July 30 - August 1st, 2008
Credit Suisse2nd Annual Midsummer Latam Conference
2
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.
3
The domestic market grew 11% from January to June 2008
Source: ANAC
PreviousPeriod
CurrentPeriod
J F MA M J J A SO N D J F MA M J J A S ON D J F M A M J J A S O ND J F M A M J8085
9095
100105110
115120125
130
Domestic Market - Variation(vs previous period)
20072005 2006 2008
Accum. marketgrowth 2006
12%
Accum. marketgrowth 2005
19%
Accum. marketgrowth 2007
12%
Accum. marketgrowth 2008
11%
4
PreviousPeriod
Market
TAM
J F MA M J J A SO N D J F MA M J J A SO N D J F MA M J J A S ON D J F M AM J40
60
80
100
120
140
160
180
200
International Market - Variation(vs previous period)
Accum. Marketgrowth 2008
40%
Acum TAM 200641%
Acum TAM 200771%
Acum TAM 200540%
Acum TAM 200846%
Accum. marketgrowth 2005
7%
Accum. marketdecrease 2006
30%
Accum. marketdecrease 2007
5%
The international market (among Brazilian carriers) is recovering, and grew 40% in 2008…
Source: ANAC
20072005 2006 2008
5
…but Brazilian carriers are transporting less passengers than the international ones…
58.2%
41.8%
57.7%
42.3%
66.9%
33.1%
71.2%
28.8%
69.8%
30.2%
2004 2005 2006 2007 June2008*
0
20
40
60
80
100%
% international passenger
BrazilianCarriers
IntlCarriers
Source: ANAC annual report
* estimates
6
…due to lower utilization of frequencies allowed in the bilateral agreements
77
107
147
2821
357
10535
Italy
England
Germany
France
Spain
USA
1414
1414
2121
3030
5151
105105
150 100 50 0 50 100 150
Weekly Frequencies
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% 49,1% 48,2% 48,6%43,5%
2003 2004 2005 2006 2007 Jan - Jun 2008 2Q08 jun/08
12,0% 14,3%
37,5%
67,5% 70,6% 74,0% 75,3%
18,8%
2003 2004 2005 2006 2007 Jan - Jun 2008 2Q08 jun/08
8
We are strengthening our network in the international market through fleet and partnerships
Increased widebody fleet plan for the next 10 years, substituting older aircraft
2 A340s (delivered in 2007)
8 B777-300ERs (4 in 2008, 4 in 2012)
22 A350s (as of 2013)
New A330 reducing Airbus fleet average age
2 B767-300ERs
Complete phase-out of F100 (impact on intra South American routes)
Expansion of network through additional destinations and frequencies
New full code share agreements at each major country – United Airlines; Lufthansa; LAN Group and TAP
Memorandum of understanding with Air Canada end Swiss
Focus on South American coverage – integration of TAM Airlines (Mercosur) activities
9
The international operations works as a natural hedge
24%
76%
33%
67%
2006 20070
20
40
60
80
100%
Revenue(Passenger + Cargo)
DomesticInternational
Dollarexchangerate
DomesticInternational
2.138
73%27%
1.771
64%36%
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
Revenues originated in the
international operations are
expected to reach 45% - 50% until
Dec/2008
Revenues originated in the
international operations are
expected to reach 45% - 50% until
Dec/2008
10
158
157
506
1,093
199
214
613
1,321
1Q07 1Q08
1,913
2,347
0
500
1,000
1,500
2,000
2,500
Gross Revenue (R$ M)
Dom.Pax
Int.Pax
Cargo
Others
Domestic passenger revenue grew 21%
RPK increased 15%
ASK increased 14%
International passenger revenue grew 21%
RPK increased 61%
ASK increased 50%
Cargo revenue grew 37%
Other revenue grew 26%
Our gross revenue increased 23%...
23%
11
...but total RASK reduced 2%...
RASK total ¹ ²
RASK scheduled domestic²Domestic load factor - %
Yield scheduled domestic³
RASK scheduled international²
International load factor - %
Yield scheduled international³
Yield scheduled international³(USD cents)
1Q071Q07
16,72
14,54
69,4
22,00
14,07
71,3
19,78
9,65
4Q074Q07
17,87
16,69
70,4
24,90
11,26
71,0
15,88
8,96
1Q081Q08
16,38
15,37
69,9
23,09
11,39
76,9
14,82
8,47
1Q08 vs 1Q07
1Q08 vs 1Q07
-2,1%
5,7%
0,5 p.p.
5,0%
-19,0%
5,6 p.p.
-25,1%
-12,2%
1Q08 vs 4Q07
1Q08 vs 4Q07
-8,3%
-7,9%
-0,5 p.p.
-7,3%
1,2%
5,9 p.p.
-6,7%
-5,4%
R$ Cents
1 Includes charter, cargo and Other revenues, net of taxes2 Net of taxes3 Gross of taxes
12
CASK
CASK excl-fuel
1Q07 1Q08
15.92 16.25
0
5
10
15
20
Total CASKBR GAAP - R$ cents
1Q08 vs 1Q07
-5.5%
2.1%
...while total CASK increased 2%...
13
...reducing the spread (RASK-CASK)...
