TAM S.A. (Form: F-1/A, Received: 03/02/2006 17:26:10)

As filed with the Securities and Exchange Commission on March 2, 2006

Registration No. 333-131938

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

PRE-EFFECTIVE AMENDMENT

NO. 6 TO

Form F-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

TAM S.A.

(Exact Name of Registrant as Specified in its Charter)






Federative Republic of Brazil	4512	Not Applicable
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

Av. Jurandir, 856 — Lote 4, 1° andar

04072-000 São Paulo, SP, Brazil

(+55 11 5582-8817)

(Address and Telephone Number of Registrant’s Principal Executive Offices)

National Corporate Research Ltd.

225 West 34 ^th Street — Suite 910

New York, New York 10122

(212) 947-7200, ext. 1127

(Name, Address and Telephone Number of Agent For Service)

Copies to:






Sara Hanks and Jonathan Zonis		Francesca Lavin
Clifford Chance US LLP		Cleary Gottlieb Steen & Hamilton LLP
31 West 52nd Street		One Liberty Plaza
New York, New York 10019		New York, New York 10006
Phone: (212) 878-8000		Phone: (212) 225-2530
Fax: (212) 878-8375		Fax: (212) 225-3999

Approximate day of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. o

CALCULATION OF REGISTRATION FEE

Proposed Maximum

Title of Each Class of

Amount to be

Offering Price

Aggregate

Amount of

Securities to be Registered

Registered

Per Share

Offering Price ⁽³⁾

Registration Fee

Preferred shares, without par value ⁽¹⁾⁽²⁾

40,960,813

$22.65

$927,762,414.50

$99,270.58


⁽¹⁾	Includes preferred shares, which the underwriters may purchase solely to cover over-allotments, if any, and preferred shares which are to be offered in an offering outside the United States but which may be resold from time to time in the United States in transactions requiring registration under the Securities Act. All or part of these preferred shares may be represented by American depositary shares (“ADSs”), each of which represents one preferred share.
⁽²⁾	A separate Registration Statement on Form F-6 will be filed for the registration of the ADSs issuable upon deposit of the preferred shares hereby.
⁽³⁾	Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(c) under the Securities Act, based on the average of the high and low prices of the preferred shares as reported by the BOVESPA on February 15, 2006.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the United States Securities and Exchange Commission becomes effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED FEBRUARY 22, 2006

Preferred Shares including Preferred Shares in the form of American Depositary Shares

TAM S.A.

(incorporated in the Federative Republic of Brazil)

We and the selling shareholders are selling 35,618,098 preferred shares (including preferred shares in the form of American Depositary Shares, or ADSs) to be sold in a global offering. Each ADS represents one preferred share. Of the total being sold by us and the selling shareholders, the underwriters are offering preferred shares and ADSs in the United States and other jurisdictions outside Brazil. Preferred shares will be placed outside the United States by the Brazilian underwriters identified elsewhere in this prospectus, settled in Brazil and paid for in reais . The offer of such preferred shares is being underwritten by the Brazilian underwriters pursuant to an underwriting agreement governed by Brazilian law. The closings of the international and Brazilian offerings will be conditional upon each other.

No public market currently exists for our ADSs. We have applied to list the ADSs for trading on the New York Stock Exchange, known as the NYSE, under the symbol “TAM.” Our preferred shares are listed on the São Paulo stock exchange, Bolsa de Valores de São Paulo — BOVESPA, known as the BOVESPA, under the symbol “TAMM4.” The closing price of our preferred shares on the BOVESPA on February 17, 2006 was R$49.99 per share, which is equivalent to approximately US$23.60 per share, based upon an exchange rate of R$2.1186 to US$1.00.

The international underwriters have an option to purchase a maximum of additional ADSs to cover over-allotments of ADSs. The Brazilian underwriters also have an option to purchase a maximum of additional preferred shares to cover over-allotments of preferred shares in the concurrent Brazilian offering.

Investing in the preferred shares and the ADSs involves risks. See “Risk Factors” beginning on page 13.

Price: R$ per preferred share and US$ per ADS

Proceeds to

Underwriting Discounts

Proceeds to

Selling

Price to Public

and Commissions

TAM S.A.

Shareholders

Per ADS

US$

Total

US$

The ADSs are expected to be delivered on or about , 2006.

Investors residing outside Brazil, including institutional investors, may purchase our preferred shares only if they comply with the foreign portfolio investment registration requirements of Instruction No. 325, dated January 27, 2000 of the Brazilian Securities Commission (Comissão de Valores Mobiliários, or CVM), and Resolution No. 2,689, dated January 26, 2000, of the Brazilian National Monetary Council (the Conselho Monetário Nacional, or CMN) or through foreign direct investment procedures as provided in Law No. 4,131 dated September 27, 1962, as amended.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.


Credit Suisse	Pactual Capital Corporation

Merrill Lynch & Co.


Citigroup	JPMorgan

The date of this prospectus is , 2006.

TABLE OF CONTENTS


	Page





Presentation of Financial and Certain Other Information		ii




Summary		1




The Offering		10




Risk Factors		13




Forward-Looking Statements		23




Enforcement of Judgments and Service of Process		24




Exchange Rate Information		25




Use of Proceeds		26




Capitalization		27




Dilution		28




Selected Financial and Operational Information		29




Management’s Discussion and Analysis of Financial Condition and Results of Operations		33




Overview of the Industry		57




Business		61




Regulation of the Brazilian Civil Aviation Industry		90




Management		97




Principal and Selling Shareholders		103




Transactions with Related Parties		108




Description of Our Capital Stock		109




Market Information		113




Significant Differences Between our Corporate Governance Practices and NYSE Corporate Governance Standards		117




BOVESPA’s Differentiated Corporate Governance Practices		119




Description of American Depositary Shares		123




Dividends and Dividend Policy		132




Taxation		136




Underwriting		143




Expenses Relating to this Offering		150




Validity of Securities		150




Experts		150




Where You Can Find More Information		150
EX-1.1: FORM OF INTERNATIONAL UNDERWRITING AGREEMENT
EX-4.1: FORM OF DEPOSIT AGREEMENT
EX-5.1: FORM OF OPINION OF MACHADO, MEYER, SENDACZ E OPICE
EX-8.1: FORM OF OPINION OF MACHADO, MEYER, SENDACZ E OPICE AS TO TAX MATTERS
EX-10.1: A320 FAMILY PURCHASE AGREEMENT
EX-10.1: A350 FAMILY PURCHASE AGREEMENT
EX-10.3: TAY ENGINE MAINTENANCE AGREEMENT
EX-10.4: V2500 MAINTENANCE AGREEMENT
EX-10.5: PW4168A MAINTENANCE SERVICE AGREEMENT
EX-10.6: NOVATION AND AMENDMENT AGREEMENT
EX-10.7: GENERAL TERMS AGREEMENT
EX-10.8: GENERAL SERVICES AGREEMENT
EX-23.1: CONSENT OF PRICEWATERHOUSECOOPERS

PRESENTATION OF FINANCIAL AND CERTAIN OTHER INFORMATION

You should rely only on the information contained in this prospectus. Neither we nor the selling shareholders have authorized anyone to provide you with information that is different from the information contained in this prospectus. This document may only be used where it is legal to sell these securities. The information in this prospectus is accurate only as of the date of this prospectus, regardless of when this prospectus is delivered or when any sale of ADSs or our preferred shares occurs.

The offering of preferred shares is being made in Brazil by a Portuguese-language prospectus that has been filed with the CVM and has the same date as this prospectus but has a different format. This offering is being made in the United States and elsewhere outside Brazil solely on the basis of the information contained in this prospectus.

U.S. investors purchasing preferred shares must be authorized to invest in Brazilian Securities under the requirements for foreign portfolio investments established by the Brazilian National Monetary Council ( Conselho Monetário Nacional , or CMN) and the Brazilian Securities Commission ( Comissão de Valores Mobiliários , or CVM) or through foreign direct investment under Law No. 4,131/62. The Brazilian underwriters are offering preferred shares in Brazil to Brazilian investors and other non-U.S. international investors authorized to invest in Brazilian securities under the requirements established by the CMN and the CVM or through foreign direct investment under Law No. 4,131/62.

No offer or sale of ADSs may be made to the public in Brazil except in circumstances which do not constitute a public offer or distribution under Brazilian laws and regulations. Any offer or sale of ADSs in Brazil to non-Brazilian residents may be made only under circumstances that do not constitute a public offer or distribution under Brazilian laws and regulations.

In this prospectus, the terms “we,” “our” and “us” refer to TAM S.A., a sociedade anônima organized under the laws of Brazil, and our consolidated subsidiaries (TAM Linhas Aéreas S.A., or TAM Linhas Aéreas, Transportes Aéreos del Mercosur S.A., or TAM Mercosur, and Fidelidade Viagens e Turismo Ltda., or TAM Viagens). During the year ended December 31, 2004, TAM Linhas Aéreas began to consolidate the financial statements of TAM Viagens ( Fidelidade Viagens e Turismo Ltda. , a subsidiary of TAM Linhas Aéreas), which had until December 31, 2003 been recorded at historic costs.

We prepare our consolidated annual financial statements and unaudited interim condensed consolidated financial information in accordance with Law No. 6,404/76, as amended by Law No. 9,457/97 and Law No. 10,303/01 (which we together refer to as Brazilian corporation law), accounting standards issued by the Brazilian Institute of Independent Accountants (Instituto dos Auditores Independentes do Brasil) and the standards and procedures established by the CVM. We refer to these accounting practices, standards and procedures as accounting practices adopted in Brazil or Brazilian GAAP. Our consolidated annual financial statements and unaudited interim consolidated financial information are also prepared in accordance with DAC Administrative Decree No. 33 of January 13, 2005, which sets domestic price levels for embarkation, parking, stopovers and unified prices for the use of airport infrastructure (or the DAC Account Plan). Our consolidated annual financial statements and our unaudited interim consolidated financial information also include the reconciliation of shareholders’ deficit and net income (loss) to generally accepted accounting principles in the United States, or U.S. GAAP. Brazilian GAAP differs in certain significant respects from U.S. GAAP. For a summary of certain significant differences, see note 29 of our consolidated annual financial statements for the years ended December 31, 2005 and 2004 and for each of the three years in the period ended December 31, 2005, included elsewhere in this prospectus. For a summary of the reconciliation from Brazilian GAAP to U.S. GAAP in our consolidated annual financial statements and unaudited financial information see “Management’s discussion and analysis of financial condition and results of operations — Reconciliation with U.S. GAAP,” and our audited consolidated annual financial statements at December 31, 2005 and 2004 and for each of the three years ended December 31, 2005, included elsewhere in this prospectus.

The following financial information is included in this prospectus:


	•	our audited consolidated annual financial statements at December 31, 2005 and 2004 and for each of the three years in the period ended December 31, 2005 which have been audited by our independent registered public accounting firm.

In this prospectus, the term “ANAC” refers to the National Civil Aviation Agency or Agência Nacional de Aviação Civil , a national aviation agency recently created to replace, in the near future, the Civil Aviation Department or Departamento de Aviação Civil (“DAC”). The term “Brazil” refers to the Federative Republic of Brazil and the phrase “Brazilian government” refers to the federal government of Brazil (and includes ANAC). The term “Central Bank” refers to the Central Bank of Brazil. The terms “U.S. dollar” and “U.S. dollars” and the symbol “US$” refer to the legal currency of the United States. The terms “real” and “reais ” and the symbol “R$” refer to the legal currency of Brazil and the term “ centavos ” means the 100th part of the real .

We maintain our books and records in reais .

All references in this prospectus to numbers of our common and preferred shares reflect a share split which took place on May 16, 2005, pursuant to which holders of our existing shares received two shares of the same class and type for each share held.

This prospectus contains terms relating to operating performance within the airline industry that are defined as follows:


	•	“ASK” means available seat kilometers, or the product of multiplying the number of seats available in all the aircraft by the distance the seats are flown in kilometers.

	•	“Average tariff” means the quotient of dividing passenger transport revenue by the number of paying passengers transported.

	•	“BELF” means the break-even load factor (or load factor in which revenue equals operating costs and expenses).

	•	“Block hours” refers to the elapsed time between an aircraft’s leaving an airport gate and arriving at an airport gate.

	•	“CASK” means cost per ASK, or quotient of dividing total operating costs by the number of available seat kilometers. The result is presented in this prospectus in centavos of reais per ASK.

	•	“Load factor” means the percentage of aircraft occupied on flights, calculated by the quotient between RPK and ASK.

	•	“Paying passengers transported” means the total number of passengers who actually paid and flew on all TAM flights.

	•	“RASK” means revenue per ASK, or quotient of dividing total operating revenue by the number of available seat kilometers. The result is presented in this prospectus in centavos of reais per ASK.

	•	“RPK” means revenue passenger kilometer, or transported passenger-kilometer, corresponding to the product of multiplying the number of paying passengers transported by the number of kilometers flown by such passengers.

	•	“Yield” means the average amount paid per passenger to fly one kilometer.

This prospectus contains translations of various real amounts, before rounding, into U.S. dollars at specified rates solely for your convenience. You should not construe these translations as representations by us that the real amounts actually represent these U.S. dollar amounts or could be converted into U.S. dollars at the rates indicated. Unless otherwise indicated, we have translated the real amounts using a rate of R$2.3407 to US$1.00, the U.S. dollar selling rate at December 31, 2005 published by the Central Bank on its electronic information system, SISBACEN, using transaction PTAX 800, option 5. On

iii

February 17, 2006, the U.S. dollar selling rate published by the Central Bank on SISBACEN, using transaction PTAX 800, option 5, was R$2.1186 to US$1.00.

The information contained in this prospectus relating to Brazil and the Brazilian economy is based on data published by the Central Bank, government agencies and other independent sources. Data and statistics regarding the Brazilian and international civil aviation markets are based on publicly available data published by DAC and the International Air Transport Association (IATA) respectively. We also make statements in this prospectus about our competitive position and market share in, and the market size of, the Brazilian airline industry. We have made these statements on the basis of statistics and other information from third-party sources that we believe are reliable. Although we have no reason to believe any of this information or these reports are inaccurate in any material respect, we have not independently verified the competitive position, market share and market size or market growth data provided by third parties or by industry or general publications.

The offer price of R$49.99 per preferred share indicated in this prospectus is based on the closing price of our existing preferred shares on BOVESPA on February 17, 2006. The offer price of US$23.60 per ADS indicated in this prospectus is based on the offer price per preferred share described above, the ratio of one preferred share to one ADS and the exchange rate of R$2.1186 to US$1.00 (being the real /US dollar exchange rate reported by the Central Bank on February 17, 2006).

Certain figures in this document have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary does not contain all the information you should consider before investing in our preferred shares or ADSs. You should read this entire prospectus carefully, especially the risks of investing in our preferred shares or ADSs discussed under “Risk Factors” beginning on page 13, our audited consolidated annual financial statements and our unaudited financial information and related notes beginning on page F-1 before investing in our preferred shares or ADSs.

Overview

We provide scheduled air transportation in both the domestic market and the international market through our operating subsidiaries TAM Linhas Aéreas and Transportes Aéreos del Mercosur S.A. (TAM Mercosur). According to data provided by DAC, we are the leading airline in the domestic market, with a 46.1% share of this market in December 2005 and a 41.2% share in December 2004, as measured in RPKs. We offer flights throughout Brazil, serving the largest number of destinations in Brazil of all Brazilian airlines, and operate scheduled passenger and cargo air transport routes to 46 cities, in addition to a further 27 domestic destinations that we serve through regional alliances with other airlines. We also directly serve 11 international destinations and provide connections to other destinations through commercial agreements with American Airlines Inc. (American Airlines), Air France-KLM S.A. (Air France) and certain other airlines. We offer convenience to our passengers by offering frequent and direct flights to and from all major domestic airports at competitive prices. We carried approximately 12.6 million passengers on domestic flights and approximately 1.2 million passengers on international flights in 2004. In 2005 we carried approximately 18.2 million passengers on domestic flights and approximately 1.8 million passengers on international flights. At December 31, 2004, we averaged 501 take-offs per day and at December 31, 2005 we averaged 636 take-offs per day. In order to meet domestic demand, we primarily cater to the business market but also operate in the leisure and cargo markets, which complement our primary operations and allow us to maximize the use of our aircraft.

We currently operate with a fleet of 84 leased aircraft, consisting primarily of Airbus models A330, A320 and A319, as well as Fokker model 100 aircraft. We currently have 9,669 employees.

Since our incorporation 29 years ago, we believe that we have demonstrated a history of sustained growth and a proven ability to adapt to the various stages through which the civil aviation industry in Brazil and around the world have passed. We believe that Brazil is currently the fifth largest domestic aviation market in the world and has one of the busiest shuttle services in the world (São Paulo — Rio de Janeiro). In the past seven years, we believe that our rate of growth has been significantly higher than that of our competitors in the domestic market, as indicated by the data in the following graph:

Growth rate (Index 1997)

Source: DAC.

We believe that we have a strong corporate culture, embedded by our founder (Captain Rolim Adolfo Amaro), that permeates all levels of our company and continues to guide the day-to -day activities of our management. In order to ensure that we act in accordance with best practices and provide value-added service to our passengers, we seek to embed our culture in the training provided to new employees and believe that all of our staff are products of this practice. Our mission is to be the best, most profitable airline in Latin America, with a reputation for operational, managerial and ethical excellence, and we consistently transmit this mission statement to our employees.

Competitive Advantages

We believe that our principal competitive advantages are:


	•	Value-added service at competitive prices. We believe that we offer the best combination in the domestic market of a network of destinations and frequent flights, with value-added service, high on-time rates and competitive prices, based on:


	•	broad domestic network of destinations: our own network serves 46 destinations in Brazil and, through regional alliances, extends to a further 27 destinations in Brazil;

	•	convenient schedules with high on-time arrival rates: according to DAC, we offer more frequent flights than our domestic competitors and have achieved a high percentage of on-time arrivals, with the highest operating efficiency index in the domestic and international markets;

	•	efficient network of international destinations and supporting domestic service: we currently serve 11 international destinations directly. We also serve various other destinations in North America, Europe, and other continents through agreements with other airlines;

	•	more direct flights: according to data from DAC, at December 31, 2005 we operated 49% and 29% more direct flights than Varig S.A. (Varig) and Gol Linhas Aeréas Inteligentes S.A. (or Gol), respectively and operated 96% and 43% more frequent daily flights than Varig and Gol, respectively; and

	•	special services: we have developed special services to meet specific demands and optimize the use of our aircraft, such as night and holiday flights offered at promotional rates.


	•	Focus on cost management. We believe that we are an airline with low operating costs. In 2003, we initiated the implementation of a restructuring project and we are implementing significant cost reductions. Some of our principal cost savings arise from:


	•	efficient use of our aircraft: we have succeeded in significantly increasing the average load factor of our aircraft and the daily average block hours per aircraft by optimizing our network of destinations and our fleet. In December 2005, the average load factor of our aircraft was 73% and the block hours per aircraft was 12.2, compared to 69% and 10.3 hours for the same period in 2004;

	•	modern and flexible fleet: we have the newest fleet in the domestic market, with an average age of 7.5 years at December 31, 2005. Our use of a modern fleet allows us to reduce operating and maintenance costs. We primarily operate Airbus aircraft;

	•	own maintenance: we have our own maintenance team, with a maintenance center in the city of São Carlos, which is trained to serve all aircraft in our fleet quickly and at a labor cost we believe is lower than that of our competitors; and

	•	use of technology in operating processes: in addition to using globally renowned systems to assist in activities such as network and fleet management, we are developing proprietary internal management systems with innovative solutions that allow greater flexibility and skill in performing daily operations.


	•	Innovative services and products combined with a strong brand and our “espírito de servir” (“spirit of service”). Our corporate culture is based on providing value-added services to our passengers.


		We consistently seek to make travel a more convenient and comfortable experience for our passengers and believe that we have successfully positioned our brand so as to associate it with superior service, aircraft and technologically-advanced operations and believe this is evidenced by:


	•	high on-time arrival rates and frequent flights;

	•	a modern fleet equipped with interiors specifically designed to afford greater comfort to our passengers;

	•	a polite approach to our passengers;

	•	the only airline to offer video and audio entertainment on domestic flights;

	•	self-service options for check-in in major airports;


	•	open channels of communication with our passengers through our call center, our “Talk to the President” program and online service chat sessions at our portal; and

	•	receiving a “Top of Mind” award from the Folha de São Paulo newspaper in October 2005, as a result of a survey (conducted by Datafolha ) that showed we were named more times than any other airline when a sample of Brazilian consumers were asked to name an airline brand.


	•	TAM Loyalty Program. We were the first airline to offer a loyalty program in Brazil and there are currently over 3.0 million members in the program (which we refer to as the TAM Loyalty Program). We believe that our loyalty program is the most flexible loyalty program in the market because it imposes no restrictions on flights or the number of seats available when members are redeeming points.

	•	An experienced management team and motivated professionals. We have an experienced management team. Our training center has the capacity to serve over 750 students each day with certification and management courses. We implemented a variable compensation policy for our officers and employees in 2004, aligned with our strategic goals and an aggressive profit-sharing policy. In addition, we implemented a share purchase option plan for our officers and employees pursuant to which the first options were granted in December 2005.

	•	Liquidity and solvency. Our restructuring project initiated in 2003 has significantly improved our liquidity and solvency indices (for example our current assets divided by current liabilities, or the current liquidity ratio, increased from 0.80 at December 31, 2003 to 1.57 at December 31, 2005). This allows us flexibility in areas such as negotiating new lease agreements and expanding our fleet on more favorable terms.

Strategy

Our strategic goal is to consolidate and expand our leadership in the domestic passenger market and to attain high levels of profitability. We will seek to pursue this goal by offering an overall service that delivers superior value for money to passengers, by continuing to reduce costs and by increasing the return on capital invested. To reach these objectives, our strategies are:


	•	To continue providing superior customer service. One of our key strategies is to offer differentiated and high-quality service. We consistently seek to make travel more convenient and comfortable, to perfect our service and to strengthen our commitment to passengers.

	•	To increase revenue with profitability, serving a greater number of passengers at a competitive price. We will seek to continue to provide what we believe is an overall service that delivers the best value for money in the domestic market, offering more convenient and higher quality services at competitive prices. Our goal is to increase revenues as well as profitability through:


	•	expansion of business traveler market: consolidating and expanding our traditional passenger base of business travelers, who we believe represent approximately 80% of demand for our flights;


	•	growth in our tourism and leisure travel operations: capturing additional demand in the tourism and leisure market through specific promotions for holidays and local events through scheduled operations.

	•	selective expansion in international markets: consolidating our market share in major destinations in Latin America and seeking to strengthen our intercontinental position with more frequent flights and the addition of new destinations; and

	•	expansion of our cargo business: greater utilization of cargo space in our aircraft to develop our cargo business line, while ensuring no negative effects on our commitment to further improve service to our passengers.


	•	To reduce our operating costs, optimizing the use of our fleet and streamlining our processes. We believe that the successful implementation of our strategy is closely linked to cost reductions and improved application of applying capital invested. We are pursuing this strategy by:


	•	maintaining a standardized, efficient and flexible fleet. We will continue to optimize the size of our fleet, with the lowest possible number of “families” of aircraft, without compromising the flexibility of the fleet, in order to keep maintenance and operating costs for our fleet at a low level as well as maintain a high aircraft usage rate; and

	•	increasing productivity by redesigning operational processes and using technology. We apply a cost reduction policy aimed at increasing our productivity through new information technology tools, redesigning operational processes, redeployment of labor and outsourcing.

We are a holding company whose principal shareholders are Brasil Private Equity Fundo de Investimento em Participações, Brazilian Equity Investments III LLC, Brazilian Equity LLC, Latin America Capital Partners II LLC and Latin America Capital Partners PIV LLC (who we collectively refer to as the Investment Funds) and companies owned by the Amaro family. The Amaro family owns TAM — Empreendimentos e Participações S.A. (or TEP), Aerosystem S.A. Empreendimentos e Participações (or Aerosystem) and Agropecuária Nova Fronteira Limitada (or Nova Fronteira), which together own 99.97% of our common shares and exercise 99.97% of the voting rights. Accordingly the Amaro family has a significant degree of control over our business and any significant transactions we may undertake.

Pursuant to the shareholders’ agreement between TEP, Aerosystem and the Investment Funds, TEP and Aerosystem on the one hand, and the Investment Funds on the other, have agreed to vote at all shareholders’ meetings in such a way as to ensure that our board of directors will always include five members appointed by TEP and Aerosystem and two by the Investment Funds. See “Principal and Selling Shareholders — Shareholders’ Agreement”. The shareholders’ agreement also provides that the respective parties will recommend to the directors they have appointed that they vote in accordance with the agreement on any election for members of the board of executive officers.

Our headquarters are located at Avenida Jurandir, 856 — Lote 4, 1° andar, CEP 04072-000, São Paulo, SP, Brazil. The telephone number of our Investor Relations Department is +55 11 5582-9715 and the e-mail address of our Investor Relations Department is invest@tam.com.br .

Investors should base their investment decisions solely on the information contained in this prospectus. The information contained on our website does not form a part of this prospectus and is not incorporated by reference.

The Principal Challenges That We Face

One of the key elements of our business model is the provision of service levels that we believe are superior to those offered by our competitors and charging higher fares to passengers accordingly. The successful implementation of our strategy described above is subject to two central risks that are associated with this model. Firstly, there is a risk that significant numbers of passengers may shift towards favoring

lower fares above superior service levels. Secondly, there is a risk that another airline (whether an existing competitor or a new entrant to the market) successfully adopts our model of providing superior service levels and charging competitive fares. In each event, the potential impact on demand for our services and market share may require us to re-visit our strategy with a view to re-focusing on evolving passenger preferences, the profile of the market and/or re-establishing brand differentiation.

In addition to the risks highlighted above, the successful implementation of our strategy also involves other challenges and risks (all explained in more detail elsewhere in this prospectus), of which we would highlight the following:


	•	as is the case for all major airlines, fuel costs represent a significant operating expense of our business. We believe that over 50% of any increase in fuel costs may be passed on to customers in our fares. However, if fuel costs increase significantly, particularly to a level that is not covered by our hedging strategy (which currently covers 30% of our projected fuel consumption for a rolling three month period), and demand for air travel decreases so as to limit our ability to pass on increases in fuel prices, our profitability could be adversely impacted;

	•	as again is the case for all major airlines, we face significant operating expenses, principally labor costs, fuel costs and leasing costs for aircraft. Many of these costs are fixed and, in many cases, we have long-term commitments with respect to such costs. However, our revenues, which principally arise from passenger transportation, are subject to variable consumer demand that may fluctuate as a result of external factors such as the strength of the Brazilian economy. Accordingly, if demand for our services does not, to a material degree, meet our expectations, we may face a temporary scenario in which our fixed costs remain high and our revenues may not be sufficient to meet those costs; and

	•	the successful execution of our strategies will always be subject to the approval of the applicable Brazilian regulatory authorities (see “Regulation of the Brazilian Civil Aviation Authorities”). If Brazilian regulatory authorities do not approve planned new routes or impact our current operations by imposing significant new burdens, we will need to re-evaluate our growth strategy.

Ownership Structure

The following organizational chart shows, in summary form, our shareholder structure and subsidiaries at the date of this prospectus:

TEP, Nova Fronteira and Aerosystem together hold 99.97% of our common shares.

Summary Financial and Operational Information

The tables below contain a summary of our financial data as of and for each of the periods indicated and were extracted from our consolidated annual financial statements and unaudited financial information, prepared in accordance with Brazilian GAAP and the Plan of Accounts drawn up by DAC. The information set forth in this section should be read in conjunction with our consolidated annual financial statements and unaudited financial information (including the notes thereto) and “Presentation of financial and certain other information” and “Management’s discussion and analysis of financial condition and results of operations.”

The summary consolidated annual financial information at December 31, 2005 and 2004 and for each of the three years in the period ended December 31, 2005, prepared in accordance with Brazilian GAAP, is derived from our audited consolidated annual financial statements included elsewhere in this prospectus audited by our independent registered public accounting firm.

The summary information described above also includes the reconciliation of certain items to U.S. GAAP. Brazilian GAAP differs in certain significant respects from U.S. GAAP. For a summary of certain significant differences, see note 29 of our consolidated annual financial statements for the year ended December 31, 2005 and 2004 and for each of the three years in the period ended December 31, 2005, included elsewhere in this prospectus. For a summary of the reconciliation from Brazilian GAAP to U.S. GAAP in our consolidated annual financial statements see “Management’s discussion and analysis of financial condition and results of operations — Reconciliation with U.S. GAAP.”

For your convenience, the following tables also contain U.S. dollar translations of the real amounts presented at December 31, 2005 and December 31, 2004, translated using the rate of R$2.3407 to US$1.00, the U.S. dollar selling rate at December 31, 2005 published by the Central Bank on SISBACEN, using transaction PTAX 800, option 5.

The following tables also include unaudited operational and other data indicative of performance utilized by certain investors in evaluating companies operating in the global air transportation sector. This unaudited operational data is not included in or derived from our consolidated annual financial statements.


		At December 31,

Brazilian GAAP		2005		2005		2004		2003		2002		2001

		(US$ millions)		(R$ millions)




Balance sheet data




	Cash and banks		40		93		86		71		46		2




	Financial investments		386		903		211		101		—		8




	Customer accounts receivable		326		763		553		293		240		439




	Total assets		1,415		3,311		2,203		2,788		3,537		2,796




	Debt ⁽¹⁾		115		270		151		81		203		56




	Finance lease and operating lease liabilities ⁽¹⁾		93		218		261		1,235		1,649		1,218




	Debentures ⁽¹⁾		25		59		75		137		89		—




	Advance ticket sales		238		558		367		225		181		242




	Shareholders’ equity		325		760		191		42		204		461


⁽¹⁾	Refers to the total balance of current liabilities plus long-term liabilities.


		At December 31,

U.S. GAAP		2005		2005		2004

		(US$ millions)		(R$ millions)




Balance sheet data




	Cash and cash equivalents and marketable securities		425		995		297




	Customer accounts receivable, net		326		763		553




	Total assets		2,586		6,052		4,989




	Debt ⁽¹⁾		115		270		151




	Obligations under finance leases ⁽¹⁾		1,215		2,845		3,172




	Debentures ⁽¹⁾		25		59		75




	Advance ticket sales		238		558		367




	Shareholders’ equity		265		620		(164	)


⁽¹⁾	Refers to the total balance of current liabilities plus long-term liabilities.


			Year Ended December 31,

Brazilian GAAP			2005			2005			2004			2003			2002			2001

			(US$ millions) ⁽¹⁾			(R$ millions) ⁽¹⁾




Statement of operations data




Gross operating revenue				2,525			5,910			4,744			3,768			3,472			2,970




	Air transportation revenues:




		Domestic		1,791			4,192			3,233			2,688			2,533			2,212




		International		442			1,034			893			679			587			463




		Cargo		174			407			319			236			220			212




	Other operating revenues			118			277			299			165			132			83




	Taxes and deductions			(112	)		(261	)		(224	)		(176	)		(142	)		(259	)

Net operating revenue				2,413			5,649			4,520			3,592			3,330			2,711




Operating expenses




	Fuel			(724	)		(1,695	)		(1,067	)		(787	)		(748	)		(578	)




	Sales and marketing			(365	)		(855	)		(656	)		(527	)		(463	)		(351	)




	Aircraft and flight equipment leases			(268	)		(627	)		(651	)		(648	)		(574	)		(362	)




	Personnel			(286	)		(669	)		(546	)		(417	)		(435	)		(397	)




	Maintenance			(152	)		(356	)		(389	)		(372	)		(329	)		(222	)




	Services rendered by third parties			(160	)		(374	)		(360	)		(304	)		(337	)		(253	)




	Landing, take-off and navigational tariffs			(100	)		(233	)		(186	)		(151	)		(185	)		(161	)




	Depreciation and amortization			(36	)		(85	)		(91	)		(155	)		(133	)		(107	)




	Aircraft insurance			(17	)		(40	)		(53	)		(77	)		(66	)		(22	)




	Other			(123	)		(288	)		(227	)		(186	)		(296	)		(265	)

Total operating expenses				(2,231	)		(5,222	)		(4,226	)		(3,624	)		(3,566	)		(2,718	)

Gross income (loss)				182			427			294			(32	)		(236	)		(7	)

	Financial income (expenses), net			(39	)		(92	)		(82	)		261			(671	)		(338	)




	Other operating income (expenses), net			(13	)		(31	)		(14	)		(9	)		(10	)		129

Operating income (loss)				130			304			198			220			(917	)		(216	)




	Non-operating income (expenses), net			(3	)		(8	)		300			15			46			131

Income (loss) before income tax and social contribution				127			296			498			235			(871	)		(85	)




	Income tax and social contribution			(47	)		(109	)		(156	)		(61	)		265			29

Income (loss) before minority interest				80			187			342			174			(606	)		(56	)




	Minority interest			—			—			(1	)		0			—			—

Income (loss) for the year				80			187			341			174			(606	)		(56	)

*Income (loss) per thousand shares (in reais* and US dollars** )				0.56			1.30			2.78			1.42			(5.00	)		(0.46	)


⁽¹⁾	Except where indicated.


			Year Ended December 31,

U.S. GAAP			2005			2005			2004			2003

			(US$ millions) ⁽¹⁾			(R$ millions) ⁽¹⁾




Statement of operations data




Gross operating revenue				2,519			5,895			4,744			3,845




	Air transportation revenues:




		Domestic		1,791			4,192			3,233			2,688




		International		442			1,034			893			740




		Cargo		174			407			319			240




	Other operating revenues			112			262			299			177




	Taxes and deductions			(112	)		(261	)		(224	)		(178	)

Net operating revenue				2,407			5,634			4,520			3,667




Operating expenses:




	Fuel			(724	)		(1,695	)		(1,067	)		(802	)




	Sales and marketing			(371	)		(868	)		(656	)		(544	)




	Aircraft and flight equipment leases			(128	)		(300	)		(321	)		(365	)




	Personnel			(285	)		(666	)		(544	)		(426	)




	Maintenance			(152	)		(356	)		(389	)		(381	)




	Services rendered by third parties			(152	)		(357	)		(360	)		(306	)




	Landing, take-off and navigational tariffs			(100	)		(233	)		(186	)		(161	)




	Depreciation and amortization			(88	)		(206	)		(193	)		(204	)




	Aircraft insurance			(17	)		(40	)		(53	)		(77	)




	Other			(129	)		(301	)		(258	)		(171	)

Total operating expenses				(2,146	)		(5,022	)		(4,027	)		(3,437	)

Operating income				261			612			493			230




	Financial income (expenses), net			14			32			137			727

Income before income tax and social contribution				275			644			630			957




	Income tax and social contribution			(93	)		(217	)		(199	)		(304	)

Income before minority interest				182			427			431			653




	Minority interest			—			—			(1	)		—

Income for the year				182			427			430			653

Income per thousand shares basic and diluted ⁽²⁾




	Common shares			1.34			3.13			3.33			5.10




	Previous preferred shares			0.58			1.35			3.67			5.61




	Current preferred shares ⁽³⁾			0.81			1.90			—			—


⁽¹⁾	Except where indicated.

⁽²⁾	The data relating to both our preferred and common shares has been adjusted to reflect the share split which took place on May 16, 2005, pursuant to which all holders of our existing shares received two shares of the same class and type for each share held.

⁽³⁾	The rights of preferred shareholders were altered on May 16, 2005. Previously, preferred shares had carried the rights to a dividend 10% higher than that distributed to holders of common shares. From May 16, 2005 however preferred shares carried the same dividend rights as common shares. The terms “Previous” and “Current” preferred shares used in the above table reflect this change in entitlement.


		Year Ended December 31,

Operating Data Computed Using Financial Information Under Brazilian GAAP		2005		2005		2004		2003		2002		2001

		US$		R$		R$		R$		R$		R$

		(Unaudited)




Operating data




	RASK ( cents/centavos )		8.61		20.16		21.53		19.90		15.10		13.11




	RASK scheduled domestic ( cents/centavos )		8.67		20.30		20.84		18.09		13.78		14.38




	RASK scheduled international ( cents/centavos )		6.28		14.70		17.13		19.23		13.11		8.01




	Yield scheduled domestic ( cents/centavos )		13.42		31.42		35.21		34.27		27.77		29.83




	Yield scheduled international ( cents/centavos )		8.59		20.10		23.96		26.65		21.67		14.89




	CASK ( cents/centavos )		7.96		18.63		20.12		19.10		15.40		13.15




	CASK except fuel ( cents/centavos )		5.37		12.58		15.04		14.60		11.90		10.36




	Average tariff ( dollars/reais )		114.09		267.05		305.17		286.50		218.90		218.45


	Year Ended December 31,

Operating Data Computed Using Financial Information Under U.S. GAAP	2005		2005		2004		2003		2002

	US$		R$		R$		R$		R$

	(Unaudited)
Operating data




RASK ( cents/centavos )		8.59		20.10		21.53		19.90		15.10




RASK scheduled domestic ( cents/centavos )		8.67		20.30		20.77		18.09		13.78




RASK scheduled international ( cents/centavos )		6.28		14.70		17.09		19.23		13.11




Yield scheduled domestic ( cents/centavos )		13.42		31.42		35.21		34.27		27.77




Yield scheduled international ( cents/centavos )		8.59		20.10		23.96		26.65		21.67




CASK ( cents/centavos )		7.63		17.87		19.18		19.10		15.40




CASK except fuel ( cents/centavos )		5.05		11.82		14.10		14.60		11.90




Average tariff ( dollars/reais )		114.09		267.05		305.17		286.50		218.90


	Year Ended December 31,

Additional Operating Data	2005			2004			2003			2002			2001

	(Unaudited)




Paid passengers transported (thousands)		19,571			13,522			11,198			13,756			13,030




RPK (millions)		19,797			13,854			10,916			12,075			11,264




ASK (millions)		28,024			20,999			18,003			22,017			20,674




Load factor — %		70.6	%		66.0	%		60.6	%		54.8	%		54.5	%




Break-even load factor (BELF) — %		65.3	%		61.7	%		61.2	%		58.7	%		54.7	%




Block hours		323,729			241,684			210,282			301,103			294,090




Kilometers flown — Km (thousands)		185,158			139,367			119,984			161,099			157,883




Liters of fuel		1,073,918			820,335			710,962			922,936			892,496




Number of employees		9,669			8,215			7,665			8,181			7,994




Average aircraft use during the period (hours per day)		11.36			8.98			7.62			9.48			10.68




Take-offs		209,831			158,898			147,122			227,001			221,108




Average leg (km)		882			877			816			710			714

THE OFFERING


Issuer		TAM S.A.

Selling shareholders		Noemy Almeida Oliveira Amaro; Maria Claudia Oliveira Amaro Demenato; Maurcio Rolim Amaro; Marcos Adolfo Tadeu Senamo Amaro; João Francisco Amaro; Aerosystem S.A. Empreendimentos e Participações; Brasil Private Equity Fundo de Investimento em Participações; Brazilian Equity Investments III LLC; Brazilian Equity LLC; Latin America Capital Partners II LLC; and Latin America Capital Partners PIV LLC.


Preferred shares offered in the global offering		A total of 35,618,098 preferred shares ( of which are being offered by us and of which are being offered by the selling shareholders), plus up to an additional 5,342,715 preferred shares being offered by us available upon exercise of the over-allotment option for preferred shares described below.


The global offering		The global offering consists of the international offering and the Brazilian offering.

International offering		ADSs, representing preferred shares, are being offered through the international underwriters in the United States and in other countries outside Brazil.

Brazilian offering		Concurrently with the international offering, preferred shares are being offered in a public offering in Brazil, including to investors residing outside Brazil. Any investor residing outside Brazil wishing to purchase preferred shares (rather than ADSs being offered in the international offering) must comply with the foreign portfolio investment registration requirements of CVM Instruction No. 325, dated January 27, 2000, and Resolution No. 2,689, dated January 26, 2000, of the CMN or through foreign direct investment procedures as provided in Law No. 4,131, dated September 27, 1962, as amended. Preferred shares will be settled in Brazil and paid for in reais and the offer of such preferred shares is being underwritten by the Brazilian underwriters identified elsewhere in this prospectus, pursuant to an underwriting agreement governed by Brazilian law.

The ADSs		Each ADS will represent one preferred share. The ADSs will be evidenced by American Depositary Receipts, or ADRs. The ADSs will be issued under a deposit agreement among us, JPMorgan Chase Bank, N.A., as depositary, and the registered holders and beneficial owners from time to time of ADSs issued thereunder.

Offering price		R$ per preferred share and US$ per ADS. The price per ADS will be based on the closing price of our preferred shares on BOVESPA on a date concurrent with or prior to pricing and the real /US dollar exchange rate reported by the Central Bank on such date. For reference purposes, the closing price of our preferred shares on BOVESPA on February 17, 2006 was R$49.99 per preferred share, which is equivalent to approximately US$23.60 per preferred share/ADS, based upon an exchange rate of R$2.1186 to US$1.00.


Risk factors		See “Risk factors” beginning on page 13 and the other information included in this prospectus for a discussion of certain factors you should consider before deciding to invest in our preferred shares or ADSs.

Total amount of offering		US$ .

Hot issue option		Pursuant to applicable CVM regulations, at the time of pricing of the offering, the total amount of preferred shares offered, including preferred shares represented by ADSs (but excluding preferred shares that may be sold pursuant to the over-allotment option), may be increased by up to 20% at our election or that of the selling shareholders, as applicable.

Over-allotment option		We have granted the Brazilian underwriters an option to purchase an additional preferred shares (representing 15% of the preferred shares offered in the Brazilian offering) to cover any over- allotments of preferred shares in the Brazilian offering. We have also granted the international underwriters an option to purchase an additional ADSs (representing 15% of the ADSs offered in the international offering) to cover any over-allotments of ADSs in the international offering.

Lock-up agreements		We, TEP, the members of our board of directors, our board of executive officers and the selling shareholders have agreed, subject to certain exceptions, not to issue or transfer, until 180 days after the date of first publication of the notice of this offering in Brazil, any preferred shares or options or warrants to purchase preferred shares, or any securities convertible into, or exchangeable for, or that represent the right to receive, our preferred shares. See “Underwriting.”

Tag-along rights		In the event of a sale of a controlling stake in us, holders of our preferred shares (including preferred shares represented by ADSs) are entitled to be included in a public tender offer to purchase all preferred shares not already held by the acquiring person, at a minimum price per preferred share of 100% of the price per share paid for the controlling stake.

Voting and other rights		Holders of our preferred shares do not have general voting rights in relation to resolutions submitted to our general shareholders’ meetings but do have the rights, benefits and restrictions provided by Brazilian corporation law, the rules set forth under Level 2 of BOVESPA’s listing requirements and our by-laws, including:

		• priority ranking on any repayment of capital (without premium) in the event of our liquidation;

		• upon a change in our control of TAM Linhas Aéreas (meaning any sale or transfer of more than 50% of our holding of voting capital in TAM Linhas Aéreas), the right to withdraw their shareholdings and receive the economic value of their shares;

		• the right to be included in a tender offer held as a result of a change of control in TAM, at the same price per share paid to the holders of our common shares; and


		• the right to receive dividends at least equal to those received by the holders of our common shares.

		• Holders of our preferred shares have limited voting rights in respect of approving the following matters only:


		• any conversion, acquisition, spin-off or merger of TAM;

		• agreements between us and our controlling shareholder(s), directly or through third parties, including any party related to the controlling shareholder(s) have an interest, so long as such matters have been approved in a general shareholders’ meeting to the extent required by law or statute;

		• the evaluation of assets in relation to any capital increase;

		• the appointment of any company specializing in evaluating the economic value of our shares in case of a mandatory tender offer launched by us or by our controlling shareholders if we decide to go private or cease to adhere to the requirements of BOVESPA’s Level 2 regulation;

		• any change in our corporate purpose; and

		• any change in, or the revocation of, provisions of our by-laws that would result in any violation of the requirements set forth in BOVESPA’s Level 2 regulation. See “BOVESPA’s differentiated corporate governance practices.”


		Subject to the terms of the deposit agreement, a holder of ADSs will have limited rights to direct the depositary to vote the preferred shares represented by the ADSs held by such holder. See “Description of American Depositary Shares — Voting of Deposited Securities.”

Use of proceeds		We anticipate that we will receive net proceeds of approximately US$ from the offering, after deduction of commissions and other estimated fees and expenses, assuming no exercise of the over-allotment option. The net proceeds will be used for fleet renewal and expansion and for general corporate purposes. We will not receive any proceeds from the secondary offering of preferred shares being made by the selling shareholders.

Dividends		Brazilian corporation law requires us to distribute at least 25% of our annual adjusted non-consolidated income to holders of our shares. See “Dividends and Dividend Policy.”

Listing		We have applied to list the ADSs for trading on the NYSE under the symbol “TAM.” Our preferred shares are listed on BOVESPA under the symbol “TAMM4.”

Expected offering timetable (subject to change)		Commencement of marketing of the offering: February 20, 2006.

		Announcement of offer price and allocation of ADSs and preferred shares: March 9, 2006.

		Settlement and delivery of ADSs and preferred shares: March 14, 2006.

RISK FACTORS

Investing in our preferred shares or ADSs involves a high degree of risk. Before making an investment decision, you should carefully consider all the information set forth in this prospectus. Our business, financial condition and results of operations may be materially adversely affected by any of these risks. The market price of our preferred shares or ADSs may decrease due to any of these risks, and you may lose all or part of your investment. The risks described below are those that we currently believe may materially affect us.

Risks Related To Brazil


	The Brazilian government has exercised, and continues to exercise, significant influence over the Brazilian economy. Brazilian political and economic conditions have a direct impact on our business, financial condition, results of operations and prospects as well as the stock market price of our preferred shares or ADSs.

The Brazilian economy has been characterized by the significant involvement of the Brazilian government, which often changes monetary, credit, fiscal and other policies to influence Brazil’s economy. The Brazilian government’s actions to control inflation and effect other policies have involved wage and price controls, depreciation of the real , controls over remittance of funds abroad, intervention by the Central Bank to affect base interest rates, and other measures. We have no control over, and cannot predict, what measures or policies the Brazilian government may take in the future. Our business, financial condition, results of operations and prospects and the stock market price of our preferred shares or ADSs may be adversely affected by changes in Brazilian government policies, as well as general economic factors, including, without limitation:


	•	Brazilian economic growth;

	•	inflation;

	•	interest rates;

	•	variations in exchange rates;

	•	exchange control policies;

	•	fiscal policy and changes in tax laws;

	•	liquidity of domestic capital and lending markets;

	•	government control of production activities and oil refining; and

	•	other political, diplomatic, social and economic developments in or affecting Brazil.

We cannot predict what future fiscal, monetary, social security and other policies will be adopted by current or future Brazilian governments, or whether these policies will result in adverse consequences to the Brazilian economy, to our business, results of operations, financial condition or prospects, or to the stock market price of our preferred shares or ADSs.


	Exchange rate instability may have adverse effects on the Brazilian economy, our business, financial condition, results of operations and prospects and the stock market price of our preferred shares or ADSs.

As a result of inflationary pressures, the Brazilian currency has depreciated frequently over the past decade. Throughout this period, the Brazilian government has implemented various economic plans and used various exchange rate policies, including sudden devaluations, periodic mini-devaluations (during which the frequency of adjustments has ranged from daily to monthly), exchange controls, dual exchange rate markets and a floating exchange rate system. Although long-term depreciation of the real is generally linked to the rate of inflation in Brazil, depreciation of the real occurring over shorter periods of time has resulted in significant variations in the exchange rate between the real , the U.S. dollar and other

currencies. In 2002, the real fell 34.3% against the U.S. dollar, caused in part by political uncertainties involving the presidential election in Brazil and the global economic recession. Notwithstanding the fact that the real has appreciated 22.3%, 8.8% and 13.4% against the U.S. dollar in 2003, 2004 and 2005 respectively, there can be no guarantees as to whether the real will depreciate or appreciate against the U.S. dollar in the future. The real /U.S. dollar exchange rate reported by the Central Bank on December 31, 2005 was R$2.3407 per U.S. dollar and on February 17, 2006 the exchange rate was R$2.1186 per U.S. dollar.

The majority of our revenues are denominated in reais and a significant portion of our operating expenses (such as fuel, aircraft and engine maintenance, aircraft leasing and insurance payments, parts and engines) are denominated in or linked to the U.S. dollar or other foreign currencies. In the event that we are unable to adjust our prices or to obtain protection through hedging transactions, a depreciation in the real would reduce our profit margins and/or would cause operating losses arising as a result of increased costs or having obligations denominated in or linked to the U.S. dollar (or other foreign currencies in respect of which we have not entered into hedging transactions). Devaluations in the real against the U.S. dollar or other foreign currencies also create inflationary pressures, which can adversely affect us by restricting our access to external financial markets and by leading to government intervention (including the implementation of recessionary policies to curb aggregate demand). Exchange rate instability may adversely affect our business, financial condition, results of operations and the stock market price of our preferred shares or ADSs.


	Inflation and certain measures by the Brazilian government to curb inflation have historically adversely affected the Brazilian economy and Brazilian securities market, and high levels of inflation in the future would adversely affect our business, financial condition, results of operations and prospects and the stock market price of our preferred shares or ADSs.

Brazil has historically experienced extremely high rates of inflation. Inflation and some of the Brazilian government’s measures taken in an attempt to curb inflation have had significant negative effects on the Brazilian economy generally. Inflation, policies adopted to contain inflationary pressures and uncertainties regarding possible future governmental intervention have contributed to economic uncertainty and heightened volatility in the Brazilian securities market.

Since the introduction of the real in 1994, Brazil’s inflation rate has been substantially lower than in previous periods. However, inflationary pressures persist. According to the General Price Index ( Índice Geral de Preços-Mercado or IGP-M), Brazilian general price inflation rates were 8.7%, 12.4% and 1.2% in 2003, 2004 and 2005 respectively. According to the National Consumer Price Index (Índice Nacional de Preços ao Consumidor Amplo, or IPCA), Brazilian price inflation rates were 9.3%, 7.6% and 5.7% in 2003, 2004 and 2005 respectively.

Brazil may experience high levels of inflation in the future. Inflationary pressures may lead to further intervention in the economy by the Brazilian government, including the introduction of policies that could adversely affect our business, financial condition, results of operations and prospects and the stock market price of our preferred shares or ADSs.

In the event that Brazil experiences high inflation in the future, we may not be able to adjust the prices we charge to our passengers to offset the impact of inflation on our costs, leading to decreased net income. Inflationary pressures may also adversely affect our ability to access foreign financial markets, leading to adverse effects on our capital expenditure plans, or anticipate anti-inflation policies instituted by the Brazilian government that may harm our business, financial condition, results of operations and prospects or adversely affect the stock market price of our preferred shares or ADSs.


	Developments and the perceptions of risks in other countries, especially emerging markets countries, may adversely affect the Brazilian economy, our business, financial condition, results of operations and prospects and the market price of Brazilian securities, including the stock market price of our preferred shares or ADSs.

The market for securities issued by Brazilian companies is influenced by economic and market conditions in Brazil and, to varying degrees, market conditions in other Latin American and emerging market countries. Although economic conditions are different in each country, the reaction of investors to developments in one country may have a material adverse effect on the market value of securities of Brazilian companies. If there is a crisis in another emerging market country, investor demand for Brazilian securities, including our preferred shares and, consequently, our ADSs, may decline. This may adversely affect the trading value of our preferred shares or ADSs and any such decline in trading value would create obstacles or otherwise impede our access to capital markets and financing for our future operations.


	*Variations in interest rates may have adverse effects on our business, financial condition, results of operations and prospects and the stock market price of our preferred shares or ADSs.*

We are exposed to the risk of interest rate variations, principally in relation to the Long Term Interest Rate ( Taxa de Juros de Longo Prazo , or TJLP) and the Interbank Deposit Rate (or DI Rate) (in respect of loans denominated in reais ) and the London Interbank Offer Rate (or LIBOR) (in respect of operating leases denominated in U.S. dollars).

In 2003 and 2004, as inflationary pressures eased, the Conselho Monetário Nacional , the highest monetary regulatory body in the Brazilian government, decreased the TJLP from 11.0% at December 31, 2003 to 9.75% at December 31, 2004. The TJLP at December 31, 2005 was 9.75%. Any increase in inflation or other macroeconomic pressures may lead the Conselho Monetário Nacional to increase the TJLP.

In addition, as repayments under many of our operating leases are linked to LIBOR, we are exposed to the risk of variations in LIBOR. At December 31, 2005, the estimated future disbursements due on these operating lease contracts linked to LIBOR amounted to US$1,779 million.

In the event that the TJLP, the DI rate or LIBOR increase, we will be required to increase the amount of our repayments under our loans and we may not be able to adjust the prices we charge to offset the impact of these increases. If we are unable to adequately adjust our prices, our revenues would not be sufficient to offset the increased expenses pursuant to these loans and this would adversely affect our results of operations. Accordingly, such increases may adversely affect our business, financial condition, results of operations and prospects and the stock market price of our preferred shares or ADSs.


	*Political and economic instability in Brazil may affect us.*

In recent months, allegations of unethical or illegal conduct have been leveled at certain figures in the Brazilian government, legislators and party officials. The allegations, which are currently under investigation by the Brazilian congress, relate to alleged violations of rules relating to election laws and campaign financing, allegations of influencing officials and other allegedly corrupt behavior. Several members of both the Brazilian government and the political party of the current president (including the president’s chief of staff) have resigned as a result. If the allegations or investigations lead to a materially adverse perception of Brazil among investors, the trading value of our preferred shares and ADSs may decline and our ability to access international markets would suffer, impacting our capital expenditure plans. In addition, any political instability resulting from the allegations or investigations could cause us to re-evaluate our strategies if the Brazilian economy suffers as a result.

Risks Relating to the Civil Aviation Industry and our Business


	*The regulatory structure of Brazilian civil aviation is undergoing change and we have not yet been able to evaluate the results of this change on our business and results of operations.*

Scheduled air transportation services are considered public utilities in Brazil and, accordingly, are subject to extensive regulation by the Brazilian government. The Brazilian civil aviation regulatory structure is undergoing changes designed to help restore the financial stability of certain Brazilian civil aviation companies that have experienced financial difficulties, in line with global trends. These regulatory authorities have therefore taken a more pro-active role in monitoring the development of the Brazilian civil aviation market, through, for example, establishing more rigorous criteria to be followed by air transport companies in creating new routes or increasing flight frequencies, aimed at preventing excess supply. Various legislative initiatives have taken place, including the drafting of a bill to replace Law No. 7,565 of December 19, 1986 (or the Brazilian Aeronautics Code), the submission of a new public policy regulation for civil aviation to the Ministry of Defense for approval and they recently approved a bill proposing the creation of ANAC, a national aviation agency to replace DAC as the principal regulatory body for Brazilian civil aviation. See “Regulation of the Brazilian Civil Aviation Industry — Future Regulation”. The Brazilian civil aviation structure may change significantly in the future and we may not be able to anticipate or evaluate how this change will affect our business and results of operations. We cannot assure you that these or other changes in Brazilian civil aviation regulations will not have an adverse effect on our business or results of operations. Any change that requires us to focus a significant level of resources on compliance with new aviation regulations, for example, would result in additional expenditure on compliance, consequently adversely affecting our results of operations.

Operation of air transportation services as well as airport infrastructure is exclusive to the Brazilian government which may provide these services directly or through third parties by means of concessions or permits. Our concession to operate scheduled and public passenger and cargo air transportation was obtained on December 9, 1996 and is valid until December 9, 2011. We cannot assure you that we will be able to automatically renew our concession. See “Regulation of the Brazilian civil aviation industry — Concession for air transportation services.”

DAC is responsible for approving all new flight routes, as well as changes in existing air routes and increased flight frequencies. Any proposal to import new aircraft is also subject to the approval of COTAC (a sub-department of DAC). We are also subject to the approval of CERNAI ( Comissão de Estudos Relativos à Navegação Internacional , a sub-department of DAC) which is responsible for regulating bilateral international agreements among airlines. Our growth plans include expanding into new markets, increasing flight frequency and expanding our fleet, which currently consists of 84 aircraft. Accordingly, our capacity to grow is dependent on receiving the necessary authorizations from DAC, the Civil Air Transport Co-ordination Commission (COTAC) and CERNAI. We cannot assure you that we will obtain all necessary authorizations in future and any failure to do so would require us to re-evaluate our strategies.

In addition, our ability to increase prices to offset an increase in our fixed costs may be adversely affected in the event that the Brazilian civil aviation authorities impose any price control restrictions on air transportation services. If we are unable to increase prices sufficiently to offset such increases in fixed costs, this would adversely affect our results of operations. Changes in the regulations issued by the Brazilian government or the occurrence of any of the above factors may increase our costs, limit our capacity to expand the number of our routes or adversely affect our business and results of operations.


	*Competition in both the domestic and international civil aviation markets may increase and the Brazilian government may intervene in the domestic market.*

We face intense competition in both the domestic and international markets. The Brazilian government has the power to authorize or deny the entry of new participants into the domestic market in which we operate, as well as the power to assume air transportation operations. Accordingly, we may face greater competition from current or new participants in the Brazilian civil aviation market. The air

transportation sector is highly sensitive to price discounting, particularly as a result of the arrival of low-cost airlines or airlines that have adopted predatory pricing policies. Other factors, such as flight frequency, schedule availability, brand recognition, and quality of services offered (such as loyalty programs, VIP airport lounges, in-flight entertainment and other amenities) also have a significant impact on competitiveness in the market. In addition, the acquisition of airline concessions in Brazil does not require significant financial investment and, as a result, the barriers to entering the domestic market are low. We cannot assure you that the Brazilian government will not assume air transport operations or as to whether current or new competitors in our markets will offer prices lower than ours, offer more attractive services than ours or increase the capacity of their routes in an effort to obtain greater market share. In the event that any of the foregoing events occurs, we cannot assure you as to whether the price of our fares, passenger traffic or our profit margins will be negatively affected. Any negative impact on our fares would lead to decreased net revenues and may require us to focus on cost-saving programs.


	Substantial increases in fuel prices or the availability of sufficient quantities of fuel may harm the Brazilian civil aviation market and our businesses in the event that such increases cannot be passed on to passengers in our fares.

Fuel costs represent a significant portion of operating expenses for airlines in general. For the year ended December 31, 2005, fuel costs represented 32% of our costs for services rendered and our operating expenses.

Historically, fuel prices have been subject to significant variations in international prices, which in turn vary as a result of global political issues and global supply and demand. The availability of fuel is also subject to periods of market scarcity and surplus and is affected by the demand for gasoline and other petroleum derivatives. It is therefore not possible to predict the cost and availability of fuel in the future with any degree of certainty. In the event that the supply of fuel is reduced for any reason, we may need to increase our prices or reduce our scheduled services, which would adversely affect our net revenues. In addition, some of our competitors may be able to obtain fuel at better terms (with respect to both price and quality) than we are able. Our hedging transactions (which currently cover 30% of our projected fuel consumption for a rolling three month period) or our margin for adjusting prices may not be sufficient to protect us from fuel price increases. If our competitors are able to obtain fuel on more competitive terms than us, they may be able to decrease their prices and obtain market share from us and this would adversely affect our results of operations. Significant increases in fuel costs may harm our financial condition and results of operations in the event that it is not possible for us to pass on such price increases to passengers in our fares.


	*Airlines operating in the domestic market have significant fixed costs that may harm our ability to attain our strategic goals.*

As is the case with other airlines operating in the domestic market, we have high fixed costs (arising principally from aircraft lease agreements). We expect to incur additional fixed costs and contractual debt as we lease or acquire new aircraft and other equipment to implement our growth strategy.

As a function of these significant fixed costs, we may (i) have limited our ability to obtain additional financing for working capital and other purposes, (ii) be required to dedicate a significant part of our cash flow to fixed costs resulting from operating leases for aircraft, (iii) incur higher interest or leasing expenses in the event that interest rates increase, or (iv) have limited ability to plan for or react to changes in our businesses, the civil aviation sector generally and general macroeconomic conditions.


	*We depend significantly on automated systems and any breakdown in these systems may harm our business and results of operations.*

We depend on automated systems to operate our businesses, including our e -TAM portal, automated seat reservation system, fleet and network management system, telecommunications system and website. Significant or repeated breakdowns in such systems may impede access to our products and services by

passengers and travel agencies, which may in turn lead them purchase tickets from other airlines which would adversely affect our net revenues. Any interruption in our systems may result in the loss of important information and increase our costs, which may cause negative perception and reduced demand for our services.


	*A failure to implement our growth strategy may harm our results of operations and the stock market price of the preferred shares or ADSs.*

Our growth strategy in the domestic and international markets and the consolidation of our leadership in the domestic market includes, among other objectives, increasing the number of markets we serve and increasing the frequency of the flights we provide. These objectives are dependent on approvals for routes in the appropriate geographic areas and obtaining adequate access at the airports. Guarulhos airport in São Paulo and Juscelino Kubitschek airport in Brasília are highly congested and passenger capacity is near or at the maximum level. In addition, Congonhas Airport in São Paulo is subject to slot restrictions which limit both the number of landings and take-offs and the times at which landings and take-offs can take place. Other airports may reach maximum passenger capacity in the future or impose slot restrictions, which would adversely affect our growth strategy. Any factor preventing or delaying our access to airports or routes which are vital to our growth strategy (including any inability to maintain our current slots and obtain additional slots at certain airports) may restrict the expansion of our operations and, consequently, adversely affect our growth objectives.


	*Insurance costs for airlines may increase significantly because of a terrorist attack, harming our financial condition and results of operations.*

Insurance companies may significantly increase insurance premiums for airlines and reduce the amount of insurance coverage available to airlines for civil liability in respect of damage resulting from acts of terrorism, war, or similar events, as occurred, for example, after the terrorist attacks of September 11, 2001 in the United States.

In response to substantial increases in insurance premiums to cover risks related to terrorist attacks following the events of September 11, 2001 in the United States, the Brazilian government enacted legislation, authorizing the Brazilian government to provisionally assume civil liability to third parties for any injury to persons or goods on the ground caused by terrorist attacks or acts of war against Brazilian airlines operating in Brazil or abroad. However, the Brazilian government may, at its sole discretion, suspend the assumption of liability at any time, provided that it gives seven days’ notice of such suspension. If the Brazilian government suspended such assumption of liability and if there was a terrorist attack, potential liability to third parties would increase substantially.

Airline insurers may reduce their coverage or increase their premiums in case of terrorist attack, seizures, aircraft accident, the end of the assumption of liability by the Brazilian government or other events affecting civil aviation in Brazil or abroad. If there are significant reductions in insurance coverage, our potential liability would increase substantially. If there are significant increases in insurance premiums, our operating expenses would increase, adversely affecting our results of operations.


	*We may not succeed in obtaining all aircraft and parts on time, which may result in a suspension of the operations of certain of our aircraft because of unscheduled or unplanned maintenance.*

At December 31, 2005, we had firm orders outstanding with Airbus to lease an additional 29 Airbus A320 and ten Airbus A350 aircraft together with an additional 20 options for Airbus A320 and five options for Airbus A350 aircraft. Any disruption or change in Airbus’ delivery schedule for these new aircraft will affect our operations and would negatively affect our financial condition and results of operations because we would not be able to accommodate demand from additional passengers. Our ability to obtain these new aircraft from Airbus may be affected by several factors, including (i) the fact that Airbus may refuse to, or be financially limited in its ability to, fulfill the obligations it assumed as a result of entering into the aircraft delivery contract, (ii) the occurrence of a fire, strike or other events affecting

Airbus’ ability to fulfill its contractual obligations in a complete and timely fashion, and (iii) any inability on our part to obtain aircraft financing or any refusal by Airbus to provide financial support. Our operations may also be affected by any failure or inability of Airbus (or other suppliers) to supply sufficient replacement parts in a timely fashion, which may cause the suspension of operations of certain aircraft because of unscheduled or unplanned maintenance. Any such suspension of operations would adversely affect our financial condition because of the decrease in passenger revenues that we would face.


	The reputation and financial results of airlines may be harmed by any accident or incident involving their aircraft or by other factors beyond their control, as well as delays caused by airport congestion, adverse weather conditions and stricter safety measures.

Any accident or incident involving the aircraft of any airline may require repair or replacement of the damaged aircraft and temporary or permanent loss of service, in addition to significant costs arising from indemnities payable to injured passengers and third parties. We believe that the level of insurance we have contracted in respect of accidents is consistent with market practice. We may incur considerable losses in the event of any accident should the amounts payable pursuant to the terms of our insurance contracts be insufficient to cover the damage. Any requirement to pay amounts not covered by our insurance contracts may harm our business and results of operations. Any accident or incident involving one of our aircraft, even if completely covered by insurance, may affect our image and generate a public perception that we are less safe or reliable than other airlines, which in turn would harm consumer demand, our revenues and our market position. In addition, any accident or incident relating to an aircraft operated by another airline and which involves one of the same models of aircraft as are in our fleet may generate a public perception that the particular model of aircraft is unsafe, which in turn may also harm demand for our services, revenues and, consequently, our results of operations.

Like other airlines, we are subject to delays caused by factors beyond our control, including airport congestion, adverse weather conditions and increased safety measures. Delays have the effects of leaving passengers dissatisfied, reducing aircraft usage rates (the average number of hours per day an aircraft is in operation) and increasing costs, and, accordingly, may affect our profitability. Adverse weather conditions may cause cancellations of, or significant delays in, our flights. Cancellations or delays resulting from adverse weather conditions, problems with air traffic control and safety related measures may harm our reputation as a punctual airline, which could lead to decreased demand for our services.

Risks Relating to the ADSs and our Preferred Shares


	*We have a stable group of principal shareholders with the power to manage our business, and the interests of these persons may conflict with those of other shareholders.*

Our principal shareholders TEP, Aerosystem and Nova Fronteira collectively control 99.97% of our common stock and have the power to, among other things, (i) elect the majority of our directors, and (ii) control the results of any proposal requiring shareholder approval (including transactions with related parties, corporate re-organization, sales of assets and the timing and conditions of payment of any future dividends, subject to the minimum mandatory dividend distribution requirements under Brazilian corporation law). Our principal shareholders have the power to approve transactions that might not be in the interests of other shareholders and may prevent or frustrate any attempts to remove our current directors or executive officers by voting in accordance with the terms of our shareholders’ agreement, see “Principal and Selling Shareholders — Shareholders’ Agreement.”


	*Our preferred shares do not carry general voting rights.*

Our preferred shares and, consequently, our ADSs do not carry general voting rights except in relation to certain specific matters and under specific circumstances. See “Description of Our Capital Stock.” Our principal shareholders, who hold the majority of common shares with voting rights and control us, are therefore able to approve corporate measures without the approval of holders of our preferred shares.

Accordingly, you will not have control over the approval of corporate measures such as appointment of directors, approval of significant transactions or changes in our capital structure.


	*We have not paid dividends in recent years and may not do so in the future.*

Our by-laws require us to pay at least 25% of our net adjusted annual profits in the form of dividends to our shareholders. Our net profit may be capitalized, used to offset losses or retained as provided for in Brazilian corporation law, and may not be available for the payment of dividends. We may not pay dividends to our shareholders in any year in the event that our board of directors resolves that a dividend payment would not be prudent as a result of our financial condition. We did not distribute dividends or interest on capital to our shareholders between 1997 and 2005 because we had accumulated losses for those years. Our board of directors has declared a dividend in respect of the financial year ended December 31, 2005, although such payment is subject to ratification by our shareholders. See “Dividends and Dividend Policy — Our dividend policy”.

In addition, the payment of dividends is contingent upon the net profit distributed as dividends by our operating subsidiaries. In the event that our operating subsidiaries are unable to distribute dividends, we may not have sufficient funds to be able to pay dividends to our shareholders.


	*The economic value of your investment may be diluted.*

The initial offering price for the ADSs may exceed the book value of our preferred shares after the completion of this offering. For the purpose of any subsequent calculation of net book value, any premiums paid by investors would be aggregated with other tangible assets and attributed to the total number of preferred shares outstanding following completion of the offering. If this were the case, investors acquiring the ADSs in this offering would accordingly suffer an immediate and significant decline in the book value of their investment. See “Dilution.”

In addition, in the event that we need to obtain capital for our operations by issuing new shares, any such issuance may be made at a value below the book value of our preferred shares on the relevant date. In that event, investors subscribing for or acquiring our preferred shares in this offering would suffer an immediate and significant dilution in relation to future transactions on the capital markets.


	*The sale of significant quantities of ADSs or preferred shares after this offering may cause the stock market price value of our preferred shares to decline.*

Pursuant to the terms of a lock-up agreement, we, our board of directors, our board of executive officers, TEP and the selling shareholders will agree that for 180 days after the date of the first publication in Brazil of the notice of this offering, we will not issue or transfer any ADSs or preferred shares or options or warrants to purchase preferred shares, or any securities convertible into, or exchangeable for, or that represent the right to receive, our preferred shares. Following the expiration of the 180 day period (which may be shortened or cancelled with the consent of agents), the preferred shares formerly subject to the restrictions set out above may be freely traded. In the event that we or the selling shareholders elect to sell a significant number of our preferred shares, or in the event that the market perceives that we have the intention of any such sale, unless there are high levels of demand to purchase our ADSs or preferred shares the stock market price of our preferred shares or ADSs would decline significantly.


	*Brazilian securities markets are relatively volatile and illiquid. Therefore you may not be able to sell the preferred shares underlying the ADSs at the price and time you desire.*

Investing in securities that trade in emerging markets, such as Brazil, often involves greater risk than investing in securities of issuers in the United States, and such investments are generally considered to be more speculative in nature. The Brazilian securities market is substantially smaller, less liquid and can be more volatile than major securities markets in the United States. There is also significantly greater

concentration in the Brazilian securities market than in major securities markets in the United States. The ten largest companies in terms of market capitalization represented approximately 66.9% of the aggregate market capitalization of the BOVESPA as of December 31, 2005. The top ten stocks in terms of trading volume accounted for approximately 51.6%, 42.0% and 50.3% of all shares traded on the BOVESPA in 2003, 2004 and in 2005, respectively. Accordingly, although you are entitled to withdraw the preferred shares underlying the ADSs from the depository at any time, you may not be able to sell the preferred shares underlying the ADSs at a price and time at which you wish to do so.


	*Changes in Brazilian tax laws may have an adverse impact on the taxes applicable to a disposition of our preferred shares or ADSs.*

Law No. 10,833 of December 29, 2003 provides that the disposition of assets located in Brazil by a non-resident to either a Brazilian resident or a non-resident is subject to taxation in Brazil, regardless of whether the disposition occurs outside or within Brazil. This provision results in the imposition of income tax on the gains arising from a disposition of our preferred shares by a non-resident of Brazil to another non-resident of Brazil. There is no judicial guidance as to the application of Law No. 10,833 of December 29, 2003 and, accordingly, we are unable to predict whether Brazilian courts may decide that it applies to dispositions of our ADSs between non-residents of Brazil. However, in the event that the disposition of assets is interpreted to include a disposition of our ADSs, this tax law would accordingly result in the imposition of withholding taxes on the disposition of our ADSs by a non-resident of Brazil to another non-resident of Brazil.

Because any gain or loss recognized by a U.S. Holder (as defined in “Taxation — United States”) will generally be treated as a U.S. source gain or loss unless such credit can be applied (subject to applicable limitations) against tax due on the other income treated as derived from foreign sources, such U.S. Holder would not be able to use the foreign tax credit arising from any Brazilian tax imposed on the disposition of our preferred shares.


	The Brazilian government may impose exchange controls and significant restrictions on remittances of reais abroad, which would adversely affect your ability to convert and remit dividends, distributions or the proceeds from the sale of our preferred shares, our capacity to make dividend payments to non-Brazilian investors and would reduce the market price of our preferred shares or ADSs.

The Brazilian government may restrict the remittance abroad of proceeds of investments in Brazil and the conversion of the real into foreign currencies. The Brazilian government last imposed such remittance restrictions for a brief period in 1989 and in early 1990. In the event that the Brazilian government determines that the Brazilian foreign currency reserves need to be maintained, it may impose temporary charges on any overseas remittance of up to 50% of the value of the remittance. We cannot assure you that the Brazilian government will not take any such similar measures in the future. The reimposition of any such restrictions would hinder or prevent your ability to convert dividends, distributions or the proceeds from any sale of our preferred shares into U.S. dollars and to remit U.S. dollars abroad and our capacity to make dividend payments to non-Brazilian investors. The imposition of any such restrictions would have a material adverse effect on the stock market price of our preferred shares or ADSs.


	*If you surrender your ADSs and withdraw preferred shares, you risk losing the ability to remit foreign currency abroad and certain Brazilian tax advantages.*

As an ADS holder, you benefit from the electronic certificate of foreign capital registration obtained by the custodian for our preferred shares underlying the ADSs in Brazil, which permits the custodian to convert dividends and other distributions with respect to the preferred shares into non-Brazilian currency and remit the proceeds abroad. If you surrender your ADSs and withdraw preferred shares, you will be entitled to continue to rely on the custodian’s electronic certificate of foreign capital registration for only five business days from the date of withdrawal. Thereafter, upon the disposition of or distributions relating to the preferred shares unless you obtain your own electronic certificate of foreign capital registration or you qualify under Brazilian foreign investment regulations that entitle some foreign investors to buy and

sell shares on Brazilian stock exchanges without obtaining separate electronic certificates of foreign capital registration you would not be able to remit abroad non-Brazilian currency. In addition, if you do not qualify under the foreign investment regulations you will generally be subject to less favorable tax treatment of dividends and distributions on, and the proceeds from any sale of, our preferred shares.

If you attempt to obtain your own electronic certificate of foreign capital registration, you may incur expenses or suffer delays in the application process, which could delay your ability to receive dividends or distributions relating to our preferred shares or the return of your capital in a timely manner. The depositary’s electronic certificate of foreign capital registration may also be adversely affected by future legislative changes.


	If we do not maintain a registration statement and no exemption from the Securities Act is available, U.S. Holders of ADSs will be unable to exercise preemptive rights with respect to our preferred shares.

We will not be able to offer our preferred shares to U.S. holders of ADSs pursuant to preemptive rights granted to holders of our preferred shares in connection with any future issuance of our preferred shares unless a registration statement under the Securities Act is effective with respect to such preferred shares and preemptive rights, or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement relating to preemptive rights with respect to our preferred shares, and we cannot assure you that we will file any such registration statement. If such a registration statement is not filed and an exemption from registration does not exist, JPMorgan Chase Bank, N.A., as depositary, will attempt to sell the preemptive rights, and you will be entitled to receive the proceeds of such sale. However, these preemptive rights will expire if the depositary does not sell them, and U.S. holders of ADSs will not realize any value from the granting of such preemptive rights.

FORWARD-LOOKING STATEMENTS

This prospectus includes certain forward-looking statements (particularly in “Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business”). These forward-looking statements are based principally on our current expectations and on projections of future events and financial trends that currently affect or might affect our business. In addition to the items discussed in other sections of this prospectus, there are many significant factors that could cause our financial condition and results of operations to differ materially from those set out in our forward-looking statements, including factors such as:


	•	economic and political developments in both Brazil and the principal international markets in which we operate;

	•	our management’s expectations and estimates as to future financial performance, financial plans and the impact of competition on our business;

	•	our level of indebtedness and other payment obligations;

	•	our plans relating to investments and capital expenditures;

	•	variations in interest rates, inflation and the exchange rate relating to the real (with respect to both potential depreciation and appreciation of the real );

	•	existing and future regulations;

	•	increases in fuel costs, maintenance costs and insurance premiums;

	•	changes in market prices, preferences of consumers and competitive conditions;

	•	cyclical and seasonal variations in our results of operations;

	•	defects or other mechanical problems in our aircraft;

	•	the implementation of our strategies and growth plans;

	•	changes in fiscal policy and tax laws; and

	•	other risk factors set forth in “Risk Factors.”

The words “believe,” “expect,” “continue,” “understand,” “hope,” “estimate,” “will,” “may,” “might,” “intend” and other similar expressions are intended to identify forward-looking statements and estimates. Such statements refer only to the date on which they were expressed and we assume no obligation to publicly update or revise any such estimates resulting from new information or any other events. As a result of the inherent risks and uncertainties involved, the forward-looking statements included in this prospectus may not be accurate and our future results of operations and performance may differ materially from those set out for a number of different reasons. No forward-looking statement in this prospectus is a guarantee of future performance and each estimate involves risks and uncertainties.

Investors are cautioned not to place undue reliance on any forward-looking statements.

ENFORCEMENT OF JUDGMENTS AND SERVICE OF PROCESS

We and certain selling shareholders are incorporated under the laws of Brazil. All of our directors and officers named in this prospectus reside in Brazil and substantially all of our assets are located in Brazil. As a result, you may not be able to effect service of process upon us or these other persons within the United States or to enforce against us or these other persons judgments obtained in United States courts predicated upon the civil liability provisions of the federal securities laws of the United States.

We have been advised by our Brazilian legal counsel, Machado, Meyer, Sendacz e Opice Advogados, that a judgment of a United States court for civil liabilities predicated upon the federal securities laws of the United States, subject to certain requirements described below, may be enforced in Brazil. Such counsel has advised that a judgment against us obtained in the United States would be enforceable in Brazil against us without reconsideration of the merits upon confirmation of that judgment by the Superior Court of Justice. That confirmation, generally, will be available if the United States judgment (i) fulfills all formalities required for its enforceability under the laws of the United States, (ii) is issued by a court of competent jurisdiction after proper service of process in accordance with Brazilian laws, (iii) is not subject to appeal, (iv) is authenticated by a Brazilian consular office in the United States and is accompanied by a sworn translation into Portuguese, and (v) is not contrary to Brazilian national sovereignty, public policy or “good morals” (as set forth in Brazilian law).

We have further been advised by Machado, Meyer, Sendacz e Opice Advogados that (i) original actions may be brought in connection with this prospectus predicated solely on the federal securities laws of the United States in Brazilian courts and that Brazilian courts may enforce liabilities in such actions against us and certain of our advisors named herein subject to Brazilian public policy and national sovereignty, and (ii) the ability of a judgment creditor to satisfy a judgment by attaching certain assets of the defendant is limited by provisions of Brazilian law. In addition, a plaintiff (whether Brazilian or non-Brazilian) who resides outside Brazil during the course of litigation in Brazil must provide a bond to guarantee court costs and legal fees if the plaintiff owns no real property in Brazil. This bond must have a value sufficient to satisfy the payment of court fees and defendant’s attorney’s fees, as determined by the Brazilian judge, except in the case of the enforcement of foreign judgments which have been duly confirmed by the Superior Court of Justice. Notwithstanding the foregoing, no assurance can be given that confirmation of any judgment will be obtained, or that the process described above can be conducted in a timely manner.

EXCHANGE RATE INFORMATION

Until March 14, 2005, there were two legal foreign exchange markets in Brazil, the commercial rate exchange market (or the Commercial Market) and the floating rate exchange market (or the Floating Market). On January 25, 1999, the Brazilian government announced the unification of the exchange positions of the Brazilian financial institutions in the Commercial Market and in the Floating Market, leading to a convergence in the pricing and liquidity of both markets. Previously, the Commercial Market was reserved primarily for foreign trade transactions and transactions that generally required prior approval from Brazilian monetary authorities, such as the purchase and sale of registered investments by foreign persons and related remittances of funds abroad (including the payment of principal of and interest on loans, notes, bonds and other debt instruments denominated in foreign currencies and duly registered with the Central Bank). The Floating Market rate generally applied to specific transactions for which Central Bank approval was not required. Both the Commercial Market rate and the Floating Market rate were reported by the Central Bank on a daily basis.

On March 4, 2005, the Conselho Monetário Nacional issued Resolution No. 3,265 and Resolution No. 3,266 (each of which became effective on March 14, 2005), pursuant to which several changes were introduced in the Brazilian foreign exchange regime, including (i) the unification of the Commercial Market and the Floating Market, and (ii) the relaxation of rules for the acquisition of foreign currency by Brazilian residents. It is expected that the Central Bank will introduce further regulations in relation to foreign exchange transactions as well as to payments and/or transfers of Brazilian currency between Brazilian residents and non-residents (such transfers being commonly known as International Transfer of Reais ), including those made through so-called non-resident accounts (also known as CC5 accounts).

See “Risk factors — Risks relating to Brazil — Exchange rate instability may have adverse effects on the Brazilian economy, our business, financial condition, results of operations and prospects and the stock market price of our preferred shares or ADSs.”

The following table sets forth the Commercial Market rate for the purchase of U.S. dollars expressed in reais per U.S. dollar for the periods and dates indicated:


	*Exchange Rates of Reais* per U.S. $1.00**

Year Ended	Low		High		Average ⁽¹⁾		Period End

December 31, 2001		1.936		2.801		2.352		2.320




December 31, 2002		2.271		3.955		2.931		3.533




December 31, 2003		2.822		3.662		3.072		2.889




December 31, 2004		2.654		3.205		2.926		2.654




December 31, 2005		2.163		2.762		2.285		2.341


	*Exchange Rates of Reais* per U.S. $1.00**

Month Ended	Low		High		Average ⁽²⁾		Period End

January 2006		2.212		2.346		2.279		2.216




February 2006 (through February 17)		2.118		2.222		2.170		2.119

Source: Central Bank.


⁽¹⁾	Represents the daily average rate during each of the relevant periods.

⁽²⁾	Average of the lowest and highest rates in the period.

Brazilian law provides that, whenever there (i) is a serious imbalance in Brazil’s balance of payments, or (ii) are serious reasons to foresee a serious imbalance in Brazil’s balance of payments, temporary restrictions may be imposed on remittances of foreign capital abroad.

USE OF PROCEEDS

Based on the offering prices of R$49.99 per preferred share and US$23.60 per ADS, we expect to receive net proceeds of approximately US$118,000,000 (assuming no exercise of the over-allotment options) or net proceeds of approximately US$244,088,074 (in the event of full exercise of the over-allotment options) from the primary offering contemplated hereby, after deduction of estimated underwriting commissions and expenses.

We will use the net proceeds from the primary offering for fleet renewal and expansion and for general corporate purposes. We will use approximately R$ for fleet renewal and expansion and the remaining funds for general corporate purposes.

We will not receive any proceeds from the secondary offering of preferred shares and ADSs by the selling shareholders.

CAPITALIZATION

The following table sets forth our short-term and long-term indebtedness, shareholders’ equity and total capitalization at December 31, 2005 and as adjusted to give effect to the primary offering and sale by us of the preferred shares and ADSs offered herein. The adjustments are based on the price of R$49.99 per preferred share, which was the closing price of the preferred shares on BOVESPA on February 17, 2006, and US$23.60 per ADS (based on an exchange rate of R$2.1186 to US$1.00, which was the U.S. dollar selling rate on February 17, 2006). The adjustments are also based on the sale of 10,342,715 preferred shares in the primary offering contemplated hereby, including preferred shares in the form of ADSs (assuming full exercise of the overallotment option and before deduction of commissions and expenses we must pay in connection with the primary offering). We will not receive any proceeds from the secondary offering of our preferred shares and ADSs by selling shareholders. The information set forth in the table below is derived from our audited consolidated financial information at December 31, 2005, prepared in accordance with Brazilian GAAP, and should be read in conjunction with “Management’s discussion and analysis of financial condition and results of operations” and our audited consolidated financial information at December 31, 2005 and the notes thereto included elsewhere in this prospectus.


		Actual		As adjusted

		(R$ millions)		(R$ millions)




Short-term debt (accumulated interest and current portion of long-term debt)
Loans and financing




	Secured		115		115




	Unsecured		4		4
Finance lease and operating lease liabilities




	Secured		62		62




	Unsecured		—		—
Reorganization of Fokker 100 fleet




	Secured		9		9




	Unsecured		—		—
Debentures




	Secured		26		26




	Unsecured		—		—

Total short-term debt			216		216

Long-term debt
Loans and financing




	Secured		151		151




	Unsecured		—		—
Finance lease and operating lease liabilities




	Secured		156		156




	Unsecured		—		—
Reorganization of Fokker 100 fleet




	Secured		85		85




	Unsecured		—		—
Debentures




	Secured		33		33




	Unsecured		—		—

Total long-term debt			425		425

Shareholders’ equity			760		1,277

Total capitalization ⁽¹⁾			1,185		1,702


⁽¹⁾	Long-term debt (excluding the short-term portion) and shareholders’ equity.

None of our indebtedness is guaranteed.

DILUTION

Dilution, for the purposes of this table, is presented as the amount by which the offering price paid by purchasers of our preferred shares and ADSs to be sold in this offering will exceed the net book value per preferred share of our capital stock after the completion of this offering. The net book value per outstanding share is equal to the amount of our total tangible assets (total assets less intangible assets) less total liabilities, divided by the number of outstanding shares on February 17, 2006. After giving effect to the sale of 10,342,715 preferred shares in the primary offering contemplated hereby including preferred shares in the form of ADSs (assuming full exercise of the over-allotment option and before deduction of commissions and expenses we must pay in connection with the primary offering), based on the closing price of our preferred shares on BOVESPA as of February 17, 2006 of R$49.99 per preferred share and US$23.60 per ADS (based on an exchange rate of R$2.1186 to US$1.00, which was the U.S. dollar selling rate on February 17, 2006), our net book value on December 31, 2005 would have been approximately R$1,277 million, representing R$8.27 per outstanding share or US$3.90 per ADS. This represents an immediate increase in net book value of R$2.99 per outstanding share, or US$1.41 per ADS, for purchasers of our preferred shares to be sold in this offering and an immediate dilution to such purchasers of R$41.72 per preferred share or US$19.69 per ADS. The following table illustrates this dilution per preferred share and per ADS (and does not take into account possible exercises of share options pursuant to the share purchase option plan we have implemented, as discussed in “Management — Share Purchase Option Plan”):


	R$

Initial offering price per preferred share		49.99




Net book value per outstanding share before this offering		5.28




Increase in net book value per outstanding share attributable to new investors		2.99




Net book value per share after this offering		8.27




Dilution in net book value per preferred share for new investors		41.72




Percentage of dilution in net book value per preferred share for new investors(1)		83%


⁽¹⁾	Percentage of dilution for new investors is calculated by dividing the dilution in net book value per share for new investors by the price of the offering.

Future Dilution

Article 8 of our by-laws provides that holders of fully paid-up common shares may convert their common shares into preferred shares (at a ratio of one to one), provided that at no time may more than two thirds of our total outstanding capital stock be comprised of preferred shares. Accordingly, holders of our preferred shares and, consequently, our ADSs may in the future experience further dilution in the event that holders of our common shares convert their common shares into preferred shares. See “Description of our Capital Stock—Rights of our common and preferred shares.”

SELECTED FINANCIAL AND OPERATIONAL INFORMATION

The tables below contain a summary of our financial data as of and for each of the periods indicated and were extracted from our consolidated financial statements and unaudited financial information, prepared in accordance with Brazilian GAAP and the Plan of Accounts drawn up by DAC. The information set forth in this section should be read in conjunction with our consolidated annual financial statements and unaudited financial information (including the notes thereto) and “Presentation of financial and certain other information” and “Management’s discussion and analysis of financial condition and results of operations.”

The summary information described above also includes the reconciliation of certain items to U.S. GAAP. Brazilian GAAP differs in certain significant respects from U.S. GAAP. For a summary of certain principal differences, see note 29 of our consolidated financial statements for the year ended December 31, 2005 and 2004 and for each of the three years in the period ended December 31, 2005, included elsewhere in this prospectus. For a summary of the reconciliation from Brazilian GAAP to U.S. GAAP in our consolidated financial statements see “Management’s discussion and analysis of financial condition and results of operations — Reconciliation with U.S. GAAP.”

For your convenience, the following tables also contain U.S. dollar translations of the real amounts presented at December 31, 2005, translated using the rate of R$2.3407 to US$1.00, the U.S. dollar selling rate at December 31, 2005 published by the Central Bank on SISBACEN, using transaction PTAX 800, option 5).


		At December 31,

Brazilian GAAP		2005		2005		2004		2003		2002		2001

		(US$ millions)		(R$ millions)




Balance sheet data




	Cash and banks		40		93		86		71		46		2




	Financial investments		386		903		211		101		—		8




	Customer accounts receivable		326		763		553		293		240		439




	Total assets		1,415		3,311		2,203		2,788		3,537		2,796




	Debt ⁽¹⁾		115		270		151		81		203		56




	Finance lease and operating lease liabilities ⁽¹⁾		93		218		261		1,235		1,649		1,218




	Debentures ⁽¹⁾		25		59		75		137		89		—




	Advance ticket sales		238		558		367		225		181		242




	Shareholders’ equity		325		760		191		42		204		461


⁽¹⁾	Refers to the total balance of current liabilities plus long-term liabilities.


		At December 31,

U.S. GAAP		2005		2005		2004

		(US$ millions)		(R$ millions)




Balance sheet data




	Cash and cash equivalents and marketable securities		425		995		297




	Customer accounts receivable, net		326		763		553




	Total assets		2,586		6,052		4,989




	Debt ⁽¹⁾		115		270		151




	Obligations under finance leases ⁽¹⁾		1,215		2,845		3,172




	Debentures ⁽¹⁾		25		59		75




	Advance ticket sales		238		558		367




	Shareholders’ equity		265		620		(164	)


⁽¹⁾	Refers to the total balance of current liabilities plus long-term liabilities.


			Year Ended December 31,

Brazilian GAAP			2005			2005			2004			2003			2002			2001

			(US$ millions) ⁽¹⁾			(R$ millions) ⁽¹⁾




Statement of operations data




Gross operating revenue				2,525			5,910			4,744			3,768			3,472			2,970




	Air transportation revenues:




		Domestic		1,791			4,192			3,233			2,688			2,533			2,212




		International		442			1,034			893			679			587			463




		Cargo		174			407			319			236			220			212




	Other operating revenues			118			277			299			165			132			83




	Taxes and deductions			(112	)		(261	)		(224	)		(176	)		(142	)		(259	)

Net operating revenue				2,413			5,649			4,520			3,592			3,330			2,711




Operating expenses:




	Fuel			(724	)		(1,695	)		(1,067	)		(787	)		(748	)		(578	)




	Sales and marketing			(365	)		(855	)		(656	)		(527	)		(463	)		(351	)




	Aircraft and flight equipment leases			(268	)		(627	)		(651	)		(648	)		(574	)		(362	)




	Personnel			(286	)		(669	)		(546	)		(417	)		(435	)		(397	)




	Maintenance			(152	)		(356	)		(389	)		(372	)		(329	)		(222	)




	Services rendered by third parties			(160	)		(374	)		(360	)		(304	)		(337	)		(253	)




	Landing, take-off and navigational tariffs			(100	)		(233	)		(186	)		(151	)		(185	)		(161	)




	Depreciation and amortization			(36	)		(85	)		(91	)		(155	)		(133	)		(107	)




	Aircraft insurance			(17	)		(40	)		(53	)		(77	)		(66	)		(22	)




	Other			(123	)		(288	)		(227	)		(186	)		(296	)		(265	)

Total operating expenses				(2,231	)		(5,222	)		(4,226	)		(3,624	)		(3,566	)		(2,718	)

Gross income (loss)				182			427			294			(32	)		(236	)		(7	)




	Financial income (expenses), net			(39	)		(92	)		(82	)		261			(671	)		(338	)




	Other operating income (expenses), net			(13	)		(31	)		(14	)		(9	)		(10	)		129

Operating income (loss)				130			304			198			220			(917	)		(216	)




	Non-operating income (expenses), net			(3	)		(8	)		300			15			46			131

Income (loss) before income tax and social contribution				127			296			498			235			(871	)		(85	)




	Income tax and social contribution			(47	)		(109	)		(156	)		(61	)		265			29

Income (loss) before minority interest				80			187			342			174			(606	)		(56	)




	Minority interest			—			—			(1	)		0			—			—

Income (loss) for the year				80			187			341			174			(606	)		(56	)

*Income (loss) per thousand shares (in reais* and US dollars)**				0.56			1.30			2.78			1.42			(5.00	)		(0.46	)


⁽¹⁾	Except where indicated.


			Year Ended December 31,

U.S. GAAP			2005			2005			2004			2003

			(US$ millions) ⁽¹⁾			(R$ millions) ⁽¹⁾




Statement of operations data




Gross operating revenue				2,519			5,895			4,744			3,845




	Air transportation revenues:




		Domestic		1,791			4,912			3,233			2,688




		International		442			1,034			893			740




		Cargo		174			407			319			240




	Other operating revenues			112			262			299			177




	Taxes and deductions			(112	)		(261	)		(224	)		(178	)

Net operating revenue				2,407			5,634			4,520			3,667




Operating expenses:




	Fuel			(724	)		(1,695	)		(1,067	)		(802	)




	Sales and marketing			(371	)		(868	)		(656	)		(544	)




	Aircraft and flight equipment leases			(128	)		(300	)		(321	)		(365	)




	Personnel			(285	)		(666	)		(544	)		(426	)




	Maintenance			(152	)		(356	)		(389	)		(381	)




	Services rendered by third parties			(152	)		(357	)		(360	)		(306	)




	Landing, take-off and navigational tariffs			(100	)		(233	)		(186	)		(161	)




	Depreciation and amortization			(88	)		(206	)		(193	)		(204	)




	Aircraft insurance			(17	)		(40	)		(53	)		(77	)




	Other			(129	)		(301	)		(258	)		(171	)

Total operating expenses				(2,146	)		(5,022	)		(4,027	)		(3,437	)

Operating income				261			612			493			230




	Financial income (expenses), net			14			32			137			727

Income before income tax and social contribution				275			644			630			957




	Income tax and social contribution			(93	)		(217	)		(199	)		(304	)

Income before minority interest				182			427			431			653




	Minority interest			—			—			(1	)		—

Income for the year				182			427			430			653

Income per thousand shares basic and diluted ⁽²⁾




	Common shares			1.34			3.13			3.33			5.10




	Previous preferred shares			0.58			1.35			3.67			5.61




	Current preferred shares ⁽³⁾			0.81			1.90			—			—


⁽¹⁾	Except where indicated.

⁽²⁾	The data relating to both our preferred and common shares has been adjusted to reflect the share split which took place on May 16, 2005, pursuant to which all holders of our existing shares received two shares of the same class and type for each share held.

⁽³⁾	The rights of preferred shareholders were altered on May 16, 2005. Previously, preferred shares had carried the rights to a dividend 10% higher than that distributed to holders of common shares. From May 16, 2005 however preferred shares carried the same dividend rights as common shares. The terms “Previous” and “Current” preferred shares used in the above table reflect this change in entitlement.


		Year Ended December 31,

Operating Data Computed Using Financial Information Under Brazilian GAAP		2005		2005		2004		2003		2002		2001

		US$		R$		R$		R$		R$		R$

		(Unaudited)




Operating data




	RASK ( cents/centavos )		8.61		20.16		21.53		19.90		15.10		13.11




	RASK scheduled domestic ( cents/centavos )		8.67		20.30		20.84		18.09		13.78		14.38




	RASK scheduled international ( cents/centavos )		6.28		14.70		17.13		19.23		13.11		8.01




	Yield scheduled domestic ( cents/centavos )		13.42		31.42		35.21		34.27		27.77		29.83




	Yield scheduled international ( cents/centavos )		8.59		20.10		23.96		26.65		21.67		14.89




	CASK ( cents/centavos )		7.96		18.63		20.12		19.10		15.40		13.15




	CASK except fuel ( cents/centavos )		5.37		12.58		15.04		14.60		11.90		10.36




	Average tariff ( dollars/reais )		114.09		267.05		305.17		286.50		218.90		218.45


	Year Ended December 31,

Operating Data Computed Using Financial Information Under U.S. GAAP	2005		2005		2004		2003

	US$		R$		R$		R$

	(Unaudited)
Operating data




RASK ( cents/centavos )		8.59		20.10		21.53		19.90




RASK scheduled domestic ( cents/centavos )		8.67		20.30		20.77		18.09




RASK scheduled international ( cents/centavos )		6.28		14.70		17.09		19.23




Yield scheduled domestic ( cents/centavos )		13.42		31.42		35.21		34.27




Yield scheduled international ( cents/centavos )		8.59		20.10		23.96		26.65




CASK ( cents/centavos )		7.63		17.87		19.18		19.10




CASK except fuel ( cents/centavos )		5.05		11.82		14.10		14.60




Average tariff ( dollars/reais )		114.09		267.05		305.17		286.50


	Year Ended December 31,

Additional Operating Data	2005			2004			2003			2002			2001

	(Unaudited)




Paid passengers transported (thousands)		19,571			13,522			11,198			13,756			13,030




RPK (millions)		19,797			13,854			10,916			12,075			11,264




ASK (millions)		28,024			20,999			18,003			22,017			20,674




Load factor — %		70.6	%		66.0	%		60.6	%		54.8	%		54.5	%




Break-even load factor (BELF) — %		65.3	%		61.7	%		61.2	%		58.7	%		54.7	%




Block hours		323,729			241,684			210,282			301,103			294,090




Kilometers flown — Km (thousands)		185,158			139,367			119,984			161,099			157,883




Liters of fuel		1,073,918			820,335			710,962			922,936			892,496




Number of employees		9,669			8,215			7,665			8,181			7,994




Average aircraft use during the period (hours per day)		11.36			8.98			7.62			9.48			10.68




Take-offs		209,831			158,898			147,122			227,001			221,108




Average leg (km)		882			877			816			710			714

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our consolidated annual financial statements and the notes thereto, which are included elsewhere in this prospectus and have been prepared in accordance with Brazilian GAAP. Brazilian GAAP differs in certain significant respects from U.S. GAAP. For a summary of the reconciliations from Brazilian GAAP to U.S. GAAP in our consolidated audited financial statements see “Management’s discussion and analysis of financial condition and results of operations — Reconciliation to U.S. GAAP,” and note 29 to our audited consolidated annual financial statements at December 31, 2005 and 2004 and for each of the three years in the period ended December 31, 2005, included elsewhere in this prospectus.

Principal Factors Affecting Our Financial Condition and Results of Operations


	*Brazilian macroeconomic conditions*

Our revenues and profitability are affected by conditions in the Brazilian economy in general. In both 2003 and 2002, Brazilian GDP grew by less than 2.0% per year, principally as a result of:


	•	uncertainties about Brazil’s political and economic future in the period before and immediately after Brazil’s presidential elections in October 2002;

	•	higher interest rates in the domestic market, particularly in 2003, as a means of controlling inflation; and

	•	political and economic uncertainties in emerging market countries.

The sharp depreciation in the real that occurred in the second half of 2002 heightened concerns over a return to high inflation. The monetary authorities under the former government responded by increasing interest rates through the end of 2002, which significantly increased the cost of obtaining credit in the Brazilian economy and, as a result negatively impacted the rate of GDP growth in that year.

During 2003 and 2004 (particularly in 2003), depreciation of the U.S. dollar in relation to other currencies, as well as the conservative monetary and fiscal policies of the Brazilian government, led to appreciation of the real in relation to the U.S. dollar. See the table in “— Effects of exchange rate variations and inflation on our financial condition and results of operations” below.

The results of less stringent fiscal policies began to be seen in 2004. The resumption of economic growth became more visible, particularly in those sectors more sensitive to more widespread availability of credit. This recovery led to improvements in the labor market. Brazilian GDP grew by 4.9% in 2004 and the value of the real increased by 8.8% against the U.S. dollar between December 31, 2003 and December 31, 2004. According to DAC, growth in the Brazilian civil aviation market showed a close correlation with growth in Brazilian GDP. In terms of RPKs, the Brazilian domestic flight market increased by 0.7% in 2002, decreased by 5.7% in 2003 and resumed growth at a rate of 12.1% in 2004 and a rate of 19.4% in 2005. In the past three years, the growth rate of our domestic RPKs was approximately five times that of the Brazilian GDP. We believe that Brazilian GDP is an important factor in determining our capacity for future growth and our results of operations.

Between September 2004 and May 2005, the Central Bank raised interest rates from 16.00% to 19.75%, in order to manage inflation. The impact of these rate rises has been to slow economic activity in Brazil during 2005, with GDP growth projected to be in the region of 3.5% for the year ended December 31, 2005, compared to 4.9% for the year ended December 31, 2004. These rate rises have also been successful in controlling inflation. Levels of inflation are now within the target range imposed by the Brazilian Central Bank on both a current and a 12 month basis. Accordingly, the Central Bank announced a decrease in the base interest rate from 19.75% to 19.50% in September 2005 and has decreased the base interest rate further in each month since that announcement. In January 2006, the Central Bank announced that the base interest rate would be 17.25%.


	*Effects of exchange rate variations and inflation on our financial condition and results of operations*

Our financial condition and results of operations have been historically affected by variations in exchange rates and the rate of Brazilian inflation. Our costs and expenses (such as fuel costs, lease obligations and GDS (or Global Distribution System, an electronic passenger distribution system) related expenses) are principally denominated in U.S. dollars or are linked to the U.S. dollar. At December 31, 2005 and December 31, 2004, approximately 52.1 and 51.1%, respectively, of our operating costs were either denominated in or linked to the U.S. dollar. In comparison, our revenues are mostly received in reais . We are therefore exposed to fluctuations in the U.S. dollar/ real exchange rate, especially with respect to fuel and leasing costs. We have a policy of hedging changes in fuel prices by means of derivative transactions covering 30% of approximately three months of fuel consumption. In addition, we have also entered into hedging transactions in respect of our exposure to the depreciation of the real against the U.S. dollar, covering 40 to 60% of the cashflow exposure for a period of 12 months.

Inflation has historically had an impact on our financial conditions and results of operations and it continues to do so. Our suppliers of services and certain products related to our operating costs and expenses generally utilize the IPCA index to adjust their prices for inflation. Approximately 47.9% and 48.9% of our operating costs and expenses were linked to inflation at December 31, 2005 and December 31, 2004 respectively. A substantial increase in inflation could adversely affect the levels of our costs and expenses.

The table below sets forth certain data relating to inflation, real GDP growth rates, the real / U.S. dollar exchange rate and oil prices for the periods indicated:


	Year Ended December 31,

	2005			2004			2003

Real growth in GDP		*			4.9	%		0.5	%




Inflation (IGP-M)		1.2	%		12.4	%		8.7	%




Inflation (IPCA)		5.7	%		7.6	%		9.3	%




DI Rate ⁽¹⁾		19.08	%		17.46	%		16.8	%




LIBOR ⁽²⁾		4.7	%		2.6	%		1.2	%




Appreciation of the Brazilian real in relation to the dollar		13.4	%		8.8	%		22.3	%




Rate of exchange at end of period — US$1.00	R$	2.3407		R$	2.6544		R$	2.8892




Average exchange rate ⁽³⁾ — US$1.00	R$	2.4341		R$	2.9257		R$	3.0715




Increase in West Texas Intermediate oil price (per barrel)		40.5	%		33.6	%		4.2	%




West Texas Intermediate oil (per barrel) (end of period)	US$	61.04		US$	43.45		US$	32.52




West Texas Intermediate oil (per barrel) (average price over period)	US$	56.56		US$	41.43		US$	31.10

Sources: Getúlio Vargas Foundation (Fundação Getúlio Vargas, or FGV), Brazilian Geography and Statistics Institute (Instituto Brasileiro de Geografia e Estatística, or IBGE), Central Bank and Bloomberg.


*	Data not yet available.


⁽¹⁾	The DI Rate corresponds to the average overnight interest rate for the interbank market in Brazil (cumulative to the end of the monthly period, annualized).

⁽²⁾	Quarterly LIBOR for dollar deposits relative to last day of period.

⁽³⁾	Represents average daily exchange rates in period.


	*Role of DAC and future replacement of DAC by ANAC*

DAC can influence our capacity for growth and our ability to generate future revenues. DAC has the authority to grant Brazilian airlines the right to operate new domestic routes, increase the frequency of flights serving existing routes, award slots, purchase or lease aircraft and approve the entry of new companies into the domestic civil aviation market. In the near future, DAC will be replaced by ANAC as the principal regulatory body for Brazilian civil aviation, according to a recent law issued by the Brazilian government. See “Regulation of the Brazilian civil aviation industry — Future Legislation.”


	*Flight sharing agreement (codeshare) with Varig*

On February 6, 2003, we signed a memorandum of understanding with Varig for the operation of shared flights (known as a codeshare agreement) with a preliminary stage and a second stage contemplating the possible merger of the two airlines. This measure was designed principally to eliminate overlapping flights and to rationalize the number of flights offered. The signing of this transaction allowed us to reorganize our fleet of aircraft, resulting in negotiations to return 19 Fokker F-100 aircraft (13 of which have already been returned), which in turn reduced our operating costs.

On February 15, 2005, after it became clear that the proposed merger would not take place, we and Varig submitted a detailed plan to the Administrative Council of Economic Defense (or CADE) to end our codeshare agreement. On February 23, 2005, the codeshare agreement with Varig was terminated with the approval of CADE. The terms of the termination agreement gave us until May 24, 2005 to end our shared flights with Varig. We ceased operations of all previously shared flights with Varig on May 2, 2005.


	*Amendments to leasing arrangements*

During the second quarter of 2004, with the agreement of the relevant leasing counterparties, we amended 17 of our aircraft leasing agreements, changing their terms from finance leases to operating leases, in order to improve comparability of our financial statements. Accordingly, the finance leases for the relevant aircraft are no longer reflected as assets on our balance sheet because the lease agreements pertaining to those aircraft no longer contain options for us to purchase the aircraft at the end of their terms.

As a result of the amendments described above (and with effect only from dates of those amendments), those expenses related to leasing have been reflected differently in our results than was previously the case. Until the second quarter of 2004, under the terms of the finance leases, our results were affected by depreciation of assets, financial expenses corresponding to interest payments, variations in the exchange rate applicable to the obligation recognized in the balance sheet and taxes applicable to the reevaluation of those same assets as a result of the realization of the corresponding reevaluation reserve. Under the terms of the operating leases, all revaluation reserve expenses we incur are recorded directly in our books as leasing expenses.

The financial adjustments made in our consolidated audited financial statements for the year ended December 31, 2004 as a result of the retirement and disposal of assets are described in note 12(b) to those financial statements and include the items set out below:

In 2004, in our statement of operations we recorded:


	•	R$227 million in income from 2004 as a result of reversal of the revaluation reserve;

	•	R$117 million as income as a result of the reversal of deferred tax effects;

	•	R$295 million as non-operating income; and

	•	R$59 million as financial income.

In 2004, in our balance sheet we recorded:


	•	a write-off of R$544 million in permanent assets; and

	•	a write-off of R$898 million in finance leases of flight equipment.


	*Revenues*

Our revenues arise principally from passenger transportation. In the years ended December 31, 2005 and December 31, 2004, our operating revenues increased period-on-period from the following sources:


	•	84.2% and 82.0%, respectively, from scheduled passenger transportation service;

	•	11.1% and 11.7%, respectively, from cargo and charter service; and


	•	4.7% and 6.3%, respectively, from services and maintenance of aircraft operated by other airlines, receipt of fines and fees in relation to re-pricing of air fares and sub-leasing, together with revenue from credit card companies that purchase TAM Loyalty Program points to pass on to their customers.

Revenue from passenger transportation is driven by the number of paying passengers we transport, measured in revenue passenger kilometers, or RPKs, and the price those passengers pay, measured in the centavos price paid for each RPKs, or yield. RPKs increase either as a function of increased capacity, measured in ASKs, or an increase in load factor, measured as increased RPK in relation to available ASKs.

Our revenues can be affected by market opportunities derived from the activities of our competitors, such as the reduction in the number of flights operated by Viaçao Aérea São Paulo S.A. (VASP) in the second half of 2004. Our revenues can also be affected by new airlines entering the market and the ticket pricing policies employed by our competitors. For this reason, we are constantly evaluating the number of flights we offer and the size of our fleet.

We have succeeded in increasing our revenue in the past three years by better utilizing our fleet and optimizing our network of destinations, thus increasing ASKs in two of those three years and load without increasing the size of our fleet. In addition, in 2004 and 2005, the airline industry in Brazil has experienced an increase in demand as a result of the increase in Brazilian GDP and we have been able to capture a significant share of that increase in demand.

The following table sets forth our supply and demand, load factor and scheduled domestic yield for the periods indicated:


	Year Ended December 31,

	2005			2004			2003

ASKs (millions)		28,024			20,999			18,003




RPKs (millions)		19,797			13,854			10,916




Scheduled domestic yield in centavos		31.42			35.21			34.27




Load factor		70.6	%		66.0	%		60.6	%


	*Taxes and deductions*

The following taxes and tariffs are deducted from our gross revenues:


	PIS and COFINS

The Programa de Integração Social (Social Integration Program, or PIS) and the Contribuição para o Financiamento de Seguridade Social (Contribution for the Financing of Social Security, or COFINS) taxes are federal social contribution taxes assessed on gross operating revenues. In respect of passenger transportation revenues, the applicable rates of PIS and COFINS are 0.65% and 3%, respectively. In respect of cargo transportation and other revenues (except financial income), the applicable rates of PIS and COFINS are 1.65% and 7.60%, respectively (increased from 0.65% and 3% respectively in February 2004). International revenues are exempt from PIS and COFINS.

Separately, TAM Mercosur is required to pay 3% of its revenues arising from international ticket and cargo sales under a Paraguayan tax referred to as the “assumed income” tax.


	ICMS

The Imposto sobre Operações Relativas à Circulação de Mercadorias e sobre Serviços de Transporte Interestadual e Intermunicipal e de Comunicação, ainda que as Operações se Iniciem no Exterior (Tax on the Circulation of Merchandise and Services, or ICMS) is a value-added state tax on gross operating revenues from the transportation of cargo. ICMS is charged for each stage in the chain of production and

sale of products, at rates varying from 4% to 12% (depending on the product and the state where the service is rendered).


	ISS

The Imposto Sobre Serviços (Tax on Services, or ISS) is a municipal tax assessed at 5% of our gross operating service revenues. We are required to pay ISS, as is our subsidiary TAM Viagens.


	Tariff surcharge

We are subject to a specific civil aviation industry contribution, referred to as a “tariff surcharge.” This contribution is assessed at 1% of each domestic air ticket sold.


	*Costs and expenses*

The principal components of our operating costs and expenses include fuel, sales and marketing expenses, leasing of aircraft and equipment, personnel, maintenance, services rendered by third parties, landing, take-off and navigational-assistance tariffs, depreciation and amortization, aircraft insurance and other expenses.

Fuel costs vary depending on the international petroleum market and the size and utilization of our fleet. From January 1, 2002 to December 31, 2005, the price of West Texas Intermediate oil, the reference price used internationally to price oil, quoted in dollars, increased 207.7%, from US$19.84 per barrel to US$61.04 per barrel. As a result of the fact that the price of oil is quoted in U.S. dollars, our fuel costs are also affected by exchange rate variations. In the past three years, we have succeeded in passing on the increase in fuel prices and exchange rate variations to passengers by increasing our ticket prices, albeit with a delay of several months. However, prevailing market conditions may lead to our having greater difficulties in adjusting our prices. We have entered into derivative transactions to hedge against certain oil price and exchange rate variations. See “— Qualitative and quantitative disclosures regarding market risk.”

We have also implemented a fuel tankering program, the object of which is to obtain cost savings that arise as a result of the fact that fuel may be obtained at lower prices in certain destinations. In the case of domestic destinations, the price variances arise principally because different states in Brazil apply different rates of value-added-tax to fuel. In the case of international destinations, the price variances reflect movements in the cost of oil on the international petroleum markets (which is itself driven by international commodity price variances). In both cases, we believe that the factors highlighted will continue to drive fuel price variances in the future and, accordingly, that the fuel tankering program will continue to be available to provide cost savings to us.

Our fuel tankering policy operates as follows: where a particular airport has fuel available at a cost that is lower than at the airport to which the relevant flight is travelling, we purchase more fuel at the point of origin, thereby minimizing uplift at those airports at which fuel is more expensive. Before making a decision as to whether we proceed with fuel tankering on a given flight, we also factor in the increased fuel costs that arise as a result of the additional weight that an aircraft carrying additional fuel must fly with. Our systems allow us to calculate the cost savings on a daily basis.

The principal components of our sales and marketing expenses are:


	•	commission and discounts to travel, tourism and cargo agents, as compensation for the sale of tickets, tourist packages and cargo shipping (paid directly to the relevant agencies); and

	•	other sales and marketing expenses, principally credit card administration fees.

The costs incurred in the leasing of aircraft and equipment are denominated in foreign currencies and increase in proportion to the size of our fleet. These costs are affected by variations in the exchange rate and in LIBOR. We have entered into derivative transactions to hedge against certain exchange rate variations. See “— Qualitative and quantitative disclosures regarding market risk.” In 2003, we began a process of renegotiating the terms of the lease agreements relating to our fleet of Fokker 100 aircraft and

agreed to return 19 Fokker 100 aircraft (13 of which have already been returned). During the second quarter of 2004, we converted our financing lease agreements to operating leases (see “— Amendments to leasing arrangements”). As a result, these lease expenses are no longer recorded against our leasing liabilities but are instead posted as costs for aircraft and flight equipment leasing costs.

Personnel costs vary with the number of employees, our salary policy, collective bargaining agreements and profit-sharing programs, as well as the number of hours flown by all crewmembers. The base date relating to renegotiations of the collective bargaining agreements with our employees is December of each year. Accordingly, any salary adjustments will be almost completely reflected in the following year.

Maintenance costs consist of corrective and preventive work performed on our aircraft and flight equipment and include spare parts for aircraft, which are posted in the accounts as operating expenses as such parts are utilized. Maintenance costs vary according to the level of utilization of the fleet.

Expenses relating to services rendered by third parties include airport ground-support services, GDS costs and airport-utilization concession expenses. Third-party expenses vary mainly according to the volume of our operations. Since implementation of the e -TAM portal in September 2004, our GDS utilization costs have been substantially reduced in relation to domestic reservations. At December 31, 2005, domestic reservations made via the e -TAM portal accounted for approximately 94.4% of all domestic reservations, compared to approximately 33% at December 31, 2004.

Landing, take-off and navigational-assistance tariff costs include aircraft parking and overflight fees and vary according to the volume of our operations and airfare adjustments established by the Brazilian Federal Airport Infrastructure Company (or INFRAERO), state and international authorities. These expenses are also affected by variations in the exchange rate because international tariffs are charged in foreign currencies.

Depreciation and amortization costs principally relate to engines, systems and spare parts and vary depending on the useful life of these components. With effect from the second quarter of 2004, our depreciation expenses decreased significantly as a result of changing the terms of the lease agreements of 17 aircraft from finance leases to operating leases.

Aircraft insurance costs increase in proportion to the size of our fleet, the number of passengers we transport and the number of landings we perform (in addition to the classification of our fleet risk by our insurers). These costs are also affected by variations in the exchange rate because we purchase insurance in foreign currency. Our operating lease agreements require us to keep the relevant aircraft insured.

Other expenses include those relating to the provision of in-flight services, which vary principally as a function of the volume of passengers we carry on domestic and international flights, and general administrative costs.


	*Net financial expenses*

The Contribuição Provisória sobre Movimentação ou Transmissão de Valores e de Créditos e Direitos de Natureza Financeira (Provisional Contribution to the Movement or Transfer of Securities and Financial Credits and Rights, or CPMF) included in our financial expenses is a 0.38% federal tax levied on every debit transaction occurring in a bank account. In December 2003, the application tax was extended through December 2007. In Brazil, everyone who has a bank account (both private individuals and legal entities) must pay CPMF whenever they transfer or withdraw cash from their accounts.

As a result of our change of 17 leasing arrangements from financing leases to operating leases, we are no longer required to reflect depreciation expenses, financial expenses corresponding to interest and exchange rate variations and revenues from reversal of income tax and social contributions applicable to the realization of revaluation reserves with respect to those leases.


	*Taxes*


	IRPJ and CSLL

We are subject to the Imposto de Renda Pessoa Jurídica (Income Tax, or IRPJ) and the Contribuição Social Sobre Lucro Líquido (Social Contribution on Net Income, or CSLL), which together can require us to pay up to 34% of our adjusted net income (referred to as real income). These taxes are divided up as follows (i) applicable income tax of 15%, (ii) additional income tax of 10% (applicable to that portion of our results that exceeds R$240,000 per year), and (iii) CSLL, which requires that we pay 9% of our taxable income.

Minority Interests

The government of Paraguay holds a 5.02% equity interest in TAM Mercosur’s capital stock. TAM Mercosur was acquired by us in September 2003. The amounts corresponding to the minority interest held by the Paraguayan government vary as a function of TAM Mercosur’s results.

Results of Operations

The figures set forth in the tables below are expressed in both millions of reais and centavos and have been subject to rounding adjustments. Accordingly, additions or divisions of certain figures may not be an arithmetic aggregation of the totals and the actual sum of percentage variations may differ from those indicated.


	*Year ended December 31, 2005 compared to year ended December 31, 2004*


			Year Ended December 31,

																					% of Net
																					operating revenue
Brazilian GAAP			2005			2004			Variation (%)			2005			2004			Variation (%)			(2005)

			(In centavos
			per ASK)									R$ millions




Gross operating revenue				21.1			22.6			(6.6	)		5,910			4,744			24.6			105




	Air transportation revenues			20.1			21.2			(5.0	)		5,633			4,445			26.7			100




		Domestic		15.0			15.4			(2.8	)		4,192			3,233			29.7			74




		International		3.7			4.3			(13.3	)		1,034			893			15.7			18




		Cargo		1.5			1.5			(4.3	)		407			319			27.7			7




	Other operating revenues			1.0			1.4			(30.6	)		277			299			(7.4	)		5




Taxes and deductions				(0.9	)		(1.1	)		(12.5	)		(261	)		(224	)		16.7			(5	)

Net operating revenue				20.2			21.5			(6.4	)		5,649			4,520			25.0			100




Operating expenses




	Fuel			(6.1	)		(5.1	)		19.1			(1,695	)		(1,067	)		58.9			(30	)




	Sales and marketing			(3.1	)		(3.1	)		(2.4	)		(855	)		(656	)		30.2			(15	)




	Aircraft and flight equipment leasing			(2.2	)		(3.1	)		(27.8	)		(627	)		(651	)		(3.7	)		(11	)




	Personnel			(2.4	)		(2.6	)		(8.1	)		(669	)		(546	)		22.7			(12	)




	Maintenance			(1.3	)		(1.9	)		(31.4	)		(356	)		(389	)		(8.4	)		(6	)




	Services rendered by third parties			(1.3	)		(1.7	)		(22.3	)		(374	)		(360	)		3.7			(7	)




	Landing, take-off and navigational tariffs			(0.8	)		(0.9	)		(6.0	)		(233	)		(186	)		25.4			(4	)




	Depreciation and amortization			(0.3	)		(0.4	)		(29.8	)		(85	)		(91	)		(6.3	)		(2	)




	Aircraft insurance			(0.1	)		(0.3	)		(43.6	)		(40	)		(53	)		(24.8	)		(1	)




	Others			(1.0	)		(1.1	)		(4.7	)		(288	)		(227	)		27.1			(5	)

Total operating expenses				(18.6	)		(20.1	)		(7.3	)		(5,222	)		(4,226	)		23.6			(92	)

Gross profit				1.5			1.4			8.6			427			294			44.7			8




	Financial income (expense)			(0.3	)		(0.4	)		(15.9	)		(92	)		(82	)		12.2			(2	)




	Other operating expenses, net			(0.1	)		(0.1	)		58			(31	)		(14	)		110.9			(1	)

Operating income				1.1			0.9			14.9			304			198			53.4			5




	Non-operating expenses, net			(0.0	)		1.4			(102	)		(8	)		300			(102.7	)		0

Income before income tax and social contribution				1.1			2.4			(55.7	)		296			498			(40.7	)		5




	Income tax and social contribution			(0.4	)		(0.7	)		(47.9	)		(109	)		(156	)		(30.9	)		(2	)

Income before minority interest				0.7			1.6			(58.9	)		187			342			(45.2	)		3




	Minority interest			0			0			(147	)		—			(1	)		(162.7	)		0

Net income for the year				0.7			1.6			(58.6	)		187			341			(45.1	)		3


	*Gross operating revenue*

Our gross operating revenues increased by 24.6% to R$5,910 million for the year ended December 31, 2005, compared to R$4,744 million for the year ended December 31, 2004. This increase was driven by an increase in volume, measured in RPKs, although this was partially offset by a decrease in yields. Our RPKs increased 42.9% and our total yield decreased 11.4% in 2005, to R$26.4 centavos on December 31, 2005. The increase in RPKs was a result of the combined effect of:


•	our taking advantage of the market opportunities resulting from the cessation of VASP’s operations as of September 2004 (which, according to the DAC, had an average of 8.8% of the domestic market share

in 2004), causing our domestic market share, according to DAC, to reach 43.5% in 2005, compared to 35.8% in 2004 and

• an increase in domestic demand, which grew 19.4% in 2005, compared to 2004, causing our load factor to increase from 66.0% to an average load factor of 70.6% in 2005.

The decrease in our yield is the result of our strategy to offer value-added services at competitive prices, in an effort to increase market share to a proportionally greater extent than the decrease in our yield, thus increasing total revenue. Thus the increase of demand in our domestic market combined with our ability to capture market share following VASP’s cessation of activities, and a revised approach to our pricing strategy have led to a significant increase in volume. Considering the limited popularity of air travel in Brazil (according to the DAC, there were only 32.2 million transported passengers in 2004, compared to a total population of 182 million), the opportunities for further volume increase are substantial. The challenge going forward is to maintain competitive prices and stimulate demand to produce a positive overall balance, i.e. to ensure that any decrease in prices will be more than compensated by the stimulation of additional demand.

Gross domestic passenger revenues increased by 29.7% to R$4,192 million for the year ended December 31, 2005, compared to R$3,233 million for the year ended December 31, 2004. Notwithstanding the decrease in our scheduled domestic yield to R$31.42 centavos for 2005, compared to R$35.21 centavos for 2004, there was an increase of 42.9% in RPKs due to the increase in our supply and the success of our network positioning strategy, which allowed us to capture significant demand in the domestic market, and as a result of the cessation of VASP’s operations as of September 2004.

Gross international passenger revenues increased by 15.7% to a total of R$1,034 million for the year ended December 31, 2005, compared to R$893 million for the year ended December 31, 2004, despite the drop in our scheduled international yield of R$20.10 centavos for 2005, compared to R$23.96 centavos for 2004, and the 13.4% appreciation in the real against the U.S. dollar in the same period, which affects us because our international tickets are denominated in U.S. dollars. The increase in gross international passenger revenue is due to the addition of a daily flight on the São Paulo — Miami route and the São Paulo — New York route and a flight to Santiago, as well as the addition of three flights each week on the São Paulo — Paris route and seven flights each week on the São Paulo — Buenos Aires route.

Gross cargo revenues increased by 27.7% to R$407 million for the year ended December 31, 2005, compared to R$319 million for the year ended December 31, 2004, due to the increase in our supply and the resulting availability of increased space in the aircraft bulk offered by TAM Express. Our strategy is to continue to utilize available aircraft cargo space opportunistically, as a complement to our passenger business.

Other gross operating revenues decreased by 7.4% to R$277 million for the year ended December 31, 2005, compared to R$299 million for the year ended December 31, 2004, primarily due to an increase in revenues resulting from a 46.0% increase in sales of Loyalty Program points. This increase was partially offset by the 48.0% decrease in revenues from the subleasing of aircraft (we sublet four A330s and two F100s at December 31, 2004 compared to three A330s at December 31, 2005).


	*Taxes and deductions*

Taxes and deductions increased by 16.7% to R$261 million for the year ended December 31, 2005, compared to R$224 million for the year ended December 31, 2004, due to an increase in gross domestic passengers revenue and in gross cargo revenue, which are the main items constituting the calculation basis for sales deductions and taxes.


	*Net operating revenues*

Our net operating revenues increased by 25.0% to R$5,649 million for the year ended December 31, 2005 compared to R$4,520 million for the year ended December 31, 2004. RASK decreased 6.4% to

R$20.16 centavos in 2005 compared to R$21.53 centavos in 2004, mainly due to the impact of the foreign exchange rate on our international revenues.


	*Operating expenses*

Our cost of services rendered and operating expenses increased by 23.6% to R$5,222 million for the year ended December 31, 2005, compared to R$4,226 million for the year ended December 31, 2004 primarily due to increases in the costs of fuel, personnel and landing, take-off and navigational tariffs. The cost of services rendered and operating expenses per ASK (CASK) decreased by 7.4%, from R$20.12 centavos for the year ended December 31, 2005, compared to R$18.63 centavos for the year ended December 31, 2004. This was due to the more efficient utilization of our aircraft (block hours increased from 8.98 hours per aircraft per day to 11.36 hours, offsetting fixed costs), and a reduction of operating cost primarily relating to removing intermediaries from the booking process that previously used GDS systems, representing a decrease of approximately 1.5% in our CASK. Appreciation in the real against the U.S. dollar by 13.4% for the same period, caused an additional decrease in our CASK of 7.7%. This was partially offset by the increased cost of fuel, which increased by approximately 4.8% of our CASK.

Fuel costs increased by 58.9% to R$1,695 million for the year ended December 31, 2005, compared to R$1,067 million for the year ended December 31, 2004, due to the 30.9% increase in the volume of fuel consumed and the 7.9% increase in the average price per liter of fuel. In 2005, we saved approximately R$21.7 million as a result of our fuel tankering program. Fuel costs per ASK increased by 19.1% in this period.

Sales and marketing expenses increased by 30.2% to R$855 million for the year ended December 31, 2005, compared to R$656 million for the year ended December 31, 2004, principally due to a 32.8% increase in commissions and incentives paid to travel agents, which is linked in percentage terms to the increase in our revenues. There was also a 43.8% increase in marketing expenses, due to our resumption of marketing activities in the second half of 2004. Our temporary suspension of marketing activities was part of the restructuring project which reduced cash costs to enhance liquidity on a short term basis during 2003 and part of 2004. Sales and marketing expenses per ASK decreased by 2.4% in this period.

Aircraft and flight equipment lease costs decreased by 3.7% to R$627 million for the year ended December 31, 2005, compared to R$651 million for the year ended December 31, 2004, primarily as a result of the increase of the size of our fleet by two aircraft, representing a cost increase of approximately R$15.0 million, and the 13.4% appreciation of the real against the U.S. dollar in this period, representing a reduction of approximately R$84.0 million. These decreases were in part offset by an increase in the average cost per aircraft due to the substitution of Fokker 100 for Airbus A-320 family aircraft, representing an aggregate increase of R$39.0 million. The cost for aircraft and flight equipment leases per ASK decreased by 27.8% in this period.

Personnel expenses increased by 22.7% to R$669 million for the year ended December 31, 2005, compared to R$546 million for the year ended December 31, 2004, primarily due to the increase of 17.7% in the effective headcount from 8,215 to 9,669 at the end of 2005 and to the salary adjustment of 6.0%. Labor costs per ASK decreased by 8.1% in this period, demonstrating economies of scale.

Maintenance costs decreased by 8.4% to R$356 million for the year ended December 31, 2005, compared to R$389 million for the year ended December 31, 2004, principally due to an increase of 33.9% in the use of our aircraft to 323,729 block hours in 2005, compared to 241,684 block hours in 2004, partially offset by the appreciation of the real against the U.S. dollar in this period. Maintenance costs per ASK decreased by 31.4%.

Costs and expenses for services rendered by third parties increased by 3.7% to R$374 million for the year ended December 31, 2005, compared to R$360 million for the year ended December 31, 2004, an increase of R$14.0 million, primarily due to airport service costs linked to the 32.1% increase in the number of take-offs from 209,831 in 2005, compared to 158,898 in 2004, and as a result of the costs of

our equity offering which took place in June 2005, for a total amount of R$15.6 million. These increases were partially offset by a reduction of GDS expenses. Expenses for services rendered by third parties per ASK decreased by 22.3% in this period.

Costs of landing, take-off and navigation charges increased by 25.4% to R$233 million for the year ended December 31, 2005, compared to R$186 million for the year ended December 31, 2004, due to the 32.1% increase in the number of take-offs and to the increase in navigational assistance, which was generated in consequence of the 32.9% increase in kilometers flown per aircraft. Costs for take-offs and landings and navigational tariffs per ASK decreased by 6.0% in this period.

Depreciation and amortization costs decreased by 6.3% to R$85 million for the year ended December 31, 2005, compared to R$91 million for the year ended December 31, 2004, primarily due to the change from financial to operational leases for 17 aircraft (which occurred during the second quarter of 2004). As a result of the change in the type of lease, the relevant aircraft are no longer reflected in our balance sheet, with a consequent reduction in our depreciation and amortization costs. Depreciation and amortization costs per ASK decreased by 29.8% in this period.

Costs for aircraft insurance decreased by 24.8% to R$40 million in 2005, compared to R$53 million in 2004, primarily due to the net reduction in the size of our fleet, and receipt of a more favorable risk rating from insurers, allowing us to obtain more favorable financial terms in our insurance agreements, and by the appreciation of the real against the U.S. dollar as regards entering into insurance agreements in 2004 because our payments under such agreements are denominated in U.S. dollars. Costs for aircraft insurance per ASK decreased by 43.6% in this period.

Other operating expenses increased by 27.1% to R$288 million for year ended December 31, 2005, compared to R$227 million for the year ended December 31, 2004, due to the growth of our operations, offset by the reduction of our on-board services. Other operating expenses per ASK decreased by 4.7% in this period.

In line with our strategy to increase productivity, we intend to further offset fixed costs in the future as a result of more efficient use of aircraft and redesigning of internal processes, and a achieve a better RASK/ CASK spread. Also, future changes in commercial policies should either decrease sales and marketing costs or increase the quality of the revenue stream. However, our exposure to foreign exchange fluctuations and fuel costs has significant impact on our expenses, and represents a key challenge to improving our results going forward.


	*Net financial income (expense)*

Our net financial income (expense) increased 12.2% to a net expense of R$92 million for the year ended December 31, 2005, compared to a net expense of R$82 million for the year ended December 31, 2004, primarily due to the change in the type of lease of our aircraft from financial to operating leases during the second quarter of 2004. The 13.4% appreciation of the real against the U.S. dollar in the period generated financial income relating to our lease payment obligations. As a result of the change in the type of leases described above, the foreign exchange variation was no longer reflected in our balance sheet and, accordingly, no longer generated financial income or expenses in 2005. The net financial income results for the year ended December 31, 2005 includes financial income from cash equivalents and expenses with foreign exchange hedge transaction (40% to 60% of the cash exposure hedged on a 12 month rolling basis) and fuel hedge transaction (30% of the fuel consumption on a 3 month rolling basis).


	*Net non-operating income (expense)*

Net non-operating income decreased to an expense of R$8 million for the year ended December 31, 2005 compared to an income of R$300 million for the year ended December 31, 2004, due to the writing off of aircraft finance leases from fixed assets, as a result of the change in the type of lease of our aircraft from financial to operating leases in 2004.


	*Income tax and social contribution*

Income tax and social security contributions decreased 30.9% to R$109 million for the year ended December 31, 2005, compared to R$156 million on December 31, 2004. This decrease is primarily due to the decrease in our results. Our actual IRPJ and CSLL expenses represented 36.7% of our income before tax and social contributions in 2005, compared to 31.3% in 2004.


	*Net income*

As a result of the factors discussed above, our net income decreased by 45.2% to R$187 million for the year ended December 31, 2005, compared to R$341 million for the year ended December 31, 2004 due primarily to a change in the type of lease of certain aircraft.


	*Year ended December 31, 2004 compared to year ended December 31, 2003*


		Year Ended December 31,

																				% of Net operating
Brazilian GAAP		2004			2003			Variation (%)			2004			2003			Variation (%)			revenue (2004)

		*(In centavos* per ASK)**									(R$ millions)




Gross operating revenue			22.6			20.9			7.9			4,744			3,768			25.9			105.0
Air transportation revenues




	Domestic		15.4			14.9			3.1			3,233			2,688			20.3			71.5




	International		4.3			3.8			12.7			893			679			31.5			19.8




	Cargo		1.5			1.3			15.9			319			236			35.2			7.1




Other operating revenue			1.4			0.9			54.4			299			165			81.3			6.6




Taxes and deductions			(1.1	)		(1.0	)		8.8			(224	)		(176	)		26.9			(5.0	)

Net operating revenue			21.5			19.9			7.9			4,520			3,592			25.9			100.0
Operating expenses




	Fuel		(5.1	)		(4.4	)		16.2			(1,067	)		(787	)		35.5			(23.6	)




	Sales and marketing		(3.1	)		(2.9	)		6.7			(656	)		(527	)		24.5			(14.5	)




	Aircraft and flight equipment leases		(3.1	)		(3.6	)		(13.8	)		(651	)		(648	)		0.5			(14.4	)




	Personnel		(2.6	)		(2.3	)		12.2			(546	)		(417	)		30.8			(12.1	)




	Maintenance		(1.9	)		(2.1	)		(10.4	)		(389	)		(372	)		4.6			(8.6	)




	Services rendered by third parties		(1.7	)		(1.7	)		1.8			(360	)		(304	)		18.7			(8.0	)




	Landing, take-off and navigational tariffs		(0.9	)		(0.8	)		5.4			(186	)		(151	)		22.9			(4.1	)




	Depreciation and amortization		(0.4	)		(0.9	)		(49.6	)		(91	)		(155	)		(41.2	)		(2.0	)




	Aircraft insurance		(0.3	)		(0.4	)		(41.2	)		(53	)		(77	)		(31.4	)		(1.2	)




	Other		(1.1	)		(1.0	)		4.5			(227	)		(186	)		21.8			(5.0	)

Total operating expenses			(20.1	)		(20.1	)		0.0			(4,226	)		(3,624	)		16.6			(93.5	)

Gross profit (loss)			1.4			(0.2	)		—			294			(32	)		(1,027.5	)		6.5

	Financial income (expenses)		(0.4	)		1.5			—			(82	)		261			(131.6	)		(1.8	)




	Other operating expenses, net		(0.1	)		(0.0	)		0.0			(14	)		(9	)		65.6			(0.3	)

Operating income			0.9			1.2			(23.3	)		198			220			(10.2	)		4.4




Non-operating income (expense), net			1.4			0.1			1,572.8			300			15			1,851.3			6.6

Income before income tax and social security contribution			2.4			1.3			81.3			498			235			111.5			11.0




	Income tax and social contribution		(0.7	)		(0.3	)		118.2			(156	)		(61	)		154.5			(3.5	)

Income before minority interest			1.6			1.0			68.3			342			174			96.3			7.6




Minority interest			—			—			—			(1	)		0			0.0			0.0

Net income for the period			1.6			1.0			68.3			341			174			96.3			7.5


	*Gross operating revenue*

Our gross operating revenues increased by 25.9% to R$4,744 million in 2004 from R$3,768 million in 2003. This increase was driven by an increase in volume, measured in RPKs, partially offset by a decrease

in yields. Our RPKs increased by 26.9% and our scheduled yield decreased by 1.4% during this period to R$31.86 centavos in 2004. The increase in RPKs was a result of the combined effect of:


	•	our taking advantage of the market opportunities resulting from the cessation of VASP’s operations as of September 2004 (which, according to the DAC, had an average of 11.2% of the domestic market share for the first nine months of 2004), causing our domestic market share, according to DAC, to reach 35.8% in 2004, compared to 33.0% in 2003 and

	•	an increase in the domestic demand, which grew 12.0% in 2004, compared to 2003, causing our load factor to increase 5.4 percentage points, resulting in an average load factor of 66.0% in 2004.

The decrease in our yield is the result of our strategy to offer value-added services at competitive prices, enabling us to increase market share. Accordingly, the increase of demand in our domestic market combined with our ability to capture market share following VASP’s cessation of activities, and a revised approach to our pricing strategy have led to a significant increase in volume.

Gross domestic passenger revenues increased by 20.3% to R$3,233 million in 2004 from R$2,688 million in 2003. RPKs increased by 21.2%. ASKs increased by 9.1%, due in large part to changes in our network, which enabled us to respond to significant demand in the domestic market (including demand resulting from the reduction in VASP’s operations beginning in September 2004). As a result of our restructuring project, domestic load factor increased to 64.4% from 58.0% in 2003. Our scheduled domestic yield was R$35.21 centavos in 2004, compared to R$34.27 centavos in 2003. The combination of increased RPKs, increased load factor and increased yield resulted in a 20.3% increase in domestic passenger revenues.

Gross international passenger revenues increased by 31.5% to R$893 million in 2004 from R$679 million in 2003, due to the addition of a daily flight on the São Paulo — Miami route and one flight to Santiago, in addition to an increase in flights on the São Paulo — Paris and São Paulo — Buenos Aires routes, leading to an increase in ASKs. Our scheduled international yield was R$23.96 centavos in 2004, compared to R$26.65 centavos in 2003, a reduction of 10.1%. This reduction in yield was largely a result of the 8.8% appreciation of the real against the U.S. dollar during 2004.

Gross cargo revenues increased by 35.2% to R$319 million in 2004 from R$236 million in 2003, due primarily to the increased frequency of our international flights and the consequent availability of more cargo space.

Other gross operating revenues increased by 81.3% to R$299 million in 2004 from R$165 million in 2003, due to the increase in revenue resulting from partnerships relating to the TAM Loyalty Program, the sub-leasing of two additional Airbus A330 aircraft and the increase in revenues arising from sales of tourist packages brokered by TAM Viagens.


	*Taxes and deductions*

Taxes and deductions increased by 26.9% to R$224 million in 2004 from R$176 million in 2003, due to a 25.9% increase in the gross revenues upon which taxes and deductions are calculated, in addition to an increase in the COFINS rate from 3.0% to 7.6% in February 2004.


	*Net operating revenues*

Our net operating revenues increased by 25.9% to R$4,520 million in 2004 from R$3,592 million in 2003. RASK increased by 7.9%, to R$21.5 centavos per ASK in 2004 from R$19.9 centavos per ASK in 2003.


	*Operating expenses*

Our cost of services rendered and operating expenses increased by 16.6% to R$4,226 million in 2004 from R$3,624 million in 2003, due principally to the increase in the cost of fuel, personnel and landing, take-off and navigational-assistance costs. The cost of services rendered and operating expenses per ASK (CASK) remained stable at R$20.1 centavos . This was due to the more efficient utilization of our aircraft (block hours increased from 7.6 hours per aircraft per day to 8.9 hours, offsetting fixed costs), the

reduction of our fleet size (we returned 13 Fokker-100 aircraft) and a reduction in our operating cost per ASK, especially relating to maintenance, as discussed below. These reductions in operating costs represented 1% of our CASK. The appreciation of the real by 8.8% against the U.S. dollar also reduced our operating costs, representing 4% of our CASK.

Fuel costs increased by 35.5% to R$1,067 million in 2004, from R$787 million in 2003, due to an 11.8% increase in the volume of aircraft fuel and a 21.3% increase in the average price of fuel. Our fuel tankering policy, pursuant to which we fuel at locations that offer better prices, saved us approximately R$10 million in costs in 2004. The cost of fuel per ASK increased 16.2%, with our fuel tankering policy partially offsetting the impact of increases in fuel prices.

Sales and marketing expenses increased 24.4% to R$656 million in 2004 from R$527 million in 2003, principally due to a 36.3% increase in commissions and incentives paid to travel agents which are linked in percentage terms to the increase in our revenues (gross revenues increased 25.9%) and a 71.4% increase in marketing expenses due to the fact that in the second half of 2004 we resumed marketing activities that had been interrupted in 2003. The temporary suspension of marketing activities was part of the restructuring project which aimed at reducing costs to increase liquidity on a short-term basis. Sales and marketing expenses per ASK increased 6.7%.

Aircraft and flight equipment leasing costs increased 0.5% to R$651 million in 2004 from R$648 million in 2003. The change in the agreements in relation to 17 of our aircraft from finance to operating leases resulted in an increase of R$114 million in leasing costs. See “Principal Factors Affecting our Financial Condition and Results of Operations — Amendments to leasing arrangements.” However this increase was offset by the 8.8% appreciation of the real against the U.S. dollar, a reduction of R$14 million, and a decrease of R$102 million following the reduction of our fleet of Fokker 100 aircraft from 43 aircraft in 2003 to 30 aircraft in 2004. Aircraft and flight equipment costs per ASK decreased by 14.8%.

Personnel costs increased by 30.8% to R$546 million in 2004 from R$417 million in 2003, principally due to a 7.2% increase in staff from 7,665 to 8,215 at the end of the year and a 12.5% salary adjustment that took effect in 2004. Our increase in staff was lower than the 16.6% increase in our supply, according to data provided by DAC. The cost of personnel per ASK increased 12.2%.

Maintenance expenses increased by 4.6% to R$389 million in 2004 from R$372 million in 2003, principally as a result of a 14.9% increase in the utilization of our aircraft to 241,685 block hours in 2004 from 210,281 block hours in 2003, partially offset by R$4 million as a result of an increase in the value of the real against the U.S. dollar and reductions in costs and a gain in productivity that we achieved as a result of obtaining the European Aviation Safety Agency (EASA) certification for our maintenance center located in São Carlos. This certification enabled us to perform locally most maintenance that was previously performed overseas. The impact of these reductions was a cost saving of R$29 million as well as a considerable reduction in the time taken to complete these checks. Maintenance expenses per ASK decreased by 10.4%.

Services rendered by third-parties increased by 18.7% to R$360 million in 2004 from R$304 million in 2003, due principally to airport service costs and ADSs fees arising from a 20.8% in the number of paid passengers transported to 13,522 in 2004 from 11,198 in 2003. Services rendered by third parties per ASK did not vary significantly in this period.

Landing, take-off, and navigational-assistance tariff costs increased by 22.9% to R$186 million in 2004 from R$151 million in 2003, due to an 8% increase in the number of take-offs and an increase in navigational assistance required as a consequence of a 15.9% increase in the number of kilometers flown in 2004. Landing, take-off, and navigational-assistance tariff costs per ASK increased 5.4% due principally to an increase in the frequency of international flights, which are more expensive than domestic flights.

Depreciation and amortization costs decreased by 41.2% to R$91 million in 2004 from R$155 million in 2003, principally as a result of the change in the agreements for 17 aircraft from financial leases to operating leases. See “Principal Factors Affecting our Financial Condition and Results of Operations —

Amendments to leasing arrangements.” As a result of this change, the relevant aircraft are no longer reflected as assets on our balance sheet, which had the effect of reducing our depreciation and amortization costs. Depreciation and amortization costs per ASK decreased by 49.6% in this period.

Aircraft insurance costs decreased by 31.4% to R$53 million in 2004 from R$77 million in 2003, principally due to the reduction of our fleet, better risk-class rating from our insurers, more favorable financial conditions and the effect of the appreciation of the real against the U.S. dollar as that related to our payments for insurance in 2004 as insurance payments are made in U.S. dollars. Aircraft insurance costs per ASK decreased by 41.2% in this period.

Other operating expenses increased by 21.8% to R$227 million in 2004 from R$186 million in 2003, due to a 16.4% increase in passenger volume and the growth of our operations, offset partially by reducing expenses relating to in-flight services. Other operating expenses per ASK increased 4.5%.


	*Net financial income (expense)*

Our net financial income decreased by 131.6% to a net expense of R$82 million in 2004 from a net income of R$261 million in 2003, principally as a result of the change in the leases for 17 aircraft from finance leases to operating leases in the second quarter of 2004. A 22.4% appreciation in the real against the U.S. dollar in 2003 generated additional financial revenues relative to our finance leases in that year. As a result of the change in leasing modes mentioned above, exchange rate variations are no longer reflected as assets on our balance sheet and no longer generated financial revenues from 2004. Financial expenses decreased by 46.8%, also as a result in the change in types of lease, as we no longer incur the expense of paying interest on finance leases.


	*Net non-operating income (expense)*

Our net non-operating income (expense) increased by 1,851.3% to R$300 million in 2004 from R$15 million in 2003, due to a writeoff of long-term finance leases and disposal of fixed assets that resulted from the change from financial lease to operating lease for 17 aircraft in the second quarter of 2004.


	*Income tax and social contribution*

Income tax and social contribution increased by 154.5% to R$156 million in 2004 from R$61 million in 2003. This increase was principally a result of an increase in our taxable operating income. Our effective IRPJ and CSLL tax rate was 31.3% in 2004 compared to 26.0% in 2003.


	*Minority interest*

The amounts corresponding to the share of minority shareholders decreased by 400% to R$(0.6) million in 2004 from R$0.2 million in 2003, due to the increase in net profits in 2004.


