Non Deal Road Show Credit Suisse

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Non Deal Road Show Credit Suisse

  1. 1. Non Deal Road Show Credit Suisse July 04-06, 2007
  2. 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. 2 2
  3. 3. TAM is a low cost company with better service at competitive prices Undisputable Better Service Sustainable Strategy to Maintain Market Leadership and Profitability Low Operating Competitive Costs Prices 3 3
  4. 4. The domestic market growth still strong in 2007, reaching 14% in the first 5 months of the year Domestic Market - Variation 130 125 120 Current 115 period 110 105 Previous 100 period 95 90 Accum. market growth Accum. market growth Accum. market growth Accum. market growth 2004 ~12% 2005 ~19% 2006 ~12% 2007 ~14% 85 80 J F M A M J J A S O N D J F M A M J J A S ON D J F M A M J J A S ON D J F M A M 2004 2005 2006 2007 Source: ANAC 4 4
  5. 5. We have been domestic market leaders since 2003, ending May with 49,7% Domestic Market Share (RPK’s) Domestic Market Share (RPK’s) 49.1% 47.8% 43.5% 35.8% 33.0% 2003 2004 2005 2006 Jan - Mai Domestic Market Share – 1Q07 Domestic Market Share - May/07 Domestic Market Share – 1Q07 Domestic Market Share - May/07 BRA Other 2,2% 3,2% Other 5,1% Varig BRA 3,4% 4,1% Varig 4,6% TAM TAM 48,5% 49.7% GOL 40.8% GOL 38,5% Source: ANAC 5 5
  6. 6. The international market (among the Brazilian carriers) has been diminishing… International Market - Variation (vs previous year) TAM 200 180 Acum TAM 2006 Acum TAM 2007 Acum TAM 2005 ~41% ~82% ~40% 160 Acum. TAM 2004 ~30% 140 120 Previous 100 period Accum. market growth Accum. market growth 2004 ~8% 2005 ~7% 80 Market Accum. 60 market Accum. market decrease 2006 decrease 2007 ~33% ~30% 40 J F M AM J J A S O N D J F M A M J J A S ON D J F M A M J J A S ON D J F M A M 2004 2005 2006 2007 Source: ANAC 6 6
  7. 7. Since July 2006, we are international market leaders among the Brazilian companies International Market Share International Market Share 65.2% 37.3% 18.8% 14.3% 12.00% 2003 2004 2005 2006 Jan - Apr International Market Share – 1Q07 International Market Share– May/07 International Market Share – 1Q07 International Market Share– May/07 Other Varig 3,9% 10.1% Varig Other 12.1% 9.1% GOL 13.7% GOL TAM 17.9% 60.9% TAM 72.4% Source: ANAC 7 7
  8. 8. Strong revenue growth quarter over quarter Domestic passenger revenue reduced 6.7% Gross Revenues (R$ M) RPK growth 22% 2,000 17% ASK growth 22% 1,856 158 International passenger revenue 1,587 157 growth 77% 86 1,500 103 RPK growth 64% 503 284 ASK growth 78% 1,000 Cargo revenue growth 52% Other revenue growth 48% 1,114 1,039 500 Other Cargo Increase of sales of Loyalty Int. Program points and expired tickets Pax Dom. compensated by the sub-leasing Pax 0 1Q06 1Q07 8 8
  9. 9. Our total RASK reduced 15%, mainly because of domestic yield decrease of 29%... 1Q06 vs 4Q06 vs 1Q06 vs 4Q06 vs 1Q06 4Q06 1Q07 1Q06 4Q06 1Q07 1Q07 1Q07 1Q07 1Q07 RASK Total1 19.8 19.3 16.7 -15.4% -13.3% RASK Scheduled Domestic2 20.2 17.5 14.5 -28.2% -17.1% LF Scheduled Domestic 68.4 69.7 69.3 0.8 p.p. -0.3 p.p. Yield Scheduled 31.0 26.4 22.0 -29.0% -16.7% Domestic3 RASK Scheduled International2 14.3 16.6 14.1 -1.5% -15.2% LF Scheduled 77.4 73.7 71.3 -6.2 p.p. -2.4 p.p. International Yield Scheduled 18.5 22.6 19.8 7.2% -12.4% International3 (em R$) Yield Scheduled 8.5 10.6 9.6 13.6% -8.7% International3 (em USD) 1 Includes charter, cargo and Other revenues, net of taxes 9 2 Net of taxes 9 3 Gross of taxes
  10. 10. ...and our CASK decreased 8.7% compared to 1Q06 Total CASK (BR GAAP - R$ cents) 1Q06 vs 1Q07 20 18.69 18.43 17.43 16.98 15.92 15 CASK -8.7% 10 CASK -7.5% 5 ex-fuel 0 1Q06 2Q06 3Q06 4Q06 1Q07 10 10
  11. 11. The decline in revenue decreased the spread (RASK- CASK)… RASK/CASK (R$ Cents) BR GAAP 25 20 RASK CASK 15 2002 2003 2004 2005 2006 1T07 -1.1 -0.2 1.4 1.5 2.8 0.9 Spread EBIT -7.1% -0.9% 6.5% 7.5% 13.6% 4.8% Margin 11 11
  12. 12. ...reducing our margins in BR GAAP... EBIT EBITDAR Net Income (BR GAAP - R$ M) (BR GAAP - R$ M) (BR GAAP - R$ M) -9% 200 400 -53% 189 376 -53% 150 340 127 150 300 24% 100 200 100 88 12% 59 8% 19% 50 5% 3% 100 50 0 0 0 1Q06 1Q07 1Q06 1Q07 1Q06 1Q07 Margin over Net Revenue 12 12
