Deutsche Bank


São Paulo, October 1, 2008
Information and Projection
     This notice may contain estimates for future events. These estimates merely reflect the ex...
The domestic market grew 11% from January to
August 2008
Domestic Market - Variation
(vs previous period)
       130
     ...
The international market (among Brazilian carriers)
is recovering and grew 37% …
International Market - Variation
(vs prev...
…with higher growth anticipated for Brazilian carriers
due to the unbalance in the bilateral agreements…
% international p...
…observed in many countries, as the example
between Brazil and USA
Weekly Frequencies

                      Brazilian Car...
We are both domestic and international market
leaders
                                TAM’s Domestic Market Share*
       ...
Our mix of international revenue reduced due to the
appreciation of Real and increase of domestic yield
Revenue
          ...
Our gross revenue increased 27%...

                                                         Domestic passenger revenue
Gr...
... total RASK increased 9.5%...
                                                                                         ...
...and the total CASK increased 8.4%...

Total CASK
BR GAAP - R$ cents
                                          2Q08 vs 2...
...improving our margins and earnings
BR GAAP
                                                                     Earning...
The main difference between BR and US GAAP is
the accounting treatment of aircraft leasing
                               ...
Our balance sheet remains solid

R$ million - BRGAAP                                             2008*    2007     2006   ...
Debt deals

     Debentures – R$ 500 million (September 2006)
       Subscription of 50,000 nominative, registered, non co...
We are beginning to evaluate new potential
business units in the company

                           TAM Linhas Aéreas
   ...
We have a positive outlook for 2008
                                           2008 Guidance                         Jan –...
Our growth plan is supported by a flexible fleet plan
Total fleet


                                                      ...
19
Brazilian domestic market has high growth potential

            Growth of Brazilian Domestic Market                      ...
High concentration of passengers in 11 airports

                                 % Total Domestic Passengers Boarded
% TA...
As Brazil becomes “stable”, the leisure segment
 will become increasingly more important
Domestic Market Passenger Mix (RP...
We will be expanding our fare bundle strategy for
the domestic market in 2008...
     Addition of extra
     features in t...
...increasing capillarity of sales through our new
methods of payments...
     Launched new methods of payment in May 2007...
...optimizing the utilization of our aircraft on off
 peak hours
Load Factor per hour

                 Off Peak       Pea...
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Tam Deutsche 20081001 Eng

