tam day 08 20090115 eng
TRANSCRIPT
November 10, 2008
TAM DAYTAM DAY
TAM International Corporation...with a strong local footprint
David Barioni Neto
2
Despite the adversities of 2008, TAM succeeded to establish as an International Corporation
TAM Financial100%
TAM Financial100%
TAM Capital100%
TAM Capital100%
TAM Viagens99,99%
TAM Viagens99,99%
TAM Mercosur94,98%
TAM Mercosur94,98%
TAM Linhas Aéreas100%
TAM Linhas Aéreas100%
TAM Financial 2100%
TAM Financial 2100%
TP Participações99,99%
TP Participações99,99%
SPC – Special Purpose Companies
3
Sin
gap
ore
Air
Sout
hw
est
JAL
ANA
Luft
han
sa
Rya
nai
rC
athay
Del
ta
Air F
rance
LAN
Air C
hin
a
Qan
tas
AM
R
British
Iber
iaea
syJe
t
Kore
an A
ir
United
CA
L
W
est
Jet
Copa
JetB
lue
Chin
aSouth
ern
US A
ir
EVA A
irA
lask
a
Chin
a A
ir
GO
LA
irAsi
a
Chin
aEa
ster
nA
irN
ew
Zea
land
ACE
Asi
ana
Air C
anad
aAir
Tran
Thai
Air
Air B
erlin
Jet
Airw
ays
Virgin
Blu
e0
2
4
6
8
10
Market Capitalization* - USD Billion
Our market capitalization places us among the top 20 airlines in the world
Americas
Europe
Other
*October 31, 2008
TAM Financial 100%
TAM Financial 100%TAM Capi tal
100%
TAM Capi tal 100%TAM Viagens
99,99%
TAM Viagens 99,99%
TAM Mercosur 94,98%
TAM Mer cosur 94,98%TAM Linhas Aéreas
100%
TAM Linhas Aéreas 100%
TAM Financial 2 100%
TAM Financial 2 100%
TP Par ti cipações 99,99%
TP Par ti cipações 99,99%
4
TAM Linhas Aéreas, our major business, thrived both in the domestic…
Maintaining leadershipMaintaining leadership
14
20
42
21
9
14
40
31
14
39
12
35
12
34
19
33
9
31
22
36
25
26
41
10
34
48
40
49
37
50
2000 2001 2002 2003 2004 2005 2006 2007 2008²0
20
40
60
80
100%
Domestic Market Share (RPKs¹)
TAMGOLVARIGVASPTRANSBRASILBRAOther
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q0820
22
24
26
28
30
32
Yield scheduled domesticR$ cents
Recovering yieldsRecovering yields
Standardizing fleetStandardizing fleet
Our narrow-body fleet operating domestic and South American routes is composed only by aircraft from the A320-family
A319 – 144 seats
A320 – 156/174 seats
A321 – 220 seats
Improving operating performanceImproving operating performance
Jan Feb Mar Apr May Jun Jul Aug Sep Oct
16%
14%
17%
15%
16%16%14%
14%
11%10%
TAM's Delayed flights2008
Source: ANAC¹ RPK – Revenue passenger kilometer² Accumulated January to September
TAM Financial 100%
TAM Financial 100%TAM Capi tal
100%
TAM Capi tal 100%TAM Viagens
99,99%
TAM Viagens 99,99%
TAM Mercosur 94,98%
TAM Mer cosur 94,98%TAM Linhas Aéreas
100%
TAM Linhas Aéreas 100%
TAM Financial 2 100%
TAM Financial 2 100%
TP Par ti cipações 99,99%
TP Par ti cipações 99,99%
5
7
75
7
82
14
87
12
88
12
85
14
77
18
50
7
37
13
14
67
17
10
72
2000 2001 2002 2003 2004 2005 2006 2007 2008²0
20
40
60
80
100%
International Market Share (RPKs¹)
TAMGOLVARIGVASPTRANSBRASILOther
…and international market
October 7, we announced our entry into the Star Alliance
We expect to start operations in 18 months, after achieving several minimum requirements
B777 MD11 A340 A330 B767
365
289267
212 205
0
100
200
300
400
Number of seats per aircraft typeIncorporated in 2008
We signed new code share agreements and memorandums of understanding:
Air Canada
Swiss International Air Lines
TAM Financial 100%
TAM Financial 100%TAM Capi tal
100%
TAM Capi tal 100%TAM Viagens
99,99%
TAM Viagens 99,99%
TAM Mercosur 94,98%
TAM Mer cosur 94,98%TAM Linhas Aéreas
100%
TAM Linhas Aéreas 100%
TAM Financial 2 100%
TAM Financial 2 100%
TP Par ti cipações 99,99%
TP Par ti cipações 99,99%
Consolidating leadershipConsolidating leadership Increasing our agreementsIncreasing our agreements
Entering in Star AllianceEntering in Star AllianceAdding flexibility to aircraft gaugeAdding flexibility to aircraft gauge
6
Within TAM Linhas Aéreas, we continue to focus on other value generation initiatives
TAM Linhas AéreasTAM Linhas Aéreas
MRO(São Carlos)
MRO(São Carlos) Loyalty ProgramLoyalty ProgramCargoCargo
Isolated business unit
Focus in maximizing assets profitability
Forming sales team
Direct benefits in cost reduction to the airline
To be structured as business unit
More fidelity from customer impacting passenger business
TAM Financial 100%
TAM Financial 100%TAM Capi tal
100%
TAM Capi tal 100%TAM Viagens
99,99%
TAM Viagens 99,99%
TAM Mercosur 94,98%
TAM Mer cosur 94,98%TAM Linhas Aéreas
100%
TAM Linhas Aéreas 100%
TAM Financial 2 100%
TAM Financial 2 100%
TP Par ti cipações 99,99%
TP Par ti cipações 99,99%
7
TAM Airlines, our subsidiary in Paraguay is capturing synergies from the Brazilian operations
FleetIn 2008, we substituted the F100 fleet per modern Airbus A320, with lower maintenance costs and more comfort to the passenger
TAM Financial 100%
TAM Financial 100%TAM Capi tal
100%
TAM Capi tal 100%TAM Viagens
99,99%
TAM Viagens 99,99%
TAM Mercosur 94,98%
TAM Mer cosur 94,98%TAM Linhas Aéreas
100%
TAM Linhas Aéreas 100%
TAM Financial 2 100%
TAM Financial 2 100%
TP Par ti cipações 99,99%
TP Par ti cipações 99,99%
Buenos Aires
Santiago
Montevidéu
Assunção
Sta Cruz de La Sierra
CochambabaRio de Janeiro
São Paulo
Ciudad delEste
Operational and administrative structureUnification of the management’s structure with TAM Linhas Aéreas
New network
Reduction in the headcount
Cost reduction projectsStreet stores closing
Revision of commercial costs
Negotiation of commercial contracts to global ones
8
TAM Viagens, our tour operator, is one of the biggest Brazilian tour operators
launched in Brazil in 1998. Based in São Paulo, with offices in Rio de Janeiro, Buenos Aires, and representatives in 49 additional Brazilian cities
relies on qualified agents network, innovative packages and high quality services
portfolio includes more than 250 products developed and managed according to the requirements and needs of our clients
TAM Financial 100%
TAM Financial 100%TAM Capi tal
100%
TAM Capi tal 100%TAM Viagens
99,99%
TAM Viagens 99,99%
TAM Mercosur 94,98%
TAM Mer cosur 94,98%TAM Linhas Aéreas
100%
TAM Linhas Aéreas 100%
TAM Financial 2 100%
TAM Financial 2 100%
TP Par ti cipações 99,99%
TP Par ti cipações 99,99%
9
Regardless of the position we achieved, the future remains challenging…
Sector growth in the domestic market will continue with the correlation of 2 to 3 times GDP growth
GOL + Varig (back to core
business)
São Paulo region continues to pose a question mark
Third airport project
Improvements in ViracoposAirport (Campinas) – new runway and new terminal
Fast connection to Guarulhos Airport
Potential concession model for Viracopos and Galeão airports?
