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Tam Conferencia Cs 20080805 Eng
Tam Conferencia Cs 20080805 Eng
Tam Conferencia Cs 20080805 Eng
Tam Conferencia Cs 20080805 Eng
Tam Conferencia Cs 20080805 Eng
Tam Conferencia Cs 20080805 Eng
Tam Conferencia Cs 20080805 Eng
Tam Conferencia Cs 20080805 Eng
Tam Conferencia Cs 20080805 Eng
Tam Conferencia Cs 20080805 Eng
Tam Conferencia Cs 20080805 Eng
Tam Conferencia Cs 20080805 Eng
Tam Conferencia Cs 20080805 Eng
Tam Conferencia Cs 20080805 Eng
Tam Conferencia Cs 20080805 Eng
Tam Conferencia Cs 20080805 Eng
Tam Conferencia Cs 20080805 Eng
Tam Conferencia Cs 20080805 Eng
Tam Conferencia Cs 20080805 Eng
Tam Conferencia Cs 20080805 Eng
Tam Conferencia Cs 20080805 Eng
Tam Conferencia Cs 20080805 Eng
Tam Conferencia Cs 20080805 Eng
Tam Conferencia Cs 20080805 Eng
Tam Conferencia Cs 20080805 Eng
Tam Conferencia Cs 20080805 Eng
Tam Conferencia Cs 20080805 Eng
Tam Conferencia Cs 20080805 Eng
Tam Conferencia Cs 20080805 Eng
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Tam Conferencia Cs 20080805 Eng

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  • 1. Credit Suisse 2nd Annual Midsummer Latam Conference July 30 - August 1st, 2008
  • 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
  • 3. The domestic market grew 11% from January to June 2008 Domestic Market - Variation (vs previous period) 130 125 120 Current 115 Period 110 105 Previous 100 Period 95 Accum. market 90 Accum. market Accum. market Accum. market growth 2008 growth 2005 growth 2006 growth 2007 85 11% 19% 12% 12% 80 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O ND J F M A M J 2005 2006 2007 2008 Source: ANAC 3
  • 4. The international market (among Brazilian carriers) is recovering, and grew 40% in 2008… International Market - Variation (vs previous period) Acum TAM 2007 71% 200 Acum TAM 2008 46% 180 Acum TAM 2006 Acum TAM 2005 TAM 41% 160 40% Market 140 120 Previous 100 Period 80 Accum. market Accum. Market Accum. market Accum. market decrease 2006 growth 2005 60 decrease 2007 growth 2008 30% 7% 5% 40% 40 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M AM J 2005 2006 2007 2008 Source: ANAC 4
  • 5. …but Brazilian carriers are transporting less passengers than the international ones… % international passenger 100% 80 58.2% 57.7% 66.9% 69.8% 71.2% 60 40 Intl Carriers 41.8% 42.3% 20 33.1% 30.2% 28.8% Brazilian Carriers 0 2004 2005 2006 2007 June 2008* Source: ANAC annual report 5 * estimates
  • 6. …due to lower utilization of frequencies allowed in the bilateral agreements Weekly Frequencies Brazilian Carriers Foreign Carriers USA 105 35 105 105 Spain 51 7 51 35 France 30 21 28 30 Germany 21 7 14 21 England 14 7 10 14 Italy 14 77 14 150 100 50 0 50 100 150 Available space on bilateral Operated by Brazilian Carriers Operated by Foreign Carriers 6
  • 7. We are both domestic and international market leaders TAM’s Domestic Market Share* TAM’s Domestic Market Share* 49,1% 48,9% 48,6% 48,2% 48,0% 43,5% 35,8% 33,0% 2003 2004 2005 2006 2007 Jan - Jun 2008 2Q08 jun/08 TAM’s International Market Share* – Among Brazilian carriers TAM’s International Market Share* – Among Brazilian carriers 74,0% 75,3% 70,6% 67,5% 37,5% 18,8% 14,3% 12,0% 2003 2004 2005 2006 2007 Jan - Jun 2008 2Q08 jun/08 Source: ANAC 7 * RPK – Revenue passenger kilometer
  • 8. 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 2 B767-300ERs 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 8
