INTEGRATED REPORT 2019 REPORT INTEGRATED INTEGRATED REPORT 2019 a INTEGRATED REPORT 2019 REPORT INTEGRATED SUMMARY ECONOMIC DIMENSION ENVIRONMENTAL DIMENSION 03 Presentation 55 Our business 75 Environment 56 Industry context 76 Policy and systems 05 Highlights 57 Financial results 77 Straight to the point: climate change 08 Message from the CEO 60 Stock information 78 Operations ecoefficiency 61 Risk management 10 Who we are 63 Investment plan 11 Historical record: 74.2 million passengers transported in 2019 64 Suppliers 107 Methodology 14 Value generation model 65 Business allies 108 Construction of the report 15 Timeline 68 Straight to the point: 110 GRI content index 18 Fleet sustainability in the crosshairs 116 Global compact 20 Operations 117 External assurance 69 Customers 26 Awards and acknowledgements 118 Glossary 70 The best experience 27 Corporate governance 72 Technological transformation 119 Appendices 28 Performance guidelines 74 Straight to the point: SOCIAL DIMENSION 163 Financial information 30 Governance structure on-time performance 87 Employees 164 Financial statements 2019 35 Ownership structure 88 Straight to the point: working more closely 253 Affiliates and subsidiaries 39 Financial policy 89 Management and development 293 Analysis of the financial statements 42 Sustainability 92 Employee profile and distribution 300 Sworn statement 43 Together, more sustainable 94 Straight to the point: protected personnel 45 Strategic focus 301 Corporate mesh 95 Security 51 Alignment with the SDG 96 Straight to the point: safety first 302 Credits 97 Shared responsibility Click on the buttons and 99 Society browse the PDF. 100 Straight to the point: driving the region 101 Care for My Destination 104 Solidary Plane 105 Expand the impact Block 5 2019 REPORT INTEGRATED Includes technical data on the report—methodol- Presentation ogy used, external auditor’s letter—a glossary of acronyms, and the Appendix section, with comple- mentary information for readers who wish to gain a deeper understanding of specific topics; Block 6 The 2019 Integrated Report reflects LATAM’s com- For the second consecutive year, LATAM is uniting Deals with the Group’s financial reports. LATAM International Financial Reporting Standards (IFRS) mitment to transparency and the periodic ac- financial and non-financial information more con- Airlines Group and most of its affiliates main- as issued by the International Accounting Stan- countability to society. This edition presents the sistently, based on the integrated reporting prin- tain their accounting records and prepare their dards Board (IASB), require assets and liabilities to main results of the year regarding the most im- ciples of the International Integrated Reporting financial statements in US dollars (USD). Howev- be translated at period-end exchange rates, while portant topics for the business and the Group’s Council (IIRC) and of the GRI standards (Global Re- er, some of its affiliates maintain their accounting revenue and expense accounts are translated at the stakeholders. porting Initiative) — main benchmark for sustain- records and prepare their financial statements in exchange rate of each transaction date, although ability communication in the world. Chilean pesos, Argentinean pesos, Colombian pe- a monthly rate may also be used if exchange rates sos, or Brazilian reals. do not vary too widely. READING THE REPORT In particular, LATAM Airlines Brazil maintains its ac- There are six large blocks of information: counting records and prepares its financial state- ments in Brazilian reals. LATAM’s audited consoli- Block 1 dated financial statements include the results of Focuses on the institutional information: who these affiliates translated into US dollars. the company is, where it operates, what its deci- sion-making process is like, and how it integrates sustainability in its day-to-day management; Blocks 2, 3, and 4 Cover the performance achieved throughout the year in the economic, environmental, and social dimensions. The organization follows the focus ad- opted by the Dow Jones Sustainability Index (DJSI); Presentation | Highlights | Message from the CEO | Who we are | Corporate governance | Sustainability | Our business Suppliers | Customers | Environment | Employees | Security | Society | Methodology | Appendices | Financial information | Credits 3 INTEGRATED REPORT 2019 REPORT INTEGRATED CONVENTIONS ADOPTED • In this annual report, various references are made to • References to “LAN” are to LAN Airlines S.A., cur- If you have “LATAM”. Unless the context otherwise requires, refer- rently known as LATAM Airlines Group S.A., and its suggestions, comments, or ences to “LATAM Airlines Group” are to LATAM Airlines consolidated affiliates, in connection with