Investor Presentation

Transcription

1 Investor Presentation December, 2011

2 FORWARD-LOOKING STATEMENTS This document contains forward-looking statements, including with respect to the negotiation, implementation and effects of the proposed combination. Such statements may include words such as anticipate, estimate, expect, project, intend, plan, believe, would or other similar expressions. Forward-looking statements are statements that are not historical facts, including statements about our beliefs and expectations. These statements are based on current plans, estimates and projections, and, therefore, you should not place undue reliance on them. Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. These factors and uncertainties include in particular those described in the documents we have filed with the U.S. Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them, whether in light of new information, future events or otherwise. ADDITIONAL INFORMATION ABOUT THE PROPOSED BUSINESS COMBINATION AND WHERE TO FIND IT This document relates to a proposed business combination between Lan Airlines S.A. ( LAN ) and TAM S.A. ( TAM ), which will become the subject of a registration statement and prospectus to be filed with the SEC by LAN and a new entity to be formed in connection with the combination. This press release is not a substitute for the registration statement, prospectus and offering materials that LAN and the new entity will file with the SEC or any other documents that they may file with the SEC or send to shareholders in connection with the proposed combination. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT, PROSPECTUS, EXCHANGE OFFER DOCUMENTS AND ALL OTHER RELEVANT DOCUMENTS FILED OR THAT WILL BE FILED WITH THE SEC AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED BUSINESS COMBINATION. All such documents, if filed, would be available free of charge at the SEC s website ( or by directing a request to LAN Investor Relations, at or by at investor.relations@lan.com, or to TAM Investor Relations, at or by at invest@tam.com.br. 2

3 Global context has created an opportunity for a Latin American market leader to emerge LAN Colombia Bogotá, 2010 LAN Ecuador Guayaquil, 2003 More competition Consolidation Greater opportunities LAN Peru Lima, 1999 LAN Airlines Santiago, LAN Argentina Buenos Aires,

4 Why TAM? Complementary business models International passenger business Cargo business Domestic market leadership Extensive route network Complementary networks with very little overlap Existing relationship in maintenance and aircraft purchases Best service in the region Focus on efficiency Globally competitive frequent flyer programs 4

5 LAN and TAM as of September 2011 (LTM) Revenue (USD billions) Operating Margin (USD millions) % % 545 1, % 8.6% EBITDAR Margin (USD millions) % 1,126 20,5% 1,246 2,372 16,2% 18,0% Net Income (USD millions) Passengers (millions) Aircraft Aircraft orders Employees (thousands) Market Cap (USD billions) (1) TAM s net income includes a non operating impact due to exchange differences and mark-to-market (2) Market Capitalization as of November 21,

6 will offer an extensive passenger network Five main passenger flows in the combined network 1 Main domestic markets 2 3 Regional within Latin America North and Central America Europe 5 South Pacific / Australia Operated by LAN only Operated by TAM only Operated by both carriers* South America + Domestics US and Canada Europe and Rest of World 102 Destinations 10 Countries Daily Departures 6 Destinations 2 Countries ~19 Daily Departures 12 Destinations 11 Countries ~14 Daily Departures Source: OAG 6

7 LAN cargo expertise + TAM market opportunity = cargo growth LAN s global and diversified cargo network with TAM s Brazilian market presence North America to South America Europe to South America Regional (intra) South America Brazil is the largest domestic cargo market in Latin America TAM offers significant strengths Domestic widebody network Existing cargo operation Strong European network with growth potential 7

8 will be among the leading airlines in the world in terms of revenues Top 20 passenger airlines in revenue USD Billions, 2010 Source: Airline Business 1 Lufthansa United-Continental Delta Air France-KLM 5 AMR BA-Iberia JAL ANA Emirates 10 Air China Qantas Southwest 12 US Airways 12 Cathay Pacific China Southern China Eastern Singapore Airlines 11 Air Canada Korean Air