  • 9. The international operations works as a natural hedge Revenue Revenues Revenues (Passenger + Cargo) originated in the originated in the 100% international international operations are 24% operations are 33% 80 expected to reach expected to reach 45% - 50% until 45% - 50% until 60 Dec/2008 Dec/2008 40 76% 67% 20 International Domestic 0 2006 2007 ASK proportion Approximately 50% Approximately 50% International 27% 36% of our costs of our costs Domestic 73% 64% (including fuel) are (including fuel) are exposed to foreign Dollar exposed to foreign exchange -17% currencies currencies 2.138 1.771 rate 9
  • 10. Our gross revenue increased 23%... Domestic passenger revenue grew 21% Gross Revenue (R$ M) RPK increased 15% 23% 2,500 2,347 ASK increased 14% 199 214 2,000 1,913 International passenger revenue 158 157 grew 21% 613 1,500 506 RPK increased 61% 1,000 ASK increased 50% 1,321 1,093 500 Others Cargo revenue grew 37% Cargo Int. Pax Other revenue grew 26% Dom. Pax 0 1Q07 1Q08 10
  • 11. ...but total RASK reduced 2%... 1Q08 vs 1Q08 vs 1Q08 vs 1Q08 vs R$ Cents 1Q07 4Q07 1Q08 1Q07 4Q07 1Q08 1Q07 4Q07 1Q07 4Q07 RASK total ¹ ² 16,72 17,87 16,38 -2,1% -8,3% RASK scheduled domestic² 14,54 16,69 15,37 5,7% -7,9% Domestic load factor - % 69,4 70,4 69,9 0,5 p.p. -0,5 p.p. 22,00 24,90 23,09 5,0% -7,3% Yield scheduled domestic³ RASK scheduled international² 14,07 11,26 11,39 -19,0% 1,2% International load factor - % 71,3 71,0 76,9 5,6 p.p. 5,9 p.p. 19,78 15,88 14,82 -25,1% -6,7% Yield scheduled international³ Yield scheduled international³ 9,65 8,96 8,47 -12,2% -5,4% (USD cents) 1 Includes charter, cargo and Other revenues, net of taxes 11 2 Net of taxes 3 Gross of taxes
  • 12. ...while total CASK increased 2%... Total CASK BR GAAP - R$ cents 1Q08 vs 1Q07 20 16.25 15.92 15 CASK 2.1% 10 CASK excl-fuel -5.5% 5 0 1Q07 1Q08 12
  • 13. ...reducing the spread (RASK-CASK)... RASK/CASK (R$ Cents) BR GAAP 20 16.72 16.38 16.25 15.92 15 10 5 CASK RASK 0 1Q07 1Q08 Spread 0.80 0.13 EBIT 4.8% 0.8% Margin 13
  • 14. ...impacting our margins in BR GAAP... BR GAAP EBITDAR - R$ M EBIT - R$ M Net Income - R$ M 100 80 400 88 -20% -80% -96% 340 80 59 60 300 272 60 40 200 40 19% 20 100 5% 18 12% 20 3% 0,1% 0,8% 3 0 0 0 1Q07 1Q08 1Q07 1Q08 1Q07 1Q08 Margin over net revenue 14
  • 15. ...and in US GAAP... US GAAP EBITDAR - R$ M EBIT - R$ M Net Income - R$ M 146 150 150 400 -14% 138 -43% -66% 331 300 283 100 100 83 200 47 50 50 8% 18% 8% 100 13% 4% 2% 0 0 0 1Q07 1Q08 1Q07 1Q08 1Q07 1Q08 Margin over net revenue 15
  • 16. ...reducing our earnings per share Earnings per share Earnings per share US GAAP (R$) BR GAAP (R$) 0.92 -66% -96% 0.39 0.31 0.02 1Q07 1Q08 1Q07 1Q08 16
  • 17. The main difference between BR and US GAAP is the accounting treatment of aircraft leasing 44 aircrafts are 44 aircrafts are Net Profit Reconciliation reclassified as capital to US GAAP reclassified as capital leases as per SFAS nº 13 leases as per SFAS nº 13 57 60 6 47 40 -19 20 3 0 BR GAAP Leasing Income Others US GAAP Taxes 17
  • 18. We are well positioned compared to other airline companies US GAAP Operating Margin (Mar Q 2008) 20% 18% 17% 15 14% 12% 11% 10 9% 8% ACE Aviation Continental US Airways Air Canada ExpressJet Northwest 5 4% 4% 3% AirTran Alaska 2% Delta TAM AMR UAL Gol 0 -0% -1% WestJet Southwest Jazz Copa JetBlue Allegiant Lan Republic Pinnacle SkyWest -1% -2% -3% -3% -3% -5 -5% -6% -7% -8% -10 -9% 18
  • 19. Our balance sheet remains solid R$ million - BRGAAP 2008* 2007 2006 2005 2004 Cash 2,226 2,607 2,453 995 297 Short-Term Debt 959 1,098 363 216 204 Long-Term Debt 1,365 1,345 895 425 399 Total Debt 2,324 2,443 1,258 641 603 Shareholder's Equity 1,489 1,527 1,449 760 191 Capitalization 2,855 2,872 2,344 1,185 590 Aircraft and flight equipment leases 5,949 5,976 5,032 4,389 4,557 Total Debt Adjusted 8,273 8,419 6,290 5,030 5,160 Total Capitalization Adjusted 8,804 8,848 7,376 5,574 5,147 Debt / Capitalization 81% 85% 54% 54% 102% Adjusted Debt / Adjusted Capitalization 94% 95% 85% 90% 100% Adjusted Net Debt / Adjusted Capitalization 69% 66% 52% 72% 94% 19 * LTM
