080605 calyon
TRANSCRIPT
Calyon Airline Conference 2008
June 5, 2008
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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.
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Previousperiod
Currentperiod
J F MAM J J A SOND J F MAM J J A SOND J F MAM J J A SOND J F MA80859095
100105110115120125130
Domestic Market - Variation(vs previous period)
The domestic market grew 10% from January to April 2008
Source: ANAC
Accum. market growth 2006
12%
Accum. market growth 2005
19%
Accum. market growth 2007
12%
Accum. market growth 2008
10%
2007
2005
2006
2008
4
The international market (among Brazilian carriers) is recovering, and grew 44% …
Previousperiod
MarketTAM
J F MA M J J A S O N D J F MA M J J A S O N D J F MA M J J A S O N D J F MA406080
100120140160180
200
International Market - Variation(vs previous period)
Source: ANAC
Accum. Marketgrowth 2008
44%
Acum TAM 200641%
Acum TAM 2007 71%
Acum TAM 200540%
Acum TAM 2008 52%
Accum. market growth 2005
7%
Accum. market decrease 2006
30%
Accum. market decrease 2007
5%
2007
2005
2006
2008
5
…with higher growth anticipated for Brazilian carriers due to the unbalance in the bilateral agreements
53.3%
46.7%
53.8%
46.2%
71.5%
28.5%
65.0%
35.0%
2004 2005 2006 2007*0
20
40
60
80
100%
% international traffic
Braziliancarriers
Intlcarriers
* estimates
6
We are both domestic and international market leaders
33,0%35,8%
48,0% 48,9% 49,3% 50,0%47,1%
43,5%
2003 2004 2005 2006 2007 Jan - Apr 2008 1Q08 Apr/08
TAM’s Domestic Market Share*
Source: ANAC* RPK – Revenue passenger kilometer
12,0% 14,3%
37,5%
67,5% 68,8% 67,7%72,4%
18,8%
2003 2004 2005 2006 2007 Jan - Apr 2008 1Q08 Apr/08
TAM’s International Market Share* – Among Brazilian carriers
7
158157
506
1,093
199214
613
1,321
1Q07 1Q08
1,913
2,347
0
500
1,000
1,500
2,000
2,500
Gross Revenue (R$ M)
Dom.Pax
Int.Pax
CargoOthers
Domestic passenger revenue grew 21%
RPK increased 15%ASK increased 14%
International passenger revenue grew 21%
RPK increased 61%ASK increased 50%
Cargo revenue grew 37%Other revenue grew 26%
Our gross revenue increased 23%...
23%
8
...but total RASK reduced 2%...
RASK total ¹ ²
RASK scheduled domestic²
Domestic load factor - %
Yield scheduled domestic³
RASK scheduled international²
International load factor - %
Yield scheduled international³ Yield scheduled international³ (USD cents)
1Q07
16,72
14,54
69,4
22,00
14,07
71,3
19,789,65
4Q07
17,87
16,69
70,4
24,90
11,26
71,0
15,888,96
1Q08
16,38
15,37
69,9
23,09
11,39
76,9
14,828,47
1Q08 vs 1Q07
-2,1%
5,7%
0,5 p.p.
5,0%
-19,0%
5,6 p.p.
-25,1%-12,2%
1Q08 vs 4Q07
-8,3%
-7,9%
-0,5 p.p.
-7,3%
1,2%
5,9 p.p.
-6,7%-5,4%
R$ Cents
1 Includes charter, cargo and Other revenues, net of taxes2 Net of taxes3 Gross of taxes
9
CASK
CASK excl-fuel
1Q07 1Q08
15.92 16.25
0
5
10
15
20
Total CASKBR GAAP - R$ cents 1Q08 vs 1Q07
-5.5%
2.1%
...while total CASK increased 2%...
10
...reducing the spread (RASK-CASK)...
1Q07 1Q08
16.72 15.92 16.38 16.25
0
5
10
15
20
RASK/CASK (R$ Cents)BR GAAP
RASKCASK
EBITMargin
Spread
4.8%
0.80
0.8%
0.13
11
1Q07 1Q08
340
272
0
100
200
300
400EBITDAR - R$ M
...impacting our margins in BR GAAP...
Margin over net revenue
1Q07 1Q08
88
18
0
20
40
60
80
100EBIT - R$ M
1Q07 1Q08
59
30
20
40
60
80Net Income - R$ M
BR GAAP
-20%
19%
12%
-80%
5%
0,8%
3% 0,1%
-96%
12
1Q07 1Q08
331
283
0
100
200
300
400EBITDAR - R$ M
...and in US GAAP...
