webconference ingles 4 t11
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Warning - 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 ormanagement, 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 thatThis 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 forward looking statements.
This material is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy ll iti l t d fi i l i t t Lik i it d t i d h ld t b t t d i ior 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.
2
1. Highlights
2. LATAM
Agenda 3. Financial Results
3
3
1 Hi hli ht1. Highlights
4
With focus on profitability, we revised our fleet plan
Former Fleet Plan
127124
Operational Narrow Body Fleet
159 164 171 179
plan
104107
119124
127 132 137 143
32 32 34 36
85
98
2012 2013 2014 2015
157 162 169 176
Revised Fleet Plan65
74 74
124 129 134 140
33 33 35 36
157
2012 2013 2014 2015
124 129 1342003 2004 2005 2006 2007 2008 2009 2010 2011 2012
2012 is the first of ten years , that the domestic fleet reduces compared to
the previous year
2012 is the first of ten years , that the domestic fleet reduces compared to
the previous year
5
Narrow Body Wide Bodythe previous yearthe previous year
We believe in a strong, growing and profitable market in 2012market in 2012
Guidance for 2012
Domestic Market Demand Growth (RPK) 8% 11%
Min. Max.
Supply growth(ASK) 1% 3%
Domestic 0% 2%
International 1% 3%International 1% 3%
Load Factor 76% 78%
Domestic 72% 74%
International 83% 85%
Average WTI USD 95Assumptions
Average US dollar rate 1.74
6
Passenger demand will continue to grow, and there is spare capacity at off peak hoursspare capacity at off peak hours
Although our supply will grow up to 2%, we have spaces on our aircraft to absorb the increasing demandLoad factor* X Hour
71%
73% Peak Hours
PeakHours
67%
69%
63%
65%
59%
61%
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Even with the increase in the load factor outside of peak hours, we believe the yields will follow the recovery trend started in 2012
Even with the increase in the load factor outside of peak hours, we believe the yields will follow the recovery trend started in 2012
7*Domestic flights at weekdays in 2011
The load factor of the Brazilian market is significantly lower than the North Americansignificantly lower than the North American
Domesic Load factorBrazil x United States
80%
85%
70%
75%13 p.p.
65%
12 p.p.
55%
60%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
USA Brazil
We believe in the improvement of airports, due to the Government's determination to conduct privatization in addition to the budget investments
PAC d U i b d t
We believe in the improvement of airports, due to the Government's determination to conduct privatization in addition to the budget investments
PAC d U i b d t
8
on PAC and Union budgeton PAC and Union budget
Highlights of our business units
•Yields recovery, looking for offsetting higher costs TAM y g g gexpected for 2012
•Consumidor Moderno magazine award
•Record in sales in the domestic and
TAM Linhas Aéreas
•Increased from 11 to 26 the number of partners in
•Record in sales in the domestic and international markets
MultiplusTAM pthe coalition in 2011
•Capillarity via Redecard
EASA tifi ti f li
MultiplusCargo
•More than doubled the number of stores in 2011. We
d d th ith 160 it
•EASA certification for line maintenance
•Focus on independent management
•LEAN Method TAMTAM ended the year with 160 units•Certification for ATR-72
•Preparation for certification of Embraer aircraft
TAMVacations
TAM MRO
9
1 D t1. Destaques2. LATAM
10
Status of the deal
Aug 13, 2010: We announced
March 1, 2011: ANAC approved the
Antitrust Brazil•SEAE (Ago 2011)
Nov 15, 2011F4 SEC filing
Jan 18, 2012Edital CVM filingannounced
the intention tocombine with LAN
ANAC approved the proposed corporate structure
•SEAE (Ago 2011)•SDE (Ago 2011)•CADE (Dec 2011)
F4 SEC filing(preliminaryversion)
Edital CVM filing(preliminaryversion)
Jan 18, 2011: LAN and TAM signedbinding agreements
Antitrust Europe•Germany(Jul 2011)•Italy (Aug 2011)•Spain(Oct 2011)
Antitrust Chile•TDLC (Sep 2011)•Supreme Court•(pending)
