tam apr 4 t07 eng
TRANSCRIPT
São Paulo, March
31, 2008
4Q074Q07 ResultsResults
PresentationPresentation
2
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 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.
3
2007 was
a year
of
many
challenges
Macro Economy
Airline Industry
Airlines Brazil
TAM
High volatility (e.g. subprime crisis)
Fuel prices
Scarcity of aircraft, seats, etc due to overall growth in the sector
Conclusion of the “Varig” questionmarkChanges in the governing structure of theindustryCollapse of BRA
Impact of infrastructure on operations
Accident
4
Previousperiod
Currentperiod
J FM AM J J A S OND J F MAM J J AS OND J F MA M J J AS ON D J F8085
9095
100
105110115
120125
130
Domestic Market - Variation(vs previous period)
The domestic market growth reached 12% in 2007 and 13% in February 2008
20072005 2006 2008
Source: ANAC
Accum. market growth 2006
12%
Accum. market growth 2005
19%
Accum. market growth 2007
12%Accum. market
growth 20089.3%
5
We have been domestic market leaders since 2003, reaching 51% in February 2008
33.0%35.8%
48.0% 48.9%43.5%
2003 2004 2005 2006 2007
Domestic Market Share – Feb/08Domestic Market Share – Feb/08
Domestic Market Share (RPKs)Domestic Market Share (RPKs)
Domestic Market Share – 4Q07Domestic Market Share – 4Q07
Varig 3.0%
Outros 7.2%
TAM 48.2%
GOL 41.7%
Varig 3.7%
Outros 7.3%
TAM 50.6%
GOL 38.4%
Source: ANAC
6
The international market (among Brazilian carriers) is recuperating, and grew 50% in February 2008…
Previousperiod
Market
TAM
J F MAM J J A S O ND J F M AM J J A S ON D J F MA M J J A S ON D J F40
60
80
100
120
140
160
180
200
International Market - Variation(vs previous period)
20072005 2006 2008
Source: ANAC
Accum. Marketgrowth 2008
56%
Acum TAM 200641%
Acum TAM 200771%
Acum TAM 200540%
Acum TAM 200871%
Accum. market growth 2005
7% Accum. market decrease 2006
30%Accum. market decrease 2007
5%
7
…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
8
Since July 2006, we are international market leaders among the Brazilian companies
12.0% 14.3%
37.5%
67.5%
18.8%
2003 2004 2005 2006 2007
International Market Share – Feb/08International Market Share – Feb/08
International Market ShareInternational Market Share
International Market Share – 4T07International Market Share – 4T07
Varig 15.4%
TAM 71.5%
GOL 11.8%
Varig 19.7%
TAM 67.3%
GOL 11.2%
Source: ANAC
9
Steady strengthening of our fleetDelivery of 2 A340, 2 A330, 7 A320 and 1 A321 (versus 3Q07)
Redelivery of 3 F100 (versus 3Q07)
BNP Paribas – loan to finance PDP (Pre-Delivery-Payment) for 30 aircraft
Operational efficiency
12.3 block hours per aircraft per day
13.3 block hours per aircraft per day, considering only the operating fleet
Average total load factor of 71.0% in 4Q07
Agreements:Beginning of code-share flights with LAN Group and United Airlines (in November 2007)
4Q07 Highlights (1/2)
10
4Q07 Highlights (2/2)
Strengthening of our networkBeginning of international flights
Montevideo (Uruguay) – November 5
Frankfurt (Germany) – November 30
Madrid (Spain) – December 21
Awards receivedMost Valuable Brands in Brazil - Interbrand
The Most Shareholder-Friendly Company in the sector – Institutional Investor
New branding
11
137147
467
1,285
242
225
537
1,357
4Q06 4Q07
2,037
2,361
0
500
1,000
1,500
2,000
2,500
Gross Revenue (R$ M)
Dom.Pax
Int.Pax
CargoOthers
Domestic passenger revenue grew 6%
RPK increased 10%
ASK increased 9%
International passenger revenue grew 15%
RPK increased 65%
ASK increased 72%
Cargo revenue grew 53%
Other revenue grew 76%
Our gross revenue increased 16%...
