	35,914	97,434	83,289	241,088	469,423	12,351	35,914	97,434	83,289	241,088	470,076	Quarterly	2.08	2.05
0-E	HSBC	U.S.A.	US$	1,374	4,180	11,533	12,112	24,384	53,583	1,504	4,180	11,533	12,112	24,384	53,713	Quarterly	2.40	1.59
0-E	PK AIRFINANCE	U.S.A.	US$	1,882	5,846	17,171	19,744	17,871	62,514	1,937	5,846	17,171	19,744	17,871	62,569	Monthly	2.04	2.04
0-E	KFW IPEX-BANK	Germany	US$	653	2,028	5,314	3,958	1,640	13,593	655	2,028	5,314	3,958	1,640	13,595	Quarterly	2.45	2.45
-	SWAP Aviones llegados	-	US$	502	1,360	2,521	765	-	5,148	502	1,360	2,521	765	-	5,148	Quarterly	-	-

Other guaranteed obligations

0-E	DVB BANK SE	U.S.A.	US$	8,054	24,438	-	-	-	32,492	8,075	24,438	-	-	-	32,513	Quarterly	2.32	2.32

Financial leases

0-E	ING	U.S.A.	US$	8,108	23,191	36,868	26,831	-	94,998	8,894	23,191	36,066	26,682	-	94,833	Quarterly	5.13	4.57
0-E	CREDIT AGRICOLE	France	US$	1,666	5,131	7,158	-	-	13,955	1,700	5,131	7,158	-	-	13,989	Quarterly	1.28	1.28
0-E	CITIBANK	U.S.A.	US$	4,687	14,447	41,726	36,523	-	97,383	5,509	14,447	40,684	36,330	-	96,970	Quarterly	6.40	5.67
0-E	PEFCO	U.S.A.	US$	15,246	46,858	108,403	22,407	-	192,914	16,536	46,858	106,757	22,324	-	192,475	Quarterly	5.37	4.77
0-E	BNP PARIBAS	U.S.A.	US$	9,956	30,678	81,373	31,100	-	153,107	10,494	30,678	79,983	30,958	-	152,113	Quarterly	4.08	3.64
0-E	WELLS FARGO	U.S.A.	US$	4,519	13,784	38,531	41,238	23,556	121,628	4,919	13,784	37,247	40,819	23,486	120,255	Quarterly	3.98	3.54
0-E	DVB BANK SE	U.S.A.	US$	4,567	13,873	14,127	-	-	32,567	4,625	13,873	14,127	-	-	32,625	Quarterly	2.06	2.06
0-E	BANC OF AMERICA	U.S.A.	US$	674	2,096	-	-	-	2,770	676	2,096	-	-	-	2,772	Monthly	1.41	1.41

Other loans

0-E	BOEING	U.S.A.	US$	-	-	151,362	-	-	151,362	2,294	-	151,363	-	-	153,657	At Expiration	1.80	1.80
0-E	CITIBANK (*)	U.S.A.	US$	19,361	60,251	174,178	196,210	-	450,000	20,485	60,251	174,178	192,932	-	447,846	Quarterly	6.00	6.00
	Total			611,840	738,017	2,291,593	1,892,936	2,155,787	7,690,173	641,578	738,016	2,218,512	1,846,051	2,127,734	7,571,891

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

Interest-bearing loans due in installments to December 31, 2015

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$		%	%

Préstamos bancarios

0-E	NEDERLANDSCHE
	CREDIETVERZEKERING MAATSCHAPPIJ	Holland	US$	115	356	1,031	1,162	689	3,353	132	356	1,031	1,162	689	3,370	Monthly	6.01	6.01

Obligaciones con el público

0-E	THE BANK OF NEW YORK	U.S.A.	US$	-	-	300,000	-	500,000	800,000	7,506	1,110	301,722	5,171	501,027	816,536	At Expiration	8.17	8.00

Arrendamientos financieros

0-E	AFS INVESTMENT IX LLC	U.S.A.	US$	1,972	6,085	17,540	17,908	-	43,505	2,176	6,085	17,540	17,908	-	43,709	Monthly	1.25	1.25
0-E	AIRBUS FINANCIAL	U.S.A.	US$	3,370	10,397	20,812	15,416	-	49,995	3,461	10,396	20,813	15,416	-	50,086	Monthly	1.43	1.43
0-E	CREDIT AGRICOLE-CIB	U.S.A.	US$	4,500	-	-	-	-	4,500	4,528	-	-	-	-	4,528	Quarterly	3.25	3.25
0-E	DVB BANK SE	U.S.A.	US$	118	355	282	-	-	755	120	355	282	-	-	757	Monthly	1.64	1.64
0-E	GENERAL ELECTRIC CAPITAL CORPORATION	U.S.A.	US$	3,654	11,137	8,970	-	-	23,761	3,697	11,137	8,970	-	-	23,804	Monthly	1.25	1.25
0-E	KFW IPEX-BANK	Germany	US$	3,097	6,401	15,186	12,215	-	36,899	3,163	6,401	15,186	12,215	-	36,965	Monthly/Quarterly	1.72	1.72
0-E	NATIXIS	France	US$	2,505	5,387	17,359	19,682	70,087	115,020	3,476	5,387	17,360	19,682	70,088	115,993	Quarterly/Semiannual	3.85	3.85
0-E	PK AIRFINANCE US, INC.	U.S.A.	US$	1,276	21,769	-	-	-	23,045	1,316	21,769	-	-	-	23,085	Monthly	1.75	1.75
0-E	WACAPOU LEASING S.A.	Luxemburg	US$	383	1,101	2,617	14,267	-	18,368	418	1,101	2,617	14,267	-	18,403	Quarterly	2.00	2.00
0-E	SOCIÉTÉ GÉNÉRALE MILAN BRANCH	Italy	US$	8,148	25,003	71,311	208,024	-	312,486	9,552	25,003	71,311	208,024	-	313,890	Quarterly	3.63	3.55
0-E	BANCO IBM S.A	Brazil	BRL	217	651	860	-	-	1,728	217	651	860	-	-	1,728	Monthly	14.14	14.14
0-E	HP FINANCIAL SERVICE	Brazil	BRL	168	529	185	-	-	882	169	529	185	-	-	883	Monthly	10.02	10.02
0-E	SOCIETE GENERALE	France	BRL	85	256	434	-	-	775	85	256	434	-	-	775	Monthly	14.14	14.14
	Total			29,608	89,427	456,587	288,674	570,776	1,435,072	40,016	90,536	458,311	293,845	571,804	1,454,512
	Total consolidado			641,448	827,444	2,748,180	2,181,610	2,726,563	9,125,245	681,594	828,552	2,676,823	2,139,896	2,699,538	9,026,403

(b)

Hedge derivatives

									Total hedge
	Current liabilities				Non-current liabilities				derivatives
	As of		As of		As of		As of		As of		As of
	September 30,		December 31,		September 30,		December 31,		September 30,		December 31,
	2016		2015		2016		2015		2016		2015
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
Accrued interest from the last date of interest rate swap		2,819		4,329		-		-		2,819		4,329
Fair value of interest rate derivatives		13,546		33,518		9,742		16,128		23,288		49,646
Fair value of fuel derivatives		2,743		56,424		-		-		2,743		56,424
Fair value of foreign currency derivatives		18,147		39,818		-		-		18,147		39,818

Total hedge derivatives		37,255		134,089		9,742		16,128		46,997		150,217

The foreign currency derivatives exchanges are FX forward and cross currency swap.

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
	September 30,			December 31,
	2016			2015
	ThUS$			ThUS$
	Unaudited
Cross currency swaps (CCS) (1)		(12,863	)		(49,311	)
Interest rate swaps (2)		(24,280	)		(44,085	)
Fuel options (3)		7,509			(50,131	)
Currency forward - options US$/GBP$ (4)		1,910			7,432
Currency forward - options US$/EUR$ (4)		352			1,438
Currency options R$/US$ (4)		(6,156	)		933
Currency options CLP/US$ (4)		(233	)		85
Currency options COP/US$ (4)		(512	)		-
Currency options AUD/US$ (4)		(94	)		-

(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$/UF and US$/BRL 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 US$/GBP, US$/EUR, R$/US$, CLP$/US$, COP$/US$ and AUD/US$ These contracts are recorded as cash flow hedges.

