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Tam Morgan Stanley Frota 20090116 Eng
 

Tam Morgan Stanley Frota 20090116 Eng

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    Tam Morgan Stanley Frota 20090116 Eng Tam Morgan Stanley Frota 20090116 Eng Presentation Transcript

    • Latin America CEO Conference January, 2009
    • 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
    • The domestic market grew 8% from January to November 2008 Domestic Market - Variation (vs previous period) 130 125 120 115 Current 110 Period 105 Previous 100 Period 95 90 J FM A M J J A S ON D J F MA M J J A S O ND J F M AM J J A SO ND J FM AM J J A SO N 2005 2006 2007 2008 19% market growth 12% market growth 12% market growth 8% market growth Source: ANAC 3
    • The international market (among Brazilian carriers) is recovering and grew 29% … International Market - Variation (vs previous period) 200 180 160 TAM 140 Market 120 Previous 100 Period 80 60 40 J FM AM J J A SON D J F MA M J J A S OND J FM AM J J A SON D J F MA M J J A S ON 2005 2006 2007 2008 7% market growth 30% market decrease 5% market decrease 29% market growth 40% TAM’s growth 41% TAM’s growth 71% TAM’s growth 42% TAM’s growth Source: ANAC 4
    • …with higher growth anticipated for Brazilian carriers due to the unbalance in the bilateral agreements… International passenger - Million CAGR 2003 – 2007 CAGR 2003 – 2007 10% 10% 13 11.4 10.9 10.2 9.9 10 8.9 7.7 8 71.2% 66.5% 57.7% 66.9% 58.2% 57.4% 5 Intl Carriers 3 42.3% 33.5% 41.8% Brazilian 33.1% 28.8% 42.6% Carriers 0 2003 2004 2005 2006 2007 Jan-Nov 2008* Source: ANAC annual report 5 * estimates
    • …observed in many countries, as the example between Brazil and USA Weekly Frequencies Brazilian Carriers Foreign Carriers USA 126* 53 124 126* Spain 51 7 51 29 France 30 21 28 30 Germany 21 7 12 21 England 14 7 10 14 Italy 14 79 14 150 100 50 0 50 100 150 Available space on bilateral Operated by Brazilian Carriers Operated by Foreign Carriers * In July 2008 the there was an addition of 21 frequencies limited to the cities in the 6 north, northeast and central west regions of Brazil and/or Belo Horizonte
    • We are both domestic and international market leaders TAM’s Domestic Market Share* TAM’s Domestic Market Share* 52,4% 51,7% 50,4% 48,9% 48,0% 43,5% 35,8% 33,0% 2003 2004 2005 2006 2007 Jan - Nov 2008 3Q08 nov/08 TAM’s International Market Share* – Among Brazilian carriers TAM’s International Market Share* – Among Brazilian carriers 84,7% 75,8% 74,3% 67,5% 37,5% 18,8% 14,3% 12,0% 2003 2004 2005 2006 2007 Jan - Nov 2008 3Q08 nov/08 Source: ANAC 7 * RPK – Revenue passenger kilometer
    • Star Alliance On October 7, we announced our entry into the Star Alliance Star Alliance is the largest global alliance and today is composed by 22 airline companies from all over the world After the integration period, our passengers will have a better experience and several benefits as: 1,000 destinations in 170 countries 20 thousand daily frequencies Luggage to final destination Faster and easier connections More than 800 VIP lounges Possibility of accumulate and redeem points or miles in different loyalty programs 8
    • Our gross revenue increased 40%... Domestic passenger revenue Gross Revenue (R$ M) grew 38% 3,500 RPK increased 17% 3,006 3,000 40% 263 ASK increased 17% 260 2,500 International passenger revenue 2,146 813 178 2,000 grew 47% 200 1,500 554 RPK increased 38% 1,000 ASK increased 23% 1,670 1,214 500 Cargo revenue grew 30% 0 3Q07 3Q08 Other revenue grew 48% Domestic Pax International Pax Cargo Other 9
    • ...and total RASK increased 18%... 3Q08 vs 3Q08 vs 3Q08 vs 3Q08 vs R$ Cents 3Q07 2Q08 3Q08 3Q07 2Q08 3Q08 3Q07 2Q08 3Q07 2Q08 RASK total ¹ ² 9.1 18.0 20.07 18.40 17.01 3.3 18.2 18.24 17.66 15.43 RASK scheduled domestic² -1.6 p.p. 0.1 p.p. 66.5 68.1 66.3 Domestic load factor - % 5.8 18.0 28.81 27.23 24.42 Yield scheduled domestic³ 29.4 18.6 14.85 11.48 12.52 RASK scheduled international² 6.5 p.p. 9.1 p.p. 79.9 73.4 70.8 International load factor - % 18.9 5.1 18.60 15.64 17.69 Yield scheduled international³ 6.81 7.21 7.76 13.9 7.6 RASK scheduled international² (USD cents) Yield scheduled international³ -1.1 1.0 9.72 9.82 9.62 (USD cents) 1 Includes charter. cargo and Other revenues. net of taxes 10 2 Net of taxes 3 Gross of taxes
