LATAM Airlines Group SA (LTM) 2007 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for waiting. At this time we would like to welcome everyone to TAM's fourth quarter 2007 earnings conference call. We would like to inform you that this call and the slides are being broadcasted on the Internet at the company's website at www.tam.com/ri and that a presentation is available to download at the investor information section.

(OPERATOR INSTRUCTIONS)

Before proceeding let me mention that forward-looking statements are based on the beliefs and assumptions of TAM management and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of TAM and could cause results to differ materially from those expressed in such forward-looking statements.

Now I'll turn the conference over to Mr. David Barioni Neto, CEO. Mr. Barioni, you may begin your conference.

Hello. Good morning, everyone. We would like to thank you for your presence. Let's begin the presentation of the fourth quarter 2007 results. Let's jump to slide number three. We can see that 2007 was a challenging year. In the macroeconomic environment we faced high volatility due to the subprime crisis. In the world aviation market, airlines were impacted by the increase on the fuel prices, which, for Brazilian airlines, was offset by the appreciation of the real. Companies also faced difficulties due to scarcity of aircraft and spare parts related to the increase in demand for the overall market.

In the Brazilian market we observed the conclusion of the Varig case which is acquisitioned by Gol. The governing structure related to the airline industry was changed with new senior management. We saw also the collapse of BRA in the fourth quarter of the year. For TAM, infrastructure issues faced during the year impacted our operations, reducing aircraft day utilization, decreasing our ability to dilute fixed costs. Also on July 17, 2007 we had an accident which totalized 199 victims. Slide number 4.

Even with all these challenges the domestic aviation market in Brazil grew 12% in 2007. In 2008 we have already seen another growth spurt of 9.3% in the first two months of the year. Slide number 5.

In July 2003, TAM took the leadership position in the domestic market. Our average market share for 2007 was 48.9% and we reached 51% in February 2008. Slide number 6.

The international market among Brazilian carriers that fly international routes decreased 5% in 2007 but recovering after the second half of the year. In 2008, the average growth until February was 56%, mainly due to TAM's international network strong increase. As a result, due to the nature of the bilateral agreements, international carriers have presented a higher ratio of international traffic flowing to and from Brazil, creating additional opportunity for Brazilian carriers in this market.

On slide number eight, in July 2006 we became market leader among the Brazilian companies and in 2007 our average market share was 67.5%. In February 2008, we had a 67.3% market share. Slide number nine.

The highlights of the fourth quarter of 2007 were the increase of the two aircraft A340 and two A330s in our long-haul fleet and also seven A320s and one airborne A321 for our overall fleet.

We redelivered three Fokker 100s following our phase out plan of the 100-seat aircraft as part of our fleet plan in order to improve utilization of our slots. We are increasing capacity primarily by substituting for larger aircraft. We also signed a loan agreement with the BNP Paribas bank to finance up to $170 million in pre-delivery payments for 20 new Airbus aircraft.

Regarding operational efficiency, our daily block hours per aircraft reached 12.3 hours in the fourth quarter of 2007. Considering only the operating aircraft excluding fares and aircraft in maintenance, we posted a daily utilization of 13.3 hours per aircraft. Our total average load factor for the fourth quarter of 2007 was 71%.

We've started our new code-share operations. In November, we started operating our code-share with LAN. Together LAN and TAM hold 66% of South America's supply. Also in November we substituted our code-share with American Airlines for United Airlines, offering now two additional non-stop destinations to TAM passengers, which are Chicago and Washington.

On slide number ten, in the fourth quarter of 2007 we initiated our daily flights to Montevideo, Uruguay, Frankfurt, Germany and Madrid, Spain. The increase of international business has been fundamental in maintaining a higher level of profitability and we believe that it will continue to provide a steady stream of revenues and results for the company going forward, as well as helping to increase passengers' loyalty with TAM, impacting loads in the domestic market. And it also provides further growth opportunities in the cargo business.

According to the survey, Ten Most Valuable Brands in Brazil, conducted by Interbrand, one of the world's largest global branding consultancies, TAM's brand was valued at R$881 million, which is the eighth position. TAM was the only airline company [reckoned]. Also we were named the most shareholder friendly company in Brazil in the aerospace, transportation and industrial sector, elected by the institutional investors in Brazil and abroad in the December issue of Institutional Investors magazine. In the same survey, our CFO, Líbano Barroso, was named the best Chief Financial Officer in the industry in Brazil.

