Morgan Stanley 10Morgan Stanley 10thth Annual Latin Annual Latin America ConferenceAmerica Conference
London, September 11 & 12, 2007
22
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.
33
Low OperatingCosts
Low OperatingCosts
UndisputableBetter ServiceUndisputableBetter Service
CompetitivePrices
CompetitivePrices
Sustainable Strategyto Maintain Market
Leadershipand Profitability
TAM is a low cost company with better service at competitive prices
44
Previousperiod
Currentperiod
J FM AM J J A SOND J FM AM J J A SOND J FM AM J J A SOND J FMAM J J8085
9095
100
105110115
120125
130
Domestic Market - Variation
2004
Source: ANAC
Accum. market growth200612%
The domestic market growth still strong in 2007, reaching 13% in the first 7 months of the year
Accum. market growth200519%
Accum. market growth200412%
Accum. market growth200713%
200720062005
55
33,0%35,8%
47,8% 49,3%43,5%
2003 2004 2005 2006 Jan - Jul
TAM 50,6%
GOL 36,9%
BRA 4,1%
Varig 2,7%
Other 5,6%
Domestic Market Share - July/07
We have been domestic market leaders since 2003, ending July with 49,3%
Domestic Market Share - July/07
Domestic Market Share (RPK’s)Domestic Market Share (RPK’s)
Source: ANAC
TAM 49,6%
GOL 40,1%
BRA 2,7%
Varig 3,8%
Other 3,7%
Domestic Market Share – 2Q07Domestic Market Share – 2Q07
66
Previousperiod
Market
TAM
J F MA M J J AS OND J FMA M J J A S ON D J F MAM J J A SOND J FMA M J J40
60
80
100
120
140
160
180
200
International Market - Variation(vs previous year)
Source: ANAC
The international market (among Brazilian carriers) is recuperating
Accum. market growth20048%
Accum. market growth20057%
Accum. market
decrease 2006 30%
Accum. marketdecrease 2007
24%
Acum TAM 200641%
Acum TAM 200775%
Acum TAM 200540%
Acum. TAM 200430%
2004 20072005 2006
77
12,00% 14,3%
37,3%
65,6%
18,8%
2003 2004 2005 2006 Jan - Jul
TAM 64,3%
GOL 15,6%
Varig 14,2%
Other 5,8%
International Market Share– July/07International Market Share– July/07
International Market ShareInternational Market Share
Since July 2006, we are international market leaders among the Brazilian companies
Source: ANAC
TAM 70,8%
Varig10,7%
GOL 13,3%
Other5,2%
International Market Share – 2Q07International Market Share – 2Q07
88
In the past 5 years, we have improved every operational metric…
No. take-offs (K)
Load Factor- LF Dom- LF Int
Market Share Dom
MS/CS Domestic
Aircraft Utilization(block hrs/day)- Narrow bodies- Wide bodies
20032003
76147
61%58%71%33%
0.97
7.6
5.87.3
TAM S.A. 20042004
76151
66%64%71%36%
0.98
9.0
6.912.6
20052005
81210
71%70%73%44%
1.00
11.4
10.214.2
20062006
92245
74%73%76%48%
1.02
12.7
12.415.1
No. operating aircraft
20022002
102219
55%53%61%35%
0.94
9.5
9.210.0
1H071H07
101130
71%71%70%49%
1.03
12.8
12.415.7
99
…resulting in an outstanding improvement in our financial metrics
Net revenues
EBITDAR
% EBITDAR
EBIT
% EBIT
Net Income
% NetIncome
20022002
3,429
475
13.9%
(236)
-6.9%
(606)
-17.7%
20032003
3,667
775
21.1%
(32)
-0.9%
174
4.7%
20042004
4,520
1,038
23.0%
294
6.5%
342
7.6%
20052005
5,649
1,140
20.2%
426
7.5%
187
3.3%
20062006
7,345
1,817
24.7%
996
13.6%
556
7.6%
BR GAAP 1H071H07
3,322
593
15.6%
120
3.2%
31
0.8%
1010
And a solid balance sheet improvement R$ million - BRGAAP 2007 2006 2005 2004
Cash 2.511 2.453 995 297
Short-Term Debt 445 363 216 204
Long-Term Debt 1.770 895 425 399
Total Debt 2.214 1.258 641 603
Shareholder's Equity 1.473 1.449 760 191
Capitalization 3.242 2.344 1.185 590
Aircraft and flight equipment leases 6.013 5.032 4.389 4.557
Total Debt Adjusted 8.227 6.290 5.030 5.160
Total Capitalization Adjusted 9.255 7.376 5.574 5.147
Debt / Capitalization 68% 54% 54% 102%
Adjusted Debt / Adjusted Capitalization 89% 85% 90% 100%
Adjusted Debt / EBITDAR 5,6x 3,5x 4,4x 5,0x
Adjusted Net Debt / EBITDAR 3,9x 2,1x 3,5x 4,7x
1111
RASKCASK
2002 2003 2004 2005 2006 1Q07 2Q0715
20
25
RASK/CASK (R$ Cents)BR GAAP
EBITMargin
Spread
-7.1%
-1.1
-0.9%
-0.2
6.5%
1.4
7.5%
1.5
13.6%
2.8
4.8%
0.9
1.7%
0.3
