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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN ISSUER

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

THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of February 2007

 

(Commission File No. 1-14728)

 

Lan Airlines S.A.

(Translation of registrant's name in English)

 

Avenida Americo Vespucio Sur 901

Renca,

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 whether the registrant by furnishing the

information contained in this form is also thereby furnishing the

information to the Commission pursuant to Rule 12g3-2(b) under the

Securities Exchange Act of 1934.)

 

Yes __              No X  

 

 

 

 

 

 

FOR IMMEDIATE RELEASE

 

LAN AIRLINES REPORTS NET INCOME OF US$93.6
MILLION FOR 4Q06 AND US$241.3 MILLION FOR FULL YEAR 2006

 

Santiago, Chile, February 14, 2007 – LAN Airlines S.A. (NYSE: LFL), one of Latin America’s leading passenger and cargo airlines, announced today its consolidated financial results for the fourth quarter and full year ended December 31, 2006. “LAN” or “the Company” makes reference to the consolidated entity, which includes several passenger and cargo airlines in Latin America. All figures were prepared in accordance with generally accepted accounting principles in Chile and are expressed in U.S Dollars.

HIGHLIGHTS

 
CONTACTS IN CHILE  CONTACTS IN NEW YORK 
Gisela Escobar – Head of Investor Relations    Maria Barona/Melanie Carpenter 
gisela.escobar@lan.com     lan@i-advize.com 
Juan José Irarrázaval – Investor Relations Analyst               i-advize Corporate Communications, Inc. 
juanjose.irarrazavalg@lan.com   Tel: (212) 406-3690 
Tel: (56-2) 565-3944/8775   


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Management Comments on 4Q06 Results

LAN reported net income of $93.6 million for the fourth quarter of 2006. This result reflects a strong operating performance, with significant margin improvements resulting mainly from higher revenues per ATK in both the passenger and cargo businesses as well as from lower fuel costs, in each case as compared to the fourth quarter of 2005. While total revenues increased 20.8% during the quarter, operating margin improved 7.8 points to 16.2% . This represents a major accomplishment for the Company as revenue growth surpassed the 14.9% expansion in operations, as measured in system ATKs. The Company also benefited from an estimated US$26.8 million in lower fuel costs as a result of decreases in the price of jet fuel, partly offset by lower fuel surcharges and a small hedging loss.

Passenger revenues grew 26.1% due mainly to a 19.8% expansion in capacity as well as a 5.3% improvement in revenues per ASK. The latter resulted from a 1.4% improvement in yield and a 2.9 point increase in load-factors during the quarter. During the fourth quarter, the Company managed capacity to respond to demand growth and market opportunities. As a consequence, capacity increased on the majority of LAN’s routes, especially those to the United States, Europe, and the South Pacific as well as within South America. Capacity decreased on segments to the Caribbean. Capacity also increased in all of the company’s domestic markets, namely Chile, Peru and Argentina. During the quarter, higher yields as a result of nominal fare increases and better revenue management were offset by lower fuel surcharges resulting from lower WTI prices as compared to 4Q05.

Cargo revenues rose 16.5% as capacity rose 7.4% and unit cargo revenues increased 8.5% . Higher revenues per ATK resulted mainly from an 8.9% improvement in yields, partly offset by a 0.3 point decrease in load factors. The cargo business continues to experience an imbalance caused by weak exports and strong imports into Latin America. In response to these conditions, LAN has adjusted its aircraft rotations in order to support northbound flights with stop-overs in various export markets. Additionally, the Company is reducing its ACMI leases of dedicated freighters and increasing the usage of its own fleet of Boeing 767 freighters, leveraging the aircraft’s low operating costs and their ability to adequately serve key destinations. Yields rose due to careful route selection and fare increases, mainly on southbound routes.

Operating expenses rose 10.6% compared to fourth quarter of 2005 as capacity increased 14.9% . This led to a 2.0% decrease in total cost per ATK (which include net financial expenses). Excluding the impact of lower fuel prices, which generated US$26.8 million in lower fuel costs for the quarter, unit costs rose 3.7% . Ex-fuel, unit costs rose due to increases in wages and benefits, higher commercial costs related to the higher yields obtained in the quarter, higher airport fees, and higher fleet related expenses as a result of a larger fleet. These factors were partially offset by lower maintenance costs attributable to a more modern fleet.

