Thank you. Hello.

Good morning, everyone, and thanks for joining us on the call -- yes, sorry, about that. We're going to go over some slides and give you some highlights of the results that were published last night.

And then, we'll be happy to take your questions. I wanted to introduce the people here in the room with me.

We have Andrés Osorio, who is the CFO. We have Cláudia Sender, who is the CEO of TAM.

We're also joined by Nicolas Goldstein, who's in charge of International Passenger operations; and we are joined by Álvaro Carril, who's in charge of the Cargo operations. If we go to Slide #1 on the slide presentation, just to go over some of the highlights for the second quarter.

As you saw in the numbers, we had, during the second quarter, a positive operating income in the amount of $15 million, despite various challenges that we faced during this quarter. As it is important to understand 2 different types of effects that we have this quarter, there were a couple of things that were more nonrecurring in nature and that had a negative impact on our numbers this quarter, specifically, as we've already mentioned, the World Cup that took place in Brazil from mid-June to mid-July, and we'll talk about that in a little bit more detail; and also a very weak seed export season in the Cargo business.

That was a very strong seed export season in 2013, and that therefore had a very negative impact on the cargo results, especially in the months of April. When we look at the broader context, we are also facing some challenging scenario from a macro perspective.

We have the economies in the regions that are, although healthy, is showing slower GDP growth rates than what we had originally anticipated; and also depreciated local currency, especially in Argentina, in Chile and in some other countries in the region; and an ongoing, very challenging competitive environment, especially affecting international operations. What we've been doing in this context, which is in line with the strategy that we've already outlined, is continue a very focused with a disciplined approach to capacity.

As we saw in the second quarter numbers, we had a reduction of 1.5% in ASKs in the passenger business and 7.5% in the ATKs in the Cargo business. And this resulted, on the passenger side, at least in an improvement in revenue per ASK of 1.8%.

We also have a very healthy domestic Brazilian market. We are -- continue to see improvement in results in the Brazilian market and we continue to have the preference of the corporate passenger in that market.

Despite the onetime impact that we had in the World Cup, which is really a nonrecurring effect, this market continued to perform very well and to have very healthy [indiscernible]. And we also continue with -- to move forward with our fleet restructuring initiatives and with our fleet renewal.

And as we've already explained, it has very positive long-term benefits for the company from a cost perspective and from a competitive standpoint as well. If you turn to the second slide in the presentation, we have a summary of the numbers.

You can see that total operating revenues reached $3 billion. That was down 1.7% versus last year, with the main impact being a 12.7% reduction in Cargo revenue.

We had a 1% approximately decline in operating costs, and that led to the $15 million in operating income and $396 million in EBITDAR, with an EBITDAR margin of 13% and operating margin of 25%. At the net income level, we had a net loss of $59 million, which is significantly [indiscernible] $30 million loss last year.

Here, we have a huge impact in the change from the exchange rate impact, which comes from the exposure to the Brazilian real on the TAM balance sheet. As a result of that, we had a loss per exchange rate differences in the second quarter of last year of $361 million.

With this year, it was a gain of $104 million. This also is -- going forward, will continue to be mitigated.

Over this time, we had reduced our exposure on the TAM balance sheet from $2.4 billion, which is what we had in June 2013, to $1 billion, which is what we had in this June 2014. So we significantly made progress in terms of reducing that exposure.

TAM will continue to reduce that from here until the end of the year. And also, the other element that's important to mention at the nonoperating level this quarter, is the impacts that we had from adjusting the exchange rate for the cash that we have presented for repatriation in Venezuela.

We had recognized approximately $148 million, but that came -- that implied -- that was at the CADIVI exchange rate, which was VEF 6.3 per dollar. We made an adjustment this quarter to the SICAD exchange rate, which is VEF 11 per dollar, and that resulted in a nonoperating loss of $56 million this quarter.

If we turn to the next slide to look at the main impact on the operating side this quarter, the impact on our margin -- the big decline came from lower yields. If we look overall at the passenger business, we had yields down 2.3%; and on the cargo business, we had yields down almost 7%.

And part of this was recovered by higher load factors in both businesses, especially on the passenger side, we've had very high load factors: that is 3.3 points higher than what they were last year; and on the cargo side, also 1 point improvement in load factors. Fuel was a negative.

We have a 5% increase in fuel prices compared to the second quarter last year. And then, we have some efficiencies in the other cost lines.

When we look at -- on the next slide, the passenger business, and we look at the revenue per ASK performance in each of the passenger operations, you can see that, both on international and domestic, Brazil grew. We continue to see improvement in revenue per ASK.

On the international group, this was mainly driven by passenger load factors that continue to be very high. We have a 3.9 point improvement in terms of passenger load factors on the international business, and that's offsetting, in part, the impact of lower yields.