Shareholders Meeting•LAN (Dec 2011)•TAM (Jan 2012)p ( ) (p g) TAM (Jan 2012)
11
We will have synergies between US$ 600 million and US$ 700 million annualyand US$ 700 million annualy
Revenue: Cargo ~$120-125M, Pax ~$240-285M Cost: ~$240-290M Lower boundUpper boundSynergy
source RationaleValue US$ Millions
Synergy source Rationale
Value US$ Millionssource Rationale
New service, sharing of best practices
US$ Millions source RationaleUS$ Millions
Cargo 125120 30Airports 35 Consolidation of functions in overlapping stations
Improved access to joint hubs and combined network appeal
Network relevance 8575 70Procurement 100
Leveraging economies of scale in contracts
Combined network creates new city pairs and increased service
New and increased connectivity
8070 20Corporate 20Streamlining of corporate overhead and some functions
Combined network supports new flights and hubs
Includes consolidation of Other
New flights 4545 65IT 70 Efficiencies of common IT
platforms
Leveraging economies andpartner airline contracts and increased utilization
Consolidation of the
Other passenger revenue
50
Frequent
35 20 25Maintenance
Efficiency of combined sales
Leveraging economies and efficiencies of scale
12
programs and sharing of best practices
15 25Frequent flyer 35 40Sales Efficiency of combined sales
efforts
3 Fi i l R lt3. Financial Results
13
Multiplus Highlights
Operating highlights
Item 4Q11 vs 4Q10 vs 3Q11
Points issued 20.6 billion +28.4% +3.2%
d d b ll
Fi i l hi hli ht
Points redeemed 17.4 billion +126.2% +39.9%
Breakage ratio 24.1% +150bps +10bps
Financial highlightsItem 4Q11 vs 4Q10 vs 3Q11
Gross Billings of points R$433 6 million +33 3% +9 1%Gross Billings of points R$433.6 million +33.3% +9.1%
Net Revenue R$398.3 million +93.8% +23.9%
EBITDA R$61.0 million +46.2% ‐21.9%EBITDA(15.3% margin)
46.2% 21.9%
Adjusted EBITDA R$92.9 million(23.2% margin)
+55.1% +12.8%
N t I R$70.9 million 63 8% 38 1%
14
14Net Income R$70.9 million
(17.8% margin)+63.8% +38.1%
Multiplus — Strong Growth
Number of partnersMillion Number of partners
Members
8 6 8,9 9,4 190
6,9 7,2 7,6 8,0 8,3 8,6 8,9
121 125 133151
166 161 168
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11
564
“Non-air” redemptionsGross Billings R$ million in million of points
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11
397434
248
425
in million of points
230264
300325 340 355
397
33 57 73 89 101
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q111Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11
15
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11
NOTE: it includes points issued before 2010 (TAM’s inventory)
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11
Yield and RASK grew both in annual and quarterly comparisoncomparison
Domestic Passengers
P R R$ Milli
ASK11,871 12,232 12,168
ASK, RPK and Load Factor2%
-1%
Passenger Revenue - R$ Million
4%
5%
RPK8,225
8,227
8,2781%
1%1,581 1,561 1,641
5%
4Q10 3Q11 4Q11LoadFactor 69% 67% 68%
4Q10 3Q11 4Q11
Yield - R$ Cents
3%
RASK - R$ Cents
5%
1%
19.2 19.0 19.8
5%12.7 12.1 12.7
16
4Q10 3Q11 4Q11 4Q10 3Q11 4Q11
In the annual comparison, international passenger revenue increased by 21% and the RASK 15% in dollarsrevenue increased by 21% and the RASK 15% in dollars
International Passengers
ASK7,209
7,820 7,619
ASK, RPK and Load Factor
R$833
R$1,025 R$1,071
Passenger Revenue - Million29%
4%
6%
4%
RPK5,749
6,541 6,089U$490
U$625 U$595
$ 4%
5%
21%6%
7%
4Q10 3Q11 4Q11LoadFactor 80% 84% 80%
4T10 3T11 4T11
Avg US DollarR$11.6
R$13.1R$14.1
RASK - Cents
22%
7%R$ 14.5
R$ 15.7R$ 17.6
Yield - Cents 21%
12%
1.70 1.64 1.80
6%
10%
g
U$6.8 U$8.0 U$7.82%
15%
U$ 8.5 U$ 9.6 U$ 9.82%
14%
17
4T10 3T11 4T114Q10 3Q11 4Q114Q10 3Q11 4Q11
We recorded an EBIT margin of 8.3%
4Q11 vs 4Q10
4Q11 vs 3Q11
In Reais 4Q11 4Q10 3Q11
3,579
3,281
298
11%
9%
37%
8%
19%
‐46%
3,319
2,766
553
3,225
3,006
218
Net Revenue (million)
Operating Expenses (million)
EBIT ( illi ) 298
8.3%
612
37%
1,6p.p.
21%
46%
‐8.3p.p.
‐28%
553
16.7%
852
218
6.8%
507
EBIT (million)
EBIT Margin
EBITDAR (million)
17.1%
(78)
96
1,4p.p.
‐
‐36%
‐8.6p.p.
