tam day

TAM DAY 2007“Unlocking Value”

Welcome

Maria Claudia AmaroChairman of the Board

November 12, 2007

22“Unlocking value”“Unlocking value”

Our Vision

To work with the “Commitment to Service”, making people happier

Our Mission

To be people’s preferred airline company, with happiness, creativity, respect and responsibility

TAM’s Essence


Our Commandments

1 - Nothing substitutes profit

2 - In search of greatness you don´t do your best

3 - Safety comes first, then the client

4 - The best way to make money is to stop loosing it

5 - Think before you act

6 - Humbleness is essential

7 - If you do not have the intelligence to create, you must have courage to copy


Pass

ion

for A

viat

ion

Our Attributes


TAM’s Beliefs

Public: For all people

Needs: who value an efficient, rewarding, safe and serene experience

Context: with an airline company,

Brand: TAM

Differentiation: is the leader and innovative company which offers services and attendance in a working environment and relationship with the “Spirit of Serving” which are present in all moments.


Our commitments

Commitment to the highest levels of corporate governance

Tag along rights

Professional management

Transparent relationship with stakeholders

TAM DAY 2007“Unlocking Value”Strategy Overview

Marco Bologna

November 12, 2007


2007 has been a year of many challenges...

Macro Economy

Airline Industry

AirlinesBrazil

TAM

High volatility (e.g. subprime crisis)

Fuel prices

Scarcity of aircraft, seats, etc due to overall growth in the sector

Conclusion of the “Varig” questionmarkChanges in the governing structure of theindustryCollapse of BRA

Impact of infrastructure on operations

Accident


...and, as in the past 31 years, TAM has shown itsability to grow and adapt

Our purpose today...

We will be discussing our actions in 2007

...demonstrating what we have done differently

...and what we are going to do in the future


We have not only continued to be the leadingdomestic carrier...

14.4

20.3

42.4

20.7

8.5

14.5

40.3

30.6

13.5

38.9

11.7

34.6

12.2

33.6

19.4

33.0

8.8

31.1

22.3

35.8

25.5

25.9

41.3

10.3

34.0

47.8

39.2

48.8

2000 2001 2002 2003 2004 2005 2006 Jan-Oct2007

0

20

40

60

80

100%

Domestic Market Share (RPKs)

TAMGOLVARIGVASPTRANSBRASILBRAOther


...but have become the leading Brazilian carrier in theinternational market...

75.0

7.4

82.1

13.9

87.4

12.5

87.9

12.0

85.4

14.5

77.0

18.4

50.4

7.3

37.3

6.2

12.5

14.7

66.6

2000 2001 2002 2003 2004 2005 2006 Jan-Oct2007

0

20

40

60

80

100%

Domestic Market Share (RPKs)

TAMGOLVARIGVASPTRANSBRASILOther


...and the only Brazilian carrier with consistentinternational deployment and growth...

ParisMiamiNew YorkLondonMilanFrankfurt¹Madrid²Buenos Aires

Santiago Montevideo Caracas

TAM's Weekly Frequencies

2121147777

49

777

Since

03/199903/199811/200510/200603/200711/200712/200703/2001

12/200411/200709/2007

Competitors

Air France (17)AA (28)AA (7), Delta (7), Continental (7) and JAL (7)British Airways (7) and Varig (7)Alitalia (7)Lufthansa (7) and Varig (7)Iberia (14)Aerolineas (56), GOL (49), BA (4),

Lufthansa (7), LAN (7)GOL (14), LAN (5) and SwissPluna and GOL (14)Varig (7)

¹ As of November 30² As of December 21


…with a dedicated focus to intra-regional flights in South America through TAM Mercosur

Buenos Aires Santiago

Assuncion1

Montevideo Ciudad del EsteSta Cruz dl Sierra

Cochabamba

Cordoba

Weekly Frequencies

377

56

7

35

7

7

7

Since

09/199609/1996

09/1996

09/1996

09/1996

09/1996

09/1996

03/2007

1 Includes 21 frequencies to São Paulo


We are strengthening our product in the internationalmarket through fleet and network...

Increased widebody fleet plan for the next 10 years, substitutingolder aircraft

2 A340s (delivered in 2007)8 B777-300ERs (4 in 2008, 4 in 2012)22 A350s (as of 2013)New A330 reducing fleet average ageComplete phase-out of F100 (impact on intra South American routes)

Expansion of network through additional destinations andfrequencies

New full code share agreements at each major country

Focus on South American coverage – integration of TAM Mercosul activities


...as well as retrofitting our entire network in 2008

180º flat beds with shell

In seat power

AVOD controls for in-flightentertainment

New colour schemeFirst ClassFirst Class

BusinessBusiness


We have changed from only a high end premium customer focus to serving the full spectrum

TAM

Premium / Business

Commodity / Leisure

Reg

iona

lInternational

First classFirst class

Business class

Business class

Economy class

Economy class

Commercial

agreements

with

regional

carriers

Commercial

agreements

with

regional

carriers

TAM’s OriginTAM’s Origin

TAM up to 1998TAM up to 1998


As Brazil becomes “stable”, the leisure segmentwill become increasingly more important

Leis

ure

Bus

ines

s

2000 2001 2002 2003 2004 2005 2006 2007E

17.9

26.6 27.025.2

28.2

35.4

39.843.5

0

10

20

30

40

50

Domestic Market Passenger Mix (RPK M)

CAGR

11%

21%

Travelling is one of the top “desire” items for consumption

* TAM Estimates


We will be expanding our fare bundle strategy for thedomestic 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


...increasing capillarity of sales through our new methods of payments... Launched new methods of payment in May 2007

Payment at lottery storesApproximately 9,000 stores in Brazil

Already functioning as bank correspondent

Billing slipsAutomatic debit Financing for passengers via direct consumer credit with the main retail banks