In the domestic Brazil business, and we view the numbers in U.S. dollars, we have a 2.9% improvement in revenue per ASK.

When we look at this number in reals, it's a 12.9% improvement in terms of revenue per ASK, driven by both higher yields in reals and also higher load factors. And it's also important to note that these are higher load factors from levels in 2013, which were already very healthy.

So we continue to improve on both the load factor and yields. In the Spanish-speaking countries, which are the other 5 countries where we have domestic passenger operations: Chile, Peru, Ecuador, Argentina and Colombia.

We have a 3.9% reduction in revenue per ASK, mainly as a result of lower yield. We have stronger load factors overall, but we have yields have been declining in part because of the strong devaluations that we've had in the different currencies in the different markets, but also as a result of generally a more challenging scenario and lower economic growth, especially in Chile, for example.

When we -- if you turn to the next slide, which is Slide 6, and we talk a little bit more about the international passenger operation. Here, we have a context that continued to be challenging, mainly as a result of weaker demand in the European markets and somewhat weaker demand in certain Latin American markets.

And the scenario that continues to be very competitive, especially in long-haul routes flying to the region where we have many international carriers that have started or are adding capacity into South America. In addition to that, we've had local currencies in the region depreciate, especially Argentina, where we saw a strong devaluation in the first quarter that negatively affected the demand of international passengers traveling out of Argentina.

And then, also in this business, given as well we've seen the impact of Venezuela, where we've made significant capacity adjustments, as a result of the issues that we've had there with being able to repatriate our fund. Our focus in terms of the strategy of the international passenger operations has been to continue with the improvement in terms of our products.

We are upgrading our products both by renewing fleets and making upgrades to our existing fleets, specifically the Boeing 777s, which will be retrofitted with the new business class, starting during the third quarter and through mid-2015. We are also incorporating additional 787s into the operations, and we'll have increasingly more routes that will be operated by this new aircraft, which is significantly more efficient, is approximately 12% more efficient than the 767, and in addition to that, has an improved passenger experience.

And we continue with our project in strengthening the hubs that we're building out of Guarulhos Airport, which has been -- which is benefiting greatly from the new terminal at Guarulhos, which was completed in time for the World Cup. If we talk a little bit more, on the next slide, some highlights related to the World Cup.

I think, first, it's important to mention that the operations of TAM during the World Cup, especially in the domestic Brazil, were extremely successful. And we had prepared in advance -- operationally, a very challenging period of time for the company, mainly because we have -- the World Cup was focused in 12 cities in Brazil, and we had a significant increase in demand to travel to those cities around the time that the games were occurring.

So that meant adjustments in terms of our network and additional demand to all those cities in a very concentrated period of time. We were able to have a flawless operation.

We had 95% on-time performance, very good customer satisfaction. And so from that perspective, it was extremely positive.

We also, as a result of all of the infrastructure investments that occurred in the period leading up to the World Cup, had been able to, as I've mentioned in the previous page, focus on strengthening the hub at Guarulhos Airport. And we are completing, during the next few months, the move of the LATAM Airlines Group international passenger operations to the new terminal.

So this is a very lasting positive impact of everything -- of -- that the World Cup will leave in Brazil. Now on the not-so-positive side, well, we've had -- as you saw the guidance that we released a few weeks ago, we estimate that there was a negative impact in our results during this quarter that amount to approximately $150 million, mostly as a result of decreased revenue.

And this comes mainly because the months of June and July are very high season months, especially in Brazil, where there's a significant amount of demand for domestic travel as well as international travel. It's winter.

It's during the vacation period of July, a lot of Brazilians travel internationally and there's a lot of demand coming [indiscernible], which are the result of the World Cup we didn't see because many -- mostly, Brazilians were staying in Brazil to see the -- to experience the World Cup. So the largest impact here was decreased revenue.

And we've also, obviously, during this period, because of all the funds that we had in place, we had somewhat a higher cost operation as well. But that's the main impact, and the total effect that we estimate, including both domestic and international operations, is $150 million, approximately both in the months of June and July.

So we're seeing a part of this impact this quarter, and we will see a part of this impact in the third quarter. But this is included in the current guidance that we've now published a couple of weeks ago.

If we move forward here to talk about the cargo business. During the quarter, on the cargo side, we saw significant adjustments in terms of cargo capacity, mainly as a result of lower belly capacity that's coming from the lower ASKs in the international passenger business, as well as our reduced freighter operation.

Our freighter operation, we continue to be very disciplined in terms of our capacity with freighters, and we're evaluating opportunities to continue to adjust freighter capacity and really to focus on the belly operations. Cargo traffic was down 6%.