In the first quarter of 2008 we announced guidelines to reposition of our brand in which we reaffirm our commitment to our customers.

I would now like to invite our CFO, Mr. Líbano Barroso, to comment on our results in the quarter. Libano?

Thank you. Good morning to all. On slide number 11, addressing now our fourth quarter 2007 results, we recorded a 16% increase in total gross revenues. In the domestic market we presented a 6% growth composed by a 9% increase in our domestic supply, offset by yield reduction commented on the next slide. In the international market, revenues increased 15% due to the raise in supply of 72% made possible by the fleet increase, partially offset by the 17% appreciation of the real against the dollar and the beginning of several new routes, which are usually launched with promotional fares.

We also had a 53% increase in cargo revenues due to higher availability of aircraft cargo space for sale, especially in the international operations. To complement our revenues we had a 76% increase in other gross revenue, mainly due to the increase on mileage program revenues and accounting for expired tickets.

On slide 12, our total RASK decreased 7% year over year but increased 5% compared to the third quarter of 2007. Our scheduled domestic yield decreased 6%, partially compensated by the load factor increase resulting in 5% scheduled domestic RASK reduction compared to the fourth quarter of 2006. The average scheduled domestic yield for 2007 reduced 19% compared to 2006.

Our scheduled international yield presented a 15% decrease in dollar terms. The load factor decreased 3 percentage points which, combined with the depreciation of the real versus the dollar of 17%, resulted in a 32% scheduled international RASK decrease. As we commented on the previous slide, the main reason for the decrease in load factors and yields was the inauguration of the new international flights, Caracas, Montevideo, Frankfurt and Madrid, which are still maturing. These new frequencies increased our international average [days yield] impacting even more the RASK compared to the previous year.

On slide 13, when we compare the fourth quarter of 2007 against 2006, we can observe that our total CASK increased 1.4% and CASK excluding fuel increased 4%. The main reasons were the impact by the operational infrastructure issues reducing our aircraft day's utilization in 5% jeopardizing our cost dilution, the beginning of new long-haul international destinations impacting our CASK due to the pre-operating costs such as the setup costs for new stations, marketing costs and crew training. We continue to pursue an increase of efficiency in our operations and believe that it will be a main driver of future profitability.

On slide 14, with combined effect of RASK and CASK, our margins suffered this quarter reducing the spread year over year. When compared to fourth quarter '06 there was a decrease of 8 percentage points in the EBIT margin, reaching 3.6% in the fourth quarter of 2007.

On slide 15, according to Brazilian accounting principals, BR GAAP, our EBITDAR margin reduced to 15% reaching an amount of R$353 million, representing a 19% reduction. Our EBIT decreased 64% to R$83 million. Our net income was R$50 million, a decrease in the margin to 2% in the fourth quarter of 2007.

On slide 16, according to the North American accounting principals, U.S. GAAP, we have observed the following figures in the fourth quarter. Our EBITDAR margin was 14% representing R$313 million. The EBIT reached R$90 million representing a margin of 4%. Our net income was R$119 million representing 5% margin.

On slide 17, our earnings per share reduced in the fourth quarter of 2007. In BR GAAP EPS reached R$0.33 and in U.S. GAAP R$0.79 or $0.45 of dollar per ADS.

On slide 18 we can understand the main reasons for the difference in net income between Brazilian and U.S. GAAP. In the U.S. GAAP, 44 aircraft were restated from operating leases according SFAS 13 requirements to financial lease. This means that these aircraft are recorded as fixed assets in reals and the related debt is recorded as liability in U.S. dollars, therefore suffering exchange variation and recognition of interest impacting our financial results. In the fourth quarter our net income was impacted mainly by the lease treatment in approximately R$103 million.

On slice 19 we can see in the graphic that the quarterly performance of the index that composed RASK. The fourth quarter shows that the yields are recovering combined with the load factor, representing the best domestic RASK of the year. Despite the intra-year increase, the average scheduled domestic yield for 2007 reduced 19% compared to 2006. On slide 20 we show the [efforts] on the spread, which had increased consistently since the second quarter '07.