  13. 13. ...and US GAAP EBIT EBITDAR Net Income (US GAAP - R$ M) (US GAAP - R$ M) (US GAAP - R$ M) 300 400 280 268 373 -11% 331 240 250 238 - 49% 300 17% 200 - 39% 24% 200 160 15% 138 146 150 200 120 100 80 100 8% 50 40 8% 18% 0 0 0 1Q06 1Q07 1Q06 1Q07 1Q06 1Q07 Margin over Net Revenue 13 13
  14. 14. The main difference between BR and US GAAP is the accounting treatment of aircraft leasing Net Profit Reconciliation 39 aircrafts are reclassified as 39 aircrafts are reclassified as to US GAAP capital leases as per SFAS nº capital leases as per SFAS nº 200 13 13 119.3 150 3.9 137.9 -44.5 100 59.2 50 0 BR GAAP Leasing Income Others US GAAP Taxes 14 14
  15. 15. Our EPS decreased Earnings per share Earnings per share BR GAAP (R$) US GAAP (R$) 1.80 0.85 -54% -49% 0.92 0.39 1Q06 1Q07 1Q06 1Q07 15 15
  16. 16. Our foreign revenues increased, reducing the mismatch in currencies Approximately 50% Approximately 50% Revenues (Passenger + Cargo) of our costs of our costs (including fuel) are (including fuel) are 100% 100% 100% exposed to foreign exposed to foreign currencies currencies 20% 33% 80 60 40 80% 67% 20 International Domestic 0 1Q06 1Q07 16 16
  17. 17. Since our second public share offer, our ADR had an increase in valuation of 73% Accumulated variation since March 10, 2006 2,0 1,5 1,0 0,5 10-mar-06 29-jun-07 TAMM4 IBOVESPA DOW JONES ADR TAM 17 17
  18. 18. Our expectations for 2007, disclosed in December 2006, are still the same Guidance 2007 1Q07 Market demand growth from 10% to 15% (in RPK 13.6%* Market terms) 49.1%* Average domestic market share above 50% Average domestic load factor at approximately 70% 71.5%* 13 Aircraft utilization per day (block hour) higher than 13 hours 7.5% Reduction of 7% in total CASK ex-fuel in BR GAAP TAM yoy Opportunity in the international market Third frequency to Paris Since January • Inauguration of two new international long haul Milan since • frequencies March * Jan-May accumulated 18 18
  19. 19. In 2007, we will be expanding both frequencies and destinations Domestic Market 2007 International Market 2007 Domestic Market 2007 International Market 2007 ~30% increase in ASKs ~60-70% increase in ASKs At least an additional 3 destinations Additional daily frequency to Paris beginning in January Strengthening of international gateways for domestic market New flight to Milan in 1S07 Guarulhos Additional longhaul frequency or destination to be disclosed Galeão Increasing of frequency on main Strengthening of Latin American domestic markets presence, both frequencies and destinations Brasília Congonhas Confins Implementing overhub flights: new city-pairs 19 19
  20. 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 20 20
  21. 21. ...increasing our fleet and maintaining one of the youngest fleets in the world Total Fleet 150 141 136 6 130 4 123 4 3 20 20 4 112 20 16 15 100 B777 115 112 106 MD11 103 50 88 Airbus wide-body Airbus narrow-body F100 6 0 2007 2008 2009 2010 2011 21 21
  22. 22. Our cost targets are aggressive, but the roadmap is already laid out Fleet and network Distribution costs Overhead Increase in direct sales Increase of block hours to Outsourcing of non-core through: over 13 hours per day per activities aircraft in 2007 Site improvement Redefinition of service 6 extra seats in the standards Fare bundles A319/320 fleet Review of spans&layers in Call center outsourcing the hierarquy New means of payment Implementation of new Insourcing of automated processes representatives Improved sourcing Adjusting indirect sales capabilities commissions to higher % on offpeak flights 22 22
  23. 23. We continue among the most profitable companies in the world 16.0 14.0 Cash Costs ($ cents/ASK) 12.0 10.0 8.0 6.0 4.0 2.0 8.0 13.0 18.0 23.0 28.0 33.0 38.0 2006 EBITDAR Margin (%) Source: Public reports of December 31, 2006 (except for Air Asia and Malaysia, which refer to 2005 figures) 23 23
  24. 24. Investor Relations Phone: (11) 5582-9715 Fax: (11) 5582-8149 email: invest@tam.com.br Website: www.tam.com.br/ri 24 24

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