	*Net income*

As a result of the factors discussed above, our net profit increased by 96.3% to R$341 million in 2004 from R$174 million in 2003.


	*Quarterly operational data*

The following tables set forth our operational data for the six most recent three-month periods in both Brazilian GAAP and reconciled to U.S. GAAP:


			2005												2004
			Three-month Period Ended												Three-month Period Ended

Brazilian GAAP			December 31			September 30			June 30			March 31			December 31			September 30

			(R$ millions) ⁽¹⁾												(R$ millions) ⁽¹⁾




Statement of operations data




Gross operating revenue				1,657			1,611			1,307			1,335			1,407			1,296




	Air transportation revenues			1,589			1,540			1,247			1,257			1,330			1,204




		Domestic		1,175			1,157			942			918			984			868




		International		292			284			206			252			238			253




		Cargo		122			99			99			87			108			83




	Other operating revenues			68			71			60			78			77			92




	Taxes and deductions			(75	)		(71	)		(60	)		(55	)		(61	)		(54	)

Net operating revenue				1,582			1,540			1,247			1,280			1,346			1,242




Operating expenses




	Fuel			(500	)		(462	)		(386	)		(347	)		(314	)		(304	)




	Sales and marketing			(215	)		(233	)		(218	)		(189	)		(190	)		(193	)




	Aircraft and flight equipment leases			(161	)		(160	)		(148	)		(158	)		(161	)		(166	)




	Personnel			(195	)		(171	)		(157	)		(146	)		(172	)		(136	)




	Maintenance			(88	)		(82	)		(94	)		(92	)		(115	)		(117	)




	Services rendered by third parties			(98	)		(94	)		(93	)		(89	)		(88	)		(108	)




	Landing, take-off and navigational tariffs			(66	)		(59	)		(54	)		(54	)		(55	)		(50	)




	Depreciation and amortization			(22	)		(21	)		(21	)		(21	)		(19	)		(21	)




	Aircraft insurance			(10	)		(10	)		(10	)		(10	)		(12	)		(14	)




	Other			(89	)		(78	)		(63	)		(58	)		(60	)		(58	)

Total operating expenses				(1,444	)		(1,370	)		(1,244	)		(1,164	)		(1,186	)		(1,167	)

Gross income				138			170			3			116			160			75




	Financial income (expenses), net			(9	)		(23	)		(26	)		(34	)		(22	)		(17	)




	Other operating expenses, net			(17	)		(7	)		(5	)		(2	)		(5	)		(4	)

Operating income				112			140			(28	)		80			133			54




	Non operating income (expenses), net			1			3			(11	)		(1	)		(10	)		(3	)

Income (loss) before income tax and social contribution				113			143			(39	)		79			123			51




	Income tax and social contribution			(48	)		(50	)		14			(25	)		(40	)		(16	)

Income (loss) before minority interest				65			93			(25	)		54			83			35




	Minority interest			—			—			—			—			—			(1	)

Income (loss) for the period				65			93			(25	)		54			83			34

Income (loss) per thousand shares (in reais )				0.45			0.65			(0.17	)		0.44			0.68			0.28


⁽¹⁾	Except where indicated.


			2005												2004
			Three-month Period Ended												Three-month Period Ended

U.S. GAAP			December 31			September 30			June 30			March 31			December 31			September 30

			(R$ millions)												(R$ millions)




Statement of operations data




Gross operating revenue				1,642			1,611			1,307			1,335			1,407			1,296




	Air transportation revenues			1,589			1,540			1,247			1,257			1,330			1,204




		Domestic		1,175			1,156			942			919			984			868




		International		293			284			206			251			238			253




		Cargo		121			100			99			87			108			83




	Other operating revenues			53			71			60			78			77			92




	Taxes and deductions			(75	)		(71	)		(60	)		(55	)		(61	)		(54	)

Net operating revenue				1,567			1,540			1,247			1,280			1,346			1,242




Operating expenses




	Fuel			(500	)		(462	)		(386	)		(347	)		(314	)		(304	)




	Sales and marketing			(228	)		(233	)		(218	)		(189	)		(190	)		(193	)




	Aircraft and flight equipment leases			(78	)		(76	)		(72	)		(74	)		(74	)		(71	)




	Personnel			(192	)		(170	)		(158	)		(146	)		(169	)		(136	)




	Maintenance			(88	)		(82	)		(94	)		(92	)		(115	)		(117	)




	Services rendered by third parties			(98	)		(92	)		(78	)		(89	)		(88	)		(108	)




	Landing, take-off and navigational tariffs			(66	)		(60	)		(53	)		(54	)		(55	)		(50	)




	Depreciation and amortization			(53	)		(51	)		(51	)		(51	)		(49	)		(50	)




	Aircraft insurance			(11	)		(10	)		(9	)		(10	)		(13	)		(14	)




	Other			(100	)		(77	)		(71	)		(53	)		(64	)		(57	)

Total operating expenses				(1,414	)		(1,313	)		(1,190	)		(1,105	)		(1,131	)		(1,100	)

Operating income				153			227			57			175			215			142




	Financial income (expenses), net			(227	)		60			271			(72	)		175			228

Income (loss) before income tax and social contribution				(74	)		287			328			103			390			370




	Income tax and social contribution			21			(93	)		(113	)		(32	)		(130	)		(124	)

Income (loss) before minority interest				(53	)		194			215			71			260			246




	Minority interest			(1	)		—			—			—						(1	)

Income (loss) for the period				(53	)		194			215			71			260			245


	*Liquidity and capital resources*

We believe that our liquidity position exceeds the minimum required to sustain our business adequately and our working capital is sufficient for our present requirements. We also believe that additional sources of liquidity are available to us, if they are needed, through bank facilities.

Our current liquidity ratio has been strongly influenced by the funds received from our public offering in June 2005. We increased our current liquidity ratio by 48% between December 31, 2004 and December 31, 2005, mainly due to this capitalization and an increase in cash generated from our operations. Our liquidity ratio is calculated by dividing current assets by current liabilities.

In order to manage our liquidity, we take into account our cash and cash equivalents, accounts receivable and short term loans. Our accounts receivable are affected by the timing of receipt of credit card revenues and of invoicing tourist agencies. Customers purchasing tickets using credit cards have the option to purchase tickets and pay in installments, typically over an 80 day period. At December 31, 2005, we had R$995.5 million in cash and cash equivalents and R$763.2 million in accounts receivable,

compared to R$296.9 million in cash and cash equivalents and R$553.3 million in accounts receivable at December 31, 2004.

At December 31, 2005, we had short-term financing of R$118.5 million to finance our working capital needs. The majority of these financings are guaranteed by our receivables. Our short term financing includes the current portion of our long-term debt (meaning that debt that matures within twelve months of the balance sheet date). Of these short-term financings, our renegotiated lease agreements and our machinery and equipment financing agreements are denominated in foreign currencies and represent 1.8% of our total short-term financings. Our renegotiated lease agreements bear interest at a monthly rate of 0.504%. Our machinery and equipment financing agreements bear interest at a fixed spread over LIBOR.

At December 31, 2005 our Industrial Funding (FINAME) agreements are denominated in reais and represent 5.7% of our total short-term financings. Our FINAME agreements bear interest at a fixed spread above TJLP, payable on both an annual and a monthly basis. At December 31, 2005 our Import Financing (FINIMP) agreements represent 28.8% of our short-term financings. They are denominated in reais and bear interest at a fixed spread above CDI on an annual basis only. At December 31, 2005 our short-term line of credit ( Compror ) is denominated in reais , representing 39.6% of our total short-term financings, and bears interest semi-annually at a fixed spread above CDI. At December 31, 2005 our information technology leasing agreements are denominated in reais and bear interest at a fixed spread over CDI with interest payable on a monthly basis, representing 6.2% of our total short-term financings.

Our additional working capital requirements represent collectively 7.2% of our total short-term financings and are financed by loans in both foreign currencies and the real , in both cases bearing interest at a rate of 8.5%, although our real -denominated interest obligations are payable on a monthly rather than an annual basis.


	Net cash generated by operating activities

Net cash generated by (used in) our operating activities was R$329.4 million for the period ended December 31, 2005, compared to R$368.4 million for the corresponding period in 2004, derived principally from pre-delivery payments in respect of acquisitions of aircraft and the change in our fuel payment policy. Net cash generated by operating activities was R$327.4 million in 2003 and R$142.5 million in 2002. The increase in net cash generated by our operating activities in the periods indicated above was due to the increase in our operations and the consequent increase in revenues, in addition to our efforts to reduce costs. Our operational cash flow is affected by variations in the average deadline for paying our operational suppliers.


	Net cash used in investing activities

We invested R$109.5 million in the year ended December 31, 2005, compared to R$122.3 million in the corresponding period in 2004. The cash invested in 2005 was mainly used in the purchase of flight equipment. Cash invested was R$72.1 million in the year ended 2003 and R$126.7 million in the year ended 2002. The increase in the amount of cash invested in the year ended December 31, 2004 compared to 2003 was due to the increase in our operations and the consequent investment in flight equipment. The reduction in the amount of cash invested in the year ending December 31, 2003 compared to 2002 was due to the reduction in our supply of services.


	Net cash generated by (used in) financing activities

Net cash generated by (used in) financing was R$478.7 million for the period ended December 31, 2005, compared to R$(121.6) million for the corresponding period in 2004. Of the net cash generated in 2005, R$383.9 million was related to our public offering in June of that year. Net cash used in financing was R$128.8 million used in 2003 and R$19.7 million raised in 2002. The reduction in net cash used in financing in the year ended 2004 compared to 2003 was due to the amortization of loans and the payment of debentures issued by TAM Linhas Aéreas. The increase in net cash used in financing in the year ended 2003 compared to 2002 was due to the issuance of debentures which took place in that year.


	*Sources of financing*

Our sources of financing during the period ended December 31, 2005 consisted principally of funds received as a result of our equity offering of preferred shares in June 2005 (R$383.9 million) and from finance leases, renegotiations of our lease agreements relating to our fleet of Fokker 100 aircraft, FINAME, FINIMP and lines of working capital (together, R$181 million). During the year ended 2004, our main sources of financing totaled R$150 million and consisted of finance leases, renegotiations of our lease agreements for our fleet of Fokker 100 aircraft, FINAME, FINIMP and lines of working capital. The main sources of financing during the year ended 2003 totaled R$81 million and consisted mainly of finance leases, renegotiation of our lease agreements for our fleet of Fokker 100 aircraft, FINAME, FINIMP and lines of working capital. The main sources of financing during the year ended December 31, 2002 totaled R$2,100 million and consisted mainly of finance leases and an issuance of debentures.

There was no distribution of dividends in 2002, 2003 or 2004. Our by-laws require that we must distribute at least 25% of our adjusted net income posted in the preceding year (calculated according to Brazilian corporation law and Brazilian GAAP) as a mandatory dividend. See “Dividends and dividend policy.”


	*Indebtedness*

At December 31, 2005, our total indebtedness was R$641.3 million, consisting of R$215.9 million in short-term debt and R$425.4 million in long-term debt (of which R$217.8 million was represented by financial lease obligations, R$59.4 million was represented by outstanding debentures, R$94.4 million arose from renegotiations of lease agreements relating to our fleet of Fokker 100 aircraft) and R$269.9 million was represented by loans.

Between February 2002 and June 2003, TAM Linhas Aéreas issued debentures which were privately placed with INFRAERO. INFRAERO funded its purchase of the debentures using credits arising from airport fees incurred by TAM Linhas Aéreas during that period. The debentures are secured by a pledge of credit rights derived from passenger ticket receivables.

We have four FINIMP-type lines of credit with financial institutions, which are guaranteed by revenues from the sale of passenger tickets made using credit cards. At December 31, 2005, the outstanding balance of our FINIMP-type contracts was R$102.4 million. We also have two FINAME-type lines of credit with financial institutions. At December 31, 2005, the outstanding balance of our FINAME-type contracts was R$6.7 million.

We have financial lease agreements for the leasing of engines and computer equipment. At December 31, 2005, the outstanding balance of such financial lease agreements was R$217.8 million.

We also have obligations to pay installments relating to ICMS, ISS, INSS and the Salário Educação (Education Allowance Contribution) (each of which are to be liquidated between April 2005 and May 2007). The installments are adjusted according to the SELIC index and we have settled all installments on their due dates. The balance of these installments (including the adjustment to the SELIC index), totaled R$12.1 million at December 31, 2005.


	*Off-balance sheet arrangements*

Our operating lease obligations are not reflected in our balance sheets. We have no other off-balance sheet arrangements.


	*Contractual and financial commitments*

The following table summarizes our significant contractual and financial obligations and commitments having an impact on our liquidity at December 31, 2005:


	Payments due per period (R$ thousands)

			Less than						More than
	Principal		1 year		1 to 3 years		3 to 5 years		5 years

Debentures		59,353		26,109		33,244		—		—




Finance leases		69,069		13,759		20,117		15,795		19,398




Operating leases		4,404,674		611,402		1,058,315		902,740		1,832,217




Operating leases renegotiated		148,683		48,290		58,004		29,285		13,104




Loans		269,853		118,448		100,595		26,797		24,013




Reorganization of the Fokker 100 fleet		94,365		9,361		26,862		41,325		16,817




Interest on debentures, finance leases and loans ⁽¹⁾		112,509		22,240		36,775		28,113		25,381




Total contractual obligations		5,158,506		849,609		1,333,912		1,044,055		1,930,930


⁽¹⁾	Consists of estimated future payment of interest, calculated based on interest rates and foreign exchange rates applicable at December 31, 2005, assuming that all amortization payments and payments at maturity will be made on their scheduled payment dates.

In addition to the net proceeds to be received from the primary offering of preferred shares contemplated hereby, we believe that our operational cash generation and lines of credit with financial institutions and leasing agents will enable us to honor our contractual and financial commitments.


	*Outlook for 2006*

Assuming that demand for our services continues to increase in line with recent periods, we anticipate that our RPKs would increase as a result and that this would enable us to both expand our network of destinations (by adding new routes, focussing primarily on the international market) and to strengthen our position on certain existing routes by adding more frequent flights. We expect to add direct flights to Lima, Peru and Caracas, Venezuela in the middle of 2006 (and have already received authorizations for both new routes). In the event that projected demand for new routes and/or more frequent flights on existing routes meets our expectations, we have contracted sufficient capacity to meet such demand (as evidenced by the fact that we currently have 29 outstanding firm orders for Airbus A320 aircraft and ten outstanding firm orders for Airbus A350 aircraft); the addition of these aircraft to our fleet will increase our ASKs, and are able to exercise options in respect of up to 20 aircraft in the Airbus A320 family and five options in respect of Airbus A350 aircraft. In order to maintain flexibility, in the event that projected demand does not materialize we are under no firm obligation to purchase such aircraft and will be able to return our maturing aircraft without exercising the relevant options.

Qualitative and Quantitative Information Regarding Market Risk

We are exposed to market risks from our normal commercial activities. These market risks principally relate to changes in interest rates, exchange rates or oil prices. Any such changes may adversely affect the value of our financial assets and liabilities or our future cash flow and income. Market risk is the possible loss derived from variations in market prices. We have entered into derivative contracts and other financial instruments for the purpose of hedging against variations in these factors. We have also implemented policies and procedures in order to evaluate such risks and approve and monitor our derivative transactions, including a policy which stipulates that we will only enter into derivative transactions with counterparties who have a high credit rating. The counterparties to our derivative transactions are major financial institutions. We do not have significant exposure to any single counterparty in relation to derivative transactions.


	*Interest rate risk*

We are exposed to the risk of interest rate variations, principally in relation to the TJLP and the DI rate (in respect of loans denominated in reais ) and LIBOR (in respect of operating leases denominated in U.S. dollars).

The improvement in Brazil’s economic conditions during 2003 (as a result of positive perceptions of the new government) resulted in a substantial decrease in risk margins in internationally traded securities, both public and private. The second halves of 2003, 2004 and the year 2005 were marked by an increase in the accessibility to international capital for Brazilian institutions and by inflation being kept under control. As a consequence, the Central Bank decreased the annual short-term interest rate (adjusted in relation to the SELIC index) from 26.5% at December 31, 2003 to 16.3% at December 31, 2004 and increased to 18.0% at December 31, 2005. In addition, in 2003, 2004 and 2005 (i) the DI rate increased from 16.80% at December 31, 2003 to 17.46% at December 31, 2004 and to 19.08% at December 31, 2005, and (ii) the TJLP decreased from 11.0% at December 31, 2003 to 9.75% at December 31, 2004 and to 9.75% at December 31, 2005.

In the event that (hypothetically) the average interest rate in 2006 is 10% higher than the actual average interest rate in 2005 based on our debt, lease payment obligations and available cash at December 31, 2005, our financial income would increase by approximately R$6.0 million and our financial expenses would increase by approximately R$8.9 million, generating a negative net effect of R$3.0 million. For purpose of this calculation, we used the balance of our indebtedness and lease payments at December 31, 2005, as well as cash equivalents on December 31, 2005.


	*Exchange rate risk*

Our operating leases contracts are mainly denominated in U.S. dollars and, accordingly, exposed to risks of variations in real /U.S. dollar exchange rate. In addition, a significant part of our operating costs and expenses (such as aircraft and engine maintenance services, aircraft leases, insurance and fuel payments) are incurred in dollars. The revenue generated by international flights generates accounts that are denominated in U.S. dollars but do not cover all of our U.S. dollar liabilities. Accordingly, we have entered into derivative contracts in order to partially offset our risk to any depreciation of the real against the U.S. dollar.

Decisions relating to contracting financial instruments are made on a case-by-case basis, taking into account the amount and length of exposure, market volatility and economic trends. These instruments are intended to reduce the impact of any depreciation of the real against the U.S. dollar. We have a policy of hedging ourselves from depreciation of the real against the U.S. dollar by entering into derivative transactions covering approximately 40% to 60% of the cashflow exposure for a period of 12 months.

As a measure of our risk exposure in relation to variations in exchange rates, in the event that the real had depreciated by R$0.10 against the U.S. dollar in 2005, our total costs indexed to the U.S. dollar in 2005, including fuel costs, would have been adversely affected by approximately R$116 million, gross of the hedge strategy.


	*Risks relating to variations in the price of oil*

Our results of operation are affected by changes in the price of oil. We have entered into derivative transactions in order to hedge ourselves against this risk. Our policy is to enter into derivative transactions covering approximately 30% of the risk for approximately three months of oil consumption. At December 31, 2005, we had outstanding derivatives contracts relating to the price of oil in respect of approximately 450,000 barrels of oil.

Based on projections for the consumption of fuel in 2005, a hypothetical 10% increase in the price of a liter of fuel in 2006 would lead to an increase of approximately R$169.5 million in relation to our fuel costs (not taking our derivative transactions into account).

Discussion of Critical Accounting Policies

Critical accounting policies are those that (i) are important for describing our financial condition and results of operations, and (ii) require difficult, subjective or complex judgments. These judgments are frequently the result of our need to estimate the potential effects of inherently uncertain issues. In order to explain how our management forms judgments regarding future events (including variables and assumptions that underlie the estimates) and the sensitivity of these judgments to various circumstances, we have identified the following critical accounting policies (in accordance with Brazilian GAAP):


	•	Revenue recognition and allowance for doubtful accounts. Tickets that are sold are posted under advance ticket sales, in current liabilities, due to our obligation to transport passengers. Flight revenue (passenger and cargo transportation) is recognized when the transportation services are effectively rendered. Other revenue is effectively recognized when the services are rendered. An allowance for doubtful accounts is established in an amount considered sufficient by our management to cover any losses incurred in the collection of those credits.

	•	Deferred taxes. We recognize deferred assets and liabilities based on the differences between the carrying amounts shown in our financial statements and the tax basis of our assets and liabilities, using prevailing tax rates. We regularly review deferred tax assets for recoverability on a regular basis, taking into account historical income we have generated and projected future taxable income based on a study of technical viability. In the event that any one of our subsidiaries operates at a loss or is unable to generate sufficient future taxable income, or in the event that there is a material change in the actual effective tax rates or the time period within which the underlying temporary differences become taxable or deductible, we evaluate the need to adjust the carrying value of our deferred tax assets.

	•	Pension plans. For those defined benefit pension plans we sponsor, we calculate our funding obligations based on calculations performed by independent actuaries who use assumptions we provide regarding interest rates, investment returns, levels of inflation, mortality rates and future employment levels. These assumptions directly impact our liability for accrued pension costs and the amounts we record as pension costs.

	•	Contingencies. We are currently involved in various judicial and administrative proceedings, as described in “Business — Judicial and administrative proceedings.” We record accrued liabilities for all contingencies in judicial proceedings that represent probable losses. For this purpose, we take into account the opinion of our external legal advisors. We believe that these contingencies are properly recognized in our financial statements.

	•	Leases. We recognize as finance leases those contracts that contain a purchase option for TAM Linhas Aéreas to purchase the asset being leased by it, recording them under a specific classification in our financial statements. All other leases are recognized as operating leases, and the obligations and respective expenses are recognized when they are incurred.

	•	Financial instruments used to mitigate the risks of variations in exchange rates (including in relation to future fuel purchases) and interest rates. We record the financial instruments we use to mitigate the risks of variations in exchange rates and interest rates at their estimated fair market value based on market quotations for similar instruments and assumptions relating to future foreign exchange rate variations and variations in interests rates. We use derivative transactions in order to mitigate our risk against variations in exchange rates, fuel prices, contracts for engine maintenance services and loan agreements.


	*Reconciliation to U.S. GAAP*

Our net income, as calculated in accordance with Brazilian GAAP, was R$187 million, R$341 million and R$174 million in 2005, 2004 and 2003, respectively. In the event that we had recorded our net income in accordance with U.S. GAAP, we would have recorded a net income of R$427 million in 2005, R$430 million in 2004 and R$653 million in 2003.

Our shareholders’ equity, as calculated in accordance with Brazilian GAAP, was R$760 million, R$191 million and R$42 million as of December 31, 2005, 2004 and 2003, respectively. In the event that we had recorded our shareholders’ equity in accordance with U.S. GAAP, we would have recorded shareholders’ equity (deficit) of R$620 million, R$(164 million) and R$(591 million) as of December 31, 2005, 2004 and 2003, respectively.

The major differences between Brazilian GAAP and U.S. GAAP relate to the accounting approach used in respect of the following items:


	•	inflation adjustment of fixed assets for the years ended 1996 and 1997;

	•	revaluation of fixed assets;

	•	leases;

	•	pension plans;

	•	business combinations;

	•	deferred assets;

	•	revenue recognition with partnerships with the TAM Loyalty Program;

	•	dividends;

	•	stock options plan;

	•	the TAM Loyalty Program;

	•	earnings per share;

	•	derivatives instruments; and

	•	earnings from sale-leaseback transactions.

For a discussion of the principal differences between Brazilian GAAP and U.S. GAAP and an explanation of the U.S. GAAP reconciliation of our net income and shareholders’ equity, as appearing in our consolidated annual financial statements, see note 29 of our consolidated annual financial statements for the year ended December 31, 2005.

OVERVIEW OF THE INDUSTRY

General

Brazil is the fifth largest domestic aviation market in the world, covering a vast area (greater than the continental United States) and a population of approximately 182 million people (according to the Brazilian Geography and Statistics Institute ( Instituto Brasileiro de Geografia e Estatística , or IBGE). According to IATA, the São Paulo — Rio de Janeiro shuttle route is one of the busiest shuttle routes in the world (after the New York—Washington D.C. and London—Paris routes). Growth of the Brazilian commercial aviation industry is closely related to growth of Brazilian GDP. According to DAC, the Brazilian commercial aviation industry transported more than 32.2 million passengers in the domestic market in 2004.

Brazilian civil aviation follows the highest established standards of flight safety in the world. Brazil is classified under Category-1 of the flight safety standards established by the International Civil Aviation Organization, the same classification attributed to the United States and Canada.

Airlines operating in the Brazilian commercial aviation market can be divided into the following four categories:


	•	domestic airlines, which provide public transportation service on a scheduled basis within Brazil and operate mainly with large aircraft between the major cities of Brazil;

	•	regional airlines, which provide public transportation service on a scheduled basis within Brazil, generally connecting between smaller cities and bigger cities in Brazil. Typically, regional airlines operate with smaller aircraft, such as turbo-props;

	•	charter airlines, which provide transportation service on a non-scheduled basis; and

	•	international airlines, which provide international transportation services on a scheduled basis to and from Brazil.

The market for scheduled airline service in Brazil includes two main types of passengers: those traveling on business and those travelling for leisure. Business passengers generally place more importance to factors such as frequency of flights, reliability, availability of direct flights, extent of area served and value-added services (and are becoming increasingly sensitive to price). Leisure passengers generally place more importance on price and tend to be more flexible regarding scheduling of their trips.

The business travel sector is the largest and most profitable segment of the air transport industry in Brazil. We believe that business trips represented approximately 70% of total demand in Brazil for domestic flights in 2004, a number we believe is significantly greater than the proportion of domestic business trips in the international civil aviation sector. In Brazil, small and medium-sized companies (which comprise a large proportion of our customer base) place significant importance on receiving good service from their airline, while maintaining a balance between quality, frequency of flights and low prices.

According to data compiled by DAC, flights between Rio de Janeiro and São Paulo represented 11.3% and 10.8% of all domestic passengers (in terms of departures and arrivals) in 2003 and 2004 respectively. The six most heavily traveled routes between pairs of cities in Brazil, represented 25.3% and 22.2% of all passengers traveling on domestic flights in Brazil (in terms of departures and arrivals) in 2003

and 2004 respectively. The following table sets forth data on the six most heavily traveled routes between pairs of cities in Brazil in 2004:


	*2004*


Routes Between Pairs of Cities		Total No. of Passengers		Market Share

São Paulo	Rio de Janeiro		3,485,798		10.8	%




São Paulo	Brasília		1,266,875		3.9	%




São Paulo	Belo Horizonte		1,159,844		3.6	%




Brasília	Rio de Janeiro		452,878		1.4	%




Belo Horizonte	Brasília		435,452		1.4	%




Belo Horizonte	Rio de Janeiro		354,916		1.1	%

Total			7,155,763		22.2	%

Source: DAC.

In 2003 and 2004, the ten busiest airports accounted for 74.9% and 69.6% respectively of all domestic traffic in terms of departures and arrivals.

The domestic civil aviation market is principally served by TAM, Varig and Gol who together represented over 97.7% of all domestic routes at December 31, 2005, in terms of RPK. According to DAC, at December 31, 2005, our share of the domestic market was 46.1%, while that of Varig and Gol was 21.7% and 29.8% respectively.

With TAM, Varig and Gol together having a share of approximately 97.7% of the domestic market at December 31, 2005, the remaining approximate 2.3% share was served by 11 different airlines. This market profile is consistent with the historical make-up of the domestic market, which has traditionally seen a small number of airlines holding the vast majority of domestic market share and a much larger number of airlines (the identity of whom has continuously changed over the years as different airlines have entered and left the market) holding the remaining portion.

Beginning in 2000, VASP (an airline which formerly operated in the civil aviation market) underwent a financial and administrative restructuring program, including measures to scale down its activities, extend the tenor of its debts and reorganize its domestic and international routes. As part of its restructuring program, VASP ceased offering certain international flights and returned some of its aircraft to its creditors. At the end of 2000, VASP withdrew from the international market. Between 2001 and 2003, there was a further deterioration in VASP’s financial condition which contributed further to a decline in its market share. In the first quarter of 2005, VASP’s passenger and cargo transportation operations ceased entirely.

According to DAC, approximately 32.2 million passengers were transported on domestic flights and 5.1 million were transported on international flights in Brazil in 2004 (out of a total population of approximately 182 million people, according to the IBGE). In comparison, according to the United States Department of Transportation, 587.5 million passengers departed on domestic flights and 57.1 million passengers departed on international flights in the United States in 2003 (out of a total population of approximately 293 million people, according to the most recent U.S. Census).

The flow of passengers who departed on flights between Brazil and other countries in Latin America, Europe and North America in 2004 is set out in the following table (together with the GDP of each country indicated):


Country	Passengers		GDP		Population

			(US$ billions)		(Millions)




Argentina		1,457,877		152,049		38.6




Chile		402,058		94,100		16.1




Uruguay		264,271		13,267		3.4




Bolivia		217,162		8,784		8.9




Paraguay		181,639		6,718		6.2




Peru		143,396		68,635		27.9




Columbia		94,673		97,389		46.0




Venezuela		78,347		108,163		26.7




North America		2,058,364		12,727,743		328.7




Europe		3,403,486		13,712,732		730.0

Source: IMF World Economic Outlook, September 2004; Population Reference Bureau, 2005; World Population Data Sheet and DAC.

Trends In the Domestic Market

In the past 33 years, the domestic market has generally grown in terms of RPK, except during times of significant economic recession (such as the oil crisis and the debt-moratorium crisis in the 1980s and the economic recession and political instability of the early 1990s).

During the past eight years, the annual air-traffic passenger growth rate, in terms of RPK, was 8.3%, compared to an annual growth rate of available capacity, in terms of ASK, of 5.5%. Load factors have increased continually since 2002, averaging 58.9%. Domestic passenger traffic and available capacity rates for the period between 1997 and 2005 are set out in the following table:


	1997			1998			1999			2000			2001			2002			2003			2004			2005

	(In millions, except percentages)




ASKs		31,146			38,121			40,323			41,437			45,314			47,013			41,851			43,034			47,979




Change in ASKs(1)					22.4	%		5.8	%		2.8	%		9.4	%		3.8	%		(11.0	)%		2.8	%		11.5	%




RPKs		17,824			22,539			22,204			24,284			26,527			26,711			25,196			28,214			33,699




Change in RPKs(1)					26.5	%		(1.5	)%		9.4	%		9.2	%		0.7	%		(5.7	)%		12.0	%		19.4	%




Rate of Occupation		57.2	%		59.1	%		55.1	%		58.6	%		58.5	%		56.8	%		60.2	%		65.6	%		70.2	%

Source: Anuário DAC (1997 to 2003) and Dados Comparativos Avançados DAC (2004 and 2005).


⁽¹⁾	Percentages refer to percentage change from previous year.

Historically, growth in domestic civil aviation revenue has generally exceeded growth in GDP. From 1997 to 2004, domestic civil aviation RPK grew 5.9% per year, while the annual GDP growth rate in the same period was 1.7%, according to DAC and Central Bank data.

The variable factors that have the greatest influence on the commercial aviation market are the price of fuel and variations in exchange rates because fuel is the most important element of costs for airlines and most elements of the market (including fuel) are tied to the U.S. dollar. In 2004 the costs of fuel and exchange rate variations represented approximately 29% and 20% of the industry’s total costs respectively, according to DAC.

The influence of the Brazilian government on the industry, through industry regulations, has also had a significant impact on the performance of airlines operating in the market. From 1986 to 1993, the Brazilian government imposed more rigid control over local civil aviation activities because of high

inflation levels which led to a series of economic crises in Brazil during that entire period. The control exerted by the Brazilian government consisted mainly of monitoring the prices of air fares charged by airlines and supervising the use and expansion of their routes. In 1994, after successful efforts to control inflation and stabilize the Brazilian economy, the Brazilian government (acting through the aviation authorities) began to deregulate civil aviation activities, principally by gradually reducing government control over the airlines’ local activities. Even though Brazilian civil aviation is still a regulated sector, DAC’s current rules are significantly more flexible than the regulations which were previously in effect and a series of basic and essential regulations have been frequently issued by the relevant authorities in order to harmonize the Brazilian regulatory environment with international, more modern models.

We believe the current regulatory regime has favored the financial performance of Brazilian civil aviation. As a result of imposing a more rational supply of services and ending implicit subsidies to less competitive airlines, we believe that the Brazilian government has enabled more competitive airlines such as TAM and Gol to better utilize their aircraft in an environment of healthy competition, which in turn has led to improved average returns in the domestic market. Such regulatory system is undergoing certain structural changes, including the recent creation of ANAC, a national aviation agency to replace DAC in the near future as the principal regulatory body for Brazilian civil aviation. See “Risk Factors — Risks relating to the Brazilian civil aviation industry — The regulatory structure of Brazilian civil aviation is undergoing change and we have not yet been able to evaluate the results of this change on our business and operating income” and “Regulation of the Brazilian civil aviation industry — Future Legislation.”

BUSINESS

Overview

We provide scheduled air transportation in both the domestic market and the international market through our operating subsidiaries TAM Linhas Aéreas and TAM Mercosur. According to data provided by DAC, we are the leading airline in the domestic market, with a 46.1% share of this market in December 2005 and a 41.2% share in December 2004, as measured in RPKs. We offer flights throughout Brazil, serving the largest number of destinations in Brazil of all Brazilian airlines, and operate scheduled passenger and cargo air transport routes to 46 cities, in addition to a further 27 domestic destinations that we serve through regional alliances with other airlines. We also directly serve 11 international destinations and provide connections to other destinations through commercial agreements with American Airlines, Air France and certain other airlines. We offer convenience to our passengers by offering frequent and direct flights to and from all major domestic airports at competitive prices. We carried approximately 12.6 million passengers on domestic flights and 1.2 million passengers on international flights in 2004. In 2005 we carried approximately 18.2 million passengers on domestic flights and approximately 1.8 million passengers on international flights. At December 31, 2004, we averaged 501 take-offs per day and at December 31, 2005 we averaged 636 take-offs per day. In order to meet domestic demand, we primarily cater to the business market but also operate in the leisure and cargo markets, which complement our primary operations and allow us to maximize the use of our aircraft.

We currently operate with a fleet of 84 leased aircraft, consisting primarily of Airbus models A330, A320 and A319, as well as Fokker model 100 aircraft. We currently have 9,669 employees.

Growth rate (Index 1997)

Source: DAC.

airline in Latin America, with a reputation for operational, managerial and ethical excellence, and we consistently transmit this mission statement to our employees.

Our principal strategic goal is to consolidate and expand our leadership in the domestic passenger market and to attain high levels of profitability. We will seek to pursue this goal by offering an overall service that delivers to passengers superior value for money, by continuing to reduce costs and by improving the return on capital invested.

The fleet of TAM Linhas Aéreas currently consists of 84 leased aircraft, as set forth in the table below. TAM Mercosur also has two Cessna Caravan-model aircraft, in addition to three Fokker 100 aircraft subleased from TAM Linhas Aéreas:


			Total at December 31

Model	Current		2004		2003		2002

Airbus A330*		10		9		9		9




Airbus A320		36		31		31		31




Airbus A319		13		13		13		13




Fokker 100		25		30		43		49

Total		84		83		96		102


*	Five aircraft with 18 seats in first class, 24 seats in business class and 171 seats in economy class, and five aircraft with seven seats in first class; 30 seats in business class and 175 seats in economy class.

Our headquarters are located at Avenida Jurandir, 856 — Lote 4, CEP 04072-000, São Paulo, SP, Brazil. Our telephone number is +55 11 5582-9715.

History

We are a holding company, founded in May 1997 (under the name CIT — Companhia de Investimentos em Transportes) for the specific purpose of participating in, managing and consolidating shareholdings in airlines. In November 1997, we implemented a corporate restructuring resulting in an increase of TAM Marília’s stake in our capital and the change of our corporate name to TAM — Companhia de Investimentos em Transportes. In September 2002 we again changed our corporate name to TAM S.A. We currently hold ownership interests in TAM Linhas Aéreas and TAM Mercosur. TAM Linhas Aéreas holds an ownership interest in TAM Viagens.

TAM Marília was founded in January 1961 in the interior of the state of São Paulo, where the late Captain Rolim Amaro worked as a pilot. In 1971, Captain Rolim Amaro became an executive partner and minority shareholder of TAM Marília. TAM Regionais was founded in May 1976 and was the group’s first scheduled airline, with 67% of its capital stock held by Captain Rolim Amaro. In 1978, Captain Rolim Amaro became the major shareholder of TAM Marília, holding 98% of its capital stock.

In 1986, Captain Rolim Amaro incorporated TAM Linhas Aéreas, launching its operations through Brasil-Central Linha Aérea Regional S.A. (which was created to operate in the country’s northern and central-western regions). In the same year, Brasil-Central Linha Aérea Regional S.A was granted a concession to operate at Guarulhos International Airport and became TAM Transportes Aéreos Meridionais S.A., Brazil’s second-largest domestic airline.

In 1993, we launched the TAM Loyalty Program (the first airline loyalty program in Brazil) in order to provide incentives for existing passengers to fly with us more often and attract new passengers. In 1998 we inaugurated our first international flight, between São Paulo and Miami. In 1999, we initiated flights to Paris through a codeshare agreement with Air France.

In 1998, we acquired Itapemirim Transportes Aéreos Regionais (the corporate name of which was changed to Interexpress Transportes Aéreos Regionais S.A.) and then acquired Helisul Linhas Aéreas S.A. (the corporate name of which was changed to TAM Express S.A.).

In 1999, TAM Express and Interexpress Transportes Aéreos Regionais merged into TAM Linhas Aéreas, leading to greater integration, operational efficiency and a consequent reduction in costs. As a continuation of this restructuring process, and as a result of the need to unify our regional, national and international operations, in November 2000 TAM — Transportes Aéreos Regionais S.A. was merged into TAM Linhas Aéreas.

On February 6, 2003, we signed a protocol of understanding with Varig for codesharing operations as a preliminary stage in a possible merger between the two companies. This was primarily intended to eliminate overlapping flights and to rationalize supply in the market. As a result of signing this protocol of understanding, we were able to reorganize our aircraft fleet, resulting in negotiations to return 19 Fokker 100 aircraft (and a consequent reduction in operating costs).

On February 15, 2005, as it became clear that the proposed merger would not take place, we and Varig submitted a detailed plan to the CADE to cancel the codeshare arrangement. On February 23, 2005, the codeshare agreement was cancelled (with the approval of the CADE) with a deadline of May 24, 2005 to terminate codeshare operations with Varig. We ceased all codeshare operations with Varig on May 2, 2005.

On June 17, 2005, we completed our initial equity offering of preferred shares, pursuant to which we (and the selling shareholders in that offering) offered a total of 30,190,000 preferred shares to institutional investors in the United States and institutional and other investors elsewhere. On July 19, 2005, we and the selling shareholders in the equity offering described above issued a further 281,600 preferred shares pursuant to an over-allotment option granted to the underwriters in that offering.

TAM Mercosur operates scheduled air transportation operations and is headquartered in Asunción, Paraguay. TAM Mercosur, which operates in Paraguay, Argentina, Brazil, Chile, Uruguay and Bolivia, was founded in March 1993 under the name Líneas Aéreas Paraguayas S.A. (LAPSA), with all capital stock held by the Government of Paraguay. The Paraguayan government currently holds 5.02% of TAM Mercosur’s capital stock. In January 1997, LAPSA’s corporate name was changed to Transportes Aéreos del Mercosur S.A. In September 2003, upon approval of TransAmérica’s dissolution and liquidation, we acquired all shares of TAM Mercosur held at the time by TransAmérica (which consisted of 94.98% of its capital stock).

TAM Viagens is a limited company ( sociedade limitada ) and tourism operator controlled by TAM Linhas Aéreas. Through TAM Viagens, we engage in operations involving the packaging and sale of tourism and corporate events in Brazil and abroad.

Capital Investments

During 2005, we invested R$109.5 million in fixed assets, primarily replacement parts for our fleet. During the years ended December 31, 2004, 2003 and 2002, we invested R$122.3 million, R$84.4 million and R$120.5 million, respectively, principally made in parts and equipment for our fleet.

On November 10, 2005, we entered into a loan agreement in the amount of approximately R$85 million with the Banco Nacional de Desenvolvimento Econômico e Social (National Bank of Economic and Social Development, or BNDES). We plan to use part of the proceeds from this loan to finance capital expenditure on software and maintenance described below. The terms of the agreement provide that TAM Linhas Aéreas will repay approximately R$72 million of the principal amount in 60 equal monthly installments, beginning in December 2006 and ending in November 2011. The remaining R$13 million of the principal amount is also repayable in 60 equal monthly installments, beginning in February 2007 and ending in January 2012. We provided BNDES with security interests over certain real property as collateral, with the total value of such interests being approximately R$65,505,000. TAM Linhas Aéreas is subject to certain restrictions in the loan agreement, including:


	•	the loan agreement may be terminated early if the amount of TAM Linhas Aéreas’ earnings before interest, depreciation and amortization (net of any income taxes, social contribution taxes and any variations in working capital), divided by the amount of all scheduled due payments during each six-month period, falls below certain specified ratios; and


	•	the loan agreement may be terminated early in the event that we fail to replace collateral or present additional collateral (so as to preserve the integrity of BNDES’ security interest) within 30 days of BNDES requesting that we do so.

On December 16, 2005, TAM Linhas Aéreas entered into a loan agreement in the principal amount of US$50 million with the International Finance Corporation (or IFC) for the purpose of financing (i) a portion of the pre-delivery payments relating to our acquisition of ten Airbus A320 aircraft pursuant to a purchase agreement we entered into with Airbus on March 19, 1998, and (ii) our working capital. US$33 million of the principal amount is guaranteed by TAM S.A. The terms of the agreement provide that TAM Linhas Aéreas will repay the loan in 12 equal semi-annual installments, beginning in November 2006 and ending in May 2012. TAM Linhas Aéreas is subject to certain restrictions in the agreement with IFC, including:


	•	it may not incur additional debt if the amount of its net income, due payments and dividends divided by the amount of all scheduled due payments falls below certain specified ratios;

	•	it may not prepay its debt under other contracts for indebtedness unless it prepays its debt to IFC under the loan agreement in a proportionate amount; and

	•	it will automatically be a default under the loan agreement if TAM Linhas Aéreas is in default in the aggregate amount of US$5,000,000 under its other contracts for indebtedness (or if it is in default in the amount of US$2,500,000 under any single contract for indebtedness).

Our principal ongoing capital expenses are related to expenses on software (principally software necessary for the operation of the e -TAM portal and software used for cost controls and managing our spare parts and supplies) and on the extension of, and environmental enhancements to, our maintenance center in São Carlos. We plan to finance these capital expenses by using both cash generated by our operations and a portion of the proceeds from the loan with BNDES described above.

Corporate Structure

Our principal shareholders are TEP, Aerosystem and Nova Fronteira (who hold an aggregate of 58.87% of our capital stock) and the Investment Funds (who hold 19.52% of our capital stock). The following organizational chart sets out, in summary form, our shareholder structure and subsidiaries at the date of this prospectus:

Competitive Advantages

We believe that our principal competitive advantages are:


	•	Value-added service at competitive prices. We believe that we offer the best combination in the domestic market of a network of destinations and frequent flights, with value-added service, high on-time rates and competitive prices, based on:


	•	broad domestic network of destinations: our own domestic network serves 46 destinations in Brazil. Through our regional alliances with Oceanair Linhas Aéreas Ltda. (Oceanair), Pantanal

Linhas Aéreas S.A. (Pantanal), Passaredo Transportes Aéreas Ltda. (Passaredo), Total Linhas Aéreas S.A. (Total Linhas) and Trip Transporte Aéreo Regional do Interior Paulista Ltda. (Trip Transporte), our network extends to a further 27 destinations in Brazil;

• convenient schedules with high on-time arrival rates: according to DAC, we offer more frequent flights than our domestic competitors and have achieved a high percentage of on-time arrivals. According to DAC, in 2005 we had the highest operating efficiency index of the leading Brazilian airlines in the domestic and international markets, with an average of 90% in the domestic market and 89% in the international market, resulting from a combination of regularity and punctuality ( i.e. flights arriving at their destinations within the timetabled schedules);

• efficient network of international destinations and supporting domestic service: we currently serve 11 profitable international destinations (eight in Latin America and three intercontinental destinations) that are in high demand by the Brazilian public. We also serve various other destinations in North America, Europe, and other continents through agreements with American Airlines, Air France and other airlines, respectively;

• more direct flights: according to data from DAC, at December 31, 2005 we operated 49% and 29% more direct flights than Varig and Gol, respectively and operated 96% and 43% more frequent daily flights than Varig and Gol, respectively; and

• special services: we have developed special services to meet specific demands and optimize the use of our aircraft, such as night and holiday flights offered at promotional rates.


	•	Focus on cost management. We are an airline with low operating costs. In 2003, we initiated the implementation of a restructuring project. The principal aim of this ongoing project is to improve the use of our aircraft, offsetting negative macroeconomic trends in the global aviation market, increased fuel prices, and variations in the real . We are implementing significant cost reductions, focusing our efforts on reducing operating and administrative expenses in particular. Our overall CASK decreased from R$20.12 centavos in 2004 to R$18.63 centavos in 2005. Some of our principal cost savings arise from:


	•	efficient use of our aircraft: we have succeeded in significantly increasing the average load factor of our aircraft and the daily average block hours per aircraft by optimizing our network of destinations and our fleet. We began with an annual load factor of 55% in 2002, which increased to 61% in 2003 and 66% in 2004. We simultaneously increased the block hours per aircraft, from 8.6 in December 2002 and 7.5 in December 2003 to 10.3 in December 2004. In December 2005, the load factor of our aircraft was 73% and the block hours per aircraft was 12.2;

	•	modern and flexible fleet: we have one of the newest fleets in the domestic market, with an average age of seven and a half years at December 31, 2005. Our use of a modern fleet allows us to reduce operating and maintenance costs. We primarily operate Airbus aircraft (both narrow- and wide-bodied), in addition to Fokker aircraft, providing us with the flexibility required to serve routes of different passenger densities. We believe that all of our aircraft are equipped with the most advanced equipment and technology, ensuring greater reliability, comfort and safety;

	•	own maintenance: we have our own maintenance team, with a maintenance center in the city of São Carlos (in the interior of the state of São Paulo), which is trained to serve all aircraft in our fleet quickly and at a labor cost we believe is lower than that of our competitors. Our maintenance center performs all hull maintenance on our aircraft and also provides maintenance services for other airlines in Latin America. By using our own maintenance center, we have been able to reduce the maintenance time of our aircraft and, consequently, obtain more efficient use of our aircraft; and

	•	use of technology in operating processes: in addition to using globally renowned systems to assist in activities such as network and fleet management, we are developing proprietary internal management systems with innovative solutions that allow greater flexibility and skill in performing our daily operations. During 2005, we finalized implementation of the e -TAM portal,

which consolidates sales made through indirect channels and provides us with greater flexibility in decision- making and allocating sales commissions.


	•	*Innovative services and products combined with a strong brand and our “espírito de servir”* (“spirit of service”).** Our corporate culture is based on providing value-added services to our passengers. We consistently seek to make travel a more convenient and comfortable experience for our passengers and believe that we have successfully positioned our brand so as to associate it with superior service, aircraft and technologically-advanced operations. In 2005 we were considered the 5th-most admired company in Brazil according to an annual survey performed by the Brazilian business magazine Carta Capital/Interscience . Reflecting our strong brand recognition, in October 2005 we received a “Top of Mind” award from the Folha de São Paulo newspaper as a result of a survey (conducted by Datafolha , a Brazilian research institute) that showed we were named more times than any other airline when a sample of Brazilian consumers were asked to name an airline brand. We strive to be a company that is focused on our passengers, translating our “spirit of service” into all operations, and we believe this is evidenced by:


	•	high on-time arrival rates and frequent flights;

	•	a modern fleet equipped with interiors specifically designed to afford greater comfort to our passengers, with more space between seats than the market average and the widest middle seat of all the Airbus model aircraft;

	•	a polite approach to our passengers, including the aircraft captain personally welcoming passengers during boarding, a courteous flight crew and attendants and our red carpet welcome for passengers at airports;

	•	the only airline to offer video and audio entertainment on domestic flights, in addition to offering in-flight meals and magazines;

	•	self-service options for check-in in major airports; and

	•	open channels of communication with our passengers through our call center, our “Talk to the President” program and online service chat sessions at our portal.


	•	TAM Loyalty Program. We were the first airline to offer a loyalty program in Brazil and there are currently over 3.0 million members in the program (which we refer to as the TAM Loyalty Program). We regard our loyalty program as a strong relationship tool and believe that it is the most flexible loyalty program in the market because it imposes no restrictions on flights or the number of seats available when members are redeeming accumulated points. Members may accumulate points quickly and easily by flying on TAM or partner airlines, making purchases through TAM Loyalty Program-affiliated credit cards or using services and products at partner establishments. In addition, the TAM Loyalty Program strengthens lines of communications with our passengers.

	•	An experienced management team and motivated professionals. We have an experienced management team, focused on realizing our mission and strategic vision. We understand that our growth potential is directly related to our ability to attract and retain the best professionals and, accordingly, our management invests significant funds and time in selecting people with high potential and who fit well into our entrepreneurial culture. Employee satisfaction surveys, followed by meetings, seminars, action plans, an internal version of “Talk to the President” program and the entire incentive policy we offer (such as our employee of the month award and breakfasts and lunches with our board of executive officers) are important instruments of communication with and integration of our staff. Our training center has the capacity to serve over 750 students each day with certification and management courses. In 2004, we also implemented a variable compensation policy for our officers and employees, aligned with our strategic goals for the company and an aggressive policy of sharing profits. Following approval by both our board of directors and shareholders, we implemented a share purchase option plan for our officers and employees pursuant to which the first options were granted in December 2005.


	•	Liquidity and solvency. Our restructuring project initiated in 2003 has significantly improved our liquidity and solvency indices (for example current assets, divided by current liabilities, or the current liquidity ratio, increased from 0.80 at December 2003 to 1.57 at December 2005). This allows us flexibility in areas such as negotiating new lease agreements and expanding our fleet on more favorable terms.

Strategy


	•	To continue providing superior customer service. One of our key strategies is to offer differentiated and high-quality service. We consistently seek to make travel more convenient and comfortable for our passengers, to perfect our service and to strengthen our commitment to passengers.

	•	To increase revenue with profitability, serving a greater number of passengers at a competitive price. We will seek to continue to provide what we believe is an overall service that delivers the best value for money in the domestic market, offering more convenient and higher quality services at competitive prices. Our goal is to increase revenues as well as profitability through:


	•	expansion of business traveler market: consolidating and expanding our traditional passenger base of business travelers, who we believe represent approximately 80% of demand for our flights, through measures focusing on business travelers and sales channels that traditionally serve that market;

	•	growth in our tourism and leisure travel operations: capturing additional demand in the tourism and leisure market through specific promotions for holidays and local events through scheduled operations. We also serve leisure travelers by (i) the operation of charter flights, and (ii) the sale of tourism packages through TAM Viagens (an indirect subsidiary controlled by TAM Linhas Aéreas). We believe that we are the largest charter operator in Brazil, with gross revenues of R$235 million and R$249 million at December 31, 2004 and December 31, 2005, respectively, representing approximately 4% of our consolidated revenues in each period. Through our subsidiary TAM Viagens, we also own the second-largest tourism and leisure travel operator in the country;

	•	selective expansion in international markets: consolidating our market share in major destinations in Latin America and seeking to strengthen our intercontinental position with more frequent flights and the addition of new destinations that support our domestic strategy. We plan to begin operation of a new direct flight between Lima, Peru and São Paulo in March 2006; and

	•	expansion of our cargo business: greater utilization of cargo space in our aircraft to develop our cargo business line, while ensuring no negative effects on our commitment to further improve service to our passengers. Our cargo transportation business line represented R$319 million, or 6.7%, of our consolidated revenues at December 31, 2004 and R$407 million or 6.9% of our consolidated revenues at December 31, 2005.


	•	To reduce our operating costs, optimizing the use of our fleet and streamlining our processes. We believe that the successful implementation of our strategy is closely linked to cost reductions and improved application of applying capital invested. We are pursuing this strategy by:


	•	maintaining a standardized, efficient and flexible fleet. We will continue to optimize the size of our fleet, with the lowest possible number of “families” of aircraft, in order to keep maintenance and operating costs for our fleet at a low level. We will seek to maintain a high aircraft usage rate and will seek to maintain a flexible fleet, with aircraft capable of easily adapting to the differing levels of demand from route to route; and

	•	increasing productivity by redesigning operational processes and using technology. Since the implementation of our restructuring project in 2003, we apply a cost reduction policy aimed at

increasing our productivity through new information technology tools, redesigning operational processes, redeployment of labor and outsourcing activities which are not related to our core strategy. We also hope to obtain economies of scale by increased growth in our operations.

Products and Services

Our principal product is the scheduled air transportation of passengers. In addition, we also have products targeted specifically towards the development of domestic and international tourism. We also provide cargo transportation operations.

We set out below a breakdown of our gross revenues by type of service provided, geographic region and product line for the periods indicated:

By type of service provided


	Year Ended December 31,

	2005		2004		2003

	(R$ millions)




Domestic revenue




Regular — Passengers		3,966		3,020		2,534




Charter — Passengers		226		214		154




Cargo		277		193		153

Total		4,469		3,427		2,841

International revenue




Regular — Passengers		1,011		871		674




Charter — Passengers		23		22		5




Cargo		130		126		83

Total		1,164		1,019		762

Other operating revenue




Commissions		21		17		15




Partnerships with the TAM Loyalty Program		85		58		31




Subleasing of aircraft		65		126		57




Other		106		97		62




Total		277		298		165

Gross operating revenue		5,910		4,744		3,768

By geographic region




Brazil		4,747		3,726		3,006




Europe		457		449		336




North America		368		366		230




South America (excluding Brazil)		338		203		196

Total		5,910		4,744		3,768

By product line




Regular — Passengers		4,977		3,891		3,208




Charter — Passengers		249		235		159




Cargo		407		319		236




Other revenue		277		298		165

Total		5,910		4,744		3,768

Sales and Distribution


	*Distribution channels*

We are developing several direct and indirect distribution channels for the sale of air fares.


	Indirect distribution channels

Indirect sales are those made through corporate travel agencies, agencies with registrations and pre-approved credit and travel operators. In 2005, indirect sales represented 84% of our total ticket sales. Currently, there are approximately 4,500 travel agencies authorized to sell our tickets in Brazil.


	Direct distribution channels

We also sell our tickets directly to passengers through the following channels:


	•	call center: our call center is available to our passengers 24 hours a day, allowing passengers to make reservations and purchase tickets;

	•	internet: we were the first airline to sell tickets in Latin America on the internet. Through our website registered users may purchase tickets online and receive customer service, make reservations up to one hour before departure and access information such as that relating to the TAM Loyalty Program; and

	•	stores: we also sell tickets through our network of stores. Currently, we have 161 stores, located in 51 cities in Brazil. We also have a network of commissioned sales representatives operating in Brazil and abroad.

At December 31, 2005, 84% of our sales were through travel agencies, 16% were through direct channels, 11% were through our shops, 2% were through our call center and 2% were through the internet.

In 2004, we implemented the e -TAM portal, a tool that integrates our entire sales chain, from the time of reservation to passenger boarding, consolidating indirect sales and eliminating the GDSs in our distribution chain. Data obtained from the e -TAM portal allows us to offer passengers a set of customized services, based on the “one-to -one” concept. In 12 months of operation, 100% of indirect channel reservations made in Brazil are now made through the e -TAM portal.

We believe that approximately 80% of our passenger traffic consists of business travelers and large and medium-sized companies with whom we have travel agreements. To further develop our business relationship with our corporate clients, we have signed agreements with hotel chains and car rental companies to offer our customers complete corporate transportation and accommodation packages. Our advertisements run primarily in media vehicles such as internet sites, radio spots, local newspaper advertisements, magazines and outdoor billboards.

Pricing Policy, Revenue and Yield Management

In general, prices charged by airlines are freely set by the airlines, with DAC responsible for monitoring the prices. No discounts greater than 65% of the total price may be granted without DAC’s approval five days in advance of the date such discounts will be offered to consumers. Brazilian airlines are freely able to set their prices. See “Regulation of the Brazilian civil aviation industry — Rights to operate air routes — Prices.”

We believe that our current pricing policy is dynamic. Focusing on maximizing profitability, we aim to divide up particular niches within the market to better serve projected demand. Pricing availability is based on traffic projections and is accompanied by closely monitored performance indicators. Our pricing policy focuses specifically on our indirect distribution channels (GDS system and e -TAM portal) and direct channels (our website, reservation call center and stores).

We seek to achieve the greatest possible competitiveness for each origin/destination in relation to the competition, keeping in mind at all times our product’s added value in terms of convenience of frequency, schedules, the TAM Loyalty Program and on-time record.

We continuously analyze market opportunities with the intention of stimulating demand for specific routes and periods. Lower prices are offered for one-time promotions (such as national or regional holidays) and as incentives to take flights at particular times (such as night flights). These prices generally carry restrictions, such as the requirement to purchase a round-trip, a minimum stay at the destination, or the requirement that the ticket be issued within 24 hours, and generally do not earn points for the TAM Loyalty Program.

The price a passenger is willing to pay may vary depending upon factors such as destination, month of the year, day of the week and departure schedule. Revenue and yield management is the process by which (based on historical data and statistical projection models) airlines establish the number of seats to be offered for each price category over time, in order to maximize total operating revenue for each flight. We believe that efficient yield management is the key to success in the air transportation market in Brazil and abroad.

We believe that we have an efficient and accurate system to collect data on reservations, departures, revenue. The system also produces recommendations to analyze levels of overbooking, and in relation to offering discounts for future departures. Data relating to reservations and departure is collected daily, forming reservation profiles for each flight and allowing specific recommendations from flight to flight. The system allows our analysts to verify whether flights are above or below historic reservation levels and decide whether to close the discount classes or offer more space for passengers who generate higher revenues. Accordingly, our yield management practices allow us to both react quickly in response to market changes and anticipate and introduce such changes into the market.

We currently have a team of analysts dedicated to revenue and price management. These professionals are divided by market sector and have particular knowledge of specific routes in order to better understand features which are specific to each route (such as holidays, high and low season, peak schedules and days and the competitive environment).

Air Transportation Operations


	*Passenger transportation*


	Scheduled domestic operations

We currently operate an average of 636 daily flights to 46 destinations in Brazil. Through our regional alliances with Oceanair, Pantanal, Passaredo, Total Linhas and Trip Transporte, we serve an additional 27 domestic destinations.

Passenger traffic in the domestic market represented approximately 67.1% of our revenues in 2005, 63.6% in 2004 and 67.3% in 2003. Our RPKs in the domestic market increased 44.7% in 2005, 21.2% in 2004, declined 11.0% in 2003 and increased 14.5% in 2002. The RPKs in the total domestic market increased 19.4% in 2005, 12.1% in 2004, declined 6.3% in 2003, and increased 1.8% in 2002.

In 2005, according to data provided by INFRAERO, we recorded the highest number of passengers transported in 46 airports served. The table below sets forth the airports we serve in Brazil, our average number of departures per day at those airports and the number of passengers who took our flights in 2005:


	Average Number
	of Departures
	with our		Passenger
Route	Aircraft ⁽¹⁾		Departures ⁽²⁾

São Paulo (Congonhas)		97.2		2,303,474




Brasília		55.2		905,900




São Paulo (Guarulhos)		23.9		698,253




Salvador		23.8		625,385




Curitiba		22.2		528,676




Rio de Janeiro (Santos Dumont)		21.2		638,605




Rio de Janeiro (Galeão)		20.5		630,961




Belo Horizonte (Confins)		18.8		542,317




Recife		18.3		395,228




Fortaleza		13.8		352,795




Vitória		11.7		335,917




Belem		11.3		289,392




Porto Alegre		11.1		381,890




Goiânia		10.8		295,191




São Paulo (Viracopos)		9.6		156,737




Campo Grande		8.7		179,989




São Luiz		7.9		163,572




Cuiabà		7.6		219,078




Porto Seguro		7.0		238,192




Florianópolis		6.9		193,037




São José Do Rio Preto		6.6		113,452




Londrina		6.4		135,637




Ilheus		5.7		90,240




Belo Horizonte (Pampulha)		5.3		189,458




Natal		5.3		160,143




Ribeirão Preto		4.7		149,394




Maceió		4.7		128,432




Uberlândia		4.4		158,185




Manaus		4.2		122,909




Teresina		4.0		79,475




Aracaju		4.0		93,277




Foz Do Iguaçu		3.6		139,101




Joinville		3.3		58,916




Navegantes		3.3		62,018




Macapá		3.0		112,675




João Pessoa		2.5		82,845




Palmas		2.1		55,155




Imperatriz		2.1		28,380




Santarem		2.0		41,606


	Average Number
	of Departures
	with our		Passenger
Route	Aircraft ⁽¹⁾		Departures ⁽²⁾

Marabá		2.0		35,374




Porto Velho		1.9		53,120




Maringa		1.4		17,531




Ji-Paranà		0.8		913




Caxias Do Sul		0.7		18,537




Corumbá		0.7		17,288




Una (Ilha De Comandatuba)		0.6		7,980


⁽¹⁾	Figures relate to departures on TAM aircraft only.

⁽²⁾	Figures relate to TAM issued tickets (and include departures on non-TAM aircraft).


	Scheduled international operations

We operate 148 international flights weekly to Buenos Aires, Santiago, Asunción, Montevideo, Punta del Este, Ciudad del Este, Santa Cruz de la Sierra, Cochabamba, Miami, New York and Paris. We recently obtained authorization to operate flights to Caracas, Venezuela and plan to begin the operation of a daily flight from São Paulo to Lima, Peru, in a code-sharing arrangement with TACA Airlines, from March 18, 2006. Our codeshare agreements with American Airlines and Air France allow our passengers to make connections to destinations in Latin America, the United States and Europe, in addition to access to other services, such as check-in at desks of our partner airlines, simplified baggage shipping, access to VIP lounges and the ability to earn points in the TAM Loyalty Program. We also have agreements allowing us to offer our passengers a wide range of destinations around the world.

International passenger traffic represented 17.1% of our revenue in 2005, 18.4% in 2004, and 17.9% in 2003. Our RPKs from international flights grew 41.4% in 2005, 27.6% in 2004, and declined 4.3% in 2003. The RPKs of Brazilian carriers in the total international market grew 7.3% in 2005, and 7.5% in 2004 after a decline of 0.7% in 2003. Our share of the international market operated by Brazilian carriers was 18.8%, 14.3% and 12.0% in 2005, 2004 and 2003 respectively.


	Charter operations

We generate revenue from charter operations (flying primarily during off-peak hours) increasing the productivity of our fleet. These operations represented 4.2% of total gross revenue in 2005, 5% in 2004 and 4.2% in 2003. According to DAC, we are the largest charter flight operator in Brazil. In 2004, we operated over 5,500 charter flights, primarily to the capitals of states in the Northeast of Brazil.


	Cargo transportation operations

We also earn revenues through cargo transportation operations. These operations represented 6.9% of our total gross revenues in 2005, 6.7% in 2004 and 6.3% in 2003. TAM Express (the cargo unit of TAM Linhas Aéreas) is responsible for providing express package, conventional cargo and special transportation services. TAM Express serves various locations in Brazil and abroad, flying directly to 46 airports, picking up packages at approximately 400 cities in Brazil and making deliveries to approximately 3,450 locations in Brazil. With the increase in international flights offered by TAM Linhas Aéreas, cargo transportation operations have encouraged cargo exports to destinations in the Mercosur countries (Brazil, Argentina, Paraguay and Uruguay), North America and Europe. In particular, exports of fruit, fish, auto parts, electronic materials, fabrics and shoes all increased. In 2005, 33,000 tons of cargo was carried in our aircraft holds to destinations outside Brazil. In 2005, cargo operations represented gross revenues of R$407.1 million (made up of R$277.4 million from the domestic market and R$129.7 million from the international market).

We use the same fleet for cargo operations as is used by TAM Linhas Aéreas. This allows us to promote the sale of vacant space in our aircraft and, consequently, to reduce fixed costs. TAM Express has some 350 vehicles (including vans, pickups and motorcycles) to pick up and deliver cargo. These operations are arranged through agents.


	Travel and tourism operations

We also earn revenues through TAM Viagens. These revenues are recorded under “Other” in “Other operating revenue” in our accounts. In 2004 and 2005, revenues from travel and tourism represented 0.6% and 0.3% of our total gross revenues respectively. Currently, TAM Viagens is the second largest travel operator in the country, according to Instituto Brasileiro de Turismo — EMBRATUR. In order to take advantage of vacant space on our aircraft, we have concentrated TAM Viagens’ operations on the least occupied routes operated by TAM Linhas Aéreas.

To promote tourism in Brazil, we are training local travel agents through events such as the TAM Show (a tourism fair traveling through the states of Brazil). We are also looking to develop tourism to destinations of cultural and historical interest. The Eco TAM brand (which currently has over 50 destinations in all regions of Brazil) was created to promote tourism to ecological destinations. Another source of strengthened activity in 2004 was tourism for conventions, events and trade shows.

Marketing


	*TAM Loyalty Program*

The TAM Loyalty Program was the first loyalty program launched by a Brazilian airline and represents a key element in our marketing strategy. We believe our program is the most flexible in the market because it imposes no restrictions on flights or the number of seats available when members are redeeming accumulated points. The TAM Loyalty Program has approximately 3.0 million members and 3.3 million free flights have been distributed since creation of the TAM Loyalty Program in 1993. Members may accumulate points quickly and easily by flying on TAM or partner airlines, making purchases through TAM Loyalty Program-affiliated credit cards or using services and products at partner establishments. There are three tiers in the TAM Loyalty Program (white, blue and red) and qualification for a particular tier is based on miles flown. The speed at which points are accumulated varies depending on the tier of membership. Blue and red cards receive extra benefits and higher points, therefore allowing the member to accrue points which can be redeemed for free travel more quickly. At December 31, 2005, the equivalent of 612,274 domestic flights had been accumulated but not redeemed by members of the TAM Loyalty Program.

On the basis of aircraft load factors, our management believes that the liability corresponding to tickets awarded to passengers redeeming TAM Loyalty Program points should be valued using the “incremental cost” method, under which only the additional costs per transported passenger (essentially the costs of insurance and in-flight service) are accounted for. As a result of uncertainties as to the date when points will be redeemed (as well as to the potential amounts involved), expenses from the TAM Loyalty Program are allocated against income when incurred. Similarly, revenue from partnerships with the TAM Loyalty Program are posted when received.

Points earned by TAM Loyalty Program members must be redeemed for tickets within two years, and historically approximately 25% of points expire without being redeemed. This two year period for redemption limits any possible growth in liabilities arising from the TAM Loyalty Program, assuming a stable trend in relation to the number of passengers we carry.

The TAM Loyalty Program is also a source of revenue for us through partnerships with various companies. The amounts of these revenues have been increasing each year, totaling R$85 million at December 31, 2005 and R$58 million at December 31, 2004.


	*Communications with our passengers*

In 1991, we created the “Talk to the President” communications initiative to encourage passengers to give us suggestions, praise and complaints. There are printed response-card brochures in all of our aircraft, boarding lounges and check-in lounges, allowing passengers to express any feedback that interests them. The Talk to the President initiative involves employees responsible for receiving and forwarding thousands of contacts per month, including response cards, faxes, e-mails and telephone calls. Issues raised by passengers are surveyed, researched and analyzed, and we seek to keep the customer informed at all times as to the progress of their request and/or suggestion until resolution or implementation. In 2005, the Talk to the President initiative received 135,730 responses from passengers (including complaints, praise and comments) compared to 98,000 in 2004 and 101,000 in 2003.

In addition to the Talk to the President initiative, we distribute the monthly President’s Letter on our flights. The President’s Letter discusses issues relating to TAM, in addition to others considered important to our passengers.

In late 2002 we established the TAM client council (which we refer to as the Client Council) for the purpose of establishing a direct and transparent line of communications to red-tier members of the TAM Loyalty Program. The Client Council is made up of 98 frequent flyers who hold the red-tier card in the TAM Loyalty Program. The members of the Client Council are invited to meetings with our president and senior management. In 2005, the Client Council presented over 1,393 suggestions to us, resulting in the implementation of several changes to improve our service.

Fleet


	*General*

Our fleet policy focuses on achieving the highest levels of safety, quality, efficient scheduling and high on-time arrival rates (as well as rationalizing maintenance costs). Currently, our fleet consists of advanced-technology jet aircraft, yielding cost benefits (such as those arising from the greater ease of transition of technical crews from Fokker to Airbus aircraft), allowing us to achieve high results in efficiency indices and qualifications relating to safety standards. See “— Safety.”

The two Airbus “families” operating in our fleet are the A330-200 aircraft (wide-bodied aircraft used for long-distance flights), and the A320-200 and A319-100 aircraft (narrow-bodied aircraft used for medium and short-distance flights). The aircraft in these families differ by number of seats, allowing us to be more flexible in making commercial decisions. The A320 and A319 models are considered to be among the most comfortable aircraft operating in Brazil in their category, with flexibility to operate at low cost on routes with up to 5 hours of flying time. They are also the only Brazilian narrow-bodied fleet to have fly-by-wire flight controls, which involve computers receiving and analyzing each pilot command, making flying more efficient and accurate. Airbus family aircraft also have the benefit of standardized maintenance and operations, allowing pilots and technicians to transition between different models after minimum additional training. All our aircraft are equipped with the best and most advanced equipment and software options offered by the manufacturer, giving us what we believe is one of the most advanced aircraft fleets in the world.

We have data communications between our aircraft and departments, even when flying. For this purpose, we have developed a proprietary DMS (Datalink Management System) that allows us to manage all information sent in real time by the ACARS (Aircraft Communication Addressing and Reporting System) installed in our fleet. Using the aircraft DMS, pilots may send text messages similar to e-mail) to any of our sectors. Messages transmitted via satellite appear on the DMS user screen in real time. In addition to communicating with the pilot, these resources also allow remote online monitoring of aviation systems, such as computer function, landing and departure time, fuel consumption and engine performance parameters. As a result, any operating variance may be analyzed by our maintenance technicians even before the aircraft arrives at its destination. We invested US$150,000 in the project and saved US$900,000

in its first year of use. The technology yields not only savings but also significant improvements in efficiency and safety.

The quality of our technical services is regularly audited by the Brazilian and international authorities, manufacturers and insurance companies. As a result of the requirements of our codeshare agreements with American Airlines and Air France, we also meet the maintenance and safety compliance requirements of the competent international aviation authorities in this regard.

The advantages of modern technology, combined with excellent operating and maintenance standards for the aircraft, are that we can yield high equipment utilization rates with reliability levels (“technical dispatchability”) above the industry average for all equipment we operate. Our fleet has maintained high technical dispatchability indices according to standards defined by IATA. This index measures the on-time departure capacity of aircraft without taking into consideration external factors such as bad weather. In 2004, we had an average technical dispatchability index of 99% for our fleet in operation (which is the reference point used in the auditing our technical services). That data is audited by aircraft, engine and equipment manufacturers according to a unified standard set by IATA.

TAM Linhas Aéreas has RBHA (Brazilian Aviation Approval Regulation) certifications 121 and 145 for maintenance operations and services. It also has an EASA (European Aviation Safety Agency) 145 certification for maintenance services, which are performed at the São Carlos maintenance center.

In 1998 we earned a US Federal Aviation Regulation (FAR 129) operating certification, and in 1999 a European certification from the Direction Générale de L’Aviation Civile — DGAC, allowing us to operate without restrictions in any European or U.S. city. In addition to allowing us to operate scheduled flights to Miami and Paris, these certifications also allow us to operate scheduled flights to New York, Washington and Indianapolis in the United States and to Madrid, Lisbon, Barcelona, Frankfurt, Zurich, Amsterdam and Moscow.

All of these certifications, obtained as a result of our modern equipment levels and technical quality of our maintenance, rank us among the highest airlines in global aviation standards. Since 2000 we have had the Extended Twin Engine Operations (ETOPS) certification of 180 minutes for Airbus A330 model aircraft (the highest international level certification), proving that we are in compliance with the most stringent global aviation standards in this respect. We also have state-of -the-art equipment in Brazil, such as the Future Air Navigation Systems (FANS), which increases safety in congested air space and achieves fuel savings by using more direct routes.

The following table shows our current fleet and past fleet use over the last three years:


																		To be returned/
		In Operation								Subleased								Out of Operation								Total

		December 31,								December 31,								December 31,								December 31,

Model	Capacity	2005		2004		2003		2002		2005		2004		2003		2002		2005		2004		2003		2002		2005		2004		2003		2002

Airbus A330	225 to 228 seats, 18 tons maximum load(*)		7		5		9		9		3		4		4		—		—		—		—		—		10		9		9		9




Airbus A320	168 seats, 10 tons maximum load		36		31		31		31		—		—		—		—		—		—		—		—		36		31		31		31




Airbus A319	138 seats, 7 tons maximum load		13		13		13		13		—		—		—		—		—		—		—		—		13		13		13		13




Fokker 100	108 seats, 7 tons maximum load		20		21		21		30		0		2		2		—		5		7		20		19		25		30		43		49

TOTAL			76		70		74		83		3		6		6		—		5		7		20		19		84		83		96		102


*	Five aircraft with 18 seats in first class, 24 seats in business class and 171 seats in economy class, and five aircraft with seven seats in first class, 30 seats in business class and 175 seats in economy class.

The TAM Mercosur fleet consists of three Fokker 100-model aircraft (sub-leased from TAM Linhas Aéreas) and two Cessna Caravan-model aircraft.

The average age of the TAM Linhas Aéreas fleet is one of the lowest in global aviation and is the lowest in Brazil: 5.7 years for Airbus A319/320 model aircraft, and 4.2 years for Airbus A330-200 model aircraft. With 76 aircraft in operation, the overall average age of our fleet is currently seven and a half years.

The following table sets forth the historical and projected development of our operational fleet at December 31 in each of the years indicated:


		2004		2005		2006		2007		2008		2009

		(Number of aircraft)




Airbus A330			5		7		8		8		8		8




Airbus A319/A320 ⁽¹⁾			44		49		59		62		66		70




Fokker F100			21		20		18		18		18		18

	Total		70		76		85		88		92		96


	⁽¹⁾	Our fleet projection is based on the following: we currently have firm orders with Airbus for 29 additional A320 aircraft and options with Airbus for up to 20 additional A320 aircraft. The projection also includes an additional four Airbus A320 aircraft that we may choose to add on a spot basis in future depending on demand for our services.

As discussed in “— Leasing Agreements”, we are in the process of reorganizing our fleet of Fokker 100 aircraft. As a result of this reorganization, we are currently considering renewal options in respect of such aircraft and are specifically considering options available from Airbus and Empresa Brasileira de Aeronáutica S.A. (or Embraer). Where the opportunities have arisen, we have also entered into negotiations for spot agreements relating to the return of our Fokker 100 aircraft and in 2005 have returned four Fokker 100 pursuant to such agreements. On March 19, 1998 we entered into a purchase agreement with Airbus pursuant to which we agreed to purchase 38 Airbus A319-100 and A320-200 Aircraft, equipped with International Aero Engines IAE V2524-A5 and IAE V2527-A5 engines respectively. The last aircraft is scheduled to be delivered pursuant to this agreement in December 2010. On December 20, 2005, we entered into a purchase agreement with Airbus pursuant to which we agreed to purchase ten Airbus A350-900 aircraft, each equipped with two General Electric Genx-1A75 engines. Each Airbus A350 will be capable of carrying up to 300 passengers. The purchase agreement provides that Airbus will begin delivery of the A350s in 2012, and the final aircraft is scheduled to be delivered in September 2014.

The following table shows average use rates of our aircraft, in hours, during the periods indicated:


	At December 31,

Bodied	2002		2003		2004		2005

Narrow-bodied aircraft		8.5		7.7		10.1		12.0




Wide-bodied aircraft		9.1		5.4		14.0		14.8


	*Leasing agreements*

We currently lease all of our aircraft (using long-term lease agreements) through TAM Linhas Aéreas. Leasing gives us greater flexibility to change the composition of our fleet relatively quickly in the event we need to.

All 84 of our aircraft are subject to operating leases, which require us to make periodic payments but do not include aircraft purchase options at the end of the agreement. Pursuant to the terms of these agreements, aircraft are returned under the agreed conditions at the end of the lease. The lessor retains ownership of the aircraft, as well as the economic benefits and risks of ownership. We are responsible for maintaining and contracting insurance for the aircraft during the leasing period. Amounts corresponding to commitments for the leased equipment are not reflected on our balance sheet because these transactions do not include an aircraft purchase option. The duration of our operating lease agreements are up to 192 months after the delivery date of the respective aircraft and payments are adjusted based on variations in the U.S. dollar exchange rate and LIBOR.

As a result of the process of reorganizing our fleet of Fokker 100 aircraft, on December 19, 2003 TAM Linhas Aéreas signed a commitment with our lessors to cancel 19 leasing agreements and schedule a plan to return these aircraft. At December 31, 2004, 13 aircraft had already been returned, with the remaining 6 due to be returned by July 2006. In addition, in the second quarter of 2004, the management of TAM Linhas Aéreas amended some of their commercial leasing agreements (relating to ten Fokker 100, four Airbus A319, two Airbus A320 and one Airbus A330 aircraft) from finance leases to operating leases with the agreement of the lessors. See “Management’s discussion and analysis of financial condition and results of operations — Amendments to leasing arrangements.”


	*Sub-leasing*

Under our policy of maximizing the use of our fleet, TAM Linhas Aéreas entered into sub-leasing agreements with the intention of minimizing the time during which our large aircraft are left idle. Pursuant to these sub-leasing agreements, three Airbus A330-200 aircraft from the TAM Linhas Aéreas fleet are leased to an airline based in the Middle East until 2006. The average terms of our subleasing agreements range from one year to a year and a half.


	*Maintenance*

We rigorously follow the maintenance plans proposed by the aircraft manufacturers and approved by the competent Brazilian and international aviation authorities. Accordingly, maintenance carried out on our aircraft may be divided into three general categories (i) line maintenance, (ii) heavy maintenance, and (iii) component repair and inspection. Line maintenance includes simple inspections up to “A checks” (the first inspection level), executed in transit and overnight without requiring any change to our operations.

Heavy maintenance includes more complex aircraft inspections and services requiring removal from operations for between five and eight days.

We have entered into a number of agreements with suppliers and service providers in order to assist with our heavy maintenance requirements, of which the following are material:


	•	a general terms agreement between TAM Linhas Aéreas and GE Engine Services Distribution, L.L.C. (“GE”) dated May 7, 2001, pursuant to which we have agreed to purchase certain spare engines and support equipment for both the spare engines that we have purchased from GE and certain engines that have already been installed on our operating fleet. We have also agreed to purchase certain product support services from GE. This agreement has no fixed termination date;

	•	an engine maintenance agreement between TAM Linhas Aéreas and MTU Motoren-und Turbinen-Union München GmbH (“MTU”) dated September 14, 2000 (the “TAY Agreement”), pursuant to which MTU has agreed to provide certain maintenance, refurbishment, repair and modification services with respect to approximately 105 TAY650-15 aircraft engines. This is complemented by a novation and amendment agreement to the TAY Agreement, between us and Rolls-Royce Brazil Ltda., dated November 8, 2001 pursuant to which Rolls-Royce Brazil Ltda., replaced MTU as contract counterparty. This agreement terminates on June 30, 2015;

	•	an engine maintenance agreement between TAM Linhas Aéreas and MTU Maintenance Hanover GmbH (“MTU Hanover”), pursuant to which MTU Hanover has agreed to provide certain maintenance, refurbishment, repair and modification services with respect to certain V2500-A5 engines. This agreement terminates on June 30, 2014; and

	•	an engine maintenance agreement between TAM Linhas Aéreas and United Technologies Inc., Pratt and Whitney Division (“Pratt and Whitney”) dated September 14, 2000, pursuant to which Pratt and Whitney has agreed to perform maintenance, modification and/or overhaul of PW4168A engines, engine modules and the parts and components thereof. This agreement terminates on September 14, 2010.

Additional maintenance work on our aircraft is performed at hangars at the Congonhas and Guarulhos Airports in São Paulo (line maintenance) and our maintenance center in São Carlos (in the interior of the state of São Paulo) which is approximately 4.6 million square meters in size and which and has received EASA (European Aviation Safety Agency) certification (JAR-145) for inspections of aircraft and aviation components. Our São Carlos maintenance center is qualified to service all aircraft in our fleet (heavy maintenance and component repair and inspection).

Out of the approximately 1,500 maintenance professionals performing maintenance work on our aircraft, 800 (including engineers, supervisors, technicians and mechanics) are assigned to our São Carlos maintenance center.

Since we are qualified to perform most line and heavy maintenance services, we eliminate the need to transfer our aircraft to distant locations, saving us time and maintenance costs and increasing aircraft utilization rates. For the maintenance of specific complex components (such as engines) we have signed long-term agreements with third parties, which tend to be the component manufacturers themselves. As a consequence of our codeshare agreements with American Airlines and Air France, we also meet the US and European requirements in that regard.

Our maintenance professionals are trained by the manufacturers and suppliers themselves (including Airbus, Fokker, Rolls-Royce, General Electric and Pratt & Whitney) at their respective facilities abroad. In addition, we provide our professionals with the most modern equipment and software necessary for their training at our service academy in São Paulo (which we refer to as the TAM Service Academy).

In addition to the maintenance we perform on the aircraft we operate, we offer line and heavy maintenance services for third parties operating in Brazil using Airbus equipment (including the presidential aircraft), allowing us to reduce our fixed costs and increase our revenues in 2004 and 2005.

A significant part of our aircraft and vehicle maintenance costs are indexed to the U.S. dollar. For a description and analysis of the effect of exchange rate variations on our income, including fleet maintenance costs, see “Management’s discussion and analysis of financial condition and results of operations — Qualitative and quantitative information regarding market risk — Exchange rate risk.”


	*Fuel*

Fuel costs are the largest component of our costs, representing some 32% of our operating costs in 2005.

Fuel consumed in Brazil represents approximately 90% of our total consumption and is acquired through the distributors of Petrobrás, Shell and Exxon. We purchase fuel abroad from Exxon, Chevron, Texaco and Repsol YPF. Supply contracts for fuel in Brazil are normally made for a two year period and we renewed our contracts in March 2005. Supply contracts at our international bases normally have a term of one year. Approximately 95% of our fuel is purchased under “into-plane” terms, meaning that the supplier is responsible for delivering the fuel directly into the tanks of our aircraft. The fuel prices in the contracts we sign consist of three components (i) the price from the refinery, (ii) the supplier differential, and (iii) airport taxes and fees. The price of fuel is subject to international market variations in the price of oil. The supplier differential is the portion charged by the supplier (which consists of a fixed amount per liter charged during the contractual period) and reflects the cost of distribution, logistics and the distribution margin. Airport taxes and fees may vary by region and by airport. We have a department responsible for negotiating fuel purchase contracts and, as a result of the high volumes of fuel we purchase, we believe that are we are normally able to obtain more favorable terms than our competitors.

To reduce our exposure to international fuel price and exchange rate variations, we began in 2004 to enter into arrangements intended to hedge 30% of our expected fuel consumption over a three month period. For a description and analysis of the effect of volatility in fuel prices on our income, see “Management’s discussion and analysis of financial condition and results of operations — Qualitative and quantitative information regarding market risk — Risks relating to variations in the price of oil.” Another important cost reduction initiative involving fuel is our “fuel tankering” program pursuant to which we

refuel aircraft in regions where fuel prices are relatively lower. In 2005 we achieved savings of approximately R$22 million as a result of the fuel tankering program. We have also formed a multidisciplinary work group, involving the departments responsible for fuel, engineering, control, operations, dispatching and financing, to develop other measures to reduce fuel consumption in our fleet and spending.


	*Safety*

Brazilian civil aviation follows the highest safety standards in the world. Brazil is classified as a Category 1 in terms of the flight safety standards established by the International Civil Aviation Organization (ICAO), which is the highest classification in existence.

Our top priority is the provision of safe transportation. We maintain our aircraft in strict compliance with manufacturers’ specifications and all applicable safety regulations and perform routine daily maintenance. We rigorously comply with the standards established by the Air Accident Prevention Program (PPAA) of DAC. We are also members of the largest civil aviation regulation organizations, including the International Civil Aviation Organization (ICAO), affiliated with the United Nations, and IATA, the worldwide association of airlines. We participate in the coordination of the IATA Regional Flights Safety committee. We are also members of the Flight Safety Foundation (the largest non-governmental organization for flight safety) and the Flight Safety Committee for Brazilian Airlines. In 2004, we obtained a JAR-145 certification from the European Aviation Safety Agency.

We were the first Latin American company to install the BASIS (British Airways Safety Information System) for processing abnormal events and the FOQA (Flight Operations Quality Assurance) for the systematic analysis of information recorded during every flight.

Notwithstanding our high safety levels, air transportation service is subject to events beyond our control. In October 1996, one of our Fokker 100-model aircraft crashed during departure, with 99 deaths. Although litigation is still pending for this accident, any potential awards are covered by our insurance policies. See “— Judicial and administrative proceedings — Proceedings filed against us — Indemnification claims relating to accidents.”

Insurance

As required by law and the terms of our aircraft leasing agreements, we maintain insurance policies with insurance companies with solid reputations. The scope of these policies includes aircraft hull coverage and coverage against risk of war and civil liability for passengers, cargo, and baggage and injuries to third parties on the ground. Our current policies, which will be in force until December 19, 2005, follow practices adopted by the international civil aviation industry.

We have also contracted asset insurance against risk of theft, fire, flood, electrical damage and similar matters for equipment and buildings we own or for which we are responsible, including airport areas where we have operations. Similarly, we have engaged vehicle insurance against risks of robbery, theft, fire and civil liability against third parties for all vehicles we own or for which we are responsible.

We have also contracted liability insurance in respect of our directors and officers, the current term of which is due to expire on June 29, 2006.

Facilities

In 2001, we inaugurated our maintenance center in São Carlos, in the interior of the state of São Paulo, which occupies an area of approximately 4.6 million square meters, with 50,000 square meters of building area. At this center, we perform maintenance on aircraft and components of TAM as well as other Latin American airlines.

TAM Linhas Aéreas has its own building of 1,050 square meters in São Paulo (in front of Congonhas Airport) for TAM Express administration, dispatch and customer service, in addition to storage for uniforms, lost baggage and warehouse space.

The TAM Service Academy is located in an eight-story building in São Paulo (in proximity to Congonhas Airport) and covers an area of 12,000 square meters. The TAM Service Academy is the largest and most modern aviation training center in Latin America and is dedicated to training pilots, flight attendants, customer service and administrative staff. The TAM Service Academy has the capacity to accommodate over 750 persons for training each day.

We have entered into concession agreements with airport managements for the use of areas to provide services in passenger terminals, including check-in halls, passenger sales areas in airports and operational support areas. These agreements provide for periodic adjustments in the amounts paid for the concessions and renewal conditions. We also have a concession for the use of hangars and cargo terminals in airports throughout Brazil. These include areas in the passenger terminals of Guarulhos, Congonhas and Recife Airports, cargo terminals at the Salvador, Recife, and Vitória Airports and aircraft maintenance hangars at the Belém, Cuiabá and Goiânia Airports. We also have approximately 40,000 square meters of space for aircraft maintenance, parts storage and administration at Congonhas Airport in São Paulo, the location of our headquarters.

Information Technology

We have a policy of investing significant amounts in information technology systems that enhance our operating processes, allowing us to provide higher quality services to our passengers, in addition to giving us greater flexibility and speed in our operations.

In 2004 we introduced the e -TAM portal, a tool that integrates our entire sales chain, from the time of reservation to passenger boarding. Moreover, data obtained from the e -TAM portal allows us to offer passengers a set of customized services. All of our domestic reservations are made through the portal environment. The use of the e -TAM portal allows us to reduce the cost of reservations and ticket issuance by consolidating the GDSs previously used for almost all our reservations. Currently, GDS is used only for tickets issued abroad.

As discussed in “— Capital Investments”, we entered into a loan agreement with BNDES on November 10, 2005 and plan to use the proceeds from such loan to invest in the software used in our e- TAM portal and the software we use for cost control and managing spare parts and supplies.

Technology allowed us to be the first Brazilian airline to develop and install self-service check-in kiosks in airports. With over 50 units operating in Brazil’s major airports, the kiosks allow passengers who purchase e-tickets to check-in and select their seat in less than 10 seconds, reducing lines in the check-in halls and on boarding of the aircraft. In 2004 and 2005 approximately 196,000 and 375,000 passengers respectively checked in through the self-service kiosks.

In October 2003, we signed a general services agreement with Sabre Travel International Limited, pursuant to which we were granted a license (relating to the provision of maintenance services) for electronic reservation technology and database backup, allowing us to better utilize our fleet and network. This agreement will remain in force until October 2013, unless previously cancelled by either party.

The TAM Loyalty Program and “special services” system are also important tools for obtaining information on the profile of our passengers. The TAM Loyalty Program allows us to monitor the activity of passengers registered with the program, recording information on each passenger flight in addition to personal information and preferences (such as preferred seat, special meal requests and other data obtained through our contacts or customer surveys). The “special services” system allows the crew to input data on preferences of our passengers directly to our database. This data is also used to study passengers, offer promotions and new services and define our advertising message.

We also have a dedicated meals system which, based on the number of passengers who pass through check-in, passes the relevant information on to our suppliers of in-flight meals and accordingly increases efficiency and reduces waste. The system also monitors payments to suppliers of in-flight meals.

Our DOV-line tracing system monitors all aircraft baggage and cargo, following the location of items inside the aircraft, for proper weight balancing. A balanced aircraft is critical for a safe flight and has the added benefit of reducing fuel consumption. The DOV-line tracing system also manages crew distribution.

Seasonality

The Brazilian passenger air transportation market is subject to seasonality, as there is always higher demand for air transportation services in the second half of the year. In this regard, we are impacted to a similar extent to the rest of the market, though this is mitigated by the fact that we have a higher concentration of business travel than the market average (and business travel is less sensitive to seasonality). Our other operations do not vary significantly as a result of seasonality.

Personnel

We believe our growth potential is directly linked to our ability to attract and retain the best professionals available in our sector. For this reason, we assign high priority to selecting and developing people with potential who can add value to our operations and who we believe can adapt to our corporate culture.

At December 31, 2005, we had 9,669 employees, compared to 8,215 employees at December 31, 2004 and 7,665 employees at December 31, 2003. Our personnel expenses in 2005 totaled R$669 million. The following table shows the number of employees at December 31, 2002, 2003, 2004 and 2005 for the operations and locations indicated:


	December 31,		December 31,		December 31,		December 31,
	2005		2004		2003		2002

Tam Linhas Aéreas




Assistants, secretaries and dispatchers		2,773		2,093		1,975		2,258




Analysts and assistants		1,220		1,133		1,100		1,179




Supervisors/coordinators		316		265		260		276




Chairman, vice chairmen, directors and managers		171		143		133		130




Mechanics, electricians and technicians		1,127		972		886		869




Attendants		2,198		1,708		1,450		1,813




Captains and co-pilots		1,034		853		776		872




Interns		25		162		300		227

Total		8,864		7,329		6,880		7,624




Tam Viagens




Assistants/receptionists/secretaries/interns		32		38		36		47




Analysts/assistants/secretaries		53		52		52		26




Attendants, promoters/issuers/sales reps		88		114		111		51




Attorneys/coordinators/leaders/supervisors		30		32		32		27




Directors/managers/advisors		10		10		10		10

Total		213		246		241		161




Tam Mercosur




Paraguay		439		382		341		266




Chile		49		35		34		30




Argentina		37		148		111		86




Uruguay		22		35		23		14




Bolivia		41		40		35		—




São Paulo		4		—		—		—




Total		592		640		544		396

Grand Total		9,669		8,215		7,665		8,181

We also outsource certain operations and services, such as representation with respect to passenger and cargo ticket sales, operational services for ramps, parking areas and runways at airports, aircraft cleaning, catering services, asset insurance and passenger and crew transportation.

The National Aviators Union represents pilots and attendants in Brazil and five other unions represent airline ground crews. Approximately 6% of our employees are members of unions. Negotiations for wage increases resulting from changes in inflation indices and social clauses are carried out annually between the unions and airlines. The basic working conditions and maximum work days for pilots are regulated by federal law and are not subject to labor negotiations. We have never experienced a labor stoppage and believe that we have a good relationship with our employees. There are no significant differences among wages paid by Brazilian airlines (which in general are lower than wages paid by major international airlines).

In 2005, we invested approximately R$17.0 million in various training programs. On average, 20 days per year for each pilot are dedicated to renewing qualifications. We provide complete training to all pilots, attendants and customer service employees.

To ensure levels of excellence in training all our employees and perpetuating the philosophy of quality we are pursuing, the TAM Service Academy was created in 2001. With an area of 12,000 square meters in

São Paulo (in proximity to Congonhas Airport) the academy is the largest and most modern aviation training center in Latin America, with courses oriented toward pilots, attendants, dispatchers, airport personnel, sales, cargo, CRM personnel and technicians. The unit operates in a similar manner to a corporate university and seeks to develop human and technical knowledge oriented toward our operations. Each year approximately 30,000 people receive some level of training at the TAM Service Academy (an employee may attend more than one course in any given year), which has the capability of providing training for 750 people each day. In 2004 we intensified the supply of training for foreign airlines, pilots, attendants, flight dispatchers and mechanics. That work, which is monitored and validated at all times by quality inspectors of the civil aviation agencies of the respective countries, was primarily carried out at the TAM Service Academy.

In 2001 we signed a training partnership agreement with CAE Inc. (CAE), the largest manufacture of flight simulators in the world. The US$30 million investment in flight simulators and support structure allows CAE to train our pilots on the Fokker 100, Airbus A319, Airbus A320 and Airbus A330 aircraft in the vicinity of Guarulhos Airport in São Paulo. We have spent approximately R$6 million each year for the training agreement with CAE, representing savings of approximately US$1 million per year in pilot training costs previously incurred as we formerly had to send our pilots abroad for such training.

We also offer executive training through internal programs developed in partnership with well-known universities.

Our compensation strategy reinforces our efforts to retain talented employees, favoring high levels of employee motivation and greater productivity. Our compensation package includes health plans, profit sharing, supplementary retirement, food and meal vouchers, transportation vouchers, dental assistance, medical clinic, emergency transportation, banking offices, group life insurance, sick-leave supplement, day-care reimbursement, loans, courtesy travel for employees, recreation awards and English-language courses for all employees.

We have a profit-sharing program. All employees participate in this program. In 2005 we paid each employee an amount that was equal to approximately two times each such employee’s monthly salary pursuant to our profit-sharing program for 2004. In 2005, provisions for amounts to be paid in 2006 totaled approximately R$42 million.

We are currently implementing a preferred share purchase option plan for our and our controlled companies officers and employees, as approved at our shareholders’ meeting held on September 29, 2005. We granted 715,252 options to purchase our preferred shares in December 2005. The share purchase options will be granted on annual basis in accordance with our board of directors’ resolution as long as the maximum amount of 2% of dilution of the participation of current shareholders is not exceeded and certain annual value-added goals are reached. The participants of our share purchase option plan may exercise their options within seven years as of the date of the relevant granting. The vesting term will last five years and will be composed by three annual installments, respectively due on the third, fourth and fifth year. Our share purchase option plan will be effective for five years from September 29, 2005. See “Management — Share Purchase Option Plan.”

Supplementary Retirement Plan

Our subsidiary TAM Linhas Aéreas sponsors three supplementary retirement benefit plans which we describe below:

Retirement plan — TAM Prev — Plan I. The TAM Prev — Plan I retirement plan is managed by a closed private retirement entity known as MultiPensions Bradesco and was implemented in 1982, under the “defined benefits” condition for death benefits, disability, and retirement. This plan is partially financed by contributions from participants and supplemented by contributions from TAM Linhas Aéreas (as the sponsoring entity). On November 26, 2004, the Supplementary Retirement Secretariat approved the proposal to migrate participants from TAM Prev — Plan I to TAM Prev — Plan III. At December 31,

2005, 181 participants had already agreed to this proposed migration, with decisions from 40 participants still pending. This plan is currently closed to new participants.

Retirement plan — TAM Prev — Plans II and III. The TAM Prev — Plans II and III retirement plans are also administered by MultiPensions Bradesco and were implemented in 1995 and 1998, respectively. These plans were structured in the form of “defined contributions” for retirement benefits, partially financed by participant contributions and supplemented by contributions from TAM Linhas Aéreas (as sponsoring entity), under the “defined benefits” condition for benefits to be paid on uncertain dates (such as those relating to death and disability), financed entirely by TAM Linhas Aéreas.

In the year ended 2005, we contributed approximately R$9.6 million to those plans through our subsidiary TAM Linhas Aéreas. See note 23 of our audited consolidated annual financial statements for the year ended December 31, 2005.

At December 31, 2005, the number of active participants in the TAM Prev — I, II and III plans was 41, 1,155 and 1,159, respectively. The total value of the net liabilities of the TAM Prev — I, II and III plans has been recognized since January 1, 2002. The value of this liability will be amortized as an expense over five years, and for the next year, the residual value of the liabilities in the TAM Prev — I, II and III plans total R$1.8 million.

Competition


	*General*

Airlines in Brazil compete primarily in terms of routes, price, flight frequency, service reliability, brand recognition and benefits offered to passengers, such as loyalty programs and customer service. We believe our market leadership and the TAM Loyalty Program enhance our competitive performance in many of these areas.

Our competitors, both actual and potential, include Brazilian airlines, airlines operating on regional air routes and new participants in the market, who operate primarily on regional transportation networks. Our principal competitors are Varig and Gol. To a much lesser degree, we also face competition from a number of significantly smaller airlines operating in the domestic market. At December 31, 2005, 11 different airlines together had a share of the 2.3% of the domestic market that is not served by TAM, Varig and Gol (who together have a share of approximately 97.7% of the domestic market). More recently, BRA Transportes Aéreos Ltda. has emerged as having the largest presence of the smaller airlines that compete with TAM, Gol and Varig, carrying additional passengers in the scheduled domestic market. According to the DAC, in January 2006 BRA Transportes Aéreos Ltda. had approximately 6.23% of the scheduled domestic market. Previously, passengers transported by BRA Transportes Aéreos were recorded as charter passengers rather than passengers in the scheduled domestic market.

The graph below shows the history of market participation on domestic routes, calculated by reference to RPKs, for the major Brazilian airlines, for the periods indicated (based on data provided by DAC):

Domestic market share (RPKs)

Source: DAC.

Some of our competitors have significant levels of debt and their financial condition and prospects are uncertain. If our competitors in financial difficulty succeed in restructuring their debt and strengthening themselves in the market, they may be able to offer cheaper fares on the routes we operate, or compete with us in other ways (even if our operations are more efficient).

We also face competition, albeit to a lesser degree, from land transportation companies such as road transport companies. In 2004, inter-state road transport companies carried over 130 million passengers, according to the Road Transport Department.

Intellectual Property

We hold or have filed registration applications for 13 trademarks before the Instituto Nacional da Propriedade Industrial (or INPI), the body with jurisdiction for registering trademarks and patents in Brazil, and two trademarks before the bodies with jurisdiction for registering trademarks in other countries in the Americas and Europe in which we operate. Currently, we are facing no third-party challenges to such applications.

The “TAM” trademark and other trademarks relating to the classes of the activities we perform are owned by TAM Milor, a company controlled by the Amaro Family. On March 10, 2005, TAM S.A., TAM Milor, TAM Linhas Aéreas, TAM Viagens and TAM Mercosur entered into a License for Use of Trademark Agreement, pursuant to which TAM Milor granted the other parties a license to use the “TAM” trademark in exchange for a monthly compensation or royalty payment. The current expense we record on a monthly basis for the use of the trademark is R$1.3 million. This amount is adjusted annually by reference to the IGP-M. This agreement is effective until December 9, 2011, following which, provided that TAM Linhas Aéreas’ concession is itself renewed, the license to use the trademark will automatically be renewed for an equivalent period. The recording of the transfer of ownership of TAM trademarks from TAM Marília to TAM Milor and the License for Use of Trademark Agreement are currently in the process of review and registration, respectively, with the INPI. The intention of recording both the transfer and the registration of the License for Use of Trademark Agreement before the INPI is to provide third parties with notice of the existence of such rights.

obligations and fail to remedy the situation within 15 days of the date of receipt of the notification, or (ii) by TAM Milor only in the event the licensees utilize the trademark in a manner other than that stipulated in the agreement.

We have also internally developed our e -TAM portal, a tool that integrates our entire sales chain, from the time of reservation until boarding of the aircraft. Additionally, such contract does not impose any limitation on TAM Milor’s right to dispose of or pledge the trademarks that are subject to the License for use of Trademark Agreement to third parties and TAM Milor may enter into such transactions without our prior knowledge or consent.

Judicial and Administrative Proceedings

We are involved in various judicial and administrative proceedings arising from the normal course of our businesses. We have established provisions for all amounts in dispute that represent a probable loss in the view of our legal advisors and in relation to those disputes that are covered by laws, administrative decrees, decrees or court rulings that have proven to be unfavorable. The table below sets forth the total value of amounts claimed, provisions for contingencies and court deposits at December 31, 2005:


	Total Amount		Provision for
	Claimed		Contingencies		Court Deposits

	December 31,		December 31,		December 31,
	2005		2005		2005

	(R$ thousands)		(R$ thousands)		(R$ thousands)




Tax proceedings		629,833		629,833		37,594




Labor proceedings		110,000		4,838		7,996




Civil proceedings		64,408		19,430		10,287




Total		804,241		654,101		55,877

We believe that our results of operations and financial condition would not be significantly affected by any unfavorable single decision in such lawsuits because we have established provisions in respect of the amounts at risk in the tax and civil proceedings and because any future cash disbursement we may be liable for in respect of any unfavorable decisions in tax proceedings may be paid in installments over a long period.


	*Proceedings filed against us*


	Civil proceedings

We are party to approximately three thousand civil proceedings arising from the normal course of our business and the total amount claimed in these proceedings as at December 31, 2005 was estimated at R$19.4 million. The vast majority of these proceedings involve minor cases relating to customer relations. The more significant actions relate to civil liability and disputes resulting from cancellation of agreements to provide services and commercial representation. At December 31, 2005, we have established provisions to address these contingencies in the total amount of R$19.4 million.


	Damage claims relating to accidents

TAM Linhas Aéreas is party to 84 actions filed by relatives of victims of the accident that occurred in October 1996 involving one of our Fokker 100 aircraft which crashed during departure, in addition to approximately 55 actions recently filed by residents of the region of the accident’s location, who are claiming pain and suffering. Unibanco Seguros S.A. is party to all of these actions because any damages resulting from the aforementioned legal claims are covered by the civil liability guarantee provided for in our insurance policy with them. We believe that the cap of US$400.0 million in that insurance policy is sufficient to cover any penalties and judicial or extra-judicial agreements arising as a result of this matter.


	Tax proceedings

We are party to various administrative proceedings or court actions in which we are claiming non-application of a specific tax or reimbursement of taxes paid improperly, or in which we are contesting the charging of specific taxes resulting from the normal course of our business and the total amount claimed in these proceedings as at December 31, 2005 was estimated at R$630 million. We cannot guarantee that we will succeed in obtaining these tax credits or securing a favorable outcome in respect of the application of those taxes. At December 31, 2005, we had established provisions totaling R$630 million for tax proceedings involving probable loss to us, including those listed below. In respect of certain proceedings, we have made court deposits, while in respect of others we have court protection that allows us to dispute the cases without need for partial payments or judicial deposits.


	PIS and COFINS

We are challenging the constitutionality of the change in tax basis of the PIS and the increase in the contribution and basis of calculation of COFINS, introduced under Law No. 9,718/98.

On May 14, 2002 and June 23, 2003, four assessment notices were issued against TAM Linhas Aéreas, demanding COFINS payments allegedly due for the third quarter of 1997 and the year 1998. We submitted the proper challenges in relation to these demands and are awaiting a first-instance ruling. The amounts claimed in the aforementioned administrative proceedings are subject to suspended enforcement (because of a temporary restraining order, confirmed by a favorable ruling, granted in the form of three court injunctions filed by TAM Linhas Aéreas). According to our legal advisors, our chance of loss in these administrative proceedings is probable. The amounts involved, adjusted for inflation at December 31, 2005, total approximately R$275.5 million. We have established provisions covering the entire amount claimed in these administrative proceedings.

In July 1999, we filed a court injunction aimed at suspending enforcement of the collection of the PIS pursuant to Laws No. 9,715/98 and 9,718/98, to collect the assessment pursuant to Supplementary Law No. 07/70. We are currently awaiting a ruling on the appeal filed by the Brazilian government against the ruling granted on the injunction that we filed. According to our legal advisors, the likelihood of loss in this action is probable. The Brazilian tax authorities also issued four assessment notices aimed at collecting PIS contributions alleged to be owed by us for the second half of 1997 and the year 1998. In all of these cases, we are awaiting a ruling on the challenges offered in the first administrative instance. We have established a provision totaling R$77.4 million as of December 31, 2005 for these cases.


	Tariff surplus

We have filed a court injunction aimed at suspending payment of the tariff supplement, which is collected monthly at the rate of 1.0% of our domestic revenues. Currently, the case is awaiting a ruling on the appeal filed by the Brazilian government against the judgment handed down on the injunction that we filed, which suspended application of the taxes. The approximate value of that proceeding at December 31, 2005 was R$168.0 million. In the opinion of our legal advisors, the chance of loss in this proceeding is considered possible. On the basis that payment of this tariff is supported by both Presidential Decree and DAC Administrative Decree, our management established a provision in accordance with the amounts required until final outcome of the legal action, which amounted to R$168.0 million.


	ICMS on the importation of aircraft

In July 2004, a citation was filed against TAM Linhas Aéreas for the alleged failure (i) to pay, using a special form, the value of the ICMS due upon an imported aircraft clearing customs, and (ii) to issue, within the proper period, a bill of sale for entry upon the arrival of such aircraft. We filed the appropriate challenge and, in December 2004, a ruling was published deeming that the assessment for ICMS was in order. An appeal was filed and we are awaiting a ruling. Application of the aforementioned tax credits has been suspended under a temporary restraining order, confirmed by a ruling, granted pursuant to the court injunction we filed to clear the aircraft without paying the ICMS. According to our legal advisors, our

chance of loss in respect of this administrative proceeding is remote. Accordingly, we have established no provision for the amount in question which, as adjusted for inflation at December 31, 2005, was R$18 million.

There was also another citation filed in November 2004 against TAM Linhas Aéreas on the same grounds. We have presented our defense and are awaiting the ruling in this first-instance administrative proceeding. Application of the tax credits is also suspended because of the preliminary injunction, confirmed by court ruling. According to our legal advisors, our chance of loss in respect of this administrative proceeding is remote. Accordingly, we have established no provision for the amount in question which, as adjusted for inflation at December 31, 2005, was R$35 million.

In addition, in June 2004 an assessment notice was issued against TAM Linhas Aéreas claiming ICMS payments supposedly owed by it for the importation of an aircraft under the terms of a commercial lease agreement. We presented our defense against this assessment notice and, in December 2004, a first-instance ruling was published deeming the assessment of ICMS to be in order. In January 2005 we filed the corresponding ordinary appeal before the Taxes and Duties Tribunal and are awaiting a ruling. Payment of the ICMS amounts owed under the aforementioned administrative proceeding have been suspended because of the temporary restraining order, confirmed by a court ruling. According to our legal advisors, our chance of loss in respect of this administrative proceeding is remote. Accordingly, we have established no provision for the amount in question which, as adjusted for inflation at December 31, 2005, was R$16 million.


	Airline worker fund

We have filed an ordinary action with a request for an injunctive relief for non-payment of the Airline Workers Fund, a tax charged monthly at the rate of 2.5% of an airline’s payroll. Payment of the tax credit is suspended by virtue of the injunctive relief in our favor. Currently, the proceeding is in the expert witness phase. In 2004, the INSS issued an assessment notice in order to toll the Statute of Limitations of the social security credit as a result of non-payment of the Airline Workers Fund. The administrative proceeding has been suspended until completion of the judicial process. The approximate adjusted value of this proceeding at December 31, 2005 was R$35.9 million. In the opinion of our legal advisors, the chance of loss in respect of this proceeding is considered possible. On the basis that payment of this tax is required by law, our management established a provision in accordance with the amounts required by law until the final outcome of the judicial action. At December 31, 2005, the provision totaled R$35.9 million.


	Labor actions

At December 31, 2005 we were party to 920 labor claims filed by our employees, former employees or service providers arising from the normal course of our business. We do not believe that such claims (individually or collectively) will have a material adverse effect on our results of operations in the event of unfavorable rulings. Of those 920 labor claims, 546 are against TAM Linhas Aéreas, 374 against service providers or sales representatives and TAM Linhas Aéreas and one is against TAM Mercosul. In the case of the individual labor claims, the principal disputes refer to demands for the payment of hazard supplements, overtime and make-up work, as well as requests for the payment of wage differentials in specific cases involving crew members. We are party to five class actions, two filed by the pilots’ union and three by the airline workers’ union. The total assessed value of those actions was approximately R$110 million at December 31, 2005, and according to our legal advisors, R$59.0 million correspond to claims with a remote chance of loss, R$46.2 million correspond to claims with a possible chance of loss, and R$4.8 million correspond to claims with a probable chance of loss. We have established provisions totaling R$4.8 million at December 31, 2005 in respect of all of these claims. For specific actions we have made court deposits totaling R$7.9 million to address labor claims. The provision is based on our management’s estimate as to likely losses we might incur as a result of the various labor claims filed by current or former employees. We believe the provisioned amount is sufficient as to cover probable losses, estimated as applicable, in the event that the rulings are unfavorable to us.


	*Proceedings instituted by us*


	Damages relating to price freezes

We are plaintiffs in an action filed against the Brazilian government in 1993 seeking damages for breaking-up of the economic-financial equilibrium of an air transport concession agreement as a result of having to freeze our prices from 1988 to September 1993 in order to maintain operations with the prices set by the Brazilian government during that period. The process is currently being heard before the Federal Regional Court and we are awaiting judgment on appeals we have lodged requesting clarification of the initial decision (which we challenged). The estimated value of the action is R$246 million, based on a calculation made by an expert witness of the court. This sum is subject to delinquent interest since September 1993 and inflation adjustment since November 1994. Based on the opinion of our legal advisors and recent rulings handed down by the Supreme Court of Justice in favor of airlines in similar cases (specifically, actions filed by Transbrasil and Varig) we believe that our chance of success is probable. Our management has not posted these credits to our accounts and will only do so when the aforementioned decision is made final.


	Claims on amounts paid in error relating to ICMS

In 2002, TAM Linhas Aéreas filed a claim against the State of São Paulo for amounts paid in error for the ICMS between 1989 and 1994. The action is based on ADIN 1.089-1/DF (which governed ICMS Accord 66/88) and authorized the collection of ICMS on air transportation services), which we are claiming is partially unconstitutional on the grounds that air navigation is included in the category of inter-state and inter-municipal transport and, therefore, is not subject to ICMS. A ruling is pending. According to our legal advisors, our chance of loss in these actions is considered possible. The total value involved, adjusted for inflation at December 31, 2005, is R$111.0 million. We have filed other claims for amounts paid in error against various states in Brazil on the same grounds, with the same chances of loss, in respect of which we are also awaiting a ruling. On the basis that such claims constitute a contingent asset, we have not posted any credits in respect thereof.


	Additional airport tariffs — ATAERO

We also filed an ordinary claim, with a request for early judgment, in relation to a dispute concerning the legality of charging the Adicional das Tarifas Aeroportuárias (Additional Airport Tariffs, or ATAERO), which are charged at a rate of 50% on the value of tariffs and airport tariffs. The total amount involved, adjusted for inflation, at December 31, 2005 totaled R$457 million.

REGULATION OF THE BRAZILIAN CIVIL AVIATION INDUSTRY

Overview

Scheduled air transportation services are considered public services in Brazil and, accordingly, are subject to extensive regulation by the High Command of Aeronautics of the Ministry of Defense (or the High Command of Aeronautics), CONAC and DAC. Scheduled air transportation services are also regulated by the Brazilian federal constitution and by the Brazilian Aeronautical Code.

The Brazilian Aeronautical Code sets out the principal rules relating to airport infrastructure and operations, flight protection and safety, certification of airlines, aircraft leasing structure, liability, transfers, registration and licensing, training of crews, concessions, inspection and control of airlines, public and private air cargo transport services, airlines’ civil liability and penalties for violations.

CONAC is the Brazilian President’s advisory body. Its board of advisors include the Ministry of Defense, the Minister of Civil Affairs, the Minister of Finance, the Minister of Development, Industry and Foreign Trade, the Minister of Foreign Relations, The Minister of Tourism and the Command of the High Command of Aeronautics. CONAC has the authority to establish policies for the Brazilian civil aviation industry that are adopted and carried out by the High Command of Aeronautics and DAC. CONAC establishes general rules related to adequate representation of Brazil in treaties, conventions and other matters related to international air transportation, airport infrastructure, the granting of additional funds to be used to benefit airlines and airports (based on strategic, economic and leisure considerations), the coordination of civil aviation operations, air safety, concessions for the operation of airline services and permits for the provision of related commercial services.

DAC is the main civil aviation authority in Brazil and reports directly to the High Command of Aeronautics. DAC is responsible for conducting, planning, encouraging and supporting public and private civil aviation companies in Brazil. DAC regulates flight operations in general and economic considerations that affect air transport, including matters related to air safety, certification and adequacy, insurance, consumer protection and competitive practices.

The Brazilian government has recognized and approved the three main international conventions related to world commercial air transportation operations: the Warsaw Convention of 1929, the Chicago Convention of 1944 and the Geneva Convention of 1948.


	*Air transportation services concession*

The Brazilian federal constitution grants the Brazilian government the exclusive authority to explore air transportation services and airport infrastructure and provides that the government can render these services either directly or indirectly through third parties (by means concessions or permits). According to the Brazilian Aeronautical Code and regulations issued by the High Command of Aeronautics, any operation of scheduled air transportation services requires a concession granted by the High Command of Aeronautics. The terms of each concession must be formalized by means of a concession agreement entered into with DAC. Any company seeking a concession must meet certain economic, financial, technical, operational and administrative requirements established by DAC. In addition, all companies seeking a concession must (i) be legal entities constituted in Brazil, (ii) obtain a valid Air Operation Approval Certification (CHOA) — corresponding to the former Air Transport Operation Approval Certification (CHETA), and (iii) comply with certain restrictions regarding ownership of its shares or quotas. See “— Restrictions regarding ownership of shares or quotas in airlines.”

DAC has the authority to revoke a concession in the event of any failure by an airline to comply with the rules of the Brazilian Aeronautical Code, supplemental laws and regulations and the terms of the applicable concession agreement.

Article 122 of Law No. 8,666 of June 21, 1993 provides that concessions must be regulated by specific procedures stipulated in the Brazilian Aeronautical Code. The Brazilian Aeronautical Code and the regulations issued by the Command of the High Command of Aeronautics do not expressly establish

any bidding procedures in relation to concessions. Accordingly, it is not currently necessary to conduct bidding prior to awarding concessions for the operation of air transportation services (such as ours) as would be required in the case of other public services generally regulated by laws applicable to public concessions.

Our concession to operate scheduled air transportation of passengers, cargo and mail at a national level was obtained on December 9, 1996 through the issuance of Ordinance 816/ GM5 and the execution of the relevant concession agreement, which will remain valid until December 9, 2011. Although we can offer no guarantee that we will be able to renew our concession, we do not currently foresee any problems in relation to such renewal.


	*Importation of aircraft into Brazil*

The importation of civil and commercial aircraft into Brazil is subject to the prior approval of COTAC (a sub-department of DAC). In authorizing the importation of aircraft, COTAC analyzes, among other things, the need to import the asset and the financial terms in relation to the proposed transaction. Upon obtaining COTAC’s authorization, the importing party must follow the other general procedures relating to the importation of goods into Brazil. Finally, the importing party must register the aircraft with RAB.


	*Aircraft registration*

The registration of aircraft in Brazil is governed by the Brazilian Aeronautical Code. The Brazilian Aeronautical Code provides that no aircraft is authorized to fly in Brazilian airspace or to land in or take-off from Brazilian territory without being duly registered. In order to remain registered with a Brazilian registration number, an aircraft must have both a certificate of registration and an airworthiness certificate (certificado de navegabilidade) , each of which are issued by RAB after a technical inspection by DAC. The certificate of registration issued by DAC attributes Brazilian nationality to the aircraft and proves for its enrollment with the proper authorities. The airworthiness certificate is generally valid for six years from the date on which DAC conducted its inspection of the aircraft and provided authorization for it to fly over Brazilian airspace (subject to continued compliance with certain technical requirements and conditions). The registration of any aircraft can be cancelled in the event that the authorities verify that such aircraft is not in compliance with the requirements for registration (in particular any failure to adapt the aircraft to any safety requirements specified by DAC or by the Brazilian Aeronautical Code).

All agreements relating to aircraft registered in Brazil, including sale and purchase agreements, financial commercial leasing agreements, operating leases, mortgages (and amendments to any such agreements) must be submitted to the Brazilian Aeronautical Registry (RAB) for the purpose of publishing the transactions contemplated thereby and updating aircraft registration.

Rights to Operate Air Routes


	*Domestic routes*

DAC has the authority to grant Brazilian airlines the right to operate any new route. Any airline seeking to operate a new route must submit studies proving both the technical and economic feasibility of the proposed route (in form satisfactory to DAC) and must fulfil certain conditions in relation to the awarding of those routes. In respect of awarding any new route or approving any change to existing routes, DAC evaluates the infrastructure capacity of the airports from which the route will be operating and the increase in demand and competition between airlines. In addition, approval for operation of a route is made subject to the condition that the route must be operated on a scheduled basis. The operation of a route by any airline can be cancelled in the event that airline (i) fails to initiate operation of the route within 15 days of receiving authorization, (ii) fails to maintain at least 75% of the flights established in the respective National Air Transport Schedule (hotran) for a period of 90 days, or (iii) suspends operations for more than 30 days. DAC’s approval of new routes or changes to existing routes is given in

the course of an administrative proceeding and does not require any amendment to the applicable concession agreement.

Once awarded, the routes must be immediately reflected in hotran (the report of the itinerary of all routes an airline operates), which will then become an integral part of each airline’s database at DAC. hotran not only establishes the routes but also the arrival and departure times at certain airports, none of which can be changed without the prior approval of DAC. Brazilian civil aviation laws and regulations provide that an airline may not sell or transfer routes to another airline.


	*International routes*

International airlines are those with points of departure in Brazilian territory and points of arrival in foreign territory, operated by Brazilian companies previously designated by the Brazilian government and operated in accordance with the terms of bilateral agreements with foreign governments. The rights to international routes between major cities (as well as the corresponding landing rights) are derived from bilateral air transportation agreements negotiated between the government of Brazil and foreign governments. Pursuant to the terms of those agreements, each government grants the other the right to designate one or more domestic airlines to operate scheduled service between certain destinations in each country.

Requests for new international routes or changes in existing routes must be submitted by each interested Brazilian airline to CERNAI, which evaluates each request based on the provisions of the applicable bilateral agreement, the availability of existing routes between the two countries and the general policies of the Brazilian aviation authorities. Following such evaluation, CERNAI forwards the request to DAC in order that DAC may take any necessary steps required in relation to qualification of the international route.

Ordinance No. 569/ GC5 of September 5, 2000 provides that international air transportation services may be cancelled in the event that such services are (i) not implemented or operated for more than six months, (ii) the airline is proven to be incapable of performing the service, or (iii) the airlines fails to comply with the agreements, laws and regulations of the High Command of Aeronautics.


	*Policy on slots*

Each hotran represents the authorization for an airline to land and take off at certain airports within a predetermined space of time. That space of time is known as an airport slot and establishes that an airline can operate in a specific airport at the times contained in the hotran.

Brazilian law provides that a slot is a DAC concession reflected in an airline’s hotran. As is in the case with routes, a slot is not owned by the airline and may not be transferred to another airline.

The more congested Brazilian airports are subject to traffic restrictions via slot allocation policies. DAC may grant additional slots to an airline at the request of the airline, which must be submitted at least one month in advance.

The Departmento de Controle do Espaço Aéreo (or DECEA) is responsible for coordinating and inspecting the infrastructure support facilities of airports. DECEA, acting jointly with DAC and Infraero, also conducts studies at all Brazilian airports to determine the maximum operating capacity of each airport. Congonhas airport in São Paulo currently has slot restrictions. We currently have the largest number of slots of any airline at Congonhas airport. Investments currently being made in Brazilian aviation infrastructure are expected to enable an increase in aircraft operations at congested airports and, consequently, the granting of new slots to airlines.


	*Aviation infrastructure and the airport system*

services either directly or indirectly through third parties (by means of concessions or permits). The installation and operation of any aviation infrastructure services inside or outside an airport will always require the prior authorization of the aviation authority, which will also supervise them.

Although air navigation takes place in the air, it begins and ends on the ground and, accordingly, ground structures are required for the operation of air navigation systems. Any surface structure which is intended to meet the needs of air navigation is included under the category of aviation infrastructure. Accordingly, aviation infrastructure is broadly defined and includes all ground organizations, assets and facilities that support the development of air navigation. Aviation infrastructure is made up of the group of ground agencies, facilities or structures that support air navigation in relation to safety, schedules and efficiency, including (i) the airport system, (ii) the flight protection and safety system, (iii) the Brazilian Aviation Registration system; (iv) the air accident investigation and prevention system, (v) the system of air transport safety and coordination facilities, (vi) the system of personnel training and education for the air navigation and aviation infrastructure, (vii) the aviation industry’s system of coordination, and (viii) the aviation infrastructure coordination system.

The airport system consists of all Brazilian landing fields (military and civilian, private and public) used for domestic aviation and international flights. Airports are public landing fields equipped with installations and facilities to support aircraft operations and the departure and arrival of passengers and cargo. The construction, administration, and operation of airports are subject to the rules, instructions, coordination and control of the aviation authority. Airports include areas intended for airport administration, public agencies that function on a mandatory or optional basis in the airports (such as those relating to the Federal Revenue Service (customs), the Ministry of Justice (federal police), the Ministry of Health (health supervision), or the Ministry of Agriculture (agricultural inspection)). In addition to these administrative areas, airports contain areas for passenger, baggage and cargo service and movement and for the general public (including vehicle parking facilities). Airports are open to traffic and the public by means of the approval of the aviation authorities. Airports may be built, maintained and operated directly by the Brazilian government or through concessions, authorizations or permits. Airports may also be operated by specialized quasi-public enterprises under the Brazilian government or its subsidiaries, reporting to the High Command of Aeronautics (such as INFRAERO), by Brazilian states or Municipalities and by legal entities considered technically, economically and financially qualified by the aviation authorities.

INFRAERO, a government agency reporting to the Ministry of Defense, has the function of managing, operating, and controlling most Brazilian federal airports (including their control towers and airport safety operations). Smaller airports and regional airports may belong to state or municipal governments and, in such cases, are frequently managed by local government agencies. INFRAERO performs safety activities at most Brazilian airports, including the verification of passengers and baggage, cargo safety and general airport safety measures.

The use of areas within federal airports (such as hangars and check-in counters) is subject to a concession-for-use granted by INFRAERO. Where there is more than one candidate to use a certain airport area, INFRAERO may institute a bidding process.


	*Prices*

Brazilian airlines are freely able to set their prices for domestic routes but must register the prices with DAC for monitoring purposes. DAC constantly monitors airfares and may intervene in the market and in scheduled air service concessions to prevent acts against economic order and to protect the interests of consumers. Airlines may establish price discounts or follow other promotional strategies. Airlines must submit any promotional passenger fare discounts greater than 65% of DAC’s reference rate per kilometer to DAC at least five business days in advance. Reference rates are established by DAC based on Brazilian civil aviation’s average operating costs.

International prices are established in accordance with bilateral agreements. In addition, airlines operating international routes must negotiate their rates with the International Air Transport Association (IATA) and then submit the negotiated rates to DAC for approval.


	*Civil liability*

The Brazilian Aeronautical Code and the Warsaw Convention limit an aircraft operator’s liability for damage to third parties caused by ground or air operations, or for damage resulting from persons or objects being thrown from aircraft. The Brazilian National Congress is currently in the process of approving the Montreal Convention of 1999, which will replace the Warsaw Convention of 1929, and which will have the effect of increasing the liability limits for civil aircraft operators. We cannot estimate when the Montreal Convention of 1999 will be ratified by the Brazilian government or when it will become part of the Brazilian legal system. The Brazilian courts, however, have occasionally disregarded the liability limits set forth in the Warsaw Convention of 1929 and have granted compensation based on the Civil Code and Consumer Defense Code (which do not expressly set out maximum liability limits).

In response to the substantial increase in insurance premiums to cover damage from terrorist attacks after the September 11, 2001 attacks in the United States, the Brazilian government introduced a law authorizing it to assume responsibility for damage caused to third parties as a result of terrorist attacks or acts of war against aircraft pertaining to Brazilian airlines. See “Business — Insurance.”


	*Environmental legislation and regulations*

Brazilian airlines are subject to various federal, state and municipal environmental protection laws, including in relation to the disposal of materials and chemical substances and noise pollution generated by aircraft. These laws and regulations are applied by the state and municipal governmental authorities, which can impose administrative sanctions following violations, in addition to liability in the civil and criminal courts for any party violating the laws and regulations. For example, according to a DAC ordinance, the operation of scheduled commercial flights departing from or arriving at Congonhas Airport is subject to a noise ban from 11:00 P.M. to 6:00 A.M. because of the airport’s proximity to residential areas in the city of São Paulo.


	*Restrictions against the ownership of shares in airlines operating under concessions*

The Brazilian Aeronautical Code provides that, in order to be entitled to a concession to operate scheduled service, and subject to the carve-outs described below, 80% of an airline’s voting capital must be held directly or indirectly by Brazilian citizens and certain management positions must be held only by Brazilian citizens.

The Brazilian Aeronautical Code sets out certain restrictions against transferring the capital of scheduled airlines operating under concessions (such as our subsidiary, TAM Linhas Aéreas) including the following restrictions:


	•	shares with voting rights must be registered and the company’s by-laws must prohibit the conversion of preferred shares with no voting rights into shares with voting rights;

	•	DAC’s prior approval of any share transfer, regardless of the investor’s nationality, which would result in (i) a change in the company’s control, (ii) the concessionaire’s ownership of more than 10% of the company’s capital, or (iii) a transfer of more than 2% of the company’s capital stock;

	•	the company must submit to DAC in the first month of each six-month period a detailed chart of shareholder participation, including a list of shareholders and a list of all share transfers that occurred during the six-month period; and

	•	based on the information in the chart described above, DAC may determine that subsequent transfers must be subject to its prior approval.

Our corporate purpose is the management of corporate participation in airlines. We hold shares representing the shareholding control of TAM Linhas Aéreas, which, in turn, is a company operating under a concession for the operation of scheduled air transportation services. The Brazilian Civil Aviation code provides that the restrictions against share transfers described above apply only to companies operating under concessions for the operation of scheduled air transportation service and, accordingly, do not apply to us. This offering will not result in any change in the direct or indirect control of TAM Linhas Aéreas, or any reduction in participation in the voting capital held by Brazilian citizens at a level of less than 80%. Accordingly, it is not necessary to obtain prior authorization from DAC for this offering.


	*Future legislation*

On September 27, 2005, President Luis Inácio Lula da Silva approved Law No. 11,182 relating to the creation of the National Civil Aviation Agency, or ANAC, which will replace DAC as the primary civil aviation authority. According to Law No. 11,182, ANAC will be responsible for organizing civil aviation within a coherent system (coordinating and supervising air transportation service and aviation and ground infrastructure) and for modernizing the regulation of Brazilian aviation operations. ANAC will be linked, but not subordinated, to the Ministry of Defense and will operate as an independent agency managed only by civilians, who will report to the President. ANAC will principally have the authority to (i) regulate, inspect and supervise services rendered by Brazilian and foreign airlines operating in Brazil, (ii) grant concessions, permits and authorizations for air transport operations and airport infrastructure services, (iii) represent the Brazilian government before international civil aviation organizations and (iv) control, register and inspect civil aircraft.

Law No. 11,182 also establishes that ANAC shall conduct a bidding process prior to the granting of any new concession. In accordance with Section 7 of Law No. 11,182, ANAC shall be implemented and commence its activities within 180 days as of September 28, 2005. However, it is necessary that the Brazilian Government issue a decree setting forth the organizational structure of the agency as well as its internal regulatory regime. As soon as ANAC commences its activities DAC will be extinguished and will transfer all its responsibilities and operations to such new agency.

In addition, on March 28, 2001, CONAC published for public consultation a draft of a bill to replace the Brazilian Aeronautical Code and modernize the basic laws and regulations relating to the industry. In general, this draft deals with matters related to civil aviation, including airport concessions, consumer protection, increased foreign shareholding participation in airlines, limitation of airlines’ civil liability, compulsory insurance and fines.


	*Federal intervention*

The executive branch of the government may intervene in Brazilian civil aviation companies whenever their operations or financial situations jeopardize the continuation, efficiency and safety of Brazilian air transportation services. The purpose of federal intervention is to re-establish normal service by the company and the intervention may last as long as necessary to achieve this purpose, though it may not exceed a period of two years. In the event that a technical inspection conducted before or after the decree of federal intervention demonstrates that the re-establishment of normal service would be impractical, the federal intervention can be converted to extra-judicial liquidation, provided at least half the company’s debts can be liquidated by means of a sale of its assets. In the event that the company’s assets are not sufficient to pay at least half of the company’s debts (or in the event that there is evidence of fraud), the federal intervention or extra-judicial liquidation must be converted to bankruptcy.


	*New bankruptcy law*

On February 9, 2005, the President of Brazil sanctioned Law No. 11,101 (which we refer to as the New Bankruptcy Law or the Law for the Recovery of Companies and Bankruptcies). The New Bankruptcy Law, which became effective on June 9, 2005 and which replaced the current bankruptcy law (Decree-Law No. 7,661/45), introduced significant innovations in the Brazilian bankruptcy system. In

general, the New Bankruptcy Law creates new processes of extra-judicial recovery and judicial recovery (the latter being a replacement for current bankruptcy protection) and introduces other relevant changes in the bankruptcy process. Business owners and business partnerships will be subject to the New Bankruptcy Law, including those whose purpose is to operate air services or aviation infrastructure of any kind, and those who are currently prevented from filing for bankruptcy protection.

Through the extra-judicial recovery process, a debtor may ask the judiciary to approve agreements with one or more classifications of creditors or with groups of creditors of the same classification with similar payment terms. The plan may not include credits of a labor or tax nature or those derived from future exchange contracts, leasing agreements or fiduciary agreements. Once approved, the plan will apply to all creditors who adhered to it and will be binding on all creditors included in its scope, even those who did not sign the plan, provided that the debtor obtained the approval of at least three-fifths of the creditors of each class of creditors.

The judicial recovery process consists of judicial action intended to remedy the debtor’s financial problems and enable it to continue its operations (provided that the economic feasibility of continuing operations can be proven). Unlike the current Brazilian bankruptcy protection system, which merely covers unauthenticated credits, the judicial recovery process obliges all prior creditors to go to court to recover credits, including labor creditors, except credits of a labor or tax nature or those derived from future exchange contracts, leasing agreements or fiduciary agreements. The recovery plan submitted by the debtor must present a proposal for the payment of debts, indicating the means of recovery to be utilized. In the event that a creditor should object to the plan proposed by the debtor, the judge must call a meeting of the creditors to decide whether to accept or refuse the plan. In the case of refusal, the judge must declare the debtor bankrupt. In the case of acceptance and subsequent granting of judicial recovery, the original obligations of the debtor will be novated.

The principal innovations introduced by the New Bankruptcy Law include (i) the requirement of a minimum amount of credit necessary for the creditor to request the debtor’s bankruptcy; (ii) elimination of suspensive bankruptcy protection, (iii) the possibility of a rapid sale of assets (with priority given to sales of blocks of assets), and (iv) an alteration in the order of credit classification.

In the case of judicial recovery and bankruptcy of airlines, the exercise of rights derived from commercial aircraft leasing agreements (or parts thereof) will not be suspended.

MANAGEMENT

In accordance with our by-laws and Brazilian corporation law, we are managed by our Conselho de Administração (board of directors), made up of eight members and our Diretoria (board of executive officers), made up of at least four and no more than eight members. We also have a non-permanent Conselho Fiscal (fiscal council) which is made up of five sitting members and five alternates.

Board of Directors

Our board of directors provides our general, strategic management guidelines and is responsible for, among other things, setting general commercial policies and electing the executive officers (as well as for supervising their management). Our board of directors meets every month or whenever requested by the chairman, vice-chairman, or any by two members of the board of directors.

Brazilian corporation law provides that members of a company’s board of directors must be shareholders in that company (although there is no specified minimum number of shares that such members must hold) and must be elected at a shareholders’ meeting. Members, who may reside or be domiciled in Brazil or abroad, are elected for a period of one year and re-election is permitted. The terms of office of the current members of our board of directors end on April 30, 2006 unless they are re-elected. Our by-laws do not specify an age limit for mandatory retirement of members of our board of directors.

Brazilian corporation law together with Article 24 of our by-laws provides that members of our management may only enter into contracts with us under reasonable and equitable terms, either identical to those prevailing in the market or to those pursuant to which we would ordinarily contract with third parties. Such transaction must also be approved by at least five of our directors at a board meeting and any director may request an independent expert to evaluate whether such agreement does in fact contain arm’s length terms. Furthermore, pursuant to the shareholders agreement, TEP, Aerosystem and the Investment Funds have agreed to require the directors appointed by them to refrain from voting at any board meeting involving transactions with directors and other related parties. Brazilian corporation law also prevents such persons from voting at any shareholders’ meeting or intervening in any corporate action in respect of which there is a conflict of interest between their interest and ours.

The following table sets forth the name, position, election date, and termination date of the current terms of office of each member of our board of directors unless they are re-elected. The business address each member is the address of our head office, Avenida Jurandir, 856, Lote 4, 1° andar, São Paulo, SP, Brazil.


Name	Position	Date of Election		Termination Date





Noemy Almeida Oliveira Amaro	Chairman		08/27/2001		04/30/2006




Maria Cláudia Oliveira Amaro Demenato	Vice-chairman		09/18/2003		04/30/2006




Maurício Rolim Amaro	Board Member		12/20/2004		04/30/2006




Henri Philippe Reichstul	Board Member		12/20/2004		04/30/2006




Luiz Antônio Corrêa Nunes Viana Oliveira	Board Member		06/27/2003		04/30/2006




Adalberto de Moraes Schettert	Board Member		08/31/2005		04/30/2006




Roger Ian Wright	Board Member		04/30/2003		04/30/2006




Waldemar Verdi Júnior	Board Member		01/23/2006		04/30/2006

Summary biographical information for each member of our board of directors is also set out below:

Noemy Almeida Oliveira Amaro, Chairman of the Board of Directors. Mrs. Amaro has been a member of our board of directors since August 2001 and is the widow of our former chairman, the late Mr. Rolim Adolfo Amaro. Mrs. Amaro was previously a teacher. She is currently a director of our controlling entity, TEP. Mrs. Amaro is also the chairman of the board of directors of Aerosystem and TAM Marília and was appointed to our board of directors by TEP pursuant to the shareholders’ agreement.

Maria Cláudia Oliveira Amaro Demenato, Vice-Chairman of the Board of Directors. Mrs. Demenato has been a member of our board of directors since September 2003. Mrs. Demenato is the daughter of Mrs. Noemy Almeida Oliveira Amaro and holds the position of executive director of TEP and was appointed to our board of directors by TEP pursuant to the shareholders’ agreement. Mrs. Demenato formerly served as executive director of TAM Lines Aéreas and is currently also a member of the board of directors of Aerosystem and TAM Marília. Mrs. Demenato has a degree in Business Administration.

Maurício Rolim Amaro, Board Member. Mr. Amaro has been a member of our board of directors since December 2004. Mr. Amaro is the son of Mrs. Noemy Almeida Oliveira Amaro and holds the position of executive director of TEP. He is also currently a member of the board of directors of Aerosystem and TAM Marília and was appointed by TEP to our board of directors pursuant to the shareholders’ agreement. Mr. Amaro has a degree in Business Administration and Aviation Administration from Broward Community College, located in Florida, United States of America.

Henri Philippe Reichstul, Board Member. Mr. Reichstul has been a member of our board of directors since December 2004 and was appointed by TEP pursuant to the shareholders’ agreement. Mr. Reichstul worked for the International Coffee Organization (IBC) in London, the newspaper Gazeta Mercantil in São Paulo, the Economic Research Institute Foundation of the University of São Paulo (FIPE), and CED — Coordenação das Entidades Descentralizadas da Secretaria de Estado dos Negócios da Fazenda de São Paulo. He was secretary of SEST — Secretaria de Controle de Empresas Estatais , the office of the Secretariat of Planning, the office of the President of the Republic and executive secretary of the Inter-Ministry Council of CISE — Conselho Interministerial de Salários de Empresas Estatais. He was a member of the boards of directors of TELEBRÁS — Telecomunicações Brasileiras S.A., ELETROBRÁS — Centrais Elétricas S.A., SIDERBRÁS — Siderúrgica Brasileira S.A., BNDES, BORLEM S.A. — Empreendimentos Industriais, CEF — Caixa Econômica Federal, LION S.A., and is currently a member of the board of directors of Coinbra (Louis Dreyfus-Brasil) and Prisma Energy International. Mr. Reichstul was the general secretary of planning under the Office of the President of the Republic, chairman of IPEA — Instituto de Planejamento Econômico e Social, executive vice-president of Banco Inter American Express S.A., president of Petrobrás — Petróleo Brasileiro S.A. and president of Globopar. Mr. Reichstul has a bachelor’s degree and master’s degree in Economics.

Luiz Antônio Correa Nunes Viana Oliveira, Board Member. Mr. Oliveira has been a member of our board of directors since June 2003 and was appointed by TEP pursuant to the shareholders’ agreement. He has a degree in Mechanical Engineering. Mr. Oliveira has worked for IBM, Banco Denasa, BNDES and IFC and was also an executive director in Grupo Ultra, Grupo Pão de Açúcar, Petrobrás Distribuidora S.A, and NET Serviços de Comunicação S.A. In addition, he was a member of the boards of directors of Aracruz, Arafertil, Copesul, Riocell, Perdigão, Pão de Açúcar and ABTA.

Adalberto de Moraes Schettert, Board Member. Mr. Schettert has been a member of our board of directors since August 2005 and was appointed by the Investment Funds in accordance with the shareholders’ agreement. He has a degree in Chemical Engineering and Business Administration. Before joining us he worked for Unibanco — União de Bancos Brasileiros S.A., (or Unibanco), Crefidata — Processamento de Dados do Banco Crefisul S.A., the Prefeitura Municipal de Porto Alegre , and Banco Industrial de Investimento do Sul S.A.. In addition, during his time at Unibanco he occupied several executive positions, including the position of vice president. Mr. Schettert worked as a professor at Universidade Federal do Rio Grande do Sul, Universidade Católica de Pelotas and Instituto Educacional São Judas Tadeu. He was also formerly a member of the board of directors of Companhia Siderúrgica Tubarão.

Roger Ian Wright, Board Member. Mr. Wright has been a member of our board of directors since 2003 and was appointed by the Investment Funds in accordance with the shareholders’ agreement. He holds a degree in Business Administration from the University of Pennsylvania. Before joining us, he held executive positions at Adubos Trevos, Garantia Administração de Investimentos S.A., Banco de Investimentos Credit Suisse (Brasil) S.A., Bassini Playfair Wright Ltda. and BPW Wealth Management Ltda.

Waldemar Verdi Júnior, Board Member . Mr. Verdi Júnior has been member of our board of directors since January 2006 and was appointed by TEP in accordance with the shareholders’ agreement. He has a bachelor’s degree in law and has taken extension courses in business administration at the University of Southern California (1977) and INSEAD (1982 and 2004). Mr. Verdi Júnior is a member of the shareholders committee of GRUPO VERDI — GV Holding S.A., and a member of the boards of directors of Banco Rodobens, Companhia Hipotecária Unibanco — Rodobens, Centro das Indústrias do Estado de São Paulo — CIESP, Associação Comercial de São Paulo, COMGÁS — Companhia de Gás de São Paulo and CDES — Conselho do Desenvolvimento Econômico e Social do Presidente Luiz Inácio Lula da Silva . Before joining us, Mr. Verdi Júnior worked for ASSOBENS — Associação Brasileira dos Distribuidores Mercedes-Benz , ABRAD — Associação Brasileira das Administradoras de Consórico dos Distribuidores de Veículos Automotores and FENABRAVE — Federação Nacional da Distribuição de Veículos Automotores .

None of our directors have service contracts with us or any of our subsidiaries providing for any compensation or benefits on the termination of their employment.

Executive Officers

The executive officers are responsible for our daily management and representation. The executive officers exercise the individual responsibilities provided in our by-laws and by our board of directors. Our board of executive officers is currently made up of five members, but can be made of at least four and no more than eight members, shareholders or otherwise, residing in Brazil. The business address of each director is the address of our head office, Avenida Jurandir, 856, Lote 4, 1°andar, São Paulo, SP, Brazil.

Executive officers are elected by our board of directors for a three-year term of office, with re-election permitted. Any member of our board of executive officers may be removed by the board of directors before his or her term of office ends. The current term of office of each member of our board of executive officers ends on April 30, 2006 unless re-elected.

Our Investor Relations Office is located in the city of São Paulo, state of São Paulo, at 896 Avenida Jurandir, Lote 4, Hangar 7, 1°andar. The person responsible for our Investor Relations Office is Mr. Líbano Miranda Barroso, elected director of finance and investor relations at a meeting of our board of directors held on May 17, 2004. The telephone number of our Investor Relations Office is +55 11 5582-8817 and the fax number is +55 11 5581-9167. The e-mail address of our Investor Relations Office is invest@tam.com.br.

The following table sets forth the name, position, date of election and date of termination of the terms of office of each member of our board of executive officers unless re-elected:


Name	Position	Date of Election		Termination Date





Marco Antonio Bologna	Chief Executive Officer		01/14/2004		04/30/2006




Líbano Miranda Barroso	Chief Financial Officer		05/17/2004		04/30/2006




José Wagner Ferreira	Commercial and Marketing Officer		09/19/2001		04/30/2006




Ruy Antônio Mendes Amparo	Technical Operations Officer		11/26/1997		04/30/2006




Gelson Pizzirani	Fleet and Revenue Administration Officer		11/01/2002		04/30/2006

Summary biographical information for each member of our board of executive officers is also set out below:

Marco Antonio Bologna, Director and Chief Executive Officer. Mr. Bologna joined us in 2001, having acted as our Finance and Investor Relations Officer from April 2001 until December 2003 and was appointed by TEP in accordance with the shareholders’ agreement. He is currently a member of the board of the American Chamber of Commerce and the Suzano Paper and Cellulose Group. He previously held various executive positions in major financial institutions as executive director of Lloyds Bank PLC, director of corporate finance of Chase Manhattan Bank, commercial vice-president of Banco Itamarati and managing director of Banco Inter American Express. Mr. Bologna left us in April 2003 and returned in

October of the same year. Mr. Bologna holds a degree in Production Engineering from the Universidade de São Paulo (USP) and has taken extension courses in financial services at the Manchester Business School, University of Manchester in the United Kingdom.

Líbano Miranda Barroso, Chief Financial Officer. Mr. Barroso has been our chief financial officer since May 2004 and was appointed by the Investment Funds in accordance with the shareholders’ agreement. Mr. Barroso held executive positions at major financial institutions, including Banco Nacional S.A., Banco Real S.A., and Banco Safra S.A. He was also Executive Officer at Companhia de Concessões Rodoviárias. Mr. Barroso holds a degree in Economics, an Executive MBA in Finance from IBMEC Business School, and a post-graduate degree in business law from Getúlio Vargas Foundation (Fundação Getúlio Vargas, or FGV).

José Wagner Ferreira, Commercial and Marketing Officer. Mr. Ferreira has been our commercial and marketing officer since September 2001 and was appointed by TEP in accordance with the shareholders’ agreement. He joined us in 1999 and has been working in the air transport industry since 1973. He currently holds an executive position at TAM Linhas Aéreas. Mr. Ferreira has a degree in Business Administration and a post-graduate degree in Systems Analysis.

Ruy Antônio Mendes Amparo, Technical Operations Officer. Mr. Amparo has been our technical operations officer since November 1997 and was appointed by TEP in accordance with the shareholders’ agreement. He joined us in 1989 and has held various executive and administrative positions since then, including manager of aircraft maintenance, currently holding an executive position at TAM Linhas Aéreas. Before joining us, he was an aero-elasticity engineer at Embraer and at Aermacchi, and an aerodynamics engineer at Embraer and Órbita Sistemas Aeroespaciais. He is currently an executive director at TAM Linhas Aéreas. Mr. Amparo has a degree in Aeronautical Engineering from the Institute of Aeronautical Technology (ITA — São Paulo) and a post-graduate degree in aeronautics and aerodynamics from the same institution.

