tva investor presentation
TRANSCRIPT
Investment Idea 10-NOV-2013
This presentation includes forward looking statements. We have based these forward looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of the business. Forward looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward looking statements are based on information available at the time those statements are made and/or management’s belief as of that time with respect to future events, and are subject to significant risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward looking statements. Forward looking statements include, without limitation, statements regarding the Company’s intentions and expectations regarding the delivery schedule of the aircraft on order and announced new service routes and customer savings programs. Important factors that could cause such differences include, but are not limited to: the competitive environment in our industry; our ability to keep costs low; changes in our fuel cost; the impact of worldwide economic conditions, including the impact of the economic recession on customer travel behavior; actual or threatened terrorist attacks and global instability; to generate non ticket revenues; restriction on third party membership programs; external conditions, including air traffic congestion, weather and outbreak of disease; air travel substitutes; labor disputes, employee strikes and other labor related disruptions including in connection with our current negotiations with the union representing our flight attendants; ability to attract and retain qualified personnel; loss of key personnel; aircraft related fixed obligations; dependence on cash balances and operating cash flows; ability to hedge fuel requirements; our aircraft utilization rate; maintenance costs; our reliance on automated systems and the risks associated with changes made to those systems; use of personal data; lack of marketing alliances; government regulation; our ability to fulfill growth strategy; operational disruptions; our indebtedness and similar obligations; our liquidity; the concentration of our revenue from Cape Verde; our reliance on third party vendors and partners; single fuel provider; an aircraft accident or incident; our aircraft and engine suppliers; changes in the Regional markets; insurance costs; environmental regulations; and other risk factors. In addition, in this presentation, the words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “predict,” “potential” and similar expressions, as they relate to our company, our business and our management, are intended to identify forward looking statements. In light of these risks and uncertainties, the Forward looking events and circumstances discussed in this presentation may not occur and actual results could differ materially from those anticipated or implied in the forward looking statements. All forward looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth or referred to above. Forward looking statements speak only as of the date of this presentation. You should not put undue reliance on any forward looking statements. We assume no obligation to update forward looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward looking information, except to the extent required by applicable law. If we update one or more forward looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward looking statements.
Disclaimer
OUR PLAN
Our Plan
Create A Valuable Network
Simplify the Business Model
Deliver Operational Excellence
Be Flexible & Agile
Carrier of Choice For Cape Verdeans
Maintain Cost Leadership
Projections…..
0.00�
6.97�
14.44�15.65� 15.65�
2013� 2014� 2015� 2016� 2017�
Revenue Growth ($Mil) �
(0.33) �
(1.36) �
4.39 �
5.58 � 5.60 �
2013� 2014� 2015� 2016� 2017�
EBITDAR�
0.0%�
-19.5% �
30.4%�35.6%� 35.8%�
2013� 2014� 2015� 2016� 2017�
EBITDAR Margin�
0.0%�
-53.0% �
11.9%�18.6% � 19.0%�
2013� 2014� 2015� 2016� 2017�
Operating Margin �
Santiago
Phase 1 – Domestic Network
RAI
BVC
SID
SFL
VXE
Sao Vicente
Sao Filipe Brava
Sao Nicolau
Sal
Boa Vista
Porto Novo
Maio
MMO
SNE
Phase 2 – Regional Network……..
Mauritania
Senegal Mali
Gambia Bissau
Guinea
Sierra Leone
Liberia
Côte d’Ivoire
Burkina Faso
Ghana Togo
Benin Nigeria
Niger
Equatorial
DKR
BJL
OXB
FNA
ROB
CKY
Our Offer……
1.0
6.0
5.0 12.0
Pre-Op Phase 1 Phase 2 Total
Investor 70%
Management 30%
(US$
Mill
ions
)
Investment Requirement Equity Split
Use Of Funds.
