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Deutsche Bank ConferenceDeutsche Bank Conference
New York, September 05 & 06, 2007
22
Information and ProjectionThis 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.
33
Low OperatingCosts
Low OperatingCosts
UndisputableBetter ServiceUndisputableBetter Service
CompetitivePrices
CompetitivePrices
Sustainable Strategyto Maintain Market
Leadershipand Profitability
TAM is a low cost company with better service at competitive prices
44
Previousperiod
Currentperiod
J FM AM J J A SOND J FM AM J J A SOND J FM AM J J A SOND J FMAM J J8085
9095
100
105110115
120125
130
Domestic Market - Variation
2004
Source: ANAC
Accum. market growth200612%
The domestic market growth still strong in 2007, reaching 13% in the first 7 months of the year
Accum. market growth200519%
Accum. market growth200412%
Accum. market growth200713%
200720062005
55
33,0%35,8%
47,8% 49,3%43,5%
2003 2004 2005 2006 Jan - Jul
TAM 50,6%
GOL 36,9%
BRA 4,1%
Varig 2,7%
Other 5,6%
Domestic Market Share - July/07
We have been domestic market leaders since 2003, ending July with 49,3%
Domestic Market Share - July/07
Domestic Market Share (RPK’s)Domestic Market Share (RPK’s)
Source: ANAC
TAM 49,6%
GOL 40,1%
BRA 2,7%
Varig 3,8%
Other 3,7%
Domestic Market Share – 2Q07Domestic Market Share – 2Q07
66
Previousperiod
Market
TAM
J F MA M J J AS OND J FMA M J J A S ON D J F MAM J J A SOND J FMA M J J40
60
80
100
120
140
160
180
200
International Market - Variation(vs previous year)
Source: ANAC
The international market (among Brazilian carriers) is recuperating
Accum. market growth20048%
Accum. market growth20057%
Accum. market
decrease 2006 30%
Accum. marketdecrease 2007
24%
Acum TAM 200641%
Acum TAM 200775%
Acum TAM 200540%
Acum. TAM 200430%
2004 20072005 2006
77
12,00% 14,3%
37,3%
65,6%
18,8%
2003 2004 2005 2006 Jan - Jul
TAM 64,3%
GOL 15,6%
Varig 14,2%
Other 5,8%
International Market Share– July/07International Market Share– July/07
International Market ShareInternational Market Share
Since July 2006, we are international market leaders among the Brazilian companies
Source: ANAC
TAM 70,8%
Varig10,7%
GOL 13,3%
Other5,2%
International Market Share – 2Q07International Market Share – 2Q07
88
In the past 4 years, we have improved every operational metric…
No. take-offs (K)
Load Factor- LF Dom- LF Int
Market Share Dom
MS/CS Domestic
Aircraft Utilization(block hrs/day)- Narrow bodies- Wide bodies
20032003
76147
61%58%71%33%
0.97
7.6
5.87.3
TAM S.A. 20042004
76151
66%64%71%36%
0.98
9.0
6.912.6
20052005
81210
71%70%73%44%
1.00
11.4
10.214.2
20062006
92245
74%73%76%48%
1.02
12.7
12.415.1
No. operating aircraft
20022002
102219
55%53%61%35%
0.94
9.5
9.210.0
1H071H07
101130
71%71%70%49%
1.03
12.8
12.415.7
99
…resulting in an outstanding improvement in our financial metrics
Net revenues
EBITDAR
% EBITDAR
EBIT
% EBIT
Net Income
% NetIncome
20022002
3,429
475
13.9%
(236)
-6.9%
(606)
-17.7%
20032003
3,667
775
21.1%
(32)
-0.9%
174
4.7%
20042004
4,520
1,038
23.0%
294
6.5%
342
7.6%
20052005
5,649
1,140
20.2%
426
7.5%
187
3.3%
20062006
7,345
1,817
24.7%
996
13.6%
556
7.6%
BR GAAP 1H071H07
3,322
593
15.6%
120
3.2%
31
0.8%
1010
154
113
329
1,228
156
196
531
1,170
2Q06 2Q07
1,824
2,054
0
500
1,000
1,500
2,000
Gross Revenues (R$ M)
Dom.Pax
Int.Pax
CargoOther
13%
Domestic passenger revenue decreased of 5%
RPK growth 21%
ASK growth 26%
International passenger revenue growth 61%
RPK growth 83%
ASK growth 98%
Cargo revenue growth 74%
Other revenue growth 2%
Total revenue grew 13%...
