Post on 28-Jan-2018
transcript
Santander
-
13th
Annual Latin America Conference
Cancun, January, 2009
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
PreviousPeriod
CurrentPeriod
J FMAM J J ASOND J FMAMJ J ASOND J FMAM J J A SOND J FMAM J J A SOND90
95
100
105
110
115
120
125
130
Domestic Market - Variation(vs previous period)
The domestic market grew 7% from January to November 2008
Source: ANAC
20072005 2006 200819% market growth 12% market growth 12% market growth 7% market growth
4
PreviousPeriod
MarketTAM
J FMAMJ J A SOND J FMAMJ J ASOND J FMAM J J A SOND J FMAMJ J ASOND40
60
80
100
120
140
160
180
200
International Market - Variation(vs previous period)
The international market (among Brazilian carriers) is recovering and grew 26% …
Source: ANAC
40% TAM’s growth 41% TAM’s growth 71% TAM’s growth 40% TAM’s growth
20072005 2006 20087% market growth 30% market decrease 5% market decrease 26% market growth
5
…with higher growth anticipated for Brazilian carriers due to the unbalance in the bilateral agreements…
Source: ANAC annual report
* estimates
57.4%
42.6%
58.2%
41.8%
57.7%
42.3%
66.9%
33.1%
71.2%
28.8%
66.5%
33.5%
2003 2004 2005 2006 2007 Jan-Nov2008*
7.78.9
9.9 10.211.4 10.9
0
3
5
8
10
13
International passenger - Million
BrazilianCarriers
IntlCarriers
CAGR 2003 – 200710%
CAGR 2003 – 200710%
6
…observed in many countries, as the example between Brazil and USA
97
107
127
2821
297
12453
Italy
England
Germany
France
Spain
USA
1414
1414
2121
3030
5151
126*126*
150 100 50 0 50 100 150
Weekly Frequencies
* In July 2008 there was an addition of 21 frequencies limited 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
TAM’s Domestic Market Share*TAM’s Domestic Market Share*
Source: ANAC
* RPK – Revenue passenger kilometer
TAM’s International Market Share* – Among Brazilian carriersTAM’s International Market Share* – Among Brazilian carriers
33,0%35,8%
48,0% 48,9% 50,4% 52,4% 51,7%
43,5%
2003 2004 2005 2006 2007 Jan - Nov 2008 3Q08 nov/08
12,0% 14,3%
37,5%
67,5%74,3% 75,8%
84,7%
18,8%
2003 2004 2005 2006 2007 Jan - Nov 2008 3Q08 nov/08
8
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
9
178200
554
1,214
263
260
813
1,670
3Q07 3Q08
2,146
3,006
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Gross Revenue (R$ M) 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%
Our gross revenue increased 40%...
Domestic Pax International Pax Cargo Other
40%
10
...and total RASK increased 18%...
RASK total ¹ ²
RASK scheduled domestic²
Domestic load factor - %
Yield scheduled domestic³
RASK scheduled international²
International load factor - %
Yield scheduled international³
Yield scheduled international³(USD cents)
3Q073Q07 2Q082Q08 3Q083Q08 3Q08 vs 3Q07
3Q08 vs 3Q07
3Q08 vs 2Q08
3Q08 vs 2Q08
R$ Cents
1 Includes charter. cargo and Other revenues. net of taxes2 Net of taxes3 Gross of taxes
RASK scheduled international² (USD cents)
17.01
15.43
66.3
24.42
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
66.5
28.81
14.85
79.9
18.60
9.72
18.0
18.2
0.1
p.p.
18.0
18.6
9.1
p.p.
5.1
1.0
9.1
3.3
-1.6
p.p.
5.8
29.4
6.5 p.p.
18.9
-1.1
6.81 7.21 7.76 13.9 7.6
11
...and the total CASK increased 14%...
CASK
CASK excl-fuel
3Q07 3Q08
16.54
18.91
0
5
10
15
20
Total CASKBR GAAP - R$ cents
3Q08 vs 3Q07
1.2%
14.3%
12
...leading to an increase in spread (RASK-CASK)
3Q07 3Q08
17.0116.54
20.08
18.91
15
17
19
21
RASK/CASK (R$ Cents)BR GAAP
RASKCASK
EBITMargin
Spread
2.8%
0.47
5.8%
1.18
13
However, we presented losses in our financial result
*WTI West Texas Intermediate
09.30.2008 09.30.2007
Financial incomeInterest income from financial investments 48.050 65.261Exchange variation 482.358 122.327Financial instrument/gains – FX 75 42.557Financial instrument/gains – WTI*
Realized 24.672Unrealized 28.219
Other 4.818 1.310535.301 284.346
Financial expensesExchange variation -428.884 -146.559Interest expense -111.115 -61.837Financial instrument/losses – FX -1.923 -38.612Financial instrument losses – WTI*
Realized -18.840Unrealized -268.267
Other -7.775 -9.410-836.804 -256.418
Financial result, net -301.503 27.928
Mainly impacted by unrealized
losses in WTI hedging
14
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 Moody’s)
Our WTI derivative transactions are contracted only for hedging purposes to protect operations...
