06 Nov Ubs
Transcript of 06 Nov Ubs
UBS Conference UBS Conference
New York, November, 2006
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TAM is a low cost company with better service at competitive prices
Low OperatingCosts
UndisputableBetter Service
CompetitivePrices
Sustainable Strategyto Maintain Market
Leadershipand Profitability
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19,2%21,8%
30,7%34,9% 33,0%
35,8%
43,5%47,0%
27,2%
1998 1999 2000 2001 2002 2003 2004 2005 Jan-Set/06
Domestic Market Share (RPK’s)
Domestic Market Share (RPK’s) – 3Q06 Domestic Market Share (RPK’s) - Sep/06
Source: ANAC
GOL ; 36,7%
TAM ; 51,1%
Others; 4,8%
BRA; 4,0%
Varig; 3,4%
TAM ; 51,7%
GOL ; 36,2%
Others; 4,5%
Varig; 4,3%
BRA; 3,4%
Undisputed domestic market leader...
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0,1%
3,8%
13,9%12,5% 12,0%
14,3%
18,8%
32,4%
7,9%
1998 1999 2000 2001 2002 2003 2004 2005 Jan-Set/06
International Market Share (RPK’s)
International Market Share (RPK’s) – 3Q06 International Market Share (RPK’s) - Sep/06
Source: ANAC
TAM 54,9%
Varig24,7%
GOL 11,3%
Others9,1%
TAM59,9%
Varig19,1%
GOL12,8%
Others8,2%
... As well as in the international market
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3Q06 Highlights (1/2)
Aircraft delivery
4 new A320, reintegration of 2 A330
Strengthening of our network
International market:
Daily night frequency to New York
New flight between Curitiba and Buenos Aires
Direct flights from Rio de Janiero, Galeão airport, to Buenos Aires, Assuncion, operated by TAM Mercosur
New flights to Zurich and Geneva operated in code-share with Air France
Domestic market:
New routes to Boa Vista and announcement of flights to Rio Branco
Strengthening operations in the airports of Guarulhos, São Paulo, and Galeão, Rio de Janeiro, increasing the number of direct flights to several destinations
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3Q06 Highlights (2/2)
Increase in operational efficiency
Increase in block hours per aircraft/day by 6.6% yoy, from 12.1 hours to 12.9 hours
Average load factor in 3Q06 of 76.8% (yoy increase of 2.7 p.p.)
Agreement with Unibanco to increase number of members of the Loyalty Program
TAM included in the Ibovespa and IBrX50 indexes
Issuing of R$ 500 millions through public offering of non convertible debentures with 6 years term
TAM’s rating Local debentures issuing
A+(bra) by Fitch brA by Standard & Poor’s
Global rating BB both for Standard & Poor’s and for Fitch
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70100
284
1,156
137124
453
1,461
3Q05 3Q06
1,610
2,176
0
600
1,200
1,800
2,400
Gross Revenues (R$ M)
Dom.Pax
Int. PaxCargoOther
Strong growth 3Q06 compared with 3Q05
35%
Domestic passenger revenue growth 26%
RPK growth 28%
ASK growth 23%
International passenger revenue growth 60%
RPK growth 35%
ASK growth 32%
Cargo revenue growth 24%
Other revenue growth 97%
Increase of sales of Loyalty Program points and expired tickets compensated by the sub-leasing
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Total RASK increased 7.6% in 3Q06 compared with 3Q05...
RASK Total1
RASK Scheduled Domestic2
LF Scheduled Domestic
Yield Scheduled Domestic3
RASK Scheduled International2
LF Scheduled International
Yield Scheduled International3 (em R$)
Yield Scheduled International3 (em USD)
3Q05
20.6
21.2
71.4
31.2
14.9
77.6
19.3
8.7
2Q06
21.5
20.6
74.5
29.1
15.3
74.9
20.4
9.4
3Q06
22.2
21.4
75.1
30.1
18.2
79.6
22.8
10.5
3Q05 vs 3Q06
7.6%
1.1%
3.7 p.p.
-3.4%
21.6%
1.9 p.p.
18.6%
21.3%
2Q06 vs 3Q06
3.1%
3.9%
0.5 p.p.
3.4%
19.0%
4.7 p.p.
14.0%
11.7%
1 Includes charter, cargo and Other revenues, net of taxes2 Net of taxes3 Gross of taxes
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...while CASK remained practically stable, increasing 0.6%...
