Tam Unlocking Value 20081110 Eng

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 Aéreas

MRO*

(São Carlos)Loyalty ProgramCargo

3

83

156

123

184

130

277

165

322

417

360

393

337

2003 2004 2005 2006 2007 2008*

239307

407

487

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

MRO*

(São Carlos)Loyalty

ProgramCargo

4

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 84

95

115

125130

138143

149 151

Total fleet

Mainly due to the consolidation in our international

businessTAM Linhas Aéreas

MRO*


ProgramCargo

* 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%

5

Domestic

Inauguration 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

International

New 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 potentialTAM Linhas Aéreas

MRO*


ProgramCargo

6

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 0.81.1

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

MRO*


ProgramCargo

Total Active

7

…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 card

Blue card

Red card

Others

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 (%)

AirMilesCA

27

Qantas

24

AirNZ

24

AirFrance/KLM

21

Nectar

21

Lufthansa

18

JAL

16

Flybuys(AU)

13

AirMilesUK

13

Aeroplan

12

VirginBlue

6

BritishAirways

5

TAM

3

Penetration on TAM passengers Penetration on population

Source: TAM

TAM Linhas Aéreas

MRO*


ProgramCargo

8

..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

Bonuses

59.6%

Total from other partners (excluding flight and credit

cards partners): 20,7%

Top mileage earnings sources Opportunities

Source: Wall Street Research; TAM

TAM Linhas Aéreas

MRO*


ProgramCargo

9

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

MRO*


ProgramCargo

10 Source: ATW /Flight International / Speednews / Aerohobby

We will focus in the market opportunities in Latin

America for Airbus ...

TAM:

15 A319

70 A320

3 A321

12 A330

2 A340

OceanAir:

16 F100

Aerolíneas

6 A340

Mexicana

10 A318

20 A319

32 A320

18 F100

LAN

5 A318

15 A319

17 A320

5 A340

Mexicana - A320/F100

Aerolíneas Argentinas – A340

TAM

A319/320/321/330

TACA

7 A319

26 A320

4 A321

Air Jamaica

9 A320

6 A321

2 A340

LAN

A318/319/320/340

Aeroman

A319/320

BWIA: 2 A340

Air Caraïbes:3 A330

Dutch Antilles: 2 F100

Cubana

2 A320

TAM Airlines

3 A320

Governo Venezuela

1 A319

TAME

2 A320

Avianca

13 F100

Avianca

F100

MRO FacilitiesAirlines

Aircraft Total

A318 15

A319 58

A320 161

A321 13

A330 15

A340 17

F100 49

Total 328

TAM Linhas Aéreas

MRO*

(São

Carlos)

Loyalty ProgramCargo

11

…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

MRO*

(São

Carlos)


Source: ATW /Flight International / Speednews / Aerohobby

MRO FacilitiesAirlines

Aerolíneas

Argentinas

B757/767(tbc)

• GOL

14 B737-300

30 B737-700

35 B737-800

• Varig

14 B737-300

01 B737-700

07 B737-800

01 B737-700

01 B767-200ER

01 B767-300ER

• Aerolíneas Argentinas

05 B767-200ER

02 B767-300ER

07 B757-200

Mexicana

02 B767(300ER)

LAN

08 B737-200

22 B767-300ER

02 B737-200F

08 B767-300F

02 B747-200

Mexicana

B727;737;757;767

VEM:

B727;737;747;757;767;777;BBJ;

MD11;DC10

GOL: B737

LAN/Goodrich

Full Boeing MRO

Aeroman/TACA (AirCanada)

B737;747;757;767

BWIA: 07 B737-

800

TAME

02 Boeing 727

Avianca

B767-200ER

B767-300ER

B757-200

MD-83

Avianca Services

B757/767(tbc)

Aeromexico

B737;757;767;777

• TAM:

04 B767

04 B777

• Ocean

Air:

03 B737-

300

02 B767

Aeromexico

33 B737-700

06 B737-800

03 B767-200ER

01 B767-300ER

04 B777-200ER

22 MD-80 family

12

We are organizing to capture the opportunities…

People

Current Capabilities Future Capabilities

TAM Linhas Aéreas

MRO*

(São

Carlos)


Airbus aircraft and F100

Line maintenance, checks C and D

Components: hard-time, on-condition and condition monitoring

ISO14001

FAA

B767 airframe certification

All targeted for 2009

IOSA

Full EASA 145 certification (A330 and A321 included)

Certification for A340, B767 and B777 components

Boeing aircraft

Running 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 laws

Non restricted 24h operations

13

…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

MRO*

(São

Carlos)


Increasing third part services allow

Better utilization of our installed capacity

Strong dilution of our fixed costs

Increase in high-skilled labor availability

Reviewing the processes to structure the MRO as a business unit has

Reduced 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 optimized

Improved unit cost control

Business

Tam Unlocking Value 20081110 Eng