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NYSSA2nd Annual Investing in Brazil Conference
New York, October 29, 2008
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
TAM: An ethical and Entrepreneurship history
May/1976
Beginning center-West Region and then throughout Brazil
Aug/1986
Center-North Region
May/1994
Paraguay countryside
Jun/1996
South + Center-North Regions
Aug/1996
Mercosur
Dec/1996
National and International territories
Dec/1996
National and International territories
Feb/1961
National and International territories
Feb/2008
4
TAM’s corporate structure
TAM Financial100%
TAM Capital100%
TAM Viagens99,99%
TAM Mercosur94,98%
TAM Linhas Aéreas100%
TAM Financial 2100%
TP Participações99,99%
5
0.5%
26.9%
72.6%
21.6%
19.5%
58.9%
45.5%
54.5%
53.9%
46.2%
Before IPO* 6/13/2005IPO BOVESPA
3/10/2006Follow-on Offering
BOVESPA and NYSE
June 2008
100% 100% 100% 100%
0
20
40
60
80
100%
Total Capital Paticipation
AmaroFamily***
InvestmentFunds**
Free Float
•IPO = Initial Public Offer •**Investment Funds liquidates its position at Follow-on***Amaro Family and its participations held 89.42% of TAM’s voting shares
Capital Market Participation
6
TAM is committed to high levels of corporate governance
Inform
ation Free-float
Board 100%
tag-al
ong
Investors
BR GAAP and US GAAP simultaneous, in Portuguese and English, with high level of disclosed information
CVM and SEC simultaneous
Professional Board
2 members of the family
5 independent members
Audit Committee
Sarbanes-Oxley Certification
Two classes maintained due to regulatory reasons
Same conditions concerning the sale of the company for both classes of shares
53.9% Free Float
1.5% ADTV
8 local analyst meetings and minimum 4 investor/analyst visits abroad per year
7
The leading Brazilian carrier…Long haul market
Paris 21x per week
London 7x per week
NY 14x per week
Miami 28x per week
Milan7x per week
Frankfurt 7x per week
Madrid 7x per week
Latin American market Buenos Aires
63x per week Bariloche
2x per week Cochabamba
4x per week Santa Cruz de Sierra
4x per week Santiago
10x per week Asuncion
21x per week Ciudad del Leste
7x per week Montevideo
7x per week Caracas
7x per week Lima
7x per weekDomestic market
42 destinations and through business agreements signed with regional companies, it reaches 79 different destinations in Brazil
Note: Based on Oct 2008 network
8
…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
9
…observed in many countries, as the example between Brazil and USA
77
107
147
2821
357
10542
I taly
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
10
Our mix of international revenue reduced due to the appreciation of Real and increase of domestic yield
34%
66%
31%
69%
2Q07 2Q080
20
40
60
80
100%
Revenue(Passenger + Cargo)
Dollarexchangerate
DomesticInternational
1.926
63%37%
1.592
62%38%
Approximately 50% of our costs
(including fuel) are exposed to foreign
currencies
-17%
ASK proportion
International(Dollar denominated)
Domestic(Real denominated)
11
J FMAM J J A SOND J FMAM J J A SOND J FMAM J J A SOND J FMAM J J A S405060708090
100110120130140150160
Market - Variation(vs previous period)
PreviousPeriod
DomesticMarket
InternationalMarket
Both international and domestic markets continue to grow
20072005 2006 2008Domestic
International
19%7%
12% -30%
12% -5%
10%* 36%*
Source: ANAC* Accumulated until September
12
We are both domestic and international market leaders
TAM’s Domestic Market Share*
Source: ANAC* RPK – Revenue passenger kilometer
TAM’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
13
No. take-offs (K)
Load Factor
- LF Dom
- LF Int
Aircraft Utilization (block hrs/day)
- Narrow bodies
- Wide bodies
2003
76 147
61%58%71%
7.6
5.87.3
TAM S.A. 2004
75159
66%64%71%
8.9
6.9
12.6
2005
81 210
71%70%73%
11.4
10.2 14.1
2006
93245
74%73%76%
12.7
12.6
15.1
No. operating aircraft
2002
102 219
55%53%61%
9.5
9.2 10.0
2007
110261
70%70%71%
12.6
12.6
15.8