3Q05 Fuel ExchangeRate
Costreduction
3Q06
18.320.90
-0.74 -0.0518.43
10
15
20
25
Total CASK (BR GAAP - R$ cents)Results mainly due to
Reduction of commercial costs
Dilution of fixed costs (more hours per aircraft)
Variation of 0.6%(-1.1% ex-fuel)
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…increasing our spread (RASK – CASK)…
RASK
CASK
2002 2003 2004 2005 1T06 2T06 3T0615
20
25
RASK/CASK (R$ Centavos)
EBITMargem
Spread
-7.1%
-0.3
-0.9%
0.8
6.5%
1.4
7.5%
1.5
11.9%
2.4
12.8%
2.8
16.8%
3.7
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... Increasing our margins in BR GAAP...
3T05 3T06
351
569
0
200
400
600
EBITDAR (BR GAAP- R$ Milhões)
3T05 3T06
170
349
0
100
200
300
400
EBIT (BR GAAP- R$ Milhões)
22,8%
11,0%
16,8%
Margin over Net Revenue
27,4%
3T05 3T06
93
213
0
30
60
90
120
150
180
210
Lucro Liq (BRGAAP - R$ Milhões)
10,2%
62%
6,1%
106%
128%
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..and US GAAP...
3T05 3T06
354
548
0
200
400
600
EBITDAR (US GAAP- R$ Milhões)
3T05 3T06
227
382
0
100
200
300
400
EBIT (US GAAP- R$ Milhões)
23,0%
14,7%
18,4%
Margin over Net Revenue
26,4%
3T05 3T06
194
229
0
50
100
150
200
250
Lucro Liq (USGAAP - R$ Milhões)
11,0%
55%
12,6%
68%
18%
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The main difference between BR and US GAAP is the accounting treatment of aricraft leasing
BR GAAP Leasing Deprec and Amortization
IncomeTaxes
Others US GAAP
213
46
-33 -8
12 229
0
100
200
300
Net Profit Reconciliation to US GAAP
39 aircrafts are reclassified from operating to capital
leases, according SFAS no. 13
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…resulting in a significant improvement in the EPS
3T05 3T06
0.65
1.41
EPS (BR GAAP) R$
3T05 3T06
1.351.52
EPS (US GAAP) R$
117%
13%
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Solid balance sheet improvement
(Net Adjusted Debt = Financial Debt + Operational Leases – Cash)
2004 2005 1Q06 2Q06 3Q06
4,863
4,035 4,049 3,965 4,008
Net Adjusted Debt (R$ M)
100% 90% 87% 85% 84%
4,7x
3,5x
2,7x 2,4x2,2x
Net Adjusted Debt / EBITDAR
2004 2005 1Q06 2Q06 3Q06
297
995
1,208
1,564
2,234
Cash (R$ M)
Adj. Debt /Adj. Capt
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TAMM4
IBOVESPADOWJONES ADR
ADR TAM
10/3 29/90.6
0.8
1.0
1.2
1.4
1.6
1.8
Accumulated variation since March,10 2006
Since our second public share offer, our share has outperformed both the Ibovespa and Dow Jones
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2006 continues stronger than expected
Average market share
Average load factor
Aircraft utilization per day
(block hour)
CASK reduction yoy
New international flights
Guidance 2006 Acum. Sep06
Market demand growth
(in RPK terms)14.7%12% a 15%
47%45%
72.9%69.5%
12.51above 12
2.1%5%
• Daily to NY• Flight to London
• Since May• Start in October
TAM
Market
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Our expectations to 2007 are also strong
Average domestic market share above 50%
Average domestic load factor at approximately 70%
Aircraft utilization per day (block hour) higher than 13 hours
Reduction of 7% in total CASK ex-fuel in BR GAAP yoy Opportunity in the international market
Third frequency to Paris
Inauguration of two new international long haul frequencies
Market demand growth from 10% to 15% (in RPK terms)
TAM
Guidance 2007
Market
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In order to take advantage of the opportunity in the international, we have closed a deal with Boeing...
Firm contract for 4 B777-300ER + 4 options
Delivery for mid 2008
“Interim” contract for 3 MD-11s
Delivery within the next 6 months
Choice for B777-300ER based on:
More attractive cost per seat
Higher technological lifespan
Creation of a “mix” of aircraft size, allowing for more gradual capacity increase per destination
New credit line (EXIM)
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... And are therefore modifying our fleet plan
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64
22
3
12
88
6
4
14
103
4
16
106
4
16
112
2006 2007 2008 2009 2010
96
109
121126
132
0
50
100
150
Total Fleet
F100A319/320A330MD11B777
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TAM: among the top airlines in the world
Fonte: relatórios das Companhias, em 31 de dezembro de 2005
Nota: Números da EasyJet baseado nos últimos dados públicos de 2005
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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.