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 9 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. The hedges on investments will impact results continuously throughout the life of the investment, while the cash flows occur at the maturity of the investment. In the case of currency hedges through a CCS, are generated two types of hedge accounting, a cash flow component by US$/UF and US$/BRL, 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 9 months ended						For the 3 months ended
	September 30,						September 30,
	2016			2015			2016			2015
	ThUS$			ThUS$			ThUS$			ThUS$
	Unaudited
Debit (credit) recognized in comprehensive income during the period		101,123			110,051			39,586			(22,452	)
Debit (credit) transferred from net equity to income during the period		(109,796	)		(235,237	)		(46,218	)		(68,620	)

NOTE 20 - TRADE AND OTHER ACCOUNTS PAYABLES

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

	As of		As of
	September 30,		December 31,
	2016		2015
	ThUS$		ThUS$
	Unaudited
Current
(a) Trade and other accounts payables		1,043,740		1,025,574
(b) Accrued liabilities at the reporting date		495,479		458,383

Total trade and other accounts payables		1,539,219		1,483,957

(a)

Trade and other accounts payable:

	As of		As of
	September 30,		December 31,
	2016		2015
	ThUS$		ThUS$
	Unaudited
Trade creditors		876,683		758,783
Leasing obligation		8,688		18,784
Other accounts payable		158,369		248,007
Total		1,043,740		1,025,574

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

	As of		As of
	September 30,		December 31,
	2016		2015
	ThUS$		ThUS$
	Unaudited
Boarding Fee		183,504		175,900
Aircraft Fuel		164,133		148,612
Airport charges and overflight		95,510		94,139
Handling and ground handling		85,650		88,629
Land services		74,734		80,387
Other personnel expenses		68,515		72,591
Suppliers' technical purchases		62,541		52,160
Professional services and advisory		46,530		63,302
Airlines		42,707		3,890
Marketing		38,195		45,997
Services on board		30,727		32,993
Leases, maintenance and IT services		29,186		25,558
Crew		28,727		23,834
Aviation insurance		22,466		7,655
Achievement of goals		12,664		15,386
Distribution system		12,017		17,531
Maintenance		8,806		18,573
Aircraft and engines leasing		8,688		19,146
SEC agreement (*)		4,719		-
Communications		2,671		6,731
Others		21,050		32,560
Total trade and other accounts payables		1,043,740		1,025,574

(*) Provision made for payments of fines, on July 25, 2016 LATAM reached agreements with the U.S. Securities and Exchange Commission ("SEC") and the U.S. Department of Justice ("DOJ") 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 of the fines is ThUS$ 12,750 to the DOJ and the amount to the SEC agreement is ThUS$ 6,744 plus interests of ThUS$ 2,694.

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

(b)

Liabilities accrued:

	As of		As of
	September 30,		December 31,
	2016		2015
	ThUS$		ThUS$
	Unaudited
Aircraft and engine maintenance		249,503		246,454
Accrued personnel expenses		172,239		108,058
Accounts payable to personnel (*)		51,985		81,368
Others accrued liabilities		21,752		22,503
Total accrued liabilities		495,479		458,383

(*) 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
	September 30,		December 31,		September 30,		December 31,		September 30,		December 31,
	2016		2015		2016		2015		2016		2015
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited				Unaudited				Unaudited
Provision for contingencies (1)
Tax contingencies		1,297		1,297		402,742		350,418		404,039		351,715
Civil contingencies		956		1,476		57,781		37,555		58,737		39,031
Labor contingencies		212		149		31,096		15,648		31,308		15,797
Other		-		-		14,899		11,910		14,899		11,910
Provision for European
Commision investigation (2)		-		-		9,229		8,966		9,229		8,966
Total other provisions (3)		2,465		2,922		515,747		424,497		518,212		427,419

(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.

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 September 30, 2016, and at December 31, 2015, 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			Investigation(*)			Total
	ThUS$			ThUS$			ThUS$

Opening balance as of January 1, 2015		705,552			9,999			715,551
Increase in provisions		33,109			-			33,109
Provision used		(12,914	)		-			(12,914	)
Difference by subsidiaries conversion		(228,298	)		-			(228,298	)
Reversal of provision		(26,278	)		-			(26,278	)
Exchange difference		(912	)		(808	)		(1,720	)
Closing balance as of September 30, 2015 (Unaudited)		470,259			9,191			479,450

Opening balance as of October 1, 2015		470,259			9,191			479,450
Increase in provisions		21,566			-			21,566
Provision used		(6,608	)		-			(6,608	)
Difference by subsidiaries conversion		8,032			-			8,032
Reversal of provision		(74,462	)		-			(74,462	)
Exchange difference		(334	)		(225	)		(559	)
Closing balance as of December 31, 2015		418,453			8,966			427,419

Opening balance as of January 1, 2016		418,453			8,966			427,419
Increase in provisions		85,613			-			85,613
Provision used		(17,964	)		-			(17,964	)
Difference by subsidiaries conversion		81,304			-			81,304
Reversal of provision		(59,256	)		-			(59,256	)
Exchange difference		833			263			1,096
Closing balance as of September 30, 2016 (Unaudited)		508,983			9,229			518,212

Accumulated balance includes the judicial deposit in guarantee, related to the “Fundo Aeroviário” (FA), of US$ 73 million, done in order to suspend the enforceability of the tax credit. The company is discussing over the Tribunal the constitutionality of the requirement made by FA in a legal suit. Initially it was covered by the effects of a provisional remedy, meaning that, the company was not obligated to collect the tax while there was not a judicial decision in this regard. However, the decision taken by a judge in the first instance was publicized in an unfavorable way, revoking the provisional remedy relief. As the legal suit is still in progress (TAM appealed from this first decision), the company needed to do the deposit judicial in guarantee to suspend the enforceability of such tax credit; deposit classified in this category deducting the existing provision. Finally, if the final decision is favorable to the company, the deposit already made is going to come back 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 September 30, 2016 is disclosed in Note 31, at case No. 2001.51.01.012530-0.

(*) European Commission Provision:

(a)

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 begun in 2007 regarding possible unfair competition on the air cargo market. This was a joint investigation done by the European and U.S.A. authorities. The start of the investigation was disclosed through an Essential Matter report dated December 27, 2007. The U.S.A. portion of the global investigation concluded when Lan Cargo S.A. and its subsidiary, Aerolíneas Brasileiras S.A. (“ABSA”) signed a Plea Agreement with the U.S.A. Department of Justice, as disclosed in an Essential Matter report notice on January 21, 2009.

(b)

A Essential Matter report dated November 9, 2010, reported that the General Direction of Competition had issued its decision on this case (the "decision"), under which 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 A irlines Group S.A. and Lan Cargo S.A., Air Canada, Air France, KLM, British Airways, Cargolux, Cathay Pacific, Japan Airlines, Qantas Airways, S.A.S. and Singapore Airlines.

(c)

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.This is a minor fine in comparison to the original decision, as there was a significant reduction in fine because LATAM Airlines Group S.A. cooperated during the investigation.

(d)

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 Commission does not appeal the sentence, but can issue a new decision correcting the failures specified in the Judgment and it has a period of 5 years the Court European resolved the appeal and annulled the European Commission. The procedural stage at September 30, 2016 is disclosed in Note 31, in (ii) lawsuits received by Latam Airlines Group S.A. and Subsidiaries.