    • ...and the total CASK increased 14%... Total CASK BR GAAP - R$ cents 3Q08 vs 3Q07 20 18.91 16.54 14.3% 15 CASK 10 1.2% CASK excl-fuel 5 0 3Q07 3Q08 11
    • ...leading to an increase in spread (RASK-CASK) RASK/CASK (R$ Cents) BR GAAP 21 20.08 18.91 19 17.01 17 16.54 CASK RASK 15 3Q07 3Q08 Spread 0.47 1.18 EBIT 2.8% 5.8% Margin 12
    • However, we presented losses in our financial result 09.30.2008 09.30.2007 Financial income Interest income from financial investments 48.050 65.261 Exchange variation 482.358 122.327 Financial instrument/gains – FX 75 42.557 Financial instrument/gains – WTI* Realized 24.672 Unrealized 28.219 Other 4.818 1.310 535.301 284.346 Financial expenses Mainly Exchange variation -428.884 -146.559 impacted by Interest expense -111.115 -61.837 unrealized Financial instrument/losses – FX -1.923 -38.612 losses in WTI Financial instrument losses – WTI* Realized hedging -18.840 Unrealized -268.267 Other -7.775 -9.410 -836.804 -256.418 Financial result, net -301.503 27.928 13 *WTI West Texas Intermediate
    • Our WTI derivative transactions are contracted only for hedging purposes to protect operations... Current Situation Current Situation 1Q08 2Q08 3Q08 1Q08 2Q08 3Q08 Volume of contracted All instruments contracted 5,390 4,390 10,180 transactions (thousand of barrel) over-the-counter 102 140 101 WTI end of period (USD/barrel) No deposits of guarantees % consumption of the twelve or margin calls 41% 31% 56% ensuing months Counterparties rated as “low credit risk” by the major rating agencies (Standard & Poors, Fitch, 2008 2009 2010 2008 2009 2010 and Moody’s) Notional 2,180 7,200 800 (thousand of barrels) Fair Value (MTM) (21,941) (170,276) (17,118) 14
    • …following our policy and corporate governance Fuel Hedging Fuel Hedging Our policy is to hedge from 30% - 80% of the projected fuel consumption in a minimum of 3 and a maximum of 24 months, approved and monitored monthly by board audit and financial committee Risk Committee Risk Committee We are committed to the highest standards of corporate governance and concerned with ensuring a high control standard of our processes Composition: eight executives of the Company from different areas Responsibility: to make Management comfortable to regularly evaluate scenarios, hedge operations adopted and suggest any necessary adjustments Activities: to validate policies, approving processes and activities to manage risks involving liquidity, credit, legal, fiscal and operations Risk Office (third part) Risk Office (third part) specialized in measuring risks and suggesting protection alternatives objectives to make Management comfortable by creating “risk committees” to permanently evaluate scenarios, confirm the effectiveness of the hedge operations adopted and suggest any necessary adjustments quality assurance on MTM evaluations 15
    • In BR GAAP our operating margin was 6%... BR GAAP EBITDAR - R$ M EBIT - R$ M Lucro Líquido - R$ M 500 200 60 49 423 167 192% 35% 30 400 2% 150 6% 0 313 300 100 -30 200 -60 57 15% 15% - 4% 50 100 -90 3% -113 0 0 -120 3T07 3T08 3T07 3T08 3T07 3T08 Margin over net revenue 16
    • ...the same as in US GAAP US GAAP Net Income - R$ M EBITDAR - R$ M EBIT - R$ M 390 150 400 200 28% 186 143 66% 7% 50 306 300 150 6% -50 112 -150 200 100 -250 15% 14% 5% -350 100 50 - 16% -450 -475 -550 0 0 3Q07 3Q08 3Q07 3Q08 3Q07 3Q08 Margin over net revenue 17
    • We posted loss per share Earnings per share Earnings per share BR GAAP (R$) US GAAP (R$) 0.95 0.32 -0.75 -3.15 3Q07 3Q08 3Q07 3Q08 18
    • The main difference between BR and US GAAP is the accounting treatment of aircraft leasing Net Profit Reconciliation 52 aircrafts are reclassified as 52 aircrafts are reclassified as to US GAAP capital leases as per SFAS nº 13 capital leases as per SFAS nº 13 0 -113 -200 -400 184 -11 -475 -600 -535 -800 BR GAAP Leasing Income Others US GAAP Taxes 19