Focus on leisure/lower income segments


...optimizing the utilization of our aircraft on off peakhours

* Average day in past month

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 2350

55

60

65

70

75

80%

Domestic load factor per hour

Off Peak Off Peak Off PeakPeakPeak


We continue to deliver more efficient processes in order to focus on what the customer wants

Becomepreferred airline

carrier

Becomepreferred airline

carrier

Focus oncustomer needs

Focus oncustomer needs

Translate intoactions

Translate intoactions

EfficientDeliveryEfficientDelivery

To be efficientmeans not onlyreduce costs butalso increase the

proportionalbenefits

To be efficientmeans not onlyreduce costs butalso increase the

proportionalbenefits


We continue to be committed to a high level of corporate governance and transparency

Info

rmat

ion Free-float

Board 100%

tag-

alon

g

Investors

BR GAAP and US GAAP simultaneous, in Portuguese and English, with high level of disclosed information

CVM and SEC simultaneous

At least 4 local analyst meetings and 4 investor/analyst visits abroad per year

Professional Board

3 members of the family

5 independent members

Audit Committee

Certified Sarbanes-Oxley in May 2007

Two classes maintained due to regulatory reasons

Same conditions concerning the sale of the company for both classes of shares

54% Free Float

1% ADTV


On the top level of the company, we have new members in our team…

CEOMarco Antonio Bologna

CEOMarco Antonio Bologna

CommercialWagner Ferreira

CommercialWagner Ferreira

CFOLibano Barroso

CFOLibano Barroso

TechnicalRuy Amparo

TechnicalRuy Amparo

OperationsDavid Barioni

OperationsDavid Barioni

HRGuilherme Cavalieri

HRGuilherme Cavalieri

Network PlanningPaulo Castello Branco

Network PlanningPaulo Castello Branco

TAM MercosurAlberto Fajermann

TAM MercosurAlberto Fajermann

Optimal mix between non-airline expertise and airline experience (over 120 years of accumulated airline experience)


...but also streamlining the structure of the company

Spans & layers revision in Nov 2006 effectively implemented in 2007 20% of the directors and 10% of the managers dismissed

Insourcing of the national stationsCommercial, check-in and handling activities

Headcount increase of ~5,500 employees

Decrease in commercial costs

Standardization of human resources and governance policies

Better compliance

Transfer of employees from the scheduling to the airports to improve communication flow and responsiveness to network last minute modifications


We are beginning to evaluate new potential business units in the company

TAM Linhas AéreasTAM Linhas Aéreas

MRO(São Carlos)

MRO(São Carlos)

Loyalty ProgramLoyalty

Program HandlingHandlingCargoCargo

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


● To be differentiated in the service of air transportation through the “spirit of serving”

Finally, we reviewed our vision and mission statement in order to better reflect our aspirations and values

● To achieve unchallenged domestic leadership

● To be the most competitive, solid and profitable airline in Latin America

● To work with the “Commitment to Service”, making people happier

● To be people’s preferred airline company, with happiness, creativity, respect and responsibility


We have gone through waves of development…

Turnaround process (2002 -2003)

Overcapacity

Loss of founder

High costs

Low operational efficiency

Surviving

Assets optimization (2004 – 2007)

Increase in domestic load factor

Better aircraft utilization

Access to financial markets (equity and debt)

Compliance with SOX

IOSA certificate

Growing Profitability


…but we have seen new and compelling horizons…

All companies compete in the same market…

Exploiting demand…

Making the value-cost trade-off…

Aligning the whole system of the company’s activities with either differentiation or low cost

Blue Ocean StrategyBlue Ocean Strategy

Company creates an uncontested marketplace…

…Creating and capturing new demand…

Breaking the value-cost trade-off…

Aligning the whole system in pursuit of differentiation and

Red Oceanis where...

low cost

Blue Oceanis where...


…resulting in a new third wave

Unlocking Value

Opportunities for value generation (future)

New passenger segmentation

Cargo

Loyalty Program

Maintenance

Turnaround process (2002 -2003)

Overcapacity

Loss of founder

High costs

Low operational efficiency

Surviving

Assets optimization (2004 – 2007)

Increase in domestic load factor

Better aircraft utilization

Access to financial markets (equity and debt)

Compliance with SOX

IOSA certificate

Growing Profitability


So why “unlocking value”? (1/2)

The “assets optimization” wave will continue to generate less and less value

In the past 5 years, TAM has reestablished its ability to grow profitably

The company has transitioned into a professionally run company

Cost consciousness has been established and continues to be permeated as part of the ongoing culture in the company

There is a new wave of growth which can be better exploited In our core business

Becoming both domestic and international leader has led the company to a broader definition of its original focus


So why “unlocking value”? (2/2)

There are hidden assets in the company which can be used as adjacencies to our core business which will add to the company’s efficiency and value

Going back to our fundamental values but with a modern and fresh outlook will re-guide our focus on customer needs


This is how we have been describing our strategy

Low Operating

Costs

Low Operating

Costs

UndisputableBetter ServiceUndisputableBetter Service

CompetitivePrices

CompetitivePrices

Sustainable Strategyto Maintain Market

Leadershipand Profitability


TAM: the best fitting product for the customer (andstakeholders) based on efficienct delivery

Low Operating

Costs

Low Operating

Costs


CompetitivePrices

CompetitivePrices




Financial Overview

Libano Barroso

November 12, 2007


Aggressive pricing environment and

operational inefficiencies in the

domestic market

RASKCASK

2005 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q0715

20

25

RASK/CASK (R$ Cents)BR GAAP

EBITMargin

Spread

7.5%

1.5

11.9%

2.4

13.0%

2.8

16.8%

3.7

11.9%

2.3

4.8%

0.8

1.7%

0.3

2.8%

0.5

Demand evasion due to changes

in regulatory environment and accident

2007 has been highlighted by external events…

Demand evasion due to changes

in regulatory environment and accident


TAM

2005 1Q06 2Q06 3Q064Q06 1Q07 2Q073Q0715

20

25

30

35

Yield scheduled domesticR$ Cents

…reduction of yields during the first months and reduction of load factor in the 3Q…