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
	September 30,		December 31,		September 30,		December 31,		September 30,		December 31,
	2016		2015		2016		2015		2016		2015
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited				Unaudited				Unaudited
Deferred revenues (*)		2,525,918		2,423,703		271,127		272,130		2,797,045		2,695,833
Sales tax		8,255		10,379		-		-		8,255		10,379
Retentions		33,080		33,125		-		-		33,080		33,125
Others taxes		4,460		11,211		-		-		4,460		11,211
Dividends		9,232		3,980		-		-		9,232		3,980
Other sundry liabilities		21,261		7,635		-		-		21,261		7,635
Total other non-financial liabilities		2,602,206		2,490,033		271,127		272,130		2,873,333		2,762,163

(*)

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.

NOTE 23 - EMPLOYEE BENEFITS

	As of		As of
	September 30,		December 31,
	2016		2015
	ThUS$		ThUS$
	Unaudited
Retirements payments		49,311		42,117
Resignation payments		10,075		8,858
Other obligations		18,291		14,296
Total liability for employee benefits		77,677		65,271

(a)

The movement in retirements and resignation payments and other obligations:

			Increase (decrease)						Actuarial
	Opening		current service			Benefits			(gains)			Currency			Closing
	balance		provision			paid			losses			translation			balance
	ThUS$		ThUS$			ThUS$			ThUS$			ThUS$			ThUS$
From January 1 to September 30, 2015 (Unaudited)		74,102		4,347			(1,070	)		-			-			77,379
From October 1 to December 31, 2015		77,379		(17,956	)		(2,754	)		14,631			(6,029	)		65,271
From January 1 to September 30, 2016 (Unaudited)		65,271		21,605			(2,543	)		(6,656	)		-			77,677

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

	As of
	September 30,
Assumptions	2016			2015

Discount rate		4.53	%		4.83	%
Expected rate of salary increase		4.50	%		4.50	%
Rate of turnover		6.16	%		6.16	%
Mortality rate		RV-2009			RV-2009
Inflation rate		3.01	%		3.05	%
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 – 2009, 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:

	Effect on the liability
	As of			As of
	September 30,			December 31,
	2016			2015
	ThUS$			ThUS$
	Unaudited
Discount rate
Change in the accrued liability an closing for increase in 100 p.b.		(5,609	)		(4,669	)
Change in the accrued liability an closing for decrease of 100 p.b.		5,843			5,345

Rate of wage growth
Change in the accrued liability an closing for increase in 100 p.b.		6,292			5,309
Change in the accrued liability an closing for decrease of 100 p.b.		(5,592	)		(4,725	)

(b)

The liability for short-term:

	As of		As of
	September 30,		December 31,
	2016		2015
	ThUS$		ThUS$
	Unaudited
Profit-sharing and bonuses (*)		51,985		81,368

(*)

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 9 months ended				For the 3 months ended
	September 30,				September 30,
	2016		2015		2016		2015
	ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited
Salaries and wages		1,156,781		1,274,890		398,693		392,531
Short-term employee benefits		93,354		138,091		46,406		51,461
Termination benefits		64,247		46,345		22,841		12,894
Other personnel expenses		140,225		151,874		51,545		50,465
Total		1,454,607		1,611,200		519,485		507,351

NOTE 24 - ACCOUNTS PAYABLE, NON-CURRENT

	As of		As of
	September 30,		December 31,
	2016		2015
	ThUS$		ThUS$
	Unaudited
Aircraft and engine maintenance		352,230		371,419
Fleet financing (JOL)		22,539		35,042
Provision for vacations and bonuses		12,213		10,365
Other sundry liabilities		226		224
Total accounts payable, non-current		387,208		417,050

(*) See Note 20

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 Capital of the Company is managed and composed in the following form:

The paid capital of the Company at September 30, 2016 amounts to ThUS$ 2,541,068 (*) divided into 545,558,101common stock of a same series (ThUS$ 2,545,705, divided into 545,547,819 shares as of December 31, 2015), 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.

(*) Paid capital include a deduction for issuance costs ThUS$ 4,793 and adjustment by 10,282 placement shares for ThUS$ 156.

(b)

Subscribed and paid 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, 2015		551,847,819
No movement of autorized shares during 2015		-
Authorized shares as of December 31, 2015		551,847,819

Autorized shares as of January 1, 2016		551,847,819
No movement of autorized shares during 2016		-
Authorized shares as of September 30, 2016 (Unaudited)		551,847,819

Movement fully paid shares

				Movement
				value		Cost of issuance
increase (decrease) through transfers and other changes				of shares		and placement			Paid- in
	N° of			(1)		of shares (2)			Capital
	shares			ThUS$		ThUS$			ThUS$
Paid shares as of January 1, 2015		545,547,819			2,552,066		(6,361	)		2,545,705
No movement of paid shares during 2015		-			-		-			-
Paid shares as of December 31, 2015		545,547,819			2,552,066		(6,361	)		2,545,705

Paid shares as of January 1, 2016		545,547,819			2,552,066		(6,361	)		2,545,705
Capital reserve		-			-		(4,793	)		(4,793	)
Increase (decrease) by transfers and other changes		10,282			156		-			156
Paid shares as of September 30, 2016 (Unaudited)		545,558,101	(3)		2,552,222		(11,154	)		2,541,068

(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 September 30, 2016, the difference between authorized shares and fully paid shares are 6,289,718 shares allocated to compensation plans for executives of LATAM Airlines Group S.A. and subsidiaries (see Note 34(a.1)).

(4) In Janury 2014, these 10,282 shares were placed and charged to the Compensation plan 2011 (See Note 34 (a.1))

(c)

Treasury stock

At September 30, 2016, 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.

At the Extraordinary Shareholder´s Meeting held on June 11, 2013, the company relinquished all right to 7,972 stocks of its portfolio, this date the Company does not maintain treasury stock.

(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 September 30, 2015 (Unaudited)		29,642		5,948		(2,139	)		3,809		33,451
From July 1 to December 31, 2015		33,451		2,976		(780	)		2,196		35,647
From January 1 to September 30, 2016 (Unaudited)		35,647		3,547		(807	)		2,740		38,387

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 September 30, 2015 (Unaudited)		2,635,748		4,250			2,639,998
From October 1 to December 31, 2015		2,639,998		(5,319	)		2,634,679
From January 1 to September 30, 2016 (Unaudited)		2,634,679		5,693			2,640,372

Balance of Other sundry reserves comprises the following:

	As of			As of
	September 30,			December 31,
	2016			2015
	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	)		(25,891	)
Cost of issuance and placement of shares		-			(4,793	)
Others		(2,029	)		(2,949	)
Total		2,640,372			2,634,679

(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.

(2)

Corresponds to the technical revaluation of fixed assets authorized by the Superintendence of Securities and Insurance in 1979, in Circular No. 1,529. The revaluation was optional and could be taken only once, the reserve is not distributable and can only be capitalized.

(3)

The balance at September 30, 2016, 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, 2015		(1,193,871	)		(151,340	)		-			(1,345,211	)
Derivatives valuation gains (losses)		-			112,483			-			112,483
Deferred tax		-			(28,970	)		-			(28,970	)
Difference by subsidiaries conversion		(1,418,037	)		-			-			(1,418,037	)

Closing balance as of September 30, 2015 (Unaudited)		(2,611,908	)		(67,827	)		-			(2,679,735	)

Opening balance as of July 1, 2015		(2,611,908	)		(67,827	)		-			(2,679,735	)
Derivatives valuation gains (losses)		-			(29,753	)		-			(29,753	)
Deferred tax		-			7,070			-			7,070
Actuarial reserves by employee benefit plans		-			-			(14,627	)		(14,627	)
Deferred tax actuarial IAS
by employee benefit plans		-			-			3,910			3,910
Difference by subsidiaries conversion		35,867			-			-			35,867

Closing balance as of December 31, 2015		(2,576,041	)		(90,510	)		(10,717	)		(2,677,268	)

Opening balance as of January 1, 2016		(2,576,041	)		(90,510	)		(10,717	)		(2,677,268	)
Derivatives valuation gains (losses)		-			100,068			-			100,068
Deferred tax		-			(27,249	)		-			(27,249	)
Actuarial reserves
by employee benefit plans		-			-			(1,418	)		(1,418	)
Deferred tax actuarial IAS
by employee benefit plans		-			-			427			427
Difference by subsidiaries conversion		509,728			-			-			509,728

Closing balance as of September 30, 2016 (Unaudited)		(2,066,313	)		(17,691	)		(11,708	)		(2,095,712	)

(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.