‐
‐
25.7%
(1,382)
(620)
15.7%
66
150
EBITDAR Margin
Net Results (million)
Financial Result + Others* (million)
18.1
16.6
10 4
7%
5%
‐5%
9%
20%
7%
16.6
13.8
9 7
16.9
15.8
10 9
Total RASK (cents)
CASK (cents)
CASK ex fuel (cents) 10.4
9.2
5.8
‐5%
‐1%
‐10%
7%
9%
‐3%
9.7
8.4
5,9
10.9
9.3
6.4
CASK ex‐fuel (cents)
CASK USD (cents)
CASK USD ex‐fuel (cents)
18*Others includes “Movements in fair value of fuel derivatives” and “Gains (losses) on aircraft revaluation
Liquidity and debt profile
3 000
Adequate debt profile Liquidity Position
R$ Milhõ
1 800
2,100
2,400
2,700 2,4532,607
1,9142,145
2,568 2,567
1,500
2,000
2,500
3,000R$ Milhões
600
900
1,200
1,500
1,800
2005 2006 2007 2008 2009 2010 2011
995
0
500
1,000
Cash 2012 2013 2014 2015 2016 2017 2018 2019 2020 20210
300
Debentures, bonds and othersLeasing on the balance sheetAdjusted Net Debt / EBITDAR
10%3.8
5.66.3 6.5
3.84.3
4 0
6.0
8.0Debt mix by currencyR$
90%2005 2006 2007 2008 2009 2010 2011
2.1
0.0
2.0
4.0
US$
19
2005 2006 2007 2008 2009 2010 2011US$
Obs.1: Net Debt Adjusted includes annual operating leases x 7Obs.2: Debt is considered in US GAAP for 2005 and 2006 and in IFRS since 2007
WTI Hedge
We understand that our coverage level and price contracts are appropriate to business needs and market reality
We understand that our coverage level and price contracts are appropriate to business needs and market reality
USD 130
USD 150
60%
70%
USD 110
USD 130
40%
50%
Prices
ge Level
USD 90
20%
30%
Stike P
Coverag
USD 50
USD 70
0%
10%
1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14
According to our hedging policy defined by
1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14
Minimum Maximum Current Position Average Strike
20
According to our hedging policy, defined by the risk committee
2011 Guidance
Domestic
Guidance for2011
Actual2011
Demand growth (RPK) 15% - 18% 16%
Supply growth (ASK) 10% - 13% 9,7%
Domestic Market
Domestic 10% - 14% 9,5%
International 10% 10,1%
Load Factor 73% - 75% 73,4%
Domestic 67,5% - 70% 68,8%
International 83% 81 5%International 83% 81,5%
New international frequency or destination 2 3
CASK ex-fuel -5% -2,4%
Average WTI USD 93 USD 95
Average US dollar rate R$ 1,78 1,67Assumptions
21
Average WTI in R$ R$ 166 R$ 159
Excluding one time effects, we reduce the CASK ex-fuel by 4 3%0%
ex-fuel by 4.3%
-1Impact of salary
readjustment higher than
-2.4%
0.2%-2
Adjust of the PIS and Adjust from
Differences of the maximum takeoff weight average fleet
f i t
inflation
-0.7%
-0.5%
0 5%4
-3PIS and
COFINS credit the line airport
fees
Expenses related to the merger
Adjust from the lower
growth of ASK according to our estimates
referring to previous years
Impact of new values of domestic -0.5%
-0.2%-0.2% -4.3%
-5
-4 gvalues of domestic fees in force since
mar/2011
PublishedCASK
variation*
PIS andCofinscredit
Personnel Airportsfees
Infraerotaxes
Dilutioneffects
LATAM AdjustedCASK
variation
22 * Excludes the impact from the additional tariff reversal.
In 2012 we remain focused in cost control and reductionreduction
Total Costs
Fixed Variables
Total Costs
OverheadThird-Party
ServicesAircraft Expenses
Passengers expenses
• Implementation of • Contracts • Reduction of fuel • Reduced spendingImplementation of internal benchmarks to reduce expenses
Contracts renegotiation with suppliers
• Implementation of
Reduction of fuel consumption (reduction of weight on board, compressor washing
Reduced spending on airport contingencies
• Reduced spending • Management
study of the source of the spending
targets for law firms
• System modernization
compressor washing, use of external sources on the ground)
on materials at airports
• Reduce costs with b d i
• Consultancies reduction
• Optimization of spare parts purchasing and inventory
on-board service with suppliers
23
management
Teremos sinergias entre US$ 600 milhões e US$ 700 milhões anuais700 milhões anuais
Fonte da Valor Fonte da Valor
Receitas: Carga US$120-125 Milhões, Pax US$240-285 Milhões Custos US$240-290Milhões
sinergia
Novos serviços, compartilhamento de melhores práticas
US$ milhões
Carga 125 Aeroportos Consolidação de funções em aeroportos em que ambas operam
120 30
Justificativa sinergia US$ milhões Justificativa
85Maior acesso a hubs conjuntos e atratividade da rede combinadaRelevância
da rede Procurement Aproveitamento de economias de escala em contratos75 70 100Q&A80
Rede combinada cria novos pares de cidades e mais serviçosNova e maior
conectividade CorporativoRacionalização dos gastos corporativos gerais e algumas funções
70 20Q&A45
A combinação da rede suporta novos destinos e hubs
Incluindo a consolidação de
Novos voos TI Eficiências em plataformas comuns45 65 70
50 Incluindo a consolidação de contratos com companhias aéreas associadas e aumento da utilização
Consolidação dos programas e Passageiro
Outras receitas com passageiros Manutenção
Eficiência com esforços de vendas
Aproveitamento de economias de escala e de eficiências35 2520
4035
www.tam.com.br/ir
24
25 Consolidação dos programas e compartilhamento das melhores práticas
Passageirofrequente Vendas Eficiência com esforços de vendas
combinados15 4035
24
25