Public hearing until December 1st, 2008 proposing changes in the slots distribution rule
Dem
and Regulator
Infrastructure Compe
tition
Consensus that GDP growth next year will be shy
Webjet (aircraft order)
Trip (capitalized by Skywest)
Azul (new entrant)
Testing possibility to allow longer flights from Santos Dumont (RJ) and
Pampulha (MG) – airports currently limited to intraregional (state)
10
… but we continue alert and resilient
Maintaining our growth plan… ...conscious about capital discipline
44
16
101
44
18
104
44
20
110
44
22
113
84
22
115
84
22
117
2008 2009 2010 2011 2012 2013
125 130138 143 149 151
Total fleet
B767 Airbus wide-body
Airbus narrow-bodyB777
No change in our fleet plan
Maintaining technical and cabin crew
Reviewing CAPEX and postponing
non core investments
Implementing initiatives to reduce
costs non-related to the operation
Centralization of back office in Europe
potential shared services in Brazil
11
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
12
TAM is prepared to face the challenges being people’s favorite with joy, creativity, respect and responsibility TAM is prepared to face the challenges being people’s favorite with joy, creativity, respect and responsibility
Star Alliance...joining an exclusive constellation
Paulo Castello Branco
2
Star Alliance is the largest alliance and we are the only Latin American member
Americas
Europe
Other
23 members
23 members
14 members
14 members
10 members
10 members
3
Joining Star Alliance will bring many benefits for TAM
Additional revenue and volume of passengers, from corporate contracts with the alliance
Contracts with more than 100 “Blue Chips” global companies
Better passenger distribution in the international market and optimization of our network
Operations under the same terminal, in order to reduce the connecting time
4
Our brand will be seen all around the world
5
Our Loyalty program will be integrated to the ones from member airlines
Advantages at all loyalty programsPossibility of accumulate and redeem points or miles in different loyalty programs
More destination options
Priority check-in and boarding
6
Passengers will have a better experience…
Baggage re-check areas
Baggage to final destination
Common baggage service facilities
Faster and more efficient baggage handling
7
…having access to hundreds of lounges in the world…
More than 800 VIP lounges around the world
First and business classes passengers
Star Alliance Gold Members
8
...been able to connect in all of our international long haul destinations
Total
CDGCDG
13
FRAFRA
15
JFKJFK
13
LHRLHR
16
MADMAD
9
MIAMIA
5
MXPMXP
10
# Gateways# Gateways
776666555554433211
81
9
TAM + Star Alliance transported 38% of the international passengers in Brazil
TAM26%
Star Alliance3%
One World15%
Sky Team8%
None48%
TAM19%
Star Alliance13%
One World41%
Sky Team26%
TAM15%
Star Alliance35%
One World16%
Sky Team23%
None10%
Sta
r Alli
ance
One W
orl
dN
one
Latin America USA and Canada Europe Other
4,415,996 2,821,979 3,820,782 352,851
Total =11,411,608
0
20
40
60
80
100%
Enplanements to and from Brazil in 2007
Source: ANAC’s 2007 annual
report
10
Our code-share agreement with the LAN Group will remain unchanged
TAM26%
Star Alliance3%
LAN15%One World
0%
Sky Team8%
None48%
TAM19%
Star Alliance13%
One World41%
Sky Team26%
TAM15%
Star Alliance35%
One World16%
Sky Team23%
None10%
Sta
r Alli
ance
One W
orl
dN
one
Latin America USA and Canada Europe Other
4,415,996 2,821,979 3,820,782 352,851
Total =11,411,608
0
20
40
60
80
100%
Enplanements to and from Brazil in 2007
Source: ANAC’s 2007 annual
report
11
Full integration in the alliance will take 18 months
Star Alliance Requirements Check List*Star Alliance Requirements Check List*
Safety Program and AuditPremium Customer Benefits
Star Alliance Gold Check-inLounge access policy
Customer HandlingSpecial baggage proceduresBaggage tracing and claim service
Sales Strategy & ProductStar Alliance Corporate PlusGDS alliance availability display
Safety Program and AuditPremium Customer Benefits
Star Alliance Gold Check-inLounge access policy
Customer HandlingSpecial baggage proceduresBaggage tracing and claim service
Sales Strategy & ProductStar Alliance Corporate PlusGDS alliance availability display
Frequent Flyer Accrual and RedemptionCommunication Principles
Star Alliance orientation training
Branding PrinciplesUsage of the Star Alliance Brand
Quality ManagementQuality assurance
Business Support ToolsManagement of Crisis and EmergencyMembership Agreements
Frequent Flyer Accrual and RedemptionCommunication Principles
Star Alliance orientation training
Branding PrinciplesUsage of the Star Alliance Brand
Quality ManagementQuality assurance
Business Support ToolsManagement of Crisis and EmergencyMembership Agreements
Impact of additional USD 60 million/year in revenues after integration
* The complete check list is composed by 75 minimum requirements.