On slide 21, our cash position at the end of the quarter reached approximately R$2.6 billion and our debt increased due to the issue of bonds in April and PDP financing. Also we are substituting the F100 for A320 family aircraft which have higher leasing costs. When we adjust our total debt by capitalizing 7 times the annual lease payments and subtracting the cash in equivalent divided by the result by capitalization adjusted by adding 7 times the annual lease payments, we will arrive to a ratio of 66%.

On slide 22, the growth in our international operations has altered our dollar exposure. Foreign currency went from 2008 -- in the fourth quarter 2006 to 21% in the fourth quarter of 2007, even with the depreciation of the real versus dollar in 17%. Considering that our costs linked with foreign currency represents approximately 50%, we are improving the natural hedge of the business, reducing the necessity for FX hedging with derivatives and therefore decreasing the overall [spend] with this transaction. With international flights launched in the end of 2007 and the new ones that will be launched up to the end of 2008, we expect foreign currency revenues to increase between 40% to 50% of total revenues until the end of the year.

On slide 23, since our IPO in June 2005, our stocks reached roughly 130% appreciation at the Bovespa by the end of 2007. The average daily trade volume in the fourth quarter '07 was 1% of the total free float, with the daily trade volume remaining about R$33 million. Since our follow-on in March '06, our ADS appreciated 26% at the New York Stock Exchange with an average daily trade volume of $19 million. We are part of [eight] index and our shares are covered by several analysts listed on our investor relations website.

On slide 24, we believe that the share value is currently underestimated. For this reason, on last January 30 we announced a share buyback program with the following characteristics. We will hold the shares in treasury and subsequently cancel or transfer them without reducing the company's capital value. We will buy back up to 4 million preferred shares, which represents 5.56% of the preferred shares free float. The program will remain in effect for the maximum period of 365 days. The purchase will be conducted on the stock exchange at market price through the mediation of UBS Pactual Corretora and Credit Suisse Corretora. We have already started the purchase.

I will pass the floor back to David Barioni, our CEO.

Okay, let's go to slide number 25. We present now our 2007 guidance originally released at the end of 2006, remaining the same through the year. We forecasted that the domestic market would grow between 10% up to 15% in RPK terms. The average last year was 11.9%. We maintain the leadership in domestic markets with an average of 48.9% in 2007. Market share came roughly 1 percentage point below target mainly due to the increases in capacity in the industry, above that which was originally guided in 2006. Our domestic load factor was 70.5%.

Our guidance for aircraft utilization was 13 hours per day, however, due to regulatory and operational changes in the industry through 2007, our average utilization per aircraft was 12.6 hours per day. Our commitment for international markets was to begin the third frequency to Paris, which is in place since January 2007, and two new long-haul flights. We started three new destinations, Milan, Frankfurt and Madrid. Also in South America we have started flying to Cordova, Caracas and Montevideo.

In the next two slide, we will comment the CASK reduction target that will be slide number 26. We reached 74% of the CASK reduction target mainly by two reasons. The negative impact of fly less hours per aircraft per day than we originally forecasted directly impacted the anticipated dilution of fixed costs. And the above planned international expansion which lead to additional setup costs as previously discriminated.

We foresee domestic market demand growing in the range of 8% up to 12% in RPKs. Regarding our operations, we will maintain leadership both in the domestic and international markets. We will grow capacity in ASK by 14% in domestic markets and 40% in the international markets. The total load factor for TAM including both markets will be approximately 70%. In terms of CASK, we continue with our cost reduction programs and committed to deliver 7% CASK ex-fuel reduction year over year in BR GAAP. As for the international market, we will capture additional opportunities still available by inaugurating three destinations or frequencies in 2008.

Slide number 28, regarding our narrow-body fleet used in the domestic market, given the growth in the net and [certain] forecast reduction, we are substituting the F100 fleet. We ended 2007 with 10 F100 aircraft of which five were already in a redelivery process and the rest of them were flying in our subsidiary in Paraguay, TAM Mercosur. Now we are monofleet in the domestic market having only Airbus A320 family aircraft. By the middle of 2008 we will start the substitution of the MD11s by the new Boeing 777-300ERs. We indeed, to end 2008 with a young having an average of five years composed by 123 aircraft.