The Company recorded a US$24.3 million non-operating loss in the fourth quarter of 2006 compared to a US$1.0 million loss in 4Q05. This was mainly the result of higher interest expenses due to higher debt related to fleet financing, as well as a decrease in fuel hedging gains (US$4.3 million
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gain in 4Q05 as compared to a US$1.0 million loss in 4Q06) and an US$8.1 million provision related to the phase-out of the Boeing 737-200 fleet to occur during 2007. LAN has hedged approximately 36%, 27%, 28% and 29% of its fuel requirements for 1Q07, 2Q07, 3Q07 and 4Q07, respectively.

LAN continues to maintain a solid financial position, with ample liquidity and a sound financing structure. At the end of the quarter LAN had US$281 million in cash, cash equivalents and committed credit lines. Additionally, the Company’s long-term debt only finances aircraft, has 12 to 18-year repayment profiles and features competitive interest rates.

In October 2006, LAN received one new Boeing 767-300F freighter to be incorporated into its dedicated cargo fleet. For its passenger operations, LAN incorporated one new Boeing 767-300ER into its long-haul fleet in November 2006, the fourth such delivery in 2006. This aircraft features LAN’s recently-launched Premium Business Class and upgraded Economy Class.

Consistent positive results and a solid balance sheet have enabled LAN to continue advancing on a number of long-term initiatives. These plans, which encompass all levels and business units, are aimed at improving LAN’s long-term strategic position by enabling the Company to address opportunities, strengthen its market position and raise competitiveness.

EBITDAR Calculation (1)

The following is a calculation of LAN’s EBITDA (earnings before interest, taxes, depreciation and amortization) and EBITDAR (earnings before interest, taxes, depreciation, amortization and aircraft rentals), which the Company considers useful indicators of operating performance.

EBITDAR (in US$ millons)             
  4Q06  4Q05  %Chg  FY06  FY05  %Chg 
 
Revenues  853.5  706.3  20.8%  3,034.0  2,506.4  21.1% 
Operating Expenses  715.5  647.1  10.6%  2731.3  2364.7  15.5% 
Operating Income  138.0  59.2  132.9%  302.6  141.6  113.7% 
Depreciation and Amortization  32.6  21.5  52.0%  122.8  80.5  52.6% 
 
EBITDA  170.6  80.7  111.4%  425.4  222.1  91.6% 
EBITDA Margin  20.0%  11.4%  8.6pp  14.0%  8.9%  5.1pp 
 
Aircraft Rentals  39.1  37.9  3.0%  157.7  148.2  6.4% 
EBITDAR  209.7  118.7  76.8%  583.1  370.3  57.5% 
EBITDAR Margin  24.6%  16.8%  7.8pp  19.2%  14.8%  4.4pp 

(1) EBITDA and EBITDAR are non-GAAP measures and should not be considered in isolation nor as a substitute for net income prepared in accordance with generally accepted accounting principles in Chile as a measure of operating performance. Furthermore, these calculations may not be comparable to similarly titled measures used by other companies.

Recent Events

New Business Model for Domestic/Regional Operations
The Company has recently embarked on an important project to redesign its domestic and regional business model. This project seeks to increase efficiency and improve the margins of LAN’s short haul operations, including domestic operations in Chile and its affiliate operations in Argentina and Peru, as well as regional narrow-body aircraft operations. During the 4Q06 LAN carried out pilot programs to test this new business model in three domestic destinations in Chile: Puerto Montt,
Page 4

 

Punta Arenas and La Serena. The Company saw very positive results in all of these markets in terms of demand stimulation as well as significant increases in first-time passengers.

LAN plans to implement the new model nationwide throughout Chile in April 2007. LAN Peru has implemented the new business model on most of its domestic routes, and plans to complete its implementation during the first quarter of 2007. In Argentina, implementation by LAN Argentina of the new model will be gradual, and will focus mainly on certain operational changes. Both Lan Peru and Lan Argentina are currently operating all Airbus 320 family fleets.