With that, we've had cargo load factors improved, but a very negative impact coming from lower yields. Here, the seed export season is very relevant, and we estimate that there is approximately $18 million of less revenue in the second quarter 2014, specifically in April, as compared to last year, because of the 70% lower demand for seed exports by our cargo.

When we look at the cost side, overall, we have total operating cost per ASK up 2.6%. And if we look at that number x fuel, it's approximately 3.1%.

We have savings in terms of wages and benefits and in general other cost, and we have slightly higher aircraft cost, which includes maintenance, depreciation and aircraft rental expense. If you look at the next slide, which is Slide 10, you can see our fleet plan for the next -- for the -- what we expect for the rest of this year and for 2015.

We are expecting to end this year with approximately 327 jets; and 2015, with a similar number of aircraft, 326 aircraft, but with significant renewal of aircraft going on in between. If you look at the delivery and the redelivery we have during this year, we're taking delivery of 20 aircraft and returning 32; next year, we expect to take delivery of 27 aircraft and return 28.

And if you look at the arrow going along the bottom of the chart, you can see that the increase in each year in the number of aircraft of the new technologies, which have a significant benefit in terms of cost per ASK and also an improvement in terms of the total passenger experience. This -- the numbers in terms of fleet, CapEx haven't varied significantly.

It's approximately $1.1 billion in fleet commitments this year and $1.9 billion in fleet commitments in 2015. A part of this is financed with sale and lease stock, approximately 1/3; and the rest is financed with ECA or EX-IM supported debt or other market debt.

When we look at the guidance for 2014, which is the next slide, this is the same guidance that we published a few weeks ago. We expect overall capacity to be relatively flat to slightly down; passenger capacity between flat and a decline of 2%, where we have declines in the international passenger business and in the domestic Brazil operations; and in terms of the Spanish-speaking countries, we expect to grow this year between 3% and 5%, which has come down significantly from our original estimates, which was close to 8%.

So here, we've made adjustments in terms of our capacity expansion, mainly as a result of the dynamics that we are seeing in the domestic Spanish-speaking countries. On the cargo side, we've also adjusted our cargo growth estimates to a decline in capacity of between 3% and 5%.

And with that, our operating margin estimate continues to be, for this year, in the range of 4% to 5%. Finally, a few words in terms of the balance sheet.

We have a very solid balance sheet as a result of all the restructuring that we did at the end of last year and early this year. We have a solid cash position.

We ended June with approximately $1.7 billion in cash, and that represents 13% of our last 12 months' revenue. And we continue to see an improvement in our leverage ratios, which is approximately 5x EBITDAR.

Those are all the prepared comments that we have regarding the second quarter. I think that covers most of the main highlights.

And we'll be happy to take any questions that you have -- you may have.

My first question is regarding Venezuela. Will you receive the remaining cash balance held in the country?

And just to be sure, and correct me if I'm wrong, what you're seeing is that the government didn't respect the applicable VEF 6.3 per U.S. dollar rate for the profits generated during 2013?

Andrés del Valle here. The deal with the Venezuelan government on the repatriation of the sale -- I mean, non-permitted funds, that calls for an exchange rate of SICAD I.

SICAD I, as you know, is currently at rate of roughly VEF 11 to the dollar, whereas CADIVI is VEF 6.3. That's the driver for having taken the onetime -- one-off of $56 million.

Now in terms of payment, this deal with the government calls for an initial payment, and then remaining payment over the next 3 years. That's necessary, the deal with the government.

Okay. And what would -- will the impact be on your results and profitability coming from the capacity reductions in Venezuela?

And could we expect further capacity reductions in the year?

For now, yes. The reductions that we've implemented are approximately 45% reduction in ASKs to the operations that we had last year at this time.

And for now, we don't have any changes planned to those itinerary. We obviously -- we're always looking at the network, but for now, that's the operation that we're working with.

Okay. And will -- what will be the impact on your results and profitability coming from this lower capacity in Venezuela, which if, I'm understand correctly, is one of the most profitable countries you're in, right?

Well, last year, there was a -- I mean, it was never -- Venezuela, as a total percentage of ASKs, was never such a large portion of the international passenger operation for LATAM. We did have flights from many of the different cities where we operate, but the impact that we have is already all quantified in the new guidance that we've given, and we expect what we're doing with the capacity is trying to put it in other markets to offset the negative impact that, that capacity reduction would result in.

Okay. And lastly, could you comment on your exposure to the Argentinian market?

And how has it been performing both in passenger and the cargo divisions in the last few months?

We were expecting a large decrease in demand from Argentina. We see the reduction.

However, this reduction is not that big as we were expecting, instead of only 30% or like 20%, 15% reduction in the demand. And this number includes the reduction number of passengers and the units going down both effects [ph].