On slide 29, our strategy is based on providing a superior quality product with a more attractive value price relation to our customers. To do so we are always working and focusing on excellence, excellence and service, working with the commitment to serve and offering always a differentiated product to our passengers. Excellence in technical operation, focusing at all times on safety, maintaining quality operations with both quality and reliability. Excellence in management, hiring and training the best people, high performance culture, controlled costs and efficiency culture, management alignment and team work.

Jointly, these three points reflect a strategy that we believe will give us higher competitive advantage and will also sustain our leadership in both domestic and international markets with profitability. Thank you.

(OPERATOR INSTRUCTIONS) Thank you. Your first question is coming from Jim Parker with Raymond James. Please go ahead.

Yes. Good afternoon, David and Libano. Just want to ask about, in November, in your investor day, you presented a potential plan of unbundling some of your non-airline operations like the loyalty program and perhaps cargo and maintenance. Could you update us on what you're doing there at this time?

Hi, Jim. This is Libano. Good afternoon. Yes. We -- in our TAM Day we present that we are carefully taking care of other areas that today you sum up, that we are considering business unity. And in the case of cargo, we have a few that we are well set on that. We are -- we have separate managerial data in the company, we use -- we have focused on using the value of the aircraft and we will maintain as is as a business unit.

On the loyalty program, you are right, we are definitely studying now all the value drivers, studying all the impacts in fiscal terms, tax terms, everything. And we are looking forward to see how we can extract more value for this. So we are putting all the efforts on that, and this study is on the right path.

The same for the MRO, the maintenance, repair and overhaul, our maintenance center that we have in San Carlos, that we -- in the inner city of San Paulo, we are studying this as a business and potentially as we mentioned the loyal program, potentially as a separate entity to attract partners and to extract more value.

But these studies are in place. We have budget dedicated, we have KPIs related, so everything is on track.

Okay. A second question for David. There's been a lot in the news media about David Neeleman, the founder of JetBlue, starting a new airline in Brazil and I think he's raised considerable capital and I'd like to know, David, your assessment of what you know about this potential start-up, how it might impact TAM?

Well, Jim -- hello, Jim, good morning. Jim, we are aware of that, about the media, of course, and they have the expertise to develop a brand new airline company indeed, of course. They're going to start flying in 2009. As far as we know, they will operate a 100-seat aircraft, which are Embraer 195. They're going to operate in secondary airports, as [competitors] and they will try to keep their network operating in secondary cities.

As far as we know, of course, they're going to be competitors for us. We are ready for them and we always open for new competitors, of course. And keep in mind that we had the Webjet and DRA in the past, they had almost the same business plan that JetBlue has right now and we are waiting for them, of course.

Okay. Thank you.

Thank you.

Thank you. Your next question is coming from Mike Linenberg with Merrill Lynch. Please go ahead.

Hello. Good morning, all. A couple of questions. First, when I go back and I look at your forecast for the market growing 8% to 12% in 2008 and the fact that you're growing your capacity 40% in international and 14%, I believe, domestic, and I believe GOL is also, GOL and Varig are also looking at a similar rate. Based on that type of growth, versus the growth that you expect the market to grow, should we anticipate pressure on yields? Or loads? Should RASK be negative in 2008? Is that a reasonable assumption?

Hello, Mike. It's Libano.

Hello.

Yes. Hi. Let's separate in market -- by market.

Okay.

If you look at the domestic -- on the domestic market, you are right, our guidance is within the range of 8% to 12%. We are more bullish on the 12% now, because we have -- we had more than -- closer to 13% February. Accumulated to February, we have 9.3. And our ASK growth is 14% on the domestic market for 2008. You are using the last guidance release by the competitor, which is, if I'm not wrong, it is closer to 18% on ASK.

Yes.

The combination of both is stated according to our assumptions -- these assumptions. Probably ASK growth on the domestic market in Brazil this year should be on the level of 16%, give or take.

Okay.

Yes. For a 12% demand growth, this will represent a two -- in our view, so far, a 2 percentage point drop in average load factor for the domestic market, which means we believe on a 67 -- 66 to 67 average load factor for the domestic market.