1111
2Q062Q06
21.5
20.6
74.5
29.1
15.3
74.9
20.4
9.4
1Q071Q07
16.7
14.5
69.4
22.0
14.1
71.3
19.8
9.7
2Q072Q07
16.8
15.3
71.9
22.3
12.3
69.1
17.8
9.3
2Q06 vs 2Q07
2Q06 vs 2Q07
-21.8%
-26.0%
-2.6 p.p.
-23.6%
-19.6%
-5.8 p.p.
-12.7%
-1.9%
1Q07 vs 2Q07
1Q07 vs 2Q07
0.5%
4.9%
2.5 p.p.
1.1%
-12.6%
-2.2 p.p.
-9.9%
-4.0%
…while total RASK decreased 21.8%, mainly due to the decrease in the domestic yields
RASK Total1
RASK Scheduled Domestic2
LF Scheduled Domestic
Yield ScheduledDomestic3
RASK Scheduled International2
LF ScheduledInternational
Yield ScheduledInternational3 (em R$)Yield ScheduledInternational3 (em USD)
1 Includes charter, cargo and Other revenues, net of taxes2 Net of taxes3 Gross of taxes
1212
CASKex-fuel
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07
17.4318.69 18.43
16.9815.92 16.52
0
5
10
15
20
Total CASK (BR GAAP - R$ cents)
2Q06 vs 2Q07
-10.8%
-11.6%
Our CASK decreased 11.6% compared to 2Q06
1313
RASKCASK
2002 2003 2004 2005 2006 1Q07 2Q0715
20
25
RASK/CASK (R$ Cents)BR GAAP
EBITMargin
Spread
-7.1%
-1.1
-0.9%
-0.2
6.5%
1.4
7.5%
1.5
13.6%
2.8
4.8%
0.9
1.7%
0.3
The decline in CASK was not enough to compensate the RASK, leading to a reduction of our spread…
1414
2Q06 2Q07
436
252
0
100
200
300
400
500
EBITDAR(BR GAAP - R$ M)
2Q06 2Q07
225
33
0
50
100
150
200
250
300
EBIT(BR GAAP - R$ M)
Margin over Net Revenue
2Q06 2Q07
97
-29
-50
-25
0
25
50
75
100
Net Income(BR GAAP - R$ M)
-42%
-85%
-129%
25%
13%13%
2%
-1%
6%
…reducing our margins in BR GAAP…
1515
2Q06 2Q07
400
239
0
100
200
300
400
EBITDAR(US GAAP - R$ M)
2Q06 2Q07
242
69
0
50
100
150
200
250
300
EBIT(US GAAP - R$ M)
23%
14%
3%
12%
2Q06 2Q07
146
69
0
40
80
120
160
200
Net Income(US GAAP - R$ M)
4%
-40%
8%
...and US GAAP
Margin over Net Revenue
-53%-72%
1616
BR GAAP Leasing IncomeTaxes
Others US GAAP
-28.6
145.8
-50.3
2.3 69.2
-50
0
50
100
150
Net Profit Reconciliationto US GAAP 40 aircrafts are reclassified as
capital leases as per SFAS nº 1340 aircrafts are reclassified as
capital leases as per SFAS nº 13
The main difference between BR and US GAAP is the accounting treatment of aircraft leasing
1717
2Q06 2Q07
0.64
-0.19
Earnings per shareBR GAAP (R$)
2Q06 2Q07
0.97
0.53
Earnings per shareUS GAAP (R$)
Our earnings per share decreased
-130%
-45%
1818
Even with the appreciation of the Real, revenues in foreign currencies increased proportionally
22%
78%
33%
67%
34%
66%
2Q06 1Q07 2Q07
100% 100% 100%
0
20
40
60
80
100%
Revenues(Passenger + Cargo)
DomesticInternational
Dollarexchangerate
R$ 2.164 R$ 2.050 R$ 1.926
Approximately 50% of our costs
(including fuel) are exposed to foreign
currencies
Approximately 50% of our costs
(including fuel) are exposed to foreign
currencies
1919
Since our second public share offer, our share had an increase in valuation of 25%
Accumulated variation since March 10, 2006
0,5
1,0
1,5
2,0
10-mar-06 31-jul-07
TAMM4 IBOVESPA DOW JONES ADR TAM
2020
Flight 3054
Focus on providing full support to victims’ families, authorities and employees
Family Assistance
Activation of a company family assistance program
Deployment of specialized teams to sites where assistance is needed
Establishment of two offices, jointly with Unibanco AIG, in São Paulo and Porto Alegre, for individual services to family members to handle compensation issues
Establishment of a website for the exclusive use and safe access by family members
Disclosure of information to the public
Full cooperation with regulatory and investigative authorities
2121
Structure of legal authorities involved in the industry
AIR FORCECOMMAND
DECEAAIR TRAFFIC/ SPACE
CONTROLCivil & Military Aircraft
NAVYCOMMAND
ARMYCOMMAND
CENIPAAccident Investigation and Prevention Board