Savi Syth here. Just on the economic weakness that you're seeing in the region.

Is it mainly Chile and Argentina that's weighing? Or are kind of the various other regions weak as well?

Mainly -- well, what we've seen in general is that during this year, various countries have brought down their GDP growth estimates. That includes Chile.

It includes Peru. It includes Argentina, Brazil.

And so it's been -- I'd say occurring throughout the region. In some countries, we've had a more significant impact than in others.

But undoubtedly, we've seen a slowdown in economics' growth pretty much throughout South America during this first half.

Okay, got it. And then, on the weak seed exports -- sorry, is that due to timing?

Is that due to kind of the slowdown in the economy? Or was there a switch from air freight to maybe ocean freight?

Yes. It was, for the -- well, it has to do with timing.

So when the seed exports season occurs earlier in the year, it -- a large part of it goes by other types of transport, mainly sea. And when there's a delay in terms of the seed exports season, which has to do with the weather, basically -- because later in the year, most of it goes by air cargo.

And that's what happened in 2013. This year, since it occurred earlier, most of it was by sea, and that resulted in a decline.

We had approximately 11,000 tons of seed exported in 2013. And this year, it was 5,000 tons of seed, specifically in the case of LAN Cargo, we saw a significant -- [indiscernible] to how that would necessarily involve going forward, but this was especially weak season.

And if I may have a follow-up on a previous question on Venezuela. So are you accumulating anymore bolivars in there?

Or is the bolivar accumulation neutral now?

It should be neutral, yes. It should be neutral, yes.

So the same amount that we have reported is -- shouldn't grow going forward.

Regarding the World Cup impact, I guess, most of which should fall in the third quarter here. Are you seeing any recovery in bookings yet?

And is it fair to say, at least at this point, internally, that you expect margin expansion to resume in the fourth quarter?

Duane, this is Cláudia Sender here. Yes, absolutely.

We have seen bookings coming back to a very healthy levels, very similar to what we were seeing previous before the World Cup. Also, the price level, deals [ph] level have been going up to the same standards that they were before.

So yes, we do expect a much healthier operation for the rest of the second quarter -- sorry, of the third quarter, sorry.

And then, I guess, just from a consolidated level, right. If we bake in that impact in the third quarter and just look at your full year guidance, it seems like it assumes margin expansion resuming in the fourth quarter.

I wonder if you guys could comment on that.

Yes. I -- definitely, margin expansion -- I mean, we should see margin expansion improve even in August.

But obviously, the impact of the third quarter and the month of July, which is seasonally very high is going -- is significant. So definitely, a healthier margin will be in the fourth quarter.

Okay. And then, have you given any thought, internally, have you at least analyzed maybe a stock repurchase program?

I think investors would certainly appreciate that signal of confidence, longer term, that you can recover these margins.

No. We haven't think about it.

We're not planning to do that.

Just a couple of questions here. I want to -- I know in the past, you've indicated that you'd like to get back to an investment-grade credit rating.

And when I look at the press release, in the balance sheet section, you talked about getting to this long-term leverage ratio of 3.5x to 4x, and then maintain the cash liquidity of approximately 15%. And it would seem that if you really wanted to get to an investment-grade credit rating, you'd probably have to have a leverage ratio a little bit lower than that, maybe more like in the 3x area.

So I'm just -- is this sort of a change in that long-term view? Do you still aspire to get to an IG rating?

Or is it just going to take longer than you anticipated?

Mike, it doesn't even matter. I mean, we definitely -- we have not changed our targets in terms of the balance sheet indicators.

The 3.5x leverage is what we see as the investment grade levels. Of course, it's coupled with healthy margins, healthy cash generation and the right liquidity levels.

And those are the levels of leverage that LAN had in the past when it was investment-grade rated. So we don't necessarily think that we need 3x or less to the investment grade.

We think that in between 3.5, we should be able to get there. I mean, it continues to be our objective, but as you correctly say, I think that's adjusted today is probably more '16 or a further event than a next-year event.

Okay, good. Fair enough.

Just another question. When -- I know that Azul has announced that they're going to start flying long-haul from Brazil to the U.S.

And it's actually been some time since TAM has actually had to go head-to-head with a local carrier flying internationally long haul. And I'm just curious how you think about the potential competitive threat when you look at Viracopos and you look at just the amount of flights that they have in that market, and -- my sense is that maybe they won't rely as much on the local market, Viracopos to the U.S., but it may be more with respect to flow traffic.

And I just wondered if that's something that you're looking at closely. How do you think about that as a competitor?

Does it make sense for you to fly long haul out of Viracopos. Just your thoughts on that.

Yes. We know they are entering by the end of this year.

