2010 Annual Report 2010 Index
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Annual Report 2010 Annual Report 2010 Index Letter from The Chairman of The Board 3 Letter from The Chief Executive Officer 5 The Company 7 Company Information 7 Vision, Mission and Values 8 Strategy and Business Model 9 Ownership Structure and Main Shareholders 11 Corporate Governance 16 Our History 29 Fleet 31 Our People 36 A Culture of Service 36 A Committed Tam 38 Results 2010 39 Financial Results 39 Awards and Recognitions 45 Stock 47 Additional Information 51 Passenger Business 71 LAN International Business 71 LANPASS 74 LAN Airlines 76 LAN Peru 78 LAN Ecuador 80 LAN Argentina 82 LAN in Colombia 84 Cargo Business 86 LAN CARGO 86 Sustainability 90 Destinations 93 Statement of Responsibility 99 Glossary of terms 100 Annual Report 2010 Letter from The Chairman of The Board Jorge Awad Dear Shareholders, LAN Peru in 1999, LAN Ecuador in 2003 With great pride, and LAN Argentina in 2005. We also Over the last 16 years, since LAN soon expect to establish a subsidiary in I can report that was acquired by its current majority Colombia where the recent acquisition LAN has developed shareholders, success has been of the AIRES airline - the country’s second the hallmark of its history. As from most important operator - will allow us from a small 1994, the Company embarked on a to participate actively in the Colombian operator into a sustained process of expansion and the passenger market, one of the largest in internationalization of its operations South America. global player and in the framework of a new strategic is today one of the approach designed to transform it into In addition, once we have received one of Latin America’s leading airlines approval for our association project Chilean companies as regards quality and service. And we with TAM, Brazil’s largest airline, we will with the greatest have achieved it. With great pride, I be taking a further decisive step in our can report that, in this period, LAN has process of internationalization in line with visibility and level developed from a small operator in the our long-term project of being the airline of recognition context of the commercial airline industry with the best coverage in Latin America. into a global player and is today one of around the world. the Chilean companies with the greatest From having just 15 aircraft and visibility and level of recognition around operating only in the Chilean market, the world. LAN has, over these 16 years, established its position among the continent’s most The first step in this process was the important airlines in both the passenger acquisition of Fast Air, a small cargo and cargo businesses, with a modern airline based in Miami. More recently, fleet of 131 aircraft and a geographic we have focused on building a network diversification that have made it a of subsidiaries within the region, creating regional airline that is highly competitive Annual Report 2010 3 and efficient and is able to offer the most market capitalization. complete connectivity within the region and with the rest of the world. We are convinced that, in order to produce results that are sustainable over We have, moreover, a unique business time, the participation and commitment model, based on the successful integration of our people are essential. For that of our passenger and cargo operations, reason, I would particularly like to thank and, of course, an approach to service each and every one of our collaborators centered on the client. Our differentiating whose professionalism and great technical value proposition has earned us the capacity have played a crucial role in these preference of our passengers and cargo achievements. I would, in addition, like to clients in most of the markets in which thank our shareholders for their support we operate, confirming the importance and the trust they have placed in this of our constant investments in aircraft, administration, which have allowed us service and human capital. As a result, to advance along the path of sustained the Company has generated profits year growth and ultimately to position LAN after year and, in 2010, these reached a among the ten best and most important record US$420 million, with a solid 14% airlines in the world. operating margin. These results were rewarded by the markets and LAN’s share Service, reliability and efficiency are price increased, taking the Company’s the keys that I am certain will always market value to US$10,400 million in form part of the business model that LAN December 2010 and positioning it among Airlines will continue to build over the the world’s five largest airlines in terms of coming decades. Jorge Awad M. President Annual Report 2010 4 Letter from The Chief Executive Officer Enrique Cueto Dear Shareholders, identity and their respective