4th UBS Latin America
Fixed Income Conference

    Miami, May 17/18, 2007
TAM is a low cost company with better service at
competitive prices


                         Undisputable
              ...
The domestic market growth still strong in 2007,
 reaching 14% in the first 4 months of the year
 Domestic Market - Variat...
We have been domestic market leaders since 2003,
 ending April with 50,7%
                                            Dome...
The international market (among the Brazilian carriers)
 has been diminishing…
International Market - Variation
          ...
Since July 2006, we are international market leaders
 among the Brazilian companies
                                      ...
1Q07 Highlights                                                          (1/2)
Aircraft delivery
    5 new A320, 1 new A31...
1Q07 Highlights                                                          (2/2)
Increase in operational efficiency
    Incr...
Strong revenue growth quarter over quarter
                                                Domestic passenger revenue grow...
Our price differential to the second player decreased to
5%
Yield scheduled domestic
R$ Cents
             35



         ...
Our total RASK reduced 15%, mainly because of the
domestic yield decrease of 29%
                                         ...
...and our CASK decreased 8.7% compared to 1Q06

Total CASK (BR GAAP - R$ cents)
                                         ...
The strong decline in revenue decreased the spread
(RASK – CASK)…
RASK/CASK (R$ Cents)
BR GAAP

         25




         2...
…reducing our margins in BR GAAP…
                                                            Net Income
                 ...
...and US GAAP

                                   EBIT
  EBITDAR                                                    Net I...
The main difference between BR and US GAAP is the
accounting treatment of aircraft leasing
Net Profit Reconciliation
     ...
Our earnings per share decreased

Earnings per share           Earnings per share
BR GAAP (R$)                 US GAAP (R$...
Our foreign revenues increased, reducing the
mismatch in currencies
                                          Approximatel...
Since our second public share offer, our share had an
increase in valuation of 36%
              Accumulated variation sin...
Our expectations for 2007, disclosed in December
   2006, are still the same
                                            G...
In 2007, we will be expanding both frequencies and
destinations
       Domestic Market 2007                        Interna...
Due to international market opportunity, we are
strengthening our international partnerships...
                Code-share...
...increasing our fleet in 3 wide-body aircraft in 2007 to
long haul destinations
     Total Fleet


            150
     ...
Our cost targets are aggressive, but the roadmap is
already laid out

  Fleet and network             Distribution costs  ...
We continue among the most profitable companies in
         the world
                                                 16....
Information and Projection
  This notice may contain estimates for future events. These estimates merely reflect the expec...
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4th UBS Latin America Fixed Income Conference

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4th UBS Latin America Fixed Income Conference