TAM

2005 1Q06 2Q06 3Q064Q06 1Q07 2Q073Q0760

65

70

75

80%

Domestic load factor

Aggressive competitive

scenario

Aggressive competitive

scenario

Reduction in domestic demand

Reduction in domestic demand

Recuperation of yields

Recuperation of yields


…impacted our financial metrics

Net revenues

EBITDAR

% EBITDAR

EBIT

% EBIT

Net Income

% Net Income

20022002

3,429

475

13.9%

(236)

-6.9%

(606)

-17.7%

20032003

3,591

775

21.6%

(33)

-0.9%

174

4.8%

20042004

4,520

1,040

23.0%

295

6.5%

341

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 Accum.2007

Accum.2007

5,865

906

15.4%

178

3.0%

79

1.4%


EBITDARMargin

easyJet GOL TAM JetBlue SouthwestVirgin Blue COPA Air Asia Ryanair

5.5%

14.7% 14.9% 15.3% 16.2%

25.9%

29.5%30.6%

36.9%

0

10

20

30

40%

% EBITDAR (Accum 2007 up to last available data)

However, we remain among the most competitive airlines worldwide

US GAAP


Balance sheet has remained practically stable

R$ million - BRGAAP 2007* 2006 2005 2004

Cash 2,471 2,453 995 297

Short-Term Debt 799 363 216 204

Long-Term Debt 1,465 895 425 399

Total Debt 2,265 1,258 641 603

Shareholder's Equity 1,514 1,449 760 191

Capitalization 2,980 2,344 1,185 590

Aircraft and flight equip. leases 6,011 5,032 4,389 4,557

Total Debt Adjusted 8,275 6,290 5,030 5,160

Total Capitalization Adjusted 8,990 7,376 5,574 5,147

Debt / Capitalization 76% 54% 54% 102%

Adj. Debt / Adj. Capitalization 92% 85% 90% 100%

Net Adj. Debt / Adj. Capitalization 65% 52% 72% 94%

* as of 3Q07


We expect increased revenues from targeting different customer bases…

We are broadening our customer bases from business segment and limited international destinations to…

…a larger international coverage and leisure passengers (including

TAM Viagens)

http://www.agenciabrasil.gov.br/media/imagens/2007/07/28/1345FP1490.jpg/view


Facilitating connection to other cities in Europe, Asia, Middle East and Africa

Facilitating connection to other cities in Europe, Asia, Middle East and Africa

Offering comprehensive choice of destinations in USA - direct to Chicago and Washington;

Offering comprehensive choice of destinations in USA - direct to Chicago and Washington;

Optimizing and improving network in South America; Optimizing and improving network in South America;

Adding new destinations, increasing volume in domestic feeding and distributing flights;

Adding new destinations, increasing volume in domestic feeding and distributing flights;

…aided by our new alliance partners

Best fitting product

increasing revenues

Best fitting product

increasing revenues


Developing new potential business units in the company will also provide an added source of value

TAM Linhas AéreasTAM Linhas Aéreas

MRO(São Carlos)

MRO(São Carlos)

Loyalty ProgramLoyalty

Program HandlingHandlingCargoCargo

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


IPOJune,2005

BNDESNov,2005

IFCDec,2005 Second

OfferMarch,2006

DebenturesSep,2006

PDPMarch,2007

BondsApril,2007 Total

LastTwoYears

189 46 50105

240

330

300 1,260

Issuances (USD million)

We have strengthened our cash position substantially with new issuances

Raising funds in liquid equity and debt markets

Building long term curves secured and unsecured –bonds and local debentures


We have installed an efficient cash management structure…

In local currencyCDBFixed income papers

PrePost

OvernightDebenturesVariable income papers

In foreign currencyFixed income fundsCDB

Exclusive investment fundsSpitfire II

FundsFunds

Defined mandate and bylaws

Itaú – Fiduciary agent

“Risk Office” –quality and audit assurance

Defined mandate and bylaws

Itaú – Fiduciary agent

“Risk Office” –quality and audit assurance


…with clear future capital expenditure needs

Required investments for the future are limitedMaintain policy to contract only operating leasesSolid balance sheet has facilitated financing for PDPs (pre delivery payments) and spare parts acquisition

Future capital expenditure will address the need for:Extra hangars to support the increase in our fleet and support potential MRO businessInitial provisioning of spare parts for new aircraftNew headquarters

Overall TAM should investApproximately USD 60 million for on-going activities~USD 240 million in the next 10 years in specific projects


We are managing potential risks…

Approximately 30% of cash exposure 12 months in a rolling basisDue to the present scenario we currently are not hedging FXSensitivity: 10% appreciation of real against dollar represents ~ R$ 100 million increase in yearly operating result (in BR GAAP)

Hedging FXHedging FX

Hedging FuelHedging Fuel

4Q07

1Q08

2Q08

3Q08

29%

37%

37%

25%

Fuel Hedging PositionFrom 30% - 80% of the projected fuel consumption in a minimum of 3 and a maximum of 24 monthsSensitivity: US$ 5 increase in WTI price corresponds to ~ R$ 300 million in extra yearly fuel expenses


21%

79%

33%

67%

34%

66%

34%

66%

3Q06 1Q07 2Q07 3Q070

20

40

60

80

100%

Revenues(Passenger + Cargo)

DomesticInternational

Dollarexchange rate 2.174 2.050 1.926 1.839

Approximately 50% of our

costs (including fuel) are

exposed to foreign

currencies

…also through our own operations

Approximately 50% of our

costs (including fuel) are

exposed to foreign

currencies

Revenues originated in the international operations are expected to reach 45% - 50% in the next 12 months


31 years of tradition in serving passenger conveyed to the finance market…

Level 2 BOVESPAAccording to the Brazilian Airline Code, Article 181 – airline companies have a maximum limit of 20% on the foreign voting capital100% tag-along