1Q07 1Q08
16.72 15.92 16.38 16.25
0
5
10
15
20
RASK/CASK (R$ Cents)BR GAAP
RASKCASK
EBITMargin
Spread
4.8%
0.80
0.8%
0.13
14
1Q07 1Q08
340
272
0
100
200
300
400
EBITDAR - R$ M
...impacting our margins in BR GAAP...
Margin over net revenue
1Q07 1Q08
88
18
0
20
40
60
80
100
IT - R$ MEB
1Q07 1Q08
59
30
t Income - R$ M
20
40
60
80
Ne
BR GAAP
-20%
19%
12%
-80%
5%
0,8%
3% 0,1%
-96%
15
1Q07 1Q08
331
283
0
100
200
300
400
EBITDAR - R$ M
...and in US GAAP...
1Q07 1Q08
146
83
0
50
100
150
IT - R$ MEB
1Q07 1Q08
138
47
0
t Income - R$ M
50
100
150
Ne
US GAAP
Margin over net revenue
-14%
18%
13%
-43%
8%
4%
8%
2%
-66%
16
1Q07 1Q08
0.39
0.02
Earnings per shareBR GAAP (R$)
1Q07 1Q08
0.92
0.31
Earnings per share US GAAP (R$)
-66%-96%
...reducing our earnings per share
17
BR GAAP Leasing IncomeTaxes
Others US GAAP
3
57
-19
6 47
0
20
40
60
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
18
We are well positioned compared to other airline companies
Republic
Copa
West
Jet
Lan
Alle
gia
nt
Jazz
SkyW
est
South
west
TAM
Pin
nacl
e
JetB
lue
Air C
anada
ACE A
via
tion
Gol
Continenta
l
Del
ta
AM
R
Nort
hw
est
Ala
ska
AirTra
n
US A
irw
ays
Expre
ssJe
t
UAL
18%17%
14%
12%11%
9%8%
4% 4% 3%2%
-0% -1% -1%-2%
-3% -3% -3%
-5% -6%-7% -8%
-9%-10
-5
0
5
10
15
20%
Operating Margin (Mar Q 2008)US GAAP
19
Our balance sheet remains solid
R$ million - BRGAAP 2008* 2007 2006 2005 2004
Cash 2,226 2,607 2,453 995 297
Short-Term Debt 959 1,098 363 216 204
Long-Term Debt 1,365 1,345 895 425 399
Total Debt 2,324 2,443 1,258 641 603
Shareholder's Equity 1,489 1,527 1,449 760 191
Capitalization 2,855 2,872 2,344 1,185 590
Aircraft and flight equipment leases 5,949 5,976 5,032 4,389 4,557
Total Debt Adjusted 8,273 8,419 6,290 5,030 5,160
Total Capitalization Adjusted 8,804 8,848 7,376 5,574 5,147
Debt / Capitalization 81% 85% 54% 54% 102%
Adjusted Debt / Adjusted Capitalization 94% 95% 85% 90% 100%
Adjusted Net Debt / Adjusted Capitalization 69% 66% 52% 72% 94%
* LTM
20
Brazilian domestic market has high growth potential
Boardings per capita
Boardings per capita, adjusted by GDP per capita at PPPSource: World Bank Data, Credit Suisse Research as of 2006
Annual Trips / Person
1.70
1.85
2.32
0.62
0.60
0.55
0.50
0.82
Japan
US
Argentina
Chile
Mexico
Russia
Brazil
Germany
100107.3 111.4
117.4100
140.6
157.6
100
121.2
175.4
228.2
256.8
104.9
176.4
112.0
2003 2004 2005 2006 2007
Market’s RPK
GDP
TAM’s RPK
Growth of Brazilian Domestic Market
21
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
% Total Domestic Passengers Boarded% TAM slots
43%
34%
39%
32%
44%
42%
27%
26%
40%
32%
46%
0% 5% 10% 15% 20%
FOR
SDU
REC
CWB
POA
CNF
SSA
GIG
BSB
GRU
CGH
20062007
22
As Brazil becomes “stable”, the leisure segment will become increasingly more important
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%
Traveling is one of the top “desire” items for consumption
* TAM Estimates
23
We will be expanding our fare bundle strategy for the domestic market in 2008...
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
24
...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
25
...optimizing the utilization of our aircraft on off peak hours
* Average day in October, 2007
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 2350
55
60
65
70
75
80%
Domestic load factor per hour
Off Peak Off Peak Off PeakPeakPeak
26
We are beginning to evaluate new potential business units in the company
TAM Linhas AéreasTAM Linhas Aéreas
MRO(São Carlos)
MRO(São Carlos)
Loyalty ProgramLoyalty
Program HandlingHandlingCargoCargo
Already structured as a business unit with focus in maximizing assets
None or little focus on selling services to third-parties Not structured as business units
27
We have a positive outlook for 2008
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
TAMTAM
MarketMarket
Actual - 1Q08Actual - 1Q08
10.8%*
49.1% dom*70.6% intl*
14.2%49.7%
73.2%
-5.5%
---
* From January to June
28
Our growth plan is supported by a flexible fleet plan
3
14
88
10
4
2
16
101
4
2
18
104
4
2
20
110
4
2
22
113
8
2
22
115
2007 2008 2009 2010 2011 2012
115123
128136
141147
0
50
100
150
Total fleet
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
B767
29