People...our strategy for a sustainable future
Guilherme Cavalieri
2
We understand it is fundamental to have a sounding support from our people
TAM’s universe of people goes beyond our employees…
... we consider our passengers, customers, suppliers and others when developing our strategies, disseminating our essence
3
We have a roadmap of priorities to allow these people to develop…
• Competence methodology implementation
• Leadership assessment
• Management Development Program to close competency gaps
• Succession plan for all leadership positions
Management DevelopmentManagement Development
Culture Management
Culture Management
Policies & ProceduresPolicies & Procedures
Organizational Structure
Organizational Structure
• Consolidation of the quality culture, spirit to serve
• Dissemination of cost culture
• Educational program on Sustainability
• Employee Survey
• Structuring of “TAM Memory” – museum collection
• Implement new remuneration and benefits policy and strategy
• Revision of capacitating and training processes
• Consolidation of the Human Resources Business Partners concept
• Continue organizational adjustments in the national and international stations
• Implement Shared Services Center
• Restructure Personnel Administration area
4
…and to echo our legacy for the future
TAM’s essence should convey…
Mod
ern
Mod
ern
Spiri
t to
Serv
eSp
irit t
o Se
rve
Sust
aina
bilit
ySu
stai
nabi
lity
Trus
tTr
ust
Total focus on operations...delivering more with less
Fernando Sporleder Junior
2
Our target is to achieve excellence to passengers and optimize operations
CCOA*
DOV*
GSE*
Airport
Crew
PunctualityRegularity
ServiceComfort
* CCOA - Air Operations Control CenterDOV - Flight Operating DispatchGSE - Ground Support Equipment
3
Crew procedures were revised to improve services and gain productivity• Standardization of communication with passengers
Standardized speech
Standardized rules
Increase in the passengers’ perception
• Optimization on crew’s scheduling
Productivity increase
Disparity decrease
Absenteeism decrease
Overnight at home
PunctualityRegularity
ServiceComfort
Crew
4
We integrated CCOA, DOV and GSE operations to facilitate information flow
• Higher punctuality and regularity
• Better services consistency
• Higher loading consistency
• Safety increase
• Quickness in operations
• Routes rationalization
• Better flight planning
• Technical dispatchers in main bases
At hub airports turnaround time of 40 minutes
Airports operated with jetway – 30 minutes
Airports without jetway– 20 minutes
Fast turnaround of the aircraftFast turnaround of the aircraft
PunctualityRegularity
ServiceComfort
CCOA
DOV
GSE
* CCOA - Air Operations Control CenterDOV - Flight Operating DispatchGSE - Ground Support Equipment
5
Airport continues to focus on enhancing passenger experience
PunctualityRegularity
ServiceComfort
Airp
ortServiceService PunctualityPunctuality
Initiatives to decrease lost luggage Initiatives to decrease lost luggage Web and self check-inWeb and self check-in
• Quality assurance at airports to guarantee service level
New training schemeModification of hiring policy based on adjusted profileDissemination of culture after rapid growthFast track project
• Reduce check-in time trough web and self check-in
Jan/06 May/06 Sep/06 Jan/07 May/07 Sep/07 Jan/08 May/08 Sep/080
10
20
30
40
50%
% of domestic passengers boarded via web and self check-in
Jan/07 Jun/07 Nov/07 Apr/08 Sep/080
2
4
6
Occurrences with luggage per 1,000 enplanements in 2008
• KPIs linked to lost luggage reduction
Jan/07 Jun/07 Nov/07 Apr/08 Sep/080
5
10
15
20
25
30
35
40
45
Claims on delays (Talk to the President)Per 100.000 enplanements
6
We have standardized our narrow body fleet with the Airbus A320family...
Source: Airbus
• Complete phase out of the 100seat aircraft
• Reduction of maintenance costs
• Interchangeability of crew and aircraft in the network
• More comfort to our passengers with modern aircraft (average age of 5.6 years)
• A320 operational excellence with one of the highest flown hours per day
PunctualityRegularity
ServiceComfort
7
...while creating a “mixed”
wide body fleet to serve different destinations
Incorporation of Boeing aircraft in the wide body fleet
Creation of a “mix” of aircraft size, allowing for adequate capacity per destination (traffic and infrastructure)
B777 opens a huge opportunityfor the cargo operations
Continuous effort to offer best in class product to passengers
Firm orders of A350-XWB to substitute the A330s as of 2013
New generation of aircraft with reduced noise, weight and emissions
PunctualityRegularity
ServiceComfort
8
Despite of the improvements, the pursue of our target continues as we signed a commitment
Unlocking Value...one year later
Paulo Castello Branco / Libano Barroso / Ruy Amparo
2
As announced last year, we evaluated new potential business units in the company
TAM Linhas AéreasTAM Linhas Aéreas
MRO*(São Carlos)
MRO*(São Carlos)Loyalty ProgramLoyalty ProgramCargoCargo
3
TAM Linhas AéreasTAM Linhas Aéreas
MRO*(São Carlos)
MRO*(São Carlos)Loyalty ProgramLoyalty ProgramCargoCargo
4
83
156
123
184
130
277
165
322
417
360
393
337
2003 2004 2005 2006 2007 2008*
239307
407487
777730
0
200
400
600
800
1,000
Cargo Revenues (R$M)
DomesticIntl
Dom ASKgrowth
Intl ASKgrowth
-
-
9%
46%
33%
34%
24%
35%
18%
65%
14%
40%
CAGR
13.9%
45.1%
We continue to increase our cargo operations
* Jan-Sep
12%
29%
TAM Linhas Aéreas TAM Linhas Aéreas
MRO* (São Carlos)
MRO*(São Carlos)Loyalty
Program
Loyalty ProgramCargo
Cargo
5
9
44
43
9
44
30
10
49
25
10
64
21
3
14
88
10
44
16
101
44
18
104
44
20
110
44
22
113
84
22
115
84
22
117
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
96
83 8495
115125
130138 143
149 151
Total fleet
Mainly due to the consolidation in our international business
TAM Linhas Aéreas TAM Linhas Aéreas
MRO* (São Carlos)
MRO*(São Carlos)Loyalty
Program
Loyalty ProgramCargo
Cargo
* Tons per Kilometer (cargo unit)
B767 Airbus wide-body Airbus narrow-bodyB777MD11F100
In 2007, the addition of 7 wide bodies, increased cargo
international revenues in 153%
In 2007, the addition of 7 wide bodies, increased cargo
international revenues in 153%
6
DomesticInauguration of two new cargo terminals (Galeão and Manaus)
Addition of commercial functionalities in domestic IT system
Quality assurance area created to speed up problems solution
Massive participation on sector events
Management and organization model optimization at stations
InternationalNew software (Cargospot) to improve commercial, operational and financial efficiency (in implementation)
Insourcing of the USA cargo commercial unit – increasing commercial efforts and decreasing costs
Better commercial approach trough cargo and client segmentation
Cargo agreements with Airline partners and key clients
In addition, we have implemented several initiatives to reach cargo’s full potential…
TAM Linhas Aéreas TAM Linhas Aéreas
MRO* (São Carlos)
MRO*(São Carlos)Loyalty
Program
Loyalty ProgramCargo
Cargo
7
…coordinating with the airline business
Investment in the construction of TAM’slargest cargo terminal in Manaus…
Operational area of 2,160 square meters and 540 square meters of admin/commercial area
More than 80 tons per day of storage capacity
Faster dispatch of freight shipments
