1. Plus3 Chile A presentation by: Caitlin Magley Benjamin Zeldes Jessica Kaschak Timothy Kraus

2. Plus3 Chile  Capital – Santiago  Population – 16.2 Million  6.3 Million in Santiago  Is a market-oriented economy based mostly in foreign trade.  Attracts much foreign investment mostly in gas, water, electricity and mining.  Unemployment has been declining over the past three years.  GDP = $234.4 Billion USD  18% of the population is below the poverty line (vs. US’ 12%)

3. Plus3 Chile  Chile accounts for 1/3 of the world’s copper production  It also the world’s fifth largest exporter of wine  Exports: US 15.6%, Japan 10.5%, China 8.6%, Netherlands 6.7%, South Korea 5.9%, Italy 4.9%, Brazil 4.8%, France 4.2% (2006)  Copper, fruit, fish products, paper and pulp, chemicals, wine.  Imports: US 15.6%, Argentina 12.6%, Brazil 11.8%, China 9.7% (2006)  Petroleum and petroleum products, chemicals, electrical and telecommunications equipment, industrial machinery, vehicles, natural gas

4. Plus3 Chile  Chile is an extremely isolated country with a very tight-knit business community.  Produces a need for fast-paced, reliable transportation and cargo services internationally.  As the South American economy has rapidly grown over the past decades, so too has LAN airlines and the need for more air traffic.  Firms such as Airbus and Boeing have continuously developed and improved upon Airplane design, manufacturing, and components.

5. Plus3 Chile  LAN Airlines primarily serves one major industry:  Scheduled Passenger Air Transportation  “Product Line” – Flights  Product Category – Coach/Economy, Business, First Classes  Also serves Cargo Industry  Accounts for about 40% of current income, but LAN is trying to depend less upon the cargo industry.  Major Competitors:  Air France-KLM  Delta Airlines  Gol Linhas Aéreas Inteligentes

6. Plus3 Chile  Continuously increasing oil prices combined with a highly competitive market forces the airline industry players to keep prices as low as possible while trying to earn profits.  Dynamics of international airports causes ground crews and flight crews to maintain a strict schedule industry wide.  Web sites such as hotwire.com, orbitz.com, and priceline.com offer discounted seats on select airlines.  Allows for increased traffic, full planes, and therefore higher profit.

7. Plus3 Chile  In a global environment, the Airline industry provides a “golden mix” of both business and engineering aspects.  Is interesting to see how airlines are able to make profits (business) and also reduce their carbon footprint (engineering) in such a highly competitive environment.  People will constantly need to travel, especially in modern times for leisure and business.

8. Plus3 Chile  Based in Santiago, Chile  Main Hub at Comodoro Arturo Merino Benítez International Airport  Employs just over 15,000  Annual Sales of just over $3 Billion  Is the main passenger airline in South America  Is one of the major cargo carriers in South America as well

9. Plus3 Chile  1929 - Linea Aeropostal Santiago-Arica created to transport passengers along peruvian border.  1932 – Becomes government controlled airline under name: Linea Aerea Nacional (LAN Chile). Carries 5000+ passengers  1935-1960 – Service increases and many domestic routes added. 27,000 passenger journeys recorded.  1960-1970 – International service increases greatly.  With increased competition, LAN Chile begins to suffer and eventually is forced to shut down as a result of bankruptcy in 1984. A new LAN Chile is started and is 98.7% owned and controlled by the Chilean government. LAN Chile regains 50% of the domestic market share.  1989 – LAN Chile is privatized with 51% sold to SAS airlines.  1995 – The Cueto Family purchases a controlling interest of LAN Airlines, fully privatizing the firm.  1997 – The company reorganizes and offers $100 million in depository shares on the NYSE. Also forms an alliance with American Airlines for their Frequent Flier program.  2000 - LAN Chile operates as the largest domestic and international passenger/cargo air carrier in Chile and a leading airline firm in Latin America.  2001 - Net income plunges nearly 78% to $10.8 million on sales of $1.42 billion. The firm downsizes its cargo fleet, believing that smaller, newer planes will allow it to offer more reliable and frequent service

10. Plus3 Chile LAN Airlines went public November 7 th, 1997 at an opening price of 2.75 USD. Its stock is currently priced at $14.40 (as of April 9 th 2008)

11. Plus3 Chile  All LAN Airlines planes are jet propeled  Air is compressed in engine a, combustion reaction creates heat and gas, the high pressure gas is then expelled out the back of the engine at high speed  The wing provides lift by creating an area of low pressure above and high pressure below

12. Plus3 Chile  Planes  Boeing  Airbus  Jet Fuel  Similar to Kerosene  Made up of many (as many as 11) different Hydrocarbons

13. Plus3 Chile  LAN has taken steps to reduce its carbon footprint  More efficient planes (Airbus A320) are being purchased as a part of LAN’s Fleet Renewal Program to reduce carbon emissions by 10%  A320s also reduce noise pollution  Winglet tip extensions  Numerous reforestation projects near its main airports  The airline industry is attempting to use biofuels in airplanes

14. Plus3 Chile  Must meet international safety regulations  LAN is dedicated to continuously inspecting and maintaining their fleet in accordance with these regulations  Employ skilled mechanics, engineers, and pilots to ensure safety and on time arrivals and departures  LAN has recently signed mutual support contracts with several other airlines, such as Lufthansa and Mexicana airlines

15. Plus3 Chile  The majority of pilots are graduates with 4 year degrees with a variety of majors. An engineering degree is certainly not required.  Engineers are more often utilized on the ground than as flight crew. Engineers are more involved in service and maintenance of the planes.  There are a variety of other non-technical employees in fields such as customer service and management

16. Plus3 Chile  With rapidly increasing costs, how does LAN Airlines compensate and is still able to earn positive operating income?  What routes is LAN currently expanding into and what are some future markets the firm is exploring? (What is the next step?)  How else is LAN working to reduce carbon emissions?  What kind of ground support structure does LAN employ? Ground Workers? Mechanical Engineers? (i.e. how does a degree in engineering fit in at LAN airlines?)

17. Plus3 Chile  How is international studies worked into your business curriculum here in Chile?  Do you mainly study Chilean business or international business?  Is it common for students to hold internships here, and if so, what type?  What types of engineering co-op opportunities and programs are available to students? Do you do many on-site visits to companies?  What do you do in your free time?  Have you traveled outside of Chile?