However the competitive dynamic in the domestic market lead to a reduction of our spread in the 1H07
1212
Structure of legal authorities involved in the industry
AIR FORCECOMMAND
DECEAAIR TRAFFIC/ SPACE
CONTROLCivil & Military Aircraft
NAVYCOMMAND
ARMYCOMMAND
CENIPAAccident Investigation and Prevention Board
Air Traffic Control
Air Traffic Control
A&I Investigation
A&I Investigation
National Civil Aviation Agency
MINISTRY OF MINISTRY OF DEFENSEDEFENSE
PRESIDENTPRESIDENT
CONACNational Civil
Aviation Council
DesignManufacturing
OperationsMaintenance
LicensingAirportsRegister
FacilitationSecurity
Air ServicesIntl. Air Navigation
ErgonomicsHuman Factors
DesignManufacturing
OperationsMaintenance
LicensingAirportsRegister
FacilitationSecurity
Air ServicesIntl. Air Navigation
ErgonomicsHuman Factors
INFRAERO
1313
CONAC announced guidelines for future implementation (1/2)
Resolution no. 6, dated July 20, 2007, states that:By ANAC
ANAC´s supervisory duties will be enhanced in order to assureunrestricted support to the victim´s family members
In 60 days, the take-off and landing rights at Congonhas will bereviewed, restricting them to point-to-point, direct flights
New international flights will be allocated outside the São Paulo terminal (Guarulhos and Congonhas)
No charter flights are allowed out of Congonhas
A permanent contingency plan for aircraft and crew must beestablished
1414
CONAC announced guidelines for future implementation (2/2)
By ANAC and Air Force Command
Further restrict the use of Congonhas for General Aviation purposes
In 90 days, submit a study on possible locations for a new aiport site in São Paulo
By Infraero
In 90 days, submit a study for expansion and redesigning of airports in São Paulo
Seek clearance from the courts for spaces currently occupied bycompaniese under bankrupcy or reorganization
Promptly adopt redistribution of spaces to permit accomodation of a larger number of passengers at Guarulhos
1515
We revised our fleet plan due to lower expectations for the domestic demand
3
15
87
6
4
16
98
4
20
101
4
20
107
6
20
110
2007 2008 2009 2010 2011
111118
125131
136
0
50
100
150
Fleet Plan
F100
Airbusnarrow-body
Airbuswide-body
MD11B777
1616
Average domestic market share above 50%Average domestic load factor at approximately 70%Aircraft utilization per day (block hour) higher than 13 hoursReduction of 7% in total CASK ex-fuel in BR GAAP yoyOpportunity in the international market
Third frequency to ParisInauguration of two new international long haul frequencies
Market demand growth from 10% to 15% (in RPK terms)
Guidance 2007Guidance 2007
TAMTAM
MarketMarket12.6%*
1S07
However, our guidance for 2007, disclosed in December 2006, is still the same
1S07
• Since January• Milan (March),
Frankfurt and Madrid (December)
49.3%*
72.1%*12.8
9.2%
* Accumulated from January to July
1717
Increased block hoursInsourcing of stationsIncreased direct website sales (110% increase 1S07 vs 1S06)Ongoing sourcing improvementsOptimized GDS costsIncreased use of technology
New check-in procedures, including higher use of self check-in totems and web check-in
Additional staff for directing passengers
Zone boarding
Revised onboard services
New international call center
Increased “dispatchability”with Operational Centre
Superior Customer Service
Superior Customer Service Increase RevenuesIncrease Revenues Reduce CostsReduce Costs
We continue to pursue our strategy, already with strong deliveries in 2007
Increase in international revenues (70% increase with a 88% ASK increase, in 1S07 vs 1S06)
Increase in international cargo (170% increase 1S07 vs 1S06)
Initial development of new customer base with popularized methods of payment
1818
We are well positioned to serve every part of theclient spectrum (from leisure to business)
Launching new methods of payment Payment at lottery storesBilling slipsAutomatic debit Financing for passengers via direct consumer credit with the main retail banks
Providing specific products for the different segments
1919