1.0
6.0
5.0 12.0
Pre-Op Phase 1 Phase 2 Total
1. Obtain AOC 2. Hire management
team, 3. Earnest negotiations
with aircraft lessors 4. Basic Infrastructure
Setup
1. Working Capital 2. Infrastructure Build-
out 3. Domestic Operations
Subject to Performance 1. Regional Expansion
Investor Clawback Option
70%
Management
If Management Does Not Meet 80% of Performance Criteria
50% Clawback
Investor
30%
80%
20%
Proposed Investment Structure
TransVerde Group (15%)
Strategic Investors
Vimana Holdings
(15%)
OUR PRODUCT
• Cruise speed - 300 kts • 50 Passengers • Fast climb • Exceptional takeoff and
single engine performance maintained even in hot and high conditions
• Excellent short-field performance
ATR-42-500
Seating Configuration
Cabin Layout
Range Chart
Mauritania
Senegal Mali
Gambia Bissau
Guinea
Sierra Leone
Liberia
Côte d’Ivoire
Burkina Faso
Ghana Togo
Benin Nigeria
Niger
Equatorial
DKR
BJL
OXB
FNA
ROB
CKY
1.5 Hrs
2.5 Hrs
Range vs. Payload
EMB-120 Do-328
Saab-340
BAe-ATP
Dash8-300
F-27 F-50
Saab-2000
Q400
ATR-42
ATR-72
Aircraft Characteristics
Max. Passengers
30 50 70
ATR-42
Dash-300
Do-328
Fokker F-27
ATR-72
Bae-ATP
Fokker-50
Dash Q400
Saab-2000
500 1,500 2,500 200 700 1,200 0 25,000 250 750
Range (Km)
Fuel Burn (Kg/Hour)
MTOW (Kg)
Cruise Speed (Km/Hr)
OUR CUSTOMERS
Population Distribution.
274
76
44
37
26
13
9
7
6
Santiago (RAI)
Sao Vicente (VXE)
Santo Antão
Fogo (SFL)
Sal (SID)
Sao Nicolau (SNE)
Boa Vista (BVC)
Maio (MMO)
Brava
Port Airport Praia Praia
Porto Grande São Pedro
Porto Novo N/A
Vale dos Cavaleiros São Filipe
Palmeira Espargos
Tarrafal Preguiça
Sal Rei Rabil
Porto Inglês Vila do Maio
Furna N/A
( 000
’s)
Cape Verde 2012 Airport Ranking.
137,874
98,821
84,178
37,194
33,570
13,218
8,063
Praia (RAI)
Sal (SID)
Sao Vicente (VXE)
Fogo (SFL)
Boa Vista (BVC)
Sao Nicolau (SNE)
Maio (MMO)
Domestic Passengers
Source: Cape Verde CAA
732.2 752.2
776.0
853.2 877.4
825.8
2007 2008 2009 2010 2011 2012
The Cape Verde Domestic Market Is Growing….. (D
omes
tic P
ax in
000
’s)
Source: Cape Verde CAA
621.8
685.5 667.7
747.2
903.9
1,020.5
2007 2008 2009 2010 2011 2012
The International Market Is Growing Too. (In
tern
atio
nal P
ax in
000
’s)
43.5
74.4
2008 2012
SFL
247.4 197.6
2008 2012
SID
20.4 26.4
2008 2012
SNE
47.2 67.1
2008 2012
BVC
164.6
168.4
2008 2012
VXE
Santiago
Domestic Growth Is Exceptional……..
Sao Vicente
Sao Filipe Brava
Sao Nicolau
Sal
Boa Vista
Porto Novo
Maio
220.6 275.7
2008 2012
RAI 25%
8.6
16.1
2008 2012
MMO
71%
88%
42%
2%
29%
20%
Source: IMF: World Economic Outlook
6.52
10.14
8.65
6.20
5.05 5.14
7.26 7.53
2005 2006 2007 2008 2011 2013 2015 2017
(GD
P G
row
th %
)
CAGR = 9%
Driven By High Economic Growth Rates.