20082008 20092009 20102010Notional(thousand of barrels)Fair Value (MTM)
2,180 7,200 800
(21,941) (170,276) (17,118)
1Q081Q08 2Q082Q08 3Q083Q08
Volume of contracted transactions (thousand of barrel)
WTI end of period (USD/barrel)
% consumption of the twelve ensuing months
5,390
102
41%
4,390
140
31%
10,180
101
56%
Current SituationCurrent Situation
15
…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 HedgingFuel Hedging
Risk CommitteeRisk 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 areasResponsibility: to make Management comfortable to regularly evaluate scenarios, hedge operations adopted and suggest any necessary adjustmentsActivities: to validate policies, approving processes and activities to manage risks involving liquidity, credit, legal, fiscal and operations
specialized in measuring risks and suggesting protection alternatives objectives
to make Management comfortable by creating “risk committees” to permanently evaluate scenarios, confirm the effectiveness of the hedge operations adopted and suggest any necessary adjustments
quality assurance on MTM evaluations
Risk Office (third part)Risk Office (third part)
16
In BR GAAP our operating margin was 6%...
BR GAAP
3T07 3T08
49
-113-120-90-60-30
03060
Net income - R$ M
3T07 3T08
313
423
0
100
200
300
400
500EBITDAR - R$ M
35%
15% 15%
3T07 3T08
57
167
0
50
100
150
200EBIT - R$ M
192%
3%
6%
2%
- 4%
US GAAP
3Q07 3Q08
306
390
0
100
200
300
400EBITDAR - R$ M
28%
3Q07 3Q08
112
186
0
50
100
150
200EBIT - R$ M
66%
3Q07 3Q08
143
-475-550-450-350-250-150-5050
150Net Income - R$ M
15% 14% 5%
6%7%
- 16%
Margin over net revenue
17
BR GAAP Leasing IncomeTaxes
Others US GAAP
-113
-535
184-11 -475
-800
-600
-400
-200
0
Net Profit Reconciliation to US GAAP
52 aircrafts are reclassified as capital leases as per SFAS nº 13 52 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
18
Our balance sheet remains solid…
R$ million - BRGAAP 2008* 2007 2006 2005 2004
Cash (1) 2.105 2.607 2.453 995 297
Short-Term Debt (2) 836 1.005 363 216 204
Long-Term Debt (3) 1.752 1.345 895 425 399
Total Debt (A) = (2) + (3) 2.588 2.350 1.258 641 603
Shareholder's Equity (4) 1.420 1.527 1.449 760 191
Capitalization (B) = (3 + 4) 3.173 2.872 2.344 1.185 590
Aircraft and flight equipment leases** (5) 6.140 5.976 5.032 4.389 4.557
Total Debt Adjusted (C) = (A + 5) 8.729 8.326 6.290 5.030 5.160
Total Capitalization Adjusted (D) = (3 + 4 + 5) 9.313 8.848 7.376 5.574 5.147
Debt / Capitalization (A / B) 82% 82% 54% 54% 102%
Adjusted Debt / Adjusted Capitalization (C / D) 94% 94% 85% 90% 100%
Adjusted Net Debt / Adjusted Capitalization (C - 1) / (D) 71% 65% 52% 72% 94%
* LTM
** Aircraft and flight equipment leases of the last twelve months x 7
19
…with no major exposure to foreign currency…
Current41%
Long term - 6%
Current24%
Long term10%
Permanent assets19%
Current21%
Long term23%
Current19%
Long term17%
Shareholders' equity20%
Assets Liabilities
R$ 7.1billion R$ 7.1billion
0
20
40
60
80
100%
Balance sheet mix
Permanent assets
Shareholders’ equity
Local currencydenominated
Foreign currencydenominated
BR GAAP
20
…and no leverage in the short term
Breakdown and maturity of financial debt
From the R$ 663 million of our short term loans, 92% are in foreign currency and correspond to pre delivery payments financing due 4Q08 – to be repaid with pre-committed US Ex-Im Bank financing
BR GAAP
Year Loans Lease payable Reorganization of Fokker 100 fleet Debentures Bonds Total % Total
2008 663.276 128.557 14.842 10.825 18.236 835.736 32%2009 30.837 17.081 3.711 0 0 51.629 2%2010 59.717 37.522 16.824 166.667 0 280.730 11%2011 160.247 37.232 12.189 166.667 0 376.335 15%2012 4.755 35.783 0 166.667 0 207.205 8%After 2012 9.203 253.014 0 0 574.290 836.507 32%
928.035 509.189 47.566 510.825 592.526 2.588.141 100%Foreign currency - denominated 837.411 509.189 47.566 0 592.526 1.986.692 77%Local currency - denominated 90.624 0 0 510.825 0 601.449 23%
R$ thousand09.30.2008
21
We intend to achieve a neutral hedging position due to the growth in our international business
31%
69%
35%
65%
2Q08 3Q080
20
40
60
80
100%
Revenue(Passenger + Cargo)
Dollarexchangerate
DomesticInternational
1.592
62%38%
1.914
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
20%
ASK proportion
International(Dollar denominated)Domestic(Real denominated)
22
High concentration of passengers in 11 airports
Source: ANAC
Important barrier to entry for newcomers
Limited ability for other competitors to grow