Capital Increase
On January 26, 2007, LAN’s Extraordinary Shareholders Meeting approved a share issuance of 7,500,000 common shares, amounting to 2.4% of the Company’s current capital on a fully diluted basis. A portion of this issuance will be designated to the implementation of a stock option plan for Company employees, under conditions to be defined by the Company’s Board of Directors.

Financing to VRG Linhas Aereas S.A.
On January 31, 2007, LAN announced that it has provided a total of approximately US$ 17.1 million in financing to Brazilian company VRG LINHAS AEREAS S.A. (“New Varig”). These loans may be converted into shares of New Varig and if LAN were to exercise its option to convert the loans into stock, the Company would then have a minority stake in New Varig. LAN in currently involved in ongoing negotiations with New Varig’s shareholders in order to potentially exercise its option to participate in such company through the capitalization of its loans.

Outlook

The actions mentioned above are part of a broad set of initiatives aimed at reinforcing LAN’s future performance. The Company’s strong fourth quarter operating performance provides a solid base for long-term growth and profitability. As a consequence, LAN is in a position to plan for capacity expansion in response to growth opportunities, while leveraging opportunities to improve its cost performance. Combined, LAN believes that these elements will enable LAN to consolidate its position as Latin America’s leading international carrier.

LAN is embarked on a very significant fleet expansion program, which included the delivery of a total of 13 passenger and cargo aircraft in 2006. In addition to additional aircraft, ASK growth will be enhanced as a result of increased aircraft utilization and, to a lesser extent, the densification of its current fleet. Overall, LAN expects passenger ASK growth to be between 19-21% in 2007 and between 18-20% in 2008. LAN expects growth in the cargo business over the next two years will largely be driven by capacity in the belly space of passenger aircraft, as well as from the delivery of one new freighter in 4Q06 and a possible additional freighter in 2008. As a result, we estimate cargo ATK growth of 4-6% in 2007 and 4-6% in 2008.

Consolidated Fourth Quarter Results

Net income for the fourth quarter of 2006 amounted to US$93.6 million compared to US$49.9 million for the same period of 2005, increasing 87.7% . Net margin for the quarter increased 3.9 points from 7.1% in 2005 to 11.0% in 2006.

Operating income amounted to US$138.0 million in 4Q06 as compared to US$59.2 million in 4Q05. Operating margin for the quarter increased 7.8 points to 16.2% .

Total operating revenues grew 20.8% compared to the fourth quarter of 2005, reaching US$853.5 million. This reflected a:

 
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Passenger and cargo revenues accounted for 60% and 35% of total revenues for the quarter, respectively.

Passenger revenues grew driven by a 24.4% increase in traffic and an 1.4% increase in yields. Load factor increased 2.9 points to 76.2% as traffic outgrew a 19.8% increase in capacity. Overall, revenues per ASK increased 5.3% . Traffic grew as a result of an 11.7% increase in Chilean domestic and a 26.7% increase in international traffic (including domestic operations in Peru and Argentina). International traffic accounted for 86% of total passenger traffic during the quarter. Yields increased 1.4% as nominal fare increases and better revenue management were offset by lower fuel surcharges resulting from lower WTI prices as compared to 4Q05.

Cargo revenues grew due to a 7.0% increase in traffic and a 8.9% improvement in yield. Yields increased primarily due to higher fares, especially on southbound routes. Traffic growth was slightly exceeded by a 7.4% capacity increase. As a consequence, load factors decreased 0.3 points to 69.0% . Nevertheless, revenues per ATK increased 8.5% as compared to 4Q05.

Other revenues decreased 5.5% as increased on-board sales, handling and courier revenues were offset by lower revenues from logistics and aircraft rental activities.