    • Our balance sheet remains solid… R$ million - BRGAAP 2008* 2007 2006 2005 2004 Cash (1) 2.105 2.607 2.453 995 297 Short-Term Debt (2) 836 1.005 363 216 204 Long-Term Debt (3) 1.752 1.345 895 425 399 Total Debt (A) = (2) + (3) 2.588 2.350 1.258 641 603 Shareholder's Equity (4) 1.420 1.527 1.449 760 191 Capitalization (B) = (3 + 4) 3.173 2.872 2.344 1.185 590 Aircraft and flight equipment leases** (5) 6.140 5.976 5.032 4.389 4.557 Total Debt Adjusted (C) = (A + 5) 8.729 8.326 6.290 5.030 5.160 Total Capitalization Adjusted (D) = (3 + 4 + 5) 9.313 8.848 7.376 5.574 5.147 Debt / Capitalization (A / B) 82% 82% 54% 54% 102% Adjusted Debt / Adjusted Capitalization (C / D) 94% 94% 85% 90% 100% Adjusted Net Debt / Adjusted Capitalization (C - 1) / (D) 71% 65% 52% 72% 94% * LTM 20 ** Aircraft and flight equipment leases of the last twelve months x 7
    • …with no major exposure to foreign currency… Balance sheet mix BR GAAP R$ 7.1billion R$ 7.1billion 100% Current 21% Current 80 41% Long term 23% 60 Long term - 6% Current Local currency 19% Current denominated 40 24% Foreign currency Long term denominated Long term 17% Permanent assets 10% 20 Shareholders’ equity Shareholders' equity Permanent assets 20% 19% 0 Assets Liabilities 21
    • …and no leverage in the short term Breakdown and maturity of financial debt BR GAAP R$ thousand 09.30.2008 Reorganization of Year Loans Lease payable Debentures Bonds Total % Total Fokker 100 fleet 2008 663.276 128.557 14.842 10.825 18.236 835.736 32% 2009 30.837 17.081 3.711 0 0 51.629 2% 2010 59.717 37.522 16.824 166.667 0 280.730 11% 2011 160.247 37.232 12.189 166.667 0 376.335 15% 2012 4.755 35.783 0 166.667 0 207.205 8% After 2012 9.203 253.014 0 0 574.290 836.507 32% 928.035 509.189 47.566 510.825 592.526 2.588.141 100% Foreign currency - denominated 837.411 509.189 47.566 0 592.526 1.986.692 77% Local currency - denominated 90.624 0 0 510.825 0 601.449 23% From the R$ 663 million of our short term loans, 92% are in foreign currency and correspond to pre delivery payments financing due 4Q08 – to be repaid with pre-committed US Ex-Im Bank financing 22
    • We intend to achieve a neutral hedging position due to the growth in our international business Revenue Approximately 50% (Passenger + Cargo) Approximately 50% of our costs of our costs 100% (including fuel) are (including fuel) are exposed to foreign 31% exposed to foreign 35% 80 currencies currencies 60 40 69% 65% International 20 (Dollar denominated) Domestic (Real denominated) 0 2Q08 3Q08 ASK proportion International 38% 38% 62% 62% Domestic Dollar exchange 20% 1.592 1.914 rate 23
    • 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 24 3 Galeão Source: ANAC 4 Santos Dumont
    • Brazilian domestic market is composed mainly by business passengers 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 17.9 Business 11% 10 0 2000 2001 2002 2003 2004 2005 2006 2007 * TAM Estimates 25
    • Opportunity for low fare passengers on off-peak flights Load Factor per hour Off Peak Peak Off Peak Peak Off Peak 75% 70 65 60 3Q07 3Q08 55 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 26
    • We are expanding our fare bundle strategy for the domestic market... 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 27
    • ...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 28
    • 2008 has been a positive year 2008 Guidance Jan - Nov 2008 Domestic market demand growth from 8% to 12% (in Market 7.8% RPK terms) 50.4% dom Maintain leadership in both domestic and international 74.3% intl markets ASK growth of Domestic 14% 14.2% 31.7% International 40% 71.4% Average load factor at approximately 70% overall TAM Reduction of 7% in total CASK ex-fuel in BR GAAP yoy -2.2%* 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 *January - September 29
    • 2009 will be a challenging year Guidance 2009 Domestic market demand growth from 5% to 9% (in RPK terms) Market Maintain leadership in both domestic and international markets ASK growth of Domestic 8% TAM International 20% Average load factor at approximately 70% overall One additional international destination or frequency in 2009 30
    • Fleet plan Total fleet In 2013 we will receive In 2013 we will receive the first 2 A350s, which the first 2 A350s, which will gradually will gradually 150 148 substitute the A330s 142 substitute the A330s 8 8 137 3 4 132 3 3 129* 4 3 4 22 4 22 3 22 3 20 18 18 117 115 113 110 107 104 2008 2009 2010 2011 2012 2013 B777 B767 Airbus wide-body Airbus narrow-body * Considering two wide body aircraft to be incorporated to our operational fleet in January 2009 - 1B777-300ER and 1 A330 31