  • 20. Brazilian domestic market has high growth potential Growth of Brazilian Domestic Market Annual Trips / Person 2.32 US 256.8 1.85 Japan TAM’s RPK 228.2 1.70 Germany 0.82 Argentina 176.4 175.4 Market’s RPK 0.62 157.6 Chile 140.6 0.60 Mexico 121.2 GDP 100 0.55 112.0 117.4 Russia 111.4 107.3 104.9 100 0.50 Brazil 2003 2004 2005 2006 2007 Boardings per capita Boardings per capita, adjusted by GDP per capita at PPP Source: World Bank Data, Credit Suisse Research as of 2006 20
  • 21. High concentration of passengers in 11 airports % Total Domestic Passengers Boarded % TAM slots Important barrier to entry for 43% CGH newcomers 34% GRU Limited ability for other 39% BSB competitors to grow 32% GIG 44% SSA 11 main airports in Brazil 42% CNF carry 72% of all passenger 27% POA traffic 26% CWB 40% REC TAM has in aggregate ~40% 32% SDU of all slots available in these 46% FOR airports 0% 5% 10% 15% 20% 2007 2006 Source: ANAC 21
  • 22. As Brazil becomes “stable”, the leisure segment will become increasingly more important Domestic Market Passenger Mix (RPK M) CAGR 50 44.4 39.7 Leisure 40 22% 35.4 28.2 30 27.0 26.6 25.2 20 Business 17.9 11% 10 0 2000 2001 2002 2003 2004 2005 2006 2007 Traveling is one of the top “desire” items for consumption * TAM Estimates 22
  • 23. We will be expanding our fare bundle strategy for the domestic market in 2008... Addition of extra features in the segmented bundles Ability to “sell up” categories Potential for further revenue increase Harmonization of the fare bundle strategy to TAM Fidelidade growth 23
  • 24. ...increasing capillarity of sales through our new methods of payments... Launched new methods of payment in May 2007 Payment at lottery stores Approximately 9,000 stores in Brazil Already functioning as bank correspondent Billing slips Automatic debit Financing for passengers via direct consumer credit with the main retail banks Focus on leisure/lower income segments 24
  • 25. ...optimizing the utilization of our aircraft on off peak hours Domestic load factor per hour 80% Off Peak Peak Off Peak Peak Off Peak 75 70 65 60 55 50 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 * Average day in October, 2007 25
  • 26. We are beginning to evaluate new potential business units in the company TAM Linhas Aéreas MRO Loyalty Cargo Handling (São Carlos) Program Already None or little focus on selling structured as services to third-parties a business Not structured as business units unit with focus in maximizing assets 26
  • 27. We have a positive outlook for 2008 2008 Guidance Actual - 1Q08 10.8%* Domestic market demand growth from 8% to Market 12% (in RPK terms) Maintain leadership in both domestic and 49.1% dom* international markets 70.6% intl* ASK growth of 14.2% Domestic 14% 49.7% International 40% TAM 73.2% Average load factor at approximately 70% overall Reduction of 7% in total CASK ex-fuel in BR GAAP -5.5% yoy Three additional international destinations or --- frequencies in 2008 * From January to June 27
  • 28. Our growth plan is supported by a flexible fleet plan Total fleet 2 2 147 150 2 141 8 2 136 4 2 4 128 123 3 22 4 22 4 115 20 18 16 14 100 Since Since dec/07 we dec/07 we are are 115 113 110 88 monofleet in monofleet in 104 50 101 domestic domestic operations operations 10 0 2007 2008 2009 2010 2011 2012 B777 MD11 B767 Airbus wide-body Airbus narrow-body F100 28
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