9 and in terms of passenger and cargo transport Top 12 airlines in passengers transported Millions of passengers, 2010 Top 12 airlines in cargo transported Thousands of tons, Delta Korean Air 1,805 United-Continental 98 Emirates 1,777 Southwest 88 Cathay Pacific 1,579 American 86 United-Continental 1,555 5 China Southern 77 5 China Airlines 1,347 Ryanair 72 Singapore Airlines 1,149 Air France-KLM 70 China Eastern 1,104 China Eastern 65 Air China 1,069 Lufthansa 54 China Southern 1, US Airways Lufthansa 1, BA-Iberia 51 JAL 911 Source: Airline Business and WATS IATA

10 will be the largest airline in the region Ingresos Revenues USD Billions, Billones, 2010 Destinos Númerode ciudades $ $4.0 $2.6 $ LAN-TAM GOL Avianca- Taca (E) Copa LAN-TAM GOL Avianca- Taca Copa EBITDAR USD Billones, Billions, 2010 Pasajeros Millones, 2010 $ $0.9 $0.4 $ LAN-TAM GOL Copa LAN-TAM GOL Avianca- Taca (E) Avianca- Taca Copa Source: Company reports and Airline Business 10

11 offering the best connectivity Destinos Destinations Númerode Number of ciudades cities, Guayaquil Bogotá LAN-TAM GOL Avianca- Taca Copa Lima Brasilia Salvador Pasajeros Passengers Millones, Millions, Belo Horizonte Rio de Janeiro Sao Paulo 33.8 Santiago Buenos Aires LAN-TAM GOL Avianca- Taca Copa LAN Hubs TAM Hubs Source: Company reports and Airline Business 11

12 with strong presence in domestic markets ASKs 100% 80% Sky Airline SAM Copa Icaro Avianca - TACA Peruvian 60% GOL Avianca - TACA 40% Aerolíneas Argentinas 20% Avianca - TACA TAME 0% Argentina Brazil Chile Colombia Ecuador Peru Source: OAG Note: Information as of

13 and connecting South America with the world ASKs 100% 80% Others Pluna Aerolíneas Argentinas Others Avianca - TACA Delta Others Air Europa Avianca - TACA Alitalia Lufthansa - Swiss 60% GOL United - Continental TAP Avianca - TACA 40% Air France - KLM 20% American BA - Iberia 0% Source: OAG Note: Information as of 2010 Within South America USA and Canada Europe 13

14 will have a globally competitive frequent flyer program 67,0 20,0 17,0 11,1 Members (millions) 6,6 5,5 4,5 4,5 3,8 2,0 Source: frequentflyersservices.com 14

15 Opportunities for the group to grow faster and increase profitability Faster top-line growth - Enhances ability to launch new flights - Increases alternatives for passenger and cargo clients, capturing new customers Improved cost competitiveness - Benefits from best practice sharing - Operational coordination in international markets - Possibility to leverage economies of scale Enhanced strategic positioning - Creates the leading Latin American carrier - Better able to compete with other global carriers 15

16 Detailing the estimated US ~$400M in synergies Revenue: Cargo ~$110M, Pax ~$170M Cost ~$120M Synergy source Value US$ Millions Synergy source Value US$ Millions Cargo 110 New service, sharing of best practices Airports 25 Consolidation of functions in overlapping stations Network relevance 50 Improved access to joint hubs and combined network appeal (especially to high yield) Procurement 25 Leveraging economies of scale in contracts New and increased connectivity 40 Combined network creates new city pairs and increased service Corporate 20 Streamlining of corporate overhead and some functions New flights 35 Combined network supports new flights and hubs IT 20 Efficiencies of common IT platforms Other passenger revenue 35 Including consolidation of partner airline contracts and increased utilization Maintenance 15 Leveraging economies and efficiencies of scale Frequent flyer 10 Consolidation of the programs and sharing of best practices Sales 15 Efficiency of combined sales efforts 16

17 will have the ability to grow into new markets Future growth would result in the creation of jobs and economic growth in Latin American countries where will operate Four primary growth areas for the network initially Brazil to Europe/Africa Lima to North/Central America New hubs Cargo Increased southern cone feed to support new service to Europe Increased Brazil feed supports new service to US and Mexico Potential new hubs could connect to Europe and US Combination of LAN s expertise and TAM s footprint 17