Best disclosure practices US GAAP;BR GAAP;English and Portuguese simultaneous

Compliance with SOX 1 year before deadline


… pursuing best corporate governance

Elaborate overall strategy 5 members of the Board of DirectorsMonthly meetingsStrategicStrategic

Enforce appropriate controls and monitor financial statements3 independent members from the Board of DirectorsMonthly meetingsAuditAudit

Define strategies for the development of our employees3 members of Board of DirectorsMonthly meetingsCompensationCompensation

Validate strategies to manage business risks 8 executives of the company + “Risk Office”Monthly meetings

Risk Management

Risk Management

Monitor execution of cost reduction program 5 executives of the company + external consultantsMonthly meetingsCostCost


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

MarketMarket 10.6%*

We continue with our 2007 guidance, disclosed Dec 2006, demonstrating our commitment to investors…

Accum. 07Accum. 07

• Since January• Milan since

March

48.8%*

70.0%

12.8

8.5%

* Jan – Oct Accumulated


Maintain the 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)


TAMTAM

MarketMarket

…and have a positive outlook for 2008


Main KPIs:EBITCASKPassenger and employee satisfaction

Variable incentives based on KPIs, reaching up to 80% of total compensation

Variable incentives based on KPIs, reaching up to 80% of total compensation

Stock option program for top

management

Stock option program for top

management

“Successor”program

“Successor”program

Prepare organization to face challenges and support future growth

Long term incentive for driving correct “trade-offs”Increasing +1 level of thecompany in 2007

We have aligned management with the correct incentives


TAM: the best fitting product for the customer (and stakeholders) based on evolving efficiencies

Low Operating

Costs

Low Operating

Costs


CompetitivePrices

CompetitivePrices




Operations Outlook

David Barioni

November 12, 2007


One of the main pillars of our best fitting product is efficient delivery, and becomes a reinforcing cycle

Deliver what the

client really needs

Monitor results

Focu

s on

wha

t the

clie

nt re

ally

nee

ds

Prioritize efforts and investments where it makes a bigger difference

Execute to deliver what is expected at the lowest cost possible

Are we delivering what we had intended to deliver?

Are there additional opportunities for improving the final product and reducing cost?

Efficient Delivery


We intend to continue reducing costs aggressively, without deviating from our product fit

Fleet, network andoperations

Fleet, network andoperations Distribution expensesDistribution expenses OverheadOverhead

Increase of aircraft size(addition of 11% aircraft = 16% seats)

Increased stage length(new longhaul flights andoverhub)

Fleet standardization for domestic fleet

Alliances providing networkoptimization

New CCOA procedures

Decreased use of fuelthrough improved flightprocedures

Improved crewmanagement

Increased automization atairports

Implementation ofagreement with ABAV, transferring commissions ondomestic sales in Brazil

Increase of direct salesthrough the call center andinternet (focus on off peaksales)

New methods ofpayment

Fare bundle strategy

Implementaton of eTAMportal for offline bases (reduction of GDS fees)

Continued outsourcing ofnon-core activities

Continued revision of spans& layers

Implementation of additionalmethods of paymentslowering transaction costs

Implementation of new processes and systems in backoffice, eliminatingmanual work

Enhanced sourcing strategy


Initiative focus


FleetFleetFleet, , , networknetworknetwork andandandoperationsoperationsoperations Distribution expensesDistributionDistributionDistribution expensesexpensesexpenses OverheadOverheadOverheadOverhead

IncreaseIncreaseIncrease ofofof aircraftaircraftaircraft sizesizesize(((additionadditionaddition ofofof 11% 11% 11% aircraftaircraftaircraft = = = 16% 16% 16% seatsseatsseats)))

IncreasedIncreasedIncreased stagestagestage lengthlengthlength(new (new (new longhaullonghaullonghaul flightsflightsflights andandandoverhuboverhuboverhub)))

FleetFleetFleet standardizationstandardizationstandardization for for for domesticdomesticdomestic fleetfleetfleet

AlliancesAlliancesAlliances providingprovidingproviding networknetworknetworkoptimizationoptimizationoptimization

New CCOA procedures

DecreasedDecreasedDecreased use use use ofofof fuelfuelfuelthroughthroughthrough improvedimprovedimproved flightflightflightproceduresproceduresprocedures

ImprovedImprovedImproved crewcrewcrewmanagementmanagementmanagement

IncreasedIncreasedIncreased automizationautomizationautomization atatatairportsairportsairports

ImplementationImplementationImplementation ofofofagreementagreementagreement withwithwith ABAV, ABAV, ABAV, transferringtransferringtransferring commissionscommissionscommissions ononondomesticdomesticdomestic salessalessales in Brazilin Brazilin Brazil

IncreaseIncreaseIncrease ofofof direct direct direct salessalessalesthroughthroughthrough thethethe callcallcall centercentercenter andandandinternet (internet (internet (focusfocusfocus ononon offoffoff peakpeakpeaksalessalessales)))

New New New methodsmethodsmethods ofofofpaymentpaymentpayment

FareFareFare bundlebundlebundle strategystrategystrategy

ImplementatonImplementatonImplementaton ofofof eTAMeTAMeTAMportal for portal for portal for offlineofflineoffline bases bases bases (((reductionreductionreduction ofofof GDS GDS GDS feesfeesfees)))

ContinuedContinuedContinued outsourcingoutsourcingoutsourcing ofofofnonnonnon---corecorecore activitiesactivitiesactivities

ContinuedContinuedContinued revisionrevisionrevision ofofof spansspansspans& & & layerslayerslayers

ImplementationImplementationImplementation ofofof additionaladditionaladditionalmethodsmethodsmethods ofofof paymentspaymentspaymentsloweringloweringlowering transactiontransactiontransaction costscostscosts