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Tam Deutsche 20081001 Eng

  1. 1. Deutsche Bank São Paulo, October 1, 2008
  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
  3. 3. The domestic market grew 11% from January to August 2008 Domestic Market - Variation (vs previous period) 130 125 120 115 Current 110 Period 105 Previous 100 Period 95 90 Accum. market Accum. market Accum. market Accum. market growth 2005 growth 2006 growth 2007 growth 2008 85 19% 12% 12% 11% 80 J F MAM J J A SOND J F MAM J J A SOND J F MAM J J A SOND J F MAM J J A 2005 2006 2007 2008 Source: ANAC 3
  4. 4. The international market (among Brazilian carriers) is recovering and grew 37% … International Market - Variation (vs previous period) Acum TAM 2007 71% 200 Acum TAM 2008 44% 180 Acum TAM 2006 Acum TAM 2005 41% TAM 40% 160 Market 140 120 Previous 100 Period 80 Accum. market Accum. Market Accum. market Accum. market decrease 2006 growth 2005 decrease 2007 growth 2008 60 30% 7% 5% 37% 40 J F MAM J J AS OND J F MAM J J ASOND J F MAM J J ASOND J F MAM J J A 2005 2006 2007 2008 Source: ANAC 4
  5. 5. …with higher growth anticipated for Brazilian carriers due to the unbalance in the bilateral agreements… % international passenger 100% 80 57.7% 58.2% 66.9% 69.2% 71.2% 60 40 Intl 42.3% Carriers 41.8% 20 33.1% 30.8% 28.8% Brazilian Carriers 0 2004 2005 2006 2007 Jan - Aug 2008* Source: ANAC annual report 5 * estimates
  6. 6. …observed in many countries, as the example between Brazil and USA Weekly Frequencies Brazilian Carriers Foreign Carriers USA 126* 42 105 126* Spain 51 7 51 35 France 30 21 28 30 Germany 21 7 14 21 14 7 10 14 England Italy 14 77 14 150 100 50 0 50 100 150 Available space on bilateral Operated by Brazilian Carriers Operated by Foreign Carriers * 21 frequencies limited to the cities in the north, northeast and central west regions of 6 Brazil and/or Belo Horizonte
  7. 7. We are both domestic and international market leaders TAM’s Domestic Market Share* TAM’s Domestic Market Share* 54,2% 49,30% 48,9% 48,2% 48,0% 43,5% 35,8% 33,0% 2003 2004 2005 2006 2007 Jan - Jul 2008 2Q08 Aug/08 TAM’s International Market Share* – Among Brazilian carriers TAM’s International Market Share* – Among Brazilian carriers 74,0% 73,9% 70,9% 67,5% 37,5% 18,8% 14,3% 12,0% 2003 2004 2005 2006 2007 Jan - Jul 2008 2Q08 Aug/08 Source: ANAC 7 * RPK – Revenue passenger kilometer
  8. 8. Our mix of international revenue reduced due to the appreciation of Real and increase of domestic yield Revenue Approximately 50% Approximately 50% (Passenger + Cargo) of our costs of our costs 100% (including fuel) are (including fuel) are exposed to foreign exposed to foreign 31% 34% 80 currencies currencies 60 40 69% 66% International (Dollar denominated) 20 Domestic (Real denominated) 0 2Q07 2Q08 ASK proportion International 37% 38% Domestic 63% 62% Dollar -17% exchange 1.926 1.592 rate 8
  9. 9. Our gross revenue increased 27%... Domestic passenger revenue Gross Revenue (R$ M) grew 31% 3,000 27% RPK increased 8% 2,615 2,500 226 ASK increased 14% 256 2,054 2,000 International passenger revenue 156 603 196 grew 13% 1,500 531 RPK increased 29% 1,000 ASK increased 22% 1,530 1,170 500 Cargo revenue grew 31% 0 Other revenue grew 45% 2Q07 2Q08 Domestic Pax International Pax Cargo Other 9
  10. 10. ... total RASK increased 9.5%... 2Q08 vs 2Q08 vs 2Q08 vs 2Q08 vs 2Q08 2Q08 2Q08 2Q08 R$ Cents 2Q07 2Q07 1Q0 8 1Q08 2Q08 2Q08 2Q07 1Q0 2Q08 2Q07 1Q0 2Q08 2Q07 1Q0 8 2Q07 1Q08 2Q07 1Q0 2Q07 1Q0 RASK total ¹ ² 16.80 16.38 18.40 9.5 12.3 domestic² RASK scheduled domestic² 15.26 15.37 17.66 15.7 14.9 Domestic load factor - % -3.9 p.p. -1.8 p.p. 71.9 69.9 68.1 Yield scheduled domestic³ 22.25 23.09 27.23 22.4 17.9 international² -6.7 RASK scheduled international² 12.30 11.39 11.48 0.8 69.1 76.9 73.4 4.3 p.p. -3.5 p.p. International load factor - % 17.83 14.82 15.64 -12.3 5.5 Yield scheduled international³ RASK scheduled 6.39 6.51 7.21 12.9 10.7 international² (USD cents) Yield scheduled international³ 9.26 8.47 9.82 6.1 16.0 (USD cents) 1 Includes charter. cargo and Other revenues. net of taxes 10 2 Net of taxes 3 Gross of taxes
  11. 11. ...and the total CASK increased 8.4%... Total CASK BR GAAP - R$ cents 2Q08 vs 2Q07 20 17.91 16.52 15 8.4% CASK 10 CASK excl-fuel -3.4% 5 0 2Q07 2Q08 11
  12. 12. ...improving our margins and earnings BR GAAP Earnings per share - R$ EBIT - R$ M Net Income - R$ M 0.33 80 60 50 67 103% 40 60 20 2% 40 33 0 3% 2% 20 -1% -20 -0.19 -29 0 -40 2Q07 2Q08 2Q07 2Q08 2Q07 2Q08 US GAAP Earnings per share - R$ EBIT - R$ M Net Income - R$ M 1.42 100 250 92 214 34% 209% 209% 80 200 69 60 150 40 100 4% 0.46 3% 9% 69 20 50 4% 0 0 2Q07 2Q08 2Q07 2Q08 2Q07 2Q08 Margin over net revenue 12
