080825 Evento Morgan StanleyPresentation Transcript
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.
The domestic market grew 10% from January to July 2008 Source: ANAC Accum. market growth 2006 12% Accum. market growth 2005 19% Accum. market growth 2007 12% Accum. market growth 2008 10% 2007 2005 2006 2008
The international market (among Brazilian carriers) is recovering and grew 38% … Source: ANAC Accum. Market growth 2008 38% Acum TAM 2006 41% Acum TAM 2007 71% Acum TAM 2005 40% Acum TAM 2008 44% Accum. market growth 2005 7% Accum. market decrease 2006 30% Accum. market decrease 2007 5% 2007 2005 2006 2008
… with higher growth anticipated for Brazilian carriers due to the unbalance in the bilateral agreements… Source: ANAC annual report * estimates
… observed in many countries, as the example between Brazil and USA * 21 frequencies limited to the cities in the north, northeast and central west regions of Brazil and/or Belo Horizonte Brazilian Carriers Foreign Carriers Available space on bilateral Operated by Brazilian Carriers Operated by Foreign Carriers
We are both domestic and international market leaders TAM’s Domestic Market Share* Source: ANAC * RPK – Revenue passenger kilometer TAM’s International Market Share* – Among Brazilian carriers
We are strengthening our network in the international market through fleet and partnerships
Increased widebody fleet plan for the next 10 years, substituting older aircraft
2 A340s (delivered in 2007)
8 B777-300ERs (4 in 2008, 4 in 2012)
22 A350s (as of 2013)
New A330 reducing Airbus fleet average age
Complete phase-out of F100 (impact on intra South American routes)
Expansion of network through additional destinations and frequencies
New full code share agreements at each major country – United Airlines; Lufthansa; LAN Group and TAP
Memorandum of understanding with Air Canada end Swiss
Focus on South American coverage – integration of TAM Airlines (Mercosur) activities
Our mix of international revenue reduced due to the appreciation of Real and increase of domestic yield Approximately 50% of our costs (including fuel) are exposed to foreign currencies -17% ASK proportion
Our gross revenue increased 27%...
Domestic passenger revenue grew 31%
RPK increased 8%
ASK increased 14%
International passenger revenue grew 13%
RPK increased 29%
ASK increased 22%
Cargo revenue grew 31%
Other revenue grew 45%
27% Domestic Pax International Pax Cargo Other
...and total RASK increased 9.5%...
RASK total ¹ ²
RASK scheduled domestic²
Domestic load factor - %
Yield scheduled domestic³
RASK scheduled international²
International load factor - %
Yield scheduled international³
Yield scheduled international³ (USD cents)
2Q 07 1Q 0 8 2Q 08 2Q 08 vs 2Q 07 2Q 08 vs 1Q 0 8 1 Includes charter. cargo and Other revenues. net of taxes 2 Net of taxes 3 Gross of taxes 16.80 15.26 71.9 22.25 12.30 69.1 17.83 9.26 16.38 15.37 69.9 23.09 11.39 76.9 14.82 8.47 18.40 17.66 68.1 27.23 11.48 73.4 15.64 9.82 9.5 15.7 -3.9 p.p. 22.4 -6.7 4.3 p.p. -12.3 6.1 12.3 14.9 -1.8 p.p. 17.9 0.8 -3.5 p.p. 5.5 16.0 6.39 6.51 7.21 12.9 10.7
RASK scheduled international ² (USD cents)
...and the total CASK increased 8.4%...
...increasing the spread (RASK-CASK)...
...impacting our margins in BR GAAP... Margin over net revenue 19% 13% 12% 103% 2% 3% -1% 2% BR GAAP
...and in US GAAP... Margin over net revenue 16% 12% 11% 34% 3% 4% 4% 9% 209% US GAAP
...increasing our earnings per share
The main difference between BR and US GAAP is the accounting treatment of aircraft leasing 46 aircrafts are reclassified as capital leases as per SFAS nº 13
Our balance sheet remains solid * LTM ** Aircraft and flight equipment leases of the last twelve months x 7
Brazilian domestic market has high growth potential Boardings per capita Boardings per capita, adjusted by GDP per capita at PPP Source: World Bank Data, Credit Suisse Research as of 2006 Annual Trips / Person 1.70 1.85 2.32 0.62 0.60 0.55 0.50 0.82 Japan US Argentina Chile Mexico Russia Brazil Germany Market’s RPK GDP TAM’s RPK Growth of Brazilian Domestic Market
High concentration of passengers in 11 airports Source: ANAC
Important barrier to entry for newcomers
Limited ability for other competitors to grow
11 main airports in Brazil carry 72% of all passenger traffic
TAM has in aggregate ~40% of all slots available in these airports