Individualized service and total access for the handicapped
Exclusive areas for different types of freight, and cold storage for perishables
... and substitution of the aircraft type flying the route Manaus - Miami from an A320 to an A330 so that there is more available capacity for cargo
TAM Linhas Aéreas TAM Linhas Aéreas
MRO* (São Carlos)
MRO*(São Carlos)Loyalty
Program
Loyalty ProgramCargo
Cargo
8
TAM Linhas AéreasTAM Linhas Aéreas
MRO*(São Carlos)
MRO*(São Carlos)Loyalty ProgramLoyalty ProgramCargoCargo
9
Fidelidade continues to show a very healthy growth in revenues and membership…
Source: TAM
2003 2004 2005 2006 2007 Jan-Sep2008
31
58
85
207
290
337
0
50
100
150
200
250
300
350
Revenue R$ Million
CAGR
82%
0.7 0.8 1.1 1.41.7
2.1
2003 2004 2005 2006 2007 Sep2008
2.0
2.5
3.0
3.8
4.4
5.9
0
1
2
3
4
5
6
Number ofmembers (Million)
CAGR
32%
31%
TAM Linhas Aéreas TAM Linhas Aéreas
MRO* (São Carlos)
MRO*(São Carlos)Loyalty
Program
Loyalty ProgramCargo
Cargo
Total Active
10
…but to reach its full potential, Fidelidade should increase client base penetration…
Up to 7
3%9%
6%
73%
9%
8 to 12
8%
19%
7%
56%
10%
14 to 24
20%
19%
16%
40%
5%
Over 24
31%
17%
23%
26%
4%
Average trips per year
White cardBlue cardRed cardOthers
None/ do notknow
There is an opportunity to increase penetration among both, frequent and non-frequent flyers
0
10
20
30
Penetration on country population (%)
AirM
iles
CA
27
Qanta
s
24
Air NZ
24
AirF
ranc
e/KL
M
21
Nect
ar
21
Lufth
ansa
18
JAL
16
Flyb
uys
(AU)
13
AirM
iles
UK
13
Aero
plan
12
Virg
inBl
ue
6
Briti
shAi
rway
s
5
TAM
3
Penetration on TAM passengersPenetration on TAM passengers Penetration on populationPenetration on population
Source: TAM
TAM Linhas Aéreas TAM Linhas Aéreas
MRO* (São Carlos)
MRO*(São Carlos)Loyalty
Program
Loyalty ProgramCargo
Cargo
11
..and strengthen partnership network
There is a significant opportunity to grow Fidelidade’s penetration in partners from non-financial industries
Less than 1% of TAM Fidelidade’s gross billing come from non-financial partners
Other top FFPs reach 10-20% of earnings sources from non-financial partners
High volume of miles could be sold to new partners, such as retail and telecom (large scale industries)
More options for accrual and redemptions also improve FFP’s value proposition
Retail Shopping 3.1%
Car Rentals 1.4%
Personal Financial
0.9%Flowers0.6%
Other0.5%Hotels
4.9%Telephone, Wireless 9,3%
Credit Cards 19.7%
Flying, Elite Status/Other Bonuses59.6%
Total from other partners (excluding flight and credit cards partners): 20,7%
Top mileage earnings sourcesTop mileage earnings sources OpportunitiesOpportunities
Source: Wall Street Research; TAM
TAM Linhas Aéreas TAM Linhas Aéreas
MRO* (São Carlos)
MRO*(São Carlos)Loyalty
Program
Loyalty ProgramCargo
Cargo
12
Therefore TAM has dedicated a team with a clear mandate
Increase airline and financial services penetration
Prospect and develop profitable relationship with members (i.e. CRM)
New businesses within existing industries (i.e. debit cards)
Explore new industries (i.e. retail, telecom)
Renegotiation of current partnership agreements
Focus on higher price partnerships
Design lower cost redemption options
Focus on cheaper partnerships
Management of breakage
TAM Linhas Aéreas TAM Linhas Aéreas
MRO* (São Carlos)
MRO*(São Carlos)Loyalty
Program
Loyalty ProgramCargo
Cargo
13
TAM Linhas AéreasTAM Linhas Aéreas
MRO*(São Carlos)
MRO*(São Carlos)Loyalty ProgramLoyalty ProgramCargoCargo
14 Source: ATW /Flight International / Speednews / Aerohobby
We will focus in the market opportunities in Latin America for Airbus ...
TAM:15 A31970 A3203 A32112 A3302 A340OceanAir:16 F100
Aerolíneas6 A340
Mexicana10 A31820 A31932 A32018 F100
LAN5 A31815 A31917 A3205 A340
Mexicana - A320/F100
Aerolíneas Argentinas – A340
TAM A319/320/321/330
TACA7 A31926 A3204 A321
Air Jamaica9 A3206 A3212 A340
LANA318/319/320/340
AeromanA319/320
BWIA: 2 A340Air Caraïbes:3 A330Dutch Antilles: 2 F100
Cubana2 A320
TAM Airlines3 A320
Governo Venezuela1 A319
TAME2 A320
Avianca13 F100
AviancaF100
MRO FacilitiesAirlines
Aircraft Total
A318 15
A319 58
A320 161
A321 13
A330 15
A340 17
F100 49
Total 328
TAM Linhas Aéreas TAM Linhas Aéreas
MRO*
(São Carlos)
MRO*
(São Carlos)
Loyalty Program Loyalty Program
Cargo Cargo
15
…and for Boeing equipment
Aircraft Total
B727 2
B737 161
B747 2
B757 7
B767 51
B777 8
MD80 22
Total 253
TAM Linhas Aéreas TAM Linhas Aéreas
MRO*
(São Carlos)
MRO*
(São Carlos)
Loyalty Program Loyalty Program
Cargo Cargo
Source: ATW /Flight International / Speednews / Aerohobby
MRO FacilitiesAirlines
Aerolíneas ArgentinasB757/767(tbc)
• GOL14 B737-30030 B737-70035 B737-800• Varig14 B737-30001 B737-70007 B737-80001 B737-70001 B767-200ER01 B767-300ER
• Aerolíneas Argentinas05 B767-200ER02 B767-300ER07 B757-200
Mexicana02 B767(300ER)
LAN08 B737-20022 B767-300ER02 B737-200F08 B767-300F02 B747-200
MexicanaB727;737;757;767
VEM: B727;737;747;757;767;777;BBJ; MD11;DC10GOL: B737
LAN/GoodrichFull Boeing MRO
Aeroman/TACA (AirCanada)B737;747;757;767
BWIA: 07 B737- 800
TAME02 Boeing 727
AviancaB767-200ERB767-300ERB757-200MD-83
Avianca ServicesB757/767(tbc)
Aeromexico B737;757;767;777
• TAM:04 B76704 B777• Ocean
Air:03 B737-
30002 B767
Aeromexico 33 B737-70006 B737-80003 B767-200ER01 B767-300ER04 B777-200ER22 MD-80 family
16
We are organizing to capture the opportunities…
People
Current CapabilitiesCurrent Capabilities Future CapabilitiesFuture Capabilities
TAM Linhas Aéreas TAM Linhas Aéreas
MRO*
(São Carlos)
MRO*
(São Carlos)
Loyalty Program Loyalty Program
Cargo Cargo
Airbus aircraft and F100 Line maintenance, checks C and DComponents: hard-time, on-condition and condition monitoring
ISO14001FAA B767 airframe certificationAll targeted for 2009
IOSAFull EASA 145 certification (A330 and A321 included)Certification for A340, B767 and B777 components
Boeing aircraftRunning at optimized productivity
Construction of a new hangar for B777-300 and A350 (target 2010)Full utilization of facilities
Certifications
Facilities Hangars for up to 7 narrow body aircraft simultaneously (or 1 wide body and 5 narrow bodies)Painting hangar in full compliance with environmental lawsNon restricted 24h operations
17
…positively impacting MRO’s
main customer: TAM
Increasing the scale of sourcing and optimizing the utilization of facilities with new customers reduces unit cost
TAM Linhas Aéreas TAM Linhas Aéreas
MRO*
(São Carlos)
MRO*
(São Carlos)
Loyalty Program Loyalty Program
Cargo Cargo
Increasing third part services allow Better utilization of our installed capacityStrong dilution of our fixed costsIncrease in high-skilled labor availability
Reviewing the processes to structure the MRO as a business unit hasReduced the downtime per aircraft in 30% (more time available to fly and generate revenues)Reduced the turnaround time for components allows the inventory of spares of the airline to be optimizedImproved unit cost control
MB ASSOCIADOS
1
Brazilian Macroeconomic
Perspectives
“T A M DAY”
November 2008
Financial crisis impact on commodities Financial crisis impact on commodities
prices and on the Brazilian economy
perspectives
2
Financial crisis impact on commodity prices
• Prospects for global
growth have
deteriorated as
financial crisis has 130
140
Oil prices (US$/barrel)
financial crisis has
worsened.