Jan-Jun2008
115135
72%69%77%
12.6
12.3
14.8
We have improved our operational metrics…
14
…impacting our financial metrics
Net revenues
EBITDAR
% EBITDAR
EBIT
% EBIT
Net Income
% Net Income
2002
3,429
475 13.9%
(236)-6.9%
(606)-17.7%
2003
3,667
775 21.1%
(32)-0.9%
174 4.7%
2004
4,520
1,039 23.0%
295 6.5%
341 7.6%
2005
5,649
1,140 20.2%
426 7.5%
187 3.3%
2006
7,345
1,817 24.7%
996 13.6%
612 8.3%
BR GAAP 2007
8,151
1,259 15.5%
261 3.2%
129 1.6%
Jan-Jun2008
4,775
57212.0%
85 1.8%
531.1%
15
Our balance sheet remains solid R$ million - BRGAAP 2008* 2007 2006 2005 2004
Cash (1) 2.009 2.607 2.453 995 297
Short-Term Debt (2) 837 1.005 363 216 204
Long-Term Debt (3) 1.301 1.345 895 425 399
Total Debt (A) = (2) + (3) 2.138 2.350 1.258 641 603
Shareholder's Equity (4) 1.539 1.527 1.449 760 191
Capitalization (B) = (3 + 4) 2.839 2.872 2.344 1.185 590
Aircraft and flight equipment leases** (5) 6.193 5.976 5.032 4.389 4.557
Total Debt Adjusted (C) = (A + 5) 8.331 8.326 6.290 5.030 5.160
Total Capitalization Adjusted (D) = (3 + 4 + 5) 9.032 8.848 7.376 5.574 5.147
Debt / Capitalization (A / B) 75% 82% 54% 54% 102%
Adjusted Debt / Adjusted Capitalization (C / D) 92% 94% 85% 90% 100%
Adjusted Net Debt / Adjusted Capitalization (C - 1) / (D) 70% 65% 52% 72% 94%
* LTM** Aircraft and flight equipment leases of the last twelve months x 7
16
Debt deals
Debentures – R$ 500 million (September 2006) Subscription of 50,000 nominative, registered, non convertible
debentures with a nominal unit value of R$ 10 thousand 6 years term with the first payment in 2010
Bonds – US$ 300 million (April 2007) 7.375% Senior Notes due 2017
Loan agreements to finance pre-delivery payment Calyon and other banks to finance up to US$ 331 million for 4
B777-300ERs BNP Paribas to finance up to US$ 117 million for 30 Airbus aircraft
until 2010 Guaranties to support the financing of aircraft
Ex-Im Bank for the Boeing fleet ECAs for the Airbus fleet
17
We are beginning to evaluate new potential business units in the company
TAM Linhas Aéreas
MRO(São Carlos)
Loyalty Program HandlingCargo
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
18
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 Guidance
We are delivering the guidance committed with investors
TAM
Market
Jan – Sep 2008
10.2%
50.2% dom72.4% intl
14.2%32.2%72.1%-4.5%*
* Accumulated from January to June, 2008** In final approval phase by ANAC
Brasília – Buenos Aires Rio de Janeiro – Miami São Paulo – Lima Rio de Janeiro – NY** São Paulo – Orlando**
19
Our growth plan is supported by a flexible fleet plan
3
14
88
10
4416
101
4418
104
4420
110
44
22
113
84
22
115
2007 2008 2009 2010 2011 2012
115125 130
138 143 149
0
50
100
150
Total fleet
B777 MD11 Airbus wide-body Airbus narrow-body F100
Since dec/07 we
are monofleet in
domestic operations
B767
20
21
Brazilian domestic market has high growth potential
Boardings per capita
Boardings per capita, adjusted by GDP per capita at PPP
Source: 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
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
As Brazil becomes “stable”, the leisure segment will become increasingly more important
Leisu
reBu
sines
s
2000 2001 2002 2003 2004 2005 2006 2007
17.9
26.6 27.0 25.228.2
35.439.7
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
24
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
25
...increasing capillarity of sales through our new methods of payments... Launched new methods of payment in May 2007
Payment at lottery stores Approximately 9,000 stores in Brazil Already functioning as bank correspondent
Billing slips Automatic debit Financing for passengers via direct consumer credit with
the main retail banks
Focus on leisure/lower income segments
26
...optimizing the utilization of our aircraft on off peak hours
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
80%
Load Factor per hour
2Q08Oct 2007
Off Peak Peak Off Peak Peak Off Peak