(g)

Retained earnings

Movement of Retained earnings:

			Result						Other
	Opening		for the						increase			Closing
Periods	balance		period			Dividens			(decreases)			balance
	ThUS$		ThUS$			ThUS$			ThUS$			ThUS$
From January 1 to September 30, 2015 (Unaudited)		536,190		(203,018	)		-			1,564			334,736
From October 1to December 31, 2015		334,736		(16,256	)		-			(530	)		317,950
From January 1 to September 30, 2016 (Unaudited)		317,950		14,875			(4,463	)		(292	)		328,070

(h)

Dividends per share

	Minimum mandatory		Final dividend
	dividend		dividend
Description of dividend	2016		2015
Date of dividend		09-30-2016		12-31-2015
Amount of the dividend (ThUS$)		4,463		-
Number of shares among which the dividend is distributed		545,558,101		545,547,819
Dividend per share (US$)		0.0082		-

NOTE 26 - REVENUE

The detail of revenues is as follows:

	For the 9 months ended				For the 3 months ended
	September 30,				September 30,
	2016		2015		2016		2015
	ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited
Passengers LAN		3,051,063		3,169,485		1,061,257		1,058,136
Passengers TAM		2,714,248		3,264,886		1,039,050		1,055,547
Cargo		801,571		994,548		265,594		309,781
Total		6,566,882		7,428,919		2,365,901		2,423,464

NOTE 27 - COSTS AND EXPENSES BY NATURE

(a)

Costs and operating expenses

The main operating costs and administrative expenses are detailed below:

	For the 9 months ended				For the 3 months ended
	September 30,				September 30,
	2016		2015		2016		2015
	ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited
Aircraft fuel		1,499,625		2,077,877		570,188		658,840
Other rentals and landing fees		792,241		834,071		270,588		275,688
Aircraft rentals		419,599		391,134		147,443		133,442
Aircraft maintenance		289,643		352,688		107,898		122,990
Comissions		194,659		235,852		67,473		81,769
Passenger services		210,505		222,679		70,230		78,161
Other operating expenses		1,011,207		931,792		370,298		303,131
Total		4,417,479		5,046,093		1,604,118		1,654,021

(b)

Depreciation and amortization

Depreciation and amortization are detailed below:

	For the 9 months ended				For the 3 months ended
	September 30,				September 30,
	2016		2015		2016		2015
	ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited
Depreciation (*)		680,815		673,682		231,194		223,487
Amortization		32,948		31,903		12,412		9,565
Total		713,763		705,585		243,606		233,052

(*) 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 September 30, 2016 is ThUS$ 254,779 and ThUS$ 258,267 for the same period of 2015.

(c)

Personnel expenses

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

(d)

Financial costs

The detail of financial costs is as follows:

	For the 9 months ended				For the 3 months ended
	September 30,				September 30,
	2016		2015		2016		2015
	ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited
Bank loan interest		253,682		257,977		86,258		91,026
Financial leases		25,512		33,320		7,737		10,268
Other financial instruments		31,369		22,195		9,936		6,615
Total		310,563		313,492		103,931		107,909

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.

(e)

Restructuring Costs

As part of the ongoing process of reviewing its fleet plan, in December 2015 the company recognized a negative impact on results of US$ 80 million before tax associated with the output of the rest of the A330 fleet, including engines and technical materials is recognized. These expenses are recognized at “Other Gain and Loses” of the Consolidated Statement of Income by Function.

NOTE 28 - OTHER INCOME, BY FUNCTION

Other income by function is as follows:

	For the 9 months ended				For the 3 months ended
	September 30,				September 30,
	2016		2015		2016		2015
	ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited
Coalition and loyalty program Multiplus		132,209		116,919		46,464		32,881
Tours		103,545		82,647		54,661		24,887
Aircraft leasing		46,982		32,863		14,505		11,565
Customs and warehousing		16,436		18,151		5,821		6,912
Maintenance		14,025		7,845		3,216		64
Duty free		7,674		13,244		2,906		5,189
Other miscellaneous income		70,023		18,230		26,052		9,860
Total		390,894		289,899		153,625		91,358

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 and Brazilian real.

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
	September 30,		December 31,
Current assets	2016		2015
	ThUS$		ThUS$
	Unaudited
Cash and cash equivalents		166,463		182,089
Argentine peso		4,733		11,611
Brazilian real		9,107		8,810
Chilean peso		38,065		17,739
Colombian peso		945		1,829
Euro		8,059		10,663
U.S. dollar		84,250		112,422
Strong bolivar		175		2,986
Other currency		21,129		16,029

Other financial assets, current		50,269		124,042
Argentine peso		36,950		108,592
Brazilian real		592		1,263
Chilean peso		606		563
Colombian peso		125		1,167
U.S. dollar		11,620		12,128
Strong bolivar		78		22
Other currency		298		307

	As of		As of
	September 30,		December 31,
Current assets	2016		2015
	ThUS$		ThUS$
	Unaudited
Other non - financial assets, current		144,270		126,130
Argentine peso		16,975		14,719
Brazilian real		20,253		15,387
Chilean peso		20,236		10,265
Colombian peso		734		486
Euro		2,409		1,983
U.S. dollar		63,456		61,577
Strong bolivar		3		-
Other currency		20,204		21,713

Trade and other accounts receivable, current		293,035		247,229
Argentine peso		48,319		30,563
Brazilian real		36,268		11,136
Chilean peso		65,321		55,169
Colombian peso		344		1,195
Euro		29,333		30,006
U.S. dollar		58,007		29,937
Strong bolivar		27		7,225
Other currency		55,416		81,998

Accounts receivable from related entities, current		498		181
Chilean peso		498		181

Tax current assets		31,791		22,717
Argentine peso		2,231		2,371
Brazilian real		2,705		5
Chilean peso		4,319		3,615
Colombian peso		1,276		1,275
Euro		258		14
U.S. dollar		322		1,394
Peruvian sol		19,099		12,572
Other currency		1,581		1,471

Total current assets		686,326		702,388
Argentine peso		109,208		167,856
Brazilian real		68,925		36,601
Chilean peso		129,045		87,532
Colombian peso		3,424		5,952
Euro		40,059		42,666
U.S. Dollar		217,655		217,458
Strong bolivar		283		10,233
Other currency		117,727		134,090

	As of		As of
	September 30,		December 31,
Non-current assets	2016		2015
	ThUS$		ThUS$
Other financial assets, non-current		28,634		20,767
Argentine peso		19		22
Brazilian real		2,504		1,478
Chilean peso		85		77
Colombian peso		177		162
Euro		7,458		614
U.S. dollar		16,391		16,696
Other currency		2,000		1,718

Other non - financial assets, non-current		31,691		60,215
Argentine peso		154		169
Brazilian real		7,672		4,454
U.S. dollar		18,705		50,108
Other currency		5,160		5,484

Accounts receivable, non-current		8,313		9,404
Chilean peso		8,177		4,251
U.S. dollar		-		5,000
Other currency		136		153

Deferred tax assets		2,463		2,632
Colombian peso		204		336
Other currency		2,259		2,296

Total non-current assets		71,101		93,018
Argentine peso		173		191
Brazilian real		10,176		5,932
Chilean peso		8,262		4,328
Colombian peso		381		498
Euro		7,458		614
U.S. dollar		35,096		71,804
Other currency		9,555		9,651