  13. 13. The main difference between BR and US GAAP is the accounting treatment of aircraft leasing 46 aircrafts are 46 aircrafts are Net Profit Reconciliation reclassified as capital reclassified as capital to US GAAP leases as per SFAS nº 13 leases as per SFAS nº 13 400 261 300 214 -84 200 -13 100 50 0 BR GAAP Leasing Income Others US GAAP Taxes 13
  14. 14. Our balance sheet remains solid R$ million - BRGAAP 2008* 2007 2006 2005 2004 Cash (1) 2.009 2.607 2.453 995 297 Short-Term Debt (2) 837 1.005 363 216 204 Long-Term Debt (3) 1.301 1.345 895 425 399 Total Debt (A) = (2) + (3) 2.138 2.350 1.258 641 603 Shareholder's Equity (4) 1.539 1.527 1.449 760 191 Capitalization (B) = (3 + 4) 2.839 2.872 2.344 1.185 590 Aircraft and flight equipment leases** (5) 6.193 5.976 5.032 4.389 4.557 Total Debt Adjusted (C) = (A + 5) 8.331 8.326 6.290 5.030 5.160 Total Capitalization Adjusted (D) = (3 + 4 + 5) 9.032 8.848 7.376 5.574 5.147 Debt / Capitalization (A / B) 75% 82% 54% 54% 102% Adjusted Debt / Adjusted Capitalization (C / D) 92% 94% 85% 90% 100% Adjusted Net Debt / Adjusted Capitalization (C - 1) / (D) 70% 65% 52% 72% 94% * LTM 14 ** Aircraft and flight equipment leases of the last twelve months x 7
  15. 15. Debt deals Debentures – R$ 500 million (September 2006) Subscription of 50,000 nominative, registered, non convertible debentures with a nominal unit value of R$ 10 thousand 6 years term with the first payment in 2010 Bonds – US$ 300 million (April 2007) 7.375% Senior Notes due 2017 Loan agreements to finance pre-delivery payment Calyon and other banks to finance up to US$ 331 million for 4 B777-300ERs BNP Paribas to finance up to US$ 117 million for 30 Airbus aircraft until 2010 Guaranties to support the financing of aircraft Ex-Im Bank for the Boeing fleet ECAs for the Airbus fleet 15
  16. 16. We are beginning to evaluate new potential business units in the company TAM Linhas Aéreas TAM Linhas Aéreas MRO MRO Loyalty Loyalty Cargo Handling Cargo Handling (São Carlos) (São Carlos) Program 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 16
  17. 17. We have a positive outlook for 2008 2008 Guidance Jan – Aug 2008 2008 Guidance Jan – Aug 2008 Domestic market demand growth from 8% to 12% (in Market 10.9% RPK terms) 49.9% dom Maintain leadership in both domestic and international 71.3% intl markets ASK growth of Domestic 14% 13.8% 33.1% International 40% 72.3% Average load factor at approximately 70% overall TAM Reduction of 7% in total CASK ex-fuel in BR GAAP yoy -4.5%* Brasília – Buenos Aires Three additional international destinations or Rio de Janeiro – Miami frequencies in 2008 São Paulo – Lima Rio de Janeiro – NY** São Paulo – Orlando** * Accumulated from January to June, 2008 17 ** In final approval phase by ANAC
  18. 18. Our growth plan is supported by a flexible fleet plan Total fleet 149 150 143 8 138 4 4 4 130 4 4 125 3 4 22 22 4 4 115 20 4 18 16 14 100 Since Since dec/07 we dec/07 we are are 115 113 monofleet in 110 monofleet in 88 104 50 101 domestic domestic operations operations 10 0 2007 2008 2009 2010 2011 2012 B777 MD11 B767 Airbus wide-body Airbus narrow-body F100 18
  19. 19. 19
  20. 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 157.6 0.62 Chile 140.6 0.60 Mexico 121.2 GDP 100 112.0 117.4 0.55 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. 21. High concentration of passengers in 11 airports % Total Domestic Passengers Boarded % TAM slots Important barrier to entry 43% São Paulo¹ for newcomers 34% São Paulo² Limited ability for other 39% Brasília competitors to grow 32% Rio de Janeiro³ 44% Salvador 11 main airports in Brazil 42% Belo Horizonte carry 72% of all passenger 27% Porto Alegre traffic 26% Curitiba 40% Recife TAM has in aggregate 32% Rio de Janeiro4 ~40% of all slots available 46% Fortaleza in these airports 0% 5% 10% 15% 20% 2007 2006 1 Congonhas 2 Guarulhos 21 3 Galeão Source: ANAC 4 Santos Dumont
  22. 22. As Brazil becomes “stable”, the leisure segment will become increasingly more important Domestic Market Passenger Mix (RPK M) CAGR 50 44.4 Leisure 39.7 40 22% 35.4 30 28.2 27.0 26.6 25.2 Business 20 17.9 11% 10 0 2000 2001 2002 2003 2004 2005 2006 2007 desire” Traveling is one of the top “desire” items for consumption * TAM Estimates 22
  23. 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. 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. 25. ...optimizing the utilization of our aircraft on off peak hours Load Factor per hour Off Peak Peak Off Peak Peak Off Peak 80% 75 70 65 60 Oct 2007 2Q08 55 0123 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 25

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