WRAPUP 3-Chile president-elect Pinera OKs LAN stake sale

* Axxion board must fix share sale price

* Cueto family approves $1 bln capital increase

* Cueto family has 20 days to decide on purchase (Updates with analyst comment, details)

By Antonio de la Jara and Fabian Cambero

SANTIAGO, Feb 5 (Reuters) - Chile's President-elect Sebastian Pinera on Friday approved the promised sale of his large holding in flagship airline LAN LAN.SN (LFL.N), worth an estimated $1.5 billion.

Pinera approved the sale via a shareholder meeting of his main holding company Axxion AXX.SN. Axxion must now must now set the price of the sale of his 26.3 percent stake in LAN, one of Latin America's biggest airlines. [ID:nN05207184] [ID:nN05115827]

The conservative billionaire had vowed to sell his stake in LAN, which he owns through his Axxion and Santa Cecilia holding companies, to counter critics who said his business empire poses conflicts of interest with the role of president.

He won last month's presidential run-off, and ends 20 years of center-left rule when he takes office March 11.

The Cueto family, which has the first option to purchase the stake, separately approved a $1 billion capital increase aimed at buying into Pinera's LAN stake, and now has 20 days to decide how much of it they will buy.

"The board of Axxion is authorized to set the sale price of the LAN shares and set in motion the sale plan contemplated in the shareholder pact with the Cueto family," Axxion said in a statement.

Shares in LAN closed 0.85 percent weaker on Friday at 8,756 pesos each, see-sawing in tandem with the market as a whole, which was buffeted by fears of sovereign debt failures in the euro zone as well as U.S. market losses following poor jobs data.

LAN's history of profit and combination of cargo and passenger business have given it a reputation as a solid business in an often troubled industry.

PUBLIC OFFERING?

Brazil's largest airline, TAM Linhas Aereas TAMM4.SN(TAM.N), last week declined comment on a media report that it was in talks to buy into Pinera's stake in LAN. TAM has an operational partnership with LAN via codeshare and helps maintain the company's aircraft.

"TAM was the favorite, but we talked to them and they said no," said an analyst close to the negotiations.

"I would bet money the public will get the rest (of Pinera's LAN stake)," he added, referring to public offering.

Axxion has said Pinera will place the funds raised from the stake sale in a blind trust, under which a third party manages investments without any involvement or influence of the investor.

Pinera has already placed hundreds of millions of dollars worth of investments in a blind trust.

Axxion holds a 19.03 percent stake in the airline, with another Pinera holding company, Santa Cecilia, owning an additional 7.3 percent. The two holding companies would coordinate the sale of their combined stakes, Axxion added.

The Cueto family, which holds the second-biggest investment in LAN, at 25.5 percent, via its Costa Verde Aeronautica holding company, is expected to take a significant slice of the stake and possibly even all of it.

Costa Verde Aeronautica said it would issue 500 million shares worth $2 each to fund the capital increase. The company did not say how much of Pinera's stake the Cueto family would buy, but local media have reported that the family has been seeking additional financing. (Additional reporting by Alonso Soto, Simon Gardner, Rodrigo Martinez; editing by Carol Bishopric)