Okay.

In other words, for us, we believe that we will reach 68% or 69% on the domestic market. Because we have been able to extract a better gap of market share to capacity share. You can see this on February that we have six percentage points above the second player. This will happen once again now in March. We are forecasting to post -- to deliver a 68.5% or 69% domestic load factor, probably the second competitor will represent, once again, 5% to 6% percentage points load factor below our target.

But with this, with 2 percentage points load factor on the average of the market, we believe that we have room to increase yields and in fact we are increasing yields on the first quarter now, on the domestic market, for us. This roughly 5% year-over-year, quarter 2007, to the first quarter 2006, 5% higher.

Okay.

But we started recovering yields now in March, late March, and that's why we are confident that April, we will maintain the pace to a level of 10% increase.

Okay.

So we are confident that domestic yields, scheduled yields, will be at least 5% '08 to '07. So we are confident on that.

Okay. Okay.

On the international side, we are considering 40% ASK growth. And you have to take in mind that this is just among the Brazilian carriers. And the Brazilian carriers are accounting today for just 35% of total traffic from and to Brazil. Which means that we have 70% out of 35, that means we have closer to 22%, 23% of total international market share.

We have room to reach, once again, the logic that used to be, up to 2004, on an equilibrium of 50/50 between international carriers and Brazilian carriers. That's why increasing 40% will not, from the Brazilian side, will not impact on our ability in load factors. We are forecasting an average load factor, international, 72% for this year with yields flat in dollar terms.

Okay. And then my second question is going back to slide 19, where you can see throughout the year, you had nice improvement in yield. Now I realize some of that is seasonal and so I was curious, based on the recent capacity additions and how the network has developed, what are your best quarters now? Where do you peak on sort of a profitability and maybe even on a fare basis? If you could just provide sort of a rejiggering of the quarters, the strongest to the weakest?

Yes. You are right, Mike, that this year this will not be so [the standard] because remember last year, in fact the yield reduction, yields at the start of the end of 2006, in fact it was in September, when the new Varig was relaunched. They started with a new discounting scheme and then go follow them immediately with -- we started reducing yields on late 2006 and this caused us, as you see on the second quarter 2006, we have a very weak yield on the domestic market. After that, we started recovering yields and then we achieved this in the fourth quarter. But the -- now that we have -- the market is more, we believe the Varig question mark is more -- is not on the market anymore. We had this impact on fuel, and that's why we are now recovering yields in all the markets.

And the second quarter this year, yields will be higher than the first quarter, which is not so logical. Because the second quarter usually is weaker than the first. But this year, especially, we will post a better second quarter year-over-year and better than the first quarter.

Okay. And then just the ranking of your quarters. I mean on profitability, is the strongest quarter going to be later in the year or in your March quarter? I mean, how do we think about that? Just with your mix and traffic and how that shifted?

Yes, you can consider a ramping second quarter better than the first quarter. But for sure, third and fourth better than the second quarter. So second semester is stronger.

Okay. Okay. So that's still -- Okay. So that's still dissimilar. Okay. Thank you very much.

Thank you, Mike.

Thank you.

Thank you. Your next question is coming from Nick Sebrell with Morgan Stanley. Please go ahead.

Good afternoon, gentlemen. I was wondering if you could give us an update on how yields are going in March? You said a little bit about it, I caught the number 5%, so there's a 5% year-over-year yield improvement. Is that for the first two months? Is that looking mostly at the whole quarter? How did yields recover in March, year-over-year? And then maybe if you could talk a little bit about what you're expecting in April? That's the first question.

And then the second, if you could give also an update on how you're hedged relative to fuel?

Hi, Nick.

Hello.

You are right that this half domestic yield, scheduled domestic yield, the first quarter '08 to first quarter '07, will represent 5% increase. On -- but the yields in January and February, they were flat to December and we started ramping in March. In April now, we are with yields, roughly 10% higher. So we are ramping, as I mentioned last answer, ramping the yields.

You -- about hedging, we are on WTI, we are as of today 4 in 12 months rolling, we have four months, average four months, hedged with a strike price at $80 per barrel. So we have roughly -- I can say more than four months ahead of us.