• Weakening global
demand is
depressing
commodity prices.
3
60,8
50
60
70
80
90
100
110
120
06/11/07 06/02/08 06/05/08 06/08/08 06/11/08
Source: Bloomberg. Prepared by: MB Associados.
Oil: Supply and Demand (mb/d)
IEA Forecast: Demand projections have been reduced (mb/d)
mb/d
2008 2009
Demand 86,5 87,2
Supply non Opec 54,4 56,1
Source: Opec.
October
4
Source and forecasts: Opep. Prepared by: MB Associados.
IEA Forecast: Demand projections have been reduced (mb/d)
CRB – Commodities Index
700
900 CRB Total
Food
Metals
100
300
500
set/98 set/00 set/02 set/04 set/06 set/08
Source: CRB. Prepared by: MB Associados.
255,3
194,8
186,9
165,5
114,4
Islândia
EUA
Japão
Reino Unido
China
Brazilian banks have strong fundamentals
Average BIS ratio of the 50 largest banks (%)
Total Private Credit (% of GDP)
114,4
111,4
61,0
34,8
25,7
18,2
11,7
9,0
1,9
China
Alemanha
Emirados Árabes
Brasil
Rússia
México
Argentina
Noruega
Congo
Source: Bacen. Prepared by: Credit Suisse.
Source: Nation Master (2004/2005 data). Prepared by: MB Associados.
Financial crisis impact on the Brazilian economy?
• Strong contraction in
credit availability;
Reduction in
7
• Exchange rate
depreciation
aggravated by
investors
deleveraging;
Reduction in the Brazilian economy growth
2,122,00
2,10
2,20
2,30
2,40
Strong devaluation in domestic exchange rate (R$/US$)
Central bank’ sales of dollars in the spot and future exchange rate markets
(data until November 06, 2008 - US$ bi)
24,5Swap
1,50
1,60
1,70
1,80
1,90
05/11/2006 05/05/2007 05/11/2007 05/05/2008 05/11/2008
Source: Bacen. Prepared by: MB Associados.
3,1
5,8
6,3
Dollars lines for exporters
Swap with repurchase agreement
Spot
Inflation dilema: activity x exchange rate
Optimistic Scenario :
– If the exchange rate
returns to R$/US$ 1,90
combined with a strong
reduction in activity,
Pessimistic Scenario:
– If the exchange rate
remains above
R$/US$ 2,00, then it
will be necessary to reduction in activity,
then the exchange rate
pass-through into
inflation should be low;
will be necessary to
increase interest
rates to curb inflation
surge;
9
6,1
6,5
5,0
5,5
6,0
6,5
7,0
IPCA optimistic
IPCA pessimistic
Inflation (IPCA) in 2008 and 2009 (%)
4,8
4,3
2,5
3,0
3,5
4,0
4,5
5,0
I/07 II/07 III/07 IV/07 I/08 II/08 III/08 IV/08 I/09 II/09 III/09 IV/09
Source: IBGE. Prepared by and Forecast: MB Associados. 10
2008 2009 2008 2009
Exchange rate R$/US$ 1,90 R$/US$ 1,90 Above R$/US$ 2,0 R$/US$ 2,0
Interest rates 13,75 12,75 14,25 16,25%
OPTIMISTIC PESSIMISTIC
• Reduction in dollar
credit lines
(including ACC);
• Uncertainty about
small banks
balance situation;
Reduction in credit availability
Evolution of ACC lines to exports (US$ millions) – daily average
291
393
Lehman Brothers bankruptcy
Central bank first offer of credit
lines in dollars for exporters
(US$ 1,6 billions).Lehman Brothers bankruptcy
balance situation;
• Concerns about
companies
exposure to loans
that combine
exchange rate
derivatives
transactions;
11Source: Banco Central. Prepared by: MB Associados.
186
144
92
133 106
150
229
173
1-5 8-12 15-19 22-26 29-30 1-3 6-10 13-17 20-24 27-31
Sept/08 Oct/08
When will the credit availability normalize?
• The Central Bank measures to address liquidity
problems should help small banks to deal with
their balance sheet, reducing solvency risks. It
also may help to increase interbank credit
availability.availability.
• Despite that, the normalization in the credit
market will take time. For now, companies that
have access to credit are paying much higher
interests (140 to 150% of the CDI interest for
short term credit lines).
12
Demand slowdown in the Demand slowdown in the
4th quarter of 2008
13
Consumer expectation and business confidence indexes
Consumer 4.24.6
7.7
4.35.2
12.1
6.3 5.6
-1.7
-5.8
-1.0
3.4
-5
0
5
10
15Change over the same month last year - %
50.5
53.4
40.0
45.0
50.0
55.0
60.0
65.0
70.0
Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08
ICEI Actual Conditions Expectations
Source: Sondagem de Opinião da CNI. Prepared by: MB Associados.