We were expecting that. And we are preparing to compete as we are doing without a carrier [ph].

American Airlines already, they're actively doing a change in the offer. Now they're going to fly from Viracopos.

We are also going to add more -- some more capacity fleets from Guarulhos. We are seeing in that some other frequencies from Brasilia also, and we're going to complement and have more cities from the domestic Brazil market going to U.S.

Perfect. Very good.

If I could just squeeze in one more. You're going to redeliver 39 airplanes over the next 2 years.

And you have to think that, as you return airplanes, there's got to be some costs associated with that, some costs headwind. And I'm just I'm curious about what that impact may be annually to turn back those airplanes.

And of course, there's some training events associated with them as pilots move away, say, this last year, 737s to the Airbus narrow bodies. I mean, do you have any sort of estimate on what that is?

Is it a margin point headwind? How do we think about that?

Michael, this is Roberto Alvo. We've already delivered some courier planes in the last 18 months.

We've accounted for a onetime impact on thesis [ph] on the first quarter. You may remember that.

We do account for the day-to-day normal redelivery process within our numbers, so it's all been accounted for. And yes, there is an expense, but it varies depending on the type of airplane, the age of the airplane and the redelivery conditions.

The impact is not significant over the numbers that we have -- with the numbers that we have given you already on first quarter onetime expense.

A couple of questions from my side. First, on the cost.

Did you have any fleet restructuring expense in the second quarter similar to the first quarter? Or there's no fleet renewal expenses this quarter?

Only the fleet expenses that are completed to the airplanes that have been redelivered during the quarter in the normal course of business. So no important or relevant expenses that haven't been accounted for, particularly in the first quarter, onetime expense that we reduced.

Are you expecting any additional expenses for the upcoming quarters still?

We have a few more redeliveries this year, and the impact throughout the year is not significant.

Okay. Second question on the -- still on the international routes out of Brazil.

Are you anticipating like a strong competition in terms of fares, given that, as you mentioned, American is starting to fly out of Campinas in December, Azul also flying. So is there a risk to see a pricing war on those Brazil and international routes by the end of this year or no?

This is Nicolas again. What we observed is that there's a lot more capacity additions than demand.

And as we know, in this industry, this is a thing that happens on the industry trends to correct. We reduced this capacity, and we expect others to reduce.

And these sets of capacity is impacting the yield. Thanks, God, our reduction give us -- gave us an improvement in the RASK.

And we expect that others are going to follow us in this effect.

But actually, the others are adding, right? So my point is, do you think 2015 could be a tough year in terms of international you saw out of Brazil, Nicolas?

We do believe that we're going to arrive to a new equilibrium in the short term. I wouldn't say like 6 months, 12 months, I don't know.

But if you see the cycles of this industry, we will arrive to a new equilibrium.

Okay. And just another question on -- recently, we saw the Brazilian government sending to Congress a law to subsidize the regional flights in the country.

I just want to hear the -- your thoughts on -- if LATAM [ph] is going to participate of this regional plan. And when do you expect to have a final decision if you're going regional or not?

This is Claudia again. Well, we're always looking into new opportunities for growth.

The regional is definitely an opportunity that's been in our radar for some -- quite some time now. And we look at the opportunity from -- it has to make sense from both the strategic and financial standpoint, regardless the subsidies.

So as a subsidy, from our perspective, the business has to make sense. And the growth in Brazil has been coming from the smaller cities faster than the bigger trunk routes.

So yes, it's something that we're looking into very closely. And we expect to have some decision by the end of this year.

And the timing between taking the decision and starting to fly is like 6 months? 12 months?

How long does it take?

I would say anything between 6 and 18, depending on the type of fleet and how we go about purchasing or leasing it.

Okay. And final question on the impact of the World Cup.

Why the impact was so much bigger in July vis-à-vis June, given that the World Cup was more or less balanced between June and July? I was wondering why the July impact is 4x bigger than the June impact.

That has everything to do with seasonality. July, historically, is one of our strongest months, where you still have a lot of corporate traffic and you have very strong leisure traffic.

In our region, as you know, July is a very concentrated travel month. So in general, both the yields and the traffic are stronger in July than in June.

That's why the impact is so much higher.

I wanted to go back to the Venezuela currency question. At what point during the quarter did you shift to a SICAD I in recognizing your revenue?

That -- it happened at the close of the quarter. We -- basically, the adjustments that we've made is we have the cash in Venezuela that amounts to -- that had been presented for repatriation to CADIVI, and that amounts to VEF 930 million approximately.

So the adjustment that was made is that cash in bolivars was presented on our balance sheet at the VEF 6.3 exchange rate. And we basically recognized an exchange rate difference when we changed, at the close of the month of June, the CADIVI exchange rate to the SICAD exchange rate, which is VEF 11.