1Q07 1Q08
146
83
0
50
100
150EBIT - R$ M
1Q07 1Q08
138
47
0
50
100
150Net Income - R$ M
US GAAP
Margin over net revenue
-14%
18%
13%
-43%
8%
4%
8%
2%
-66%
13
1Q07 1Q08
0.39
0.02
Earnings per shareBR GAAP (R$)
1Q07 1Q08
0.92
0.31
Earnings per share US GAAP (R$)
-96%
...reducing our earnings per share
-66%
14
BR GAAP Leasing IncomeTaxes
Others US GAAP3
57
-19
6 47
0
20
40
60
Net Profit Reconciliation to US GAAP
44 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
15
Our balance sheet remains solid
* LTM
R$ million - BRGAAP 2008* 2007 2006 2005 2004
Cash 2,226 2,607 2,453 995 297
Short-Term Debt 865 1,005 363 216 204
Long-Term Debt 1,365 1,345 895 425 399
Total Debt 2,230 2,350 1,258 641 603
Shareholder's Equity 1,489 1,527 1,449 760 191
Capitalization 2,855 2,872 2,344 1,185 590
Aircraft and flight equipment leases 5,949 5,976 5,032 4,389 4,557
Total Debt Adjusted 8,179 8,326 6,290 5,030 5,160
Total Capitalization Adjusted 8,804 8,848 7,376 5,574 5,147
Debt / Capitalization 78% 82% 54% 54% 102%
Adjusted Debt / Adjusted Capitalization 93% 94% 85% 90% 100%
Adjusted Net Debt / Adjusted Capitalization 68% 65% 52% 72% 94%
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Brazilian domestic market has high growth potential
Boardings per capita
Boardings per capita, adjusted by GDP per capita at PPP
Source: World Bank Data, Credit Suisse Research as of 2006
Annual Trips / Person
1.70
1.85
2.32
0.62
0.60
0.55
0.50
0.82
Japan
US
Argentina
Chile
Mexico
Russia
Brazil
Germany
100107.3 111.4
117.4100
140.6
157.6
100
121.2
175.4
228.2
256.8
104.9
176.4
112.0
2003 2004 2005 2006 2007
Market’s RPK
GDP
TAM’s RPK
Growth of Brazilian Domestic Market
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High concentration of passengers in 10 airports
Source: ANAC
% Total Domestic Passengers Boarded
Curitiba
Recife
PortoAlegre
Confins
Salvador
Galeão
Guarulhos
Brasília
Congonhas
Santos Dumont
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
% TAM slots
44%
42%
33%
30%
39%
37%
27%
39%
36%
25%
Important barrier to entry for newcomers
Limited ability for other competitors to grow
10 main airports in Brazil carry 70% of all passenger traffic
TAM has in aggregate ~40% of all slots available in these airports
18
As Brazil becomes “stable”, the leisure segment will become increasingly more important
Leisu
reBu
sines
s
2000 2001 2002 2003 2004 2005 2006 2007
17.9
26.6 27.0 25.228.2
35.439.7
44.4
0
10
20
30
40
50
Domestic Market Passenger Mix (RPK M)
CAGR
11%
22%
Traveling is one of the top “desire” items for consumption
* TAM Estimates
19
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
20
...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
21
...optimizing the utilization of our aircraft on off peak hours
* Average day in October, 2007
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 2350
55
60
65
70
75
80%
Domestic load factor per hour
Off Peak Off Peak Off PeakPeakPeak
22
We are beginning to evaluate new potential business units in the company
TAM Linhas Aéreas
MRO(São Carlos)
Loyalty Program HandlingCargo
Already structured as a business unit with focus in maximizing assets
None or little focus on selling services to third-parties
Not structured as business units
23
We have a positive outlook for 2008
Maintain leadership in both domestic and international markets
ASK growth of Domestic 14% International 40%
Average load factor at approximately 70% overall
Reduction of 7% in total CASK ex-fuel in BR GAAP yoy
Three additional international destinations or frequencies in 2008
Domestic market demand growth from 8% to 12% (in RPK terms)
2008 Guidance
TAM
Market
Actual - 1Q08
10.6%
50.0% dom67.7% intl
14.2%49.7%73.2%
-5.5%
---
24
Our growth plan is supported by a flexible fleet plan
4
2
16
101
4
2
18
104
4
2
20
110
4
2
22
113
8
2
22
115
2008 2009 2010 2011 2012
123 128136 141 147
0
50
100
150
Total fleet
B767 Airbus wide-body Airbus narrow-bodyB777
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Calyon Airline Conference 2008
June 5, 2008