Conference Call  2Q10
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Conference Call 2Q10

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Conference Call  2Q10 Conference Call 2Q10 Presentation Transcript

  • (You will go with TAM) 2Q10 Results Presentation August 16th, 2010
  • Warning - 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 forward looking 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. 2
  • The new middle class in Brazil is a large market that wants to fly Middle class accounts for 49% of Since 2002 the Brazilian middle the Brazilian population class has grown 3 times more than the total population Millions of Brazilians do not live in 53% of the middle class never their home states traveled by plane and 58% have traveled by bus more than 8h Over the next 12 months, 8.7 million Brazilians should travel by plane for 80% of these trips have leisure the first time purposes Most people who intend to travel by plane belong to the new 56% of those who intend to Brazilian middle class travel are in middle class Who experience traveling by plane don’t go back to bus 85% of those who have flown anymore want to fly again on the next trip 3 Source: Data Popular
  • We have a great opportunity in the off-peak flights, and to attract this new customers, we must work on three fronts 1 Communication Brazilian singer Ivete Sangalo will be the star of 2 Sales Channels Increased TAM Viagens’ capillarity by the advertising campaign the franchising model, reaching 200 Campaign theme: Você vai. stores in 2 years E vai de TAM (You will go Sales kiosks at the retail chain Casas with TAM) Bahia Printed sheet containing information for first-time passengers Website 3 TAM.COM.BR/COMOVIAJAR Bus comparison tables Payment Choices Today we are the airline that offers more payment chices Possibility to buy tickets in up to 12 installments using the ItaúCard/TAM card and the Casas Bahia credit card 4
  • We made a capital increase for the acquisition of TAM Milor, bringing financial, corporate governance and intangible benefits Transaction Structure Transaction Structure Expected Benefits Expected Benefits TAM SA Cash outflow reduction TAM Linhas Improved corporate governance Aéreas TAM Milor Incorporation of a valuable asset TAM Milor acquisition by R$ 170 million: Capital Increase Capital Increase Payment in cash on the contract’s 15% Issuance of 5.6 million new common signature date shares Payment by promissory notes in favor Issuance price of R$ 25.69 each common of the selling parties, being this credit will used by the selling parties for share 85% increasing TAM SA’s capital, with the issuance of new common shares, Preemptive right from August 2, 2010 up paying the debt of TAM Linhas Aéreas. to September 14, 2010 (inclusive) 5
  • We expanded Pantanal’s network, which will reach 17 cities and will use Airbus and ATR aircraft Previous Network Previous Network New Network New Network Recife Araçatuba Presidente Juiz de Fora Marília Prudente Bauru Maringá São Paulo Salvador Cuiabá Brasília Belo Uberlândia Horizonte São José Before After Var Rio Preto Uberaba Araçatuba Ribeirão Marília Preto Juiz de Fora Presidente Yearly ASK 3 22 7x Prudente Bauru Rio de Janeiro (million) Weekly Maringá São Paulo 220 405 84% Flights Curitiba Destinations 6 17 3x Airbus ATR Aircraft ATR Airbus and ATR Porto Alegre To be approved The new network will start on August 23 6
  • We increased by 11% our domestic passengers revenue and our yield by 1% comparing to the previous year Domestic Passengers Domestic Passengers ASK, RPK and Load Factor Passenger Revenue - R$ Million 11% 11% 1% 10,422 10,357 2% 9,311 10% 1,397 1,428 1,286 7,220 12% 6,335 5,743 Load 2Q09 1Q10 2Q10 2Q09 1Q10 2Q10 Factor 62% 69% 61% Yield - R$ Cents RASK - R$ Cents 1% 0% 3% 17% 13.0 12.6 13.0 22.4 22.5 19.3 2Q09 1Q10 2Q10 2Q09 1Q10 2Q10 7
  • In dollars, we increased by 45% our international passengers revenue and our yield by 28% comparing to the previous year International Passengers International Passengers ASK, RPK and Load Factor Passenger Revenue - Million 2% 25% ASK 1% 6,482 6,557 6,621 R$816 10% R$732 R$584 14% RPK 5,020 5,055 45% 4,440 1% U$453 10% U$409 U$281 2Q09 1Q10 2Q10 Load 2Q09 1Q10 2Q10 Factor 68% 77% 76% Yield - Cents Scheduled RASK - Cents 10% 23% R$ 16.2 R$12.4 11% R$11.1 R$ 13.2 11% R$ 14.5 Avg US Dollar Avg US Dollar R$9.0 -14% 28% 42% -1% U$ 9.0 10% U$ 8.1 U$6.9 11% U$6.2 U$ 6.3 2.1 1.8 1.8 U$4.3 2Q09 1Q10 2Q10 2Q09 1Q10 2Q10 2Q09 1Q10 2Q10 8
