Santander Conference

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1. Santander Conference January, 2007 2. We have delivered a strong 2006...Guidance 2006Sept06 YTD Market demand growth14.7%12%-15% Market(in RPK terms)45%47%Average market share Average load factor 69.5% 72.9% Aircraft utilization per above 12 12.51day (block hour)TAM2.1%CASK reduction yoy5% New internationalDaily to NYSince May Flight to Londonflights Since October 2 3. and believe in a very positive 2007Guidance 2007Market demand growth from 10% to 15% (in RPK terms) MarketAverage domestic market share above 50%Average domestic load factor at approximately 70%Aircraft utilization per day (block hour) higher than 13 hoursTAM Reduction of 7% in total CASK ex-fuel in BR GAAP yoyOpportunity in the international market Third frequency to Paris Inauguration of two new international long haul frequencies3 4. TAM has the most extensive domestic network...TAM GOL VarigASKs1 7.299 5.376 780 Destinations3 48+27248 12 Non-stop city 129 10912 links3 Daily342 264 44 Roundtrips3Operational90% 89%81% efficiency41 Based on 4Q06 ANAC numbers; 2 27 destinations served through operational agreements with OceanAir, Pantanal, Passaredo, Total, Trip 3 Based on December, 2006 reported routes (HOTRANs) 4 Based on 3Q06 ANAC numbers4 5. ...and is the leading Brazilian international carrierLonghaul marketParis 2x per dayLondon1x per dayNY2x per dayMiami 3x per dayLatin American marketBuenos Aires7x per daySantiago2x per dayAssuncion 8x per dayLima1x per dayMontevideo1x per dayCiudad del Este 3x per daySta Cruz dl Sierra 1x per dayCochabamba1x per day Note: Based on Dec 2006 network5 6. The international market has huge potential forgrowth on the Brazilian side % International traffic 100% 8053% 54% 72%60 40Intl47% 46% carriers20 28%Braziliancarriers 020042005 2006 6 7. In 2007, we will be expanding both frequencies and destinations...Domestic Market 2007International Market 2007~30% increase in ASKs ~60-70% increase in ASKs At least an additional 3Additional daily frequency to Paris destinationsbeginning in January Strengthening of internationalNew flight to Milan in 1S07 gateways for domestic market Additional longhaul frequency or Guarulhos destination to be disclosed Galeo Strengthening of Latin American Increasing of frequency on main presence, both frequencies and domestic marketsdestinations Braslia Congonhas Confins Implementing overhub flights: new city-pairs 7 8. ...expanding the fleet and maintaining one of theyoungest fleets in the world Total Fleet 150132 126412143 416109 16 1496 10012 10112 64106103 50 88 B777 MD11 A330 A319/320 22 F1006 02006 2007 2008 2009 2010Average Fleet Age 76567 TAM will be monofleet in the domestic market by 1S088 9. In order to take advantage of the opportunity in the international, we have closed a deal with Boeing Firm contract for 4 B777-300ER + 4 optionsDelivery for mid 2008Interim contract for 3 MD-11sDelivery within the next 6 monthsSame cost per seat as B777-300ERsChoice for B777-300ER based on:More attractive cost per seatHigher technological lifespanCreation of a mix of aircraft size,allowing for more gradual capacityincrease per destinationNew credit line (EXIM)9 10. We attained domestic leadership in 2003 ...Domestic Market Share (RPKs)47.8% 43.5%35.8% 34.9%33.0% 30.7%27.2%21.8%19.2% 1998 19992000 200120022003 200420052006 Domestic Market Share (RPKs) - Dez/06Domestic Market Share (RPKs) 4Q06 Others; Others;Varig, 5.0% 4,8%BRA, 3.9% 4,8% Varig, 4.7%BRA, 3.6%TAM ; TAM , 51,1% 49.1%GOL ,GOL ,37.1%36.1% Source: ANAC10 11. and since July 2006, the leading Brazilian carrier in the international marketInternational Market Share (RPKs)37.3% 18.8%14.3%13.9% 12.5%12.0% 7.9%3.8% 0.1%1998 1999 2000 20012002 2003200420052006International Market Share (RPKs) - Dez/06International Market Share (RPKs) 4Q06 OthersOthers 9.9% 10.8%VarigVarig16.9%15.4%TAMTAM GOL60.0%61,2%GOL13.2% 13.3% Source: ANAC 11 12. Our RASK has been increasing while yieldsdecreasing...Scheduled Domestic (Yield and RASK) Load FactorR$ cents40 80 Load Factor 70 30 Yield60 20.8 20.8 20.3 2018.15013.8RASK 10 40 2002 