Okay. So just to make sure I get the math right.

So the -- what was the ending cash? Is it the $147 million minus the $56 million?

So you're at net $92 million in U.S. dollars terms at the end of the second quarter?

Yes.

Okay. And then, so in the -- so obviously 1% -- last time, you mentioned that Venezuela's about 1% of revenue.

Obviously, not necessarily a big number, but if you've got to book revenue now at SICAD 1, then that 1% is going to drop to basically a few bps at that point. And is that also reflected in your guidance?

It is reflected in our guidance, but also it's important that the revenue from our international operations is booked in U.S. dollars.

So the adjustment that we'll make is in our cash balance, not in the revenue recognition, which is always in U.S. dollars.

Okay, all right. That's helpful.

Can you just walk me through the process behind going to SICAD I versus some other companies that have actually already moved to SICAD II?

This is Andrés Osorio. The -- what happened in Venezuela is there's a problem with the money that was sent to CADIVI from 2013.

And then, you have the regular operation of 2014. 2014 has been -- booked all the airlines at SICAD I because that is official churn or exchange rate to present it to the CADIVI or whatever -- or to the government.

But what is going over there, money of 2014, there have been some payment or allowed to repatriate at the SICAD I. Many agreements have been signed with among different airlines to the government.

Some of them have, in order to repatriate money, have accepted a haircut of, whatever, 30%, 40%. And then, they say we bought U.S.

dollar at VEF 6.3, which is the same math if you go to SICAD I, which is our case. We have agreed with the government that we will have the right to repatriate $148 million at SICAD I.

If you, in the past, have the right to repatriate at VEF 6.3, it's kind of the same thing that -- having a haircut of 25%. But what we're talking here is, at what exchange rate do you convert your bolivars that you have in Valenzuela?

And that is why we decided or if the business today is running at SICAD I, and mainly, all the agreement with the government of Venezuela to repatriate the money of 2013 is at SICAD I, we decided to convert our money that we have in Venezuela to SICAD I. And that would have a onetime loss adjustment of $56 million, okay?

Okay. All right.

And just -- I know you recognized in the dollars -- the revenue in dollars. But if you -- do you -- for future revenue recognition, or at least from a real cash standpoint, for your originating traffic out of Venezuela, you -- would you be booking effectively at the SICAD II?

SICAD II, it's another market like official black market because it's -- the featured currency today is VEF 6.3, then the SICAD I market to the airlines. And SICAD II is a market that the government allows you to sell or to trade dollars on a different price.

But the first, today, in Venezuela, are taken on SICAD I. So you sell ticket in bolivars thinking that the SICAD I, and then you can present to the government authorities, your request to repatriate your money at SICAD I.

Therefore, in terms of margin, we are a much -- the fact that we are selling with the money that we're presenting to repatriate. And there are some delays by the government of Venezuela, has paid in 2014 to a different airlines at the SICAD I during this year.

So Venezuela is a day-to-day living. So -- and we have put all our kind of requests, forecast of what's going to happen Venezuela in our guidance for the end of this year.

Okay. I appreciate all that additional color.

And then, just with regard to the Argentinian situation. Can you give us some sort of benchmark to help us understand what the impact will be with the FX?

So like -- with regard to Argentina, I think it's like 7% of your revenue, so it isn't material. How should we be thinking about the FX impact on your non-op expense?

I mean, obviously, you put [ph] more importantly, from a cash flow perspective?

Before passing the answer of that question, will be presented by Nicolas. But the problem with -- in Argentina, there is no restriction to, up today, with the dollars.

So the impact is basically on the selling, and Nicolas will explain that. But from the financial point of view, so far, we haven't faced any problem of repatriating $9 or $10 of bills abroad.

Nicolas, please?

Yes, as I've mentioned before, we were expecting a bigger downside from Argentina due to the crisis that they're having done there. However, we still see passengers growing and buying tickets with the reduction close to 8% on the ticket value on the yield and amount of passengers reducing in total 20% RASK.

But we were expecting, as I mentioned before, a bigger reduction, and we are seeing this number growing and going back to regular numbers. Each week, we are seeing big numbers getting better.

I just have a couple of questions. First, I would like to know if you can share with us what's the breakdown, the current breakdown, of the revenues and cost per currency and what measures are you -- put in place to increase your USD-linked revenue generation.

My second question is, it's a follow-up of the -- coming back to our IG metrics. And basically, I would like to know what measures are you putting in place to reduce your leverage at the balance sheet level?

And if you're planning on doing any divestitures looking forward?

We didn't quite get the first question. Could you please repeat the first question, again?

Yes, of course. So basically, the first question is, I want to know what's the current breakdown of the revenues and cost per currency.