  • Cargo revenue grew 33% and other revenues grew 1% Cargo Revenue Cargo Revenue Other Revenue Other Revenue (R$ Million) (R$ Million) 1% 300 33% 285 300 278 -27% 281 20 15 250 250 215 -13% 158 108 200 50% 200 124 105 150 150 100 100 19% 16% 159 127 134 50 110 50 0 0 2Q09 2Q10 2Q09 2Q10 Travel and tourism Domestic Internacional Others Loyalty Program agencies 9
  • Our net revenue increased by 15% and we improved our EBIT margin by 8 p.p. compared to 2Q09 In Reais 2Q10 vs 2Q10 vs 2Q10 2Q10 2Q09 2Q09 1Q10 1Q10 2Q09 1Q10 Net Revenue (million) 2,611 2,270 15.1% 2,604 0.3% Operating Expenses (million) 2,579 2,426 6.3% 2,508 2.8% EBIT (million) 33 (157) - 96 -66.0% EBIT Margin 1.3% -6.9% 8.2p.p. 3.7% -2.4p.p. EBITDAR (million) 289 165 75.7% 376 -23.1% EBITDAR Margin 11.1% 7.3% 3.8p.p. 14.5% -3.4p.p. Financial Result + Others* (million) (211) 994 - (173) -21.8% Net Income (million) (154) 555 - (58) -165.2% Total RASK (cents) 15.4 14.4 7.0% 15.3 0.3% CASK (cents) 15.2 15,4 -1.1% 14.8 2.8% CASK ex-fuel (cents) 10.2 11.4 -10.8% 10.1 1.1% CASK USD (cents) 8.5 7.4 14.5% 8.2 3.4% CASK USD ex-fuel (cents) 5,7 5.5 3.2% 5.6 1,7% * Others includes “Movements in fair value of fuel derivatives” and “Gains (losses) on aircraft revaluation” 10
  • Liquidity and debt profile Adequate debt profile* Adequate debt profile* Debentures issued in 2009 Debentures issued in 2009 2,700 R$ Million Original Actual 2,400 2,100 Maturity date July, 2013 July, 2017 1,800 Grace period 12 months 18 months (Jan 2012) 1,500 Interest Monthly Semiannually 1,200 900 CDI % 126.5% 124% 600 Installments Quarterly Semiannually 300 0 Cash 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Adjusted Net Debt / EBITDAR Adjusted Net Debt / EBITDAR Leasing on the balance sheet Debentures, bonds and others 8.0 Debt mix by currency 6.3 6.5 6.3 R$ 6.0 5.6 16% 4.0 3.8 2.1 2.0 84% US$ US$ 0.0 2005 2006 2007 2008 2009 2T10 Obs.1: 2010 EBITDAR considers last 12 months from 2Q10 Obs.2: Net Debt Adjusted includes annual operating leases x 7 Obs.3: Debt is considered in US GAAP for 2005 and 2006 and in IFRS since 2007 11 * Do not include the new debentures position
  • 2010 Guidance Guidance Guidance Actual Actual for 2010 for 2010 Jan - Jul Jan - Jul Domestic Market Domestic Market Demand growth (RPK) 14% - 18% 26% Supply growth (ASK) 12% 8% Domestic 14% 10% International 8% 3% Load factor 69% 71% Domestic 66% 66% International 75% 78% New international frequency or destination 2 21 CASK ex-fuel -6% -10%2 Average WTI USD 85 USD 78 Assumptions Assumptions Average US dollar rate R$ 1,81 R$ 1,79 1 The two new flights from Rio de Janeiro to Frankfurt and London started on August 10 and the flight to Bogota has been authorized by ANAC 2 Considers the period from January to June 12
  • Fleet plan Total Fleet (end of period) Total Fleet (end of period) 168 2 163 2 158 159 10 2 151 4 8 10 3 3 A340 - 2 143 4 3 3 21 20 18 132 4 3 18 20 4 3 18 9 A330 7 16 5 A321 - 5 85 85 82 137 A320 128 132 81 24 27 30 A319 21 5 5 5 2009 2T10 2010 2011 2012 2013 2014 B777 B767 Airbus wide-body Airbus narrow-body ATR-42 13
  • “The only way to compete in an open skies market, is creating a large Latin American airline group” Captain Rolim Adolfo Amaro 14 All information provided as of this slide will only materialize with the approval of shareholders and the authorities
  • Evolving global context has created the opportunity for a Latin American leader to emerge • The world is consolidating and international players are looking at Latin America for growth • Regional consolidation creates the opportunity for a Latin American carrier to enter on an equal footing with the world leaders • LAN and TAM have the opportunity to create this global champion, due to leading home market positions and shared focus on value creation This is the right time for the two companies combined to take the opportunities of one of the regions with greatest potential demand growth in the world All information provided will only materialize with the approval of shareholders 15 and the authorities