20032004 2005 Jan-Sep-06Coherent with our strategy to offer competitive prices 12 13. ...maintaining a 10-15% price differential due toour product features Yield scheduled domestic R$ Cents 35 TAM 30 GOL252015200120022003 2004 2005 2006 YTDGAP60% 30%18% 13%15%10% Note: GOL Yield Grossed up 1.05X in order to include taxes13 14. In retrospect, TAM was in a strong competitive position at the end of the 90s AVERAGE 97/00Relative cost position High 1.6VarigDisadvantage1.41.2 VASP1.0 Advantage TAMTransbrasil R$ 1.3BLow 0.80 1 23 45 Low High Network/Service/Brand Note: for domestic market; Varig includes Rio Sul/Nordeste 14 15. However, TAM became squeezed between Varig,the flagship carrier, and Gol, the new entrant Relative cost positionHigh 1.6Varig1.4VarigVaspTAM1.2 Vasp 1.0Gol TAM R$1,5B Low 0.8 01 2 3 4 5 High LowAverage 97-00 Network/Service/Brand2002 Increase in costs and loss of service awareness put TAM in a difficult position Note: for domestic market; Varig includes Rio Sul/Nordeste15 16. Today, TAM is out of the squeeze with a superiorproduct acknowledgement and financial position Relative cost position 1.6VarigVarig 1.4 OceanAir VarigBRATAM1.2TAMVasp 1.0GolGol TAM New entrants/smallerNew entrants/smaller 0.8players will be1looking to 2 034 5 lower costs and serve Average 97-00 Network/Service/Brandthe low end passengers 2002 2006 16 17. Our methodology for stage length adjustments onCASK show us a 10-12% gap to Gol todayTo compare apples to apples, TAM removes the STEP 1 results from wide bodiesOtherwise, we would be assuming that a Separate Narrowwidebody A330 would fly the shuttle servicefrom Wide Bodies GOL has maintenance as a provision on theirP&L (Phased Maintenance + Supplemental STEP 2 Lease)TAM accounts for Maintenance only whenStandardize incurred Maintenance CostsTAM substitutes for a provision Only 2 lines require adjustments for stage lengthpurposes: STEP 3Fuel the more take-offs, the higher the fuelburn Adjustment for stagelengthMaintenance the more landings, the higherwear of the aircraft17 18. which will reduce to 5% by December 2007 CASK total (BR GAAP - R$ centavos)Our domesticgap is 10-12%22 YTD20.420.12019.118.618.218 16.7 16.3 15.816 15.515.414 GOL TAM1220022003 20042005 2006 YTDGap to Gol 32% 24%20% 14%15% The 5% gap translates into our 7% reduction y-o-y ex-fuel18 19. Our cost targets are aggressive, but the roadmap is already laid outFleet and networkDistribution costsOverheadIncrease in direct sales Increase of block hours Outsourcing of non-through: to over 13 hours percore activities day per aircraft in 2007 Site improvement Redefinition of service 6 extra seats in thestandardsFare bundles A319/320 fleet Review of spans&layersCall centeroutsourcingin the hierarquyNew means of Implementation of newpaymentautomated processesInsourcing ofImproved sourcingrepresentativescapabilitiesAdjusting indirect salescommissions to higher% on offpeak flights 19 20. We are innovating in the way we offer our product, servicing the client better at a lower cost TAM has specificproducts designed forevery part of the client spectrum (from leisure tobusiness) 20 21. Today, we are one of the most lucrative airlines inthe world Net OperatingNetNetOperating Net EBITDAR OperatingEBITDAR (1)EBITDAROperatingEBITDAR (1) Income Income (1) Income (1) IncomeIncome (1) Income (1) Margin (%)Margin (%)(US$ MM)Margin (%)Margin (%) (US$ MM) Margin (%)(US$ MM) (US$ MM)Margin (%) (US$ MM) (US$ MM) TAM 801522 389 24,516,0 11,9GOL 510357 289 30,221,1 17,1Ryanair 819593 495 33,023,9 19,9Southwest1.587 924 528 18,010,56,0Virgin 389177 113 20,9 9,56,1West Jet343178 7923,412,15,4Jet Blue267 (9) (60) 12,3(4,0)(2,7)652370 241 23,012,28,6 Avg (ex-TAM)TAM, GOL and Virgin Blue with 2006 annualized; LTM September 30, 2006 for other airlines; USGAAP21 1 Assumes average period exchange rates. 22. In 4 years, we have become one of the best in the world, with more to comeTo be the most competitive, solid and profitable airline in Latin AmericaCoherent business planFocused and capable management, delivering resultsQuick response to market conditions Source: Public Reports, December 31, 200522