ImplementationImplementationImplementation ofofof new new new processes processes processes andandand systemssystemssystems in in in backofficebackofficebackoffice, , , eliminatingeliminatingeliminatingmanual manual manual workworkwork

EnhancedEnhancedEnhanced sourcing sourcing sourcing strategystrategystrategy


Since December 06, we have implemented the “CCOA” (Air Operations Control Center)…

CCOACCOA

SchedulingScheduling AirportAirportMaintenanceMaintenance DOVDOVCoordinationCoordination

Goal is to maintain schedule “operational”, minimizing the final impact of unplanned events to customers and company

Chief PilotChief Pilot


…and is monitoring the “day-to-day” implementation of the network with faster responses

Physically “pooling together” areas which have direct contactwith the day-to-day activities has provided a faster responsetime to non-planned issues

Definition of objectives and standards of operations have giventhe CCOA more “autonomy” in decision making, also speedingup responses

Focus on safety and on-time performance, with no cancellationswith efficient use of aircraft


As well as faster responses, there are other adjacent benefits

Concentrates knowledge on real time basis of network status

Enhanced ability to supply airport and passengers with necessaryinformation

Enhanced ability to measure over time repeated errors orbottlenecks in “delivering” network therefore better visibility to “work out” hidden problems

Creates better teamwork

Mutual understanding of issues and focused actions on solvingthem (no discording action plans)

Decreases cost of operations

Anticipation of problems allows for alternative solutions, decreasing high costs in “fixing” the network


Initiative focus

















New CCOA New CCOA New CCOA proceduresproceduresprocedures


Improved crewmanagement



We have increased crew flight hours to 74 hours/pilot

~1,500 pilots and co-pilots at September 2007

Improvement in crewpairing has increasingtotal usage in 800 hours/day

Reformating simulatortraining has gained 4 hours/day

Before Nov 07 After Nov 07

60

74

0

20

40

60

80

100

Flight hours/pilot/monthLegal limit ~76 hours/month

Legal limit ~76 hours/month

23%


Additional operational measures for improved crew management and procedures

Change in flight proceduresBreaks vs. thrust reversersAltitude of flights

Change in scheduling proceduresTrade of day offAllocation of crew members in home bases

Deferral of training expenses

New software for scheduling


Initiative focus




















Increased automization atairports


We have increased self check-in usage in 2007 in over 300%…

95%

5%

73%

6%

21%

Apr 060.0

0.2

0.4

0.6

0.8

1.0

% Total Check-In(10 major airports)

Counter

Totem self check inWeb check in

Counter check in

Oct 07

10 major airports in Brazil

New focus for attendants:KPIs based on no. oftotem check-ins

Inclusion of daily follow-up in morning meetings

Development ofconfirmation enginespeeding up boardingpass printing

ID no., TAM Fidelidade no., e-tkt no. etc


…reducing queue waiting time

In 18 months, demand has grown ~10%, while self check-inover 300%

Reduction of ~ 20% queue waiting time

In 2007, with the new localization of totems in front of thecounters, we implemented luggage counters

Split between only check-in, only luggage, and check-in/luggage

Luggage counter takes 1/4 less time than normal check-in


We plan to increase usage through a series of initiatives

Expansion and renewal of totems

Repositioning airport totems in certain airports

Technological update to totem/web check-in servicesServe non-TAM e-tkts (interline partners)Allow modifications in bookingAllow use for all destinations

Optimized lay out to ensure luggage customers quickness for dispatch

Increase publicity to loyalty card customers


Initiative focus
















Implementation ofagreement with ABAV, transferring commissions ondomestic sales in Brazil






We signed an agreement with ABAV in October changing the structure of commissionsChanges with agreement, valid as of January:

Travel agent compensation

Applicable

Expected benefits for TAM: no more commissions paid in the domestic market(reduction in commercial costs), fiscal benefits, increase in direct sales through website

Included in ticket valuePaid directly by TAM6-7% of ticket value

All channels

Specified in the ticket valuePaid directly by the passenger10% of ticket value or R$ 30(whichever is greater)

Agencies linked to ABAV, TAM’s point of sales (stores and TAM Viagens, outsourced agencies and call center) – excluding electronic sales

Before After


Initiative focus











ImplementationImplementationImplementation ofofofagreementagreementagreement withwithwith ABAV, ABAV, ABAV, transferringtransferringtransferring commissionscommissionscommissions ononondomesticdomesticdomestic salessalessales ininin Brazil









Enhanced sourcing strategy


This year, we have initiated a revision of all our contracts and purchasing needs…

Initial focus on all non-aircraft related contracts

Implementation of unified sourcing policy

Centralization of purchasing activity/strategy, regardless of typeof contract

Creation of special sourcing know-how for ample negotiations

Focus on reducing cost while maintaining or enhancing quality

Implementation of continuous monitoring process in order to control “inflation” in following years


…with reduction of ongoing costs of up to 30% in each category of spend (1/2)

Example 1: Health Insurance (-5%)Example 1: Health Insurance (-5%)

Study on main value levers, including different plan structures

Increase in volume due to internalization of stations

Increased tenure of contract

RFP sent to various players, including current provider at thetime

PreparationPreparation ResultResultRemained with current provider

+1 doctor for first aid office

Upgrade of entry level, offeringhigher reimbursement rates andaccess to better labs and hopitals

Regional coverage

Inclusion of hiring medical evaluation

Return on claim %


…with reduction of ongoing costs of up to 30% in each category of spend (1/2)

Example 2: Tires (-30%)Example 2: Tires (-30%)

Centralization of data for preparation of negotiation

Purchase agreement for long term(vs. spot purchasing)

Definition and standardization ofquality levels and exchange/ reusage levels

Aggregated services for volume guarantee

PreparationPreparation ResultResultCentralized purchasing (vsdecentralized at stations)

Guarantees based on useful life oftires

Delivery directly at given stations(though centralized purchasing)

Aggregated services in analysingcosts, life, wear, etc


With all our initiatives, we expect CASK ex-fuel in 2008 to decrease 7%, while delivering a better product