circum- questions regarding the report, Group S.A., the unconsolidated operating entity, and stances and facts occurring prior to the completion please send an e-mail to references to “LATAM,” “the Group”, “Society”, “we,” date of the combination between LAN Airlines S.A. [email protected] or “us” or the “Company” are to LATAM Airlines Group and TAM S.A. [email protected]. S.A. and its consolidated affiliates: Transporte Aéreo S.A. (“LATAM Airlines Chile”), LATAM Airlines Perú • In this annual report, unless the context otherwise [102-53] S.A. (“LATAM Airlines Perú”), LATAM-Airlines Ecuador requires, references to “TAM” are to TAM S.A., and its S.A. (“LATAM Airlines Ecuador”), LAN Argentina S.A. consolidated affiliates, including TAM Linhas Aereas SECTIONS (“LATAM Airlines Argentina,” formerly Aero 2000 S.A.), S.A. (“TLA”), which operates under the name “LATAM The Appendix section was one of the editorial re- STRAIGHT TO THE POINT Aerovías de Integración Regional, Aires S.A. (“LATAM Airlines Brazil”, Fidelidade Viagens e Turismo Limited sources adopted to counter the apparent contra- Fact sheets on a range of key subjects. These are Airlines Colombia”), TAM S.A. (“TAM” or “LATAM (“TAM Viagens”), and Transportes Aéreos Del Mercosur diction between the commitment with objectivity organized into three parts: Context and position- Airlines Brazil”), LAN Cargo S.A. (“LATAM Cargo”) and S.A. (“TAM Mercosur”). and the need for a greater coverage of the infor- ing, where the relevance of that topic for LATAM, its two regional affiliates: Linea Aerea Carguera de mation to meet the needs of different stakehold- the aviation sector, or society is reported; top- Colombia S.A. (“LANCO”) in Colombia and Aerolinhas ers. External links were also provided for additional ic management, with the Group’s focus, including Brasileiras S.A. (“ABSA”) in Brazil. In November 2018, • Throughout the text, the GRI indicators are includ- relevant information. opportunities and challenges; and 2019 achieve- LATAM Airlines Group sold its stake in its Mexican ed in brackets. This content can also be found in the ments, a compilation of the most recent actions cargo affiliate Aero Transportes Mas de Carga S.A. de Methodology section, which opens section 5 of the Three specific sections contribute to this edition’s and their results; C.V. (“MasAir”). Other references to “LATAM”, as the report, and concentrates the technical information objectivity: context may require, are to the LATAM brand, which regarding this edition. was launched in 2016 and brings together, under one Highlights Snapshot internationally recognized name, all of the affiliate Found at the beginning of the Report, with the Historical series of the main indicators; there is one brands, such as LATAM Airlines Chile, LATAM Airlines Enjoy your reading! most relevant events and numbers; for each performance chapter in the economic, so- Peru, LATAM Airlines Argentina, LATAM Airlines Colom- cial, and environmental dimensions. bia, LATAM Airlines Ecuador, and LATAM Airlines Brazil. Presentation | Highlights | Message from the CEO | Who we are | Corporate governance | Sustainability | Our business Suppliers | Customers | Environment | Employees | Security | Society | Methodology | Appendices | Financial information | Credits 4 MEMORIA INTEGRADA 2019 INTEGRADA MEMORIA ECONOMIC HIGHLIGHTS 2019 PERFORMANCE Over 1,300 90 YEARS CONNECTING flights per day EBITDA (US$ thousand) PEOPLE AND DESTINATIONS EBITDA Margin EBITDA 21.8% 22.1% 21.2% earnings before interest, tax, depreciation, and amortization. 2,295,710 2,259,612 2,211,578 Fleet with The 2017 and 2018 values have been 342 short- and restated pursuant to IFRS 2016 accounting long-haul aircrafts standards. 2017 2018 2019 Cargo 41,719 AIR004Operations 2019 Revenues (%) employees 903.8 thousand tons transported 152 destinations Passengers Passenger 29 countries PEO006 Operations 86.3 AGREEMENT WITH Load factor: 55.5% 6.5 DELTA AIR LINES +1.6%1 74.2 million passengers Consolidated traffic (Cargo: RTK): Others Capacity (Cargo: ATK): +0.4%1 10.2 Complementary transported (all-time record) network between +5.4 million compared to 2018 Cargo North America and 1 Compared to 2018, excluding the sale of MasAir in Total 145 destinations late 2018. US$10.43 billion Latin America 26 countries ASK: available seat-kilometers. 155 shared codes ATK: available ton-kilometers. New destinations in RPK: revenue passenger-kilometers. US$742 million Load factor: 83.5% RTK: revenue ton-kilometers. in operating income the other continents Consolidated traffic (Passenger: RPK): +3.9%1 • Operating margin of 7.1% Capacity (Passenger: ASK): +3.7%1 • Stable debt level, at around 4.0x. Presentation | Highlights | Message from the CEO | Who we are | Corporate