brands, We are proud of our LAN’s consolidation as one of Latin their joint operation will give rise to Latin great work in 2010 America’s leading airlines as regards America’s largest airline, serving over 115 because it puts us quality and service has been our primary destinations in 23 countries with a fleet focus in recent years and we have worked of more than 280 aircraft. on a good footing consistently and with discipline to achieve to continue growing this goal. It is, therefore, satisfying to be In 2010, we also acquired Colombia’s LAN in the long term. able to report that, in 2010, we made AIRES airline, giving us the opportunity significant progress in this direction to start operations in that country’s The progress we have through the implementation of two long passenger market - one of the largest achieved paves the cherished projects that allow us to look to in South America - and to continue strengthening our presence in the region. way to our ongoing the future with renewed optimism. AIRES’s network is key for ensuring a development and In August, we signed an association rapid expansion since it operates regular to improving our agreement with TAM, Brazil’s largest services to 24 destinations in Colombia airline, that lays the foundations for a and is the second largest operator in the competitive position joint operation with enormous potential domestic market of which it holds a 20% in pursuit of our goal for offering cargo clients and passengers share. This acquisition makes Colombia of positioning LAN new destinations and connections the fifth country in the region in which that we would not be able to provide LAN has domestic passenger operations, as one of the world’s independently. Once this association along with Chile, Peru, Argentina and best airlines. has been approved, we will create a Ecuador. new world-class Latin American group, known as Latam Airlines Group, that will Both our project in Brazil and our include LAN and TAM. Although both debut in Colombia are milestones in companies will retain their corporate the Company’s history in that they will Annual Report 2010 5 give us a significant presence in all year in pursuit of our goal of positioning Latin American markets, with the many LAN as one of the world’s best airlines for advantages this implies in terms of quality and service. Without doubt, the coverage and connectivity. We have, in commitment of our workers, technicians other words, taken a transcendental step and professionals in the different countries in LAN’s consolidation as Latin America’s where we operate played a crucial role leading airline. in these achievements and I would, therefore, particularly like to thank each We are proud of our great work in and every one of our collaborators for 2010 because it puts us on a good footing their efforts and dedication during the to continue growing LAN in the long term. year. In addition, I would like to thank The progress we have achieved paves the our shareholders for the confidence that, way to our ongoing development and to over all these years, they have shown in improving our competitive position year by the Company’s management. Enrique Cueto P. Chief Executive Officer | CEO Annual Report 2010 6 The Company Company Information LAN AIRLINES S.A. Huérfanos 770, Piso 22nd Floor RUT 89.862.200-2 Santiago, Chile Email: [email protected] Corporate Headquarters Tel: (56) (2) 393 9003 Avenida Presidente Riesco 5711 20th Fax: (56) (2) 393 9315 Floor Las Condes, Santiago, Chile Depositary Bank Tel: (56) (2) 565 2525 The Bank of New York Mellon Fax: (56) (2) 565 8764 BNY Mellon Shareowner Services PO Box 358516 Maintenance Base Pittsburgh, PA 15252-8516 Aeropuerto Arturo Merino Benítez Tel: (Toll free) 1-888-269-2377 Santiago, Chile Tel: (International) 201-680-6825 Tel: (56) (2) 677 4500 (Non-U.S. Residents) Fax: (56) (2) 677 4505 Email: [email protected] Trading Symbol Custodian Bank LAN- Santiago Stock Exchange Banco Santander LFL- New York Stock Exchange Chief of Custodian Department Tel: (56) (2) 320 3320 Financial Information Fax: (56) (2) 320 3560 Investor Relations LAN Airlines S.A. Independent Auditors Avenida Presidente Riesco 5711 20th PricewaterhouseCoopers Floor Avenida Andrés Bello 2711, 5th Floor Las Condes, Santiago, Chile Santiago, Chile Tel: (56) (2) 565 8785 Tel: (56) (2) 940 0000 Email: [email protected] Website Investor Assistance For information about LAN Airlines log on Depósito Central de Valores to www.lan.com Annual Report 2010 7 The Company Vision, Mission And Values Vision Mission Values To be recognized as one of the To be the carrier of people’s Safety, Achievement, Efficiency world’s ten best airlines. dreams, giving the best of and Cordiality. ourselves, earning our customers’ and communities preference and building a sustainable company in which we love to work.