Gelson Pizzirani, Network, Fleet and Revenue Administration Officer. Mr. Pizzirani has been our Network, Fleet and Revenue Administration officer since November 2002 and was appointed by TEP in accordance with the shareholders’ agreement. Before joining us, he held management positions at a number of computer companies. Mr. Pizzirani currently holds executive positions in TAM Linhas Aéreas. Mr. Pizzirani has a degree in Mathematics from the Universidade de Santo André and a post-graduate degree in Strategic Management of Information Technology from the FGV.

Fiscal Council

According to Brazilian corporation law, each company’s fiscal council must be an independent body that is separate from the company’s management and external auditors (and may or may not be permanent). The fiscal council is installed to act during a given year at the request of shareholders representing at least 10% of the voting shares or 5% percent of non-voting shares. The fiscal council’s principal function is to oversee the activities of management and to examine and provide its opinion in regard to the financial statements and certain proposals of management submitted to shareholders’ meetings.

Brazilian corporation law provides that persons elected to the fiscal council must be individuals residing in Brazil, with a college degree or at least three years’ experience as a business manager or fiscal council member. The following persons may not be elected to a Fiscal Council (i) persons disqualified by a special law or convicted of bankruptcy fraud, embezzlement, bribery, or crimes against public economic order, public faith, property or a criminal penalty that prohibits, even if temporarily, access to public positions, (ii) members of the management and employees of the company or its subsidiaries, and (iii) the spouse or relative three times removed of any member of the company’s management. Brazilian corporation law also provides that members of the fiscal council must receive compensation equal to at least 10% of the average amount paid to our executive officers.

Brazilian corporation law requires that the fiscal council be made up of at least three and no more than five members and their respective alternates. Our by-laws provide that our fiscal council must be non-permanent in nature and that it be installed by a shareholders’ meeting. Our fiscal council, when active, must be made up of five members plus their respective alternates.

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Our fiscal council was established on January 11, 2006. The members of our fiscal council are:


Name	Date of Election





Antonio Fernando Siqueira Rodrigues		01/11/06




Edvaldo Massao Murakami		01/11/06




Nilton Maia Sampaio		01/11/06




Pedro Wagner Pereira Coelho		01/11/06




Márcio Mancini		01/11/06

The appointment of each member of our fiscal council will end on the date that our 2007 annual shareholders’ meeting takes place. Summary of biographical information for each member of our fiscal council is set out below:

Antonio Fernando Siqueira Rodrigues . Mr. Siqueira Rodrigues has been a member of our fiscal council since January 2006. He has a bachelor’s degree in law at USP. Mr. Siqueira Rodrigues is currently the general council of Grupo Mapfre Seguros e Previdência, a member of the board of directors of Mapfre Nossa Caixa Vida e Previdência S.A. and a member of the board of executive officers of Mapfre Distribuidora de Títulos e Valores Mobiliários S.A. Mr. Siqueira Rodrigues previously worked for Grupo Mercantil Finasa, Sistema Financeiro Bandeirantes, Grupo Itamarati, EBT Executivos Associados and BPA Participações e Administração — Consultor.

Edvaldo Massao Murakami . Mr. Murakami has been a member of our fiscal council since January 2006. He has a bachelor’s degree in accounting. Mr. Murakami previously worked for Banco Auxiliar S.A., Banco Itaú S.A., Banco Royal do Canadá (Brasil) S.A., Banco Iochpe S.A., Banco Itamarati S.A., Banco Inter American Express S.A. and Banco VR S.A.

Nilton Maia Sampaio . Mr. Sampaio has been a member of our fiscal council since January 2006. He has a bachelor’s degree in accounting and has taken extension courses in financial, accounting and business administration. Mr. Sampaio is currently in the process of obtaining a master’s degree in accounting. Mr. Sampaio previously worked for COMGÁS — Companhia de Gás de São Paulo, CESP — Companhia de Energética de São Paulo, Concessionária Rota 116 S.A., Concessionária de Rodovias TEBE S.A. and Prefeitura Municipal de Campo Grande — M.S.

Pedro Wagner Pereira Coelho . Mr. Coelho has been a member of our fiscal council since January 2006. He has a bachelor’s degree in accounting and business administration. Mr. Coelho is currently a member of the fiscal councils of Telemar Participações S.A., Tele Norte Leste Participações S.A., Telemar Norte Leste S.A., Lojas Americanas S.A. and Empresa Energética de Mato Grosso do Sul — ENERSUL. Mr. Coelho previously worked for Price Waterhouse Auditores Independetes.

Márcio Mancini . Mr. Mancini has been a member of our fiscal council since January 2006. He has a bachelor’s degree in business administration. Mr. Mancini is currently a member of the fiscal councils of Lojas Americanas S.A., COMGÁS — Companhia de Gás de São Paulo and AES Tietê S.A. Mr. Mancini previously worked for AES Sul Distribuidora Gaúcha de Energia, Hedging Griffo Asset Management and BMS Partners Serviços Financeiros.

In addition, pursuant to our shareholders’ agreement, at any shareholders’ meeting where the agenda contains matters related to the election and appointment of members of our fiscal council, the parties to our shareholders’ agreement have agreed to vote in such a way as to ensure that the fiscal council will be made up of (i) three members elected by TEP, and (ii) up to two members elected by the Investment Funds (and that, in the event that any other minority shareholders have the ability to elect the one member, the Investment Funds have the guaranteed right to elect the other member).

Swearing-In of Members of Our Board of Directors, Board of Executive Officers and Fiscal Council

The members of our board of directors, board of executive officers and fiscal council (i) will take office upon signing the respective term drawn up in the proper book, which is itself conditional on them signing BOVESPA’s agreement in respect of companies listed on the Level 2 segment of BOVESPA, and

101

(ii) must notify BOVESPA, immediately after they are sworn-in, as to how many securities issued by us they own (directly or indirectly) and the characteristics of such securities (including derivatives).

Compensation

Brazilian corporation law and our by-laws provide that our shareholders are responsible for setting the total compensation to be paid every year to our board of directors and board of executive officers. Only if the shareholders set a global figure for the total compensation to be paid, is the board of directors then solely responsible for distributing that compensation individually, in accordance with the terms of our by-laws.

In the year ended December 31, 2005, total compensation (including cash and in-kind benefits) paid to the members of our board of directors and to our executive officers was approximately R$454,000 and R$21.6 million, respectively. For the year ended December 31, 2006, our shareholders authorized the payment of a total of up to R$1,200,000 to the members of our board of directors.

Share Purchase Option Plan

We have implemented a preferred share purchase option plan for our and our controlled companies officers and employees, as approved at our shareholders’ meeting held on September 29, 2005. On December 21, 2005, our board of directors approved the names of participants in our share purchase option plan (each being one of our employees or an employee of one of our controlled companies) and granted a total of 715,252 options number of shares to be granted to each such participant. We are expecting to enter into the relevant to such participants. The share purchase options will be granted on annual basis in accordance with our board of directors’ resolution as long as the maximum amount of 2% of dilution of the participation of current shareholders is not exceeded and certain annual value-added goals are reached. The strike price will correspond to 80% of the average of the market price of our shares in the preceding month of the granting, as adjusted for inflation. Exceptionally for the first granting, the strike price will be R$14.40, as adjusted for inflation. The participants of our share purchase option plan may exercise their options within seven years as of the date of the relevant granting. The vesting term will last five years and will be composed by three annual installments, respectively due on the third, fourth and fifth year. Our share purchase option plan will be effective for five years from September 29, 2005.

Share Ownership

The following table sets forth the class, number and percentage of shares held by our directors at the date of this prospectus:


	Number of		Number of
	Common		Preferred
Name	Shares Held		Shares Held

Noemy Almeida Oliveira Amaro		1		14,585




Maria Cláudia Oliveira Amaro Demenato		1		706,765




Maurício Rolim Amaro		1		706,765




Henri Philippe Reichstul		1		—




Luiz Antônio Corrêa Nunes Viana Oliveira		1		—




Adalberto de Moraes Schettert		—		1




Roger Ian Wright		—		1

At the date of this prospectus, none of our executive officers holds any of our common or preferred shares.

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PRINCIPAL AND SELLING SHAREHOLDERS

Share Ownership

The following table shows the shareholdings of each shareholder holding 5% or more of our common or preferred shares and of the members of our board of directors and our board of executive officers, both at February 14, 2006 and after the completion of this offering (without the exercise of the over-allotment option):


	Shares Beneficially Owned				Number of		Shares Beneficially
	Prior to Offering				Shares		Owned After Offering
					Being
Shareholders	Number		Percent		Offered		Number		Percent

*Common Shares*




TAM — Empreendimentos e Participações S.A. ⁽¹⁾		58,180,632		97.30%		0		58,180,632		97.30%




Aerosystem S.A. Empreendimentos e Participações ⁽²⁾		1,515,656		2.53%		0		1,515,656		2.53%




Agropecuária Nova Fronteira Ltda. ⁽³⁾		79,516		0.13%		0		79,516		0.13%




Brazilian Equity Investments III LLC ⁽⁴⁾		1		0%		0		1		0%




Brazilian Equity LLC		1		0%		0		1		0%




Latin America Capital Partners PIV LLC ⁽⁵⁾		1		0%		0		1		0%




Brasil Private Equity Fundo de Investimento em Participações ⁽⁶⁾		1		0%		0		1		0%




Latin America Capital Partners II LLC ⁽⁷⁾		1		0%		0		1		0%




Marcos Adolfo Tadeu Senamo Amaro		0		0%		0		0		0%




João Francisco Amaro		0		0%		0		0		0%




Minority Shareholders		19,030		0.03%		0		19,030		0.03%




Noemy Almeida Oliveira Amaro		1		0%		0		1		0%




Maria Cláudia Oliveira Amaro Demenato		1		0%		0		1		0%




Maurício Rolim Amaro		1		0%		0		1		0%




Henri Philippe Reichstul		1		0%		0		1		0%




Luiz Antônio Corrêa Nunes Viana Oliveira		1		0%		0		1		0%




Waldemar Verdi Júnior		1		0%		0		1		0%




Adalberto de Moraes Schettert		0		0%		0		0		0%




Roger Ian Wright		0		0%		0		0		0%




Treasury shares		0		0%		0		0		0%




Total		59,794,845		100.00%		0		59,794,845		100.00%
*Preferred Shares*




TAM — Empreendimentos e Participações S.A. ⁽¹⁾		20,454,654		24.27%




Aerosystem S.A. Empreendimentos e Participações ⁽²⁾		2,703,985		3.21%




Agropecuária Nova Fronteira Ltda. ⁽³⁾		0		0%




Brazilian Equity Investments III LLC ⁽⁴⁾		3,804,611		4.52%




Brazilian Equity LLC ⁽⁸⁾		1,005,795		1.19%




Latin America Capital Partners PIV LLC ⁽⁵⁾		1,156,610		1.37%

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	Shares Beneficially Owned				Number of	Shares Beneficially
	Prior to Offering				Shares	Owned After Offering
					Being
Shareholders	Number		Percent		Offered	Number	Percent

Brasil Private Equity Fundo de Investimento em Participações ⁽⁶⁾		17,604,804		20.90%




Latin America Capital Partners II LLC ⁽⁷⁾		4,546,278		5.40%




Marcos Adolfo Tadeu Senamo Amaro		285,627		0.34%




João Francisco Amaro		156,155		0.19%




Minority shareholders		31,117,981		36.94%




Noemy Almeida Oliveira Amaro		14,585		0.01%




Maria Cláudia Oliveira Amaro Demenato		706,765		0.83%




Maurício Rolim Amaro		706,765		0.83%




Henri Philippe Reichstul		0		0%




Luiz Antônio Corrêa Nunes Viana Oliveira		0		0%




Waldemar Verdi Júnior		0		0%




Adalberto de Moraes Schettert		1		0%




Roger Ian Wright		1		0%




Treasury shares		0		0%




Total		84,264,617		100.00%



⁽¹⁾	TAM — Empreendimentos e Participações S.A., is owned by the Amaro family and has its principal offices at Avenida Monsenhor Antonio Pepe, 331, São Paulo, SP, Brazil. Noemy Almeida Oliveiro Amaro whose business address is at Avenida Monsenhor Antonio Pepe, 331, São Paulo, SP, Brazil; Maria Claudia Oliveira Amaro Demenato whose business address is at Avenida Monsenhor Antonio Pepe, 331, São Paulo, SP, Brazil; Maurcio Rolim Amaro whose business address is at Avenida Monsenhor Antonio Pepe, 331, São Paulo, SP, Brazil; Marcos Adolfo Tadeu Senamo Amaro whose business address is at Rua Silvio Tramontano, 231, house 15, São Paulo, SP, Brazil; and João Francisco Amaro whose business address is at Avenida Monsenhor Antonio Pepe, 387, São Paulo, SP, Brazil own all of the shares in the company and exercise all of the voting rights and investment power.



⁽²⁾	Aerosystem S.A. Empreendimentos e Participações is owned by the Amaro family and has its principal offices at Ava Monsenhor Antônio Pepe, No. 94, São Paulo, SP, Brazil. Noemy Almeida Oliveiro Amaro whose business address is at Avenida Monsenhor Antonio Pepe, 331, São Paulo, SP, Brazil; Maria Claudia Oliveira Amaro Demenato whose business address is at Avenida Monsenhor Antonio Pepe, 331, São Paulo, SP, Brazil; Maurcio Rolim Amaro whose business address is at Avenida Monsenhor Antonio Pepe, 331, São Paulo, SP, Brazil; Marcos Adolfo Tadeu Senamo Amaro whose business address is at Rua Silvio Tramontano, 231, house 15, São Paulo, SP, Brazil; and João Francisco Amaro whose business address is at Avenida Monsenhor Antonio Pepe, 387, São Paulo, SP, Brazil own all of the shares in the company and exercise all of the voting rights and investment power.



⁽³⁾	Agropecuária Nova Fronteira Ltda. is owned by the Amaro family and has it principal offices at Fazenda Jaguarundy, Rodovia BR 463-KM 109, Ponta Porá, Mato Grosso do Sul, Brazil. Noemy Almeida Oliveiro Amaro whose business address is at Avenida Monsenhor Antonio Pepe, 331, São Paulo, SP, Brazil; Maria Claudia Oliveira Amaro Demenato whose business address is at Avenida Monsenhor Antonio Pepe, 331, São Paulo, SP, Brazil; Maurcio Rolim Amaro whose business address is at Avenida Monsenhor Antonio Pepe, 331, São Paulo, SP, Brazil; Marcos Adolfo Tadeu Senamo Amaro whose business address is at Rua Silvio Tramontano, 231, house 15, São Paulo, SP, Brazil; and João Francisco Amaro whose business address is at Avenida Monsenhor Antonio Pepe, 387, São Paulo, SP, Brazil own all of the shares in the company and exercise all of the voting rights and investment power.


⁽⁴⁾	Brazilian Equity Investments III LLC is a limited liability company organised under the laws of the State of Delaware, and has its principal offices c/o The Corporation Trust Company, Orange Street,

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1209, Wilmington, New Castle, Delaware, 19801. Brazilian Equity Investments III LLC is co-managed by Credit Suisse Investment Bank (Bahamas) Limited (Credit Suisse Bahamas) and Bassini Playfair Wright Advisors Inc. Voting power over investments, divestments and other strategic matters is exercised by the investment committee of Brazilian Equity Investments III Ltd. (which is the sole shareholder of Brazilian Equity Investments III LLC). Brazilian Equity Investments III Ltd.’s investment committee is made up of the following four persons: Mauro Bergstein and Nilson Teixeira (who were appointed by Credit Suisse Bahamas) and Emilio Bassini and Piers Playfair (who were appointed by Bassini Playfair Wright LLC).

⁽⁵⁾ Latin America Capital Partners PIV LLC is a limited liability company organised under the laws of the State of Delaware, and has its principal offices at 1209 Orange Street, Wilmington, Delaware 19801. Latin America Capital Partners PIV LLC is managed by Bassini Playfair Wright Advisors Inc. Voting power over investments, divestments and other strategic matters is exercised by Emilio Bassini, Piers Playfair and Roger Wright.

⁽⁶⁾ Brasil Private Equity Fundo de Investimento em Participações is a private equity fund incorporated in Brasil managed by Credit Suisse (Brasil) Distribuidora de Títulos e Valores Mobiliários S.A. (Credit Suisse DTVM), and has its principal offices at Avenida Brigadeiro Faria Lima, 3064, 13th Floor, São Paulo, SP, Brazil. Brasil Private Equity Fundo de Investimento em Participações is managed by Credit Suisse DTVM. Voting power over investments, divestments and other strategic matters is exercised by Brasil Private Equity Fundo de Investimento Participações’ investment committee, which is made up of the following five persons: Antonio Carlos Quintella, Mauro Bergstein and Teodoro Lima (who were appointed by Credit Suisse DTVM) and Roberto Bulhões Pedreira and Gustavo Pinheiro Gonçalves (who were appointed by BNDES and Fundação Petrobras de Seguridade Social — PETROS (a pension fund for employees of Petróleo Brasileiro — PETROBRAS), respectively).

⁽⁷⁾ Latin America Capital Partners II LLC is a limited liability company organised under the laws of the State of Delaware, and has its principal offices at 1209 Orange Street, Wilmington, Delaware, 19801. Latin America Capital Partners II LLC is managed by Bassini Playfair Wright Advisors Inc. Voting power over investments, divestments and other strategic matters is exercised by Emilio Bassini, Piers Playfair and Roger Wright.

⁽⁸⁾ Brazilian Equity LLC is a limited liability company organized under the laws of the State of Delaware, and has its principal offices c/o The Corporation Trust Company, Orange Street, 1209, Wilmington, New Castle, Delaware, 19801. Brazilian Equity LLC is co-managed by Credit Suisse Bahamas and Bassini Playfair Wright. Voting power over managed investments, divestments and other strategic matters is exercised by the investment committee of Brazilian Equity Ltd. (which is the sole shareholder of Brazilian Equity LLC). Brazilian Equity Ltd.’s investment committee is made up of the following four persons: Mauro Bergstein and Nilson Teixeira (who were appointed by Credit Suisse Bahamas) and Emilio Bassini and Piers Playfair (who were appointed by Bassini Playfair Wright LLC).

Material Relationships between us and our Selling Shareholders.

Noemy Almeida Oliveiro Amaro, Maria Claudia Oliveira Amaro Demenato, Maurício Rolim Amaro, Marcos Adolfo Tadeu Senamo Amaro and João Francisco Amaro collectively own 100% of the shares in TEP, Aerosystem and Nova Fronteira which together own 99.97% of our common shares and have the right, pursuant to our shareholders agreement, to appoint six members of our board of directors and three members of our board of executive officers (four if our board of executive officers is comprised of six members). In the event that the other minority shareholders are entitled to appoint a member of our board of directors, then TEP and Aerosystem will only have the right to appoint five members.

Aerosystem is a holding company owned by the Amaro family, and pursuant to the terms of the Shareholders’ Agreement has the right, in conjunction with TEP to appoint six members of our board of directors.

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Brasil Private Equity Fundo de Investimento em Participações; Brazilian Equity Investments III LLC; Brazilian Equity LLC; Latin America Capital Partners II LLC; and Latin America Capital Partners PIV LLC, constitute the Investment funds and have the right, pursuant to our shareholders agreement, to appoint two members of our board of directors, and the right to nominate, through such directors, the chief financial officer (subject to a right of veto accorded to the other directors).

Brasil Private Equity Fundo de Investimento em Participações and Latin America Capital Partners II LLC are both five percent holders of our preferred shares and are beneficially owned by a large number of natural and legal persons, none of whom owns more than 20% of the shares, or can exercise more than 20% of the voting rights relating to ordinary-course corporate approvals in respect thereof. The shareholders of these entities do not have voting rights in respect of investment decisions.

Shareholders’ Agreement

On November 28, 1997, TEP and Aerosystem entered into a shareholders’ agreement with the Investment Funds as amended and restated on November 20, 2002 and on May 16, 2005. TAM S.A., Credit Suisse (Brasil) Distribuidora de Títulos e Valores Mobiliários S.A. and Credit Suisse Investment Bank (Bahamas) Limited are intervening parties to the shareholders’ agreement.

Pursuant to the terms of the shareholders’ agreement, TEP and Aerosystem, on one hand, and the Investment Funds, on the other hand, will vote at all shareholders’ meetings in such a way as to ensure that our board of directors will always include six members appointed by TEP and Aerosystem (including the president and vice-president of our board of directors) and two members appointed by the Investment Funds. In the event that other minority shareholders are entitled to appoint a member of our board of directors, then TEP and Aerosystem will only have the right to appoint five members.

The shareholders’ agreement also provides that the parties will recommend to those members of our board of directors they have appointed that, in any election for members of the board of executive officers, they will vote in such a way as to ensure that (i) (x) three executive officers will be elected by the members of our board of directors elected by TEP and Aerosystem (in the event the board of executive officers is made up of a total of four to five members), or (y) four executive officers will be elected by members of our board of directors elected by TEP and Aerosystem (in the event the board of executive officers is made up of a total of six members, including in any case the chairman of the board of executive officers), and that the members of our board of directors elected by the Investment Funds will have the right to veto in respect of the election of the chairman of the board of executive officers, and (ii) a person designated by the members of our board of directors elected by the Investment Funds will be elected as chief financial officer, and that the members of our board of directors elected by TEP and Aerosystem will a the right of veto in respect of such election.

At any shareholders’ meeting where the agenda contains matters related to the election and appointment of members of our fiscal council, the parties to our shareholders’ agreement have agreed to vote in such a way as to ensure that the fiscal council will be made up of (i) three members elected by TEP and Aerosystem, and (ii) up to two members elected by the Investment Funds (and that, in the event that any other minority shareholders have the ability to elect the one member, the Investment Funds have the guaranteed right to elect the other member).

The approval of certain matters at the shareholders’ meetings will require the affirmative vote of both TEP and Aerosystem, on one hand, and the Investment Funds, on the other hand. Resolutions of the board of directors will be passed by the affirmative vote of at least five members, except for certain matters which will also require the affirmative vote of at least two members designated by TEP and Aerosystem and at least one member designated by the Investment Funds.

The shareholders that are party to the shareholders’ agreement have pre-emption rights for sales of preferred shares to third parties. The shareholders’ agreement also grants the Investment Funds the right of tag-along sale in any eventual sales of common shares that would represent a sale of control of us by TEP and Aerosystem to third parties. The shareholders’ agreement also prevents the Investment Funds

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from selling their common shares in our capital stock to third parties. The Investment Funds also have the right to effect a drag-along sale in the event they sell shares representing more than 2% of our non-voting stock, in the proportion of one TEP and/or Aerosystem share for each share sold by the Investment Funds, up to a maximum of 10% of the shares held by TEP and/or Aerosystem. In addition, TEP and/or Aerosystem may only request a conversion of their respective common shares into preferred shares in accordance with our by-laws after January 2007. The shares to be distributed in the secondary offering will not be subject to the shareholders’ agreement.

In addition, the shareholders’ agreement also provides for a mechanism to resolve any deadlocks. A deadlock will be deemed to have occurred in the event (i) the shareholders or, as the case may be, the board of directors fail to make a decision at three consecutive shareholders’ meetings or board of directors’ meetings in relation to matters that, according to the terms of the relevant shareholders’ or board meeting, require a joint decision, (ii) there is no quorum during three consecutive meetings of the board of directors because of a failure by the members elected by the same shareholder to be present, or (iii) any specific business plan is not approved during three years within any five-year period. In the event of a deadlock, the shareholders’ agreement provides that the shareholder responsible for causing the deadlock has the right to sell all its shares to the other shareholders, who in turn have the right to purchase all of the other shareholders’ shares or sell all of their shares under the same terms and conditions.

Our shareholders’ agreement terminates on November 28, 2007. However, in the event we fail to make a public offer of depositary receipts representing our preferred shares in the United States for a minimum amount of US$50.0 million, the term of our shareholders’ agreement shall be automatically extended to November 28, 2008. Additionally, our shareholders’ agreement shall terminate in the event the Investment Funds own, in the aggregate, less than 10% of our capital stock.

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TRANSACTIONS WITH RELATED PARTIES

We believe that all of the relevant transactions we entered into with the related parties described below were performed on terms that reflected the market rate for such transactions.

License For Use of Trademark

The “TAM” trademark and other trademarks relating to the classes of the activities we perform are owned by Taxi Aéreo, Representações, Marcas e Patentes S.A., (TAM Milor), a company controlled by the Amaro Family. On March 10, 2005, TAM S.A., TAM Milor, TAM Linhas Aéreas, TAM Viagens and Transportes Aéreas Meridionais S.A., (TAM Mercosur) entered into a License for Use of Trademark Agreement, pursuant to which TAM Milor granted the other parties a license to use the “TAM” trademark in exchange for a monthly compensation or royalty payment. The current expense we record on a monthly basis for the use of the trademark is R$1.3 million. This amount is adjusted annually by reference to the IGP-M. This agreement is effective until December 9, 2011, following which, provided that TAM Linhas Aéreas’ concession is itself renewed, the license to use the trademark will automatically be renewed for an equivalent period. The recording of the transfer of ownership of TAM trademarks from TAM Marília to TAM Milor and the License for Use of Trademark Agreement are currently in the process of review and registration, respectively, with the INPI. The intention of recording both the transfer and the registration of the License for Use of Trademark Agreement before the INPI is to provide third parties with notice of the existence of such rights.

The license for use was granted exclusively in relation to the classes of the activities we currently perform. TAM Milor may grant a license to use the TAM trademark to other parties for different activities that do not involve the scheduled transportation of passengers. That agreement may be rescinded (i) by either party in the event that one of the parties should fail to comply with any of the contractual obligations and fail to remedy the situation within 15 days of the date of receipt of the notification, or (ii) by TAM Milor only in the event the licensees utilize the trademark in a manner other than that stipulated in the agreement. In addition, the agreement does not impose any limitation on the right of TAM Milor to dispose of or pledge the trademarks subject to the agreement to third parties and TAM Milor may enter into such transactions without our prior knowledge or consent.

Service Agreement — TAM Marília

In September 2002, we entered into a service agreement with TAM Marília for the sharing of our general management activities, relating mainly to human resources, purchasing and procurement and information technology systems. Pursuant to the terms of this service agreement, we received payments from TAM Marilia in the amounts of R$1.6 million during the last quarters of 2005 and R$2.1 million during the year of 2004.

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DESCRIPTION OF OUR CAPITAL STOCK

We set forth below a brief summary of certain significant provisions of our by-laws, Brazilian corporation law and the rules and regulations of the CVM. Because this is a summary, it may not contain all information which is important to you. Accordingly, this description is qualified entirely by references to our by-laws and Brazilian corporation law.

In addition, holders of our preferred shares will be entitled to all shareholders’ rights provided to shareholders of companies listed on the Level 2 segment of BOVESPA. For a summary description of these shareholder rights, see “BOVESPA’s Differentiated Corporate Governance Practices.”

General

Our corporate name is TAM S.A. and our head office is located in the city of São Paulo, state of São Paulo, Brazil. We were registered with the Board of Trade of the state of São Paulo under NIRE number 35,300,150,007 and were registered with the CVM as a public stock corporation under number 01639-0 since 1997.

At the date of this prospectus our total capital is R$153,909,444.21, represented by 59,794,845 common shares and 84,264,617 preferred shares. All of our shares are registered with no par value and are indivisible. Our entire capital stock is fully paid-up. We currently do not hold any treasury shares. Following the completion of the offering contemplated herein (assuming full exercise of the over-allotment options), we will have a total capital of R$ , represented by 154,402,177 shares, of which 59,794,845 will be common shares and 94,607,332 will be preferred shares.


	*Corporate purpose*

Pursuant to article 3 of our by-laws, our corporate purposes are the participation (as either a shareholder or quotaholder) in companies engaged in scheduled air transportation services or related activities (including TAM Linhas Aéreas). Our by-laws provide that any sale of more than 50% of our holding of voting capital in TAM Linhas Aéreas to a third party is considered a change in corporate purpose and, accordingly, would allow shareholders to exercise their right to withdraw their shareholdings and receive in consideration the economic value of their shares, subject to the provisions of our by-laws and the Brazilian corporation law. See “— Reimbursement and right of withdrawal.”


	*Rights of our common and preferred shares*

Each of our common shares gives the holder the right to vote on decisions of our shareholders’ meetings. Pursuant to article 8, paragraph 2, of our by-laws, our shareholders will be entitled to convert, in accordance with applicable law, their paid-up common shares into preferred shares, at the proportion of one preferred share per common share. Our preferred shares carry no right to vote on decisions of the shareholders’ meetings, except (as long as we are listed on the Level 2 segment of BOVESPA) with regard to certain matters. See “— Voting Rights.”

Our preferred shares shall have the following advantages as compared to our common shares:


	•	priority in the reimbursement of capital, without premium, in the event of our liquidation; and

	•	the right to be included in public offerings derived from the transfer of our control, at the same price paid per each common share of the controlling block.


	*Reimbursement and right of withdrawal*

For purposes of the right of withdrawal, Brazilian corporation law provides that a dissident shareholder includes not only shareholders who vote against a specific resolution, but also those that have abstained from voting or failed to appear at the shareholders’ meeting. Brazilian corporation law provides that a dissident shareholder or shareholder with no voting rights has the right to withdraw from shareholding in a

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company upon receiving full reimbursement for all shares held in the event that the first invitation published for attending such shareholders’ meeting is made (by a qualified quorum of shareholders representing at least 50% of the shares with the right to vote) to approve any of the following matters:


	•	create preferred shares or increase an already existing class of preferred shares, without maintaining the same proportion in relation to the other classes of shares, unless already provided or authorized in the by-laws;

	•	alter the preference, privilege, or conditions for redemption or amortization granted to one or more classes of preferred classes, or create a new class of shares with greater privileges than the existing classes of preferred shares;

	•	reduce the mandatory dividend;

	•	consolidate or merge with another company, including one of our controlling companies;

	•	participate in a group of companies;

	•	change of corporate purpose;

	•	transfer all shares to another company or receive shares in another company in such a way as to make the company whose shares were transferred a wholly-owned subsidiary of the merged company;

	•	perform a spin-off that results in (i) a change in the company’s corporate purpose (unless the company’s assets and liabilities are transferred to a company that has substantially the same corporate purpose), (ii) a reduction in the compulsory dividend, or (iii) participation in a group of companies, as defined in Brazilian corporation law; or

	•	acquire control of another company for a price that exceeds the limits provided in Brazilian corporation law (and subject to the conditions set forth in Brazilian corporation law).

In the case of the first two items set out above, only the holders of shares adversely affected may exercise the right of withdrawal.

Whenever a company resulting from the consolidation, merger of shares, or spin-off of a public stock corporation fails to obtain registration as a public stock corporation (and, if applicable, fails to obtain registration of its shares for trading on the stock exchange within 120 days of the date of the shareholders meeting that approved that decision), the dissident shareholders or shareholders without voting rights may also exercise the right of withdrawal.

In the event that our shareholders approve any resolution for us to (i) consolidate or merge with another company, (ii) transfer all our shares to another company so as to transform our company into a wholly-owned subsidiary of that company, or (iii) become part of a group of companies, the right of withdrawal may be exercised only if our shares fail to satisfy certain liquidity tests at the time of the shareholders’ meeting.

The right of withdrawal expires 30 days after publication of the minutes of the shareholders’ meeting which approved any of the matters set out above. In the case of the first two items above, the decision taken at the shareholders’ meeting only becomes legally effective upon confirmation by shareholders holding preferred shares, which must be obtained at a special shareholders’ meeting held within one year. In such cases, the 30 day deadline begins on the date of publication of the minutes of the special shareholders meeting. In the event that any redemption of shares held by dissident shareholders would potentially be prejudicial to our financial stability, we would have ten days following the expiration of that 30 day deadline to reconsider the resolution that caused the exercise of the right of withdrawal.

Brazilian corporation law also provides that the value of any shares to be withdrawn by dissident shareholders, or shareholders with no voting rights who have exercised the right to withdraw, shall be valued in an amount greater than the portion of our net worth attributed to those shares, as demonstrated by reference to our assets in the latest balance sheet approved at a shareholders meeting (in the event that

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more than 60 days have passed since the date of that balance sheet, the dissident shareholders have the right to request that the value of their shares be calculated by reference to our assets on our most recent balance sheet).

The change in the rights and benefits of our preferred shares was discussed at an extraordinary general shareholders’ meeting held on May 16, 2005. Those shareholders holding preferred shares who did not vote, were not present or who voted against the change in rights and benefits of our preferred shares at such meeting, in accordance with Brazilian corporation law, were entitled to withdraw their shareholdings within 30 days of the date of publication of the minutes of such meeting and receive R$3.1093 per preferred share in respect of such withdrawal.

The sale of more than 50% of our common stake in TAM Linhas Aéreas to a third party would be considered a change in our corporate purpose and would give our shareholders the right (subject to Brazilian corporation law and our by-laws) to withdraw their shareholdings and receive the economic value of their shares.


	*Increases in capital and preemptive rights*

Each shareholder has preemptive right in respect of any issuance of new shares we conduct for the purpose of increasing our capital (as well as in respect of subscribing to debentures convertible to shares and warrants). The extent of the preemptive right is in direct proportion to the equity interest held by the shareholder and may be exercised at least 30 days after the publication of the notice of capital increase. In the case of an increase of equal proportion in the number of shares of all existing types and classes, each shareholder may exercise the preemptive right only over the same type and class of shares already held. In the event that the shares to be issued are of existing types and classes but the exercise of the preemptive right would result in a change in the respective proportions of our capital stock, the preemptive right may only be exercised over the types and classes identical to those already held by the shareholders and may only extend to any other shares in the event that these are insufficient to assure the shareholders the same proportion in our capital stock they had prior to the increase in capital. In the event that there is an issuance of shares of types and classes different from those already existing, each shareholder may exercise their preemptive rights (in proportion to the same number of shares already held) over the shares of all types and classes in the capital increase.

Our by-laws provide that, in accordance with Brazilian corporation law and criteria set forth by our board of directors, preemptive rights may be excluded, or the deadline for exercise may be brought forward, in respect of any issuance of shares, subscription bonuses, debentures or other securities convertible to shares where such issuance is placed (a) via sale on the stock exchange or public subscription, or (b) in exchange for shares in a public offering of control acquisition, in accordance with applicable laws. In addition, Brazilian corporation law provides that granting an option to purchase shares in relation to certain plans is not subject to preemptive rights.


	*Shareholders’ meetings*

Our board of directors is the competent body for calling our shareholders’ meetings. Notice of our shareholders’ meetings must be published at least three times in the Diário Oficial do Estado , the official newspaper of the state where our headquarters are located and another newspaper in general circulation, currently Valor Econômico and Gazeta Mercantil . Our shareholders’ meetings take place in our headquarters, in the city of São Paulo, in the State of São Paulo. Shareholders attending a shareholders’ meeting must produce proof of their status as shareholders and proof that they hold the shares entitling them to vote.

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	*Voting rights*

Each common share grants the holder the right to one vote at shareholders’ meetings.

Our preferred shares do not grant their holders general voting rights except, for so long as we are listed on the Level 2 segment of BOVESPA, in relation to the following matters:


	•	any direct conversion, consolidation, spin-off or merger of TAM;

	•	agreements between us and our controlling shareholder(s), as well as other companies in which our controlling shareholder(s) have an interest, so long as such matters have been approved in a general shareholders’ meeting to the extent required by law or statue;

	•	the evaluation of assets in relation to any capital increase;

	•	the appointment of any company specializing in evaluating the economic value of our shares in case of a mandatory tender offer launched by us or by our controlling shareholders if we elect to go private or if we elect to cease to follow the requirements of BOVESPA’s Level 2 regulation;

	•	any change in our corporate purpose; and

	•	any change in, or the revocation of, provisions of our by-laws resulting in any violation of certain requirements of BOVESPA’s Level 2 regulation. See “BOVESPA’s differentiated corporate governance practices.”

Brazilian corporation law provides that shares with no voting rights or restricted voting rights (which would include our preferred shares) must now carry unrestricted voting rights in the event we should fail to distribute, for three consecutive years, any fixed or minimum dividends granted by these shares until such time as the respective distribution is completed. As a result of the fact that our by-laws do not provide for any fixed or minimum dividend, such unrestricted voting rights do not apply to our preferred shares.

Brazilian corporation law also provides that any change in the rights of preferred shareholders, or any creation of a class of shares with priority over the preferred shares must be approved by the owners of our common shares at a shareholders’ meeting. Any such approval will only become legally effective upon approval by the majority of our preferred shareholders at a special shareholders’ meeting, at which preferred shareholders vote as a special class of shareholder.

Brazilian corporation law grants the right to elect members of our board of directors (and alternates) at general shareholders’ meetings to the holders of (i) preferred shares with no voting rights (or with restricted voting rights) representing at least 10% of the total capital, and (ii) common shares that are not part of the controlling group, representing at least 15% of the total voting capital. In the event that the non-controlling holders of preferred shares or common shares do not represent the respective thresholds set out above, Brazilian corporation law provides that holders of preferred shares and common shares representing at least 10% of our capital may combine their holdings in order to elect a member (and alternate) to our board of directors.

Shareholders have certain rights which may not be altered by provisions of our by-laws or resolutions of shareholders’ meetings. These rights are (i) in the case of common shares only, the right to vote at general shareholders’ meetings, (ii) the right to participate in the distribution of dividends and interest paid on our own capital and to share in our remaining assets in the case of liquidation, (iii) rights to subscribe for shares or securities convertible to shares under certain circumstances, and (iv) withdrawal rights in certain cases. Our by-laws and a resolution of the majority of the shareholders with voting rights have the ability to establish as well as remove certain additional rights.

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MARKET INFORMATION

Since May 2, 2005 our preferred shares have been listed under the symbol “TAMM4” and will continue to be listed on BOVESPA under the same symbol. Prior to May 2, 2005, our preferred shares were listed on BOVESPA under the symbol “TANC4”. Our common shares are and will continue to be listed on BOVESPA under the symbol “TAMM3.” At February 17, 2006, we had 1,594 registered owners of our shares.

Price and Market for Our Preferred Shares

The following table sets out the high, average and low closing price in reais of our preferred shares on BOVESPA during the periods indicated:


	reais per preferred share ⁽¹⁾

	High		Average		Low

2005		47.50		27.31		15.75




2004		33.00		16.94		3.70




2003		4.20		3.92		3.60




2002		0		0		0




2001		4.20		4.20		4.20


	reais per preferred share ⁽¹⁾

	High		Average		Low

2005




1st Quarter		45.90		38.18		27.00




2nd Quarter		23.50		20.32		12.50




3rd Quarter		27.00		22.68		15.75




4th Quarter		47.50		34.42		24.51




2004




1st Quarter		0		0		0




2nd Quarter		4.10		3.90		3.70




3rd Quarter		6.00		5.20		4.40




4th Quarter		33.00		20.55		6.00




2003




1st Quarter		0		0		0




2nd Quarter		4.20		3.90		3.60




3rd Quarter		0		0		0




4th Quarter		4.20		3.95		3.70


	reais per preferred share ⁽¹⁾

	High		Average		Low

January 2006		55.00		48.06		44.00




December 2005		47.50		42.26		37.80




November 2005		38.51		33.65		28.30




October 2005		27.00		25.30		23.15




September 2005		27.00		25.29		23.15




August 2005		27.00		24.54		18.90




July 2005		20.50		18.03		15.75




June 2005		22.25		18.71		16.50




May 2005		23.50		22.70		20.75

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	reais per preferred share ⁽¹⁾

	High		Average		Low

April 2005		44.00		42.06		38.50




March 2005		43.00		41.57		40.00




February 2005		45.90		40.48		34.00




January 2005		35.00		31.75		22.00




December 2004		33.00		25.17		13.07




November 2004		11.31		9.46		6.00

Source: Bovespa.


⁽¹⁾	The figures presented above have not been adjusted to reflect share split agreed on May 16, 2005, except with respect to May 2005 figures. The figures for June 2005 and subsequent periods reflect the split.

Trading on BOVESPA

BOVESPA is a not-for-profit entity owned by its member brokerage firms. Trading on such exchanges is limited to member brokerage firms and to a limited number of authorized non-members.

The CVM and BOVESPA have discretionary authority to suspend trading in shares of a particular issuer under certain circumstances. Trading in securities listed on BOVESPA, including the Novo Mercado and Levels 1 and 2 segments, may be effected off the exchanges in the unorganized over-the -counter market in certain circumstances.

The shares of all companies listed on BOVESPA, including Novo Mercado and Level 1 and Level 2 companies, are traded together.

Settlement of transactions occurs three business days after the trade date. Delivery of and payment for shares is made through the facilities of separate clearing houses for each exchange, which maintain accounts for member brokerage firms. The seller is ordinarily required to deliver the shares to the clearing house on the second business day following the trade date. The clearing house for BOVESPA is the CBLC.

In order to reduce volatility, BOVESPA has adopted a “circuit breaker” system pursuant to which trading sessions may be suspended for a period of 30 minutes or one hour whenever specified indices of BOVESPA fall below the limits of 10% and 15%, respectively, in relation to the index levels for the previous trading session.

Although the Brazilian equity market is Latin America’s largest in terms of market capitalization, it is smaller and less liquid than the major U.S. and European securities markets. Moreover, BOVESPA is less liquid than the New York Stock Exchange and other major exchanges in the world. BOVESPA had a market capitalization of US$482 billion as of December 31, 2005 and an average monthly trading volume of approximately US$13.8 billion in 2004. In comparison, the New York Stock Exchange had a market capitalization of US$17.4 trillion at December 31, 2005 and an average monthly trading volume of approximately US$1,202 billion in 2005. Although any of the outstanding shares of a listed company may trade on a Brazilian stock exchange, in most cases fewer than half of the listed shares are actually available for trading by the public, the remainder being held by small groups of controlling persons, governmental entities or one principal shareholder.

Trading on Brazilian stock exchanges by non-residents of Brazil is subject to registration procedures. See “— Investment in our preferred shares by non-residents of Brazil.”

Regulation of Brazilian Securities Markets

The Brazilian securities markets are principally governed by Law No. 6,385, of December 7, 1976, and Brazilian corporation law, each as amended and supplemented, and by regulations issued by the CVM,

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which has authority over stock exchanges and the securities markets generally; the National Monetary Council; and the Central Bank, which has, among other powers, licensing authority over brokerage firms and regulates foreign investment and foreign exchange transactions.

These laws and regulations, among others, provide for licensing and oversight of brokerage firms, governance of the Brazilian stock exchanges, disclosure requirements applicable to issuers of traded securities, restrictions on price manipulation and protection of minority shareholders. They also provide for restrictions on insider trading. However, the Brazilian securities markets are not as highly regulated and supervised as the U.S. securities markets or securities markets in some other jurisdictions. Accordingly, any trades or transfers of our equity securities by our officers and directors, our controlling shareholders or any of the officers and directors of our controlling shareholders must comply with the regulations issued by the CVM. See “Description of our capital stock — Disclosure requirements.”

Under Brazilian corporation law, a corporation is either public ( companhia aberta ), as we are, or closely held ( companhia fechada ). All public companies are registered with the CVM and are subject to reporting requirements. Our preferred shares will be listed on the Level 2 segment of BOVESPA. See “BOVESPA’s differentiated corporate governance practices.”

We have the option to ask that trading in securities on BOVESPA be suspended in anticipation of a material announcement. Trading may also be suspended on the initiative of BOVESPA or the CVM, based on or due to, among other reasons, a belief that a company has provided inadequate information regarding a material event or has provided inadequate responses to inquiries by the CVM or BOVESPA.

The Brazilian over-the -counter market consists of direct trades between individuals in which a financial institution registered with the CVM serves as intermediary. No special application, other than registration with the CVM, is necessary for securities of a public company to be traded in this market. The CVM requires that it be given notice of all trades carried out in the Brazilian over-the -counter market by the respective intermediaries.

Investment in Our Preferred Shares by Non-Residents of Brazil

Investors residing outside Brazil are authorized to purchase equity instruments, including our preferred shares, or as foreign portfolio investments on BOVESPA, provided that they comply with the registration requirements set forth in Resolution No. 2,689 of the National Monetary Council, (or Resolution No. 2,689) and CVM Instruction No. 325; or register their investment as foreign direct investments under Law No. 4,131/62.

With certain limited exceptions, Resolution No. 2,689 investors are permitted to carry out any type of transaction in the Brazilian financial capital market involving a security traded on a stock, future or organized over-the -counter market. Investments and remittances outside Brazil of gains, dividends, profits or other payments under our preferred shares are made through the foreign exchange market.

In order to become a Resolution No. 2,689 investor, an investor residing outside Brazil must:


	•	appoint a representative in Brazil with powers to take actions relating to the investment;

	•	appoint an authorized custodian in Brazil for the investments, which must be a financial institution duly authorized by the Central Bank and CVM; and

	•	through its representative, register itself as a foreign investor with the CVM and the investment with the Central Bank.

Foreign direct investors under Law No. 4,131/62 may sell their shares in both private or open market transactions, but these investors will generally be subject to less favorable tax treatment on gains.

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A foreign direct investor under Law No. 4,131/62 must:


	•	register as a foreign direct investor with the Central Bank;

	•	obtain a taxpayer identification number from the Brazilian tax authorities;

	•	appoint a tax representative in Brazil; and

	•	appoint a representative in Brazil for service of process in respect of suits based on the Brazilian corporation law.

Resolution No. 1,927 of the National Monetary Council, which restated and amended Annex V to Resolution No. 1,289 of the National Monetary Council, provides for the issuance of depositary receipts in foreign markets in respect of shares of Brazilian issuers. We filed an application to have the ADSs approved under Resolution 1,927 by the Central Bank and the CVM, and we received final approval in , 2006.

If a holder of ADSs decides to exchange ADSs for the underlying preferred shares, the holder will be entitled to (i) sell the preferred shares on the BOVESPA and rely on the depositary’s electronic registration for five business days from the date of exchange to obtain and remit U.S. dollars abroad upon the holder’s sale of our preferred shares, (ii) convert its investment into a foreign portfolio investment under Resolution No. 2,689/00, or (iii) convert its investment into a foreign direct investment under Law No. 4,131/62.

If a holder of ADSs wishes to convert its investment into either a foreign portfolio investment under Resolution No. 2,689/00 or a foreign direct investment under Law No. 4,131/62, it should begin the process of obtaining his own foreign investor registration with the Central Bank or with the CVM as the case may be, in advance of exchanging the ADSs for preferred shares.

The custodian is authorized to update the depositary’s electronic registration to reflect conversions of ADSs into foreign portfolio investments under Resolution No. 2,689/00. If a holder of ADSs elects to convert its ADSs into a foreign direct investment under Law 4,131/62, the conversion will be effected by the Central Bank after receipt of an electronic request from the custodian with details of the transaction.

If a foreign direct investor under Law No. 4,131/62 wishes to deposit its shares into the ADR program in exchange for ADSs, such holder will be required to present to the custodian evidence of payment of capital gains taxes. The conversion will be effected by the Central Bank after receipt of an electronic request from the custodian with details of the transaction. Please refer to “Taxation — Brazil” for a description of the tax consequences to an investor residing outside Brazil of investing in our preferred shares in Brazil.

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SIGNIFICANT DIFFERENCES BETWEEN OUR CORPORATE GOVERNANCE PRACTICES

AND NYSE CORPORATE GOVERNANCE STANDARDS

Assuming that our application to list the ADSs on the NYSE is successful, we will be subject to the NYSE corporate governance listing standards. As a foreign private issuer, the standards applicable to us will be considerably different to the standards applied to U.S. listed companies. Under the NYSE rules, we will be required only to (i) have an audit committee or audit board, pursuant to an applicable exemption available to foreign private issuers, that meets certain requirements, as discussed below, (ii) provide prompt certification by our chief executive officer of any material non-compliance with any corporate governance rules, and (iii) provide a brief description of the significant differences between our corporate governance practices and the NYSE corporate governance practices required to be followed by U.S. listed companies. The discussion of the significant differences between our corporate governance practices and those required of U.S. listed companies follows below.

Majority of Independent Directors

The NYSE rules require that a majority of the board must consist of independent directors. Independence is defined by various criteria, including the absence of a material relationship between the director and the listed company. Brazilian law does not have a similar requirement. Under Brazilian law, neither our board of directors nor our management is required to test the independence of directors before their election to the board. However, both Brazilian corporation law and the CVM have established rules that require directors to meet certain qualification requirements and that address the compensation and duties and responsibilities of, as well as the restrictions applicable to, a company’s executive officers and directors. While our directors meet the qualification requirements of Brazilian corporation law and the CVM, we do not believe that a majority of our directors would be considered independent under the NYSE test for director independence. Brazilian corporation law and our bylaws require that our directors be elected by our shareholders at a general shareholders’ meeting.

Executive Sessions

NYSE rules require that the non-management directors must meet at regularly scheduled executive sessions without management present. Brazilian corporation law does not have a similar provision. According to Brazilian corporation law, up to one-third of the members of the board of directors can be elected from management. The remaining non-management directors are not expressly empowered to serve as a check on management, and there is no requirement that those directors meet regularly without management. As a result, the non-management directors on our board do not typically meet in executive session.

Nominating/ Corporate Governance Committee

NYSE rules require that listed companies have a nominating/corporate governance committee composed entirely of independent directors and governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities, which include, among other things, identifying and selecting qualified board member nominees and developing a set of corporate governance principles applicable to the company.

Compensation Committee

NYSE rules require that listed companies have a compensation committee composed entirely of independent directors and governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities, which include, among other things, reviewing corporate goals relevant to the chief executive officer’s compensation, evaluating the chief executive officer’s performance, approving the chief executive officer’s compensation levels and recommending to the board non-chief executive officer compensation, incentive-compensation and equity-based plans. We are not required under applicable Brazilian law to have a compensation committee. Under Brazilian corporation law, the total

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amount available for compensation of our directors and executive officers and for profit-sharing payments to our executive officers is established by our shareholders at the annual general meeting. The board of directors is then responsible for determining the individual compensation and profit-sharing of each executive officer, as well as the compensation of our board and committee members. In making such determinations, the board reviews the performance of the executive officers, including the performance of our chief executive officer, who typically excuses himself from discussions regarding his performance and compensation.

Audit Committee

NYSE rules require that listed companies have an audit committee that (i) is composed of a minimum of three independent directors who are all financially literate, (ii) meets the SEC rules regarding audit committees for listed companies, (iii) has at least one member who has accounting or financial management expertise, and (iv) is governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities. However, as a foreign private issuer, we need only to comply with the requirement that the audit committee meet the SEC rules regarding audit committees for listed companies. Brazilian corporation law requires companies to have a non-permanent Conselho Fiscal composed of three to five members who are elected at the general shareholders’ meeting.

Shareholder Approval of Equity Compensation Plans

NYSE rules require that shareholders be given the opportunity to vote on all equity compensation plans and material revisions thereto, with limited exceptions. Under Brazilian corporation law, shareholders must approve all stock option plans. In addition, any issuance of new shares that exceeds our authorized share capital is subject to shareholder approval.

NYSE rules require that listed companies adopt and disclose corporate governance guidelines. We have not adopted any formal corporate governance guidelines beyond those required by applicable Brazilian law. We have adopted and observe a disclosure policy, which requires the public disclosure of all relevant information pursuant to guidelines set forth by the CVM, as well as an insider trading policy, which, among other things, establishes black-out periods and requires insiders to inform management of all transactions involving our securities.

Code of Business Conduct and Ethics

NYSE rules require that listed companies adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. Applicable Brazilian law does not have a similar requirement.

Internal Audit Function

NYSE rules require that listed companies maintain an internal audit function to provide management and the audit committee with ongoing assessments of the company’s risk management processes and system of internal control.

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BOVESPA’S DIFFERENTIATED CORPORATE GOVERNANCE PRACTICES

BOVESPA, in carrying out its self-regulatory functions, has established three differentiated levels of corporate governance: Level 1, Level 2 and Novo Mercado.

Each of the differentiated corporate governance levels includes companies that agree, on a voluntarily basis, to adopt the corporate governance practices established for the level they have adopted. These corporate governance practices go beyond those required by law.

The entry of a company into any one of the special listing segments of the BOVESPA occurs through the signing of a contract that obliges the company to abide by the rules of corporate governance established in the regulations for the relevant level.

BOVESPA Level 2


	*Preferred shares with restricted voting rights*

Voting rights are guaranteed to holders of preferred shares with respect to the following issues (i) transformation, merger, consolidation or spin-off of the company, (ii) valuation of assets to be used for payment of capital increases by the company, (iii) selection of a specialized company to determine the economic value of our shares for the purpose of our delisting or discontinuation of our Level 2 registration, (iv) the approval in shareholders meetings of agreements between the company and its controlling shareholders, both directly and through third parties, as well as with other companies in which the controlling shareholders may have an interest, whenever required by law, (v) amending or changing terms in the company’s by-laws that result in a failure on the part of the company to meet the requirements established under the Level 2 regulations.


	*Tag along rights*

A change of control of a Level 2 listed company must be conditioned on the acquiror undertaking, within a maximum period of 90 days from the date of the acquisition of the controlling interest, to make a public offer to purchase (i) 100% of the common shares at a price per share equal to the highest price offered per common share so as to guarantee that all common shareholders are treated equally for purposes of the change of control, and (ii) 100% of the preferred shares at a price per share of 70% of the price offered to the holders of the common shares. In the event of a change of control, we have voluntarily adopted a provision in our bylaws, according to which we will offer to the preferred shareholders 100% of the price per share paid to the controlling shareholder group.

Similarly, any party that acquires a controlling interest in the company through successive purchases of shares will be obliged to make a public offer to purchase the remaining shares as described above, and to pay the difference between the price it paid for the shares acquired during the previous six months, duly adjusted in accordance with the inflation index or any other monetary correction applicable to the relevant period, and the price to be paid to the other shareholders as described above.


	*Free float*

Companies listed on Level 2 segment of the BOVESPA must maintain a minimum percentage of shares in circulation (free float), equal to at least 25% of its total share capital. This percentage must be maintained for the duration of the Level 2 registration.


	*Public offers of shares through mechanisms that favor broad distribution*

In each public offer of shares, we must make every effort to ensure the broad distribution of our shares, through the adoption of special procedures that must appear in the relevant prospectus, such as guaranteeing access to all qualified interested investors and distribution of at least 10% of the offer to private individuals or non-institutional investors.

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	*Introduction of improvements in financial statements*

We must present our quarterly information report (ITR), or other unaudited financial information, including information reconciled to U.S. GAAP or IFRS standards, in each case translated into English, within a maximum of 15 days after the time established by law for the publication of quarterly information. The ITR must include, in addition to the obligatory information established by law:


	(i) a consolidated balance sheet, a consolidated income statement and a report on consolidated performance, if obliged to present consolidated annual financial statements at the end of the financial year;

	(ii) information on the equity positions of all investors, including private individuals, holding, directly or indirectly, over 5% of our voting capital;

	(iii) consolidated information on the number and characteristics of securities issued by us, and whether held, directly or indirectly, by individuals or groups forming the controlling shareholder group, by directors or by members of the audit committee;

	(iv) information on the acquisition and disposition of securities over the 12 immediately preceding months by investors covered in item (iii) above with respect to relevant securities;

	(v) in the explanatory notes, company and consolidated cash flow statements, if we are obliged to present consolidated statements at the end of the financial year; and

	(vi) information on the number of outstanding shares and the percentage of total issued shares that they represent.

In the Annual Information Report (IAN), the company should include, in addition to legal requirements, the information listed in items (iii), (iv) and (vi) above.

The quarterly information must be accompanied by a special review report issued by an independent auditor that is duly registered with the CVM, observing the methodology specified in the regulations published by the CVM.

Commencing in 2006, we must, in addition to the terms of current legislation and regulations in Brazil, release (i) financial information prepared in accordance with international standards of U.S. GAAP or IFRS or release financial information, in English, also disclosing the net income and shareholders’ equity at the end of the respective year, as determined according to accounting practices adopted in Brazil; or (ii) financial statements, in English, prepared in accordance with Brazilian corporation law, together with additional notes demonstrating the reconciliation of results of operations and equity according to Brazilian GAAP and U.S. GAAP or IFRS, as the case may be, evidencing the main differences between the applied accounting criteria. In addition, the annual financial statements must include, in the explanatory notes, a company cash flow statement and a consolidated cash flow statement, if applicable.


	*Compliance with transparency rules on the part of controlling shareholders and managers in transactions involving our shares*

Our directors, our controlling shareholder group and members of our audit committee must report to BOVESPA the number and characteristics of our securities which they hold, directly or indirectly, including associated derivatives. This information must be provided to the BOVESPA immediately after any such person is elected, or acquires control, as the case may be.

In the same way, any transactions that may be effected with respect to securities and associated derivatives dealt with in this item must be communicated in detail to the BOVESPA, including pricing information, within ten days of the end of the month in which the transaction occurs. These obligations are extended to securities and their associated derivatives that may be held, directly or indirectly, by spouses, partners and dependents who are included in the annual income tax declaration of directors, controlling shareholders, and members of the audit committee.

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	*Shareholders’ agreement, stock option programs and contracts with companies in the same economic group*

We must submit to BOVESPA a copy of any shareholders’ agreement filed at our headquarters. Accordingly, whenever we sign new shareholders’ agreements or amendments to any existing shareholders’ agreement, the submission to BOVESPA must occur within five days following its filing and/or signing. The date of filing and/or registration of any shareholders’ agreement at our headquarters must be indicated on the copy.

Details of stock option programs or other programs for the acquisition of any of our securities by our employees or directors must also be submitted to BOVESPA and disclosed.

Finally, we must publish information setting out details of each agreement (a) between us and our subsidiaries and associated companies, directors and members of our controlling shareholder group, (b) between us and any company controlled by or associated with the directors and any member of the controlling shareholder group, as well as with other companies that form, in conjunction with any one of these parties, the same group, whether de facto or de jure, in each case, whenever a single agreement, or a group of successive agreements, with or without the same purpose, in any period of one year, represents values of (i) R$200,000 or more, or (ii) 1% of our net stockholders’ equity, whichever is greater.


	*Resolution of disputes through arbitration*

We and our controlling shareholder group, directors and members of our audit committee must resolve through arbitration all disputes or controversies related to the Level 2 regulations, our by-laws, Brazilian corporation law and any other regulations regarding the financial markets or securities, in each case in accordance with the terms of the Market Arbitration Chamber ( Câmara de Arbitragem do Mercado ).


	*Cancellation of Level 2 registration*

In the event we cancel the registration of our shares on Level 2 of BOVESPA, or de-list as a publicly listed company, a public offering by the controlling shareholder group for the acquisition of all our outstanding shares will be required. The minimum price to be paid per share will be determined through a report on the valuation of our shares, which must be prepared by a specialized company of proven experience that is independent of us, our directors and our controlling shareholder group, in addition to satisfying the applicable terms of and carrying responsibility under Brazilian corporation law.

The choice of the specialized company responsible for determining the economic value of our shares is to be determined at a shareholders’ meeting at which preferred shareholders will be entitled to vote, following presentation by the board of directors of a list of three specialized companies nominated for such purpose. The selection must be made on the basis of a majority vote of the free float shares, excluding abstentions. The cost of the valuation report will be borne in full by the controlling shareholders.

In the event that the valuation report is available by the date of the shareholders’ meeting called for the purpose of canceling our listing as a public company, the controlling shareholders must disclose the value per share or per 1,000 shares on the basis of which the offer to purchase will be made. Unless the price per share announced by the controlling shareholder group in the shareholders’ meeting is greater than or equal to the value determined in the valuation report, the meeting will automatically be cancelled, and timely notification of this fact must be given to the market, unless the controlling shareholders expressly agree to make the offer to purchase at a price per share equal to the economic value per share as set forth in the valuation report.

The cancellation of registration as a listed company must follow the procedures and meet the other requirements established in the regulations applicable under the terms of current law applicable to a Brazilian company, particularly those appearing in regulations published by the CVM on the subject.

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	*Divestment of control following abandonment of Level 2 listing*

In the event that we abandon or cancel our Level 2 listing and in the subsequent 12 months there is a change in our control, the controlling shareholders relinquishing control and the acquiror undertake, jointly and with joint responsibility, to acquire the shares of all shareholders at the price per share and pursuant to the same terms and conditions obtained by the controlling shareholder group in the sale of their own shares in accordance with the inflation index or any other monetary connection applicable to the relevant period. In the event that the price obtained by the controlling shareholder group for their shares is higher than the price per share offered to the other shareholders in the offer to purchase made in accordance with Level 2 regulations (see “— Cancellation of Level 2 registration”), the controlling shareholders relinquishing control and the acquiror undertake, jointly and with joint responsibility, to pay the difference between the proceeds in the operation for the transfer of control and the value paid to those shareholders who accept the terms of the offer.

In addition, we and our controlling shareholders are obliged to register in our share registry book the obligation to fulfill the provision described in the paragraphs above.

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DESCRIPTION OF AMERICAN DEPOSITARY RECEIPTS

American Depositary Receipts

JPMorgan Chase Bank, N.A., as depositary will issue the ADSs which you will be entitled to receive in the offering. Each ADS will represent an ownership interest in one preferred share which we will deposit with the custodian, as agent of the depositary, under the deposit agreement among ourselves, the depositary and yourself as an ADR holder. In the future, each ADS will also represent any securities, cash or other property deposited with the depositary but which they have not distributed directly to you. Unless specifically requested by you, all ADSs will be issued on the books of our depositary in book-entry form and periodic statements will be mailed to you which reflect your ownership interest in such ADSs. In our description, references to American depositary receipts or ADRs shall include the statements you will receive which reflects your ownership of ADSs.

The depositary’s office is located at 4 New York Plaza, New York, NY 10004.

You may hold ADSs either directly or indirectly through your broker or other financial institution. If you hold ADSs directly, by having an ADS registered in your name on the books of the depositary, you are an ADR holder. This description assumes you hold your ADSs directly. If you hold the ADSs through your broker or financial institution nominee, you must rely on the procedures of such broker or financial institution to assert the rights of an ADR holder described in this section. You should consult with your broker or financial institution to find out what those procedures are.

Because the depositary’s nominee will actually be the registered owner of the shares, you must rely on it to exercise the rights of a shareholder on your behalf. The obligations of the depositary and its agents are set out in the deposit agreement. The deposit agreement and the ADSs are governed by New York law.

The following is a summary of the material terms of the deposit agreement. Because it is a summary, it does not contain all the information that may be important to you. For more complete information, you should read the entire deposit agreement and the form of ADR which contains the terms of your ADSs. You can read a copy of the deposit agreement which is filed as an exhibit to the registration statement of which this prospectus forms a part. You may also obtain a copy of the deposit agreement at the SEC’s Public Reference Room which is located at 100 F Street, NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800 -732-0330.

Share Dividends and Other Distributions


	*How will I receive dividends and other distributions on the shares underlying my ADSs?*

We may make various types of distributions with respect to our securities. The depositary has agreed to pay to you the cash dividends or other distributions it or the custodian receives on shares or other deposited securities, after converting any cash received into U.S. dollars and, in all cases, making any necessary deductions provided for in the deposit agreement including any applicable fees and expenses. You will receive these distributions in proportion to the number of underlying securities that your ADSs represent.

Except as stated below, to the extent the depositary is legally permitted it will deliver such distributions to ADR holders in proportion to their interests in the following manner:


	•	Cash. The depositary will distribute any U.S. dollars available to it resulting from a cash dividend or other cash distribution or the net proceeds of sales of any other distribution or portion thereof (to the extent applicable), on an averaged or other practicable basis, subject to (i) appropriate adjustments for taxes withheld, (ii) such distribution being impermissible or impracticable with respect to certain registered holders, and (iii) deduction of the depositary’s expenses in (1) converting any foreign currency to U.S. dollars to the extent that it determines that such conversion may be made on a reasonable basis, (2) transferring foreign currency or U.S. dollars to

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the United States by such means as the Depositary may determine to the extent that it determines that such transfer may be made on a reasonable basis, (3) obtaining any approval or license of any governmental authority required for such conversion or transfer, which is obtainable at a reasonable cost and within a reasonable time and (4) making any sale by public or private means in any commercially reasonable manner. If this conversion is not possible or if any approval from the Brazilian government is needed and cannot be obtained, the deposit agreement allows the depositary to distribute reais only to those ADR holders to whom it is possible to do so. It will hold the reais it cannot convert for the account of the ADR holders who have not been paid. It will not invest the reais on behalf of the ADR holders and it will not be liable for the interest. Before making a distribution, any withholding taxes that must be paid under Brazilian law will be deducted. If exchange rates fluctuate during a time when the depositary cannot convert a foreign currency, you may lose some or all of the value of the distribution.

• Shares. In the case of a distribution in shares, the depositary will issue additional ADRs to evidence the number of ADSs representing such shares. Only whole ADSs will be issued. Any shares which would result in fractional ADSs will be sold and the net proceeds will be distributed in the same manner as cash to the ADR holders entitled thereto.

• Rights to receive additional shares. In the case of a distribution of rights to subscribe for additional shares or other rights, if we provide satisfactory evidence that the depositary may lawfully distribute such rights, the depositary will distribute warrants or other instruments representing such rights. However, if we do not furnish such evidence, the depositary may:


	•	sell such rights if practicable and distribute the net proceeds as cash; or

	•	if it is not practicable to sell such rights, do nothing and allow such rights to lapse, in which case ADR holders will receive nothing.


	We have no obligation to file a registration statement under the Securities Act in order to make any rights available to ADR holders.


	•	Other Distributions. In the case of a distribution of securities or property other than those described above, the depositary may either (i) distribute such securities or property in any manner it deems equitable and practicable or (ii) to the extent the depositary deems distribution of such securities or property not to be equitable and practicable, sell such securities or property and distribute any net proceeds in the same way it distributes cash.

If the depositary determines that any distribution described above is not practicable with respect to any specific ADR holder, the depositary may choose any practicable method of distribution for such ADR holder, including the distribution of foreign currency, securities or property, or it may retain such items, without paying interest on or investing them, on behalf of the ADR holder as deposited securities, in which case the ADSs will also represent the retained items.

Any US dollars will be distributed by checks drawn on a bank in the United States for whole dollars and cents. Fractional cents will be withheld without liability for interest thereon and dealt with by the Depositary in accordance with its then current practices.

The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADR holders.

There can be no assurances that the depositary will be able to convert any currency at a specified exchange rate or sell any property, rights, shares or other securities at a specified price, nor that any of such transactions can be completed within a specified time period.

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Deposit, Withdrawal and Cancellation


	*How does the depositary issue ADSs?*

The depositary will issue ADSs if you or your broker deposit shares or evidence of rights to receive shares with the custodian. In the case of the ADSs to be issued under this prospectus, we will arrange with the underwriters named herein to deposit such shares.

Shares deposited in the future with the custodian must be accompanied by certain delivery documentation, including instruments showing that such shares have been properly transferred or endorsed to the person on whose behalf the deposit is being made.

The custodian will hold all deposited shares (including those being deposited by or on our behalf in connection with the offering to which this prospectus relates) for the account of the depositary. ADR holders thus have no direct ownership interest in the shares and only have such rights as are contained in the deposit agreement. The custodian will also hold any additional securities, property and cash received on or in substitution for the deposited shares. The deposited shares and any such additional items are referred to as “deposited securities”.

Upon each deposit of shares, receipt of related delivery documentation and compliance with the other provisions of the deposit agreement, including the payment of the fees and charges of the depositary and any taxes or other fees or charges owing, the depositary will issue an ADR or ADRs in the name or upon the order of the person entitled thereto evidencing the number of ADSs to which such person is entitled. All of the ADSs issued will, unless specifically requested to the contrary, be part of the depositary’s direct registration system, and a registered holder will receive periodic statements from the depositary which will show the number of ADSs registered in such holder’s name. An ADR holder can request that the ADSs not be held through the depositary’s direct registration system and that a certificated ADR be issued.


	*How do ADR holders cancel an ADS and obtain deposited securities?*

When you turn in your ADSs at the depositary’s office, or when you provide proper instructions and documentation in the case of direct registration ADSs, the depositary will, upon payment of certain applicable fees, charges and taxes, deliver the underlying shares at the custodian’s office or effect delivery by such other means as the depositary deems practicable, including transfer to an account of an accredited financial institution on your behalf. At your risk, expense and request, the depositary may deliver deposited securities at such other place as you may request.

The depositary may only restrict the withdrawal of deposited securities in connection with:


	•	temporary delays caused by closing our transfer books or those of the depositary or the deposit of shares in connection with voting at a shareholders’ meeting, or the payment of dividends;

	•	the payment of fees, taxes and similar charges; or

	•	compliance with any U.S. or foreign laws or governmental regulations relating to the ADRs or to the withdrawal of deposited securities.

This right of withdrawal may not be limited by any other provision of the deposit agreement.

Record Dates

The depositary may fix record dates for the determination of the ADR holders who will be entitled (or obligated, as the case may be):


	•	to receive a dividend, distribution or rights,

	•	to give instructions for the exercise of voting rights at a meeting of holders of ordinary shares or other deposited securities, or

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	•	for the determination of the registered holders who shall be responsible for the fee assessed by the depositary for administration of the ADR program and for any expenses as provided for in the ADR,

	•	to receive any notice or to act in respect of other matters

all subject to the provisions of the deposit agreement.

Voting Rights


	*How do I vote?*

If you are an ADR holder and the depositary asks you to provide it with voting instructions, you may instruct the depositary how to exercise the voting rights for the shares which underlie your ADSs. After receiving voting materials from us, the depositary will notify the ADR holders of any shareholder meeting or solicitation of consents or proxies. This notice will state such information as its contained in the voting materials and describe how you may instruct the depositary to exercise the voting rights for the shares which underlie your ADSs and will include instructions for giving a discretionary proxy to a person designated by us. For instructions to be valid, the depositary must receive them in the manner and on or before the date specified. The depositary will try, as far as is practical, subject to the provisions of and governing the underlying shares or other deposited securities, to vote or to have its agents vote the shares or other deposited securities as you instruct. The depositary will only vote or attempt to vote as you instruct. The depositary will not itself exercise any voting discretion. Furthermore, neither the depositary nor its agents are responsible for any failure to carry out any voting instructions, for the manner in which any vote is cast or for the effect of any vote.

There is no guarantee that you will receive voting materials in time to instruct the depositary to vote and it is possible that you, or persons who hold their ADSs through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote.

Reports and Other Communications


	*Will I be able to view our reports?*

The depositary will make available for inspection by ADR holders any written communications from us which are both received by the custodian or its nominee as a holder of deposited securities and made generally available to the holders of deposited securities. We will furnish these communications in English when so required by any rules or regulations of the Commission.

Additionally, if we make any written communications generally available to holders of our shares, including the depositary or the custodian, and we request the depositary to provide them to ADR holders, the depositary will mail copies of them, or, at its option, English translations or summaries of them to ADR holders.

Fees and Expenses


	*What fees and expenses will I be responsible for paying?*

ADR holders will be charged a fee for each issuance of ADSs, including issuances resulting from distributions of shares, rights and other property, and for each surrender of ADSs in exchange for deposited securities. The fee in each case is $5.00 for each 100 ADSs (or any portion thereof) issued or surrendered.

The following additional charges shall be incurred by the ADR holders, by any party depositing or withdrawing shares or by any party surrendering ADRs or to whom ADRs are issued (including, without

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limitation, issuance pursuant to a stock dividend or stock split that we may declare or an exchange of stock regarding the ADRs or the deposited securities or a distribution of ADRs), whichever is applicable:


	•	to the extent not prohibited by the rules of any stock exchange or interdealer quotation system upon which the ADSs are traded, a fee of $1.50 per ADR or ADRs for transfers of certificated or direct registration ADRs;

	•	to the extent not prohibited by the rules of any stock exchange or interdealer quotation system upon which the ADSs are traded, a fee of $0.02 or less per ADS (or portion thereof) for any cash distribution made pursuant to the deposit agreement;

	•	to the extent not prohibited by the rules of any stock exchange or interdealer quotation system upon which the ADSs are traded, a fee of US$0.02 per ADS (or portion thereof) per year for services performed, by the depositary in administering our ADR program (which fee shall be assessed against holders of ADRs as of the record date set by the depositary not more than once each calendar year and shall be payable in the manner described in the following provision);

	•	any other charge payable by any of the depositary, any of the depositary’s agents, including, without limitation, the custodian, or the agents of the depositary’s agents in connection with the servicing of our shares or other deposited securities (which charge shall be assessed against registered holders of our ADRs as of the record date or dates set by the depositary and shall be payable at the sole discretion of the depositary by billing such registered holders or by deducting such charge from one or more cash dividends or other cash distributions);

	•	a fee for the distribution of securities (or the sale of securities in connection with a distribution), such fee being in an amount equal to the fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities (treating all such securities as if they were shares) but which securities or the net cash proceeds from the sale thereof are instead distributed by the depositary to those holders entitled thereto;

	•	stock transfer or other taxes and other governmental charges;

	•	cable, telex and facsimile transmission and delivery charges incurred at your request;

	•	transfer or registration fees for the registration of transfer of deposited securities on any applicable register in connection with the deposit or withdrawal of deposited securities;

	•	expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars; and

	•	such fees and expenses as are incurred by the depositary (including without limitation expenses incurred in connection with compliance with foreign exchange control regulations or any law or regulation relating to foreign investment) in delivery of deposited securities or otherwise in connection with the depositary’s or its custodian’s compliance with applicable law, rule or regulation.

We will pay all other charges and expenses of the depositary and any agent of the depositary (except the custodian) pursuant to agreements from time to time between us and the depositary. The fees described above may be amended from time to time.

Payment of Taxes

ADR holders must pay any tax or other governmental charge payable by the custodian or the depositary on any ADS or ADR, deposited security or distribution. If an ADR holder owes any tax or other governmental charge, the depositary may (i) deduct the amount thereof from any cash distributions, or (ii) sell deposited securities and deduct the amount owing from the net proceeds of such sale. In either case the ADR holder remains liable for any shortfall. Additionally, if any tax or governmental charge is unpaid, the depositary may also refuse to effect any registration, registration of transfer, split-up or combination of deposited securities or withdrawal of deposited securities (except under limited circumstances mandated by securities regulations). If any tax or governmental charge is required to be

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withheld on any non-cash distribution, the depositary may sell the distributed property or securities to pay such taxes and distribute any remaining net proceeds to the ADR holders entitled thereto.

By holding an ADR or an interest therein, you will be agreeing to indemnify us, the depositary, its custodian and any of our or their respective directors, employees, agents and Affiliates against, and hold each of them harmless from, any claims by any governmental authority with respect to taxes, additions to tax, penalties or interest arising out of any refund of taxes, reduced rate of withholding at source or other tax benefit obtained in respect of, or arising out of, your ADSs.

Reclassifications, Recapitalizations and Mergers

If we take certain actions that affect the deposited securities, including (i) any change in par value, split-up, consolidation, cancellation or other reclassification of deposited securities or (ii) any recapitalization, reorganization, merger, consolidation, liquidation, receivership, bankruptcy or sale of all or substantially all of our assets, then the depositary may choose to:


	(1) amend the form of ADR;

	(2) distribute additional or amended ADRs;

	(3) distribute cash, securities or other property it has received in connection with such actions;

	(4) sell any securities or property received and distribute the proceeds as cash; or

	(5) do none of the above.

If the depositary does not choose any of the above options, any of the cash, securities or other property it receives will constitute part of the deposited securities and each ADS will then represent a proportionate interest in such property.

Amendment and Termination


	*How may the deposit agreement be amended?*

We may agree with the depositary to amend the deposit agreement and the ADSs without your consent for any reason. ADR holders must be given at least 30 days notice of any amendment that imposes or increases any fees or charges (other than stock transfer or other taxes and other governmental charges, transfer or registration fees, cable, telex or facsimile transmission costs, delivery costs or other such expenses), or prejudices any substantial existing right of ADR holders. If an ADR holder continues to hold an ADR or ADRs after being so notified, such ADR holder is deemed to agree to such amendment. Notwithstanding the foregoing, if any governmental body or regulatory body should adopt new laws, rules or regulations which would require amendment or supplement of the deposit agreement or the form of ADR to ensure compliance therewith, we and the depositary may amend or supplement the deposit agreement and the ADR at any time in accordance with such changed laws, rules or regulations, which amendment or supplement may take effect before a notice is given or you otherwise receive notice. No amendment, however, will impair your right to surrender your ADSs and receive the underlying securities.


	*How may the deposit agreement be terminated?*

The depositary may terminate the deposit agreement by giving the ADR holders at least 30 days prior notice, and it must do so at our request. The deposit agreement will be terminated on the removal of the depositary for any reason. After termination, the depositary’s only responsibility will be (i) to deliver deposited securities to ADR holders who surrender their ADRs, and (ii) to hold or sell distributions received on deposited securities. As soon as practicable after the expiration of six months from the termination date, the depositary will sell the deposited securities which remain and hold the net proceeds of such sales, without liability for interest, in trust for the ADR holders who have not yet surrendered their ADRs. After making

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such sale, the depositary shall have no obligations except to account for such proceeds and other cash. The depositary will not be required to invest such proceeds or pay interest on them.

Limitations on Obligations and Liability to ADR holders


	*Limits on our obligations and the obligations of the depositary; limits on liability to ADR holders and holders of ADSs*

Prior to the issue, registration, registration of transfer, split-up, combination, or cancellation of any ADRs, or the delivery of any distribution in respect thereof, the depositary and its custodian may require you to pay, provide or deliver:


	•	payment with respect thereto of (i) any stock transfer or other tax or other governmental charge, (ii) any stock transfer or registration fees in effect for the registration of transfers of shares or other deposited securities upon any applicable register and (iii) any applicable fees and expenses described in the ADR;

	•	the production of proof satisfactory to it of (i) the identity of any signatory and genuineness of any signature and (ii) such other information, including without limitation, information as to citizenship, residence, exchange control approval, beneficial ownership of any securities, payment of applicable taxes or governmental charges, or legal or beneficial ownership and the nature of such interest, information relating to the registration of the shares on the books maintained by or on our behalf for the transfer and registration of shares, compliance with applicable law, regulations, provisions of or governing deposited securities and terms of the deposit agreement and the ADR, as it may deem necessary or proper; and

	•	compliance with such regulations as the depositary may establish consistent with the deposit agreement.

The deposit agreement expressly limits the obligations and liability of the depositary, ourselves and our respective agents. Neither we nor the depositary nor any such agent will be liable if:


	•	present or future law, rule or regulation of the United States, the Federative Republic of Brazil or any other country, or of any governmental or regulatory authority or securities exchange or market or automated quotation system, the provisions of or governing any deposited securities, any present or future provision of our charter, any act of God, war, terrorism or other circumstance beyond its control shall prevent, delay or subject to any civil or criminal penalty any act which the deposit agreement or the ADRs provides shall be done or performed by it or them (including, without limitation, voting);

	•	it exercises or fails to exercise discretion under the deposit agreement or the ADR;

	•	it performs its obligations without gross negligence or bad faith;

	•	it takes any action or refrains from taking any action in reliance upon the advice of or information from legal counsel, accountants, any person presenting shares for deposit, any registered holder of ADRs, or any other person believed by it to be competent to give such advice or information; or

	•	it relies upon any written notice, request, direction or other document believed by it to be genuine and to have been signed or presented by the proper party or parties.

Neither the depositary nor its agents have any obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any deposited securities or the ADRs. We and our agents shall only be obligated to appear in, prosecute or defend any action, suit or other proceeding in respect of any deposited securities or the ADRs, which in our opinion may involve us in expense or liability, if indemnity satisfactory to us against all expense (including fees and disbursements of counsel) and liability is furnished as often as may be required. The depositary and its agents may fully respond to any and all demands or requests for information maintained by or on its behalf in connection with the deposit agreement, any registered holder or holders of ADRs, any ADSs or otherwise to the extent such

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information is requested or required by or pursuant to any lawful authority, including without limitation laws, rules, regulations, administrative or judicial process, banking, securities or other regulators.

The depositary will not be responsible for failing to carry out instructions to vote the deposited securities or for the manner in which the deposited securities are voted or the effect of the vote. In no event shall the depositary or any of its agents be liable for any indirect, special, punitive or consequential damages.

The depositary may own and deal in deposited securities and in ADSs.

Disclosure of Interest in ADSs

To the extent that the provisions of or governing any deposited securities may require disclosure of or impose limits on beneficial or other ownership of deposited securities, other shares and other securities and may provide for blocking transfer, voting or other rights to enforce such disclosure or limits, you agree to comply with all such disclosure requirements and ownership limitations and to comply with any reasonable instructions we may provide in respect thereof. We reserve the right to request you to deliver your ADSs for cancellation and withdrawal of the deposited securities so as to permit us to deal with you directly as a holder of deposited securities and, by holding an ADS or an interest therein, you will be agreeing to comply with such instructions.

Requirements for Depositary Actions

We, the depositary or the custodian may refuse to:


	•	issue, register or transfer an ADR or ADRs;

	•	effect a split-up or combination of ADRs;

	•	deliver distributions on any such ADRs; or

	•	permit the withdrawal of deposited securities (unless the deposit agreement provides otherwise), until the following conditions have been met:


	•	the holder has paid all taxes, governmental charges, and fees and expenses as required in the deposit agreement;

	•	the holder has provided the depositary with any information it may deem necessary or proper, including, without limitation, proof of identity and the genuineness of any signature; and

	•	the holder has complied with such regulations as the depositary may establish under the deposit agreement including those regulations which we inform the depositary in writing are necessary to facilitate compliance with any applicable rules or regulations of the Central Bank or the Commission.

The depositary may also suspend the issuance of ADSs, the deposit of shares, the registration, transfer, split-up or combination of ADRs, or the withdrawal of deposited securities (unless the deposit agreement provides otherwise), if the register for ADRs or any deposited securities is closed or the depositary decides it is advisable to do so.

Books of Depositary

The depositary or its agent will maintain a register for the registration, registration of transfer, combination and split-up of ADRs, which register shall include the depositary’s direct registration system. You may inspect such records at such office during regular business hours, but solely for the purpose of communicating with other holders in the interest of business matters relating to the deposit agreement. Such register may be closed from time to time, when deemed expedient by the depositary.

The depositary will maintain facilities to record and process the issuance, cancellation, combination, split-up and transfer of ADRs. These facilities may be closed from time to time, to the extent not prohibited by law.

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Pre-release of ADSs

The depositary may issue ADSs prior to the deposit with the custodian of shares (or rights to receive shares). This is called a pre-release of the ADS. A pre-release is closed out as soon as the underlying shares (or rights to receive shares from us or from any registrar, transfer agent or other entity recording share ownership or transactions) are delivered to the depositary. The depositary may pre-release ADSs only if:


	•	the depositary has received collateral for the full market value of the pre-released ADSs (marked to market daily); and

	•	each recipient of pre-released ADSs agrees in writing that he or she


	•	owns the underlying shares,

	•	assigns all rights in such shares to the depositary,

	•	holds such shares for the account of the depositary and

	•	will deliver such shares to the custodian as soon as practicable, and promptly if the depositary so demands.

In general, the number of pre-released ADSs will not evidence more than 30% of all ADSs outstanding at any given time (excluding those evidenced by pre-released ADSs). However, the depositary may change or disregard such limit from time to time as it deems appropriate. The depositary may retain for its own account any earnings on collateral for pre-released ADSs and its charges for issuance thereof.

Appointment

In the deposit agreement, each holder and each person holding an interest in ADSs, upon acceptance of any ADSs (or any interest therein) issued in accordance with the terms and conditions of the deposit agreement shall be deemed for all purposes to (i) be a party to and bound by the terms of the deposit agreement and the applicable ADR(s), and (ii) appoint the depositary its attorney-in -fact, with full power to delegate, to act on its behalf and to take any and all actions contemplated in the deposit agreement and the applicable ADR(s), to adopt any and all procedures necessary to comply with applicable law and to take such action as the depositary in its sole discretion may deem necessary or appropriate to carry out the purposes of the deposit agreement and the applicable ADR(s), the taking of such actions to be conclusive determination of the necessity and appropriateness thereof.

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DIVIDENDS AND DIVIDEND POLICY

Amounts available for distribution

At each general shareholders’ meeting, our board of directors must propose the allocation of net profits earned during the preceding year (based on our non-consolidated annual financial statements). Brazilian corporation law provides that a company’s net profit is defined as the results from the year, after deductions of income tax and social contribution on the net profit for that year, net of accumulated losses from preceding years and amounts allocated to profit-sharing plans. Brazilian corporation law also provides that the amounts available for distribution of dividends are the amounts corresponding to the net profit:


	•	less the amount allocated to the legal reserve; and

	•	less the amount allocated to the contingency reserve, if any.

The payment of dividends may be limited to the amount of net profit earned, provided the difference is recorded as a future profit reserve, as discussed below. The calculation of our net income for this purpose is made in accordance with Brazilian GAAP, which differs from U.S. GAAP in certain significant respects.

According to the Brazilian corporation law and our by-laws, we must maintain a legal reserve to which we must allocate 5% of our profit for each year until we reach 20% of the paid-up capital. We are not required to allocate any amount to the legal reserve in any year in which that reserve, when added to the others, is equal to or greater than 30% of our total capital. Accumulated losses, if any, can be offset by the legal reserve. If not utilized for these purposes, the legal reserve can only be utilized for a capital increase. The legal reserve is subject to approval of the shareholders at a regular shareholders’ meeting, and can be transferred to the capital, but it is not available for the payment of dividends in subsequent years. Our net-profit calculations and allocations to reserves for any year are determined based on non-consolidated annual financial statements prepared in accordance with Brazilian GAAP.

Brazilian corporation law provides that part of a company’s net profit can be utilized to constitute discretionary or statutory reserves, which must be described in the company’s by-laws, precisely and comprehensively indicating the purpose of such reserves, the criteria for determining the annual portion of net profits that will be allocated for constituting the reserves and the maximum limit of the reserves. Currently, our by-laws do not provide for the constitution of statutory reserves or contingency reserves.

According to Brazilian corporation law, the amount of mandatory dividend that exceeds the net profit realized in any year can be allocated for future-profit reserves and the payment of mandatory dividends can be limited to the amount of net profit earned in the year. The profits from any future year consist of the sum of (i) the portion of positive net profit equal to the net worth equivalency in that year, if any, and (ii) profit derived from transactions in respect of which the due date for repayment occurs after the end of the following year. To the extent that amounts allocated for future profits reserve are earned in subsequent years, those amounts must be added to the payment of dividends relative to the year in which they were earned. The profits recorded in the future profits reserve, when earned and if not absorbed by losses in later years, must be added to the first dividends declared after they are earned.

A company is permitted to allocate to the future profit reserves all income from equity gains in subsidiaries that are not distributed to the company in the form of cash dividends. When such gains are distributed to the company in the form of cash dividends, the company is required to reverse the reserve. Under Brazilian corporate law, our shareholders may decide, upon a proposal of our board of directors, to allocate a discretionary amount of our net profits to a contingency reserve for estimated future losses which are deemed probable.

The distributable amount may be further increased by the reversal of such reserve in the fiscal year when the reasons that justified the creation of such reserve cease to exist or in which the anticipated loss occurs. Accordingly, there is no specific percentage of net profit allocable to this type of reserve.

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The amounts available for distribution can be increased by reversing the contingency reserve for losses considered probable, established in previous years, but not realized. Allocations to the contingency reserve are also subject to the approval of shareholders at a shareholders’ meeting.

The balance of the profit reserve accounts (except for contingency reserves and future profit reserves) must not exceed our total capital. In the event that the balance of the profit reserve accounts did exceed our capital, a shareholders’ meeting must decide if the excess amount will be utilized to pay the subscribed but not paid-up capital, subscription of new shares or the distribution of dividends.

Brazilian corporation law provides that any net profit not allocated for the accounts set out above must be distributed as dividends.

Mandatory dividend

Brazilian corporation law generally requires that the by-laws of each company must specify the minimum available percentage of profit to be distributed to shareholders as dividends, also known as the mandatory dividend.

The compulsory dividend is based on a percentage of adjusted profit (and must be a minimum of 25%) instead of being based on a fixed monetary amount per share. In the event that a company’s by-laws does not specifically address this issue, Brazilian corporation law provides that the applicable percentage is 50%. Our by-laws provide that at least 25% of the balance of the net profit from the preceding year (as calculated in accordance with Brazilian corporation law and Brazilian GAAP) must be distributed as mandatory dividends. Brazilian corporation law allows us, however, to suspend the mandatory dividend in any year in the event that our board of directors informs the shareholders’ general meeting that the distribution would not be feasible in light of our financial situation. Any such suspension of the compulsory dividend is subject to both the review of our fiscal council and approval of the shareholders’ meeting. In the case of a public company, the board of directors must file a specific justification for the suspension with the CVM within five days of the shareholders’ meeting. Any dividends not distributed as a result of any such suspension must be allocated to a special reserve. If not absorbed by subsequent losses, that amount must be distributed in the form of dividends as soon as the company’s financial situation allows such distribution.

Distribution of dividends

Brazilian corporation law provides that we must hold a general shareholders’ meeting by April 30th of each year at which, in addition to other matters, shareholders must make decisions regarding the allocation of our net profit with respect to the fiscal year ended immediately prior to our shareholders’ meeting and the distribution of our annual dividends. Interim dividends may also be declared by our board of directors. Any payment of an interim dividend may be set off against the amount of the mandatory dividend distribution for that fiscal year. Any holder of shares at the time of the declaration of dividends has the right to receive those dividends. Dividends corresponding to shares held by custodians are paid to the custodian for distribution to shareholders. According to Brazilian corporation law, dividends must generally be paid to owners within 60 days after the dividend is declared, unless shareholders elect a different payment date which, in any case, must occur before the end of the year in which the dividend was declared. Dividends attributed to shareholders and not claimed shall not earn interest or be subject to inflation adjustment and the statute of limitations in respect of receiving such dividends will expire (in our favor) three years from the date such dividends were attributed to the shareholders.

Interest on shareholders’ equity

According to current Brazilian tax law, companies have been authorized since January 1, 1996 to distribute interest on shareholders’ equity instead of dividends and treat such distributions as deductible expenses for the purposes of income tax. Since 1998, such distributions may also be treated as deductible expenses for the purposes of social contributions. Such interest, which may be paid at the discretion of our

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board of directors, subject to approval of the shareholders’ meeting, is limited to the daily variations in the TJLP on a pro-rated basis and may not exceed the greater of:


	•	50% of net income (after deducting provisions for social contribution on the net profit and before provision for income tax and interest on the company’s own capital) for the period for which the payment is made; or

	•	50% of retained profits and profit reserves at the beginning of the year in relation to which the payment is made.

For accounting purposes, although the deductible expense must be reflected in our statement of income in order to be deductible, the expense is immediately reversed before calculating net profit for the statutory financial statements and deducted from net worth in a manner similar to a dividend. Income tax of 15% (or 25% in the event that the shareholder resides in a tax haven jurisdiction) is withheld at source and owed by shareholders upon receipt of the interest, however the tax is normally paid by the companies on behalf of the shareholders upon distribution of the interest.

Our by-laws and article 9, paragraph 7, of Law No. 9,249/95 provide that interest on Net Equity can be attributed to the payment of dividends for purposes of the mandatory dividend.

Our dividend policy

We have not distributed dividends or interest on capital to our shareholders since 1997 because we had accumulated losses for those years. As of June 30, 2005, we no longer had accumulated losses at a level that would prevent us from paying dividends and our board of directors has declared a dividend payment of R$29,404,862 in respect of the year ended December 31, 2005, subject to the approval of our shareholders. However, we cannot assure you that we will pay dividends in the future. We intend that any distribution of dividends or interest on capital be made in future will be made in accordance with Brazilian corporation law and our by-laws. Our board of directors may declare dividends and elect that they be paid against either accumulated profits or existing profits reserves, following approval at a shareholders’ meeting. The amount distributed will depend on various factors such as our financial condition and results of our operations, our cash requirements, prospects and other factors considered relevant by our board of directors and shareholders. Holders of our ADSs will be entitled to the same rights in respect of any distribution of dividends as holders of our preferred shares.

In addition, the payment of dividends to our shareholders is contingent upon the net profit distributed as dividends by our operating subsidiaries. We may not be able to pay dividends to our shareholders in the event that our operational subsidiaries are unable to distribute dividends. See “— Amounts available for distribution.”

Restrictions On Foreign Investments

There are no restrictions on ownership of our preferred shares by individuals or legal entities domiciled outside Brazil, except in relation to companies holding concessions in relation to air transportation (see “Regulation of the Brazilian Civil Aviation Industry”). However, the right to convert dividend payments, sale proceeds or other amounts with respect to their shares eligible to the remitted in foreign currency outside Brazil is subject to registration of investments with the Central Bank.

Foreign investors must either register their investment as a direct foreign investment before the Central Bank of Brazil under Law 4,131/62, or as a foreign portfolio investment before the CVM under Resolution No. 2,689/00 and Instruction No. 325.

Foreign investors with direct foreign investments registered under Law 4,131/62 may divest through private transactions or transactions conducted through the stock exchange or over-the -counter market and are generally subject to less favorable tax treatment as compared to foreign investors with investments in portfolio pursuant to Resolution No. 2,689/ 00 and Instruction No. 325.

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Under Resolution No. 2,689/00, foreign investors with portfolio investments registered with the CVM may only buy and sell shares on the São Paulo Stock Exchange or on the over-the -counter market, except in certain cases, such as the acquisition of shares in public offerings. Investors under these regulations are also generally entitled to favorable tax treatment. See “Taxation — Brazilian tax considerations.”

Options

There are currently 715,252 outstanding options for the purchase and sale of our preferred shares.

Arbitration

Any and all dispute or disputes between us, our shareholders, managers and Fiscal Council among ourselves or involving BOVESPA itself, other companies registered on the Level 2 segment of BOVESPA, or arising out of or in connection with the interpretation of our by-laws, Brazilian corporation law, the agreement pursuant to which we adopted BOVESPA’s Level 2 differentiated corporate governance practices, if applicable, practices established by the National Monetary Council, the Central Bank, the CVM and other stock market practices shall be resolved through arbitration, in accordance with the terms of BOVESPA’s market arbitration chamber regulation.

Registration of Our Shares; Form and Transfer

Our preferred shares are held in registered book-entry form, using the book-entry form services of Banco Itaú S.A., as custodian. Transfer of our preferred shares is carried out by means of an entry in their books, by debiting the share account of the transferor and crediting the share account of the transferee.

Transfer of shares by a foreign investor are made in the same way and executed by the investor’s local agent on the investor’s behalf except that, if the original investment was registered with the Central Bank pursuant to foreign investment regulations, the foreign investor should also seek amendment, if necessary, through its local agent, of the Certificate of Registration to reflect the new ownership.

The São Paulo Stock Exchange operates a central and fungible clearing system through the CBLC. A holder of our preferred shares may choose, at its discretion, to participate in these systems and all shares elected to be put into the systems will be deposited in custody with the relevant stock exchange (through a Brazilian institution that is duly authorized to operate by the Central Bank and maintains a clearing account with the relevant stock exchange). The fact that such shares are subject to custody with the relevant stock exchange will be reflected in our registry of shareholders. Each participating shareholder will, in turn, be registered in our register of beneficial shareholders that is maintained by the relevant stock exchange and will be treated in the same way as registered shareholders.

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TAXATION

The summary below is based upon tax laws of Brazil and the United States as in effect on the date of this prospectus, which are subject to change (possibly with retroactive effect).

There is at present no income tax treaty between Brazil and the United States. In recent years, the tax authorities of the two countries held discussions that did not, but may eventually, culminate in such a treaty. No assurance can be given as to whether or when such a treaty might enter into force or how it would effect the United States holders of our preferred shares.

Brazilian Tax Considerations

The following discussion summarizes the material Brazilian tax consequences of the acquisition, ownership and disposition of our preferred shares or ADSs by a holder that is not domiciled in Brazil for purposes of Brazilian taxation and, in the case of preferred shares, which has registered its investment in such securities with the Central Bank as a U.S. dollar investment (in each case, a Non-Brazilian Holder). Pursuant Brazilian law, investors may invest in the preferred shares under Resolution No. 2,689.

Resolution No. 2,689 allows foreign investors to invest in almost all financial assets and to engage in almost all transactions available in the Brazilian financial and capital markets, provided that some requirements are fulfilled. In accordance with Resolution No. 2,689, the definition of foreign investor includes individuals, legal entities, mutual funds and other collective investment entities, domiciled or headquartered abroad.

Pursuant to Resolution No. 2,689, foreign investors must: (a) appoint at least one representative in Brazil with powers to perform actions relating to the foreign investment; (b) complete the appropriate foreign investor registration form; (c) register as a foreign investor with the Brazilian securities commission; and (d) register the foreign investment with the Central Bank.

Securities and other financial assets held by foreign investors pursuant to Resolution No. 2,689 must be registered or maintained in deposit accounts or under the custody of an entity duly licensed by the Central Bank or the CVM. In addition, securities trading is restricted to transactions carried out in the stock exchanges or organized over-the -counter markets licensed by the CVM, except for transfers resulting from a corporate reorganization, occurring upon the death of an investor by operation of law or will or as a consequence of the delisting of the relevant shares from a stock exchange and the cancellation of the registration with the CVM.


	*Taxation of Dividends*

Dividends, including dividends in kind, paid by us to the depositary in respect of the preferred shares underlying the ADSs or to a Non-Brazilian Holder in respect of preferred shares generally will not be subject to Brazilian income withholding tax provided that they are paid out of profits generated as of or after January 1, 1996. Dividends relating to profits generated prior to December 31, 1995 are subject to a Brazilian withholding tax of 15% to 25% according to the tax legislation applicable to each corresponding year.


	*Taxation of Gains*

Gains realized outside Brazil by a Non-Brazilian Holder on the disposition of ADSs to another Non-Brazilian Holder are not currently subject to Brazilian tax. However, according to Law No. 10,833, enacted on December 29, 2003, or Law No. 10,833, the disposition of assets located in Brazil by a Non-Brazilian Holder, whether to other Non-Brazilian Holders or Brazilian holders, may become subject to taxation in Brazil. Although we believe that the ADSs do not fall within the definition of assets located in Brazil for purposes of Law No. 10,833, considering the general and unclear scope of such provisions and

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the lack of a judicial court ruling in respect thereto, we are unable to predict whether such understanding will ultimately prevail in the courts of Brazil.

For purposes of Brazilian taxation, there are two types of Non-Brazilian Holders of preferred shares or ADSs: (a) Non-Brazilian Holders that are not resident or domiciled in a tax haven jurisdiction ( i.e. , a country or location that does not impose income tax or where the maximum income tax rate is lower than 20% or where the internal legislation imposes restrictions to disclosure of shareholding composition or the ownership of the investment), and that, in the case of holders of preferred shares, are registered before the Central Bank and the CVM to invest in Brazil in accordance with Resolution No. 2,689; and (b) other Non-Brazilian Holders, which include any and all non-residents of Brazil who invest in equity securities of Brazilian companies through any other means and all types of investors that are located in tax haven jurisdiction. The investors mentioned in item (a) above are subject to a favorable tax regime in Brazil, as described below.

The deposit of preferred shares in exchange for ADSs may be subject to Brazilian tax on capital gains at the rate of 15%, if the amount previously registered with the Central Bank as a foreign investment in the preferred shares is lower than (a) the average price per preferred share on a Brazilian stock exchange on which the greatest number of such shares were sold on the day of deposit; or (b) if no preferred shares were sold on that day, the average price on the Brazilian stock exchange on which the greatest number of preferred shares were sold in the 15 trading sessions immediately preceding such deposit. In such case, the difference between the amount previously registered and the average price of the preferred shares calculated as above will be considered to be a capital gain. Such taxation is not applicable in case of investors registered under Resolution No. 2,689 which are not located in a tax haven jurisdiction, which are currently tax exempt from income tax in such transaction.

The withdrawal of ADSs in exchange for preferred shares is not subject to Brazilian tax. Upon receipt of the underlying preferred shares, a Non-Brazilian Holder registered under Resolution No. 2,689 will be entitled to register the U.S. dollar value of such shares with the Central Bank as described below.

As a general rule, Non-Brazilian Holders registered under Resolution No. 2,689 that are not located in a tax haven jurisdiction are subject to income tax at a rate of 15% on gains realized on sales or exchanges of preferred shares outside a Brazilian stock exchange. With reference to proceeds of a redemption or of a liquidating distribution with respect to the preferred shares, the difference between the amount effectively received by the shareholder and the amount of foreign currency registered with the Central Bank, translated into reais at the commercial market rate on the date of the redemption or liquidating distribution, will be also subject to income tax at a rate of 15% once such transactions are treated as a sale or exchange not carried out on Brazilian stock exchange. In both cases, if the Non-Brazilian Holders are located in tax haven jurisdictions, the applicable rate is 25%. Gains realized arising from transactions on a Brazilian stock exchange by an investor registered under Resolution No. 2,689 that is not located in a tax haven jurisdiction are exempt from Brazilian income tax. This preferential treatment under Resolution No. 2,689 does not apply to Non-Brazilian Holders of the preferred shares or ADSs that are resident in a tax haven jurisdiction, in which case, gains realized on transactions performed by such holder on the Brazilian stock exchange are subject to the same tax rate that is applicable to a Brazilian resident. Pursuant to Law No. 11,033 of December 21, 2004, the rate applicable to Brazilian residents in transaction entered as of January 1, 2005 was established at 15%, being also subject to a withholding tax of 0.005% (to be offset against tax due on eventual capital gains).

Therefore, Non-Brazilian Holders are subject to income tax at a rate of 15% on gains realized on sales or exchanges in Brazil of preferred shares that occur on a Brazilian stock exchange, unless such sale is made by a Non-Brazilian Holder that is not resident in a tax haven jurisdiction, and (a) such a sale is made within five business days of the withdrawal of such preferred shares in exchange for ADSs and the proceeds of such sale are remitted abroad within such Five-day period, or (b) such a sale is made under Resolution No. 2,689 by Non-Brazilian Holders that register with the CVM. In these two cases the transaction will be tax exempt.

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The “gain realized” as a result of a transaction on a Brazilian stock exchange is the difference between the amount in Brazilian currency realized on the sale or exchange of the shares and their acquisition cost, without any correction for innovation. The “gain realized” as a result of a transaction that occurs other than on a Brazilian stock exchange, with shares that are registered under a certificate of registration of investment (other than under Resolution No. 2,689), will be calculated based on the foreign currency amount registered with the Central Bank which will be translated into reais at the commercial market rate of the date of such sale or exchange. There can be no assurance that the current preferential treatment for holders of ADSs and Non-Brazilian Holders of preferred shares under Resolution No. 2,689 will continue or will not be changed in the future. Reductions in the tax rate provided for by Brazil’s tax treaties do not apply to tax on gains realized on sales or exchanges of preferred shares.

Any exercise of preemptive rights relating to the preferred shares or ADSs will not be subject to Brazilian taxation. Any gain on the sale or assignment of preemptive rights relating to preferred shares by the depositary on behalf of holders of ADSs will be subject to Brazilian income taxation according to the same rules applicable to the sale or disposition of preferred shares.


	*Distributions of Interest Attributable to Shareholders’ Equity.*

In accordance with Law No. 9,249, dated December 26, 1995, as amended Brazilian corporations may make payments to shareholders characterized as distributions of interest on the company’s shareholders’ equity. Such interest is calculated by reference to the TJLP as determined by the Central Bank from time to time and cannot exceed the greater of:


	•	50% of net income (after social contribution on profits and before taking such distribution and any deductions for corporate income tax into account) for the period in respect of which the payment is made; or

	•	50% of the sum of retained profits and profits reserves.

Distributions of interest on shareholders’ equity in respect of the preferred shares paid to shareholders who are either Brazilian residents or non-Brazilian residents, including holders of ADSs, are subject to Brazilian income withholding tax at the rate of 15%, or 25% in case of shareholders domiciled in a tax haven jurisdiction. The distribution of interest on shareholders’ equity may be determined by our board of directors. We cannot assure you that our board of directors will not determine that future distributions of profits may be made by means of interest on shareholders’ equity instead of by means of dividends.

The amounts paid as distribution of interest on shareholders’ equity are deductible for corporation income tax and social contribution on profit, both of which are taxes levied on our profits, as far as the limits and rules described above are observed by us.


	*Other Relevant Brazilian Taxes*

There are no Brazilian inheritance, gift or succession taxes applicable to the ownership, transfer or disposition of preferred shares or ADSs by a Non-Brazilian Holder except for gift and inheritance taxes which are levied by some states of Brazil on gifts made or inheritances bestowed by individuals or entities not resident or domiciled in Brazil or domiciled within the state to individuals or entities resident or domiciled within such state in Brazil. There are no Brazilian stamp, issue, registration or similar taxes or duties payable by holders of preferred shares or ADSs. Pursuant to Decree 4,494 of December 3, 2002, the conversion into foreign currency or the conversion into Brazilian currency of the proceeds received by a Brazilian entity from a foreign investment in the Brazilian securities market, including those in connection with the investment in the preferred shares and ADSs and those made under Resolution No. 2,689, is potentially subject to an exchange transactions tax (Imposto Sobre Operações Financeiras — IOF/ Câmbio), although at present the rate of such tax is generally zero percent. Under Law No. 8,894 of June 21, 1994, or Law No. 8,894, such IOF tax rate may be increased at any time to a maximum of 25%, but any such increase will only be applicable to transactions occurring after such increase becomes effective.

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Law No. 8,894 creates the Tax on Bonds and Securities Transactions (IOF/ Títulos), which may be imposed on any transactions involving bonds and securities effected in Brazil, even if there transactions are performed on a Brazilian stock exchange. As a general rule, the rate of this tax is currently zero but the executive branch may increase such rate up to 1.5% per day, but only with respect to future transactions.

Financial transfers are taxed by the Contribuição Provisória sobre Movimentação Financeira, or CPMF, at a rate of 0.38%. The CPMF is levied upon the remittance of proceeds on the amount converted in reais of the transaction and is required to be withheld by the financial institution that carries out the transaction. Currently, the funds transferred from a bank account to acquire shares on the Brazilian stock exchange are exempt from CPMF. In addition, Provisional Measure 281 of February 15, 2006 provides that the CPMF rate assessable on an acquisition of shares in a non-organized over the counter transaction is to be reduced to zero (provided that such acquisition relates to a public offering of shares made by a publicly-traded company). Provisional Measure 281 is currently in effect but remains subject to ratification by the Brazilian National Congress. The funds transferred abroad resulting from the disposal of these shares on the Brazilian Stock Exchange are also exempt from CPMF.

United States

The following summary describes the material U.S. federal income tax consequences of the ownership and disposition of our ADSs or preferred shares as of the date hereof. Except where noted, this discussion deals only with U.S. Holders (as defined below) that hold our ADSs or preferred shares as capital assets for U.S. federal income tax purposes (generally, property held for investment). This summary does not represent a detailed description of the U.S. federal income tax consequences applicable to you if you are subject to special treatment under the U.S. federal income tax laws, including if you are:


	•	a financial institution;

	•	a dealer or trader in securities or currencies;

	•	a regulated investment company;

	•	a real estate investment trust;

	•	an insurance company;

	•	a tax-exempt organization;

	•	a person holding our ADSs or preferred shares as part of a hedging, integrated or conversion transaction, a constructive sale or a straddle;

	•	a person liable for alternative minimum tax;

	•	a person who actually or by attribution owns 10% or more of our voting stock;

	•	a partnership or other pass-through entity for U.S. federal income tax purposes; or

	•	a person whose “functional currency” is not the U.S. dollar.

The discussion below is based upon the provisions of the Internal Revenue Code of 1986, as amended (which we refer to as the Code), and regulations, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be repealed, revoked or modified so as to result in U.S. federal income tax consequences different from those discussed below. If you are considering the purchase, ownership or disposition of our ADSs or preferred shares, you should consult your own tax advisors concerning the U.S. federal income tax consequences to you in light of your particular situation as well as any consequences arising under the laws of any other taxing jurisdiction.

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As used herein, “U.S. Holder” means a holder of our ADSs or that is for U.S. federal income tax purposes:


	•	a citizen or resident alien of the United States;

	•	a corporation created or organized in or under the laws of the United States or any political subdivision thereof;

	•	an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

	•	a trust which is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust (or otherwise if the trust has a valid election in effect under current Treasury regulations to be treated as a U.S. person).

If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) holds our ADSs or preferred shares, the tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. If you are a partner of a partnership holding our ADSs or preferred shares, you should consult your tax advisors.

In general, for U.S. federal income tax purposes, U.S. Holders of the ADSs will be treated as the beneficial owners of the underlying preferred shares that are represented by such ADSs. Accordingly, deposits or withdrawals of preferred shares by U.S. Holders for the ADSs will not be subject to the U.S. federal income tax. This summary is based, in part, upon representations made by the depositary to us and assumes that the deposit agreements, and all other related agreements, will be performed in accordance with their terms.

The U.S. Treasury has expressed concerns that parties involved in transactions where depositary shares are pre-released may be taking actions that are inconsistent with the claiming of foreign tax credits for U.S. holders of ADSs. Accordingly, the analysis of the creditability of Brazilian taxes and the availability of the reduced dividend rate discussed below could be affected by future actions that may be taken by the U.S. Treasury.


	*Taxation of dividends*

Subject to the discussion under “Passive Foreign Investment Company (“PFIC”) Rules” below, distributions on our ADSs or preferred shares, including distributions paid in the form of payments of interest on capital for Brazilian tax purposes, before reduction for any Brazilian income tax withheld by us, will be taxable as dividends to the extent paid out of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. Such dividends, including any withheld taxes, will be includable as ordinary income on the day received by the depository. Such dividends will not be eligible for the dividends received deduction allowed to corporations. Under current law, dividends received before January 1, 2009 by non-corporate U.S. investors on shares of certain foreign corporations will be subject to U.S. federal income tax at a maximum rate of 15% if certain conditions are met. A U.S. Holder will be eligible for this reduced rate only if it has held the ADSs or preferred shares for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date. A U.S. Holder will not be able to claim the reduced rate for any year in which the company is treated as a PFIC. See “Passive foreign investment company rules” below.

Based on existing guidance, it is not entirely clear whether dividends received with respect to the preferred shares will be treated as qualified dividends because the preferred shares are not themselves listed on a U.S. exchange. In addition, the U.S. Treasury has announced its intention to promulgate rules pursuant to which holders of ADSs and intermediaries through whom such securities are held will be permitted to rely on certifications from issuers to establish that dividends are treated as qualified dividends. Because such procedures have not yet been issued, it is not clear whether the company will be able to

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comply with them. Holders of ADSs should consult their own tax advisers regarding the availability of the reduced dividend tax rate in the light of their own particular circumstances.

The amount of any dividend paid in reais will equal the U.S. dollar value of the reais received calculated by reference to the exchange rate in effect on the date the dividend is actually or constructively received by the depositary, regardless of whether the reais are converted into U.S. dollars at that time. A U.S. holder should not recognize any foreign currency gain or loss in respect of such distribution if the reais is converted into U.S. dollars on the date received. If any reais received are not converted into U.S. dollars on the date of receipt, you will have a tax basis in the reais equal to their U.S. dollar value on the date of receipt. Any gain or loss realized on a subsequent conversion or other disposition of the reais will be treated as U.S. source ordinary income or loss.

Subject to generally applicable limitations and restrictions, Brazilian withholding taxes on dividends may be treated as foreign taxes eligible for credit against your U.S. federal income tax liability. In the event that you do not elect to claim a credit for foreign taxes, you may instead claim a deduction in respect of such Brazilian taxes. For purposes of calculating the foreign tax credit, dividends paid on our ADSs or preferred shares will be treated as income from sources outside the United States. The limitation on foreign taxes eligible for credit is calculated separately for specific categories of income. The rules governing the foreign tax credit are complex. You are urged to consult your tax advisors regarding the availability of the foreign tax credit under your particular circumstances.


	*Taxation of capital gains*

Subject to the discussion under “Passive Foreign Investment Company Rules” below, you will recognize capital gain or loss for U.S. federal income tax purposes on any sale, exchange or redemption of our ADSs or preferred shares in an amount equal to the difference between the amount realized for the ADSs or preferred shares and your tax basis in the ADSs or preferred shares. This gain or loss will be long-term capital gain or loss if you held the ADSs or preferred shares for more than one year at such time. The deductibility of capital losses is subject to limitations. Any gain or loss recognized by you will generally be treated as U.S. source gain or loss. Consequently, you may not be able to use the foreign tax credit arising from any Brazilian tax imposed on the disposition of our ADSs or preferred shares unless such credit can be applied (subject to applicable limitations) against tax due on other income treated as derived from foreign sources in the appropriate income category. Alternatively, you may take a deduction for the Brazilian tax.

If Brazilian tax is withheld on the sale or disposition of our ADSs or preferred shares, your amount realized will include the gross amount of the proceeds of such sale or disposition before deduction of Brazilian tax.


	*Passive foreign investment company rules*

We do not expect to be considered a passive foreign investment company for U.S. federal income tax purposes. Passive foreign investment company status depends on a foreign company not earning more than a permitted amount of gross income that is considered “passive income” (such as interest, dividends and certain rents and royalties) and not holding more than a permitted percentage of assets, determined by value, that produce or are held to produce passive income. Because these tests depend on our income and the fair market value of our assets from time to time, there can be no assurance that we will not be considered a passive foreign investment company for any taxable year. If you are a taxable U.S. Holder and we are treated as a passive foreign investment company for any taxable year during which you own preferred shares or ADSs, you could be subject to materially adverse consequences including the imposition of significantly greater amounts of U.S. tax liability on disposition gains and certain distributions as well as additional tax form filing requirements.

141


	*Other Brazilian taxes*

You should note that any Brazilian IOF/ Exchange Tax, IOF/ Bonds Tax or CPMF Tax (as discussed above under “Taxation — Brazil” above) may not be treated as a creditable foreign tax for U.S. federal income tax purposes, although you may be entitled to deduct such taxes, subject to applicable limitations under the Code. You should consult your tax advisors regarding the U.S. federal income tax consequences of these taxes.


	*Information reporting and backup withholding*

Information returns may be filed with the Internal Revenue Service in connection with distributions on our ADSs or preferred shares and the proceeds from their sale, exchange or redemption unless you establish that you are exempt from the information reporting rules, for example because you are a corporation. If you do not establish this, you may be subject to backup withholding on these payments if you fail to provide your taxpayer identification number or comply with certain certification procedures. The amount of any backup withholding from a payment to you will be allowed as a credit against your U.S. federal income tax liability and may entitle you to a refund, provided that the required information is timely furnished to the Internal Revenue Service.

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UNDERWRITING

We and the selling shareholders are offering the preferred shares and the ADSs described in this prospectus through the underwriters and the placement agents named below (which, in the case of the preferred shares, will act as placement agents on behalf of the Brazilian underwriters) in the United States and other jurisdictions outside Brazil. Preferred shares purchased by U.S. investors will be placed outside the United States by the Brazilian underwriters, settled in Brazil and paid for in reais and their offer is being underwritten by the Brazilian underwriters pursuant to the Brazilian underwriting agreement. U.S. investors purchasing preferred shares must be authorized to invest in Brazilian Securities in accordance with the requirements established by the CMN and the CVM.

Under the terms and subject to the conditions contained in an underwriting agreement dated , 2006, we and the selling shareholders have agreed to sell to the underwriters named below, for whom Credit Suisse Securities (USA) LLC and Pactual Capital Corporation are acting as representatives, the following respective numbers of ADSs:


		Number of
Underwriters		ADSs

Credit Suisse Securities (USA) LLC




Pactual Capital Corporation




Merrill Lynch, Pierce, Fenner & Smith Incorporated

	Total

In addition, pursuant to the terms of the underwriting agreement and the inter-syndicate agreement, the underwriters will act as placement agents on behalf of the Brazilian underwriters identified below with respect to the offering of preferred shares sold to investors located outside Brazil.

Pursuant to the Instrumento Particular de Contrato de Distribuição de Ações Preferenciais de Emissão da TAM S.A. , which we refer to as the Brazilian underwriting agreement, Banco de Investimentos Credit Suisse (Brasil) S.A. and Banco Pactual S.A., or the Brazilian underwriters, have agreed to offer preferred shares to investors located inside Brazil and other non-U.S. international investors that are authorized to invest in Brazilian securities either under the foreign portfolio investment requirements established by the CMN and the CVM or through foreign direct investment procedures under Law No. 4,131/62. The Brazilian underwriting agreement provides that, if any of the firm shares are not placed, the Brazilian underwriters are obligated to purchase them on a firm commitment basis on the settlement date, subject to certain conditions and exceptions. Under the terms and subject to the conditions contained in the Brazilian underwriting agreement, each we and the selling shareholders have agreed to sell and the Brazilian underwriters have agreed to place, the following respective numbers of preferred shares:


		Number of
Brazilian Underwriters		Preferred Shares

Banco de Investimentos Credit Suisse (Brasil) S.A.




Banco Pactual S.A.

	Total

The underwriting agreement provides that the underwriters are obligated to purchase all of the ADSs if any are purchased, other than those ADSs covered by the over-allotment option described below. The underwriting agreement also provides that if an underwriter defaults the purchase commitments of non-defaulting underwriters may be increased or the offering of ADSs may be terminated. In addition, pursuant to the terms of the underwriting agreement, the underwriters will act as placement agents on behalf of the Brazilian underwriters with respect to the offer of preferred shares sold to investors located outside Brazil.

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Our ADSs are offered subject to a number of conditions, including:


	•	Receipt and acceptance of our ADSs by the underwriters, and

	•	The underwriters’ right to reject orders in whole or in part.

We have also granted the underwriters a 30-day option (beginning on the date of this prospectus) to purchase on a pro rata basis up to additional ADSs at the initial public offering price less the underwriting discounts and commissions. The option may be exercised only to cover any over-allotments in the sale of the ADSs.

The underwriters propose to offer the ADSs initially at the public offering price on the cover page of this prospectus and to selling group members at that price less a selling concession of US$ per ADS. The underwriters and selling group members may allow a discount of US$ per ADS on sales to other broker/ dealers. After the initial public offering the representatives may change the public offering price and concession and discount to broker/ dealers.

The preferred shares are being offered in Brazil to Brazilian investors and those U.S. and other international investors who register their investments as foreign direct investments before the Central Bank of Brazil under Law. No. 4,131/62 or who are registered as foreign portfolio investors with the CVM and acting through custody accounts managed by local agents pursuant to Resolution no. 2,689 of the CMN, which we refer to as Resolution 2,689.

Investors residing outside Brazil are authorized to purchase equity instruments, including our preferred shares, on the BOVESPA provided that they comply with the registration requirements set forth in Resolution 2,689 and CVM Instruction no. 325.

With certain limited exceptions, Resolution 2,689 investors are permitted to carry out any type of transaction in the Brazilian financial capital market involving a security traded on a stock or futures exchange or organized over-the -counter market.

In order to become a Resolution 2,689 investor, an investor residing outside Brazil must:


	•	appoint a representative in Brazil with powers to take actions relating to the investments;

	•	appoint an authorized custodian in Brazil for the investments, which must be a financial institution duly authorized by the Central bank and CVM; and

	•	through its representative, register itself as a non-Brazilian investor with the CVM and the investment with the Central Bank.

Securities and other financial assets held by non-Brazilian investors pursuant to Resolution 2,689 must be registered or maintained in deposit accounts or under the custody of an entity duly licensed by the Central Bank or the CVM. In addition, securities trading by non-Brazilian investors is generally restricted to transactions involving securities listed on Brazilian stock exchanges or traded in organized over-the -counter markets licensed by the CVM.

A foreign direct investor under Law No. 4,131/62 must:


	•	register as a foreign direct investor with the Central Bank;

	•	obtain a taxpayer identification number from the Brazilian tax authorities;

	•	appoint a tax representative in Brazil; and

	•	appoint a representative in Brazil for service of process in respect of suits based on the Brazilian corporation law.

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Our preferred shares are offered subject to a number of conditions, including the Brazilian underwriters’ right to reject orders from institutional investors in whole or in part.

We have also granted to the Brazilian underwriters a 30-day option (beginning on the date of this prospectus) to purchase on a pro rata basis up to additional preferred shares at the initial public offering price less the underwriting discounts and commissions. The option may be exercised only to cover any over-allotments in the sale of the preferred shares.

The following table summarizes the per ADS and total compensation and estimated expenses we and the selling shareholders will pay to the underwriters, assuming both no exercise and full exercise of the underwriters’ over-allotment option.

Per ADS

Total

Without

With

Without

With

Over-allotment

Underwriting Discounts and Commissions paid by us

US$

Expenses payable by us

US$

Underwriting Discounts and Commissions paid by selling shareholders

US$

Expenses payable by the selling shareholders

US$

Preferred shares will initially be offered at the respective offering price set forth on the cover of this prospectus of R$ per preferred shares (approximately US$ ).

The following table summarizes the per preferred share and total compensation and estimated expenses we and the selling shareholders will pay to the Brazilian underwriters, assuming both no exercise and full exercise of the Brazilian underwriters’ over-allotment option.

Per Preferred Share

Total

Without

With

Without

With

Over-allotment

Underwriting Discounts and Commissions paid by us

US$

Expenses payable by us

US$

Underwriting Discounts and Commissions paid by selling shareholders

US$

Expenses payable by the selling shareholders

US$

Brazilian Equity Investments III LLC, Brazilian Equity LLC and Brasil Private Equity Fundo de Investimento em Participações, some of our selling shareholders, may be deemed to be affiliates of Credit Suisse Securities (USA) LLC, one of the underwriters. The offering is therefore being conducted in accordance with the applicable provisions of Rules 2710(h) and 2720 of the Conduct Rules of the National Association of Securities Dealers, Inc. (or NASD). Rule 2720 requires that the initial public offering price of the ADSs and the preferred shares not be lower than that recommended by a “qualified independent underwriter” meeting certain standards. Accordingly, Merrill Lynch, Pierce, Fenner & Smith Incorporated will assume the responsibilities of acting as the qualified independent underwriter in pricing the offering and conducting due diligence. The initial public offering price of the ADSs and the preferred shares, when sold to the public at the public offering price set forth on the cover page of this prospectus, is no lower than that recommended by Merrill Lynch, Pierce, Fenner & Smith Incorporated.

We, TEP, the selling shareholders and each of our directors and executive officers have agreed with the underwriters and the Brazilian underwriters, for a period of 180 days following the date of the final prospectus, not to issue, offer, sell, contract to sell, pledge, loan, grant any option to purchase, make any

145

short sale or otherwise dispose of, or grant any rights or, in the case of our company, file a registration statement under the Securities Act or Brazilian laws, in all cases with respect to, any preferred shares or any options or warrants to purchase any preferred shares, or any securities convertible into, or exchangeable for, or that represent the right to receive preferred shares. Additionally, we, TEP, the selling shareholders and each of our directors and executive officers have agreed with the underwriters and the Brazilian underwriters, for the 180-day period referred to in the preceding sentence, not to enter into any swap or other arrangement that transfers to another party, in whole or in part, any of the economic consequences of the ownership of preferred shares or of any securities convertible into or exercisable or exchangeable for preferred shares, or of warrants or other rights to purchase preferred shares, whether any such transaction is to be settled by delivery of preferred shares or such other securities, in cash or otherwise, and not to publicly announce an intention to effect any transaction described in this paragraph. We call such actions, other than issuance, ”transfer.”

Under this agreement, the following transfers could be made:


	•	a transfer by us, TEP, any of the selling shareholders or any of our directors or executive officers to any of its affiliates or shareholders, as the case may be;

	•	a transfer among our affiliates or shareholders or among affiliates or shareholders or each of TEP, any of their selling shareholders or any of their directors or executive officers, as the case may be;

	•	a transfer in connection with the appointment or the removal of a director from office;

	•	the issue, by us, of shares in connection with stock option plans to our employees and other persons which contribute with our business; and

	•	transfers in connection with share loans related to the implementation of this offering.

In any of the first four cases, the transferor must cause the relevant transferee to agree to formally adhere in writing to the lock-up agreement.

We cannot assure you that the underwriters and the Brazilian underwriters will not waive these lock-up obligations, in which case these preferred shares would become eligible for sale earlier.

Neither we, the underwriters or the Brazilian underwriters can predict the effect, if any, that future sales of the preferred shares or ADSs, or the availability of such preferred shares or ADSs for future sale, will have on the market price of the preferred shares or ADSs prevailing from time to time or on our ability to raise capital in the future. Sales of substantial amounts of preferred shares or ADSs in the public market, or the perception that such sales could occur, could adversely affect the prevailing market price of the preferred shares or ADSs and our ability to sell shares or ADSs in the future at a time and at a price that we deem appropriate.

We have agreed to indemnify the several underwriters against liabilities under the Securities Act, or contribute to payments which the underwriters may be required to make in that respect.

Credit Suisse Securities (USA) LLC, which may be deemed an affiliate of some of our shareholders, is participating in this proposed offer and sale of the ADSs and preferred shares as global coordinator and joint bookrunner. The participation of Credit Suisse Securities (USA) LLC could present a conflict of interest since it may have an interest in the successful completion of this offering in addition to receiving underwriting discounts and commissions. The offering will be conducted in accordance with all applicable provisions of NASD Conduct Rules 2710(h) and 2720 and, accordingly, Merrill Lynch, Pierce, Fenner & Smith Incorporated is assuming the responsibilities of acting as the qualified independent underwriter in pricing the offering and conducting due diligence.

Under U.S. Federal Securities laws, the selling shareholders may be deemed to be underwriters.

The underwriters and their affiliates and the Brazilian underwriters and their affiliates have provided and may in the future provide certain commercial banking, financial advisory and investment banking services for us, for which they receive fees.

146

The underwriters and their affiliates and the Brazilian underwriters and their affiliates may from time to time in the future engage in transactions with us and perform services for us in the ordinary course of their business.

In connection with the offering the underwriters, may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Exchange Act.


	•	Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.

	•	Over-allotment involves sales by the underwriters of ADSs in excess of the number of ADSs the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of ADSs over-allotted by the underwriters is not greater than the number of ADSs that they may purchase in the over-allotment option. In a naked short position, the number of ADSs involved is greater than the number of ADSs in the over-allotment option. The underwriters may close out any short position by either exercising their over-allotment option and/or purchasing ADSs in the open market.

	•	Syndicate covering transactions involve purchases of the ADSs in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of ADSs to close out the short position, the underwriters will consider, among other things, the price of ADSs available for purchase in the open market as compared to the price at which they may purchase ADSs through the over-allotment option. If the underwriters sell more ADSs than could be covered by the over-allotment option, a naked short position, that position can only be closed out by buying ADSs in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the ADSs in the open market after pricing that could adversely affect investors who purchase in the offering.

	•	Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the ADSs originally sold by the syndicate member are purchased in a stabilizing transaction or a syndicate covering transaction to cover syndicate short positions.

	•	In passive market making, market makers in the ADSs who are underwriters or prospective underwriters may, subject to limitations, make bids for or purchases of the ADSs until the time, if any, at which a stabilizing bid is made.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of the ADSs or preventing or retarding a decline in the market price of the ADSs. As a result the price of the ADSs may be higher than the price that might otherwise exist in the open market. These transactions may be effected on the New York Stock Exchange or otherwise and, if commenced, may be discontinued at any time without notice.

The Brazilian lead manager, through its brokerage house, may carry out stabilization activities in BOVESPA. Stabilization activities may be carried out for 30 (thirty) days from the date of this Prospectus. A stabilization activities agreement, in a form approved by the CVM, has been executed simultaneously with the execution of the Brazilian underwriting agreement.

Stabilization activities in the BOVESPA will be carried out at the sole discretion of the Brazilian lead manager. In addition, we cannot forecast the effect of stabilization activities in relation to the price of our preferred shares.

We have applied for the ADSs to be approved for listing on the NYSE under the symbol “TAM.”

147

NOTICE TO CANADIAN RESIDENTS

Resale Restrictions

The distribution of the ADSs and the preferred shares in Canada is being made only on a private placement basis exempt from the requirement that we and the selling shareholders prepare and file a prospectus with the securities regulatory authorities in each province where trades of ADSs or preferred shares are made. Any resale of the ADSs or preferred shares in Canada must be made under applicable securities laws which will vary depending on the relevant jurisdiction, and which may require resales to be made under available statutory exemptions or under a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the ADSs or preferred shares.

Representations of Purchasers

By purchasing ADSs or preferred shares in Canada and accepting a purchase confirmation a purchaser is representing to us, the selling shareholders and the dealer from whom the purchase confirmation is received that:


	•	the purchaser is entitled under applicable provincial securities laws to purchase the ADSs or preferred shares without the benefit of a prospectus qualified under those securities laws,

	•	where required by law, that the purchaser is purchasing as principal and not as agent,

	•	the purchaser has reviewed the text above under Resale Restrictions, and

	•	the purchaser acknowledges and consents to the provision of specified information concerning its purchase of the ADSs or preferred shares to the regulatory authority that by law is entitled to collect the information.

Further details concerning the legal authority for this information is available on request.

Rights of Action – Ontario Purchasers Only

Under Ontario securities legislation, certain purchasers who purchase a security offered by this prospectus during the period of distribution will have a statutory right of action for damages, or while still the owner of the ADSs or preferred shares, for rescission against us and the selling shareholders in the event that this prospectus contains a misrepresentation without regard to whether the purchaser relied on the misrepresentation. The right of action for damages is exercisable not later than the earlier of 180 days from the date the purchaser first had knowledge of the facts giving rise to the cause of action and three years from the date on which payment is made for the ADSs or preferred shares. The right of action for rescission is exercisable not later than 180 days from the date on which payment is made for the ADSs or preferred shares. If a purchaser elects to exercise the right of action for rescission, the purchaser will have no right of action for damages against us or the selling shareholders. In no case will the amount recoverable in any action exceed the price at which the ADSs or preferred shares were offered to the purchaser and if the purchaser is shown to have purchased the securities with knowledge of the misrepresentation, we and the selling shareholders will have no liability. In the case of an action for damages, we and the selling shareholders will not be liable for all or any portion of the damages that are proven to not represent the depreciation in value of the ADSs or preferred shares as a result of the misrepresentation relied upon. These rights are in addition to, and without derogation from, any other rights or remedies available at law to an Ontario purchaser. The foregoing is a summary of the rights available to an Ontario purchaser. Ontario purchasers should refer to the complete text of the relevant statutory provisions.

148

Enforcement of Legal Rights

All of our directors and officers as well as the experts named herein and the selling shareholders may be located outside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service of process within Canada upon us or those persons. All or a substantial portion of our assets and the assets of those persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against us or those persons in Canada or to enforce a judgment obtained in Canadian courts against us or those persons outside of Canada.

Taxation and Eligibility for Investment

Canadian purchasers of ADSs or preferred shares should consult their own legal and tax advisors with respect to the tax consequences of an investment in the ADSs or preferred shares in their particular circumstances and about the eligibility of the ADSs or preferred shares for investment by the purchaser under relevant Canadian legislation.

149

EXPENSES RELATING TO THIS OFFERING

Set forth below is an itemization of the total expenses, excluding underwriting discounts and commissions, that we and the selling shareholders expect to incur in connection with this offering. With the exception of the SEC registration fee and the National Association of Securities Dealers, Inc. filing fee, all amounts are estimates.






SEC Registration Fee		US$




New York Stock Exchange Listing Fee		US$




National Association of Securities Dealers, Inc. Filing Fee		US$




Printing Expenses		US$




Legal Fees and Expenses		US$




Accounting Fees and Expenses		US$




Miscellaneous		US$




	Total	US$

VALIDITY OF SECURITIES

The validity of the ADSs will be passed upon for us by Clifford Chance US LLP, New York, New York and for the underwriters by Cleary Gottlieb Steen & Hamilton LLP, New York, New York. The validity of the preferred shares and other matters governed by Brazilian law will be passed upon for us by Machado, Meyer, Sendacz e Opice — Advogados, São Paulo, Brazil. Certain matters of Brazilian law will be passed upon for the underwriters by Pinheiro Neto Advogados, São Paulo, Brazil.

EXPERTS

PricewaterhouseCoopers Auditores Independentes, independent registered public accounting firm, have audited our consolidated annual financial statements at December 31, 2005 and 2004, and for each of the three years in the period ended December 31, 2005, as set forth in their report. We have included our consolidated annual financial statements in this prospectus and elsewhere in the registration statement in reliance on PricewaterhouseCoopers Auditores Independentes’ report, given on their authority as experts in accounting and auditing. PricewaterhouseCoopers’ São Paulo address is Av. Francisco Matarazzo, 1700-Torre Torino, 05001-400 São Paulo. SP, Brazil

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Commission a registration statement (including amendments and exhibits to the registration statement) on Form F-1 under the Securities Act. This prospectus, which is part of the registration statement, does not contain all of the information set forth in the registration statement and the exhibits and schedules to the registration statement. For further information, we refer you to the registration statement and the exhibits and schedules filed as part of the registration statement. If a document has been filed as an exhibit to the registration statement, we refer you to the copy of the document that has been filed. Each statement in this prospectus relating to a document filed as an exhibit is qualified in all respects by the filed exhibit.

We are subject to the informational requirements of the U.S. Securities Exchange Act of 1934, which is also known as the Exchange Act. Accordingly, we are required to file reports and other information with the Commission, including annual reports on Form 20-F and reports on Form 6-K. You may inspect and copy reports and other information to be filed with the Commission at the public reference facilities maintained by the Commission at 100 F Street, N.E., Washington D.C. 20549. Copies of the materials may be obtained from the Public Reference Room of the Commission 100 F Street, N.E., Washington, D.C. 20549 at prescribed rates. The public may obtain information on the operation of the Commission’s Public Reference Room by calling the Commission in the United States at 1-800-SEC-0330. In addition, the Commission

150

maintains an internet website at http://www.sec.gov, from which you can electronically access the registration statement and its materials.

As a foreign private issuer, we are not subject to the same disclosure requirements as a domestic U.S. registrant under the Exchange Act. For example, we are not required to prepare and issue quarterly reports. However, we furnish our shareholders with annual reports containing financial statements audited by our independent registered public accounting firm and make available to our shareholders quarterly reports containing unaudited financial data for the first three quarters of each fiscal year. We file annual reports on Form 20-F within the time period required by the Commission, which is currently six months from December 31, the end of our fiscal year.

We will send the depositary a copy of all notices that we give relating to meetings of our shareholders or to distributions to shareholders or the offering of rights and a copy of any other report or communication that we make generally available to our shareholders. The depositary will make all these notices, reports and communications that it receives from us available for inspection by registered holders of ADSs at its office. The depositary will mail copies of those notices, reports and communications to you if we ask the depositary to do so and furnish sufficient copies of materials for that purpose.

We also file financial statements and other periodic reports with the CVM located at Rua Sete de Setembro, 111, Rio de Janeiro, Rio de Janeiro 20159-900, Brazil.

151

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS






Consolidated Financial Statements at December 31, 2005 and 2004




Report of Independent Registered Public Accounting Firm			F-2




Consolidated Balance Sheets at December 31, 2005 and 2004			F-3




Consolidated Statements of Operations for the years ended December 31, 2005, 2004 and 2003			F-4




Statement of Changes in Shareholders’ Equity for the years ended December 31, 2005, 2004 and 2003			F-5




Consolidated Statements of Changes in Financial Position for the years ended December 31, 2005, 2004 and 2003			F-6




Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003			F-7




Notes to Consolidated Financial Statements			F-8

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

TAM S.A.


1	We have audited the accompanying consolidated balance sheets of TAM S.A. and its subsidiaries (the “Company”) as of December 31, 2005 and 2004, and the related consolidated statements of operations, of changes in shareholders’ equity, of changes in financial position and of cash flows for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements.

2	We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

3	In our opinion the consolidated financial statements referred to above present fairly, in all material respects, the financial position of TAM S.A. and its subsidiaries at December 31, 2005 and 2004, and the results of their operations, the changes in the shareholders’ equity, the changes in their financial position and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with accounting practices adopted in Brazil.

4	Accounting practices adopted in Brazil vary in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effects of such differences is presented in Note 29 to the consolidated financial statements.

São Paulo, February 14, 2006

/s/ PricewaterhouseCoopers

Auditores Independentes

F-2

TAM S.A.

CONSOLIDATED BALANCE SHEETS AT DECEMBER 31


		2005		2004

		In thousands of reais




ASSETS
Current assets




	Cash and banks		92,935		85,920




	Financial investments		902,517		210,941




	Customer accounts receivable		763,165		553,329




	Inventories		104,565		94,102




	Taxes recoverable		43,035		26,843




	Deferred income tax and social contribution		23,782		39,897




	Prepaid expenses		129,479		86,848




	Advances to aircraft manufacturers		100,995		29,085




	Other		21,758		17,025

			2,182,231		1,143,990

Long-term assets




	Deposits in guarantee		118,660		123,073




	Deferred income tax and social contribution		166,236		149,244




	Judicial deposits		55,877		47,937




	Other		12,466		14,614

			353,239		334,868

Permanent assets




	Goodwill and other investments		1,504		2,845




	Property, plant and equipment		768,606		715,289




	Deferred charges		5,228		6,291

			775,338		724,425

Total assets			3,310,808		2,203,283






LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities




	Suppliers		282,048		264,216




	Short-term debt including current portion of long-term debt		118,448		119,577




	Finance lease and operating lease liabilities		62,049		54,968




	Debentures		26,109		23,619




	Salaries and payroll charges		134,048		121,104




	Advance ticket sales		557,647		367,335




	Taxes and tariffs payable		35,156		49,345




	Income tax and social contribution payable		27,073		3,072




	Dividends payable		29,405		—




	Other		121,146		78,431

			1,393,129		1,081,667

Long-term liabilities




	Long-term debt		151,405		30,975




	Debentures		33,244		51,529




	Finance lease and operating lease liabilities		155,703		206,391




	Return of Fokker 100 fleet		85,004		110,225




	Deferred income tax and social contribution		63,287		56,822




	Provision for contingencies and tax obligations under judicial dispute		654,101		449,999




	Other		1,906		11,752

			1,144,650		917,693

Deferred income			11,099		11,099

Minority interest			1,843		2,027

Shareholders’ equity




	Capital (representing 59,816,248 common shares and 84,243,214 preferred shares at December 31, 2005 and 59,816,248 common shares and 62,913,094 at December 31, 2004 (considering the retroactive effects of the share split for December 31, 2004 — Note 19(a)))		153,909		120,749




	Capital reserve		350,782		—




	Revaluation reserve		161,196		137,669




	Revenue reserves		94,200		—




	Retained earnings (deficit)		—		(67,621	)

			760,087		190,797

Total liabilities and shareholders’ equity			3,310,808		2,203,283

The accompanying notes are an integral part of these consolidated financial statements.

F-3

TAM S.A.

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31


			2005			2004			2003

			*In thousands of reais,* except amounts per**
			thousand shares




Gross operating revenue
	Air transportation revenues




		Domestic		4,192,698			3,233,300			2,687,676




		International		1,033,556			893,140			679,420




		Cargo		407,147			318,953			235,839




	Other operating revenues			276,735			298,888			164,848

				5,910,135			4,744,281			3,767,783




	Taxes and deductions			(261,370	)		(223,910	)		(176,440	)

Net operating revenue				5,648,765			4,520,371			3,591,343




	Cost of services rendered			(3,796,886	)		(3,010,070	)		(2,653,369	)

Gross profit				1,851,879			1,510,301			937,974

Operating income (expenses)




	Selling			(1,078,181	)		(890,957	)		(720,920	)




	General and administrative			(324,699	)		(310,627	)		(242,577	)




	Executive management fees			(22,088	)		(13,998	)		(7,146	)




	Financial expenses			(198,282	)		(114,381	)		(215,164	)




	Financial income			105,721			31,806			476,607




	Other operating expenses, net			(30,806	)		(14,610	)		(8,821	)

				(1,548,335	)		(1,312,767	)		(718,021	)

Operating income				303,544			197,534			219,953

	Non-operating income (expenses), net			(8,046	)		300,126			15,381

Income before income tax and social contribution				295,498			497,660			235,334

Income tax and social contribution




		Current		(153,636	)		(81,292	)		—




		Deferred		45,159			(74,673	)		(61,288	)

Income before minority interest				187,021			341,695			174,046




	Minority interest			353			(563	)		(242	)

Net income for the year				187,374			341,132			173,804

Net income per thousand shares at the end of the year (considering the retroactive effects of share split for 2004 and 2003 described in Note 19(a))				1.30			5.56			2.83

The accompanying notes are an integral part of these consolidated financial statements

F-4

TAM S.A.

STATEMENT OF CHANGES IN SHAREHOLDER’S EQUITY


														Retained
					Capital		Revaluation							Earnings
			Capital		Reserve		Reserve			Revenue Reserves				(Deficit)			Total

										Legal		Retention
										Reserve		of Profits

			In thousands of reais




At December 31, 2002				118,056		—		709,663			—		—		(623,244	)		204,475




	Issuance and exchange of shares for acquisition of Transportes Aéreos del Mercosur S.A. (Note 19(a))			2,693		—		—			—		—		—			2,693




	Reversal of revaluation reserve upon change in type of aircraft lease			—		—		(77,537	)		—		—		—			(77,537	)




	Realization of revaluation reserve, net (Note 19(d))			—		—		(33,103	)		—		—		33,103			—




	Revaluation, net of tax effects			—		—		(261,509	)		—		—		—			(261,509	)




	Net income for the year			—		—		—			—		—		173,804			173,804

At December 31, 2003				120,749		—		337,514			—		—		(416,337	)		41,926




	Reversal of tax effects on revaluation			—		—		7,046			—		—		—			7,046




	Reversal of revaluation reserve upon change in type of aircraft engines			—		—		(4,023	)		—		—		—			(4,023	)




	Reversal of revaluation reserve upon change in type of aircraft lease (Note 12(b))			—		—		(226,560	)		—		—		—			(226,560	)




	Realization of revaluation reserve, net (Note 19(d))			—		—		(7,584	)		—		—		7,584			—




	Revaluation, net of tax effects (Note 10)			—		—		31,276			—		—		—			31,276




	Net income for the year			—		—		—			—		—		341,132			341,132

At December 31, 2004				120,749		—		137,669			—		—		(67,621	)		190,797




	Capital increase			33,160		—		—			—		—		—			33,160




	Premium on subscription of shares			—		350,782		—			—		—		—			350,782




	Reversal of deferred income tax			—		—		1,163			—		—		—			1,163




	Reversal of revaluation reserve upon disposal of aircraft engines			—		—		(1,405	)				—		—			(1,405	)




	Realization of revaluation reserve, net (Note 19(e))			—		—		(3,852	)		—		—		3,852			—




	Revaluation, net of tax effects (Note 10)			—		—		27,621			—		—					27,621




	Net income for the year			—		—		—			—		—		187,374			187,374




	Appropriation of net income:




		Legal reserve		—		—		—			5,988		—		(5,988	)		—




		Dividends proposed (R$0.20414391 per share)		—		—		—			—		—		(29,405	)		(29,405	)




		Retention of profits (unappropriated retained earnings)*		—		—		—			—		88,212		(88,212	)		—

At December 31, 2005				153,909		350,782		161,196			5,988		88,212		—			760,087


*	Positive balances in the retained earnings account at the end of the year must be appropriated entirely to the revenue reserve account.

The accompanying notes are an integral part of these consolidated financial statements.

F-5

TAM S.A.

CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION

Years Ended December 31


				2005			2004			2003

				In thousands of reais




Financial resources were generated by
	Operations




		Net income for the year			187,374			341,132			173,804




		Expenses (income) not affecting working capital Amortization of goodwill			1,341			2,291			4,457




			Depreciation and amortization		85,353			91,426			154,995




			Residual value of long lived assets disposals		7,920			577,443			212,238




			Finance leases modified to operating leases, long-term portion		—			(833,523	)		(217,079	)




			Deferred income tax and social contribution		(40,675	)		96,792			61,288




			Provision for contingencies and tax obligations under judicial dispute		204,588			87,648			119,276




			Indexation charges on long-term receivables and liabilities		(16,745	)		13,608			(253,674	)




			Minority interest		(353	)		563			971

					428,803			377,380			256,276

	Shareholders




		Capital increase			33,160			—			2,693




		Premium on subscription of shares			350,782			—			—




		Deferred income			—			—			11,099

					383,942			—			13,792

	Third parties




		Increase in long-term liabilities			144,538			29,870			348,571




		Transfers from long-term to current assets			19,431			—			55,133

					163,969			29,870			403,704

Total funds generated					976,714			407,250			673,772

Financial resources were used for




	Increase in long-term assets				15,768			9,272			—
	Permanent assets




		Property, plant and equipment			109,543			122,285			84,351




		Deferred charges			—			—			2,478




	Transfer from long-term to current liabilities				95,219			21,438			249,297




		Dividends payable			29,405			—			—

Total funds used					249,935			152,995			336,126

Increase in working capital					726,779			254,255			337,646

Changes in working capital




Current assets




	At end of year				2,182,231			1,143,990			774,411




	At beginning of year				(1,143,990	)		(774,411	)		(591,018	)

					1,038,241			369,579			183,393

Current liabilities




	At end of year				1,393,129			1,081,667			966,343




	At beginning of year				(1,081,667	)		(966,343	)		(1,120,596	)

					311,462			115,324			(154,253	)

Increase in working capital					726,779			254,255			337,646

The accompanying notes are an integral part of these consolidated financial statements.

F-6

TAM S.A.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31


			2005			2004			2003

			In thousands of reais




Cash flows from operating activities




	Net income for the year			187,374			341,132			173,804




	Adjustments to reconcile net income to cash provided by operating activities Depreciation and amortization			85,353			91,426			154,995




		Deferred income tax and social contribution		(45,159	)		74,673			61,288




		Provision for contingencies and tax obligations under judicial dispute		204,588			87,648			119,276




		Amortization of goodwill		1,341			2,291			4,457




		Loss of long lived assets disposals		7,920			577,443			212,238




		Finance leases modified to operating leases		—			(833,523	)		(217,079	)




		Indexation charges and exchange variations, net		14,920			9,893			(256,933	)




		Other provisions		(4,243	)		9,043			17,485




		Minority interest		(353	)		563			971
	(Increase) decrease in assets




		Trade accounts receivable		(205,586	)		(266,910	)		(59,930	)




		Taxes recoverable		(16,192	)		25,510			(1,273	)




		Inventories		(10,470	)		(9,251	)		278




		Prepaid expenses		(42,631	)		5,004			1,165




		Deposits in guarantee		(9,991	)		6,844			5,570




		Judicial deposits		(8,172	)		(6,155	)		(180	)




		Advances to aircraft manufacturers		(71,910	)		2,573			—




		Other		(4,617	)		1,034			2,367
	Increase (decrease) in liabilities




		Suppliers		17,832			64,427			(117,018	)




		Salaries and payroll charges		12,944			63,628			(1,655	)




		Advance ticket sales		190,312			142,102			43,907




		Taxes and tariffs payable		(14,189	)		(12,140	)		5,542




		Financial and operating lease		(46,117	)		(25,658	)		130,653




		Income tax and social contribution payable		66,312			3,072			—




		Other		20,133			13,756			48,462

	Net cash provided by operating activities			329,399			368,425			328,390

Cash flows from investing activities




	Acquisition of property, plant and equipment			(109,543	)		(122,285	)		(84,351	)




	Additions to deferred assets			—			—			(2,478	)




	Merger of shares of Mercosur			—			—			2,693




	Deferred income			—			—			11,099

	Net cash used in investing activities			(109,543	)		(122,285	)		(73,037	)

Cash flows from financing activities




	Capital increase			383,942			—			—
	Debt, including financial and operating lease




		Issuance		649,963			235,084			105,573




		Repayments		(529,734	)		(285,944	)		(254,985	)




	Debentures			(25,436	)		(70,742	)		20,564

	Net cash provided by (used in) financing activities			478,735			(121,602	)		(128,848	)

	Increase in cash and banks and financial investments			698,591			124,538			126,505

Cash and banks and financial investments at the end of the year				995,452			296,861			172,323




Cash and banks and financial investments at the beginning of the year				(296,861	)		(172,323	)		(45,818	)

Change in cash and banks and financial investments				698,591			124,538			126,505

Non cash transactions — see Note 12(b) modification to lease terms.

The accompanying notes are an integral part of these consolidated financial statements.

F-7

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003

In thousands of reais, unless otherwise indicated


1	Operations

TAM S.A. (“TAM” or “Company”) was incorporated in 1997, to invest in companies which carry out air transportation activities. The Company’s principal subsidiary, TAM Linhas Aéreas S,A, (“TLA”), operates in the transportation of passengers and cargo within Brazil and on international routes. In September, 2003, the Company acquired Transportes Aéreos del Mercosur S.A. (“Mercosur”), an airline headquartered in Asunción, Paraguay, which operates in Paraguay, Argentina, Brazil, Chile, Uruguay and Bolivia.

From 2004, TLA began consolidating its subsidiary Fidelidade Viagens e Turismo Ltda (“Fidelidade”), which had previously been recorded at historical cost. Fidelidade operates in the travel and tourism agency sector.

In 2004, management began implementing programs to enhance the Company’s cash flows including the implementation of a web based distribution channel, e-TAM, which generated a significant costs saving as well as other actions that resulted in reductions in costs and generated productivity gains.

Beginning in 2003, and consistent with the agreed schedule which runs through 2006, a number of Fokker 100 aircraft, were returned to the lessors.

On June 13, 2005 the Company concluded a public offering of its shares on the São Paulo Stock Exchange (BOVESPA), which raised funds for the acquisition/lease of narrow bodied aircraft (predominantly the Airbus A320), to renovate and expand its fleet, in line with its strategy to consolidate its leadership in the domestic market and further our participation in the international market. On July 15, 2005, the over-allotment option was exercised by underwriters of the public offering.


2	Presentation of the Financial Statements

The financial statements have been prepared in accordance with the accounting practices adopted in Brazil (“Brazilian GAAP”) which are based on:


	•	Brazilian Law No. 6.404/76, as amended by Brazilian Law No. 9.457/97 and Brazilian Law No. 10.303/01;

	•	the rules and regulations of the Brazilian Securities Commission ( Comissão de Valores Mobiliários, or “CVM”); and

	•	the accounting standards issued by the Brazilian Institute of Independent Accountants ( Instituto dos Auditores Independentes do Brasil, or “IBRACON”).

The Company also utilizes the chart of accounts issued by the Civil Aviation Department ( Departamento de Aviação Civil, or “DAC”).

These financial statements have been prepared in connection with an international offering of shares, and include financial information commonly presented by Brazilian companies in international offerings. These financial statements therefore contain information that differs from the financial statements prepared for statutory purposes which were filed with the CVM in February 2006, as follows:


	(i) exclusion of parent company’s financial statements;

	(ii) inclusion of three years of consolidated statements of operations, changes in shareholders’ equity, changes in financial position and cash flows;

	(iii) presentation of financial information and additional disclosures required by the accounting principles generally accepted in the United States of America (“U.S. GAAP”), as well as a reconciliation of the net income and shareholders’ equity.

F-8

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)

All net income per thousand shares, earnings per share and share amounts presented herein for 2004 and 2003 have been conformed to take account of retroactive effects of the share split, (Note 19(a)).


3	Summary of Significant Accounting Practices


*(a)*	*Determination of results of operations*

Results of operations are determined on the accrual basis of accounting. Revenue is recognized, as follows:


	(i) air transportation revenues (passengers and cargo) is recognized when transportation services are rendered;

	(ii) tickets sold but not yet used related to advances ticket sales are registered as current liabilities;

	(iii) revenue for unused tickets is recognized on the ticket expiration date, which is one year after the issuance date of the ticket; and

	(iv) other operating revenues represented by fees arising from alterations to flight reservations, sub-lease of aircraft and other services are recognized when the service is provided. Other operating revenues also includes revenue from partnerships with the Fidelity program for frequent flyers (“TAM Fidelidade Program”) which is recognized when the points are issued to participants.


*(b)*	*Accounting estimates*

The preparation of consolidated financial statements in conformity with Brazilian GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates are used for, but not limited to: the useful life of property, plant and equipment, allowance for doubtful accounts, allowance for inventories, deferred income tax assets, provision for contingencies and tax obligations under judicial dispute, valuation of derivative instruments, and assets and liabilities related to employees’ benefits.


*(c)*	*Foreign currency*

Monetary assets and liabilities denominated in foreign currencies were translated into reais at the foreign exchange rate ruling at the balance sheet date. Foreign exchange differences arising on translation are recognized in the statements of operations.


*(d)*	*Current and long-term assets*


(i)	Financial investments

Financial investments are initially recorded at acquisition cost and subsequently at market value. Investment funds are recorded at market value and are classified under financial investments under Brazilian GAAP.


(ii)	Allowance for doubtful accounts

The allowance for doubtful accounts receivable is established in an amount considered sufficient by management to cover expected losses incurred in the collection of those credits.

F-9

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)


(iii)	Inventories

Inventories, consisting of parts and materials to be used in maintenance and repair services, are stated at the average purchase cost, which is lower than replacement cost. Additionally, inventories are reduced by a provision for obsolete items, when applicable.

The changes in provision for obsolete inventories are summarized as follows:


		2005			2004			2003

Balance at January 1			12,520			10,022			—




	Additions		3,394			3,451			10,022




	Reversals		(3,387	)		(953	)		—

Balance at December 31			12,527			12,520			10,022


(iv)	Other current receivables and long-term assets

Other current receivables and long-term assets are presented at net realizable values.


*(e)*	*Permanent assets*


(i)	Goodwill and negative goodwill

Goodwill related to the purchase of a minority interest in TLA, is based substantially on expected future profitability, and is being amortized over ten years, as from the date at which benefits are first generated.

Negative goodwill will be amortized upon the divestiture or write-off of this investment, and is recorded in the balance sheet as Deferred income.


(ii)	Property, plant and equipment

Property, plant and equipment is recorded at the cost of acquisition, formation or construction, plus annual revaluation of aircraft, flight equipment land and building to their fair market values. Depreciation is recorded using the straight-line method (Note 10), and takes into account the estimated useful lives of assets.

Maintenance expenses and overhaul costs are recorded within cost of services rendered as incurred. Maintenance expenses incurred for aircraft which will be returned are accrued from the date of the return agreement with the lessor for the residual period under the lease contracts, and are recorded in the statement of operations.


(iii)	Deferred charges

Deferred charges are comprised substantially of improvements to leased properties, and are recorded at the cost of acquisition. Amortization is calculated under the straight-line method, at rates that consider the contractual terms of the leased properties.


*(f)*	*Current and long-term liabilities*

Current and long-term liabilities are stated at the known or estimated amounts, including, when applicable, accrued indexation charges and exchange rate variations.

F-10

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)


*(g)*	*Provisions*

Provisions are recognized when the Company has a legal or constituted obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are recorded considering the best estimates of the risk specific to the liability.


*(h)*	*Advance ticket sales*

Advances for ticket sales represent our obligations to transport passengers related to tickets sold and not yet used.


*(i)*	*Pension plan and benefits to employees*

TLA sponsors private defined contribution and defined benefit pension plans, In accordance with CVM Deliberation No. 371/00, the Company recognizes the actuarial liability, which was initially calculated in 2001, in the statements of operations, over a five year period. For subsequent periods, obligations are actuarially determined and accrued in the statement of operation.


*(j)*	*Income tax and social contribution*

Current and deferred income tax and social contribution are recorded based on composite statutory rates.

Deferred tax loss carryforwards are recorded in accordance with CVM Instruction No. 371/02, and consider past profitability and expectations of future taxable income. Income tax and social contribution available for offset against tax payable are limited to 30% of annual taxable income in any single year.

The Company also recognized deferred income tax and social contribution on temporary differences, including liabilities over the surplus generated by the revaluation of assets.


*(k)*	*Lease*


(i)	Finance lease

Recorded in a specific account to reflect our liability in relation to lease contracts where the lessee holds a bargain purchase option to acquire the asset.


(ii)	Operating lease

Operating leases are all leases other than finance leases. Liabilities and the respective expenses of this type of lease are recognized as incurred.


*(l)*	*Financial instruments*

TLA contracts operations involving financial instruments with the objective of mitigating exposure to interest rate risk, exchange rate risk and fuel price variations. These risks are managed by defining operational strategies and establishing control systems. Income is accrued based on the yield curve of the respective instruments and, when applicable adjusted to reduce the carrying value to market.


*(m)*	*TAM Fidelidade Program*

The Company sponsors a program (the TAM Fidelidade Program) to award frequent flyers, whereby points are accumulated from TAM flights or flights with partner airline companies, or upon making

F-11

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)

purchases using the TAM Fidelidade Program credit card, or using the services and products of partner entities.

The Company adopts the incremental cost method to recognize its obligation to honor the program benefits, by estimating total expenses of redeeming these tickets, taking into account the current average capacity levels of the flights and marginal cost, per passenger transported (basically insurance and catering). Due to the uncertain timing for redeeming the benefits the TAM Fidelidade Program expenses are appropriated to the statements of operations as incurred.

Income resulting from the TAM Fidelidade Program partnerships, from credit cards, hotels, rental car and others are recorded when the points are issued to participants.


*(n)*	*Consolidated financial information*

The accounting policies have been consistently applied by the consolidating companies and are consistent with those used in previous years.

The consolidated financial statements include the financial statements of TAM and its subsidiaries, as listed below:


			Economic Ownership

			%
	Date of Consolidated
Company	Financial Statements		2005		2004		2003

TLA		December 31, 2005		100.00		100.00		100.00




Mercosur		November 30, 2005		94.98		94.98		94.98




Fidelidade		December 31, 2005		99.99		99.99		99.99

From 2004, TLA began consolidating its subsidiary Fidelidade, which had previously been recorded at historical cost.


	Description of main consolidation procedures


	•	Elimination of intercompany asset and liability account balances.

	•	Elimination of investment in the subsidiaries’ capital, reserves and retained earnings.

	•	Elimination of intercompany income and expense balances.

	•	Identification of minority interests in subsidiaries.

	•	Additionally, the revaluation of Mercosur’s property, plant and equipment has been considered in the consolidated financial statement, in order to assure consistency with the Company’s accounting practices, without having adjusted the corporate books in the country of origin.

	•	The financial statements of the company headquartered abroad (Mercosur) were translated into reais at the exchange rate at the balance sheet date.


*(o)*	*Statement of cash flows*

The Company presents its statement of cash flows as supplementary information.

The statement of cash flows was prepared in accordance with the relevant IBRACON standard, and reflects the main operations that affected the Company’s cash and banks and financial investments.

F-12

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)


4	Financial Investments


		2005		2004

Denominated in local currency




	Bank Deposit Certificates		2,497		22,049




	Investment funds (trading)		885,417		—




	Others		808		584

			888,722		22,633

Denominated in foreign currency




	Investment funds (trading)		13,795		188,308

			902,517		210,941

Investment funds represent shares in exclusive funds, which principally include shares in money market funds, federal government securities, bank deposit certificates, debentures and may include derivatives related to such securities.


5	Customers Accounts Receivable


*(a)*	*Composition of balances*


	2005									2004

	Domestic			International			Total			Total

Credit cards		394,529			11,578			406,107			236,853




Travel agencies		227,799			16,677			244,476			190,419




Account holders		20,931			379			21,310			28,010




Other corporate customers		3,754			8,536			12,290			41,141




Cargo agencies		18,506			—			18,506			9,865




Prepaid checks		7,313			26,572			33,885			37,491




Others		40,491			17,636			58,127			39,950

Total		713,323			81,378			794,701			583,729

Allowance for doubtful accounts		(23,676	)		(7,860	)		(31,536	)		(30,400	)

		689,647			73,518			763,165			533,329

During the third quarter of 2004, TLA management implemented a policy for credit card sales, extending the period for collection up to 12 monthly installments, which was maintained until the end of the year, as a temporary and promotional measure.


*(b)*	*Changes in the allowance for doubtful accounts*


		December 31,			December 31,
		2005			2004

At beginning of year			30,400			21,210




	Increases (recorded as sales expenses) in the year		5,802			11,754




	Recoveries in the period		(4,666	)		(2,564	)

Balance at the end of the year			31,536			30,400

F-13

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)


6	Advances to aircraft manufacturers

At December 31, 2005, advances to aircraft manufacturers are represented by U.S. dollar denominated contractual prepayments of Airbus A320 aircraft, made to the manufacturer, of R$100,995 (2004 — R$29,085), equivalent to US$43,147 thousand (2004 — US$10,957 thousand).

The advances are classified as current assets, since TLA is guaranteed reimbursement of these amounts when the aircraft is leased by the manufacturer, within the following year, and once the financing for the equipment is agreed. Furthermore, the Company has offered promissory notes as guarantees, which, at December 31, 2005, amounted to US$59,035 thousand (2004 — US$65,986 thousand).


7	Deposits in Guarantee

Deposits and collaterals in guarantee relating to the lease of aircraft and engines serve mainly to guarantee the performance of routine maintenance. As the Company presents proof of the performance of such maintenance, the related guarantee restrictions are cancelled. Such deposits and collaterals are denominated in U.S. dollars, and accrue interest based on the London Interbank Offered Rate (“LIBOR”) plus a spread of 1% per annum (p.a.). The terms for redemption are defined in the lease contracts and comprise periods ranging from April 2006 to August 2021.


8	Goodwill and Other Investments


	*(a) Composition of balances*


	2005		2004

Goodwill		1,434		2,775




Other investments		70		70

		1,504		2,845


*(b)*	*Information on our subsidiaries*


		2005					2004

		TLA		Mercosur			Total

Number of shares




	Total		2,064,602		87,653			n/a




	Held		2,064,602		83,253			n/a




Percentage of ownership			100,00		94,98			n/a




Shareholders’ equity			359,859		34,873			222,619




Net income for the year			181,036		(6,692	)		343,902

Additionally, the Company is the sole owner of Fidelidade.


9	Related-party Transactions

During 2005, TLA received from Táxi Aéreo Marília S.A. (“Marília”), a company under common control, R$2,143 (2004 — R$2,107), relating to services provided, such as the use of its importations area and aircraft insurance.

The Company and its subsidiaries signed a contract with TAM Milor Táxi Aéreo, Representações, Marcas e Patentes S.A. (“TAM Milor”) for the right to use the “TAM” brand. This contract establishes a monthly fee, which totaled to R$11,559 in 2005, recorded as General and administrative expenses.

F-14

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)


10	Property, Plant and Equipment


	2005							2004
										Annual
			Accumulated							Depreciation
	Cost		Depreciation			Net		Net		Rates — %

Flight equipment, including finance leases		723,700		(280,569	)		443,131		453,255		3 to 10




Buildings		185,416		(8,206	)		177,210		131,484		1.73 to 3




Furniture, fixtures and facilities		19,831		(10,120	)		9,711		10,478		10




Machinery and equipment		59,408		(25,364	)		34,044		36,018		10




Vehicles		30,661		(24,794	)		5,867		4,663		20




Computers and software		73,365		(28,482	)		44,883		36,388		20




Construction in progress		42,332		(182	)		42,150		31,302




Other		13,342		(1,732	)		11,610		11,701		4 to 20

		1,148,055		(379,449	)		768,606		715,289

Flight equipment, at December 31, 2005, includes engines and spare parts. The weighted average annual rate of depreciation for flight equipment is 8.64%.

TLA, updated its revaluation of aircraft engines and properties at November 30, 2005, based on an independent revaluation report issued by Engeval Engenharia de Avaliações S/ C Ltda,, which was approved at the Extraordinary Board Meeting held on December 28, 2005. This revaluation resulted in an increase in shareholders’ equity of R$35,963 or R$25,577 net of tax (2004 — R$21,933, net of tax). The revaluation was based on the current fair market value of the assets. When applicable, new estimates of useful lives of these items were determined.

Mercosur, revalued it aircraft engines and property at November 30, 2005, based on an independent revaluation report. This revaluation resulted in an increase in the Company’s shareholders’ equity, of R$2,152 (2004 — R$9,343). The revaluation was based on the current fair market value of the assets.

As required by CVM Deliberation No. 183/95, upon realization of the revaluation reserve R$3,852 was appropriated to the Retained earnings in the year ended December 31, 2005 (2004 — R$7,584; 2003 — R$33,103).

On December 19, 2003, TLA renegotiated the leases for ten Fokker 100 aircraft, which included the cancellation of the acquisition of these aircraft and a more accelerated timetable for their subsequent future return. This reorganization resulted in the reclassification of the related leases from finance leases to operating leases (Note 14).

Following a renegotiation with the lessors during the second quarter of 2004, a further 17 aircraft which had been classified as finance leases were reclassified to operating leases. As a result of this change, TLA ceased to record these assets as property, plant and equipment (Note 13(c)).

F-15

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)


11	Short and Long-term Debt


		Annual financial	Amortization terms and	December 31,		December 31,
	Guarantees	charges	final due date	2005		2004

Foreign currency- denominated

Refinancing of lease	Letter of credit	Fixed interest	2022		15,922		18,654
Financing of machinery and equipment		Monthly LIBOR + 5%	2008		2,974		5,129
Other	Fixed asset	Fixed interest 8.5%	2007		366		1,805

					19,262		25,588
Local currency- denominated

Computer Equipment	Promissory note		Monthly amortization
Lease	R$25,066	CDI + 3.0% to 4.8%	through 2009		29,393		20,467
FINIMP	Promissory note US$35,468 thousand and credit card receivables	CDI + 0.3% to 5.0%	Annual amortization through 2008		102,361		33,554
FINEM	Mortgage	TJLP + 3.0% to 4.5%	Semi-annual amortizations through 2006		63,515
Compror (vendor financing)	Promissory note R$32,000 and credit card receivables	CDI + 0.6% to 3.5%	Semi-annual amortization through 2006		46,848		63,955
Other	Promissory note US$5,417 thousand	TJLP + 1.5% through 5.5% and Fixed interest — 8.5%	Monthly amortization through 2006		8,474		6,987

					250,591		124,963

					269,853		150,552

Less: Short term debt					97,028		104,027

Less: Current portion of long-term debt					21,420		15,550

Long-term debt					151,405		30,975

FINIMP — Import Financing.

FINEM — Government Agency for Machinery and Equipment Financing.

TJLP — Long-term Interest Rate.

CDI — Interbank Deposit Certificate.

F-16

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)

Long-term amounts mature as follows:


	December 31,		December 31,
Year	2005		2004

2006		—		7,865




2007		58,832		5,432




2008		41,764		1,900




2009		13,377		823




2010		13,419		874




2011		12,413		928




After 2011		11,600		13,153

		151,405		30,975

On December 16, 2005, the Company entered into a loan contract with the International Finance Corporation — IFC — in the amount of US$50 million, of which US$33 million will be used as advances to aircraft manufacturers and US$17 million as working capital. The resources will be available for the Company during the first quarter of 2006.


12	Leases


*(a)*	*Finance leases and operating lease liabilities*


				December 31,			December 31,
		Annual Financial Charges		2005			2004

Foreign currency-denominated




	Fokker 100 engines(i)		Fixed interest — 1.2%		255			2,641




	Airbus A319/ Airbus A320 engines(ii)	Semi-annual LIBOR + 1.5%			60,347			47,826




	Airbus A330 engines and spare parts(iii)		Monthly LIBOR + 1.5%		8,467			11,553




	Other lease obligations(iv)		Monthly LIBOR		32,984			36,770
		Three-month LIBOR + 1.75%			8,430			13,458
		Semi-annual LIBOR + 1.25% to 2.10%			95,942			132,436
		Fixed interest — 1.12% to 4.0%			11,327			16,675

					217,752			261,359

Less: Current					(62,049	)		(54,968	)

Long-term liabilities					155,703			206,391


⁽ⁱ⁾	Fokker 100 — Financing of five engines for Fokker 100 aircraft (2004 — five engines for Fokker 100 aircraft), obtained in November 2003 and maturing in December 2006 in the amount equivalent to US$109 thousand (2004 — US$995 thousand).


⁽ⁱⁱ⁾	Airbus A319/ Airbus A320 — Financing of engines and spare parts for Airbus A319 and Airbus A320 aircraft (2004 — eight engines and spare parts for Airbus A319 and Airbus A320 aircraft), obtained

F-17

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)


	between September 1999 to July 2002, with final maturities between November 2009 and November 2015, in the amount equivalent to US$25,849 thousand (2004 — US$18,020 thousand).


⁽ⁱⁱⁱ⁾	Airbus A330 — Financing of two engines and spare parts for Airbus A330 aircraft (2004 — two engines and spare parts for Airbus A330 aircraft), contracted in July 1999, with final maturities between May 2006 and May 2009, in the amount equivalent to US$3,550 thousand (2004 — US$4,351 thousand).

^(iv)	Other lease obligations — Corresponds to our obligation in relation to operating leases incurred during 2003, which were renegotiated by the Company with the lessors and fall due through 2017.

The Company provided letters of guarantee for the leases.

Long term finance leases and operating lease liabilities mature as follows:


	December 31,		December 31,
Year	2005		2004

2006		—		34,758




2007		45,983		53,328




2008		32,137		35,505




2009		30,357		33,957




2010		14,723		13,962




2011		13,974		13,112




After 2011		18,529		21,769

		155,703		206,391


*(b)*	*Modification to terms*

During the second quarter of 2004 the Company agreed with the lessors to modify the lease contracts for ten Fokker 100, four Airbus A319, two Airbus A320 and one Airbus A330, among others things, eliminating TLA’s a purchase option. This resulted in the leases being reclassified for accounting purposed from finance leases to operating leases. Accordingly, these finance lease contracts are no longer reflected on the balance sheet as assets with a corresponding lease obligation.

As a consequence, the revaluation reserve related to these aircraft and the corresponding deferred tax effects amounting to R$226,560 and R$116,713, respectively, were reversed, as provided by CVM Decision 165/94. The reversal effects on the balance sheet amounting to R$294,564 and R$58,715 were recorded as credits to Non operational income (expense), net and Financial expenses, respectively. The total credit balances reversed from the equity accounts, net of the tax effects, amounted to R$233,164. The amounts reversed from property, plant and equipment — flight equipment and financial leases, at the time the change in the type of leases was recorded, were R$544,360 and R$897,639 (US$318,510 thousand), respectively.


13	Commitments


*(a)*	*Operating leases*

TLA has obligations arising from operating lease commitments. The obligations under these lease commitments are not reflected in the balance sheet because the contracts do not include purchase options for the aircraft subject to the lease agreements. These operating leases cover: 25 Fokkers-100, 13 Airbus A319, 35 Airbus A320 and 9 Airbus A330 (December 31, 2004 — 30 Fokkers-100, 13 Airbus A319, 31

F-18

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)

Airbus A320 and 9 Airbus A330). These contracts are for periods of up to 192 months and are denominated in U.S. dollar and accrue six-monthly LIBOR. For the year ended December 31, 2005, the cost of aircraft leases, recognized in the consolidated statement of operations in Costs of services rendered, totaled R$613,817 (2004 — R$631,088 ), equivalent to US$254,432 thousand (2005 — US$216,341 thousand).

Future disbursements due on these contracts (expressed for purpose of convenience in U.S. dollars, at the balance sheet exchange rates) are as follows:


						December 31,
		Annual Financial Charges		December 31, 2005		2004

				(Unaudited)		(Unaudited)
				Thousands of U.S. dollars
Foreign currency-denominated




	Fokker 100		Fixed interest —
			1.12% to 2.0% p.a.		101,553		156,004
			Semi-annual LIBOR		13,459		50,218




	Airbus A319		Monthly LIBOR		97,026		121,679
			Three-month LIBOR		19,360		17,335
			Semi-annual LIBOR
			+ 1.5% to 1.75% p.a.		187,927		168,668




	Airbus A320		Fixed interest — 4.0% p.a.		4,640		8,120
			Monthly LIBOR		138,273		171,082
			Three-month LIBOR
			+ 1.75% p.a.		224,445		112,001
			Semi-annual interest		358,225		340,565




	Airbus A330		Semi-annual LIBOR
			+ 1.25% to 2.1% p.a.		725,540		595,354




	Airbus engines		Fixed interest —
			0.92% to 1.01% p.a.		1,696		2,968
			Semi-annual LIBOR		9,632		10,905

					1,881,776		1,754,899

The Company provided letters of guarantee for the transactions above.

Future disbursements are due on these contracts as follows:


	December 31,
Year	2005

	(Unaudited)
	Thousands of U.S. dollars




2006		261,205




2007		238,778




2008		213,358




2009		197,470




2010		188,201




2011		204,777




After 2011		577,987

		1,881,776

F-19

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)


*(b)*	*Commitments for future aircraft acquisition*

The subsidiary TLA has commitments to purchase nine new Airbus 320 family aircrafts, which are scheduled for delivery through 2008. At the time of delivery, new leasing arrangements will be consummated which have already been preapproved by Airbus Finance.

During 2005, the Company signed an amendment to the contract with Airbus for the firm commitment to purchase 20 Airbus A320 with 20 additional options for the same aircraft family (including A319, A320 and A 321), which are scheduled for delivery between 2007 and 2010; four in 2007, five in 2008, six in 2009 and five in 2010 and they will be used for domestic routes.

The Company also signed a memorandum of understanding for the purchase of ten A350-900 with an additional five options subject to certain conditions. The A350 aircraft will start to be delivered in 2012 and will be used on international routes.


14	Return of the Fokker 100 Fleet

As a result of the agreement to return of the Fokker 100 fleet, on December 19, 2003, TLA cancelled 19 lease contracts, of which ten were finance leases and nine were operating leases. These aircraft, as from the date of the renegotiated lease contracts up to their return, are under operating leases.

TLA agreed to pay a contractual rescission penalty in 30 consecutive quarterly installments, between April 2004 and July 2011 in the original amount of R$94,188. This amount was recognized in the statement of operations in the year ended December 31, 2003. TLA also renegotiated the rescheduled overdue installments in the original amount of R$49,599.

The return of these aircraft will occur until April 2006, Through December 31, 2005, 14 aircraft had been returned.

At December 31, 2005, the total commitment under the Fokker 100 fleet operating leases arrangements amounted to R$94,365 (2004 — R$116,499), equivalent to US$40,315 thousand (2004 — US$43,889 thousand), of which R$9,361 (2004 — R$6,274) is classified in current liabilities (Other liabilities).

Maturities of the operating leases following the accelerated return of the Fokker 100 fleet are as follows:


Year	2005

2006		9,361




2007		12,311




2008		14,550




2009		19,371




2010		21,954




2011		16,818

		94,365


15	Advance Ticket Sales

At December 31, 2005, the balance of advance ticket sales is represented by 1,483,315 (unaudited) (2004 — 916,761 (unaudited)) ticket coupons sold but not yet used.

F-20

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)

Based on the average rate of passengers transported during 2005, the number of coupons sold and not used, which remain outstanding at December 31, 2005, correspond to approximately 27 days of passenger transportation.


16	Provision for Contingencies and Tax Obligations Under Judicial Disputes

Management of TLA and Mercosur recorded provisions for the estimated loss for amounts being disputed in court for those cases, as judged by the Company’s outside legal counsel, where loss to the Company is deemed probable, and for tax obligations under judicial dispute considered legal obligations under laws or decrees despite the Company’s questioning legislation. In all cases, the Company provided a liability for 100% of the amount calculated according to the provisions under the applicable laws, including interest and penalties.

The provisions are summarized below:


		2005		2004

Tax obligations




	Contribution for Social Security Financing (“COFINS”)(i)		275,516		208,743




	Social Integration Program (“PIS”)(i)		77,431		66,081




	Additional tariff(ii)		168,045		113,862




	Withholding income tax (IRRF) on leases		10,932		9,757




	Staff fund(iii)		35,978		24,496




	Airport tariff(iv)		61,931		—

			629,833		422,939

Labor contingencies			4,838		7,949




Civil contingencies			19,430		19,111

			654,101		449,999


⁽ⁱ⁾		Corresponds to a claim to challenge the changes introduced by Law 9,718/98, which modified the taxation basis of PIS and increased the rate and calculation basis of COFINS, Judicial deposits were made for the period from June 1997 to April 1999. For the months in which no deposits were made, TLA obtained a preliminary injunction. These amounts, net of related judicial deposits, accrue interest based on the SELIC rate.

⁽ⁱⁱ⁾		Corresponds to the collection of 1% on the amount of fares of all tickets sold for regular domestic routes which are not supplemented. TLA management, based on the opinion of its outside legal counsel, is contesting the constitutionality of this collection, and non-payment is supported by a judicial order.

⁽ⁱⁱⁱ⁾		Corresponds to the collection of 2.5% on the payroll for on the payroll for private social service and professional formation entities. TLA management, based on the opinion of its outside legal counsel, is contesting the constitutionality of this collection, and the non-payment is supported by a judicial order.

^(iv)		Corresponds to a claim to challenge the charges for use of communication and navigational support, the use of communications, visual and radio support at aircraft traffic terminals and charges for landing and on-ground time. The non-payment is supported by a judicial order. In periods prior to 2005, the Company expensed and paid for these charges.

F-21

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)

The changes in provision for contingencies and tax obligations under judicial dispute are summarized as follows:


		2005			2004			2003

Balance at January 1			449,999			362,351			243,075




	Increases		220,818			109,146			135,142




	Reversals		(6,293	)		(17,677	)		(13,883	)




	Payments		(10,423	)		(3,821	)		(1,983	)

Balance at December 31			654,101			449,999			362,351

Company’s management has recorded provisions for the full amounts under dispute when the actions represent probable unfavorable decisions being taken against the Company. The judicial deposits related to matters being disputed have been recorded as long-term assets, and comprise the following:


		2005		2004

Taxes




	COFINS		25,397		25,397




	PIS		8,450		8,450




	Income Tax		3,164		—




	Others		583		—




Labor			7,996		3,951




Civil			10,287		10,139

			55,877		47,937


17	Debentures

At the Extraordinary General Meeting held on February 1, 2002 and April 7, 2003, shareholders approved the private issuance of non-convertible debentures, with a nominal value of R$100.00 each. These debentures were placed in six and three series, respectively. Each series matures in 30 months and 60 months, respectively, after the subscription date, with a grace period of six months from the first debenture issued.

Debentures are guaranteed by a pledge of credit rights, and interest is payable at the average interest rate for one-day interbank deposits plus a spread of 1% per annum for the first issuance.

For the second issuance, annual interest is equivalent to the Long-term Interest Rate (TJLP) plus 4.75%.

The issuances are summarized as follows:


						Amount
Date		Series		Quantity		Issued		2005			2004

First issuance




	July 30, 2002		Sixth		138,989		13,899		—			952

					138,989		13,899		—			952

Second issuance




	April 22, 2003		First		473,006		47,301		31,826			39,966




	April 22, 2003		Second		222,835		22,284		14,994			18,828




	May 16, 2003		Third		177,165		17,717		12,533			15,402

					873,006		87,302		59,353			74,196

Total					1,011,995		101,201		59,353			75,148

Current									(26,109	)		(23,619	)

Long-term liabilities									33,244			51,529

F-22

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)

The debentures are secured based on travel agency receipts.


18	Income Tax and Social Contribution


*(a)*	*Reconciliation between nominal and effective income and social contribution taxes*


		2005			2004			2003

Income before income tax and social contribution			295,498			497,660			235,334

Composite statutory rate — %			34			34			34

Nominal income tax and social contribution			(100,470	)		(169,204	)		(80,014	)




Non deductibles/non taxable items			(8,277	)		13,239			18,726

			(108,477	)		(155,965	)		(61,288	)

Income tax and social contribution




	Current expense		(153,636	)		(81,292	)		—




	Deferred (expense) benefit		45,159			(74,673	)		(61,288	)

			(108,477	)		(155,965	)		(61,288	)


*(b)*	*Deferred income tax and social contribution assets*


	2005			2004

Income tax loss carryforwards		660			31,205




Social contribution carryforwards		28,118			35,399




Temporary differences		161,240			122,537

		190,018			189,141

Current		(23,782	)		(39,897	)

Long-term assets		166,236			149,244


*(c)*	*Deferred income tax and social contribution liabilities*

The revaluation reserve recorded by TLA is net of deferred income tax and social contribution charges of R$63,287 at December 31, 2005 (2004 — R$56,822).


19	Shareholders’ Equity


*(a)*	*Capital*

As at December 31, 2005, subscribed and paid-in capital is comprised of 144,059,462 shares (2004 — 122,729,342, taking into account the retroactive effects of the share split), of which 59,816,248 are common shares (2004 — 59,816,248, taking into account the retroactive effects of the share split) and 84,243,214 are preferred shares (2004 — 62,913,094, taking into account the retroactive effects of share split). Authorized capital amounts to R$1,200,000 (2004 — R$300,000) and can be increased upon issuance of common and preferred share with the Board of Directors’ ( Conselho de Administração ) approval.

At December 31, 2005 and 2004, the Company did not hold any shares in treasury.

F-23

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)

The preferred shares do not have the right to vote in general meetings, except in limited matters, however, they have priority in the distribution of dividends, priority in capital reimbursement, without any premium, in the event the Company is liquidated and the right to participate, under the same terms as the common shares, in the distribution of any benefits to the shareholders.

The Extraordinary General Meeting, held on September 18, 2003, approved a capital increase of R$2,693, with the issuance of 1,595,480 new common shares (after the share split). Subscribed shares were issued in exchange for 83,253 shares of Mercosur.

At the Extraordinary Shareholders’ Meeting held on May 16, 2005, the shareholders approved the split of the shares issued by the Company, whereby holders of each share received two shares of the same type. As a result, the total number of shares increased from 61,364,671 at March 31, 2005 to 122,729,342, of which 59,816,248 are common shares and 62,913,094 are preferred shared, all with no par value. At that same date, the following was approved:


	•	Increase in the limit of the Company’s authorized capital to R$1,200,000.

	•	Revision of the Bylaws to reflect the corporate governance practices requirements set forth by BOVESPA Level 2.

	•	The maximum effect to the Company’s shareholders is 2% of outstanding shares in the event of a share purchase plan that might be approved in the future.

On June 13, 2005 the Board of Directors approved the primary public offering of 21,133,000 preferred shares issued by the Company and the secondary offering of 9,057,000 preferred shares. The price of the primary offering of preferred shares was R$18.00, which was allocated as follows: R$1.5546 to paid-in capital and R$16.4454 to capital reserve, to premium on subscription of shares, corresponding to R$32,853 for paid-in capital and R$347,541 for the capital reserve.

The Company is committed by the BOVESPA Level 2 requirements to assume the free float of 25% of its shares by June 2008, At December 31, 2005, the free float was 21.7% (unaudited).

In July, 2005, as a result of the exercise of the over-allotment option under the preferred shares distribution agreement related to the June 2005 public offering of shares, the Company issued 197,120 preferred shares at the price of R$18.00 per share. The over-allotment option was approved by the Company. The capital increase amounted to R$307 (representing R$1.5546 per share) and the premium on subscription of shares amounted to R$3,242 (representing R$16.4454 per share), which was recorded as capital reserve.

There are no over-allotment options outstanding.


*(b)*	*Capital reserve — Premium on subscription of shares*

The premium on the subscription of shares is allocated to all shareholders equally.


*(c)*	*Dividends*

Pursuant to the Company’s statutes, shareholders are assured a minimum dividend of 25% of adjusted net income for the year, after deducting 5% appropriated to the legal reserve, up to a maximum of 20% of capital. The preferred shares have priority in capital reimbursement and the right to a dividend at least equal to that distributed to the common shares.

F-24

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)

The calculation of the minimum dividends is as follows:


	2005

Net income for the year		187,374




Offset of accumulated losses		(67,621	)

Adjusted Net Income for appropriation of legal reserve		119,753

Appropriation of legal reserve — 5%		(5,988	)




Realization of revaluation reserve		3,852

Adjusted Net income for minimum dividend		117,617




Minimum dividend		25	%

Dividends payable (R$0.20414391 per share)		29,405


*(d)*	*Shareholders’ agreement*

A shareholders’ agreement, dated May 16, 2005, covers the following aspects:


	•	Management principles;

	•	Public offer of shares;

	•	Statutory audit committee;

	•	Right of preference and other rules related to the sale and encumbrance of shares;

	•	Resolutions of impasses;

	•	Oversight of the Company; and

	•	Waivers.


*(e)*	*Revaluation reserve*

The amount realized is in proportion to the depreciation of the revalued assets and is transferred to the accumulated deficit in 2005, amounted to R$3,582 (2004 — R$7,584). Of the total reserve, R$27,400 corresponds to the revaluation of land, which will only be realized upon sale.

In accordance with CVM Instruction No. 197/93, the deferred tax charges on the revaluation reserve, which at December 31, 2005 amounted to R$63,287 (2004 — R$56,822), are recognized in the statement of operations to the extent that the reserve is realized.


*(f)*	*Stock option plan*

At the Extraordinary Shareholders’ Meeting held on May 16, 2005, the shareholders approved the stock option plan. The maximum dilution effect to the Company’s shareholders is 2% of outstanding shares, or 2,857,247 shares, for a share options to be granted to full time employees by the Board of Directors.

The Board of Directors meeting held on December 21, 2005, granted 715,252 preferred share options under the plan.

F-25

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)

Under the terms of the Plan, the options granted are divided into three equal amounts and employees may exercise one third of their options after three, four and five years, respectively, if still employed by the company at that time.


20	Gross Sales Report

The Company presents its gross sales information segmented by type of service rendered. However, as a way to make this information available to users of theses financial statements, we are also providing below information by geographic area and by product line:


*(a)*	*By type of service rendered*


														Variation			Variation
														between			between
														2005 and			2004 and
		2005		%		2004		%		2003		%		2004 - %			2003 - %

Domestic revenue




	Regular — Passenger		3,966,429		67.1		3,019,725		63.6		2,534,007		67.3		31.4			19.2




	Charter — Passenger		226,269		3.8		213,575		4.5		153,669		4.1		5.9			39.0




	Cargo		277,403		4.7		193,545		4.1		153,339		4.1		43.3			26.2

			4,470,101		75.6		3,426,845		72.2		2,841,015		75.5		30.4			20.6

International revenue




	Regular — Passenger		1,010,701		17.1		871,248		18.4		674,326		17.9		16.0			29.2




	Charter — Passenger		22,855		0.4		21,892		0.5		5,094		0.1		4.4			329.8




	Cargo		129,743		2.2		125,408		2.6		82,500		2.2		3.5			52.0

			1,163,299		19.7		1,018,548		21.5		761,920		20.2		14.2			33.7

Other operating revenue




	Commission		21,004		0.4		17,189		0.4		14,645		0.4		22.2			17.4




	Partnerships with TAM Fidelidade Program card		85,051		1.4		58,251		1.2		30,999		0.8		46.0			87.9




	Aircraft sub-lease		65,228		1.1		126,320		2.7		57,282		1.5		(48.4	)		120.5




	Others		105,452		1.8		97,128		2.0		61,922		1.6		8.6			56.9

			276,735		4.7		298,888		6.3		164,848		4.3		(7.4	)		81.3

Gross operating revenue			5,910,135		100.0		4,744,281		100.0		3,767,783		100.0		24.6			25.9

F-26

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)


*(b)*	*By geographic area*

Revenue by geographic are is presented by flight destination


													Variation		Variation
													between		between
													2005 and		2004 and
	2005		%		2004		%		2003		%		2004 - %		2003 - %

Brazil		4,746,835		80.4		3,725,694		78.5		3,005,863		79.8		27.4		23.9




Europe		457,190		7.7		449,218		9.5		336,166		8.9		1.8		33.6




North America		367,674		6.2		366,016		7.7		230,042		6.1		0.5		59.1




South America (excluding Brazil)		338,436		5.7		203,353		4.3		195,712		5.2		66.4		4.0

		5,910,135		100.0		4,744,281		100.0		3,767,783		100.0		24.6		25.9


*(c)*	*By line of product*


													Variation			Variation
													between			between
													2005 and			2004 and
	2005		%		2004		%		2003		%		2004 - %			2003 - %

Regular — Passenger		4,977,130		84.2		3,890,973		82.0		3,208,333		85.2		27.9			21.3




Charter — Passenger		249,124		4.2		235,467		5.0		158,763		4.2		5.8			48.3




Cargo		407,146		6.9		318,953		6.7		235,839		6.3		27.7			35.2




Other operating revenue		276,735		4.7		298,888		6.3		164,848		4.3		(7.4	)		81.3

		5,910,135		100.0		4,744,281		100.0		3,767,783		100.0		24.6			25.9

The Company’s property, plant and equipment consist primarily of flight equipment which is used across geographic markets and, therefore, has not been allocated.


21	Main Costs and Expenses


			2005										2004				2003

	Cost of						Executive
	services				General and		management
	rendered		Selling		administrative		fees		Total		%		Total		%		Total		%

Fuel		1,694,980		—		—		—		1,694,980		32.5		1,066,731		25.3		786,996		21.7




Aircraft and flight equipment lease		615,444		2,120		9,684		—		627,248		12.0		651,034		15.4		647,825		17.9




Selling and marketing		—		854,602		—		—		854,602		16.4		656,326		15.5		527,382		14.5




Personnel		503,367		68,934		74,259		22,088		668,648		12.8		545,725		12.9		417,088		11.5




Maintenance		356,322		—		—		—		356,322		6.8		389,186		9.2		372,180		10.3




Services rendered by third parties		126,330		105,844		141,547		—		373,721		7.2		360,461		8.5		303,634		8.4




Landing, take-off and navigational tariffs		233,012		—		—		—		233,012		4.5		185,773		4.4		151,103		4.2




Depreciation and amortization		69,482		1,089		14,782		—		85,353		1.6		91,426		2.2		154,995		4.3




Aircraft insurance		39,644		—		—		—		39,644		0.8		52,714		1.2		76,810		2.1




Other		158,305		45,592		84,427		—		288,324		5.5		226,276		5.4		185,999		5.1

		3,796,886		1,078,181		324,699		22,088		5,221,854		100.0		4,225,652		100.0		3,624,012		100.0

F-27

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)


22	Financial Income and Expense


		2005			2004			2003

Financial income




	Foreign exchange gains		25,020			6,956			430,521




	Interest income		70,939			6,007			1,705




	Discounts obtained		4,413			15,552			33,621




	Gain from financial instruments		5,335			1,524			10,666




	Other		14			1,767			94

			105,721			31,806			476,607

Financial expense




	Foreign exchange losses		—			—			(3,906	)




	Interest expense and financial charges		(89,576	)		(57,342	)		(172,930	)




	Tax on Bank Account Transactions — (“CPMF”)		(20,007	)		(14,287	)		(11,107	)




	Losses from financial instruments		(75,316	)		(34,858	)		(11,424	)




	Other		(13,383	)		(7,894	)		(15,797	)

			(198,282	)		(114,381	)		(215,164	)

Financial income (expense), net			(92,561	)		(82,575	)		261,443


23	Benefits to Employees


*(a)*	*Supplementary pension plan*

TLA sponsors three private pension plans (TAM Prev I, II and III) which supplement retirement benefits, as follows:


	(i) Retirement Plan — TAM Prev — Plan I

TAM Prev — Plans I is managed by MultiPensions Bradesco and started in October 1982 as a defined benefit plan covering retirement, death and disability, and is partially funded by employees contributions and complemented by the sponsor.

On November 26, 2004, the Secretariat for Complementary Pensions approved the proposal to transfer participants from Plan I to Plan III. At December 31, 2005, 181 participants had migrated. This plan is no longer open to new participants.


	(ii) Retirement Plan — TAM Prev — Plans II and III

TAM Prev — Plans II and III are managed by MultiPensions Bradesco, launched in April 1995 and December 1998, respectively, are structured as defined contribution plans for retirement benefits funded by employees and matched by sponsor contributions, in addition to defined benefits (death and disability), which are entirely funded by the sponsor.

The total net liability of the plans determined based on the actuarial report issued by independent experts, dated January 23, 2006, considered assumptions that at time did not result in any significant changes compared to 2004. The remaining amount, related to the initial actuarial liability calculation in 2001, is being recorded over five years, as from January 1, 2002. The residual value to be amortized during the next year amounts to R$1,796.

F-28

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)

At December 31, 2005, the amount recorded under Other liabilities is R$17,078 (2004 — R$13,757).

The total benefit obligation with active participants and the number of active participants, at December 31, 2005, are as follows:


		2005		2004

Benefit obligation with active participants




	TAM Prev — Plan I		11,283		25,971




	TAM Prev — Plan II		8,763		7,158




	TAM Prev — Plan III		7,632		3,501

			27,678		36,630

Active participants (number of employees) — unaudited




	TAM Prev — Plan I		41		64




	TAM Prev — Plan II		1,155		1,253




	TAM Prev — Plan III		1,159		1,258

			2,355		2,575


	(iii) Actuarial assumptions

The Projected Unit Credit Method was applied by an independent actuary based on the following actuarial assumptions (nominal rates, including inflation):


		Annual percentage

		2005		2004

Economic




	Discount rate		11.83		12.36




	Expected return on plan assets		13.72		14.28




	Future salary increases		7.10		8.12




	Inflation		5.00		6.00




	Future increase in Social Security benefits		5.00		6.00


*(b)*	*Profit sharing*

Pursuant to our agreement with our labor union, profit sharing payments will be made upon attaining preestablished performance indicators based on the annual budget. The provision for payment of this benefit, was R$42,465 at December 31, 2005 (2004 — R$51,908), included in Salaries and payroll charges.

F-29

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)


24	Insurance Coverage

The Company contracts insurance coverage above the minimum mandatory amounts deemed necessary for possible claims, considering the nature of the assets and the risks involved. Coverage at December 31, 2005, for maximum indemnity amounts are as follows:


		Coverage — Thousands of
Type		U.S. Dollars

		(Unaudited)




Air traffic			3,254,153
Responsibilities (per aircraft)




	Civil		1,500,000




	War		150,000

Following the September 11, 2001 terrorist attacks in the United States, insurance companies established surcharges on the insurance of aircraft hulls and on civil liabilities generated by acts of war or terrorism. The insurance companies limited worldwide coverage to US$150,000 thousand per claim, and for higher amounts, the premiums must be paid in cash for the total term of the policies, which has made the coverage unviable.

The Brazilian Government has assumed commitment to complement potential expenses of civil liabilities for third parties generated by acts of war or terrorist attacks that the Company may be required to pay limited to the equivalent in reais of one billion U.S. dollars.


25	Contingent Assets


*(a)*	*Value-Added Tax on Sales and Services (“ICMS”)*

(i) On December 17, 2001, the Federal Supreme Court ruled that domestic and international air passenger transportation revenue, as well as international air cargo transportation revenue were no longer subject to ICMS.

ICMS taxation on domestic air cargo transportation revenue is still due. Management recorded a provision of R$9,952 (2004 — R$4,698), in Taxes and tariffs payable. The installments due in more than one year totaling R$547 (2004 — R$1,571) are classified as long-term liabilities under Other liabilities.

(ii) Collected of certain ICMS payments made from 1989 to 1994 were later ruled to have been unconstitutional. TLA management, together with its outside legal counsel, is taking appropriate measures to recover the amounts paid. The Company will recognize the credits, estimated at approximately R$55,000 and corresponding indexation adjustments, when final recovery is assured.


*(b)*	*Indemnification for losses on regulated fares*

TLA filed a lawsuit against the Federal Government demanding indemnity for losses arising in the period from 1988 to 1993, when the fares were regulated by the Federal Government.

In 1998, a judicial ruling was granted in favor of the Company and confirmed its right to indemnification of R$245,000 plus corresponding indexation adjustments. The federal Government appealed the ruling and the Court of Appeals determined that the lawsuit should again be judged by a court of first instance. Appeals by TLA are pending.

F-30

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)


*(c)*	*Additional tariff (ATAERO)*

TLA filed a claim for anticipated custody addressing the legality of the additional amount to tariffs (ATAERO), which rate is 50% on the tariff amount. On December 31, 2005, the amount under discussion totaled R$457,000 (unaudited).


26	Financial Instruments


*(a)*	*General considerations*

The management of these financial instruments is made pursuant to operational strategies, pursuing liquidity, return and security. Control policy consists basically of monitoring contracted rates against current rates negotiated in the market. The Company does not use financial instruments or any other risk assets for speculative purposes.

The Company contracts transactions involving financial instruments to mitigate its exposure to interest, fuel prices and foreign exchange risks. Also, cash surpluses are invested, in accordance with current treasury policies, which are continuously reviewed.


	(i) Price, interest, exchange and credit risk

This risk relates to the possibility of fluctuation in the price of services provided by the Company, since it operates in an extremely competitive local and international market. The price of the services offered by the Company could be affected by alterations in international prices of its main input, that is, fuel for airplanes. To minimize this risk, the Company permanently monitors the fluctuations in these prices on the domestic and international markets in order to adjust the price of its services to the effective cost; its policy is to contract fuel hedges providing protection for 30% of the estimated consumption the next three months.


	(ii) Interest rate risk

This risk arises from the possibility of the Company incurring losses (or gains) as a result of fluctuations in the interest rates applied to its liabilities and assets invested on the market. To minimize possible impacts arising from interest rate fluctuations, the Company has adopted a policy of diversification, alternating between contracting fixed and variable rates (such as LIBOR, CDI and TJLP), and periodically renegotiates its contracts, in order to adapt them to the market situation.


	(iii) Foreign exchange rate risk

This risk is related to the possibility of fluctuation in foreign exchange rates, affecting the financial expense (or income) and the liability (or asset) balance for contracts that are indexed in a foreign currency. To protect against these fluctuations the Company has adopted a policy of contracting hedge operations, usually “Asiatic Options” operations (options with underlying based on weighted average exchange rates of the option term). Part of this risk is mitigated as the Company operates international routes and revenues from these transactions is received are a foreign currency. The existing policy for contracting hedges is to mitigate risks for the next 12 months.


	(iv) Credit risk

Credit risk arises from the possibility of the Company not recovering amounts receivable from services provided to consumers and/or travel agencies, or from credits held by financial institutions generated for financial investment operations. To reduce this risk the Company has adopted the practice of establishing

F-31

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)

credit limits and permanently accompanying its debtor balance (basically from travel agencies). With respect to marketable securities, the Company only invests with institutions with low credit risk, as evaluated by rating agencies, In addition, each institution has a maximum limit for investments, as determined by Company’s Financial Committee.


*(b)*	*Market value*

The financial instruments reflect their market values and were obtained based on fair market value, considering current interest rates practiced on the market for operations of similar risks and terms. With respect to loans and financing, (Notes 11 and 14), the carrying amounts approximate fair market value.


*(c)*	*Exposure*


(i)	Foreign exchange rate risk

The Company contracts derivative financial operations, to mitigate its foreign currency exposure, arising from future fuel purchase, contracting of engine maintenance services and loan agreements related to its operational activities.

At December 31, 2005, contracts for swaps with options, acquired to mitigate risks for liabilities from suppliers and financing, amounted to R$816,904 — US$349,000 thousand (2004 — R$661,476 — US$249,200 thousand), and have various maturity dates, up to November 8, 2006.

Had these operation been settled at December 31, 2005, would have generated a loss of R$93,514 (2004 — R$7,585).

The foreign exchange exposure is mainly indexed to the U.S. dollar, summarized as follows:


		2005			2004

Assets




	Current assets — denominated in, or indexed to the US dollar		341,993			210,941
Liabilities




	Loans and financing/return of fleet		(331,379	)		(362,689	)




	Foreign suppliers		(29,775	)		(22,521	)




	Operating lease — commitments for the next 12 months		(611,403	)		(581,399	)


(ii)	Price of services

During 2005, the Company contracted financial instruments with the objective of mitigating its exposure to the variation in the price of aviation fuel, its main input.

At December 31, 2005, these operations, which matured at various dates, through April 1, 2006, amounted to approximately R$82,912 (2004 — R$28,731), equivalent to approximately 585 thousand barrels (2004 — 246 thousand barrels).

Had these operation been settled at December 31, 2005, the above operations would have generated a loss of R$47 (2004 — R$369).

F-32

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)


*(d)*	*Financial investments*

Fixed rate deposits with foreign exchange rate variation and maturity dates up to 60 days.


*(e)*	*Investments*

TLA and Mercosur are non-public companies and, therefore, there is no information to readily available to evaluate their fair market values.


27	TAM Fidelidade Program

At December 31, 2005, the TAM Fidelidade Program carried 1,161,477 (unaudited) (2004 — 830,888 (unaudited)) one way domestic trip tickets earned by its clients but not redeemed. The Company currently records the incremental costs when awards are redeemed. During 2005, 546,452 (unaudited) (2004 — 429,200 (unaudited)) free tickets were granted and used by our clients. The incremental costs of points redeemed under the loyalty program for the years ended December 31, 2005, 2004 and 2003 were R$8,573, R$6,334 and R$5,837, respectively. The incremental costs include amount paid to other airlines for points redeemed on other airlines and passenger ticketing, food and beverages, insurance and estimated fuel costs for points redeemed on our flights.

Considering that the conversion of points into one way trips occurs, on average, for every 10,000 points gained, at December 31, 2005, clients that had acquired sufficient points to make the conversion, corresponded to 612,274 (unaudited) (2004 — 484,707 (unaudited)) domestic one way trips of air tickets.

Had the Company recorded a provision for incremental costs, when the award levels were achieved the impact would be immaterial.

The points earned by our clients from the TAM Fidelidade Program are valid for two years for the redemption into tickets. This limits any growth in the liability from the program, which has tended to stabilize in relation to the number of passengers transported.


28	Code Share

As from May 2, 2005, the Company has ceased to operate its code share with VARIG, under the terms of the Memorandum of Understanding of 2003. Since then, the Company has maintained an agreement regarding feeder-routes on two domestic routes. This agreement may last for up to two years and the total number of passengers transported on these routes corresponds to less than 1% of the total number of passengers transported by the Company.


29	Summary of Differences between Brazilian GAAP and U.S. GAAP


*(a)*	*Description of the GAAP differences*

The accounting practices of the Company are in accordance with Brazilian GAAP which differ significantly from U.S. GAAP, as are summarized below.


*(b)*	*Supplementary inflation restatement in 1996 and 1997 for U.S. GAAP*

Brazilian GAAP discontinued inflation accounting effective January 1, 1996, Brazilian GAAP statements included indexation adjustments which partially accounted for the effects of inflation on property, plant and equipment, investments, deferred charges (together, denominated Permanent assets) and shareholders’ equity, which reported the net charge or credit in the statement of operations. However, under U.S. GAAP, Brazil ceased to be treated as a highly inflationary economy only from January 1,

F-33

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)

1998. Therefore the financial information for purposes of U.S. GAAP include additional inflation restatement adjustments in 1996 and 1997, made by applying the General Price Index — Internal Availability (“IGP-DI”) to the Company permanent assets and shareholders’ equity. The IGP-DI index increased by 9.3% in 1996 and by 7.5% in 1997.

For purposes of the reconciliation, shareholders’ equity under U.S. GAAP was increased by R$156 and R$258, respectively, at December 31, 2005 and 2004, due to the additional inflation restatement adjustments, net of depreciation. These amounts generated differences in depreciation charges of R$102, R$116 and R$136 respectively in 2005, 2004 and 2003.


*(c)*	*Property, plant and equipment*


(i)	Revaluation of property, plant and equipment

Brazilian GAAP permits the revaluation of assets. The revaluation increment, net of deferred tax effects after 1991, is credited to a reserve account in shareholders’ equity. Depreciation of the revaluation increments is charged to income and an offsetting amount is transferred from the revaluation reserve in shareholders’ equity to retained earnings as the related assets are depreciated or upon disposal.

Under U.S. GAAP, revaluation of property, plant and equipment is not accepted and the revaluation increments and related deferred tax effects have therefore been eliminated in order to present property, plant and equipment at historical cost less accumulated depreciation. Accordingly, the depreciation expense on revaluation has also been reversed in the statement of operations.

For the purposes of the reconciliation, under U.S. GAAP the revaluation reserve was reversed, net of depreciation and deferred tax effects, totaling R$161,196 in 2005 and R$137,669 in 2004. In the statement of operations, these effects totaled R$3,852 in 2005 R$7,584 in 2004 and R$33,103 in 2003.


(ii)	Lease agreements

Brazilian GAAP does not have a specific requirement on accounting for leases and TAM recognizes as finance leases only contracts where the lessee has a bargain purchase option for the asset, All other leases are treated as operating leases.

Under U.S. GAAP, Statement of Financial Accounting Standards (“SFAS”) No. 13, “Accounting for Leases” defines finance leases as those leases which meet at least one of the following criteria:


	•	The lease transfers ownership of the property to the lessee by the end of the lease.

	•	The lease contains a bargain purchase option.

	•	The lease term is equal to 75 percent or more of the estimated economic life of the leased asset.

	•	The present value at the beginning of the lease term of the minimum lease payments, excluding that portion of the payments representing executory costs such as insurance, maintenance, and taxes to be paid by the lessor, including any profit thereon, equals or exceeds 90 percent of the fair value of the leased asset at the inception of the lease.

Additionally, on renegotiation of lease terms, regardless as to whether the lessor is changed, the new lease is maintained as a finance lease by the lessee if the under amended lease terms, the lease would have been classified as a finance lease either at inception or at the renegotiation date.

At December 31, 2005, TAM had 40 aircraft recorded as operating lease under Brazilian GAAP (Airbus A319 — 9 units, Airbus A320 — 12 units; Airbus A330 — 8 units and Fokker 100 — 11 units)

F-34

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)

which are considered as finance leases under U.S. GAAP because the present value of the minimum payments of these contracts exceed 90% of the fair value of the asset leased.

Under U.S. GAAP, the acquisition cost of these aircraft and the related liability at the inception of the lease contract, totaling R$3,525,277, are recorded in the balance sheet. The assets are depreciated over the estimated useful life which is 25 years for the Airbus A319, Airbus A320 and Fokker 100 and 30 years for the Airbus A330. The obligations are recorded in short and long term liabilities, including accrued interest and foreign exchange gains or losses. Depreciation expense on these aircraft recognized in 2005, 2004 and 2003 totaled R$127,810, R$115,652 and R$102,531, respectively. Foreign exchange gains (losses) on finance lease obligation in 2005, 2004 and 2003, totaled R$329,638, R$288,557 and R$740,127, respectively. Interest expenses on the finance lease obligation of these aircraft in 2005, 2004 and 2003 totaled R$139,876, R$130,068 and R$111,543, respectively. The operating lease expense recognized under Brazilian GAAP for these aircraft were reversed during all periods and totaled R$327,543, R$329,558 and R$263,504, in 2005, 2004 and 2003 respectively.

For reconciliation purposes, the appropriated effects in shareholders’ equity at December 31, 2005 totaled R$330,694 (December 31, 2004 — R$(54,302)).

Additionally, in 2004, TAM modified the terms of certain aircraft leases (Note 12(b)) and for Brazilian GAAP purposes these contracts were no longer recorded as finance leases. As a consequence the finance lease obligations and the corresponding aircraft asset accounts were reversed generating a non-operating gain of R$353,279 during 2004.

For U.S. GAAP purposes, these contracts are included in the context of the aforementioned 40 contracts, and therefore they were maintained as finance leases, For U.S. GAAP reconciliation purposes, the gain recognized under Brazilian GAAP totaling R$353,279 was reversed.

Considering the aforementioned adjustments, the lease obligations under U.S. GAAP were:


	Annual Financial		December 31,			December 31,
	Charges		2005			2004

Foreign currency




Airbus A319/ Airbus A320 aircraft and engines		Monthly LIBOR		1,414,170			1,570,941




Airbus A330 aircraft, engines and spare parts		Six-month LIBOR		1,076,742			1,065,108




Fokker 100 aircraft and engines		Fixed interest		316,792			450,399




Lease obligations		Monthly LIBOR		6,865			9,298
		Six-month LIBOR		16,409			51,714
		Three-month LIBOR		3,152			7,240
		Fixed interest		11,277			17,342

				2,845,407			3,172,042

Current				(342,983	)		(361,648	)

Long-term liabilities				2,502,424			2,810,394

The lease obligations above are secured by letters of credit issued by the Company.

F-35

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)

Maturities are as follows:


Year	2005		2004

2006		—		274,045




2007		273,019		307,060




2008		268,342		299,684




2009		277,988		311,179




2010		296,131		317,380




2011		254,959		267,515




After 2011		1,131,985		1,033,531

		2,502,424		2,810,394

(iii) Impairment

Under Brazilian GAAP, companies are required to determine if operating income is sufficient to absorb the depreciation or amortization of long-lived assets in order to assess potential asset impairment. In the event such operating income is insufficient to recover the depreciation, the assets, or groups of assets, are written-down to recoverable values, preferably, based on the projected discounted cash flows of future operations. In the event of a planned substitution of assets prior to the end of the original estimated useful life of the asset, depreciation of such asset is accelerated to ensure the asset is depreciated according to estimated net realizable value at the estimated date of substitution.

Under U.S. GAAP, SFAS No, 144, “Accounting for the Impairment or Disposal of Long-lived Assets”, requires companies to evaluate the carrying value of long-lived assets to be held and used, and for long-lived assets to be disposed of, when events and circumstances require such a review. The carrying value of long-lived assets is considered impaired when the anticipated undiscounted cash flow, representing the lowest level in which identifiable cash flow is less than their carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the assets or discounted cash flows generated by the assets.

In the case of TAM, there were no impairment indicators and, therefore, no differences between U.S. GAAP and Brazilian GAAP related to impairment provision criteria were recorded for the years presented.

(iv) Gains on sale-leaseback

Brazilian GAAP does not have specific requirements for sale-leaseback transactions. All gains arising from sale-leaseback transactions were recognized at the time of the transaction.

Under U.S. GAAP, SFAS No. 28, “Accounting for Sales with Leaseback”, establishes a sale-leaseback as a single financing transaction in which any profit or loss on the sale is deferred and amortized

F-36

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)

by the seller, who becomes the lessee, in proportion to rental payments over the period of time the asset is expected to be used, as defined in the new operating lease agreement.


						December 31,		December 31,		December 31,
						2005		2004		2003
	Gains on Sale-		Accumulated
	Leaseback		Amortization			Net		Net		Net

Transaction Airbus A330(i)		319,073		(115,221	)		203,852		230,441		257,031




Transaction Airbus A320(ii)		54,957		(15,113	)		39,844		45,339		50,836




Transaction Fokker 100(iii)		76,815		(75,066	)		1,749		9,424		76,815

		450,845		(205,400	)		245,445		285,204		384,682

The amortization of gains on sale-leaseback transactions appropriated in the statement of operations for the year ended December 31, 2005, as Financial income (expenses), net and Other operating expenses, net totaled R$24,895 and R$14,864, respectively (December 31, 2004 — R$65,382 and R$34,096) (December 31, 2003 — R$9,063 and R$21,647).

⁽ⁱ⁾

In August 2001, TAM entered into an agreement which resulted in the termination of a finance lease agreement for three Airbus A330 aircraft with a lessor and signed and a new lease agreement, under operating lease provisions, with a different lessor for the same aircraft. For Brazilian GAAP purposes, TAM recognized a net gain of R$319,073 during 2001. This gain is being amortized over the period of the new lease contract, through August 2013.

⁽ⁱⁱ⁾

In April 2003, TAM entered into an agreement which resulted in the termination of a finance lease agreement for four Airbus A320 aircraft with a lessor and signed a new lease agreement, under operating lease provisions, with a different lessor for the same aircraft. For Brazilian GAAP purposes, TAM did not recognize any gain, as this contract had already been recorded as an operating lease. Under U.S. GAAP this transaction generated a deferred gain of R$54,957.

This gain is being amortized in accordance with the operating lease contract, through March 2013.

⁽ⁱⁱⁱ⁾

Also, in December 2003, TAM reorganized its fleet of 19 Fokker 100 aircraft (Note 14), which resulted in the cancellation of the finance lease agreements, generating new operating lease agreements. For Brazilian GAAP purposes, TAM recognized a gain of R$76,815, which was recognized in the results for 2003. Under U.S. GAAP, the amortization is being recognized in accordance with the aircraft return schedule, originally estimated to be concluded by July 2005, and amended in January 2005, postponing the return date of the last five aircraft until April 2006. This gain is being amortized over the revised schedule through April 2006.

The transactions summarized above were considered to be a modification of the provisions of the original contract under U.S. GAAP, According to recently issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections”, if the change in the lease provisions gives rise to a new agreement classified as an operating lease, the transaction shall be accounted for under the sale-leaseback requirements in accordance with paragraphs 2 and 3 of SFAS No. 28, mentioned above.

F-37

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)


	(v) Sub-leasing of aircraft

As of December 31, 2005 the Company sub-leased three Airbus A 330 aircraft and one engine under operating leases to other airline company. The contract matures in November 2006. Rental fees are charged and revenues recognized on a straight line basis over the lease term. As of December 31, 2005 the minimum lease payments receivable on non-cancelable sub-leases was US$20,985 and the cost, accumulated depreciation and net book value of aircraft and engine under operating sub-leases were R$457,677, R$83,291 and R$374,386. There were no contingent rentals included in the sub-leasing revenues.


*(d)*	*Deferred charges*

Brazilian GAAP permits deferral of leasehold improvement as deferred charges.

Under U.S. GAAP, amounts related to leasehold improvements should be treated as additions to property, plant and equipment and reclassified for balance sheet disclosure purposes. The amount reclassified in the balance sheet totaled R$5,228 at December 31, 2005 and R$6,291 at December 31, 2004.


*(e)*	*Business combinations*


(i)	Goodwill

Under Brazilian GAAP, goodwill arises from the difference between the amount paid and the book value of the net assets acquired. This goodwill is normally attributed to the market value of assets acquired or justified based on expectation of future profitability and is amortized over the remaining useful lives of the assets or up to 10 years. Negative goodwill arises under Brazilian GAAP when the book value of assets acquired exceeds the purchase consideration; negative goodwill is not generally amortized.

Under U.S. GAAP, fair values are assigned to acquired assets and liabilities in business combinations, including intangible assets and unallocated goodwill, applicable to each specific transaction. Upon the adoption of SFAS No. 142, “Goodwill and Other Intangible Assets”, as from January 1, 2002 goodwill is no longer amortized but, instead, is assigned to an entity’s reporting units and tested for impairment at least annually. Additionally, according to the U.S. GAAP, goodwill generated in transactions under common control should not be recorded but, instead, the difference between amounts paid and book values of net assets acquired should be recorded as a capital contribution or distribution.

The differences related to the Brazilian GAAP applicable to TAM derive mainly from (i) non-amortization of goodwill as from January 1, 2002 and (ii) non-recognition of negative goodwill arising from transactions of companies under common control, (Note (ii) below).

For Brazilian GAAP purposes, the net balance of goodwill at December 31, 2005 was R$1,434 (2004 — R$2,775), which is being amortized to income over a period of five to 10 years; negative goodwill at December 31, 2005 was R$11,099 (2004 — R$11,099).

For reconciliation purposes, amortization of goodwill as from January 1, 2003 was reversed, totaling R$1,341, R$2,291 and R$4,457 in the statement of operations for 2005, 2004 and 2003, respectively. In shareholders’ equity, for reconciliation purposes these effects totaled R$8,246 and R$6,904 in 2005 and 2004, respectively.

For U.S. GAAP purposes, the net balance of goodwill at December 31, 2005 is R$9,680 (2004 — R$9,679).

F-38

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)


(ii)	Common control and negative goodwill — Mercosur

For Brazilian GAAP purposes, Mercosur was acquired and consolidated by the Company in September 2003 through an exchange of shares (Note 19(a)).

For U.S. GAAP purposes, Mercosur has been considered under common control since 1996, because Mercosur has the same controlling shareholders as TAM and therefore, it was consolidated retroactively for all periods presented. The effects of the retroactively consolidation in the changes in shareholders’ equity have been recorded as additional paid-in capital.

Additionally, in this transaction, the negative goodwill for Brazilian GAAP purposes was generated by the difference between book value and the amount paid in the transaction for the acquisition of Mercosur. As this transaction was considered to be under common control, for U.S. GAAP purposes the difference between the amount paid and the book value of Mercosur was recognized in shareholders’ equity as a capital contribution.

Also, for Brazilian GAAP purposes, the effects of the exchange variation on this subsidiary’s shareholders’ equity are distributed among the lines of the statement of operations. For U.S. GAAP purposes, the effect of this exchange variation was recognized in shareholders’ equity in cumulative translation adjustments, in accordance with SFAS No. 52, “Foreign Currency Translation”.

For reconciliation purposes, the effects described above totaled R$8,870, R$2,045 and R$4,669, in the statement of operations of 2005, 2004 and 2003, respectively, and R$11,828 in shareholders’ equity of 2005 and 2004.


*(f)*	*Pension and other post-retirement benefits*

In determining the pension and other post-retirement benefit obligations for Brazilian GAAP purposes, NPC No. 26 is effective for financial statements ended from December 31, 2002. As permitted by the Standard, the transitional gain (being the difference between the plan net assets and the projected benefit obligation (“PBO”)) at that date will be charged to income over five years.

Under U.S. GAAP, SFAS No. 87, “Employer’s Accounting for Pensions”, is effective for fiscal years beginning after 1988. As from such dates, when an initial transition obligation determined based on an actuarial valuation was booked, actuarial gains and losses, as well as unexpected variations in plan assets and the PBO and the effects of amendments, settlements and other events, have been recognized in accordance with this standard and therefore results in deferral differences, Until 1997, these amounts were treated as non-monetary items and indexed by the inflation, The U.S. GAAP also requires the recognition of an additional minimum liability.

Although the calculation of the sufficiency of the funded status has been the same since December 31, 2001, differences arise in (i) actuarial gains and losses, as initially there is no gain or actuarial loss on December 31, 2001, (ii) recognition of the initial transition obligation and (iii) minimum liability, according to U.S. GAAP.

Based on the report of our independent actuary, the funded status and amounts recorded in our condensed consolidated balance sheet in accordance with the U.S. GAAP at December 31, 2005 and 2004 and the condensed consolidated statement of operation in 2005, 2004 and 2003 of the pension liabilities of

F-39

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)

our plans with retired beneficiaries, in conformity with SFAS No. 132, “Employer’s Disclosures. About Pensions and Post-Retirement Benefits — revised”, are as follows:


				2005			2004			2003

Change in net benefit obligation




	Net liability of benefits projected at beginning of year				57,978			59,058			51,453




			Service cost		2,784			3,495			4,166




			Interest cost		6,690			7,065			6,149




			Actuarial gain		(6,474	)		(237	)		(216	)




			Gross benefits paid		(2,777	)		(2,337	)		(2,494	)




			Effects from changes in plans		(1,662	)		(9,066	)		—

	Net liability of benefit obligation projected at end of year				56,539			57,978			59,058

Change in fair value of plan assets




	At beginning of year				36,630			40,654			32,151




		Actual return on plan assets			6,917			6,078			7,970




		Employer’s contributions			2,421			1,245			2,430




		Employees’ contributions			240			506			597




		Effects from changes in plans			(1,444	)		(9,516	)		—




		Gross benefits paid			(2,777	)		(2,337	)		(2,494	)

At end of year					41,987			36,630			40,654

Funded status




	Funded status at end of year				(14,552	)		(21,348	)		(18,404	)




	Unrecognized net actuarial gain				(9,187	)		(827	)		(587	)




	Cost of unrecognized past services				2,805			1,748			—




	Unrecognized net transition asset				189			331			1,179

Accrued benefit cost					(20,745	)		(20,096	)		(17,812	)

The measurement date of the pension plan was December 31, 2005.

The amounts recognized in the balance sheet consist of:


		2005			2004			2003

Accrued benefit cost			(20,745	)		(20,096	)		(17,812	)




Additional minimum liability			—			(2,231	)		(1,616	)




Intangible asset			—			172			223

Net amount recognized			(20,745	)		(22,155	)		(19,205	)

Weighted average assumptions at December 31




	Discount rate — %		11.83			12.36			12.36




	Expected return on plan assets — %		13.72			14.28			13.72




	Rate of compensation increase — %		7.10			8.12			8.12

F-40

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)

The accumulated benefit obligation for the pension plan at the end of 2005 was R$53,554 (2004 — R$55,302).


	2005			2004			2003

Components of net periodic benefit cost




Service cost		2,553			2,839			4,166




Interest cost		6,690			7,065			6,149




Expected return on assets		(4,934	)		(5,536	)		(4,278	)




Effects from changes in plans		(1,493	)		(1,076	)		—




Amortization of transition obligation		81			274			—




Amortization of prior service cost		166			—			—




Amortization of net actuarial gain		7			(37	)		51

Net periodic benefit cost		3,070			3,529			6,088

The asset allocation for the Company’s pension plans at the end of 2005 and 2004, and the target allocation for 2005, by asset category, follows. The fair value of plan assets for these plans is R$41,987 and R$36,630 at December 31, 2005 and 2004, respectively. The expected long term rates of return on these plan assets were 14.28% and 13.72% for 2005 and 2004, respectively.


			Percentage of
			Plan Assets
			at
	Target		December 31
	Allocation
Asset Category	for 2006 - %		2005		2004

Equity securities		5		5		6




Fixed income		95		95		94

		100		100		100

The plan investment strategy is based on a long-term macroeconomic scenario. This scenario presents low sovereign risk, moderate economic growth, stable inflation and exchange rates, and moderate interest rates.

The devised asset mix is composed by fixed income investments and equities. The fixed income target allocation is 95% and equities target allocation is 5%.

For reconciliation purposes the following effects were recognized:

Pension expense


	2005			2004			2003

Reversal of pension expenses recorded under BR GAAP		5,518			5,649			5,535




Accounting of pension expenses under U.S. GAAP		(3,070	)		(3,529	)		(6,088	)

U.S. GAAP adjustment on net income		2,448			2,120			(553	)

F-41

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)


	Pension liability


		2005			2004			2003

U.S. GAAP opening balance			(22,155	)		(19,205	)		(15,772	)




	U.S. GAAP pension expense		(3,070	)		(3,529	)		(6,088	)




	Employer’s contributions		2,421			1,245			2,430




	Change in additional minimum liability		2,231			(615	)		1,202




	Change in intangible assets		(172	)		(51	)		(977	)

U.S. GAAP closing balance			(20,745	)		(22,155	)		(19,205	)


	Shareholders’ equity


	2005			2004

Pension liability under Brazilian GAAP		17,078			13,757




Intangible asset under U.S. GAAP		—			223




Pension liability under U.S. GAAP		(20,745	)		(22,155	)

U.S. GAAP adjustment on shareholders’ equity		(3,667	)		(8,175	)


*(g)*	*Derivative instruments*

Under Brazilian GAAP, there is no specific requirement for accounting for derivative instruments. The Company records its financial instruments based on contractual rates, recognized on the accrual basis of accounting.

Under U.S. GAAP, SFAS No. 133, as amended and interpreted, “Accounting for Derivative Instruments and Hedging Activities”, requires that the Company recognizes all derivatives as assets or liabilities and measures these instruments to fair market value. Changes in market value are included in the Company’s results of operations. No derivative financial instrument of the Company qualified as hedges.

For reconciliation purposes, the valuation of instruments at fair market value totaled R$(85,606), R$(3,985) and R$(25,063) in results of operations for 2005, 2004 and 2003, respectively. The appropriated effect in the shareholder’s equity at December 31, 2005 was R$(93,561) (December 31, 2004 — R$(7,954)).


*(h)*	*Revenue recognition — Revenues with partnerships with Programa Fidelidade*

Under Brazilian GAAP, revenues related partnership with Programa Fidelidade for frequent flyers are recorded when the points are issued to participants. Under U.S. GAAP, as from 2005, the Company is recognizing revenue earned from selling points into two components, The first component represents the revenue for air transportation sold, which are being valued at current market rate. This revenue is being deferred and recognized over the period the points are expected to be used. The second revenue component, represents the services deemed to have been provided associated with operating the program, which is being recognized when the points are sold.

For reconciliation purposes, the deferred revenue totaled R$15,185 at December 31, 2005 in results of operations and shareholders’ equity.

F-42

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)


*(i)*	*Stock options plan*

In December 2004, the FASB issued SFAS 123 (Revised) “Share Based Payments” (SFAS 123(R)), which requires companies to expense the value of employee stock option schemes and similar awards based on the grant date fair value of the award. SFAS 123(R) eliminates the option to use APB 25’s intrinsic method of accounting for valuation of share options and similar awards as provided by SFAS 123 as originally issued. In March 2005, the SEC released Staff Accounting Bulletin No. 107 “Share-Based Payment” (“SAB 107”), which provides interpretive guidance related to the interaction between SFAS 123(R) and certain SEC rules and regulations. It also provides the SEC staff’s views regarding valuation of share-based payment arrangements. The grant date fair value of employee share options are estimated using the Black-Scholes option-pricing model. SFAS no. 123R is effective as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. As described in further details below, the Company has granted options to certain employees to purchase stock at prices below market. The market value of the options granted will be recognized for US GAAP purposes as expense over the period in which the services are rendered. Under Brazilian GAAP the stock options do not generate any expense and are recorded as a capital increase only when exercised, in the amount of the exercise price paid.

On May 16, 2005, the shareholders approved the maximum effect to the Company’s shareholders is 2% of outstanding shares, or 2,857,247 shares, for a share options to be granted to full time employees by the Board of Directors.

The Board of Directors meeting held on December 21, 2005, granted 715,252 preferred share options under the plan.

Under the terms of the Plan, the options granted are dividend into three equal amounts and employees may exercise one third of their options after three, four and five years, respectively, if still employed by the company at that time. As of December 31, 2005, 715,252 stock options were outstanding, and none had been canceled. The options contain a “service condition” as vesting and exercisability of the options depends only on the rendering of a defined period of services by the employee. The fair value of the options granted are not reassessed but the compensation cost is reassessed and recognized only for the awards that ultimately vest.

Stock options were granted initially with an exercise price of R$14.4 per share but the exercise price of future grants will be equal to 80% of the weighted average price of the Company’s preferred shares traded on the São Paulo Stock Exchange 30 days prior to the grant date.

No amounts have been charged to expense for the options granted as of December 31, 2005.

At December 31, 2005, the average remaining contractual life of the outstanding options was seven years.

The Company has opted to accounts for participation in the Plan in accordance with FASB Statement 123(R). Accordingly, compensation cost has been measured as the fair value of the options at

F-43

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)

the stock option grant date. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 2005:


	2005

Risk-free interest rate		5.71%




Exercise price		R$14.4




Dividend yield		0.46%




Volatility factors of the market		36.45%




Stock market price		R$45.0




Expected life of the option		4.01 years

The weighted average grant date fair value of the stock options granted in 2005 was R$32.94 per share resulting in a total fair value of options granted of R$23,559.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumption including the expected stock price volatility. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s option, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.


*(j)*	*Dividends*

Under BR GAAP, the Company’s executive officers proposed a dividend distribution from earnings and accrued the dividends.

Under U.S. GAAP, because this proposal may be ratified or modified at the shareholders meeting, such dividends would not be considered as declared at the year end and, therefore, are not accrued. For purposes of reconciliation, the dividends accrued were reversed, amounting to R$29,405 at December 31, 2005 in the shareholders’ equity.


*(k)*	*Loyalty program*

Under Brazilian GAAP incremental costs relating to redeeming points on the loyalty program are recorded when awards are redeemed.

Under U.S. GAAP, incremental costs relating to the number of points estimated to be redeemed under the loyalty program are estimated at the time the passenger earns the award points and a related provision is recorded for these future costs. The estimated incremental costs include fuel, food and beverages, payments made for points redeemed on partner airlines, insurance and ticketing costs. As of December 31, 2005 a provision and related expense was recorded for R$13,520 relating to these expenses as they were not material in prior years.


*(l)*	*Earnings per share*

Under Brazilian GAAP, net income per share is calculated on the number of shares outstanding at the balance sheet date. Information is disclosed per lot of one thousand shares because, generally, this is the minimum number of shares that can be traded on the Brazilian stock exchanges. The 10% premium to which preferred shareholders were entitled until May 16, 2005 on distributed earnings is not allocated in calculating EPS under Brazilian GAAP.

F-44

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)

Under U.S. GAAP, since the preferred and common shareholders have different voting and liquidation rights, basic and diluted earnings per share have been calculated using the “two-class” method, pursuant to SFAS No. 128, “Earnings per Share”, which provides computation, presentation and disclosure requirements for earnings per share. The “two-class” method is an earnings allocation formula that determines earnings per share for preferred and common stock according to the dividends to be paid as required by the Company’s by-laws and participation rights in undistributed earnings. Basic earnings per common share is computed by dividing net income by the weighted-average number of common and preferred shares outstanding during the period, including up to May 16, 2005, the 10% premium allocated to preferred shareholders. Earnings may be capitalized used to absorb losses or otherwise appropriated; consequently, such earnings would no longer be available to be paid as dividends. Therefore, no assurance can be made that preferred shareholders will receive distributed earnings.

As from May 16, 2005 the preferred shares receive the same dividends as common shares and no longer have the previous preferred share right to a dividend 10% higher than that distributed to common shareholders. In compensation current preferred shares have the right to vote in shareholders’ meetings on limited matters and the right to receive the same price paid to common shareholders in the event of transfer of the Company’s control. The earnings per share information for the year ended December 31, 2005 reflects a proportionate profit allocation based on the period the previous preferred shares were in existence and the balance of the profits are allocated to the current preferred shares:


		2005

				Current		Previous
		Common		Preferred		Preferred
		share		share		share		Total

Basic and diluted numerator




	10% premium to previous preferred shareholders		—		—		7,749		7,749




	Undistributed earnings allocation		187,086		154,195		77,495		418,776

Total undistributed earnings			187,086		154,195		85,244		426,525

Weighted average number of outstanding shares — basic and diluted (thousands) ^(*)			59,816		81,331		62,913

Basic and diluted earnings per thousand shares — (whole reais) — R$ ^(*)			3.13		1.90		1.35


(*)	Considering the retroactive effect of share split.

The stock options which were granted on December 21, 2005 (Note 29(i)) were considered to have an anti-dilutive effect on earnings per share.


		2004

		Common		Preferred
		share		share		Total

Basic and diluted numerator




	10% premium to preferred shareholders		—		20,970		20,970




	Undistributed earnings allocation		199,372		209,695		409,067

Total undistributed earnings			199,372		230,665		430,037

Weighted average number of outstanding shares — basic and diluted (thousands)(*)			59,816		62,913

Basic and diluted earnings per thousand shares — (whole reais) — R$ ^(*)			3.33		3.67


(*)	Considering the retroactive effect of share split.

F-45

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)


		2003

		Common		Preferred
		share		share		Total

Basic and diluted numerator




	10% premium to preferred shareholders		—		32,112		32,112




	Undistributed earnings allocation		299,496		321,124		620,620

Total undistributed earnings			299,496		353,236		652,732

Weighted average number of outstanding shares — basic and diluted (thousands) ^(*)			58,676		62,913

Basic and diluted earnings per thousand shares — (whole reais) — R$ ^(*)			5.10		5.61


(*)	Considering the retroactive effect of share split.


	*(m) Comprehensive income*

Under Brazilian GAAP, the concept of comprehensive income is not recognized.

Under U.S. GAAP, SFAS No. 130, “Reporting Comprehensive Income” requires the disclosure of comprehensive income. Comprehensive income is comprised of net income/loss and “other comprehensive income” that include charges or credits directly to equity which are not the result of transactions with owners. In the case of TAM, components of comprehensive income are its net income or loss, changes in additional minimum pension liability and cumulative translation adjustments (Note 29(r)(iii)).


*(n)*	*Income tax and social contribution*

Under Brazilian GAAP, the deferred income tax asset represents the estimated amount to be recovered.

Under U.S. GAAP, deferred taxes on all temporary tax differences are accrued. Deferred tax assets and liabilities are classified as current or long term, according to the classification of the asset or liability that originated the temporary difference. Deferred income tax assets and liabilities in the same tax jurisdiction are offset among themselves and are not presented at the gross value.

Up to 2004, for purposes of U.S. GAAP, management had determined that a valuation allowance for TAM S.A. (the holding company), because of the rebuttable assumption of the three years’ taxable income had not been met. During 2005, TAM S.A. met the assumptions of the three years’ taxable income, and the projections are sufficient to justify recording the assets. Therefore, management believes that TAM S.A. will more likely than not, realize the associated benefits. For purposes of reconciliation, management has reversed the valuation allowance previously recognized.

In addition for the purpose of reconciliation to U.S. GAAP, the benefits (expenses) of income tax related to U.S. GAAP adjustments were recognized.

Together, these adjustments amounted to R$ (107,167), R$(39,628) and R$(225,810) in 2005, 2004 and 2003, respectively in the statements of operations. The aggregate net deferred tax assets reflected in the shareholder’s equity at December 31, 2005 was R$13,038 (December 31, 2004 — R$120,206). No valuation allowance has been provided on the deferred tax assets because management believes that these benefits will, more likely than not, be realized.

F-46

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)


*(o)*	*Classification of statement of operations line items*

Under Brazilian GAAP, the classification of certain income and expense items is presented differently from U.S. GAAP. The consolidated statement of operations under Brazilian GAAP has therefore been reclassified to present a condensed consolidated statement of operations in accordance with U.S. GAAP (Note 29 (r)(ii)), Reclassifications are summarized as follows:


	•	Interest income and expense and other financial charges reported within operating income in the statement of operations presented under Brazilian GAAP have been reclassified to non-operating income (expenses) in the condensed consolidated statement of operation in accordance with U.S. GAAP.

	•	Under Brazilian GAAP, gains and losses on the disposal of property, plant and equipment and investments or impairment of fixed assets are classified as non-operating income (expense) while under U.S. GAAP they are classified as an adjustment to operating income.

	•	The net income differences between Brazilian GAAP and U.S. GAAP, as detailed in the reconciliation in Note 29(q), were incorporated in the statement of operations in accordance with U.S. GAAP.

	•	Cost of services rendered and operating income (expenses) under U.S. GAAP have been presented by type of expense, following disclosure standards used by the airline industry.


*(p)*	*Classification of balance sheet line items*

Under Brazilian GAAP, the classification of certain balance sheet items is presented differently from U.S. GAAP. The Company has recast its consolidated balance sheet under the Brazilian GAAP to present a condensed consolidated balance sheet in accordance with U.S. GAAP. The reclassifications are summarized as follows:


	•	Under BR GAAP, according to Normas e Procedimentos de Contabilidade No, 20 - “Demonstração dos Fluxos de Caixa” cash and cash equivalents consist principally of highly liquid cash deposits and marketable securities, but there is no requirement that there is insignificant potential changes in value because of interest rate change nor is there a maximum 90 day original period to maturity.

	•	Under U.S. GAAP, the Company’s funds are considered to be subject to potential change in value due to changes in interest rates or have underlying securities with original maturities greater than 90 days. Therefore, under U.S. GAAP, such multi market funds were classified under marketable securities in the balance sheet,

	•	Under U.S. GAAP, certain deferred charges were reclassified to property, plant and equipment, according to their nature.

	•	Under Brazilian GAAP, deferred income taxes are not netted and assets are presented separately from liabilities. For U.S. GAAP purposes, deferred tax assets and liabilities are netted and classified as current or non-current based on the classification of the underlying temporary difference.

	•	Under Brazilian GAAP, share issuance costs directly related to the public equity offering were expensed. Under U.S. GAAP, such costs are reclassified to additional paid in capital.

F-47

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)


*(q)*	*Net income reconciliation of the differences between Brazilian GAAP and U.S. GAAP*

Net income


		Ref.
		Note 29		2005			2004			2003

Net income under Brazilian GAAP					187,374			341,132			173,804




Reversal of revaluation depreciation			(c)(i)		3,852			7,584			33,103
Lease contracts




	Depreciation of capitalized finance lease		(c)(ii)		(127,810	)		(115,652	)		(102,531	)




	Foreign exchange variation on finance lease		(c) (ii)		329,638			288,557			740,127




	Interest expense on finance lease		(c)(ii)		(139,876	)		(130,068	)		(111,543	)




	Reversal of gains on change in type of lease		(c)(ii)		—			(353,279	)		—




	Write-off of capitalized finance lease		(c)(ii)		(4,499	)




	Reversal of operating lease expense		(c)(ii)		327,543			329,558			263,504

	Total lease contracts				384,996			19,116			789,557




Amortization/(reversal) of gain on sale-leaseback transactions, net			(c)(iv)		39,759			99,478			(101,062	)




Depreciation of additional indexation of permanent assets for 1996 and 1997			(b)		(102	)		(116	)		(136	)




Reversal of goodwill amortization			(e)(i)		1,341			2,291			4,457




Pension plan			(f)		2,448			2,120			(553	)




Common control — Mercosur			(e)(ii)		8,870			2,045			4,669




Fair value of derivative instruments			(g)		(85,606	)		(3,985	)		(25,063	)




Public equity offering			(o)		19,465			—			—




Revenue recognition on partnerships with Programa Fidelidade			(h)		(15,185	)		—			—




Loyalty program			(k)		(13,520	)		—			—




Deferred income tax and social contribution on adjustments above			(n)		(107,167	)		(39,628	)		(225,810	)




Minority interest on adjustments above					—			—			(235	)

Net income under U.S. GAAP					426,525			430,037			652,731

F-48

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)

Shareholders’ equity


		Ref,
		Note 29		2005			2004

Shareholders’ equity under Brazilian GAAP					760,087			190,797




	Reversal of revaluation, net		(c)(i)		(161,196	)		(137,669	)




	Lease contracts		(c)(ii)		330,694			(54,302	)




	Deferral of gain on sale-leaseback transaction		(c)(iv)		(245,445	)		(285,204	)




	Business combination (Mercosur)		(e)(ii)		11,828			11,828




	Additional indexation of permanent assets for 1996 and 1997, net of depreciation		(b)		156			258




	Reversal of goodwill amortization		(e)(i)		8,246			6,904




	Pension plan		(f)		(3,667	)		(8,175	)




	Fair value of derivative instruments		(g)		(93,561	)		(7,954	)




	Revenue recognition on partnerships with Programa Fidelidade		(h)		(15,185	)		—




	Deferred income tax and social contribution on adjustments above		(n)		13,038			120,206




	Reversal of dividends proposed ^(*)		(j)		29,405




	Minority interest on adjustments above				(729	)		(729	)




	Loyalty program		(k)		(13,520	)		—

Shareholders’ equity (deficit) under U.S. GAAP ^(*)					620,151			(164,040	)

(*)

Under its By-laws and assuming that the Company’s financial condition is sufficient, the Company is required to pay a minimum dividend of 25% of adjusted net income calculated as i) Brazilian GAAP net income, less ii) allocation to legal reserve, less iii) allocation to contingency reserve, less iv) allocation to unrealized profits reserve plus v) realization of revaluation reserve. On February 10, 2006 the Board of Directors proposed a minimum dividend of R$29,405. Assuming the Board of Director’s proposal does not change, the shareholders’ meeting would normally approve the Brazilian GAAP financial statements and the dividend proposal.

F-49

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)


*(r)*	*Condensed consolidated financial statements under U.S. GAAP*

Based on the reconciliation items and description above, the condensed consolidated balance sheet, condensed consolidated statement of operations and condensed statement of changes in shareholders’ equity of TAM, under U.S. GAAP, are as follows:


	(i) Condensed consolidated balance sheet under U.S. GAAP


			2005		2004





Assets
Current assets




	Cash and cash equivalents and marketable securities			995,452		296,861




	Customers accounts receivable (net of allowance for doubtful accounts — R$31,536 and R$ $30,400, respectively)			763,165		553,329




	Inventories			104,565		94,102




	Taxes recoverable			43,035		26,843




	Prepaid expenses			120,013		116,037




	Deferred income tax and social contribution			80,061		39,897




	Other			122,753		46,110

Total current assets				2,229,044		1,173,179

Long-term assets




	Deferred income tax and social contribution			122,995		269,451




	Deposits in guarantee			118,660		123,073




	Judicial deposits			55,877		47,937




	Other			12,466		14,614

				309,998		455,075

	Investments




		Goodwill		9,680		9,679




		Other investments		70		70




	Property, plant and equipment			3,507,855		3,350,979

				3,517,605		3,360,728

Total assets				6,056,647		4,988,982

F-50

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)


		2005		2004

Liabilities and shareholders’ equity
Current liabilities




	Suppliers		282,048		264,216




	Obligations under finance lease and lease payable		342,983		361,648




	Short-term debt, including current portion of long-term debt		118,448		119,577




	Debentures		26,109		23,619




	Taxes and tariffs payable		35,156		49,345




	Advance ticket sales		557,647		367,335




	Salaries and payroll charges		134,048		121,104




	Deferred gain on sale-leaseback		32,085		81,352




	Income tax and social contribution payable		27,073		3,072




	Other		237,613		91,002

			1,793,210		1,482,270

Long-term liabilities




	Obligation under finance lease		2,502,424		2,810,394




	Long-term debt		151,405		30,975




	Debentures		33,244		51,529




	Return of Fokker 100 fleet		85,004		110,225




	Provision for contingencies		654,101		449,999




	Deferred gain on sale-leaseback		213,360		203,852




	Other		1,905		11,751

			3,641,443		3,668,725

Minority interest			1,843		2,027

Shareholders’ equity (deficit)			620,151		(164,040	)

Total liabilities and shareholders’ equity			6,056,647		4,988,982

F-51

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)


	(ii) Consolidated statement of operations under U.S. GAAP


			2005			2004			2003

Net operating revenue				5,633,580			4,520,371			3,666,402
Operating expenses




	Personnel			666,243			543,605			426,120




	Fuel			1,694,977			1,066,731			801,550




	Aircraft and flight equipment lease			299,819			321,476			365,045




	Selling and marketing			868,124			656,326			543,992




	Landing, take-off and navigational tariffs			233,010			185,773			160,814




	Depreciation and amortization			206,215			193,238			203,501




	Maintenance			356,274			389,186			380,769




	Services rendered by third parties			356,416			360,461			305,597




	Aircraft insurance			39,644			52,714			76,810




	Other			300,961			258,133			172,212

Operating income				611,897			492,728			229,992




	Financial income (expenses), net			32,345			137,308			727,428

Income taxes and minority interest				644,242			630,036			957,420




		Income tax and social contribution		(217,602	)		(199,328	)		(304,213	)

Income before minority interest				426,640			430,708			653,207




		Minority interest		(115	)		(671	)		(476	)

Net income for the year				426,525			430,037			652,731


(iii)	Condensed statement of shareholders’ equity movement under U.S. GAAP


		2005			2004

At beginning of year			(164,040	)		(591,366	)




Capital increase			33,160			—




Premium on subscription of shares			350,782			—




Share issuance cost			(19,465	)		—




	Cumulative translation adjustment		(8,870	)		(2,045	)




	Changes in minimum pension liability		2,059			(666	)




	Net income		426,525			430,037

Comprehensive income			419,714			427,326




At end of year			620,151			(164,040	)


*(s)*	*Business segments*

Under Brazilian GAAP, no separate segment reporting is required,

Under U.S. GAAP, SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information”, defines operating segments as components of an enterprise for which separate financial information is available and evaluated regularly for assessing segment performance and allocating resources

F-52

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Continued)

to segments. Measures of profit or loss, total assets and other related information are required to be disclosed for each operating segment. In addition, this standard requires the annual disclosure of information concerning revenues derived from the enterprise’s products or services, countries in which revenues or assets are generated, and major customers.

SFAS No. 131 requires that segment data be presented in the U.S. GAAP financial statements in accordance with the internal information that is used by management for operating decision making, including allocation of resources among segments, and segment performance. This information results from the statutory accounting records kept under Brazilian GAAP. The Company considers that it has only one reportable segment.


	*(t) Additional disclosures*


	*(i) Advertising costs*

Advertising costs, which are included in selling expenses totaled R$58,705, R$40,836 and R$24,565 in 2005, 2004 and 2003, respectively.


	*(u) Recently issued accounting pronouncements*

The FASB recently issued a number of SFAS and interpretations; neither of the standards or interpretations described below had or are expected to have a material impact on the financial position and results of operations of the Company.

In November 2004, the FASB issued SFAS 151, Inventory Costs an amendment of ARB 43, Chapter 4, which addresses inventory pricing. This statement clarifies the accounting for abnormal amounts of idle facility expenses, freight, handling costs, and spoilage. Under previous guidance, paragraph 5 of ARB 43, items such as idle facility expense, excessive spoilage, double freight, and rehandling costs that are considered to be “so abnormal” are treated as current period charges. This statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of “so abnormal.” In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The provisions of this Statement shall be effective prospectively for inventory costs incurred during fiscal years beginning after June 15, 2005.

In December 2004, the FASB issued SFAS 153, “Exchanges of Nonmonetary Assets — an amendment of APB 29”, to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. SFAS 153 is effective for nonmonetary assets exchanges occurring in fiscal periods beginning after June 15, 2005.

In March 2005, the FASB issued FASB Interpretation 47, “Accounting for Conditional Asset Retirement Obligations”. This statement requires companies to recognize a liability for the fair value of a legal obligation to perform asset retirement obligations that are conditional on a future event if the amount can be reasonably estimated. This statement becomes effective on December 31, 2005. Management has previously evaluated the application of FASB Statement 143 to its operations and concluded that no material effects would be expected. Management will consider this Interpretation from 2005 in the event a conditional asset retirement obligation arises.

In June 2005, the FASB issued SFAS 154, “Accounting Changes and Error Corrections, a replacement of APB 20 and FASB Statement 3”. SFAS 154 requires retrospective application to financial statements of prior periods for changes in accounting principles as if such principles had always been used.

F-53

TAM S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005, 2004 AND 2003 — (Conclusion)

The cumulative effect of the change is reflected in the carrying value of assets and liabilities as of the first period presented and the offsetting adjustments are recorded to opening retained earnings. This statement is effective January 1, 2006. The Company will apply this statement as of January 1, 2006 as such changes in accounting principles occur.

In July 2005, the FASB issued FSP No. APB 18-1, “Accounting By an Investor for Its Proportionate Share of Accumulated Other Comprehensive Income of an Investee Accounted for Under The Equity Method in Accordance with APB Opinion No. 18 Upon a Loss of Significant Influence”, which requires that when equity method accounting ceases upon the loss of significant influence of an investee, the investor’s proportionate share of the investee’s other comprehensive income should be offset against the carrying value of the investment. To the extent this results in a negative carrying value, the investor should adjust the carrying value to zero and record the residual balance through earnings. The Company will apply this Statement in the fiscal period beginning January 1, 2006 as the need arises.

In November 2005, the FASB issued FSP FAS 115-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments”, which outlines a three-step model for identifying investment impairments in debt and equity securities within the scope of Statement 115 and cost-method investments. The three steps involve (1) determining whether the investment is impaired, (2) evaluating whether the impairment is other-than-temporary, and (3) if the impairment is other-than-temporary, recognizing an impairment loss. The FSP carries forward the disclosure requirements of issue 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.” The Company will begin applying this guidance as of January 1, 2006 as circumstances arise.

* * *

F-54

ROUTES • DOMESTIC ROUTES • COMMERCIAL DEALS • INTERNATIONAL ROUTES • CODESHARE

TAM S.A.

Av. Jurandir, 856 - Lote 4 - 04072-000

São Paulo - SP - Brasil

Through and including , 2006 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS


Item 6.	*Indemnification of Directors and Officers*

Under Brazilian Law, any provision, whether contained in the articles of association of a company or in any agreement, exempting any officer or director or indemnifying any officer or director against any liability which by law or otherwise would attach to them in respect of negligence, default, misfeasance, breach of duty or trust, is void. A company may, however, indemnify an officer or director against any liability incurred by them in defending any proceedings, whether criminal or civil, in which a judgment is given in their favor. We have not entered into any indemnification agreements of this kind.


Item 7.	*Recent Sales of Unregistered Securities*

The securities of the Registrant that were issued or sold by the Registrant within the last three years and not registered with the Commission are described below:


	•	On June 17, 2005, the Registrant issued 21,133,000 preferred shares, in its initial public offering of preferred shares, to qualified institutional buyers in the United States pursuant to the exemption provided by Section 4(2) of the Securities Act 1933 and to institutional and other investors outside the United States in accordance with Rule 903 under the Securities Act. The principal underwriters were Banco Pactual S.A., Banco UBS S.A. and Unibanco — União de Bancos Brasileiros S.A. The aggregate offering price was R$380,394,000, based on an offering price of R$18.00 per preferred share.

	•	On July 19, 2005, the Registrant issued a further 197,120 preferred shares pursuant to an over-allotment granted to the underwriters in respect of the initial public offering of preferred shares described above. The preferred shares were issued to qualified institutional buyers in the United States pursuant to the exemption provided by Section 4(2) of the Securities Act and to institutional and other investors outside the United States in accordance with Rule 903 under the Securities Act. The aggregate offering price was R$3,548,160, based on an offering price of R$18.00 per preferred share.

	•	The aggregate underwriting discount for the sales described above was R$15.6 million.


Item 8.	*Exhibits and Financial Statement Schedules*


*(a)*	*Exhibits*


Exhibit
Number			Description of Exhibits

	1	.1	Form of International Underwriting Agreement.
	3	.1 ⁽²⁾	By-laws of the Registrant (English translation).
	4	.1	Form of Deposit Agreement among the Registrant, JPMorgan Chase Bank, N.A., as depositary, and the Holders from time to time of American Depositary Shares issued there under, including the form of American Depositary Receipts.
	4	.2 ⁽²⁾	Amended and Consolidated Stockholders’ Agreement dated May 16, 2005 among certain named stockholders and the Registrant (English translation).
	5	.1	Form of Opinion of Machado, Meyer, Sendacz e Opice — Advogados, Brazilian legal counsel of the Registrant, as to the legality of the preferred shares.
	8	.1	Form of Opinion of Machado, Meyer, Sendacz e Opice, as to tax matters.
	10	.1†	A320 Family Purchase Agreement, dated March 19, 1998, between Airbus S.A.S. (formerly known as Airbus Industrie GIE) and TAM Linhas Aéreas S.A. (formerly known as TAM Transportes Aéreas Meridionais S/A and as successor in interest in TAM-Transportes Aéreas Regionais S.A.)

II-1


Exhibit
Number			Description of Exhibits

	10	.2†	A350 Family Purchase Agreement, dated December 20, 2005, between Airbus S.A.S. and TAM Linhas Aéreas S.A.
	10	.3†	Tay Engine Maintenance Agreement, dated September 14, 2000, between TAM Linhas Aéreas S.A. and MTU Motoren-und Turbinen-Union Muchen GmbH.
	10	.4†	V2500 Maintenance Agreement, dated September 14, 2000, between TAM Transportes Aéreos Regionais S.A. (incorporated by TAM Linhas Aéreas S.A.) and MTU Maintenance Hannover GmbH (MTU).
	10	.5†	PW4168A Maintenance Service Agreement, dated September 14, 2000, between TAM Linhas Aéreas S.A. and United Technologies International, Inc., Pratt & Whitney Division.
	10	.6†	Novation and Amendment Agreement, dated November 8, 2001, between Rolls-Royce, MTU Aero Engines GmbH and TAM Linhas Aéreas S.A.
	10	.7†	General Terms Agreement N° GE-00-0059, dated May 2001, among General Electric Company. GE Engine Services Distribution LLC and TAM Linhas Aéreas S.A.
	10	.8†	General Services Agreement, dated October 3, 2003, between Sabre Travel Information Limited and TAM Linhas Aéreas S.A.
	12	.1 ⁽²⁾	Computation of ratios
	21	.1 ⁽²⁾	List of subsidiaries
	23	.1	Consent of PricewaterhouseCoopers Auditores Independentes
	23	.2	Consent of Machado, Meyer, Sendacz e Opice — Advogados, Brazilian legal counsel of the Registrant (included in Exhibits 5.1 and 8.1).
	23	.3 ⁽²⁾	Consent of Clifford Chance US LLP, US legal counsel of the Registrant
	24	.1	Powers of Attorney (included on signature page to the Registration Statement).


⁽¹⁾	To be filed by amendment.

⁽²⁾	Previously filed.


	†	Confidential treatment requested.


*(b)*	*Financial Statement Schedules*

Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto.


Item 9.	*Undertakings*

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

II-2

The undersigned registrant also hereby undertakes that:


	1. For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

	2. For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

	3. For purposes of Item 512(f) of Regulation S-K, the undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.

	4. For the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:


	i. Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

	ii. Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

	iii. The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

	iv. Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

II-3

SIGNATURES

Pursuant to the requirement of the Securities Act of 1933, the registrant, TAM S.A., certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Brazil, on the 2nd day of March 2006.


	TAM S.A.


	By:	/s/ Marco Antonio Bologna




	Name: Marco Antonio Bologna


	Title:	Chief Executive Officer


	By:	/s/ Libano Miranda Barroso



	Name: Libano Miranda Barroso


	Title:	Chief Financial Officer

POWER OF ATTORNEY AND SIGNATURES

We, the undersigned directors and officers of TAM S.A., do hereby constitute Marco Antônio Bologna and Libano Miranda Barroso, and each of them, our true and lawful attorneys-in -fact and agents, with full power of substitution and resubstitution in each of them, to do any and all acts and things in our respective names and on our respective behalves in the capacities indicated below that Marco Antônio Bologna and Libano Miranda Barroso, or any one of them, may deem necessary or advisable to enable TAM S.A. to comply with the Securities Act of 1933, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this registration statement, including specifically, but not limited to, power and authority to sign for us in our respective names in the capacities indicated below any and all amendments (including post-effective amendments) hereto and to file the same, with all exhibits thereto and other documents therewith, with the Securities and Exchange Commission; and we do hereby ratify and confirm that Marco Antônio Bologna and Libano Miranda Barroso, or any of them, shall do or cause to be done by virtue hereof. This power of attorney shall be governed by New York Law.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons on March 2, 2006 in the capacities indicated.


Name		Title


/s/ Noemy Almeida Oliveira Amaro		Chairman

Noemy Almeida Oliveira Amaro

/s/ Maria Cláudia Oliveira Amaro Demenato		Vice-Chairman

Maria Cláudia Oliveira Amaro Demenato

/s/ Maurício Rolim Amaro		Board Member

Maurício Rolim Amaro

II-4


Name		Title


/s/ Henri Philippe Reichstul		Board Member

Henri Philippe Reichstul

/s/ Luiz Antônio Corrèa Nunes Viana Oliveira		Board Member

Luiz Antônio Corrèa Nunes Viana Oliveira

/s/ Adalberto de Moraes Schettert		Board Member

Adalberto de Moraes Schettert

/s/ Roger Ian Wright		Board Member

Roger Ian Wright

/s/ Waldemar Verdi Júnior		Board Member

Waldemar Verdi Júnior

/s/ Eduardo Matzenbacher Eduardo Matzenbacher		Principal Accounting Officer

/s/ Donald J. Puglisi Donald J. Puglisi		Authorized Representative in the United States

II-5

Exhibit 1.1

[PRINCIPAL AMOUNT OR NUMBER OF ADSS]

TAM S.A.

AMERICAN DEPOSITARY SHARES,

EACH REPRESENTING ONE PREFERRED SHARE

UNDERWRITING AND AGENCY AGREEMENT

_____________, 2006

TAM S.A.

Avenida Jurandir, 856, Lote 4, 1 o andar

04072-000, Sao Paulo, SP
Brazil

AEROSYSTEM S.A. EMPREENDIMENTOS E PARTICIPACOES

Rua Monsenhor Antonio Pepe no. 331

Sao Paulo, SP
Brazil

BRASIL PRIVATE EQUITY FUNDO DE INVESTIMENTO EM PARTICIPACOES
c/o Credit Suisse (Brasil) Distribuidora de Titulos e Valores Mobiliarios S.A. Avenida Brigadeiro Faria Lima, 3064,13 o andar Sao Paulo, SP
Brazil

BRAZILIAN EQUITY INVESTMENTS III LLC
BRAZILIAN EQUITY LLC
LATIN AMERICA CAPITAL PARTNERS II LLC
LATIN AMERICA CAPITAL PARTNERS PIV LLC
c/o.: Bassini Playfair Wright LLC
Rua Leopoldo Couto de Magalhaes Junior, 758, Conjunto 51 Sao Paulo, SP
Brazil

THE OTHER SELLING STOCKHOLDERS NAMED IN SCHEDULE B HERETO
Sao Paulo, SP
Brazil

Dear Sirs:

1. Introductory. TAM S.A. ("COMPANY"), a sociedade por acoes incorporated under the laws of the Federative Republic of Brazil ("BRAZIL"), proposes to issue and sell to the several international underwriters named in Schedule A hereto ("INTERNATIONAL UNDERWRITERS"), and certain stockholders of the Company ("SELLING STOCKHOLDERS") named in Schedule B hereto severally propose to sell to the several International Underwriters, an aggregate of
[_____] preferred shares (acoes preferenciais) of the Company ("FIRM UNDERLYING SHARES"), all of which may be deposited pursuant to a custody agreement ("CUSTODY AGREEMENT"), to be dated as of [_____], to be entered into among the Company, the Selling Stockholders, [_____], as depositary ("DEPOSITARY"), and,
[_____], as custodian ("CUSTODIAN"), and delivered in the form of American Depositary Shares at the Representatives' (as defined below) election as hereinafter provided ("FIRM ADSS"). The Firm Underlying Shares and the Firm ADSs are hereinafter together referred to as "FIRM INTERNATIONAL SECURITIES." [_____] Firm International Securities are to be issued and sold by the Company and
[_____] Firm International Securities are to be sold by the Selling Stockholders, each Selling Stockholder selling the amount set forth opposite such Selling Stockholder's name in Schedule B hereto. Pactual

Capital Corporation ("PACTUAL") and Credit Suisse Securities (USA) LLC ("CREDIT SUISSE") shall act as representatives ("REPRESENTATIVES") of the several International Underwriters.

The Company also proposes to issue and sell to the several International Underwriters not more than an additional [_____] preferred shares ("OPTIONAL UNDERLYING SHARES" and, together with the Firm Underlying Shares, the "UNDERLYING SHARES") if and to the extent that the Representatives shall have determined to exercise, on behalf of the International Underwriters, the right to purchase such Optional Underlying Shares granted to the International Underwriters in Section 3 hereof. All of the Optional Underlying Shares may be deposited pursuant to the Custody Agreement referred to herein and delivered in the form of American Depositary Shares at the International Underwriters' election as hereinafter provided ("OPTIONAL ADSS"). The Optional Underlying Shares and the Optional ADSs are hereinafter together referred to as "OPTIONAL INTERNATIONAL SECURITIES." The Firm International Securities and the Optional International Securities are hereinafter together referred to as "INTERNATIONAL SECURITIES." The Company and the Selling Stockholders are hereinafter sometimes collectively referred to as "SELLERS."

In addition to the Securities subject to this agreement ("AGREEMENT"),
[_____] preferred shares (acoes preferenciais) ("BRAZILIAN FIRM SHARES") will be sold to the underwriters ("BRAZILIAN UNDERWRITERS" and, together with the International Underwriters, the "UNDERWRITERS") set forth in the Schedule
[_____] to the underwriting agreement dated as of the date hereof, among the Company, Companhia Brasileira de Liquidacao e Custodia, the Selling Stockholders and the Brazilian Underwriters in connection with the offering and sale of the Brazilian Firm Shares in Brazil ("BRAZILIAN UNDERWRITING AGREEMENT"). The Company [and the Selling Stockholders] also propose to issue and sell to the several Brazilian Underwriters not more than an additional [_____] preferred shares ("OPTIONAL BRAZILIAN SHARES"), if and to the extent that the Brazilian Underwriters shall have determined to exercise the right to purchase such Optional Brazilian Shares granted to the Brazilian Underwriters in the Brazilian Underwriting Agreement. The Firm Brazilian Shares and the Optional Brazilian Shares are hereinafter together referred to as "BRAZILIAN SECURITIES." The Company understands that the Brazilian Underwriters have appointed as their agents for the placement of Brazilian Securities outside Brazil, the several agents named in Schedule A hereto ("AGENTS"). The Company further understands that the Agents propose to make an offering of the Brazilian Securities, as soon as the Agents deem advisable after this Agreement has been executed and delivered, to persons outside Brazil pursuant to the Registration Statement (as defined below).

The Firm Underlying Shares, the Firm Brazilian Shares, the Optional Underlying Shares and the Optional Brazilian Shares are hereinafter collectively referred to as "SHARES." The Firm ADSs and the Optional ADSs are hereinafter collectively referred to as the "ADSS" and the Shares and the ADSs are hereinafter collectively referred to as "SECURITIES." The preferred shares of the Company to be outstanding after giving effect to the sales contemplated hereby are hereinafter referred to as "PREFERRED SHARES."

Each ADS will represent one Share. The ADSs purchased by the International Underwriters will be evidenced by American Depositary Receipts ("ADRS") to be issued pursuant to a Deposit Agreement ("DEPOSIT AGREEMENT"), to be dated as of the Closing Date (as defined below), to be entered into among the Company, the Depositary, and all holders and beneficial owners from time to time of the ADRs.

The ADSs will be sold pursuant to the Prospectus (as defined below), and the Brazilian Securities will be sold pursuant to a registration statement, including a prospectus ("BRAZILIAN PROSPECTUS"), filed with and approved by the Brazilian Securities Commission (Comissao de Valores Mobiliarios) ("CVM"), with respect to the offer and sale of the Brazilian Securities ("BRAZILIAN REGISTRATION STATEMENT").

The International Underwriters and the Brazilian Underwriters simultaneously are entering into an agreement between their respective syndicates ("INTERSYNDICATE AGREEMENT"), which provides for, among other things, the transfer of Securities between the two syndicates.

The Company and the Selling Stockholders hereby agree with the International Underwriters as follows:

2. Representations and Warranties of the Company and the Selling Stockholders.

(a) On the date of this Agreement and on each Closing Date (as defined below), the Company represents and warrants to, and agrees with, the International Underwriters and the Agents that:

(i) A registration statement (No. [____]) relating to the International Securities, including a form of prospectus, has been filed with the U.S. Securities and Exchange Commission ("COMMISSION") and either
(a) has been declared effective under the Securities Act of 1933, as amended ("ACT"), and is not proposed to be amended or (b) is proposed to be amended by amendment or post-effective amendment. If such registration statement ("INITIAL REGISTRATION STATEMENT") has been declared effective, either (a) an additional registration statement ("ADDITIONAL REGISTRATION STATEMENT") relating to the International Securities may have been filed with the Commission pursuant to Rule 462(b) under the Act ("RULE 462(B)") and, if so filed, has become effective upon filing pursuant to such Rule, and the offer and sale of all International Securities have been duly registered under the Act pursuant to the initial registration statement and, if applicable, the additional registration statement or (b) such an additional registration statement is proposed to be filed with the Commission pursuant to Rule 462(b) and will become effective upon filing pursuant to such Rule, and upon such filing the offer and sale of all International Securities will have been duly registered under the Act pursuant to the initial registration statement and such additional registration statement. If the Company does not propose to amend the initial registration statement or if an additional registration statement has been filed and the Company does not propose to amend it, and if any post-effective amendment to either such registration statement has been filed with the Commission prior to the execution and delivery of this Agreement, the most recent amendment (if any) to each such registration statement has been declared effective by the Commission or has become effective upon filing pursuant to Rule 462(c) under the Act ("RULE 462(C)") or, in the case of the additional registration statement, Rule 462(b). For purposes of this Agreement, "EFFECTIVE TIME" with respect to the initial registration statement and, if filed prior to the execution and delivery of this Agreement, the additional registration statement means (a) if the Company has advised the Representatives that it does not propose to amend such registration statement, the date and time as of which such registration statement, or the most recent post-effective amendment thereto (if any) filed prior to the execution and delivery of this Agreement, was declared effective by the Commission or has become effective upon filing pursuant to Rule 462(c), or (b) if the Company has advised the Representatives that it proposes to file an amendment or post-effective amendment to such registration statement, the date and time as of which such registration statement, as amended by such amendment or post-effective amendment, as the case may be, is declared effective by the Commission. If an additional registration statement has not been filed prior to the execution and delivery of this Agreement but the Company has advised the Representatives that it proposes to file one, "EFFECTIVE TIME" with respect to such additional registration statement means the date and time as of which such registration statement is filed and becomes effective pursuant to Rule 462(b). "EFFECTIVE DATE" with respect to the initial registration statement or the additional registration statement (if any) means the date of the Effective Time thereof. The initial registration statement, as amended at its Effective Time, including all information contained in the additional registration statement (if any) and deemed to be a part of the initial registration statement as of the Effective Time of the additional registration statement pursuant to the General Instructions of the form on which it is filed and including all information (if any) deemed to be a part of the initial registration statement as of its Effective Time pursuant to Rule 430A(b) under the Act ("RULE 430A(B)"), is hereinafter referred to as the "INITIAL REGISTRATION STATEMENT". The additional registration statement, as amended at its Effective Time, including the contents of the initial registration statement incorporated by reference therein and including all information (if any) deemed to be a part of the additional registration statement as of its Effective Time pursuant to Rule 430A(b), is hereinafter referred to as the "ADDITIONAL REGISTRATION STATEMENT". The Initial Registration Statement and the Additional Registration Statement are herein collectively referred to as the "REGISTRATION STATEMENTS" and individually as a "REGISTRATION STATEMENT". "REGISTRATION STATEMENT" without reference to a time means the Registration Statement as of its Effective Time. "REGISTRATION STATEMENT" as of any time means the initial registration statement and any additional registration statement in the form then filed with the Commission, including any amendment thereto and any prospectus deemed or retroactively deemed to be a part thereof that has not been superseded or modified. For purposes of the previous sentence, information contained in a form of prospectus or prospectus supplement that is deemed retroactively to be a part of the Registration Statement pursuant to Rule 430A shall be considered to be included in the Registration Statement as of the time specified in Rule 430A. "STATUTORY PROSPECTUS" as of any time means the

prospectus included in the Registration Statement immediately prior to that time, including any prospectus deemed to be a part thereof that has not been superseded or modified. For purposes of the preceding sentence, information contained in a form of prospectus that is deemed retroactively to be a part of the Registration Statement pursuant to Rule 430A shall be considered to be included in the Statutory Prospectus as of the actual time that form of prospectus is filed with the Commission pursuant to Rule
424(b) ("RULE 424(B)") under the Act. "PROSPECTUS" means the Statutory Prospectus that discloses the public offering price and other final terms of the International Securities and otherwise satisfies Section 10(a) of the Act. "ISSUER FREE WRITING PROSPECTUS" means any "ISSUER FREE WRITING PROSPECTUS," as defined in Rule 433, relating to the International Securities in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company's records pursuant to Rule 433(g). "GENERAL USE ISSUER FREE WRITING PROSPECTUS" means any Issuer Free Writing Prospectus that is intended for general distribution to prospective investors, as evidenced by its being specified in Schedule C hereto. "LIMITED USE ISSUER FREE WRITING PROSPECTUS" means any Issuer Free Writing Prospectus that is not a General Use Issuer Free Writing Prospectus. "APPLICABLE TIME" means :00 [a/p]m (Eastern time) on the date of this Agreement. No stop order suspending the effectiveness of any Registration Statement is in effect, and no proceedings for such purpose are pending before or, to the knowledge of the Company, threatened by the Commission.

(ii) If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement (a) on the Effective Date of the Initial Registration Statement, the Initial Registration Statement conformed in all material respects to the requirements of the Act and the rules and regulations of the Commission ("RULES AND REGULATIONS") and did not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not (with respect to the Prospectus, in light of the circumstances under which they were made) misleading, (b) on the Effective Date of the Additional Registration Statement (if any), each Registration Statement conformed, or will conform, in all material respects to the requirements of the Act and the Rules and Regulations and did not include, or will not include, any untrue statement of a material fact and did not omit, or will not omit, to state any material fact required to be stated therein or necessary to make the statements therein not (with respect to the Prospectus, in light of the circumstances under which they were made) misleading and (c) on the date of this Agreement, the Initial Registration Statement and, if the Effective Time of the Additional Registration Statement is prior to the execution and delivery of this Agreement, the Additional Registration Statement each conforms, and at the time of filing of the Prospectus pursuant to Rule 424(b) or (if no such filing is required) at the Effective Date of the Additional Registration Statement in which the Prospectus is included, each Registration Statement and the Prospectus will conform, in all material respects to the requirements of the Act and the Rules and Regulations, and neither of such documents includes, or will include, any untrue statement of a material fact or omits, or will omit, to state any material fact required to be stated therein or necessary to make the statements therein not (with respect to the Prospectus, in light of the circumstances under which they were made) misleading. If the Effective Time of the Initial Registration Statement is subsequent to the execution and delivery of this Agreement: on the Effective Date of the Initial Registration Statement, the Initial Registration Statement and the Prospectus will conform in all material respects to the requirements of the Act and the Rules and Regulations, neither of such documents will include any untrue statement of a material fact or will omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and no Additional Registration Statement has been or will be filed. The two preceding sentences do not apply to statements in or omissions from a Registration Statement or the Prospectus based upon written information furnished to the Company by any International Underwriter through the Representatives specifically for use therein, it being understood and agreed that the only such information is that described as such in Section 8(c) hereof.

(iii) (a) A registration statement (No. [___]) in respect of the ADSs on Form F-6 has been filed with the Commission and has become effective pursuant to the Rules and Regulations (such registration statement, including all exhibits thereto, at the time it became effective, being hereinafter referred to as the "ADS REGISTRATION STATEMENT"), (b) no stop order suspending the effectiveness of the ADS Registration Statement is in effect, and no proceedings for such purpose are pending before or, to the knowledge of the Company, threatened by the Commission, (c) the ADS Registration Statement complies and, as amended or

supplemented, if applicable, will comply in all material respects with the Act and the applicable Rules and Regulations, and (d) the ADS Registration Statement, when it became effective, did not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading.

(iv) (a) At the time of filing the Registration Statement and (b) at the date of this Agreement, the Company was not and is not an "ineligible issuer," as defined in Rule 405 (without taking account of any determination by the Commission pursuant to Rule 405 that it is not necessary that the Company be considered an ineligible issuer), including (A) the Company or any other subsidiary in the preceding three years not having been convicted of a felony or misdemeanor or having been made the subject of a judicial or administrative decree or order as described in Rule 405 and (B) the Company in the preceding three years not having been the subject of a bankruptcy petition or insolvency or similar proceeding, not having had a registration statement be the subject of a proceeding under Section 8 of the Act and not having been the subject of a proceeding under Section 8A of the Act in connection with the offering of the International Securities, all as described in Rule 405.

(v) As of the Applicable Time, neither (a) the General Use Issuer Free Writing Prospectus(es) issued at or prior to the Applicable Time, any other free writing prospectus that the parties hereto shall hereafter expressly agree in writing to treat as part of the General Disclosure Package (as defined below), the Statutory Prospectus, the price to the public on the cover page of the Prospectus, all considered together (collectively, the "GENERAL DISCLOSURE PACKAGE"), nor (b) any individual Limited Use Issuer Free Writing Prospectus, when considered together with the General Disclosure Package, included any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to statements in or omissions from any prospectus included in the Registration Statement or any Issuer Free Writing Prospectus in reliance upon and in conformity with written information furnished to the Company by any International Underwriter through the Representatives specifically for use therein, it being understood and agreed that the only such information furnished by any International Underwriter consists of the information described as such in
Section 8(c) hereof.

(vi) Each Issuer Free Writing Prospectus, as of its issue date and at all subsequent times through the completion of the public offer and sale of the International Securities or until any earlier date that the Company notified or notifies the Representatives as described in the next sentence, did not, does not and will not include any information that is materially different from the information then contained in the Registration Statement. If at any time following issuance of an Issuer Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer Free Writing Prospectus contains information that is materially different from the information then contained in the Registration Statement or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at that subsequent time, not misleading, (a) the Company has promptly notified or will promptly notify the Representatives and (b) the Company has promptly amended or supplemented or will promptly amend or supplement such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission. The foregoing two sentences do not apply to statements in or omissions from any Issuer Free Writing Prospectus in reliance upon and in conformity with written information furnished to the Company by any International Underwriter through the Representatives specifically for use therein, it being understood and agreed that the only such information furnished by any International Underwriter consists of the information described as such in Section 8(c) hereof.

(vii) The Company has been duly incorporated and is validly existing as a sociedade anonima under the laws of Brazil, with full corporate power and authority to own or lease, as the case may be, and to operate its properties and conduct its business as described in the General Disclosure Package and in each Statutory Prospectus.

(viii) TAM Linhas Aereas S.A., Transportes Aereos del Mercosur S.A. and Fidelidade Viagens e Turismo Ltda. (each a "SUBSIDIARY" and, collectively, "SUBSIDIARIES") are all of the Company's subsidiaries, as such term is defined in the Act.

(ix) The Company is duly qualified to do business in Brazil and as a foreign corporation in each other jurisdiction where the ownership or leasing of its properties or the conduct of its business requires such qualification, except where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect. For the purposes of this Agreement, the term "MATERIAL ADVERSE EFFECT" means (a) any material adverse effect on the condition (financial or otherwise), business, properties, results of operations or prospects of the Company and the Subsidiaries, taken as a whole or, when applicable, on any of the Selling Stockholders, and (b) any material adverse effect on the ability of the Company or, when applicable, any of the Selling Stockholders, to perform its obligations under this Agreement, the Brazilian Underwriting Agreement, the Deposit Agreement or the Custody Agreement.

(x) All of the Company's Subsidiaries are listed in the General Disclosure Package and in each Statutory Prospectus; complete and correct copies of the certificates of incorporation and by-laws (or other comparable constituent documents) of the Company and the Subsidiaries and all amendments thereto have been delivered to the International Underwriters, and no changes therein will be made subsequent to the date hereof; each Subsidiary has been duly incorporated and is validly existing as a corporation under the laws of the jurisdiction of its incorporation, with full corporate power and authority to own, lease and operate its properties and to conduct its business as described in the General Disclosure Package and in each Statutory Prospectus; each Subsidiary is duly qualified to do business in Brazil and as a foreign corporation in each jurisdiction where the ownership or leasing of its properties or the conduct of its business requires such qualification, except where the failure to so qualify would not have a Material Adverse Effect; all of the outstanding shares of capital stock of each of the Subsidiaries held by the Company have been duly authorized and validly issued, are fully paid and are owned by the Company free and clear of any security interest, other encumbrance or adverse claim; no options, warrants or other rights to purchase, agreements or other obligations to issue or rights to convert any securities for shares of capital stock of or ownership interests in the Company or any of the Subsidiaries are outstanding.

(xi) The Shares and all other issued and outstanding shares of capital stock of the Company have been duly authorized and validly issued, fully paid and non-assessable, issued in compliance with all applicable Brazilian laws and were not issued in violation of any preemptive right, resale right, right of first refusal or similar right; and the stockholders of the Company have no preemptive rights with respect to the Shares.

(xii) The Company and each of the Subsidiaries are in compliance with the laws, orders, rules, regulations and directives issued or administered by Brazil or any other jurisdiction in which the Company or any of the Subsidiaries owns or leases property or conducts business, except where the failure to so comply would not have a Material Adverse Effect.

(xiii) (a) Neither the Company nor any of the Subsidiaries is in violation or breach of or default under (nor has any event occurred which with notice, lapse of time or both would result in any violation or breach of or default under or give the holder of any indebtedness (or a person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a part of such indebtedness under) and
(b) neither the execution, delivery and performance of this Agreement nor the issue and sale of the Securities or the consummation of the transactions contemplated herein or in the Brazilian Underwriting Agreement will conflict with or result in any violation, breach of or result in a default under (nor constitute any event which with notice, lapse of time, or both would result in a conflict with, violation or breach of or default under or give the holder of any indebtedness (or a person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a part of such indebtedness under): (x) the Estatuto Social, Contrato Social or equivalent charter documents of the Company or any of the Subsidiaries, (y) the performance or observance of any obligation, agreement, covenant or condition contained in any license, indenture, mortgage, deed of trust, bank loan or credit agreement or other evidence of indebtedness, or any lease, contract or other agreement or instrument to which the Company or any of the Subsidiaries is a party or by which any of them or any of their respective properties may be bound or affected, except where such

a violation, breach or default would not have a Material Adverse Effect or
(z) any federal, state, local or foreign law, regulation or rule or any decree, judgment or order applicable to the Company or any of the Subsidiaries.

(xiv) The capital stock of the Company, including the Securities, conforms in all material respects to the description thereof contained in the General Disclosure Package and in each Statutory Prospectus and the holders of the Securities will not be subject to personal liability by reason of being such holders.

(xv) The Preferred Shares are listed and traded on the Nivel 2 segment of the Bolsa de Valores do Estado de Sao Paulo ("BOVESPA"), and the Company has not received any notice of any proceedings relating to the delisting of the Preferred Shares from BOVESPA. The Company has applied to list the ADSs on the New York Stock Exchange ("NYSE").

(xvi) Each of this Agreement, the Brazilian Underwriting Agreement, the Deposit Agreement and the Custody Agreement has been duly authorized, executed and delivered by the Company; and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by the Company of its obligations under this Agreement, the Brazilian Underwriting Agreement, the Deposit Agreement and the Custody Agreement, except (a) such as may be required by the securities or Blue Sky laws of the States of the United States or securities laws of other jurisdictions in connection with the placement, offer and sale of the Securities, (b) such as may be required from the Brazilian Central Bank (Banco Central do Brasil) ("CENTRAL BANK") and the CVM relating to the Deposit Agreement, (c) from the CVM relating to the offering of the Brazilian Securities in Brazil ("BRAZILIAN OFFERING") and the offering of the Securities as provided for in this Agreement and in the Brazilian Underwriting Agreement, (d) from the Central Bank and the CVM relating to the payment of the fees, commissions and expenses contemplated by this Agreement and the Deposit Agreement under Annex V to Resolution No. 1,289 of March 20, 1987, as amended, ("ANNEX V") of the Conselho Monetario Nacional ("CMN"), and (e) such as may be required by the Brazilian Aviation Department (Departamento de Aviacao Civil) ("DAC"), all of which have been obtained or will be duly obtained (except for those described in clause (a) and in clause (d), specifically with respect to any payment outside Brazil pursuant to Section 8 hereof) prior to the Closing Date (as defined below).

(xvii) This Agreement, the Brazilian Underwriting Agreement, the Deposit Agreement and the Custody Agreement are in proper legal form under the laws of Brazil for the enforcement thereof in Brazil against the Company, provided that to ensure the legality, validity, enforcement or admissibility into evidence of this Agreement, the Brazilian Underwriting Agreement, the Deposit Agreement and the Custody Agreement, it is not necessary that they be filed or recorded with any court or other authority in Brazil or that any tax or fee be paid in Brazil on or in respect of this Agreement, the Deposit Agreement, the Custody Agreement or any other document, other than court costs, including (without limitation) filing fees and except that (a) the signatures of the parties thereto shall have been notarized by a notary public licensed as such under the law of the place of signing and the signature of such notary public shall have been legalized by a Brazilian Consulate, and (b) this Agreement, the Custody Agreement and the Deposit Agreement shall have been translated into Portuguese by a sworn translator and registered with the competent Registry of Titles and Deeds in Brazil.

(xviii) (a) No person has the right, contractual or otherwise, to cause the Company to issue any shares of any capital stock or other equity interests of the Company or to sell the Securities, other than those set forth in the Estatuto Social and in the Company's Shareholders' Agreement dated November 27, 1997, as amended on November 20, 2002 and on May 16, 2005 ("COMPANY'S SHAREHOLDERS' AGREEMENT"), and those that have been expressly waived or cancelled under Brazilian law prior to the date hereof,
(b) no person has any preemptive rights, resale rights, co-sale rights, rights of first refusal or other rights to purchase any shares of any capital stock or other equity interests of the Company, including the Securities, other than those set forth in the Estatuto Social and in the Company's Shareholders' Agreement, and those that have been expressly waived or cancelled under Brazilian law prior to the date hereof, (c) no person other than the International Underwriters and the Brazilian Underwriters has the right to act as an underwriter or as a financial advisor to the Company in connection with the offer and sale of the Securities,

and (d) no person has the right, contractual or otherwise, to require the Company to file a registration statement under the Act with respect to any securities of the Company or to require the Company to include such securities within the Securities registered pursuant to the Registration Statement or in any securities being registered pursuant to any other registration statement filed by the Company under the Act.

(xix) Pricewaterhouse Coopers Auditores Independentes, whose reports on the consolidated financial statements of the Company and the Subsidiaries are included in the General Disclosure Package and in each Statutory Prospectus as part of such General Disclosure Package and Statutory Prospectus, and KPMG Auditores Independentes, are independent public accountants with respect to the Company.

(xx) Except as disclosed in the General Disclosure Package and in any Statutory Prospectus, each of the Company and the Subsidiaries has all necessary licenses, authorizations, consents and approvals and has made all necessary filings required under any federal, state, local or foreign law, regulation or rule, and has obtained all necessary authorizations, consents and approvals from other persons, in order to conduct its respective business, except where failure to obtain such authorizations would not have a Material Adverse Effect; neither the Company nor any of the Subsidiaries is in violation of, or in default under, or has received notice of any proceedings relating to revocation or modification of, any such license, authorization, consent or approval or any federal, state, local or foreign law, regulation or rule or any decree, order or judgment applicable to the Company or any of the Subsidiaries, except where such violation, default, revocation or modification would not have a Material Adverse Effect.

(xxi) The financial statements included in the General Disclosure Package, in any Statutory Prospectus and in each Registration Statement, together with the related notes and schedules, present fairly the financial position of the Company and the Subsidiaries as of the dates specified and their results of operations and statements of changes in financial position, changes in shareholders' equity and changes in cash flows of the Company and the Subsidiaries for the periods specified; such financial statements have been prepared in conformity with the Brazilian generally accepted accounting principles applied on a consistent basis during the periods involved ("Brazilian GAAP"), and include a reconciliation to United States generally accepted accounting principles ("U.S. GAAP") applied on a consistent basis during the period involved; the selected financial and operational information and the summary financial and operational information included in the General Disclosure Package, in each Statutory Prospectus and in each Registration Statement present fairly the information shown therein and have been compiled on a basis consistent with that of the Company's audited financial statements included in the General Disclosure Package, in each Statutory Prospectus and in each Registration Statement; any market and statistical information provided in the General Disclosure Package, in each Statutory Prospectus and in each Registration Statement is based on or furnished by sources that the Company deems to be reasonably reliable and the Company has obtained the written consent to the use of such data from such sources to the extent required; other financial and statistical information provided in the General Disclosure Package, in each Statutory Prospectus and in each Registration Statement is correct and was fairly prepared on a basis consistent with the financial statements and books and records of each of the Company and the Subsidiaries; and the Company and the Subsidiaries do not have any material liabilities or obligations, direct or contingent (including off-balance sheet), except as otherwise disclosed in the General Disclosure Package, in each Statutory Prospectus and in each Registration Statement.

(xxii) Since the date of the most recent General Disclosure Package or any Statutory Prospectus, there has not been: (a) any change or development that would cause a Material Adverse Effect, (b) any obligation, direct or contingent, which is material to the Company and the Subsidiaries taken as a whole, incurred by the Company or the Subsidiaries, (c) any change in the capital stock or a material increase in the outstanding indebtedness of the Company or the Subsidiaries, or (d) any dividend, interest on shareholders' equity or distribution of any kind declared, paid or made on the capital stock of the Company.

(xxiii) Since the date of the audited financial statements included in the General Disclosure Package or in any Statutory Prospectus, neither the Company nor any of the Subsidiaries suffered any material loss or interference in its business as a result of (a) fire, explosion, flood, or any other calamity, whether covered by insurance or not, or (b) any material labor loss or lawsuit, order or decree.

(xxiv) The Company is not and, after giving effect to the offering and sale of the Securities, will not be an "investment company" or an entity "controlled" by an "investment company," as such terms are defined in the U.S. Investment Company Act of 1940, as amended ("INVESTMENT COMPANY ACT") or a "passive foreign investment company" or a "controlled foreign corporation" as such terms are defined in the United States Internal Revenue Code.

(xxv) Except as disclosed in the General Disclosure Package and in each Statutory Prospectus, there are no actions, suits, claims, investigations or proceedings pending or threatened or, to the Company's knowledge after due inquiry, contemplated to which the Company or any of the Subsidiaries or any of their respective directors or officers is or would be a party or of which any of their respective properties is or would be subject at law or in equity, before or by any federal, state, local or foreign governmental or regulatory commission, board, body, authority or agency, except any such action, suit, claim, investigation or proceeding which would not result in a judgment, decree or order having, individually or in the aggregate, a Material Adverse Effect or preventing consummation of the transactions contemplated in this Agreement, the Custody Agreement, the Deposit Agreement or the Brazilian Underwriting Agreement. The General Disclosure Package does not contain any description of the foregoing matters that is materially different from those contained in the Prospectus.

(xxvi) Except as disclosed in the General Disclosure Package and in each Statutory Prospectus, each of the Company and the Subsidiaries owns or leases all of its properties as described in the General Disclosure Package and Statutory Prospectus and necessary to the conduct of its operations as currently conducted free and clear of any liens, charges, claims, security interests or other encumbrances, other than encumbrances that do not and will not have any Material Adverse Effect; all the rent and leasing agreements to which the Company or any of the Subsidiaries is party are valid and in full force and effect, except where the failure to be so would not have a Material Adverse Effect; and any real property, buildings, aircraft, aircraft engines and other material personal property held under lease by each of the Company and the Subsidiaries are held by it under valid, subsisting and enforceable leases with such exceptions as would not have a Material Adverse Effect or would not interfere with the use made and proposed to be made of such property and buildings by the Company or the Subsidiaries, as the case may be, in each case except as described in the General Disclosure Package and Statutory Prospectus.

(xxvii) Neither the Company nor any of the Subsidiaries is engaged in any illegal labor practice, except for matters that would not, individually or in the aggregate, have a Material Adverse Effect. There is (a) no illegal labor practice complaint pending or, to the Company's knowledge after due inquiry, threatened against the Company or any of the Subsidiaries, and no grievance or arbitration proceeding arising out of or under collective bargaining agreements is pending or threatened, (b) no strike, labor dispute, slowdown or stoppage pending or, to the Company's knowledge after due inquiry, threatened against the Company or any of the Subsidiaries, and (c) no union representation dispute currently existing concerning the employees of the Company or any of the Subsidiaries. To the Company's knowledge after due inquiry, (a) no union organizing activities are currently taking place concerning the employees of the Company or any of the Subsidiaries, and (b) there has been no violation of any federal, state, local or foreign law relating to discrimination in the hiring, promotion or pay of employees or any applicable wage or hour laws concerning the employees of the Company or any of the Subsidiaries.

(xxviii) Except as disclosed in the General Disclosure Package and in each Statutory Prospectus, each of the Company and the Subsidiaries has filed or caused to be filed all tax returns that are required to be filed or has requested extensions thereof, and has paid all taxes required to be paid by it, and any other assessment, fine or penalty levied against it by any governmental authority to the extent that any of the foregoing is due and payable (other than that the amount or validity of which is currently being contested in good faith and for which adequate reserves have been provided).

(xxix) There is no tax, duty, levy, impost, deduction, charge or withholding imposed by Brazil or any political subdivision thereof or taxing authority therein either (a) on or by virtue of the Company's execution, delivery, performance or enforcement of this Agreement, the Custody Agreement, the Deposit Agreement and the Brazilian Underwriting Agreement or of any other document to be furnished hereunder

or thereunder, or (b) on any payment to be made pursuant to this Agreement, the Brazilian Underwriting Agreement, the Deposit Agreement and the Custody Agreement, except for the Temporary Contribution on Financial Transaction (Contribuicao Provisoria sobre Movimentacao ou Transmissao de Valores e de Creditos e Direitos de Natureza Financeira - CPMF), withholding income tax, economic domain intervention contribution - CIDE, Programa de Integracao Social - PIS and Contribuicao para Financiamento da Seguridade Social -COFINS and Imposto sobre Servicos de Qualquer Natureza - ISS, as applicable. Under current and, to the knowledge of the Company, proposed or pending Brazilian laws and regulations, all dividends (excluding juros sobre capital proprio), either in cash or any other form, paid on the Securities are not subject to any Brazilian withholding or other tax, except as otherwise described in the General Disclosure Package and in each Statutory Prospectus.

(xxx) Except as disclosed in the General Disclosure Package and in each Statutory Prospectus, the Company and the Subsidiaries maintain insurance covering its properties, operations, personnel and business by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses and in the geographical regions in which they are engaged, and the Company has no reason to believe that it or any of the Subsidiaries will not be able to renew its existing insurance coverage as and when such coverage expires, or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.

