4th UBS Latin America Fixed Income Conference Miami, May 17/18, 2007
TAM is a low cost company with better service at competitive prices Low Operating Costs Undisputable Better Service Compet...
The domestic market growth still strong in 2007, reaching 14% in the first 4 months of the year 2004 Source: ANAC Accum. m...
We have been domestic market leaders since 2003, ending April with 50,7% Domestic Market Share - Apr/07 Domestic Market Sh...
The international market (among the Brazilian carriers) has been diminishing… Source: ANAC Accum. market growth   2004 ~8%...
Since July 2006, we are international market leaders among the Brazilian companies International Market Share– Apr/07 Inte...
1Q07 Highlights  (1/2) <ul><li>Aircraft delivery </li></ul><ul><ul><li>5 new A320, 1 new A319, incorporation of 3 MD11 and...
1Q07 Highlights  (2/2) <ul><li>Increase in operational efficiency </li></ul><ul><ul><li>Increase in block hours per aircra...
Strong revenue growth quarter over quarter 15% <ul><li>Domestic passenger revenue growth 8% </li></ul><ul><ul><li>RPK grow...
Our price differential to the second player decreased to 5% Note: Gol’s yield da GOL grossed up 1.05x to include taxes
Our total RASK reduced 15%, mainly because of the domestic yield decrease of 29% 1Q 0 6 19.8 20. 2 68. 4 31. 0 1 4 .3 7 7 ...
...and our CASK decreased 8.7% compared to 1Q06
The strong decline in revenue decreased the spread (RASK – CASK)…
… reducing our margins in BR GAAP… Margin over Net Revenue -9% -53% -53% 24% 19% 12% 5% 3% 8%
...and US GAAP 24% 15% 8% 18% 8% -11% 17% Margin over Net Revenue -49% -39%
The main difference between BR and US GAAP is the accounting treatment of aircraft leasing 39 aircrafts are reclassified a...
Our earnings per share decreased -54% -49%
Our foreign revenues increased, reducing the mismatch in currencies Approximately 50% of our costs (including fuel) are ex...
Since our second public share offer, our share had an increase in valuation of 36%
Our expectations for 2007, disclosed in December 2006, are still the same <ul><li>Average domestic market share above 50% ...
In 2007, we will be expanding both frequencies and destinations Domestic Market 2007 International Market 2007 <ul><li>~30...
Due to international market opportunity, we are strengthening our international partnerships... <ul><li>Code-share with TA...
...increasing our fleet in 3 wide-body aircraft in 2007 to long haul destinations
Our cost targets are aggressive, but the roadmap is already laid out Fleet and network Distribution costs Overhead <ul><li...
2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 8.0 13.0 18.0 23.0 28.0 33.0 38.0 2006 EBITDAR Margin (%) Cash Costs ($ cents/ASK) We ...
Information and Projection <ul><li>This notice may contain estimates for future events. These estimates merely reflect the...
1Q07 Results Presentation São Paulo, May 10, 2007
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070515 Ubs Miami

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070515 Ubs Miami

  1. 1. 4th UBS Latin America Fixed Income Conference Miami, May 17/18, 2007
  2. 2. TAM is a low cost company with better service at competitive prices Low Operating Costs Undisputable Better Service Competitive Prices Sustainable Strategy to Maintain Market Leadership and Profitability
  3. 3. The domestic market growth still strong in 2007, reaching 14% in the first 4 months of the year 2004 Source: ANAC Accum. market growth 2006 ~12% Accum. market growth 2005 ~19% Accum. market growth 2004 ~12% Accum. market growth 2007 ~14% 2005 2006 2007
  4. 4. We have been domestic market leaders since 2003, ending April with 50,7% Domestic Market Share - Apr/07 Domestic Market Share (RPK’s) Source: ANAC Domestic Market Share – 1Q07
  5. 5. The international market (among the Brazilian carriers) has been diminishing… Source: ANAC Accum. market growth 2004 ~8% Accum. market growth 2005 ~7% Accum. market decrease 2006 ~30% 2004 2005 2006 2007 Accum. market decrease 2007 ~39% Acum TAM 2006 ~41% Acum TAM 2007 ~78% Acum TAM 2005 ~40% Acum. TAM 2004 ~30%
  6. 6. Since July 2006, we are international market leaders among the Brazilian companies International Market Share– Apr/07 International Market Share Source: ANAC International Market Share – 1Q07