18 Corporate Structure TAM Controlling shareholders 13.7% LAN Controlling shareholders 24.1% Others LAN 46.7% Others TAM 15.5% 80% Class A Shares (voting) AIRLINES GROUP (Currently LAN) Chile 20% Class A Shares (voting) 100% Class B Shares (non voting) 100% ON Shares HoldCo Chile TAM S.A. Brazil 100% 100% TLA Brazil Pantanal Brazil 100% PN Shares Stock transaction: TAM shareholders are offered newly issued LAN shares (1 TAM = 0.9 LAN) Structure designed to comply with foreign ownership restrictions, including 20% foreign ownership restriction in Brazil Economic alignment of all shareholders Note: assuming 100% participation of TAM shareholders in the exchange offer 18

19 Corporate governance Shareholders agreements between the two companies provide for: - board to have 9 members. - Grupo Cueto agrees to vote for TEP Chile (Grupo Amaro) to be able to elect a second board member at, while TEP Chile holds at least12.5% of. - Grupo Cueto and Grupo Amaro agree to make their best effort to work cooperatively. When agreements cannot be reached, matters shall be resolved by the Board or Ordinary Shareholders Meetings of. - During the first 3 years, neither Grupo Cueto nor Grupo Amaro may reduce their holdings of to less than12.5% of total. After this period, sales are subject to certain conditions. LAN shall have a right of first offer on shares in Holdco 1. Grupo Amaro may not sell shares in without offering LAN the shares in Holdco 1. - Inasmuch as is permitted under Brazilian legislation, LAN has the right to accrue most voting shares in Holdco 1. - Boards of TAM and Holdco 1 with 6 members, 4 to be appointed by Grupo Amaro and 2 by. - Voting quorum for TAM of 95% for shareholders meetings, and 5 members for board meetings. For significant issues, quorum to require one board member in Holdco 1 and TAM. - Grupo Amaro and may appoint the same number of board members in Multiplus. - Selection of key executives in TAM requires coordination with the board of. - Enrique Cueto to be CEO of, Marco Bologna to be CEO of TAM. 19

20 Milestones in the business combination process August 13, 2010: LAN and TAM announce their intentions to combine March 1, 2011: ANAC approved the proposed corporate structure Antitrust Brazil SEAE (Aug 2011) SDE (Aug 2011) CADE (pending) November 15, 2011: F4 SEC filing (preliminary version) January 18, 2011: LAN and TAM signed binding agreements Antitrust Europe Germany(Jul 2011) Italy (Aug 2011) Spain (Oct 2011) Antitrust Chile: TDLC (Sep 2011) Supreme Court (pending) 20

21 Antitrust measures imposed by TDLC 1. Exchange of 4 slots at GRU airport 2. Extend the frequent flyer program by 36 months for other operators on routes between SCL and SAO, RIO, ASU, MVD 3. Interline agreement with other operators on routes between SCL and SAO, RIO, ASU, for 12 months after compliance with measure 1 4. Not to increase, for a 12 month period, SCL-GRU service within 15 minutes before or after the slots exchanged under measure 1 5. Changes in domestic self regulation plan in Chile 6. Agree a sole alliance for 7. Codeshare agreements outside of the alliance selected must be approved by TDLC, and may not be conducted in South America with GOL or Avianca-TACA 8. Provide four regular flights on the SCL LIM USA route that make use of the 5 th freedom of the air between Peru and the USA 9. Support unilateral cabotage in Chile 10. Support expansion and development of airport facilities at SCL and GRU 11. Restrictions on travel agency incentive plans 12. Maintain current frequencies of non-stop flights from Chile to USA (12) and Europe (7) up tuntil compliance with measures1,6,7, and Freeze freight tariffs between Chile and Brazil, and not to increase the average yield of passengers per cabin on the SCL-SAO and SCL-RIO routes up until compliance with measure Contract a consultant to review compliance with the measures Measures appealed to the Supreme Court 21

22 Estimated merger timeline Process in Chile TDLC Approval * Sep 2011 Oct 2011 Nov 2011 Dec 2011 Jan 2012 Feb 2012 Mar 2012 Apr 2012 LAN's Shareholder Meeting * SVS Registration * Process in USA F4 Filing * SEC Registration * Process in Brazil CADE Approval Exchange Rate Appraisal * BDR Registration (Bovespa) * CVM Registration Start of Exchange Offer End of Exchange Offer Steps completed Steps pending 22

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