Total operating expenses increased 10.6% during the quarter as capacity, measured in system ATKs, increased 14.9% . As a consequence, unit (ATK) costs decreased 2.0% . Lower jet fuel prices during the quarter led to approximately US$26.8 million in lower fuel costs. Ex-fuel, unit costs increased 3.7% . Changes in operating expenses were driven by:

Non-operating results for the fourth quarter of 2006 amounted to a US$24.3 million loss compared to a US$1.0 million loss in the fourth quarter of 2005. Interest income increased 22.1% due to higher average cash balances. Interest expenses increased 67.8% due to increased average long-term debt related with fleet financing. In the miscellaneous-net item, the Company recorded a US$8.2 million loss compared to a US$7.9 million gain in 2005. In 4Q06, this included a US$1.0 million fuel hedging loss (compared to a US$4.3 million gain in 4Q05) as well as a US$6.1 million
Page 6

 

foreign-exchange gain (compared to a US$3.3 million gain in 2005). This item also included in 4Q06 an US$8.1 million provision related with the phase-out of the Boeing 737-200 fleet planned for 2007.

Consolidated Full Year 2006 Results

Net income for the full-year 2006 amounted to US$241.3 million compared to US$146.6 million for 2005. Net margin increased 2.1 points from 5.8% in 2005 to 8.0% in 2006. Excluding extraordinary items, net income for 2006 reached US$213.0 million.
Operating income for 2006 was US$302.6 million compared to US$141.6 million in 2005.
Operating margin for 2006 increased 4.3 points to 10.0% .

Total operating revenues amounted to US$3.0 billion in 2006, a 21.1% increase compared with 2005. This reflected a:

Passenger and cargo revenues accounted for 60% and 35% of total revenues for 2006, respectively.

Passenger revenues grew driven by an 11.5% increase in traffic and an 11.4% increase in yields. Load factors remained flat at 73.8% as traffic growth equaled a 11.5% capacity increase. Overall, revenues per ASK rose 11.4% . Traffic grew by 3.1% in the Chilean domestic market and by 12.8% on international routes (including domestic operations in Peru and Argentina). International traffic accounted for 87% of total passenger traffic during 2006. Yields grew mainly due to the implementation of fuel cost pass-through initiatives as well as nominal fare increases and improved segmentation.

Cargo revenues grew due to a 7.8% increase in traffic and a 9.3% improvement in yield, measured in RTKs. Yields rose primarily due to increases in southbound rates and cost driven rate increases. Growth in cargo traffic outpaced a 7.0% increase in capacity, resulting in a 0.5 -point increase in cargo load factors to 66.8% . As a consequence, revenues per ATK rose 10.1% .

Other revenues grew 9.3%, mainly driven by higher revenues from on-board sales and courier operations, as well as higher revenues from aircraft leasing and handling activities to third parties, partially offset by lower maintenance to third parties.

Total operating expenses increased 15.5% in 2006 compared to 2005, as capacity, measured in system ATKs, increased 9.3% . As a consequence, unit (ATK) costs increased 6.9% . Excluding the impact of higher fuel prices, which led to US$70.9 million in additional expenses, unit costs increased 6.2% . Changes in operating expenses were driven by:


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Non-operating results for 2006 amounted to a US$15.7 million loss compared to a US$31.5 million gain in 2005. Interest income decreased 36.4% due to lower average cash balances and lower interest rates. Interest expenses increased 55.0% due to an increase in average debt, mainly related to fleet financing. In the miscellaneous-net item, the Company recorded a US$37.1 million gain compared to a US$58.2 million gain in 2005. In 2006, this included (i) a US$40.3 million onetime gain due to a change in the Company’s maintenance accounting policy recorded in 1Q06 (ii) a US$6.4 million pre-tax one-time charge due to severance payments recorded in 2Q06 and (iii) an US$8.1 million provision related to the phase-out of the Boeing 737-200 fleet planned for 2007 recorded in 4Q06. In addition, this item included a US$12.9 million fuel hedging gain (compared to a US$51.5 million gain in 2005) as well as a US$5.5 million foreign-exchange gain (compared to a US$6.0 million gain in 2005).