  7. 7. 1Q07 Highlights (1/2) <ul><li>Aircraft delivery </li></ul><ul><ul><li>5 new A320, 1 new A319, incorporation of 3 MD11 and redelivery of 3 F100 </li></ul></ul><ul><li>Strengthening of our network </li></ul><ul><ul><li>International market: </li></ul></ul><ul><ul><ul><li>3 rd daily frequency to Paris </li></ul></ul></ul><ul><ul><ul><li>2 nd daily frequency to Santiago </li></ul></ul></ul><ul><ul><ul><li>Daily flight to Milan </li></ul></ul></ul><ul><ul><ul><li>Daily flight to Cordoba </li></ul></ul></ul><ul><ul><li>Domestic market: </li></ul></ul><ul><ul><ul><li>New flight to Barreiras e Vitória da Conquista (Bahia) through alliances with regional carriers </li></ul></ul></ul><ul><ul><ul><li>Strengthening operations in Northwestern and Southern of Brazil </li></ul></ul></ul><ul><ul><ul><li>Increase in the flights from Rio de Janeiro to Northwestern and Southern of Brazil </li></ul></ul></ul>
  8. 8. 1Q07 Highlights (2/2) <ul><li>Increase in operational efficiency </li></ul><ul><ul><li>Increase in block hours per aircraft/day by 4.8% yoy, from 12.4 hours to 13.0 hours </li></ul></ul><ul><ul><li>Average load factor in 1Q07 of 70.8% (yoy decrease of 1.7 p.p.) </li></ul></ul><ul><li>Entered into IOSA Registry (IATA Operational Safety Audit Registration ) </li></ul><ul><li>Finalized process to obtain the Sarbanes-Oxley Act (SOX) certification </li></ul><ul><li>Offering of US$300 million 7.375% Senior Notes due 2017 </li></ul><ul><li>Reelected the airline with the newest fleet in Brazil, according with Airplane Revue Magazine </li></ul><ul><li>Elected Best Airline of the Year, according with Airplane Revue magazine </li></ul>
  9. 9. Strong revenue growth quarter over quarter 15% <ul><li>Domestic passenger revenue growth 8% </li></ul><ul><ul><li>RPK growth 22% </li></ul></ul><ul><ul><li>ASK growth 22% </li></ul></ul><ul><li>International passenger revenue growth 76% </li></ul><ul><ul><li>RPK growth 64% </li></ul></ul><ul><ul><li>ASK growth 78% </li></ul></ul><ul><li>Cargo revenue growth 52% </li></ul><ul><li>Other revenue growth 85% </li></ul><ul><ul><li>Increase of sales of Loyalty Program points and expired tickets compensated by the sub-leasing </li></ul></ul>
  10. 10. Our price differential to the second player decreased to 5% Note: Gol’s yield da GOL grossed up 1.05x to include taxes
  11. 11. Our total RASK reduced 15%, mainly because of the domestic yield decrease of 29% 1Q 0 6 19.8 20. 2 68. 4 31. 0 1 4 .3 7 7 . 5 18 . 5 8. 5 4Q 06 19 . 3 17 . 5 69 . 7 26 .4 1 6 . 6 7 3 . 7 2 2 . 6 10. 6 1Q 0 7 1 6 . 7 1 4 .5 69. 3 22.0 1 4 . 1 7 1 . 3 19.8 9 . 6 1Q 0 6 vs 1Q 0 7 - 15 . 4 % -28.2% 0 . 8 p.p. -29.0% -1.5 % - 6 . 2 p.p. 7.2% 13.6 % 4Q 06 vs 1Q 0 7 -13. 3 % -17.1% - 0 . 3 p.p. -16.7% -15.2% - 2 . 4 p.p. - 12 . 4 % - 8 . 7 % <ul><li>RASK Total 1 </li></ul><ul><li>RASK Scheduled Domestic 2 </li></ul><ul><ul><li>LF Scheduled Domestic </li></ul></ul><ul><ul><li>Yield Scheduled Domestic 3 </li></ul></ul><ul><li>RASK Scheduled International 2 </li></ul><ul><ul><li>LF Scheduled International </li></ul></ul><ul><ul><li>Yield Scheduled International 3 (em R$) </li></ul></ul><ul><ul><li>Yield Scheduled International 3 (em USD) </li></ul></ul>1 Includes charter, cargo and Other revenues, net of taxes 2 Net of taxes 3 Gross of taxes
  12. 12. ...and our CASK decreased 8.7% compared to 1Q06
  13. 13. The strong decline in revenue decreased the spread (RASK – CASK)…
  14. 14. … reducing our margins in BR GAAP… Margin over Net Revenue -9% -53% -53% 24% 19% 12% 5% 3% 8%
  15. 15. ...and US GAAP 24% 15% 8% 18% 8% -11% 17% Margin over Net Revenue -49% -39%
  16. 16. The main difference between BR and US GAAP is the accounting treatment of aircraft leasing 39 aircrafts are reclassified as capital leases as per SFAS nº 13
  17. 17. Our earnings per share decreased -54% -49%
  18. 18. Our foreign revenues increased, reducing the mismatch in currencies Approximately 50% of our costs (including fuel) are exposed to foreign currencies
  19. 19. Since our second public share offer, our share had an increase in valuation of 36%