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
	September 30,		December 31,		September 30,			December 31,
Current liabilities	2016		2015		2016			2015
	ThUS$		ThUS$		ThUS$			ThUS$
	Unaudited				Unaudited
Other financial liabilities, current		132,385		94,199		597,177			141,992
Chilean peso		56,293		54,655		58,409			52,892
U.S. dollar		76,092		39,544		538,768	(*)		89,100

Trade and other accounts payables, current		552,480		482,402		16,890			14,981
Argentine peso		24,807		20,772		1,602			2,072
Brazilian real		45,659		37,572		-			16
Chilean peso		38,245		40,219		12,109			10,951
Colombian peso		7,214		5,271		282			155
Euro		12,622		5,275		3			618
U.S. dollar		360,819		310,565		18			839
Strong bolivar		679		2,627		-			-
Peruvian sol		18,804		28,293		2,344			87
Mexican peso		6,923		15,248		248			225
Pound sterling		19,442		7,819		-			-
Uruguayan peso		10,513		6,005		-			-
Other currency		6,753		2,736		284			18

Accounts payable to related entities, current		225		447		-			-
Chilean peso		145		83		-			-
U.S. dollar		1		22		-			-
Other currency		79		342		-			-

Other provisions, current		-		-		428			457
Chilean peso		-		-		24			21
Other currency		-		-		404			436

Tax liabilities, current		937		36		12,109			9,037
Argentine peso		937		-		12,109			9,036
U.S. dollar		-		27		-			-
Other currency		-		9		-			1

	Up to 90 days						91 days to 1 year
	As of			As of			As of		As of
	September 30,			December 31,			September 30,		December 31,
Current liabilities	2016			2015			2016		2015
	ThUS$			ThUS$			ThUS$		ThUS$
	Unaudited						Unaudited
Other non-financial liabilities, current		34,696			40,432			-		-
Argentine peso		4,648			(2,387	)		-		-
Brazilian real		5,046			4,297			-		-
Chilean peso		17,188			32,228			-		-
Colombian peso		978			145			-		-
Euro		5,569			2,706			-		-
U.S. dollar		278			(3,238	)		-		-
Strong bolivar		(14	)		2,490			-		-
Other currency		1,003			4,191			-		-

Total current liabilities		720,723			617,516			626,604		166,467
Argentine peso		30,392			18,385			13,711		11,108
Brazilian real		50,705			41,869			-		16
Chilean peso		111,871			127,185			70,542		63,864
Colombian peso		8,192			5,416			282		155
Euro		18,191			7,981			3		618
U.S. dollar		437,190			346,920			538,786		89,939
Strong bolivar		665			5,117			-		-
Other currency		63,517			64,643			3,280		767

(*) See Note 19.a (3)

	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
	September 30,		December 31,		September 30,		December 31,		September 30,		December 31,
Non-current liabilities	2016		2015		2016		2015		2016		2015
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited				Unaudited				Unaudited
Other financial liabilities, non-current		195,530		561,217		763,579		328,480		44,041		571,804
Chilean peso		73,757		104,385		21,856		34,635		-		-
U.S. dollar		121,773		456,832		741,723		293,845		44,041		571,804

Accounts payable, non-current		231,682		239,029		329		168		30		8
Chilean peso		9,792		8,058		329		168		30		8
U.S. dollar		220,389		229,005		-		-		-		-
Other currency		1,501		1,966		-		-		-		-

Other provisions, non-current		39,076		27,780		-		-		-		-
Argentine peso		659		797		-		-		-		-
Brazillian real		22,594		11,009		-		-		-		-
Chilean peso		38		-		-		-		-		-
Colombian peso		489		198		-		-		-		-
Euro		9,229		8,966		-		-		-		-
U.S. dollar		6,067		6,810		-		-		-		-

Provisions for employees benefits, non-current		67,610		56,306		-		-		-		-
Chilean peso		67,610		56,306		-		-		-		-

Other non-financial liabilities, non-current		3		-		-		-		-		-
Colombian peso		3		-		-		-		-		-

Total non-current liabilities		533,901		884,332		763,908		328,648		44,071		571,812
Argentine peso		659		797		-		-		-		-
Brazilian real		22,594		11,009		-		-		-		-
Chilean peso		151,197		168,749		22,185		34,803		30		8
Colombian peso		492		198		-		-		-		-
Euro		9,229		8,966		-		-		-		-
U.S. dollar		348,229		692,647		741,723		293,845		44,041		571,804
Other currency		1,501		1,966		-		-		-		-

100

	As of			As of
General summary of foreign currency:	September 30,			December 31,
	2016			2015
	ThUS$			ThUS$
	Unaudited

Total assets		757,427			795,406
Argentine peso		109,381			168,047
Brazilian real		79,101			42,533
Chilean peso		137,307			91,860
Colombian peso		3,805			6,450
Euro		47,517			43,280
U.S. dollar		252,751			289,262
Strong bolivar		283			10,233
Other currency		127,282			143,741

Total liabilities		2,689,207			2,568,775
Argentine peso		44,762			30,290
Brazilian real		73,299			52,894
Chilean peso		355,825			394,609
Colombian peso		8,966			5,769
Euro		27,423			17,565
U.S. dollar		2,109,969			1,995,155
Strong bolivar		665			5,117
Other currency		68,298			67,376

Net position
Argentine peso		64,619			137,757
Brazilian real		5,802			(10,361	)
Chilean peso		(218,518	)		(302,749	)
Colombian peso		(5,161	)		681
Euro		20,094			25,715
U.S. dollar		(1,857,218	)		(1,705,893	)
Strong bolivar		(382	)		5,116
Other currency		58,984			76,365

101

(b)

Exchange differences

Exchange differences recognized in the income statement, except for financial instruments measured at fair value through profit or loss, for the period ended September 30, 2016 and 2015, generated a debit of ThUS$ 132,814 and a charge ThUS$ 410,755, respectively. In the third quarter of 2016 and 2015 generated a credit of ThUS$ 10,594 and ThUS$ 241,533 respectively.

Exchange differences recognized in equity as reserves for currency translation differences for the period ended September 30, 2016 and 2015, represented a debit of ThUS$ 516,548 and a charge ThUS$ 1,437,025, respectively. In the third quarter of 2016 and 2015 generated a credit of ThUS$ 32,514 and ThUS$ 776,941 respectively.

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

	As of				As of
	September 30,				December 31,
	2016		2015		2015		2014
	Unaudited
Argentine peso		15.24		9.42		12.97		8.55
Brazilian real		3.24		3.97		3.98		2.66
Chilean peso		658.02		698.72		710.16		606.75
Colombian peso		2,891.95		3,090.99		3,183.00		2,389.50
Euro		0.89		0.89		0.92		0.82
Strong bolivar		658.89		13.50		198.70		12.00
Australian dollar		1.31		1.43		1.37		1.22
Boliviano		6.86		6.86		6.85		6.86
Mexican peso		19.34		16.93		17.34		14.74
New Zealand dollar		1.37		1.56		1.46		1.28
Peruvian Sol		3.39		3.23		3.41		2.99
Uruguayan peso		28.45		29.05		29.88		24.25

102

NOTE 30 - EARNINGS / (LOSS) PER SHARE

	For the 9 months ended					For the 3 months ended
	September 30,					September 30,
Basic earnings / (loss) per share	2016		2015			2016		2015
	Unaudited
Earnings / (loss) attributable to owners of the parent (ThUS$)		14,875		(203,018	)		4,742		(113,344	)
Weighted average number of shares, basic		545,558,101		545,547,819			545,558,101		545,547,819
Basic earnings / (loss) per share (US$)		0.02727		(0.37214	)		0.00869		(0.20776	)

	For the 9 months ended					For the 3 months ended
	September 30,					September 30,
Diluted earnings / (loss) per share	2016		2015			2016		2015
	Unaudited
Earnings / (loss) attributable to owners of the parent (ThUS$)		14,875		(203,018	)		4,742		(113,344	)
Weighted average number of shares, basic		545,558,101		545,547,819			545,558,101		545,547,819
Weighted average number of shares, diluted		545,558,101		545,547,819			545,558,101		545,547,819
Diluted earnings / (loss) per share (US$)		0.02727		(0.37214	)		0.00869		(0.20776	)

In the calculation of diluted earnings per share have not been considered the compensation plan disclosed in Note 33 (a.1), because the average market price is lower than the price of options.