(xxxi) Except as disclosed in the General Disclosure Package and in each Statutory Prospectus or as would not have a Material Adverse Effect, no Subsidiary is currently prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distribution on such Subsidiary's capital stock, from repaying to the Company any loans or advances to such Subsidiary from the Company; restrictions on transferring any Subsidiary's property or assets to the Company or any other Subsidiary of the Company pursuant to the agreements governing the grants to the Subsidiaries are accurately described in the General Disclosure Package and in each Statutory Prospectus in all material respects.

(xxxii) Each of the Company and the Subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurance that (a) transactions are executed in accordance with management's general or specific written authorizations, (b) transactions are recorded as necessary to permit preparation of financial statements in accordance with Brazilian GAAP and to maintain asset accountability, (c) access to assets is permitted only in accordance with management's general or specific authorization, and (d) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences, except where the failure so to maintain a system of internal accounting controls would not have a Material Adverse Effect.

(xxxiii) Except as disclosed in the General Disclosure Package and in each Statutory Prospectus, the Company and the Subsidiaries own, possess, license or have other rights to use, on reasonable terms, all trade and service marks, trade and service mark registrations, trade names, copyrights, licenses, know-how and other intellectual property necessary for the conduct of the Company's businesses as now conducted or as described in the General Disclosure Package and in each Statutory Prospectus to be conducted by it, and neither the Company nor any of the Subsidiaries has received any notice of infringement or of conflict with asserted rights of others with respect to any of the foregoing which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or funding, could reasonably be expected to result in any Material Adverse Effect.

(xxxiv) Except as disclosed in the General Disclosure Package and in any Statutory Prospectus, the Company and the Subsidiaries (a) are in compliance with any and all applicable Brazilian federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), (b) have received and are in compliance with all permits, licenses or other approvals required of them under the applicable Environmental Laws to conduct their respective businesses, and (c) have not received notice of any actual or potential liability for the investigation or remediation of any disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants, except where such non-compliance with

Environmental Laws, failure to receive required permits, licenses or other approvals, or liability would not, individually or in the aggregate, have a Material Adverse Effect.

(xxxv) In the ordinary course of its business, the Company reviews the effect of Environmental Laws on the business, operations and properties of the Company and the Subsidiaries; on the basis of such review, the Company is not aware of any associated costs and liabilities that could, singly or in the aggregate, have a Material Adverse Effect.

(xxxvi) Neither the Company nor any of the Subsidiaries nor, to the Company's knowledge, any employee or agent of the Company or any of the Subsidiaries, has made any payment of funds of the Company or the Subsidiaries or received or retained any funds in violation of any law, rule or regulation.

(xxxvii) There is no extension of credit in the form of any personal loan made, directly or indirectly, by the Company or any Subsidiary to any director or executive officer of the Company or any Subsidiary, or its material contracts, including to any family member or affiliate of any director or executive officer of the Company or any Subsidiary.

(xxxviii) Except as disclosed in the General Disclosure Package and in any Statutory Prospectus, the Company has neither sent or threatened to send, nor received or is threatened to receive, any notification regarding the termination or not renewal of any of the contracts described in the General Disclosure Package and in each Statutory Prospectus, except for the cases where there is no Material Adverse Effect.

(xxxix) The Company has the power to submit, and pursuant to Section 17 of this Agreement has legally, validly, effectively and irrevocably submitted, to the jurisdiction of any state court of the State of New York located in the City and County of New York or in the United States District Court for the Southern District of New York, and has the power to designate, appoint and empower, and pursuant to Section 17 of this Agreement, has legally, validly and effectively designated, appointed and empowered National Corporate Research Limited for service of process in any suit or proceeding based on or arising under this Agreement in any state court of the State of New York located in the City and County of New York or in the United States District Court for the Southern District of New York.

(xl) Each preliminary prospectus filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the Act, complied when so filed in all material respects with the Act and the applicable Rules and Regulations.

(xli) The Securities are not subject to any restrictions on transfer pursuant to the Company's by-laws, Brazilian law or any agreement or other instrument to which the Company is a party that have not been effectively waived.

(xlii) The Deposit Agreement has been duly authorized by the Company and, when duly executed and delivered by the Company, and, assuming the Depositary has satisfied those legal requirements that are applicable to it to the extent necessary to make the Deposit Agreement enforceable against it, will constitute a valid, binding and enforceable agreement of the Company, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium and other similar laws affecting the rights of creditors generally and the application of general equitable principles, and, assuming the accuracy and compliance with the representations, warranties and covenants made by the Selling Stockholders herein, upon issuance by the Depositary of ADRs evidencing ADSs against the deposit of Underlying Shares in respect thereof in accordance with the provisions of the Deposit Agreement, such ADRs will be duly and validly issued and the persons in whose names the ADRs are registered will be entitled to the rights specified therein and in the Deposit Agreement; and the Deposit Agreement and the ADRs conform in all material respects to the descriptions thereof contained in each Statutory Prospectus.

(xliii) There are no contracts, agreements or understandings between the Company and any person that would give rise to a valid claim against either the Company or any International Underwriter for a brokerage commission, finder's fee or other like payment in connection with this offering.

(xliv) Except as disclosed in the General Disclosure Package and in each Statutory Prospectus, under current, and to the best of the Company's knowledge, pending or proposed, laws and regulations of Brazil and any political subdivision thereof, all dividends and other distributions declared and payable on the Securities, including those in the form of ADSs, may be paid by the Company to the holder thereof in reais, so long as the ADR program remains registered with the Central Bank and the CVM pursuant to Annex V of the CMN, which may be converted into foreign currency and freely transferred out of Brazil.

(xlv) Neither the Company nor the Subsidiaries nor any of their respective directors, officers, affiliates or controlling persons has taken, directly or indirectly, any action designed, or which has constituted or might reasonably be expected, to cause or result in, under the Securities Exchange Act of 1934, as amended ("EXCHANGE ACT") or otherwise, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities. To the extent that information is required to be publicly disclosed under the UK Financial Services Authority's Price Stabilising Rules (the "STABILIZING RULES") before stabilizing transactions can be undertaken in compliance with the safe harbor provided under such Stabilizing Rules, such information has been adequately publicly disclosed (within the meaning of the Stabilizing Rules).

(xlvi) The Company has consented to the deposit of the Underlying Shares by the Selling Stockholders with the Custodian and the issuance by the Depositary of the ADRs evidencing the ADSs to be delivered by the Selling Stockholders, acting through the Company in connection with the Deposit Agreement, to the International Underwriters on the Closing Date.

(xlvii) The Company maintains a system of internal control over financial reporting (as such term is defined in Rule 13a-15(f) of the Exchange Act) that complies with the requirements of the Exchange Act and has been designed by the Company's principal executive officer and principal financial officer, or under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company's internal control over financial reporting is effective and the Company is not aware of any material weaknesses in its internal control over financial reporting.

(xlviii) The Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) of the Exchange Act) that comply with the requirements of the Exchange Act; such disclosure controls and procedures have been designed to provide reasonable assurance that material information relating to the Company and the Subsidiaries is made known to the Company's principal executive officer and principal financial officer by others within those entities; and such disclosure controls and procedures are effective.

(xlix) The Company is a "foreign private issuer," as defined in Rule 405.

(l) The Company has executed and delivered to the Representatives prior to the printing of the preliminary prospectus (red herring), and has caused each of its directors (membros do Conselho de Administracao) and executive officers (diretores), other than the Selling Stockholders, and each of TAM - Empreendimentos e Participacoes S.A. and Agropecuaria Nova Fronteira Ltda., to execute and deliver to the Representatives, prior to the printing of the preliminary prospectus (red herring), a Lock-up Agreement substantially in the form set forth in Schedule D hereto.

(li) Except as described in the in the General Disclosure Package, the Company has not sold, issued or distributed any Preferred Shares during the six-month period preceding the date hereof, including any sales pursuant to Rule 144A under, or Regulation D or S of, the Act.

(lii) As of the date hereof, the Company and each of the Subsidiaries, as well as the directors and officers of the Company, are each in compliance in all material respects with all provisions of the Sarbanes-Oxley Act of 2002 in effect and as applicable to each such person as of the date hereof and the Rules and Regulations and the NYSE promulgated thereunder as of the date hereof.

In addition, any certificate, designated as such, signed by any officer of the Company or any of the Subsidiaries and delivered to the Underwriters or counsel for the Underwriters in connection with the offering of the Securities shall be deemed to be a representation and warranty by the Company or Subsidiary, as the case may be, as to matters covered thereby, to each Underwriter.

(b) One the date of this Agreement and on each Closing Date (as defined below), each Selling Stockholder severally, and not jointly, represents and warrants to, and agrees with, the International Underwriters that:

(i) Such Selling Stockholder has and on each Closing Date hereinafter mentioned will have valid and unencumbered title to the Securities to be delivered by such Selling Stockholder on such Closing Date and full right, power and authority to enter into this Agreement and to sell, assign, transfer and deliver the Securities to be delivered by such Selling Stockholder on such Closing Date hereunder; and upon the delivery of and payment for the Securities on each Closing Date hereunder the several International Underwriters and the purchasers of ADSs placed by the Agents will acquire valid right, title and interest in such Securities, to be delivered free and clear of all liens, encumbrances, security interests, claims of first refusal, tag along or similar rights by such Selling Stockholder on such Closing Date.

(ii) If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement: (a) on the Effective Date of the Initial Registration Statement, the Initial Registration Statement conformed in all respects to the requirements of the Act and the Rules and Regulations and did not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, (b) on the Effective Date of the Additional Registration Statement (if any), each Registration Statement conformed, or will conform, in all respects to the requirements of the Act and the Rules and Regulations and did not include, or will not include, any untrue statement of a material fact and did not omit, or will not omit, to state any material fact required to be stated therein or necessary to make the statement therein not misleading, and (c) on the date of this Agreement, the Initial Registration Statement and, if the Effective Time of the Additional Registration Statement is prior to the execution and delivery of this Agreement, the Additional Registration Statement each conforms, and at the time of filing of the Prospectus pursuant to Rule 424(b) or (if no such filing is required) at the Effective Date of the Additional Registration Statement in which the Prospectus is included, each Registration Statement and the Prospectus will conform, in all respects to the requirements of the Act and the Rules and Regulations, and neither of such documents includes, or will include, any untrue statement of a material fact or omits, or will omit, to state any material fact required to be stated therein or necessary to make the statements therein not misleading. If the Effective Time of the Initial Registration Statement is subsequent to the execution and delivery of this Agreement: on the Effective Date of the Initial Registration Statement, the Initial Registration Statement and the Prospectus will conform in all respects to the requirements of the Act and the Rules and Regulations, neither of such documents will include any untrue statement of a material fact or will omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. The two preceding sentences do not apply to statements in or omissions from a Registration Statement or the Prospectus based upon written information furnished to the Company by any International Underwriter through the Representatives specifically for use therein, it being understood and agreed that the only such information is that described as such in Section 8(c) hereof.

(iii) There are no contracts, agreements or understandings between such Selling Stockholder and any person that would give rise to a valid claim against either such Selling Stockholder or any International Underwriter for a brokerage commission, finder's fee or other like payment in connection with this offering.

(iv) Such Selling Stockholder has been duly incorporated and is validly existing in accordance with the laws of the jurisdiction of its incorporation, in each case with full corporate power and authority to own or lease, as the case may be, and to operate its properties and conduct its business, except where the absence of such authorization to own or lease or operate its properties and conduct its business has no Material

Adverse Effect, as well as to execute and deliver this Agreement, the Custody Agreement and the Brazilian Underwriting Agreement and to sell and deliver the Securities as contemplated herein and therein.

(v) Neither the execution, delivery and performance of this Agreement nor the sale of the Securities or the consummation of the transactions contemplated herein or in the Brazilian Underwriting Agreement will conflict with or result in any violation, breach of or result in a default under (nor constitute any event which with notice, lapse of time, or both would result in a conflict with, violation or breach of or default under or give the holder of any indebtedness (or a person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a part of such indebtedness under) (x) the charter or by-laws of such Selling Stockholder or any of its subsidiaries, (y) the performance or observance of any obligation, agreement, covenant or condition contained in any license, indenture, mortgage, deed of trust, bank loan or credit agreement or other evidence of indebtedness, or any lease, contract or other agreement or instrument to which such Selling Stockholder or any of its subsidiaries is a party or by which any of them or any of their respective properties may be bound or affected or (z) any federal, state, local or foreign law, regulation or rule or any decree, judgment or order applicable to such Selling Stockholder or any of its subsidiaries.

(vi) Such Selling Stockholder has no reason to believe that the representations and warranties of the Company contained in Section 2(a) of this Agreement are not true and correct, is familiar with the General Disclosure Package, the Registration Statement and the Statutory Prospectuses and has no knowledge of any material fact, condition or information not disclosed in the General Disclosure Package, the Registration Statement or the Statutory Prospectuses that has had, or may have, a material adverse effect on the Company.

(vii) The sale of such Selling Stockholder's Securities pursuant to this Agreement and the Brazilian Underwriting Agreement is not prompted by any material non-public information concerning the Company that is not set forth in the General Disclosure Package and in any Statutory Prospectus or any amendment or supplement thereto.

(viii) Each of this Agreement, the Brazilian Underwriting Agreement, the Deposit Agreement and the Custody Agreement has been duly authorized, executed and delivered by such Selling Stockholder; and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by such Selling Stockholder of its obligations under this Agreement, the Brazilian Underwriting Agreement, the Deposit Agreement and the Custody Agreement, except (a) such as may be required by the securities or Blue Sky laws of the States of the United States or securities laws of other jurisdictions in connection with the placement, offer and sale of the Securities, (b) such as may be required from the Central Bank and the CVM relating to the Deposit Agreement (c) from the CVM relating to the Brazilian Offering and the offering of the Securities as provided for in this Agreement and in the Brazilian Underwriting Agreement, (d) from the Central Bank and the CVM relating to the payment of the fees, commissions and expenses contemplated by this Agreement and the Deposit Agreement under Annex V, and (e) such as may be required by the DAC, all of which have been obtained or will be duly obtained (except for those described in clause (a) and in clause (d), specifically with respect to any payment outside Brazil pursuant to Section 8 hereof) prior to the Closing Date (as defined below).

(ix) This Agreement, the Brazilian Underwriting Agreement, the Deposit Agreement and the Custody Agreement are in proper legal form under the laws of Brazil for the enforcement thereof in Brazil against such Selling Stockholder, provided that to ensure the legality, validity, enforcement or admissibility into evidence of this Agreement, the Deposit Agreement and the Custody Agreement in Brazil, it is not necessary that they be filed or recorded with any court or other authority in Brazil or that any tax or fee be paid in Brazil on or in respect of this Agreement, the Deposit Agreement, the Custody Agreement or any other document, other than court costs, including (without limitation) filing fees and except that (a) the signatures of the parties thereto shall have been notarized by a notary public licensed as such under the law of the place of signing and the signature of such notary public shall have been legalized by a Brazilian Consulate, and (b) this Agreement, the Deposit Agreement and the Custody Agreement shall have been

translated into Portuguese by a sworn translator and registered with the competent Registry of Titles and Deeds in Brazil.

(x) No person has the right, contractual or otherwise, to cause such Selling Stockholder to sell any shares of any capital stock or other equity interests of the Company or to sell the Securities, other than those set forth in the Company's Shareholders' Agreement, and those that have been expressly waived or cancelled under Brazilian law prior to the date hereof,
(b) no person has any preemptive rights, resale rights, co-sale rights, rights of first refusal or other rights to purchase any shares of any capital stock or other equity interests of the Company, including the Securities, other than those set forth in the Company's Shareholders' Agreement, and those that have been expressly waived or cancelled under Brazilian law prior to the date hereof, and (c) no person other than the International Underwriters and the Brazilian Underwriters has the right to act as an underwriter or as a financial advisor to such Selling Stockholder in connection with the offer and sale of the Securities.

(xi) There are no actions, suits, claims, investigations or proceedings pending or threatened or, to such Selling Stockholder's knowledge after due inquiry, contemplated to which such Selling Stockholder or any of its subsidiaries or any of their respective directors or officers is or would be a party or of which any of their respective properties is or would be subject at law or in equity, before or by any federal, state, local or foreign governmental or regulatory commission, board, body, authority or agency seeking to prevent consummation of the transactions contemplated in this Agreement or the Brazilian Underwriting Agreement or performance by such Selling Stockholder of its obligations hereunder or thereunder.

(xii) Such Selling Stockholder has the power to submit, and pursuant to Section 17 of this Agreement has legally, validly, effectively and irrevocably submitted, to the jurisdiction of any state court of the State of New York located in the City and County of New York or in the United States District Court for the Southern District of New York, and, in addition, each of [Noemy Almeida Oliveira Amaro, Maria Claudia Oliveira Amaro Demenato, Mauricio Rolim Amaro, Marcos Adolfo Tadeu Senamo Amaro, Joao Francisco Amaro,] Aerosystem S.A. Empreendimentos e Participacoes and Brasil Private Equity Fundo de Investimento em Participacoes has the power to designate, appoint and empower, and pursuant to Section 17 of this Agreement, has legally, validly and effectively designated, appointed and empowered National Corporate Research Ltd. for service of process in any suit or proceeding based on or arising under this Agreement in any state court of the State of New York located in the City and County of New York or in the United States District Court for the Southern District of New York.

(xiii) Neither such Selling Stockholder nor any of its directors, officers, affiliates or controlling persons (other than the Underwriters, as to which the Selling Stockholder makes no representation) has taken, directly or indirectly, any action designed, or which has constituted or might reasonably be expected, to cause or result in, under the Exchange Act or otherwise, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities. To the extent that information is required to be publicly disclosed under the Stabilizing Rules before stabilizing transactions can be undertaken in compliance with the safe harbor provided under such Stabilizing Rules, such information has been adequately publicly disclosed (within the meaning of the Stabilizing Rules).

(xiv) Such Selling Stockholder has deposited, or will deposit on or prior to the Closing Date, Underlying Shares with the Custodian against the issuance, by the Depositary, of the ADRs evidencing the ADSs to be sold by it, acting through the Company as provided hereunder, to the International Underwriters and has instructed or will instruct the Depositary to deliver such ADSs to the International Underwriters at the Closing Date.

(xv) Such Selling Stockholder has executed and delivered to the Representatives prior to the printing of the preliminary prospectus (red herring), a Lock-up Agreement substantially in the form set forth in Schedule D hereto.

(xvi) Such Selling Stockholder has not prepared, used or referred to, and will not, without the prior consent of the Representatives, prepare, use or refer to, any free writing prospectus as defined in Rule 405.

In addition, any certificate, designated as such, signed by any officer of such Selling Stockholders and delivered to the Underwriters or counsel for the Underwriters in connection with the sale of the Securities shall be deemed to be a representation and warranty by such Selling Stockholder, as to matters covered thereby, to each Underwriter.

3. Placement; Purchase, Sale and Delivery of Securities. Upon the basis of the representations and warranties and subject to the terms and conditions herein set forth, each Agent agrees that it will place on a best efforts basis the number of Brazilian Securities indicated opposite its name in Schedule B hereto under the caption "Number of Brazilian Securities to be Sold". Nothing in this Agreement shall be interpreted as a commitment by the Agents to purchase any Security.

On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Company and the Selling Stockholders agree, severally and not jointly, to sell to the International Underwriters, and each International Underwriter agrees, severally and not jointly, to purchase from the Company and the Selling Stockholders, at a purchase price of US$ [-] per ADS, that number of Firm International Securities (rounded up or down, as determined by the Representatives in their discretion, in order to avoid fractions) obtained by multiplying the number of Firm International Securities set forth opposite the name of the Company and the Selling Stockholders in Schedule B hereto under the caption "Number of Firm International Securities to be Sold" by a fraction the numerator of which is the number of Firm International Securities set forth opposite the name of such International Underwriter in Schedule A hereto and the denominator of which is the total number of Firm International Securities.

The Underlying Shares have been placed in custody, under the Custody Agreement made with the Custodian. Each of the Sellers agrees that the Underlying Shares held in custody under such Custody Agreement are subject to the interests of the International Underwriters hereunder, that the arrangements made by the Sellers for such custody are to that extent irrevocable, and that the obligations of the Sellers hereunder shall not be terminated by operation of law, whether by the death of any individual Selling Stockholder, liquidation or dissolution of any Seller, or the occurrence of any other event. If any individual Selling Stockholder should die, any Seller should be liquidated or dissolved, or if any other such event should occur before the delivery of the Securities hereunder, ADRs shall be delivered by the Depositary in accordance with the terms and conditions of this Agreement and of the Deposit Agreement as if such death, liquidation or dissolution, or other event had not occurred, regardless of whether or not the Custodian or the Depositary shall have received notice of such death, liquidation or dissolution, or other event.

The Sellers shall deliver the Firm International Securities to the Representatives for the accounts of the International Underwriters, against payment of the purchase price by wire transfer in immediately available funds to an account with a bank in New York City (or otherwise reasonably acceptable to Representatives) specified by the Sellers to the Representatives, at the office of Cleary Gottlieb Steen & Hamilton LLP, One Liberty Plaza, New York, New York 10006, at 10:00 A.M., New York time, on [date], or at such other time not later than seven full business days thereafter as the Representatives and the Sellers determine, such time being herein referred to as "FIRST CLOSING DATE". For purposes of Rule 15c6-1 under the Exchange Act, the First Closing Date (if later than the otherwise applicable settlement date) shall be the settlement date for payment of funds and delivery of securities for all the International Securities sold pursuant to the offering. The ADRs evidencing the Firm International Securities so to be delivered will be in definitive form, in such denominations and registered in such names as the Representatives request upon reasonable notice prior to the First Closing Date.

In addition, upon written notice from the Representatives given to the Company from time to time not more than 30 days subsequent to the date of the Prospectus, Credit Suisse may purchase all or less than all of the Optional International Securities at the purchase price per ADS to be paid for the Firm International Securities. The Company agrees to sell to Credit Suisse the respective numbers of Optional International Securities obtained by multiplying the number of Optional International Securities specified in such notice by a fraction the numerator of which is the number of Optional International Securities set forth opposite the names of such Selling Stockholders in Schedule B hereto under the caption "Number of Optional International Securities to be Sold" and the denominator of which is the total number of Optional International Securities (subject to adjustment by the Representatives to eliminate fractions). Such Optional International Securities may be purchased by Credit Suisse only for the purpose of covering over-allotments

made in connection with the sale of the Firm International Securities. No Optional International Securities shall be sold or delivered unless the Firm International Securities previously have been, or simultaneously are, sold and delivered. The right to purchase the Optional International Securities or any portion thereof may be exercised from time to time and to the extent not previously exercised may be surrendered and terminated at any time upon notice by the Representatives to the Sellers.

Each time for the delivery of and payment for the Optional International Securities, being herein referred to as an "OPTIONAL CLOSING DATE", which may be the First Closing Date (the First Closing Date and each Optional Closing Date, if any, being sometimes referred to as a "CLOSING DATE"), shall be determined by Credit Suisse but shall be not later than five full business days after written notice of election to purchase Optional International Securities is given. The Company will deliver the Optional International Securities being purchased on each Optional Closing Date to Credit Suisse, against payment of the purchase price in Federal (same day) funds by wire transfer in immediately available funds to the account specified (as aforesaid) by the Company to Credit Suisse, at the above office of Cleary Gottlieb Steen & Hamilton LLP. The ADRs evidencing the Optional International Securities being purchased on each Optional Closing Date will be in definitive form, in such denominations and registered in such names Credit Suisse requests upon reasonable notice prior to such Optional Closing Date.

As compensation for the International Underwriters' commitments, each Seller will pay to the Representatives for the International Underwriters' proportionate accounts the sum of US$[-] per ADS times the total number of Securities purchased by the International Underwriters from such Seller on each Closing Date. Such payment will be made on each Closing Date with respect to the Securities purchased on such Closing Date.

4. Offering by Underwriters and Placement by Agents. It is understood that the several International Underwriters propose to offer and the Agents propose to place the Securities for sale to the public as set forth in the Prospectus.

5. Certain Agreements of the Company and the Selling Stockholders.

(a) The Company agrees with the several International Underwriters, the Agents and the Selling Stockholders that:

(i) The Company has filed or will file each Statutory Prospectus pursuant to and in accordance with Rule 424(b)(1) (or, if applicable and consented to by the Representatives, subparagraph (4)) not later than the second business day following the earlier of the date it is first used or the date of this Agreement. The Company has complied and will comply with Rule 433.

(ii) If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement, the Company will file the Prospectus with the Commission pursuant to and in accordance with Rule 424(b)(1) (or, if applicable and if consented to by the Representatives, subparagraph (4)) not later than the earlier of (a) the second business day following the execution and delivery of this Agreement or (b) the fifteenth business day after the Effective Date of the Initial Registration Statement. The Company will advise the Representatives promptly of any such filing pursuant to Rule 424(b). If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement and an additional registration statement is necessary to register a portion of the International Securities under the Act but the Effective Time thereof has not occurred as of such execution and delivery, the Company will file the additional registration statement or, if filed, will file a post-effective amendment thereto with the Commission pursuant to and in accordance with Rule 462(b) on or prior to 10:00 P.M., New York time, on the date of this Agreement or, if earlier, on or prior to the time the Prospectus is printed and distributed to any International Underwriter, or will make such filing at such later date as shall have been consented to by the Representatives.

(iii) The Company will furnish to the Representatives copies of each Registration Statement (three of which will be signed and will include all exhibits), each related preliminary prospectus, each Issuer Free Writing Prospectus, and, so long as a prospectus relating to the Securities is required to be delivered under the Act in connection with sales by any International Underwriter or dealer (including in circumstances where such requirement may be satisfied pursuant to Rule 172), the Prospectus and all amendments and supplements

to such documents, in each case in such quantities as the Representatives request. The Prospectus shall be so furnished on or prior to 3:00 P.M., New York time, on the business day following the later of the execution and delivery of this Agreement or the Effective Time of the Initial Registration Statement. All other such documents shall be so furnished as soon as available. The Company [and the Selling Stockholders] will pay the expenses of printing and distributing to the International Underwriters all such documents.

(iv) The Company will advise the Representatives promptly of any proposal to amend or supplement the initial or any additional registration statement as filed or the related prospectus or the Initial Registration Statement, the Additional Registration Statement (if any) or any Statutory Prospectus and will not effect such amendment or supplementation without the consent of the Representatives; and the Company will also advise the Representatives promptly of the effectiveness of each Registration Statement (if its Effective Time is subsequent to the execution and delivery of this Agreement) and of any amendment or supplementation of a Registration Statement or any Statutory Prospectus and of the institution by the Commission of any stop order proceedings in respect of a Registration Statement and will use its best efforts to prevent the issuance of any such stop order and to obtain as soon as possible its lifting, if issued.

(v) If at any time when a prospectus relating to the International Securities is (or but for the exemption in Rule 172 would be required to be) delivered under the Act in connection with sales by any International Underwriter or dealer, any event or development occurs as a result of which either the General Disclosure Package or the Statutory Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances then prevailing or under which they were made, as the case may be, not misleading, or if it is necessary at any time to amend the Statutory Prospectus to comply with the Act, the Company will (i) promptly notify the Representatives of such event or development, (ii) promptly prepare and, if required, file with the Commission, at its own expense, an amendment or supplement or Issuer Free Writing Prospectus which will correct such statement or omission or effect such compliance and (iii) supply any amended or supplemented Statutory Prospectus or any such Issuer Free Writing Prospectus to the Representatives in such quantities as the Representatives may reasonably request. Neither the consent of the Representatives to, nor the delivery by the International Underwriters of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 7.

(vi) The Company will arrange for the qualification of the Securities for sale under the laws of such jurisdictions as the Representatives designate and will continue such qualifications in effect so long as required for the distribution; provided that the Company shall not be required to qualify as a foreign corporation or consent to the service of process under the laws of any jurisdiction (except service of process with respect to the offering and sale of the Securities); and provided further that the Company shall bear the expense of such qualifications; and to reasonably promptly advise the Representatives of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction, including Brazil, or the initiation or threatening of any proceeding for such purpose.

(vii) As soon as practicable, but not later than the Availability Date (as defined below), the Company will make generally available to the its securityholders and to the Representatives an earnings statement covering a period of at least twelve months beginning after the Effective Date of the initial Registration Statement (or, if later, the Effective Date of the Additional Registration Statement) which will satisfy the provisions of
Section 11(a) of the Act. For the purpose of the preceding sentence, "AVAILABILITY DATE" means the 45th day after the end of the fourth fiscal quarter following the fiscal quarter that includes such Effective Date, except that, if such fourth fiscal quarter is the last quarter of the Company's fiscal year, "AVAILABILITY DATE" means the 90th day after the end of such fourth fiscal quarter.

(viii) The Company shall use its best efforts to maintain the listing of the Preferred Shares on at least the Nivel 2 segment of the BOVESPA, to maintain the registration of the Company with the CVM, as long as it is a publicly held company in Brazil, and to maintain the registration of the ADR program with the CVM and the Central Bank.

(ix) The Company shall use its best efforts to effect the listing of the ADSs on the NYSE, including the filing with the NYSE of all required documents and notices for non-U.S. companies that have securities that are traded on the NYSE, except as such filing may have been waived by the NYSE.

(x) The Company shall file any documents or reports with respect to the Securities required to be filed with the CVM and the BOVESPA in the time period required for such filing.

(xi) The Company shall use the net proceeds received by it from the sale of the Securities in the manner specified in the Prospectus under the caption "Use of Proceeds."

(xii) The Company shall furnish to the holders of the ADSs, directly or through the Depositary, with a copy to the Representatives, (a) after the end of each fiscal year, an annual report (in English) that will include a review of operations and annual audited consolidated financial statements (including consolidated balance sheets, statements of income, statements of change in stockholders' equity and statements of cash flow) with an opinion by an independent accountant and prepared in conformity with Brazilian GAAP including a reconciliation to U.S. GAAP applied on a consistent basis during the period involved; and (b) after the end of each of the first three quarterly periods of each fiscal year, unaudited consolidated financial information prepared in accordance with Brazilian GAAP, including a reconciliation to U.S. GAAP applied on a consistent basis during the period involved, equivalent in substance to the information that would be required to be filed on Form 10-Q, if the Company were required to file quarterly reports on Form 10-Q.

(xiii) The Company shall publish an earnings release reporting financial results prepared in conformity with Brazilian GAAP and including a reconciliation to U.S. GAAP applied on a consistent basis during the period involved no later than the publishing of an earnings release reporting financial results for the corresponding period prepared in accordance with Brazilian GAAP.

(xiv) The Company shall not distribute prior to the completion of the distribution of the Securities any offering material in connection with the offer and sale of the Securities outside Brazil other than a Statutory Prospectus.

(xv) The Company shall furnish to the Representatives upon request (a) copies of any reports or other communications which the Company shall send to its stockholders or shall from time to time publish or publicly disseminate, (b) copies of all annual, quarterly and current reports filed with any securities regulatory authority in Brazil, (c) copies of documents or reports filed with any national securities exchange on which any class of securities of the Company is listed, and (d) such other information as the Representatives may reasonably request regarding the business and financial condition of the Company or the Subsidiaries, in each case reasonably promptly after such communications, documents or information becomes available.

(xvi) Except for the stabilization activities to be carried out by the Underwriters, the Company shall not take, directly or indirectly any action designed to or which has constituted or which could reasonably be expected to cause or result, under Regulation M of the Exchange Act or otherwise, in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities, and not to take or omit to take any action (such as issuing any press release relating to any Securities without the "Stabilization/FDSA legend") which may result in the loss by any stabilizing manager or its agents of the ability to rely on any stabilization safe harbor provided by the Financial Services Authority under the Financial Services and Markets Act 2000.

(b) Each Selling Stockholder agrees with the several International Underwriters, the Agents and the Company that:

(i) Except for the stabilization activities to be carried out by the Underwriters, not to take, directly or indirectly any action designed to or which has constituted or which could reasonably be expected to cause or result, under Regulation M of the Exchange Act or otherwise, in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities [, and not to take or

omit to take any action (such as issuing any press release relating to any Securities without the "Stabilization/FDSA legend") which may result in the loss by any stabilizing manager or its agents of the ability to rely on any stabilization safe harbor provided by the Financial Services Authority under the Financial Services and Markets Act 2000].

(ii) Such Selling Stockholder will advise the Representatives promptly, and if requested by the Representatives, will confirm such advice in writing, so long as delivery of a prospectus relating to the International Securities by an International Underwriter or dealer may be required under the Act (including in circumstances where such requirement may be satisfied pursuant to Rule 172), of (i) any material change in the Company's condition (financial or otherwise), prospects, earnings, business or properties, (ii) any change in information in the Registration Statement, any Statutory Prospectus or any Issuer Free Writing Prospectus or any amendment or supplement thereto relating to such Selling Stockholder or (iii) any new material information relating to the Company or relating to any matter stated in any Statutory Prospectus or any Issuer Free Writing Prospectus or any amendment or supplement thereto which comes to the attention of such Selling Stockholder.

(iii) Such Selling Stockholder represents that it has not prepared or had prepared on its behalf or used or referred to, and agrees that it will not prepare or have prepared on its behalf or use or refer to, any Issuer Free Writing Prospectus, and has not distributed and will not distribute any written materials in connection with the offer or sale of the International Securities.

6. Free Writing Prospectuses. The Company represents and agrees that, unless it obtains the prior consent of the Representatives, and each International Underwriter represents and agrees that, unless it obtains the prior consent of the Company and the Representatives, it has not made and will not make any offer relating to the International Securities that would constitute an Issuer Free Writing Prospectus, or that would otherwise constitute a "free writing prospectus," as defined in Rule 405, required to be filed with the Commission. Any such free writing prospectus consented to by the Company and the Representatives is hereinafter referred to as a "Permitted Free Writing Prospectus." The Company represents that it has treated and agrees that it will treat each Permitted Free Writing Prospectus as an "issuer free writing prospectus," as defined in Rule 433, and has complied and will comply with the requirements of Rule 433 applicable to any Permitted Free Writing Prospectus, including timely Commission filing where required, legending and record keeping. The Company represents that it has satisfied and agrees that it will satisfy the conditions in Rule 433 to avoid a requirement to file with the Commission any electronic road show.

7. Conditions of the Obligations of the International Underwriters. The obligations of the International Underwriters to purchase and pay for the Firm International Securities on the First Closing Date and the Optional International Securities to be purchased on each Optional Closing Date will be subject to the accuracy of the representations and warranties on the part of the Company and the Selling Stockholders herein, to the accuracy of the statements of the Company's and Selling Stockholders' officers made pursuant to the provisions hereof, to the performance by the Company and the Selling Stockholders of their obligations hereunder and to the following additional conditions precedent:

(a) the Registration Statement and the ADS Registration Statement shall have become effective not later than 5:30 p.m. (New York City time) on the date hereof and no stop order suspending the effectiveness of any Registration Statement shall be in effect, and no proceedings for such purpose shall be pending before or threatened by the Commission.

(b) Subsequent to the execution and delivery of this Agreement and prior to each Closing Date:

(i) there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any of the Company's securities by any "nationally recognized statistical rating organization," as such term is defined for purposes of Rule 436(g)(2) under the Act;

(ii) the representations and warranties of the Company or of the relevant Selling Stockholder, as the case may be, in this Agreement and the Brazilian Underwriting Agreement shall be true and correct on and as of such First Closing Date and, if applicable, at the Optional Closing Date, with the same effect as if made on such First Closing Date or Optional Closing Date, as the case may be, and the Company or the relevant Selling Stockholder, as the case may be, shall have complied will all the agreements and satisfied all the conditions on its part to be performed or satisfied under this Agreement, the Custody Agreement, the Deposit Agreement and the Brazilian Underwriting Agreement at or prior to such First Closing Date and, if applicable, at each Optional Closing Date; and

(iii) there shall not have occurred (a) any change, or any development or event involving a prospective change, in the condition, financial or otherwise, or in the earnings, business, properties, operations or prospects of the Company or the Subsidiaries from that set forth in the General Disclosure Package and the Prospectus that, in the Representatives' judgment, is material and adverse and that makes it, in the Representatives' judgment, impracticable or inadvisable to market the Securities on the terms and in the manner contemplated in the General Disclosure Package and the Prospectus and proceed with completion of the public offering or the sale of and payment for the Securities; (b) any change in United States, Brazilian or international financial, political or economic conditions or currency exchange rates or exchange controls as would, in the judgment of the Representatives, be likely to prejudice materially the success of the proposed issue, sale or distribution of the Securities, whether in the primary market or in respect of dealings in the secondary market; (c) any material suspension or material limitation of trading in securities generally on the New York Stock Exchange, or the BOVESPA, or any setting of minimum prices for trading on such exchanges;
(d) or any suspension of trading of any securities of the Company on any exchange or in the over-the-counter market; (e) any banking moratorium declared by United States Federal, New York or Brazilian authorities; (f) any major disruption of settlements of securities or clearance services in the United States or Brazil or (g) any attack on, outbreak or escalation of hostilities or act of terrorism involving the United States or Brazil, any declaration of war by the United States or Brazilian Congress or any other national or international calamity or emergency if, in the judgment of the Representatives, the effect of any such attack, outbreak, escalation, act, declaration, calamity or emergency makes it impractical or inadvisable to proceed with completion of the public offering or the sale of and payment for the Securities.

(c) Each of the Company and the Selling Stockholders shall have furnished to the International Underwriters a closing certificate of the Company or of the relevant Selling Stockholder, as the case may be, signed by two authorized officers, dated each First Closing Date and, if applicable, at each Optional Closing Date, in form and substance reasonably acceptable to the Representatives, to the effect set forth in Section 7(a), (b)(i), (ii) and (iii) above, and an incumbency certificate as to the incumbency of the officers of the Company, or of the relevant Selling Stockholder, as the case may be, signing this Agreement on behalf of the Company or of the relevant Selling Stockholder, as the case may be, containing specimen signatures thereof.

(d) The Representatives shall have received an opinion, dated such Closing Date, of Machado, Meyer, Sendacz e Opice - Advogados, Brazilian counsel to the Company and the Selling Stockholders, to the effect that:

(i) The Company has been duly incorporated and is validly existing as a sociedade anonima (corporation), under the laws of Brazil, with full power and authority to own its properties and conduct its business as described in the General Disclosure Package and the Prospectus; and the Company is duly qualified to do business in each Brazilian jurisdiction in which its ownership or lease of property or the conduct of its business requires such qualification;

(ii) Each of Aerosystem S.A. Empreendimentos e Participacoes and Brasil Private Equity Fundo de Investimento em Participacoes, each a selling stockholder organized under the laws of Brazil (each, a "BRAZILIAN CORPORATE SELLING STOCKHOLDER") has been duly incorporated and is validly existing as a sociedade anonima (corporation) or a fundo de investimento em participacoes, as the case may be, under the laws of Brazil, with full power and authority to own its properties and conduct its business as described in the General Disclosure Package and the Prospectus; and each of the Brazilian selling stockholders is

duly qualified to do business in each Brazilian jurisdiction in which its ownership or lease of property or the conduct of its business requires such qualification;

(iii) Each of Noemy Almeida Oliveira Amaro, Maria Claudia Oliveira Amaro Demenato, Mauricio Rolim Amaro, Marcos Adolfo Tadeu Senamo Amaro, Joao Francisco Amaro, each a selling stockholder (each, a "BRAZILIAN INDIVIDUAL SELLING STOCKHOLDER", collectively and together with the Brazilian corporate selling stockholders, the "BRAZILIAN SELLING STOCKHOLDERS"), is a Brazilian citizen and resident, with full power and authority to own its properties and conduct its business as described in the General Disclosure Package and the Prospectus; and each of the Brazilian individual selling stockholders is duly qualified to do business in each Brazilian jurisdiction in which its ownership or lease of property or the conduct of its business requires such qualification;

(iv) Each of TAM Linhas Aereas S.A. and Fidelidade Viagens e Turismo Ltda., each a subsidiary of the Company organized under the laws of Brazil (each, a "BRAZILIAN SUBSIDIARY"), has been duly incorporated and is validly existing as a sociedade anonima (corporation) or a sociedade limitada (limited liability company), as the case may be, under the laws of Brazil, with full power and authority to own its properties and conduct its business as described in the General Disclosure Package and the Prospectus; and each of the Company's Brazilian subsidiaries is duly qualified to do business in each Brazilian jurisdiction in which its ownership or lease of property or the conduct of its business requires such qualification;

(v) All of the issued shares of capital stock of the Company have been duly and validly authorized and issued and are fully paid and nonassessable;

(vi) The Securities to be sold by the Company pursuant to the Underwriting Agreements have been duly authorized and, when issued, paid for and delivered in accordance with the terms of the Underwriting Agreements, will be validly issued, fully paid and non-assessable and will be free and clear of all security interests, mortgages, pledges, liens or encumbrances;

(vii) The Selling Stockholders own, and on the Applicable Time will own, the Securities to be sold by the Selling Stockholders pursuant to the Underwriting Agreements free and clear of all security interests, mortgages, pledges, liens or encumbrances;

(viii) Except as set forth in the General Disclosure Package and the Prospectus, all of the issued shares or quotas of capital stock of each Brazilian subsidiary have been duly and validly authorized and issued and are fully paid and nonassessable and are owned of record by the Company, and, to the knowledge of such counsel, the shares or quotas of capital stock of each Brazilian subsidiary held by the Company are beneficially owned by the Company free and clear of all liens, encumbrances, equities, defects or claims (including preemptive or other rights);

(ix) To the knowledge of such counsel, except as set forth in the General Disclosure Package and the Prospectus, there are no outstanding warrants or options issued by the Company or any of its Brazilian subsidiaries to purchase any shares of the capital stock of the Company or any security convertible into or exchangeable for capital stock of the Company, and, except as provided in the shareholders' agreements referred to in or otherwise set forth in the General Disclosure Package and the Prospectus, there are no preemptive or other rights to subscribe for or to purchase from the Company or any of its Brazilian subsidiaries, and no restrictions upon the voting or transfer of, any shares of capital stock of the Company (including, without limitation, the Underlying Shares) pursuant to the Company's by-laws, any Brazilian law or any rule, regulation or order of any Brazilian governmental agency or body or court, or any agreement or other instrument to which the Company or any of its Brazilian Significant Subsidiaries is a party or by which it is bound;

(x) This Agreement, the Brazilian Underwriting Agreement and the Custody Agreement have been duly authorized, executed and delivered by the Company and the Selling Stockholders and, assuming due authorization, execution and delivery of this Agreement, the Brazilian Underwriting Agreement and the Custody Agreement by the other parties hereto and thereto, each of this Agreement, the Brazilian

Underwriting Agreement and the Custody Agreement constitutes a valid and binding obligation of the Company and the Selling Stockholders enforceable against the Company and the Selling Stockholders in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles;

(xi) The Deposit Agreement has been duly authorized, executed and delivered by the Company and, assuming due authorization, execution and delivery by the Depositary, constitutes a valid and legally binding agreement of the Company enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles;

(xii) The Brazilian Securities, the Underlying Shares underlying the International Securities delivered on such Closing Date and all other outstanding shares of capital stock of the Company have been duly authorized and validly issued, are fully paid and nonassessable and conform to the description thereof contained in the General Disclosure Package and the Prospectus; and the shareholders of the Company have no preemptive rights with respect to the International Securities, the Underlying Shares and the Brazilian Securities;

(xiii) No consent, approval, authorization or order of, or filing with, any Brazilian governmental agency or regulatory body or court is required for the consummation of the transactions contemplated by this Agreement, the Brazilian Underwriting Agreement, the Deposit Agreement and the Custody Agreement in connection with the issuance or sale of the Underlying Shares by the Company and the Selling Stockholders and the International Securities pursuant to the Deposit Agreement and in connection with the issuance and sale of the Brazilian Securities by the Company, except (a) for the approval by the Brazilian Securities Commission of the offering of the International Securities, the Underlying Shares and the Brazilian Securities as contemplated by this Agreement and the Brazilian Underwriting Agreement and (b) for the approval by the Central Bank and the Brazilian Securities Commission of the payment of fees, commissions and reimbursement of expenses pursuant to this Agreement, which have been obtained and remain in full force and effect or will be obtained prior to each Closing Date;

(xiv) The execution, delivery and performance of this Agreement, the Brazilian Underwriting Agreement, the Deposit Agreement and the Custody Agreement and the issuance and sale of the International Securities, the Underlying Shares and the Brazilian Securities will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, (a) any Brazilian statute, any rule, regulation or order of any Brazilian governmental agency or body or any court having jurisdiction over the Company, the Selling Stockholders or any subsidiary of the Company or of the Selling Stockholders or any of their properties, (b) any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument which is identified on a schedule satisfactory to U.S. counsel to the Agents or (c) the by-laws or equivalent constitutive documents or the Company of the Brazilian corporate shareholders or any of its Brazilian subsidiaries, it being understood that such counsel may rely upon certificates of officers of the Company and of the Brazilian subsidiaries in assessing compliance with financial covenants under agreements to which the Company or any of its Brazilian subsidiaries is a party. The Company has full power and authority to issue and the Company and the Brazilian selling stockholders have full power and authority to authorize and sell the Underlying Shares and the Brazilian Securities as contemplated by this Agreement and the Brazilian Underwriting Agreement;

(xv) Such counsel has no reason to believe that the indemnification and contribution provisions of this Agreement, the Brazilian Underwriting Agreement, the Deposit Agreement and the Custody Agreement contravene Brazilian law or public policy;

(xvi) The Registration Statement, the General Disclosure Package, each Statutory Prospectus, the Prospectus, any Issuer Free Writing Prospectus and the preliminary and final prospectuses relating to the Brazilian Offering have been duly authorized by the Company;

(xvii) No approvals are currently required in Brazil in order for the Company to pay dividends, interest attributable to shareholders' equity or other distributions declared by the Company to the holders of Preferred Shares, including the Depositary, and, except as disclosed in the General Disclosure Package and the Prospectus, under current laws and regulations of Brazil and any political subdivision thereof, any amounts payable with respect to the Underlying Shares upon liquidation of the Company or upon redemption thereof and dividends and other distributions declared and payable on the Underlying Shares may be paid by the Company to the Depositary in Brazilian reais that may be converted into foreign currency and freely transferred out of Brazil, as long as the investment in respect of the Underlying Shares is registered with the Central Bank. Except as set forth in the General Disclosure Package and the Prospectus, no such payments made to holders thereof or therein who are non-residents of Brazil will be subject to income, withholding or other taxes under laws and regulations of Brazil or any political subdivision or taxing authority thereof or therein and will otherwise be free and clear of any other tax, duty, withholding or deduction in Brazil or any political subdivision or taxing authority thereof or therein and without the necessity of obtaining any governmental authorization in Brazil or any political subdivision or taxing authority thereof or therein, as long as the investment in respect of the Underlying Shares is registered with the Central Bank;

(xviii) No stamp, issue, registration, documentary or other similar taxes and duties, including interest and penalties, are payable in Brazil on or in connection with the issuance and sale of the Underlying Shares by the Company and the Selling Stockholders and the International Securities pursuant to the Deposit Agreement, the issuance and sale of the Brazilian Securities by the Company and the Selling Stockholders or the execution and delivery of this Agreement, the Brazilian Underwriting Agreement, the Deposit Agreement and the Custody Agreement;

(xix) The choice of laws of the State of New York as the governing law of this Agreement and the Deposit Agreement is a valid choice of law under the laws of Brazil, and the Brazilian courts should recognize the choice of New York state law as the governing law of this Agreement and the Deposit Agreement;

(xx) Any judgment obtained in a U.S. federal or state court of competent jurisdiction sitting in New York City arising out of or in relation to the obligations of the Company or the Selling Stockholders under this Agreement or the Deposit Agreement or the transactions contemplated thereby will be enforced against the Company and the Selling Stockholders and will be recognized in Brazil without reconsideration of the merits, upon confirmation of that judgment by the Brazilian Superior Court of Justice; provided that (a) such judgment is rendered by a competent court and is obtained in compliance with the legal requirements of the jurisdiction of the court rendering such judgment; (b) proper service of process is made; (c) such judgment does not contravene Brazilian national sovereignty, good morals or public policy; (d) such judgment is final and conclusive and, therefore, not subject to appeal in the jurisdiction where rendered; (e) such judgment is authenticated by a consular official of Brazil having jurisdiction over the place of signing and submitted to the Brazilian courts with a certified translation of such judgment; and (f) the applicable procedure under the law of Brazil with respect to the enforcement of foreign judgments is complied with; to such counsel's knowledge, none of the provisions of this Agreement or the Deposit Agreement is or would be deemed against Brazilian national sovereignty, public policy or morality;

(xxi) The submission by the Company and the Brazilian selling stockholders to the jurisdiction of the U.S. federal or state courts sitting in New York City set forth in this Agreement and the Deposit Agreement constitute valid and legally binding obligations of the Company and the Brazilian selling stockholders, and service of process effected in the manner set forth in this Agreement and the Deposit Agreement, assuming validity under the laws of the State of New York, will be effective, insofar as Brazilian law is concerned, to confer valid personal jurisdiction over the Company and the Brazilian selling stockholders;

(xxii) This Agreement and the Deposit Agreement are in proper legal form for enforcement against the Company and the Selling Stockholders in Brazil; and it is not necessary to ensure the legality, validity, enforceability or admissibility in evidence of this Agreement and the Deposit Agreement and any other document to be furnished hereunder and thereunder in Brazil that any of them be filed or recorded or

enrolled with any court or other authority in Brazil or that any stamp, issue, registration, documentary or other similar taxes or duties be paid in Brazil, other than court costs, including filing fees and deposits to guarantee judgment required by Brazilian law and regulations, except that to ensure the legality, validity, enforceability or admissibility in evidence of this Agreement and the Deposit Agreement, (a) the signatures of the parties to this Agreement and the Deposit Agreement, if not signed in Brazil, should be notarized by a notary public licensed to act as such under the laws of the place of signing and the signature of such notary public should be authenticated by a consular official of Brazil having jurisdiction over the place of signing; (b) this Agreement and the Deposit Agreement and such related documents in any foreign language should be translated into the Portuguese language by a sworn translator; and (c) and each of this Agreement and the Deposit Agreement and such related documents (together with the respective sworn translation) should be registered with the appropriate Registry of Deeds and Documents having jurisdiction over the place where the head office or residency of the Company and the Selling Stockholders, as the case may be, is located, which registration can be made at any time before judicial enforcement in Brazil. The International Underwriters, in respect of this Agreement, and the Depositary and any holder of International Securities, in respect of the Deposit Agreement, are entitled to sue as plaintiffs in the Brazilian courts for the enforcement of their respective rights against the Company and the Selling Stockholders;

(xxiii) It is not necessary under the laws of Brazil that any holder of International Securities or the International Underwriters or the Depositary should be licensed, qualified or entitled to carry on business in Brazil (a) to enable any of them to enforce their respective rights under this Agreement or the Deposit Agreement or any other document to be delivered in connection herewith or therewith or (b) solely by reason of the execution, delivery or performance of any such document;

(xxiv) The holders of the Securities will not be deemed resident, domiciled, carrying on business or subject to taxation in Brazil solely by the execution, delivery, performance or enforcement of this Agreement or the Deposit Agreement or by virtue of the ownership or transfer of the Securities or the receipt of payment for dividends thereon, assuming that none of such persons is a resident of brazil or has a permanently established or fixed base in Brazil;

(xxv) Each of the Company, its Brazilian subsidiaries and the Brazilian selling stockholders and any of its properties or assets does not have any immunity from the jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) under the laws of Brazil;

(xxvi) Except as disclosed in the General Disclosure Package and the Prospectus, to the knowledge of such counsel, there is no legal or governmental action, suit or proceeding pending against or affecting the Company, any of its Brazilian subsidiaries, any of the Brazilian selling stockholders or any of their respective properties or assets that, if determined adversely to the Company, any such Brazilian subsidiary or any such Brazilian selling stockholder, would reasonably be expected to have a Material Adverse Effect, or could reasonably be expected materially and adversely to affect the ability of the Company, such Brazilian subsidiary or such Brazilian selling stockholder to perform its obligations under this Agreement, the Brazilian Underwriting Agreement, the Deposit Agreement and the Custody Agreement or which are otherwise material in the context of the issuance and sale of the International Securities or the Brazilian Securities; and, to such counsel's knowledge, no such actions, suits or proceedings are threatened;

(xxvii) To the knowledge of such counsel, except as disclosed in the General Disclosure Package and the Prospectus, the Company and each of its Brazilian subsidiaries have good and marketable title to all material Brazilian real property and good and marketable title to all material Brazilian personal property owned by them, in each case free and clear of all liens, encumbrances and defects, except as set forth in the Prospectus or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its Brazilian subsidiaries; and all material real and personal property and buildings held under lease by the Company and its Brazilian subsidiaries in Brazil are held by them under valid, subsisting and enforceable leases, with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Brazilian subsidiaries;

(xxviii) To the knowledge of such counsel, the Company and its Brazilian subsidiaries possess adequate licenses, certificates, authorizations and permits issued by appropriate Brazilian governmental agencies or bodies necessary to the conduct of the business now operated by them, except to the extent that the failure to possess such licenses, certificates, authorizations and permits would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, and have not received any notice of proceedings relating to the revocation or modification of any such license, certificate, authorization or permit that, if determined adversely to the Company or any of its subsidiaries, would reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect;

(xxix) To the knowledge of such counsel, neither the Company nor any of its Brazilian subsidiaries (a) is in violation of its by-laws or equivalent constitutive documents, (b) is in default in any material respect, and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any material term, covenant or condition contained in any material indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets is subject or (c) is in violation of any Brazilian statute, any rule, regulation or order of any Brazilian governmental agency or body or any court having jurisdiction over the Company or any Brazilian subsidiary of the Company or any of their properties, except, in the case of clause (c), for such violations which would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect;

(xxx) Except as described in the General Disclosure Package and the Prospectus, to the knowledge of such counsel, there are no material off-balance sheet transactions, as well as transactions, contracts, licenses, agreements, leases or documents involving the Company and/or its Brazilian subsidiaries and/or their related parties;

(xxxi) To the knowledge of such counsel, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Act or with the CVM with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in the securities registered pursuant to the Registration Statement or in any securities being registered pursuant to any other registration statement filed by the Company under the Act or with the CVM;

(xxxii) The statements in the General Disclosure Package and the Prospectus under the captions "Risk Factors", "Market Information", "Management's Discussion and Analysis of Financial Condition and Results of Operations - Principal Factors Affecting Our Financial Condition and Results of Operations - Taxes and Deductions", "Overview of the Industry", "Business", "Business - Antitrust Matters", "Business - Judicial and Administrative Proceedings", "Regulation of the Brazilian Civil Aviation Industry" "Management", "Principal and Selling Stockholders - Shareholders' Agreement", "Transactions with Related Parties", "Description of Our Capital Stock", "Dividends and Dividend Policy" and "Enforcement of Judgments", insofar as such statements constitute a description of the Preferred Shares and other capital stock of the Company, the by-laws of the Company or matters of Brazilian law and regulation or legal conclusions with respect thereto or the provisions of documents therein described governed by or issued pursuant to Brazilian law, have been reviewed by such counsel and constitute accurate summaries of the matters described therein in all material respects;

(xxxiii) The statements in the General Disclosure Package and the Prospectus set forth under the caption "Taxation - Brazilian Tax Considerations," insofar as such statements purport to summarize Brazilian tax laws and regulations, constitute accurate summaries of the matters described therein in all material respects;

(xxxiv) Neither the Company nor any of its Brazilian subsidiaries is the object of any ongoing bankruptcy, insolvency, liquidation, reorganization, recuperacao judicial or recuperacao extrajudicial or other related insolvency proceeding in any court of any jurisdiction in which their ownership, lease or

operation of property or the conduct of its business are located, nor have they petitioned or sought consent for a plan of reorganization, receivership, liquidation, recuperacao judicial or recuperacao extrajudicial;

(xxxv) Such counsel do not know of any legal or governmental proceedings required to be described in a Registration Statement or in the General Disclosure Package and the Prospectus which are not described as required or of any contracts or documents of a character required to be described in a Registration Statement or in the General Disclosure Package and the Prospectus or to be filed as exhibits to a Registration Statement which are not described and filed as required; and

(xxxvi) No facts have come to such counsel's attention which caused such counsel to believe that a Registration Statement or any amendment thereto, as of its effective date or as of such Closing Date, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus or any amendment or supplement thereto, as of its date or as of such Closing Date, contained any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; such counsel have no reason to believe that the documents specified in a schedule to such counsel's letter, consisting of those included in the General Disclosure Package, as of the Applicable Time and as of such Closing Date, contained any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; the descriptions in the Registration Statements, the General Disclosure Package and the Prospectus of statutes, legal and governmental proceedings and contracts and other documents are accurate and fairly present the information required to be shown, it being understood that such counsel need express no opinion as to the financial statements or other financial data contained in the Registration Statements, the General Disclosure Package or the Prospectus.

The opinion of such counsel may state that their opinion is limited to matters of Brazilian law.

(e) The Representatives shall have received an opinion, dated such Closing Date, of Clifford Chance US LLP, United States counsel for each of the Company and the Selling Stockholders, to the effect that:

(i) This Agreement has been duly executed and delivered by the Company and the Selling Stockholders and, assuming due authorization, execution and delivery of this Agreement by the other parties hereto, this Agreement constitutes a valid and binding obligation of the Company and the Selling Stockholders enforceable against the Company and the Selling Stockholders in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles;

(ii) The Deposit Agreement has been duly executed and delivered by the Company and, assuming due authorization, execution and delivery of the Deposit Agreement by the Depositary, the Deposit Agreement constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles;

(iii) Upon due issuance by the Depositary of the ADRs representing the International Securities against the deposit of the Underlying Shares in respect thereof in accordance with the provisions of the Deposit Agreement, and upon payment by the International Underwriters for the International Securities evidenced thereby in accordance with the provisions of this Agreement, the persons in whose names such ADRs are registered will be entitled to the rights specified therein and in the Deposit Agreement;

(iv) No consent, approval, authorization or order of, or filing with, any U.S. federal or New York state governmental agency or regulatory body or court is required for the consummation of the transactions contemplated by this Agreement and the Deposit Agreement in connection with the issuance and sale of the Underlying Shares by the Company and the Selling Stockholders and the International Securities pursuant

to the Deposit Agreement, except such as have been obtained and made under the Act and such as may be required under state securities laws;

(v) The execution, delivery and performance of this Agreement and the Deposit Agreement and the issuance and sale of the International Securities and the Underlying Shares will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, (A) any U.S. federal or New York state law or any rule or regulation thereunder, (B) any order of any U.S. federal or New York state governmental agency or body or any U.S. Federal or New York State court having jurisdiction over the Company, the Selling Stockholders or any subsidiary of the Company or of the Selling Stockholders or any of their properties or (C) any agreement or instrument identified on a schedule to the opinion satisfactory to U.S. counsel to the International Underwriters;

(vi) The Company is not and, after giving effect to the offering and sale of the International Securities and the application of the proceeds thereof as described in the General Disclosure Package and the Prospectus, will not be an "investment company" as defined in the Investment Company Act;

(vii) Except as disclosed in the General Disclosure Package and the Prospectus, to the knowledge of such counsel, there is no legal or governmental action, suit or proceeding pending against or affecting Brazilian Equity Investments III LLC, Brazilian Equity LLC, Latin America Capital Partners PIV LLC and Latin America Capital Partners II LLC ("U.S. SELLING STOCKHOLDERS") or any of their respective properties or assets that, if determined adversely to any such U.S. selling stockholder, would reasonably be expected to have a Material Adverse Effect, or could reasonably be expected materially and adversely to affect the ability of such U.S. selling stockholder to perform its obligations under this Agreement, the Brazilian Underwriting Agreement or which are otherwise material in the context of the issuance and sale of the International Securities or the Brazilian Securities; and, to such counsel's knowledge, no such actions, suits or proceedings are threatened;

(viii) Under the laws of the State of New York relating to submission to jurisdiction, each of the Company and the Selling Stockholders have, pursuant to this Agreement and, when applicable, the Deposit Agreement, validly and irrevocably submitted to the non-exclusive jurisdiction of any New York state or U.S. federal court located in the Borough of Manhattan, The City of New York, New York, in connection with any proceeding arising out of or related to this Agreement or, when applicable, the Deposit Agreement, and the Company and each of [Noemy Almeida Oliveira Amaro, Maria Claudia Oliveira Amaro Demenato, Mauricio Rolim Amaro, Marcos Adolfo Tadeu Senamo Amaro, Joao Francisco Amaro,] Aerosystem S.A. Empreendimentos e Participacoes and Brasil Private Equity Fundo de Investimento em Participacoes] have validly appointed CT Corporation System as their authorized agent for the purposes described in this Agreement and, when applicable, the Deposit Agreement. Service of process effected in the manner set forth in this Agreement and the Deposit Agreement will be effective to confer valid personal jurisdiction over the Company and, when applicable, the above mentioned Selling Stockholders in any such action;

(ix) The choice of law of the State of New York under this Agreement and the Deposit Agreement is a valid choice by the Selling Stockholders that are incorporated or established under the laws of Delaware;

(x) The statements made in the General Disclosure Package and the Prospectus under the caption "Description of American Depositary Shares," insofar as such statements purport to summarize certain provisions of the Deposit Agreement (including the terms of the International Securities), fairly summarize such provisions in all material respects;

(xi) The information contained in the General Disclosure Package and the Prospectus under the caption "Taxation--United States" to the extent it constitutes matters of U.S. federal income tax law or legal conclusions and subject to the limitations and assumptions contained therein, is accurate in all material respects;

(xii) The descriptions in the General Disclosure Package and the Prospectus of this Agreement and the Deposit Agreement fairly summarize the matters described therein in all material respects;

(xiii) There are no contracts, agreements or understandings known to such counsel between the Company and any person granting such person the right to require the Company to file a registration statement under the Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in the securities registered pursuant to the Registration Statement or in any securities being registered pursuant to any other registration statement filed by the Company under the Act;

(xiv) The Initial Registration Statement was declared effective under the Act as of the date and time specified in such opinion; the Additional Registration Statement (if any) was filed and became effective under the Act as of the date and time (if determinable) specified in such opinion; the F-6 Registration Statement was declared effective under the Act as of the date and time specified in such opinion; the Prospectus either was filed with the Commission pursuant to the subparagraph of Rule 424(b) specified in such opinion on the date specified therein or was included in the Initial Registration Statement or the Additional Registration Statement (as the case may be); and, to the knowledge of such counsel, no stop order suspending the effectiveness of a Registration Statement or the F-6 Registration Statement or any part thereof has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Act, and each Registration Statement, the F-6 Registration Statement and the Prospectus, and each amendment or supplement thereto, as of their respective effective or issue dates, complied as to form in all material respects with the requirements of the Act and the Rules and Regulations; such counsel have no reason to believe that any part of a Registration Statement or any amendment thereto, as of its effective date or as of such Closing Date, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus or any amendment or supplement thereto, as of its issue date or as of such Closing Date, contained any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; such counsel have no reason to believe that the documents specified in a schedule to such counsel's letter, consisting of those included in the General Disclosure Package, as of the Applicable Time and as of such Closing Date, contained any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; the descriptions in the Registration Statements, the General Disclosure Package and the Prospectus of statutes, legal and governmental proceedings and contracts and other documents are accurate and fairly present the information required to be shown; and such counsel do not know of any legal or governmental proceedings required to be described in a Registration Statement or the Prospectus which are not described as required or of any contracts or documents of a character required to be described in a Registration Statement or the Prospectus or to be filed as exhibits to a Registration Statement which are not described and filed as required; it being understood that such counsel need express no opinion as to the financial statements or other financial data contained in the Registration Statements or the Prospectus; and

The opinion of such counsel may state that their opinion is limited to matters of U.S. federal and New York state law and may be subject to such other reservations and to such assumptions as are customary.

(f) The Representatives shall have received an opinion, dated such Closing Date, of Willkie Farr & Gallagher LLP, special counsel for each of the U.S. selling stockholders, to the effect that:

(i) Each of the U.S. selling stockholders has been duly organized and is validly existing as a limited liability company in good standing under the laws of the State of Delaware and has full limited liability company power and authority necessary to own or hold its properties and to conduct the business in which it is engaged;

(ii) Each U.S. selling shareholder has limited liability company power and authority to execute and deliver the this Agreement and to perform its obligations thereunder and, under the laws of the State of Delaware, each U.S. selling shareholder has the limited liability company power and authority to execute and deliver the Brazilian Underwriting Agreement [and the Custody Agreement];

(iii) This Agreement has been duly authorized, executed and delivered by the U.S. selling shareholders and, assuming due authorization, execution and delivery of this Agreement by the other parties hereto, this Agreement constitutes a valid and binding obligation of the U.S. selling shareholders enforceable against the U.S. selling shareholders in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles;

(iv) To the knowledge of such counsel, none of the U.S. selling shareholders is the object of any ongoing bankruptcy, insolvency, liquidation, reorganization, or other related insolvency proceeding in any court of competent jurisdiction, nor has it petitioned or sought consent for a plan or reorganization, receivership or liquidation;

(v) Except as disclosed in the General Disclosure Package and the Prospectus, to the knowledge of such counsel, there is no legal or governmental action, suit or proceeding pending against or affecting any of the U.S. selling stockholders or any of their respective properties or assets that, if determined adversely to any such U.S. selling stockholder, would reasonably be expected to have a Material Adverse Effect, or could reasonably be expected materially and adversely to affect the ability of such U.S. selling stockholder to perform its obligations under this Agreement, the Brazilian Underwriting Agreement [and the Custody Agreement] or which are otherwise material in the context of the issuance and sale of the International Securities or the Brazilian Securities; and, to such counsel's knowledge, no such actions, suits or proceedings are threatened;

(vi) Under the laws of the State of New York and the Limited Liability Company Act of the State of Delaware, no filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency is necessary or required for the execution and delivery of this Agreement and the Deposit Agreement by each of the U.S. selling shareholders and the performance of its obligations thereunder, in connection with the sale of the Underlying Shares by the U.S. selling stockholders and the International Securities pursuant to the Deposit Agreement, except such as have been obtained and made under the Act and such as may be required under state securities laws;

(vii) Each U.S. selling shareholder is subject to Delaware law and to suit in respect of its obligations under this Agreement, and none of the U.S. selling shareholders is, nor is any of its properties, assets or revenues, subject to any right of immunity under Delaware law from: (a) any legal action, suit or proceeding, (b) the giving of any relief in any such legal action, suit or proceeding, (c) set-off or counterclaim, (d) the jurisdiction of any Delaware court, (e) service of process, attachment upon or prior to judgment, or attachment in aid of execution of judgment, or (f) execution of a judgment, or other legal process or proceeding for the giving of any relief or for the enforcement of a judgment, in any such court, in each case with respect to its obligations, liabilities or any other matter under or arising out of or in connection with this Agreement; and

(viii) Each U.S. selling shareholder has the power to submit, and pursuant to this Agreement has legally and validly submitted, to the non-exclusive personal jurisdiction of any state court in the State of New York, County of New York in connection with any suit or proceeding based on or arising under this Agreement.

(g) The International Underwriters shall have received on each Closing Date an opinion and negative assurance letter of Pinheiro Neto Advogados, Brazilian counsel for the International Underwriters, dated such Closing Date, in form and substance satisfactory to the Representatives.

(h) The International Underwriters shall have received on each Closing Date an opinion and negative assurance letter of Cleary Gottlieb Steen & Hamilton LLP, counsel for the International Underwriters, dated such Closing Date, in form and substance satisfactory to the Representatives.

The opinions of counsel described in Sections 7(d), 7(e) and 7(f) above shall be rendered to the International Underwriters at the request of the Company or one or more of the Selling Stockholders, as the case may be, and shall so state therein.

(i) The International Underwriters shall have received on each Closing Date an opinion of Ziegler, Ziegler & Associates LLP, counsel for the Depositary, dated such Closing Date, in form and substance satisfactory to the Representatives, to the effect set forth in Schedule E hereto.

(j) The International Underwriters shall have received, on each of the date hereof and each Closing Date, a letter dated the date hereof or such Closing Date, as the case may be, in form and substance satisfactory to the Representatives, from PriceWaterhouseCoopers Auditores Independentes, independent public accountants, containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement and the Prospectus; provided that the letter delivered on the Closing Date shall use a "cut-off date" not earlier than the date hereof.

(k) The "lock-up" agreements, each substantially in the form of Schedule D hereto, between the Representatives and each of the Company, the officers and directors of the Company, the Selling Stockholders, TAM - Empreendimentos e Participacoes S.A. and Agropecuaria Nova Fronteira Ltda. relating to sales and certain other dispositions of Securities or certain other securities, delivered to the Representatives on or before the printing of the preliminary prospectus (red herring), shall be in full force and effect on each Closing Date.

(l) The Preferred Shares shall be listed and trading on the Nivel 2 segment of the BOVESPA, and the Company shall not have not received any notice of any proceedings relating to the delisting of the Preferred Shares from the BOVESPA. The ADSs shall have been approved for listing on the NYSE, subject only to official notice of issuance.

(m) The Brazilian Registration Statement, which has been filed by the Company with the CVM with respect to the Brazilian Offering pursuant to Instrucao CVM No. 400 of 29/12/2003 ("BRAZILIAN SECURITIES LAW"), as well as the Brazilian Prospectus, have been prepared in accordance with the Brazilian Securities Law and the regulations and rules promulgated thereunder, shall be in full force and effect and do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.

(n) The Brazilian Underwriting Agreement shall be in full force and effect.

The several obligations of the International Underwriters to purchase Optional International Securities hereunder are subject to the delivery to you on the applicable Optional Closing Date of such documents as the Representatives may reasonably request with respect to the good standing of the Company, the due authorization and issuance of the Optional International Securities to be sold on such Optional Closing Date and other matters related to the issuance of such Optional International Securities.

8. Indemnification and Contribution.

(a) The Company will indemnify and hold harmless each of the International Underwriters, Agents, their partners, members, directors, officers and their affiliates and each person, if any, who controls such International Underwriter or Agent within the meaning of Section 15 of the Act, against any losses, claims, damages or liabilities, joint or several, to which such International Underwriter or Agent may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, each Statutory Prospectus, the General Disclosure Package, the Prospectus, any Issuer Free Writing Prospectus, or each

amendment or supplement thereto, or any related preliminary prospectus, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each International Underwriter or Agent for any legal or other expenses reasonably incurred by such International Underwriter or Agent in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Company by any International Underwriter or Agent through the Representatives specifically for use therein, it being understood and agreed that the only such information furnished by any International Underwriter or Agent consists of the information described as such in subsection (c) below.

(b) Each Selling Stockholder, severally and not jointly, will indemnify and hold harmless each of the International Underwriters, Agents, their partners, members, directors, officers and their affiliates and each person, if any, who controls such International Underwriter or Agent within the meaning of Section 15 of the Act, against any losses, claims, damages or liabilities, joint or several, to which such International Underwriter or Agent may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, each Statutory Prospectus, the General Disclosure Package, the Prospectus, any Issuer Free Writing Prospectus, or any amendment or supplement thereto, or any related preliminary prospectus, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but only with reference to information relating to such Selling Stockholder furnished to the Company by or on behalf of such Selling Stockholder expressly for use in such Registration Statement, Statutory Prospectus, General Disclosure Package, Prospectus, Issuer Free Writing Prospectus, or amendment or supplement thereto, or any related preliminary prospectus, and will reimburse each International Underwriter or Agent for any legal or other expenses reasonably incurred by such International Underwriter or Agent in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that no such Selling Stockholder shall be liable under this Section 8(b) to make any indemnification in excess of the amount received by it from the proceeds of the sale of the Securities (after deducting commissions but prior to deducting expenses).

(c) Each of the International Underwriters or Agents will severally and not jointly indemnify and hold harmless the Company, its directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the Act, and each Selling Stockholder against any losses, claims, damages or liabilities to which the Company or such Selling Stockholder may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, each Statutory Prospectus, the General Disclosure Package, the Prospectus, any Issuer Free Writing Prospectus, or any amendment or supplement thereto, or any related preliminary prospectus, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such International Underwriter or Agent through the Representatives specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by the Company and each Selling Stockholder in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred, it being understood and agreed that the only such information furnished by any International Underwriter or Agent consists of (i) the following information in the Prospectus furnished on behalf of each International Underwriter: the concession and reallowance figures appearing in the paragraph under the caption "Underwriting" and (ii) the following information in the Prospectus furnished on behalf of [insert name of Underwriter]: [insert description of information, such as material relationship disclosure under the caption "Underwriting"].(1)

(d) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under

(1) To be completed.

subsection (a), (b) or (c) above, notify the indemnifying party of the commencement thereof; but the failure to notify the indemnifying party shall not relieve it from any liability that it may have under subsection (a), (b) or (c) above except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided further that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party otherwise than under subsection (a), (b) or (c) above. In case any such action is brought against any indemnified party and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement (i) includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action and (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of an indemnified party.

(e) If the indemnification provided for in this Section is unavailable or insufficient to hold harmless an indemnified party under subsection (a), (b) or
(c) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a), (b) or (c) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Selling Stockholders on the one hand and the International Underwriters and Agents on the other from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Selling Stockholders on the one hand and the International Underwriters and Agents on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by the Company and the Selling Stockholders on the one hand and the International Underwriters and Agents on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company and Selling Stockholders bear to the total underwriting discounts and commissions received by the International Underwriters and Agents. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, the Selling Stockholders, the International Underwriters or the Agents and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (e). Notwithstanding the provisions of this subsection (e), no International Underwriter or Agent shall be required to contribute any amount in excess of the amount by which the total price at which the Securities underwritten or placed by it and distributed to the public were offered to the public exceeds the amount of any damages which such International Underwriter or Agent has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The International Underwriters' and Agents' obligations in this subsection (e) to contribute are several in proportion to their respective underwriting obligations and not joint.

(f) The obligations of the Company and the Selling Stockholders under this
Section shall be in addition to any liability which the Company and the Selling Stockholders may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any International Underwriter or Agent within the meaning of the Act; and the obligations of the International Underwriters and Agents under this Section shall be in addition to any liability which the respective International Underwriters or Agents may otherwise have and shall extend, upon the same terms and conditions, to each director of the Company, to each officer of the Company who has signed a Registration Statement and to each person, if any, who controls the Company within the meaning of the Act.

9. Default of International Underwriters. If any International Underwriter or International Underwriters default in their obligations to purchase Securities hereunder on either the First Closing Date or any Optional Closing Date and the aggregate number of Securities that such defaulting International Underwriter or International Underwriters agreed but failed to purchase does not exceed 10% of the total number of Securities that the International Underwriters are obligated to purchase on such Closing Date, the Representatives may make arrangements satisfactory to the Sellers for the purchase of such Securities by other persons, including any of the International Underwriters, but if no such arrangements are made by such Closing Date, the non-defaulting International Underwriters shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the Securities that such defaulting International Underwriters agreed but failed to purchase on such Closing Date. If any International Underwriter or International Underwriters so default and the aggregate number of Securities with respect to which such default or defaults occur exceeds 10% of the total number of Securities that the International Underwriters are obligated to purchase on such Closing Date and arrangements satisfactory to the Representatives and the Sellers for the purchase of such Securities by other persons are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting International Underwriter or the Sellers, except as provided in
Section 10, (provided that if such default occurs with respect to Optional Securities after the First Closing Date, this Agreement will not terminate as to the Firm Securities or any Optional Securities purchased prior to such termination). As used in this Agreement, the term "International Underwriter" includes any person substituted for an International Underwriter under this Section. Nothing herein will relieve a defaulting International Underwriter from liability for its default.

10. Expenses. Regardless of whether the transactions contemplated in this Agreement are consummated or this Agreement is terminated, the Sellers agree to pay or cause to be paid all expenses incident to the performance of the Sellers' obligations under this Agreement, including: (i) the fees, disbursements and expenses of the Sellers' counsels and the Company's accountants in connection with the registration and delivery of the Securities under the Act and all other fees or expenses in connection with the preparation and filing of the Registration Statement, the ADS Registration Statement, any preliminary prospectus, the General Disclosure Package, the Prospectus, any Issuer Free Writing Prospectuses and amendments and supplements to any of the foregoing, including all printing costs associated therewith, and the mailing and delivery of copies thereof to the International Underwriters, Agents and dealers, in the manner specified by them, (ii) all costs and expenses related to the transfer and delivery of the International Securities to the International Underwriters,
(iii) all expenses and taxes incident to (A) the deposit by the Sellers of the International Securities with the Custodian and the issuance and delivery of the ADRs evidencing the ADSs in exchange therefor by the Depositary to the Sellers, (B) the sale and delivery of the ADSs by the Sellers to or for the account of the International Underwriters, (C) the sale and delivery outside Brazil of the ADSs by the International Underwriters to each other and the initial purchasers thereof in the manner contemplated herein and (D) the placement of the Brazilian Securities by the Agents, including, in any such case, any Brazilian income, capital gains, withholding transfer or other tax (but excluding any brokerage fee and any Brazilian income tax on capital gains from the sale of the Securities and on the income of any International Underwriter whose net income is subject to tax by Brazil) asserted against an International Underwriter by reason of the purchase and sale of any Securities pursuant to this Agreement or the Intersyndicate Agreement, including without limitation any taxes referred to in Section 2(a)(xxix) above, (iv) the cost of printing or producing any Blue Sky or Legal Investment memorandum in connection with the offer and sale of the Securities under state securities laws and all expenses in connection with the qualification of the Securities for offer and sale under securities laws of various jurisdictions as provided in Section 5(a)(vi) hereof, including filing fees and the reasonable fees and disbursements of counsel for the International Underwriters in connection with such qualification and in connection with the Blue Sky or Legal Investment memorandum, (v) all filing fees incurred in connection with the review and qualification of the offering of the Securities by the National Association of Securities Dealers, Inc. (the "NASD"), (vi) all fees and expenses in connection with the preparation and filing of the registration statement on Form 8-A relating to the Preferred Shares and all costs and expenses incident to listing the Securities on the NYSE and other national securities exchanges and other foreign stock exchanges and the registration of the Securities with the CVM, (vii) the cost of printing certificates representing the Securities, (viii) the costs and charges of any transfer agent, registrar or depositary, including the fees and expenses (including fees and disbursements of counsel), if any, of the Depositary and any custodian appointed under the Deposit Agreement, other than the fees and expenses to be paid by holders of ADRs (other than the International Underwriters in connection with the initial purchase of the Securities), (ix) the costs and expenses of the Sellers relating to travel and lodging expenses of the representatives and officers of the Sellers and

one-half of the cost of any aircraft chartered in connection with the road show,
(x) the document production charges and expenses associated with preparing this Agreement, the Intersyndicate Agreement, the Deposit Agreement and any other documents in connection with the offering, purchase and sale of the Securities and (xi) all other costs and expenses incident to the performance of the obligations of the Sellers hereunder for which provision is not otherwise made in this Section. It is understood, however, that except as provided in this Section, Sections 8 and 9 above, the International Underwriters will pay all of their costs and expenses, including fees and disbursements of their counsel, stock transfer taxes payable on resale of any of the Securities by them and any advertising expenses connected with any offers they may make.

The provisions of this Section shall not supersede or otherwise affect any agreement that the Sellers may otherwise have for the allocation of such expenses among themselves.

11. Survival of Certain Representations and Obligations. The respective indemnities, agreements, representations, warranties and other statements of the Sellers or their officers and of the several International Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of any International Underwriter, any Seller or any of their respective representatives, officers or directors or any controlling person, and will survive delivery of and payment for the Securities. If this Agreement is terminated pursuant to Section 9 or if for any reason the purchase of the Securities by the International Underwriters is not consummated, the Sellers shall remain responsible for the expenses to be paid or reimbursed by them pursuant to Section 10 and the respective obligations of the Sellers and the International Underwriters pursuant to Section 8 shall remain in effect, and if any Securities have been purchased hereunder the representations and warranties in Section 2 and all obligations under Section 5 shall also remain in effect. If the purchase of the Securities by the International Underwriters is not consummated for any reason other than solely because of the termination of this Agreement pursuant to Section 9 or the occurrence of any event specified in clause (II), (III), (IV), (V), (VI) or (VII) of Section 7(b)(iii), the Sellers will jointly and severally, reimburse the International Underwriters for all out-of-pocket expenses (including fees and disbursements of counsel) reasonably incurred by them in connection with the offering of the Securities.

12. Notices. All communications hereunder will be in writing and (a) if sent to the International Underwriters, will be mailed, delivered or telegraphed and confirmed to the Representatives, c/o Credit Suisse Securities (USA) LLC, Eleven Madison Avenue, New York, NY 10010-3629, Attention: Transactions Advisory Group (telephone: +1-212-702-4103; facsimile: +1-212-702-4110), and Pactual Capital Corporation, 527 Madison Av., 11th Floor, New York, NY 10022, Attention:
Christina S. Alves de Castro (telephone: +1-212-702-4103; facsimile:
+1-212-702-4110), (b) if sent to the Company, will be mailed, delivered or telegraphed and confirmed to it at at Avenida Jurandir, 856, lote 4, hangar 7, Sao Paulo, SP, Attention: Mr. Libano Miranda Barroso (telephone:
+55-11-5582-8817; facsimile: +55-11-5582-8243), or, (c) if sent to the Selling Stockholders or any of them, will be mailed, delivered or telegraphed and confirmed to the addresses set forth opposite such Selling Stockholders' names on Schedule B; provided, however, that any notice to an International Underwriter pursuant to Section 8 will be mailed, delivered or telegraphed and confirmed to such International Underwriter.

13. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers and directors and controlling persons referred to in Section 8, and no other person will have any right or obligation hereunder.

14. Representation. The Representatives will act for the several International Underwriters in connection with the transactions contemplated by this Agreement, and any action under this Agreement taken by the Representatives will be binding upon all the International Underwriters.

15. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement.

16. Absence of Fiduciary Relationship. The Sellers acknowledge and agree that:

(a) The International Underwriters have been retained solely to act as underwriters in connection with the sale of the Securities and that no fiduciary, advisory or agency relationship between the Sellers, on the one hand, and

the International Underwriters, on the other, has been created in respect of any of the transactions contemplated by this Agreement, irrespective of whether the International Underwriters have advised or are advising the Sellers on other matters;

(b) the price of the Securities set forth in this Agreement was established by the Sellers following discussions and arms-length negotiations with the International Underwriters and the Sellers are capable of evaluating and understanding and understand and accepts the terms, risks and conditions of the transactions contemplated by this Agreement;

(c) They have been advised that the International Underwriters and their affiliates are engaged in a broad range of transactions which may involve interests that differ from those of the Sellers and that the International Underwriters have no obligation to disclose such interests and transactions to the Sellers by virtue of any fiduciary, advisory or agency relationship; and

(d) They waive, to the fullest extent permitted by law, any claims they may have against the International Underwriters for breach of fiduciary duty or alleged breach of fiduciary duty and agree that the International Underwriters shall have no liability (whether direct or indirect) to the Sellers in respect of such a fiduciary duty claim or to any person asserting a fiduciary duty claim on behalf of or in right of any of the Sellers, including stockholders, employees or creditors of the Company.

17. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

The Sellers hereby submit to the non-exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. Each of the Company and [Noemy Almeida Oliveira Amaro, Maria Claudia Oliveira Amaro Demenato, Mauricio Rolim Amaro, Marcos Adolfo Tadeu Senamo Amaro, Joao Francisco Amaro,] Aerosystem S.A. Empreendimentos e Participacoes and Brasil Private Equity Fundo de Investimento em Participacoes irrevocably appoints National Corporate Research Ltd. as its authorized agent in the Borough of Manhattan in The City of New York upon which process may be served in any such suit or proceeding, and agree that service of process upon such agent, and written notice of said service to such Sellers by the person serving the same to the address provided in Section 12, shall be deemed in every respect effective service of process upon the Sellers, as the case may be, in any such suit or proceeding. Each of the Company and [Noemy Almeida Oliveira Amaro, Maria Claudia Oliveira Amaro Demenato, Mauricio Rolim Amaro, Marcos Adolfo Tadeu Senamo Amaro, Joao Francisco Amaro,] Aerosystem S.A.
Empreendimentos e Participacoes and Brasil Private Equity Fundo de Investimento em Participacoes further agrees to take any and all action as may be necessary to maintain such designation and appointment of such agent in full force and effect for a period of seven years from the date of this Agreement.

The obligation of the Sellers in respect of any sum due to any International Underwriter shall, notwithstanding any judgment in a currency other than United States dollars, not be discharged until the first business day, following receipt by such International Underwriter of any sum adjudged to be so due in such other currency, on which (and only to the extent that) such International Underwriter may in accordance with normal banking procedures purchase United States dollars with such other currency; if the United States dollars so purchased are less than the sum originally due to such International Underwriter hereunder, the Sellers agree, as a separate obligation and notwithstanding any such judgment, to indemnify such International Underwriter against such loss. If the United States dollars so purchased are greater than the sum originally due to such International Underwriter hereunder, such International Underwriter agrees to pay to the Sellers an amount equal to the excess of the dollars so purchased over the sum originally due to such International Underwriter hereunder.

If the foregoing is in accordance with the Company's and Selling Stockholders' understanding of our agreement, kindly sign and return to the Representatives one of the counterparts hereof, whereupon it will become a binding agreement among the Company, the Selling Stockholders and the several International Underwriters in accordance with its terms.

                                Very truly yours,

CREDIT SUISSE SECURITIES (USA) LLC      PACTUAL CAPITAL CORPORATION


By:                                     By:
    ---------------------------------       ------------------------------------
Name:                                   Name:
      -------------------------------         ----------------------------------
Title:                                  Title:
       ------------------------------          ---------------------------------

The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.


TAM S.A.                                AEROSYSTEM S.A.
                                        EMPREENDIMENTOS E PARTICIPACOES


By:                                     By:
    ---------------------------------       ------------------------------------
Name:                                   Name:
      -------------------------------         ----------------------------------
Title:                                  Title:
       ------------------------------          ---------------------------------


By:                                     By:
    ---------------------------------       ------------------------------------
Name:                                   Name:
      -------------------------------         ----------------------------------
Title:                                  Title:
       ------------------------------          ---------------------------------


BRAZILIAN EQUITY INVESTMENTS III, LLC   BRASIL PRIVATE EQUITY FUNDO DE
                                        INVESTIMENTO EM PARTICIPACOES


By:                                     By:
    ---------------------------------       ------------------------------------
Name:                                   Name:
      -------------------------------         ----------------------------------
Title:                                  Title:
       ------------------------------          ---------------------------------


LATIN AMERICA CAPITAL PARTNERS II, LLC  BRAZILIAN EQUITY LLC


By:                                     By:
    ---------------------------------       ------------------------------------
Name:                                   Name:
      -------------------------------         ----------------------------------
Title:                                  Title:
       ------------------------------          ---------------------------------

NOEMY ALMEIDA OLIVEIRA AMARO            LATIN AMERICA CAPITAL PARTNERS PIV, LLC


By:                                     By:
    ---------------------------------       ------------------------------------
Name:                                   Name:
      -------------------------------         ----------------------------------
Title:                                  Title:
       ------------------------------          ---------------------------------


MAURICIO ROLIM AMARO                    MARIA CLAUDIA OLIVEIRA AMARO DEMENATO


By:                                     By:
    ---------------------------------       ------------------------------------
Name:                                   Name:
      -------------------------------         ----------------------------------
Title:                                  Title:
       ------------------------------          ---------------------------------


JOAO FRANCISCO AMARO                    MARCOS ADOLFO TADEU SENAMO AMARO


By:                                     By:
    ---------------------------------       ------------------------------------
Name:                                   Name:
      -------------------------------         ----------------------------------
Title:                                  Title:
       ------------------------------          ---------------------------------

Witnessed by:


-------------------------------------   ----------------------------------------
Name:                                   Name:
      -------------------------------         ----------------------------------
ID:                                     ID:
    ---------------------------------       ------------------------------------

STATE OF NEW YORK    )
                     ) ss:
COUNTY OF NEW YORK   )

On this __ day of _____________, 2005, before me, a notary public within and for said county, personally appeared ______________________________________, to me personally known, who being duly sworn, did say that he/she is a ____________________________________________ of Credit Suisse Securities (USA) LLC, the person described in and who executed the foregoing instrument, and acknowledge said instrument to be the free act and deed of said corporation.

Notary Public

STATE OF NEW YORK    )
                     ) ss:
COUNTY OF NEW YORK   )

On this __ day of _____________, 2005, before me, a notary public within and for said county, personally appeared ________________________________________, to me personally known, who being duly sworn, did say that he/she is a _______________________________________________ of Pactual Capital Corporation, the person described in and who executed the foregoing instrument, and acknowledge said instrument to be the free act and deed of said corporation.

Notary Public

SCHEDULE A

                                                    NUMBER OF FIRM INTERNATIONAL
INTERNATIONAL UNDERWRITERS                           SECURITIES TO BE PURCHASED
--------------------------                          ----------------------------
Credit Suisse Securities (USA) LLC
Pactual Capital Corporation
Merrill Lynch Incorporated, Pierce, Fenner & Smith

Total

                                                          NUMBER OF BRAZILIAN
AGENTS                                                SECURITIES TO BE PURCHASED
------                                                --------------------------
[Name]
[Name]
[Name]

SCHEDULE B

                                                  ADDRESS FOR   NUMBER OF FIRM INTERNATIONAL
SELLING STOCKHOLDER                                  NOTICE        SECURITIES TO BE SOLD
-------------------                               -----------   ----------------------------
Aerosystem S.A. Empreendimentos e Participacoes

Brasil Private Equity Fundo de Investimento
em Participacoes

Brazilian Equity Investments III LLC

Brazilian Equity LLC

Latin America Capital Partners II LLC

Latin America Capital Partners PIV LLC

Noemy Almeida Oliveira Amaro

Maria Claudia Oliveira Amaro Demenato

Mauricio Rolim Amaro

Marcos Adolfo Tadeu Senamo Amaro

Joao Francisco Amaro

TOTAL

SCHEDULE C

GENERAL USE ISSUER FREE WRITING PROSPECTUS

SCHEDULE D

TAM S.A.

FORM OF LOCK - UP AGREEMENT

_______________, 2005

[TAM S.A.]
[TAM EMPREENDIMENTOS E PARTICIPACOES S.A.]
[AEROSYSTEM S.A. EMPREENDIMENTOS E PARTICIPACOES]
[AGROPECUARIA NOVA FRONTEIRA LTDA.]
[BRASIL PRIVATE EQUITY FUNDO DE INVESTIMENTO EM PARTICIPACOES]
[BRAZILIAN EQUITY INVESTMENTS III LLC]
[BRAZILIAN EQUITY LLC]
[LATIN AMERICA CAPITAL PARTNERS II LLC]
[LATIN AMERICA CAPITAL PARTNERS PIV LLC]
[NOEMY ALMEIDA OLIVEIRA AMARO]
[MARIA CLAUDIA OLIVEIRA AMARO DEMENATO]
[MAURICIO ROLIM AMARO]
[MARCOS ADOLFO TADEU SENAMO AMARO]
[JOAO FRANCISCO AMARO]
[NAME OF DIRECTOR OR OFFICER OF THE COMPANY]
[Address]
Sao Paulo, SP
Brazil

Ladies and Gentlemen:

TAM S.A., a sociedade por acoes incorporated under the laws of the Federative Republic of Brazil ("COMPANY"), its stockholders [Noemy Almeida Oliveira Amaro, Maria Claudia Oliveira Amaro Demenato, Mauricio Rolim Amaro, Marcos Adolfo Tadeu Senamo Amaro, Joao Francisco Amaro, ]Aerosystem S.A. Empreendimentos e Participacoes, Brasil Private Equity Fundo de Investimento em Participacoes, Brazilian Equity Investments III LLC, Brazilian Equity LLC, Latin America Capital Partners II LLC and Latin America Capital Partners PIV LLC (collectively, "SELLING STOCKHOLDERS") propose to enter into an Underwriting and Agency Agreement ("UNDERWRITING AGREEMENT") with Credit Suisse Securities (USA) LLC and Pactual Capital Corporation, as representatives (collectively, "REPRESENTATIVES") of the several international underwriters named in Schedule A to the Underwriting Agreement (collectively, "INTERNATIONAL UNDERWRITERS"), providing for a public offering of up to [-] preferred shares (acoes preferenciais) of the Company ("UNDERLYING SHARES"), all of which may be deposited pursuant to a custody agreement to be entered into among the Company, the Selling Stockholders, [-], as depositary, and, [-], as custodian, and delivered in the form of American Depositary Shares ("ADSS") at the International Underwriters' election.

The Company and the Selling Stockholders also propose to enter into a Contrato de Coordenacao e Colocacao de Acoes Preferenciais de Emissao da TAM S.A. ("BRAZILIAN UNDERWRITING AGREEMENT") with [Names of Brazilian Underwriters] (collectively, "BRAZILIAN UNDERWRITERS") and Companhia Brasileira de Liquidacao e Custodia, providing for a public distribution in Brazil of up to [_____] preferred shares (acoes preferenciais) ("BRAZILIAN SHARES") to be sold by the Company and the Selling Stockholders.

Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Underwriting Agreement.

To induce the International Underwriters and the Agents to continue their efforts in connection with the offering, [name of Undersigned], [a stockholder of the Company / title in case of Director or Officer of the Company] (hereinafter "UNDERSIGNED"), hereby agrees pursuant to this Lock-Up Agreement ("AGREEMENT") that, without the prior written consent of the Representatives on behalf of the International Underwriters and the Agents, it will not, during the period beginning on the date hereof and continuing to and including the date 180 days after the date of execution of the Underwriting Agreement ("LOCK-UP PERIOD"), (i) issue, offer, sell, contract to sell, pledge, loan, grant any option to purchase, make any short sale or otherwise dispose of, directly or indirectly, or grant any rights (such action, a "TRANSFER") or file or cause to be filed a registration statement pursuant to the Securities Act or Brazilian laws, in all cases with respect to any shares of the Company ("STOCK") newly issued or held by the Undersigned on the date hereof, or any options or warrants newly issued or held by the Undersigned on the date hereof to purchase any shares of Stock, or any securities newly issued or held by the Undersigned on the date hereof convertible into or exchangeable for, or that represent the right to receive or subscribe for, shares of Stock, issued or owned directly by the Undersigned or with respect to which the Undersigned has beneficial ownership under any applicable laws or regulations under the laws of the Federative Republic of Brazil (collectively "UNDERSIGNED'S SECURITIES"), (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of Stock or any securities convertible into or exercisable or exchangeable for Stock, or warrants or other rights to purchase Stock, whether any such transaction is to be settled by delivery of Stock or such other securities, in cash or otherwise, or (iii) publicly announce an intention to effect any transaction specified in clause (i) or (ii) above.

If (1) during the last 17 days of the Lock-Up Period, the Company releases earnings results or material news or a material event relating to the Company occurs or (2) prior to the expiration of the Lock-Up Period, the Company announces that it will release earnings results during the 16-day period beginning on the last day of the Lock-Up Period, then in each case the Lock-Up Period will be extended until the expiration of the 18-day period beginning on the date of release of the earnings results or the occurrence of the material news or material event, as applicable, unless the Representatives waive, in writing, such extension. The Company will provide the Representatives with notice of any announcement described in clause (2) of the preceding sentence that gives rise to an extension of the Lock-Up Period.

The foregoing restrictions are expressly agreed to preclude the Undersigned from engaging in any hedging or other transaction that is designed to or that reasonably could be expected to lead to or result in an issuance of new Stock or sale or disposition of the Undersigned's Securities even if the Undersigned's Securities would be disposed of by someone other than the Undersigned. Such prohibited hedging or other transactions would include without limitation any short sale or any purchase, sale or grant of any right (including, without limitation, any put or call option) with respect to any of the Undersigned's Securities or with respect to any security that includes, relates to, or derives any significant part of its value from the Undersigned's Securities.

Any transfer by the Undersigned of Undersigned's Securities that fails to comply with the restrictions described herein shall be null and void. The Company hereby commits to have the registration agent for its Stock record the restrictions described herein in the appropriate share registry of the Company.

Notwithstanding the foregoing, the following transfers shall be permitted (collectively, "PERMITTED TRANSFERS"): (1) a transfer by the Undersigned to any of its affiliates or stockholders; (2) a transfer among the affiliates or stockholders of the Undersigned; (3) a transfer by the Undersigned of one of the Undersigned's Securities to an individual solely for the purpose of making him/her eligible to become a director of the Company; (4) if the Undersigned is a director of the Company and is being removed or is leaving office, a transfer by the Undersigned of one of the Undersigned's Securities to the Company's stockholder which appointed the Undersigned as Company's director;
(5) if the Undersigned is the Company, the issue, by the Company, of Stock in connection with stock option plans to its employees and other persons which contribute with the Company's business; (6) a loan, by the Undersigned, through Companhia Brasileira de Liquidacao e Custodia, of a certain number of Undersigned's Securities as determined by the Brazilian Underwriters, in order to provide liquidity to the market in connection with the settlement of transactions with Stock carried out on [date]; and (7) a loan, by the

Undersigned to the International Underwriters or Brazilian Underwriters (as the case may be) or to any entity indicated by the Representatives, of a certain number of Undersigned's Securities as determined by the International Underwriters, Brazilian Underwriters or Representatives, as the case may be, in order to allow for the stabilization of the Stock as provided in the Brazilian Underwriting Agreement or the Prospectus. Upon the occurrence of a Permitted Transfer, the relevant transferor shall (1) immediately inform, in writing, the Representatives of the occurrence of such Permitted Transfer and (2) cause the relevant transferee to agree to formally adhere in writing to this Agreement. The Company shall cause the registration agent for its Stock (i) to make the necessary adjustments in its records upon the occurrence of a Permitted Transfer, so that the restrictions described herein continue in full force and effect; and (ii) to refrain from recording any transfer that is not a Permitted Transfer.

Except as otherwise disclosed in the Registration Statement or Prospectus, the Undersigned now has, and for the duration of this Agreement will have, good and marketable title to the Undersigned's Securities, free and clear of all liens, encumbrances and claims whatsoever. The Undersigned also agrees and consents to the entry of stop transfer instructions with the Company's registrar against the transfer of the Undersigned's Securities except in compliance with the foregoing restrictions.

The Undersigned further understands that this Agreement is irrevocable and shall be binding upon the Undersigned's heirs, legal representatives, successors and assigns. If for any reason the Underwriting Agreement or the Brazilian Underwriting Agreement shall terminate prior to their stated maturity, this Agreement shall likewise terminate.

This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

                                        Very truly yours,

CREDIT SUISSE SECURITIES (USA) LLC      PACTUAL CAPITAL CORPORATION


By:                                     By:
    ---------------------------------       ------------------------------------
Name:                                   Name:
      -------------------------------         ----------------------------------
Title:                                  Title:
       ------------------------------          ---------------------------------


Agreed, confirmed and accepted
as of the date first above written.

[NAME OF UNDERSIGNED]


By:
    ---------------------------------
Name:
      -------------------------------
Title:
       ------------------------------

SCHEDULE E

FORM OF OPINION OF [_____]

Exhibit 4.1

TAM S.A.

AND

JPMORGAN CHASE BANK, N.A.,
As Depositary

AND

HOLDERS OF AMERICAN DEPOSITARY RECEIPTS

Deposit Agreement

Dated as of March __, 2006

TABLE OF CONTENTS

                                                                            Page
                                                                            ----
PARTIES .................................................................     1
RECITALS ................................................................     1

Section 1.  Certain Definitions
       (a)  ADR Register ................................................     1
       (b)  ADRs; Direct Registration ADRs ..............................     1
       (c)  ADS .........................................................     1
       (d)  Custodian ...................................................     1
       (e)  Deliver, execute, issue et al ...............................     1
       (f)  Delivery Order ..............................................     1
       (g)  Deposited Securities ........................................     1
       (h)  Direct Registration System ..................................     1
       (i)  Holder ......................................................     2
       (j)  Securities Act of 1933  .....................................     2
       (k)  Securities Exchange Act of 1934  ............................     2
       (l)  Shares ......................................................     2
       (m)  Transfer Office .............................................     2
       (n)  Withdrawal Order ............................................     2
Section 2.  ADRs ........................................................     2
Section 3.  Deposit of Shares ...........................................     3
Section 4.  Issue of ADRs ...............................................     3
Section 5.  Distributions on Deposited Securities .......................     4
Section 6.  Withdrawal of Deposited Securities ..........................     4
Section 7.  Substitution of ADRs ........................................     4
Section 8.  Cancellation and Destruction of ADRs ........................     4
Section 9.  The Custodian ...............................................     4
Section 10. Co-Registrars and Co-Transfer Agents ........................     5
Section 11. Lists of Holders ............................................     5
Section 12. Depositary's Agents .........................................     5
Section 13. Successor Depositary ........................................     5
Section 14. Reports .....................................................     5
Section 15. Additional Shares ...........................................     6
Section 16. Indemnification .............................................     6
Section 17. Notices .....................................................     7
Section 18. Miscellaneous ...............................................     7
Section 19. Consent to Jurisdiction .....................................     7
TESTIMONIUM .............................................................     9

SIGNATURES ..............................................................     9

-i-

EXHIBIT A

                                                                            Page
                                                                            ----
FORM OF FACE OF ADR .....................................................    A-1

   Introductory Paragraph ...............................................    A-1
   (1)   Issuance of ADRs ...............................................    A-2
   (2)   Withdrawal of Deposited Securities .............................    A-2
   (3)   Transfers of ADRs ..............................................    A-2
   (4)   Certain Limitations ............................................    A-3
   (5)   Taxes ..........................................................    A-4
   (6)   Disclosure of Interests ........................................    A-4
   (7)   Charges of Depositary ..........................................    A-5
   (8)   Available Information ..........................................    A-6
   (9)   Execution ......................................................    A-6

   Signature of Depositary ..............................................    A-6

   Address of Depositary's Office .......................................    A-6

FORM OF REVERSE OF ADR ..................................................    A-7
   (10)  Distributions on Deposited Securities ..........................    A-7
   (11)  Record Dates ...................................................    A-8
   (12)  Voting of Deposited Securities .................................    A-8
   (13)  Changes Affecting Deposited Securities .........................    A-8
   (14)  Exoneration ....................................................    A-9
   (15)  Resignation and Removal of Depositary; the Custodian............    A-9
   (16)  Amendment ......................................................   A-10
   (17)  Termination ....................................................   A-10
   (18)  Appointment ....................................................   A-11

-ii-

DEPOSIT AGREEMENT dated as of March, 2006 (the "Deposit Agreement") among TAM S.A. and its successors (the "Company"), JPMORGAN CHASE BANK, N.A., as depositary hereunder (the "Depositary"), and all holders from time to time of American Depositary Receipts issued hereunder ("ADRs") evidencing American Depositary Shares ("ADSs") representing deposited Shares (defined below). The Company hereby appoints the Depositary as depositary for the Deposited Securities and hereby authorizes and directs the Depositary to act in accordance with the terms set forth in this Deposit Agreement. All capitalized terms used herein have the meanings ascribed to them in Section 1 or elsewhere in this Deposit Agreement. The parties hereto agree as follows:

1. Certain Definitions.

(a) "ADR Register" is defined in paragraph (3) of the form of ADR.

(b) "ADRs" mean the American Depositary Receipts executed and delivered hereunder. ADRs may be either in physical certificated form or Direct Registration ADRs. ADRs in physical certificated form, and the terms and conditions governing the Direct Registration ADRs (as hereinafter defined), shall be substantially in the form of Exhibit A annexed hereto (the "form of ADR"). The term "Direct Registration ADR" means an ADR, the ownership of which is recorded on the Direct Registration System. References to "ADRs" shall include certificated ADRs and Direct Registration ADRs, unless the context otherwise requires. The form of ADR is hereby incorporated herein and made a part hereof; the provisions of the form of ADR shall be binding upon the parties hereto.

(c) Subject to paragraph (13) of the form of ADR, each "ADS" evidenced by an ADR represents the right to receive one Share and a pro rata share in any other Deposited Securities.

(d) "Custodian" means the agent or agents of the Depositary (singly or collectively, as the context requires) and any additional or substitute Custodian appointed pursuant to Section 9.

(e) The terms "deliver", "execute", "issue", "register", "surrender", "transfer" or "cancel", when used with respect to Direct Registration ADRs, shall refer to an entry or entries or an electronic transfer or transfers in the Direct Registration System, and, when used with respect to ADRs in physical certificated form, shall refer to the physical delivery, execution, issuance, registration, surrender, transfer or cancellation of certificates representing the ADRs.

(f) "Delivery Order" is defined in Section 3.

(g) "Deposited Securities" as of any time means all Shares at such time deposited under this Deposit Agreement and any and all other Shares, securities, property and cash at such time held by the Depositary or the Custodian in respect or in lieu of such deposited Shares and other Shares, securities, property and cash.

(h) "Direct Registration System" means the system for the uncertificated registration of ownership of securities established by The Depository Trust Company ("DTC") and utilized by

the Depositary pursuant to which the Depositary may record the ownership of ADRs without the issuance of a certificate, which ownership shall be evidenced by periodic statements issued by the Depositary to the Holders entitled thereto. For purposes hereof, the Direct Registration System shall include access to the Profile Modification System maintained by DTC which provides for automated transfer of ownership between DTC and the Depositary.

(i) "Holder" means the person or persons in whose name an ADR is registered on the ADR Register.

(j) "Securities Act of 1933" means the United States Securities Act of 1933, as from time to time amended.

(k) "Securities Exchange Act of 1934" means the United States Securities Exchange Act of 1934, as from time to time amended.

(l) "Shares" mean the preferred shares of the Company, and shall include the rights to receive Shares specified in paragraph (1) of the form of ADR.

(m) "Transfer Office" is defined in paragraph (3) of the form of ADR.

(n) "Withdrawal Order" is defined in Section 6.

2. ADRs. (a) ADRs in certificated form shall be engraved, printed or otherwise reproduced at the discretion of the Depositary in accordance with its customary practices in its American depositary receipt business, or at the request of the Company typewritten and photocopied on plain or safety paper, and shall be substantially in the form set forth in the form of ADR, with such changes as may be required by the Depositary or the Company to comply with their obligations hereunder, any applicable law, regulation or usage or to indicate any special limitations or restrictions to which any particular ADRs are subject. ADRs may be issued in denominations of any number of ADSs. ADRs in certificated form shall be executed by the Depositary by the manual or facsimile signature of a duly authorized officer of the Depositary. ADRs in certificated form bearing the manual or facsimile signature of anyone who was at the time of execution a duly authorized officer of the Depositary shall bind the Depositary, notwithstanding that such officer has ceased to hold such office prior to the delivery of such ADRs.

(b) Direct Registration ADRs. Notwithstanding anything in this Deposit Agreement or in the form of ADR to the contrary, ADSs shall be evidenced by Direct Registration ADRs, unless certificated ADRs are specifically requested by the Holder.

(c) Holders shall be bound by the terms and conditions of this Deposit Agreement and of the form of ADR, regardless of whether their ADRs are Direct Registration ADRs or certificated ADRs.

3. Deposit of Shares. In connection with the deposit of Shares hereunder, the Depositary or the Custodian may require the following in form satisfactory to it: (a) a written order directing the Depositary to issue to, or upon the written order of, the person or persons designated in such order a Direct Registration ADR or ADRs evidencing the number of ADSs representing such deposited Shares (a "Delivery Order"); (b) proper endorsements or duly executed instruments of transfer in respect of such deposited Shares; (c) instruments assigning to the Custodian or its nominee any distribution on or in respect of such deposited Shares or indemnity therefor; and (d) proxies entitling the Custodian to vote such deposited Shares. As soon as practicable after the Custodian receives Deposited Securities pursuant to any such deposit or pursuant to paragraph (10) or (13) of the form of ADR, the Custodian shall present such Deposited Securities for registration of transfer into the name of the Custodian or its nominee, to the extent such registration is practicable, at the cost and expense of the person making such deposit (or for whose benefit such deposit is made) and shall obtain evidence satisfactory to it of such registration. Deposited Securities shall be held by the Custodian for the account and to the order of the Depositary at such place or places and in such manner as the Depositary shall determine. Deposited Securities may be delivered by the Custodian to any person only under the circumstances expressly contemplated in this Deposit Agreement. To the extent that the provisions of or governing the Shares make delivery of certificates therefor impracticable, Shares may be deposited hereunder by such delivery thereof as the Depositary or the Custodian may reasonably accept, including, without limitation, by causing them to be credited to an account maintained by the Custodian for such purpose with the Company or an accredited intermediary, such as a bank, acting as a registrar for the Shares, together with delivery of the documents, payments and Delivery Order referred to herein to the Custodian or the Depositary.

The Depositary and the Custodian shall comply with reasonable written instructions from the Company or its Brazilian counsel to maintain registration of the amount of Deposited Securities with Banco Central do Brasil (the "Central Bank") and to furnish to the Central Bank and to the Comissao de Valores Mobiliarios (the "Securities Commission"), whenever reasonably required, information or documents related to this Deposit Agreement, the ADRs and the Deposited Securities and distributions thereon, and may rely, and shall be fully protected in relying, on such written instructions from the Company or its Brazilian counsel in respect of such registration, information and documents.

4. Issue of ADRs. After any such deposit of Shares, the Custodian shall notify the Depositary of such deposit and of the information contained in any related Delivery Order by letter, first class airmail postage prepaid, or, at the request, risk and expense of the person making the deposit, by cable, telex or facsimile transmission. After receiving such notice from the Custodian, the Depositary, subject to this Deposit Agreement, shall properly issue at the Transfer Office, to or upon the order of any person named in such notice, an ADR or ADRs registered as requested and evidencing the aggregate ADSs to which such person is entitled.

5. Distributions on Deposited Securities. To the extent that the Depositary determines in its reasonable discretion that any distribution pursuant to paragraph (10) of the form of ADR is not practicable with respect to any Holder, the Depositary may make such distribution as it so deems practicable, including the distribution of foreign currency, securities or property (or appropriate documents evidencing the right to receive foreign currency, securities or property) or the retention thereof as Deposited Securities with respect to such Holder's ADRs (without liability for interest thereon or the investment thereof).

6. Withdrawal of Deposited Securities. In connection with any surrender of an ADR for withdrawal of the Deposited Securities represented by the ADSs evidenced thereby, the Depositary may require proper endorsement in blank of such ADR (or duly executed instruments of transfer thereof in blank) and the Holder's written order directing the Depositary to cause the Deposited Securities represented by the ADSs evidenced by such ADR to be withdrawn and delivered to, or upon the written order of, any person designated in such order (a "Withdrawal Order"). Directions from the Depositary to the Custodian to deliver Deposited Securities shall be given by letter, first class airmail postage prepaid, or, at the request, risk and expense of the Holder, by cable, telex or facsimile transmission. Delivery of Deposited Securities may be made by the delivery of certificates (which, if required by law shall be properly endorsed or accompanied by properly executed instruments of transfer or, if such certificates may be registered, registered in the name of such Holder or as ordered by such Holder in any Withdrawal Order) or by such other means as the Depositary may deem practicable, including, without limitation, by transfer of record ownership thereof to an account designated in the Withdrawal Order maintained either by the Company or an accredited intermediary, such as a bank, acting as a registrar for the Deposited Securities.

7. Substitution of ADRs. The Depositary shall execute and deliver a new Direct Registration ADR in exchange and substitution for any mutilated certificated ADR upon cancellation thereof or in lieu of and in substitution for such destroyed, lost or stolen certificated ADR, unless the Depositary has notice that such ADR has been acquired by a bona fide purchaser, upon the Holder thereof filing with the Depositary a request for such execution and delivery and a sufficient indemnity bond and satisfying any other reasonable requirements imposed by the Depositary.

8. Cancellation and Destruction of ADRs. All ADRs surrendered to the Depositary shall be cancelled by the Depositary. The Depositary is authorized to destroy ADRs in certificated form so cancelled in accordance with its customary practices.

9. The Custodian. Any Custodian in acting hereunder shall be subject to the directions of the Depositary and shall be responsible solely to it. The Depositary may from time to time appoint one or more agents to act for it as Custodian hereunder. Each Custodian so appointed (other than JPMorgan Chase Bank, N.A.) shall give written notice to the Company and the Depositary accepting such appointment and agreeing to be bound by the applicable terms hereof. Any Custodian may resign from its duties hereunder by at least 30 days written notice to the Depositary. The Depositary may discharge any Custodian at any time upon notice to the Custodian being discharged. Any Custodian ceasing to act hereunder as Custodian shall deliver, upon the instruction of the Depositary, all Deposited Securities held by it to a Custodian

continuing to act.

10. Co-Registrars and Co-Transfer Agents. The Depositary may appoint and remove (i) co-registrars to register ADRs and transfers, combinations and split-ups of ADRs and to countersign ADRs in accordance with the terms of any such appointment and (ii) co-transfer agents for the purpose of effecting transfers, combinations and split-ups of ADRs at designated transfer offices in addition to the Transfer Office on behalf of the Depositary. Each co-registrar or co-transfer agent (other than JPMorgan Chase Bank, N.A.) shall give notice in writing to the Company and the Depositary accepting such appointment and agreeing to be bound by the applicable terms of this Deposit Agreement.

11. Lists of Holders. The Company shall have the right to inspect transfer records of the Depositary and its agents and the ADR Register, take copies thereof and require the Depositary and its agents to supply copies of such portions of such records as the Company may request. The Depositary or its agent shall furnish to the Company promptly upon the written request of the Company, a list of the names, addresses and holdings of ADSs by all Holders as of a date that is prior to or otherwise within seven days of the Depositary's receipt of such request.

12. Depositary's Agents. The Depositary may perform its obligations under this Deposit Agreement through any agent appointed by it, provided that the Depositary shall notify the Company of such appointment and shall remain responsible for the performance of such obligations as if no agent were appointed.

13. Successor Depositary. The Depositary may at any time resign as Depositary hereunder by 60 days prior written notice of its election so to do delivered to the Company. The Depositary may at any time be removed by the Company by 60 days prior written notice of such removal. Notwithstanding anything to the contrary contained herein, in case at any time the Depositary acting hereunder shall resign or be removed, it shall continue to act as Depositary for the purpose of terminating this Deposit Agreement pursuant to paragraph (17) of the form of ADR. Any bank or trust company into or with which the Depositary may be merged or consolidated, or to which the Depositary shall transfer substantially all its American depositary receipt business, shall be the successor of the Depositary without the execution or filing of any document or any further act.

14. Reports. On or before the first date on which the Company makes any communication available to holders of Deposited Securities or any securities regulatory authority or stock exchange, by publication or otherwise, the Company shall transmit to the Depositary a copy thereof in English or with an English translation or summary. The Company has delivered to the Depositary, the Custodian and any Transfer Office, a copy of all provisions of or governing the Shares and any other Deposited Securities issued by the Company or any affiliate of the Company and existing at the date of this Deposit Agreement and, promptly upon any change thereto, the Company shall deliver to the Depositary, the Custodian and any Transfer Office, a copy (in English or with an English translation) of such provisions as so changed. The Depositary and its agents may rely upon the Company's delivery thereof for all purposes of this Deposit Agreement.

15. Additional Shares. Neither the Company nor any company controlling, controlled by or under common control with the Company shall issue additional Shares, rights to subscribe for Shares, securities convertible into or exchangeable for Shares or rights to subscribe for any such securities or shall deposit any Shares under this Deposit Agreement, except under circumstances complying in all respects with the Securities Act of 1933. The Depositary will use reasonable efforts to comply with written instructions of the Company not to accept for deposit hereunder any Shares identified in such instructions at such times and under such circumstances as may reasonably be specified in such instructions in order to facilitate the Company's compliance with securities laws in the United States.

16. Indemnification. The Company shall indemnify, defend and save harmless each of the Depositary and its agents against any loss, liability or expense (including reasonable fees and expenses of counsel) which may arise out of acts performed or omitted, in connection with the provisions of this Deposit Agreement and of the ADRs, as the same may be amended, modified or supplemented from time to time in accordance herewith (i) by either the Depositary or its agents or their respective directors, employees, agents and affiliates, except, subject to the penultimate paragraph of this Section 16, for any liability or expense directly arising out of the negligence or bad faith of the Depositary, or (ii) by the Company or any of its directors, employees, agents or affiliates.

The indemnities set forth in the preceding paragraph shall also apply to any liability or expense which may arise out of any misstatement or alleged misstatement or omission or alleged omission in any registration statement, proxy statement, prospectus (or placement memorandum), or preliminary prospectus (or preliminary placement memorandum) relating to the offer or sale of ADSs, except to the extent any such liability or expense arises out of (i) information relating to the Depositary or its agents (other than the Company), as applicable, furnished in writing by the Depositary and not changed or altered by the Company expressly for use in any of the foregoing documents or (ii) if such information is provided, the failure to state a material fact necessary to make the information provided not misleading.

Except as provided in the next succeeding paragraph, the Depositary shall indemnify, defend and save harmless the Company against any loss, liability or expense (including reasonable fees and expenses of counsel) incurred by the Company in respect of this Deposit Agreement to the extent such loss, liability or expense is due to the negligence or bad faith of the Depositary.

Notwithstanding any other provision of this Deposit Agreement or the form of ADR to the contrary, neither the Company nor the Depositary, nor any of their agents, shall be liable to the other for any indirect, special, punitive or consequential damages (collectively "Special Damages") except (i) to the extent such Special Damages arise from the gross negligence or willful misconduct of the party from whom indemnification is sought or (ii) to the extent Special Damages arise from or out of a claim brought by a third party (including, without limitation, Holders) against the Depositary or its agents, except to the extent such Special Damages arise out of the gross negligence or willful misconduct of the party seeking indemnification hereunder.

Any person seeking indemnification hereunder (an "indemnified person") shall notify the person from whom it is seeking indemnification (the "indemnifying person") of the

commencement of any indemnifiable action or claim promptly after such indemnified person becomes aware of such commencement (provided that the failure to make such notification shall not affect such indemnified person's rights to seek indemnification except to the limited extent the indemnifying person is materially prejudiced by such failure) and shall consult in good faith with the indemnifying person as to the conduct of the defense of such action or claim that may give rise to an indemnity hereunder, which defense shall be reasonable in the circumstances. No indemnified person shall compromise or settle any action or claim that may give rise to an indemnity hereunder without the consent of the indemnifying person, which consent shall not be unreasonably withheld or delayed unless (i) there is no finding or admission of any violation of law and no effect on any other claims that may be made against such other party and (ii) the sole relief provided is monetary damages that are paid in full by the party seeking the settlement

The obligations set forth in this Section 16 shall survive the termination of this Deposit Agreement and the succession or substitution of any indemnified person.

17. Notices. Notice to any Holder shall be deemed given when first mailed, first class postage prepaid, to the address of such Holder on the ADR Register or received by such Holder. Notice to the Depositary or the Company shall be deemed given when first received by it at the address or facsimile transmission number set forth in (a) or (b), respectively, or at such other address or facsimile transmission number as either may specify to the other by written notice:

(a) JPMorgan Chase Bank, N.A.

Four New York Plaza
New York, New York 10004

Attention: ADR Administration Fax: (212) 623-0079

(b) TAM S.A.

Av. Jurandir 856 - Lote 4, 1 andar
04072-000 Sao Paulo SP Brazil

Attention: General Counsel Fax: 55 11 5582 6134

18. Miscellaneous. This Deposit Agreement is for the exclusive benefit of the Company, the Depositary, the Holders, and their respective successors hereunder, and shall not give any legal or equitable right, remedy or claim whatsoever to any other person. The Holders and owners of ADRs from time to time shall be parties to this Deposit Agreement and shall be bound by all of the provisions hereof. If any such provision is invalid, illegal or unenforceable in any respect, the remaining provisions shall in no way be affected thereby. This Deposit Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one instrument.

19. Consent to Jurisdiction. The Company irrevocably agrees that any legal suit, action or proceeding against the Company brought by the Depositary or any Holder, arising out of or based upon this Deposit Agreement or the transactions contemplated hereby, may be instituted in any state or federal court in New York, New York, and irrevocably waives any objection which it may

now or hereafter have to the laying of venue of any such proceeding, and irrevocably submits to the non-exclusive jurisdiction of such courts in any such suit, action or proceeding. The Company also irrevocably agrees that any legal suit, action or proceeding against the Depositary brought by the Company, arising out of or based upon this Deposit Agreement or the transactions contemplated hereby, may only be instituted in a state or federal court in New York, New York. The Company has appointed National Corporate Research Ltd., 225 West 34th Street, Suite 910, New York, New York, as its authorized agent (the "Authorized Agent") upon which process may be served in any such action arising out of or based on this Deposit Agreement or the transactions contemplated hereby which may be instituted in any state or federal court in New York, New York by the Depositary or any Holder, and waives any other requirements of or objections to personal jurisdiction with respect thereto. The Company represents and warrants that the Authorized Agent has agreed to act as said agent for service of process, and the Company agrees to take any and all action, including the filing of any and all documents and instruments, that may be necessary to continue such appointment in full force and effect as aforesaid. Service of process upon the Authorized Agent and written notice of such service to the Company shall be deemed, in every respect, effective service of process upon the Company. If, for any reason, the Authorized Agent named above or its successor shall no longer serve as agent of the Company to receive service of process in New York, the Company shall promptly appoint a successor acceptable to the Depositary, so as to serve and will promptly advise the Depositary thereof. In the event the Company fails to continue such designation and appointment in full force and effect, the Company hereby waives personal service of process upon it and consents that any such service of process may be made by certified or registered mail, return receipt requested, directed to the Company at its address last specified for notices hereunder, and service so made shall be deemed completed five (5) days after the same shall have been so mailed. Notwithstanding the foregoing, any action based on this Agreement may be instituted by the Depositary or any Holder in any competent court in The Federative Republic of Brazil.

To the extent that the Company or any of its properties, assets or revenues may have or may hereafter be entitled to, or have attributed to it, any right of immunity, on the grounds of sovereignty or otherwise, from any legal action, suit or proceeding, from the giving of any relief in any respect thereof, from setoff or counterclaim, from the jurisdiction of any court, from service of process, from attachment upon or prior to judgment, from attachment in aid of execution or judgment, or from execution of judgment, or other legal process or proceeding for the giving of any relief or for the enforcement of any judgment, in any jurisdiction in which proceedings may at any time be commenced, with respect to its obligations, liabilities or other matter under or arising out of or in connection with the Shares or Deposited Securities, the ADSs, the ADRs or this Agreement, the Company, to the fullest extent permitted by law, hereby irrevocably and unconditionally waives, and agrees not to plead or claim, any such immunity and consents to such relief and enforcement.

IN WITNESS WHEREOF, TAM S.A. and JPMORGAN CHASE BANK, N.A. have duly executed this Deposit Agreement as of the day and year first above set forth and all holders of ADRs shall become parties hereto upon acceptance by them of ADRs issued in accordance with the terms hereof.

TAM S.A.

By:

Name:
Title:

JPMORGAN CHASE BANK, N.A.

By:

Name:
Title: Vice President

EXHIBIT A
ANNEXED TO AND INCORPORATED IN
DEPOSIT AGREEMENT

                              [FORM OF FACE OF ADR]

                                                       No. of ADSs: _____

Number _____                                           Each ADS represents
                                                       One Share

                                                       CUSIP: _____

AMERICAN DEPOSITARY RECEIPT

evidencing

AMERICAN DEPOSITARY SHARES

representing

PREFERRED SHARES

TAM S.A.

(Incorporated under the laws of The Federative Republic of Brazil)

JPMORGAN CHASE BANK, N.A., a national banking association organized under the laws of the United States of America, as depositary hereunder (the "Depositary"), hereby certifies that _____ is the registered owner (a "Holder") of _____ American Depositary Shares ("ADSs"), each (subject to paragraph (13)) representing one preferred share (including the rights to receive Shares described in paragraph (1), "Shares" and, together with any other securities, cash or property from time to time held by the Depositary in respect or in lieu of deposited Shares, the "Deposited Securities"), of TAM S.A., a corporation organized under the laws of the Federative Republic of Brazil (the "Company"), deposited under the Deposit Agreement dated as of March __, 2006 (as amended from time to time, the "Deposit Agreement") among the Company, the Depositary and all Holders from time to time of American Depositary Receipts issued thereunder ("ADRs"), each of whom by accepting an ADR becomes a party thereto. The Deposit Agreement and this ADR (which includes the provisions set forth on the reverse hereof) shall be governed by and construed in accordance with the laws of the State of New York.

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(1) Issuance of ADRs. This ADR is one of the ADRs issued under the Deposit Agreement. Subject to paragraph (4), the Depositary may so issue ADRs for delivery at the Transfer Office (defined in paragraph (3)) only against deposit with the Custodian of: (a) Shares in form satisfactory to the Custodian; (b) rights to receive Shares from the Company or any registrar, transfer agent, clearing agent or other entity recording Share ownership or transactions; or,
(c) other rights to receive Shares (until such Shares are actually deposited pursuant to (a) or (b) above, "Pre-released ADRs") only if (i) Pre-released ADRs are fully collateralized (marked to market daily) with cash or such other collateral as the Depositary deems appropriate held by the Depositary for the benefit of Holders (but such collateral shall not constitute "Deposited Securities"), (ii) each recipient of Pre-released ADRs represents and agrees in writing with the Depositary that such recipient or its customer (a) beneficially owns such Shares, (b) assigns all beneficial right, title and interest therein to the Depositary, (c) holds such Shares for the account of the Depositary and
(d) will deliver such Shares to the Custodian as soon as practicable and promptly upon demand therefor and (iii) all Pre-released ADRs evidence not more than 30% of all ADSs (excluding those evidenced by Pre-released ADRs), provided, however, that the Depositary reserves the right to change or disregard such limit from time to time as it deems appropriate. The Depositary may retain for its own account any earnings on collateral for Pre-released ADRs and its charges for issuance thereof. At the request, risk and expense of the person depositing Shares, the Depositary may accept deposits for forwarding to the Custodian and may deliver ADRs at a place other than its office. Every person depositing Shares under the Deposit Agreement represents and warrants that such Shares are validly issued and outstanding, fully paid, nonassessable and free of pre-emptive rights, that the person making such deposit is duly authorized so to do and that such Shares (A) are not "restricted securities" as such term is defined in Rule 144 under the Securities Act of 1933 unless at the time of deposit they may be freely transferred in accordance with Rule 144(k) and may otherwise be offered and sold freely in the United States or (B) have been registered under the Securities Act of 1933. Such representations and warranties shall survive the deposit of Shares and issuance of ADRs. The Depositary will not knowingly accept for deposit under the Deposit Agreement any Shares required to be registered under the Securities Act of 1933 and not so registered; the Depositary may refuse to accept for such deposit any Shares identified by the Company in order to facilitate the Company's compliance with such Act.

(2) Withdrawal of Deposited Securities. Subject to paragraphs (4) and (5), upon surrender of (i) a certificated ADR in form satisfactory to the Depositary at the Transfer Office or (ii) proper instructions and documentation in the case of a Direct Registration ADR, the Holder hereof is entitled to delivery at, or to the extent in dematerialized form from, the Custodian's office of the Deposited Securities at the time represented by the ADSs evidenced by this ADR. At the request, risk and expense of the Holder hereof, the Depositary may deliver such Deposited Securities at such other place as may have been requested by the Holder. Notwithstanding any other provision of the Deposit Agreement or this ADR, the withdrawal of Deposited Securities may be restricted only for the reasons set forth in General Instruction I.A.(1) of Form F-6 (as such instructions may be amended from time to time) under the Securities Act of 1933.

(3) Transfers of ADRs. The Depositary or its agent will keep, at a designated transfer office in the Borough of Manhattan, The City of New York (the "Transfer Office"), (a) a register (the "ADR Register") for the registration, registration of transfer, combination and split-up of

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ADRs, and, in the case of Direct Registration ADRs, shall include the Direct Registration System, which at all reasonable times will be open for inspection by Holders and the Company for the purpose of communicating with Holders in the interest of the business of the Company or a matter relating to the Deposit Agreement and (b) facilities for the delivery and receipt of ADRs. The term ADR Register includes the Direct Registration System. Title to this ADR (and to the Deposited Securities represented by the ADSs evidenced hereby), when properly endorsed (in the case of ADRs in certificated form) or upon delivery to the Depositary of proper instruments of transfer, is transferable by delivery with the same effect as in the case of negotiable instruments under the laws of the State of New York; provided that the Depositary, notwithstanding any notice to the contrary, may treat the person in whose name this ADR is registered on the ADR Register as the absolute owner hereof for all purposes and neither the Depositary nor the Company will have any obligation or be subject to any liability under the Deposit Agreement to any holder of an ADR, unless such holder is the Holder thereof. Subject to paragraphs (4) and (5), this ADR is transferable on the ADR Register and may be split into other ADRs or combined with other ADRs into one ADR, evidencing the aggregate number of ADSs surrendered for split-up or combination, by the Holder hereof or by duly authorized attorney upon surrender of this ADR at the Transfer Office properly endorsed (in the case of ADRs in certificated form) or upon delivery to the Depositary of proper instruments of transfer and duly stamped as may be required by applicable law; provided that the Depositary may close the ADR Register at any time or from time to time when deemed expedient by it or requested by the Company. At the request of a Holder, the Depositary shall, for the purpose of substituting a certificated ADR with a Direct Registration ADR, or vice versa, execute and deliver a certificated ADR or a Direct Registration ADR, as the case may be, for any authorized number of ADSs requested, evidencing the same aggregate number of ADSs as those evidenced by the certificated ADR or Direct Registration ADR, as the case may be, substituted.

(4) Certain Limitations. Prior to the issue, registration, registration of transfer, split-up or combination of any ADR, the delivery of any distribution in respect thereof, or, subject to the last sentence of paragraph (2), the withdrawal of any Deposited Securities, and from time to time in the case of clause (b)(ii) of this paragraph (4), the Company, the Depositary or the Custodian may require: (a) payment with respect thereto of (i) any stock transfer or other tax or other governmental charge, (ii) any stock transfer or registration fees in effect for the registration of transfers of Shares or other Deposited Securities upon any applicable register and (iii) any applicable charges as provided in paragraph (7) of this ADR; (b) the production of proof satisfactory to it of (i) the identity of any signatory and genuineness of any signature and (ii) such other information, including without limitation, information as to citizenship, residence, exchange control approval, beneficial ownership of any securities, compliance with applicable law, regulations, provisions of or governing Deposited Securities and terms of the Deposit Agreement and this ADR, as it may deem necessary or proper; and (c) compliance with such regulations as the Depositary may establish consistent with the Deposit Agreement and any regulations which the Depositary is informed of in writing by the Company which are deemed desirable by the Depositary, the Company or the Custodian to facilitate compliance with any applicable rules or regulations of the Banco Central do Brasil or Comissao de Valores Mobiliarios. The issuance of ADRs, the acceptance of deposits of Shares, the registration, registration of transfer, split-up or

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combination of ADRs or, subject to the last sentence of paragraph (2), the withdrawal of Deposited Securities may be suspended, generally or in particular instances, when the ADR Register or any register for Deposited Securities is closed or when any such action is deemed advisable by the Depositary.

(5) Taxes. If any tax or other governmental charge shall become payable by or on behalf of the Custodian or the Depositary with respect to this ADR, any Deposited Securities represented by the ADSs evidenced hereby or any distribution thereon, such tax or other governmental charge shall be paid by the Holder hereof to the Depositary. The Depositary may refuse to effect any registration, registration of transfer, split-up or combination hereof or, subject to the last sentence of paragraph (2), any withdrawal of such Deposited Securities until such payment is made. The Depositary may also deduct from any distributions on or in respect of Deposited Securities, or may sell by public or private sale for the account of the Holder hereof any part or all of such Deposited Securities (after attempting by reasonable means to notify the Holder hereof prior to such sale), and may apply such deduction or the proceeds of any such sale in payment of such tax or other governmental charge, the Holder hereof remaining liable for any deficiency, and shall reduce the number of ADSs evidenced hereby to reflect any such sales of Shares. In connection with any distribution to Holders, the Company will remit to the appropriate governmental authority or agency all amounts (if any) required to be withheld and owing to such authority or agency by the Company; and the Depositary and the Custodian will remit to the appropriate governmental authority or agency all amounts (if any) required to be withheld and owing to such authority or agency by the Depositary or the Custodian. If the Depositary determines that any distribution in property other than cash (including Shares or rights) on Deposited Securities is subject to any tax that the Depositary or the Custodian is obligated to withhold, the Depositary may dispose of all or a portion of such property in such amounts and in such manner as the Depositary deems necessary and practicable to pay such taxes, by public or private sale, and the Depositary shall distribute the net proceeds of any such sale or the balance of any such property after deduction of such taxes to the Holders entitled thereto. Each Holder of an ADR or an interest therein agrees to indemnify the Depositary, the Company, the Custodian and any of their respective directors, employees, agents and affiliates against, and hold each of them harmless from, any claims by any governmental authority with respect to taxes, additions to tax, penalties or interest arising out of any refund of taxes, reduced rate of withholding at source or other tax benefit obtained.

(6) Disclosure of Interests. To the extent that the provisions of or governing any Deposited Securities may require disclosure of or impose limits on beneficial or other ownership of Deposited Securities, other Shares and other securities and may provide for blocking transfer, voting or other rights to enforce such disclosure or limits, Holders and all persons holding ADRs agree to comply with all such disclosure requirements and ownership limitations and to comply with any reasonable Company instructions in respect thereof. The Company reserves the right to instruct Holders to deliver their ADSs for cancellation and withdrawal of the Deposited Securities so as to permit the Company to deal directly with the Holder thereof as a holder of Shares and Holders agree to comply with such instructions. The Depositary agrees to cooperate with the Company in its efforts to inform Holders of the Company's exercise of its rights under this

A-4

paragraph and agrees to consult with, and provide reasonable assistance without risk, liability or expense on the part of the Depositary, to the Company on the manner or manners in which it may enforce such rights with respect to any Holder.

(7) Charges of Depositary. The Depositary may charge (i) each person to whom ADSs are issued, including, without limitation, issuances against deposits of Shares, issuances in respect of Share Distributions, Rights and Other Distributions (as such terms are defined in paragraph (10)), issuances pursuant to a stock dividend or stock split declared by the Company, or issuances pursuant to a merger, exchange of securities or any other transaction or event affecting the ADSs or the Deposited Securities, and (ii) each person surrendering ADSs for withdrawal of Deposited Securities or whose ADSs are cancelled or reduced for any other reason, U.S. $5.00 for each 100 ADSs (or portion thereof) issued, delivered, reduced, cancelled or surrendered (as the case may be). The Depositary may sell (by public or private sale) sufficient securities and property received in respect of Share Distributions, Rights and Other Distributions prior to such deposit to pay such charge. The following additional charges shall be incurred by the Holders, by any party depositing or withdrawing Shares or by any party surrendering ADRs, to whom ADRs are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by the Company or an exchange of stock regarding the ADRs or the Deposited Securities or a distribution of ADRs pursuant to paragraph (10)), whichever is applicable (i) to the extent not prohibited by the rules of the primary stock exchange upon which the ADSs are listed, a fee of $0.02 or less per ADS (or portion thereof) for any Cash distribution made pursuant to the Deposit Agreement, (ii) to the extent not prohibited by the rules of the primary stock exchange upon which the ADSs are listed, a fee of $1.50 per ADR or ADRs for transfers made pursuant to paragraph (3) hereof, (iii) a fee for the distribution or sale of securities pursuant to paragraph (10) hereof, such fee being in an amount equal to the fee for the execution and delivery of ADSs referred to above which would have been charged as a result of the deposit of such securities (for purposes of this paragraph (7) treating all such securities as if they were Shares) but which securities or the net cash proceeds from the sale thereof are instead distributed by the Depositary to Holders entitled thereto, (iv) to the extent not prohibited by the rules of the primary stock exchange upon which the ADSs are listed, a fee of US$0.02 per ADS (or portion thereof) per year for the services performed by the Depositary in administering the ADRs (which fee shall be assessed against Holders as of the record date or dates set by the Depositary not more than once each calendar year and shall be payable at the sole discretion of the Depositary by billing such Holders or by deducting such charge from one or more cash dividends or other cash distributions), and (v) such fees and expenses as are incurred by the Depositary (including without limitation expenses incurred on behalf of Holders in connection with compliance with foreign exchange control regulations or any law or regulation relating to foreign investment) in delivery of Deposited Securities or otherwise in connection with the Depositary's or its Custodian's compliance with applicable law, rule or regulation. The Company will pay all other charges and expenses of the Depositary and any agent of the Depositary (except the Custodian) pursuant to agreements from time to time between the Company and the Depositary, except (i) stock transfer or other taxes and other governmental charges (which are payable by Holders or persons depositing Shares), (ii) cable, telex and facsimile transmission and delivery charges incurred at the request of persons depositing, or Holders delivering Shares, ADRs or Deposited Securities (which are payable by such persons or Holders),
(iii) transfer or registration fees for the registration or transfer of Deposited Securities on any applicable register in connection with the deposit or withdrawal of Deposited Securities (which are payable by persons depositing Shares or Holders withdrawing Deposited Securities;

A-5

there are no such fees in respect of the Shares as of the date of the Deposit Agreement), (iv) expenses of the Depositary in connection with the conversion of foreign currency into U.S. dollars (which are paid out of such foreign currency), and (v) any other charge payable by any of the Depositary, any of the Depositary's agents, including, without limitation, the custodian, or the agents of the Depositary's agents in connection with the servicing of the Shares or other Deposited Securities (which charge shall be assessed against Holders as of the record date or dates set by the depositary and shall be payable at the sole discretion of the Depositary by billing such Holders or by deducting such charge from one or more cash dividends or other cash distributions). Such charges may at any time and from time to time be changed by agreement between the Company and the Depositary.

(8) Available Information. The Deposit Agreement, the provisions of or governing Deposited Securities and any written communications from the Company, which are both received by the Custodian or its nominee as a holder of Deposited Securities and made generally available to the holders of Deposited Securities, are available for inspection by Holders at the offices of the Depositary and the Custodian and at the Transfer Office. The Depositary will distribute copies of such communications (or English translations or summaries thereof) to Holders when furnished by the Company. The Company is subject to the periodic reporting requirements of the Securities Exchange Act of 1934 and accordingly files certain reports with the United States Securities and Exchange Commission (the "Commission"). Such reports and other information may be inspected and copied at public reference facilities maintained by the Commission located at the date hereof at 100 F Street, NE, Washington, DC 20549.

(9) Execution. This ADR shall not be valid for any purpose unless executed by the Depositary by the manual or facsimile signature of a duly authorized officer of the Depositary.

Dated:

JPMORGAN CHASE BANK, N.A., as Depositary

By
Authorized Officer

The Depositary's office is located at 4 New York Plaza, New York, New York 10004.

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[FORM OF REVERSE OF ADR]

(10) Distributions on Deposited Securities. Subject to paragraphs (4) and
(5), to the extent practicable, the Depositary will distribute to each Holder entitled thereto on the record date set by the Depositary therefor at such Holder's address shown on the ADR Register, in proportion to the number of Deposited Securities (on which the following distributions on Deposited Securities are received by the Custodian) represented by ADSs evidenced by such Holder's ADRs: (a) Cash. Any U.S. dollars available to the Depositary resulting from a cash dividend or other cash distribution or the net proceeds of sales of any other distribution or portion thereof authorized in this paragraph (10) ("Cash"), on an averaged or other practicable basis, subject to (i) appropriate adjustments for taxes withheld, (ii) such distribution being impermissible or impracticable with respect to certain Holders, and (iii) deduction of the Depositary's expenses in (1) converting any foreign currency to U.S. dollars by sale or in such other manner as the Depositary may determine to the extent that it determines that such conversion may be made on a reasonable basis, (2) transferring foreign currency or U.S. dollars to the United States by such means as the Depositary may determine to the extent that it determines that such transfer may be made on a reasonable basis, (3) obtaining any approval or license of any governmental authority required for such conversion or transfer, which is obtainable at a reasonable cost and within a reasonable time and (4) making any sale by public or private means in any commercially reasonable manner. If the Company shall have advised the Depositary pursuant to the provisions of the Deposit Agreement that any such conversion, transfer or distribution can be effected only with the approval or license of the Brazilian government or any agency thereof or the Depositary shall become aware of any other governmental approval or license required therefor, the Depositary may, in its discretion, apply for such approval or license, if any, as the Company or its Brazilian counsel may reasonably instruct in writing or as the Depositary may deem desirable including, without limitation, Central Bank registration. (b) Shares. (i) Additional ADRs evidencing whole ADSs representing any Shares available to the Depositary resulting from a dividend or free distribution on Deposited Securities consisting of Shares (a "Share Distribution") and (ii) U.S. dollars available to it resulting from the net proceeds of sales of Shares received in a Share Distribution, which Shares would give rise to fractional ADSs if additional ADRs were issued therefor, as in the case of Cash. (c) Rights. (i) Warrants or other instruments in the discretion of the Depositary representing rights to acquire additional ADRs in respect of any rights to subscribe for additional Shares or rights of any nature available to the Depositary as a result of a distribution on Deposited Securities ("Rights"), to the extent that the Company timely furnishes to the Depositary evidence satisfactory to the Depositary that the Depositary may lawfully distribute the same (the Company has no obligation to so furnish such evidence), or (ii) to the extent the Company does not so furnish such evidence and sales of Rights are practicable, any U.S. dollars available to the Depositary from the net proceeds of sales of Rights as in the case of Cash, or (iii) to the extent the Company does not so furnish such evidence and such sales cannot practicably be accomplished by reason of the nontransferability of the Rights, limited markets therefor, their short duration or otherwise, nothing (and any Rights may lapse).
(d) Other Distributions. (i) Securities or property available to the Depositary resulting from any distribution on Deposited Securities other than Cash, Share Distributions and Rights ("Other Distributions"), by any means that the Depositary may deem equitable and practicable, or (ii) to the extent the Depositary deems distribution of such securities or property not to be equitable and practicable, any U.S. dollars available to the Depositary from the net proceeds of sales of Other Distributions as in the case of Cash. Such U.S. dollars available will be distributed by checks drawn on a bank

A-7

in the United States for whole dollars and cents. Fractional cents will be withheld without liability and dealt with by the Depositary in accordance with its then current practices.

(11) Record Dates. The Depositary may, after consultation with the Company if practicable, fix a record date (which, to the extent applicable, shall be as near as practicable to any corresponding record date set by the Company) for the determination of the Holders who shall be responsible for the fee assessed by the Depositary for administration of the ADR program and for any expenses provided for in paragraph (7) hereof as well as for the determination of the Holders who shall be entitled to receive any distribution on or in respect of Deposited Securities, to give instructions for the exercise of any voting rights, to receive any notice or to act in respect of other matters and only such Holders shall be so entitled or obligated.

(12) Voting of Deposited Securities. At the date of this Deposit Agreement, the Shares have only limited voting rights. As soon as practicable after receipt from the Company of notice of any meeting or solicitation of consents or proxies of holders of Shares or other Deposited Securities, as soon as practicable after receipt from the Company of notice of any meeting or solicitation of consents or proxies of holders of Shares or other Deposited Securities, the Depositary shall distribute to Holders a notice stating (a) such information as is contained in such notice and any solicitation materials, (b) that each Holder on the record date set by the Depositary therefor will, subject to any applicable provisions of Brazilan law, be entitled to instruct the Depositary as to the exercise of the voting rights, if any, pertaining to the Deposited Securities represented by the ADSs evidenced by such Holder's ADRs and (c) the manner in which such instructions may be given, including instructions to give a discretionary proxy to a person designated by the Company. Upon receipt of instructions of a Holder on such record date in the manner and on or before the date established by the Depositary for such purpose, the Depositary shall endeavor insofar as practicable and permitted under the provisions of or governing Deposited Securities to vote or cause to be voted the Deposited Securities represented by the ADSs evidenced by such Holder's ADRs in accordance with such instructions. The Depositary will not itself exercise any voting discretion in respect of any Deposited Securities. There is no guarantee that Holders generally or any Holder in particular will receive the notice described above with sufficient time to enable such Holder to return any voting instructions to the Depositary in a timely manner.

(13) Changes Affecting Deposited Securities. Subject to paragraphs (4) and
(5), the Depositary may, in its discretion, amend this ADR or distribute additional or amended ADRs (with or without calling this ADR for exchange) or cash, securities or property on the record date set by the Depositary therefor to reflect any change in par value, split-up, consolidation, cancellation or other reclassification of Deposited Securities, any Share Distribution or Other Distribution not distributed to Holders or any cash, securities or property available to the Depositary in respect of Deposited Securities from (and the Depositary is hereby authorized to surrender any Deposited Securities to any person and, irrespective of whether such Deposited Securities are surrendered or otherwise cancelled by operation of law, rule, regulation or otherwise, to sell by public or private sale any property received in connection with) any recapitalization, reorganization, merger, consolidation, liquidation, receivership, bankruptcy or sale of all or substantially all the assets of the Company, and to the extent the Depositary does not so amend this ADR or make a distribution to Holders to reflect any of the foregoing, or the net proceeds thereof, whatever cash, securities or property results from any of the foregoing shall

A-8

constitute Deposited Securities and each ADS evidenced by this ADR shall automatically represent its pro rata interest in the Deposited Securities as then constituted.

