transportation and logistic conference - deutsche bank
TRANSCRIPT
Transportation and Logistic ConferenceTransportation and Logistic ConferenceDeutsche Bank
July 10, 2007
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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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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 F M AM J J A SO N D J F M AM J J A S ON D J FM A M J J A S ON D J F MA M8085
9095
100
105110115
120125
130
Domestic Market - Variation
Source: ANAC
Accum. market growth2006 ~12%
The domestic market growth still strong in 2007, reaching 14% in the first 5 months of the year
Accum. market growth2005 ~19%
Accum. market growth2004 ~12%
Accum. market growth2007 ~14%
2004 2005 2006 2007
55
33.0%35.8%
47.8% 49.1%43.5%
2003 2004 2005 2006 Jan - Mai
TAM 49.7%
GOL 40.8%
Other3,2%
BRA2,2%Varig
4,1%
Domestic Market Share - May/07
We have been domestic market leaders since 2003, ending May with 49,7%
Domestic Market Share - May/07
Domestic Market Share (RPK’s)Domestic Market Share (RPK’s)
Source: ANAC
BRA 3,4%
Varig 4,6%
Other 5,1%
TAM 48,5%
GOL 38,5%
Domestic Market Share – 1Q07Domestic Market Share – 1Q07
66
Previousperiod
Market
TAM
J F M AM J J A SO N D J F M AM J J A S ON D J FM A M J J A S ON D J FM A M40
60
80
100
120
140
160
180
200
International Market - Variation(vs previous year)
Source: ANAC
The international market (among the Brazilian carriers) has been diminishing…
Accum. market growth2004 ~8%
Accum. market growth2005 ~7%
Accum. market
decrease 2006 ~30%
Accum. marketdecrease 2007 ~33%
Acum TAM 2006~41%
Acum TAM 2007~82%
Acum TAM 2005~40%Acum. TAM 2004
~30%
2004 2005 2006 2007
77
12.00% 14.3%
37.3%
65.2%
18.8%
2003 2004 2005 2006 Jan - Apr
TAM 72.4%
GOL 13.7%
Varig 10.1%
Other 3,9%
International Market Share– May/07International Market Share– May/07
International Market ShareInternational Market Share
Source: ANAC
International Market Share – 1Q07
Since July 2006, we are international market leaders among the Brazilian companies
International Market Share – 1Q07
TAM 60.9%
Varig12.1%
GOL 17.9%
Other9.1%
88
86
103
284
1,114
158
157
503
1,039
1Q06 1Q07
1,587
1,856
0
500
1,000
1,500
2,000
Gross Revenues (R$ M)
Dom.Pax
Int.Pax
CargoOther
17%
Domestic passenger revenue reduced 6.7%
RPK growth 22%ASK growth 22%
International passenger revenue growth 77%
RPK growth 64%ASK growth 78%
Cargo revenue growth 52%Other revenue growth 48%
Increase of sales of Loyalty Program points and expired tickets compensated by the sub-leasing
Strong revenue growth quarter over quarter
99
1Q061Q06
19.8
20.2
68.4
31.0
14.3
77.4
18.5
8.5
4Q064Q06
19.3
17.5
69.7
26.4
16.6
73.7
22.6
10.6
1Q071Q07
16.7
14.5
69.3
22.0
14.1
71.3
19.8
9.6
1Q06 vs 1Q07
1Q06 vs 1Q07
-15.4%
-28.2%
0.8 p.p.
-29.0%
-1.5%
-6.2 p.p.
7.2%
13.6%
4Q06 vs 1Q07
4Q06 vs 1Q07
-13.3%
-17.1%
-0.3 p.p.
-16.7%
-15.2%
-2.4 p.p.
-12.4%
-8.7%
Our total RASK reduced 15%, mainly because of domestic yield decrease of 29%...
RASK Total1
RASK Scheduled Domestic2
LF Scheduled Domestic
Yield ScheduledDomestic3
RASK Scheduled International2
LF ScheduledInternational
Yield ScheduledInternational3 (em R$)Yield ScheduledInternational3 (em USD)
1 Includes charter, cargo and Other revenues, net of taxes2 Net of taxes3 Gross of taxes
1010
CASK
CASKex-fuel
1Q06 2Q06 3Q06 4Q06 1Q07
17.4318.69 18.43
16.9815.92
0
5
10
15
20
Total CASK (BR GAAP - R$ cents)
1Q06 vs 1Q07
-7.5%
-8.7%
...and our CASK decreased 8.7% compared to 1Q06
1111
RASKCASK
2002 2003 2004 2005 2006 1T0715
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
The decline in revenue decreased the spread (RASK-CASK)…
1212
1Q06 1Q07
376
340
0
100
200
300
400
EBITDAR(BR GAAP - R$ M)
1Q06 1Q07
189
88
0
50
100
150
200
EBIT(BR GAAP - R$ M)
Margin over Net Revenue
1Q06 1Q07
127
59
0
50
100
150
Net Income(BR GAAP - R$ M)
...reducing our margins in BR GAAP...