  20. 20. Our expectations for 2007, disclosed in December 2006, are still the same <ul><li>Average domestic market share above 50% </li></ul><ul><li>Average domestic load factor at approximately 70% </li></ul><ul><li>Aircraft utilization per day (block hour) higher than 13 hours </li></ul><ul><li>Reduction of 7% in total CASK ex-fuel in BR GAAP yoy </li></ul><ul><li>Opportunity in the international market </li></ul><ul><ul><li>Third frequency to Paris </li></ul></ul><ul><ul><li>Inauguration of two new international long haul frequencies </li></ul></ul><ul><li>Market demand growth from 10% to 15% (in RPK terms) </li></ul>Guidance 2007 TAM Market 13.8%* 1Q07 <ul><li>Since January </li></ul><ul><li>Milan since March </li></ul>49.0%* 72.1%* 13,0 7.5% * Jan – Apr Accumulated
  21. 21. In 2007, we will be expanding both frequencies and destinations Domestic Market 2007 International Market 2007 <ul><li>~30% increase in ASKs </li></ul><ul><li>At least an additional 3 destinations </li></ul><ul><li>Strengthening of international gateways for domestic market </li></ul><ul><ul><li>Guarulhos </li></ul></ul><ul><ul><li>Galeão </li></ul></ul><ul><li>Increasing of frequency on main domestic markets </li></ul><ul><ul><li>Brasília </li></ul></ul><ul><ul><li>Congonhas </li></ul></ul><ul><ul><li>Confins </li></ul></ul><ul><li>Implementing overhub flights: new city-pairs </li></ul><ul><li>~60-70% increase in ASKs </li></ul><ul><li>Additional daily frequency to Paris beginning in January </li></ul><ul><li>New flight to Milan in 1S07 </li></ul><ul><li>Additional longhaul frequency or destination to be disclosed </li></ul><ul><li>Strengthening of Latin American presence, both frequencies and destinations </li></ul>
  22. 22. Due to international market opportunity, we are strengthening our international partnerships... <ul><li>Code-share with TAP staring operation on July: </li></ul><ul><ul><ul><li>Flying to the following destinations in Portugal: Lisbon, Porto, Faro, Funchal, Horta, Pico, Ponta Delgada, Porto Santo and Terceira; departing from the following destinations in Brazil: Rio de Janeiro, São Paulo and Brasilia.   </li></ul></ul></ul><ul><ul><ul><li>Linkage of the companies' mileage programs, TAM's Fidelidade and TAP's Victoria </li></ul></ul></ul><ul><li>Commercial alliance with LAN </li></ul><ul><ul><ul><li>to unlimited seats sell to South America: Brazil, Chile, Argentina, Peru, Venezuela </li></ul></ul></ul><ul><ul><ul><li>Linkage of the companies ' mileage programs, TAM's Fidelidade and LAN PASS </li></ul></ul></ul>
  23. 23. ...increasing our fleet in 3 wide-body aircraft in 2007 to long haul destinations
  24. 24. Our cost targets are aggressive, but the roadmap is already laid out Fleet and network Distribution costs Overhead <ul><li>Increase of block hours to over 13 hours per day per aircraft in 2007 </li></ul><ul><li>6 extra seats in the A319/320 fleet </li></ul><ul><li>Increase in direct sales through: </li></ul><ul><ul><li>Site improvement </li></ul></ul><ul><ul><li>Fare bundles </li></ul></ul><ul><ul><li>Call center outsourcing </li></ul></ul><ul><ul><li>New means of payment </li></ul></ul><ul><li>Insourcing of representatives </li></ul><ul><li>Adjusting indirect sales commissions to higher % on offpeak flights </li></ul><ul><li>Outsourcing of non-core activities </li></ul><ul><li>Redefinition of service standards </li></ul><ul><li>Review of spans&layers in the hierarquy </li></ul><ul><li>Implementation of new automated processes </li></ul><ul><li>Improved sourcing capabilities </li></ul>In implementation Implemented
  25. 25. 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 8.0 13.0 18.0 23.0 28.0 33.0 38.0 2006 EBITDAR Margin (%) Cash Costs ($ cents/ASK) We continue among the most profitable companies in the world Source: Public Reports of December 31, 2006 (except for Air Asia and Malaysia, which refer to 2005 figures)
  26. 26. Information and Projection <ul><li>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. </li></ul><ul><li>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. </li></ul><ul><li>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. </li></ul>
  27. 27. 1Q07 Results Presentation São Paulo, May 10, 2007

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