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TAM S.A. 23 June 2008

Update Report - 1Q 08 Results

Rising jet fuel prices to impact profitability

Preferred SELL Fundamental research indicates a 13% downside in the preferred stock over the next 6-12 months.
We have calculated the target price based on fundamental factors, using a weighted average of target
Stock prices obtained through DCF and comparative valuation methodologies.

Ticker: TAMM4.SA
Target price: BRL27.75
We reiterate the preferred stock a SELL with a 6-12 month target price of BRL27.75.
Current price: BRL32.05

ADR HOLD The ADR is expected to appreciate approximately 6% over the next 6-12 months primarily due
approximately 19 percentage point upside attributable to the anticipated appreciation of the Brazilian
real against the US dollar over the same period1. We continue to rate this stock over 6-12 months as
we continue to anticipate a significant currency impact on the ADR in the medium term.
Ticker: TAM
Target price: US$21.35
Current price: US$20.12
We reiterate the ADR (1 ADR= 1 preferred share) a HOLD with a 6-12 month target price of US$21.35.

Analyst: Mayuresh Kelkar

Editor: Matthew Bridle
Global Research Director:
Satish Betadpur, CFA
Next news due:
2Q 08 results, August 2008
Investment horizon - short term actionable trading strategies
This report addresses the needs of strategic investors with a long term investment horizon of 6-12 months. If this
report is provided to you by your broker under the Global Settlement, you may now also access (free of charge) the
short term trading outlook that we publish from time to time for this issuer, looking at the coming 5-30 days for
readers with a shorter trading horizon. These are available online only at www.researchoracle.com.

Report summary
TAM S.A.’s (TAM) 1Q 08 revenues were above our expectation while profitability was significantly below
our expectations. Top-line growth was driven by strong domestic and international passenger revenue
growth, while its bottom line was impacted by rising operating costs, primarily fuel, personnel, and
sales and marketing expenses. Going forward, we maintain our cautious outlook for the company’s
performance in light of an anticipated suppression in yields compounded by rising jet fuel expenses.
Furthermore, given global economic conditions and slowing airline traffic, it is unlikely the company will
be to recover fuel costs in the form of higher airfares. Therefore, we expect TAM to deliver an operating
loss in FY 2008 and FY 2009. Therefore, based on current price levels, we believe TAM’s preferred
stock will trade at a discount, going forward.

Currency impact for US investors1

The impact by itself of the anticipated currency movements on the ADR (now US$20.12), without
considering changes in the share price, is positive and is expected to be:

Over 6 months: US$20.03

Over 12 months: US$24.65

Page 1 Refer to page 4 for all footnotes