-9%-53% -53%
24%
19%12%
5% 3%
8%
1313
1Q06 1Q07
373
331
0
100
200
300
400
EBITDAR (US GAAP - R$ M)
1Q06 1Q07
238
146
0
50
100
150
200
250
300
EBIT(US GAAP - R$ M)
24%
15%
8%18%
1Q06 1Q07
268
138
0
40
80
120
160
200
240
280
Net Income(US GAAP - R$ M)
8%
-11%
17%- 39%
...and US GAAP
- 49%
Margin over Net Revenue
1414
BR GAAP Leasing IncomeTaxes
Others US GAAP
59.2
119.3
-44.5
3.9 137.9
0
50
100
150
200
Net Profit Reconciliationto US GAAP 39 aircrafts are reclassified as
capital leases as per SFAS nº13
39 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
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1Q06 1Q07
0.85
0.39
Earnings per shareBR GAAP (R$)
1Q06 1Q07
1.80
0.92
Earnings per shareUS GAAP (R$)
-54%
Our EPS decreased
-49%
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Our foreign revenues increased, reducing the mismatch in currencies
20%
80%
33%
67%
1Q06 1Q07
100% 100%
0
20
40
60
80
100%
Revenues(Passenger + Cargo)
DomesticInternational
Approximately 50% of our costs
(including fuel) are exposed to foreign
currencies
Approximately 50% of our costs
(including fuel) are exposed to foreign
currencies
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Since our second public share offer, our ADR had an increase in valuation of 73%
Accumulated variation since March 10, 2006
0,5
1,0
1,5
2,0
10-mar-06 29-jun-07
TAMM4 IBOVESPA DOW JONES ADR TAM
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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
MarketMarket
Our expectations for 2007, disclosed in December 2006, are still the same
13.6%*
1Q071Q07
• Since January• Milan since
March
49.1%*
71.5%*13
7.5%
* Jan-May accumulated
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Domestic Market 2007Domestic Market 2007 International Market 2007International Market 2007
~30% increase in ASKsAt least an additional 3 destinationsStrengthening of international gateways for domestic market
GuarulhosGaleão
Increasing of frequency on main domestic markets
BrasíliaCongonhasConfins
Implementing overhub flights: new city-pairs
~60-70% increase in ASKs
Additional daily frequency to Paris beginning in January
New flight to Milan in 1S07
Additional longhaul frequency or destination to be disclosed
Strengthening of Latin American presence, both frequencies and destinations
In 2007, we will be expanding both frequencies anddestinations
2020
Due to international market opportunity, we are strengthening our international partnerships...
Signature of several MOUs:Code-share with TAP serving several destinations in Portugal and integration of TAM’s Programa Fidelidade TAM with TAP’s Programa Victoria da TAP.Operations starting in July;Code-share with LAN with unlimited seat sales within South America: Brazil, Chile, Argentina, Peru, Venezuela and integration with LAN’s PASS;Code-share with United Airlines serving several destinations in the USA (strong hubs in Chicago and Washington) and integration with Mileage Plus;Code-share with Lufthansa serving the German market – connecting point of flights to Europe, Asia, Middle East and Africa. Integration with Miles & More
2121
...increasing our fleet and maintaining one of the youngest fleets in the world
3
15
88
6
4
16
103
4
20
106
4
20
112
6
20
115
2007 2008 2009 2010 2011
112123
130136
141
0
50
100
150
Total Fleet
F100
Airbusnarrow-body
Airbuswide-body
MD11B777
2222
Fleet and networkFleet and network Distribution costsDistribution costs OverheadOverhead
Increase of block hours to over 13 hours per day per aircraft in 2007
6 extra seats in the A319/320 fleet
Increase in direct sales through:
Site improvementFare bundlesCall center outsourcingNew means of payment
Insourcing of representativesAdjusting indirect sales commissions to higher % on offpeak flights
Outsourcing of non-core activities
Redefinition of service standards
Review of spans&layers in the hierarquy
Implementation of new automated processes
Improved sourcing capabilities
Our cost targets are aggressive, but the roadmap is already laid out
2323
Source: Public reports of December 31, 2006 (except for Air Asia and Malaysia, which refer to 2005 figures)
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
8.0 13.0 18.0 23.0 28.0 33.0 38.0
2006 EBITDAR Margin (%)
Cas
h C
osts
($ c
ents
/ASK
)
We continue among the most profitable companies in the world
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Investor Relations
Phone: (11) 5582-9715
Fax: (11) 5582-8149
email: [email protected]
Website: www.tam.com.br/ri
2525