070703 Cs
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  • Bologna: Good morning. We would like to thank you all for your presence. Let’s begin the presentation of the first quarter 2007 results...

070703 Cs Presentation Transcript

  • 1. Non Deal Road Show Credit Suisse July 04-06 , 2007
  • 2. Information and Projection
    • This notice may contain estimates for future events. These estimates merely reflect the expectations of the Company’s management, and involve risks and uncertainties. The Company is not responsible for investment operations or decisions taken based on information contained in this communication. These estimates are subject to changes without prior notice.
    • This material has been prepared by TAM S.A. (“TAM“ or the “Company”) includes certain forward-looking statements that are based principally on TAM’s current expectations and on projections of future events and financial trends that currently affect or might affect TAM’s business, and are not guarantees of future performance. They are based on management’s expectations that involve a number of business risks and uncertainties, any of each could cause actual financial condition and results of operations to differ materially from those set out in TAM’s forward-looking statements. TAM undertakes no obligation to publicly update or revise any forwardlooking statements.
    • This material is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Likewise it does not give and should not be treated as giving investment advice. It has no regard to the specific investment objectives, financial situation or particular needs of any recipient. No representation or warranty, either express or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein. It should not be regarded by recipients as a substitute for the exercise of their own judgment.
  • 3. TAM is a low cost company with better service at competitive prices Low Operating Costs Undisputable Better Service Competitive Prices Sustainable Strategy to Maintain Market Leadership and Profitability
  • 4. The domestic market growth still strong in 2007, reaching 14% in the first 5 months of the year Source: ANAC Accum. market growth 2006 ~12% Accum. market growth 2005 ~19% Accum. market growth 2004 ~12% Accum. market growth 2007 ~14% 2004 2005 2006 2007
  • 5. We have been domestic market leaders since 2003, ending May with 49,7% Domestic Market Share - May/07 Domestic Market Share (RPK’s) Source: ANAC Domestic Market Share – 1Q07
  • 6. The international market (among the Brazilian carriers) has been diminishing… Source: ANAC Accum. market growth 2004 ~8% Accum. market growth 2005 ~7% Accum. market decrease 2006 ~30% Accum. market decrease 2007 ~33% Acum TAM 2006 ~41% Acum TAM 2007 ~82% Acum TAM 2005 ~40% Acum. TAM 2004 ~30% 2004 2005 2006 2007
  • 7. Since July 2006, we are international market leaders among the Brazilian companies International Market Share– May/07 International Market Share Source: ANAC International Market Share – 1Q07
  • 8. Strong revenue growth quarter over quarter 17%
    • Domestic passenger revenue reduced 6.7%
      • RPK growth 22%
      • ASK growth 22%
    • International passenger revenue growth 77%
      • RPK growth 64%
      • ASK growth 78%
    • Cargo revenue growth 52%
    • Other revenue growth 48%
      • Increase of sales of Loyalty Program points and expired tickets compensated by the sub-leasing
  • 9. Our total RASK reduced 15%, mainly because of domestic yield decrease of 29%... 1Q 0 6 19.8 20. 2 68. 4 31. 0 1 4 .3 7 7 . 4 18 . 5 8. 5 4Q 06 19 . 3 17 . 5 69 . 7 26 .4 1 6 . 6 7 3 . 7 2 2 . 6 10. 6 1Q 0 7 1 6 . 7 1 4 .5 69. 3 22.0 1 4 . 1 7 1 . 3 19.8 9 . 6 1Q 0 6 vs 1Q 0 7 - 15 . 4 % -28.2% 0 . 8 p.p. -29.0% -1 . 5 % - 6 . 2 p.p. 7.2% 13 . 6 % 4Q 06 vs 1Q 0 7 -13. 3 % -17.1% - 0 . 3 p.p. -16.7% -15.2% - 2 . 4 p.p. - 12 . 4 % - 8 . 7 %
    • RASK Total 1
    • RASK Scheduled Domestic 2
      • LF Scheduled Domestic
      • Yield Scheduled Domestic 3
    • RASK Scheduled International 2
      • LF Scheduled International
      • Yield Scheduled International 3 (em R$)
      • Yield Scheduled International 3 (em USD)