(14) Exoneration. The Depositary, the Company, their agents and each of them shall: (a) incur no liability (i) if any present or future law, rule or regulation of the United States, the Federative Republic of Brazil or any other country, or of any governmental or regulatory authority or any securities exchange or market or automated quotation system, the provisions of or governing any Deposited Securities, any present or future provision of the Company's charter, any act of God, war, terrorism or other circumstance beyond its control shall prevent, delay or subject to any civil or criminal penalty any act which the Deposit Agreement or this ADR provides shall be done or performed by it or them (including, without limitation, voting pursuant to paragraph (12) hereof), or (ii) by reason of any exercise or failure to exercise any discretion given it in the Deposit Agreement or this ADR; (b) assume no liability except to perform its obligations to the extent they are specifically set forth in this ADR and the Deposit Agreement without gross negligence or bad faith; (c) in the case of the Depositary and its agents, be under no obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any Deposited Securities or this ADR; (d) in the case of the Company and its agents hereunder be under no obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any Deposited Securities or this ADR, which in its opinion may involve it in expense or liability, unless indemnity satisfactory to it against all expense (including fees and disbursements of counsel) and liability be furnished as often as may be required; or (e) not be liable for any action or inaction by it in reliance upon the advice of or information from legal counsel, accountants, any person presenting Shares for deposit, any Holder, or any other person believed by it to be competent to give such advice or information. The Depositary, its agents and the Company may rely and shall be protected in acting upon any written notice, request, direction or other document believed by them to be genuine and to have been signed or presented by the proper party or parties. The Depositary and its agents will not be responsible for any failure to carry out any instructions to vote any of the Deposited Securities, for the manner in which any such vote is cast or for the effect of any such vote. The Depositary may rely upon instructions from the Company or its Brazilian counsel in respect of any approval or license of the Brazilian government or any agency thereof required for any currency conversion, transfer or distribution. The Depositary and its agents may own and deal in any class of securities of the Company and its affiliates and in ADRs. Notwithstanding anything to the contrary set forth in the Deposit Agreement or an ADR, the Depositary and its agents may fully respond to any and all demands or requests for information maintained by or on its behalf in connection with the Deposit Agreement, any Holder or Holders, any ADR or ADRs or otherwise related hereto to the extent such information is requested or required by or pursuant to any lawful authority, including without limitation laws, rules, regulations, administrative or judicial process, banking, securities or other regulators. The Company has agreed to indemnify the Depositary and its agents under certain circumstances and the Depositary has agreed to indemnify the Company under certain circumstances. Neither the Company nor the Depositary nor any of their respective agents shall be liable to Holders or beneficial owners of interests in ADSs for any indirect, special, punitive or consequential damages. No disclaimer of liability under the Securities Act of 1933 is intended by any provision hereof.

(15) Resignation and Removal of Depositary; the Custodian. The Depositary may resign as Depositary by 60 days prior written notice of its election to do so delivered to the Company, or

A-9

be removed as Depositary by the Company by 60 days prior written notice of such removal delivered to the Depositary. The Depositary may appoint substitute or additional Custodians and the term "Custodian" refers to each Custodian or all Custodians as the context requires.

(16) Amendment. Subject to the last sentence of paragraph (2), the ADRs and the Deposit Agreement may be amended by the Company and the Depositary, provided that any amendment that imposes or increases any fees or charges (other than stock transfer or other taxes and other governmental charges, transfer or registration fees, cable, telex or facsimile transmission costs, delivery costs or other such expenses), or that shall otherwise prejudice any substantial existing right of Holders, shall become effective 30 days after notice of such amendment shall have been given to the Holders. Every Holder of an ADR at the time any amendment to the Deposit Agreement so becomes effective shall be deemed, by continuing to hold such ADR, to consent and agree to such amendment and to be bound by the Deposit Agreement as amended thereby. In no event shall any amendment impair the right of the Holder of any ADR to surrender such ADR and receive the Deposited Securities represented thereby, except in order to comply with mandatory provisions of applicable law. Any amendments or supplements which (i) are reasonably necessary (as agreed by the Company and the Depositary) in order for (a) the ADSs to be registered on Form F-6 under the Securities Act of 1933 or (b) the ADSs or Shares to be traded solely in electronic book-entry form and (ii) do not in either such case impose or increase any fees or charges to be borne by Holders, shall be deemed not to prejudice any substantial rights of Holders. Notwithstanding the foregoing, if any governmental body or regulatory body should adopt new laws, rules or regulations which would require amendment or supplement of the Deposit Agreement or the form of ADR to ensure compliance therewith, the Company and the Depositary may amend or supplement the Deposit Agreement and the ADR at any time in accordance with such changed laws, rules or regulations. Such amendment or supplement to the Deposit Agreement in such circumstances may become effective before a notice of such amendment or supplement is given to Holders or within any other period of time as required for compliance.

(17) Termination. Upon the resignation or removal of the Depositary pursuant to the Deposit Agreement, the Depositary may, and shall at the written direction of the Company, terminate the Deposit Agreement and this ADR by mailing notice of such termination to the Holders at least 30 days prior to the date fixed in such notice for such termination, which 30 days shall not act to reduce the 60 days referred to in paragraph (15) above. After the date so fixed for termination, the Depositary and its agents will perform no further acts under the Deposit Agreement and this ADR, except to receive and hold (or sell) distributions on Deposited Securities and deliver Deposited Securities being withdrawn. As soon as practicable after the expiration of six months from the date so fixed for termination, the Depositary shall sell the Deposited Securities and shall thereafter (as long as it may lawfully do so) hold in a segregated account the net proceeds of such sales, together with any other cash then held by it under the Deposit Agreement, without liability for interest, in trust for the pro rata benefit of the Holders of ADRs not theretofore surrendered. After making such sale, the Depositary shall be discharged from all obligations in respect of the Deposit Agreement and this ADR, except to account for such net proceeds and other cash. After the date so fixed for termination, the Company shall be discharged from all obligations under the Deposit Agreement except for its obligations to the Depositary and its agents.

A-10

(18) Appointment. Each Holder and each person holding an interest in ADSs, upon acceptance of any ADSs (or any interest therein) issued in accordance with the terms and conditions of the Deposit Agreement shall be deemed for all purposes to (a) be a party to and bound by the terms of the Deposit Agreement and the applicable ADR(s), and (b) appoint the Depositary its attorney-in-fact, with full power to delegate, to act on its behalf and to take any and all actions contemplated in the Deposit Agreement and the applicable ADR(s), to adopt any and all procedures necessary to comply with applicable law and to take such action as the Depositary in its sole discretion may deem necessary or appropriate to carry out the purposes of the Deposit Agreement and the applicable ADR(s), the taking of such actions to be the conclusive determinant of the necessity and appropriateness thereof.

A-11

Exhibit 5.1

[Letterhead]

[o], 2006

TAM S.A.
Av. Jurandir, 856-Lote 4
04072-000
Sao Paulo-SP-Brazil

Ladies and Gentlemen,

We are qualified to practice law in the Federative Republic of Brazil ("Brazil") and have acted as special Brazilian counsel to (a) the TAM S.A. (the "Issuer"), a corporation organized under the laws of Brazil, in connection with the offer and sale by the issuer of initially 5,000,000 American Depositary Shares (the "Primary Offering ADSs"), each representing one newly-issued preferred shares of the Issuer, without par value, and the offer and sale by Brasil Private Equity Fundo de Investimento em Participacoes, Brazilian Equity Investments III LLC, Brazilian Equity LLC, Latin America Capital Partners II LLC, Latin America Capital Partners PIV LLC, Aerosystem S.A. Empreendimentos e Participacoes, Noemy Almeida Oliveira Amaro, Maria Claudia Oliveira Amaro Demenato, Mauricio Rolim Amaro, Marcos Adolfo Tadeu Senamo Amaro, and Joao Francisco Amaro (jointly, the "Selling Shareholders") of initially 30,618,098 American Depositary Shares (the "Secondary Offering ADSs"), each representing one preferred shares of the Issuer, without par value, in accordance with the Underwriting and Agency Agreement (the "Underwriting and Agency Agreement") to be entered into among the Issuer, the Selling Shareholders and the several Agents and Underwriters named therein. An aggregate of up to 5,342,714 additional American Depositary Shares, each representing one preferred share of the Issuer (the "Optional ADSs" and together with the Primary Offering ADSs and the Secondary Offering ADSs, the "Securities"), may be issued and sold by the Issuer in connection with the over-allotment option, as contemplated by the Issuer's registration statement on Form F-1 (File No. 333-131938), publicly filed with the Securities and Exchange Comission on February 22, 2006 (as amended, the "Registration Statement").

For the purposes of rendering this opinion we have examined and/or relied upon copies of the following documents:

(i) a final draft of the Underwriting and Agency Agreement;
(ii) a copy of the Registration Statement; and
(iii) such other documents, stock transfer and registry books, corporate records and certificates of officers of the Issuer as we may have deemed necessary for the

purpose of this opinion.

We have not made any investigation of the laws of any jurisdiction outside Brazil and this opinion is given solely in respect of the laws of Brazil as of the date hereof and not in respect of any other laws.

In giving this opinion we have made the following assumptions:

(i) that all the documents submitted to use as facsimile or copy of specimen documents conform to their originals;
(ii) that the signatures on the originals, certified copies or copies of all documents submitted to us are genuine; and
(iii) that all documents submitted to us as originals are authentic.

As to factual matters, we have relied upon the representations and warranties made in the Underwriting and Agency Agreement by the Issuer and on certificates, documents and oral or written information of the Issuer provided to us by officers of the Issuer on behalf of the Issuer.

Based on the above assumptions, we are of the opinion that (i) the preferred shares represented by the Primary offering ADSs are duly and validly authorized, legally issued and, when fully paid for, will be non-assessable and (ii) the preferred shares represented by the Secondary offering ADSs and by the Optional ADSs are duly and validly authorized, legally issued, fully paid and non-assessable.

This opinion is limited to the matters expressly stated herein and does not extend to, and is not to be read as extended by implication to, any other matter in connection with the Underwriting and Agency Agreement or the transaction or documents referred to therein.

This opinion will be governed by and construed in accordance with the laws of Brazil in effect on the date hereof.

This opinion is being furnished by us, as Brazilian counsel to the Issuer and each Selling Shareholders, to you, the Issuer, each of the Selling Shareholders and potential investors solely for its benefit in connection with the public offering of Securities pursuant to the Underwriting and Agency Agreement, and is not to be used, circulated, quoted, relied upon or otherwise referred to for any purpose or by any other person.

We hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and to the reference to us under the captions "Validity of Securities" and "Enforcement Against Foreign Persons" in the Prospectus constituting a part of the Registration Statement.

Very truly yours,

Machado, Meyer, Sendacz e Opice A d v o g a d o s

Exhibit 8.1

[o], 2006

[Letterhead]

TAM S.A.
Av. Jurandir, 856-Lote 4
04072-000
Sao Paulo-SP-Brazil

Ladies and Gentlemen,

We are qualified to practice law in the Federative Republic of Brazil ("Brazil") and have acted as special Brazilian counsel to (a) the TAM S.A. (the "Issuer"), a corporation organized under the laws of Brazil, in connection with the offer and sale by the issuer of initially 5,000,000 American Depositary Shares (the "Primary Offering ADSs"), each representing one newly-issued preferred shares of the Issuer, without par value, and the offer and sale by Brasil Private Equity Fundo de Investimento em Participacoes, Brazilian Equity Investments III LLC, Brazilian Equity LLC, Latin America Capital Partners II LLC, Latin America Capital Partners PIV LLC, Aerosystem S.A. Empreendimentos e Participacoes, Noemy Almeida Oliveira Amaro, Maria Claudia Oliveira Amaro Demenato, Mauricio Rolim Amaro, Marcos Adolfo Tadeu Senamo Amaro, and Joao Francisco Amaro (jointly, the "Selling Shareholders") of initially 30,618,098 American Depositary Shares (the "Secondary Offering ADSs"), each representing one preferred shares of the Issuer, without par value, in accordance with the Underwriting and Agency Agreement (the "Underwriting and Agency Agreement") to be entered into among the Issuer, the Selling Shareholders and the several Agents and Underwriters named therein. An aggregate of up to 5,342,714 additional American Depositary Shares, each representing one preferred share of the Issuer (the "Optional ADSs" and together with the Primary Offering ADSs and the Secondary Offering ADSs, the "Securities"), may be issued and sold by the Issuer in connection with the over-allotment option, as contemplated by the Issuer's registration statement on Form F-1 (File No. 333-131938), publicly filed with the Securities and Exchange Commission on February 22, 2006 (as amended, the "Registration Statement").

In connection with the Registration Statement, we confirm that we have reviewed the information in the prospectus included in the Registration Statement under the caption "Taxation - Brazilian Tax Considerations" and that, in our opinion, the statements of law included therein, insofar as they relate to the Brazilian tax consequences currently applicable to non-Brazilian holders, address the material tax consequences of the ownership and disposition of the preferred shares and the American depositary shares. In rendering this opinion, we expressly incorporate in this opinion the statements set forth under the caption "Taxation - Brazilian Tax Considerations" in the prospectus included in the Registration Statement, including the limitations on the matters covered by that section set forth therein. Our opinion expressed in this paragraph is limited to the federal

laws of Brazil and is based upon existing provisions of federal laws and regulations, the regulations of the Federal Revenue Department (Departamento da Receita Federal) thereunder and administrative and judicial interpretations thereof, including existing interpretations thereof of the Federal Revenue Department, the Federal Attorney for Revenues (Procuradoria-Geral da Fazenda) as of the date hereof, all of which are subject to subsequent, different interpretations and applications with effect from the date of effectiveness of the underlying laws and regulations.

We are furnishing this opinion letter to you in connection with the filing of the Registration Statement. This opinion is limited to the matters expressly stated herein and does not extend to, and is not to be read as extended by implication to, any other matter in connection with the Registration Statement or the transactions or documents referred to therein.

We hereby consent to the use of this opinion as Exhibit 8.1 to the Registration Statement and to the use of our name in the Registration Statement. In giving this consent, we do not thereby concede that we are within the category of persons whose consent is required by the Act or the General Rules and Regulations promulgated thereunder.

This opinion will be governed by and construed in accordance with the laws of Brazil in effect on the date hereof.

Very truly yours,

Machado, Meyer, Sendacz e Opice A d v o g a d o s

* Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as "*". A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

Exhibit 10.1

A320 FAMILY

PURCHASE AGREEMENT

BETWEEN

AIRBUS INDUSTRIE

AND

TAM

TRANSPORTES AEREOS REGIONAIS

CONTENTS

CLAUSES   TITLES
-------   ------
    0     PURCHASE AGREEMENT
    1     SALE AND PURCHASE
    2     SPECIFICATION CHANGES
    3     PRICES AND TAXES
    4     PRICE REVISION FORMULAE
    5     PAYMENT TERMS
    6     PLANT REPRESENTATIVES - INSPECTION
    7     CERTIFICATION
    8     BUYER'S TECHNICAL ACCEPTANCE
    9     DELIVERY
   10     EXCUSABLE DELAY
   11     NON EXCUSABLE DELAY
   12     WARRANTIES AND SERVICE LIFE POLICY
   13     PATENT - INDEMNITY
   14     TECHNICAL PUBLICATIONS
   15     SELLER REPRESENTATIVES
   16     TRAINING AND TRAINING AIDS
   17     VENDOR PRODUCT SUPPORT
   18     BUYER FURNISHED EQUIPMENT AND DATA
   19     DATA RETRIEVAL
   20     TERMINATION
   21     ASSIGNMENT
   22     MISCELLANEOUS PROVISIONS

CONTENTS

EXHIBITS      TITLES
--------      ------
Exhibit "A"   SPECIFICATION
Exhibit "B"   S.C.N.FORM
Exhibit "C"   SERVICE LIFE POLICY - ITEMS OF PRIMARY STRUCTURE
Exhibit "D"   MANUALS
Exhibit "E"   SPARE PARTS PROCUREMENT

Letter Agreement No 1: *
Letter Agreement No 2: A319 PERFORMANCE GUARANTEES Letter Agreement No 3: A320 PERFORMANCE GUARANTEES Letter Agreement No 4: OPTION AIRCRAFT
Letter Agreement No 5: PRODUCT SUPPORT SERVICES Letter Agreement No 6: *
Letter Agreement No 7: *
Letter Agreement No 8: *
Letter Agreement No 9: *

A320 FAMILY PURCHASE AGREEMENT

This Agreement is made as of the 19 day of March 1998

BETWEEN

AIRBUS INDUSTRIE, having its principal office at:

1 Rond-Point Maurice Bellonte

31707 BLAGNAC - CEDEX

FRANCE

(hereinafter referred to as the "Seller") of the one part

AND

T.A.M. - TRANSPORTES AEREOS REGIONAIS, having its principal office at:

Rua Monsenhor Antonio Pepe, 94
JD Aeroporto
CEP - 04357-080

SAO PAULO
BRAZIL

(hereinafter referred to as the "Buyer") of the other part.

WHEREAS

A- The Seller is a "Groupement d'Interet Economique" created and existing under French Law and established under Ordonnance No 67-821 dated September 23, 1967 of the Republic of FRANCE.

B- The Members of the Seller are:

(1) AEROSPATIALE, SOCIETE NATIONALE INDUSTRIELLE, whose principal office is at:
37, Boulevard Montmorency
75016 PARIS
FRANCE,

(2) DAIMLER-BENZ AEROSPACE AIRBUS GmbH, whose principal office is at:
Kreetslag 10
Postfach 95 01 09
21111 - HAMBURG

FEDERAL REPUBLIC OF GERMANY,

(3) CONSTRUCCIONES AERONAUTICAS S.A., whose principal office is at:
Avenida de Aragon, 404
28022 MADRID
SPAIN

and

(4) BRITISH AEROSPACE (OPERATIONS) LTD, whose principal office is at:
Warwick House
P.O. Box 87
Famborough Aerospace Centre
Famborough
HANTS GU14 6YU
GREAT BRITAIN.

C- Each of the Members of the Seller is (after service on the Seller by "huissier", of notice to perform) jointly and severally liable with the other Members (but not with the Seller) for all due and unperformed liabilities and obligations of the Seller (subject to any defences which may be available to the Seller or to that Member personally or to all the Members together).

D- The Buyer wishes to purchase and the Seller is willing to sell thirty eight
(38) A319 Aircraft and A320 Aircraft equipped with a set of two (2) Propulsion Systems installed thereon (hereinafter individually or collectively referred to as the "Aircraft") together with certain other spare parts, equipment and services more particularly described herein.

NOW THEREFORE IT IS AGREED AS FOLLOWS:

CONTENTS

CLAUSE            TITLE
------            -----
  1-     SALE AND PURCHASE
  1.1    Scope
  1.2    Aircraft Specification
  1.3    Propulsion Systems

1- SALE AND PURCHASE

1.1 Scope

The Seller shall sell and supply and the Buyer shall buy and take delivery of thirty eight (38) Aircraft of the A319-100 and A320-200 type and also spare parts (pursuant to Exhibit "E") upon the terms and conditions contained in this Agreement, together with the Exhibits "A" thru "E" attached hereto which shall constitute an integral part of the Agreement.

1.2 Aircraft Specification

1.2.1 The Aircraft shall be manufactured in accordance with:

- For the A319-100, the Standard Specification Document No J.000.01000, Issue 3 dated March 29th, 1995 plus Temporary Revision No 1 dated August 25th, 1995 with the following design weights: MTOW: 75.5 tons, MLW: 62.5 tons, MZFW: 58.5 tons, a copy of which has been initialled on its effective pages for the purpose of identification by or on behalf of the parties and is annexed hereto as Exhibit "A".

- For the A320-200, the Standard Specification Document No D.000.02000, Issue 4 dated March 30th, 1995 with the following design weights:
MTOW: 77 tons, MLW: 64.5 tons, MZFW: 61 tons, a copy of which has been initialled on its effective pages for the purpose of identification by or on behalf of the parties and is annexed hereto as Exhibit "A".

Said Standard Specification as modified by the Specification Change Notices (SCNs) listed in Appendix 1 to Exhibit "A" for the A319-100 and Appendix 2 to Exhibit "A" for the A320-200 shall constitute the Buyer's detailed Specification and is hereinafter referred to as the "Specification".

The SCN form is annexed hereto as Exhibit "B".

1.2.2 The Specification may be modified or varied pursuant to the provisions of Clauses 2, 7 and 18.

1.2.3 In the event of any inconsistency between the Specification and any other part of this Agreement, the latter shall prevail to the extent of such inconsistency.

1.3 Propulsion Systems

The Aircraft shall be equipped with a set of two (2) Propulsion Systems:

- For the A319-100: INTERNATIONAL AERO ENGINES IAE V2524-A5.

- For the A320-200: INTERNATIONAL AERO ENGINES IAE V2527-A5.

CONTENTS

CLAUSE   TITLE
------   -----
  2-     SPECIFICATION CHANGES
  2.1    Specification Change Notice
  2.2    Effect on Aircraft Price
  2.3    Development Changes
  2.4    Customization Milestones Chart

2- SPECIFICATION CHANGES

2.1 Specification Change Notice

The Specification may be amended by written agreement between the parties in a Specification Change Notice (hereinafter referred to as a "SCN") which shall set forth in detail the particular change to be made therein and the effect, if any, of such change on design, performance, weight, time of delivery, price of the Aircraft, and on the text of the Specification.

A specimen copy of a SCN form is attached hereto as Exhibit "B".

2.2 Effect on Aircraft Price

The possible effect of changes on the price of the Aircraft shall be agreed before signature of the relevant SCN form.

2.3 Development Changes

The Specification may also be revised by the Seller without Buyer's consent in order to incorporate development changes if such changes do not adversely affect price, delivery, weight or performance of the Aircraft, interchangeability or replaceability requirements under the Specification. Development changes are changes deemed necessary to correct defects, improve the Aircraft, prevent delay or ensure compliance with this Agreement.

CONTENTS

CLAUSE   TITLE
------   -----
  3-     PRICES AND TAXES
  3.1    Basic Price of the Aircraft
  3.2    Final Price of the Aircraft
  3.3    Taxes

3- PRICES AND TAXES

3.1 Basic Price of the Aircraft

The Basic Price of the Aircraft is the sum of :

- the Basic Price of the Airframe as defined in sub-Clause 3.1.1 and

- the Basic Price of the Propulsion Systems as defined in sub-Clause 3.1.2 ;

and is exclusive of any variation resulting from price revision provisions and, if any, other provisions of this Agreement.

3.1.1 Basic Price of the Airframe

The Basic Price of the Airframe is the sum of:

(i) the basic price of the airframe as defined in the Standard Specification described in sub-Clause 1.2.1, which is :

- For the A319-100 Aircraft

- For the A320-200 Aircraft

(ii) the basic price of all the SCNs defined and listed in :

- Appendix 1 to Exhibit "A" for the A319-100 Aircraft

- Appendix 2 to Exhibit "A" for the A320-200 Aircraft

The basic prices have been established in accordance with the delivery conditions prevailing in January 1997 and are subject to adjustment in accordance with the Seller's Price Revision Formula set forth in sub-Clause 4.1.

3.1.2 Basic Price of the Propulsion Systems

The basic price of a set of two (2) Propulsion Systems including standard equipment, nacelles and thrust reversers is :

- For the A319-100 Aircraft

With INTERNATIONAL AERO ENGINES IAE V2524-A5 :

- For the A320-200 Aircraft

With INTERNATIONAL AERO ENGINES IAE V2527-A5 :

Said basic prices have been established in accordance with the delivery conditions prevailing in January 1997 and have been calculated from the Reference Price of the Propulsion Systems indicated in sub-Clause 4.2.1.

Said Propulsion Systems Reference Price are subject to adjustment in accordance with the Propulsion Systems Manufacturer Price Revision Formula set forth in sub-Clause 4.2.

3.1.3 Validity of Propulsion Systems Price

It is understood that the above-mentioned quotation as well as Price Revision Formula concerning the Propulsion Systems and related equipment are based upon information received from the Propulsion Systems Manufacturer.

3.2 Final Price of the Aircraft

The Final Price of each Aircraft shall be the sum of:

- the Basic Price of the Airframe as adjusted at the time of Aircraft delivery in accordance with the Seller's Price Revision Formula set forth in sub-Clause 4.1;

- the basic prices of any and all SCNs mutually agreed upon in addition to the SCNs already taken into account in the Basic Price of the Airframe as adjusted at the time of Aircraft delivery in accordance with the Seller's Price Revision Formula set forth in sub-Clause 4.1 or as otherwise agreed upon;

- the installed Propulsion Systems Reference Price as adjusted at the time of Aircraft delivery in accordance with the Price Revision Formula set forth in sub-Clause 4.2;

- any further amount provided for or resulting from any other provisions of this Agreement (including but not limited to Clauses 7 and 18) and / or any other written agreement between the Buyer and the Seller.

3.3 Taxes

3.3.1 The Seller shall pay any and all taxes, duties, imposts or similar charges of any nature whatsoever levied, assessed, charged or collected for or in connection with the fabrication, manufacture, assembly, sale and delivery under this Agreement of any of the Aircraft, services, instructions and data delivered or furnished hereunder provided such charges have been promulgated and are enforceable under the laws of FRANCE, FEDERAL REPUBLIC OF GERMANY, GREAT BRITAIN and SPAIN.

3.3.2 The Buyer shall bear the costs of and pay any and all taxes, duties and similar charges of any nature whatsoever not covered by the preceding sub-Clause 3.3.1 including but not limited to any duties or taxes due upon or in relation to the importation or registration of the Aircraft in the Buyer's country and/or any withholdings or deductions levied or required in the Buyer's country in respect of the payment to the Seller of any amount due by the Buyer hereunder.

CONTENTS

CLAUSE   TITLE
------   -----
  4-     PRICE REVISION FORMULAE
  4.1    Seller's Price Revision Formula
  4.2    Propulsion Systems Manufacturer's Price Revision Formula

4- PRICE REVISION FORMULAE

4.1 Seller's Price Revision Formula

4.1.1 Basic Prices

The basic prices quoted in sub-Clause 3.1.1 are subject to adjustment for changes in economic conditions as measured by data obtained from the US Department of Labor, Bureau of Labor Statistics, and in accordance with the provisions hereof.

4.1.2 Base Period

The basic prices have been established in accordance with the average economic conditions prevailing in December 1995, January 1996, February 1996 and corresponding to a theoretical delivery in January 1997 as defined by "ECIb" and "ICb" index values indicated hereafter.

"ECIb" and "ICb" index values indicated hereof shall not be subject to any revision.

4.1.3 Indexes

Labor Index: "Employment Cost Index for Workers in Aerospace manufacturing" (Aircraft manufacturing, standard industrial classification code SIC 3721, wages and salaries, base month and year June 1989 = 100), as released by the US Department of Labor, Bureau of Labor Statistics, on a quarterly basis, hereinafter referred to as "ECI SIC 3721W".

The quarterly value released for a certain month (March, June, September and December) shall be the one deemed to apply for the two preceeding months.

Material Index: "Industrial commodities" (hereinafter referred to as "IC") as published in "Producer Price Indexes" (Table 6. Producer price indexes and percent changes for commodity groupings and individual items). (Base Year 1982 = 100).

4.1.4 Revision Formula

Pn = (Pb + F)(0.75 ECIn/ECIb + 0.25 ICn/ICb)

Where :

Pn : basic price as revised at delivery of the Aircraft

Pb : basic price at economic conditions December 1995, January 1996, February 1996 averaged (January 1997 delivery conditions)

F : (0.005 x N x Pb) where N = the calendar year of delivery of the Aircraft minus 1997

ECIn : the arithmetic average of the latest published values of the ECI SIC 3721W-Index available at the date of Aircraft delivery for the 11th, 12th and 13th month prior to the month of Aircraft delivery

EClb : ECI SIC 3721W-Index for December 1995, January 1996, February 1996 averaged (= 128.7)

ICn : the arithmetic average of the latest published values of the IC-Index available at the date of Aircraft delivery for the 11th, 12th and 13th month prior to the month of Aircraft delivery

ICb : IC-Index for December 1995, January 1996, February 1996 averaged (= 126.2)

4.1.5 General Provisions

4.1.5.1 Roundings

The Labor Index average and the Material Index average shall be computed to the first decimal. If the next succeeding place is five (5) or more, the preceding decimal place shall be raised to the next higher figure.

Each quotient shall be rounded to the nearest ten-thousandth (4 decimals). If the next succeeding place is five (5) or more, the preceding decimal place shall be raised to the next higher figure.

The final factor shall be rounded to the nearest ten-thousandth (4 decimals).

The final price shall be rounded to the nearest whole number (0.5 or more rounded to 1).

4.1.5.2 Substitution of Indexes

In the event that:

(i) the U.S. Department of Labor substantially revises the methodology of calculation of any of the indexes referred to hereabove, or

(ii) the U.S. Department of Labor discontinues, either temporarily or permanently, any of the indexes referred to hereabove, or

(iii) the data samples used to calculate any of the indexes referred to hereabove are substantially changed,

the Seller shall select a substitute index and will provide the Buyer with the necessary justification with regards to this substitute index to allow its approval.

Such substitute index shall reflect as closely as possible the actual variations of the wages or of the material costs, as the case may be, used in the calculation of the original index.

As a result of this selection of a substitute index, the Seller shall make an appropriate adjustment to its price revision formula, allowing to combine the successive utilization of the original index and of the substitute index.

4.1.5.3 Final Index Values

The Index values as defined in sub-Clause 4.1.4 above shall be considered final and no further adjustment to the basic prices as revised at delivery of the Aircraft shall be made after Aircraft delivery for any subsequent changes in the published Index values.

4.2 Propulsion System Manufacturer's Price Revision Formula

4.2.1 Reference Price of the Propulsion Systems

- For the A319-100 Aircraft

The Reference Price of a set of two (2) INTERNATIONAL AERO ENGINES IAE V2524-A5 Propulsion Systems is:

- For the A320-200 Aircraft

The Reference Price of a set of two (2) INTERNATIONAL AERO ENGINES IAE V2527-A5 Propulsion Systems is:

These Reference Prices are subject to adjustment for changes in economic conditions as measured by data obtained from the US Department of Labor, Bureau of Labor Statistics and in accordance with the provisions of sub-Clauses 4.2.4 and 4.2.5.

4.2.2 Reference Period

The above Reference Price has been established in accordance with the economic conditions prevailing in September 1996 as defined, by INTERNATIONAL AERO ENGINES by the "HEb", "MMPb" and "EPb" index values indicated in sub-Clause 4.2.4.

4.2.3 Indexes

Labor Index: "Aircraft engines and engine parts" Standard Industrial Classification 3724 - Average hourly earnings (hereinafter referred to as; "HE") as published in "Employment and Earnings" (Establishment Data-Hours and Earnings not seasonally adjusted Table B-15. Average hours and earnings of production or nonsupervisory workers on private nonfarm payrolls by detailed industry).

Material Index: "Metals and metal products" Code 10 (hereinafter referred to as "MMP") as published in "Producer Price Indexes" (Table 6. Producer price indexes and percent changes for commodity groupings and individual items). (Base Year 1982=100).

Energy Index: "Fuels and related products and power" Code 5 (hereinafter referred to as "EP") as published in "Producer Price Indexes" (Table 6. Producer price indexes and percent changes for commodity groupings and individual items). (Base Year 1982 = 100).

4.2.4 Revision Formula

Pn = Pb x (.60 HEn/HEb + .30 MMPn/MMPb + .10 EPn/EPb)

where :

Pn : revised Reference Price at Aircraft delivery.

Pb : Reference Price at economic conditions September 1996.

HEn : HE-lndex SIC 3724 for the fourth (4th) month prior to the month of Aircraft delivery.

HEb : HE-lndex IC 3724 for September 1996 (= 18.40).

MMPn : MMP-lndex for the fourth (4th) month prior to the month of Aircraft delivery.

MMPb : MMP-lndex for September 1996 (= 130.0).

EPn : EP-lndex for the fourth (4th) month prior to the month of Aircraft delivery.

EPb : EP-lndex for September 1996 (= 87.1).

4.2.5 GENERAL PROVISIONS

4.2.5.1 Roundings

Each factor (.60 HEn/HEb, .30 MMPn/MMPb, .10 EPn/EPb) shall be rounded to the nearest fourth decimal place.

After final computation Pn shall be rounded to the nearest whole number (0.5 rounds to 1).

4.2.5.2 Final Index Values

The revised Reference Price at the date of Aircraft delivery shall not be subject to any further adjustments in the indexes.

If no final index values are available for the applicable month, the then published preliminary figures shall be the basis on which the revised Reference Price shall be computed.

4.2.5.3 Interruption of Index Publication

If the US Department of Labor substantially revises the methodology of calculation or discontinues any of these indexes referred to hereabove, the Seller shall reflect the substitute for the revised or discontinued index selected by INTERNATIONAL AERO ENGINES, such substitute index to lead in application to the same adjustment result, insofar as possible, as would have been achieved by continuing the use of the original index as it may have fluctuated had it not been revised or discontinued.

Appropriate revision of the formula shall be made to accomplish this result.

4.2.5.4 Annulment of Formula

Should the above escalation provisions become null and void by action of the US Government, the Reference Price shall be adjusted due to increases in the costs of labor, material and fuel which have occurred from the period represented by the applicable Reference Price Indexes to the fourth
(4th) month prior to the scheduled month of Aircraft delivery.

4.2.5.5 Limitation

Should the revised Reference Price be lower than the Reference Price, the final price shall be computed with the Reference Price.

CONTENTS

CLAUSE   TITLE
------   -----
  5-     PAYMENT TERMS
  5.1    Seller's Account
  5.2    Payment of the Aircraft
  5.3    Other Charges
  5.4    General

5- PAYMENT TERMS

5.1 Seller's Account

The Buyer shall pay the final price of each Aircraft or any invoice to the Seller's account No 74.65 159 2 000 with:

NATEXIS GROUPE

48 Allees Francois Verdier
31000 TOULOUSE
FRANCE

or to such other account as may be designated by the Seller, sufficiently in advance to allow the Buyer to perform the payment accordingly.

5.2 Payment of the Aircraft

The Final Price of each Aircraft as defined in sub-Clause 3.2 shall be paid in accordance with the following terms and conditions:

5.2.1 Predelivery Payments

The Buyer shall make predelivery payments calculated on the Predelivery Payment Reference Price of the Aircraft.

5.2.1.1 The Predelivery Payment Reference Price is defined as:

A = Pb * + * N)

where :

A : the Predelivery Payment Reference Price for Aircraft to be delivered in year T;

T : the year of delivery of the relevant Aircraft as provided for in sub-Clause 9.1;

Pb : the Basic Price of the Aircraft as defined in sub-Clause 3.1;

N : (T-1997).

5.2.1.2 Such predelivery payments shall constitute an instalment for the Final Price of the Aircraft for each firmly ordered Aircraft and shall be made in accordance with the following schedule:

                                              percentage of
                                           Predelivery Payment
Due Date of Payments                         Reference Price
--------------------                       -------------------
*

On the first day of each of the
following month prior to the scheduled
month of delivery:

*

TOTAL PAYMENT PRIOR TO AIRCRAFT DELIVERY

5.2.2 Balance of the Final Price of the Aircraft

Concurrently with the Aircraft delivery and on receipt of the Seller's invoice, the Buyer shall pay to the Seller the Final Price of the Aircraft as defined in sub-Clause 3.2 less the total amount of the predelivery payments received by the Seller and set forth in sub-Clause 5.2.

5.3 Other Charges

If not expressly stipulated otherwise any other charges due under this Agreement other than those mentioned in sub-Clause 5.2 shall be paid by the Buyer concurrently with the Aircraft delivery *

5.4 General

5.4.1 All payments provided for in this Agreement shall be made in United States Dollars (USD) in immediately available funds if not otherwise agreed upon.

5.4.2 All payments due to the Seller hereunder shall be made in full, without set-off, counterclaim, deduction or withholding of any kind. Consequently, the Buyer shall procure that the sums received by the Seller under this Agreement shall be equal to the full amounts expressed to be due to the Seller hereunder, without deduction or withholding on account of and free from any and all taxes, levies, imposts, dues or charges of whatever nature. If the Buyer is compelled by law to make any such deduction or withholding the Buyer shall pay such additional amounts as may be necessary in order that the net amount received by the Seller after such deduction or withholding shall equal the amounts which would have been received in the absence of such deduction or withholding.

5.4.3 If any payment due to the Seller under this Agreement including but not limited to any predelivery payment, deposit, option fees for the Aircraft as well as any payment for any spare parts, data, documents, training and services due to the Seller is not received on the due date, without prejudice to the Seller's other rights under this Agreement, the Seller shall be entitled to interest for late payment calculated on the amount due from and including the due date of payment up to the date when the payment is received by the Seller at a rate equal to

5.4.4 If any predelivery payment is not received on the date(s) as specified in this Clause or as may be subsequently agreed upon in writing between the parties, then the Seller will advise the Buyer in writing and in addition to any other rights and remedies available, the Seller shall have the right to set back the delivery date of the Aircraft by a period of * for each * days such payment is delayed.

Furthermore, if such delay is greater than * days, the Seller shall have no obligation to deliver the Aircraft at the date quoted in sub-Clause 9.1 as modified as per the above Paragraph of this sub-Clause 5.4.4. Upon receipt of the full due payment of the delayed predelivery payment, the Seller shall indicate the new delivery date consistent with the Seller's other commitments and production capabilities.

CONTENTS

CLAUSE   TITLE
------   -----
6-       PLANT REPRESENTATIVES - INSPECTION
6.1      Aircraft Inspection
6.2      Seller's Service
6.3      Inspection Requirements
6.4      Indemnities

6- PLANT REPRESENTATIVES - INSPECTION

6.1 Aircraft Inspection

6.1.1 The manufacture of the Aircraft by the Seller and all materials and parts obtained by it therefor shall at all reasonable times during business hours be open to inspection by duly authorized representatives of the Buyer at the Members' works and if possible at the facilities of Seller's sub-contractors.

The representatives shall in order to carry out the aforesaid inspection have access to such relevant technical data as is reasonably necessary for this purpose (except that if access to any part of the works where construction is in progress or materials or parts are stored is restricted for security reasons, the Seller shall be allowed a reasonable time to make the items available for inspection elsewhere).

The actual detailed inspection of the Aircraft, materials and parts thereof shall only take place in the presence of the respective inspection department personnel of the Seller.

This inspection shall be made according to a procedure to be agreed upon with the Buyer.

All inspections, examinations and discussions with the Seller and other personnel by the Buyer and its said representatives shall be performed in such manner as not unduly to delay or hinder the manufacture or assembly of the Aircraft or the proper performance of this Agreement by the Seller or its sub-contractors or any other work in progress in the respective works.

6.2 Seller's Service

For this purpose and commencing with the date of this Agreement until the delivery of the last Aircraft, the Seller shall furnish without additional charge suitable space and office equipment in or conveniently located with respect to the Aircraft final assembly line for the use of a reasonable number of Buyer's representatives.

6.3 Inspection Requirements

The Aircraft shall be manufactured in accordance with the relevant requirements of the Governments of the Members of the Seller as enforced by their respective Aviation Authorities and shall only be inspected under the Seller's own systems of inspection as approved by and under the supervision of the above Aviation Authorities.

6.4 Indemnities

6.4.1 THE SELLER SHALL BE SOLELY LIABLE FOR, AND HEREBY INDEMNIFIES AND HOLDS HARMLESS THE BUYER, ITS OFFICERS, AGENTS AND EMPLOYEES FROM AND AGAINST ALL LIABILITIES, DAMAGES, LOSSES, COSTS AND EXPENSES FOR ALL INJURIES TO AND DEATHS OF PERSONS (EXCEPTING INJURIES TO AND DEATH OF THE BUYER'S REPRESENTATIVES PARTICIPATING IN ANY GROUND CHECK, TECHNICAL ACCEPTANCE FLIGHT, CHECK AND CONTROLS UNDER THIS CLAUSE) AND FOR LOSS OF OR DAMAGE TO PROPERTY, ARISING OUT OF OR IN CONNECTION WITH ANY GROUND CHECK, TECHNICAL ACCEPTANCE FLIGHT, CHECK OR CONTROLS UNDER THIS CLAUSE EXCEPT WHEN DUE TO GROSS NEGLIGENCE OR WILFUL MISCONDUCT OF THE BUYER.

6.4.2 THE BUYER HEREBY INDEMNIFIES AND HOLDS HARMLESS THE SELLER, ITS OFFICERS, AGENTS AND EMPLOYEES FROM AND AGAINST ALL LIABILITIES, DAMAGES, LOSSES, COSTS AND EXPENSES FOR INJURIES TO OR DEATH OF THE BUYER'S SAID REPRESENTATIVES DURING ANY GROUND CHECK, TECHNICAL ACCEPTANCE FLIGHT, CHECK AND CONTROLS UNDER THIS CLAUSE EXCEPT WHEN DUE TO GROSS NEGLIGENCE OR WILFUL MISCONDUCT OF THE SELLER.

6.4.3 IN THE EVENT ANY CLAIM IS MADE OR SUIT IS BROUGHT AGAINST EITHER PARTY FOR DAMAGES, DEATH, INJURY OR LOSS, THE LIABILITY FOR WHICH HAS BEEN ASSUMED BY THE OTHER PARTY IN ACCORDANCE WITH THE PROVISIONS OF SUB-CLAUSES 6.4.1 OR 6.4.2, SAID PARTY AGAINST WHOM CLAIM IS SO MADE OR SUIT IS SO BROUGHT SHALL PROMPTLY GIVE NOTICE TO THE OTHER PARTY, AND THE LATTER SHALL EITHER ASSUME AND CONDUCT THE DEFENCE THEREOF, OR EFFECT ANY SETTLEMENT WHICH IT, IN ITS OPINION, DEEMS PROPER.

CONTENTS

CLAUSE   TITLE
------   -----
7-       CERTIFICATION
7.1      Type Certification
7.2      Certificate of Airworthiness for Export
7.3      Validation of the Certificate of Airworthiness for Export

7- CERTIFICATION

7.1 Type Certification

The Aircraft has been type certificated under Joint Aviation Authorities (JAA) procedures for joint certification in the transport category.

The Seller has obtained the relevant Type Certificates (or equivalent) to allow the issuance of the Certificate of Airworthiness for Export.

7.2 Certificate of Airworthiness for Export

7.2.1 The Aircraft final assembly line being located either in FRANCE or in FEDERAL REPUBLIC OF GERMANY, it shall therefore be delivered to the Buyer with a Certificate of Airworthiness for Export issued by the "Direction Generale de I'Aviation Civile" (DGAC) for the A320-200 Aircraft or by the "Luftfahrt-Bundesant" (LBA) for the A319-100 Aircraft, valid for export of the Aircraft to Brazil.

7.2.2 If any law or regulation is promulgated or becomes effective or an interpretation of any law is issued before an Aircraft purchased under this Agreement is "ready for delivery" to the Buyer (as that expression is defined in sub-Clause 9.3) and which law, regulation or interpretation requires any change to the Specification as it may be modified pursuant to Clause 2 in order to obtain the Certificate of Airworthiness for Export as hereinabove provided for such Aircraft, the Seller shall make the requisite variation or modification. The costs thereof shall be borne

In the event of such a variation or modification being made pursuant to this sub-Clause, the parties hereto shall sign a SCN, in which the effects, if any, upon guaranteed performances, weights, interchangeability and delivery shall be specified.

7.2.3 Notwithstanding the provisions of sub-Clause 7.2.2, if any such change is applicable to Propulsion Systems and in particular to Engines, engine accessories, quick engine change units or thrust reversers,

7.2.4 The Seller shall as far as practicable take into account the information available to it concerning any proposed new regulations of the Seller's Aviation Authorities in order to minimize the costs of changes which may appear necessary to obtain the Certificate of Airworthiness for Export from the DGAC after such proposed new regulations have become mandatory.

7.3 Validation of the Certificate of Airworthiness for Export

7.3.1 The Seller shall endeavour to obtain the validation of the above certificate by the Buyer's Aviation Authorities.

7.3.2 Where the Buyer's Aviation Authorities require a modification to comply with additional import aviation requirements and/or supply of additional data, prior to the issuance of the first Certificate of Airworthiness for Export, the Seller shall incorporate such modification and/or provide such data at costs to be borne by the Buyer.

CONTENTS

CLAUSE   TITLE
------   -----
  8-     BUYER'S TECHNICAL ACCEPTANCE
  8.1    Time, Place and Scheduling
  8.2    Technical Acceptance
  8.3    Certificate of Acceptance
  8.4    Aircraft Utilization
  8.5    Indemnities

8- BUYER'S TECHNICAL ACCEPTANCE

8.1 Time, Place and Scheduling

The Seller shall give to the Buyer not less than * days notice in writing of the proposed time when the Buyer's technical acceptance process shall be conducted and in the event of the Buyer electing to attend the said process, the Buyer shall co-operate in complying with the reasonable requirements of the Seller with the intention of completing the technical acceptance within * working days after commencement.

The technical acceptance shall take place at the Aircraft final assembly line and shall be carried out by the personnel of the Seller (accompanied, if the Buyer so wishes, by representatives of the Buyer up to a total of * acting as observers, not more than * to have access to the cockpit at any one time). During technical acceptance flight, these representatives shall comply with the instructions of the Seller's representatives. The Seller shall not normally be required in the course of such technical acceptance to fly any of the Aircraft for an aggregate period of time in excess of * hours.

Failure to attend the technical acceptance process or failure so to co-operate shall entitle the Seller to complete them in the absence of the Buyer who shall be deemed to have accepted the processing as satisfactory in all respects.

8.2 Technical Acceptance

The technical acceptance process shall demonstrate the satisfactory functioning of the Aircraft and its equipment in accordance with the established Aircraft acceptance procedure proposed by the Seller. Should it be established from the processing that an Aircraft does not comply with the said acceptance procedure, the Seller shall without hindrance from the Buyer be entitled to carry out any necessary changes and as soon as practicable thereafter resubmit the Aircraft to such final processing as to demonstrate the elimination of the non-compliance.

The successful compliance with Seller's proposed Aircraft acceptance procedure shall be deemed to demonstrate compliance with the Specification.

8.3 Certificate of Acceptance

Upon successful completion of the said technical acceptance processing the Buyer shall forthwith give to the Seller a signed Certificate of Acceptance in respect of the Aircraft. Should the Buyer fail to deliver the said Certificate of Acceptance then the Buyer shall be deemed to be in default as though it had without warrant rejected delivery of the Aircraft when duly tendered to it hereunder and shall thereafter bear all risk of loss or damage to the Aircraft and all costs and consequences resulting from such delay in delivery including, but not limited to costs of storage, parking and insurance.

8.4 Aircraft Utilization

The Seller shall, without payment or other liability, be entitled to use the Aircraft prior to delivery as may be necessary to obtain the certificates required under Clause 7, and such use shall not prejudice the buyer's obligation to accept delivery of the Aircraft hereunder.

8.5 Indemnities

8.5.1 THE SELLER SHALL BE SOLELY LIABLE FOR, AND HEREBY INDEMNIFIES AND HOLDS HARMLESS THE BUYER, ITS OFFICERS, AGENTS AND EMPLOYEES FROM AND AGAINST ALL LIABILITIES. DAMAGES, LOSSES, COSTS AND EXPENSES FOR ALL INJURIES TO AND DEATH OF PERSONS (EXCEPTING INJURIES TO AND DEATH OF THE BUYER'S REPRESENTATIVES PARTICIPATING IN ANY GROUND CHECK OR TECHNICAL ACCEPTANCE FLIGHT UNDER THIS CLAUSE) AND FOR LOSS OF OR DAMAGE TO PROPERTY, ARISING OUT OF OR IN CONNECTION WITH THE OPERATION OF THE AIRCRAFT DURING ANY GROUND CHECK OR TECHNICAL ACCEPTANCE FLIGHT UNDER THIS CLAUSE EXCEPT WHEN DUE TO GROSS NEGLIGENCE OR WILFUL MISCONDUCT OF THE BUYER.

8.5.2 THE BUYER HEREBY INDEMNIFIES AND HOLDS HARMLESS THE SELLER, ITS OFFICERS, AGENTS AND EMPLOYEES FROM AND AGAINST ALL LIABILITIES, DAMAGES, LOSSES, COSTS AND EXPENSES FOR INJURIES TO OR DEATH OF THE BUYER'S SAID REPRESENTATIVES DURING ANY GROUND CHECK OR TECHNICAL ACCEPTANCE FLIGHT UNDER THIS CLAUSE EXCEPT WHEN DUE TO GROSS NEGLIGENCE OR WILFUL MISCONDUCT OF THE SELLER.

8.5.3 IN THE EVENT ANY CLAIM IS MADE OR SUIT IS BROUGHT AGAINST EITHER PARTY FOR DAMAGES, DEATH, INJURY OR LOSS, THE LIABILITY FOR WHICH HAS BEEN ASSUMED BY THE OTHER PARTY IN ACCORDANCE WITH THE PROVISIONS OF SUB-CLAUSES 8.5.1 OR 8.5.2, SAID PARTY AGAINST WHOM CLAIM IS SO MADE OR SUIT IS SO BROUGHT, SHALL PROMPTLY GIVE NOTICE TO THE OTHER PARTY, AND THE LATTER SHALL EITHER ASSUME AND CONDUCT THE DEFENCE THEREOF, OR EFFECT ANY SETTLEMENT WHICH IT, IN ITS OPINION, DEEMS PROPER.

CONTENTS

CLAUSE   TITLE
------   -----
  9-     DELIVERY
  9.1    Delivery Schedule
  9.2    Seller's Notification
  9.3    Aircraft Ready for Delivery
  9.4    Delivery
  9.5    Fly Away

9- DELIVERY

9.1 Delivery Schedule

Subject to the provisions of Clauses 2, 7, 8, 10 and 18 the Seller shall have the Aircraft ready for delivery at the Aircraft final assembly line in the following months:

                     Delivery Date   Aircraft Type
                     -------------   -------------
-Aircraft No  1...
-Aircraft No  2...
-Aircraft No  3...
-Aircraft No  4...
-Aircraft No  5...
-Aircraft No  6...
-Aircraft No  7...
-Aircraft No  8...
-Aircraft No  9...
-Aircraft No 10...
-Aircraft No 11...
-Aircraft No 12...
-Aircraft No 13...
-Aircraft No 14...
-Aircraft No 15...
-Aircraft No 16...
-Aircraft No 17...
-Aircraft No 18...
-Aircraft No 19...         *
-Aircraft No 20...
-Aircraft No 21...
-Aircraft No 22...
-Aircraft No 23...
-Aircraft No 24...
-Aircraft No 25...
-Aircraft No 26...
-Aircraft No 27...
-Aircraft No 28...
-Aircraft No 29...
-Aircraft No 30...
-Aircraft No 31...
-Aircraft No 32...
-Aircraft No 33...
-Aircraft No 34...
-Aircraft No 35...
-Aircraft No 36...
-Aircraft No 37...
-Aircraft No 38...

9.2 Seller's Notification

At least * days prior to any anticipated date of delivery of the Aircraft, the Seller shall notify the Buyer of such anticipated delivery date. Thereafter, the Seller shall keep the Buyer advised of any change in such delivery date necessitated by conditions of manufacture or flight.

9.3 Aircraft Ready for Delivery

The Aircraft shall for the purpose of this Agreement be deemed to be "ready for delivery" upon the successful completion of its acceptance tests and the issue of the Certificate of Airworthiness for Export pursuant to sub-Clause 7.2.

9.4 Delivery

9.4.1 The Buyer shall send representatives to said Aircraft final assembly line to take delivery of and collect the Aircraft within * days after the Aircraft is ready for delivery as defined in sub-Clause 9.3, any unreasonable refusal by the Buyer to take delivery of and collect the Aircraft being considered as late payment pursuant to sub-Clause 5.4.3. Should the Buyer fail to collect the Aircraft within the aforesaid period, the Buyer shall nevertheless thereafter bear all risk of loss or damage to the Aircraft and shall indemnify and hold the Seller harmless against any and all costs (including but not limited to any parking, storage, and insurance costs) and consequences resulting from such failure, it being understood that the Seller shall be under no duty to store, park, insure, or otherwise protect the uncollected Aircraft.

9.4.2 Each of the Aircraft shall be deemed to be delivered to the Buyer upon the issue of the Certificate of Acceptance in accordance with Clause 8.3 and full payment of the Final Price of the Aircraft in accordance with the provisions of Clause 5.

9.4.3 Title to, property in and risk of loss of or damage to, the Aircraft shall be transferred to the Buyer upon delivery of the Aircraft. The Seller shall provide the Buyer with such receipt and a document confirming transfer of title as may reasonably be requested by the Buyer.

9.5 Fly Away

9.5.1 The Buyer and the Seller shall cooperate to obtain any licences which may be required by the French or German Authorities. as applicable, for the purpose of exporting the Aircraft.

9.5.2 All expenses of, or connected with, fly away shall be borne by the Buyer. The Buyer shall make direct arrangements with the supplying companies for the fuel and oil required for all post-delivery flights.

CONTENTS

CLAUSE   TITLE
------   -----
 10-     EXCUSABLE DELAY
 10.1    GENERAL
 10.2    Anticipated or Actual Delay
 10.3    Loss, Destruction or Damage
 10.4    Termination Rights Exclusive

10- EXCUSABLE DELAY

10.1 GENERAL

The Seller shall not be responsible, nor be deemed to be in default on account of delays or interruptions in the performance of its obligations hereunder, due to causes beyond its control or not occasioned by its fault or negligence, including (but without limiting the foregoing) acts of God or public enemy, war, civil war, warlike operations, terrorism, insurrections or riots, fires, floods, explosions, earthquakes, natural disasters or serious accidents, epidemics or quarantine restrictions, any act of government, governmental priorities, allocation regulations or orders affecting materials, facilities or completed aircraft, strikes or labour troubles causing cessation, slowdown or interruption of work, inability after due and timely diligence to procure materials, accessories, equipment or parts, general hindrance in transportation, failure of a subcontractor or Vendor to furnish materials, accessories, equipment or parts due to the above mentioned causes or of the Buyer to perform under this Agreement.

The Seller shall as soon as practicable after becoming aware of any delay falling within the provisions of this sub-Clause notify the Buyer of such delay and of the probable extent thereof and shall as soon as practicable after the removal of the cause of the delay resume its performance under this Agreement.

10.2 Anticipated or Actual Delay

10.2.1 In the event that the delivery of any Aircraft is delayed or interrupted by reason of any one or more of the causes described in sub-Clause 10.1 for a period of more than * months after the end of the calendar month in which delivery is otherwise required hereunder either party shall be entitled to terminate this Agreement with respect to the Aircraft so affected upon notice given to the other within thirty (30) days after the expiration of such * months period, provided, however, that a party shall not be entitled to terminate this Agreement pursuant to the provisions of this sub-Clause where the cause of such delay is within its control.

10.2.2 If the Seller concludes that the delivery of any Aircraft shall be delayed for more than * months due to one or more of the causes described in sub-Clause 10.1 and as a result thereof reschedules delivery of such Aircraft to a date reflecting such delay, then the Seller shall promptly notify the Buyer in writing to this effect and shall include in such notification the rescheduled delivery date. Either party may thereupon terminate this Agreement with respect to such Aircraft so delayed by giving written notice to the other party within thirty (30) days after receipt by the Buyer of the notice of anticipated delay.

If at the expiry of the said thirty (30) day period this Agreement shall not have been terminated with respect to the delayed Aircraft pursuant to the terms of this sub-Clause, then the rescheduled delivery date as notified to the Buyer shall be deemed to be incorporated into Clause 9 hereof as the date of delivery of the delayed Aircraft.

10.3 Loss, Destruction or Damage

If prior to its delivery, any Aircraft is lost, destroyed or damaged beyond repair, the Seller shall notify the Buyer to this effect within * days of such occurrence. Should the cause of such loss, destruction or damage be beyond the Seller's control or not be occasioned by its fault or negligence as described in the foregoing sub-Clause, the Seller shall include in said notification (or as soon after the issue of the notice as such information becomes available to the Seller) the earliest date consistent with the Seller's other commitments and production capabilities that an aircraft to replace the Aircraft lost, destroyed or damaged may be delivered to the Buyer and the date of delivery of the Aircraft shall be extended as specified in the Seller's notice to accommodate the delivery of the replacement aircraft: provided, however, that in the event the specified extension of the delivery date shall exceed * months after the date relating to the lost, destroyed or damaged Aircraft contained in sub-Clause 9.1 then this Agreement shall terminate as to such lost, destroyed or damaged Aircraft unless:

(i) the Buyer notifies the Seller within one (1) month of the date of receipt of the Seller's notice that it desires the Seller to provide a replacement aircraft on the delivery date quoted therein

and

(ii) the parties execute an amendment to this Agreement recording the variation in the aircraft delivery date

provided, however, that nothing herein shall require the Seller to manufacture and deliver a replacement aircraft if such manufacture would require the reactivation of its production line for the model or series of Aircraft purchased hereunder.

10.4 Termination Rights Exclusive

IN THE EVENT THAT THIS AGREEMENT SHALL BE TERMINATED AS PROVIDED FOR UNDER THE TERMS OF SUB-CLAUSES 10.2 OR 10.3, SUCH TERMINATION SHALL DISCHARGE ALL OBLIGATIONS AND LIABILITIES OF THE PARTIES HEREUNDER WITH RESPECT TO SUCH AFFECTED AIRCRAFT AND UNDELIVERED MATERIAL, SERVICES, DATA, OR OTHER ITEMS APPLICABLE THERETO AND TO BE FURNISHED HEREUNDER EXCEPT THAT THE SELLER SHALL REPAY TO THE BUYER THE PREDELIVERY PAYMENTS RECEIVED FROM THE BUYER HEREUNDER WITH RESPECT TO SUCH UNDELIVERED AIRCRAFT TOGETHER WITH ACCRUED INTEREST AT SIX MONTHS LIBOR PLUS 1.5%.

CONTENTS

CLAUSE   TITLE
------   -----
 11-     NON-EXCUSABLE DELAY
 11.1    Liquidated Damages
 11.2    Renegotiation
 11.3    Termination
 11.4    Waiver

11- NON-EXCUSABLE DELAY

11.1 Liquidated Damages

Should any of the Aircraft not be ready for delivery to the Buyer within * days after the delivery date pursuant to Clause 9 (as varied by virtue of Clauses 2, 7, 10 and 18) and such delay is not excusable under sub-Clause 10.1, the Buyer shall have the right to claim, and the Seller shall pay or credit to the Buyer in respect of any such subsequent delay the following amount per Aircraft by way of damages for each day of delay in the delivery starting from the * day beyond the agreed delivery date:

The amount of Seller's liquidated damages shall in no event exceed the total of USD * in respect of any one Aircraft.

The Buyer's right to recover said damages in respect of the Aircraft is conditional upon a claim therefor being submitted in writing to the Seller by the Buyer not later than * after the date when the Aircraft is ready for delivery.

11.2 Renegotiation

Should a delay in delivery for non excusable reasons exceed * months after the initial * -days-period the Buyer shall have the right exercisable by written notice to the Seller given not less than * days nor more than * after the expiration of the said * months to require from the Seller a renegotiation of the delivery date of the Aircraft which is the subject of such delay. Unless otherwise agreed between the Seller and the Buyer during such renegotiation, the said renegotiation shall not prejudice the Buyer's right to receive liquidated damages in accordance with the preceding sub-Clause during the period of non-excusable delay.

11.3 Termination

Should a delay in delivery for non excusable reasons exceed * months after the initial * days-period both parties shall have the right exercisable by written notice to the other party, given not less than * nor more than * after expiration of such * months to terminate this Agreement in respect only of the said Aircraft which is the subject of such delay whereupon either party may cancel any undelivered spare parts applicable thereto

11.4 Waiver

The Seller shall not under any circumstances have any liability whatsoever in respect of delay or failure in the delivery of any Aircraft other than and beyond the liabilities set forth in this Clause and in Clause 10.

CONTENTS

CLAUSE   TITLE
------   -----
 12-     WARRANTIES AND SERVICE LIFE POLICY
 12.1    Standard Warranty
 12.2    Seller Service Life Policy
 12.3    Vendor Product Support Agreements
 12.4    Interface Commitment
 12.5    Waiver, Release and Renunciation
 12.6    Duplicate Remedies
 12.7    Negotiated Agreement

12- WARRANTIES AND SERVICE LIFE POLICY

12.1 Standard Warranty

12.1.1 Nature of Warranty

Subject to the conditions and limitations as hereinafter provided for and except as provided for in sub-Clause 12.1.2, the Seller warrants to the Buyer that each Aircraft and all Warranted Parts as defined hereinafter shall at the time of delivery to the Buyer:

(i) be free from defects in material;

(ii) be free from defects in workmanship, including without limitation processes of manufacture;

(iii) be free from defects in design (including without limitation the selection of materials) having regard to the state of the art at the date of such design; and

(iv) be free from defects arising from failure to conform to the Specification, except to those portions of the Specification relating to performance or where it is expressly stated that they are estimates, approximations or design aims.

For the purpose of this Agreement: the term "Warranted Part" shall mean any Seller proprietary component, equipment, accessory or part as installed on an Aircraft at the time of delivery of such Aircraft and

(a) which is manufactured to the detailed design of the Seller or a subcontractor of the Seller and

(b) which bears a part number of the Seller at the time of such delivery.

12.1.2 Exclusions

The warranties set forth in sub-Clause 12.1.1 shall not apply to Buyer Furnished Equipment, nor to the Propulsion Systems, nor to any component, equipment, accessory or part purchased by the Seller that is not a Warranted Part except that:

(i) any defect in the Seller's workmanship incorporated in the installation of such items in the Aircraft, including any failure by the Seller to conform to the installation instructions of the manufacturer of such item that invalidates any applicable warranty from such manufacturer, shall constitute a defect in workmanship for the purpose of this sub-Clause and be covered by the warranty set forth in sub-Clause 12.1.1 (ii); and

(ii) any defect inherent in the Seller's design of the installation, in view of the state of the art at the date of such design, which impair the use of such item shall constitute a defect in design for the purpose of this sub-Clause and be covered by the warranty set forth in sub-Clause 12.1.1 (iii).

12.1.3 Warranty Periods

The warranties contained in sub-Clauses 12.1.1 and 12.1.2 shall be limited to those defects which become apparent within thirty six (36) months after delivery of the affected Aircraft.

12.1.4 Buyer's Remedy and Seller's Obligation

12.1.4.1 The Buyer's remedy and the Seller's obligation and liability under sub-Clauses 12.1.1 and 12.1.2 are limited to the repair, replacement or correction of any Warranted Part which is defective or to the supply of modification kits rectifying the defect, at the Seller's expense and option.

The Seller may equally at its option furnish a credit to the Buyer equal to the price at which the Buyer is entitled to purchase a replacement for the defective Warranted Part.

12.1.4.2 In the event of a defect covered by sub-Clauses 12.1.1 (iii), 12.1.1
(iv) and 12.1.2 (ii) becoming apparent within the applicable period set forth in sub-Clause 12.1.3 and the Seller being obliged to correct such defect, the Seller shall also, if so requested by the Buyer, make such correction in any Aircraft which has not yet been delivered to the Buyer; provided, however,

that the Seller shall not be responsible nor deemed to be in default on account of any delay in delivery of any Aircraft or otherwise, in respect of the performance of this Agreement due to the Seller's undertaking to make such correction and provided further

that, rather than accept a delay in the delivery of any such Aircraft, the Buyer and the Seller may agree to deliver such Aircraft with subsequent correction of the defect by the Buyer at the Seller's expense, or the Buyer may elect to accept delivery and thereafter file a warranty claim as though the defect had become apparent immediately after delivery of such Aircraft.

12.1.4.3 In addition to the remedies set forth in sub-Clauses 12.1.4.1 and 12.1.4.2, the Seller shall reimburse the direct labour costs spent by the Buyer in performing inspections of the Aircraft to determine whether or not a defect exists in any Warranted Part within thirty six (36) months after delivery of each Aircraft or until the corrective technical solution removing the need for the inspection is provided by the Seller, whichever occurs earlier.

The above commitment is subject to the following conditions:

(i) such inspections are recommended by a Seller's Service Bulletin to be performed within the above covered period;

(ii) the inspection is performed outside of a scheduled maintenance check as recommended by the Seller's Maintenance Planning Document;

(iii) the reimbursement shall not apply for any inspections performed as an alternative to accomplishing corrective action when such corrective action has been offered to the Buyer at the time such inspections are performed or earlier,

(iv) the labour rate to be used for the reimbursement shall be the labour rate defined in sub-Clause 12.1.7, and

(v) the manhours used to determine such reimbursement shall not exceed the Seller's estimate of the manhours required by the Buyer for such inspections.

12.1.5 Warranty Claim Requirements

The Buyer's warranty claims shall be considered by the Seller only if the following conditions are first fulfilled:

(i) the defect having become apparent within the applicable warranty period as set forth in sub-Clause 12.1.3;

(ii) the Buyer having submitted to the Seller proof reasonably satisfactory to the Seller that the claimed defect is due to a matter embraced within this sub-Clause 12.1, and that such defect has not resulted from any act or omission of the Buyer, including but not limited to, any failure to operate and maintain the affected Aircraft or part thereof in accordance with the standards set forth or any matter covered in sub-Clause 12.1.10;

(iii) the Buyer having returned as soon as practicable the Warranted Part claimed to be defective to the repair facilities as may be designated by the Seller, except when the Buyer elects to repair a defective Warranted Part in accordance with the provisions of sub-Clause 12.1.7;

(iv) the Seller having received a warranty claim as set forth in sub-Clause 12.1.6.

12.1.6 Warranty Administration

The warranties set forth in sub-Clause 12.1 shall be administered as hereinafter provided for.

(i) Claim Determination

Warranty claim determination by the Seller shall be reasonably based upon the claim details, reports from the Seller's local representative, historical data logs, inspection, tests, findings during repair, defect analysis and other suitable documents.

(ii) Transportation Costs

Transportation costs for sending a defective Warranted Part to the facilities designated by the Seller and for the return therefrom of a repaired or replaced Warranted Part shall be borne by

(iii) Return of an Aircraft

In the event of the Buyer desiring to return an Aircraft to the Seller for consideration of a warranty claim, the Buyer shall notify the Seller of its intention to do so and the Seller shall, prior to such return, have the right to inspect such Aircraft and thereafter, without prejudice to its rights hereunder, to repair such Aircraft, at its sole option, either at the Buyer's facilities or at another place acceptable to the Seller. Return of any Aircraft by the Buyer to the Seller, at Buyer's option, and return of such Aircraft to the Buyer's facilities shall be at *

(iv) On-Aircraft Work by the Seller

In the event that a defect subject to this sub-Clause 12.1 may justify the dispatch by the Seller of a working team to repair or correct such defect through the embodiment of one or several Seller's Service Bulletins at the Buyer's facilities, or in the event of the Seller accepting the return of an Aircraft to perform or have performed such repair or correction, then the labour costs for such on-Aircraft work are to be borne by *

All related expenses, including but not limited to travel and living expenses, in excess of the labour costs as defined above, incurred in performing such repair or correction shall be borne by *

The conditions which have to be fulfilled for on-Aircraft work by the Seller are the following:

- in the opinion of the Seller, the work necessitates the technical expertise of the Seller as manufacturer of the Aircraft, or

- the downtime of the affected Aircraft would exceed three (3) days per Aircraft outside of any scheduled maintenance downtime and the number of manhours as quoted on the Seller's service bulletin or batch of service bulletins for their embodiment on any Aircraft would exceed three hundred (300). In case a batch of service bulletins is contemplated, and for the purpose of assessing the volume of the work against the three hundred (300) manhours threshold, only service bulletins with more than twenty
(20) hours of elapsed time shall be considered.

If one or both of the above conditions are fulfilled, and if the Seller is requested to perform the work, the Seller and the Buyer shall agree on a schedule and place for the work to be performed.

(v) Warranty Claim Substantiation

In connection with each claim by the Buyer made under this sub-Clause 12.1, the Buyer shall file a warranty claim on the Buyer's form within sixty (60) days after a defect became apparent. Such form must contain at least the following data:

a) description of defect and action taken, if any,

b) date of incident and/or of removal date,

c) description of the defective part,

d) part number,

e) serial number (if applicable),

f) position on Aircraft,

g) total flying hours or calendar time, as applicable at the date of defect appearance,

h) time since last shop visit at the date of defect appearance,

i) Manufacturer's Serial Number of the Aircraft and/or its registration,

j) Aircraft total flying hours and/or number of landings at the date of defect appearance,

k) claim number,

l) date of claim,

m) delivery date of Aircraft or part to the Buyer,

Claims are to be addressed as follows:

AIRBUS INDUSTRIE
CUSTOMER SERVICES DIRECTORATE
WARRANTY ADMINISTRATION

Rond-Point Maurice Bellonte
B.P. 33
F-31707 BLAGNAC CEDEX
FRANCE

(vi) Replacements

Replaced components, equipment, accessories or parts shall become the Seller's property.

(vii) Seller's Rejection

The Seller shall provide reasonable written substantiation in case of rejection of a warranty claim. In such event the Buyer shall refund to the Seller reasonable inspection and test charges incurred in connection therewith.

(viii) Seller's inspection

The Seller shall have the right to inspect the affected Aircraft and documents and other records relating thereto in the event of any warranty claim under this sub-Clause 12.1.

12.1.7 Inhouse Warranty

(i) Seller's Authorization

The Seller hereby authorizes the Buyer to perform the repair of Warranted Parts subject to the terms of this sub-Clause 12.1.7. The Buyer shall notify the Seller's representative of its intention to perform Inhouse Warranty repairs before such repairs are started, unless it is not practicable.

(ii) Conditions for Seller's Authorization

The Buyer shall be entitled to repair such Warranted Parts only:

- if adequate facilities and qualified personnel are available to the Buyer;

- in accordance with the Seller's written instructions set forth in the applicable Seller's technical documentation;

- to the extent specified by the Seller, or, in the absence of such specification, to the extent reasonably necessary to correct the defect, in accordance with the standards set forth in sub-Clause 12.1.10.

(iii) Seller's Rights

The Seller shall have the right to have any Warranted Part, or any part removed therefrom, claimed to be defective, returned to the Seller, as set forth in sub-Clause 12.1.6 (ii) if, in the judgement of the Seller, the nature of the defect requires technical investigation. The Seller shall further have the right to have a representative present during the disassembly, inspection and testing of any Warranted Part claimed to be defective.

(iv) Inhouse Warranty Claim Substantiation

Claims for Inhouse Warranty credit shall contain the same information as that required for warranty claims under sub-Clause 12.1.6 (v) and in addition shall include:

a) a report of technical findings with respect to the defect,

b) for parts required to remedy the defect:

- part numbers,

- serial numbers (if applicable),

- parts description,

- quantity of parts,

- unit price of parts,

- related Seller's or third party's invoices (if applicable),

- total price of parts,

c) detailed number of labour hours,

d) agreed Inhouse Warranty labour rate,

e) total claim value.

(v) Credit

The Buyer's account shall be credited with an amount equal to the direct labour costs expended in performing the off-Aircraft repair of a Warranted Part and to the direct costs of materials incorporated in said repair.

- For the determination of direct labour costs only manhours spent on disassembly, inspection, repair, reassembly, and final inspection and test of the Warranted Part are permissible. Any manhours required for maintenance work concurrently being carried out on the Aircraft or Warranted Part as well as for removal and installation of the Warranted Part are not included.

The manhours permissible above shall be multiplied by an agreed labour rate referred to as the Inhouse Warranty labour rate and representing the Buyer's composite labour rate meaning the average hourly rate (excluding all fringe benefits, premium time allowances, social charges, business taxes and the like) paid to the Buyer's employees whose jobs are directly related to the performance of the repair.

- Direct material costs are determined by the prices at which the Buyer acquired such material, excluding any parts and materials used for overhaul and as may be furnished by the Seller at no charge.

(vi) Limitation

The Buyer shall in no event be credited for repair costs (including labour and material) in excess of sixty-five percent (65 %) of the current catalog price for a replacement of the defective Warranted Part or in excess of those costs which would have resulted if repairs had been carried out at the Seller's facilities. Such costs shall be substantiated in writing by the Seller upon reasonable request by the Buyer.

(vii) Scrapped Material

The Buyer shall retain any defective Warranted Part beyond economic repair and any defective part removed from a Warranted Part during repair for a period of either one hundred and twenty (120) days after the date of completion of repair or sixty (60) days after submission of a claim for Inhouse Warranty credit relating thereto, whichever is longer. Such parts shall be returned to the Seller within thirty (30) days of receipt of the Seller's request to that effect.

Notwithstanding the foregoing, the Buyer may scrap any such defective parts which are beyond economic repair and not required for technical evaluation locally with the agreement of the Seller's local representative. Scrapped Warranted Parts shall be evidenced by a record of scrapped material certified by an authorized representative of the Buyer.

12.1.8 Standard Warranty Transferability

The warranties provided for in this sub-Clause 12.1 for any Warranted Part shall accrue to the benefit of any airline in revenue service, other than the Buyer, if the Warranted Part enters into the possession of any such airline as a result of a pooling or leasing agreement between such airlines and the Buyer, in accordance with the terms and subject to the limitations and exclusions of the foregoing warranties and to the extent permitted by any applicable laws or regulations.

12.1.9 Warranty for Corrected, Replaced or Repaired Warranted Parts

Whenever any Warranted Part which contains a defect for which the Seller is liable under sub-Clause 12.1 has been corrected, replaced or repaired pursuant to the terms of this sub-Clause 12.1, the period of the Seller's warranty with respect to such corrected, replaced or repaired Warranted Part whichever may be the case, shall be the remaining portion of the original warranty.

12.1.10 Good Airline Operation - Normal Wear and Tear

The Buyer's rights under this sub-Clause 12.1 are subject to the Aircraft and each component, equipment, accessory and part thereof being maintained, overhauled, repaired, and operated in accordance with good commercial airline practice, all technical documentation and any other instructions issued by the Seller and the Vendors and the Manufacturer of the Propulsion Systems and all applicable rules, regulations and directives of relevant Aviation Authorities. The Seller's liability under this sub-Clause 12.1 shall not extend to normal wear and tear nor to:

(i) any Aircraft or component, equipment, accessory or part thereof which has been repaired, altered or modified after delivery except by the Seller or in a manner approved by the Seller;

(ii) any Aircraft or component, equipment, accessory or part thereof which has been operated in a damaged state;

(iii) any component, equipment, accessory and part from which the trade mark, name, part or serial number or other identification marks have been removed;

unless in any such case (except in the case of (iii) above) the Buyer submits reasonable evidence to the Seller that the defect did not arise from or was not contributed to by any one or more of the said causes.

12.2 Seller Service Life Policy

In addition to the warranties set forth in sub-Clause 12.1, the Seller further agrees that should a Failure as defined in sub-Clause 12.2.1.2 occur in any Item as defined in sub-Clause 12.2.1.1, and subject to the general conditions and limitations set forth in sub-Clause 12.2.4, then the provisions of this sub-Clause 12.2 shall apply.

12.2.1 Definitions

For the purpose of this sub-Clause 12.2 the following conditions shall apply:

12.2.1.1 "Item" means any of the Seller components, equipment, accessories and parts listed in Exhibit "C", Seller Service Life Policy.

12.2.1.2 "Failure" means any breakage of, or defect in, an Item which has occurred and which can reasonably be expected to occur on a fleetwide basis, and which materially impairs the utility of the Item.

12.2.2 Periods and Seller's Undertakings

The Seller agrees that if a Failure occurs in an Item within * years after the delivery of said Aircraft to the Buyer, whichever shall first occur, the Seller shall at its own discretion and as promptly as practicable and with the Seller's financial participation as hereinafter provided either:

12.2.2.1 design and furnish to the Buyer a correction for such Item with a Failure and provide any parts required for such correction (including Seller designed standard parts but excluding industry standard parts), or,

12.2.2.2 replace such Item.

12.2.3 Seller's Participation in the Costs

Any part or Item which the Seller is required to furnish to the Buyer under this Service Life Policy in connection with the correction or replacement of an Item shall be furnished to the Buyer with the Seller's financial participation determined in accordance with the following formula:

P = C (N - T)/N

where :

P: financial participation of the Seller,

C: Seller's then current sales prices for the required Item or Seller designed parts,

T: total time in months since delivery of the Aircraft in which the Item subject to a Failure has been used, and,

N: (*) months,

12.2.4 General Conditions and Limitations

12.2.4.1 The undertakings given in this sub-Clause 12.2 shall be valid after the period of the Seller's warranty applicable to an Item under sub-Clause 12.1.

12.2.4.2 The Buyer's remedy and the Seller's obligation and liability under this Service Life Policy are subject to the prior compliance by the Buyer with the following conditions:

(i) the Buyer shall maintain log books and other historical records with respect to each Item adequate to enable determination of whether the alleged Failure is covered by this Service Life Policy and if so to define the costs to be borne by the Seller in accordance with sub-Clause 12.2.3;

(ii) the Buyer shall keep the Seller informed of any significant incidents relating to an Aircraft howsoever occurring or recorded;

(iii) the Buyer shall comply with the conditions of sub-Clause 12.1.10;

(iv) the Buyer shall carry out specific structural inspection programs for monitoring purposes as may be established from time to time by the Seller. Such programs shall be as compatible as possible with the Buyer's operational requirements and shall be carried out at the Buyer's expense. Reports relating thereto shall be regularly furnished to the Seller;

(v) in the case of any breakage or defect, the Buyer must have reported the same in writing to the Seller within sixty (60) days after any breakage or defect in an Item becomes apparent whether or not said breakage or defect can reasonably be expected to occur in any other aircraft, and the Buyer shall have informed the Seller of the breakage or defect in sufficient detail to enable the Seller to determine whether said breakage or defect is subject to this Service Life Policy.

12.2.4.3 Except as otherwise provided for in this sub-Clause 12.2, any claim under this Service Life Policy shall be administered as provided for in and shall be subject to the terms and conditions of sub-Clause 12.1.6.

12.2.4.4 In the event that the Seller shall have issued a modification applicable to an Aircraft, the purpose of which is to avoid a Failure, the Seller may elect to supply the necessary modification kit free of charge or under a pro rata formula. If such a kit is so offered to the Buyer, then, to the extent of such Failure and any Failures that could ensue therefrom, the validity of the Seller's commitment under this sub-Clause 12.2 shall be subject to the Buyer's incorporating such modification in the relevant Aircraft, as promulgated by the Seller and in accordance with the Seller's instructions, within a reasonable time.

12.2.4.5 This Service Life Policy is neither a warranty, performance guarantee, nor an agreement to modify any Aircraft or airframe components to conform to new developments occurring in the state of airframe design and manufacturing art.

The Seller's obligation herein is to furnish only those corrections to the Items or provide replacement therefor as provided for in sub-Clause 12.2.3.

The Buyer's sole remedy and relief for the non-performance of any obligation or liability of the Seller arising under or by virtue of this Service Life Policy shall be in monetary damages, limited to the amount the Buyer reasonably expends in procuring a correction or replacement for any Item which is the subject of a Failure covered by this Service Life Policy and to which such non-performance is related.

The Buyer hereby waives, releases and renounces all claims to any further damages, direct, incidental or consequential, including loss of profits and all other rights, claims and remedies, arising under or by virtue of this Service Life Policy.

12.2.5 Transferability

The Buyer's rights under this sub-Clause 12.2 shall not be assigned, sold, leased, transferred or otherwise alienated by operation of law or otherwise, without the Seller's prior consent thereto, which shall not be unreasonably withheld and given in writing.

Any unauthorized assignment, sale, lease, transfer or other alienation of the Buyer's rights under this Service Life Policy shall, as to the particular Aircraft involved, immediately void this Service Life Policy in its entirety.

12.3 Vendor Product Support Agreements

12.3.1 Seller's Support

Prior to the delivery of the first Aircraft, the Seller shall obtain from all Vendors listed in the "Vendor Product Support Agreements" enforceable and transferable warranties for each of their components, equipment, accessories or parts installed in an Aircraft at the time of delivery thereof ("Vendor Parts") except for the Propulsion Systems, Buyer Furnished Equipment and other equipment selected by the Buyer to be supplied by Vendors with whom the Seller has no existing enforceable warranty agreements.

The Seller shall also obtain enforceable and transferable Vendor Service Life Policies from landing gear Vendors for selected structural landing gear elements.

The Seller undertakes to supply to the Buyer such Vendor warranties and Vendor Service Life Policies in the form of "Vendor Product Support Agreements".

12.3.2 Vendor's Default

12.3.2.1 In the event of any Vendor, under any standard warranty obtained by the Seller pursuant to sub-Clause 12.3.1, defaulting in the performance of any material obligation with respect thereto and the Buyer submitting in reasonable time to the Seller reasonable proof that such default has occurred, then sub-Clause 12.1 shall apply to the extent the same would have been applicable had such Vendor Part been a Warranted Part, except that the Vendor's warranty period as indicated in the "Vendor Product Support Agreement" shall apply.

12.3.2.2 In the event of any Vendor, under any Vendor Service Life Policy obtained by the Seller pursuant to sub-Clause 12.3.1, defaulting in the performance of any material obligation with respect thereto and the Buyer submitting in reasonable time to the Seller reasonable proof that such default has occurred, then sub-Clause 12.2 shall apply to the extent the same would have been applicable had such Vendor Item been listed in Exhibit "C", Seller Service Life Policy, except that the Vendor's Service Life Policy period as indicated in the "Vendor Product Support Agreement" shall apply.

12.3.2.3 At the Seller's request, the Buyer shall assign to the Seller, and the Seller shall be subrogated to, all of the Buyer's rights against the relevant Vendor with respect to and arising by reason of such default and shall provide reasonable assistance to enable the Seller to enforce the rights so assigned.

12.4 Interface Commitment

12.4.1 Interface Problem

If the Buyer experiences any technical problem in the operation of an Aircraft or its systems due to a malfunction, the cause of which, after due and reasonable investigation, is not readily identifiable by the Buyer, but which the Buyer reasonably believes to be attributable to the design characteristics of one or more components of the Aircraft (an "interface Problem"), the Seller shall, if so requested by the Buyer, and without additional charge to the Buyer except for transportation of the Seller's personnel to the Buyer's facilities, promptly conduct or have conducted an investigation and analysis of such problem to determine, if possible, the cause or causes of the problem and to recommend such corrective action as may be feasible. The Buyer shall furnish to the Seller all data and information in the Buyer's possession relevant to the Interface Problem, and shall cooperate with the Seller in the conduct of the Seller's investigations and such tests as may be required.

At the conclusion of such investigation the Seller shall promptly advise the Buyer in writing of the Seller's opinion as to the cause or causes of the Interface Problem and the Seller's recommendations as to corrective action.

12.4.2 Seller's Responsibility

If the Seller determines that the Interface Problem is primarily attributable to the design of a Warranted Part, the Seller shall, if so requested by the Buyer and pursuant to the terms and conditions of sub-Clause 12.1, correct the design of such Warranted Part to the extent of the Seller's obligation as defined in sub- Clause 12.1.

12.4.3 Vendor's Responsibility

If the Seller determines that the Interface Problem is primarily attributable to the design of any Vendor Part, the Seller shall, if so requested by the Buyer, reasonably assist the Buyer in processing any warranty claim the Buyer may have against the Vendor.

12.4.4 Joint Responsibility

If the Seller determines that the Interface Problem is attributable partially to the design of a Warranted Part and partially to the design of any Vendor Part, the Seller shall, if so requested by the Buyer, seek a solution to the Interface Problem through cooperative efforts of the Seller and any Vendor involved.

The Seller shall promptly advise the Buyer of such corrective action as may be proposed by the Seller and any such Vendor. Such proposal shall be consistent with any then existing obligations of the Seller hereunder and of any such Vendor to the Buyer. Such corrective action when duly accepted by the Buyer shall constitute full satisfaction of any claim the Buyer may have against either the Seller or any such Vendor with respect to such Interface Problem.

12.4.5 General

12.4.5.1 All requests under this sub-Clause 12.4 shall be directed to both the Seller and the Vendors.

12.4.5.2 Except as specifically set forth in this sub-Clause 12.4, this sub-Clause shall not be deemed to impose on the Seller any obligations not expressly set forth elsewhere in this Clause 12.

12.4.5.3 All reports, recommendations, data and other documents furnished by the Seller to the Buyer pursuant to this sub-Clause 12.4 shall be deemed to be delivered under this Agreement and shall be subject to the terms, covenants and conditions set forth in this Clause 12.

12.5 Waiver, Release and Renunciation

THE WARRANTIES, OBLIGATIONS AND LIABILITIES OF THE SELLER AND REMEDIES OF THE BUYER SET FORTH IN THIS CLAUSE 12 ARE EXCLUSIVE AND IN SUBSTITUTION FOR, AND THE BUYER HEREBY WAIVES, RELEASES AND RENOUNCES ALL OTHER WARRANTIES, OBLIGATIONS AND LIABILITIES OF THE SELLER AND RIGHTS, CLAIMS AND REMEDIES OF THE BUYER AGAINST THE SELLER, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, WITH RESPECT TO ANY NONCONFORMITY OR DEFECT IN ANY AIRCRAFT, COMPONENT, EQUIPMENT, ACCESSORY OR PART THEREOF DELIVERED UNDER THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS, ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE, ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN CONTRACT OR IN TORT, WHETHER OR NOT ARISING FROM THE SELLER'S NEGLIGENCE, ACTUAL OR IMPUTED, AND ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS OR DAMAGE TO ANY AIRCRAFT, COMPONENT, EQUIPMENT, ACCESSORY OR PART THEREOF, FOR LOSS OF USE, REVENUE OR PROFIT WITH RESPECT TO ANY AIRCRAFT, COMPONENT, EQUIPMENT, ACCESSORY OR PART THEREOF, OR FOR ANY OTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, PROVIDED THAT IN THE EVENT THAT ANY OF THE AFORESAID PROVISIONS SHOULD FOR ANY REASON BE HELD UNLAWFUL OR OTHERWISE INEFFECTIVE THE REMAINDER OF THIS SUB-CLAUSE 12.5 SHALL REMAIN IN FULL FORCE AND EFFECT.

12.6 Duplicate Remedies

The Seller shall not be obliged to provide any remedy which is duplicate of any other remedy provided to the Buyer under any part of this Clause 12 as may be amended, complemented or supplemented by other contractual agreements or Clauses of this Agreement.

12.7 Negotiated Agreement

The Buyer and the Seller agree that this Clause 12 has been the subject of discussion and negotiation and is fully understood by the parties, and that the price of the Aircraft and the other mutual agreements of the parties set forth in this Agreement were arrived at in consideration of, inter alia, the provisions of this Clause 12, specifically including the waiver, release and renunciation by the Buyer set forth in sub-Clause 12.5.

CONTENTS

CLAUSE   TITLE
------   -----
 13-     PATENT - INDEMNITY
 13.1    Seller's Obligation and Buyer's Remedy
 13.2    Claim Administration
 13.3    Buyer's Rights Exclusive

13- PATENT - INDEMNITY

13.1 Seller's Obligation and Buyer's Remedy

13.1.1 Subject to the provisions of sub-Clause 13.2.2, the Seller shall indemnify the Buyer from and against any damages, costs or expenses including legal costs (excluding damages, costs, expenses, loss of profits and other liabilities in respect of or resulting from loss of use of the Aircraft or any of them) resulting from any infringement or claim of infringement of:

(i) any British, French, German, Spanish or U.S. patent;

and:

(ii) any patent issued under the laws of any other country in which the Buyer may lawfully operate the Aircraft, provided that:

(1) from the time of design of such Aircraft, accessory, equipment or part and until infringement claims are resolved, such country and the flag country of the Aircraft are legally bound by and recognize their obligations and duties under the Chicago Convention on International Civil Aviation of December 7, 1944 and the flag country is fully entitled to all benefits of Article 27 thereof

or in the alternative,

(2) from such time of design and until infringement claims are resolved such country shall either be a party to the International Convention for the Protection of Industrial Property, or have in full force and effect patent laws which recognize and give adequate protection to patents issued under the laws of other countries.

13.1.2 The sub-Clause 13.1.1 shall not apply to Buyer Furnished Equipment nor to parts which the Buyer has requested the Seller to install on the Aircraft where such parts are to be supplied by Vendors with whom the Seller has no existing enforceable warranty agreements.

13.1.3 In the event that the Buyer is prevented from using a unit or a part of the Aircraft (whether by a valid judgment of a court of competent jurisdiction or by a settlement arrived at between claimant, Seller and Buyer), the Seller shall at its expense either:

(i) procure for the Buyer the right to use the same free of charge to the Buyer; or

(ii) replace the same as soon as possible with a non infringing substitute complying in all other respects with the requirements of this Agreement.

13.2 Claim Administration

13.2.1 If the Buyer receives a written claim or a suit is threatened or commenced against the Buyer for infringement, the Buyer shall:

(i) forthwith notify the Seller giving particulars thereof;

(ii) furnish to the Seller all data papers and records within the Buyer's knowledge control or possession;

(iii) refrain from admitting any liability or making any payment or assuming any expenses, damages, costs or royalties or otherwise acting in a manner prejudicial to the defence or denial of such suit or claim;

(iv) fully cooperate with, and render all such assistance to, the Seller as may be pertinent to the defence or denial of the suit or claim;

(v) act in such a way as to mitigate damages and / or to reduce the amount of royalties which may be payable as well as to minimise costs and expenses.

13.2.2 The Seller shall be entitled either in its own name or on behalf of the Buyer to conduct negotiations with the party or parties alleging infringement and may assume and conduct the defence or settlement of any suit or claim in the manner which, in its opinion, deems proper.

13.3 Buyer's Rights Exclusive

The Seller's liability hereunder shall be conditional upon the strict and timely compliance by the Buyer with the terms of this Clause and is in lieu of any other liability to the Buyer express or implied which the Seller might incur at law as a result of any infringement or claim of infringement of any patent.

CONTENTS

CLAUSE       TITLE
------       -----
 14          TECHNICAL PUBLICATIONS
 14.1        General
 14.2        Scope
 14.3        Delivery
 14.4        Revision Service
 14.5        Vendor Equipment
 14.6        Aircraft Identification for Technical Publications
 14.7        Performance Engineer's Programs
 14.8        CD-ROM
 14.9        Future Developments
 14.10       Warranties
 14.11       Proprietary Rights
Appendix A   Licence for use of the Performance Engineer's Programs (PEP)
Appendix B   Licence for use of CD-ROM

14- TECHNICAL PUBLICATIONS

14.1 General

This Clause covers the terms and conditions for the supply of technical publications (hereinafter "the Technical Publications") to support the Aircraft operation.

The Technical Publications shall be supplied in the English language using the aeronautical terminology in common use.

14.2 Scope

Range, form, type, format, ATA/Non ATA compliance, revision, quantity and delivery schedule of the Technical Publications are covered in Exhibit "D".

14.3 Delivery

14.3.1 The Technical Publications and corresponding revisions to be supplied by the Seller shall be sent to one address only as advised by the Buyer.

Documentation already in the Buyer's possession through a previous agreement shall not be included in the Technical Publications package subject of the present Agreement, except as quantities may be increased in accordance with the provisions of Exhibit "D".

Packing and shipment of the Technical Publications and their revisions shall be carried out in consideration of the quickest transportation methods. The shipment shall be Free Carrier (FCA) TOULOUSE, FRANCE and/or Free Carrier (FCA) HAMBURG, FEDERAL REPUBLIC OF GERMANY, as the term Free Carrier (FCA) is defined by publication no 460 of the International Chamber of Commerce, published in April 1990.

The delivery schedule of the Technical Publications shall be phased as mutually agreed to correspond with Aircraft deliveries. The Buyer agrees to provide forty (40) days notice when requesting a change to the delivery schedule.

14.3.2 It shall be the responsibility of the Buyer to coordinate and satisfy local Aviation Authorities needs for Seller's Technical Publications. Such Technical Publications shall be supplied by the Seller at no charge to the Buyer Free Carrier (FCA) TOULOUSE, FRANCE and/or Free Carrier (FCA) HAMBURG, FEDERAL REPUBLIC OF GERMANY.

14.4 Revision Service

14.4.1 General

Unless otherwise specifically stated, Revision Service shall be offered on a free of charge basis for a period of * after delivery of the last firmly ordered Aircraft covered under this Agreement.

Mandatory changes shall be incorporated into the Technical Publications at no charge for as long as one (1) Aircraft is in service with the Buyer.

14.4.2 Service Bulletins (SB)

Seller's Service Bulletin information shall be incorporated into the Technical Publications for the Buyer's Aircraft after formal notification by the Buyer of its intention to accomplish a Service Bulletin. The split effectivity for the corresponding Service Bulletin shall remain in the Technical Publications until notification from the Buyer that embodiment has been completed on all the Buyer's Aircraft.

The request for incorporation has to be made within two (2) years after issue of the Service Bulletin.

14.4.3 Customer Originated Changes (COC)

14.4.3.1 Buyer originated data documented in the Buyer's own Airline Engineering Bulletin may be introduced into the following Seller's customized manuals :

- Aircraft Maintenance Manual,

- Illustrated Parts Catalog,

- Trouble Shooting Manual,

- Wiring Manual (Schematics, Wirings, Lists).

COC data shall be established by the Buyer according to the "Guidelines for Customer Originated Changes" as issued by the Seller.

The data shall be labelled with COC as being Buyer originated. The Seller shall endeavour to incorporate such Buyer originated data within the two
(2) revisions following the receipt of complete and accurate data for processing.

COC data shall be incorporated by the Seller in all affected customized manuals unless the Buyer specifies in writing the documents of its choice into which the COC data shall be incorporated. The customized manuals into which the COC data are incorporated shall only show the Aircraft configuration reflecting the COC data and not the configuration before such COC data's incorporation.

14.4.3.2 The Buyer shall ensure that any such data have received prior agreement from its local Aviation Authorities.

14.4.3.3 The Buyer hereby acknowledges and accepts that the incorporation of any COC into the Technical Publications issued by the Seller shall be entirely at the Buyer's risk. Accordingly, the Seller shall be under no liability whatsoever in respect of either the contents of any COC, including any omissions or inaccuracies therein, or the effect which the incorporation of such COC may have on the Seller's Technical Publications.

The Seller shall not be required to check any COC data submitted for incorporation as aforesaid.

Further, the Buyer acknowledges full liability for the effects, including all related costs, which any COC may have on all subsequent Service Bulletins/modifications.

14.4.3.4 In the event of the Seller being required under any court order or settlement to indemnify any third party for injury, loss or damage incurred directly or indirectly as a result of incorporation of any COC into the Technical Publications issued by the Seller, the Buyer agrees to reimburse the Seller for all payments or settlements made in respect of such injury, loss or damage including any expenses incurred by the Seller in defending such claims.

The Seller's liability shall in no event be affected by any communication written or oral which the Seller may make to the Buyer with respect to such documentation.

14.4.3.5 The Seller's costs with respect to the incorporation of any COC as aforesaid shall be invoiced to the Buyer under conditions specified in the Seller's then current Support Services Price List.

14.5 Vendor Equipment

Information relating to Vendor equipment which is installed on the Aircraft by the Seller shall be introduced into the Seller's Technical Publications to the extent necessary for the comprehension of the systems concerned, at no additional charge to the Buyer for the Technical Publications' basic issue.

The Buyer shall supply the data related to Buyer Furnished Equipment (BFE) and Seller Furnished Equipment (SFE) (if not covered in the Seller's Standard SFE definition) to the Seller at least six (6) months before the scheduled delivery of the Seller's customized Technical Publications. The BFE and SFE data (if not covered in the Seller's standard SFE definition) supplied by the Buyer to the Seller shall be in English language.

The Seller shall introduce BFE and SFE data into the Seller's Technical Publications at no additional charge to the Buyer for the Technical Publications basic issue. The transportation costs related to BFE and SFE data shipment shall be the Buyer's responsibility.

14.6 Aircraft Identification for Technical Publications

For the customized Technical Publications the Buyer agrees to the allocation of Fleet Serial Numbers (FSN) in the form of block of numbers selected in the range from 001 to 999.

The sequence shall be interrupted only if two (2) different Propulsion Systems or different Aircraft models are selected.

The Buyer shall indicate to the Seller the Fleet Serial Number allocated to the Aircraft Manufacturer's Serial Number (MSN) within forty-five (45) days after execution of this Agreement. The allocation of Fleet Serial Numbers to Manufacturer's Serial Numbers shall not constitute any property, insurable or other interest of the Buyer whatsoever in any Aircraft prior to the delivery of and payment for such Aircraft as provided for in this Agreement.

The affected customized Technical Publications are:

- Aircraft Maintenance Manual,

- Illustrated Parts Catalog,

- Trouble Shooting Manual,

- Wiring Manual (Schematics, Wirings, Lists).

14.7 Performance Engineer's Programs

Complementary to the standard Operational Manuals, covered in Exhibit "D", the Seller shall provide to the Buyer Performance Engineer's Programs (PEP) under licence conditions as defined in Appendix A to this Clause.

14.8 CD-ROM

CD-ROM, in replacement for manuals/data provided by the Seller in other media, can be provided under licence conditions as defined in Appendix B to this Clause.

The affected Technical Publications are the following :

- Trouble Shooting Manual,

- Aircraft Maintenance Manual,

- Illustrated Parts Catalog.

14.9 Future Developments

The Seller shall continuously monitor technological developments and apply them to document production and method of transmission where beneficial and economical.

14.10 Warranties

The Seller warrants that the Technical Publications are prepared in accordance with the state of the art at the date of their conception. Should a Technical Publication prepared by the Seller contain error or omission, the sole and exclusive liability of the Seller shall be to take all reasonable and proper steps to, at its option, correct or replace such Technical Publication. Notwithstanding the above, no warranties of any kind are given for the Customer Originated Changes, as set forth in sub-Clause
14.4.3. The provisions of sub-Clause 12.5,12.6 and 12.7 shall apply to all Technical Publications.

14.11 Proprietary Rights

14.11.1 All proprietary rights, including but not limited to patent, design and copyrights, relating to Technical Publications and data supplied under this Agreement shall remain with the Seller. All such Technical Publications and data are supplied to the Buyer for the sole use of the Buyer who undertakes not to divulge the contents thereof to any third party save as permitted therein or otherwise pursuant to any Government or legal requirement imposed upon the Buyer or if any such information falls into the public domain other than by any unauthorised disclosure of Buyer. These proprietary rights shall also apply to any translation into a language or languages or media that may have been performed or caused to be performed by the Buyer.

14.11.2 Whenever this Agreement provides for manufacturing by the Buyer, the consent given by the Seller shall not be construed as express or implicit approval howsoever of the manufactured products. The supply of the Technical Publications and data shall not be construed as any further right for the Buyer to design or manufacture any Aircraft or part thereof or spare part.

14.11.3 In the case of the Seller having authorized the disclosure to third parties either under this Agreement or by an express prior written authorization, the Buyer shall undertake that such third party agree to be bound by the same conditions and restrictions as the Buyer with respect to the disclosed Technical Publications.

LICENCE FOR USE OF THE PERFORMANCE ENGINEER'S PROGRAMS (PEP)

1. Grant

The Seller grants the Buyer the right to use the PEP in machine readable form during the term of this licence on a single computer.

Use of the PEP in readable form shall be limited to one (1) copy other than the copies contained in the single computer and copies produced for checkpoint and restart purposes or additional copies made with the consent of the Seller for a specific need.

2. Merging

The PEP may be used and adapted in machine readable form for the purpose of merging it into other program material of the Buyer but, on termination of this Agreement, the PEP shall be removed from the other program material with which it has been merged.

The Buyer agrees to reproduce the copyright and other notices as they appear on or within the original media on any copies which the Buyer makes of the PEP.

3. Personal Licence

The above described licence is personal to the Buyer and, subject to prior written notice to the Seller by the Buyer of the name, address and identity thereof, Buyer's affiliates, and is otherwise non-transferable and non-exclusive.

4. Installation

It is the Buyer's responsibility to install the PEP and to perform any mergings and checks. The Seller shall however assist the Buyer's operations engineers in the initial phase following the delivery of the PEP until such personnel reach the familiarization level required to make inputs and correlate outputs.

5. Proprietary Rights and Non-Disclosure

5.1 The PEP and the copyright and other proprietary rights of whatever nature in the PEP are and shall remain with the Seller. The PEP and its contents are designated as confidential.

5.2 The Buyer undertakes not to disclose the PEP or parts thereof and its contents to any third party without the prior written consent of the Seller. In so far as it is necessary to disclose aspects of the PEP to employees, such disclosure is permitted only for the purpose for which the PEP is supplied and only to the employee who needs to know the same.

6. Conditions of Use

6.1 The Seller does not warrant that the PEP shall not contain errors. However, should the PEP be found to contain any error at delivery, the Buyer shall notify the Seller promptly thereof and the Seller shall take all proper steps to correct the same at his own expense.

6.2 The Buyer shall ensure that the PEP is correctly used in appropriate machines as indicated in the Performance Programs Manual (PPM) and that staff are properly trained to use the same, to trace and correct running faults, to restart and recover after fault and to operate suitable checks for accuracy of input and output.

6.3 It is understood that the PPM is the user's guide of the PEP and the Buyer shall undertake to use the PEP in accordance with the PPM.

6.4 The PEP are supplied under the express condition that the Seller shall have no liability in contract or in tort arising from or in connection with the use of or inability to use the PEP.

7. Duration

The rights under this licence shall be granted to the Buyer as long as the Buyer operates a Seller's Aircraft model to which the PEP refers. When the Buyer stops operating said Aircraft model, the Buyer shall return the PEP and any copies thereof to the Seller, accompanied by a notice certifying that the Buyer has returned all existing copies.

LICENCE FOR USE OF CD-ROM

1. Grant

The Seller grants the Buyer the right to use the Aircraft Documentation Retrieval System (ADRES) and/or the Computer Assisted Aircraft Trouble Shooting (CAATS) on CD-ROM for the term of this Licence. Use of ADRES and/or CAATS shall be limited to the number of copies defined between the parties.

For clarification, it is hereby stated that the Power Plant IPC is not part of the electronic IPC and is only available on other media (paper or film).

2. Term

The rights under the Licence shall be granted from the date of first delivery of ADRES and/or CAATS to the end of the current year. The grant shall be renewed automatically at the beginning of each calendar year for another year, unless either the Buyer or the Seller gives written notice to the other party three (3) months prior to the end of the Licence of its intention to terminate the grant. Within thirty (30) days of termination, the Buyer shall return ADRES and/or CAATS and all copies thereof to the Seller.

3. Revision Service

the Seller shall provide revision service for ADRES and/or CAATS during the term. The revision service shall be based on the revision service which the Seller provides for the documentation in paper or film format.

ADRES and/or CAATS CD-ROM shall be revised concurrently with the paper and film deliveries. However, temporary revisions are not currently provided in digital data format and are only available in paper format.

4. Personal Licence

The Licence is personal to the Buyer and, subject to prior written notice to the Seller by the Buyer of the name, address and identity thereof, Buyer's affiliates, and is otherwise non-transferable and non-exclusive. The Buyer shall not permit any third party to use ADRES and/or CAATS, nor shall it transfer or sub-licence ADRES and/or CAATS to any third party, without prior written consent from the Seller.

5. Installation

The Seller shall provide the list of hardware on which ADRES and/or CAATS shall be installed. The Buyer shall be responsible for procuring such hardware and installing ADRES and/or CAATS.

6. Proprietary Rights

ADRES and/or CAATS are proprietary to the Seller and the copyright and all other proprietary rights in ADRES and/or CAATS are and shall remain the property of the Seller.

7. Copyright Indemnity

The Seller shall defend and indemnify the Buyer (such indemnity to include, without limitation, all reasonable legal fees and expenses incurred by the Buyer) against any claim that the normal use of ADRES and/or CAATS infringes the intellectual property rights of any third party, provided that the Buyer:

7.1 immediately notifies the Seller of any such claim;

7.2 makes no admission or settlement of any claim;

7.3 allows the Seller to have sole control of all negotiations for its settlement;

7.4 gives the Seller all reasonable assistance in connection therewith.

8. Confidentiality

ADRES and/or CAATS and their contents are designated as confidential. The Buyer undertakes not to disclose ADRES and/or CAATS or parts thereof to any third party without the prior written consent of the Seller except (i) as required by applicable court orders or governmental regulations (in which case it shall give the Seller prior written notice of such disclosure and use its best efforts to limit such disclosure to the greatest extent possible) or (ii) for information which is in the public domain at the time of disclosure otherwise than through a breach of this Agreement (but compilations of information which are not public shall not be treated as being public by reason of them containing information which is). In so far as it is necessary to disclose aspects of ADRES and/or CAATS to the employees, such disclosure is permitted solely for the purpose for which ADRES and/or CAATS are supplied and only to those employees who need to know the same.

9. Conditions of Use

9.1 The Buyer shall not make any copies of ADRES and/or CAATS, except for installation purposes.

9.2 The Seller does not warrant that the operation of ADRES and/or CAATS shall be error free. In the event of an error occurring within thirty (30) days of delivery, the sole and exclusive liability of the Seller shall be, at its expense, to correct ADRES and/or CAATS in the following revision.

9.3 THE WARRANTIES, OBLIGATIONS AND LIABILITIES OF THE SELLER AND REMEDIES OF THE BUYER SET FORTH IN THIS LICENCE ARE EXCLUSIVE AND IN SUBSTITUTION FOR, AND THE BUYER HEREBY WAIVES, RELEASES AND RENOUNCES ALL OTHER WARRANTIES, OBLIGATIONS AND LIABILITIES OF THE SELLER AND THE RIGHTS, CLAIMS OR REMEDIES OF THE BUYER AGAINST THE SELLER, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, WITH RESPECT TO ANY NON CONFORMITY OR DEFECT IN THE ADRES AND/OR CAATS DELIVERED UNDER THIS LICENCE.

10. Training

In addition to the user guide supplied with ADRES and/or CAATS, training and other assistance may be provided upon the Buyer's request at conditions to be mutually agreed.

11. Replacement of Product

For clarification purposes it is hereby expressly stated that ADRES and/or CAATS shall be offered for a limited time period, not exceeding the term of this Licence. In the event that the Seller should offer a replacement product, the conditions for using such product shall be subject to a separate agreement.

CONTENTS

CLAUSE   TITLE
------   -----
 15-     SELLER REPRESENTATIVES
 15.1    Seller's Service
 15.2    Customer Support Manager
 15.3    Buyer's Service
 15.4    Withdrawal of Seller's Representatives
 15.5    Seller's Representatives' Status
 15.6    Indemnities

15 SELLER REPRESENTATIVES

15.1 Seller's Service

15.1.1 The Seller shall provide free of charge the services of a team of Technical Representatives acting in an advisory capacity at the Buyer's main base for a period commencing at or about the delivery of the first Aircraft for a total of * man-months. The actual number of Seller Technical Representatives assigned to the Buyer at any time shall be mutually agreed upon but at no time shall this number exceed three men.

15.1.2 The Seller has set up a global Technical Services network available for the non-exclusive use by each of the Seller's aircraft operators.

The Buyer shall have free access to this global network at any time in the course of the Aircraft operation, and in particular to the regional Technical Representatives closest to the Buyer's main base after the end of the mission of the Technical Representatives referred to in sub-Clause 15.1.1, or to cover for their temporary absence in the course of their mission. A list of the contacts for the global Technical Services network including the regional Technical Representatives shall be provided to the Buyer.

15.1.3 The Seller shall cause similar services to be provided by competent Representatives of the Propulsion Systems Manufacturer and by Vendor Representatives when necessary and applicable.

15.2 Customer Support Manager

The Seller shall provide one (1) Customer Support Manager to liaise on product support matters between the Seller's main office and the Buyer after signature of this Agreement for as long as one (1) Aircraft is operated by the Buyer.

15.3 Buyer's Service

15.3.1 From the date of arrival of the first of the Seller's Representatives specified in sub-Clause 15.1.1 the Buyer shall provide free of charge a non-exclusive English speaking secretary and a suitable office, conveniently located with respect to the Buyer's maintenance facilities, with complete office furniture and equipment including telephone, telefax and SITA connection for the sole use of the Seller's Representatives.

Should the Buyer already provide such facilities through another Purchase Agreement with the Seller, the above Buyer's service may not be provided if they do not appear necessary.

15.3.2 For the Representatives mentioned in sub-Clause 15.1.1 and their families, that is their children still undergoing education and spouse, the Buyer shall provide at no charge to the Seller confirmed reservations, Business Class, if available, to and from their place of assignment and the airport on the Buyer's network nearest to TOULOUSE, FRANCE.

15.3.3 The Buyer shall also provide at no charge to the Seller air transportation, confirmed reservations for the annual vacation of the persons mentioned in sub-Clause 15.1.1 above to and from their place of assignment and the airport on the Buyer's network nearest to TOULOUSE, FRANCE.

15.3.4 The Buyer shall assist the seller to obtain from the civil authorities of the Buyer's country those documents which are necessary to permit the Seller's Representatives to live and work in the Buyer's country. Failure of the Seller to obtain the necessary documents shall relieve the Seller of any obligation to the Buyer under the provisions of sub-Clauses 15.1.1 and 15.1.2.

15.4 Withdrawal of Seller's Representatives

The Seller shall have the right to withdraw its assigned personnel as it sees fit if conditions arise which are in the Seller's opinion dangerous to their safety or health or prevent them from fulfilling their contractual tasks.

15.5 Seller's Representatives' Status

In providing the above technical services, the Seller's employees and other Representatives are deemed to be acting in an advisory capacity only and at no time shall they be deemed to act as Buyer's employees or agents either directly or indirectly.

15.6 Indemnities

THE BUYER SHALL, EXCEPT IN CASE OF WILFUL MISCONDUCT OF THE SELLER, ITS DIRECTORS, OFFICERS, AGENTS, SUBCONTRACTORS AND EMPLOYEES, BE SOLELY LIABLE FOR AND SHALL INDEMNIFY AND HOLD HARMLESS THE SELLER, ITS DIRECTORS, OFFICERS, AGENTS, SUBCONTRACTORS AND EMPLOYEES FROM AND AGAINST ALL LIABILITIES, CLAIMS, DAMAGES, LOSSES, COSTS AND EXPENSES (INCLUDING LEGAL EXPENSES AND ATTORNEY FEES) FOR ALL INJURIES TO OR DEATH OF PERSONS, EXCEPTING INJURIES TO OR DEATH OF THE SELLER'S REPRESENTATIVES PROVIDING THE SERVICES UNDER THIS CLAUSE 15, AND FOR LOSS OF OR DAMAGE TO PROPERTY AND/OR FOR LOSS OF USE THEREOF HOWSOEVER ARISING OUT OF OR IN CONNECTION WITH THE PERFORMANCE OF SERVICES UNDER THIS CLAUSE 15.

THE SELLER SHALL, EXCEPT IN CASE OF WILFUL MISCONDUCT OF THE BUYER, ITS DIRECTORS, OFFICERS, AGENTS, SUBCONTRACTORS AND EMPLOYEES, BE SOLELY LIABLE FOR AND SHALL INDEMNIFY AND HOLD HARMLESS THE BUYER, ITS DIRECTORS, OFFICERS, AGENTS, SUBCONTRACTORS AND EMPLOYEES FROM AND AGAINST ALL LIABILITIES, CLAIMS, DAMAGES, LOSSES, COSTS AND EXPENSES (INCLUDING LEGAL EXPENSES AND ATTORNEY FEES) FOR ALL INJURIES TO OR DEATH OF THE SELLER'S SAID REPRESENTATIVES DURING THE PERFORMANCE OF SERVICES UNDER THIS CLAUSE 15.

FOR THE PURPOSE OF THIS SUB-CLAUSE 15.6, SELLER'S REPRESENTATIVES SHALL BE DEEMED TO INCLUDE THE REPRESENTATIVES REFERRED TO IN SUB-CLAUSES 15.1.1, 15.1.2 AND 15.2.

CONTENTS

CLAUSE   TITLE
------   -----
 16-     TRAINING AND TRAINING AIDS
 16.1    General
 16.2    Logistics
 16.3    Training Courses Execution
 16.4    Training Aids and Materials
 16.5    Training Engineering Support
 16.6    Indemnities and Insurance

Appendix "A" Recommended Pilot Qualification in Relation to Training Requirements

Appendix "B" List of A319 and A320 Maintenance Courses

Appendix "C" List of A319 and A320 Operations/Performance Courses

16. TRAINING AND TRAINING AIDS

16.1. General

16.1.1. Training Organization

The Seller shall supply training and training aids for the Buyer's personnel in accordance with the provisions set forth in this Clause 16.

The training and training aids shall be provided by the Seller at its training center in BLAGNAC, FRANCE, or by Airbus Service Company ("Airbus Service Company") an US affiliate of the Seller having its training center in MIAMI, FLORIDA, USA, subject to the availability of training allocation in each training center. For the purposes of this Clause 16, the term Seller shall include Airbus Service Company.

In the event of the non-availability of facilities or scheduling imperatives making training by the Seller impractical, the Seller shall make arrangements for the provision to the Buyer of such training support elsewhere.

Certain training may also be provided by the Seller at one of the Buyer's bases, if and when practicable for the Seller, under terms and conditions to be mutually agreed upon. In this event, all additional charges listed in sub-Clause 16.2.1.2 shall be borne by the Buyer.

Training courses provided for the Buyer shall be the Seller's standard courses. The Seller shall be responsible for all training course syllabi, training aids and training equipment necessary for the organization of the training courses.

The training curricula and the training equipment may not be fully customized. However, academic curricula may be modified to include the most significant of the Buyer's Aircraft Specification (to the exclusion of Buyer Furnished Equipment (BFE)) as known at the latest six (6) months prior to the date of the first training course planned for the Buyer. The equipment used for flight and maintenance personnel shall not be fully customized; however, this equipment shall be configured in order to obtain the relevant approval and to support the Seller's teaching programs.

In fulfilment of its obligation to provide training courses, the Seller shall deliver to the trainees a certificate of completion at the end of any such training course. The Seller's certificate does not represent authority or qualification by any official Civil Aviation Authorities but may be presented to such officials in order to obtain relevant formal qualification.

Training courses provided for the Buyer's personnel shall be scheduled according to plans mutually agreed upon during a Training Conference to be held at least twelve (12) months prior to delivery of the first Aircraft.

The contractual training courses shall be provided up to one (1) year after delivery of the last Aircraft ordered under this Agreement. In the event that the Buyer should use none or only part of the training or training aids to be provided pursuant to this Clause, no compensation or credit of any sort shall be allowed to the Buyer.

16.1.2. Prerequisites

The Buyer warrants that trainees have the prerequisite jet transport category experience as defined in Appendix "A" to this Clause 16 and are able to fully understand, write and speak English in order to attend the Seller's courses.

It is clearly understood that said training courses are "Transition Training Courses" and not "Initial Training Courses".

Furthermore, the Buyer shall be responsible for the selection of the trainees and for any liability with respect to the entry knowledge level of the trainees.

The Buyer shall provide the Seller with an attendance list of the trainees for each course with the validated qualification of each trainee. The Seller reserves the right to check the trainees' proficiency and previous professional experience. The Seller shall in no case warrant or otherwise be held liable for the trainee's performance as a result of any training services thus provided.

Upon the Buyer's request, the Seller may be consulted to orientate the above mentioned trainee(s) through a relevant entry level training program, which shall be at the Buyer's charge, and, if necessary, to coordinate with competent outside organizations for this purpose. Such consultation should be held during the Training Conference.

In the event the Seller should determine that a trainee lacks such entry level, such trainee shall, following consultation with the Buyer, be withdrawn from the program and shall then be considered to be at the Buyer's disposal.

16.2. Logistics

16.2.1 Trainees

16.2.1.1 The Seller shall provide free local transportation by bus for the Buyer's trainees to and from designated pick up points and the training center.

The Seller shall provide each flight crew with one (1) rented car, or transportation by taxi, at the beginning of the fixed base simulator phase of the course, specifically to be used to enable the crew to attend either simulator or flight sessions at any time.

16.2.1.2 However, the Buyer shall indemnify and hold the Seller harmless from and against all liabilities, claims, damages, costs and expenses for any injury to or death of any of the Buyer's trainees occasioned during the course of such transportation.

16.2.1.3 Living expenses for the Buyer's trainees are to be borne by the Buyer.

16.2.2 Seller's Instructors

In the event that, at the Buyer's request, training is provided by the Seller's instructors at any location other than the Seller's training centers, the Buyer shall reimburse the Seller for all the expenses related to the assignment of such instructors and their performance of the duties as aforesaid.

16.2.2.1 Living Expenses

Such expenses, covering the entire period from day of secondment to day of return to the Seller's base, shall include but shall not be limited to lodging, food and local transportation to and from the place of lodging and the training course location. The Buyer shall reimburse the Seller for such expenses on the basis of a per diem rate corresponding to the current per diem rate used by the Seller for its personnel.

16.2.2.2 Air Travel

Airline reservation(s) shall be guaranteed and confirmed to the Seller's instructors in business class on the Buyer's route network. When the use of the Buyer's route network is not feasible or practical, the Buyer shall reimburse the Seller for business class travel on other airlines.

It is understood that transportation for the Seller's instructors includes air travel to and from the Seller's training centers and the place of assignment.

16.2.2.3 Indemnities

The Buyer shall be solely liable for any and all delay in the performance of the training outside of the Seller's training centers associated with the transportation services described above and shall indemnify and hold harmless the Seller from and against such delay and any consequences arising therefrom.

16.2.3 Training Equipment Availability

Training equipment necessary for course performance at any course location other than Seller's training centers shall be provided by the Buyer in accordance with the Seller's specifications.

16.3. Training Courses Execution

16.3.1. Flight Crew Transition Course

The Seller shall train up to the CAT three level, * a total of * of the Buyer's flight crews in a Flight Crew Transition course program (or in a Cross Crew Qualification program), each crew shall consist of one Captain
(1) and one (1) First Officer. The training manual shall be the Airbus Industrie Flight Crew Operating Manual.

In addition, the Seller shall provide * Flight Crew Instructor Familiarization Training Course for * Captains out of the Buyer's flights crews receiving the Flight Crew Transition Course as referred above.

Whenever base flight training is required, the Buyer shall use its delivered Aircraft for said base flight training, which shall not exceed * of * * hours per pilot. When such base flight crew training is performed in BLAGNAC, FRANCE, the Seller shall provide * line maintenance, including servicing, preflight checks and changing of minor components, subject to conditions agreed in the present agreement.

The Buyer shall provide mutually agreed spare parts as required to support said Aircraft in-flight training and shall provide public liability insurance in line with sub-Clause 16.6.

In all cases, the Buyer shall bear all expenses such as fuel, oil and landing fees.

16.3.2. Flight Crew Line Initial Operating Experience

In order to assist the Buyer with initial operating experience after delivery of the first Aircraft, the Seller shall provide to the Buyer * pilot instructor man-months (number of pilot present at the same time to be mutually agreed). The Buyer shall reimburse the expenses for each such instructor according to sub-Clause 16.2.1.2. Additional pilot instructors can be provided at the Buyer's expense and upon conditions to be mutually agreed upon.

16.3.3. MAINTENANCE TRAINING

16.3.3.1 The available courses are listed in Appendix "B" to this Clause 16.

16.3.3.2 The Seller shall train * the Buyer's ground personnel for a training period equivalent to * trainee days of instruction in the courses listed in Appendix "B" to this Clause 16. However, the number of Engine Run-up courses shall be limited to * trainees per firmly ordered Aircraft and to a maximum of * in total.

16.3.3.3 Courses shall only be scheduled for a given minimum number of participants as agreed to at the Training Conference.

Trainee days are counted as follows:

- for instruction at the Seller's training centers: one (1) day of instruction for one (1) trainee equals one (1) trainee day. The number of trainees at the beginning of the course shall be counted as the number of trainees considered to have taken the course.

- for instruction outside of the Seller's training centers: one (1) day of secondment of one (1) Seller instructor equals the actual number of trainees attending the course or a minimum of twelve (12) trainee days.

16.3.3.4 On-the-Job Training

Upon request by the Buyer, the Seller shall organize up to a maximum of * On-the-Job training courses for * trainees per course.

For On-the-Job training courses, one (1) day of instruction shall equal twelve (12) trainee days.

16.3.4. Line Maintenance Initial Operating Training

In order to assist the Buyer during the entry into service of the Aircraft, the Seller shall provide to the Buyer one (1) maintenance instructor at the Buyer's base for a period of * months. This line maintenance training shall cover training in handling and servicing of Aircraft, flight crew / maintenance coordination, use of manuals and any other activities which might be deemed necessary for this training after delivery of the first Aircraft.

The Buyer shall reimburse the expenses for said instructor according to sub-Clause 16.2.1.2. Additional maintenance instructors can be provided at the Buyer's expense.

16.3.5. Cabin Attendants' Familiarization Course

The Seller shall offer up to * sessions of a free-of-charge cabin attendants' course to twelve (12) of the Buyer's cabin attendants.

16.3.6. Performance / Operations Course

The available courses are listed in Appendix "C" to this Clause 16.

The Seller shall provide * trainee days of Performance/Operations training for the Buyer's personnel. Courses shall only be scheduled for a given minimum number of participants as agreed upon at the Training Conference.

16.3.7. Vendors and Engine Manufacturer Training

The Seller shall ensure that major Vendors and the applicable Propulsion Systems Manufacturer provide maintenance and overhaul training on their products at appropriate times.

A list of the Vendors concerned may be supplied to the Buyer upon request.

16.4. Training Aids and Materials

16.4.1. Training Aids for Trainees at the Training Centers

Paper documentation for trainees receiving the instruction referred to above in sub-Clause 16.3 at the Seller's training centers shall be free-of-charge.

Training aids shall be "FOR TRAINING ONLY" and as such are supplied for the sole and express purpose of training.

16.4.2. Training Aids and Materials for Buyer's Training Organization

The Seller shall provide * sets of the Seller's VACBI courseware for the workstation related to the Aircraft type as covered by this Agreement, including the relating utilization rights. The courseware shall be the Seller VACBI courseware as used by the Seller in its official training centers.

The items delivered to the Buyer under the terms of this sub-Clause 16.4.2 shall be for the training of the Buyer's personnel only.

Supply of sets of additional courseware supports, as well as any extension to the right of utilization of such courseware, shall be subject to terms and conditions to be mutually agreed. VACBI supply general conditions shall apply and shall be detailed during the Training Conference.

The Buyer shall agree not to disclose the content of the courseware or any information or documentation provided by the Seller in relation to training in whole or in part, to any third party without prior written consent of the Seller.

16.5. Training Engineering Support

If requested by the Buyer and on terms to be agreed upon, the Seller shall assist the Buyer with the introduction of training programs at the Buyer's training center.

16.6. Indemnities and Insurance

16.6.1. Indemnity and Insurance Relating to Ground Training

16.6.1.1 The Seller shall, except in case of wilful misconduct of the Buyer, its directors, officers, agents or employees, be solely liable for and shall indemnify and hold harmless the Buyer, its directors, officers, agents and employees from and against all liabilities, claims, damages, costs and expenses (including legal expenses and attorney fees) in respect of loss of or damage to the Seller's property and/or injury to or death of the directors, officers, agents or employees of the Seller and/or from and against all liabilities, claims, damages, costs and expenses (including legal expenses and attorney fees) for any damages caused by the Seller to third parties, caused by or in any way connected to the performance of the ground training services subject of this Agreement.

The Buyer shall, except in case of wilful misconduct of the Seller, its directors, officers, agents or employees, be solely liable for and shall indemnify and hold harmless the Seller, its directors, officers, agents and employees from and against all liabilities, claims, damages, costs and expenses (including legal expenses and attorney fees) in respect of loss of or damage to the Buyer's property and/or injury to or death of the directors, officers, agents or employees of the Buyer and/or from and against all liabilities, claims, damages, costs and expenses (including legal expenses and attorney fees) for any damages caused by the Buyer to third parties, caused by or in any way connected with the performance of the ground training services subject of this Agreement.

16.6.1.2. For the purposes of this sub-Clause 16.6.1 "ground training services" include but are not limited to all training courses performed in classroom (classical or VACBI CBT courses), full flight simulator sessions, fixed base simulator sessions, field trips, provided under or in connection with the provisions of this Agreement.

16.6.2. Indemnity and Insurance relating to Training on Aircraft

16.6.2.1. The Buyer shall, except in the case of wilful misconduct of the Seller, its directors, officers, agents and employees, be solely liable for and shall indemnify and hold harmless the Seller from and against all liabilities, claims, damages, costs and expenses (including legal expenses and attorney fees) incident thereto or incident to successfully establishing the right to indemnification, for injury to or death of any person (including any of the Buyer's directors, officers, agents and employees utilizing such training services, but not directors, officers, agents and employees of the Seller) and/or for loss of or damage to any property and/or for loss of use thereof arising (including the aircraft on which the training services are performed), caused by or in any way connected to the performance of any training services defined in this Agreement.

The foregoing indemnity shall not apply to legal liability to any person other than the Buyer, its directors, officers, agents or employees arising out of an accident caused solely by a product defect in the Aircraft delivered to and accepted by the Buyer hereunder.

16.6.2.2. For the purposes of this sub-Clause 16.6.2. "training services" include but are not limited to all training courses, base flight training, line training, line assistance, flight, ferry flight, maintenance support, maintenance training (including On the Job Training and Hot Run-Up) or training support performed on aircraft, provided under or in connection with the provisions of this Agreement.

16.6.2.3. For all training periods on aircraft, after delivery, the Buyer shall cause the Seller, its subsidiaries, the associated contractors and sub-contractors and the assignees of each of the foregoing and their respective directors, officers, agents and employees to be named as additional insureds under all liability policies of the Buyer to the extent of the Buyer's undertaking set forth in sub-Clause 16.6.2.1. With respect to the Buyer's hull all risks and hull war risks insurances, the Buyer shall cause the insurers of the Buyer's hull insurance policies to waive all rights of subrogation against the Seller, its subsidiaries, the associated contractors and sub-contractors and the assignees of each of the foregoing and their respective directors, officers, agents and employees, to the extent of the Buyer's undertaking set forth in sub-Clause 16.6.2.1.

Any applicable deductible shall be borne by the Buyer.

With respect to the above policies, the Buyer shall furnish to the Seller, not less than seven (7) working days prior to the start of any such training period, certificates of insurance, in English language, evidencing the limits of liability cover and period of insurance in a form acceptable to the Seller from the Buyer's insurance brokers certifying that such policies have been endorsed as follows:

(I) The Buyer's policies shall be primary and non-contributory to any insurance maintained by the Seller.

(II) Such insurance shall not become ineffective, cancelled, or coverage decreased or materially changed except on seven (7) days' prior written notice thereof to the Seller; and

(III) Under any such cover, all rights of subrogation against the Seller, its subsidiaries, each of the associated contractors and subcontractors, the assignees of each of the foregoing and their respective directors, officers, agents and employees, have been waived to the extent of the Buyer's undertaking and specifically referring to sub-Clause 16.6.2.1 and to this sub-Clause 16.6.2.3.

16.6.3. For the purposes of this sub-Clause 16.6, "the Seller and its subsidiaries" includes the Seller, Airbus Service Company, each of the associated contractors, and sub-contractors, the assignees of each of the foregoing, and their respective directors, officers, agents and employees.

16.6.4. If any claim is made or suit is brought against either party (or its respective directors, officers, agents or employees) for damages for which liability has been assumed by the other party in accordance with the provisions of this Agreement, the party against which a claim is so made or suit is so brought shall promptly give notice to the other party, and the latter shall (unless otherwise requested by the former party against which a claim is so made or suit is so brought, in which case the other party nevertheless shall have the right to) assume and conduct the defence thereof, or effect any settlement which it, in its opinion, deems proper.

CLAUSE 16 - APPENDIX "A"

RECOMMENDED PILOT QUALIFICATION

IN RELATION TO TRAINING REQUIREMENTS

(TRANSITION COURSES)

The prerequisites listed below are the minimum requirements specified for Airbus training. If the appropriate regulatory agency or the specific airline policy of the trainee demand greater or additional requirements, they shall apply as prerequisites.

- FIRST OFFICER prerequisites

- Fluency in English

- 500 hours minimum flying experience as pilot

- 300 hours experience on FAR/JAR 25 aircraft

- 200 hours flying experience as airline pilot or a corporate pilot or military pilot

- CAPTAIN prerequisites

- Fluency in English

- 1500 hours minimum flying experience as pilot

- 1000 hours experience on FAR/JAR 25 aircraft

- 200 hours experience as airline or corporate pilot

For both FIRST OFFICER and CAPTAIN, if one or several of the above criteria are not met, the trainee must follow:

- an adapted course (example: if not fluent in English, an adapted course with a translator)

- or an ELT (Entry Level Training) program before entering the regular or the adapted course.

CLAUSE 16 - APPENDIX "B"

LIST OF A319 MAINTENANCE COURSES

JM01    GENERAL FAMILIARIZATION COURSE
JM02    RAMP SERVICING COURSE
JM35    LINE MECHANICS COURSE
JM45    LINE/BASE MECHANICS/ELECTRICS COURSE
JM52    LINE/BASE AVIONICS/ELECTRICS COURSE
JM42    LINE/BASE MECHANICS/ELECTRICS/AVIONICS COURSE
JM07    ENGINE RUN UP COURSE
JM09    MECHANICAL CONTROL RIGGING COURSE
JM10    CABIN INTERIOR & EMERGENCY EQUIPMENT
JM12    ON THE JOB PRACTICAL TRAINING
JM13    MAINTENANCE INITIAL OPERATING COURSE
JM18    MAINTENANCE ETOPS COURSE
JM20    AIDS MAINTENANCE COURSE
XM15    BASIC DIGITAL AND MICROPROCESSOR
JMG04   CARGO LOADING AND HANDLING COURSE
JMFT    FIELD TRIP
JMSIM   SIMULATOR SESSIONS
JMFMT   FIELD TRIP + SIMULATOR SESSIONS
JM11    METALLIC STRUCTURE MAINTENANCE
JM16    STRUCTURE NDT INSPECTION COURSE
JM17    COMPOSITE STRUCTURE REPAIR COURSE (SHOP LEVEL)
JM21    STRUCTURAL REPAIR COURSE FOR ENGINEERS
JM23    MATERIEL AND PROCESSES COURSE FOR ENGINEERS

CLAUSE 16 - APPENDIX "B"

LIST OF A320 MAINTENANCE COURSES

EM01    GENERAL FAMILIARIZATION COURSE
EM02    RAMP SERVICING COURSE
EM35    LINE MECHANICS COURSE
EM45    LINE/BASE MECHANICS/ELECTRICS COURSE
EM52    LINE/BASE AVIONICS/ELECTRICS COURSE
EM42    LINE/BASE MECHANICS/ELECTRICS/AVIONICS COURSE
EM07    ENGINE RUN UP COURSE
EM09    MECHANICAL CONTROL RIGGING COURSE
EM10    CABIN INTERIOR & EMERGENCY EQUIPMENT
EM12    ON THE JOB PRACTICAL TRAINING
EM13    MAINTENANCE INITIAL OPERATING EXPERIENCE
EM18    MAINTENANCE ETOPS COURSE
EM20    AIDS MAINTENANCE COURSE
XM15    BASIC DIGITAL AND MICROPROCESSOR
EMG04   CARGO LOADING AND HANDLING COURSE
EMFT    FIELD TRIP
EMSIM   SIMULATOR SESSIONS
EMFMT   FIELD TRIP + SIMULATOR SESSIONS
EM11    METALLIC STRUCTURE MAINTENANCE
EM16    STRUCTURE NDT INSPECTION COURSE
EM17    COMPOSITE STRUCTURE REPAIR COURSE (SHOP LEVEL)
EM21    STRUCTURAL REPAIR COURSE FOR ENGINEERS
EM23    MATERIEL AND PROCESSES COURSE FOR ENGINEERS

CLAUSE 16 - APPENDIX "C"

LIST OF A319 OPERATIONS/PERFORMANCE COURSES

JG01    MANAGEMENT SURVEY COURSE
JG02    PERFORMANCE ENGINEER COURSE
JG03    DISPATCHER TRANSITION COURSE
JG38    DISPATCHER TRANSITION AND ETOPS QUALIFICATION COURSE
JG06    BALANCE CHART DESIGN COURSE
JG07    LOAD MASTER TRANSITION COURSE
JG67    BALANCE CHART DESIGN AND LOAD MASTER TRANSITION COURSE
JG08    ETOPS QUALIFICATION DISPATCHER COURSE

CLAUSE 16 - APPENDIX "C"

LIST OF A320 OPERATIONS/PERFORMANCE COURSES

EG01    MANAGEMENT SURVEY COURSE
EG02    PERFORMANCE ENGINEER COURSE
EG03    DISPATCHER TRANSITION COURSE
EG38    DISPATCHER TRANSITION AND ETOPS QUALIFICATION COURSE
EG06    BALANCE CHART DESIGN COURSE
EG07    LOAD MASTER TRANSITION COURSE
EG67    BALANCE CHART DESIGN AND LOAD MASTER TRANSITION COURSE
EG08    ETOPS QUALIFICATION DISPATCHER COURSE

CONTENTS

CLAUSE   TITLE
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17-      VENDOR PRODUCT SUPPORT
17.1     Vendor Product Support Agreements
17.2     Vendor Compliance

17- VENDOR PRODUCT SUPPORT

17.1 Vendor Product Support Agreements

17.1.1 The Seller has obtained product support agreements transferable to the Buyer from Vendors of Seller Furnished Equipment listed in the Specification.

17.1.2 These agreements are based on the "World Airlines Suppliers Guide" and include Vendor commitments as contained in the "Vendor Product Support Agreements" which include the following provisions:

17.1.2.1 Technical data and manuals required to operate, maintain, service and overhaul the Vendor items. Such technical data and manuals shall be prepared in accordance with the applicable provisions of ATA Specification 100 and 101 in accordance with Clause 14 including revision service and be published in the English language. The Seller shall recommend that software data, supplied in the form of an Appendix to the Component Maintenance Manual, be provided in compliance with ATA Specification 102 up to level 3 to protect Vendor's proprietary interest.

17.1.2.2 Warranties and guarantees including standard warranties. In addition, landing gear Vendor shall provide Service Life Policies for landing gear structure.

17.1.2.3 Training to ensure efficient operation, maintenance and overhaul of the Vendor's items for the Buyer's instructors, shop and line service personnel.

17.1.2.4 Spares data in compliance with ATA 200/2000 Specification, Initial Provisioning Recommendations, spare parts and logistic service including routine and emergency deliveries.

17.1.2.5 Technical service to assist the Buyer with maintenance, overhaul, repair, operation and inspection of Vendor items as well as required tooling and Spares provisioning.

17.2 Vendor Compliance

The Seller shall monitor Vendor compliance with support commitments defined in the "Vendor Product Support Agreements" and shall take remedial action together with the Buyer if necessary.

CONTENTS

CLAUSE   TITLE
------   -----
18-      BUYER FURNISHED EQUIPMENT AND DATA
18.1     Administration
18.2     Aviation Authorities' Requirements
18.3     Buyer's Obligation and Seller's Remedies
18.4     Title and Risk of Loss

18- BUYER FURNISHED EQUIPMENT AND DATA

18.1 Administration

18.1.1 Without additional charge, the Seller shall provide for the installation of those items of equipment which are identified in the Specification as being furnished by the Buyer ("Buyer Furnished Equipment" or "BFE").

The Seller shall advise the Buyer of the dates by which, in the planned release of engineering for the Aircraft, the Seller requires a written detailed engineering definition including the description of the dimensions and weight of BFE, the information related to its certification and information necessary for the installation and operation thereof. The Buyer shall furnish such detailed description and information by the dates so specified. Such information, dimensions and weights shall not thereafter be revised unless authorized by a SCN.

The Seller shall also furnish in due time to the Buyer a schedule of dates and indication of shipping addresses for delivery of BFE and, where requested by the Seller, additional spare BFE to permit installation in the Aircraft and delivery of the Aircraft in accordance with the delivery schedule. The Buyer shall provide such equipment by such dates in a serviceable condition, in order to allow performance of any assembly, test, or acceptance process in accordance with the industrial schedule.

The Buyer shall also provide, when requested by the Seller, at AEROSPATIALE Works in TOULOUSE (FRANCE) and / or at DAIMLER-BENZ AEROSPACE AIRBUS GmbH,
Division Hamburger Flugzeugbau Works in HAMBURG (FEDERAL REPUBLIC OF GERMANY) adequate field service including support from BFE suppliers to act in a technical advisory capacity to the Seller in the installation, calibration and possible repair of any BFE.

18.1.2 The Seller shall be entitled to refuse any item of BFE which it considers incompatible with the Specification, the above mentioned engineering definition or the certification requirements.

18.1.3 The BFE shall be imported into FRANCE or into the FEDERAL REPUBLIC OF GERMANY by the Buyer under a suspensive customs system ("Regime de I'entrepot industriel pour fabrication coordonnee" or "Zollverschluss") without application of any French or German tax or customs duty, and shall be Delivered Duty Unpaid (DDU) according to the Incoterms definition.

Shipping Addresses :

AEROSPATIALE, Societe Nationale Industrielle

316 Route de Bayonne

31300 TOULOUSE
FRANCE

or:

DAIMLER-BENZ AEROSPACE AIRBUS GmbH
Division Hamburger Flugzeugbau

Kreetslag 10

21129 HAMBURG

FEDERAL REPUBLIC OF GERMANY

as provided for in sub-Clause 18.1.

18.1.4 If the Buyer requests the Seller to supply directly certain items which are considered as BFE according to the Specification and if such request is notified to the Seller in due time in order not to affect the delivery date of the Aircraft, the Seller may agree to order such items subject to the execution of a SCN reflecting the effect on price, escalation adjustment, and any other conditions of the Agreement. In such a case the Seller shall be entitled to the payment of a reasonable handling charge and shall bear no liability in respect of delay and product support commitments for such items which shall be the subject of separate arrangements between the Buyer and the relevant vendor.

18.2 Aviation Authorities' Requirements

The Buyer is responsible for, at its expenses, and warrants that BFE shall be manufactured by a qualified supplier, shall meet the requirements of the applicable Specification, shall comply with applicable requirements incorporated by reference to the Type Certificate and listed in the Type Certificate Data Sheet, shall be approved by the Aviation Authorities delivering the Certificate of Airworthiness for Export and by the Buyer's Aviation Authorities for installation and use on the Aircraft at the time of delivery of such Aircraft.

18.3 Buyer's Obligation and Seller's Remedies

18.3.1 Any delay or failure in complying with the foregoing warranty or in providing the descriptive information or service representatives mentioned in sub-Clause 18.1 or in furnishing the BFE in serviceable condition at the requested delivery date or in obtaining any required approval for such equipment under the above mentioned Aviation Authorities regulations may delay the performance of any act to be performed by the Seller, and cause the Final Price of the Aircraft to be adjusted in accordance with the updated delivery schedule and to include in particular the amount of the Seller's additional costs, attributable to such delay or failure such as storage, taxes, insurance and costs of out-of sequence installation.

18.3.2 Further, in any such event, the Seller may:

(i) select, purchase and install an equipment similar to the involved one, in which event the Final Price of the affected Aircraft shall also be increased by the purchase price of such equipment plus reasonable costs and expenses incurred by the Seller for handling charges, transportation, insurance, packaging and if so required and not already provided for in the price of the Aircraft for adjustment and calibration; or

(ii) if the BFE shall be so delayed by more than * days, or unapproved within * days deliver the Aircraft without the installation of such equipment, notwithstanding the terms of sub-Clause 7.1 insofar as it may otherwise have applied, and the Seller shall thereupon be relieved of all obligations to install such equipment The Buyer may also elect to have the Aircraft so delivered.

18.4 Title and Risk of Loss

Title to and risk of loss of any BFE shall at all times remain with the Buyer. The Seller shall have only such responsibility for BFE as is provided for by law but shall not be liable for loss of use.

CONTENTS

CLAUSE   TITLE
------   -----
19-      DATA RETRIEVAL

19- DATA RETRIEVAL

The Buyer shall provide the Seller, as the Seller may reasonably request, with all the necessary data pertaining to the operation of the Aircraft for an efficient and coordinated survey of all reliability, maintainability, operational and cost data with a view to improving the safety, availability and operational costs of the Aircraft.

CONTENTS

CLAUSE   TITLE
------   -----
20-      TERMINATION
20.1     Termination for Insolvency
20.2     Termination for Non-Payment of Predelivery Payments
20.3     Termination for Failure to Take Delivery
20.4     General

20- TERMINATION

20.1 Termination for Insolvency

In the event that either the Seller or the Buyer:

(a) makes a general assignment for the benefit of creditors or becomes insolvent;

(b) files a voluntary petition in bankruptcy;

(c) petitions for or acquiesces in the appointment of any receiver, trustee or similar officer to liquidate or conserve its business or any substantial part of its assets;

(d) commences under the laws of any competent jurisdiction any proceeding involving its insolvency, bankruptcy, reorganisation, readjustment of debt, dissolution, liquidation or any other similar proceeding for the relief of financially distressed debtors;

(e) becomes the object of any proceeding or action of the type described in (c) or (d) above and such proceeding or action remains undismissed or unstayed for a period of at least * days; or

(f) is divested of a substantial part of its assets for a period of at least * days,

then the other party may, to the full extent permitted by law, by written notice, terminate all or part of this Agreement.

20.2 Termination for Non-Payment of Predelivery Payments

If for any Aircraft the Buyer fails to make any predelivery payments at the time, in the manner and in the amount specified in sub-Clause 5.2.1 the Seller may, by written notice, terminate all or part of this Agreement with respect to undelivered Aircraft.

20.3 Termination for Failure to Take Delivery

If the Buyer fails to comply with its obligations as set forth under Clause 8 and/or Clause 9, or fails to pay the Final Price of the Aircraft, * the Seller shall have the right to put the Buyer on notice to do so within a period of * working days after the date of such notification.

If the Buyer has not cured such default within such period, the Seller may, by written notice, terminate all or part of this Agreement with respect to undelivered Aircraft.

All costs referred to in sub-Clause 9.4.1 and relating to the period between the delivery date and the date of termination of all or part of this Agreement shall be borne by the Buyer.

20.4 GENERAL

20.4.1 To the full extent permitted by law, the termination of all or part of this Agreement, pursuant to sub-Clauses 20.1, 20.2 and 20.3 shall become effective immediately upon receipt by the relevant party of the notice of termination sent by the other party without it being necessary for either party to take any further action or to seek any consent from the other party or any court having jurisdiction.

20.4.2 The right for either party under sub-Clause 20.1 and for the Seller under sub-Clauses 20.2 and 20.3 to terminate all or part of this Agreement shall be without prejudice to any other rights and remedies available to such party to seek termination of all or part of this Agreement before any court having jurisdiction pursuant to any failure by the other party to perform its obligations under this Agreement.

20.4.3 If the party taking the initiative of terminating this Agreement decides to terminate part of it only, the notice sent to the other party shall specify the number of Aircraft, services, data and other items undelivered or unfurnished on the date of such termination for which such partial termination shall be effective.

20.4.4 In the event of termination of this Agreement following a default from the Buyer, including but not limited to a default under sub-Clauses 20.1, 20.2 and 20.3, the Seller, without prejudice to any other rights and remedies available under this Agreement or by law, shall retain an amount equal to all predelivery payments, deposits, option fees and any other monies paid by the Buyer to the Seller under this Agreement and corresponding to the Aircraft, services, data and other items covered by such termination.

CONTENTS

CLAUSE      TITLE
------      -----
21-      ASSIGNMENT

21- ASSIGNMENT

This Agreement shall be deemed personal to the parties hereto and the rights and/or obligations induced shall not be assigned ("cession"), novated ("novation"), delegated ("delegation"), sold or transferred in any manner, in whole or in part, by either party without the prior written consent of the other party, such consent not to be unreasonably withheld.

Any assignment made without such consent shall be of no effect whatsoever as between the parties hereto, except that the Seller shall have the right to transfer its rights and/or its obligations hereunder to any of its majority owned subsidiaries or to its successors or assigns without the consent of the Buyer.