11 main airports in Brazil carry 72% of all passenger traffic
TAM has in aggregate ~40% of all slots available in these airports
% TAM slots
43%
34%
39%
32%
44%
42%
27%
26%
40%
32%
46% Fortaleza
Rio de Janeiro4
Recife
Curitiba
Porto Alegre
Belo Horizonte
Salvador
Rio de Janeiro³
Brasília
São Paulo²
São Paulo¹
% Total Domestic Passengers Boarded
0% 5% 10% 15% 20%
20062007
1 Congonhas2 Guarulhos3 Galeão4 Santos Dumont
23
Brazilian domestic market is composed mainly by business passengers
Leis
ure
Busi
nes
s
2000 2001 2002 2003 2004 2005 2006 2007
17.9
26.6 27.025.2
28.2
35.4
39.7
44.4
0
10
20
30
40
50
Domestic Market Passenger Mix (RPK M)
CAGR
11%
22%
* TAM Estimates
24
Opportunity for low fare passengers on off-peak flights
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 2355
60
65
70
75%
Load Factor per hour
3Q083Q07
Off Peak Peak Off Peak Peak Off Peak
25
We are expanding our fare bundle strategy for the domestic market...
Addition of extra features in the segmented bundles
Ability to “sell up”categories
Potential for further revenue increase
Harmonization of the fare bundle strategy to TAM Fidelidade growth
26
...increasing capillarity of sales through our new methods of payments Launched new methods of payment in May 2007
Payment at lottery storesApproximately 9,000 stores in Brazil
Already functioning as bank correspondent
Billing slipsAutomatic debit Financing for passengers via direct consumer credit with the main retail banks
Focus on leisure/lower income segments
27
2008 Guidance2008 Guidance
2008 was impacted by external factors
Jan - Dec 2008Jan - Dec 2008
7.4%
50.3% dom75.2% intl
14.2%30.6%
71.1%
-2.2%*
Brasília – Buenos AiresRio de Janeiro – MiamiSão Paulo – LimaRio de Janeiro – NYSão Paulo – Orlando
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)
TAMTAM
MarketMarket
*January - September
28
2009 will be a challenging year
Maintain leadership in both domestic and international markets
ASK growth of
Domestic 8%
International 20%
Average load factor at approximately 70% overall
One additional international destination or frequency in 2009
Domestic market demand growth from 5% to 9% (in RPK terms)
Guidance 2009Guidance 2009
MarketMarket
TAMTAM
29
43
18
104
43
18
107
43
20
110
43
22
113
83
22
115
83
22
117
2008 2009 2010 2011 2012 2013
129* 132137 142
148 150
Total fleet
Fleet plan
B767 Airbus wide-body Airbus narrow-bodyB777
In 2013 we will receive the first 2 A350s, which
will gradually substitute the A330s
In 2013 we will receive the first 2 A350s, which
will gradually substitute the A330s
*Considering two wide body aircraft to be incorporated into the operational fleet in January 2009 (1 B777 and 1 A330)
30
The economy downturn is a fact, however, understanding the bounce back is key
Rapid market recovery in 2010
Rapid market recovery in 2010
Market recovery in 2011
Market recovery in 2011
Adjustment of operations in flown hours and micromanagement of non operating activities
Maintaining fleet might jeopardize cash
ILLUSTRATIVE
?
Longer term recoveryLonger term recovery Mandatory fleet alteration
31
On our side, we are acting to prepare TAM for any turbulence
Act in the balance sheetIncrease / Preserve liquidity
Postpone / reduce investments
Focus in the P&L defending liquidity
Initiatives impacting cash
Initiatives impacting cash
Initiatives impacting cost
Initiatives impacting cost
32
MeaningMeaning
1) Cross management
“Spending Matrix”
2) Focus on spending development
Spending managed by more than one person (Entities and packages)
3) Systematic monitoring Effort directed based on spending detailed management: • deviation cause analysis
• action plan to eliminate deviations
Spending detailed until realization level
Sharing accountability is the main principle of the initiatives…
PrinciplePrinciple
33
... which have been identified and detailed at each directory
Finance & ITFinance & IT
Commercial & Planning
Commercial & Planning
OperationsOperations
TechnicalTechnical
Knowledge & People
Knowledge & People
MROMRO
Reviewing need/scope of IT projectsTreasury total focus on liquidity
Distribution costsControl non-operating international costs
Efficiency gainsCrew overnight scheme evaluation
Strategic sourcingRenegotiation with third parties
Conscious hiringReexamining benefits
Reduction of downtime per aircraftFinancing any required investment
Main priority to executives
during uncertainty:
regular meetings 2x/week
Main priority to executives
during uncertainty:
regular meetings 2x/week
NON EXHAUSTIVE