Source: IMF: World Economic Outlook
0.49 0.54
0.97
1.66 1.87
1.96
2.26
1995 2000 2005 2010 2012 2013 2015
(US$
Bill
ion)
98% 102%
GDP Is Expected To Double At A Faster Pace…..
Source: IMF: World Economic Outlook
1,245.28 1,221.68
2,035.82
3,242.19 3,544.44 3,675.93
4,113.75
1995 2000 2005 2010 2012 2013 2015
(US$
Per
Cap
ita)
63% 102%
Significantly Increasing Income Per Capita.
0.0
98.8
183.2 197.7 197.7
2013 2014 2015 2016 2017
Projected TVA Pax Figures Are Conservative…. (T
VA D
omes
tic P
ax in
000
’s) • Represents ~35% of Total Market
• Excludes International Transits/Tourists • Load Factor Increases from 30% in 2014
to 62% in 2017
413.7
465.6 479.6
494.0 508.8
519.0 529.4
2010 2014 2014 2015 2016 2017 2018
Based On Conservative Market Growth Rates…. ( D
omes
tic P
ax in
000
’s)
CAGR = 3%
Baseline Stimulated
Source: Cape Verde CAA
16.91 17.10
22.39 21.78
14.26 14.88
Domestic Travel Peaks During Summer…... (D
omes
tic P
ax in
000
’s)
SID
RAI
VXE
Source: Cape Verde CAA
42.18 41.17
18.79 20.97
32.73 33.16
International Travel Peaks During The Winter. (In
tern
atio
nal P
ax in
000
’s)
Allowing TVA To Enter Into Marketing Arrangements With International Carriers.
RAI
SID
BVC
Tourism Provides Additional Opportunities….
90.5
66.6
65.7
60.5
56.4
42.6
40.7
24.2
13.8
6.0
3.7
2.8
1.8
GBR
FRA
POR
GER
ITA
CVE
OTH
NED
ESP
SWE
USA
ZAR
AUT
Average Stay 8.5
4.4
4.8
7.1
6.6
2.4
3.6
7.2
4.0
5.0
3.2
4.1
6.2
Arrivals (000s)
Source: Cape Verde Tourism Organization
For Partnerships With Hotels etc.
83.2%
61.2%
24.8%
18.8%
24.4%
16.0%
17.8%
23.5%
7.8%
Distribution By Island Average Occupancy Rates
38.9%
35.4%
12.6%
6.2%
3.9%
2.4%
0.3%
0.2%
0.0%
Bao Vista
Sal
Santiago
São Vicente
Santo Antão
Fogo
São Nicolau
Maio
Brava
Source: Cape Verde Tourism Organization
Santiago
Passenger Flows…….
RAI
BVC
SID
SFL
VXE
Sao Vicente
Fogo Brava
Sao Nicolau
Sal
Boa Vista
Sao Antao
Maio
50-75 25-49
>100 76 – 100
PDEW
20-25
Demand Distribution 2012
VXE SNE SID BVC MMO RAI SFL Total VXE 0 9,228 52,957 15,403 134 86,884 3,749 168,355 SNE 11,030 0 10,131 496 0 4,449 330 26,436 SID 62,947 10,288 0 18,791 897 100,943 3,776 197,642 BVC 18,911 514 18,182 0 415 28,166 952 67,139 MMO 150 0 830 377 0 14,769 0 16,125 RAI 94,384 4,207 92,719 26,903 14,920 0 42,613 275,747 SFL 6,104 396 4,414 2,042 0 61,432 0 74,388 Total 193,525 24,632 179,233 64,012 16,366 296,643 51,420 825,832
Source: World Bank: Republic of Cape Verde, Inter-Island Transport Study, 2011
Santiago
Aircraft Schedule…….
RAI
BVC
SID
SFL
VXE
Sao Vicente
Fogo Brava
Sao Nicolau
Sal
Boa Vista
Sao Antao
Maio
Aircraft #1 Aircraft #2
AM/PM Rotation
Midday Rotation
Midday Rotation
PRICING
Price Is Always A Factor…….
