Counting on Varig’s Demise Brazilian TAM Gets 37 New Airbus Jets

While once monopoly Brazilian Varig continues a painful agony in its death bed, TAM, Brazil’s largest airline company, has just signed a Memorandum of Understanding to acquire 37 additional Airbus aircraft.

The order includes 15 Airbus A319, 16 A320 and 6 A330 to be delivered until 2010. The new acquisition comes in addition to last year’s signed contract of 29 A320 to be delivered during the same period and the option of another 20 aircraft of the same models.

With this agreement, TAM expands its fleet plan until 2010 in order to match the growth in demand in the domestic market and maintains its strategy of selective profitable growth in the international segment.

The strong growth of the domestic market – year-on-year, January to May, 21.2%, according to data from the Brazilian authority ANAC (Agência Nacional de Aviação Civil) – was decisive for the Company to opt to acquire aircraft with higher number of seats (144 in the case of A319 and 174 of A320) to substitute the 100 seat fleet, currently served by Fokker 100 planes.

"The decision is aligned with our proposal to be a low cost company with differentiated services and competitive prices. The increase in traffic density justifies that we operate larger aircraft, which will also result in a lower cost per available seat kilometer," states TAM’s CEO, Mr. Marco Antonio Bologna. TAM is the largest Airbus operator in Latin America, currently with 64 aircraft (41 A320, 13 A319 and 10 A330).

In the international market, TAM already owns 10 Airbus aircraft A330 and, with this new agreement, it will incorporate an additional six planes of the same model to be allocated to international routes.

In the long haul flights, the company directly serves Paris (two daily frequencies), Miami (three daily), New York (one daily), and, as of October 28, it will start a daily flight to London.

In South America, TAM is now using an A330 to fly to Santiago (Chile) responding to the augment in demand, and will substitute an A320 for an A330 in one daily frequency to Buenos Aires (Argentina), as of September.

Considering this new agreement, TAM expects its fleet to achieve a minimum of 96 airplanes at the end of 2006. Year to date, the company has incorporated five A320 in its fleet that were additional to the contract previously signed with Airbus.

The new Airbus agreement, aligned with TAM’s policy of a flexible fleet planning, through their leasing contracts, result in the following composition:

Aircraft  2006  2007  2008  2009  2010

F100  22  14  10  5  –
A319/320  64  81  88  98  111
A330  10  12  14  16  16
Total  96  107  112  119  127

TAM has been the leader in the Brazilian domestic market for more than two years, and had a domestic 45.6% market share and international 28.6% market share at the end of May 2006.

TAM operates regular flights to 47 destinations throughout Brazil. It serves 72 different cities in the domestic market through regional alliances. Additionally, it maintains code-share agreements with international airline companies that allow passengers to travel to a large number of destinations throughout the world.

TAM was the first Brazilian airline company to launch a loyalty program. Currently, the program has 3.0 million subscribers and has awarded more than 3.3 million tickets.

TAM – www.tam.com.br

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