Andres del Valle, LAN Airlines. Growing through Consolidation

Transcription

1 Andres del Valle, LAN Airlines Growing through Consolidation 0

2 This presentation may include forward-looking comments regarding the Company s business outlook and anticipated financial and operating results. These expectations are highly dependent on the economy, the airline industry, commodity prices, international markets and external events. Therefore, they are subject to change and we undertake no obligation to publicly update or revise any forward looking statements to reflect events or circumstances that may arise after the date of this presentation. More information on the risk factors that could affect our results are contained on our Form 20-F for the year ended December 31, Information, tables and logos contained in this presentation may not be used without consent from LAN 1

3 Contents I. LAN S DIVERSIFIED BUSINESS MODEL II. FUEL STRATEGY III. FLEET PLANNING IV. GROWTH OPPORTUNITIES 2

4 Strong Revenue Growth Operating Revenues 1993 LTM June08 US$ Millions CAGR 20% CAGR 1% CAGR 24% LTM Jun08 3

5 Consistent Profitability Despite Multiple Market Shocks (US$ millions) $425 $400 $375 $350 $325 $300 $275 $250 $225 $200 $175 $150 $125 $100 $75 $50 $25 $0 $11 $15 $6 $0 Operating Income and Net Income 1993 LTM June08 Recession 9/11 & Argentine Crisis $80 $83 $64 $62 $51 $46 $44 $50 $34 $38 $48 $48 $25 $31 $31 $11 $112 $84 $172 $164 $142 $ LTM Jun08 Operating Income Net Income Increasing Fuel Prices $303 $241 $413 $308 $399 $318 LAN Airlines has been consistently profitable under the current management 4

6 LAN Operates with High Efficiency Levels EBITDAR Margin Industry comparison (LTM Jun08) 30% 25% 22,3% 23,9% Ebitdar Mg. (%) 20% 15% 10% 6,3% 6,7% 7,3% 11,0% 12,9% 13,4% 14,2% 14,3% 17,9% 5% 0% GOL United American Continental TAM AirFrance Iberia British LAN COPA Ryanair Source: Companies Annual Reports (Last full year reported). 5

7 1H08 Highlights LAN achieved a strong operating performance with a 34.0% increase in revenues. Despite high fuel prices, LAN reported a 7.4% increase in net income demonstrating the resiliency of its business model and its ability to operate in a high fuel price environment. EBITDAR Margin for 1H08 reached 15.4%. However, EBITDAR margin adjusted for the fuel hedging gain reached 16.8%. US$ millions 1H07 1H08 % Chg Revenues 1,604 2, % Passenger 996 1, % Cargo % Other % Total Operating Expenses (1,421) (1,982) 39.5% Operating Income % Operating Margin 11.4% 7.8% -3.6 pp Net Income % EBITDAR* % EBITDAR Margin 20.6% 15.4% -5.2 pp * EBITDAR = Operating income + depreciation & amortization + aircraft rentals (does not include fuel hedging gains/losses) 6

8 LAN s Diversified Business Model: Passenger + Cargo Operations Cargo Diversified Business Model (% Operating Revenues) 1H08 Others 4% 33% 35% 67% 61% Passenger LAN s business model is diversified between the passenger and cargo businesses This allows LAN the flexibility to better withstand unfavorable economic conditions 7

9 LAN s Passenger Operations are Geographically Diversified Diversified Passenger Capacity (% ASKs) 1998 Dom. Chile 3% 28% 39% 72% International Dom. Chile Regional 20% 2003 Dom. Perú 3% 18% 59% International (Long Haul) Dom. Argentina Dom. Perú 4% Dom. Chile 8% 14% Regional 24% 1H08 50% International (Long Haul) LAN s business model is diversified geographically throughout Latin America and the rest of the world This allows LAN the flexibility to better withstand unfavorable economic conditions Approximately 50% of ASKs are currently originated in Chile 8

10 LAN s Cargo Operations are Geographically Diversified Diversified Cargo Capacity (% ATKs by routes 1H08) Miami-Mexico LAX - México 5% LAX - Brasil 9% 2% 3% Mexico-South America Chile 11% 43% Miami-Brazil 13% 87% Argentina, Uruguay 14% Others 9

11 LAN: A Passenger + Cargo Airline Passenger Business: Capacity Breakdown by Route Type (ASK) International 74% Passenger Operations Sales (LTM Jun08): US$2.5 billion Passengers (LTM Jun08): 12.0 million Fleet: 72 aircraft Companies: Chile, Argentina, Peru & Ecuador Arg. (Dom) 4% Peru (Dom) 8% Chile (Dom) 14% Cargo Business: Capacity Breakdown by Route Type (ATK) Chile (Dom) 3% Cargo Operations Sales (LTM Jun08): US$1.4 billion Tons (LTM Jun08): 634 thousand Fleet: 9 dedicated freighters Companies: Chile, Brazil, Mexico & Colombia* Intl 97% * In process of setting up a new cargo subsidiary 10