******

About LAN
LAN Airlines (“LAN”) is one of the leading airlines in Latin America. The LAN Alliance includes LAN Airlines, LAN Express, LAN Peru, LAN Ecuador, and LAN Argentina. Through its own operations and code-share arrangements, the LAN Alliance serves 15 destinations in Chile, eleven destinations in Peru, nine destinations in Argentina, two in Ecuador, 30 destinations in other Latin American countries, 25 in North America, 13 destinations in Europe, four in the South Pacific and one in Asia. Currently, the LAN Alliance operates 70 passenger aircraft and ten dedicated freighters.

LAN is a member of oneworld (TM), the most international of the global airline alliances. It has bilateral commercial agreements with oneworld partners American Airlines, British Airways, Iberia and Qantas and also with Alaska Airlines, AeroMexico, Mexicana, TAM and Lufthansa Cargo. For more information visit www.lan.com or www.oneworldalliance.com.

******

Note on Forward-Looking Statements
This report contains forward-looking statements. Such statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” or other similar expressions. Forward-looking statements are statements that are not historical facts, including statements about our beliefs and expectations. These statements are based on current plans, estimates and projections, and, therefore, you should not place undue reliance on them. Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. These factors and uncertainties include in particular those described in the documents we have filed with the U.S. Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made, and we undertak e no obligation to update publicly any of them, whether in light of new information, future events or otherwise.


Page 8

LAN Airlines S.A.
Consolidated Income Statement (in thousands of U.S. Dollars)

  For the Three-Month Period ended    For the Full Year Ended   
  December 31      December 31   
  2006  2005  % Change    2006  2005  % Change 
               
REVENUES               
 Passenger  514,224  407,650  26.1%    1,813,373  1,460,584  24.2% 
 Cargo  302,571  259,802  16.5%    1,072,730  910,453  17.8% 
 Other  36,711  38,866  -5.5%    147,857  135,316  9.3% 
TOTAL OPERATING REVENUES  853,506  706,318  20.8%    3,033,960  2,506,353  21.1% 
               
EXPENSES               
 Wages and Benefits  (122,880)  (102,803)  19.5%    (442,967)  (371,596)  19.2% 
 Aircraft Fuel  (191,222)  (194,635)  -1.8%    (763,951)  (642,696)  18.9% 
 Commissions to Agents  (103,501)  (90,168)  14.8%    (403,899)  (345,387)  16.9% 
 Depreciation and Amortization  (32,639)  (21,480)  52.0%    (122,802)  (80,456)  52.6% 
 Other Rental and Landing Fees  (93,363)  (76,232)  22.5%    (336,821)  (301,544)  11.7% 
 Passenger Services  (15,062)  (12,748)  18.2%    (56,077)  (53,176)  5.5% 
 Aircraft Rentals  (39,091)  (37,935)  3.0%    (157,681)  (148,202)  6.4% 
 Aircraft Maintenance  (26,940)  (31,957)  -15.7%    (117,206)  (132,198)  -11.3% 
 Other Operating Expenses  (90,825)  (79,124)  14.8%    (329,934)  (289,462)  14.0% 
TOTAL OPERATING EXPENSES  (715,523)  (647,082)  10.6%    (2,731,338)  (2,364,717)  15.5% 
               
OPERATING INCOME (LOSS)  137,983  59,236   132.9%    302,622  141,636  113.7% 
 OPERATING MARGIN  16.2%  8.4%  7.8 pp.    10.0%  5.7%  4.3 pp. 
               
OTHER INCOME ( EXPENSE )               
 Interest Income  2,606  2,134  22.1%    7,897  12,426  -36.4% 
 Interest Expenses  (18,647)  (11,114)  67.8%    (60,739)  (39,191)  55.0% 
 Miscellaneous-Net  (8,237)  7,938  -203.8%    37,113  58,234  -36.3% 
TOTAL  (24,278)  (1,042)   2229.9%    (15,729)  31,469  -150.0% 
               
INCOME BEFORE MINORITY INTEREST  113,705  58,194  95.4%    286,893  173,105  65.7% 
 Minority Interest  (1,669)  521  -420.3%    1,244  1,754  -29.1% 
               
INCOME (LOSS) BEFORE INCOME TAXES  112,036  58,715  90.8%    288,137  174,859  64.8% 
 Income Taxes  (18,391)  (8,833)  108.2%    (46,837)  (28,258)  65.7% 
               
NET INCOME (LOSS)  93,645  49,882  87.7%    241,300  146,601  64.6% 
 NET MARGIN  11.0%  7.1%  3.9 pp.    8.0%  5.8%  2.1 pp. 
               