Maintain the leadership in both domestic and international markeMaintain the leadership in both domestic and international markeMaintain the leadership in both domestic and international marketststs

ASK growth of ASK growth of ASK growth of

Domestic 14%Domestic 14%Domestic 14%

International 40%International 40%International 40%

Average load factor at approximately 70% overall Average load factor at approximately 70% overall 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 20Three additional international destinations or frequencies in 20Three additional international destinations or frequencies in 20080808

Domestic market demand growth from 8% to 12% (in RPK terms)Domestic market demand growth from 8% to 12% (in RPK terms)Domestic market demand growth from 8% to 12% (in RPK terms)


TAMTAM

MarketMarket


TAM: the best fitting product for the customer(stakeholders) based on efficienct delivery

Low Operating

Costs

Low Operating

Costs


CompetitivePrices

CompetitivePrices




MRO (Maintenance repair and overhaul)

Ruy Amparo

November 12, 2007


TAM has its own maintenance center since 2001 and has invested R$ 60 million up to December 2006

2001/2002 – Acquisition, construction, environment licenses and DAC (ANAC) certifications

2003/2004 – Nationalization of services

2005 – Increase in services selling

2006 – EASA qualification for A319/A320 and development of qualification for third part

2007 – Increase in qualification for components and planning for introducing Boeing B777-300

2010 – Construction of a new hangar for B777-300 and A350


We are organized to provide a full range of services…

MaintenanceTAM

EngineeringCTMMCC

Line Maintenance

HEAVYMAINTENANCE In-house Shops

Supply & LogisticsExternalSuppliers

External Shops

MRO SÃO CARLOS

CENTER

ConsumablesRotable Repair

REPAROROTABLES

Check C / D

ComponentsConsumables

Engine and Component RepairComponentsConsumables

Check A

Inventory Mgmt

SupplySão Carlos

ComponentsConsumables


…and well positioned to capture new opportunities

Employees are trained to provide several servicesAribus aircraft (first check D in A330 in Americas) and F100 Line maintenance, checks C and DComponents: hard-time, on-condition e condition monitoringCertifying for Boeing

We have the necessary certifications to support credibility EASAIOSAISO14001 in implementation

Our facilities accommodate increase in servicesHangars for at least 3 narrow body aircraft simultaneouslyPainting shopLarge area in the surroundings – allowing 24h testsGalvanoplastic installations


Future market for MRO is promising

Fleet size will grow in the coming years but MRO facilities may not increase proportionally

Main manufactures with record orders in the last two yearsMain markets continue with strong demand for aircraft

More demand for outsourced services

Airlines seeking lower unit costsGlobal consolidation taking place

2006 20160

10,000

20,000

30,000

Air Transport Fleet Forecast

CAGR 4.3%

CAGR 4.3%

Source: AeroStrategy


Our focus is to leverage the MRO potential

Sales force and marketing structure dedicated

Comprehensive solution – technological condominium( Goodrich )

Profit from the local labor cost advantage

Aggressiveness in selling heavy maintenance to charter operators

Establish long term contracts for line maintenance withinternational carriers


Cargo

Klaus Kuhnast

November 12, 2007


Our cargo operation is already structured as a business unit

Founded in 1996

Serves 45 airports and over 3.900 cities in Brazil and abroad

No dedicated aircraft – utilizes belly space from the operating fleet from TAM

More than 350 vehicles for ground distribution


We have different products for different customer segments

Door to door

Maximum weight per package: usually 100kg

Pick up and deliveries 365 day per year

The order is boarded in the next flight

Delivery in 2 hours after the cargo is authorized by the responsible entity

TAM Next FlightTAM Next Flight TAM Next DayTAM Next Day ConventionalConventional TAM CargoTAM Cargo

Door to door


Pick up in business days

Delivery in the next business day


Pick up and delivery in business days

Expected to delivery in until 72 business hours

Conventional transportation of international cargo, mainly developed for importations and exportations


61

176

83

156

123

184

130

277

165

322

389

347

2002 2003 2004 2005 2006 2007*

237 239307

407

487

736

0

200

400

600

800

Cargo Revenues (R$M)

DomesticIntl

Dom ASKgrowth

Intl ASKgrowth

-

-

-18%

-19%

9%

46%

33%

34%

24%

35%

18%

65%

CAGR

13%

22%

* Jan-Sep data annualized

12%

29%

Cargo revenues will grow stronger with the international expansion


Substitution of the F100 by the A320 family will increase domestic capacity for cargo

Increase in the wide body fleet is a huge opportunity for cargo

Substitution of the F100 by the A320 family will increase domestic capacity for cargo

Increase in the wide body fleet is a huge opportunity for cargo

Our wide body fleet is increasing aggressively...

3

10

80

13

3

14

87

6

4

18

101

4

20

104

4

22

110

4

24

113

8

24

115

3Q07 2007 2008 2009 2010 2011 2012

106 110

123128

136141

147

0

50

100

150

Total Fleet


...offering more space for cargo operations

Airbus A330

Airbus A340

Boeing 777-300ER

MD-11

Number of pallets

Number of pallets

6 + bulk

8

10 + bulk

7

VolumeVolume

2,228 cubic feet

65 cubic meters

3,544 cubic feet

100 cubic meters

5,454 cubic feet

122 cubic meters

2,118 cubic feet

60 cubic meters

Capacity in metric tonnesCapacity in

metric tonnes

10

16

24

12 - 19


Potential for optimization in the domestic market

Com

mer

cial

Screening of new commercial opportunities

Loyalty program for TAM Express

CRM

Marke

ting

New media plan for TAM Express

Targeting of potential clients

Call Center

OperationalCargo

Potential

Infra structure and IT

Building / reform of cargo and connecting terminals

New IT systems, including commercial decision tools(volume x discount x load factor)