I don't know if I missed one question or it's okay?

No, that's mostly it. I was wondering if when you're talking about 5% and 10% yields, we're talking about domestic? Or are we talking about the market?

Domestic.

Domestic, okay, that's what --.

Domestic.

That was the question, yes. And then you said 40% hedged on a 12-month rolling basis. So 40% of your next 12 months expected domestic usage, is that right?

No, no, total consumption of the company, 40% hedged at $80 per barrel.

Got it. Thank you.

Thank you.

Thank you. (OPERATOR INSTRUCTIONS) Thank you. Your next question is coming from Frank Boroch with Bear Stearns. Please go ahead.

Hi. Good afternoon. Could you give us an update on how the international markets have been performing since Varig made their announcement of discontinuing some of the -- their European service and also any update on the [Inaci] proposals to raise parking fees and landing fees in Brazil? Thanks.

Hi, Frank. We will share the -- first would be the second Varig item. The -- since Varig had released this, their decision to exit some destinations there, you know that we launched our Frankfurt flight in December, since that we are with load factor on the 75% to 80%, 80%, so we are doing very well in Frankfurt with the A340. And generally in all Europe, we are with load factor higher than 70%, 75%, just in Madrid we have high 60s, closer to 70, so we are doing very well there.

We are -- you know that we have -- this is a guidance, one guidance. We have a view to start three new flights or destinations this year and for sure we are -- we will take care of these opportunities and despite the decision of Varig or not, we will maintain our pace of growth, putting at least 40% of ASKs on international capacity this year.

(inaudible)

Hello, Frank, Barioni, good morning. Frank, we got into the practice to [car plants] and the commercial [ports. ] The new measures is in effect by now. Those measures didn't affect us a lot because we have a very optimized operation in Congonhas Airport, where the majority of the air traffic stays on the ground for 30 up to 40 minutes. And so of course if we have some maintenance delays, we can be reached by the high taxes. But this could affect the (inaudible). That -- as the (inaudible) report, the measure is not in effect and as far as we know, the idea was cancelled. And so there is no news about the new taxes for parking areas imposed in Congonhas Airport. As far as we know, the idea was cancelled.

Okay. Great. And lastly, Libano, could you maybe just share what you expect to -- or what you're paying for jet fuel maybe in the first quarter? I don't know if it's close to R$1.60 per liter, or where do you see that?

Yes, we can send the detail, but roughly we have this at this level. I can send the detail but you are right at this level.

Okay. Thank you very much.

Thank you. Your next question is coming from Steve Trent with Citigroup. Please go ahead.

Good day, everybody. Most of my questions have been answered at this point, but just one quick one for you. I was wondering if you have any updates as to what's the latest on air traffic control? Certainly, versus the last several months, it seems to have calmed down a lot, and headcount of course has improved, et cetera. But any formal updates that you're aware of in terms of what they might be doing in terms of air traffic controller salaries or any other relevant events that you could give us some color?

Hello, Steve. (spoken in Portuguese).

(spoken in Portuguese).

That for checking for Portuguese is improving well. Okay, Steve. The air traffic situation is resolved. We have no excess delays anymore regarding to air traffic controllers. Of course, we can tell you that the situation will remain. We expect that the situation is okay. They are putting a lot of new aircraft controllers on the system. As far as we know, they hire more -- over than 450 new controllers and they are delivering then in 2007, 2008 until August. And so as far as we know, Steve, the situation is resolved in terms of aircraft controllers.

Okay. Great. (spoken in Portuguese).

Regards, Steve.

Thank you. Your next question is coming from Keith Weissman, with Calyon Securities. Please go ahead.

Good afternoon. I had a question on your tax rate for the quarter. It was lower than your run rate. And just wanted to discuss some of the specifics behind why it was lower than the foregoing run rate?

Yes. Hi. How are you?

Okay.

This -- okay, this was lower just because we had a benefit for paying interest on capital for the shareholders. Dividends and interest on capital. That's why we reduced the tax rate. But normally, the tax rate for the company is 34%. Exceptionally, this quarter we had this effect.

And would you expect this again every fourth quarter or -- ?

No -- yes. Yes. Yes. Each fourth quarter, probably, yes.