12 LAN Business Model: Distinct blend enhances returns and reduces risk Revenue Mix, Selected Companies, 2007 EVA 41% 6% LAN 33% 5% 62% 53% Passenger and Cargo Combination Lower Break-Even Load Factors Increased diversification Korean Air 29% 12% 59% BELF Differential for passenger + cargo routes (2Q08) Cathay 22% 19% 60% Singapore 19% 11% 70% 11% Air France-KLM BA 12% 8% 7% 7% 80% 86% Load Factor 74% 63% Qantas 6% 16% 79% Iberia American 6% 4% 6% 21% 90% 73% BELF w/o Cargo Cargo Contribution BELF w/ Cargo Delta 3% 9% 88% Note: BELF = Break-even load factor Source: Companies - Last Full Year reported. Cargo Others Passenger 11

13 LAN s Regional Strategy Passenger Operations Multi-hub/Multi-airline model Interlocking hubs protect and complement each other Higher asset utilization Guayaquil 2003 TAM Commercial Agreement Implemented in December 2007 Main Routes: Santiago, Lima, Buenos Aires to Sao Paulo Domestic Markets Brazil Peru Chile Argentina Lima KM Santiago 1929 TAM / LAN Agreement 2008 Buenos Aires

14 Leading Presence in South American Markets LAN Market Share in Passenger Markets (July 2008) Market Size: Passengers Transported 2007 (millions) Ecuador International: 24% Millions of Passengers Peru International: 30% Domestic: 86% Chile International 52% Domestic: 70% Guayaquil Lima Santiago Buenos Aires Argentina International: 16% Domestic: 27% ,5 5,6 4,9 4,1 3,9 3,6 2,8 2,2 Ecuador Chile Peru Argentina International Domestic Sources: DGAC Chile, DGAC Peru, Undersecretary of Transportation Argentina, DAC Ecuador, LAN Estimates. 13

15 Diversified Passenger & Cargo Network LAN is one the leading passenger and cargo operators in Latin America Toronto Nueva York Amsterdam Houston Los Angeles Miami Frankfurt Madrid Mexico City Cancun Pta. Cana Merida San Jose Panama Medellin Caracas LAN Codeshare Sydney Auckland Papeete Easter Island Bogotá Quito Guayaquil Piura Chiclayo Trujillo Lima Arequipa Tacna Arica Iquique Antofagasta Calama Copiapo La Serena Santiago Concepcion Temuco Valdivia Osorno Pto. Montt Balmaceda Pta. Arenas Iquitos Tarapato Pucalpa Puerto Maldonado Cuzco La Paz Salta Manaos Asunción Rosario Cordoba Mendoza Bariloche Iguazú Montevideo Com. Rivadavia Rio Gallegos Ushuaia Curitiba Rio de Janeiro Sao Paulo Porto Alegre Buenos Aires Salvador Belo Horizonte Vitoria Passenger + Cargo Network Freighter Network 693 destinations worldwide 14

16 Evolution of Passenger Business in 1H08 80,0% 75,0% 70,0% Load factor (%) + 1.7p.p Yield (US$ cents) % ,0% 60,0% 55,0% Revenues (US$ mill) % 1,317 50,0% 1H07 1H08 6 1H07 1H ,5 7,5 Revenues / ASK (US$ cents) % Passenger ASK (millions) % 15, H07 1H08 6, , ,426 4, ,5 1H07 1H H07 1H08 15

17 Evolution of Cargo Business in 1H08 80,0% 75,0% Load factor (%) -1.9 p.p. 60 Yield (US$ cents) % 70,0% 74.% 72.1% ,0% 60,0% 55,0% 50,0% 1H07 1H H07 1H Revenues (US$ mill) % Revenue / ATK (US$ cents) % , Cargo ATK (millions) % 2,015 1, H07 1H H07 1H08 0 1H07 1H08 16

18 New Short Haul Business Model: Improvement in Main Indicators % Internet Sales % Check in Web/ATM 17% 25% 34% 45% 46% 52% 39% 38% 49% 67% 69% 67% 77% 67% Dec- 06 Mar- 07 Jun- 07 Sep- 07 Dec- 07 Mar- 08 Jun- 08 Dec- 06 Mar- 07 Jun- 07 Sep- 07 Dec- 07 Mar- 08 Jun- 08 Chile Domestic Traffic Growth (RPKs millions) and Load Factor Peru Domestic Traffic Growth (RPKs millions) and Load Factor ,9% +24% 72,5% ,0% +32% 78,0%