Enhanced efficiency of operators

New organizational structure

KPIs in all bases

Training

New quality control area

Libano Barroso

November 12, 2007

TAM DAY 2007“Unlocking Value”Loyalty Program


TAM Fidelidade was the first airline frequent flierprogram in Brazil

1961 1993

Foundation of TAM

TAM launched its Loyalty Program

The first airline loyalty program in Brazil

19941994

Smiles Loyalty Program was launched by Varig

2000

Achieved 1MM airline tickets redeemed

2007

Fare Bundles linkedFare price differentiation and points accrual differentiation


In 1999, TAM Fidelidade launched the differentLoyalty Cards – Red, Blue and White

From 12.000 accumulated pointsonly on flights (TAM + other FFP) during 12 consecutive months

25% bonus on regular points for economicclass

Allows 10 kg excessluggage on TAM flights

From 48.000 accumulated points onlyon flights (TAM + FFP) during 12 consecutivemonths

50% bonus on regular points of the economicclass (points accrued as 1° class passengers)

Preferential check-in

Access to domestic vip lounges

Allows 20 kg excessluggage on TAM flights

Basic Category

Entry card. Pointsaccumulated byflying andexchangable for freetickets andupgrades

* Including Flight swithalliances


Points accrued through commercial partners as well as co-branded cards with Itaú and Unibanco

Itaú since 2004, Unibanco since 2007

Includes Mastercard and Visa

Conversion rate USD 1,00 = 1,33 Points

Itaú 220K cardholders, Unibanco 20K cardholders

Available for Domestic, International andPlatinum

First year includes a 5,000 points bonus award

Rebate on card admin fee

Profit sharing and/or commission on new cardholders


Redemption of points are solely air

Redemption on TAM flights (JJ e PZ) and FFP Alliances Flights

Validity of ticket issued with points:

South America: tickets issued within South America are valid for 3 monthsfrom the issuance date

Longhaul: tickets issued outside Latin America are valid for 6 months fromthe issuance date.

Allows name, distance, date, flight alterations after issued ticket as long as it is still valid and the member pays 10% fee with points

Reservations and issuing for South American flights must be atleast 7 days in advance and immediately issued


In 4 years, TAM has increased tenfold therevenues obtained with the sale of points

2003 2004 2005 2006 2007 *

30,99958,251

85,051

207,255

301,101

0

100,000

200,000

300,000

400,000

Revenue R$M

CAGR

77%

*2007 anualized*2007 anualized


Brazil has few recognized loyalty programs

TAM Fidelidade is in a unique position to be the “firstmover”, consolidating a broader loyalty program

Most “loyalty programs” are not loyalty programs but “privatelabel” cards, linked to retail stores

e.g. C&A, Renner, Americanas, etc

Banks offer reward programs which have as main attractivenessairline partners

Independent programs have not been able to sustain rewardpartners

e.g. Dotz

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Brazilian domestic market growth outlookSão Paulo, November 12th, 2007

2071105 Crescimento mercado doméstico_v9


SAO

Executive summary

• We do not have an “algorithm” to predict market growth in airline passengers; however, growth is known to be dependent of factors such as:

-GDP growth-Supply growth-Yields (average yields and pricing policies)-Industry players’ efficiency-Infrastructure bottlenecks

• In particular, GDP growth and industry penetration are very good predictors

• Considering a 3,5% annual GDP growth, Brazilian domestic market should more than triple in size in the next 20 years

-These growth rates could be even higher if there capacity constraints in the São Paulo terminal are resolved



SAO

0

200

400

600

5 10 15 20

CASM ex-fuel (2006 US cents)

Domestic market (billion RPM)

2006

2001

2000

1996

1994

1987

1985

1984

19821979

1978

1977

197419731971

2005

2004

2003

2002

1995

1993

# of Objs. = 36R² = 0.87

Market growth shows a good correlation with yields and players’ efficiency...

Sources: Bureau of Economic Analysis; Air Transport Association

0

200

400

600

10 20 30 40 50 60

Domestic yields (2006 US cents)

Domestic market size (billion RPM)

2005

2004

20001999

1998

1995

1994

1991

1986

1979

1978

19771975

1968

1966 1965

19621957 1949 1945

2006

20032002

1996

19931992

1985

1984

1969

# of Objs. = 6R² = 0.89

2

USA



SAO

... but there is a stronger correlation between market growth and GDP growth…

0

200

400

600

0 5 10 15

GDP (2006 US$ trillion)

Domestic market size (billion RPM)

20062004

2003

2002

2000

1999

1998

1996

1995

1993

1987

1985

1984

1977

1966

2005

2001

1997

1994

19921991

19901989

19881986

1983

198219811980

1979

1978

1976

1975

1974

1973

19721971

19701969

19681967

# of Objs. = 78R² = 0,98

USA




SAO

5

10

15

20

25

30

35

40

1.0 1.5 2.0 2.5

GDP (2006 R$ trillion)

Domestic market size (billion RPK)

2005

2004

200320022001

2000

1999

1998

19971996

19951994

19931992

1989

1988

1986

19851983

1982

1981

2006

1987

# of Objs. = 26R² = 0,88

Brazil

Sources: BACEN; ANAC

... which proves to be true also in the Brazilian market



SAO

0.0

5.0

10.0

15.0

Annual market growth /Real GDP growth

30's

12.6

40's

4.4

50's

4.3

60's

3.1

70's

2.3

80's

1.7

90's

1.2

2000's

1.0

2.1% 5.2% 3.6% 4.6% 3.6% 3.4% 3.2% 2.4%Annual GDPgrowth

26.1% 23.0% 15.5% 14.4% 8.0% 5.7% 3.9% 2.4%Annual RPKgrowth

USA


As the market matures, the market growth vs. GDP growth multiple declines

9/11 attacks



SAO

0.0

1.0

2.0

3.0

4.0


87-96

1.1

97-06

4.0

1.8% 2.4%Annual GDPgrowth

2.0% 9.7%Annual RPKgrowth

Brazil


In Brazil, the market/GDP growth multiple increased substantially in the past 10 years…