103

NOTE 31 – CONTINGENCIES

Lawsuits

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 29^th , 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.	In implementation stage in Switzerland, the conviction stated that Variglog should pay the principal, interest and costs in favor of AAI. It keeps the embargo of Variglog funds in Switzerland with AAI. In Brazil a Settlement Agreement was signed and it is awaiting for approval from the Bankruptcy Court of that country and Variglog has asked Switzerland to recognize the judgment that declared the state of judicial recovery and subsequent bankruptcy. Conversations have begun with the representatives in the Variglog liquidation process to work towards a settlement regarding the funds in Switzerland.	17,100 Plus interests and costs

Lan Argentina S.A.	National Administrative Court.	36337/13	ORSNA Resolution No. 123 which directs Lan Argentina to vacate the hangar located in the Airport named Aeroparque Metropolitano Jorge Newberry, Argentina.	The 2nd Room of the Federal Appellate Court confirmed another extension of the precautionary measure that will expire March 16, 2016. ORSNA did not file an extraordinary remedy, so the measure is in effect through that date. On February 25, 2016, Lan Argentina S.A. and ORSNA informed the Court of their decision to put an end to the lawsuit and guarantee use of the hangar by Lan. The parties agreed to maintain the precautionary measure in effect allowing Lan to use the hangar indefinitely until the parties reach a final agreement. The court agreed, so the precautionary measure was extended indefinitely.	-0-

104

Lawsuits received by LATAM Airlines Group S.A. and Subsidiaries

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 26^th , 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 14^th, 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 9^th, 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$ 9,229. (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 resolution, but rather confirmed, on May 20, 2016, that it will issue a new decision curing the rulings specified in the Decision. It has a period of 5 years to do this, or until 2021.	9,229

105

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$10,479; (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.	10,479

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.	11,184

106

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.	2,160

Tam Linhas Aéreas S.A.	Department of Federal Revenue of Brazil	19515.721155/2014-15	Alleged irregularities in the SAT payments for the periods 01/2010 to 13/2009.	A decision was rendered in favor of Tam Linhas Aéreas S.A. on August 22, 2016. The Attorney General has said it will not appeal.	25,515

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.	52,622

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$73. 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.	80,162

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.	66,050

107

Company	Court	Case Number	Origin	Stage of trial	Amounts Committed (*)
					ThUS$
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.	22,314

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.	43,513

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 30^th , 2012 LAN COLOMBIA AIRLINES 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 LAN COLOMBIA AIRLINES arising from breach of contractual obligations of the aircraft HK-4107. The June 20^th , 2013 AIRES SA And / Or LAN 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 LAN COLOMBIA AIRLINES 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 Bogota Circuit. In an interim decree issued August 16, 2016, the hearing under article 101 was set for February 2, 2017, when a reconciliation will be attempted, facts of the case will be set, the parties will conduct depositions and evidence will be decreed. The Federal Court of the State of Florida decided on March 26, 2016 to approve Lan Colombia Airlines’s request to suspend the proceedings in the USA until the claim under way in Colombia is decided. The U.S. Court judge also closed the case administratively. The Federal Court of Appeal ratified the case closing in the U.S.A. on April 1, 2015. On October 1, 2015, Regional One petitioned that the U.S. court reopen the case. Lan Colombia Airlines presented its arguments and the Court sustained them on August 23, 2016, ratifying the closing of the case in the United States, so it continues to be closed.	12,443

108

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.	54,182

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. A first-instance administrative decision is now pending.	89,980

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.	Early stage. Eventually could affect the operations and control of working hours of employees. The company won in the first instance, but an appeal by the Union is expected.	16,275

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.	104,838

109

Company	Court	Case Number	Origin	Stage of trial	Amounts Committed (*)
					ThUS$

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 procedural agreement was made for 23 million reals (ThUS$7,142) on September 23, 2016.	7,142

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 was reached with the Union on August 2, 2016.	16,460

TAM Linhas Aéreas S.A.	Sao Paulo Labor Court, Sao Paulo	0000009-45.2016.5.02.090	The Ministry of Labor filed an action seeking that the company adapt the ergonomics and comfort of seats.	The action is in its initial phase since a new filing was made.	15,980

In order to deal with any financial obligations arising from legal proceedings in effect at June 30, 2016, 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.

110

II.

Governmental Investigations.

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:

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.

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.

111

As at September 20, 2016, a balance of ThUS$ 4,719 was payable to the SEC, as reported in Note 20 - Trade payables and other payables.

LATAM Airlines Ecuador, our Ecuadoran subsidiary, has received notice from one of the Investigative Divisions of the Market Power Control Commission of Ecuador that LATAM Airlines Ecuador and two other airlines are being investigated by that Division for alleged signs of conscious parallelism in setting specific fares for one domestic route in Ecuador from August 2012 to February 2013. The Investigative Division has 180 days (to February 21, 2017) to issue a report stating whether it will close the investigation or present charges against two or more of the airlines being investigated. That period can be extended. If charges are made, only then will proceedings begin. LATAM Airlines Ecuador is cooperating with the authority and has retained a law firm specializing in this subject to advise the company during this process.

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.

On March 30, 2016, LATAM structured a Revolving Credit Facility granted by with aircraft, engines, spare parts and supplies for a total amount available of US$ 325 million, this line includes restrictions minimum liquidity level as the consolidated company and individual level as for companies LATAM Airlines Group S.A. and TAM Linhas Aereas S.A.

On September 29, TAM Linhas Aereas S.A. realizes financing amounting to US $ 200 million with the guarantee of approximately 18% of Multiplus S.A. This contract includes certain minimum value of the shares as collateral on the loan amount conditions.

At September 30, 2016, the Company is in compliance with all indicators detailed above.

112

(b) Commitments under operating leases as lessee

Details of the main operating leases are as follows:

		As of		As of
		September 30,		December 31,
Lessor	Aircraft	2016		2015
		Unaudited
Aircraft 76B-26329 Inc.	Boeing 767		1		1
Aircraft 76B-27615 Inc.	Boeing 767		1		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		1
Avolon Aerospace AOE 20 Limited	Airbus A320		1		1
Avolon Aerospace AOE 6 Limited	Airbus A320		1		1
Avolon Aerospace AOE 62 Limited	Boeing 777		1		1
AWAS 5125 Trust	Airbus A320		-		1
AWAS 5178 Limited	Airbus A320		-		1
AWAS 5234 Trust	Airbus A320		1		1
Baker & Spice Aviation Limited	Airbus A320		1		1
Bank of America	Airbus A321		2		3
CIT Aerospace International	Airbus A320		2		2
ECAF I 1215 DAC	Airbus A320		1		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		2		3
GFL Aircraft Leasing Netherlands B.V.	Airbus A320		1		1
International Lease Finance Corporation	Boeing 767		-		1
JSA Aircraft 38484, LLC	Boeing 787		1		1
JSA Aircraft 7126, LLC	Airbus A320		1		-
JSA Aircraft 7128, LLC	Airbus A321		1		-
JSA Aircraft 7239, LLC	Airbus A321		1		-
JSA Aircraft 7298, LLC	Airbus A321		1		-
Macquarie Aerospace Finance 5125-2 Trust	Airbus A320		1		-
Macquarie Aerospace Finance 5178 Limited	Airbus A320		1		-
Magix Airlease Limited	Airbus A320		2		2