Yes. Well, regarding that, we, in general, we have approximately 1/3 of our revenues denominated in Brazilian reals and approximately 27% of cost in reals.

And that -- so we have an operating exposure to the devaluation in the Brazilian currency. For the rest of the currencies, to the rest of the local currencies, we have more or less a natural hedge because we have approximately the same amount of revenues as cost denominated in the different currencies.

So from an operating perspective, our most significant exposure is the Brazilian real.

Okay. And in that sense -- yes, sorry, and I just want to know in that sense, what measures are you putting in place to increase your USD-linked revenues generation?

Sorry? Can you repeat that?

To increase what?

Your USD -- U.S. dollar-linked revenue generation.

Well, first, the exposures that we have to the Brazilian real is a reality, right? Because we have a very significant domestic operation in Brazil.

And in -- there are certain things that can increase the U.S. dollar revenues in generation and domestic Brazil, for example, a larger percentage of domestic tickets sold internationally, things like that, that can reduce this exposure.

But we also have a financial hedge that hedges that exposure. We have the -- we took for, the full year, $750 million hedge of the real at an average of about BRL 2.34 per dollar for the year.

So this is an exposure that we have to live with. And in addition to that, we have a financial hedge at least for this year.

Okay. And regarding the second question, regarding the IG, coming back to our IG metrics.

I just want to know if you're planning on doing any divestitures anytime soon?

We're not planning any divestiture. I think the leverage of the company will be accompanied by the margin expansion.

As you know, last year, we did a capital increase. And we have significantly delevered the company, as can be seen on Slide #12, the adjustment debt over EBITDAR as of June 2012 was 6.6x.

And currently, we are running at 5x. So this is going to be a consequence of the expansion on the markets.

But there are no divestitures are planned.

And regarding the timing, do you have any expected timing when you're expecting to come back to IG metrics?

I think that question came up before. We said that the continued numbers that we expect to have for IG metrics, roughly 3.5x.

This is -- I think it's more sort of a long-term project, but are continued numbers that we see maybe by 2016.

Most of my questions have been answered at this point. Just one follow-up, if I may, of the operations in Guarulhos Airport to the new terminal.

If you could remind me, refresh my memory: one, when it's supposed to be done; and two, given the reduction in connection times, if there is any upside from a block hour utilization perspective.

We -- we believe that there's -- we're planning for the change -- the move from Terminal 1 to Terminal 3 for the international operations will happen by the end of September. Of course, that has some flexibility, given that it will -- with the entirety, the whole airport, so the coordination is happening among a lot of airlines, but it should happen by the end of the third quarter.

And yes, you're absolutely right, the reduction in connecting times should not only give us more time to fly our planes, but also increase the number of O&D served with the same flights in the same airports. So we increase our senses of connecting that number of passengers between the regional, long-haul and domestic markets, while still helping us to increase our on-time performance metric.

Just a couple of questions about Argentina and Chile. If I understood what you said that the devaluation of the Argentinian currency does not cause as much of a problem because, in effect, the percent of sales that you actually have or the tickets that are sold in and out of Argentina tend to be denominated more in dollars as are the expenses in dollars, and therefore, it's not out of balance and doesn't cause a problem.

Is that what you were saying?

Yes, Bob. Well, there's-- we sort of differentiate -- there's 2 types of impact from the devaluation.

From a financial perspective, we don't have an imbalance in terms of revenues and cost in Argentina. So we don't have a financial impact from a depreciation of the Argentine currency.

What we do have, and what has impacted us this year is the fact that a devaluation, especially a very sudden devaluation in Argentina, like the one that occurred early this year, has an impact on international travel because the international tickets are sold in U.S. dollars.

The international fares are set in U.S. dollars.

So they become more expensive for our passenger based in Argentina, and therefore, demand dropped. And that's the impact that we've seen.

And probably -- this is Nicolas again. Since I am from Argentina, I am too positive and this is well known[ph].

But really, we do see reduction in the demand. This is close to 20%.

We don't see like a bully market there. There is a reduction in our demand, close to 20%.

Okay. And then, over in Chile, you said the currency there has been devalued to some extent.

What is the -- from just a macro point of view in terms of what's going on in Chile, why is there the weakness there? What is it about Chile that is causing the overall weakness in the currency?

Well, we've seen a -- we've seen first a slowdown in terms of the macro growth estimates throughout the year. And we saw the devaluation-- the peso has remained I'd say more or less stable this year, but there was a significant devaluation in February -- January, February.

And I think that has to do with the general macro and political situation in the country this year. It's still a healthy economic environment.

We're still looking at a growing economy this year. But compared to last year, we were looking at 460 pesos per dollar; and today, we're looking at 570.