Index
14
Business
-5.8
-10.1
-15
-10
Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08Source: FGV. Prepared by: MB Associados.
Commerce indicators in São Paulo(consults to SCPC)
%
SCPC
Jul/08 - Jul/07 6,5
15
Source: ACSP. Prepared by: MB Associados.
Jul/08 - Jul/07 6,5
Ago/08 - Ago/07 13,5
Sep/08 - Sep/07 0,2
Oct/08 - Oct/07 0,0
New vehicle sales
Units
Oct/08 Sept/08
Auto + light trucks 224.744 254.182 -11,6 �
Change
Oct/08 -
Sept/08 (%)
16
Auto + light trucks 224.744 254.182 -11,6 �
Trucks 12.100 12.040 0,5 �
Bus 2.485 2.512 -1,1 �
Motorcycle 150.110 184.368 -18,6 �
Others 9.068 9.254 -2,0 �
TOTAL 398.507 462.356 -13,8 �
Source: Fenabrave. Prepared by: MB Associados.
Vehicle inventories are increasing, as sales fall production will have to adjust
Vehicles: Production and sales(yoy montly change - %)
Vehicles: Inventories(in days of supply)
Sales
Production
17
Production
Industrial Electrical Energy consumption
5,25,3
5,2
5,6
5,2
4,8 4,8 4,8
5,1
5,6
12 - month accumulated growth - %
Previous forecast
4,84,7
4,8
4,6
3,8
4,8
3,6
4,1
4,6
jan/08 fev/08 mar/08 abr/08 mai/08 jun/08 jul/08 ago/08 set/08 dez/08
Source: EPE. Prepared by: MB Associados.
Current forecast
GDP Growth in 2009 (%)?
Optimistic Scenario:
– Even if the credit
availability starts to
recuperate, the
economy is expected to
Pessimistic Scenario:
– If the international
crisis don’t show
signs of
improvement then economy is expected to
expand slower in 2009,
with GDP growth of
3,5%;
improvement then
GDP growth rate
should be significant
smaller, around 2,3%.
19
2009 Most Probable GDP Growth Scenario
• GDP growth is expected to slow from 5,4% to 5,1%,
due to signs that 4th quarter growth will be lower
than previously forecasted.than previously forecasted.
• Activity is now expected to grow 2,8%, down 0,7
percentage point from our previous estimative. A
recovery is expected to begin late in 2009.
20
2009 GDP slowdown will be led by a decline in investment growth
• Most companies have decided to delay further
investments as the international financial crisis
deteriorated. This decision was intensified by thedeteriorated. This decision was intensified by the
fact that most companies deadline for fiscal
budged review occurs in September and October,
exactly when the credit crunch worsened.
21
Companies that already announced investments postponement
Sectors Companies
Oil and Gas Petrobrás
AgribusinessMinerva, VCP, Suzano Papel e Celulose, Cosan e Crystalsev (Uniduto), Klabin, Aracruz, Grupo Orsa, Stora Enso, Duratex, CoopercentralAurora, John Deere, Grupo Equipav, Nova America
Automotive Hyundai, Volkswagen, GM, Delphi, Bosch
CR2, Even, Camargo Correa Desenvolvimento Imobiliário, Condomínio Civil Construction
CR2, Even, Camargo Correa Desenvolvimento Imobiliário, Condomínio RN, Inpar, Holcim
Mining and Steelmaker
Gerdau, ArcelorMittal
Chemical and petrochemical
Elekeiroz, Comperj, Reliance
Electrical energy Tractebel Energia
Telecomunications Vivo
Retail Lojas Renner, Magazine Luiza, Ponto Frio, Amis
Information technology
Samsung
Sources: Jornal Valor, Estado de S.Paulo, Gazeta Mercantil , Folha de S. Paulo e Relatório Reservado. Prepared by: MB Associados.
2009 Most Probable Scenario: Breakdown on Brazil's quarterly GDP growth
5,3%
4,6%
5,8%6,1%
5,1%
4,4%
Previous forecast (2008: 5,3% e 2009: 3,5%)
Current forecast (2008: 5,1% e 2009: 2,8%)
Source: IBGE. Prepared by: MB Associados.
4,0%
3,0%2,6%
3,6%
4,6%
3,2%
1,9% 2,1%
2,9%
4,4%
I/08 II/08 III/08 IV/08 I/09 II/09 III/09 IV/09
6,04,4
12,9
2,9
19,3
3,3 4,02,5
5,57,8
2009 Most Probable Scenario: GDP growth by main components
Household consumption
Government consumption
Investment Exports Imports
4,2
5,5
4,55,1
2,02,4
2,9 2,8
Agriculture Industry Services GDP 24Source: IBGE. Prepared by and forecast: MB Associados.
Real income on 2006 and 2007, by minimum wage (variation in R$ billions)
14.1
20.117.3
25.7
16.9
20.3
9.6
15.415.0
20.0
25.0
30.0 2006 2007
On 2006 low income classes got real income growth because of minimum wageand social welfare. By 2007 middle class income has also started to improve.
25
2.8
6.5
0.8
-0.5
2.9
9.6
-6.4-10.0
-5.0
0.0
5.0
10.0
15.0
Up to 1 From 1 to 2 From 2 to 3 From 3 to 5 From 5 to 10 From 10 to 20 More than 20
Source: IBGE. Prepared by MB Associados.
Real income on 2008 and 2009, by minimum wage (variation in R$ billions)
Growth has accelerated income gain of the upper classes. This may diminish by2009 with the economy slowdown.
14.417.0
18.8 19.4
14.6 14.115.0
20.0
25.0
2008
2009
26
2.04.6
7.2
1.74.7
8.8
5.0 5.2
0.0
5.0
10.0
15.0
Up to 1 From 1 to 2 From 2 to 3 From 3 to 5 From 5 to
10
From 10 to
20
More than
20
2009
Source: IBGE, MB Associados. Prepared by MB Associados.
• Gradual recovery in credit availability;
• Exchange rate stabilization around R$/US$ 2,00;
• End of the interest rate hike cycle;
Perspectives for 2009 and 2010
• Inflation should converge towards the Central
Bank’s target;
• In 2008 GDP is expected to grow 5,1%. For 2009,
GDP growth rate will fall to around 3,0%. By 2010,
growth rate is expected to pickup to around 4,0%.27
Strong improvement in Brazil’s Strong improvement in Brazil’s
political, social and macroeconomic
indicators
28
Investment Grade reflects the strong improvement in Brazil’s economy
• Stabilization: domestic and external;
• Strong links with high growth regions;
• Formalization and consolidation in most markets;• Formalization and consolidation in most markets;
• Reduction in poverty, credit expansion and growth
in the domestic market;
• Investment expansion;
29
-4 -1
6
-1 -2
14 14
2
-2
11 1115 13
10
-3 -6 -7
45 46
40
31
-10
0
10
20
30
40
50
60
Current Account Balance
Trade Balance
33 36 3849 53 54
86
180
201
Improvements in the External SectorCurrent Account Evolution (US$ Billion)
International Reserves (US$ Billion)
-18-24
-30-40
-30
-20
1990 1991 1992 1993 1994 1995 1996 1997 2005 2006 2007 2008*
3,9
3,63,5
2,9
2,1
1,41,3 1,2 1,2
2000 2001 2002 2003 2004 2005 2006 2007 2008*
33 36 38
2000 2001 2002 2003 2004 2005 2006 2007 2008*
30
External Debt and Exports Ratio (%)
Source: Central Bank of Brazil. Prepared by: MB Associados(*) 12-month accumulated until June.