    1 Includes charter, cargo and Other revenues, net of taxes 2 Net of taxes 3 Gross of taxes
  • 10. ...and our CASK decreased 8.7% compared to 1Q06
  • 11. The decline in revenue decreased the spread (RASK-CASK)…
  • 12. ...reducing our margins in BR GAAP... Margin over Net Revenue -9% -53% -53% 24% 19% 12% 5% 3% 8%
  • 13. ...and US GAAP 24% 15% 8% 18% 8% -11% 17% - 39% - 49% Margin over Net Revenue
  • 14. The main difference between BR and US GAAP is the accounting treatment of aircraft leasing 39 aircrafts are reclassified as capital leases as per SFAS nº 13
  • 15. Our EPS decreased -54% -49%
  • 16. Our foreign revenues increased, reducing the mismatch in currencies Approximately 50% of our costs (including fuel) are exposed to foreign currencies
  • 17. Since our second public share offer, our ADR had an increase in valuation of 73%
  • 18. Our expectations for 2007, disclosed in December 2006, are still the same
    • Average domestic market share above 50%
    • Average domestic load factor at approximately 70%
    • Aircraft utilization per day (block hour) higher than 13 hours
    • Reduction of 7% in total CASK ex-fuel in BR GAAP yoy
    • Opportunity in the international market
      • Third frequency to Paris
      • Inauguration of two new international long haul frequencies
    • Market demand growth from 10% to 15% (in RPK terms)
    Guidance 2007 TAM Market 13.6%* 1Q07
    • Since January
    • Milan since March
    49.1%* 71.5%* 13 7.5% * Jan-May accumulated
  • 19. In 2007, we will be expanding both frequencies and destinations Domestic Market 2007 International Market 2007
    • ~30% increase in ASKs
    • At least an additional 3 destinations
    • Strengthening of international gateways for domestic market
      • Guarulhos
      • Galeão
    • Increasing of frequency on main domestic markets
      • Brasília
      • Congonhas
      • Confins
    • Implementing overhub flights: new city-pairs
    • ~60-70% increase in ASKs
    • Additional daily frequency to Paris beginning in January
    • New flight to Milan in 1S07
    • Additional longhaul frequency or destination to be disclosed
    • Strengthening of Latin American presence, both frequencies and destinations
  • 20. Due to international market opportunity, we are strengthening our international partnerships...
    • Signature of several MOUs:
      • Code-share with TAP serving several destinations in Portugal and integration of TAM’s Programa Fidelidade TAM with TAP’s Programa Victoria da TAP. Operations starting in July;
      • Code-share with LAN with unlimited seat sales within South America: Brazil, Chile, Argentina, Peru, Venezuela and integration with LAN’s PASS;
      • Code-share with United Airlines serving several destinations in the USA (strong hubs in Chicago and Washington) and integration with Mileage Plus ;
      • Code-share with Lufthansa serving the German market – connecting point of flights to Europe, Asia, Middle East and Africa. Integration with Miles & More
  • 21. ...increasing our fleet and maintaining one of the youngest fleets in the world
  • 22. Our cost targets are aggressive, but the roadmap is already laid out Fleet and network Distribution costs Overhead
    • Increase of block hours to over 13 hours per day per aircraft in 2007
    • 6 extra seats in the A319/320 fleet
    • Increase in direct sales through:
      • Site improvement
      • Fare bundles
      • Call center outsourcing
      • New means of payment
    • Insourcing of representatives
    • Adjusting indirect sales commissions to higher % on offpeak flights
    • Outsourcing of non-core activities
    • Redefinition of service standards
    • Review of spans&layers in the hierarquy
    • Implementation of new automated processes
    • Improved sourcing capabilities
  • 23. Source: Public reports of December 31, 2006 (except for Air Asia and Malaysia, which refer to 2005 figures) 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 8.0 13.0 18.0 23.0 28.0 33.0 38.0 2006 EBITDAR Margin (%) Cash Costs ($ cents/ASK) We continue among the most profitable companies in the world
  • 24. Investor Relations Phone: (11) 5582-9715 Fax: (11) 5582-8149 email: invest@tam.com.br Website: www.tam.com.br/ri