16%
12
...but total RASK reduced 7.3%...
RASK Total 1
RASK Scheduled Domestic2
LF Scheduled Domestic - %
Yield Scheduled Domestic3
RASK Scheduled Intl2
LF ScheduledInternational -
%
Yield Scheduled Intl3
Yield Scheduled Intl3
(cents of USD)
4Q064Q06
19.28
17.53
69.7
26.42
16.60
73.7
22.58
10.56
3Q073Q07
17.01
15.43
66.3
24.42
12.52
70.8
17.69
9.62
4Q074Q07
17.87
16.69
70.4
24.90
11.26
71.0
15.88
8.96
4Q07
vs 4Q06
4Q07
vs 4Q06
-7.3%
-4.8%
0.7 p.p.
-5.8%
-32.2%
-2.7 p.p.
-29.7%
-15.2%
4Q07
vs
3Q07
4Q07
vs
3Q07
5.1%
8.2%
4.1 p.p.
2.0%
-10.1%
0.2 p.p.
-10.2%
-6.8%
R$ Cents
1 Includes charter, cargo and Other revenues, net of taxes2 Net of taxes3 Gross of taxes
13
CASK excl-fuel
4Q06 4Q07
16.98 17.22
0
5
10
15
20
Total CASKBR GAAP - R$ cents
4Q07 vs 4Q06
4.1%
1.4%
...while total CASK increased 1.4%...
14
...reducing the spread (RASK-CASK)...
4Q06 4Q070
5
10
15
20
RASK/CASK (R$ Cents)BR GAAP
RASKCASK
EBITMargin
Spread
11.9%
2.3
3.6%
0.7
15
4Q06 4Q07
437
353
0
100
200
300
400
500
EBITDAR - R$ M
-19%
23%
15%
...impacting our margins in BR GAAP...
Margin over net revenue
4Q06 4Q07
232
83
0
50
100
150
200
250
300
EBIT - R$ M
-64%
12%
4%
4Q06 4Q07
136
50
0
50
100
150
Net Income - R$ M
7%
2%
-63%
BR GAAP
16
4Q06 4Q07
372
313
0
100
200
300
400
EBITDAR - R$ M
19%
14%
...and in US GAAP...
4Q06 4Q07
229
90
0
50
100
150
200
250
300
EBIT - R$ M
-61%
12%
4%
4Q06 4Q07
166
119
0
50
100
150
200
Net Income - R$ M
9%
5%
-28%
US GAAP
Margin over net revenue
-16%
17
4Q06 4Q07
0.90
0.33
Earnings per shareBR GAAP (R$)
4Q06 4Q07
1.10
0.79
Earnings per share US GAAP (R$)
-63%
...reducing our earnings per share
-29%
18
BR GAAP Leasing IncomeTaxes
Others US GAAP
50
103
-25-10
119
0
50
100
150
200
Net Profit Reconciliation to US GAAP
44 aircrafts are reclassified as capital
leases as per SFAS nº 13
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
19
In an intra-year analysis we can see a strong recovery in the domestic market...