Okay. And it looks like your fuel costs on a per liter basis have been pretty flat through this year and even back to the fourth quarter of last year. Maybe some of that's due to exchange rates or all of it. Can you just discuss that?

Yes, it's a mix of exchange rates. We are phasing out A400s and we are with aircraft more efficient, higher stage lengths on -- with new long-haul destinations. That's why this -- it's a combination of these items.

Yes. And in terms of the first quarter, do you have any guidance you can provide considering we're towards the end of March by now?

In terms of?

Just any data points that you have guidance on that you might be able to provide?

Okay. We can talk about load factor, we are expecting to have domestic load factor, 68.5% to 69%. International load factor 72%. In terms of domestic market share, probably it will be closer to 51%.

Yields on the domestic market, first quarter, 5% higher than year over year. And internationally, we have -- as we are maintaining this new ramp up flights that we started in the fourth quarter, we have -- in real, we have lower yields. But for the year, we are considering 5% increase on the domestic yield and internationally we are considering flat in dollars, dollar terms.

This is for the year or for the quarter?

For the year. For the quarter, it's lower in the yields on the domestic market. Higher, 5%, international yields, lower at -- I don't -- we don't provide the figure yet, but lower because of a combination of FX and the foreign ramp up flights that we started at the end -- in December, November and December.

Okay. That's all I had. Thank you.

Thank you.

Thank you. You have a follow-up question coming from Nick Sebrell with Morgan Stanley. Please go ahead.

Hi. Thanks for taking the follow-up question. I had a question regarding Congonhas and how they've created new flexibility in terms of making connections. What changes have you made in your network, if you could just summarize? And what impact do you think that has in yield? In other words, is some of the yield increase that you're seeing directly due to those changes in Congonhas?

And then the second question I was wondering, you talked about how your load factors are expected to compare to your nearest competitor. And how much of that do you think is international connections? What percentage or how many basis points of your load factor do you think is feeding into your international route network?

And then last, if you could give maybe some information on buyback progress?

Okay, Nick. First on -- with the connections resuming in Congonhas. You know that this [turned] airport, once again, a better feed for business travelers. With it we are better positioned to attract more and to increase the yields because as you know, the breakdown for our passengers is 75% are business-related. So we have a breakdown more concentrated in business. They are more inelastic to price, that's why we have been able to increase the yields and we are confident to maintain this level, increasing along the next quarters.

With this, in terms of the comparative position in terms of load factor with the second player, since February, we have been able to post a differential in terms of load factor on the domestic markets by 5 to 6 percentage points. And on international, more than 10 to 15 points, percentage points.

This will happen, once again, now in March. We are expecting load factors on domestic markets, 68.5 to 69, probably the second player will post a -- according to their release, exactly yesterday, probably they will post 63. So we are -- still maintain a better market share to capacity share because by a combination of better network, better service, more punctuality and regularity and other things that are more value for the business travelers.

Other thing, you asked -- repeat please the third one, Nick?

Well, the third one was progress on the buyback. But if I could just ask for clarity, so you're saying that maybe 3, 4 percentage points, would that be accurate, of your domestic load factor are people and making connections to your international network?

Two percentage points, you can consider.

Okay. And --?

Two percentage points.

Cool. And the last question is the buyback.

Right. Okay. On the buy-back, we started the buyback scheme according to the Brazilian resolution on CEM, we have to release this up to the 10th of April and we will release that. But we started a small -- on a small proportion just as a signal that we believe that the shares are under-priced and in some days you will be able to see that, the number of shares.

Thank you.

Thank you. This concludes the question and answer section. At this time, I would like to turn the floor back over to Mr. Barioni for any closing remarks.

Hello. This is still Libano. Before passing the floor to Barioni, I have just to note -- to advise all the analysts and investors that Christina Betts that has been doing a great job together with us for the last three years is leaving TAM. She is going to work on a shopping mall company and we have to thank her for the great job together with us and wish her good luck. Barioni, now?

Okay. Everybody, thank you very much for joining us at this conference call. And in the name of TAM, we wish to Christina all the best and very good luck for you. Thank you very much. Thank you very much, everybody.

Thank you. And this concludes today's presentation. You may now disconnect your lines at this time and have a very nice day.