12
14
16
18
20
Inflation (CPI)
Inflation Target
Exchange
rate shock
(political
transition)
Domestic Stabilization
Reduction in Net Public Debt
(% of GDP)
Inflation rate
(12 months accumulated growth)
48,7 48,8
52,6
55,557,2
51,7
46,544,7
45
50
55
60
5,84,4
8,5
5,5 5,1
4,5 4,5
0
2
4
6
8
10
12
dez/01 jan/03 jan/04 jan/05 jan/06 jan/07 jan/08Source: Bacen, IBGE. Prepared by: MB Associados.
31
30,0 30,6
33,334,4
41,7
44,742,7
40,4
25
30
35
40
45
1994 1996 1998 2000 2002 2004 2006 2008*Source: Bacen. Prepared by: MB Associados.
(*) Until June-08.
8,5
14,815,8
17,3 17,4 17,718,6
17,7
20,6 20,9 20,6
11
13
15
17
19
21
23
40
60
80
100
120
140
160
180
200Number of companies
Exports
8,0
-0,8-1
2
4
6
8
Formal Informal
Formal markets are expandingFormal and Informal Employment
(12 months accumulated growth - %)
Exports (US$ Billion) and number of exporting
companies (thousands)
8,5
7
9
0
20
40
1990 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008*So urce: Secex. Prepared by: MB Associados.
-5
-3
mar/05 set/05 mar/06 set/06 mar/07 set/07 mar/08 set/08
Source: IBGE. Prepared by: MB Associados.
32
IPOs in Bovespa
6,7
55,7
15,45,44,54
64
26
97
20082007200620052004
R$ billions
No. IPOs
Source: Bovespa. Prepared by: MB Associados.
(*) 12-month accumulated until June.
Accumulated Change in Poverty –Brazil (%)
-2,15%
-0,15
-0,10
-0,05
0,00
2005/2003 1995/1993 2003/1995 2005/1993
33
-19,18% -18,47%
-35,53%
-0,40
-0,35
-0,30
-0,25
-0,20
-0,15
Source: Neri, Marcelo (2007). “ Poverty, Inequality and Income Policies”.
7,2
7,1 7,1
7,2
7,1 7,1 7,1 7,1 7,1
7,4
7,3
7,5
7,37 ,2
7 ,4
7 ,6
14,5
15,5
16,5 Duration (in months)
Deliquency rate (%)
Meses %
Credit Expansion, Duration and Delinquency rate
30,7
34,7
36,7
30
32
34
36
38% of GDP
Total Credit - % of GDPPersonal Credit - Duration and
Delinquency rate
7,0
7,1 7,1 7,1
7,0
7,1
7,0
7,1 7,1
6,9
7,1
7,0
6 ,4
6 ,6
6 ,8
7 ,0
10,5
11,5
12,5
13,5
ab
r/0
7
ma
i/0
7
jun
/07
jul/
07
ag
o/0
7
set/
07
ou
t/0
7
no
v/0
7
de
z/0
7
jan
/08
fev
/08
ma
r/0
8
ab
r/0
8
ma
i/0
8
jun
/08
jul/
08
ag
o/0
8
set/
08
Source: Bacen. Prepared by: MB Associados.
34
24,9
26,4
24,7
22,024,0
24,5
28,1
20
22
24
26
28
30
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008*
Source: Banco Central. Elaboration: MB Associados.
(*) Until June-08.
5,7
3,8
5,46,0
4,0
5,0
6,0
7,0 GDP Growth%
Gross Domestic Product is Growing Faster
1,3
2,7
1,1
3,23,8
0,0
1,0
2,0
3,0
4,0
2001 2002 2003 2004 2005 2006 2007 2008*Source: IBGE. Prepared by: MB Associados.
35
(*) 4-quarter accumulated growth until the 2nd quarter of 2008.
Increase in Investment in recent periods
8,7 9,110,0
13,4
15,7
10
15
20
Var.%
36
1,5
-0,3
-8,2
5,0
0,4
-5,2 -4,6
3,6
-10
-5
0
5
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008*
Fuente: IBGE. Elaboración y proyección: MB Associados. (*) Acumulado 4 trimestres até Junho/08.(*) Acumulado hasta II/08.Source: IBGE. Elaboration and Forecast: MB Associados. (*) 4-quarter accumulated growth until the 2nd quarter of 2008.
Real Overall Income Growth by minimum wage classes — in 2007/06 %
5,5%
3,4%2,9%
4,0%
5,0%
6,0%
37
2,3%
1,6%
2,9%
1,7%1,2%
0,0%
1,0%
2,0%
3,0%
Up to 1 From 1 to 2
From 2 to 3
From 3 to 5
From 5 to 10
From 10 to 20
More than 20
Source: IBGE. Prepared by: MB Associados.
22,9
10
15
20
25Credit to Real State
Real State Sector Expansion
Construction Sector
Percentage growth - %
Credit to Real State
12 months accumulated growth - %
8,5
6,6
4,6 5,0
9,4
6,3
8,3
10,3
-15
-10
-5
0
5
10
set/04 mai/05 jan/06 set/06 mai/07 jan/08 set/08Source: BCB, IBGE e SNIC. Prepared by: MB Associados.
38
3,2
1,1
-2,9
2,0
-2,1 -2,2
-3,3
1,8
4,6 5,0
-3,7
-1,7
0,3
2,3
4,3
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 20072008*
Source: IBGE. Elaboration and Forecast: MB Associados
(*) 4-quarter accumulated growth until the 2nd quarter of 2008.