CONTENTS

CLAUSE   TITLE
------   -----
22-      MISCELLANEOUS PROVISIONS
22.1     Notices
22.2     Waiver
22.3     Interpretation and Law
22.4     Alteration to Contract
22.5     Language
22.6     Confidentiality
22.7     General

22- M1SCELLANEOUS PROVISIONS

22.1 Notices

All notices and requests required or authorized hereunder shall be given in writing either by personal delivery to an authorized representative of the party to whom the same is given or by registered mail (return receipt requested) or by telegraph or cable and the date upon which any such notice or request is so personally delivered or if such notice or request is given by registered mail, telegraph or cable, the date upon which it is received by the addressee shall be deemed to be the effective date of such notice or request.

Seller's address for notices is:

AIRBUS INDUSTRIE
Attn. to V.P. Contracts

1 Rond-Point Maurice Bellonte

31707 BLAGNAC CEDEX
FRANCE

Buyer's address for notice is:

TAM

Rue Monsenhor Antonio Pepe 94

SAO PAULO
BRAZIL

or such other address or such other person as the party receiving the notice or request may reasonably designate from time to time.

22.2 Waiver

The failure of either party to enforce at any time any of the provisions of this Agreement, or to exercise any option herein provided, or to require at any time performance by the other party of any of the provisions hereof, shall in no way be construed to be a present or future waiver of such provisions nor in any way to affect the validity of this Agreement or any part thereof or the right of the other party thereafter to enforce each and every such provision. The express waiver (whether one (1) or several times) by either party of any provision, condition or requirement of this Agreement shall not constitute a waiver of any future obligation to comply with such provision, condition or requirement.

22.3 Interpretation and Law

This Agreement shall be governed by and construed and performance thereof shall be determined in accordance with the Laws of France.

In the event of a dispute arising from the interpretation performance or breach of this Agreement, said dispute shall fall within the exclusive jurisdiction of the French Courts and only the Laws of France shall be applicable.

In the event that any provision of this Agreement should for any reason be held ineffective, the remainder of this Agreement shall remain in full force and effect.

Clause and sub-Clause headings used in this Agreement are for convenient reference only and shall not affect the Agreement's interpretation.

22.4 Alterations to Contract

This Agreement contains the entire agreement between the parties and supersedes any previous understandings, commitments or representations whatsoever oral or written. This Agreement shall not be varied except by an instrument in writing of date even herewith or subsequent hereto executed by both parties or by their duly authorized representatives.

22.5 Language

All correspondence, documents and any other written matters in connection with this Agreement shall be in English.

This Agreement has been executed in two (2) original copies which are in English.

22.6 Confidentiality

This Agreement including any Exhibits, or other documents related hereto shall be treated by both parties as confidential and shall not be released in whole or in part to any third party except as may be required by law, or to professional advisors for the purpose of implementation hereof. In particular, each party agrees not to make any press release concerning the whole or any part of the contents and/or subject matter hereof or of any future addendum hereto without the prior consent of the other party hereto.

22.7 General

The Buyer and the Seller agree that this Agreement is an international supply contract which has been the subject of discussion and negotiation, that all its terms and conditions are fully understood by the parties, and that the price of the Aircraft and the other mutual agreements of the parties set forth herein were arrived at in consideration of, inter alia, all the provisions hereof specifically including all waivers, releases and renunciations by the Buyer set out herein.

IN WITNESS WHEREOF this Agreement was entered into the day and year first above written.

For and on behalf of                    For and on behalf of

TAM -                                   AIRBUS INDUSTRIE
TRANSPORTES AEREOS REGIONAIS


/s/                                     /s/
-------------------------------------   ----------------------------------------
Name:                                   Name:
Title:                                  Title:
       ------------------------------          ---------------------------------


/s/                                     /s/
-------------------------------------   ----------------------------------------
Name:                                   Name:
Title:                                  Title:
       ------------------------------          ---------------------------------

EXHIBIT "A"

The A319-100 and A320-200 Standard Specification are contained in a separate folder.

[Four Pages redacted]

EXHIBIT "B"

S.C.N. FORM

AIRBUS INDUSTRIE
(AIRBUS INDUSTRIE LOGO)

SPECIFICATION CHANGE NOTICE   SCN Number _________
                              Issue ______________
(SCN)                         Dated ______________
                              Page: 1 of 3

Title:
       ------------------------------
Description:
             ------------------------

EFFECT ON WEIGHT
     Manufacturer's Weight Empty Change ..:
     Operational Weight Empty Change .....:
     Allowable Payload Change ............:

REMARKS/ REFERENCES

     Responds to RFC

Specification changed by this SCN

This SCN requires prior or concurrent acceptance of the following SCN(s):

PRICE PER AIRCRAFT

US DOLLARS:

AT DELIVERY CONDITIONS:

This change will be effective on _____ AIRCRAFT No _____ and subsequent _____

Provided approval is received by _____________________________

Buyer approval                          Seller approval
               ----------------------                    -----------------------

AIRBUS INDUSTRIES
(AIRBUS INDUSTRIES LOGO)

SPECIFICATION CHANGE NOTICE   SCN Number ___________
                              Issue ________________
(SCN)                         Dated ________________
                              Page: 2 of 3

SPECIFICATION REPERCUSSION:

After contractual agreement with respect to weight, performance, delivery, etc. the indicated part of the specification wording will read as follows:

AIRBUS INDUSTRIE
(AIRBUS INDUSTRIE LOGO)

SPECIFICATION CHANGE NOTICE   SCN Number ____________
                              Issue _________________
(SCN)                         Dated _________________
                              Page: 3 of 3

SCOPE OF CHANGE (FOR INFORMATION ONLY)

EXHIBIT "C"

SERVICE LIFE POLICY

ITEMS OF PRIMARY STRUCTURE

SELLER SERVICE LIFE POLICY

1. The Items covered by the Service Life Policy pursuant to sub-Clause 12.2 are those Seller Items of primary and auxiliary structure described hereunder.

2. WINGS - CENTER AND OUTER WING BOX

2.1 Spars

2.2 Ribs inside the wing box

2.3 Upper and lower panels of the wing box

2.4 Fittings

2.4.1 Attachment fittings for the flap structure

2.4.2 Attachment fittings for the engine pylons

2.4.3 Attachment fittings for the main landing gear

2.4.4 Attachment fittings for the center wing box

2.5 Auxiliary Support Structure

2.5.1 For the slats:

2.5.1.1 Ribs supporting the track rollers on wing box structure

2.5.1.2 Ribs supporting the actuators on wing box structure

2.5.2 For the ailerons:

2.5.2.1 Hinge brackets and ribs on wing box rear spar or shroud box

2.5.2.2 Actuator fittings on wing box rear spar or shroud box

2.5.3 For airbrakes, spoilers, lift dumpers:

2.5.3.1 Hinge brackets and ribs on wing box rear spar or shroud box

2.5.3.2 Actuator fittings on wing box rear spar or shroud box

3. FUSELAGE

3.1 Fuselage structure

3.1.1 Fore and aft bulkheads

3.1.2 Pressurized floors and bulkheads surrounding the main and nose gear wheel well and centre wing box

3.1.3 Skins with doubters, stringers and frames from the forward pressure bulkheads to the frame supporting the rear attachment of horizontal stabilizer

3.1.4 Window and windscreen attachment structure but excluding transparencies

3.1.5 Passenger and cargo doors internal structure

3.1.6 Sills excluding scuff plates and upper beams surrounding passenger and cargo door apertures

3.1.7 Cockpit floor structure and passenger cabin floor beams excluding floor panels and seat rails

3.1.8 Keel beam structure

3.2 Fittings

3.2.1 Landing gear attachment fittings

3.2.2 Support structure and attachment fittings for the vertical and horizontal stabilizers

4. STABILIZERS

4.1 Horizontal Stabilizer Main Structural Box

4.1.1 Spars

4.1.2 Ribs

4.1.3 Upper and lower skins and stringers

4.1.4 Attachment fittings to fuselage and trim screw actuator

4.1.5 Elevator support structure

4.1.5.1 Hinge bracket

4.1.5.2 Servocontrol attachment brackets

4.2 Vertical Stabilizer Main Structural Box

4.2.1 Spars

4.2.2 Ribs

4.2.3 Skins and stringers

4.2.4 Attachment fittings to fuselage

4.2.5 Rudder support structure

4.2.5.1 Hinge brackets

4.2.5.2 Servocontrol attachment brackets

5. Bearing and roller assemblies, bearing surfaces, bushings, bolts, rivets, access and inspection doors, including manhole doors, latching mechanisms, all system components, commercial interior parts, insulation and related installation and connecting devices are excluded from this Seller Service Life Policy.

EXHIBIT "D"

MANUALS

LIST OF DOCUMENTS

The following identifies the Technical Publications provided in support of the Aircraft. The explanation of the table is as follows:

MANUAL DESIGNATION               Self explanatory.

ABBREVIATED DESIGNATION (Abbr)   Self explanatory.

FORM

     AC   APERTURE CARD. Refers to 35mm film contained on punched aperture
          cards.

F MICROFILM. Refers to 16mm roll film in 3M type cartridges.

MF MASTER FILM. Refers to thick diazo film suitable for further reproduction.

MP MASTER PAPER. Refers to manuals in paper with print on one (1) side of the sheet, no folded pages. No punching, highly contrasted, suitable for further reproduction or filming.

P1 PRINTED ONE SIDE. Refers to manuals in paper with print on one (1) side of the sheets only.

P2 PRINTED BOTH SIDES. Refers to manuals with print on both sides of the sheets.

DD DIGITAL DATA. Data format of deliverables depends on Aircraft model and data, for more details please refer to the document "Digital Deliverable Status".

TYPE

C CUSTOMIZED. Refers to manuals which are applicable to an individual Airbus customer/operator fleet or aircraft.

G GENERIC. Refers to manuals which are applicable to a whole group of Airbus customers for all aircraft types/models/series.

E ENVELOPE. Refers to manuals which are applicable to a whole group of Airbus customers for a specific aircraft type/model/series.

P PRELIMINARY. Refers to preliminary data or manuals which may consist of either:

- one-time issue not maintained by revision service, or

- preliminary issues maintained by revision service until final manual or data delivery, or

- supply of best available data under final format with progressive

               completion through revision service.

ATA  Reference to manuals established with reference to ATA Specification No
     100:

     The manuals responding to ATA Specification No 100 shall be essentially in
     accordance with revision:

     21 for Aircraft Models A310, A300-600

     23 for Aircraft Model A319, A320, A321

     26 for Aircraft Model A330, A340

QUANTITY (Qty)     Self explanatory.

DELIVERY (Deliv)   Manual delivery refers to scheduled delivery dates and is
                   expressed in either the number of corresponding days prior to
                   first Aircraft delivery, or nil (0) corresponding to the
                   first delivery day.

                   The number of days indicated shall be rounded up to the next
                   regular revision release date.

MANUAL DESIGNATION                Abbr   Form   Type   ATA   Qty    Deliv
------------------                ----   ----   ----   ---   ---   -------
1. OPERATIONAL MANUALS AND DATA
Quick Reference Handbook          QRH    P2     C      NO    *        90
                                                                   per A/C
Flight Crew Operating Manual      FCOM   P2     C      NO    *        90
                                                                   per A/C
Flight Manual                     FM     P1     C      NO    *        0
                                                                   per A/C
Master Minimum Equipment List     MMEL   P2     C      NO    *      90***
Performance Engineer's Programs   PEP    DD     C      NO    *      90*
Performance Programs Manual       PPM    P2     C      NO    *      90
Weight and Balance Manual         WMB    P1     C      YES   *       0***

* ONLY ONE FORM IS SUPPLIED

** WEIGHING EQUIPMENT LIST DELIVERED A FORTNIGHT AFTER AIRCRAFT DELIVERY

*** PLUS ONE COPY PER AIRCRAFT AT DELIVERY

MANUAL DESIGNATION                Abbr   Form   Type   ATA   Qty   Deliv
------------------                ----   ----   ----   ---   ---   -----
2. MAINTENANCE AND ASSOCIATED
MANUALS
APU Build-up Manual               ABM    P2     E      NO    *     90
Aircraft Maintenance Manual       AMM    DD     C      YES   *     90
                                         P2     C      YES
Component Location Manual         CLM    P2     C      NO    *     90
Aircraft Time Limits/             TLMC   P2     C      YES   *     90
Maintenance Checks
Aircraft Schematics Manual        ASM    P1     C      YES   *     90
Aircraft Wiring Manual            AWM    P1     C      YES   *     90
Aircraft Wiring Lists             AWL    F      C      YES   *     90***
Electrical Standard Practices     ESP    P      G      YES   *     90
Consumable Material List          CML    P2     G      YES   *     90
Duct Repair Manual                DRM    P2     E      NO    *     90
Fuel Pipe Repair Manual           FPRM   P2     G      NO    *     90
Illustrated Parts Catalog         IPC    DD     C      YES   *     90*
(Airframe)                               P1
Illustrated Parts Catalog         PIPC   F      C      NO    *     90**
(Power Plant)

* Issue date to be coordinated with Initial Provisioning Data delivery included in EXHIBIT "E" Spare Parts Procurement.

** Supplied by Propulsion System Manufacturer 90 days prior to first Aircraft delivery or concurrent with the first spare Quick Engine Change (QEC) kit delivery, whichever first applies (NOT APPLICABLE TO A330 WITH PRATT AND WHITNEY ENGINES).

*** Wiring List can also be delivered in ATA format SGML as of 1998

MANUAL DESIGNATION                Abbr   Form   Type   ATA   Qty   Deliv
------------------                ----   ----   ----   ---   ---   -----
2. MAINTENANCE AND ASSOCIATED
MANUALS (continued)
Technical Publications            TPCI   DD     E      NO    *       90
Combined Index
Illustrated Tool and Equipment    TEM    P2     E      YES   *      360
Manual
Maintenance Facility Planning     MFP    P2     E      NO    *       90
Maintenance Planning Document     MPD    P2     E      NO    *      360
Power Plant Build-up Manual       PBM    P2     C      YES   *       90*
Support Equipment Summary         SES    P1     G      NO    *      360
Tool and Equipment Drawings       TED    AC     E      NO    *      360
Tool and Equipment Index          TEI    P2     E      NO    *      360
Tool and Equipment Bulletins      TEB    P1     E      NO    *       90
Trouble Shooting Manual           TSM    DD     C      NO    *       90
                                         P2     C      NO    *       90

* Supplied by Propulsion System Manufacturer 90 days prior to first Aircraft delivery or concurrent with the first spare Quick Engine Change (QEC) kit delivery, whichever first applies (NOT APPLICABLE TO A330 WITH PRATT AND WHITNEY ENGINES).

MANUAL DESIGNATION              Abbr   Form   Type   ATA   Qty   Deliv
------------------              ----   ----   ----   ---   ---   -----
3.   STRUCTURAL MANUALS
     Nondestructive Testing     NTM    P2     E      YES   *     90
     Manual
     Structural Repair Manual   SRM    P2     E      YES   *     90
                                       F      E      YES   *     90
     Power Plant Structural     PSRM   P2     E      YES   *     90****
     Repair Manual                     F      E      YES   *     90****

4.   OVERHAUL DATA
     Component Documentation    CDS    P2     C      NO    *     180
     Status                            D      C      NO    *     180
     Component Evolution List   CEL    P2     G      NO    *     **
     Cable Fabrication Manual   CFM    P2     E      NO    *     90
     Component Maintenance      CMMM   P2     E      YES   *     180*****
     Manual Manufacturer               F      E      YES   *     180
     Component Maintenance      CMMV   P2     E      YES   *     180***
     Manual Vendor

* Optional

** Optional Delivered as follow-on for CDS

*** Supplied by Vendors

**** Supplied by Propulsion System Manufacturer

***** The selection, form, Type and quantities shall be further discussed.

MANUAL DESIGNATION               Abbr   Form   Type   ATA   Qty   Deliv
------------------               ----   ----   ----   ---   ---   -----
5.   ENGINEERING DOCUMENTS
     Installation and Assembly   IAD    AC     C      NO    *       0
     Drawings
     Parts Usage (Effectivity)   PU     F      E      NO    *       0
     Schedule (Drawing           S      F      E      NO    *       0
     Nomenclature)
     Drawing Numerical Index     DNI    P1     C      NO    *       0
     Process and Material        PMS    F      G      NO    *       0
     Specification
     Standards Manual            SM     F      G      NO    *       0

MANUAL DESIGNATION                Abbr   Form   Type   ATA   Qty   Deliv
------------------                ----   ----   ----   ---   ---   -----
6.   MISCELLANEOUS PUBLICATIONS
     Airplane Characteristics     AC     P2     E      NO     *     360
     for Airport Planning
     Aircraft Recovery Manual     ARM    P2     E      YES    *     90
     Cargo Loading System         CLS    P2     E      NO     *     180
     Manual
     Crash Crew Chart             CCC    P1     E      NO     *     180
     List of Radioactive and      LRE    P1     G      NO     *     90
     Hazardous Elements
     List of Applicable           LAP    P2     C      NO     *     90
     Publications
     Livestock Transportation     LTM    P2     E      NO     *     90*
     Manual
     Service Bulletins            SB     P2     C      YES    *     0
                                         F      E      YES    *     90
     Service Information          SIL    P1     E      YES    *     0
     Letters
     Transportability Manual      TM     P1     G      NO     *     90
     Vendor Information Manual    VIM    D      G      NO     *     360
     Vendor Information Manual    VIM/   P2     G      NO     *     360
     GSE                          GSE
     Vendor Product Support       VPSA   P2     E      NO     *     360
     Agreements

* SPECIFIC REQUEST

EXHIBIT "E"

SPARE PARTS PROCUREMENT

CONTENTS

CLAUSE   TITLE
------   -----
  1      GENERAL
  2      INITIAL PROVISIONING
  3      CENTRAL STORE
  4      DELIVERY
  5      PRICE
  6      PAYMENT PROCEDURES AND CONDITIONS
  7      TITLE
  8      PACKAGING
  9      DATA RETRIEVAL
  10     BUY-BACK
  11     WARRANTIES
  12     SELLER PARTS LEASING
  13     TERMINATION OF THE SPARES PROCUREMENT COMMITMENTS

1. GENERAL

1.1 This Exhibit covers the terms and conditions for the material support offered by the Seller to the Buyer with respect to material (hereinafter referred to as "Material") specified within the following categories:

a. Seller Parts (Seller's Proprietary Material bearing an official part number of the Seller or Material for which the Seller has the exclusive sales rights);

b. Vendor Parts classified as Rotable Line Replacement Units;

c. Vendor Parts classified as Expendable Line Maintenance Parts;

d. Ground Support Equipment (GSE) and Special (To Type) Tools;

e. Hardware and standard material;

Rotable Line Replacement Units as specified in sub-Clauses 1.1.a and 1.1.b above having less than * flight-hours are considered as new.

Material covered under sub-Clause 1.1.e above when being part of Initial Provisioning shall only be supplied as a packaged kit.

In addition, this Exhibit "E" establishes the general terms and conditions under which the Buyer may lease certain Seller Parts as defined in Appendix A to Clause 12 of this Exhibit "E" for the Buyer's use on its Aircraft in commercial air transport service.

1.2 Scope of Material Support

The Material support to be provided hereunder by the Seller covers all items classified as Material in sub-Clause 1.1 for Initial Provisioning and sub-Clauses 1.1.a thru 1.1.d for replenishment under the conditions detailed in this Exhibit "E".

1.2.1 Engine, nacelles, quick engine change unit and thrust reverser accessories and parts, including associated parts, are not covered under this Exhibit "E" and shall be subject to direct agreements between the Buyer and the relevant Propulsion Systems Manufacturer. The Seller shall use its reasonable efforts to assist the Buyer in case of any difficulties with availability of Propulsion Systems and associated spare parts.

1.2.2 During a period commencing on the date hereof and continuing for as long as at least * A320 model aircraft are operated by airlines in commercial air transport Service (the "Term"), the Seller shall maintain or have maintained such stock of Seller Parts as is deemed reasonable by the Seller and shall furnish at reasonable prices Seller Parts adequate to meet the Buyer's needs for repairs and replacements upon the Aircraft. Such Seller Parts shall be sold and delivered in accordance with Clauses 4 and 5 of this Exhibit "E" upon receipt of the Buyer's orders.

1.3 Agreements of the Buyer

1.3.1 The Buyer agrees to purchase from the Seller the Seller Parts required for the Buyer's own needs during the Term, provided that the provisions of this sub-Clause 1.3 shall not in any way prevent the Buyer from resorting to the Seller Parts stocks of other airlines operating the same Aircraft or from purchasing Seller Parts from said airlines, or from distributors or dealers, provided said Seller Parts have been designed and manufactured by, or obtained from, the Seller.

1.3.2 The Buyer may manufacture or have manufactured for its own use *, or may purchase from any other source whatsoever, parts equivalent to Seller Parts:

1.3.2.1 after expiration of the Term if at such time the Seller Parts are out of stock,

1.3.2.2 at any time, to the extent Seller Parts are needed to effect AOG repairs upon any Aircraft delivered under the Agreement and are not available from the Seller within a lead time shorter than or equal to the time in which the Buyer can provide such Seller Parts, and provided the Buyer shall not sell such Seller Parts,

1.3.2.3 in the event that the Seller fails to fulfil its obligations with respect to any Seller Parts pursuant to sub-Clause 1.2 of this Exhibit "E" within a reasonable time after written notice thereof from the Buyer,

1.3.2.4 in those instances where a Seller Part is identified as "Local Manufacture" in the Illustrated Parts Catalog (IPC).

1.3.3 The rights granted to the Buyer in sub-Clause 1.3.2 of this Exhibit "E" shall not in any way be construed as a licence, nor shall they in any way obligate the Buyer to the payment of any licence fee or royalty, nor shall they in any way be construed to affect the rights of third parties.

1.4 Meanings

Words and expressions shall have the same meanings when used in this Exhibit "E" as when used in the rest of the Agreement except where the contrary is stated herein.

2. INITIAL PROVISIONING

The Initial Provisioning Period referred to in this Exhibit "E" shall mean the period up to and expiring on the * day after delivery of the last Aircraft subject to firm order under the Agreement.

2.1 Seller - Supplied Data

The Seller shall prepare and supply to the Buyer the following documents.

2.1.1 Initial Provisioning Data

Initial Provisioning Data provided for the A300, A300-600 and A310 in Specification ATA 200, Chapter 2A (Revision 10) format, for the A319, A320 and A321, A330 and A340 in Specification 2000, Chapter 1, fixed or variable format ("the Initial Provisioning Data") shall be supplied by the Seller to the Buyer in form, format and a time-scale to be mutually agreed upon during the Pre-Provisioning Meeting as described in sub-Clause 2.3 of this Exhibit "E".

Revision Service shall be assured every * days, up to the end of the Initial Provisioning Period, or until the configuration of the Buyer's delivered Aircraft is included.

In any event, the Seller shall ensure that Initial Provisioning Data are released to the Buyer in due time to allow the necessary Buyer's evaluation time and the on-time delivery of ordered Material.

2.1.2 Supplementary Data

The Seller shall provide the Buyer with Local Manufacture Tables (X-File), as part of the IPC (Additional Cross Reference Tables) which shall be a part of the Initial Provisioning Data Package.

2.1.3 Initial Provisioning Data for Exercised Options

2.1.3.1 All Aircraft for which the Buyer exercises its option shall be included into the revision of the provisioning data that is issued after execution of the relevant amendment to the Agreement if such revision is not scheduled to be issued within * weeks from the date of execution. If the execution date does not allow * weeks preparation time for the Seller, the concerned Aircraft shall be included in the subsequent revision as may be mutually agreed upon.

2.1.3.2 The Seller shall, from the date of execution of the relevant amendment to the Agreement until * months after delivery of each Aircraft, submit to the Buyer details of particular Vendor components being installed on each Aircraft, with recommendation of order quantity. A list of such components shall be supplied at the time of the provisioning data revision as specified above.

2.1.3.3 The Seller shall deliver to the Buyer T-files for particular components as applicable and in due time to allow the Buyer's planning of repair and overhaul tasks.

2.1.3.4 The data with respect to Material at the time of each Aircraft delivery shall at least cover such Aircraft's technical configuration as it existed
* months prior to Aircraft delivery and shall be updated to reflect the final build status of the concerned Aircraft. Such update shall be included in the data revisions issued * months after delivery of such Aircraft.

2.2 Vendor-Supplied Data

2.2.1 General

The Seller shall obtain from Vendors agreements to prepare and issue for their own products T-files in the English language, for those components for which the Buyer has elected to receive data.

Said data (initial issue and revisions) shall be transmitted to the Buyer through the Seller. The Seller shall review the compliance of such data with the relevant ATA requirements but shall not be responsible for the substance of such data. Such data should be adequate to enable the Buyer to undertake in-house repair/overhaul of such components.

In any event, the Seller shall exert its reasonable efforts to supply Initial Provisioning Data to the Buyer in due time to allow the necessary Buyer's evaluation time and on-time deliveries.

2.2.2 Initial Provisioning Data

Initial Provisioning Data for Vendor Parts as per sub-Clause 1.1.b of this Exhibit "E" described in Specification 2000, Chapter 1, fixed or variable format, shall be furnished as mutually agreed upon during a Pre-Provisioning Meeting with revision service assured up to the end of the Initial Provisioning period, or until it reflects the configuration of the Buyer's delivered Aircraft.

2.3 Pre-Provisioning Meeting

2.3.1 The Seller shall organize a Pre-Provisioning Meeting at its materiel support centre in HAMBURG, FEDERAL REPUBLIC OF GERMANY (hereinafter referred to as "the Materiel Support Centre") for the purpose of formulating an acceptable schedule and working procedure to accomplish the initial provisioning of Material.

2.3.2 The date of the meeting shall be mutually agreed upon, but it shall take place no later than * months after the Agreement shall have come into effect and no later than * months before delivery of the Buyer's first Aircraft.

2.4 Initial Provisioning Training

An Initial Provisioning Training can be provided by the Seller for the Buyer's provisioning and purchasing staff. The following areas shall be covered:

2.4.1 The Buyer shall be familiarized with the provisioning documents by the Seller during the Pre-Provisioning Meeting.

2.4.2 The technical function as well as the necessary technical and commercial Initial Provisioning Data shall be explained during the Initial Provisioning Conference.

2.4.3 A familiarization with the Seller's purchase order administration system shall be conducted during a separate session within the Initial Provisioning Conference.

2.5 Initial Provisioning Conference

The Seller shall organize an Initial Provisioning Conference at the Materiel Support Centre including Vendor participation as agreed upon during the Pre-Provisioning Meeting.

2.6 Initial Provisioning Data Compliance

2.6.1 Initial Provisioning Data generated by the Seller and supplied to the Buyer shall comply with the latest configuration of the Aircraft to which such data relate as known * months before the date of issue. Said data shall enable the Buyer to order Material conforming to its Aircraft as required for maintenance and overhaul.

This provision shall not cover:

- parts embodying Buyer's modifications not known to the Seller,

- parts embodying modifications not agreed to by the Seller.

2.6.2 During the Initial Provisioning Period the Seller shall supply Material as defined in sub-Clause 1.1 of this Exhibit "E" ordered from the Seller which shall be in conformity with the configuration standard of the affected Aircraft and with the Initial Provisioning Data transmitted by the Seller. Should the Seller default in this obligation, it shall immediately replace such parts and/or authorize return shipment at no transportation cost to the Buyer. The Buyer shall make * efforts to minimize such costs, particularly by using its own airfreight system for transportation

2.7 Delivery of Initial Proyisionina Material

2.7.1 In order to support the operation of the Aircraft, the Seller shall use its reasonable efforts to deliver Material ordered during the Initial Provisioning Period (the "Initial Provisioning Material") against the Buyer's orders and according to the following schedule, provided the Buyer's orders have been placed within * days after receipt of the Seller's provisioning data, and not later than * months before delivery of the corresponding Aircraft,

2.7.1.1 at least * percent * of the ordered quantity of each Rotable Line Replacement Unit or Expendable Line Maintenance Part * months before delivery of the corresponding Aircraft,

2.7.1.2 at least * percent * of the ordered quantity of each Rotable Line Replacement Unit or Expendable Line Maintenance Part * month (for items identified as line station items * months) before delivery of corresponding Aircraft,

2.7.1.3 * percent * of the ordered quantity of each item except as specified in sub-Clauses 2.7.1.1 and 2.7.1.2 of this Exhibit "E", at delivery of the first Aircraft.

2.7.1.4 * percent * of the ordered quantity of each item, including line station items, three (3) months after delivery of the last Aircraft. If said * percent * cannot be accomplished, the Seller shall endeavour to have such items available at its facilities for Seller Parts as per sub-Clause 1.1.a of this Exhibit "E" or its Vendors' facilities for parts as per sub-Clauses 1.1.b through 1.1.e of this Exhibit "E" for immediate supply in case of an AOG,

2.7.1.5 The above percentages apply only to that portion of the quantity ordered that is recommended for the number of Aircraft operated during the * months that follow first Aircraft delivery.

2.7.2 The Buyer may, subject to the Seller's agreement, cancel or modify Initial Provisioning orders placed with the Seller with no cancellation charge,

- for "Long Lead Time Material" (leadtime exceeding * months) not later than * months before scheduled delivery of said Material,

- for normal lead time Material not later than * months before scheduled delivery of said Material,

- for Buyer's specific Material and Material as per sub-Clauses 1.1.b thru 1.1.e of this Exhibit "E" not later than the quoted leadtime before scheduled delivery of said Material.

2.7.3 In the event of the Buyer cancelling or modifying (without any liability of the Seller for the cancellation or modification) any orders for Material outside the time limits defined in sub-Clause 2.7.2 of this Exhibit "E", the Buyer shall reimburse the Seller for any costs incurred in connection therewith.

2.7.4 All transportation costs for the return of Material under this Clause 2, including any insurance, customs and duties applicable or other related expenditures, shall be borne by the *

2.8 Commercial Offer

The prices of Initial Provisioning Material are in general those mentioned in Clause 5 of this Exhibit "E".

At the end of the Initial Provisioning Conference, the Seller shall, at the Buyer's request, submit a Commercial Offer for all Material mutually agreed as being Initial Provisioning based on the Seller's sales prices valid at the time of finalization of the Initial Provisioning Conference. This Commercial Offer shall be valid for a period to be mutually agreed upon, irrespective of any price changes for Seller Parts during this period, except for significant error and/or for price alterations due to part number changes and/or for Vendor price changes.

3. CENTRAL STORE

3.1 Central Store

The Seller has set up at HAMBURG, FEDERAL REPUBLIC OF GERMANY and shall maintain or cause to be maintained during the Term a central store of Seller Parts at its Materiel Support Centre.

3.2 Operation of Central Store

The Materiel Support Centre is operated twenty-four (24) hours/day and seven (7) days/week.

3.3 Alternative Delivery Places

The Seller reserves the right to effect deliveries from distribution centres other than the Materiel Support Centre or from any designated production or Vendors' facilities.

4. DELIVERY

4.1 General

Buyer purchase orders are administered in accordance with ATA Specification 2000 Chapter 3.

For the sake of clarification it is expressly stated that the provisions of sub-Clause 4.2 do not apply to Initial Provisioning Data and Material as described in Clause 2 of this Exhibit "E".

4.2 Lead times

In general the lead times are in accordance with the provisions of the "World Airline Suppliers' Guide" (Edition 1988).

4.2.1 Seller Parts as per sub-Clause 1.1.a of this Exhibit "E" listed in the Seller's Spare Parts Price List can be dispatched within the lead times defined in the Spare Parts Price List.

Lead times for Seller Parts which are not published in the Seller's Spare Parts Price List are quoted upon request.

4.2.2 Material of sub-Clauses 1.1.b through 1.1.d of this Exhibit "E" can be dispatched within the Vendor's/Supplier's lead time augmented by the Seller's own order and delivery processing time.

Material of sub-Clause 1.1.e of this Exhibit "E" when on stock and subject to prior sale can be dispatched within ten (10) days from receipt of a Buyer purchase order.

4.2.3 Expedite Service

The Seller shall provide a twenty-four (24) hours-a-day, seven (7) days-a-week Expedite Service to provide for the supply of the relevant Seller Parts available in the Seller's stock, workshops and assembly line including long lead time spare parts, to the international airport nearest to the location of such part ("the Expedite Service").

The Expedite Service is operated in accordance with the "World Airline Supplier's Guide", and the Seller shall notify the Buyer of the action taken to satisfy the expedite within:

- * hours after receipt of an AOG Order,

- * hours after receipt of a Critical Order (imminent AOG or work stoppage),

- * days after receipt of an Expedite Order from the Buyer.

The Seller shall deliver Seller Parts requested on an Expedite basis against normal orders placed by the Buyer, or upon telephone or telex requests by the Buyer's representatives. Such telephone or telex requests shall be confirmed by subsequent Buyer's orders for such Seller Parts within a reasonable time.

4.3 Delivery Status

The Seller agrees to report to the Buyer the status of supplies against orders on a monthly basis.

4.4 Excusable Delay

Sub-Clause 10.1 of the Agreement shall apply for the material support.

4.5 Shortages, Overshipments, Non-Conformance in Orders

4.5.1 The Buyer shall immediately and not later than * days after receipt of Material delivered pursuant to a purchase order advise the Seller:

a) of any alleged shortages or overshipments with respect to such order,

b) of all non-conformance to specification of parts in such order subjected to inspections by the Buyer.

In the event of the Buyer not having advised the Seller of any such alleged shortages, overshipments or non-conformance within the above defined period, the Buyer shall be deemed to have accepted the deliveries.

4.5.2 In the event of the Buyer reporting overshipments or non-conformance to the specifications within the period defined in sub-Clause 4.5.1 of this Exhibit "E" the Seller shall, if accepted, either replace the concerned Material or credit the Buyer for the returned Material. In such case, transportation costs shall be borne by the Seller.

The Buyer shall endeavour to minimize such costs, particularly through the use of its own airfreight system for transportation at no charge to the Seller.

4.6 Cessation of Deliveries

The Seller reserves the right to stop or otherwise suspend deliveries if the Buyer fails to meet its obligations defined in Clauses 6 and 7 of this Exhibit "E".

5. PRICE

5.1 The Material prices shall be:

5.1.1 * the Materiel Support Centre for deliveries from the Materiel Support Centre.

5.1.2 * place specified by the Seller for deliveries from other Seller or Vendor facilities as the term * is defined by the publication No 460 of the International Chamber of Commerce published in April 1990.

5.2 The prices shall be the Seller's sales prices in effect on the date of receipt of the order (subject to reasonable quantities and delivery time) and shall be expressed in US-Dollars.

5.2.1 Prices of Seller Parts shall be in accordance with the current Seller's Spare Parts Price List. Prices shall be firm for each calendar year. The Seller, however, reserves the right to revise the prices of said parts during the course of the calendar year in the following cases:

- significant revision in manufacturing costs,

- significant revision in manufacturer's purchase price of parts or materials (including significant variation of exchange rates),

- significant error in estimation or expression of any price.

5.2.2 Prices of Material as defined in sub-Clauses 1.1.b thru 1.1.d of this Exhibit "E" shall be the valid list prices of the supplier augmented by the Seller's handling charge. The percentage of the handling charge shall vary with the Material's value and shall be determined item by item.

5.2.3 The Seller warrants that, should the Buyer purchase * percent (*%) of the recommended Initial Provisioning Package of the Material as defined in sub- Clauses 1.1.b thru 1.1.d of this Exhibit "E" through the Seller, the average handling charge on the total package shall not exceed *%)

This average handling charge shall apply when all orders are received by the Seller not later than * months before first Aircraft delivery.

When these orders are received by the Seller less than * months before first Aircraft delivery, the average handling charge shall be increased to
* percent *%).

5.2.4 Prices of Material as defined in sub-Clause 1.1.e of this Exhibit "E" shall be the Seller's purchase prices augmented by a variable percentage of handling charge.

6. PAYMENT PROCEDURES AND CONDITIONS

6.1 Payment shall be made in immediately available funds in the quoted currency. In case of payment in any other free convertible currency the exchange rate valid at the day of actual money transfer shall be applied for conversion.

6.2 Payment shall be made by the Buyer to the Seller within * days from date of the invoice to the effect that the value date of the credit to the Seller's account of the payment falls within this * day period.

6.3 The Buyer shall make all payments hereunder to the Seller's account, No 473323H with:

BANQUE PARIBAS TOULOUSE
24, rue de Metz
31000 TOULOUSE
FRANCE

or as otherwise directed by the Seller.

6.4 All payments due to the Seller hereunder shall be made in full without set-off, counterclaim, deduction or withholding of any kind. Consequently, the Buyer shall procure that the sums received by the Seller under this Exhibit "E" shall be equal to the full amounts expressed to be due to the Seller hereunder, without deduction or withholding on account of and free from any and all taxes, levies, imposts, dues or charges of whatever nature except that if the Buyer is compelled by law to make any such deduction or withholding the Buyer shall pay such additional amounts as may be necessary in order that the net amount received by the Seller after such deduction or withholding shall equal the amounts which would have been received in the absence of such deduction or withholding.

6.5 If any payment due to the Seller is not received in accordance with the timescale provided in sub-Clause 6.2 of this Exhibit "E", the Seller shall have the right to claim from the Buyer and the Buyer shall promptly pay to the Seller interest on the unpaid amount at a rate equal to the London Interbank Offered Rate (LIBOR) rate for * months deposits in US Dollars (as published in the Financial Times on the due date) plus * percent * to be calculated from the due date until the date the payment is received by the Seller. Claiming such interest shall not prejudice any other rights the Seller may have under this Exhibit "E".

6.6 Credit Assurance

The Seller and the Buyer agree that the Seller has the right to request and the Buyer shall upon such request provide the Seller with sufficient financial means in due time in order to assure the Seller of full payment of the Buyers' current and/or expected payment obligations.

6.6.1 The Sellers' right to request credit assurance from the Buyer shall be limited to the following cases:

6.6.1.1 The Seller has received purchase orders from the Buyer for Initial Provisioning Material.

6.6.1.2 The Seller has received purchase and/or service orders exceeding the Buyer's average * months turnover with the Seller.

6.6.1.3 The Buyer is indebted to the Seller for overdue invoices.

6.6.2 The Seller shall accept the following financial means as credit assurance:

6.6.2.1 Irrevocable and confirmed letter of credit, raised by banks of international standing and reputation. The conditions of such letter of credit shall be pertinent to Aircraft support activities and shall be set forth by the Seller.

6.6.2.2 Bank guarantee raised by banks of international standing and reputation. The conditions of such bank guarantee shall be mutually agreed upon prior to acceptance by the Seller.

6.6.2.3 Stand-by letter of credit raised by banks of international standing and reputation. The conditions of such letter of credit shall be mutually agreed upon prior to acceptance by the Seller.

7. TITLE

Title to any Material purchased under this Exhibit "E" remains with the Seller until full payment of the invoices and any interest thereon have been received by the Seller.

The Buyer shall undertake that Material, title to which has not passed to the Buyer, shall be kept free from any debenture or mortgage or any similar charge or claim in favour of any third party.

8. PACKAGING

All Material shall be packaged in accordance with ATA 300 Specification, Category III for consumable/expendable material and Category II for rotables. Category I containers shall be used if requested by the Buyer and the difference between Category I and Category II packaging costs shall be paid by the Buyer together with payment for the respective Material.

9. DATA RETRIEVAL

The Buyer undertakes to provide periodically to the Seller, as the Seller may request during the Term, a quantitative list of the parts used for maintenance and overhaul of the Aircraft. The range and contents of this list shall be established by mutual agreement between the Seller and the Buyer.

10. BUY-BACK

10.1 Buy-Back of Obsolete Material

The Seller agrees to buy back unused Seller Parts which may become obsolete before * to the Buyer as a result of mandatory modifications required by the Buyer's or Seller's Aviation Authorities, subject to the following:

10.1.1 The Seller Parts involved shall be those which the Buyer is directed by the Seller to scrap or dispose of and which cannot be reworked or repaired to satisfy the revised standard.

10.1.2 The Seller shall credit to the Buyer the purchase price paid by the Buyer for any such obsolete parts, provided that the Seller's liability in this respect does not extend to quantities in excess of the Seller's Initial Provisioning recommendation.

10.1.3 The Seller shall use its reasonable efforts to obtain for the Buyer the same protection from Vendors.

10.2 Buy-Back of Surplus Material

10.2.1 The Seller agrees that at any time after * and within * years after delivery of the first Aircraft to the Buyer, the Buyer shall have the right to return to the Seller, at a credit of * percent (*%) of the original purchase price paid by the Buyer, unused and undamaged Material as per sub- Clause 1.1.a of this Exhibit "E" and at a credit of * percent (*%) of the original Vendor list price, unused and undamaged Material as per sub-Clause 1.1.b of this Exhibit "E" originally purchased from the Seller under the terms hereof, provided that the selected protection level does not exceed * % with a turn-around-time of * days and said Material was recommended for the Buyer's purchase in the Seller's Initial Provisioning recommendations to the Buyer and does not exceed the provisioning quantities recommended by the Seller, and is not shelflife limited, or does not contain any shelflife limited components with less than *% shelflife remaining when returned to the Seller and provided that the Material is returned with the Seller's original documentation (tag, certificates).

10.2.2 In the event of the Buyer electing to procure Material in excess of the Seller's recommendation, the Buyer shall so notify the Seller in writing, with due reference to the present Clause. The Seller's agreement in writing is necessary before any Material in excess of the Seller's recommendation shall be considered for buy-back.

10.2.3 It is expressly understood and agreed that the rights granted to the Buyer under this sub-Clause 10.2 shall not apply to Material which may become surplus to requirements due to obsolescence at any time or for any reason other than those set forth in sub-Clause 10.1 above.

10.2.4 Further, it is expressly understood and agreed that all credits described in this sub-Clause 10.2 shall be provided by the Seller to the Buyer exclusively by means of credit notes to be entered into the Buyer's spares account with the Seller.

10.3 All transportation costs for the return of obsolete or surplus Material under this Clause 10, including any insurance and customs duties applicable or other related expenditures, shall be borne by the *

10.4 The Seller's obligation to buy back surplus Material is conditioned upon the Buyer reasonably demonstrating that items proposed for buy-back were in excess of the Buyer's requirements after the initial purchase of such items.

The Seller shall accept as a reasonable demonstration of such excess initial purchase by the Buyer if the data submitted to the Seller in compliance with the provisions of Clause 9 of this Exhibit "E" indicate that the items proposed for buy-back are surplus to the Buyer's requirements.

11. WARRANTIES

11.1 Seller Parts

Subject to the limitations and conditions as hereinafter provided, the Seller warrants to the Buyer that all Seller Parts in sub-Clause 1.1.a of this Exhibit "E" shall at the time of delivery to the Buyer:

(i) be free from defects in material,

(ii) be free from defects in workmanship, including without limitation processes of manufacture,

(iii) be free from defects arising from failure to conform to the applicable specification for such part.

11.2 Warranty Period

The Standard Warranty period for Seller Parts is * months after delivery of such parts to the Buyer.

11.3 Buyer's Remedy and Seller's Obligation

The Buyer's remedy and Seller's obligation and liability under this Clause 11 are limited to the repair, replacement or correction, at the Seller's expense and option, of any Seller Parts which is defective.

The Seller may equally at its option furnish a credit to the Buyer for the future purchase of Seller Parts equal to the price at which the Buyer is then entitled to acquire a replacement for the defective Seller Parts.

The provisions of sub-Clauses 12.1.5 thru 12.1.10 of the Agreement shall apply to this Clause 11 of this Exhibit E.

11.4 WAIVER, RELEASE AND RENUNCIATION

THE WARRANTIES, OBLIGATIONS AND LIABILITIES OF THE SELLER AND REMEDIES OF THE BUYER SET FORTH IN THIS CLAUSE 11 ARE EXCLUSIVE AND IN SUBSTITUTION FOR, AND THE BUYER HEREBY WAIVES, RELEASES AND RENOUNCES ALL OTHER WARRANTIES, OBLIGATIONS AND LIABILITIES OF THE SELLER AND RIGHTS, CLAIMS AND REMEDIES OF THE BUYER AGAINST THE SELLER, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, WITH RESPECT TO ANY NONCONFORMITY OR DEFECT IN ANY COMPONENT, EQUIPMENT, ACCESSORY OR PART THEREOF DELIVERED UNDER THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS, ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE, ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN CONTRACT OR IN TORT, WHETHER OR NOT ARISING FROM THE SELLER'S NEGLIGENCE, ACTUAL OR IMPUTED, AND ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS OR DAMAGE TO ANY AIRCRAFT, COMPONENT, EQUIPMENT, ACCESSORY OR PART THEREOF, FOR LOSS OF USE, REVENUE OR PROFIT WITH RESPECT TO ANY AIRCRAFT, COMPONENT, EQUIPMENT, ACCESSORY OR PART THEREOF, OR FOR ANY OTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, PROVIDED THAT IN THE EVENT THAT ANY OF THE AFORESAID PROVISIONS SHOULD FOR ANY REASON BE HELD UNLAWFUL OR OTHERWISE INEFFECTIVE THE REMAINDER OF THIS SUB-CLAUSE 11.4 SHALL REMAIN IN FULL FORCE AND EFFECT.

12. SELLER PARTS LEASING

12.1 Applicable Terms

The terms and conditions of this Clause 12 shall apply to the list of Seller Parts in Appendix A to this Clause 12 entitled:

"Seller Parts Available for Leasing",

hereinafter, "Leased Parts" or a "Leased Part" and shall form a part of each lease of Seller Parts by the Buyer from the Seller after the date hereof. Except for the identification of:

- the Leased Part,

- the Leased Part return location,

- the Lease Term,

- the Lease Charges,

all other terms and conditions appearing on any order form or other document pertaining to Leased Parts shall be deemed inapplicable, and in lieu thereof the terms and conditions of this Clause 12 shall prevail. For the purposes of this Clause 12, the term "Lessor" refers to the Seller and the term "Lessee" refers to the Buyer.

Parts not included in Appendix A to this Clause 12 shall be the subject of a separate lease agreement supplied by the Seller at the Buyer's request.

12.2 Leasing Procedure

At the Lessee's request by telephone (to be confirmed promptly in writing), telegram, letter or other written instrument, the Lessor shall lease such Leased Parts, which shall be made available in accordance with sub-Clause 4.2.3 of this Exhibit "E", to the Lessee for the purpose of being substituted for a part withdrawn from an Aircraft for repair or overhaul. Each lease of Leased Parts shall be evidenced by a lease document (hereinafter the "Lease") issued by the Lessor to the Lessee no later than
* days after delivery of the Leased Part.

12.3 Lease Term

The term of the lease (hereinafter the "Lease Term") shall commence on the date of dispatch of the Leased Part to the Lessee or the Lessee's agent at the Lessor's facility and shall end on the date falling * days after such delivery, unless extended by written agreement between the Lessor and the Lessee within such * day period. Notwithstanding the foregoing, the Lease Term shall end in the event of, and upon the date that, the Lessee acquiring title to a Leased Part as a result of exercise of the Lessee's option to purchase the Leased Part, as provided for herein.

12.4 Lease Charges and Taxes

Lessee shall pay Lessor:

(a) a daily rental charge for the Lease Term for each Leased Part equal

(b) any reasonable additional costs which may be incurred by the Lessor as a direct result of such Lease, such as inspection, test, repair, overhaul and repackaging costs as required to place the Leased Part in a satisfactory condition for lease to a subsequent customer,

(d) any taxes, charges or custom duties imposed upon the Lessor or its property as a result of the Lease, sale, delivery, storage or transfer of any Leased Part. All payments due hereunder shall be made in accordance with Clause 6 of this Exhibit "E".

In the event of the Leased Part not having been returned to the Lessor's designated facilities within the time period provided for in sub-Clause 12.3 of this Exhibit "E", the Lessor shall be entitled, in addition to any other remedy it may have by law or under this Clause 12, to charge to the Lessee, and the Lessee shall pay, all of the charges in this sub-Clause 12.4 accruing for each day after the end of the Lease Term that such Leased Part is not returned to the Lessor as though the Lease Term were extended for the period of such delay.

12.5 Title

Title to each Leased Part shall remain with the Lessor at all times unless the Lessee exercises its option to purchase in accordance with sub-Clause 12.8 of this Exhibit "E" in which case title shall pass to the Lessee upon receipt by the Lessor of the payment for the purchased Leased Part.

12.6 Risk of Loss

Except for normal wear and tear, each Leased Part shall be returned to the Lessor in the same condition as when delivered to the Lessee. However, the Lessee shall not without the Lessor's prior written consent repair, modify or alter any Leased Part. Risk of loss or damage to each Leased Part shall remain with the Lessee until such Leased Part is redelivered to the Lessor at the return location specified in the applicable Lease. If a Leased Part is lost or damaged beyond repair, the Lessee shall be deemed to have exercised its option to purchase the part in accordance with sub-Clause 12.8 of this Exhibit "E" as of the date of such loss or damage.

12.7 Record of Flight Hours

All flight hours accumulated by the Lessee on each Leased Part during the Lease Term shall be documented by the Lessee. Records shall be delivered to the Lessor upon return of such Leased Part to the Lessor. In addition, all documentation pertinent to inspection, maintenance and/or rework of the Leased Part as maintained serviceable in accordance with the standards of the Lessor shall be delivered to the Lessor upon return of the Leased Part to the Lessor on termination of the Lease.

Such documentation shall include but not be limited to evidence of incidents such as hard landings, abnormalities of operation and corrective action taken by the Lessee as a result of such incidents.

12.8 Option to Purchase

12.8.1 The Lessee may at its option exercisable by written notice given to the Lessor during the Lease Term, elect to purchase the Leased Part, in which case the then current purchase price for such Leased Part as set forth in the Seller's Spare Parts Price List shall be paid by the Lessee to the Lessor. Such option shall be contingent upon the Lessee providing the Lessor with evidence satisfactory to the Lessor that the original part fitted to the Aircraft is beyond economical repair. Should the Lessee exercise such option, * percent, *%) of the Lease rental charges already invoiced pursuant to sub-Clause 12.4.a of this Exhibit "E" shall be credited to the Lessee against the said purchase price of the Leased Part.

12.8.2 Should the Lessee fail to return the Leased Part to the Lessor at the end of the Lease Term and if the Lessor so elects, by giving prompt written notice to the Lessee, such failure shall be deemed to be an election by the Lessee to purchase the Leased Part, and upon the happening of such event the Lessee shall pay the Lessor all amounts due under sub-Clause 12.4 of this Exhibit "E" for the Leased Part up to the date of such written notice by the Lessor plus the purchase price of the Leased Part current at the commencement of the Lease Term.

12.8.3 In the event of purchase, the Leased Part shall be warranted in accordance with Clause 11 of this Exhibit "E" as though such Leased Part were a spare part, but the Warranty Period shall be deemed to have commenced on the date such part was first installed on any aircraft; provided, however, that in no event shall such Warranty Period be less than
* months from the date of purchase of such Leased Part. A warranty granted under this sub-Clause 12.8.3 shall be in substitution for the warranty granted under sub-Clause 12.9 of this Exhibit "E" at the commencement of the Lease Term.

12.9 Warranties

12.9.1 The Lessor warrants that each Leased Part shall at the time of delivery thereof:

a) conform to the applicable specification for such part,

b) be free from defects in material and,

c) be free from defects in workmanship, including without limitation processes of manufacture.

12.9.2 Survival of Warranties

With respect to each Leased Part:

(i) the warranty set forth in sub-Clause 12.9.1.a of this Exhibit "E" shall not survive delivery and

(ii) the warranties set forth in sub-Clauses 12.9.1.b and 12.9.1.C of this Exhibit "E" shall survive delivery only upon the conditions and subject to the limitations set forth in sub-Clauses 12.9.3 thru 12.9.8 of this Exhibit "E".

12.9.3 Warranty and Notice Periods

The Lessee's remedy and the Lessor's obligation and liability under this sub-Clause 12.9, with respect to each defect, are conditioned upon:

(i) the defect having become apparent to the Lessee within the Lease Term and

(ii) the Lessor's Warranty Administrator having received written notice of the defect from the Lessee within * days after the defect becomes apparent to the Lessee.

12.9.4 Return and Proof

The Lessee's remedy and the Lessor's obligation and liability under this sub-Clause 12.9, with respect to each defect, are also conditioned upon:

a) the return by the Lessee as soon as practicable to the return location specified in the applicable Lease, or such other place as may be mutually agreed upon, of the Leased Part claimed to be defective and

b) the submission by the Lessee to the Lessor's warranty administrator of reasonable proof that the claimed defect is due to a matter embraced within the Lessor's warranty under this sub-Clause 12.9 and that such defect did not result from any act or omission of the Lessee, including but not limited to any failure to operate or maintain the Leased Part claimed to be defective or the Aircraft in which it was installed in accordance with applicable governmental regulations and the Lessor's applicable written instructions.

12.9.5 Remedies

The Lessee's remedy and the Lessor's obligation and liability under this sub-Clause 12.9 with respect to each defect are limited to the repair of such defect in the Leased Part in which the defect appears, or, as mutually agreed, to the replacement of such Leased Part with a similar part free from defect.

Any replacement part furnished under this sub-Clause 12.9.5 shall for the purpose of this Exhibit "E" be deemed to be the Leased Part so replaced. Suspension and Transportation Costs

12.9.6 Suspension and Transportation Costs

12.9.6.1 If a Leased Part is found to be defective and covered by this warranty, the Lease Term and the Lessee's obligation to pay rental charges as provided for in sub-Clause 12.4.a of this Exhibit "E" shall be suspended from the date on which the Lessee notifies the Lessor of such defect until the date on which the Lessor has repaired, corrected or replaced the defective Leased Part, provided, however, that the Lessee has, promptly after giving such notice to the Lessor, withdrawn such defective Leased Part from use. If the defective Leased Part is replaced, such replaced part shall be deemed to no longer be a Leased Part under the Lease as of the date on which such part was received by the Lessor at the return location specified in the applicable Lease.

If a Leased Part is found to be defective on first use by the Lessee and is covered by this Warranty, no rental charges as provided in sub-Clause 12.4.a of this Exhibit "E" shall accrue and be payable by the Lessee until the date on which the Lessor has repaired, corrected or replaced the defective Leased Part.

12.9.6.2 All transportation and insurance costs of returning the defective Leased Part and returning the repaired, corrected or replacement part to the Lessee shall be borne by the *

12.9.7 Wear and Tear

Normal wear and tear and the need for regular maintenance and overhaul shall not constitute a defect or non-conformance under this sub-Clause 12.9.

12.9.8 Waiver, Release and Renunciation

THE WARRANTIES, OBLIGATIONS AND LIABILITIES OF THE LESSOR AND REMEDIES OF THE LESSEE SET FORTH IN THIS SUB-CLAUSE 12.9 ARE EXCLUSIVE AND IN SUBSTITUTION FOR, AND THE LESSEE HEREBY WAIVES, RELEASES AND RENOUNCES ALL OTHER WARRANTIES, OBLIGATIONS AND LIABILITIES OF THE LESSOR AND RIGHTS, CLAIMS AND REMEDIES OF THE LESSEE AGAINST THE LESSOR, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, WITH RESPECT TO ANY NON CONFORMANCE OR DEFECT IN ANY LEASED PART DELIVERED UNDER THESE LEASING CONDITIONS OR ANY LEASE, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTY OF MERCHANTABILITY OF FITNESS, ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE, ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN CONTRACT OR IN TORT, WHETHER OR NOT ARISING FROM THE LESSOR'S NEGLIGENCE, ACTUAL OR IMPUTED, AND ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS OF OR DAMAGE TO ANY AIRCRAFT OR LEASED PART, FOR LOSS OF USE, REVENUE OR PROFIT WITH RESPECT TO ANY AIRCRAFT OR LEASED PART, OR ANY LIABILITY OF THE BUYER TO ANY THIRD PARTY OR FOR ANY OTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES PROVIDED THAT IN THE EVENT THAT ANY OF THE AFORESAID PROVISIONS SHOULD FOR ANY REASON BE HELD UNLAWFUL OR OTHERWISE INEFFECTIVE THE REMAINDER OF THIS SUB-CLAUSE 12.9.8 SHALL REMAIN IN FULL FORCE AND EFFECT.

APPENDIX "A" TO CLAUSE 12 OF EXHIBIT "E"

SELLER PARTS AVAILABLE FOR LEASING

AILERONS
APU DOORS
CARGO DOORS
PASSENGER DOORS
ELEVATORS
FLAPS
LANDING GEAR DOORS
RUDDER
TAIL CONE
WING SLATS
SPOILERS
AIRBRAKES
WING TIPS
WINGLETS

13 TERMINATION OF SPARES PROCUREMENT COMMITMENTS

13.1 In the event of the Agreement being terminated with respect to any Aircraft due to causes provided for in Clauses 10, 11 or 20 of the Agreement, such termination may also affect the terms of this Exhibit "E" to the extent set forth in sub-Clause 13.2 below.

13.2 Any termination under Clauses 10, 11 or 20 of the Agreement shall discharge all obligations and liabilities of the parties hereunder with respect to such undelivered spare parts, services, data or other items to be purchased hereunder which are applicable to those Aircraft for which the Purchase Agreement has been terminated. Unused spare parts in excess of the Buyer's requirements due to such Aircraft cancellation shall be repurchased by the Seller as provided for in sub-Clause 10.2 of this Exhibit "E"

LETTER AGREEMENT No 1

TAM - TRANSPORTES AEREOS REGIONAIS

Rua Monsenhor Antonio Pepe 94

SAO PAULO - BRAZIL

TAM - TRANSPORTES AEREOS REGIONAIS ("the Buyer") and AIRBUS INDUSTRIE ("the Seller) have entered into a Purchase Agreement ("the Agreement") dated as of even date herewith which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the A320 Family Aircraft as described in the Agreement.

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

Both parties agree that this Letter Agreement, upon execution thereof, shall constitute an integral, nonseverable part of said Agreement and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement.

[2 pages redacted]

LETTER AGREEMENT No 1

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted                     Agreed and Accepted

For and on behalf of                    For and on behalf of

TAM - TRANSPORTES AEREOS REGIONAIS      AIRBUS INDUSTRIE


By: /s/                                 By: /s/
    ---------------------------------       ------------------------------------
Its:                                    Its:
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By: /s/                                 By: /s/
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Its:                                    Its:
     --------------------------------

Date: March 19, 1998

LETTER AGREEMENT NO 2

TAM - TRANSPORTES AEREOS REGIONAIS

Rua Monsenhor Antonio Pepe 94

SAO PAULO - BRAZIL

SUBJECT: A319-100 PERFORMANCE GUARANTEES

TAM - TRANSPORTES AEREOS REGIONAIS ("the Buyer") and AIRBUS INDUSTRIE ("the Seller") have entered into a Purchase Agreement ("the Agreement") dated as of even date herewith which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the A319 Aircraft as described in the Agreement.

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

LETTER AGREEMENT NO 2

1. AIRCRAFT CONFIGURATION

The guarantees defined below ("the Guarantees") are applicable to the A319-100 Aircraft as described in the Standard Specification referenced J 000 01000 Issue 3 dated 29th March 1995 plus Temporary Revision No 1 dated 25th August 1995 and amended by Specification Change Notices ("SCNs") for:

i) increase of the design weights to:

Maximum Take-off Weight : 75,500 kg

Maximum Landing Weight : 62,500 kg Maximum Zero Fuel Weight : 58,500 kg

ii) installation of International Aero Engines (IAE) V2524-A5 engines

hereinafter referred to as "the Specification", and without taking into account any further changes thereto as provided in the Agreement.

2. MISSION FUEL BURN GUARANTEE

The Aircraft carrying a fixed payload of * over a still air stage distance of 500 nautical miles under the conditions defined below, the Seller guarantees that the trip fuel of the Aircraft shall be not more than *.

2.1. The departure airport conditions and the destination airport conditions are such as to allow the required take-off weight and landing weight to be used without restriction.

2.2. Fixed allowances of * of fuel and of * minutes of time are assumed for take-off and initial climb to * pressure altitude with acceleration to climb speed.

2.3. Climb from * pressure altitude up to cruise altitude using maximum climb thrust, cruise at a pressure altitude of * at a * cruise Mach number not less than * and descent to * pressure altitude are conducted in conditions. Speeds below * pressure altitude shall be * CAS.

2.4. Fixed allowances of * of fuel and of * minutes of time are assumed for approach and landing at destination.

2.5. The stage distance is defined as the distance covered during climb, cruise and descent as described in the paragraph 2.3 above.

The flight time is defined as the time spent during take-off and initial climb, climb, cruise, descent and approach and landing as defined in paragraphs 2.2, 2.3 and 2.4 above.

The trip fuel is defined as the fuel burnt during take-off and initial climb, climb, cruise, descent and approach and landing as defined in paragraphs 2.2, 2.3 and 2.4 above.

LETTER AGREEMENT NO 2

2.6. At the end of approach and landing * of usable fuel shall remain in the tanks. This fixed allowance represents the estimated fuel required for:

a) Contingency fuel: * flight time

b) Missed approach at destination, followed by a diversion in * conditions over an equivalent still air stage distance of * nautical miles, starting and ending at * pressure altitude

c) Holding for * ft pressure altitude in ISA+10 degrees C conditions

d) Approach and landing at alternate.

2.7. The mission fuel burn guarantee is based on a fixed estimated Operating Weight Empty (OWE) of *

3. MISSION PAYLOAD GUARANTEE

The Aircraft shall be capable of carrying a guaranteed payload not less than * over a still air stage distance of 206 nautical miles (assumed representative of the mission CGH to SDU with a 6 kt tailwind) under the conditions defined below.

3.1. The departure airport conditions are as follows (assumed representative of CGH runway 35L):
Pressure altitude:
Temperature:

Available Take-off Run (TOR):
Available Take-off Distance (TOD):

Available Accelerate-Stop Distance (ASD): * Runway Slope:
Wind:
Obstacles (height / distance from end of TOR):

The destination airport conditions are as follows (assumed representative of SDU runway 20L):
Pressure altitude
Temperature
Available Landing Distance (LDA) * Runway Slope
Wind

3.2. Fixed allowances of * kg of fuel and of * minutes of time are assumed for take-off and initial climb to * above departure airport pressure altitude with acceleration to climb speed.

LETTER AGREEMENT NO 2

3.3. Climb from * above departure airport pressure altitude up to cruise altitude using maximum climb thrust, cruise at a pressure altitude of * at a fixed cruise Mach number not less than * and descent to * pressure altitude are conducted in * conditions. Speeds below * pressure altitude shall be * CAS.

3.4. Fixed allowances of * of fuel and of * of time are assumed for approach and landing at destination.

3.5. The stage distance is defined as the distance covered during climb, cruise and descent as described in the paragraph 3.3 above.

The flight time is defined as the time spent during take-off and initial climb, climb, cruise, descent and approach and landing as defined in paragraphs 3.2, 3.3 and 3.4 above.

The trip fuel is defined as the fuel burnt during take-off and initial climb, climb, cruise, descent and approach and landing as defined in paragraphs 3.2, 3.3 and 3.4 above.

3.6. At the end of approach and landing * of usable fuel shall remain in the tanks. This fixed allowance represents the estimated fuel required for:

a) Contingency fuel: * flight time

b) Missed approach at destination, followed by a diversion in ISA+10 degrees C conditions over an equivalent still air stage distance of * nautical miles (assumed representative of SDU to CGH), starting and ending at * pressure altitude above airports

c) Holding for * pressure altitude in ISA+10 degrees C conditions

d) Approach and landing at alternate.

3.7. The mission payload guarantee exclude any volumetric limitation and is based on a fixed estimated Operating Weight Empty (OWE) of *

LETTER AGREEMENT NO 2

4. ADDITIONAL PERFORMANCE GUARANTEES

4.1. Take-off

The Aircraft permissible Take-off Weight shall not be less than * when operated in departure airport conditions as defined below (assumed representative of CGH runway 35L):

Pressure altitude                               :
Temperature                                     :
Available Take-off Run (TOR)                    :
Available Take-off Distance (TOD)               :   *
Available Accelerate-Stop Distance (ASD)        :
Runway Slope                                    :
Wind                                            :
Obstacles (height / distance from end of TOR)   :
                                                :
                                                :

4.2. CLIMB

During a climb performed in ISA+10 degrees C conditions from * pressure altitude at an initial gross weight of * up to cruise pressure altitude, using maximum climb thrust and a speed profile of * with limitation at * below 10,000 ft pressure altitude:

4.2.1. - for a cruise altitude of 35,000ft, the guaranteed fuel burn shall not be more than * and the guaranteed climb time shall not be more than * minutes

4.2.2. - for a cruise altitude of * the guaranteed fuel burn shall not be more than * and the guaranteed climb time shall not be more than * minutes

4.3. Specific Range

4.3.1. The nautical miles per kilogram of fuel at an Aircraft gross weight of * at a pressure altitude of * in ISA+10 degrees C conditions at a true Mach number of * shall be not less than *

4.3.2. The nautical miles per kilogram of fuel at an Aircraft gross weight of * at a pressure altitude of * in ISA+10 degrees C conditions at Long Range Cruise Mach number of * shall be not less than *

4.3.3. The nautical miles per kilogram of fuel at an Aircraft gross weight of * at a pressure altitude of * in ISA+10 degrees C conditions at a true Mach number of * shall be not less than *

4.3.4. The nautical miles per kilogram of fuel at an Aircraft gross weight of * at a pressure altitude of * in ISA+10 degrees C conditions at Long Range Cruise Mach number shall be not less than * nm/kg.

LETTER AGREEMENT NO 2

5. MANUFACTURER'S WEIGHT EMPTY GUARANTEE

The Seller guarantees a Manufacturer's Weight Empty of not more than * This is the Manufacturer's Weight Empty of the Aircraft as defined in the paragraph 1 above, which will be derived from the weighing of the Aircraft and is subject to adjustment as defined in paragraph 8 below.

6. GUARANTEE CONDITIONS

6.1. The performance certification requirements for the Aircraft, except where otherwise stated, will be as stated in Section 02 of the Standard Specification.

6.2. For the determination of FAR take-off and landing performance a hard level dry runway surface with no runway strength limitation, no obstacles, zero wind, atmosphere according to ISA, except as otherwise stated, and the use of speedbrakes, flaps, associated speeds, landing gear and engines in the conditions liable to provide the best results will be assumed.

6.3. When establishing take-off performance no air will be bled from the engines for cabin air conditioning or anti-icing.

6.4. Climb, cruise, descent and holding performance elements of the Guarantees will include allowances for normal electrical load and for normal engine air bleed and power extraction associated with maximum cabin differential pressure as defined in Section 21-30.31 of the Specification. Cabin air conditioning management during performance demonstration as described in paragraph 7.3 below may be such as to optimize the Aircraft performance while meeting the minimum air conditioning requirements defined above. Unless otherwise stated no air will be bled from the engines for anti-icing. Cruise performance are based on a center of gravity position of *

6.5. The engines will be operated using not more than the engine manufacturer's maximum recommended outputs for take-off, maximum go-round, maximum continuous, maximum climb and cruise for normal operation unless otherwise stated.

6.6. Where applicable the Guarantees assume the use of an approved fuel having a density of * kg per liter and a lower heating value of *

LETTER AGREEMENT NO 2

7. GUARANTEE COMPLIANCE

7.1. Compliance with the Guarantees shall be demonstrated using operating procedures and limitations in accordance with those defined by the certifying Airworthiness Authority and by the Seller unless otherwise stated.

7.2. Compliance with the take-off and landing elements of the Guarantees will be demonstrated with reference to the approved Flight Manual.

7.3. Compliance with those parts of the Guarantees not covered by the requirements of the certifying Airworthiness Authority shall be demonstrated by calculation based on data obtained during fully instrumented flight tests conducted on one (or more, at the Seller's discretion) A319-100 aircraft of the same airframe/engine model combination as those Aircraft purchased by the Buyer.

7.4. Compliance with the Manufacturer's Weight Empty guarantee shall be demonstrated with reference to a weight compliance report which shall include a comparison of the actual Manufacturer's Weight Empty and the adjusted Specification Manufacturer's Weight Empty.

7.5. Data derived from flight tests will be adjusted as required using conventional methods of correction, interpolation or extrapolation in accordance with established aeronautical practices to show compliance with the Guarantees.

7.6. The Seller undertakes to furnish the Buyer with a report or reports demonstrating compliance with the Guarantees at, or as soon as possible after, the delivery of each of the Buyer's A319-100 Aircraft.

8. ADJUSTMENT OF GUARANTEES

8.1. In the event of any change to any law, governmental regulation or requirement or interpretation thereof ("rule change") by any governmental agency made subsequent to the date of the Agreement and such rule change affects the Aircraft configuration or performance or both required to obtain certification the Guarantees shall be appropriately modified to reflect the effect of any such change.

8.2. The Guarantees apply to the Aircraft as described in paragraph 1 and may be adjusted in the event of:

a) Any further configuration change which is the subject of a Specification Change Notice (SCN)

b) Variation in actual weights of items defined in Section 13-10 of the Standard Specification

LETTER AGREEMENT NO 2

9. EXCLUSIVE GUARANTEES

The Guarantees are exclusive and are provided in lieu of any and all other performance and weight guarantees of any nature which may be stated, referenced or incorporated in the Specification or any other document.

10. UNDERTAKING: REMEDIES

10.1. Should any Aircraft fail to meet any of the guarantees specified in this Letter Agreement, the Seller will use its best endeavours, at Seller's cost and expense, to correct the deficiency so that the Aircraft comply with the guarantee set out herein.

10.2. Should the Seller fail to develop and make available corrective means (including but not limited to kits, procedures, increase of design weights) of the above said deficiency, then the Seller shall for the concerned Aircraft pay to the Buyer by way of liquidated damages upon delivery and, subject to Seller's maximum liability set forth hereunder, on the anniversary date of the delivery for as long as the deficiency remains, an amount of:

10.2.1. * for each kilogram deficient per Aircraft and per year based on the higher deficiency expressed in kilograms of the Mission Payload guarantee and the Manufacturer's Weight Empty guarantee;

10.2.2. * for each percent deficient per Aircraft and per year based on the average deficiency expressed as a percentage of the Specific Range guarantees (part of a percent to be prorated);

10.2.3. * for each kilogram in excess per Aircraft and per year based on the deficiency expressed in kilograms of the Manufacturer's Weight Empty guarantee.

10.3. In the event the Seller develops and makes available corrective means mentioned above the Buyer shall reimburse to the Seller the monthly prorated portion of the yearly penalty paid by the Seller on account of the year during which the corrective means are made available.

10.4. The Seller's maximum liability in respect of deficiency in performance of any Aircraft shall be limited to the payment of liquidated damages for a period of not more than * years and up to an aggregated value of
* for each deficient Aircraft, whichever occurs first. Payment of liquidated damages shall be deemed to settle all claims and remedies the Buyer would have against the Seller in respect of performance deficiencies.

LETTER AGREEMENT NO 2

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted                     Agreed and Accepted

For and on behalf of                    For and on behalf of

TAM - TRANSPORTES AEREOS REGIONAIS      AIRBUS INDUSTRIE


By: /s/                                 By: /s/
    ---------------------------------       ------------------------------------
Its:                                    Its:
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By: /s/                                 By: /s/
    ---------------------------------       ------------------------------------
Its:                                    Its:
     --------------------------------        -----------------------------------

Date: March 19, 1998

LETTER AGREEMENT NO 3

TAM - TRANSPORTES AEREOS REGIONAIS

Rua Monsenhor Antonio Pepe 94

SAO PAULO - BRAZIL

SUBJECT: A320-200 PERFORMANCE GUARANTEES

TAM - TRANSPORTES AEREOS REGIONAIS ("the Buyer) and AIRBUS INDUSTRIE ("the Seller") have entered into a Purchase Agreement ("the Agreement") dated as of even date herewith which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the A320 Aircraft as described in the Agreement.

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

LETTER AGREEMENT NO 3

1. AIRCRAFT CONFIGURATION

The guarantees defined below ("the Guarantees") are applicable to the A320-200 Aircraft as described in the Standard Specification referenced D 000 02000 Issue 4 dated 30th March 1995 and amended by Specification Change Notices ("SCNs") for:

i) increase of the Maximum Take-off Weight to 77,000 kg

ii) installation of International Aero Engines (IAE) V2527-A5 engines

hereinafter referred to as "the Specification", and without taking into account any further changes thereto as provided in the Agreement.

2. MISSION FUEL BURN GUARANTEE

The Aircraft carrying a fixed payload of * over a still air stage distance of 700 nautical miles under the conditions defined below the Seller guarantees that the trip fuel of the Aircraft shall be not more than *

2.1. The departure airport conditions and the destination airport conditions are such as to allow the required take-off weight and landing weight to be used without restriction.

2.2. Fixed allowances of * of fuel and of * minutes of time are assumed for take-off and initial climb to * pressure altitude with acceleration to climb speed.

2.3. Climb from * pressure altitude up to cruise altitude using maximum climb thrust, cruise at a pressure altitude of * at a fixed cruise Mach number not less than * and descent to * pressure altitude are conducted in ISA+10 degrees C conditions. Speeds below * pressure altitude shall be * knots CAS.

2.4. Fixed allowances of * of fuel and of * minutes of time are assumed for approach and landing at destination.

2.5. The stage distance is defined as the distance covered during climb, cruise and descent as described in the paragraph 2.3 above.

The flight time is defined as the time spent during take-off and initial climb, climb, cruise, descent and approach and landing as defined in paragraphs 2.2, 2.3 and 2.4 above.

The trip fuel is defined as the fuel burnt during take-off and initial climb, climb, cruise, descent and approach and landing as defined in paragraphs 2.2, 2.3 and 2.4 above.

LETTER AGREEMENT NO 3

2.6. At the end of approach and landing * kg of usable fuel shall remain in the tanks. This fixed allowance represents the estimated fuel required for:

a) Contingency fuel: * flight time

b) Missed approach at destination, followed by a diversion in ISA+10 degrees C conditions over an equivalent still air stage distance of * nautical miles, starting and ending at * pressure altitude

c) Holding for * minutes at * pressure altitude in ISA+10 degrees C conditions

d) Approach and landing at alternate.

2.7. The mission fuel burn guarantee is based on a fixed estimated Operating Weight Empty (OWE) of *

3. MISSION PAYLOAD GUARANTEE

The Aircraft shall be capable of carrying a guaranteed payload not less than * over a still air stage distance of * nautical miles (assumed representative of the mission CGH to REC with a * headwind) under the conditions defined below.

3.1. The departure airport conditions are as follows (assumed representative of CGH runway 35L):

Pressure altitude                             :
Temperature                                   :
Available Take-off Run (TOR)                  :
Available Take-off Distance (TOD)             : *
Available Accelerate-Stop Distance (ASD)      :
Runway Slope                                  :
Wind                                          :
Obstacles (height/distance from end of TOR)   :
                                              :
                                              :

The destination airport conditions are such as to allow the required landing weight to be used without restriction.

3.2. Fixed allowances of * kg of fuel and * minutes of time are assumed for take-off and initial climb to * ft above departure airport pressure altitude with acceleration to climb speed.

3.3. Climb from * ft above departure airport pressure altitude up to cruise altitude using maximum climb thrust, cruise at a pressure altitude of * at a fixed cruise Mach number not less than * and descent to * ft pressure altitude are conducted in ISA+10 degrees C conditions. Speeds below * ft pressure altitude shall be * nots CAS.

LETTER AGREEMENT NO 3

3.4. Fixed allowances of * kg of fuel and of * minutes of time are assumed for approach and landing at destination.

3.5. The stage distance is defined as the distance covered during climb, cruise and descent as described in the paragraph 3.3 above.

The flight time is defined as the time spent during take-off and initial climb, climb, cruise, descent and approach and landing as defined in paragraphs 3.2, 3.3 and 3.4 above.

The trip fuel is defined as the fuel burnt during take-off and initial climb, climb, cruise, descent and approach and landing as defined in paragraphs 3.2, 3.3 and 3.4 above.

3.6. At the end of approach and landing * kg of usable fuel shall remain in the tanks. This fixed allowance represents the estimated fuel required for:

a) Contingency fuel: * flight time

b) Missed approach at destination, followed by a diversion in ISA+1O degrees C conditions over an equivalent still air stage distance of * nautical miles (assumed representative of REC to NAT), starting and ending at * ft pressure altitude above airports

c) Holding for * minutes at * ft pressure altitude in ISA+10 degrees C conditions

d) Approach and landing at alternate.

3.7. The mission payload guarantee exclude any volumetric limitation and is based on a fixed estimated Operating Weight Empty (OWE) of * kg.

LETTER AGREEMENT NO 3

4. ADDITIONAL PERFORMANCE GUARANTEES

4.1. Take-off

The Aircraft permissible Take-off Weight shall not be less than * when operated in departure airport conditions as defined below (assumed representative of CGH runway 35L):

Pressure altitude
Temperature
Available Take-off Run (TOR)
Available Take-off Distance (TOD) * Available Accelerate-Stop Distance (ASD) Runway Slope
Wind
Obstacles (height / distance from end of TOR)

4.2. Climb

During a climb performed in ISA+10 degrees C conditions from * pressure altitude at an initial gross weight of * kg up to cruise pressure altitude, using maximum climb thrust and a speed profile of * with limitation at * kt below * ft pressure altitude:

4.2.1. - for a cruise altitude of * ft, the guaranteed fuel burn shall not be more than * kg and the guaranteed climb time shall not be more than * minutes

4.2.2. - for a cruise altitude of * ft, the guaranteed fuel burn shall not be more than * kg and the guaranteed climb time shall not be more than * minutes

4.3. Specific Range

4.3.1. The nautical miles per kilogram of fuel at an Aircraft gross weight of * kg at a pressure altitude of * ft in ISA+10 degrees C conditions at a true Mach number of * shall be not less than * nm/kg.

4.3.2. The nautical miles per kilogram of fuel at an Aircraft gross weight of * kg at a pressure altitude of * ft in ISA+10 degrees C conditions at Long Range Cruise Mach number shall be not less than * nm/kg.

4.3.3. The nautical miles per kilogaram of fuel at an Aircraft gross weight of * kg at a pressure altitude of * ft in ISA+10 degrees C conditions at a true Mach number of * shall be not less than * nm/kg.

4.3.4. The nautical miles per kilogram of fuel at an Aircraft gross weight of * kg at a pressure altitude of * ft in ISA+10 degrees C conditions at Long Range Cruise Mach number shall be not less than * nm/kg.

LETTER AGREEMENT NO 3

5. MANUFACTURER'S WEIGHT EMPTY GUARANTEE

The Seller guarantees a Manufacturer's Weight Empty of not more than *. This is the Manufacturer's Weight Empty of the Aircraft as defined in the paragraph 1 above, which will be derived from the weighing of the Aircraft and is subject to adjustment as defined in paragraph 8 below.

6. GUARANTEE CONDITIONS

6.1. The performance certification requirements for the Aircraft, except where otherwise stated, will be as stated in Section 02 of the Standard Specification.

6.3. When establishing take-off performance no air will be bled from the engines for cabin air conditioning or anti-icing.

6.6. Where applicable the Guarantees assume the use of an approved fuel having a density of * kg per liter and a lower heating value of * TU/Ib.

LETTER AGREEMENT NO 3

7. GUARANTEE COMPLIANCE

7.2. Compliance with the take-off and landing elements of the Guarantees will be demonstrated with reference to the approved Flight Manual.

7.3. Compliance with those parts of the Guarantees not covered by the requirements of the certifying Airworthiness Authority shall be demonstrated by calculation based on data obtained during fully instrumented flight tests conducted on one (or more, at the Seller's discretion) A320-200 aircraft of the same airframe/engine model combination as those Aircraft purchased by the Buyer.

8. ADJUSTMENT OF GUARANTEES

8.2. The Guarantees apply to the Aircraft as described in paragraph 1 and may be adjusted in the event of:

a) Any further configuration change which is the subject of a Specification Change Notice (SCN)

b) Variation in actual weights of items defined in Section 13-10 of the Standard Specification

LETTER AGREEMENT NO 3

9. EXCLUSIVE GUARANTEES

10. UNDERTAKING: REMEDIES

10.2. Should the Seller fail to develop and make available corrective means
(including but not limited to kits, procedures, increase of design weights) of the above said deficiency, then the Seller shall for the concerned Aircraft pay to the Buyer by way of liquidated damages upon delivery and, subject to Seller's maximum liability set forth hereunder, on the anniversary date of the delivery for as long as the deficiency remains, an amount of:

10.2.1. * for each kilogram deficient per Aircraft and per year based on the higher deficiency expressed in kilograms of the Mission Payload guarantee and the Manufacturer's Weight Empty guarantee;

10.2.2. * for each percent deficient per Aircraft and per year based on the average deficiency expressed as a percentage of the Specific Range guarantees (part of a percent to be prorated);

10.2.3. * for each kilogram in excess per Aircraft and per year based on the deficiency expressed in kilograms of the Manufacturer's Weight Empty guarantee.

10.4. The Seller's maximum liability in respect of deficiency in performance of any Aircraft shall be limited to the payment of liquidated damages for a period of not more than * years and up to an aggregated value of * for each deficient Aircraft, whichever occurs first Payment of liquidated damages shall be deemed to settle all claims and remedies the Buyer would have against the Seller in respect of performance deficiencies.

LETTER AGREEMENT NO 3

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted                     Agreed and Accepted

For and on behalf of                    For and on behalf of

TAM - TRANSPORTES AEREOS REGIONAIS      AIRBUS INDUSTRIE


By: /s/                                 By: /s/
    ---------------------------------       ------------------------------------
Its:                                    Its:
     --------------------------------        -----------------------------------


By: /s/                                 By: /s/
    ---------------------------------       ------------------------------------
Its:                                    Its:
     --------------------------------        -----------------------------------

Date: March 19, 1998

LETTER AGREEMENT NO 4

TAM - TRANSPORTES AEREOS REGIONAIS

Rua Monsenhor Antonio Pepe 94

SAO PAULO - BRAZIL

SUBJECT: OPTION AIRCRAFT

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

LETTER AGREEMENT NO 4

1. OPTION AND OPTION EXERCISE

1.1 Option

The Buyer shall have an option to purchase up to thirty seven (37) additional A319 Aircraft (hereinafter called the "Option Aircraft" or individually "Option Aircraft No 1 to No 37").

1.2 Option Exercise

The formal exercise of the Option Aircraft granted to the Buyer in accordance with the terms of the present Letter Agreement No 3 shall be made by written notice to the Seller from the Buyer at any time during the period commencing with the signature hereof and ending on or before the first day of the * month preceding the Option Aircraft delivery date.

In order to be valid, the Seller shall have received in Seller's bank account an initial predelivery payment equal to * of the Predelivery Payment Reference Price, corresponding to the first Predelivery Payment defined in Clause 5.2.1.2 of this Agreement.

In the event that the Buyer fails to timely exercise the Option Aircraft, the Option Aircraft shall lapse and neither party shall have any further rights or obligations hereunder as to such lapsed Option Aircraft.

2. ASSIGNMENT

The Option Aircraft are personal to the Buyer and cannot be assigned to third parties without Seller's prior consent in writing. Such consent shall not be unreasonalby withheld.

LETTER AGREEMENT NO 4

3. OPTION AIRCRAFT DEFINITION

3.1 Definition

The Option Aircraft shall be manufactured in accordance with the detailed Specification as defined in sub-Clause 1.2 of the Agreement.

3.2 Modifications

In the event the Seller and the Buyer have agreed to carry out modification(s) in accordance with the provisions of Clauses 2 and 7 of the Agreement on any Aircraft which is subject of a firm order such modification(s) shall, unless otherwise agreed between the parties apply to the manufacture of the Option Aircraft with all effects, if any, on price and/or delivery resulting therefrom.

4. DELIVERY OF OPTION AIRCRAFT

In the event the related Option Aircraft is exercised in accordance with the conditions set forth in Paragraph 1.2 hereabove, the Option Aircraft will be ready for delivery at the following date:

                      Delivery Date   Aircraft Type
                      -------------   -------------
- Aircraft No 1....
- Aircraft No 2....
- Aircraft No 3....
- Aircraft No 4....
- Aircraft No 5....
- Aircraft No 6....
- Aircraft No 7....
- Aircraft No 8....
- Aircraft No 9....
- Aircraft No 10...         *
- Aircraft No 11...
- Aircraft No 12...
- Aircraft No 13...
- Aircraft No 14...
- Aircraft No 15...
- Aircraft No 16...
- Aircraft No 17...
- Aircraft No 18...
- Aircraft No 19...
- Aircraft No 20...

LETTER AGREEMENT NO 4

                      Delivery Date   Airline Type
                      -------------   -------------
- Aircraft No 21...
- Aircraft No 22...
- Aircraft No 23...
- Aircraft No 24...
- Aircraft No 25...
- Aircraft No 26...
- Aircraft No 27...
- Aircraft No 28...
- Aircraft No 29...         *
- Aircraft No 30...
- Aircraft No 31...
- Aircraft No 32...
- Aircraft No 33...
- Aircraft No 34...
- Aircraft No 35...
- Aircraft No 36...
- Aircraft No 37...

5. OPTION AIRCRAFT PRICE

The Airframe Basic Price of the Option Aircraft offered hereby will be

6. PAYMENT

The Buyer shall make predelivery payments, and the Final Contract Price shall be paid, pursuant to Clause 5 of the Purchase Agreement with the exception however that the amount due according to said Clause upon signature of the Purchase Agreement less the amount of * already paid for the Option Aircraft) is due upon Buyer's notice to the Seller provided for in Paragraph 1.2 hereabove.

7. VALIDITY

Unless otherwise agreed to in writing by the parties hereto the general terms and conditions of the Purchase Agreement shall apply to the sale of each Option Aircraft converted into firm order. Upon the exercise of such option the parties shall conclude an amendment to the Purchase Agreement to that effect.

8. RIGHT OF FIRST REFUSAL

LERTER AGREEMENT NO 4

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted                     Agreed and Accepted

For and on behalf of                    For and on behalf of

TAM - TRANSPORTES AEREOS REGIONAIS      AIRBUS INDUSTRIE


By: /s/                                 By: /s/
    ---------------------------------       ------------------------------------
Its:                                    Its:
     --------------------------------        -----------------------------------


By: /s/                                 By: /s/
    ---------------------------------       ------------------------------------
Its:                                    Its:
     --------------------------------        -----------------------------------

Date: March 19, 1998

LETTER AGREEMENT NO 5

TAM - TRANSPORTES AEREOS REGIONAIS

Rua Monsenhor Antonio Pepe 94

SAO PAULO - BRAZIL

Subject: PRODUCT SUPPORT SERVICES

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

LETTER AGREEMENT NO 5

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted                     Agreed and Accepted

For and on behalf of                    For and on behalf of

TAM - TRANSPORTES AEREOS REGIONAIS      AIRBUS INDUSTRIE


By: /s/                                 By: /s/
    ---------------------------------       ------------------------------------
Its:                                    Its:
     --------------------------------        -----------------------------------


By: /s/                                 By: /s/
    ---------------------------------       ------------------------------------
Its:                                    Its:
     --------------------------------        -----------------------------------

Date: March 19, 1998

                                                                       Page No 1

LETTER AGREEMENT NO 6

TAM - TRANSPORTES AEREOS REGIONAIS S/A
Rua Monsenhor Antonio Pepe, 94
Parque Jabaquara
SAO PAULO
BRAZIL

Subject: *

TAM ("the Buyer") and AIRBUS INDUSTRIE ("the Seller) have entered into a Purchase Agreement ("the Agreement") dated as of even date herewith which covers the manufacture and the sale by the Seller and the purchase by the Buyer of certain A319-A320-A321 Aircraft as described in the Agreement.

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement. If not otherwise herein defined any reference to the Net Aircraft Price shall mean an amount equal to the Final Price of the Aircraft excluding Buyer Furnished Equipment and net of all available Credit Memoranda of the Seller and the selected Engine Manufacturer.

[7 pages redacted]

Page No 9

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and accepted,                    Agreed and accepted,

For and on behalf of                    For and on behalf of

TAM-TRANSPORTES AEREOS REGIONAIS S/A    AIRBUS INDUSTRIE


By: /s/                                 By: /s/
    ---------------------------------       ------------------------------------
Its:                                    Its:
     --------------------------------        -----------------------------------


By: /s/                                 By: /s/
    ---------------------------------       ------------------------------------
Its:                                    Its:
     --------------------------------        -----------------------------------

Date: March 19, 1998

LETTER AGREEMENT NO 7

TAM - TRANSPORTES AEREOS REGIONAIS

Rua Monsenhor Antonio Pepe 94

SAO PAULO - BRAZIL

SUBJECT: *

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

LETTER AGREEMENT NO 7

If the foregoing correctly sets forth our understanding; please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted                     Agreed and Accepted

For and on behalf of                    For and on behalf of

TAM - TRANSPORTES AEREOS REGIONAIS      AIRBUS INDUSTRIE



By: /s/                                 By: /s/
    ---------------------------------       ------------------------------------
Its:                                    Its:
     --------------------------------        -----------------------------------

By: /s/                                     /s/
    ---------------------------------       ------------------------------------
Its:
     --------------------------------


Date: March 19, 1998

LETTER AGREEMENT NO 8

TAM - TRANSPORTES AEREOS REGIONAIS

Rua Monsenhor Antonio Pepe 94

SAO PAULO - BRAZIL

SUBJECT: *

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

[6 pages redacted]

LETTER AGREEMENT NO 8

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted                     Agreed and Accepted

For and on behalf of                    For and on behalf of

TAM - TRANSPORTES AEREOS REGIONAIS      AIRBUS INDUSTRIE



By: /s/                                 By: /s/
    ---------------------------------       ------------------------------------
Its:                                    Its:
     --------------------------------        -----------------------------------

By: /s/                                 By: /s/
    ---------------------------------       ------------------------------------
Its:                                    Its:
     --------------------------------        -----------------------------------


Date: March 19, 1998

LETTER AGREEMENT NO 9

TAM - TRANSPORTES AEREOS REGIONAIS

Rua Monsenhor Antonio Pepe 94

SAO PAULO - BRAZIL

SUBJECT: *

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

LETTER AGREEMENT NO 9

LETTER AGREEMENTS NO 9

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted                     Agreed and Accepted

For and on behalf of                    For and on behalf of

TAM - TRANSPORTES AEREOS REGIONAIS      AIRBUS INDUSTRIE



By: /s/                                 By: /s/
    ---------------------------------       ------------------------------------
Its:                                    Its:
     --------------------------------        -----------------------------------

By: /s/                                 By: /s/
    ---------------------------------       ------------------------------------
Its:                                    Its:
     --------------------------------        -----------------------------------
Date: March 19, 1998

APPENDIX 1 TO LETTER AGREEMENT NO 9

AMENDMENT NO 1

TO THE A320

PURCHASE AGREEMENT

BETWEEN

AIRBUS INDUSTRIE
(THE SELLER)

AND

T.A.M.
TRANSPORTES AEREOS REGIONAIS
(THE BUYER)

TABLE OF CONTENTS

CLAUSES   TITLES
-------   ------
   1      Scope
   2      Delivery
   3      *
   4      Miscellaneous Provisions

AMENDMENT NO 1

TO THE

A320 PURCHASE AGREEMENT

This Amendment No 1 is made as of the day of February 16th, 1999 to the A320 Purchase Agreement signed on March 19th, 1998

Between

AIRBUS INDUSTRIE "Groupement d'Interet Economique" duly created and existing under French law and having its principal office at:

1, rond-point Maurice Bellonte
31707 BLAGNAC CEDEX
FRANCE

(hereinafter referred to as "the Seller") of the one part,

AND

T.A.M. - TRANSPORTES AEREOS REGIONAIS having its principal office at:

Rua Monsenhor Antonio Pepe, 94 JD Aeroporto
CEP - 04357 - 080
SAO PAULO
BRAZIL

(hereinafter referred to as "the Buyer") of the other part.

WHEREAS

A. The Buyer and the Seller have signed on March 19th, 1998 an A320 Family Purchase Agreement (hereinafter referred to as "the Purchase Agreement") covering the purchase by the Buyer and the sale by the Seller of thirty eight (38) series Aircraft of the A319-100 and A320-200 typo (Aircraft No 1 to No 38).

B. The Seller and the Buyer wish to further modify certain terms and conditions of the Purchase Agreement with respect to certain Aircraft (hereinafter referred to as the "Aircraft").

NOW THEREFORE IT IS AGREED AS FOLLOWS :

1. SCOPE

The scope of this Amendment No 1 is the modification of Clause 9 of the Purchase Agreement with respect to the Aircraft No 5, No 6, No 7, No 8 and No 10 *

2. DELIVERY

The delivery dates specified in Clause 9 of the Purchase Agreement with respect to the Aircraft are respectively replaced by the following:

4. MISCELLANEOUS PROVISIONS

If not otherwise expressly stated in this Amendment No 1, the A320 Family Purchase Agreement, its Exhibits, Letter Agreements shall apply also to this Amendment No 1.

This Amendment No 1 supersedes any previous understandings, commitments or representations whatsoever oral or written with respect to the Aircraft.

Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned thereto in the A320 Family Purchase Agreement, its Exhibits and Letter Agreements.

In the event of any inconsistency between the Purchase Agreement and the present Amendment, the latter shall prevail to the extent of said inconsistency.

This Amendment No 1 has been executed in two (2) original specimens which are in English.

IN WITNESS WHEREOF this Amendment No 1 was duly entered into the day and year first above written.

For and on behalf of                    For and on behalf of

T.A.M.                                  AIRBUS INDUSTRIE
TRANSPORTES AEREOS REGIONAIS


/s/                                     /s/ Michel Dechelotte
-------------------------------------   ----------------------------------------
Name:                                   Name: Michel Dechelotte
Title: Vice President                   Title: Vice President Contract & Pricing


/s/
-------------------------------------
Name:
Title: V.P. Advisor

LETTER AGREEMENT NO 1

TAM - TRANSPORTES AEREOS REGIONAIS

Rua Monsenhor Antonio Pepe 94
JD AEROPORTO
CEP - 04357 - 080

SAO PAULO - BRAZIL

SUBJECT: A320 - MISCELLANEOUS

Gentlemen,

TAM - TRANSPORTES AEREOS REGIONAIS (the "Buyer") and AIRBUS INDUSTRIE (the "Seller") have entered into an A320 Amendment No 1 dated as of even date herewith (the "Amendment" or the "Agreement") which modifies certain terms and conditions of the Purchase Agreement.

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

Both parties agree that this Letter Agreement No 1, upon execution thereof, shall constitute an integral part of the said Amendment and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement.

[2 pages redacted]

LETTER AGREEMENT NO 1

If the foregoing correctly sets forth our understanding, please execute the original and one copy hereof in the space provided herebelow and return the copy to AIRBUS INDUSTRIE.

Agreed and Accepted                     Very Truly Yours

TAM                                     AIRBUS INDUSTRIE
TRANSPORTES AEREOS REGIONAIS


By: /s/                                 By: /s/ Michel Dechelotte
    ---------------------------------       ------------------------------------
Its: Vice President                     Its: Vice President Contracts & Pricing

Date: 16.02.99                          Date: 16.02.99

LETTER AGREEMENT NO 2

TAM - TRANSPORTES AEREOS REGIONAIS

Rua Monsenhor Antonio Pepe 94
JD Aeroporto
CEP-04357-080

SAO PAULO - BRAZIL

SUBJECT: A320 - *

Gentlemen,

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

Both parties agree that this Letter Agreement No 2, upon execution thereof, shall constitute an integral part of the said Amendment No 1 and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement.

[2 pages redacted]

LETTER AGREEMENT NO 2

If the foregoing correctly sets forth our understanding, please execute the original and one copy hereof in the space provided herebelow and return the copy to AIRBUS INDUSTRIE.

Agreed and Accepted                     Very Truly Yours

TAM
TRANSPORTES AEREOS REGIONAIS            AIRBUS INDUSTRIE


By: /s/                                 By: /s/ MICHEL DECHELOTTE
    ---------------------------------       ------------------------------------
Its:  Vice President                    Its: Vice President Contracts of Pricing

Date: 16.02.99                          Date: 16.02.99

[page redacted]

AMENDMENT NO 2

TO THE A320

PURCHASE AGREEMENT

BETWEEN

AIRBUS INDUSTRIE
(THE SELLER)

AND

T.A.M.
TRANSPORTES AEREOS REGIONAIS S. A.
(THE BUYER)

Page No 1/8

TABLE OF CONTENTS

CLAUSES   TITLES
-------   ------
   1      Scope
   2      *
   3      Delivery Dates
   4      Miscellaneous Provisions

Page No 2/8

AMENDMENT NO 2

TO THE

A320 PURCHASE AGREEMENT

This Amendment No 2 is made as of the 04th day of October 2000 to the A320 Purchase Agreement signed on March 19th, 1998

Between

AIRBUS INDUSTRIE "Groupement d'Interet Economique" duly created and existing under French law and having its principal office at:

1, rond-point Maurice Bellonte
31707 BLAGNAC CEDEX
FRANCE

(hereinafter referred to as "the Seller") of the one part,

AND

T.A.M. - TRANSPORTES AEREOS REGIONAIS S.A. having its principal office at:

Rua Monsenhor Antonio Pepe, 94 JD Aeroporto
CEP - 04357 - 080

SAO PAULO

BRAZIL

(hereinafter referred to as "the Buyer") of the other part.

Page No 3/8

WHEREAS

A. The Buyer and the Seller have signed on March 19th, 1998 an A320 Family Purchase Agreement (hereinafter referred to as "the Purchase Agreement") covering the purchase by the Buyer and the sale by the Seller of thirty eight (38) A320 Family Aircraft of the A319-100 and A320-200 type (Aircraft No 1 to No 38).

B. The Buyer and the Seller have on February 16th, 1999 entered into an Amendment No 1 (hereinafter referred to as "the Amendment No 1") to the A320 Family Purchase Agreement covering changes to the delivery dates of some of the Aircraft.

C. The Seller and the Buyer wish to further modify certain terms and conditions of the Purchase Agreement with respect to the type and delivery dates of the Aircraft *

NOW THEREFORE IT IS AGREED AS FOLLOWS:

Page No 4/8

1- SCOPE

The scope of this Amendment No 2

2- TYPE AND DELIVERY DATES OF *

Sub-Clause 9.1 of the Purchase Agreement is therefore cancelled and replaced by Sub-Article 9.1 hereof:

QUOTE

9.1 Delivery Schedule

Subject to the provisions of Clauses 2, 7, 8, 10 and 18 the Seller shall have the Aircraft ready for delivery at the Aircraft final assembly line in the following months:

Delivery Date   Aircraft Type
-------------   -------------
      *

Page No 5/8

UNQUOTE

3- QUANTITY OF OPTION AIRCRAFT AND *

The paragraphs 1.1 and 1.2 of the Letter Agreement No 4 of the A320 Family Purchase Agreement is therefore cancelled and replaced by the following Articles 1.1 and 1.2:

QUOTE

1.1 Option

The Buyer shall have an option to purchase up to

1.2 Option Exercise and Rolling Options

The formal exercise of the Option Aircraft granted to the Buyer in accordance with the terms of the present Letter Agreement No 4 (as modified) shall be made by written notice to the Seller from the Buyer at any time during the period commencing with the signature hereof and ending on or before the first day of the * month preceding the Option Aircraft delivery date.

In order to validly exercise am Option, the Seller shall have received in Seller's bank account an initial predelivery payment equal to * of the Predelivery Payment Reference Price, corresponding to the first Predelivery Payment as defined in Article 3 of the Amendment No 1 to the Agreement minus the corresponding deposit amounting to * already paid by the Buyer as an option fee for each of the * Option Aircraft.

Page No 6/8

UNQUOTE

4- DELIVERIES OF OPTION AIRCRAFT

The paragraph 4 of the Letter Agreement No 4 of the A320 Family Purchase Agreement is therefore cancelled and replaced by the following:

QUOTE

UNQUOTE

5- MISCELLANEOUS PROVISIONS

Page No 7/8

If not otherwise expressly stated in this Amendment No 2, the A320 Family Purchase Agreement, its Exhibits and Letter Agreements shall apply also to this Amendment No 2.

This Amendment No 2 supersedes any previous understandings, commitments or representations whatsoever oral or written with respect to the matters referred to herein.

Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned thereto in the A320 Family Purchase Agreement, its Exhibits and Letter Agreements.

In the event of any inconsistency between the Purchase Agreement and the present Amendment the latter shall prevail to the extent of said inconsistency.

This Amendment No 2 has been executed in two (2) original specimens which are in English.

IN WITNESS WHEREOF this Amendment No 2 was duly entered into the day and year first above written.

For and on behalf of                    For and on behalf of

T.A.M.
TRANSPORTES AEREOS REGIONAIS S.A.       AIRBUS INDUSTRIE


/S/ Jose Zaidan Maluf                   /S/ Robillard Francis
-------------------------------------   ----------------------------------------
Name: Jose Zaidan Maluf                 Name: Robillard Francis
Title: Contract Director                Title: Contract Director

Page No 8/8

AMENDMENT NO 3

TO THE A320

PURCHASE AGREEMENT

BETWEEN

AIRBUS INDUSTRIE
(THE SELLER)

AND

T.A.M.
TRANSPORTES AEREOS REGIONAIS S. A.
(THE BUYER)

TABLE OF CONTENTS

CLAUSES   TITLES
-------   ------
   1      Scope
   2      *
   3      Delivery Dates
   4      Miscellaneous Provisions

AMENDMENT NO 3
TO THE
A320 PURCHASE AGREEMENT

This Amendment No 3 is made as of the __th day of January 2001 to the A320 Purchase Agreement signed on March 19th, 1998

Between

AIRBUS INDUSTRIE "Groupement d'Interet Economique" duly created and existing under French law and having its principal office at:

1, rond-point Maurice Bellonte
31707 BLAGNAC CEDEX
FRANCE

(hereinafter referred to as "the Seller") of the one part,

AND

T.A.M. - TRANSPOSES AEREOS REGIONAIS S. A. having its principal office at:

Rua Monsenhor Antonio Pepe, 94 JD Aeroporto
CEP - 04357 - 080

SAO PAULO

BRAZIL

(hereinafter referred to as "the Buyer") of the other part.

WHEREAS

A. The Buyer and the Seller have signed on March 19th, 1998 an A320 Family Purchase Agreement (hereinafter referred to as "the Purchase Agreement") covering the purchase by the Buyer and the sale by the Seller of thirty eight (38) A320 Family Aircraft of the A319-100 and A320-200 type (Aircraft No 1 to No 38).

C. The Seller and the Buyer have on October 04th, 2000 entered into an Amendment No 2 (hereinafter referred to as "the Amendment No 2") to the A320 Family Purchase Agreement covering certain terms and conditions of the Purchase Agreement with respect to the type and delivery dates of the Aircraft

D. The Buyer has notified to the Seller of its decision to convert three (3) Option A320-200 Aircraft (Option Aircraft No 1, 2 and 3) into firm orders (Firm Aircraft No 39, 40 and 41).

NOW THEREFORE IT IS AGREED AS FOLLOWS:

1- SCOPE

The scope of this Amendment No 3

2- TYPE AND DELIVERY DATES OF *

Sub-Clause 9.1 of the Purchase Agreement is therefore cancelled and replaced by Sub-Article 9.1 hereof:

QUOTE

9.1 Delivery Schedule

Subject to the provisions of Clauses 2, 7, 8, 10 and 18 the Seller shall have the Aircraft ready for delivery at the Aircraft final assembly line in the following months:

Delivery Date   Aircraft Type
-------------   -------------
             *

UNQUOTE

3- OPTION AIRCRAFT *

The paragraphs 1.1 and 1.2 of the Letter Agreement No 4 of the A320 Family Purchase Agreement as modified by the Amendment No 2 is therefore cancelled and replaced by the following Articles 1.1 and 1.2:

QUOTE

1.1 OPTION

1.2 OPTION EXERCISE *

In order to valid an exercise of an Option, the Seller shall have received in Seller's bank account an initial predelivery payment equal
* * of the Predelivery Payment Reference Price, corresponding to the first Predelivery Payment as defined in Article 3 of the Amendment No 1 to the Agreement minus the corresponding deposit amounting to * already paid by the Buyer as an option fee for each of the * Option Aircraft.

In the event that the Buyer falls to timely exercise its option in respect of Option Aircraft, the Option Aircraft shall lapse and neither party shall have any further rights or obligations hereunder as to such lapsed Option Aircraft.

UNQUOTE

4- DELIVERIES OF OPTION AIRCRAFT

The paragraph 4 of the Letter Agreement No 4 of the A320 Family Purchase Agreement is therefore cancelled and replaced by the following:

QUOTE

UNQUOTE

5- MISCELLANEOUS PROVISIONS

If not otherwise expressly stated in this Amendment No 3, the A320 Family Purchase Agreement, its Exhibits and Letter Agreements shall apply also to this Amendment No 3.

This Amendment No 3 supersedes any previous understandings, commitments or representations whatsoever oral or written with respect to the matters referred to herein.

Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned thereto in the A320 Family Purchase Agreement, its Exhibits and Letter Agreements.

In the event of any inconsistency between the Purchase Agreement and the present Amendment, the latter shall prevail to the extent of said inconsistency.

This Amendment No 3 has been executed in two (2) original specimens which are in English.

IN WITNESS WHEREOF this Amendment No 3 was duly entered into the day and year first above written.

For and on behalf of                    For and on behalf of

T.A.M.                                  AIRBUS INDUSTRIE
TRANSPORTES AEREOS REGIONAIS S.A.


/s/ Jose Zaidan Maluf                   /s/ Francis Robillard
-------------------------------------   ----------------------------------------
Name: Jose Zaidan Maluf                 Name: Francis Robillard
Title: Contract Director                Title: Contract Director

AMENDMENT NO 4

TO THE A320

PURCHASE AGREEMENT

BETWEEN

AIRBUS INDUSTRIE
(THE SELLER)

AND

T.A.M.
TRANSPORTES AEREOS REGIONAIS S.A.
(THE BUYER)

TABLE OF CONTENTS

CLAUSES   TITLES
-------   ------
   1      Scope
   2      Type and Delivery Dates *
   3      Miscellaneous Provisions

AMENDMENT NO 4
TO THE
A320 PURCHASE AGREEMENT

This Amendment No 4 is made as of the 20th day of February 2001 to the A320 Purchase Agreement signed on March 19th, 1998

Between

AIRBUS INDUSTRIE "Groupement d'Interet Economique" duly created and existing under French law and having its principal office at:

1, rond-point Maurice Bellonte
31707 BLAGNAC CEDEX
FRANCE

(hereinafter referred to as "the Seller") of the one part,

AND

T.A.M. - TRANSPORTES AEREOS REGIONAIS S. A. having its principal office at:

Rua Monsenhor Antonio Pepe, 94 JD Aeroporto
CEP - 04357 - 080

SAO PAULO

BRAZIL

(hereinafter referred to as "the Buyer") of the other part.

WHEREAS

A. The Buyer and the Seller have signed on March 19th, 1998 an A320 Family Purchase Agreement (hereinafter referred to as "the Purchase Agreement") covering the purchase by the Buyer and the sale by the Seller of thirty eight (38) A320 Family Aircraft of the A319-100 and A320-200 type (Aircraft No 1 to No 38).

C. The Buyer and the Seller have on October 04th, 2000 entered into an Amendment No 2 (hereinafter referred to as "the Amendment No 2") to the A320 Family Purchase Agreement covering certain terms and (Conditions of the Purchase Agreement with respect to the type and delivery dates of the

D. The Buyer and the Seller have entered into an Amendment No 3 on January 18th, 2001 (hereinafter referred to as "the Amendment No 3") to the A320 Family Purchase Agreement covering the conversion of three (3) Option A320-200 Aircraft (Option Aircraft No 1, 2 and 3) into firm orders (Firm Aircraft NO 39, 40 and 41)

E. The Buyer have notify the seller of the need to convert

NOW THEREFORE IT IS AGREED AS FOLLOWS:

1- SCOPE

The scope of this Amendment No 4 is the

2- TYPE AND DELIVERY DATES OF *

Sub-Clause 9.1 of the Purchase Agreement is therefore cancelled and replaced by Sub-Article 9.1 hereof:

QUOTE

9.1 Delivery Schedule

Subject to the provisions of Clauses 2, 7, 8, 10 and 18 the Seller shall have the Aircraft ready for delivery at the Aircraft final assembly line in the following months:

Delivery Date   Aircraft Type
-------------   -------------
          *

UNQUOTE

3- MISCELLANEOUS PROVISIONS

If not otherwise expressly stated in this Amendment No 4, the A320 Family Purchase Agreement, its Exhibits and Letter Agreements shall apply also to this Amendment No 4.

This Amendment No 4 supersedes any previous understandings, commitments or representations whatsoever oral or written with respect to the matters referred to herein.

Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned thereto in the A320 Family Purchase Agreement, its Exhibits and Letter Agreements.

In the event of any inconsistency between the Purchase Agreement and the present Amendment, the latter shall prevail to the extent of said inconsistency.

This Amendment No 4 has been executed in two (2) original specimens which are in English.

IN WITNESS WHEREOF this Amendment No 4 was duly entered into the day and year first above written.

For and on behalf of                    For and on behalf of

T.A.M.                                  AIRBUS INDUSTRIE
TRANSPOSES AEREOS REGIONAIS S.A.


/s/ Jose Zaidan Maluf                   /s/ Francis Robillard
-------------------------------------   ----------------------------------------
Name: Jose Zaidan Maluf                 Name: Francis Robillard
Title: Contract Director                Title: Contract Director

AMENDMENT NO 5

TO THE A320

PURCHASE AGREEMENT

BETWEEN

AIRBUS INDUSTRIE
(THE SELLER)

AND

T.A.M.
TRANSPORTES AEREOS REGIONAIS S.A.
(THE BUYER)

TABLE OF CONTENTS

CLAUSES   TITLES
-------   ------
   1      Scope
   2      Type and Delivery Dates of *
   3      Miscellaneous Provisions

AMENDMENT NO 5
TO THE
A320 PURCHASE AGREEMENT

This Amendment No 5 is made as of the 27th day of April 2001 to the A320 Purchase Agreement signed on March 19th, 1998

Between

AIRBUS INDUSTRIE "Groupement d'Interet Economique" duly created and existing under French law and having its principal office at:

1, rond-point Maurice Bellonte
31707 BLAGNAC CEDEX
FRANCE

(hereinafter referred to as "the Seller") of the one part,

AND

T.A.M. - TRANSPORTES AEREOS REGIONAIS S.A. having its principal office at:

Rua Monsenhor Antonio Pepe, 94 JD Aeroporto
CEP - 04357 - 080

SAO PAULO

BRAZIL

(hereinafter referred to as "the Buyer") of the other part.

WHEREAS

A. The Buyer and the Seller have signed on March 19th, 1998 an A320 Family Purchase Agreement (hereinafter referred to as "the Purchase Agreement") covering the purchase by the Buyer and the sale by the Seller of thirty eight (38) A320 Family Aircraft of the A319-100 and A320-200 type (Aircraft No 1 to No 38).

C. The Buyer and the Seller have on October 04th, 2000 entered into an Amendment No 2 (hereinafter referred to as "the Amendment No 2") to the A320 Family Purchase Agreement covering certain terms and conditions of the Purchase Agreement with respect to the type and delivery dates of the

E. The Buyer and the Seller have entered into an Amendment No 4 on February 20th, 2001 (hereinafter referred to as "the Amendment No 4") to the A320 Family Purchase Agreement covering

F. In addition to the

NOW THEREFORE IT IS AGREED AS FOLLOWS :

1- SCOPE

The scope of this Amendment No 5 *

2- TYPE AND DELIVERY DATES OF *

Sub-Clause 9.1 of the Purchase Agreement is therefore cancelled and replaced by Sub-Article 9.1 hereof:

QUOTE

9.1 Delivery Schedule

Subject to the provisions of Clauses 2, 7, 8, 10 and 18 the Seller shall have the Aircraft ready for delivery at the Aircraft final assembly line in the following months:

Delivery Date   Aircraft Type
-------------   -------------
                *

UNQUOTE

3- MISCELLANEOUS PROVISIONS

If not otherwise expressly stated in this Amendment No 5, the A320 Family Purchase Agreement, its Exhibits and Letter Agreements shall apply also to this Amendment No 5.

This Amendment No 5 supersedes any previous understandings, commitments or representations whatsoever oral or written with respect to the matters referred to herein.

Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned thereto in the A320 Family Purchase Agreement, its Exhibits and Letter Agreements.

In the event of any inconsistency between the Purchase Agreement and the present Amendment, the latter shall prevail to the extent of said inconsistency.

This Amendment No 5 has been executed in two (2) original specimens which are in English.

IN WITNESS WHEREOF this Amendment No 5 was duly entered into the day and year first above written.

For and on behalf of                    For and on behalf of

T.A.M.                                  AIRBUS INDUSTRIE
TRANSPORTES AEREOS REAIONAIS S.A.


/s/ Jose Zaidan Maluf                   /s/ Francis Robillard
-------------------------------------   ----------------------------------------
Name: Jose Zaidan Maluf                 Name: Francis Robillard
Title: Contract Director                Title: Contract Director

AMENDMENT NO 6

TO THE A320

PURCHASE AGREEMENT

BETWEEN

AIRBUS INDUSTRIE
(THE SELLER)

AND

T.A.M.
TRANSPORTES AEREOS REGIONAIS S.A.
(THE BUYER)

TABLE OF CONTENTS

CLAUSES               TITLES
-------               ------
   1      Scope
   2      Type and Delivery Dates *
   3      Option aircraft *
   4      Deliveries of option aircraft
   5      Miscellaneous Provisions

AMENDMENT NO 6
TO THE
A320 PURCHASE AGREEMENT

This Amendment No 6 is made as of the 27th day of July 2001 to the A320 Purchase Agreement signed on March 19th, 1998

Between

AIRBUS INDUSTRIE "Groupement d'Interet Economique" duly created and existing under French law and having its principal office at:

1, rond-point Maurice Bellonte
31707 BLAGNAC CEDEX
FRANCE

(hereinafter referred to as "the Seller") of the one part,

AND

T.A.M. - TRANSPOSES AEREOS REGIONAIS S.A. having its principal office at:

Rua Monsenhor Antonio Pepe, 94 JD Aeroporto
CEP-04357 - 080
SAO PAULO
BRAZIL

(hereinafter referred to as "the Buyer") of the other part.

WHEREAS

A. The Buyer and the Seller have signed on March 19th, 1998 an A320 Family Purchase Agreement (hereinafter referred to as "the Purchase Agreement") covering the purchase by the Buyer and the sale by the Seller of thirty eight (38) A320 Family Aircraft of the A319-100 and A320-200 type (Aircraft No 1 to No 38).

C. The Buyer and the Seller have on October 04th, 2000 entered into an Amendment No 2 (hereinafter referred to as "the Amendment No 2") to the A320 Family Purchase Agreement covering certain terms and conditions of the Purchase Agreement with respect to the type and delivery rates of the

E. The Buyer and the Seller have entered into an Amendment No 4 on February 20th, 2001 (hereinafter referred to as "the Amendment No 4") to the A320 Family Purchase Agreement covering

F. The Buyer and the Seller have entered into an Amendment No 5 on February 20th, 2001 (hereinafter referred to as "the Amendment No 5") to the A320 Family Purchase Agreement covering four

G. The Buyer has notified to the Seller (on the 28th of May 2001) of its decision to

NOW THEREFORE IT IS AGREED AS FOLLOWS:

1- SCOPE

The scope of this Amendment No 6 is *

2- TYPE AND DELIVERY DATES *

Sub-Clause 9.1 of the Purchase Agreement is therefore cancelled and replaced by Sub-Article 9.1 hereof:

QUOTE

9.1 Delivery Schedule

Subject to the provisions of Clauses 2, 7, 8, 10 and 18 the Seller shall have the Aircraft ready for delivery at the Aircraft final assembly line in the following months:

Delivery Date   Aircraft Type
-------------   -------------
                       *

UNQUOTE

3- OPTION AIRCRAFT *

The paragraphs 1.1 and 1.2 of the Letter Agreement No 4 of the A320 Family Purchase Agreement as modified by the Amendment No 6 is therefore cancelled and replaced by the following Articles 1.1 and 1.2:

QUOTE

1.1 OPTION

The Buyer shall have an option to purchase

1.2 OPTION EXERCISE *

In order to valid an exercise of an Option, the Seller shall have received in Seller's bank account an initial predelivery payment equal to * of the Predelivery Payment Reference Price, corresponding to the first Predelivery Payment as defined in Article 3 of the Amendment No 1 to the Agreement minus the corresponding deposit amounting to * already paid by the Buyer as an option fee for each of the * Option Aircraft.

In the event that the Buyer falls to timely exercise its option in respect of Option Aircraft, the Option Aircraft shall lapse and neither party shall

have any further rights or obligations hereunder as to such lapsed Option Aircraft.

UNQUOTE

4- DELIVERIES OF OPTION AIRCRAFT

The paragraph 4 of the Letter Agreement No 4 of the A320 Family Purchase Agreement is therefore cancelled and replaced by the following:

QUOTE

UNQUOTE

5- MISCELLANEOUS PROVISIONS

If not otherwise expressly stated in this Amendment No 6, the A320 Family Purchase Agreement, its Exhibits and Letter Agreements shall apply also to this Amendment No 6.

This Amendment No 6 supersedes any previous understandings, commitments or representations whatsoever oral or written with respect to the matters referred to herein.

Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned thereto in the A320 Family Purchase Agreement, its Exhibits and Letter Agreements.

In the event of any inconsistency between the Purchase Agreement and the present Amendment, the latter shall prevail to the extent of said inconsistency.

This Amendment No 6 has been executed in two (2) original specimens which are in English.

IN WITNESS WHEREOF this Amendment No 6 was duly entered into the day and year first above written.

For and on behalf of                    For and on behalf of

T.A.M.                                  AIRBUS INDUSTRIE
TRANSPORTES AEREOS REGIONAIS S.A.


/s/ Jose Zaidan Maluf                   /s/ Guy Brunon
-------------------------------------   ----------------------------------------
Name: Jose Zaidan Maluf                 Name: Guy Brunon
Title: Contract Director                Title: V.P. Contracts

AMENDMENT NO 7

TO THE A320

PURCHASE AGREEMENT

BETWEEN

AIRBUS INDUSTRIE
(THE SELLER)

AND

T.A.M.
TRANSPORTES AEREOS REGIONAIS S.A.
(THE BUYER)

TABLE OF CONTENTS

CLAUSES               TITLES
-------               ------
   1      Scope
   2      Type and Delivery Dates *
   3      Option aircraft *
   4      Deliveries of option aircraft
   5      Miscellaneous Provisions

AMENDMENT NO 7
TO THE
A320 PURCHASE AGREEMENT

This Amendment No 7 is made as of the 08th day of October 2001 to the A320 Purchase Agreement signed on March 19th, 1998

Between

AIRBUS INDUSTRIE. GIE "Groupement d'lnteret Economique" duly created and existing under French law and having its principal office at:

1, rond-point Maurice Bellonte

31707 BLAGNAC CEDEX

FRANCE

(hereinafter referred to as "the Seller") of the one part,

AND

T.A.M. - TRANSPORTES AEREOS REGIONAIS S.A. having its principal office at:

Rua Monsenhor Antonio Pepe, 94 JD Aeroporto
CEP - 04357 - 080

SAO PAULO

BRAZIL

(hereinafter referred to as "the Buyer") of the other part.

WHEREAS

A. The Buyer and the Seller have signed on March 19th, 1998 an A320 Family Purchase Agreement (hereinafter referred to as "the A320 Family Purchase Agreement") covering the purchase by the Buyer and the sale by the Seller of thirty eight (38) A320 Family Aircraft of the A319-100 and A320-200 type (Aircraft No 1 to No 38).

C. The Buyer and the Seller have on October 04th, 2000 entered into an Amendment No 2 (hereinafter referred to as "the Amendment No 2") to the A320 Family Purchase Agreement covering certain terms and conditions of the Purchase Agreement with respect to the type and delivery dates of the Aircraft *

E. The Buyer and the Seller have entered into an Amendment No 4 on February 20th, 2001 (hereinafter referred to as "the Amendment No 4") to the A320 Family Purchase Agreement covering

F. The Buyer and the Seller have entered into an Amendment No 5 on February 20th, 2001 (hereinafter referred to as "the Amendment No 5") to the A320 Family Purchase Agreement covering four * having the similar exchange rights.

G. The Buyer and the Seller have entered into an Amendment No 6 on February 20th, 2001 (hereinafter referred to as "the Amendment No 6") to the A320 Family Purchase Agreement

H. The Buyer has moyified the Seller on the 01st of July 2001 of its dedcision to

NOW THEREFORE IT IS AGREED AS FOLLOWS:

1- SCOPE

The scope of this Amendment No 7 is *

2- TYPE AND DELIVERY DATES OF FIRM AIRCRAFT

Sub-Clause 9.1 of the A320 Family Purchase Agreement is therefore cancelled and replaced by Sub-Article 9.1 hereof:

QUOTE

9.1 Delivery Schedule

Subject to the provisions of Clauses 2, 7, 8, 10 and 18 the Seller shall have the Aircraft ready for delivery at the Aircraft final assembly line in the following months:

Delivery Date   Aircraft Type
-------------   -------------
                 *

UNQUOTE

3- OPTION AIRCRAFT *

The paragraphs 1.1 and 1.2 of the Letter Agreement No 4 of the A320 Family Purchase Agreement as modified by the Amendment No 7 is therefore cancelled and replaced by the following Articles 1.1 and 1.2:

QUOTE

1.1 OPTION

The Buyer shall have an option to purchase up to additional Aircraft (hereinafter called the "Option Aircraft"

1.2 OPTION EXERCISE:

In order to valid an exercise of an Option, the Seller shall have received in Seller's bank account an initial predelivery payment equal to * of the Predelivery Payment Reference Price, corresponding to the first Predelivery Payment as defined in Clause 5.2.1.2 of the A320 Family Purchase Agreement minus the corresponding deposit amounting to
* already paid by the Buyer as an option fee for each of the 18 Option Aircaft.

UNQUOTE

4- DELIVERIES OF OPTION AIRCRAFT

The paragraph 4 of the Letter Agreement No 4 of the A320 Family Purchase Agreement is therefore cancelled and replaced by the following:

QUOTE

UNQUOTE

5- MISCELLANEOUS PROVISIONS

If not otherwise expressly stated in this Amendment No 7, the A320 Family Purchase Agreement, its Exhibits and Letter Agreements shall apply also to this Amendment No 7.

This Amendment No 7 supersedes any previous understandings, commitments or representations whatsoever oral or written with respect to the matters referred to herein.

Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned thereto in the A320 Family Purchase Agreement, its Exhibits and Letter Agreements.

In the event of any inconsistency between the Purchase Agreement and the present Amendment, the latter shall prevail to the extent of said inconsistency.

This Amendment No 7 has been executed in two (2) original specimens which are in English.

IN WITNESS WHEREOF this Amendment No 7 was duly entered into the day and year first above written.

For and on behalf of                    For and on behalf of

T.A.M.
TRANSPORTES AEREOS REGIONAIS S.A.       AIRBUS INDUSTRIE


/s/ Jose Zaidan Maluf                   /s/ Francis Robillard
-------------------------------------   ----------------------------------------
Name: Jose Zaidan Maluf                 Name: Francis Robillard
Title: Contract Director                Title: Contract Director

AMENDMENT NO 8

TO THE A320

PURCHASE AGREEMENT

BETWEEN

AIRBUS

AND

T.A.M.
TRANSPORTES AEREOS REGIONAIS S.A.

AMENDMENT NO 8
TO THE
A320 PURCHASE AGREEMENT

This Amendment No 8 is made as of the 8th day of March 2002 to the A320 Purchase Agreement signed on March 19th, 1998

Between

AIRBUS GIE a "Groupement d'lnteret Economique" duly created and existing under French law and having its principal office at:

1, rond-point Maurice Bellonte
31707 BLAGNAC CEDEX

FRANCE

(hereinafter referred to as "THE SELLER") of the one part,

T.A.M. - TRANSPOTES AEREOS REGIONAIS S.A. having its principal office at:

Rua Monsenhor Antonio Pepe, 94 JD Aeroporto
CEP-04357-080

SAO PAULO

BRAZIL

(hereinafter referred to as "THE BUYER") of the other part.

WHEREAS

A. The Buyer and the Seller have on March 19th, 1998 entered into an A320 Family Purchase Agreement (hereinafter referred to as "THE A320 FAMILY PURCHASE AGREEMENT") covering the purchase by the Buyer and the sale by the Seller of thirty eight (38) A320 Family Aircraft (each an "AIRCRAFT) of the A319-100 and A320-200 type (Aircraft No 1 to No 38).

B. The Buyer and the Seller have on February 16th, 1999 entered into an Amendment No 1 (hereinafter referred to as "AMENDMENT NO 1) to the A320 Family Purchase Agreement covering changes to the delivery dates of some of the Aircraft.

C. The Buyer and the Seller have on October 04th, 2000 entered into an Amendment No 2 (hereinafter referred to as "AMENDMENT NO 2") to the A320 Family Purchase Agreement covering certain terms and conditions of the A320 Family Purchase Agreement with respect to the type and delivery dates of the Aircraft

D. The Buyer and the Seller have entered into an Amendment No 3 on January 18th, 2001 (hereinafter referred to as "AMENDMENT NO 3") to the A320 Family Purchase Agreement covering the conversion of three (3) Option A320-200 Aircraft (Option Aircraft No 1, 2 and 3) into firm orders (Firm Aircraft No 39, 40 and 41)

E. The Buyer and the Seller have entered into an Amendment No 4 on February 20th, 2001 (hereinafter referred to as "AMENDMENT NO 4") to the A320 Family Purchase Agreement covering

F. The Buyer and the Seller have entered into an Amendment No 5 on March 19th, 2001 (hereinafter referred to as "AMENDMENT NO 5") to the A320 Family Purchase Agreement covering

G. The Buyer and the Seller have entered into an Amendment No 6 on July 27th, 2001 (hereinafter referred to as "AMENDMENT NO 6") to the A320 Family Purchase Agreement

H. The Buyer and the Seller have entered into an Amendment No 7 on September 06th, 2001 (hereinafter referred to as "AMENDMENT NO 7") to the A320 Family Purchase Agreement covering

NOW THEREFORE IT IS AGREED AS FOLLOWS:

TABLE OF CONTENTS

CLAUSES   TITLES
-------   ------
    1     Scope
    2
    3
    4
    5
    6     *
    7
    8
    9     Delivery Dates
   10     *
   11     Termination
   12     Miscellaneous Provisions

1- SCOPE

The scope of this Amendment No 8 is

[6 pages redacted]

11- TERMINATION

It is expressly agreed between the parties that any of the following events will constitute a termination event, enabling the Seller to terminate the A320 Family Purchase Agreement by written notice to the Buyer:

(a) Buyer is in default in respect of any of its material obligations pursuant to the A320 Family Purchase Agreement;

(b) Buyer is in default in respect of any of its material obligations under any financing provided to Buyer by Seller, its affiliates or subsidiaries.

12- MISCELLANEOUS PROVISIONS

This Amendment No 8 shall be without prejudice to Seller's rights under the A320 Family Purchase Agreement, at law and/or otherwise in the event of any default under the A320 Family Purchase Agreement.

If not otherwise expressly stated in this Amendment No 8, the A320 Family Purchase Agreement, its Exhibits and Letter Agreements shall apply also to this Amendment No 8.

This Amendment No 8 supersedes any previous understandings, commitments or representations whatsoever oral or written with respect to the matters referred to herein.

Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned thereto in the A320 Family Purchase Agreement, its Exhibits and Letter Agreements.

In the event of any inconsistency between the Purchase Agreement and the present Amendment, the latter shall prevail to the extent of said inconsistency.

This Amendment No 8 has been executed in two (2) original specimens which are in English.

IN WITNESS WHEREOF this Amendment No. 8 to the A320 Family Purchase Agreement was duly entered into the day and year first above written.

For and on behalf of                    For and on behalf of

T.A.M.                                  AIRBUS
TRANSPORTSES AEREOS REGIONAIS S. A.


/s/ Jose Zaidan Maluf                   /s/ Christian Scherer
-------------------------------------   ----------------------------------------
Name: Jose Zaidan Maluf                 Name: Christian Scherer
Title: Contract Director                Title: Senior Vice-President
                                               Transactions and Control
                                               Deputy Head of Commercial

APPENDIX A

APPENDIX B

APPENDIX C

AMENDMENT NO 9

TO THE A320

PURCHASE AGREEMENT

BETWEEN

AIRBUS GIE (FORMERLY KNOWN AS AIRBUS INDUSTRIE GIE)

AND

T.A.M.
TRANSPORTES AEREOS REGIONAIS S.A.

AMENDMENT NO 9
TO THE
A320 PURCHASE AGREEMENT

This Amendment No 9 is made as of the 26th day of April 2002 to the A320 Purchase Agreement signed on March 19th, 1998

Between

AIRBUS GIE (formerly known as Airbus Industrie GIE), having its principal office at:

1, rond-point Maurice Bellonte
31707 BLAGNAC CEDEX

FRANCE

(hereinafter referred to as "THE SELLER") of the one part,

AND

T.A.M. - TRANSPORTES AEREOS REGIONAIS S.A. having its principal office at:

Rua Monsenhor Antonio Pepe, 94 JD Aeroporto
CEP-04357-080

SAO PAULO

BRAZIL

(hereinafter referred to as "THE BUYER") of the other part.

WHEREAS

A. The Buyer and the Seller have on March 19th, 1998 entered into an A320 Family Purchase Agreement (hereinafter referred to as THE A320 FAMILY PURCHASE AGREEMENT") covering the purchase by the Buyer and the sale by the Seller of thirty eight (38) A320 Family Aircraft (each an "AIRCRAFT") of the A319-100 and A320-200 type (Aircraft No 1 to No 38).

B. The Buyer and the Seller have on February 16th, 1999 entered into an Amendment No 1 (hereinafter referred to as "AMENDMENT NO 1") to the A320 Family Purchase Agreement covering changes to the delivery dates of some of the Aircraft.

E. The Buyer and the Seller have entered into an Amendment No 4 on February 20th, 2001 (hereinafter referred to as "AMENDMENT NO 4") to the A320 Family Purchase Agreement covering

F. The Buyer and the Seller have entered into an Amendment No 5 on March 19th, 2001 (hereinafter referred to as "AMENDMENT NO 5") to the A320 Family Purchase Agreement covering

G. The Buyer and the seller have entered into an Amendment No 6 on July 27th, 2001 (hereinafter referred to as "AMENDMENT NO 6") to the A320 Family Purchase Agreement covering the conversion of one (1) Option A320-200 Aircraft (Option Aircraft No 4) into a firm order (Firm Aircraft No 42),

H. The Buyer and the Seller have entered into an Amendment No 7 on September 06th, 2001 (hereinafter referred to as "AMENDMENT NO 7") TO the A320 Family Purchase Agreement

I. The Buyer and the Seller have entered into an Amendment No 8 on April 08th, 2002 (hereinafter referred to as "AMENDMENT No 8") to the A320 Family Purchase Agreement covering the advancement two (2) A319 delivery slots from February and April 2004 to May 2002

NOW THEREFORE IT IS AGREED AS FOLLOWS:

TABLE OF CONTENTS

CLAUSES   TITLES
-------   ------
   1      Scope
   2      Delivery Dates
   3      Miscellaneous Provisions

1- SCOPE

The scope of this Amendment No 9 is to confirm the agreement by the Seller and the Buyer

2- DELIVERY DATES

3- MISCELLANEOUS PROVISIONS

This Amendment No 9 shall be without prejudice to Seller's rights under the A320 Family Purchase Agreement, at law and/or otherwise in the event of any default under the A320 Family Purchase Agreement.

If not otherwise expressly stated in this Amendment No 9, the A320 Family Purchase Agreement, its Exhibits and Letter Agreements shall apply also to this Amendment No 9.

This Amendment No 9 supersedes any previous understandings, commitments or representations whatsoever oral or written with respect to the matters referred to herein.

Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned thereto in the A320 Family Purchase Agreement, its Exhibits and Letter Agreements.

In the event of any inconsistency between the Purchase Agreement and the present Amendment, the latter shall prevail to the extent of said inconsistency.

This Amendment No 9 has been executed in two (2) original specimens which are in English.

IN WITNESS WHEREOF this Amendment NO 9 to the A320 Family Purchase Agreement was duly entered into the day and year first above written.

For and on behalf of                    For and on behalf of

T.A.M.                                  AIRBUS
TRANSPORTES AEREOS REGIONAIS S.A.


/s/ Jose Zaidan Maluf                   /s/ Guy Brunon
-------------------------------------   ----------------------------------------
Name: Jose Zaidan Maluf                 Name: Guy Brunon
Title: Contract Director                Title: V.P.Contracts

AMENDMENT NO 10

TO THE A320

PURCHASE AGREEMENT

BETWEEN

AIRBUS S.N.C. (FORMERLY KNOWN AS AIRBUS INDUSTRIE G I E)

AND

T.A.M. - LINHAS AEREAS S. A.
(FORMERLY KNOWN AS TAM - TRANSPORTES AEREOS MERIDIONAIS S.A.)

AMENDMENT NO 10
TO THE
A320 PURCHASE AGREEMENT

This Amendment No 10 is made as of the ___th day of April 2004 to the A320 Purchase Agreement signed on March 19th, 1998

Between

AIRBUS S.N.C. (formerly known as Airbus Industrie GIE), having its principal office at:

1, rond-point Maurice Bellonte
31707 BLAGNAC CEDEX

FRANCE

(hereinafter referred to as "THE SELLER") of the one part,

AND

T.A.M. - LINHAS AEREAS S.A. (formerly TAM - TRANSPORTES AEREOS MERIDIONAIS S.A). as successor of TAM - TRANSPORTES AEREOS REGIONAIS S.A, having its principal office at:

Avenida Jurandir, 856, 40 andar, Lote 4, CEP 04072 - 000, Jardim CECI
SAO PAULO - SP

BRAZIL

(herein after referred to as "THE BUYER") of the other part.

WHEREAS

A. The Buyer and the Seller have on March 19th, 1998 entered into an A320 Family Purchase Agreement (hereinafter referred to as "THE A320 FAMILY PURCHASE AGREEMENT") covering the purchase by the Buyer and the sale by the Seller of thirty eight (38) A320 Family Aircraft (each an "AIRCRAFT") of the A319-100 and A320-200 type (Aircraft No 1 to No 38).

E. The Buyer and the Seller have entered into an Amendment No 4 on February 20th, 2001 (hereinafter referred to as "AMENDMENT NO 4") to the A320 Family Purchase Agreement covering

F. The Buyer and the Seller have entered into an Amendment No 5 on March 19th, 2001 (hereinafter referred to as "AMENDMENT NO 5") to the A320 Family Purchase Agreement covering

G. The Buyer and the Seller have entered into an Amendment No 6 on July 27th, 2001 (hereinafter referred to as "AMENDMENT NO 6") to the A320 Family Purchase Agreement

H. The Buyer and the Seller have entered into an Amendment No 7 on September 06th, 2001 (hereinafter referred to as "AMENDMENT NO 7") to the A320 Family Purchase Agreement

I. The Buyer and the Seller have entered into an Amendment No 8 on April 08th, 2002 (hereinafter referred to as "AMENDMENT NO 8") to the A320 Family Purchase Agreement covering the advancement of two (2) A319 delivery slots from February and April 2004 to May 2002

J. The Buyer and the Seller have entered into an Amendment No 9 on April 26th, 2002 (hereinafter referred to as "AMENDMENT NO 9") to the A320 Family Purchase Agreement covering the change of the type and delivery dates of

NOW THEREFORE IT IS AGREED AS FOLLOWS:

TABLE OF CONTENTS

CLAUSES   TITLES
-------   ------
   1      Scope
   2      Aircraft Configuration
   3      Landing Performance Guarantee at Santos
          Dumont Airport (SDU)
   4      Guarantee Conditions
   5      Guarantee Compliance
   6      Adjustment of the Guarantees
   7      Undertaking Remedies
   8      Miscellaneous Provisions

1 SCOPE

The scope of this Amendment No 10 is to describe the improved performance guarantee due to the embodiment of the lift Improvement Package ("UP") on some A320-232 Aircraft powered by International Aero Engines (IAE) V2527-A5 engines and operated by the Buyer.

2 AIRCRAFT CONFIGURATION

The guarantee defined below ("the Guarantee") is applicable to the A320-232 Aircraft powered by International Aero Engines (IAE) V2527-A5 engines and equipped with the Lift Improvement Package ("LIP") according to the Retrofit Modification Offer ("RMO") TAM 0312-03-04.

3 LANDING PERFORMANCE GUARANTEE AT SANTOS DUMONT (SDU)

The FAR Aircraft permissible Landing Weight when operated in airport conditions as defined below (assumed representative of of SDU runway 20L):

Pressure Attitude
Temperature
Available Landing Distance (LDA) * Runway Slope
Wind

shall not be less than a guaranteed value of:

3.1 * kg on dry runway
3.2 * kg on wet runway.

4 GUARANTEE CONDITIONS

4.1 The performance certification requirements for the Aircraft, except where otherwise stated, will be as stated in Section 02 of the Standard Specification.

4.2 For the determination of FAR landing performance a hard level runway with Porous Friction Course ("PFC") surface, with no runway strength limitation, no obstacles, zero wind, atmosphere according to ISA, except as otherwise stated, and the use of speed brakes, flaps, associated speeds, landing gear and engines in the conditions liable to provide the best results will be assumed.

5 GUARANTEE COMPLIANCE

5.1 Compliance with the Guarantees shall be demonstrated using operating procedures and limitations in accordance with those defined by the certifying Airworthiness Authority and by the Seller unless otherwise stated.

5.2 Compliance with the landing elements of the Guarantees will be demonstrated with reference to the approved Flight Manual.

5.3 Data derived from flight tests will be adjusted as required using conventional methods of correction, interpolation or extrapolation in accordance with established aeronautical practices to show compliance with the Guarantees.

5.4 The Seller undertakes to furnish the Buyer with a report or reports demonstrating compliance with the Guarantee at, or as soon as possible after, the installation of the LIP on the first of the Buyer's A320-232 Aircraft.

6 ADJUSTMENT OF GUARANTEES

6.1 In the event of any change to any law, governmental regulation or requirement or interpretation thereof ("rule change") by any governmental agency made subsequent to the date of the Agreement and such rule change affects the Aircraft configuration or performance or both required to obtain certification the Guarantees shall be appropriately modified to reflect the effect of any such change.

6.2 The Guarantees apply to the Aircraft as described in paragraph 2 and may be adjusted in the event of any further configuration change which is the subject of a SCN/RMO.

7 UNDERTAKING REMEDIES

7.1 Should any Aircraft fail to meet any of the guarantee specified in this Amendment No 10 to the Purchase Agreement, the Seller will use its reasonable endeavours, at Seller's cost and expense, to correct the deficiency so that the Aircraft comply with the guarantee set out herein.

7.2 Should the Seller fail to develop and make available corrective means (including but not limited to kits, procedures) of the above said deficiency, then the Seller shall for the concerned Aircraft pay to the Buyer by way of liquidated damages upon delivery and, subject to Seller's maximum liability set forth hereunder, on the anniversary date of the delivery for as long as the deficiency remains, an amount of 58 US$ (FIFTY EIGHT US Dollars) for each kilogram deficient per Aircraft and per year based on the deficiency expressed in kilograms of the Landing performance guarantee.

7.3 In the event the Seller develops and makes available corrective means mentioned above the Buyer shall reimburse to the Seller the monthly prorated portion of the yearly penalty paid by the Seller on account of the year during which the corrective means are made available.

7.4 The Seller's maximum liability in respect of deficiency in performance of any Aircraft shall be limited to the payment of liquidated damages for a period of not more than * and up to an aggregated value of * for each deficient Aircraft, whichever occurs first. Payment of liquidated damages shall be deemed to settle all claims and remedies the Buyer would have against the Seller in respect of landing performance deficiencies.

8. MISCELLANEOUS PROVISIONS

This Amendment No 10 shall be without prejudice to Seller's rights under the A320 Family Purchase Agreement, at law and/or otherwise in the event of any default under the A320 Family Purchase Agreement.

If not otherwise expressly stated in this Amendment No 10, the A320 Family Purchase Agreement, its Exhibits and Letter Agreements shall apply also to this Amendment No 10.

This Amendment No 10 supersedes any previous understandings, commitments or representations whatsoever oral or written with respect to the matters referred to herein.

Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned thereto in the A320 Family Purchase Agreement, its Exhibits and Letter Agreements.

In the event of any inconsistency between the Purchase Agreement and the present Amendment, the latter shall prevail to the extent of said inconsistency.

This Amendment No 10 has been executed in two (2) original specimens which are in English.

IN WITNESS WHEREOF this Amendment No 10 to the A320 Family Purchase Agreement was duly entered into the day and year first above written.

For and on behalf of                    For and on behalf of

T.A.M. - LINHAS AEREAS S.A.             AIRBUS S.N.C.


/s/ Jose Zaidan Maluf
-------------------------------------   ----------------------------------------
Name: Jose Zaidan Maluf                 Name:
Title: Contract Director                       ---------------------------------
                                        Title:
                                               ---------------------------------

AMENDMENT NO 11

TO THE A320

PURCHASE AGREEMENT

BETWEEN

AIRBUS S. N. C. (FORMERLY KNOWN AS AIRBUS INDUSTRIE G I E)

AND

T.A.M. - LINHAS AEREAS S.A.
(FORMERLY KNOWN AS TAM - TRANSPORTES AEREOS MERIDIONAIS S.A.)

AMENDMENT NO 11
TO THE
A320 PURCHASE AGREEMENT

This Amendment No 11 is made as of the ____th day of April 2004 to the A320 Purchase Agreement signed on March 19th, 1998

Between

AIRBUS S.N.C. (formerly known as Airbus Industrie GIE), having its principal office at

1, rond-point Maurice Bellonte
31707 BLAGNAC CEDEX

FRANCE

(hereinafter referred to as "THE SELLER") of the one part,

AND

T.A.M.- LINHAS AEREAS S.A. (formerly TAM - TRANSPORTES AEREOS MERIDIONAIS S.A). as successor of TAM -TRANSPORTES AEREOS
REGIONAIS S.A, having its principal office at:

Avenida Jufandir, 856,40 andar, Lote 4, CEP 04072 - 000, Jardim CECI
SAO PAULO - SP

BRAZIL

(herein after referred to as "THE BUYER") of the other part.

WHEREAS

A. The Buyer and the Seller have on March 19th, 1998 entered into an A320 Family Purchase Agreement (hereinafter referred to as "THE A320 FAMILY PURCHASE AGREEMENT") covering the purchase by the Buyer and the sale by the Seller of thirty eight (38) A320 Family Aircraft (each an "AIRCRAFT") of the A319-100 and A32O-20O type (Aircraft No 1 to No 38).

B. The Buyer and the Seller have on February 16th, 1999 entered into an Amendment NO 1 (hereinafter referred to as "AMENDMENT NO 1") to the A320 Family Purchase Agreement covering changes to the delivery dates of some of the Aircraft.

E. The Buyer and the Seller have entered into an Amendment No 4 on February 20th, 2001 (hereinafter referred to as "AMENDMENT NO 4") to the A320 Family Purchase Agreement covering

F. The Buyer and the Seller have entered into an Amendment No 5 ON March 19th, 2001 (hereinafter referred to as "AMENDMENT NO 5") to the A320 Family Purchase Agreement covering

G. The Buyer and the Seller have entered into an Amendment No 6 on July 27th, 2001 (hereinafter referred to as "AMENDMENT NO 6") tO The A320 Family Purchase Agreement covering

H. The Buyer and the Seller have entered into an Amendment No 7 on September 06th, 2001 (hereinafter referred to as "AMENDMENT NO 7") to the A320 Family Purchase Agreement

I. The Buyer and the Seller have entered into an Amendment No 8 on April 08th, 2002 (hereinafter referred to as "AMENDMENT NO 8") tO the A320 Family Purchase Agreement covering the advancement of two (2) A319 delivery slots from February and April 2004 to May 2002

K. The Buyer and the Seller have entered into an Amendment No 10 on April ___th, 2004 (hereinafter referred to as "AMENDMENT NO 10") to the A320 Family Purchase Agreement covering

NOW THEREFORE IT IS AGREED AS FOLLOWS:

TABLE OF CONTENTS

CLAUSES            TITLES
-------            ------
   1      Scope
   2      Delivery Dates
   3      *
   4      Miscellaneous Provisions

1- SCOPE

The scope of this Amendment No 11 is to confirm the agreement by the Seller and the Buyer to convert the delivery dates of

2- DELIVERY DATES

QUOTE

9.1 Delivery Schedule

Subject to the provisions of Clauses 2, 7, 8, 10 and 18 the Seller shall have the Aircraft ready for delivery at the Aircraft final assembly line in the following months:

Aircraft Contractual Rank   Delivery Date   MSN   Aircraft Type
-------------------------   -------------   ---   -------------
                                  *

UNQUOTE

4- MISCELLANEOUS PROVISIONS

This Amendment No 11 shall be without prejudice to Seller's rights under the A320 Family Purchase Agreement, at law and/or otherwise in the event of any default under the A320 Family Purchase Agreement.