113

		As of		As of
		September 30,		December 31,
Lessor	Aircraft	2016		2015
		Unaudited
MASL Sweden (1) AB	Airbus A320		-		1
MASL Sweden (2) AB	Airbus A320		-		1
MASL Sweden (7) AB	Airbus A320		-		1
MASL Sweden (8) AB	Airbus A320		1		1
Merlin Aviation Leasing (Ireland) 18 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		-
NBB-6658 Lease Partnership	Airbus A321		1		1
NBB-6670 Lease Partnership	Airbus A321		1		1
Orix Aviation Systems Limited	Airbus A320		4		2
PAAL Aquila Company Limited	Airbus A321		1		-
PAAL Aquila Company Limited	Airbus A321		2		-
SASOF II (J) Aviation Ireland Limited	Airbus A319		1		1
Shenton Aircraft Leasing Limited	Airbus A320		1		1
SKY HIGH V LEASING COMPANY LIMITED	Airbus A320		-		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		6		7
SMBC Aviation Capital Limited	Airbus A321		2		2
Sunflower Aircraft Leasing Limited	Airbus A320		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		2		2
Wells Fargo Bank Northwest National Association	Airbus A320		7		7
Wells Fargo Bank Northwest National Association	Airbus A330		2		2
Wells Fargo Bank Northwest National Association	Boeing 767		3		3
Wells Fargo Bank Northwest National Association	Boeing 777		6		6
Wells Fargo Bank Northwest National Association	Boeing 787		11		7
Wells Fargo Bank Northwest National Association	Airbus A350		1		-
Wilmington Trust Company	Airbus A319		1		1
Total			114		106

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

114

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

	As of		As of
	September 30,		December 31,
	2016		2015
	ThUS$		ThUS$
	Unaudited
No later than one year		539,381		513,748
Between one and five years		1,450,440		1,281,454
Over five years		1,226,834		858,095
Total		3,216,655		2,653,297

The minimum lease payments charged to income are the following:

	For the 9 months ended				For the 3 months ended
	September 30,				September 30,
	2016		2015		2016		2015
	ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited

Minimum operating lease payments		419,599		391,134		147,443		133,442

Total		419,599		391,134		147,443		133,442

In the first quarter of 2015, 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 2015, two Airbus A321-200 aircraft and one Boeing 787-9 aircraft were leased for a period of twelve years each. On the other hand, one Airbus A320-200 aircraft and two Airbus A330-200 aircraft were returned. In the third quarter of 2015, five Airbus A321-200 aircraft and one Boeing 787-9 aircraft were leased for a period of twelve years each. On the other hand, one Airbus A330-200 aircraft was returned. In the fourth quarter of 2015, one Airbus A330-200 aircraft was returned.

In the first quarter of 2016, two Boeing 787-9 aircraft were leased for a period of twelve years each. On the other hand and one Airbus A320-200 aircraft was returned. In the second quarter of 2016, three Airbus A321-200 aircraft were leased for a period of ten years each and two Boeing 787-9 aircraft were leased for a period of twelve 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 was leased for a period of twelve years. On the other hand and one Airbus A320-200 aircraft was returned.

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.

115

At September 30, 2016 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

May 25, 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.

Nine letter of credit

37,178

Dec 6, 2016

International Lease Finance Corp

LATAM Airlines Group S.A.

Three letter of credit

1,450

Feb 4, 2017

ORIX Aviation System 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

13,569

Aug 14, 2017

Wells Fargo Bank

LATAM Airlines Group S.A.

Nine letter of credit

15,160

Feb 8, 2017

CIT Aerospace International

Tam Linhas Aéreas S.A.

Three letter of credit

12,375

Oct 6, 2016

RBS Aerospace Limited

Tam Linhas Aéreas S.A.

One letter of credit

13,096

Jan 29, 2017

Wells Fargo Bank North N.A.

Tam Linhas Aéreas S.A.

One letter of credit

5,500

Jul 14, 2017

119,907

At September 30, 2016 the Company has existing letters of credit, certificates of deposits and warranty insurance policies as follows:

Value

Release

Creditor Guarantee

Debtor

Type

ThUS$

date

Lima Airport Partners S.R.L.

Lan Perú S.A.

Twenty two letter of credit

3,805

Dec 31, 2016

Superintendencia Nacional de Aduanas y de Administración Tributaria

Lan Perú S.A.

Nine letter of credit

75,000

Oct 30, 2016

Aena Aeropuertos S.A.

LATAM Airlines Group S.A.

Four letter of credit

2,137

Nov 15, 2017

American Alternative Insurance Corporation

LATAM Airlines Group S.A.

Six letter of credit

3,490

Apr 5, 2017

Deutsche Bank A.G.

LATAM Airlines Group S.A.

One letter of credit

30,000

Mar 31, 2017

Dirección General de Aeronáutica Civil

LATAM Airlines Group S.A.

Forty-eight letter of credit

18,952

Oct 31, 2016

Empresa Pública de Hidrocarburos del Ecuador EP Petroecuador

LATAM Airlines Group S.A.

One letter of credit

5,500

Jun 17, 2017

JP Morgan Chase

LATAM Airlines Group S.A.

One letter of credit

10,000

Jun 17, 2017

Metropolitan Dade County

LATAM Airlines Group S.A.

Ten letter of credit

2,521

Mar 13, 2017

The Royal Bank of Scotland plc

LATAM Airlines Group S.A.

One letter of credit

5,000

May 20, 2017

4ª Vara Mista de Bayeux

Tam Linhas Aéreas S.A.

One insurance policies guarantee

1,064

Mar 25, 2021

6ª Vara Federal da Subseção

Tam Linhas Aéreas S.A.

Two insurance policies guarantee

25,068

Jan 4, 2018

8ª Vara Federal da Subseção de Campinas SP

Tam Linhas Aéreas S.A.

One insurance policies guarantee

12,945

May 19, 2020

Conselho Administrativo de Conselhos Federais

Tam Linhas Aéreas S.A.

One insurance policies guarantee

6,730

Oct 20, 2021

Fundação de Proteão de Defesa do Consumidor Procon

Tam Linhas Aéreas S.A.

Two insurance policies guarantee

3,289

Jan 21, 2021

União Federal Vara Comarca de DF

Tam Linhas Aéreas S.A.

Two insurance policies guarantee

2,707

Nov 9, 2020

União Federal Vara Comarca de SP

Tam Linhas Aéreas S.A.

One insurance policies guarantee

19,635

Feb 22, 2021

227,843

116

NOTE 33 - TRANSACTIONS WITH RELATED PARTIES

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

Transaction amount

Nature of

with related parties

relationship with

Country

related parties

As of September 30,

Tax No.

Related party

related parties

of origin

transactions

Currency

2016

2015

ThUS$

Unaudited

96.810.370-9

Inversiones Costa Verde Ltda. y CPA.

Related director

Chile

Tickets sales

CLP

65.216.000-K

Comunidad Mujer

Related director

Chile

Services provided for advertising

CLP

(12

)

(11

)

Tickets sales

CLP

78.591.370-1

Bethia S.A and subsidiaries

Related director

Chile

Services received cargo transport

CLP

(1,257

)

(1,656

)

Services received from National and International Courier

CLP

(362

)

(136

)

Services provided cargo transport

CLP

1,416

1,520

65.216.000-K

Viajes Falabella Ltda.

Related director

Chile

Sales commissions incurred

CLP

(108

)

79.773.440-3

Transportes San Felipe S.A

Common property

Chile

Shuttle services received passenger

CLP

(80

)

(131

)

Tickets sales

CLP

87.752.000-5

Granja Marina Tornagaleones S.A.

Common shareholder

Chile

Tickets sales

CLP

Foreign

Consultoría Administrativa Profesional S.A. de C.V.