NET INCOME (LOSS) EXCLUDING EXTRAORDINARY ITEMS  93,645  49,882  87.7%    212,956  146,601  45.3% 
 NET MARGIN  11.0%  7.1%  3.9 pp.    7.0%  5.8%  1.2 pp. 
               
Shares Outstanding  318,909,090  318,909,090      318,909,090  318,909,090   
Earnings per share  0.29  0.16  87.7%    0.76  0.46  64.6% 
Earnings per ADR  1.47  0.78  87.7%    3.78  2.30  64.6% 


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LAN Airlines S.A.
Consolidated Income Statistics

 
For the Three-Month Period ended 
 
For the Full Year ended 
 
December 31 
  December 31   
  2006  2005   % Change    2006 
2005
% Change 
Operating Statistics               
System               
ATKs (millions)  1,738.9  1,513.3  14.9%    6,349.8  5,810.8  9.3% 
ASKs (millions)  7,273.6  6,072.3  19.8%    26,400.0  23,687.3  11.5% 
RTKs (millions)  1,212.3  1,067.9  13.5%    4,333.8  3,967.9  9.2% 
RPKs (millions)  5,543.1  4,454.1  24.4%    19,495.5  17,490.8  11.5% 
Overall Load Factor (based on ATKs)%  69.7%  70.6%  -0.9 pp.    68.3%  68.3%  0.0 pp. 
Break-Even Load Factor (based on ATK)%  59.3%  65.3%  -5.9 pp.    62.3%  65.0%  -2.6 pp. 
Yield based on RTKs (US Cents)  67.4  62.5  7.8%    66.6  59.8  11.4% 
Operating Revenues per ATK (US Cents)  47.0  44.1  6.5%    45.5  40.8  11.4% 
Operating Costs per ATK (US Cents)  40.0  40.8  -2.0%    41.5  38.8  6.9% 
Fuel Gallons Consumed (millions)  98.3  87.7  12.0%    364.8  338.3  7.8% 
Average Trip Length (thousands km)  2.173  2.136  1.7%    2.195  2.195  0.0% 
               
Passenger               
ASKs (millions)  7,273.6  6,072.3  19.8%    26,400.0  23,687.3  11.5% 
RPKs (millions)  5,543.1  4,454.1  24.4%    19,495.5  17,490.8  11.5% 
RTKs (millions)  498.9  400.9  24.4%    1,754.6  1,574.2  11.5% 
Passengers Transported (thousands)  2550.8  2085.1  22.3%    8,881.3  7,966.9  11.5% 
Load Factor (based on ASKs) %  76.2%  73.4%  2.9 pp.    73.8%  73.8%  0.0 pp. 
Yield (based on RPKs, US Cents)  9.3  9.2  1.4%    9.3  8.4  11.4% 
Yield (based on RTKs, US Cents)  103.1  101.7  1.4%    103.3  92.8  11.4% 
Revenue/ASK (US cents)  7.1  6.7  5.3%    6.9  6.2  11.4% 
               
Cargo               
ATKs (thousands)  1,033.6  962.7  7.4%    3,861.3  3,607.0  7.0% 
RTKs (thousands)  713.4  667.0  7.0%    2,579.2  2,392.3  7.8% 
Tons Transported (thousands)  157.7  143.5  9.9%    564.1  529.0  6.6% 
Load Factor (based on ATKs) %  69.0%  69.3%  -0.3 pp.    66.8%  66.3%  0.5 pp. 
Yield based on RTKs (US Cents)  42.4  38.9  8.9%    41.6  38.1  9.3% 
Revenue/ATK (US Cents)  29.3  27.0  8.5%    27.8  25.2  10.1% 


