081124 Merrill Lynch

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Transcript of 081124 Merrill Lynch

  • 1. December, 2008

2. Information and Projection

  • This notice may contain estimates for future events. These estimates merely reflect the expectations of the Companys 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 TAMs current expectations and on projections of future events and financial trends that currently affect or might affect TAMs business, and are not guarantees of future performance. They are based on managements 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 TAMs 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. The domestic market grew 9% from January to October 2008 Source: ANAC 2007 2005 2006 2008 19% market growth 12% market growth 12% market growth 9% market growth 4. The international market (among Brazilian carriers) is recovering and grew 34% Source: ANAC 2007 2005 2006 2008 7% market growth 30% market decrease 5% market decrease 34% market growth 40% TAMs growth 41% TAMs growth 71% TAMs growth 43% TAMs growth 5. with higher growth anticipated for Brazilian carriers due to the unbalance in the bilateral agreements Source: ANAC annual report * estimates 6. observed in many countries, as the example between Brazil and USA * 21 frequencieslimited to the cities in the north, northeast and central west regions of Brazil and/or Belo Horizonte Brazilian Carriers Foreign Carriers Available space on bilateral Operated by Brazilian Carriers Operated by Foreign Carriers 7. We are both domestic and international market leaders TAMs Domestic Market Share* Source: ANAC * RPK Revenue passenger kilometer TAMs International Market Share* Among Brazilian carriers 8. 3Q08 Highlights(1/3)

  • Increasing our fleet
    • Delivery of 2 A319 and 4 A320 (versus 2Q08)
    • Delivery of 1 B767 and first B777-300ER (versus 2Q08)
    • Redelivery of the entire F100 fleet
    • Redelivery of 1 MD11 (versus 2Q08)
  • Operational efficiency
    • 12.6 block hours per aircraft per day
    • 13.1 block hours per aircraft per day. considering only the operating fleet
    • Average total load factor of 72.4% in 3Q08
  • Agreements:
    • Increase in TAPs code share, with flights to Buenos Aires, via So Paulo and Rio de Janeiro
    • Beginning code share with Lufthansa (August 18)
    • Beginning code share with Air Canada (October 07)
    • Entrance in Star Alliance announced (October 07)

9. 3Q08 Highlights(2/3)

  • Strengthening of our network
    • New nonstop flight to:
      • Buenos Aires, including from Braslia (August 08)
      • Bariloche and Lima, via So Paulo (August 14 and October 17, respectively)
      • Miami, via Rio de Janeiro (September 19)
    • ANACs approval to new nonstop flights to:
      • New York, via Rio de Janeiro (November 1st)
      • Orlando, via So Paulo (November 21)
  • Adjustments in TAM Airlines operational and administrative structure
  • Awards Received
    • Honor in 'Biggest and Best' of EXAMEs magazine 35 years ceremony
    • Valor 1,000 as the best Company in the Transportation and Logistics sector

10. 3Q08 Highlights(3/3)

  • Adherence to the declaration of "Business Social Responsibility and Human Rights
  • Share Buy-back program
    • 228.700 thousand shares bought-back
  • Contract for mobile communications aboard its aircraft
  • TAM CARGO
    • Largest freight terminal installed in Manaus
    • New Cargo Terminal Operations installed at Tom Jobim Airport

11. Star Alliance

  • On October 7, we announced our entry into the Star Alliance
    • Star Alliance is the largest global alliance and today is composed by 22 airline companies from all over the world
    • After the integration period, our passengers will have a better experience and several benefits as:
      • 1,000 destinations in 170 countries
      • 20 thousand daily frequencies
      • Luggage to final destination
      • Faster and easier connections
      • More than 800 VIP lounges
      • Possibility of accumulate and redeem points or miles in different loyalty programs

12. Our gross revenue increased 40%...

  • Domestic passenger revenue grew 38%
    • RPK increased 17%
    • ASK increased 17%
  • International passenger revenue grew 47%
    • RPK increased 38%
    • ASK increased 23%
  • Cargo revenue grew 30%
  • Other revenue grew 48%

Domestic Pax International Pax Cargo Other 40% 13. ...and total RASK increased 18%...

  • RASK total
  • RASK scheduled domestic
    • Domestic load factor - %
    • Yield scheduled domestic
  • RASK scheduled international
    • International load factor - %
    • Yield scheduled international
    • Yield scheduled international (USD cents)

3Q 07 2Q 0 8 3Q 08 3Q 08 vs3Q 07 3Q 08 vs2Q 0 8 1 Includes charter. cargo and Other revenues. net of taxes 2 Net of taxes 3 Gross of taxes

    • RASKscheduled international (USD cents)

1 7.01 15 .43 66.3 2 4.42 12 .52 70.8 17 .69 9 .62 18.40 17.66 68.1 27.23 11.48 73.4 15.64 9.82 20.07 18.24 6 6.5 2 8.81 1 4.85 7 9.9 1 8.60 9 .72 18.0 1 8.2 0.1p.p. 18.0 18.6 9.1p.p. 5.1 1.0 9.1 3.3 -1 .6p.p. 5.8 29.4 6. 5 p.p. 18.9 -1.1 6 .81 7.21 7 .76 1 3.9 7.6 R$ Cents 14. ...and the total CASK increased 14%... 15. ...leading to an increase in spread (RASK-CASK) 16. However, we presented losses in our financial result *WTI West Texas Intermediate Mainly impacted by unrealized losses in WTI hedging 17. Our WTI derivative transactions are contracted only for hedging purposes to protect operations...

  • All instruments contracted over-the-counter
  • No deposits of guarantees or margin calls
  • Counterparties rated as low credit risk by the major rating agencies (Standard & Poors, Fitch, and Moodys)

2008 2009 2010 Notional (thousand of barrels) Fair Value (MTM) 2,180 7,200 800 (21,941) (170,276) (17,118) 1Q08 2Q08 3Q08 Volume of contracted transactions (thousand of barrel) WTI end of period (USD/barrel) % consumption of the twelve ensuing months 5,390 105 41% 4,390 134 31% 10,180 104 56% Current Situation 18. following our policy and corporate governance

  • Our policy is to hedge from 30% - 80% of the projected fuel consumption in a minimum of 3 and a maximum of 24 months, approved and monitored monthly by board audit and financial committee

Fuel Hedging Risk Committee

  • We are committed to the highest standards of corporate governance and concerned with ensuring a high control standard of our processes
    • Composition: eight executives of the Company from different areas
    • Responsibility: to make Management comfortable to regularly evaluate scenarios, hedge operations adopted and suggest any necessary adjustments
    • Activities: to validate policies, approving processes and activities to manage risks involving liquidity, credit, legal, fiscal and operations