Air Traffic Control
Air Traffic Control
A&I Investigation
A&I Investigation
National Civil Aviation Agency
MINISTRY OF MINISTRY OF DEFENSEDEFENSE
PRESIDENTPRESIDENT
CONACNational Civil
Aviation Council
DesignManufacturing
OperationsMaintenance
LicensingAirportsRegister
FacilitationSecurity
Air ServicesIntl. Air Navigation
ErgonomicsHuman Factors
DesignManufacturing
OperationsMaintenance
LicensingAirportsRegister
FacilitationSecurity
Air ServicesIntl. Air Navigation
ErgonomicsHuman Factors
INFRAERO
2222
CONAC announced guidelines for future implementation (1/2)
Resolution no. 6, dated July 20, 2007, states that:By ANAC
ANAC´s supervisory duties will be enhanced in order to assureunrestricted support to the victim´s family members
In 60 days, the take-off and landing rights at Congonhas will bereviewed, restricting them to point-to-point, direct flights
New international flights will be allocated outside the São Paulo terminal (Guarulhos and Congonhas)
No charter flights are allowed out of Congonhas
A permanent contingency plan for aircraft and crew must beestablished
2323
CONAC announced guidelines for future implementation (2/2)
By ANAC and Air Force Command
Further restrict the use of Congonhas for General Aviation purposes
In 90 days, submit a study on possible locations for a new aiport site in São Paulo
By Infraero
In 90 days, submit a study for expansion and redesigning of airports in São Paulo
Seek clearance from the courts for spaces currently occupied bycompaniese under bankrupcy or reorganization
Promptly adopt redistribution of spaces to permit accomodation of a larger number of passengers at Guarulhos
2424
Average domestic market share above 50%Average domestic load factor at approximately 70%Aircraft utilization per day (block hour) higher than 13 hoursReduction of 7% in total CASK ex-fuel in BR GAAP yoyOpportunity in the international market
Third frequency to ParisInauguration of two new international long haul frequencies
Market demand growth from 10% to 15% (in RPK terms)
Guidance 2007Guidance 2007
TAMTAM
MarketMarket12.6%*
1S07
Our expectations for 2007, disclosed in December 2006, are still the same
1S07
• Since January• Milan (March),
Frankfurt and Madrid (December)
49.3%*
72.1%*12.8
9.2%
* Accumulated from January to July
2525
...maintaining our fleet plan
3
15
87
6
4
16
98
4
20
101
4
20
107
6
20
110
2007 2008 2009 2010 2011
111118
125131
136
0
50
100
150
Fleet Plan
F100
Airbusnarrow-body
Airbuswide-body
MD11B777
2626
Increased block hoursInsourcing of stationsIncreased direct website sales (110% increase 1S07 vs 1S06)Ongoing sourcing improvementsOptimized GDS costsIncreased use of technology
New check-in procedures, including higher use of self check-in totems and web check-in
Additional staff for directing passengers
Zone boarding
Revised onboard services
New international call center
Increased “dispatchability”with Operational Centre
Superior Customer Service
Superior Customer Service Increase RevenuesIncrease Revenues Reduce CostsReduce Costs
We continue to pursue our strategy, already with strong deliveries in 2007
Increase in international revenues (70% increase with a 88% ASK increase, in 1S07 vs 1S06)
Increase in international cargo (170% increase 1S07 vs 1S06)
Initial development of new customer base with popularized methods of payment
2727
TAM: continuing to grow, with solid fundamentals
Focus on profitability and cost reduction
Sustainable competitive advantage
Experienced management team
delivering solid results
“Best in Class” service and brand recognition
Undisputed leader in the domestic and
international market
Outstanding growth history and prospects
2828