Page 10

LAN Airlines S.A. 
Fleet Data 

Consolidated Fleet 
     
 
As of December 31, 2006 
  Leased  Owned  Total 
Passenger Aircraft 
     
   Boeing 737-200 
10  6  16 
   Airbus A319-100 
5  10  15 
   Airbus A320-200 
11  4  15 
   Boeing 767-300 
13  7  20 
   Airbus A340-300 
4  0  4 
TOTAL  43  27  70 
       
       
Cargo Aircraft*       
   Boeing 737-200C 
0  1  1 
   Boeing 767-300F 
1  8  9 
TOTAL  1  9  10 
Total Fleet  44  36  80 

*During the third quarter LAN also operated between one and two Boeing 747, one DC-10, one DC-8 and one Airbus 300 cargo aircraft under ACMI lease contracts.

Note: table does not include one Boeing 767-200 leased to AeroMexico.

Future Deliveries*       
    2007  2008 
Aircraft       
   Boeing 737-200    -  - 
   Airbus A318-100    5  15 
   Airbus A319-100    -  - 
   Airbus A320-200    2  2 
   Boeing 767-300ER    3  5** 
   Airbus A340-300    1  2 
TOTAL    11  24 

*      Refers only to firm lease or purchase commitments
**      One of these include option to be converted to Boeing 767-300F freighter
 


Page 11

LAN Airlines S.A. 
Consolidated Statements of Cash Flows 

 
For the Three-Month Period ended 
 
For the full year ended 
 
December 31, 
 
December 31, 
 
2006 
2005 
 
2006 
2005 
           
Cash Flows From Operating Activities           
Collection of trade accounts receivable  836,079  597,920    2,951,595  2,213,947 
Interest income  1,674  1,783    6,358  11,679 
Income and other interest received  2,905  18,144    24,936  65,139 
Payments to suppliers and personnel  (603,208)  (493,894)    (2,371,090)  (1,938,117) 
Interest paid  (19,151)  (10,213)    (60,107)  (36,630) 
Income tax paid  (4,440)  (941)    (14,581)  (1,782) 
Other expenses paid  (4,102)  (459)    (11,592)  (1,724) 
Value-added tax and similar payments  (6,387)  (8,873)    (35,265)  (35,575) 
NET CASH PROVIDED BY OPERATING ACTIVITIES  203,370  103,467    490,254  276,937 
           
           
Cash Flows From Financing Activities           
Proceds from share issuance  645  292    2,541  3,213 
Loans obtained  231,091  172,877    821,324  268,501 
Securitization proceeds  (2,866)  (3,309)    (11,817)  (12,908) 
Other loans from related companies  -  -    -  - 
Dividend payments  (4)  (16)    (84,910)  (43,536) 
Loans repaid  (55,396)  (18,737)    (223,415)  (35,481) 
Other  -  -    (6)  (1,901) 
NET CASH PROVIDED BY FINANCING ACTIVITIES  173,470  151,107    503,717  177,888 
           
           
Cash Flows From Investing Activities           
Acquisitions of property, plant and equipment  (263,588)  (242,157)    (920,429)  (592,410) 
Proceeds from sales of property and equipment  33  954    7,620  1,694 
Sale of financial instruments and other investments  2,684  35,664    28,057  77,981 
Other investments  (296)  (4,895)    (2,238)  (5,624) 
Investments in financial instruments  -  -    -  (38,978) 
Other  (18,659)  (99)    (18,659)  (3,109) 
NET CASH PROVIDED BY INVESTING ACTIVITIES  (279,826)  (210,533)    (905,649)  (560,446) 
           
           
Net Increase (Decrease) in Cash and Cash Equivalents  97,014  44,041    88,322  (105,621) 
           
Inflation Efect in Cash and Cash Equivalents  128  (185)    (97)  24 
           
Net Variation in Cash and Cash Equivalents  97,142  43,856    88,225  (105,597) 
           
Cash and Cash Equivalents at Beginning of the Period  102,354  67,415    111,271  216,868 
           
Cash and Cash Equivalents at End of the Period  199,496  111,271    199,496  111,271 
           
Note: The Company  considers all short-term, highly-liquid investment  securities with original  maturities of three months or less to be cash equivalents for porpuses of the Consolidated  Statement of Cash Flows.  Securities with original  maturities of more than three months are not considerated as cash equivalents, and amounted to US$87.8 million as of December 31, 2004, US$48.0 million as of December 31, 2005, US$91.4 million as of March 31, 2005, US$30.7 million as of March 31, 2006, US$87.9 million as of June 30, 2005, US$26.0 million as of June 30, 2006, US$83.7 million as of September 30, 2005, and US$22.8 million as of September 30, 2006, to US$48.0 million as of December 31, 2005, and to US$20.4 million as of December 31, 2006,.  