SAO

-4.0

-2.0

0.0

2.0

4.0

6.0


83-85

0.3

86-88

-2.2

89-91

0.8

92-94

1.3

95-97

1.8

98-00

1.9

01-03

-1.3

04-06

5.7

6.6% 1.7% -1.7% 5.4% 2.8% 2.3% 1.9% 3.3%Annual GDPgrowth

1.8% -3.7% -1.4% 6.9% 4.8% 4.4% -2.5% 18.8%Annual RPKgrowth

Brazil


In Brazil, the market/GDP growth multiple increased substantially from 2004

External debt crisis



SAO

0.0

2.0

4.0

6.0


04-06

5.7

3.3%Annual GDPgrowth

18.8%Annual RPKgrowth


A number of factors explain the the market/GDP growth multiple between 2004-2006

Main reasons

• Removal of “Varig’sbottleneck”

• Lower cost airlines growth

• New price/yield management practices

• Favorable economic environment

-Currency / growth / inflation



SAO

Economic and population indicators in Brazil are similar to US’s in the 50’s

Sources: US: US Census Bureau, ATA, IES; Brazil: IBGE, MEC, MME, ANFAVEA, ANAC

GDP per capita(2006 US$ k) 7,2 12,8 15,1 18,8 24,0 29,2 35,5 5,7

Enplaned domestic passengers per capita 0,01 0,05 0,22 0,50 0,94 1,45 1,85 0,23

Life expectancy at birth (years) 61,5 65,7

NA NA

Penetration of radios(% of homes) 39,3 85,2 93,5 94,1 99,0 99,0 99,0 87,9

Penetration of phones(% of homes) 34,6 47,9 70,5 83,8 94,3 92,5 93,9 74,5

Registered auto vehicles per capita 0,21 0,25 0,37 0,46 0,63 0,74 0,77 0,24

Population working at agriculture (%) NA 8,7 5,8 3,6 2,3 1,9 1,7 9,2

1,81,2

69,2 70,2 72,3 74,6 76,0 72,4

Penetration of TVs(% of homes) 55,1 91,8 96,7 98,1 98,3 93,0

BA degrees conferred per 1000 habitants 2,1 2,8 4,3 4,2 4,4 3,8

USA in the decade of... Brazil in the 2000’s30’s 40’s 50’s 60’s 70’s 80’s 90’s



SAO

0.0

5.0

10.0

15.0


30's

12.6

40's

4.4

50's

4.3

60's

3.1

70's

2.3

80's

1.7

90's

1.2

2000's

1.0

USA

Sources: Bureau of Economic Analysis; Air Transport Association; Bain analysis

Conservatively Brazil, in the next 20 years, could grow as the US market grew in the 60’s-70’s

A multiple of 3x can be expected for next 10 years on Brazil, and a multiple of 2x on the following decade

Considering a GDP growth of 3,5% per year over the next 20 years, the Brazilian market would grow at ~9% per year,

(~500% cumulative)



SAO

São Paulo airports are already close to their maximum capacity at peak hours

Source: ANAC

0

10

20

30

40

CGH - Average occupied slots per hour

Limit (33)

0 1 2 3 4 5 6

33

7

33

8

33

9

33

10

33

11 12

33

13

33

14

33

15

33

16 17

33

18

33

19

33

20

33

21

33

22

33

23

5052

32 32

0

10

20

30

40

GRU - Average occupied slots per hour

Limit (52)

0

7

1

7

2

7

3

11

4

10

5

19

6

20

7

35

8

31

9

34

10

26

11

18

12

21

13

12

14

8

15

17

16

24

17

32

18

25

19

29

20

42

21

42

22

27

23

23

5052

Analyzed day period

On some critical

hours, SP terminal

today already

presents a bottleneck, which will become

even more severe from

2013

MON – FRI



SAO

Market/GDP growth multiple will be lower in SP

Source: INFRAERO; ANAC; Bain analysis

0.0

1.0

2.0

3.0

Annual market/GDP growth multiple

2008-2017

Rest ofBrazil

SP

3.0

1.5

2018-2027

2.0

1.0

In 2006, CGH and GRU accounted for an estimated ~50% of Brazilian domestic RPKs

Market/GDP growth multiple in SP estimated

as ~50% of “natural”Brazilian multiple due to

capacity bottlenecks

HYPOTHESIS

USED IN SIMULATION



SAO

Notwithstanding São Paulo’s bottlenecks, the market will more than triple in size in 20 years

100

200

300

400

500

600

Brazilian market evolution (2007 = 100)

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

8.8%

6.9%

'07-'27

CAGR

Withoutbottlenecksin SP

Basescenario(predictedgrowth)

-2p.p.

Source: ANAC; INFRAERO; Bain analysis



SAO

Growth depends on airport investments beyond São Paulo

Sources: ANAC; INFRAERO; Press Clippings; Bain analysis

Domestic RPKs (B) 39,9 43,4 164,3 234,8

Domestic Enplanements (M) 43,0 46,7 212,0 253,2

2006 2007E Base scenario

Without capacity

bottleneck

2027E

Current annual capacity of Brazilian market is at 118M PAX/year,and will be expanded to 158M PAX/year by 2010; investments

should be in order to support growth



SAO

Projected market growth would lead enplanementsin Brazil in 2027 to be similar to US’s in the 70’s

Note: IBGE predicts a Brazilian population of ~232M in 2027Source: ATA; US Census Bureau; ANAC; IBGE; Bain estimates

0.0

0.5

1.0

1.5

2.0

2.5

Enplaned passengers per capita

1930's

0.01940's

0.1

1950's

0.2

1960's

0.5

1970's

0.9

1980's

1.4

1990's

1.9

2000's

2.2

2006

0.2

2027E(Base

scenario)

0.9

USA Brazil

tam day

Documents