1Q07 2Q07 3Q07 4Q07
14.5
22.0
15.3
22.3
15.4
24.4
16.7
24.9
0
5
10
15
20
25
30
Domestic - RASK and YieldR$ Cents
0
20
40
60
75
Domestic Load Factor - %
69% 72%66%
70%
RASK Yield Load Factor
20
...increasing the total spread (RASK-CASK)
RASK
CASK
1Q07 2Q07 3Q07 4Q0715
16
17
18
RASK/CASK (R$ Cents)BR GAAP
EBITMargin
Spread
4.8%
0.8
1.7%
0.3
2.8%
0.4
3.6%
0.7
21
Our balance sheet remains solid
R$ million - BRGAAP 2007 2006 2005 2004
Cash 2,607 2,453 995 297
Short-Term Debt 1,005 363 216 204
Long-Term Debt 1,345 895 425 399
Total Debt 2,350 1,258 641 603
Shareholder's Equity 1,492 1,449 760 191
Capitalization 2,837 2,344 1,185 590
Aircraft and flight equipment leases 6,166 5,032 4,389 4,557
Total Debt Adjusted 8,516 6,290 5,030 5,160
Total Capitalization Adjusted 9,003 7,376 5,574 5,147
Debt / Capitalization 83% 54% 54% 102%
Adjusted Debt / Adjusted Capitalization 95% 85% 90% 100%
Adjusted Net Debt / Adjusted Capitalization 66% 52% 72% 94%
22
Even with the appreciation of the Real, revenue in foreign currencies increased
28%
72%
31%
69%
4Q06 4Q070
20
40
60
80
100%
Revenue(Passenger + Cargo)
DomesticInternational
Dollarexchangerate
DomesticInternational
2.138
72%28%
1.771
62%38%
Approximately 50% of our costs
(including fuel) are exposed to foreign
currencies
Approximately 50% of our costs
(including fuel) are exposed to foreign
currencies
-17%
ASK proportion
23
Stocks performance since follow-on
www.tam.com.br/irwww.tam.com.br/ir
Stocks performance
-50%
50%
150%
250%
350%
IPOJun/14/2005
Follow-onMar/10/2006
12/28/2006 12/28/2007
TAMM4 TAMN IBOV DJBR20
VariationTAMM4 = 56%
IBOV = 21%TAMN = 62%
DJBR20 = 12%
VariationTAMM4 = 56%
IBOV = 21%TAMN = 62%
DJBR20 = 12%
VariationTAMM4 = 133%
IBOV = 43%
VariationTAMM4 = 133%
IBOV = 43%
VariationTAMM4 = -35%
IBOV = 44%TAMN = -22% DJBR20 = 63%
VariationTAMM4 = -35%
IBOV = 44%TAMN = -22% DJBR20 = 63%
24
On January 30, 2008 we announced a share buy- back program
The program has the following characteristics
Shares will be held in treasury and subsequently cancelled or transferred,
without reducing the company's capital stock.
The acquisition will respect the limit of up to 4,000,000 preferred shares,
equivalent to 5.56% of the total of this class of shares in circulation
Will remain in effect for a maximum period of 365 days
UBS Pactual Corretora and Credit Suisse will mediate the operations
We already started the purchase
25
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)
2007 Guidance2007 Guidance
TAMTAM
MarketMarket
Our guidance for 2007, released in the end of 2006
11.9%
2007 Realized2007 Realized
•
Since January•
Milan (Mar)•
Frankfurt (Nov)•
Madrid (Dec)
48.9%
70.5%
12.6
5.2%
26
2006 Actualreduction
Actual 2007 Block hours InternationalDestinations
2007Adjusted
11.86
-0.6211.25
-0.14-0.08
11.02
10.0
10.5
11.0
11.5
12.0
CASK ex-fuel(R$ Cents)
CASK reduction reached 74% of the target due to block hours and additional international destinations
-5,2%
BR GAAP
-7,1%
27
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 Guidance2008 Guidance
We have a positive outlook for 2008
TAMTAM
MarketMarket
28
3
14
88
10
4
18
101
4
20
104
4
22
110
4
24
113
8
24
115
2007 2008 2009 2010 2011 2012
115123
128136
141147
0
50
100
150
Total fleet
Our growth plan is supported by a flexible fleet plan
B777 MD11 Airbus wide-body Airbus narrow-body F100
Since dec/07 we
are monofleet in
domestic operations
Since dec/07 we
are monofleet in
domestic operations
29
To be the preferred airline company
Excellence in Technical-
Operational
Excellence in Service
Excellence in
Management
We signed a commitment
PASSION FOR AVIATIONPASSION FOR AVIATION
30
São Paulo, March
31, 2008
4Q074Q07 ResultsResults
PresentationPresentation