24.3%
15.1%
13.5%
10.9%
8.8%
6.3%
5.1%
5.1%
4.8%
4.5%
1.4%
Better Prices
Comfort/Clean
Speed
Punctuality
Security
Facilities
Frequency
Baggage
Others
Service Quality
No Alternative
However, We Will Compete On Other Factors. Source: World Bank: Republic of Cape Verde, Inter-Island Transport Study, 2011
Reason for Choice…….
25.1%
20.7%
17.6%
16.7%
6.2%
5.7%
4.2%
2.2%
1.7%
No Alternative
Quicker
Comfort
Cheaper
Baggage
Timing
Security
Others
Take Car
Travelers Want A Choice. Source: World Bank: Republic of Cape Verde, Inter-Island Transport Study, 2011
TACV Y/N Fare vs. TVA 0-3 Day Fare
25
35
45
55
65
75
85
95
105
( Far
e U
S$)
RAI-SFL
RAI-BVC SID-SNE
RAI-SID
SID-BVC SNE-VXE
RAI-MMO
RAI-SNE
SID-VXE VXE-SFL, SFL-BVC
VXE-BVC
RAI-VXE
TACV
TVA
TACV T/L Fare vs. TVA 7 Day Fare
25
35
45
55
65
75
( Far
e U
S$)
RAI-SFL
RAI-BVC SID-SNE
RAI-SID
SID-BVC SNE-VXE
RAI-MMO
RAI-SNE
SID-VXE VXE-SFL, SFL-BVC
VXE-BVC
RAI-VXE
TACV
TVA
TACV V Fare vs. TVA 14 Day Fare
10
20
30
40
50
60
70
( Far
e U
S$)
RAI-SFL
RAI-BVC SID-SNE
RAI-SID
SID-BVC SNE-VXE
RAI-MMO
RAI-SNE
SID-VXE VXE-SFL, SFL-BVC
VXE-BVC
RAI-VXE
TACV
TVA
Since We Will Maintain A Fare Differential
64.94 69.27
73.60 77.93
82.26 86.59
90.92 95.25
99.58 103.91
108.24
54.99 58.30
61.60 64.91
68.22 71.53
74.84 78.15
81.45 84.76
88.07
50 60 70 80 90 100 110 120 130 140 150
(Ave
rage
Far
e U
S$)
Distance
Halcyonair
TVA
23%
18%
48.1%
16.5%
4.1%
11.9%
14.0%
2.7%
2.7%
Yearly
2x /Year
3x /Year
Monthly
1-3x /Month
1-2x /Week
3x /Week
68.7%
11.9%
14.0%
2.7%
2.7%
Yearly
Monthly
1-3x /Month
1-2x /Week
3x /Week
Current After TVA Entry
Propensity For Domestic Travel……
Source: World Bank: Republic of Cape Verde, Inter-Island Transport Study, 2011
Reasons For Travel…….
40.0%
19.0%
15.0%
10.0%
16.0%
Family & Friends
Work
Health
Trading
Other
We Will Give Them Incentives To Travel. Source: World Bank: Republic of Cape Verde, Inter-Island Transport Study, 2011
OUR COMPETITION
Our Competition Is Not Too Hot…….
TACV Technically Bankrupt World Bank Report, 2011
And The Problems Keep Mounting…….
Creating Significant Opportunities For Us.
Critical Success Factors For Any Airline…….
Frequency
Network
Comfort
FFP
Brand Name
Clean
Reliable
Safe
Basic/Minimum
Requirements
Build Market Share
High Yield Traffic
Service Execution
• Competition Performing Poorly – Halcyon Has Suspended
Operations
• We Just Need To Stick To The Basics – Deliver Operational
Excellence – Maintain Cost Leadership
Assessment Of The Competition.
TACV Halcyonair Reliability 0 0
Service 0 0
Price 0 1
Schedule 0 0
On-Time 0 0
Comfort 2 2
Network 4 0
Good Poor
WE CAN RUN FASTER. We Just Need To Be Better Than Our Competition
THANK YOU