Conclusions: Medium and long term perspectives are very good considering:
• Democracy in better shape compared to important countries
in Latin America;
• Population sees low inflation as an important value;
• Brazil’s importance as a global supplier of food and energy is• Brazil’s importance as a global supplier of food and energy is
increasing;
• Long term links with China;
• Internationalization of some Brazilian companies;
• Brazil is becoming a more open economy;
39
MB Associados
Av. Paulista, 2421 – 6°andarSão Paulo – SP – 01311-300
40
São Paulo – SP – 01311-300Telephone: (011) 3062 - 1085Fax: (011) 3062 – 8482
São Paulo, November 10, 2008
3Q083Q08 Results PresentationResults Presentation
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 F MAM J J ASOND J FMAM J J A SOND J FMAM J J ASOND J FMAM J J A S80859095
100105110115120125130
Domestic Market - Variation(vs previous period)
The domestic market grew 10% from January to September 2008
Source: ANAC
Accum. market growth 2006
12%
Accum. market growth 2005
19%
Accum. market growth 2007
12%
Accum. market growth 2008
10%
20072005 2006 2008
4
PreviousPeriod
Market
TAM
J FMAM J J ASOND J FMAM J J ASOND J FMAM J J A SOND J FMAM J J AS40
60
80
100
120
140
160
180
200
International Market - Variation(vs previous period)
The international market (among Brazilian carriers) is recovering and grew 36% …
Source: ANAC
Accum. Marketgrowth 2008
36%
Acum TAM 200641%
Acum TAM 200771%
Acum TAM 200540%
Acum TAM 200844%
Accum. market growth 2005
7%
Accum. market decrease 2006
30%
Accum. market decrease 2007
5%
20072005 2006 2008
5
…with higher growth anticipated for Brazilian carriers due to the unbalance in the bilateral agreements…
Source: ANAC annual report
* estimates
58.2%
41.8%
57.7%
42.3%
66.9%
33.1%
71.2%
28.8%
66.5%
33.5%
2004 2005 2006 2007 Jan - Sep2008*
0
20
40
60
80
100%
% international passenger
BrazilianCarriers
IntlCarriers
6
…observed in many countries, as the example between Brazil and USA
77
107
147
2821
357
10542
Italy
England
Germany
France
Spain
USA
1414
1414
2121
3030
5151
126*126*
150 100 50 0 50 100 150
Weekly Frequencies
* 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% 50,2% 52,4% 52,8%
43,5%
2003 2004 2005 2006 2007 Jan - Sep 2008 3Q08 Sep/08
12,0% 14,3%
37,5%
67,5%72,4% 75,8%
82,1%
18,8%
2003 2004 2005 2006 2007 Jan - Sep 2008 3Q08 Sep/08
8
Increasing our fleetDelivery of 2 A319 and 4 A320 (versus 2Q08)Delivery of 1 B767 and first B777-300ER (versus 2Q08)Redelivery of the entire F100 fleetRedelivery of 1 MD11 (versus 2Q08)
Operational efficiency12.6 block hours per aircraft per day13.1 block hours per aircraft per day. considering only the operating fleetAverage total load factor of 72.4% in 3Q08
Agreements:Increase in TAP’s code share, with flights to Buenos Aires, via São Paulo and Rio de JaneiroBeginning code share with Lufthansa (August 18)Beginning code share with Air Canada (October 07)Entrance in Star Alliance announced (October 07)
3Q08 Highlights (1/3)
9
3Q08 Highlights (2/3)
Strengthening of our networkNew nonstop flight to:
Buenos Aires, including from Brasília (August 08)Bariloche and Lima, via São Paulo (August 14 and October 17, respectively)Miami, via Rio de Janeiro (September 19)
ANAC’s approval to new nonstop flights to:New York, via Rio de Janeiro (November 1st) Orlando, via São Paulo (November 21)
Adjustments in TAM Airlines’ operational and administrative structureAwards Received
Honor in 'Biggest and Best' of EXAME’s magazine 35 years ceremonyValor 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 program228.700 thousand shares bought-back
Contract for mobile communications aboard its aircraft
TAM CARGOLargest 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
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%
13
...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
14
...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%
15
...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
16
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
17
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
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 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)
19
In BR GAAP our operating margin was 6%...
Margin over net revenue
BR GAAP
3T07 3T08
49
-113-120
-90
-60
-30
0
30
60
Lucro Líquido - R$ M
3T07 3T08
313
423
0
100
200
300
400
500
EBITDAR - R$ M
35%
15% 15%
3T07 3T08
57
167
0
50
100
150
200
EBIT - R$ M
192%
3%
6%2%
- 4%
20
...the same as in US GAAP
Margin over net revenue
US GAAP
3Q07 3Q08
306
390
0
100
200
300
400
EBITDAR - R$ M
28%
3Q07 3Q08
112
186
0
50
100
150
200
EBIT - R$ M
66%
3Q07 3Q08
143
-475-550
-450
-350
-250
-150
-50
50
150
Net Income - R$ M
15% 14% 5%
6%
7%
- 16%
21
We posted loss per share
3Q07 3Q08
0.95
-3.15
Earnings per shareUS GAAP (R$)
3Q07 3Q08
0.32
-0.75
Earnings per shareBR GAAP (R$)
22
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
23
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
24
…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
25
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
…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
26
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)
27
-50%
50%
150%
250%
350%
Stocks performance since follow-on
www.tam.com.br/irwww.tam.com.br/ir
IPOJun/14/2005
Follow-onMar/10/2006
TAMM4 TAMN IBOV DJBR20
Sep/30/2008
92%100%
33%-1%
Average Daily Trade VolumeBOVESPA: R$ 25 millionNYSE: USD 22 million
Average Daily Trade VolumeBOVESPA: R$ 25 millionNYSE: USD 22 million
28
2008 Guidance2008 Guidance
2008 has been a positive year
Jan – Sep 2008Jan – Sep 2008
10.2%
50.2% dom72.4% intl
14.2%32.2%
72.1%
-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
29
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
30
44
16
101
44
18
104
44
20
110
44
22
113
84
22
115
84
22
117
2008 2009 2010 2011 2012 2013
125130
138143
149 151
Total fleet
We are maintaining our 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
MD11
31
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
32
São Paulo, November
10, 2008
3Q083Q08 ResultsResults
PresentationPresentation
Cash is King
...”Fasten seat belt”
Libano Barroso
2
The economy downturn is a fact, however,
understanding the bounce back is key
Rapid market recovery
in 2010
Market recovery in
2011
Adjustment of operations in flown
hours and micromanagement of
non operating activities
Maintaining fleet might jeopardize
cash
ILLUSTRATIVE
?
Longer term recovery Mandatory fleet alteration
3
On our side, we are acting to prepare TAM for any
turbulence
Act in the balance sheet
Increase /
Preserve
liquidity
Postpone / reduce investments
Focus in the P&L defending liquidity
Initiatives
impacting cash
Initiatives
impacting cost
4
Meaning
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…
Principle
5
... which have been identified and detailed at each
directory
Finance & IT
Commercial &
Planning
Operations
Technical
Knowledge &
People
MRO
Reviewing need/scope of IT projects
Treasury total focus on liquidity
Distribution costs
Control non-operating international costs
Efficiency gains
Crew overnight scheme evaluation
Strategic sourcing
Renegotiation with third parties
Conscious hiring
Reexamining benefits
Reduction of downtime per aircraft
Financing any required investment
Main priority
to executives
during
uncertainty:
regular
meetings
2x/week
NON EXHAUSTIVE