Associate

Mexico

Service received professional management consulting

MXN

(1,756

)

(371

)

Foreign

Inversora Aeronáutica Argentina

Related director

Argentina

Service received lease property

US$

(198

)

(201

)

Revenues by advertising poster maintenance

ARS

Foreign

TAM Aviação Executiva e Taxi Aéreo S/A

Principal shareholder of the common matrix

Brazil

Services provided by tickets sales

BRL

Services provided cargo transport

BRL

Airport services received

BRL

(18

)

(43

)

117

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 9 months ended				For the 3 months ended
	September 30,				September 30,
	2016		2015		2016		2015
	ThUS$		ThUS$		ThUS$		ThUS$
	Unaudited
Remuneration		12,781		13,002		3,872		4,444
Management fees		348		455		102		177
Non-monetary benefits		600		513		186		153
Short-term benefits		19,159		14,964		4,106		4,812
Share-based payments		5,927		7,921		2,939		2,640
Total		38,815		36,855		11,205		12,226

NOTE 34 - SHARE-BASED PAYMENTS

(a) Compensation plan for increase of capital in LATAM Airlines Group S.A.

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

At a Special Shareholders Meeting held on December 21, 2011, the Company’s shareholders approved, among other matters, an increase of capital of which 4,800,000 shares were allocated to compensation plans for employees of the Company and its subsidiaries, pursuant to Article 24 of the Companies Law. In this compensation plan no member of the controlling group would be benefited. It is recorded that the 10,282 shares placed on the market in January 2014 were allocated and deducted from the issued and unallocated shares of this compensation plan. In view of the foregoing, this compensation plan currently comprises a balance of 4,789,718 shares.

118

The granting of options for the subscription and payment of shares has been formalized through conclusion of contracts of options to subscribe for shares, according to the proportions shown in the following schedule of accrual and is related to the permanence condition of the executive as employee of the Company at these dates for the exercise of the options:

Percentage		Period

30%		From December 21, 2014 and until December 21, 2016.
30%		From December 21, 2015 and until December 21, 2016.
40%		From June 21, 2016 and until December 21, 2016.

	Number
	of share
	options

Share options in agreements of share- based payments, as of January 1, 2015		4,202,000
Share options granted		406,000
Share options cancelled		(90,000	)
Share options in agreements of share- based payments, as of December 31, 2015		4,518,000

Share options in agreements of share- based payments, as of January 1, 2016		4,518,000
Executives resinged options (*)		(4,172,000	)
Share options in agreements of share- based payments, as of September 30, 2016 (Unaudited)		346,000

These options have been valued and recorded at fair value at the grant date, determined by the "Black-Scholes-Merton”. The effect on income to September 2016 corresponds to ThUS$ 2,989 (ThUS$ 7,920 at September 30, 2015).

The input data of option pricing model used for share options granted are as follows:

	Weighted average		Exercise		Expected			Life of	Dividends			Risk-free
	share price		price		volatility			option	expected			interest
As of September 30, 2015 (Unaudited)	US$	15,47	US$	18,29		34.74	%	3.6 years		0	%		0.00696
As of September 30, 2016 (Unaudited)	US$	15,47	US$	18,29		34.74	%	3.6 years		0	%		0.00696

(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. The granting of options for the subscription and payment of shares has been formalized through conclusion of contracts of options to subscribe for shares, according to the proportions shown in the following schedule of accrual and is related to the permanence condition of the executive at these dates for the exercise of the options:

119

Percentage		Period
100%			From November 15, 2017 and until June 11, 2018.

(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.

		Unit bases granted
Units bases, balance at September 30, 2016			4.719.720

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 September 30, 2016, the carrying amount of MUS $ 2,939, is classified under "Administrative expenses" in the Consolidated Statement of Income by Function.

(c.1) Stock Options

TAM Linhas Aereas S.A. and Multiplus S.A., both subsidiaries of TAM S.A., have outstanding stock options at September 30, 2016, which amounted to 96,675 shares and 417,539 shares, respectively (at December 31, 2015, the distribution of outstanding stock options amounted to 394,698 for Multiplus S.A. and 96,675 shares TAM Linhas Aéreas S.A.).

120

TAM Linhas Aéreas S.A.

Description	4th Grant
Date	05/28/2010		Total
Outstanding option number As September 30, 2015 (Unaudited)		96,675		96,675
Outstanding option number As September 30, 2016 (Unaudited)		96,675		96,675

Multiplus S.A.

							4nd Extraordinary
Description	1st Grant		3rd Grant		4th Grant		Grant
Date	10/04/2010		03/21/2012		04/03/2013		11/20/2013		Total
Outstanding option number As September 30, 2015 (Unaudited)		3,796		115,298		269,241		205,575		593,910
Outstanding option number As September 30, 2016 (Unaudited)		-		84,249		173,399		137,050		394,698

The Options of TAM Linhas Aéreas S.A., under the plan's terms, are divided into three equal parts and employees can run a third of its options after three, four and five years respectively, as long as they remain employees of the company. The agreed term of the options is seven years.

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.

Both companies have an option that contains a "service condition" in which the exercise of options depends exclusively on the delivery services by employees during a predetermined period. Terminated employees will be required to meet certain preconditions in order to maintain their right to the options.

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
	September 30,		December 31,		September 30,		December 31,
Company	2016		2015		2016		2015
	Unaudited				Unaudited
TAM Linhas Aéreas S.A.		-		-		96,675		96,675
Multiplus S.A.		-		-		394,698		518,507

121

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 September 30, 2016 (at December 31, 2015 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.

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

As of january 1, 2015		91,103
Granted		119,731
Not acquired by non-compliance with conditions of stay		(34,924	)
As of september 30, 2015 (Unaudited)		175,910
As of october 1, 2015		175,910
No movement		-
As of december 31, 2015		175,910
As of January 1, 2016		175,910
Granted		138,282
Exercised		(15,811	)
Not acquired due to breach of employment retention conditions		(42,944	)
As of september 30, 2016 (Unaudited)		255,437

122

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
	September 30,
	2016			2015
	ThUS$			ThUS$
	Unaudited
Change reservation systems		-			11,000
Bank cmmissions, taxes paid and other		(1,335	)		(4,028	)
Hedging margin guarantees		(1,795	)		89,280
SEC agreement		(4,719	)		-
Fuel derivatives premiums		(6,840	)		(18,979	)
Tax paid on bank transaction		(7,016	)		(8,905	)
DOJ fine		(12,750	)		-
Guarantees		(17,640	)		(15,117	)
Currency hedge		(30,031	)		(25,047	)
Fuel hedge		(44,664	)		(220,069	)
Others		50			-
Total Other inflows (outflows) Operation flow		(126,740	)		(191,865	)

Recovery loans convertible into shares		-			20,000
Certificate of bank deposits		-			3,497
Tax paid on bank transaction		(3,308	)		(8,196	)
Total Other inflows (outflows) Investment flow		(3,308	)		15,301

Credit card loan manager		-			3,227
Early redemption of bonds TAM 2020		-			(15,328	)
Settlement of derivative contracts		(19,304	)		(27,744	)
Aircraft Financing advances		(151,363	)		9,067
Others		-			(2,822	)
Total Other inflows (outflows) Financing flow		(170,667	)		(33,600	)

	For the periods ended
	September 30,
	2016			2015
	ThUS$			ThUS$
	Unaudited
Multiplus S.A		(30,287	)		(25,283	)
Lan Perú S.A		(400	)		(400	)
Total dividends paid (*)		(30,687	)		(25,683	)

(*) Dividends paid to minority shareholders

123

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:

Carbon Footprint

ii.

Eco-Efficiency

iii.

Sustainable Alternative Energy

iv.

Standards and Certifications

For 2016, were established the following topics:

Advance in the implementation of an Environmental Management System;

Manage the Carbon Footprint of our emissions by ground operations;

Corporate Risk Management;

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

Thus, during 2016, 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 has a certified management system, under ISO 14.001 at its facility in Miami, obtained in the second quarter of 2015.

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.

124

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

Subsequent at September 30, 2016 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.

LATAM Airlines Group S.A. and Subsidiaries’ consolidated financial statements as at September 30, 2016, have been approved by the Board of Director’s in an extraordinary meeting held on November 10, 2016.

125

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.

126

Date: August 14, 2016

LATAM AIRLINES GROUP S.A.

/s/ Enrique Cueto

Enrique Cueto

Latam Airlines Group CEO