19 Contents I. LAN S DIVERSIFIED BUSINESS MODEL II. FUEL STRATEGY III. FLEET PLANNING IV. GROWTH OPPORTUNITIES 18

20 High Fuel Price Environment WTI Price ( Sept. 2008) Avg. price 2004 Avg. price 2005 Avg. price 2006 Avg. price 2007 Avg. price Aug 08 US$41.5 US$56.6 US$66.1 US$72.2 US$116.6 US$/Barrel Var % Var % Price effect for LAN: US$187MM Var % Price effect for LAN: US$71MM Var % Price effect for LAN: US$79MM 1H08 +46% Price effect for LAN: US$272 MM 19

21 Fuel Strategy: Fuel Cost Pass-Through Mechanism Change in passenger fuel pass-through table in September 2008 WTI Regional Long Haul Long Haul (US$) (US$) (US$) (EUR+SYD) (US$) < WTI Domestic Chile (CL$) (US$) kms >1000 kms < Fuel pass-through in cargo businesses International US$ 1.70 / Kg (1) Note: Fuel surcharges are per segment (ie.one way). (1) Euro 1.20 / Kg from Europe. 20

22 Fuel Strategy: Fuel Hedging Fuel Hedging Program (*) WTI (US$ / bbl) 60% % 40% 53% 55% % 20% 10% 0% 30% 10% 10% 10% 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 % Hedged Price % Hedged of total consumption Price (*) Hedging as of August

23 Contents I. LAN S DIVERSIFIED BUSINESS MODEL II. FUEL STRATEGY III. FLEET PLANNING IV. GROWTH OPPORTUNITIES 22

24 LAN Continues Modernizing its Fleet Arrival of 19 passenger aircraft during Boeing Airbus A318 2 Airbus A319 2 Airbus A320 Fleet YE08: 90 Aircraft Boeing Fleet: Phasing out finished in May

25 Aircraft orders for B787 Dreamliner (Passenger) and B777 (Freighter) Orders for 32 Boeing B787 Dreamliner 25% more efficient in fuel Environment friendly aircraft Orders for 4 Boeing 777 Freighter Almost double the capacity of the B767 Longer range, which enables LAN to open new routes 24

26 LAN s Fleet is among the Youngest in the World Average Fleet Age for Selected Airlines (Years as of June 2008) 3,7 3,8 (*) 5, ,1 7,4 7,5 7.4 (*) (*) 9.0 (*) (*) As of December REGIONAL EUROPE NORTH AMERICA ASIA Source: Airlines reports, public information / 25

27 Current Fleet Plan Short Haul Long Haul Cargo A318 A319 A320 B767 A340 B787 B767F B777F B x 10 x 10 x 2 x 3 x 6 x 2 x 1 x 6 x 3 x 5 x 1 x 3 x 1 x 5 x x 2 x 1 x 1 CAPEX (USD MM) % 141 US$6.0 Billion

28 Fleet Plan: LAN Maintains the Flexibility to Adjust its Fleet Size Number of Long Haul Passenger Aircraft % -31% -24% 0 MIN MAX PLAN 27

29 Contents I. LAN S DIVERSIFIED BUSINESS MODEL II. FUEL STRATEGY III. FLEET PLANNING IV. GROWTH OPPORTUNITIES 28

30 Opportunities in Argentine Domestic Market Lan Argentina Destinations Highlights Recent Events Salta Córdoba Mendoza Neuquén Bariloche C. Rivadavia Calafate Río Gallegos Ushuaia Iguazú Buenos Aires Lan Argentina is currently serving 11 domestic destinations, which comprise 75% of domestic traffic. Current fleet: 8 Airbus A320 Current market share: +/- 27% Fleet YE08: 10 Airbus A320 New destinations: 2 additional in 2H08 New Developments: Two consecutive 18% increases of the fare band in April and May State subsidy for fuel cost for the entire Argentine domestic industry. Nationalization of Aerolineas Argentinas / Austral 29

31 LAN Ecuador: New Domestic Operation Lan Ecuador Destinations Highlights Galapagos New operation expected to start in 1Q09. Esmeraldas Coca Quito Lago Agrio Destinations 1st phase: Quito, Guayaquil, Cuenca and Galápagos Islands Guayaquil Destinations 2nd phase: Machala, Loja, Coca, Lago Agrio, Esmeraldas Machala Cuenca Loja 30

32 New Cargo Operation in Colombia Colombia Highlights MIAMI Expected to start in 1Q09 Colombia is the largest air cargo market in Latin America in terms of exports to the United States. Estimated volume for the Colombian cargo market is about 200,000 tons annually This operation will provide LAN Cargo with connectivity between Colombia and the rest of the region, US and Europe 31

33 In Conclusion LAN Continues to Grow in a Challenging Environment Diversified business model Strong footprint in Latin America Modern and fuel efficient fleet Effective fuel strategy Successful implementation of low cost model 32