  • Transaction overview • TAM and LAN controlling shareholders will keep control • TAM and LAN controlling shareholders will keep control of LATAM with balanced voting power of 50% each of LATAM with balanced voting power of 50% each • Transaction based on shares exchange seeks to consolidate • Board composed by 9 members, of which 4 from the • Board composed by 9 members, of which 4 from the the economic interests of shareholders groups into a single controlling shareholders: controlling shareholders: entity • 2 from Amaro Family • 2 from Amaro Family • 2 from Cueto Family • 2 from Cueto Family Details Details • There will be a public offer to exchange for • There will be a public offer to exchange for cancellation of TAM’s registration as an open company cancellation of TAM’s registration as an open company • To TAM’s shareholders (controlling and others) will be • To TAM’s shareholders (controlling and others) will be • LAN Airlines SA will be renamed to LATAM Airlines Group SA • LAN Airlines SA will be renamed to LATAM Airlines Group SA offered 0.90 LATAM common share for each share of offered 0.90 LATAM common share for each share of and will be the holding company that will align the activities of and will be the holding company that will align the activities of TAM TAM the entire group the entire group LATAM will be listed on three stock exchanges LATAM will be listed on three stock exchanges •Santiago •Santiago •New York (ADRs) •New York (ADRs) •São Paulo (BDRs) •São Paulo (BDRs) All information provided will only materialize with the approval of shareholders 16 and the authorities
  • The control of the group will be equally divided among the families Amaro and Cueto Amaro Family Amaro Family Cueto Family Cueto Family Free Float Free Float Free Float Free Float From TAM From TAM From LAN From LAN 13,5% 13,5% 24,1% 24,1% 15,8% 46,6% 15,8% 46,6% Controlling Shareholders LATAM Chairman of the Board - Mauricio Amaro LATAM LATAM LATAM CEO - Enrique Cueto TAM SA Chairman of the Board - Maria Cláudia Amaro LAN CEO - Ignacio Cueto TAM SA CEO – Marco Antonio Bologna TAM Linhas Aéreas CEO – Líbano Miranda Barroso Subsidiaries: Subsidiaries: LAN Peru Pantanal LAN Argentina TAM Mercosur LAN Ecuador Multiplus LAN Cargo The Controlling Shareholders have a shareholders' agreement, which determines the equal LATAM’s control distribution All information provided will only materialize with the approval of shareholders 17 and the authorities
  • LAN e TAM today Passengers (million) 30.4 15.4 Destinations 63 70 Countries served 14 17 Employees (thousand) 26.3 17.7 Operational Operational Aircraft 143 98 Aircraft orders 90+ 121 2009 ASKs (billion) 64.7 38.8 Tons (thousand) 183 649 2009 Revenue (USD billion) 4.9 3.7 Financial Financial 2009 EBITDAR margin 14.0% 22.5% Note: Most recent figures except for financials and ASK (as of Dec 2009) All information provided will only materialize with the approval of shareholders 18 and the authorities
  • LATAM will be the leading company within it’s region... Revenue Destinations US$ Billion, 2009 Number of cities, as of today $8.5 116 62 58 $3.5 $2.6 51 $1.3 LAN-TAM GOL Avianca- Copa LAN-TAM GOL Avianca- Copa Taca Taca EBITDAR Passengers US$ Million, 2009 Million, 2009 $1.505 45.8 28.4 $690 $400 $320 11.3 5.6 LAN-TAM GOL Avianca- Copa LAN-TAM GOL Avianca- Copa Taca (E) Taca Source: Company 20-F filings, Airline Business, IR presentation, Company websites. All information provided will only materialize with the approval of shareholders 19 and the authorities
  • ... and will be among the leading airlines in the world The Top 15 passenger airlines in revenue The Top 15 passenger airlines in passengers US$ Billion, 2009 Million, 2009 1 Lufthansa Group 31 1 Delta 161 Air France-KLM Group 30 United-CO 102 United - CO 29 Southwest 86 Delta 28 American 86 5 AMR Corporation 20 5 Air France-KLM 71 BA - Iberia 19 Lufthansa 70 JAL 16 China Southern 66 ANA Group 13 Ryanair 65 Qantas 11 BA - Iberia 52 10 US Airways 10 10 US Airways 51 Southwest 10 LATAM 46 Singapore Air Group 9 China Eastern 44 Cathay Pacific 9 JAL 41 Air Canada 9 Air China 40 15 LATAM 9 15 Qantas 38 Source: Company reports for LAN and TAM, Airline Business All information provided will only materialize with the approval of shareholders 20 and the authorities
