On Friday, TAM S.A. (TAM) disclosed its operating data for September 2009. For the month, TAM gained 87.3% market share in the international market, representing 5.2% growth year on year. However, the domestic market share was 44.2%, down 8.7% compared to the same period in 2008. 

The domestic market was strongly stimulated during the month of September as a result of the competitive dynamics. In this environment, TAM observed a growth of 8.6% in domestic demand, while domestic supply grew by 7.4% compared with the same period in 2008. With this, TAM’s load factor increased by 0.8% compared to September 2008 and presented a strong recovery of 2.6% compared to the August of 2009, reaching 65.4%. In September, industry demand grew 29.9%, while supply increased 19.9%. 

The competitive scenario for September impacted domestic yield for the quarter, so that it declined between 5% and 10% compared to the second quarter of 2009. As of the first weeks in October, the company has observed a slight tariff recovery in comparison to the previous month. 

In the international market, TAM achieved a growth of 15.0% in demand compared with the same period in 2008, while the growth in supply stood at 21.4%. The international load factor was 76.1%, remaining 2.4% above the market average, which was 73.7%. 

In the international market, which is already showing greater rationality and a stronger recovery, the company estimates an increase between 10% and 15% in the yield in dollars for the third quarter, compared with the preceding quarter. 

A stronger real will make international travel more affordable. However, there is a growing concern that the liberalization of international flight tariffs in Brazil would lead to a 50% drop in airfares in the following quarters. 

However, the growing competition in the Latin American airline industry is a source of concern. Additionally, the recent surge in oil prices also remains a problem. Furthermore, we do not expect a significant recovery in the global airline industry even in 2010. Thus, we reiterate a Neutral recommendation on the stock.
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