So it's stabilized at those levels, but early this year, it had an impact. Also significantly, a large portion, as you know, of the Chilean economy has invested in the mining industry, and so a slowdown in that industry this year has implied -- has had a significant impact in part of that -- those downward revisions to GDP growth.

Good, good. Very helpful.

And then, just one quick one, make sure I understand about what was said about Venezuela in terms of -- you have restated this whole amount, and -- but you have received a modest -- it sounded like a modest payment with the balance at these rates returned to you over 4 years. Is that correct?

And if so, how much was the payment that you did receive?

No. This is Andrés again.

During the year, we have received closely about $10 million from Venezuela, but this agreement that we have made with the government, we haven't received the initial payment yet. We think that this could happen within the next 15 to 30 days, but I hope to give this good news on the next conference call by -- when we inform the quarter 3.

But again, we -- if you take the cash that we have by December and the cash that we have today, we have less cash in Venezuela. The adjustment is only to evaluate the bolivars that we have at the moment in Venezuela.

And we have today, about VEF 800 million in cash, in banks in Venezuela. So we've been diminishing, we -- our operation has diminished.

And we use the cash that we have to pay our cost of the operation there. So we are aware that the situation in Venezuela is uncertain.

And what we want to do is to transfer that on our balance sheet. That's it.

We hope that the Government of Venezuela will give us the right to repatriate, as we have said in our agreement. There's no -- we don't see anything yet to say something different.

So we'll wait and see, and hopefully, I have very good news for you on the next quarter. But our cash will be diminished month-by-month in Venezuela.

Okay. Well, if you do get -- it would be helpful to all of us, I think, if you got a payment in the meantime, that you not wait until the next quarterly call to let us know.

Just to put out some kind of release because it would help us all feel more comfortable, not only for you, but for all the airlines, as to what might be a way to approach the problem. If there is a way that you could...

Don't worry. We will make it loud.

Just a follow-up question on the international. With the Boeing 777 retrofits and moving to the new terminal, is there -- could you share some kind of again what the potential magnitude of impact would be?

And then, like how much are you under earning because of the -- on product side? Or just anything that could help us as we model this out.

We do believe that we will have a very positive impact on -- especially on our business class load factor and yields, given the products improvements, which is very, very significant. Also, the quality of the products that LATAM will have in the new terminal is unparalleled by any airline in this airport.

We will have, by far, the largest and the best VIP room. We will have the largest connection to serve both Brazil and the South American region.

So we do not disclose the order of magnitude, but we do expect a very significant increase in our yields, especially coming from executive class load factor, but also from corporate, overall economy class, given the quality of the products that we will offer, the quality of the connection and the quality of the flows within Latin America and some Latin America to the other continents, given that LATAM is by far the airline that's covered the largest flows within and to and from Latin America.

Okay, Claudia. And then, so is the full impact -- should we expect that in the first quarter?

Or would you see it right away in the fourth quarter?

I think we will see part of it in the fourth quarter, but the full impact, given the time that will take us to implement the entire retrofit of all of the 777s, we will feel it in 2015, full year.

Just a quick follow-up. You mentioned several savings for ASK coming from new and more efficient airplanes.

But how will the leasing cost per ASKs behave in these new planes compared to your current fleets?

When we talk about the savings and the cost per ASK of the aircraft, it includes -- it's the total impact. So it includes the fleet cost, as well as the savings in terms of fuel.

So when we compare a 787, for example, with a 767, the cost per ASK reduction of approximately 12% includes the efficiencies of the 787, as well as the fact that it's a more expensive aircraft than a 767, on average. With the A350s, which will eventually replace the A330 fleet at TAM, when we look at that comparison, the reduction in terms of cost per ASK is more than 20%.

And that's comparing our A350 orders with the exterior configuration of those aircraft would the existing A330s in our fleet. And that reduction includes also the fleet cost.

So they're all-in numbers when we look at the cost per ASK reductions.

Okay, perfect. Got it.

And I mean, there have been rumors lately about TAM buying or acquiring this regional airline, Passaredo, I think. And you have mentioned that you are very closely looking at the regional market in Brazil.

So could we expect some acquisition in the market? Or will you think of entering this regional market by yourself?

We -- what -- the deals that we have with Passaredo are clear. It's an airline deal that we have with over 100 airlines across the world.

So we are not looking into acquisition. And it's just a partnership that makes sense for us to have a better coverage of the domestic market.

So traditionally, it's totally complementary to our network as they fly to destinations that we don't. So it makes sense for us to serve our customers better, to have a partnership with an airline that flies to other destinations.

Well, thank you very much for participating in the call today, and please feel free to reach out to us if you have any further questions. Thank you, and goodbye.