  • Will be the absolute leader in South America and co-leader on routes to and from the USA and Canada Current capacity Million of seats per month 1,6 1,4 1,1 100% Outher Other Other Pluna Alitalia 80 Aerolineas Avianca Avianca Lufthansa and Swiss United and GOL Continental 60 4th LATAM Delta Avianca TAP 40 2nd LATAM Air France and KLM 20 1st LATAM American British Airways and Iberia 0 Intra South America USA e Canada Europe Note: International non-stop segments Source: OAG as of July 2010 All information provided will only materialize with the approval of shareholders 21 and the authorities
  • The combination will provide growth opportunities to the group This combination provides us an unique position... 116 destinations in 23 countries Fleet of 241 aircraft 44 thousand employees Leaders in the domestic markets of Brazil, Chile, Ecuador and Peru In South American intra-regional our leadership will be very strong ... and we have the opportunity to grow even more acting initially on four growth areas 1 Brazil to Europe/Africa Increased Southern cone feed to support new service to Europe 2 Lima to North/Central Am. Increased Brazil feed supports new service to US and Mexico 3 New hubs Potential new hubs could connect to Europe and US 4 Cargo Combination of LAN’s expertise and TAM’s footprint All information provided will only materialize with the approval of shareholders 22 and the authorities
  • The transaction is expected to generate estimated annual synergies of ~US$400 million US$ ~400M Cargo Revenue • Expectation to implement one third of the synergies within the first year $110M • All synergies should be implemented by the end of the third year PAX Revenue Revenues: Cargo ~$110M, Pax ~$170M Revenues: Cargo ~$110M, Pax ~$170M Costs: ~$120M Costs: ~$120M $170M Synergy Value Synergy Value Source US$ Million Rationale Source US$ Million Rationale Costs New service, sharing of best Airports Consolidation of functions in Cargo 110 25 practices overlapping stations $120M Improved access to joint Network Leveraging economies of 50 hubs and combined network Procurement 25 relevance scale in contracts appeal Combined network creates Increased Streamlining of corporate 40 new city pairs and increased Corporate 20 connectivity overhead and some functions service New Combined network supports Efficiencies of common IT flights 35 IT 20 new flights and hubs platforms Other Including consolidation of Leveraging economies and passenger 35 partner airline contracts and Maintenance 15 efficiencies of scale revenue increased utilization Frequent Consolidation of the Efficiency of combined sales 10 programs and sharing of best Sales 15 flyer efforts practices All information provided will only materialize with the approval of shareholders 23 and the authorities
  • Opportunities on cargo transportation combining LAN cargo expertise with TAM market opportunity LAN’s global and diversified cargo …with TAM’s Brazilian network… market presence North America to South America Europe to South America Regional (intra) South America Brazil is the largest domestic cargo market in Latin America TAM offers significant strengths Domestic widebody network Existing cargo operation Strong and growing European network All information provided will only materialize with the approval of shareholders 24 and the authorities
  • We will be the third largest airline of the world in market value Market Cap (USD B) 20.0 19.2 15.0 13.7 10.6 10.0 9.4 7.5 7.4 7.4 7.2 5.1 5.0 4.5 3.8 2.3 0.0 M s na ia a re t LM ol O s ir es ta op is TA er G C na po hi K Sw w an d+ C Ib LA e+ C ya ga th Q + te ir + or R in nc sa A ni S N h ra U an is + irF rit ta th el B A f Lu D Source: Bloomberg (30/07/2010) All information provided will only materialize with the approval of shareholders 25 and the authorities
  • invest@tam.com.br 26 www.tam.com.br/ir