Page 12

FOR IMMEDIATE RELEASE 

         LAN Airlines S.A.       
         Consolidated Balance Sheet (in thousands of US$)       
 
As of December 31, 
 
 
2006 
 
2005 
         ASSETS       
         CURRENT ASSETS       
           Cash  9,565    11,733 
           Time deposits  148,977    34,519 
           Marketable securities  60,069    112,983 
           Accounts and notes receivable -trade and other  356,512    310,068 
           Accounts and notes receivable from related companies  4,765    899 
           Inventories  46,827    37,283 
           Prepaid and recoverable taxes  34,048    24,307 
           Prepaid expenses  26,786    24,278 
           Deferred income tax assets  6,435    7,670 
           Other current assets  12,324    13,321 
                       Total current assets  706,308    577,061 
         PROPERTY AND EQUIPMENT (net)       
           Aircraft  1,619,847    1,013,231 
           Other  256,180    239,039 
                       Total property and equipment  1,876,027    1,252,270 
         OTHER ASSETS       
           Investments  3,482    2,839 
           Goodwill  43,469    44,751 
           Notes and accounts receivable from related companies  51    10,252 
           Long-term accounts receivable  28,915    9,756 
           Long-term deferred taxes  0    0 
           Deposits and others  270,537    246,690 
                       Total other assets  346,454    314,288 
                       Total assets  2,928,789    2,143,619 
       
         LIABILITIES AND SHAREHOLDERS' EQUITY       
         CURRENT LIABILITIES       
           Bank loans  8,996    11,666 
           Current portion of long-term loans from financial institutions  89,883    53,104 
           Current portion of long term leasing obligations  55,040    45,687 
           Dividends Payable  67,789    35,000 
           Accounts payable  260,947    235,988 
           Notes and accounts payable to related companies  301    327 
           Other creditors  0    532 
           Air traffic liability and others  265,307    175,580 
           Other current liabilities  128,020    124,367 
                       Total current liabilities  876,283    682,251 
         LONG-TERM LIABILITIES       
           Loans from financial institutions  1,031,082    521,974 
           Other creditors  523    17,039 
           Provisions  45,892    117,277 
           Notes and accounts payable to related companies  0    0 
           Air traffic liability  19,578    31,549 
           Deferred taxes  126,886    95,576 
           Obligations under capital leases  176,433    161,151 
           Other long-term liabilities  21,481    10,716 
                       Total long-term liabilities  1,421,875    955,282 
         MINORITY INTEREST  4,311    3,373 
         SHAREHOLDERS' EQUITY       
           Common stock  134,303    134,303 
           Reserves  2,620    2,620 
           Interim dividends  -115,850    -71,451 
           Retained earmings  605,247    437,241 
                       Total shareholders equity  626,320    502,713 
Total liabilities and shareholders equity  2,928,789    2,143,619 

 

 
CONTACTS IN CHILE  CONTACTS IN NEW YORK 
Gisela Escobar – Head of Investor Relations    Maria Barona/Melanie Carpenter 
gisela.escobar@lan.com     lan@i-advize.com 
Juan José Irarrázaval – Investor Relations Analyst               i-advize Corporate Communications, Inc. 
juanjose.irarrazavalg@lan.com   Tel: (212) 406-3690 
Tel: (56-2) 565-3944/8775   


 

 

SIGNATURE

 

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

 

Date: February 15, 2007

 

 

 

Lan Airlines S.A.

 

/s/ Alejandro de la Fuente                                                     
By: Alejandro de la Fuente
Chief Financial Officer