  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 Undisputable Better Service Sustainable Strategy to Maintain Market Leadership and Profitability Low Operating Competitive Costs Prices 2 2
  3. 3. The domestic market growth still strong in 2007, reaching 14% in the first 4 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 MAM J J A S O ND J F MAM J J A S OND J F MA M J J A S OND J F MA 2004 2005 2006 2007 Source: ANAC 3 3
  4. 4. We have been domestic market leaders since 2003, ending April with 50,7% Domestic Market Share (RPK’s) Domestic Market Share (RPK’s) 49,0% 47,8% 43,5% 35,8% 33,0% 2003 2004 2005 2006 Jan - Apr Domestic Market Share – 1Q07 Domestic Market Share - Apr/07 Domestic Market Share – 1Q07 Domestic Market Share - Apr/07 BRA Other Other 5,1% 2,6% 3,3% BRA 3,4% Varig 4,3% Varig 4,6% TAM TAM 48,5% 50,70% GOL 39,1% GOL 38,5% Source: ANAC 4 4
  5. 5. The international market (among the Brazilian carriers) has been diminishing… International Market - Variation TAM (vs previous year) 180 Acum TAM 2005 Acum TAM 2006 160 ~40% ~41% Acum TAM 2007 Acum. TAM 2004 ~78% ~30% 140 120 Previous 100 period Accum. market growth Accum. market growth 80 2004 ~8% 2005 ~7% Accum. Market 60 market decrease 2006 Accum. market ~30% decrease 2007 ~39% 40 J F MAM J J A S OND J F MAM J J A S ON D J F MA M J J A S OND J F MA 2004 2005 2006 2007 Source: ANAC 5 5
  6. 6. Since July 2006, we are international market leaders among the Brazilian companies International Market Share International Market Share 63,5% 37,3% 18,8% 14,3% 12,00% 2003 2004 2005 2006 Jan - Apr International Market Share – 1Q07 International Market Share– Apr/07 International Market Share – 1Q07 International Market Share– Apr/07 Varig Other 9,3% Varig 6,5% Other 12,1% 9,1% GOL 14,5% GOL TAM 17,9% 60,9% TAM 69,7% Source: ANAC 6 6
  7. 7. 1Q07 Highlights (1/2) Aircraft delivery 5 new A320, 1 new A319, incorporation of 3 MD11 and redelivery of 3 F100 Strengthening of our network International market: 3rd daily frequency to Paris 2nd daily frequency to Santiago Daily flight to Milan Daily flight to Cordoba Domestic market: New flight to Barreiras e Vitória da Conquista (Bahia) through alliances with regional carriers Strengthening operations in Northwestern and Southern of Brazil Increase in the flights from Rio de Janeiro to Northwestern and Southern of Brazil 7 7
  8. 8. 1Q07 Highlights (2/2) Increase in operational efficiency Increase in block hours per aircraft/day by 4.8% yoy, from 12.4 hours to 13.0 hours Average load factor in 1Q07 of 70.8% (yoy decrease of 1.7 p.p.) Entered into IOSA Registry (IATA Operational Safety Audit Registration ) Finalized process to obtain the Sarbanes-Oxley Act (SOX) certification Offering of US$300 million 7.375% Senior Notes due 2017 Reelected the airline with the newest fleet in Brazil, according with Airplane Revue Magazine Elected Best Airline of the Year, according with Airplane Revue magazine 8 8
  9. 9. Strong revenue growth quarter over quarter Domestic passenger revenue growth 8% Gross Revenues (R$ M) RPK growth 22% 15% 2,000 1,913 ASK growth 22% 158 1,664 International passenger revenue 157 86 growth 76% 103 1,500 506 RPK growth 64% 287 ASK growth 78% 1,000 Cargo revenue growth 52% Other revenue growth 85% 1,188 1,093 500 Other Cargo Increase of sales of Loyalty Int. Program points and expired tickets Pax Dom. compensated by the sub-leasing Pax 0 1Q06 1Q07 9 9
  10. 10. Our price differential to the second player decreased to 5% Yield scheduled domestic R$ Cents 35 30 25 TAM GOL 20 15 2001 2002 2003 2004 2005 2006 1Q07 GAP 60% 30% 18% 13% 15% 14% 5% Note: Gol’s yield da GOL grossed up 1.05x to include taxes 10 10
  11. 11. Our total RASK reduced 15%, mainly because of the 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 77.5 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$) Yield Scheduled 8.5 10.6 9.6 13.6% -8.7% International3 (em USD) 1 Includes charter, cargo and Other revenues, net of taxes 11 2 Net of taxes 11 3 Gross of taxes
  12. 12. ...and our CASK decreased 8.7% compared to 1Q06 Total CASK (BR GAAP - R$ cents) 1Q06 vs 1Q07 20 18.69 18.43 17.43 16.98 15.92 15 -8.7% 10 CASK -7.5% 5 ex-fuel 0 1Q06 2Q06 3Q06 4Q06 1Q07 12 12
  13. 13. The strong 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 13 13
  14. 14. …reducing our margins in BR GAAP… Net Income EBIT EBITDAR (BR GAAP - R$ M) (BR GAAP - R$ M) (BR GAAP - R$ M) -9% 200 400 -53% 150 189 376 -53% 340 127 150 300 24% 100 200 100 88 12% 8% 59 19% 50 5% 100 50 3% 0 0 0 1Q06 1Q07 1Q06 1Q07 1Q06 1Q07 Margin over Net Revenue 14 14
  15. 15. ...and US GAAP EBIT EBITDAR Net Income (US GAAP - R$ M) (US GAAP - R$ M) (US GAAP - R$ M) -49% -11% 300 400 280 268 373 -39% 331 240 250 238 300 200 24% 200 17% 160 15% 138 146 150 200 18% 120 100 80 100 50 40 8% 8% 0 0 0 1Q06 1Q07 1Q06 1Q07 1Q06 1Q07 Margin over Net Revenue 15 15
  16. 16. 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 16 16
  17. 17. Our earnings per share 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 17 17
  18. 18. 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 18 18
  19. 19. Since our second public share offer, our share had an increase in valuation of 36% Accumulated variation since March 10, 2006 2,0 1,5 1,0 0,5 10-mar-06 14-may-2007 TAMM4 IBOVESPA DOW JONES ADR TAM 19 19
  20. 20. Our expectations for 2007, disclosed in December 2006, are still the same Guidance 2007 1Q07 Market demand growth from 10% to 15% (in RPK 13.8%* Market terms) 49.0%* Average domestic market share above 50% Average domestic load factor at approximately 70% 72.1%* 13,0 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 – Apr Accumulated 20 20
  21. 21. In 2007, we will be expanding both frequencies and destinations 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 21 21
  22. 22. Due to international market opportunity, we are strengthening our international partnerships... Code-share with TAP staring operation on July: 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. Linkage of the companies' mileage programs, TAM's Fidelidade and TAP's Victoria Commercial alliance with LAN to unlimited seats sell to South America: Brazil, Chile, Argentina, Peru, Venezuela Linkage of the companies' mileage programs, TAM's Fidelidade and LAN PASS 22 22
  23. 23. ...increasing our fleet in 3 wide-body aircraft in 2007 to long haul destinations 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 23 23
  24. 24. 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 % In implementation on offpeak flights Implemented 24 24
  25. 25. 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) 25 25
  26. 26. 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. 26 26

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