If not otherwise expressly stated in this Amendment No 11, the A320 Family Purchase Agreement, its Exhibits and Letter Agreements shall apply also to this Amendment No 11.

This Amendment No 11 supersedes any previous understandings, commitments or representations whatsoever oral or written with respect to the matters referred to herein.

Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned thereto in the A320 Family Purchase Agreement, its Exhibits and Letter Agreements.

In the event of any inconsistency between the Purchase Agreement and the present Amendment, the latter shall prevail to the extent of said inconsistency.

This Amendment No 11 has been executed in two (2) original specimens which are in English.

IN WITNESS WHEREOF this Amendment No 11 to the A320 Family Purchase Agreement was duly entered into the day and year first above written.

For and on behalf of                    For and on behalf of

T.A.M. - LINHAS AEREAS S.A.             AIRBUS S.N.C.


/s/ Jose Zaidan Maluf
-------------------------------------   ----------------------------------------
Name: Jose Zaidan Maluf                 Name:
Title: Contract Director                      ----------------------------------
                                        Title:
                                               ---------------------------------

AMENDMENT NO 12

TO THE A320

PURCHASE AGREEMENT

BETWEEN

AIRBUS S.A.S. (FORMERLY KNOWN AS AIRBUS INDUSTRIE G I E)

AND

TAM-LINHAS AEREAS S.A.
(FORMERLY KNOWN AS TAM - TRANSPORTES AEREOS MERIDIONAIS S.A.)

AMENDMENT NO 12
TO THE
A320 PURCHASE AGREEMENT

This Amendment No 12 is made as of the 16th day of June 2005 to the A320 Purchase Agreement signed on March 19th, 1998

Between

AIRBUS S.A.S. (formerly known as Airbus Industrie GIE), having its principal office at:

1, rond-point Maurice Bellonte
31707 BLAGNAC CEDEX

FRANCE

(hereinafter referred to as "THE SELLER") of the one part,

AND

TAM- LINHAS AEREAS S.A. (formerly TAM - TRANSPORTES
AEREOS MERIDIONAIS S.A). as successor of TAM -TRANSPORTES AEREOS
REGIONAIS S.A, having its principal office at:

Avenida Jurandir, 856, 40 andar, Lote 4, CEP 04072 - 000, Jardim CECI
SAO PAULO - SP

BRAZIL

(herein after referred to as "THE BUYER") of the other part.

WHEREAS

A. The Buyer and the Seller have on March 19th, 1998 entered into an A320 Family Purchase Agreement (hereinafter referred to as "THE A320 FAMILY PURCHASE AGREEMENT") covering the purchase by the Buyer and the sale by the Seller of thirty eight (38) A320 Family Aircraft (each an "AIRCRAFT") of the A319-100 and A320-200 type (Aircraft No 1 to No 38).

D. The Buyer and the Seller have entered into an Amendment No 3 on January 18th, 2001 (hereinafter referred to as "AMENDMENT N0 3") to the A320 Family Purchase Agreement covering the conversion of three (3) Option A320-200 Aircraft (Option Aircraft No 1, 2 and 3) into firm orders (Firm Aircraft No 39, 40 and 41),

E. The Buyer and the Seller have entered into an Amendment No 4 on February 20th, 2001 (hereinafter referred to as "AMENDMENT NO 4") to the A320 Family Purchase Agreement covering

F. The Buyer and the Seller have entered into an Amendment No 5 on March 19th, 2001 (hereinafter referred to as "AMENDMENT NO 5") to the A320 Family Purchase Agreement covering

G. The Buyer and the Seller have entered into an Amendment No 6 on July 27th, 2001 (hereinafter referred to as "AMENDMENT NO 6") to the A320 Family Purchase Agreement covering

H. The Buyer and the Seller have entered into an Amendment No 7 on September 06, 2001 (hereinafter referred to as "AMENDMENT NO 7") to the A320 Family Purchase Agreement

K. The Buyer and the Seller have entered into an Amendment No 10 on April 08th, 2004 (hereinafter referred to as "AMENDMENT NO 10") to the A320 Family Purchase Agreement covering.

L. The Buyer and the Seller have entered into an Amendment No 11 on April 08th, 2004 (hereinafter referred to as "AMENDMENT NO 11") to the A320 Family Purchase Agreement covering the change of the delivery dates of the

NOW THEREFORE IT IS AGREED AS FOLLOWS:

TABLE OF CONTENTS

CLAUSES            TITLES
-------            ------

   1      Scope

   2

   3

   4

   5

   6      *

   7

   8

   9

   10

   11

   12     Miscellaneous Provisions

1- SCOPE

The scope of this Amendment No 12 is to record the agreement of the Buyer and the Seller;

[33 pages redacted]

This Amendment No 12 has been executed in two (2) original specimens which are in English.

IN WITNESS WHEREOF this Amendment No 12 to the A320 Family Purchase Agreement was duly entered into the day and year first above written.

For and on behalf of                    For and on behalf of

TAM - LINHAS AEREAS S.A.                AIRBUS S.A.S.


/s/                                     /s/
-------------------------------------   ----------------------------------------
Name:                                   Name:
      -------------------------------         ----------------------------------
Title:                                  Title:
       ------------------------------          ---------------------------------


WITNESS                                 WITNESS


                                        /s/
-------------------------------------   ----------------------------------------
Name:                                   Name:
      -------------------------------         ----------------------------------
Title:                                  Title:
       ------------------------------          ---------------------------------

AMENDMENT NO 13

TO THE A320

PURCHASE AGREEMENT

BETWEEN

AIRBUS S.A.S. (FORMERLY KNOWN AS AIRBUS INDUSTRIE GIE)

AND

TAM - LINHAS AEREAS S.A.
(FORMERLY KNOWN AS TAM - TRANSPORTES AEREOS MERIDIONAIS S.A.)

AMENDMENT NO 13
TO THE
A320 PURCHASE AGREEMENT

This Amendment No 13 is made as of the 16th day of June 2005 to the A320 Purchase Agreement signed on March 19th, 1998

Between

AIRBUS S.A.S. (formerly known as Airbus Industrie GIE), having its principal office at:

1, rond-point Maurice Bellonte
31707 BLAGNAC CEDEX
FRANCE

(hereinafter referred to as "THE SELLER") of the one part,

AND

TAM- LINHAS AEREAS S.A. (formerly TAM - TRANSPORTES AEREOS MERIDIONAIS S.A), as successor of TAM - TRANSPORTES AEREOS REGIONAIS S.A, having its principal office at:

Avenida Jurandir, 856, 40 andar, Lote 4, CEP 04072 - 000, Jardim CECI
SAO PAULO - SP
BRAZIL

(herein after referred to as "THE BUYER") of the other part.

WHEREAS

A. The Buyer and the Seller have on March 19th, 1998 entered into an A320 Family Purchase Agreement (hereinafter referred to as THE A320 FAMILY PURCHASE AGREEMENT") covering the purchase by the Buyer and the sale by the Seller of thirty eight (38) A320 family Aircraft (each an "AIRCRAFT") of the A319-100 and A320-200 type (Aircraft No 1 to No 38).

E. The Buyer and the Seller have entered into an Amendment No 4 on February 20th, 2001 (hereinafter referred to as "AMENDMENT NO 4") to the A320 Family Purchase Agreement covering

F. The Buyer and the Seller have entered into an Amendment No 5 on March 19th, 2001 (hereinafter referred to as "AMENDMENT NO 5") to the A320 Family Purchase Agreement covering

G. The Buyer and the Seller have entered into an Amendment No 6 on July 27th, 2001 (hereinafter referred to as "AMENDMENT NO 6") to the A320 Family Purchase Agreement covering

H. The Buyer and the Seller have entered into an Amendment No 7 on September 06th, 2001 (hereinafter referred to as "AMENDMENT NO 7") to the A320 Family Purchase Agreement

(ii) *

K. The Buyer and the Seller have entered into an Amendment No 10 on April 08th, 2004 (hereinafter referred to as "AMENDMENT NO 10") to the A320 Family Purchase Agreement covering

M. The Buyer and the Seller have entered into an Amendment No 12 on June 16th, 2005 (hereinafter referred to as "AMENDMENT NO 12") to the A320 Family Purchase Agreement covering

NOW THEREFORE IT IS AGREED AS FOLLOWS:

TABLE OF CONTENTS

CLAUSES   TITLES
-------   ------
1         Scope
2         * Delivery Dates
3
4         *
5
6
7
8
9         Option Rights
10        *
11
12        Miscellaneous Provisions

1- SCOPE

The scope of this Amendment No 13 is to amend certain provisions of the A320 Family Purchase Agreement,

2- * AIRCRAFT DELIVERY DATED

Sub-Clause 9.1 of the A320 Family Purchase Agreement is hereby cancelled and replaced by the following:

QUOTE

9.1 Delivery Schedule

Subject to the provisions of Clauses 2, 7, 8, 10 and 18 the Seller shall have the Aircraft ready for delivery at the Aircraft final assembly line in the following months:

Aircraft Contractual Rank   Delivery Date   MSN   Aircraft Type
-------------------------   -------------   ---   -------------
                            *

[7 pages redacted]

12 MISCELLANEOUS PROVISIONS

This Amendment No 13 shall be without prejudice to the rights of the Seller and the Buyer under the A320 Family Purchase Agreement, at law and/or otherwise. If not otherwise expressly stated in this Amendment No 13, the A320 Family Purchase Agreement, its Exhibits and Letter Agreements shall apply also to this Amendment No 13.

This Amendment No 13 supersedes any previous understandings, commitments or representations whatsoever oral or written with respect to the matters referred to herein.

Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned thereto in the A320 Family Purchase Agreement, its Exhibits and Letter Agreements.

In the event of any inconsistency between the A320 Family Purchase Agreement and the present Amendment No 13, the latter shall prevail to the extent of said inconsistency.

This Amendment No 13 has been executed in two (2) original specimens which are in English.

IN WITNESS WHEREOF this Amendment No 13 to the A320 Family Purchase Agreement was duly entered into the day and year first above written.

For and on behalf of                    For and on behalf of

TAM - LINHAS AEREAS S.A.                AIRBUS S.A.S.


/s/                                     /s/
-------------------------------------   ----------------------------------------
Name:                                   Name:
      -------------------------------         ----------------------------------
Title:                                  Title:
       ------------------------------          ---------------------------------


WITNESS                                 WITNESS


                                        /s/
-------------------------------------   ----------------------------------------
Name:                                   Name:
      -------------------------------         ----------------------------------
Title:                                  Title:
       ------------------------------          ---------------------------------

EXHIBIT A TO THE AMENDMENT NO 13

The seller have developed AIRMAN software dedicated to maintenance operation for new aircraft equipped with on-board monitoring function. The three major functions of AIRMAN are line maintenance, hangar maintenance and engineering.

With license reference GCS/062.0037/02-issue 3 * TAM aircraft are scheduled to be connected in June / July 05 for a duration of * years.

Exhibit 10.2

A350

PURCHASE AGREEMENT

BETWEEN

AIRBUS S.A.S.
AS SELLER

AND

TAM-LINHAS AEREAS S.A.
AS BUYER

DATE: December 20th, 2005

REFERENCE: CCC 337.0042/05

Foreword - Page 1/4

CONTENTS

CLAUSES   TITLES
-------   ------
    0     DEFINITIONS AND INTERPRETATION
    1     SALE AND PURCHASE
    2     SPECIFICATION
    3     PRICES
    4     PRICE REVISION
    5     PAYMENTS
    6     MANUFACTURE PROCEDURE - INSPECTION
    7     CERTIFICATION
    8     BUYER'S TECHNICAL ACCEPTANCE
    9     DELIVERY
   10     EXCUSABLE DELAY
   11     NON-EXCUSABLE DELAY
   12     WARRANTIES AND SERVICE LIFE POLICY
   13     PATENT AND COPYRIGHT INDEMNITY
   14     TECHNICAL DATA AND SOFTWARE SERVICES
   15     SELLER'S REPRESENTATIVES
   16     TRAINING AND TRAINING AIDS
   17     EQUIPMENT SUPPLIER PRODUCT SUPPORT
   18     BUYER FURNISHED EQUIPMENT
   19     INDEMNIFICATION AND INSURANCE
   20     TERMINATION
   21     ASSIGNMENTS AND TRANSFERS
   22     MISCELLANEOUS PROVISIONS

Foreword - Page 2/4

CONTENTS

EXHIBITS    TITLES
--------    ------
Exhibit A   SPECIFICATION
Exhibit B   FORM OF SPECIFICATION CHANGE NOTICE
Exhibit C   AIRCRAFT PRICE REVISION FORMULA
Exhibit D   FORM OF CERTIFICATE OF ACCEPTANCE
Exhibit E   FORM OF BILL OF SALE
Exhibit F   SERVICE LIFE POLICY - ITEMS OF PRIMARY STRUCTURE
Exhibit G   TECHNICAL DATA INDEX
Exhibit H   MATERIAL SUPPLY AND SERVICES

LETTERS AGREEMENTS        TITLES
------------------        ------
Letter Agreement No 1:    *
Letter Agreement No 2:    *
Letter Agreement No 3:    OPTIONS
Letter Agreement No 4:    *
Letter Agreement No 5A:   A350-900 PERFORMANCE GUARANTEE (75,000 lbs Thrust)
Letter Agreement No 5B:   *
Letter Agreement No 5C:   *
Letter Agreement No 6A:   *
Letter Agreement No 6B:   *
Letter Agreement No 7:    *
Letter Agreement No 8:    *
Letter Agreement No 9:    *
Letter Agreement No 10:   MISCELLANEOUS
Letter Agreement No 11:   *

Foreword - Page 3/4

A 350-900 PURCHASE AGREEMENT

This A350-900 Purchase Agreement (the "AGREEMENT") is made as of the 20th day of December 2005

BETWEEN:

AIRBUS S.A.S., a societe par actions simplifiee, legal successor of Airbus S.N.C., formerly known as Airbus G.I.E. and Airbus Industrie G.I.E. created and existing under French law having its registered office at 1 Rond-Point Maurice Bellonte, 31707 Blagnac-Cedex, France and registered with the Toulouse Registre du Commerce under number RCS Toulouse 383 474 814 (the "SELLER"),

and

TAM - LINHAS AEREAS S.A. a company organised under the laws of Brazil having its principal place of business at Avenida Jurandir, 856, 20 andar, Lote 4, CEP 04072 - 000, Jardim CECI, SAO PAULO - SP. BRAZIL (the "BUYER")

WHEREAS subject to the terms and conditions of this Agreement, the Seller desires to sell the Aircraft to the Buyer and the Buyer desires to purchase the Aircraft from the Seller.

NOW THEREFORE IT IS AGREED AS FOLLOWS:

Foreword - Page 4/4

0 DEFINITIONS AND INTERPRETATION

0.1 IN addition to words and terms elsewhere defined in this Agreement, the initially capitalised words and terms used in this Agreement shall have the meaning set out below.

AFFILIATE                     means with respect to any person or entity, any
                              other person or entity directly or indirectly
                              controlling, controlled by or under common control
                              with such person or entity.

AGREEMENT                     means this Agreement including the Appendices and
                              Exhibits hereto and all Letter Agreements entered
                              into by the Buyer and the Seller in respect
                              hereof.

AIRCRAFT                      means an Airbus A350-900 aircraft including the
                              Airframe, the Engines, and any part, component,
                              furnishing or equipment installed on the Aircraft
                              on Delivery under the terms and conditions of this
                              Agreement

AIRCRAFT TRAINING SERVICES    means all training courses, flight training, line
                              training, flight assistance, line assistance,
                              maintenance support, maintenance training
                              (including practical training as defined in Clause
                              16.8.1) or training support performed on aircraft
                              and provided to the Buyer pursuant to this
                              Agreement.

AIRFRAME                      means the Aircraft excluding the Engines.

AIRCRAFT BASIC PRICE          has the meaning set out in Clause 3.1.

AIRCRAFT PRICE REVISION
FORMULA                       is set out in Exhibit C.

AVIATION AUTHORITY            means when used in respect of any jurisdiction the
                              government entity, which under the laws of such
                              jurisdiction has control over civil aviation or
                              the registration, airworthiness or operation of
                              aircraft in such jurisdiction.

BALANCE OF FINAL PRICE        has the meaning set out in Clause 5.4.1.

BILL OF SALE                  has the meaning set out in Clause 9.2.2.

BUSINESS DAY                  means (i) a day, other than a Saturday or Sunday
                              on which business of the kind contemplated by this
                              Agreement is carried out in France and Brazil, or
                              (ii) where used in relation to a payment, which is
                              also a day on which banks are open for business in
                              France, New York or Brazil.

BUYER FURNISHED EQUIPMENT     has the meaning set out in Clause 18.1.1.

CERTIFICATE OF ACCEPTANCE     has the meaning set out in Clause 8.3.

DEFAULT RATE                  means the rate of Default Interests as defined in
                              Clause 5.7.

DELIVERY                      means the transfer of title to the Aircraft from
                              the Seller to the Buyer in accordance with Clause
                              9.

DELIVERY DATE                 means the date on which Delivery shall occur.

DELIVERY LOCATION             means the facilities of the Seller at the location
                              of final

Clause 0 - Page 1/3

                              assembly of the Aircraft.

ENGINES                       has the meaning set out in Clause 2.2.

ENGINES MANUFACTURER          means the manufacturer of the Engines as set out
                              in Clause 2.2.

EXCUSABLE DELAY               has the meaning set out in Clause 10.1.

EXPORT AIRWORTHINESS
CERTIFICATE                   means an export certificate of airworthiness
                              issued by the Aviation Authority of the Delivery
                              Location.

FINAL PRICE                   has the meaning set out in Clause 3.2

GROUND TRAINING SERVICES      means all training courses performed in classrooms
                              (classical or Airbus CBT courses), full flight
                              simulator sessions, fixed base simulator sessions,
                              field trips and any other services provided to the
                              Buyer on the ground pursuant to this Agreement and
                              which are not Aircraft Training Services.

MANUFACTURE FACILITIES        means the various manufacture facilities of the
                              Seller, its Affiliates or any sub-contractor,
                              where the Airframe or its parts are manufactured
                              or assembled.

MATERIAL                      has the meaning set out in Clause 1.2 of Exhibit
                              H.

NON-EXCUSABLE DELAY           has the meaning set out in Clause 11.1.

PREDELIVERY PAYMENT           means the payment(s) determined in accordance with
                              Clause 5.3.

READY FOR DELIVERY            means the time when (i) the Technical Acceptance
                              Process has been successfully completed and (ii)
                              the Export Airworthiness Certificate has been
                              issued.

SCHEDULED DELIVERY MONTH      has the meaning set out in Clause 9.1.1.

SELLER'S REPRESENTATIVES      means the representatives of the Seller referred
                              to in Clause 15.2.

SELLER REPRESENTATIVES        means the services provided by the Seller to
SERVICES                      the Buyer and from the Buyer to the Seller
                              pursuant to Clause 15.

SELLER SERVICE LIFE POLICY    has the meaning set out in Clause 12.2.

SPARE PARTS                   means the items of equipment and material which
                              may be provided pursuant to Exhibit H.

SPECIFICATION CHANGE
NOTICE OR SCN                 means an agreement in writing between the parties
                              to amend the Specification pursuant to Clause 2.

SPECIFICATION                 means either (a) the Standard Specification if no
                              SCNs are applicable or (b) if SCNs are issued, the
                              Standard Specification as amended by all
                              applicable SCNs.

STANDARD SPECIFICATION        means the A350-900 standard specification
                              document

Clause 0 - Page 2/3

                              number G.000.09000, Issue B, dated June 30th,
                              2005, a copy of which has been annexed hereto in
                              form of a CD-Rom as Exhibit A.

SUPPLIER                      has the meaning set out in Clause 12.3.1.1.

SUPPLIER PART                 has the meaning set out in Clause 12.3.1.2.

SUPPLIER PRODUCT SUPPORT
AGREEMENT                     has the meaning set out in Clause 12.3.1.3.

TECHNICAL ACCEPTANCE
PROCESS                       has the meaning set out in Clause 8.1.1.

TECHNICAL DATA                has the meaning set out in Clause 14.1.

TOTAL LOSS                    has the meaning set out in Clause 10.4.

TYPE CERTIFICATE              has the meaning set out in Clause 7.1.

WARRANTED PART                has the meaning set out in Clause 12.1.1.

0.2            Clause headings and the Index are inserted for convenience of
               reference only and shall be ignored in the interpretation of this
               Agreement.

0.3            In this Agreement unless the context otherwise requires:

               (a)  references to Clauses, Appendices and Exhibits are to be
                    construed as references to the Clauses of, and Appendices,
                    and Exhibits to this Agreement and references to this
                    Agreement include its Schedules, Exhibits and Appendices;

               (b)  words importing the plural shall include the singular and
                    vice versa; and

               (c)  references to a person shall be construed as including,
                    without limitation, references to an individual, firm,
                    company, corporation, unincorporated body of persons and any
                    state or agency of a state.

Clause 0 - Page 3/3

1              SALE AND PURCHASE

               The Seller shall sell and deliver and the Buyer shall buy and
               take delivery of ten (10) A350-900 Aircraft on the Delivery Date
               at the Delivery Location upon the terms and conditions contained
               in this Agreement.

Clause 1 - Page 1/1

2              SPECIFICATION

2.1            AIRFRAME SPECIFICATION

2.1.1          SPECIFICATION

               The Airframe shall be manufactured in accordance with the
               Standard Specification, as modified or varied prior to the date
               of this Agreement by the Specification Change Notices listed in
               Appendix I or, as applicable. Appendix II to Exhibit A.

2.1.2          SPECIFICATION CHANGE NOTICE (SCN)

               The Specification may be amended by written agreement between the
               parties in a Specification Change Notice. Each Specification
               Change Notice shall be substantially in the form set out in
               Exhibit B and shall set out in detail the particular change to be
               made to the Specification and the effect, if any, of such change
               on design, performance, weight, time of Delivery of the Aircraft,
               and on the text of the Specification. Such SCN may result in an
               adjustment of the Aircraft Basic Price.

2.1.3          DEVELOPMENT CHANGES

               The Specification may also be revised by the Seller without the
               Buyer's consent in order to incorporate development changes if
               such changes do not adversely affect price, time of delivery,
               weight or performance of the Aircraft, * interchangeability or
               replaceability requirements under the Specification.

                                        *

               In any other case the Seller shall issue to the Buyer a
               Manufacturer Specification Change Notice. Development changes are
               changes deemed necessary by the Seller to improve the Aircraft,
               prevent delay or ensure compliance with this Agreement

2.1.4          SPECIFICATION CHANGE NOTICES FOR CERTIFICATION

               The provisions relating to Specification Change Notices for
               certification are set out in Clauses 7.2. and 7.3.

2.1.5          BUYER IMPORT REQUIREMENTS

               The provisions relating to Specification Change Notices for Buyer
               import requirements are set out in Clause 7.4.

2.1.6          INCONSISTENCY

               In the event of any inconsistency between the Specification and
               any other part of this Agreement, this Agreement shall prevail to
               the extent of such inconsistency.

2.2            ENGINES

               The Airframe shall be equipped with a set of two (2) General
               Electric GEnx-1A75 engines (Engine Thrust 75,000 Lbs) (the
               "ENGINES").

Clause 2 - Page 1/2

2.3            CUSTOMISATION MILESTONES CHART

               Within a reasonable period following signature of the Agreement,
               the Seller shall provide the Buyer with a Customisation
               Milestones Chart setting out the minimum lead times prior to the
               Scheduled Delivery Month of the Aircraft, when a mutual agreement
               shall be reached (such agreement to be reflected in the execution
               of one or more SCNs) in order to integrate into the
               Specification, any items requested by the Buyer from the
               Specification Changes Catalogues made available by the Seller.

Clause 2 - Page 2/2

3              PRICES

3.1            Aircraft Basic Price

3.1.1          The Aircraft Basic Price includes the basic price of the
               Airframe, nacelles, thrust reversers and Engines (General
               Electric Genx 1A75). The Aircraft Basic Price is the sum of:

               (i)  the basic price of the Aircraft as defined in the Standard
                    Specification (excluding Buyer Furnished Equipment), which
                    is:

                                       *

               (ii) the sum of the basic prices of all SCNs set forth in
                    Appendix II to the Exhibit A (the "Aircraft Modification
                    Package Price"), which is:

                                       *

3.1.2          The Aircraft Basic Price has been established in accordance with
               the average economic conditions prevailing in December 2002,
               January 2003, February 2003 and corresponding to a theoretical
               delivery in JANUARY 2004 - (the "Base Period").

3.2            Final Price

               The Final Price of each Aircraft shall be the sum of:

               (i)  the Aircraft Basic Price as revised as of the Delivery Date
                    in accordance with Clause 4; plus

               (ii) the aggregate of all increases or decreases to the Aircraft
                    Basic Price as agreed in any Specification Change Notice or
                    part thereof applicable to the Aircraft subsequent to the
                    date of this Agreement as revised as of the Delivery Date in
                    accordance with Clause 4; plus

               (iii) any other amount due by the Buyer to the Seller provided
                    for or resulting from the any other provision of this
                    Agreement and/or any other written agreement between the
                    Buyer and the Seller with respect to the Aircraft.

Clause 3 - Page 1/1

4. PRICE REVISION

The Aircraft Basic Price is subject to revision in accordance with the Aircraft Price Revision Formula up to and including the Delivery Date (as set forth in Exhibit C).

Clause 4 - Page 1/1

5              PAYMENTS

5.1            SELLER'S ACCOUNT

               The Buyer shall pay the Predelivery Payments, the Balance of
               Final Price and/or any other amount due by the Buyer to the
               Seller, to the Seller's account:

               Beneficiary Name: AIRBUS

               account identification: 0121 635 000 100

               with:

               CALYON
               SWIFT: CRLYUS33
               ABA: 026008073
               1301 avenue of the Americas
               New York, NY 10019
               USA

               or to such other account as may be designated in writing by the
               Seller.

5.2            COMMITMENT FEE

               An amount equal to the initial commitment fee of US Dollars * per
               Aircraft already paid by the Buyer to the Seller prior to the
               date of this Agreement shall be deducted from the first
               Predelivery Payment due under this Agreement.

5.3            PREDELIVERY PAYMENTS

5.3.1          The Buyer shall pay Predelivery Payments to the Seller calculated
               on the predelivery payment reference price of each Aircraft (the
               "Predelivery Payment Reference Price", as defined herebelow). The
               Predelivery Payment Reference Price is determined by the
               following formula:

               A = Pb (1 + 0.03N)

               Where

               A  : The Predelivery Payment Reference Price for Aircraft to be
                    delivered in year T;

               T  : the year of Delivery of the relevant Aircraft

               Pb : the Aircraft Basic Price;

               N  : (T- *

Clause 5 - Page 1/5

5.3.2          Such Predelivery Payments shall be made in accordance with the
               following schedule:

               DUE DATE OF PAYMENTS   PERCENTAGE OF
                                      PREDELIVERY PAYMENT
                                      REFERENCE PRICE

                                        *

               In the event that at signature of the Agreement any of the above
               payments due at * months prior to Delivery have already fallen
               due as the respective Deliveries are scheduled at less than *  '
               months after signature, such payments shall be made together with
               the payment of * due upon signature of the Agreement.

5.3.3          Any Predelivery Payment received by the Seller shall constitute
               an instalment ("acompte") in respect of the Final Price of the
               Aircraft. The Seller shall be entitled to hold and use any
               Predelivery Payment as absolute owner thereof, subject only to
               (i) the obligation to deduct any such Predelivery Payment from
               the Final Price when calculating the Balance of Final Price or
               (ii) the obligation to repay to the Buyer an amount equal to the
               Predelivery Payments pursuant to any other provision of this
               Agreement.

5.3.4          If any Predelivery Payment is not received on the relevant due
               date specified in Clause 5.3.2 then, and in addition to any other
               rights and remedies available to Seller, the Seller shall have
               the right to set back the Scheduled Delivery Month by a period of

* for each * days such payment is delayed.

Furthermore, if such delay is greater than * the Seller shall have no obligation to deliver the Aircraft within the Scheduled Delivery Month as modified pursuant to the preceding paragraph. Upon receipt of the full amount of all delayed Predelivery Payments, together with Default Interest pursuant to Clause 5.7, the Seller shall inform the Buyer of a new Scheduled Delivery Month consistent with the Seller's other commitments and production capabilities.

Clause 5 - Page 2/5

5.3.5          Specification Change Notice Predelivery Payments

               The Seller shall be entitled to request Predelivery Payments for
               each SCN executed after signature of this Agreement if such SCN
               does not originate from the Seller's system or catalogue
               configuration guides. Such Predelivery Payments shall correspond
               to.

                                        *

5.4            BALANCE OF FINAL PRICE

5.4.1          The Balance of the Final Price payable by the Buyer to the Seller
               on the Delivery Date shall be the Final Price less the amount of
               all Predelivery Payments received by the Seller for the relevant
               Aircraft on or before the Delivery Date.

5.4.2          Upon receipt of the Seller's invoice, immediately prior *
               Delivery, the Buyer shall pay to the Seller the Balance of the
               Final Price.

5.5            OTHER CHARGES

               Unless expressly stipulated otherwise, any other charges due
               under this Agreement other than those set out in Clauses 5.2, 5.3
               and 5.4 shall be paid by the Buyer at the same time as payment of
               the Balance of Final Price or, if invoiced after the Delivery
               Date, within * after the invoice date.

5.6            METHOD OF PAYMENT

5.6.1          All payments provided for in this Agreement shall be made in the
               United States Dollars (USD) in immediately available funds.

5.6.2          All payments due to the Seller hereunder shall be made in full,
               without set-off, counterclaim, deduction or withholding of any
               kind. Consequently, the Buyer shall procure that the sums
               received by the Seller under this Agreement shall be equal to the
               full amounts expressed to be due to the Seller hereunder, without
               deduction or withholding on account of and free from any and all
               taxes, levies, imposts, dues or charges of whatever nature. In
               the event that the tax laws of Brazil change in a manner that
               would require the Buyer to make any such deduction or withholding
               the Buyer shall pay such additional amounts as may be necessary
               in order that the net amount received by the Seller after such
               deduction or withholding shall be equal to the amounts which
               would have been received in the absence of such deduction or
               withholding and pay to the relevant taxation or other authorities
               within the period for payment permitted by applicable law, the
               full amount of the deduction or withholding.

5.7            DEFAULT INTEREST

               If any payment due to the Seller under this Agreement including
               but not limited to any Predelivery Payment, option fees for the
               Aircraft as well as any payment due to the Seller for any spare
               parts, data, documents, training and services, is not received on
               the due date, without prejudice to the Seller's other rights
               under this Agreement and at law, the Seller shall be entitled to
               interest for late payment calculated on the amount due from and
               including the due date of payment up to and including the date
               when the payment is received by the Seller at a rate equal to the
               London Interbank Offered Rate (LIBOR) for * deposits in US
               Dollars (as published in the Financial Times on the due date)
               plus *

Clause 5 - Page 3/5

               per year (part year to be prorated).

               All such interest shall be compounded monthly and calculated on
               the basis of the actual number of days elapsed in the month
               assuming a thirty (30) day month and a three hundred and sixty
               (360) day year.

5.8            TAXES

5.8.1          The amounts stated in this Agreement to be payable by the Buyer
               are exclusive of value added tax ("VAT") chargeable under the
               laws of the Delivery Location.

5.8.2          Subject to Buyer exporting the Aircraft after Delivery and
               providing the Seller with all necessary documents attesting to
               this exportation, the Seller shall pay all taxes, duties or
               similar charges of any nature whatsoever levied, assessed,
               charged or collected for or in connection with the manufacture,
               assembly, sale and delivery under this Agreement of any of the
               Aircraft, services, instructions and data delivered or furnished
               hereunder provided such charges have been promulgated and are
               enforceable under the laws of the Delivery Location, or if
               different, FRANCE, the FEDERAL REPUBLIC OF GERMANY, GREAT BRITAIN
               or SPAIN.

5.8.3          The Buyer shall bear the costs of and pay any and all taxes,
               duties or similar charges of any nature whatsoever not assumed by
               the Seller under Clause 5.8.2 including but not limited to any
               duties or taxes due upon or in relation to the importation or
               registration of the Aircraft in the Buyer's country and/or any
               withholdings or deductions levied or required in the Buyer's
               country in respect of the payment to the Seller of any amount due
               by the Buyer hereunder.

5.8.4                                   *

5.9            PROPRIETARY INTEREST

               The Buyer shall not, by virtue of anything contained in this
               Agreement (including, without limitation, any Predelivery
               Payments hereunder, or any designation or identification by the
               Seller of a particular aircraft as an Aircraft to which any of
               the provisions of this Agreement refers) acquire any proprietary,
               insurable or other interest whatsoever in any Aircraft before
               Delivery of and payment for such Aircraft, as provided in this
               Agreement.

5.10           SET-OFF

               The Seller may set-off any matured obligation owed by the Buyer
               to the Seller and/or its Affiliates * agreement between the Buyer
               and the Seller against any obligation owed by the Seller to the
               Buyer *. regardless of the place of payment or currency (it
               being understood that if this obligation is unascertainable it
               may be estimated and the set-off made in respect of such
               estimate).

Clause 5 - Page 4/5

5.11           CROSS-COLLATERALISATION

5.11.1         The Buyer hereby agrees that, notwithstanding any provision to
               the contrary in this Agreement, in the event that the Buyer
               should fail to make any material payment owing under this
               Agreement or under any other under any * agreement between the
               Buyer and the Seller and/or any of their respective Affiliates
               (the "Other Agreement") * the Seller may:

               (i)  withhold payment to the Buyer or its Affiliates of any sums
                    that may be due to or claimed by the Buyer or its Affiliates
                    from the Seller or its Affiliates pursuant to this Agreement
                    or any Other Agreement, including Predelivery Payments,
                    unless or until the default under this Agreement or the
                    Other Agreement is cured or remedied; and

               (ii) apply any amount of any Predelivery Payment it then holds
                    under this Agreement in respect of any of the Aircraft as
                    well as any other monies held pursuant to any Other
                    Agreement (collectively the "Relevant Amounts") in such
                    order as the Seller deems appropriate in satisfaction of any
                    amounts due and unpaid by the Buyer or its Affiliates.

                                       *

                    The rights granted to the Seller in the preceding paragraphs
                    (i) and (ii) are without prejudice and are in addition to
                    and shall not be deemed a waiver of any other rights and
                    remedies the Seller or its Affiliates may have at law or
                    under this Agreement or any Other Agreement, including the
                    right of set-off.

5.11.2         In the event that the Seller, in accordance with the provisions
               hereof, applies any amount of any Predelivery Payment it then
               holds under this Agreement in respect of any of the Aircraft in
               satisfaction of the amount due and unpaid by the Buyer or its
               Affiliates or to compensate for losses and/or damages to the
               Seller or its Affiliates as a result of the Buyer's or its
               Affiliates' failure to make payment in a timely manner under the
               Agreement or any Other Agreement, then the Seller shall notify
               the Buyer to that effect. Within * Business Days of issuance of
               such notification, the Buyer shall pay by wire transfer of funds
               immediately available to the Seller the amount of the Predelivery
               Payment that has been applied by the Seller as set forth above.

               Failure of the Buyer to pay such amount in full, shall entitle
               the Seller to (i) collect interest on such unpaid amount in
               accordance with Clause 5.7 hereof from the * Business Day
               following the Seller's written request to the Buyer for such
               payment and (ii) treat such failure as an additional termination
               event for which the Seller shall be entitled to the remedies
               available under Clause 20.2 of the Agreement.

Clause 5 - Page 5/5

6              MANUFACTURE PROCEDURE - INSPECTION

6.1.           MANUFACTURE PROCEDURE

               Each Airframe shall be manufactured in accordance with the
               relevant requirements of the laws of the jurisdiction of
               incorporation of the Seller or of its relevant Affiliates as
               enforced by the Aviation Authority of such jurisdictions.

6.2            INSPECTION

6.2.1          Subject to providing the Seller with certificates evidencing
               compliance with the insurance requirements set forth in Clause
               19, the Buyer or its duly authorised representatives (the
               "BUYER'S INSPECTOR(S)") shall be entitled to inspect the
               manufacture of the Airframe and all materials and parts obtained
               by the Seller for the manufacture of the Airframe on the
               following terms and conditions;

               (i)  any inspection shall be made according to a procedure to be
                    agreed upon with the Buyer but shall be conducted pursuant
                    to the Seller's own system of inspection as developed under
                    the supervision of the relevant Aviation Authority;

               (ii) the Buyer's Inspector(s) shall have access to such relevant
                    technical data as is reasonably necessary for the purpose of
                    the inspection;

               (iii) any inspection and any related discussions with the Seller
                    and other relevant personnel by the Buyer's Inspector(s)
                    shall be at reasonable times during business hours and shall
                    take place in the presence of relevant inspection department
                    personnel of the Seller;

               (iv) the inspections shall be performed in a manner not to unduly
                    delay or hinder the manufacture or assembly of the Aircraft
                    or the performance of this Agreement by the Seller or any
                    other work in progress at the Manufacture Facilities.

6.2.2          LOCATION OF INSPECTIONS

               The Buyer's Inspector(s) shall be entitled to conduct any such
               inspection at the relevant Manufacture Facility of the Seller or
               its Affiliates and where possible at the Manufacture Facilities
               of the sub-contractors provided that if access to any part of the
               Manufacture Facilities where the Airframe manufacture is in
               progress or materials or parts are stored are restricted for
               security or confidentiality reasons, the Seller shall be allowed
               reasonable time to make the relevant items available elsewhere.

6.3            SELLER'S SERVICE FOR BUYER'S INSPECTOR(S)

               For the purpose of the inspections, and commencing with the date
               of this Agreement until the Delivery Date, the Seller shall
               furnish without additional charge suitable space and office
               equipment in or conveniently located with respect to the Delivery
               Location for the use of a reasonable number of Buyer's
               Inspector(s).

Clause 6 - Page 1/1

7              CERTIFICATION

7.1            TYPE CERTIFICATION

               The Aircraft shall have been type certificated under European
               Aviation Safety Agency (EASA) procedures for joint certification
               in the transport category. The Seller shall have obtained the
               relevant type certificate (the "TYPE CERTIFICATE") to allow the
               issuance of the Export Airworthiness Certificate.

7.2            EXPORT AIRWORTHINESS CERTIFICATE

7.2.1          The Aircraft shall be delivered to the Buyer with an Export
               Airworthiness Certificate valid for export of the Aircraft to
               Brazil.

7.2.2          If, any time before the date on which the Aircraft is Ready for
               Delivery, any law or regulation is enacted, promulgated, becomes
               effective and/or an interpretation of any law or regulation is
               issued which requires any change to the Specification for the
               purposes of obtaining the Export Airworthiness Certificate (a
               "CHANGE IN LAW"), the Seller shall make the required variation or
               modification and the parties hereto shall sign a Specification
               Change Notice which specifies the effects, if any, upon the
               guaranteed performances, weights, interchangeability, time of
               Delivery, price of the Aircraft and text of the Specification.

7.2.3          The Seller shall as far as practicable (but at its sole
               discretion and without prejudice to Clause 7.3.1 (ii)) take into
               account the information available to it concerning any proposed
               law, regulation or interpretation which could become a Change in
               Law in order to minimise the costs of changes to the
               Specification as a result of such proposed law, regulation or
               interpretation becoming effective prior to the Aircraft being
               Ready for Delivery.

7.3            COSTS OF SCNS FOR CERTIFICATION

7.3.1          The costs of implementing the variation or modification referred
               to in Clause 7.2.2 above shall be

                                       *

7.3.2.         Notwithstanding the provisions of sub-Clauses 7.3.1 (i) and (ii),
               if the Change in Law relates to the Engines, the costs shall be
               borne in accordance with such arrangements as may be made
               separately between the Buyer and the Engines Manufacturer.

Clause 7 - Page 1/2

7.4            VALIDATION OF THE EXPORT AIRWORTHINESS CERTIFICATE

7.4.1          The Seller shall endeavour to obtain the validation of the Export
               Airworthiness Certificate by the Buyer's Aviation Authority.

7.4.2          Where the Buyer's Aviation Authority requires a modification to
               comply with additional import aviation requirements and/or supply
               of additional data prior to the issuance of the Export
               Airworthiness Certificate, the Seller shall incorporate such
               modification and/or provide such data at costs to be borne by the
               Buyer. The parties shall sign a Specification Change Notice which
               specifies the effects, if any, upon the guaranteed performances,
               weights, interchangeability, time of Delivery and price of the
               Aircraft.

Clause 7 - Page 2/2

8              BUYER'S TECHNICAL ACCEPTANCE

8.1            TECHNICAL ACCEPTANCE PROCESS

8.1.1          Prior to Delivery the Aircraft shall undergo * technical
               acceptance process (the "TECHNICAL ACCEPTANCE PROCESS").
               Completion of the Technical Acceptance Process shall demonstrate
               the satisfactory functioning of the Aircraft and shall be deemed
               to demonstrate compliance with the Specification. Should it be
               established that the Aircraft does not comply with the Technical
               Acceptance Process requirements, the Seller shall without
               hindrance from the Buyer be entitled to carry out any necessary
               changes and, as soon as practicable thereafter, resubmit the
               Aircraft to such further Technical Acceptance Process as is
               necessary to demonstrate the elimination of the non-compliance.

8.1.2          The Technical Acceptance Process shall:

               (i)  commence *

               (ii) take place at the Delivery Location;

               (iii) be carried out by the personnel of the Seller, *

               (iv) include a technical acceptance flight which shall not exceed
                    a period of three (3) hours.

8.2            BUYER'S ATTENDANCE

8.2.1          The Buyer shall be entitled to elect to attend the Technical
               Acceptance Process.

8.2.2          If the Buyer elects to attend the Technical Acceptance Process,
               the Buyer;

               (i)  shall co-operate in complying with the reasonable
                    requirements of the Seller with the intention of completing
                    the Technical Acceptance Process within * Business Days
                    after its commencement;

               (ii) may have a maximum of * of the Buyer's representatives
                    (with no more than * such representatives having access to
                    the cockpit at any one time) accompany the Seller's
                    representatives on a technical acceptance flight and during
                    such flight the Buyer's representatives shall comply with
                    the instructions of the Seller's representatives.

8.2.3          If the Buyer, * does not attend and/or fails to co-operate in the
               Technical Acceptance Process, the Seller shall be entitled to
               complete the Technical Acceptance Process and the Buyer shall be
               deemed to have accepted the Technical Acceptance Process as
               satisfactory in all respects.

Clause 8 - Page 1/2

8.3            CERTIFICATE OF ACCEPTANCE

               Upon successful completion of the Technical Acceptance Process,
               the Buyer shall, on or before the Delivery Date, sign and deliver
               to the Seller a certificate of acceptance in respect of the
               Aircraft in the form of Exhibit D (the "CERTIFICATE OF
               ACCEPTANCE").

8.4            AIRCRAFT UTILISATION

               The Seller shall, without payment or other liability to the
               Buyer, be entitled to use the Aircraft prior to Delivery as may
               be necessary to obtain the certificates required under Clause
               7.2, and such use shall not prejudice the Buyer's obligation to
               accept Delivery of the Aircraft hereunder.

               However the Seller shall not be authorised to use the Aircraft
               during more than * hours for any other purpose without the
               specific agreement of the Buyer.

Clause 8 - Page 2/2

9              DELIVERY

9.1            DELIVERY SCHEDULE

9.1.1          Subject to Clauses 2, 7, 8, 10 and 18, the Seller shall have the
               Aircraft Ready for Delivery at the Delivery Location within the

following quarters:

- Aircraft No 1....

- Aircraft No 2....

- Aircraft No 3....

- Aircraft No 4....

- Aircraft No 5.... *
- Aircraft No 6....

- Aircraft No 7....

- Aircraft No 8....

- Aircraft No 9....

- Aircraft No 10...

At a time closer to the above mentioned quarters, at the latest * months prior to the beginning of the relevant quarter, the Seller shall precise to the Buyer the delivery month for the relevant Aircraft within such quarter, subject to the Seller's then prevailing industrial and commercial constraints. Each of such months shall be, with respect to the corresponding Aircraft, the "SCHEDULED DELIVERY MONTH".

9.1.2          The Seller shall give the Buyer at least * days prior written
               notice of the anticipated week in which the Aircraft is scheduled
               to be Ready for Delivery.

               Thereafter, the Seller shall give the Buyer at least * days prior
               written notice of the anticipated date upon which the Aircraft
               shall be Ready for Delivery, such notification including the
               schedule of the Technical Acceptance Process as set forth in
               Clause 8.1.

               Thereafter the Seller shall without undue delay notify the Buyer
               in writing of any change in such date necessitated by the
               conditions of manufacture or flight.

9.2            DELIVERY

9.2.1          The Buyer shall send its representatives to the Delivery Location
               to take Delivery of, and collect, the Aircraft within * days
               after the date on which the Aircraft is Ready for Delivery and
               shall pay the Balance of the Final Price on or before the
               Delivery Date.

9.2.2          The Seller shall deliver and transfer title to the Aircraft free
               and clear of all encumbrances to the Buyer provided that the
               Balance of the Final Price has been paid by the Buyer pursuant to
               Clause 5.4 and that the Certificate of Acceptance has been signed
               and delivered to the Seller pursuant to Clause 8.3. The Seller
               shall provide the Buyer with a bill of sale in the form of
               Exhibit E (the "BILL OF SALE") and/or such other documentation
               confirming transfer of title and receipt of the Final Price as
               may reasonably be requested by the Buyer. Title to, property in
               and risk of loss of or damage to the Aircraft shall be
               transferred to the Buyer on Delivery.

9.2.3          Should the Buyer fail to

               (i)  deliver the signed Certificate of Acceptance to the Seller *
                    within the delivery period as defined in Clause 9.2.1; or

Clause 9 - Page 1/2

               (ii) pay the Balance of the Final Price for the Aircraft to the
                    Seller within the above defined period

                    then the Buyer shall be deemed to have rejected delivery of
                    the Aircraft without warrant when duly tendered to it
                    hereunder. In addition to Clause 5.7 and the Seller's other
                    rights under this Agreement, the Seller shall retain title
                    to the Aircraft but the Buyer shall thereafter indemnify and
                    hold the Seller harmless against any and all costs
                    (including but not limited to any parking, storage, and
                    insurance costs, * and consequences resulting from such
                    failure, it being understood that the Seller shall be under
                    no duty to store, park, insure, or otherwise protect the
                    Aircraft.

9.3            FLY AWAY

9.3.1          The Buyer and the Seller shall co-operate to obtain any licenses
               which may be required by the Aviation Authority of the Delivery
               Location for the purpose of exporting the Aircraft.

9.3.2          All expenses of, or connected with, flying the Aircraft from the
               Delivery Location after Delivery shall be borne by the Buyer. The
               Buyer shall make direct arrangements with the supplying companies
               for the fuel and oil required for all post-Delivery flights.

Clause 9 - Page 2/2

10             EXCUSABLE DELAY

10.1           The Buyer acknowledges that each of the Aircraft is to be
               manufactured by Seller in performance of this Agreement and that
               the Scheduled Delivery Month is based on the assumption that
               there shall be no delay due to causes beyond the control of the
               Seller. Accordingly, Seller shall not be responsible for any
               delay in the Delivery of the Aircraft or delay or interruption in
               the performance of the other obligations of the Seller hereunder
               due to causes beyond its control, and not occasioned by its fault
               or negligence including (but without limitation) acts of God or
               the public enemy, war, civil war, warlike operations, terrorism,
               insurrections or riots, fires, explosions, natural disasters,
               compliance with any applicable foreign or domestic governmental
               regulation or order, labour disputes * causing cessation,
               slowdown or interruption of work, inability after due and timely
               diligence to procure materials, equipment or parts, general
               hindrance in transportation or failure of a sub-contractor or
               supplier to furnish materials, equipment or parts. Any delay or
               interruption resulting from any of the foregoing causes is
               referred to as an "EXCUSABLE DELAY". For the sake of clarity,
               delays in the launch of the A350 programme or certification do
               not constitute an Excusable Delay and the provisions of Clause 11
               shall apply to such delays, except if such delays are due to
               causes as listed hereabove.

10.2           If an Excusable Delay occurs:

               (i)  the Seller shall notify the Buyer of such Excusable Delay as
                    soon as practicable after becoming aware of the same;

               (ii) the Seller shall not be responsible for any damages arising
                    from or in connection with such Excusable Delay suffered or
                    incurred by the Buyer;

               (iii) the Seller shall not be deemed to be in default in the
                    performance of its obligations hereunder as a result of such
                    Excusable Delay;

               (iv) the Seller shall use all reasonable endeavors to minimize or
                    overcome any Excusable Delay to the extent it is reasonably
                    able to do so;

               (iv) the Seller shall as soon as practicable after the removal of
                    the cause of the delay resume performance of its obligations
                    under this Agreement and in particular shall notify to the
                    Buyer the revised Scheduled Delivery Month; and

                                        *

10.3           TERMINATION ON EXCUSABLE DELAY

10.3.1         If the Delivery of any Aircraft is delayed as a result of an
               Excusable Delay for a period of more than * months after the last
               day of the Scheduled Delivery Month then either party may
               terminate this Agreement with respect to the Aircraft so affected
               by giving written notice to the other party within thirty (30)
               days after the expiry of such * period provided that the Buyer
               shall not be entitled to terminate this Agreement pursuant to
               this Clause if the Excusable Delay results from a cause within
               its control.

10.3.2         If the Seller concludes that the Delivery of any Aircraft shall
               be delayed for more than * after the last day of the Scheduled
               Delivery Month due to an Excusable Delay and as a result thereof
               reschedules Delivery of such Aircraft to a date or month
               reflecting such delay then the Seller shall promptly notify the
               Buyer

Clause 10 - Page 1/3

               in writing to this effect and shall include in such notification
               the new Scheduled Delivery Month. Either party may thereupon
               terminate this Agreement with respect to such Aircraft by giving
               written notice to the other party within thirty (30) days after
               receipt by the Buyer of the notice of anticipated delay.

10.3.3         If this Agreement shall not have been terminated with respect to
               the delayed Aircraft during the thirty (30) day period referred
               to in either Clause 10.3.1 or 10.3.2 above, then the Seller shall
               be entitled to reschedule Delivery and the new Scheduled Delivery
               Month shall be notified to the Buyer and shall be binding on the
               parties.

10.3.4                                  *

10.4           TOTAL LOSS, DESTRUCTION OR DAMAGE

               If prior to Delivery, any Aircraft is lost, destroyed or in the
               reasonable opinion of the Seller is damaged beyond repair ("TOTAL
               LOSS"), the Seller shall notify the Buyer to this effect within *
               days of such occurrence, or in the case of loss or destruction
               within * The Seller shall include in said notification (or as
               soon after the issue of the notice as such information becomes
               available to the Seller) the earliest date consistent with the
               Seller's other commitments and production capabilities that an
               aircraft to replace the Aircraft may be delivered to the Buyer
               and the Scheduled Delivery Month shall be extended as specified
               in the Seller's notice to accommodate the delivery of the
               replacement aircraft; provided, however, that in the event the
               specified extension of the Scheduled Delivery Month to a month is
               exceeding * months after the last day of the original
               Scheduled Delivery Month then this Agreement shall terminate with
               respect to said Aircraft unless:

               (i)  the Buyer notifies the Seller within one (1) month of the
                    date of receipt of the Seller's notice that it desires the
                    Seller to provide a replacement aircraft during the month
                    quoted in the Seller's notice; and

               (ii) the parties execute an amendment to this Agreement recording
                    the variation in the Scheduled Delivery Month;

               provided, however, that nothing herein shall require the Seller
               to manufacture and deliver a replacement aircraft if such
               manufacture would require the reactivation of its production line
               for the model or series of aircraft which includes the Aircraft
               purchased hereunder.

Clause 10 - Page 2/3

10.5           TERMINATION RIGHTS EXCLUSIVE

               In the event that this Agreement shall be terminated as provided
               for under the terms of Clauses 10.3 or 10.4, such termination
               shall discharge all obligations and liabilities of the parties
               hereunder with respect to such affected Aircraft and undelivered
               material, services, data or other items applicable thereto and to
               be furnished hereunder and neither party shall have any claim
               against the other for any loss resulting from such non-delivery.
               The Seller shall in no circumstances have any liability
               whatsoever for Excusable Delay other than as set forth in this
               Clause 10.

Clause 10 - Page 3/3

11             NON-EXCUSABLE DELAY

11.1           LIQUIDATED DAMAGES

               Should any of the Aircraft not be Ready for Delivery to the Buyer
               within * days after the last day of the Scheduled Delivery Month
               (as varied by virtue of Clauses 2, 7 and 10) (the "DELIVERY
               PERIOD") and such delay is not as a result of an Excusable Delay
               or Total Loss (a "NON-EXCUSABLE DELAY"), then the Buyer shall
               have the right to claim, and the Seller shall pay by way of
               liquidated damages to the Buyer for each day of delay in the
               Delivery commencing on the date falling * days after the last day
               of the Scheduled Delivery Month, the amounts:

                                        *

               The amount of such liquidated damages shall in no event exceed
               the total of US Dollars: * in respect of any one Aircraft.

                                        *

               The Buyer shall submit a claim in respect of such liquidated
               damages in writing to the Seller.

11.2                                    *

11.3           RE-NEGOTIATION

               If, as a result of Non-Excusable Delay, Delivery does not occur
               in the period falling * months after the Delivery Period, the
               Buyer shall have the right exercisable written notice to the
               Seller given not less than fifteen (15) days nor more than one
               (1) month after the expiration of the * months falling after the
               Delivery Period to require from the Seller a re-negotiation of
               the Scheduled Delivery Month for the affected Aircraft. Unless
               otherwise agreed between the Seller and the Buyer during such
               re-negotiation, the said re-negotiation shall not prejudice the
               Buyer's right to receive liquidated damages in accordance with
               Clause 11.1 during the period of Non-Excusable Delay.

Clause 11 - Page 1/2

11.4           TERMINATION

               If, as a result of Non-Excusable Delay, Delivery does not occur
               in the period falling * months after the Delivery Period and the
               parties have not renegotiated the Delivery Date pursuant to
               Clause 11.2, the Buyer shall have the right exercisable by
               written notice to the other party, given not less than one (1)
               month nor more than two (2) months after expiration of such *
               months to terminate this Agreement in respect of the affected
               Aircraft * In the event of such termination neither party shall
               have any claim against the other in respect of such nondelivery
               except that the Seller shall pay to the Buyer an amount equal to
               the Predelivery Payments received from the Buyer hereunder * in
               respect of such affected Aircraft, calculated from the date of
               payment of such Predelivery Payment until the date of
               reimbursement hereunder, and shall pay to the Buyer any amounts
               due pursuant to Clause 11.1.

11.5           LIMITATION OF DAMAGES

               The Buyer and the Seller agree that payment by the Seller of the
               amounts due pursuant to Clause 11.1 shall be considered to be a
               liquidated damages provision (Clause penale) within the meaning
               of Articles 1152 and 1226 of the French Civil Code and has been
               calculated to compensate the Buyer for its entire damages for all
               losses of any kind due to Non-Excusable Delay. The Seller shall
               not in any circumstances have any liability whatsoever for
               Non-Excusable Delay other than as set forth in this Clause 11.

Clause 11 - Page 2/2

12             WARRANTIES AND SERVICE LIFE POLICY

               This Clause covers the terms and conditions of the warranty and
               service life policy.

12.1           STANDARD WARRANTY

12.1.1         NATURE OF WARRANTY

               Subject to the conditions and limitations as hereinafter provided
               for and except as provided for in Clause 12.1.2, the Seller
               warrants to the Buyer that each Aircraft and all Warranted Parts
               as defined hereinafter shall at Delivery to the Buyer:

               (i)  be free from defects in material;

               (ii) be free from defects in workmanship, including without
                    limitation processes of manufacture;

               (iii) be free from defects in design (including without
                    limitation the selection of materials) having regard to the
                    state of the art at the date of such design

                                        *

               (iv) be free from defects arising from failure to conform to the
                    Specification, except to those portions of the Specification
                    relating to performance or where it is expressly stated that
                    they are estimates, approximations or design aims.

               For the purpose of this Agreement the term "WARRANTED PART" shall
               mean any Seller proprietary component, equipment, accessory or
               part as installed on an Aircraft at Delivery of such Aircraft and

               (a)  which is manufactured to the detailed design of the Seller
                    or a subcontractor of the Seller and

               (b)  which bears a part number of the Seller at the time of such
                    delivery.

12.1.2         EXCLUSIONS

               The warranties set forth in Clause 12.1.1 shall not apply to
               Buyer Furnished Equipment, nor to the Engines, nor to any
               component, equipment, accessory or part purchased by the Seller
               that is not a Warranted Part except that:

               (i)  any defect in the Seller's workmanship incorporated in the
                    installation of such items in the Aircraft, including any
                    failure by the Seller to conform to the installation
                    instructions of the manufacturer of such item that
                    invalidates any applicable warranty from such manufacturer,
                    shall constitute a defect in workmanship for the purpose of
                    this Clause and be covered by the warranty set forth in
                    sub-Clause 12.1.1 (ii); and

               (ii) any defect inherent in the Seller's design of the
                    installation, in view of the state of the art at the date of
                    such design *

Clause 12 - 1/16

                    *, which impair the use of such item shall constitute a
                    defect in design for the purpose of this Clause and be
                    covered by the warranty set forth in sub-Clause 12.1.1
                    (iii).

12.1.3         WARRANTY PERIOD

               The warranties contained in Clauses 12.1.1 and 12.1.2 shall be
               limited to those defects which become apparent within * months
               after Delivery of the affected Aircraft ("WARRANTY PERIOD"), *

12.1.4         BUYER'S REMEDY AND SELLER'S OBLIGATION

12.1.4.1       The Buyer's remedy and the Seller's obligation and liability
               under Clauses 12.1.1 and 12.1.2 are limited to the removal,
               repair, replacement or correction of any Warranted Part which is
               defective and the reinstallation thereof on the Aircraft or to
               the supply of modification kits rectifying the defect, at the
               Seller's expense and option.

                                       *

               The Seller may equally at its option furnish a credit to the
               Buyer equal to the price at which the Buyer is entitled to
               purchase a replacement for the defective Warranted Part

                                        *

12.1.4.2       In the event of A defect covered by sub-Clauses 12.1.1 (iii),
               12.1.1 (iv) and 12.1.2 (ii) becoming apparent within the Warranty
               Period and the Seller being obliged to correct such defect, the
               Seller shall also, if so requested by the Buyer, make such
               correction in any Aircraft which has not yet been delivered to
               the Buyer; provided, however,

               (i)  that the Seller shall not be responsible nor deemed to be in
                    default on account of any delay in delivery of any Aircraft
                    or otherwise, in respect of the performance of this
                    Agreement due to the Seller's undertaking to make such
                    correction and provided further

               (ii) that, rather than accept a delay in the Delivery of any such
                    Aircraft, the Buyer may accept Delivery of such Aircraft
                    with subsequent correction of the defect by the Buyer at the
                    Seller's expense, or the Buyer may elect to accept Delivery
                    and thereafter file a warranty claim as though the defect
                    had become apparent immediately after Delivery of such
                    Aircraft.

                                        *

12.1.4.3       In addition to the remedies set forth in Clauses 12.1.4.1 and
               12.1.4.2, the Seller shall reimburse the direct labor costs spent
               by the Buyer in performing inspections of the Aircraft to
               determine whether or not a defect exists in any Warranted Part
               within the Warranty Period or until the corrective technical
               solution removing the need for the inspection is provided by the
               Seller.

Clause 12 - 2/16

The above commitment is subject to the following conditions:

               (i)  such inspections are recommended by a Seller Service
                    Bulletin to be performed within the Warranty Period;

               (ii) the reimbursement shall not apply for any inspections
                    performed as an alternative to accomplishing corrective
                    action when such corrective action has been made available
                    to the Buyer and such corrective action could have
                    reasonably been accomplished by the Buyer at the time such
                    inspections are performed or earlier,

               (iii) the labor rate to be used for the reimbursement shall be
                    labor rate defined in Clause 12.1.7, and

               (iv) the manhours used to determine such reimbursement shall not
                    exceed the Seller's estimate of the manhours required by the
                    Buyer for such inspections.

12.1.5         WARRANTY CLAIM REQUIREMENTS

               Each Buyer's warranty claim ("WARRANTY CLAIM") shall be
               considered by the Seller only if the following conditions are
               first fulfilled:

               (i)  the defect having become apparent within the Warranty
                    Period;

               (ii) the Buyer having submitted to the Seller proof reasonably
                    satisfactory to the Seller that the claimed defect is due to
                    a matter embraced within this Clause 12.1, and that such
                    defect has not resulted from any act or omission of the
                    Buyer, including but not limited to, any failure to operate
                    and maintain the affected Aircraft or part thereof in
                    accordance with the standards set forth or any matter
                    covered in Clause 12.1.10;

               (iii) the Buyer having returned as soon as practicable the
                    Warranted Part claimed to be defective to the repair
                    facilities as may be designated by the Seller, except when
                    the Buyer elects to repair a defective Warranted Part in
                    accordance with the provisions of Clause 12.1.7;

               (iv) the Seller having received a Warranty Claim as set forth in
                    Clause 12.1.6.

12.1.6         WARRANTY ADMINISTRATION

               The warranties set forth in Clause 12.1 shall be administered as
               hereinafter provided for:

               (i)  CLAIM DETERMINATION

                    Warranty Claim determination by the Seller shall be
                    reasonably based upon the claim details, reports from the
                    Seller's local representative, historical data logs,
                    inspection, tests, findings during repair, defect analysis
                    and other suitable documents.

               (ii) TRANSPORTATION COSTS

                    Transportation costs for sending a defective Warranted Part
                    to the

Clause 12 - 3/16

facilities designated by the Seller and for the return therefrom of a repaired or replaced Warranted Part shall be borne by'

(iii) RETURN OF AN AIRCRAFT

In the event of the Buyer desiring to return an Aircraft to the Seller for consideration of a Warranty Claim, the Buyer shall notify the Seller of its intention to do so and the Seller shall, prior to such return, have the right to inspect such Aircraft and thereafter, without prejudice to its rights hereunder, to repair such Aircraft, at its sole option, either at the Buyer's facilities or at another place acceptable to the Seller.

(iv) ON-AIRCRAFT WORK BY THE SELLER

In the event that a defect subject to this Clause 12.1 may justify the dispatch by the Seller of a working team to repair or correct such defect through the embodiment of one or several Seller's Service Bulletins at the Buyer's facilities, or in the event of the Seller accepting the return of an Aircraft to perform or have performed such repair or correction, then the labor costs for such on-Aircraft work are to be borne by the Seller.

The conditions which have to be fulfilled for on-Aircraft work by the Seller are the following:

(i) in the opinion of the Seller, the work necessitates the technical expertise of the Seller as manufacturer of the Aircraft.

Clause 12 - 4/16

If * of the above conditions are fulfilled and if the Seller is requested to perform the work, the Seller and the Buyer shall agree on a schedule and place for the work to be performed.

(v) WARRANTY CLAIM SUBSTANTIATION

In connection with each claim by the Buyer made under this Clause 12.1, the Buyer shall file a Warranty Claim on the Buyer's form within sixty (60) days after a defect became apparent. Such form must contain at least the following data:

a) description of defect and action taken, if any,

b) date of incident and/or removal date,

c) description of the defective part,

d) part number,

e) serial number (if applicable),

f) position on Aircraft,

g) total flying hours or calendar time, as applicable at the date of defect appearance,

h) time since last shop visit at the date of defect appearance (if applicable),

i) manufacturer serial number ("MANUFACTURER'S SERIAL NUMBER") of the Aircraft and/or its registration,

j) Aircraft total flying hours and/or number of landings at the date of defect appearance,

k) Warranty Claim number,

l) date of Warranty Claim,

m) delivery date of Aircraft or part to the Buyer,

Warranty Claims are to be addressed as follows:

AIRBUS
CUSTOMER SERVICES DIRECTORATE
WARRANTY ADMINISTRATION
Rond-Point Maurice Bellonte
B.P. 33
F-31707 BLAGNAC CEDEX
FRANCE

(vi) REPLACEMENTS

Components, equipment, accessories or parts, which the Seller has replaced pursuant to this Clause, shall become the Seller's property. The replacement components, equipment, accessories or parts provided by the Seller to the Buyer pursuant to this Clause shall become the Buyer's property.

(vii) SELLER'S REJECTION

The Seller shall provide reasonable written substantiation In case of rejection of a Warranty Claim. In such event the Buyer shall refund to the

Clause 12 - 5/16

Seller reasonable inspection and test charges incurred in connection therewith.

(viii) SELLER'S INSPECTION

                    The Seller shall have the right to inspect the affected
                    Aircraft and documents and other records relating thereto in
                    the event of any Warranty Claim under this Clause 12.1.

12.1.7         INHOUSE WARRANTY

               (i)  SELLER'S AUTHORIZATION

                    The Seller hereby authorizes the Buyer to perform the repair
                    of Warranted Parts (INHOUSE WARRANTY") subject to the terms
                    of this Clause 12.1.7.

               (ii) CONDITIONS FOR SELLER'S AUTHORIZATION

                    The Buyer shall be entitled to repair such Warranted Parts
                    only:

                    -    if the Buyer notifies the Seller's Representative of
                         its intention to perform Inhouse Warranty repairs
                         before any such repairs are started. The Buyer's
                         notification shall include sufficient detail regarding
                         the defect, estimated labor hours and material to allow
                         the Seller to ascertain the reasonableness of the
                         estimate. The Seller agrees to use all reasonable
                         efforts to ensure a prompt response and shall not
                         unreasonably withhold authorization;

                    -    if adequate facilities and qualified personnel are
                         available to the Buyer;

                    -    in accordance with the Seller's written instructions
                         set forth in the applicable Seller's technical
                         documentation;

                    -    to the extent specified by the Seller, or, in the
                         absence of such specification, to the extent reasonably
                         necessary to correct the defect, in accordance with the
                         standards set forth in Clause 12.1.10.

               (iii) SELLER'S RIGHTS

                    The Seller shall further have, * the right to have any
                    Warranted Part, or any part removed therefrom, claimed to be
                    defective, returned to the Seller, as set forth in
                    sub-Clause 12.1.6 (ii) if, in the judgement of the Seller,
                    the nature of the defect requires technical investigation.
                    The Seller shall further have the right, * to have a
                    representative present during the disassembly, inspection
                    and testing of any Warranted Part claimed to be defective,
                    subject to its presence being practical and not unduly
                    delaying the repair.

               (iv) INHOUSE WARRANTY CLAIM SUBSTANTIATION

                    Claims for Inhouse Warranty credit shall contain the same
                    information as that required for Warranty Claims under
                    sub-Clause 12.1.6 (v) and in

Clause 12 - 6/16

addition shall include:

a) a report of technical findings with respect to the defect,

b) for parts required to remedy the defect:

- part numbers,

- serial numbers (if applicable),

- parts description,

- quantity of parts,

- unit price of parts,

- related Seller's or third party's invoices (if applicable),

- total price of parts,

c) detailed number of labor hours,

d) Inhouse Warranty Labor Rate,

e) total claim value.

(v) CREDIT

The Buyer's account shall be credited with an amount equal to the mutually agreed direct labor costs expended in performing the repair of a Warranted Part and to the direct costs of materials incorporated in said repair.

- For the determination of direct labor costs only manhours spent on removal from the Aircraft, disassembly, inspection, repair, reassembly, and final inspection and test of the Warranted Part and reinstallation thereof on the Aircraft are permissible. Any manhours required for maintenance work concurrently being carried out on the Aircraft or Warranted Part are not included.

- The manhours permissible above shall be multiplied by an agreed labor rate of US Dollars *, ("INHOUSE WARRANTY LABOUR RATE") and representing the Buyer's composite labor rate meaning the average hourly rate (excluding all fringe benefits, premium time allowances, social charges, business taxes and the like) paid to the Buyer's employees whose jobs are directly related to the performance of the repair.

- Direct material costs are determined by the prices at which the Buyer acquired such material, excluding any parts and materials used for overhaul and as may be furnished by the Seller at no charge.

(vi) LIMITATION

The Buyer shall in no event be credited for repair costs (including labor and material) in excess of * of the current catalogue price for a replacement of the defective Warranted Part, unless previously approved by the Seller in accordance with sub-Clause 12.1.7 (ii).

Clause 12 - 7/16

(vii) SCRAPPED MATERIAL

                    The Buyer shall retain any defective Warranted Part beyond
                    economic repair and any defective part removed from a
                    Warranted Part during repair for a period of either * days
                    after the date of completion of repair or * days after
                    submission of a claim for Inhouse Warranty credit relating
                    thereto, whichever is longer. Such parts shall be returned
                    to the Seller within thirty (30) days of receipt of the
                    Seller's request to that effect.

                    Notwithstanding the foregoing, the Buyer may scrap any such
                    defective parts which are beyond economic repair and not
                    required for technical evaluation locally with the agreement
                    of the Seller's local representative. Scrapped Warranted
                    Parts shall be evidenced by a record of scrapped material
                    certified by an authorized representative of the Buyer.

12.1.8         STANDARD WARRANTY TRANSFERABILITY

               The warranties provided for in this Clause 12.1 for any Warranted
               Part shall accrue to the benefit of any airline in revenue
               service, other than the Buyer, if the Warranted Part enters into
               the possession of any such airline as a result of a pooling or
               leasing agreement between such airlines and the Buyer, in
               accordance with the terms and subject to the limitations and
               exclusions of the foregoing warranties, and to the extent
               permitted by any applicable law or regulations.

12.1.9         WARRANTY FOR CORRECTED, REPLACED OR REPAIRED WARRANTED PARTS

               Whenever any Warranted Part which contains a defect for which the
               Seller is liable under Clause 12.1 has been corrected, replaced
               or repaired pursuant to the terms of this Clause 12.1, the period
               of the Seller's warranty with respect to such corrected, replaced
               or repaired Warranted Part whichever may be the case, shall be *
               or the remaining portion of the original warranty.

12.1.10        ACCEPTED INDUSTRY STANDARD PRACTICES - NORMAL WEAR AND TEAR

               The Buyer's rights under this Clause 12.1 are subject to the
               Aircraft and each component, equipment, accessory and part
               thereof being maintained, overhauled, repaired, and operated in
               accordance with accepted industry standard practices, all
               technical documentation and any other instructions issued by the
               Seller and the Suppliers and the Engine Manufacturer and all
               applicable rules, regulations and directives of relevant Aviation
               Authorities.

12.1.10.1      The Seller's liability under this Clause 12.1 shall not extend to
               normal wear and tear nor to:

               (i)  any Aircraft or component, equipment, accessory or part
                    thereof which has been repaired, altered or modified after
                    Delivery except by the Seller or in a manner approved by the
                    Seller or the relevant Supplier;

               (ii) any Aircraft or component, equipment, accessory or part
                    thereof which has been * operated in a damaged state;

Clause 12 - 8/16

(iii) any component, equipment, accessory and part from which the trademark, name, part or serial number or other identification marks have been removed *

Clause 12 - 9/16

12.2           SELLER SERVICE LIFE POLICY

12.2.1         In addition to the warranties set forth in Clause 12.1, the
               Seller further agrees that should any item listed in Exhibit "F"
               ("ITEM") sustain any breakage or defect which can reasonably be
               expected to occur on a fleetwide basis, and which materially
               impairs the utility of the Item. ("FAILURE"), and subject to the
               general conditions and limitations set forth in Clause 12.2.4,
               then the provisions of this Clause 12.2 ("SELLER SERVICE LIFE
               POLICY") shall apply.

12.2.2         PERIODS AND SELLER'S UNDERTAKINGS

               The Seller agrees that if a Failure occurs in an Item before the
               Aircraft in which such Item has been originally installed has
               completed * years after the Delivery of said Aircraft to the
               Buyer,, the Seller shall at its own discretion and as promptly as
               practicable and with the Seller's financial participation as
               hereinafter provided either:

12.2.2.1       design and furnish to the Buyer a correction for such Item with a
               Failure and provide any parts required for such correction
               (including Seller designed standard parts but excluding industry
               standard parts), or,

12.2.2.2       replace such Item.

12.2.3         SELLER'S PARTICIPATION IN THE COSTS

               Any part or Item which the Seller is required to furnish to the
               Buyer under this Service Life Policy in connection with the
               correction or replacement of an Item shall be furnished to the
               Buyer with the Seller's financial participation determined in
               accordance with the following formula:

               P = *

               where:

               P: financial participation of the Seller,

               C: Seller's then current sales prices for the required Item or
                  Seller designed parts,

               T: total time in months since Delivery of the Aircraft in which
                  the Item subject to a Failure has been originally installed,
                  and,

               N: *

Clause 12 - 10/16

12.2.4         GENERAL CONDITIONS AND LIMITATIONS

12.2.4.1       The undertakings given in this Clause 12.2 shall be valid after
               the period of the Seller's warranty applicable to an item under
               Clause 12.1.

12.2.4.2       The Buyer's remedy and the Seller's obligation and liability
               under this Service Life Policy are subject to the prior
               compliance by the Buyer with the following conditions:

               (i)  the Buyer shall maintain log books and other historical
                    records in accordance with the applicable Aviation Authority
                    requirements with respect to each item adequate to enable
                    determination of whether the alleged Failure is covered by
                    this Service Life Policy and if so to define the costs to be
                    borne by the Seller in accordance with Clause 12.2.3;

               (ii) the Buyer shall keep the Seller informed of any significant
                    incidents relating to an Aircraft howsoever occurring or
                    recorded ;

               (iii) the Buyer shall comply with the conditions of Clause
                    12.1.10;

               (iv) the Buyer shall carry out specific structural inspection
                    programs for monitoring purposes as may be established from
                    time to time by the Seller. Such programs shall be as
                    compatible as possible with the Buyer's operational
                    requirements and shall be carried out at the Buyer's
                    expense. Reports relating thereto shall be regularly
                    furnished to the Seller;

               (v)  in the case of any breakage or defect, the Buyer must have
                    reported the same in writing to the Seller within * days
                    after any breakage or defect in an item becomes apparent
                    whether or not said breakage or defect can reasonably be
                    expected to occur in any other aircraft, and the Buyer shall
                    have informed the Seller of the breakage or defect in
                    sufficient detail to enable the Seller to determine whether
                    said breakage or defect is subject to this Service Life
                    Policy.

12.2.4.3       Except as otherwise provided for in this Clause 12.2, any claim
               under this Service Life Policy shall be administered as provided
               for in and shall be subject to the terms and conditions of Clause
               12.1.6.

12.2.4.4       In the event that the Seller shall have issued a modification
               applicable to an Aircraft, the purpose of which is to avoid a
               Failure, the Seller may elect to supply the necessary
               modification kit free of charge or under a pro rata formula. If
               such a kit is so offered to the Buyer, then, to the extent of
               such Failure and any Failures that could ensue therefrom, the
               validity of the Seller's commitment under this Clause 12.2 shall
               be subject to the Buyer's incorporating such modification in the
               relevant Aircraft, as promulgated by the Seller and in accordance
               with the Seller's instructions, within a reasonable time.

12.2.4.5       This Service Life Policy is neither a warranty, performance
               guarantee, nor an agreement to modify any Aircraft or airframe
               components to conform to new developments occurring in the state
               of airframe design and manufacturing art.

               The Seller's obligation herein is to furnish only those
               corrections to the items or provide replacement therefor as
               provided for in Clause 12.2.3.

Clause 12 - 11/16

               The Buyer's sole remedy and relief for the non-performance of any
               obligation or liability of the Seller arising under or by virtue
               of this Service Life Policy shall be in monetary damages, limited
               to the amount the Buyer reasonably expends in procuring a
               correction or replacement for any Item which is the subject of a
               Failure covered by this Service Life Policy and to which such
               non-performance is related.

               The Buyer hereby waives, releases and renounces all claims to any
               further damages, direct, incidental or consequential, including
               loss of profits and all other rights, claims and remedies,
               arising under or by virtue of this Service Life Policy.

12.2.5         TRANSFERABILITY

               The Buyer's rights under this Clause 12.2 shall not be assigned,
               sold, leased, transferred or otherwise alienated by operation of
               law or otherwise, without the Seller's prior consent thereto,
               which shall not be unreasonably withheld and shall be given in
               writing.

               Any unauthorized assignment, sale, lease, transfer or other
               alienation of the Buyer's rights under this Service Life Policy
               shall, as to the particular Aircraft involved, immediately void
               this Service Life Policy in its entirety.

Clause 12 - 12/16

12.3           SUPPLIER PRODUCT SUPPORT AGREEMENTS

               Prior to the Delivery of the first Aircraft, the Seller shall
               provide the Buyer with such warranties and service life policies
               that the Seller has obtained pursuant to the Supplier Product
               Support Agreement.

                                       *

12.3.1         DEFINITIONS

12.3.1.1       "SUPPLIER" means any supplier of Supplier Parts.

12.3.1.2       "SUPPLIER PART" means any component, equipment, accessory or part
               installed in an Aircraft at the time of Delivery thereof as to
               which there exists a Supplier Product Support Agreement. However,
               the Engines and Buyer Furnished Equipment and other equipment
               selected by the Buyer to be supplied by Suppliers with whom the
               Seller has no existing enforceable warranty agreements are not
               Supplier Parts.

12.3.1.3       "SUPPLIER PRODUCT SUPPORT AGREEMENT" means an agreement between
               the Seller and a Supplier containing enforceable and transferable
               warranties and in the case of landing gear suppliers, service
               life policies for selected structural landing gear elements.

12.3.2         SUPPLIER'S DEFAULT

12.3.2.1       In the event of any Supplier, under any standard warranty
               obtained by the Seller pursuant to Clause 12.3.1, defaulting in
               the performance of any material obligation with respect thereto
               and the Buyer submitting in reasonable time to the Seller
               reasonable proof that such default has occurred, then Clause 12.1
               shall apply to the extent the same would have been applicable had
               such Supplier Part been a Warranted Part, except that the
               Supplier's warranty period as indicated in the Supplier Product
               Support Agreement shall apply.

12.3.2.2       In the event of any Supplier, under any Supplier Service Life
               Policy obtained by the Seller pursuant to Clause 12.3.1,
               defaulting in the performance of any material obligation with
               respect thereto and the Buyer submitting in reasonable time to
               the Seller reasonable proof that such default has occurred, then
               Clause 12.2 shall apply to the extent the same would have been
               applicable had such Supplier Item been listed in Exhibit F,
               Seller Service Life Policy, except that the Supplier's Service
               Life Policy period as indicated in the Supplier Product Support
               Agreement shall apply.

12.3.2.3       At the Seller's request, the Buyer shall assign to the Seller,
               and the Seller shall be subrogated to, all of the Buyer's rights
               against the relevant Supplier with respect to and arising by
               reason of such default and shall provide reasonable assistance to
               enable the Seller to enforce the rights so assigned.

Clause 12 - 13/16

12.4           INTERFACE COMMITMENT

12.4.1         INTERFACE PROBLEM

               If the Buyer experiences any technical problem in the operation
               of an Aircraft or its systems due to a malfunction, the cause of
               which, after due and reasonable investigation, is not readily
               identifiable by the Buyer, but which the Buyer reasonably
               believes to be attributable to the design characteristics of one
               or more components of the Aircraft ("INTERFACE PROBLEM"), the
               Seller shall, if so requested by the Buyer, and without
               additional charge to the Buyer except for transportation of the
               Seller's personnel to the Buyer's facilities *, promptly conduct
               or have conducted an investigation and analysis of such problem
               to determine, if possible, the cause or causes of the problem and
               to recommend such corrective action as may be feasible. The Buyer
               shall furnish to the Seller all data and information in the
               Buyer's possession relevant to the Interface Problem, and shall
               cooperate with the Seller in the conduct of the Seller's
               investigations and such tests as may be required.

               At the conclusion of such investigation the Seller shall promptly
               advise the Buyer in writing of the Seller's opinion as to the
               cause or causes of the Interface Problem and the Seller's
               recommendations as to corrective action.

12.4.2         SELLER'S RESPONSIBILITY

               If the Seller determines that the Interface Problem is primarily
               attributable to the design of a Warranted Part, the Seller shall,
               if so requested by the Buyer and pursuant to the terms and
               conditions of Clause 12.1, correct the design of such Warranted
               Part to the extent of the Seller's obligation as defined in
               Clause 12.1.

12.4.3         SUPPLIER'S RESPONSIBILITY

               If the Seller determines that the Interface Problem is primarily
               attributable to the design of any Supplier Part, the Seller
               shall, if so requested by the Buyer, reasonably assist the Buyer
               in processing any warranty claim the Buyer may have against the
               Supplier.

12.4.4         JOINT RESPONSIBILITY

               If the Seller determines that the Interface Problem is
               attributable partially to the design of a Warranted Part and
               partially to the design of any Supplier Part, the Seller shall,
               if so requested by the Buyer, seek a solution to the Interface
               Problem through cooperative efforts of the Seller and any
               Supplier involved.

               The Seller shall promptly advise the Buyer of such corrective
               action as may be proposed by the Seller and any such Supplier.
               Such proposal shall be consistent with any then existing
               obligations of the Seller hereunder and of any such Supplier to
               the Buyer. Such corrective action when accepted by the Buyer
               shall constitute full satisfaction of any claim the Buyer may
               have against either the Seller or any such Supplier with respect
               to such Interface Problem.

Clause 12 - 14/16

12.4.5         GENERAL

12.4.5.1       All requests under this Clause 12.4 shall be directed to both the
               Seller and the Supplier.

12.4.5.2       Except as specifically set forth in this Clause 12.4, this Clause
               shall not be deemed to impose on the Seller any obligations not
               expressly set forth elsewhere in this Clause 12.

12.4.5.3       All reports, recommendations, data and other documents furnished
               by the Seller to the Buyer pursuant to this Clause 12.4 shall be
               deemed to be delivered under this Agreement and shall be subject
               to the terms, covenants and conditions set forth in this Clause
               12.

12.5           WAIVER, RELEASE AND RENUNCIATION

               THE WARRANTIES, OBLIGATIONS AND LIABILITIES OF THE SELLER AND/OR
               ITS SUPPLIERS AND REMEDIES OF THE BUYER SET FORTH IN THIS CLAUSE
               12 ARE EXCLUSIVE AND IN SUBSTITUTION FOR, AND THE BUYER HEREBY
               WAIVES, RELEASES AND RENOUNCES ALL OTHER WARRANTIES, OBLIGATIONS
               AND LIABILITIES OF THE SELLER AND/OR ITS SUPPLIERS AND RIGHTS,
               CLAIMS AND REMEDIES OF THE BUYER AGAINST THE SELLER, ITS
               SUPPLIERS AND/OR THEIR INSURERS, EXPRESS OR IMPLIED, ARISING BY
               LAW OR OTHERWISE WITH RESPECT TO ANY NON-CONFORMITY OR DEFECT IN
               ANY AIRCRAFT, COMPONENT, EQUIPMENT, ACCESSORY, PART, SOFTWARE OR
               DATA DELIVERED UNDER THIS AGREEMENT INCLUDING BUT NOT LIMITED TO:

               (A)  ANY WARRANTY AGAINST HIDDEN DEFECTS (GARANTIE DES VICES
                    CACHES);

               (B)  ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS;

               (C)  ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE,
                    COURSE OF DEALING OR USAGE OF TRADE;

               (D)  ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY, WHETHER
                    CONTRACTUAL OR DELICTUAL AND WHETHER OR NOT ARISING FROM THE
                    SELLER'S AND/OR ITS SUPPLIERS' NEGLIGENCE, ACTUAL OR
                    IMPUTED; AND

               (E)  ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS
                    OR DAMAGE TO ANY AIRCRAFT, COMPONENT, EQUIPMENT, ACCESSORY,
                    PART, SOFTWARE OR DATA DELIVERED UNDER THIS AGREEMENT.

               THE SELLER AND/OR ITS SUPPLIERS SHALL HAVE NO OBLIGATION OR
               LIABILITY. HOWSOEVER ARISING, FOR LOSS OF USE, REVENUE OR PROFIT
               OR FOR ANY OTHER DIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES
               WITH RESPECT TO ANY NON-CONFORMITY OR DEFECT IN ANY AIRCRAFT,
               COMPONENT, EQUIPMENT, ACCESSORY, PART, SOFTWARE OR DATA DELIVERED
               UNDER THIS AGREEMENT.

               FOR THE PURPOSES OF THIS CLAUSE 12.5, "THE SELLER" SHALL INCLUDE
               THE SELLER, ITS AFFILIATES AND ANY OF THEIR RESPECTIVE INSURERS.

Clause 12 - 15/16

12.6           DUPLICATE REMEDIES

               The Seller shall not be obliged to provide any remedy which
               duplicates any other remedy already provided to the Buyer in
               respect of the same defect under any part of this Clause 12 as
               such Clause may be amended, complemented or supplemented by other
               contractual agreements or by other Clauses of this Agreement.

 12.7          NEGOTIATED AGREEMENT

               The Buyer specifically recognises that:

               (i)  the Specification has been agreed upon after careful
                    consideration by the Buyer using its judgment as a
                    professional operator of and maintenance provider with
                    respect to aircraft used in public transportation and as
                    such is a professional within the same industry as the
                    Seller;

               (ii) this Agreement, and in particular this Clause 12, has been
                    the subject of discussion and negotiation and is fully
                    understood by the Buyer;

               (iii) the price of the Aircraft and the other mutual agreements
                    of the Buyer set forth in this Agreement were arrived at in
                    consideration of, inter alia, the provisions of this Clause
                    12, specifically including the waiver, release and
                    renunciation by the Buyer set forth in Clause 12.5.

Clause 12 - 16/16

13             PATENT AND COPYRIGHT INDEMNITY

13.1           INDEMNITY

13.1.1         Subject to the provisions of Clause 13.2.3, the Seller shall
               indemnify the Buyer from and against any damages, costs or
               expenses including legal costs (excluding damages, costs,
               expenses, loss of profits and other liabilities in respect of or
               resulting from loss of use of the Aircraft) resulting from any
               infringement or claim of infringement by the Airframe (or any
               part or software installed therein at Delivery) of:

               (i)  any British, French, German, Spanish or U.S. patent; and

               (ii) any patent issued under the laws of any other country in
                    which the Buyer may lawfully operate the Aircraft, provided
                    that:

                    (1)  from the time of design of such Airframe, accessory,
                         equipment or part and until infringement claims are
                         resolved, such country and the flag country of the
                         Aircraft are each a party to the Chicago Convention on
                         International Civil Aviation of December 7, 1944, and
                         are each fully entitled to all benefits of Article 27
                         thereof,

                    or in the alternative,

                    (2)  from such time of design and until infringement claims
                         are resolved, such country and the flag country of the
                         Aircraft are each a party to the International
                         Convention for the Protection of Industrial Property of
                         March 20,1883 ("Paris Convention");

               and

               (iii) in respect of computer software installed on the Aircraft,
                    any copyright, provided that the Seller's obligation to
                    indemnify shall be limited to infringements in countries
                    which, at the time of infringement are members of The Berne
                    Union and recognise computer software as a "work" under the
                    Berne Convention.

13.1.2         Clause 13.1.1 shall not apply to

               (i)  Buyer Furnished Equipment or Engines; or

               (ii) parts not supplied pursuant to a Supplier Product Support
                    Agreement; or

               (iii) software not created by the Seller.

Clause 13 - Page 1/2

13.1.3         In the event that the Buyer is prevented from using the Aircraft
               (whether by a valid judgement of a court of competent
               jurisdiction or by a settlement arrived at between claimant,
               Seller and Buyer), the Seller shall at its expense either:

               (i)  procure for the Buyer the right to use the same free of
                    charge to the Buyer; or

               (ii) replace the infringing part of the Aircraft as soon as
                    possible with a non-infringing substitute complying in all
                    other respects with the requirements of this Agreement.

13.2           ADMINISTRATION OF PATENT AND COPYRIGHT INDEMNITY CLAIMS

13.2.1         If the Buyer receives a written claim or a suit is threatened or
               commenced against the Buyer for infringement of a patent or
               copyright referred to in Clause 13.1, the Buyer shall:

               (i)  forthwith notify the Seller giving particulars thereof;

               (ii) furnish to the Seller all data, papers and records within
                    the Buyer's control or possession relating to such patent or
                    claim;

               (iii) refrain from admitting any liability or making any payment
                    or assuming any expenses, damages, costs or royalties or
                    otherwise acting in a manner prejudicial to the defense or
                    denial of such suit or claim provided always that nothing in
                    this sub-Clause (iii) shall prevent the Buyer from paying
                    such sums as may be required in order to obtain the release
                    of the Aircraft, provided such payment is accompanied by a
                    denial of liability and is made without prejudice;

               (iv) fully co-operate with, and render all such assistance to,
                    the Seller as may be pertinent to the defense or denial of
                    the suit or claim ;

               (v)  act in such a way as to mitigate damages and / or to reduce
                    the amount of royalties which may be payable as well as to
                    minimise costs and expenses.

13.2.2         The Seller shall be entitled either in its own name or on behalf
               of the Buyer to conduct negotiations with the party or parties
               alleging infringement and may assume and conduct the defense or
               settlement of any suit or claim in the manner which, in the
               Seller's opinion, it deems proper.

13.2.3         The Seller's liability hereunder shall be conditional upon the
               strict and timely compliance by the Buyer with the terms of this
               Clause and is in lieu of any other liability to the Buyer express
               or implied which the Seller might incur at law as a result of any
               infringement or claim of infringement of any patent or copyright.

Clause 13 - Page 2/2

14             TECHNICAL DATA AND SOFTWARE SERVICES

               This Clause covers the terms and conditions for the supply of
               technical data and software services (hereinafter "TECHNICAL
               DATA") to support the Aircraft operation.

14.1           SCOPE

               The Technical Data shall be supplied in the English language
               using the aeronautical terminology in common use.

               Range, form, type, format, quantity and delivery schedule of Air
               Transport Association ("ATA") and Non ATA Technical Data to be
               provided under this Agreement are outlined in Exhibit G.

               Not used or only partially used Technical Data provided pursuant
               to this Clause shall not be compensated or credited to the Buyer.

14.2           AIRCRAFT IDENTIFICATION FOR TECHNICAL DATA

14.2.1         For the customized Technical Data the Buyer agrees to the
               allocation of fleet serial numbers ("FLEET SERIAL NUMBERS") in
               the form of block of numbers selected in the range from 001 to
               999.

14.2.2         The sequence shall not be interrupted except if two (2) different
               Engines or two (2) different Aircraft models are selected.

14.2.3         The Buyer shall indicate to the Seller the Fleet Serial Number
               allocated to each Aircraft corresponding to the Aircraft rank in
               the Delivery schedule set forth in Clause 9.1.1 hereof within
               forty-five (45) days after execution of this Agreement. The
               subsequent allocation of Fleet Serial Numbers to Manufacturer's
               Serial Numbers for the purpose of producing customized Technical
               Data shall not constitute any property, insurable or other
               interest of the Buyer whatsoever in any Aircraft prior to the
               Delivery of such Aircraft as provided for in this Agreement.

The affected customized Technical Data are:

- Aircraft Maintenance Manual,

- Illustrated Parts Catalog,

- Trouble Shooting Manual,

- Aircraft Wiring Manual,

- Aircraft Schematics Manual,

- Aircraft Wiring Lists.

Clause 14 - 1/20

14.3           INTEGRATION OF EQUIPMENT DATA

14.3.1         SUPPLIER EQUIPMENT

               Information relating to Supplier equipment which is installed on
               the Aircraft by the Seller shall be introduced into the
               customized Technical Data to the extent necessary for the
               comprehension of the systems concerned, at no additional charge
               to the Buyer for the Technical Data basic issue.

14.3.2         BUYER FURNISHED EQUIPMENT

14.3.2.1       The Seller shall introduce Buyer Furnished Equipment data, for
               equipment which is installed on the Aircraft by the Seller, into
               the customized Technical Data at no additional charge to the
               Buyer for the Technical Data basic issue, provided such data is
               provided in accordance with the conditions set forth in Clauses
               14.3.2.2 through 14.3.2.5 hereunder.

14.3.2.2       The Buyer shall supply the data related to Buyer Furnished
               Equipment to the Seller at least six (6) months before the
               scheduled delivery of the customized Technical Data. The Buyer
               Furnished Equipment data supplied to the Buyer by the Seller
               shall be in English Language.

14.3.2.3       The supplied Buyer Furnished Equipment data shall be established
               in compliance with ATA 2200 standard Specification in the
               applicable Revision.

               Subsequent revisions of the ATA Specification shall be considered
               as applicable.

14.3.2.4       The Buyer and the Seller shall agree on the requirements for the
               provision to the Seller of BFE data for "on-aircraft
               maintenance", such as but not limited to timeframe, media and
               format, for integration of such data into Technical Data, with
               the aim of managing the BFE data integration process in an
               efficient, expedite and economic manner.

14.3.2.4       The Buyer Furnished Equipment data shall be delivered in digital
               format (SGML) and/or in Portable Document Format (PDF), as shall
               have been set forth in the Data Supply/Exchange Agreement.

14.3.2.6       All costs related to the delivery to the Seller of the applicable
               Buyer Furnished Equipment data shall be borne by the Buyer.

14.3.2.7       In the event of the Seller providing directly certain items which
               are considered as Buyer Furnished Equipment according to the
               Specification pursuant to and in accordance with Clause 18.1.4,
               this Clause 14.3.2 shall remain fully applicable to the data
               related to such Buyer Furnished Equipment.

Clause 14 - 2/20

14.4           DELIVERY

14.4.1         Technical Data are delivered on-line and/or off-lline, as set
               forth in Exhibit G hereto.

14.4.2         In the event of the Technical Data and corresponding revisions
               being delivered in a format other than on-line, the Technical
               Data and corresponding revisions to be supplied by the Seller
               shall be sent to one address only as advised by the Buyer.

14.4.3         In such case, the shipment shall be Free Carrier (FCA) TOULOUSE,
               FRANCE and/or Free Carrier (FCA) HAMBURG, FEDERAL REPUBLIC OF
               GERMANY, as the term Free Carrier (FCA) is defined by publication
               no 560 of the International Chamber of Commerce, published in
               January 2000.

14.4.4         The delivery schedule of the Technical Data shall be phased as
               mutually agreed to correspond with Aircraft Deliveries. The Buyer
               agrees to provide forty (40) days notice when requesting a change
               to the delivery schedule.

14.4.5         It shall be the responsibility of the Buyer to coordinate and
               satisfy local Aviation Authorities' needs for Technical Data.

14.5           REVISION SERVICE

               Unless otherwise specifically stated, revision service shall be
               provided on a free of charge basis for a period of * years after
               Delivery of the last firmly ordered Aircraft covered under this
               Agreement.

               Thereafter revision service shall be provided at the standard
               conditions set forth in the then current Seller's Customer
               Services Catalog.

                                       *

14.6           SERVICE BULLETINS (SB) INCORPORATION

               During the period of revision service and upon the Buyer's
               request for incorporation, which shall be made within two years
               after issuance of a Service Bulletin, Seller's Service Bulletin
               information shall be incorporated into the Technical Data for the
               Buyer's Aircraft after formal notification by the Buyer of its
               intention to accomplish a Service Bulletin. The split effectivity
               for the corresponding Service Bulletin shall remain in the
               Technical Data until notification from the Buyer that embodiment
               has been completed on all the Buyer's Aircraft. The above is
               applicable for Technical Data relating to maintenance. For the
               operational Data only the pre or post Service Bulletin status
               shall be shown.

14.7           FUTURE DEVELOPMENTS

               The Seller shall continuously monitor technological developments
               and apply them to data production and methods of transmission
               where beneficial and economical. The Buyer accepts to consider
               any new development proposed by the Seller for possible
               implementation.

Clause 14 - 3/20

14.8           TECHNICAL DATA FAMILIARIZATION

               Upon request by the Buyer, the Seller is ready to provide a one
               (1) week Technical Data familiarization training, *, at the
               Seller's or at the Buyer's facilities. If such familiarization is
               conducted at the Buyer's facilities, the Buyer shall reimburse
               the Seller for all air travel (business class) and living
               expenses of the representatives of the Seller conducting such
               familiarization.

14.9           CUSTOMER ORIGINATED CHANGES (COC)

14.9.1         Buyer originated data may be introduced as COC into the following

customized Technical Data:

- Aircraft Maintenance Manual,

- Illustrated Parts Catalog,

- Trouble Shooting Manual,

- Aircraft Wiring Manual,

- Aircraft Schematics Manual,

- Aircraft Wiring Lists,

- Flight Crew Operating Manual,

- Quick Reference "Handbook".

14.9.2         COC data shall be established by the Buyer according to the
               Customer Guide for Customer Originated Changes, as issued by the
               Seller. The Buyer shall ensure that any such data is in
               compliance with the requirements of its local Aviation
               Authorities.

               COC data shall be incorporated by the Seller into all affected
               customized Technical Data unless the Buyer specifies in writing
               the documents of its choice into which the COC data shall be
               incorporated.

14.9.3.1       The Buyer hereby acknowledges and accepts that the incorporation
               of any COC into the Technical Data issued by the Seller shall be
               entirely at the Buyer's risk and that the Seller shall not be
               required to check any COC data submitted for incorporation.

               Further, the Buyer acknowledges full liability for the effects,
               including all related costs, which any COC may have on any
               subsequent Service Bulletins and/or modifications.

14.9.3.2       THE SELLER HEREBY EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OR
               LIABILITIES, EXPRESSED OR IMPLIED, ORAL OR WRITTEN, ARISING BY
               LAW, COURSE OF DEALING OR OTHERWISE, AND WITHOUT LIMITATION ALL
               WARRANTIES AS TO QUALITY, OPERATION, MERCHANTABILITY, FITNESS FOR
               ANY INTENDED PURPOSE, AND ALL OTHER CHARACTERISTICS WHATSOEVER,
               INCLUDING ANY OMISSIONS OR INACCURACIES THEREIN, OF ANY CUSTOMER
               ORIGINATED CHANGES (COC) INCORPORATED INTO THE TECHNICAL DATA
               ISSUED BY THE SELLER.

               THE FOREGOING DISCLAIMER SHALL ALSO APPLY TO ANY OTHER PORTION OF
               THE SELLER'S TECHNICAL DATA WHICH MAY BE AFFECTED BY ANY SUCH
               CUSTOMER ORIGINATED CHANGES (COC).

Clause 14 - 4/20

14.9.3.3       In the event of the Seller being required under any court order
               or settlement to indemnify any third party for injury, loss or
               damage incurred directly or indirectly as a result of
               Incorporation of any COC into the Technical Data issued by the
               Seller, the Seller shall promptly notify the Buyer and shall
               inform the Buyer with respect to the conduct and/or settlement of
               any such claim. The Buyer agrees to reimburse the Seller for all
               payments or settlements made in respect of such injury, loss or
               damage including any expenses incurred by the Seller in defending
               such claims.

14.9.3.4       In the event of the Buyer selling, leasing or otherwise
               transferring the Aircraft to which the COC data apply, the Buyer
               hereby agrees that, unless the COC data are removed from the
               Technical Data at the Buyer's request and expense prior to such
               transfer:

               (i)  the Buyer shall remain fully liable for the COC data and any
                    and all effects of their incorporation, as set forth in this
                    Clause 14.9;

               (ii) the Seller may disclose the COC data to the subsequent
                    owner(s) or operator(s) of the transferred Aircraft;

               (iii) it shall be the sole responsibility of the Buyer to notify,
                    or cause to be notified, the subsequent owner(s) or
                    operator(s) of the existence of the such COC data in the
                    Technical Data applicable to the corresponding Aircraft.

               The Seller hereby disclaims any and all liabilities whatsoever
               for the COC data in the event of transfer, sale or lease as set
               forth hereabove.

14.9.4         The incorporation of any COC as aforesaid shall be performed
               under the conditions specified in the Seller's then current
               Customer Services Catalog.

14.10          SOFTWARE SERVICES

14.10.1        PERFORMANCE ENGINEER'S PROGRAMS

14.10.1.1      The Seller shall provide to the Buyer software components and
               databases composing the Performance Engineer's Programs (PEP) for
               the Aircraft type covered under this Agreement under licence
               conditions as defined in Appendix A to this Clause.

14.10.1.2      Use of the PEP shall be limited to three (3) copies to be used on
               three (3) computers. The PEP is intended for use on ground only
               and shall not be embarked on board of the Aircraft.

14.10.1.3      The licence to use the PEP shall be granted free of charge for as
               long as the revisions of the PEP are free of charge in accordance
               with Clause 14.5. At the end of such period, the yearly revision
               service for the PEP shall be provided to the Buyer at the
               standard commercial conditions set forth in the then current
               Seller's Customer Services Catalog.

Clause 14 - 5/20

14.10.2        AIRN@V FAMILY

               Certain Technical Data are provided on DVD and/or on line under
               licence conditions as defined in Appendix A to this Clause.

               The AirN@v Family covers several Technical Data domains, with the

following AirN@v Family products:

- AirN@v Maintenance,

- AirN@v Engineering,

- AirN@v Planning,

- AirN@v Repair,

- AirN@v Shop.

               Details of the documents included in such products are set forth
               in Exhibit G.

               The licence to use AirN@v Family products shall be granted free
               of charge for the Aircraft for as long as the revisions of such
               Technical Data are free of charge in accordance with Clause 14.5.
               At the end of such period, the yearly revision service for AirN@v
               Family products shall be provided to the Buyer at the standard
               commercial conditions set forth in the then current Seller's
               Customer Services Catalog.

14.10.3        AIRBUS|WORLD CUSTOMER PORTAL

14.10.3.1      The Buyer shall be entitled to obtain access to a wide range of
               information and services, including Technical Data, available in
               the secure zone of Airbus' Customer Portal Airbus|Wor1d
               ("AIRBUS|WORLD").

               Access to the secure zone of Airbus|World, which is reserved to
               Airbus owners and operators (the "SECURE ZONE"), shall be subject
               to the prior signature by the Buyer of the "General Terms and
               Conditions of Access to and Use of Airbus Secure Area of Customer
               Portal" (hereinafter the "GTC").

               A description of the Basic Services, which are available to the
               Buyer in the Secure Zone and are provided to the Buyer free of
               charge after signature of the GTC, for as long as the Buyer
               operates the Aircraft, is set forth in Appendix B to this Clause
               14.

               Furthermore, although part of the data available on Airbus|World
               is neither sensitive nor confidential and is also available to
               the general internet public in the public zone of the portal (the
               "PUBLIC ZONE"), it is however recommended that for simplicity of
               access the Buyer find this information in the Secure Zone.

14.10.3.2      On-Line Technical Data

14.10.3.2.1    The Technical Data defined in Exhibit "G" as being provided
               on-line shall be made available to the Buyer through the Secure
               Zone.

               Such provision shall be at no cost as long as revision service
               for such Technical Data is free of charge in accordance with
               Clause 14.5.

14.10.3.2.2    The list of the Technical Data available on-line may be extended
               from time to time.

Clause 14 - 6/20

               For any Technical Data which is or becomes available on-line, the
               Seller reserves the right to suppress other formats for the
               concerned Technical Data.

14.10.3.3      Access to the Secure Zone shall be granted free of charge for a
               maximum of * of the Buyer's users (including one Buyer
               Administrator) for the Technical Data related to the Aircraft
               which shall be operated by the Buyer.

14.10.3.4      For the sake of clarification, it is hereby specified that
               Technical Data accessed through the Secure Zone - which access
               shall be covered by terms and conditions set forth in the GTC -
               shall remain subject to the conditions of this Clause 14.

               In addition, should the Secure Zone provide access to Technical
               Data in software format, the use of such software shall be
               further subject to the conditions of Appendix A hereto.

14.11          WARRANTIES

14.11.1        The Seller warrants that the Technical Data are prepared in
               accordance with the state of art at the date of their conception.
               Should any Technical Data prepared by the Seller contain error,
               omission, non-conformity or defect, the sole and exclusive
               liability of the Seller shall be to take all reasonable and
               proper steps to, at its option, correct or replace such Technical
               Data. Notwithstanding the above, no warranties of any kind are
               given for the Customer Originated Changes, as set forth in Clause
               14.9.

14.11.2        THE WARRANTIES, OBLIGATIONS AND LIABILITIES OF THE SELLER AND/OR
               ITS SUPPLIERS AND REMEDIES OF THE BUYER SET FORTH IN THIS CLAUSE
               14 ARE EXCLUSIVE AND IN SUBSTITUTION FOR, AND THE BUYER HEREBY
               WAIVES, RELEASES AND RENOUNCES ALL OTHER WARRANTIES, OBLIGATIONS
               AND LIABILITIES OF THE SELLER AND/OR ITS SUPPLIERS AND RIGHTS,
               CLAIMS AND REMEDIES OF THE BUYER AGAINST THE SELLER, ITS
               SUPPLIERS AND/OR THEIR INSURERS, EXPRESS OR IMPLIED, ARISING BY
               LAW OR OTHERWISE, WITH RESPECT TO ANY NON CONFORMITY OR DEFECT IN
               ANY TECHNICAL DATA DELIVERED UNDER THIS AGREEMENT, INCLUDING BUT
               NOT LIMITED TO:

               (A)  ANY WARRANTY AGAINST HIDDEN DEFECTS (GARANTIE DES VICES
                    CACHES);

               (B)  ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS;

               (C)  ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE,
                    COURSE OF DEALING OR USAGE OF TRADE;

               (D)  ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY, WHETHER
                    CONTRACTUAL OR DELICTUAL AND WHETHER OR NOT ARISING FROM THE
                    SELLER'S AND/OR ITS SUPPLIERS' NEGLIGENCE, ACTUAL OR
                    IMPUTED; AND

               (E)  ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS
                    OR DAMAGE TO ANY AIRCRAFT, COMPONENT, EQUIPMENT, ACCESSORY
                    OR PART THEREOF OR ANY TECHNICAL DATA DELIVERED HEREUNDER.

               THE SELLER AND/OR ITS SUPPLIERS SHALL HAVE NO OBLIGATION OR
               LIABILITY, HOWSOEVER ARISING, FOR LOSS OF USE. REVENUE OR PROFIT
               OR FOR ANY OTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES WITH
               RESPECT TO ANY NON-CONFORMITY OR DEFECT IN ANY

Clause 14 - 7/20

               TECHNICAL DATA DELIVERED UNDER THIS AGREEMENT.

               FOR THE PURPOSES OF THIS CLAUSE 14.11.2, "THE SELLER" SHALL
               INCLUDE THE SELLER, ITS AFFILIATES AND ANY OF THEIR RESPECTIVE
               INSURERS.

14.12          PROPRIETARY RIGHTS

14.12.1        All proprietary rights, including but not limited to patent,
               design and copyrights, relating to Technical Data shall remain
               with the Seller and/or its Affiliates as the case may be.

               These proprietary rights shall also apply to any translation into
               a language or languages or media that may have been performed or
               caused to be performed by the Buyer.

14.12.2        Whenever this Agreement provides for manufacturing by the Buyer,
               the consent given by the Seller shall not be construed as express
               or implicit approval howsoever neither of the Buyer nor of the
               manufactured products. The supply of the Technical Data shall not
               be construed as any further right for the Buyer to design or
               manufacture any Aircraft or part thereof or spare part.

14.13          CONFIDENTIALITY

14.13.1        The Technical Data and their content are designated as
               confidential. All such Technical Data are supplied to the Buyer
               for the sole use of the Buyer who undertakes not to disclose the
               contents thereof to any third party without the prior written
               consent of the Seller, * save as permitted therein or otherwise
               pursuant to any government or legal requirement imposed upon the
               Buyer, *

14.13.2        in the case of the Seller having authorized the disclosure to
               third parties either under this Agreement or by an express prior
               written authorization, the Buyer shall undertake that such third
               party agree to be bound by the same conditions and restrictions
               as the Buyer with respect to the disclosed Technical Data.

Clause 14 - 8/20

APPENDIX A TO CLAUSE 14

LICENCE FOR USE

SOFTWARE

Clause 14 - 9/20

APPENDIX A TO CLAUSE 14

LICENCE FOR USE OF SOFTWARE

1. DEFINITIONS

For the purposes of this licence the following definitions shall apply:

"LICENSOR" means the Seller.

"LICENSEE" means the Buyer.

"SOFTWARE" means the set of programs, configurations, processes, rules and, if applicable, documentation related to the operation of the data processing.

"FREEWARE" means the Software furnished free of charge to the Licensee.

"COMPOSITE WORK" means the work composed of various elements, such as database, software or data, and which necessitates the use of the Software

"USER GUIDE" means the documentation, which may be in electronic format, designed to assist the Licensee to use the Software, Freeware or Composite Work, as applicable.

Capitalized terms used herein and not otherwise defined in this Software Licence shall have the meaning assigned thereto in the Agreement.

2. GRANT

The Licensor grants the Licensee the right to use the Software under the conditions set forth below ("the SOFTWARE LICENCE"). The Software Licence shall also apply to any Freeware and/or Composite Work delivered by the Licensor.

3. PERSONAL LICENCE

The sole right granted to the Licensee under this Software Licence is the right to use the Software. The Software Licence is personal to the Licensee, for its own internal use, and is non-transferable and non-exclusive.

4. COPIES

Use of the Software is limited to the number of copies delivered by the Licensor to the Licensee and to the medium on which the Software is delivered. No reproduction shall be made without the written consent of the Licensor. It is however agreed that the Licensee is authorized to copy the Software for back-up and archiving purposes. Any copy authorized by the Licensor to be made by the Licensee shall be performed under the sole responsibility of the Licensee. The Licensee agrees to reproduce the copyright and other notices as they appear on or within the original media on any copies that the Licensee makes of the Software.

Clause 14 - 10/20

APPENDIX A TO CLAUSE 14

5. TERM

Subject to the Licensee having complied with the terms of this Software Licence, the rights under the Software Licence shall be granted from the date of first delivery of the Software to December 31st of the year of delivery. For the following years, the rights under this Software Licence shall be automatically granted to the Licensee from January 1st to December 31st, subject to compliance by the Licensee with its obligations.

The Licensee may terminate the Software Licence by notifying in writing to the Licensor its desire not to renew the service for the following year. Such notification shall be received by the Licensor not later than November 30th of the current year.

For clarification purposes, it is hereby expressly stated that the Software may be offered for a limited period. In the event that the Licensor should offer a replacement product, the conditions for using such product shall be subject to a separate agreement.

6. CONDITIONS OF USE

Under the present Software Licence, the Licensee shall:

- * to maintain the Software and the relating documentation in good working condition, in order to ensure the correct operation thereof;

- use the Software in accordance with such documentation and the User Guide, and ensure that the staff using the Software have received the appropriate training;

- use the Software exclusively in the technical environment defined in the applicable User Guide, except as otherwise agreed in writing between the parties (subject to said agreement, decompilation may be exceptionally agreed to by the Licensor in order for the Licensee to obtain the necessary information to enable the Software to function in another technical environment);

- use the Software for its own internal needs and on its network only (except if Seller has consented to other usages), when technically possible, and exclusively on the machine referenced and the site declared;

- not alter, reverse engineer, modify or adapt the Software, nor integrate all or part of the Software in any manner whatsoever into another software product;

- when the source code is provided to the Licensee, the Licensee shall have the right to study and test the Software, under conditions to be expressly specified by the Licensor, but in no event shall the Licensee have the right to correct, modify or translate the Software;

- not correct the Software, except that such correction right may exceptionally be granted to the Licensee by the Licensor in writing;

- not translate, disassemble or decompile the Software, nor create a software product derived from the Software;

- not attempt to or authorize a third party to discover or re-write the Software source codes in any manner whatsoever;

Clause 14 - 11/20

APPENDIX A TO CLAUSE 14

- not delete any identification or declaration relative to the intellectual property rights, trademarks or any other information related to ownership or intellectual property rights provided in the Software by the Licensor;

- not pledge, sell, distribute, grant, sub-licence, lease, lend, whether on a free-of-charge basis or against payment, or permit access on a time-sharing basis or any other utilization of the Software, whether in whole or in part, for the benefit of a third party;

- not permit any third-party to use the Software in any manner, including but not limited to, any outsourcing, loan, commercialization of the Software or commercialization by merging the Software into another software or adapting the Software, without prior written consent from the Licensor.

The Licensor, *, shall be entitled, subject to providing reasonable prior written notice thereof to the Licensee and provided the same will not interfere with the Licensee's commercial operation, to come and verify in the Licensee's facilities whether the conditions specified in the present Software Licence are respected. This shall not however engage the responsibility of the Licensor in any way whatsoever.

7. TRAINING

In addition to the User Guide provided with the Software, training and other assistance shall be provided upon the Licensee's request on a chargeable basis (unless otherwise provided for in this Agreement).

8. PROPRIETARY RIGHTS

The Software is proprietary to the Licensor or the Licensor has acquired the intellectual property rights necessary to grant this Software Licence. The copyright and all other proprietary rights in the Software are and shall remain the property of the Licensor.

The Licensor reserves the right to modify any Software at its sole discretion without prior notice to the Licensee.

9. COPYRIGHT INDEMNITY

The Licensor shall defend and indemnify the Licensee against any claim that the normal use of the Software infringes the intellectual property rights of any third party, provided that the Licensee:

- promptly notifies the Licensor of any such claim;

- Makes no decision or settlement of any claim;

- Allows the Licensor to have sole control over all negotiations for its settlement;

- Gives the Licensor all reasonable assistance in connection therewith.

Clause 14 - 12/20

APPENDIX A TO CLAUSE 14

Should the Licensee be prevented from using the Software by any enforceable court decision, the Licensor shall at its own costs and at its choice either modify the Software to avoid infringement or obtain for the Licensee the right to use the Software.

10. CONFIDENTIALITY

The Software and its contents are designated as confidential. The Licensee undertakes not to disclose the Software or parts thereof to any third party without the prior written consent of the Licensor. In so far as it is necessary to disclose aspects of the Software to the employees, such disclosure is permitted solely for the purpose for which the Software is supplied and only to those employees who need to know the same.

The obligations of the Licensee to maintain confidentiality shall survive the termination of the Software Licence grant for a period of ten (10) years.

11. WARRANTY

The Licensor warrants that the Software is prepared in accordance with the state of art at the date of its conception and shall perform substantially in accordance with its functional and technical specification at the time of delivery. Should the Software be found to contain any nonconformity or defect, the Licensee shall notify the Licensor promptly thereof and the sole and exclusive liability of the Licensor under this Software Licence shall be to correct the same.

THE WARRANTIES, OBLIGATIONS AND LIABILITIES OF THE LICENSOR AND/OR ITS SUPPLIERS AND REMEDIES OF THE LICENSEE ARE EXCLUSIVE AND IN SUBSTITUTION FOR, AND THE LICENSEE HEREBY WAIVES, RELEASE AND RENOUNCES, ALL OTHER WARRANTIES, OBLIGATIONS AND LIABILITIES OF THE LICENSOR AND/OR ITS SUPPLIERS AND RIGHTS, CLAIMS AND REMEDIES OF THE LICENSEE AGAINST THE LICENSOR, ITS SUPPLIERS AND/OR THEIR INSURERS, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE WITH RESPECT TO ANY NON-CONFORMITY OR DEFECT IN ANY SOFTWARE DELIVERED UNDER THIS SOFTWARE LICENCE INCLUDING BUT NOT LIMITED TO:

(A) ANY WARRANTY AGAINST HIDDEN DEFECTS (GARANTIE DES VICES
CACHES):

(B) ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS;

(D) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY, WHETHER CONTRACTUAL OR DELICTUAL AND WHETHER OR NOT ARISING FROM THE LICENSOR'S AND/OR ITS SUPPLIERS' NEGLIGENCE, ACTUAL OR IMPUTED; AND

(E) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS OR DAMAGE TO ANY AIRCRAFT, COMPONENT, EQUIPMENT, ACCESSORY OR PART THEREOF OR ANY SOFTWARE DELIVERED HEREUNDER.

THE LICENSOR AND/OR ITS SUPPLIERS SHALL HAVE NO OBLIGATION OR LIABILITY, HOWSOEVER ARISING, FOR LOSS OF USE, REVENUE OR PROFIT OR FOR ANY OTHER DIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES WITH RESPECT TO ANY NONCONFORMITY OR DEFECT IN ANY SOFTWARE DELIVERED UNDER THIS SOFTWARE LICENCE.

FOR THE PURPOSES OF THIS CLAUSE 11, "THE LICENSOR" SHALL INCLUDE
THE

Clause 14 - 13/20

APPENDIX A TO CLAUSE 14

LICENSOR, ITS AFFILIATES AND ANY OF THEIR RESPECTIVE INSURERS.

The Licensor shall have no liability for data that is entered into the Software by the Licensee and/or used for computation purposes.

12. LIABILITY AND INDEMNITY

The Software is supplied under the express condition that the Licensor shall have no liability in contract or in tort arising from or in connection with the use or possession by the Licensee of the Software and that the Licensee shall indemnify and hold the Licensor harmless from and against any liabilities and claims resulting from such use or possession.

13. EXCUSABLE DELAYS

13.1           The Licensor shall not be responsible nor be deemed to be in
               default on account of delays in delivery or otherwise in the
               performance of this Software Licence or any part thereof due to
               causes reasonably beyond Licensor's or its subcontractors'
               control including but not limited to: natural disasters, fires,
               floods, explosions or earthquakes, epidemics or quarantine
               restrictions, serious accidents, total or constructive total
               loss, any act of the government of the country of the Licensee or
               the governments of the countries of Licensor or its
               subcontractors, war, insurrections or riots, failure of
               transportation, communications or services, strikes or labor
               troubles causing cessation, slow down or interruption of
               services, inability after due and timely diligence to procure
               materials, accessories, equipment or parts, failure of a
               subcontractor or vendor to furnish materials, accessories,
               equipment or parts due to causes reasonably beyond such
               subcontractor's or vendor's control or failure of the Licensee to
               comply with its obligations arising out of the present Software
               Licence.

13.2           The Licensor shall, as soon as practicable after becoming aware
               of any delay falling within the provisions of this Clause, notify
               the Licensee of such delay and of the probable extent thereof and
               shall, subject to the conditions as hereinafter provided and as
               soon as practicable after the removal of the cause or causes for
               delay, resume performance under the Software Licence.

13.3           Should an event of force majeure last for a period extending
               beyond three (3) months, the Software Licence shall be
               automatically terminated, as a matter of right, unless otherwise
               agreed in writing, without compensation for either the Licensor
               or the Licensee.

14.            TERMINATION

               In the event of breach of an obligation set forth in this
               Software Licence by either the Licensor or the Licensee, which is
               not cured within 30 days from the date of receipt of a written
               notice notifying the breach, the non-breaching party shall be
               entitled to terminate this Software Licence.

               In the event of termination for any cause, the Licensee shall no
               longer have any right to use the Software and shall return to the
               Licensor all copies of the Software and any relating
               documentation together with an affidavit to that effect. In case
               of breach by the Licensee, the Licensor shall be entitled to
               retain any amount paid for the ongoing year.

Clause 14 - 14/20

APPENDIX A TO CLAUSE 14

15. GENERAL PROVISIONS

15.1           This Software Licence or part thereof shall not be assigned to a
               third party without the prior written consent of the other party
               except that the Licensor may assign this Licence to any of the
               Licensor's Members or Affiliates.

15.2           This Software Licence shall be governed by the laws of France.
               All disputes arising in connection with this Software Licence
               shall be submitted to the competent courts of Toulouse, France.

15.3           In the event that any provision of this Software Licence should
               for any reason be held ineffective, the remainder of this
               Software Licence shall remain in full force and effect. The
               invalid provision shall be replaced by such valid one as the
               parties would have chosen had they been aware of such invalidity.

15.4           All notices and requests required or authorized hereunder shall
               be given in writing either by registered mail (return receipt
               requested) or by telefax. In the case of any such notice or
               request being given by registered mail, the date upon which the
               answerback is recorded by the addressee or, in case of a telefax,
               the date upon which the answerback is recorded by the sender's
               telefax machine, shall be deemed to be the effective date of such
               notice or request

Clause 14 - 15/20

APPENDIX B TO CLAUSE 14

AIRBUS|WORLD CUSTOMER PORTAL

SECURE ZONE

BASIC SERVICES

Clause 14 - 16/20

APPENDIX B TO CLAUSE 14

1. GENERAL SERVICES

1.1 GCS GENERAL INFORMATION

Providing general information such as:

- Airbus Abbreviations Dictionary (AAD)

- Airbus Monitored Retrofit Campaign

- Engineering and Technical Services (Contact List)

- Events & Symposium

- On-line Services General Information

- Training Catalogues

- Monthly Service Report

- Tutorials

- Spares Information

- Fast Magazine

- Upgrade Services

1.2            FTP SITE

               This service provides access on an ad-hoc basis to specific
               documents or data that first need to be downloaded onto the
               user's local workstation for display and use, after prior
               arrangement with the corresponding Airbus technical counterpart.

1.3            "WHAT IS NEW" FACILITY AND E-MAIL NOTIFICATION

               The "What is New function" allows a user to be informed of new
               information put On-Line within a specific date range (default
               value is between user's last login and "now")

This facility is applicable to following services:

- AIDA (Drawings)

- AOG RG

- CAWA

- ETDS

- General Information

- SPSA

- TPPO

- VIM

As a complementary service to the "What is New facility", a subscription to e-mail notification is available for some mainly used documents.

This function provides information of new data on-line, with direct access links, via e-mail, according to the user's subscription.

Clause 14 - 17/20

                                                         APPENDIX B TO CLAUSE 14

2.             TECHNICAL DATA

2.1            ETDS (ENGINEERING TECHNICAL DOCUMENTATION) SERVICE

               The service provides access via a document index to the contents
               of:

               -    Service Bulletins - all SB in PDF, but SB issued after July
                    1997 in PDF and SGML

- Technical Follow-Up (TFU) - all

- Modification Information Document (MID) - all

- All Operators Telex (AOT) - all

- Operators Information Telex (OIT) - all

- Flight Operations Telex (FOT) - all

- Service Information Letter (SIL) - all

- Consignes de Navigabilite (CN) - all

- Advisory Directives (AD) - all

               In addition, links between such documents are available through
               the service.

               Documents can be printed or downloaded, depending of their
               electronic format.

               SBs available in SGML format can be downloaded in SGML.

               Printing will be based on PDF format.

2.2            STDO (SUPPLIER TECHNICAL MANUALS) SERVICE

               The Supplier Technical Manuals service provides an on-line
               consultation of Suppliers' component maintenance manuals (CMMv)
               available in PDF.

               It allows access to Suppliers' CMMs that are effective for the
               Buyer's fleet.

               Through the application interface, users are able to:

               -    Search documents by Aircraft type, ATA references, document
                    type, Supplier code and Part number;

               -    Access, print and download via the PDF reader plug in
                    (Acrobat Reader) the available release of the Suppliers'
                    technical documentation.

Clause 14 - 18/20

                                                         APPENDIX B TO CLAUSE 14

3.             SPARE PARTS AND REPAIR

3.1            ARG (AOG AND REPAIR GUIDE) SERVICE

               Access to vendor and repairs stations by P/N.

3.2            ASDS (AIRBUS SUPPORT DATA FOR SUPPLIER) SERVICE

               This service offers for all Airbus aircraft:

               -    Part number information such as price, lead-time,
                    manufacturer code, stock status and location

- Part number interchangeability

- Single purchase order status

- Useful information such as contact details, help function and e-mail

- Internet parts ordering

- Information link to selected in-house forwarders

- Support guide and excess inventory list

3.3            VIM (VENDOR INFORMATION MANUAL) SERVICE

               The service offers:

               -    List of Airbus vendors with location, fax, phones, addresses
                    and contacts

- List of repairs stations

- List of equipment manufactured by the vendors

3.4            SPSA (SUPPLIER PRODUCT SUPPORT AGREEMENTS) SERVICE

               Information relative to agreements negotiated between Airbus and
               Aircraft Equipment Suppliers. DMC and MTBUR are available for the
               main Suppliers

3.5            SPARES SERVICES

               This service is already available in an autonomous mode through
               the Spares Portal (http://spares.airbus.com).

               The service offers for all AIRBUS aircraft:

               -    Part number information such as price, lead-time,
                    manufacturer code, stock status and location

- Part number interchangeability

- Single purchase order status

- Useful information such as contact details, help function and e-mail

- Internet parts ordering

- Information link to selected in-house forwarders

- Support guide and excess inventory list

Clause 14 - 19/20

APPENDIX B TO CLAUSE 14

4. WARRANTY

4.1 CAWA (CONTRACTS AND WARRANTY ADMINISTRATION) SERVICE

The Warranty Claim Service proposes four main functions:

- Warranty claims booking

- Consultation of the warranty claims status

- Consultation of statistics on response time regarding closed/open files

- Consultation of warranty guide

5. CUSTOMIZE & DELIVER

5.1            ACCL (A/C COMPARISON LIST) service

               Aircraft configuration comparison list, 6 months and 1 month
               before Delivery

5.2            CDIS (CUSTOMIZATION AND DELIVERY INFORMATION) SERVICES

The following service provides access to:

- RFC (Request For Change)

- AIR (Aircraft Inspection Report)

- SCN (Specification change Notices)

- CCR (Customer Change Register)

- Concessions

Clause 14 - 20/20

15             SELLER REPRESENTATIVES

15.1           CUSTOMER SUPPORT DIRECTOR

               The Seller shall assign one (1) customer support manager based at
               the Seller's main office to coordinate customer support matters
               between the Seller's main office and the Buyer after signature of
               this Agreement for as long as one (1) Aircraft is operated by the
               Buyer.

15.2           CUSTOMER SERVICES REPRESENTATIVES

15.2.1         The Seller shall provide free of charge the services of Seller
               customer services representatives ("SELLER'S REPRESENTATIVES")
               acting in an advisory capacity as defined in Appendix A of this
               Clause 15.

15.2.2         In the event of a need for non-routine technical assistance, the
               Buyer shall have non-exclusive access to the Seller's
               Representatives closest to the Buyer's main base after the end of
               the assignment of the Seller's Representatives referred to in
               Appendix A of this Clause 15. A list of the contacts for the
               Seller's Representatives closest to the Buyer's main base shall
               be provided to the Buyer.

15.2.3         The Seller shall cause similar services to be provided by
               competent representatives of the Engines Manufacturer and by
               Supplier representatives when reasonably necessary and
               applicable.

15.2.4         The Seller shall provide to the Buyer an annual written
               accounting of the consumed man-months and any remaining man-month
               balance. Such accounting shall be deemed as final and acceptable
               to the Buyer unless the Seller receives written objection from
               the Buyer within thirty (30) days of receipt of such accounting.

15.2.5         If requested by the Buyer, Seller Representative services
               exceeding the allocation specified in Appendix A of this Clause
               15 may be provided by the Seller subject to terms and conditions
               to be mutually agreed.

15.3           BUYER'S SERVICE

15.3.1         From the date of arrival of the first of the Seller's
               Representatives and for the duration of the assignment, the Buyer
               shall provide free of charge a suitable lockable office,
               conveniently located with respect to the Buyer's maintenance
               facilities, with complete office furniture and equipment
               including telephone and facsimile connections for the sole use of
               the Seller's Representatives.

               Should the Buyer already provide such facilities through another
               Purchase Agreement with the Seller, the above Buyer's service may
               not be provided if they do not appear necessary.

15.3.2         The Buyer shall reimburse the Seller the costs for the initial
               and termination assignment travel of the Seller's Representatives
               of one (1) confirmed ticket, Business Class, to and from their
               place of assignment and TOULOUSE, FRANCE.

15.3.3         The Buyer shall also provide at no charge to the Seller air
               transportation, confirmed reservations for the annual vacation of
               the persons mentioned in sub- Clause 15.2.1 above to and from
               their place of assignment and the airport on the

Clause 15 - 1/3

               Buyer's network nearest to TOULOUSE, FRANCE.

15.3.4         Should the Buyer request any of the Seller's Representatives
               referred to in Clause 15.2 above, to travel on business to a city
               other than his usual place of assignment, the Buyer shall be
               responsible for all related transportation costs and expenses.

15.3.5         The Buyer shall assist the Seller to obtain from the civil
               authorities of the Buyer's country those documents which are
               necessary to permit the Seller's Representatives to live and work
               in the Buyer's country. Failure of the Seller to obtain the
               necessary documents shall relieve the Seller of any obligation to
               the Buyer under the provisions of Clause 15.2.

15.4           WITHDRAWAL OF THE SELLER'S REPRESENTATIVES

               The Seller shall have the right to withdraw its assigned Seller
               Representatives as it sees fit if conditions arise which are in
               the Seller's opinion dangerous to their safety or health or
               prevent them from fulfilling their contractual tasks.

15.5           SELLER'S REPRESENTATIVES' STATUS

               In providing the above technical services, the Seller's
               Representatives and other employees are deemed to be acting in an
               advisory capacity only and at no time shall they be deemed to act
               as Buyer's employees or agents, either directly or indirectly.

15.6           INDEMNITIES

               INDEMNIFICATION PROVISIONS APPLICABLE TO THIS CLAUSE 15 ARE SET
               FORTH IN CLAUSE 19.

Clause 15 - 2/3

APPENDIX A TO CLAUSE 15

SELLER REPRESENTATIVE ALLOCATION

The Seller Representative allocation that is provided to the Buyer pursuant to Clause 15.2 is defined hereunder.

1 The Buyer shall be provided a total of * man-months of Seller Representative services at the Buyer's main base or at other locations to be mutually agreed.

2 For clarification, such Seller Representatives' services shall include initial Aircraft Entry Into Service (EIS) assistance and sustaining support services.

3 The number of the Seller's Representatives assigned to the Buyer at any one time shall be mutually agreed, but at no time shall it exceed * men.

4 Absence of an assigned Seller's Representative during normal statutory vacation periods are covered by the Seller's Representatives as defined in Clause 15.2.2 and as such are accounted against the total allocation provided in item 1 above.

Clause 15 - 3/3

16             TRAINING AND TRAINING AIDS

16.1           GENERAL

               This Clause 16 covers the terms and conditions for the supply of
               training and training aids for the Buyer's personnel to support
               the Aircraft operation.

16.2           SCOPE

16.2.1         The range and quantity of training and training aids to be
               provided free of charge under this Agreement are covered in
               Appendix A to this Clause 16.

16.2.2.1       With respect to Maintenance Training, training courses shall be
               provided up to one (1) year after Delivery of the last firm
               Aircraft ordered under this Agreement.

16.2.2.2       With respect to Flight Operations Training, the quantity of
               training allocated to each Aircraft shall be provided up to one
               (1) year after Delivery of each corresponding Aircraft.

16.2.3         In the event that the Buyer should use none or only part of the
               training or training aids to be provided pursuant to this Clause
               16, no compensation or credit of any sort shall be provided.

16.3           TRAINING ORGANISATION / LOCATION

16.3.1         The Seller shall provide training at its training center in
               Blagnac, France, or in Hamburg, Germany (each the "SELLER'S
               TRAINING CENTER") or one of its affiliated training centers in
               Miami, U.S.A., or any other future Seller's training center in
               Europe or the Americas (the "AFFILIATED TRAINING CENTERS").

16.3.2         In the event of the non-availability of facilities or scheduling
               imperatives making training by the Seller impractical, the Seller
               shall make arrangements for the provision to the Buyer of such
               training support elsewhere.

16.3.3.1       Upon the Buyer's request, the Seller may also provide certain
               training at a location other than the Seller's Training Centers
               or Affiliated Training Centers, including one of the Buyer's
               bases, if and when practicable for the Seller, under terms and
               conditions to be mutually agreed upon. In this event, all
               additional charges listed in Clause 16.6.2 shall be borne by the
               Buyer.

16.3.3.2       If the training as set forth in Clause 16.3.3.1 above is either
               an Airbus EASA - Part 147 (for maintenance training) or a Type
               Rating Training Organisation (TRTO) (for flight operation
               training) approved course, the Buyer shall provide access to its
               training facilities to the Seller's and the relevant Aviation
               Authorities' representatives for the necessary approval of such
               facilities for the training.

Clause 16 - 1/21

16.4           TRAINING COURSES

16.4.1         Training courses, as well as the minimum and maximum numbers of
               trainees per course provided for the Buyer's personnel, are
               defined in the applicable brochure describing the various
               Seller's training courses (the "SELLER'S TRAINING COURSE
               CATALOG") and shall be scheduled as mutually agreed upon during a
               training conference ("the TRAINING CONFERENCE") to be held
               between nine (9) and twelve (12) months prior to Delivery of the
               first Aircraft.

16.4.2         When training is performed by the Seller:

               (i)  Training courses shall be the Seller's standard courses as
                    described in the applicable Seller's Training Course Catalog
                    valid at the time of the execution of the course. The Seller
                    shall be responsible for all training course syllabi,
                    training aids and training equipment necessary for the
                    organisation of the training courses; however, for the
                    purpose of performing training, training equipment does not
                    include aircraft;

               (ii) The equipment used for training of flight and maintenance
                    personnel shall not be fully customised, however such
                    equipment and the training curricula used for training of
                    flight and/or maintenance personnel shall be configured in
                    order to obtain the relevant Aviation Authorities' approval
                    and to support the Seller's training programs. Training data
                    and documentation shall not be revised;

               (iii) Training data and documentation for trainees receiving the
                    training at the Seller's Training Centers or Affiliated
                    Training Centers shall be free-of-charge. Training data and
                    documentation shall be marked "FOR TRAINING ONLY" and as
                    such are supplied for the sole and express purpose of
                    training;

               (iv) Upon the Buyer's request, the Seller shall collect and pack
                    for consolidated shipment to the Buyer's facility, all
                    training data and documentation of the Buyer's trainees
                    attending training at the Seller's Training Centers or
                    Affiliated Training Centers at no charge to the Buyer;

                    The above shipment shall be delivered Free Carrier ("FCA")
                    to the airport closest to the location at which the training
                    actually takes place, as the term Free Carrier ("FCA") is
                    defined by publication No 560 of the International
                    Chamber of Commerce published in January 2000. Title to and
                    risk of loss of said shipment shall pass to the Buyer upon
                    delivery.

16.4.3         When the Seller's training courses are provided by the Seller's
               instructors, the Seller shall deliver a Certificate of
               Recognition, a Certificate of Course Completion or an
               Attestation, as applicable, at the end of any such training
               course. Any such certificate shall not represent authority or
               qualification by any Aviation Authorities but may be presented to
               such Aviation Authorities in order to obtain relevant formal
               qualification.

               In the event of the training courses being provided by a training
               provider selected by the Seller, the Seller shall cause such
               training provider to deliver a Certificate of Recognition, a
               Certificate of Course Completion or an Attestation, as
               applicable, at the end of any such training course. Any such
               certificate shall not represent

Clause 16 - 2/21

               authority or qualification by any Aviation Authorities but may be
               presented to such Aviation Authorities in order to obtain
               relevant formal qualification.

16.4.4         In the event of the Buyer deciding to cancel or re-schedule a
               training course, if the cancellation is notified * days prior
               to the training, a cancellation charge of * of Airbus Customer
               Services Catalogue price shall be applied.

16.5           PREREQUISITES AND CONDITIONS

16.5.1         Training shall be conducted in English and all training aids are
               written in English using common aeronautical terminology.
               Trainees shall have the prerequisite knowledge and experience
               defined in Appendix "B" to this Clause 16.

               The Buyer hereby acknowledges that the Seller's training courses
               are "Standard Transition Training Courses" and not "Ab Initio
               Training Courses".

               The Buyer shall be responsible for the selection of the trainees
               and for any liability with respect to the entry knowledge level
               of the trainees.

16.5.2.1       The Buyer shall provide the Seller with an attendance list of the
               trainees for each course with the validated qualification of each
               trainee. The Seller reserves the right to check the trainees'
               proficiency and previous professional experience. The Seller
               shall in no case warrant or otherwise be held liable for any
               trainee's performance as a result of any training provided.

16.5.2.2       The Buyer shall further return to the Seller the "Airbus
               Pre-Training Survey" or the "Maintenance Training Survey", as
               applicable, detailing the trainees' associated background at the
               latest two (2) months before the start of the training course.

16.5.2.3       In the event of the Buyer having to make a change to the trainees
               attendance list within * the Buyer shall immediately inform the
               Seller thereof and send to the Seller an updated Airbus
               Pre-Training Survey or Maintenance Training Survey reflecting
               such change.

16.5.3         Upon the Buyer's request, the Seller may be consulted to direct
               the above mentioned trainee(s) through a relevant entry level
               training program, which shall be at the Buyer's charge, and, if
               necessary, to coordinate with competent outside organisations for
               this purpose. Such consultation shall be held during the Training
               Conference.

               In the event of the Seller determining that a trainee lacks the
               required entry level, following consultation with the Buyer, such
               trainee shall be withdrawn from the program.

Clause 16 - 3/21

16.6           LOGISTICS

16.6.1         TRAINEES

16.6.1.1       The Seller shall provide *: for local transportation to the
               Seller's Training Centers or Affiliated Training Centers.

16.6.1.2       The Seller shall provide * for local transportation to the
               Seller's Training Centers or Affiliated Training Centers.

16.6.1.2       Living and travel expenses for the Buyer's trainees shall be
               borne by the Buyer.

16.6.2         TRAINING AT EXTERNAL LOCATION - SELLER'S INSTRUCTORS

               In the event of training being provided at an external location
               specifically at the Seller's request, the conditions relative to
               expenses shall be the same as those which would have been
               applicable if the training had been provided at the Seller's
               Training Centers or Affiliated Training Centers.

               In the event of training being provided by the Seller's
               instructors at any location other than the Seller's Training
               Centers or Affiliated Training Centers at the Buyer's request or
               as otherwise detailed in this Clause 16, the Buyer shall
               reimburse the Seller for all the expenses directly related to the
               assignment of such instructors and their performance of the
               duties as aforesaid.

16.6.2.1       LIVING EXPENSES

               Such expenses, covering the entire period from day of departure
               from to day of return to the Seller's base, shall include but
               shall not be limited to lodging, food and local transportation to
               and from the place of lodging and the training course location.
               The Buyer shall reimburse the Seller for such expenses at the per
               diem rate currently used by the Seller for its personnel.

16.6.2.2       AIR TRAVEL

               The Buyer shall * reimburse the Seller the costs for the Seller's
               instructors in confirmed business class to and from the Buyer's
               designated training site and the Seller's Training Centers or
               Affiliated Training Center, as applicable.

16.6.2.3       TRAINING MATERIAL

               The Buyer shall reimburse the Seller the cost of shipment for the
               training material needed to conduct such courses.

16.6.2.4       TRANSPORTATION

               The Buyer shall be solely liable for any and all delay in the
               performance of the training outside of the Seller's or the
               Seller's Affiliated Training Centers associated with any
               transportation described in this Clause 16.6.

Clause 16 - 4/21

16.6.3         TRAINING EQUIPMENT AVAILABILITY - TRAINING AT EXTERNAL LOCATION.

               Training equipment necessary for course performance at any course
               location other than the Seller's Training Centers or Affiliated
               Training Centers or the facilities of the training provider
               selected by the Seller shall be provided by the Buyer in
               accordance with the Seller's specifications.

16.7           FLIGHT OPERATIONS TRAINING

16.7.1         FLIGHT CREW TRAINING COURSE

16.7.1.1       The Seller shall perform a flight crew training course program
               (standard transition course or a cross crew qualification program
               as applicable) for the Buyer's flight crews, each of which shall
               consist of * captain and * first officer, as defined in Appendix
               A to this Clause 16. The training manual used shall be the
               Seller's Flight Crew Operating Manual (FCOM), except for base
               Flight training, for which the Buyer's customized FCOM shall be
               used.

16.7.1.2       Base Flight Training

16.7.1.2.1     The Buyer shall use its delivered Aircraft, or any other aircraft
               operated by the Buyer, for any base flight training, which shall
               not exceed * session of * minutes per pilot, according to the
               related Airbus training course definition.

16.7.1.2.2     In the event of it being necessary to ferry the Buyer's delivered
               Aircraft to the location where the base flight training shall
               take place, the additional flight time required for the ferry
               flight to and/or from the base training field shall not be
               deducted from the base flight training allowance.

               However, if the base flight training is performed outside of the
               zone where the Seller usually performs such training, the ferry
               flight to the location where the base flight training shall take
               place shall be performed by a crew composed of the Seller's
               and/or the Buyer's qualified pilots, in accordance with the
               Aviation Authorities' regulations related to the place of
               performance of the base flight training.

16.7.2         FLIGHT CREW LINE INITIAL OPERATING EXPERIENCE

16.7.2.1       To assist the Buyer with initial operating experience after
               Delivery of the first Aircraft, the Seller shall provide to the
               Buyer pilot instructor(s) as defined in Appendix A to this Clause
               16.

16.7.2.2       The Buyer shall reimburse the expenses for each such instructor
               in accordance with Clause 16.6.2. Additional pilot instructors
               can be provided at the Buyer's expense and upon conditions to be
               mutually agreed upon.

16.7.3         INSTRUCTOR CABIN ATTENDANTS' FAMILIARIZATION COURSE

               The Seller shall provide instructor cabin attendants' course(s)
               to the Buyer's cabin attendants, as defined in Appendix A to this
               Clause 16, at one of the locations defined in Clause 16.3.1.

               The instructor cabin attendants' course, when incorporating the
               features of the

Clause 16 - 5/21

               Buyer's Aircraft, can be given at the earliest * before the
               Delivery date of the Buyer's first Aircraft.

16.7.4         PERFORMANCE/OPERATIONS COURSE

               The Seller shall provide performance/operations training for the
               Buyer's personnel as defined in Appendix A to this Clause 16.

               The available courses are listed in the Seller's applicable
               Training Courses Catalog.

16.7.5         TRANSITION TYPE RATING INSTRUCTOR (TRI) COURSE

               The Seller shall provide transition type rating instructor (TRI)
               training for the Buyer's flight crew instructors as defined in
               Appendix A to this Clause 16.

               This course provides the Buyer's instructors with the training in
               flight instruction and synthetic instruction required to instruct
               on Airbus aircraft.

16.7.6         During any and all flights performed in accordance with this
               Clause 16.7, the Buyer shall bear full responsibility for the
               aircraft upon which the flight is performed, including but not
               limited to any required maintenance, all expenses such as fuel,
               oil or landing fees and the provision of insurance in line with
               Clause 16.12.

16.8           MAINTENANCE TRAINING

               The Seller shall provide maintenance training for the Buyer's
               ground personnel as defined in Appendix A to this Clause 16.

               The available courses are listed in the Seller's applicable
               Training Courses Catalog.

               The Buyer shall provide the Seller with an attendance list of
               trainees at the latest one (1) month before the start of the
               training course.

               The practical training provided in the frame of maintenance
               training is performed exclusively on the training devices in use
               in the Seller's Training Centers or Affiliated Training Centers.

               In the event of practical training on aircraft being requested by
               the Buyer, such practical training can be organized with the
               assistance of the Seller, in accordance with Clause 16.8.1
               hereunder.

16.8.1         PRACTICAL TRAINING ON AIRCRAFT

               IF the practical training does not need to be covered by an EASA
               - Part 147 (or equivalent) certificate, the Seller may assist the
               Buyer in organizing such practical training on aircraft, at the
               Buyer's expense.

               In the event of the Buyer requiring a full EASA - Part 147
               certificate from the Seller, the practical training on aircraft
               shall be conducted by the Seller, at the Buyer's expense, in a
               EASA - Part 145 facility approved and selected by the Seller.

               In the event of the Buyer requiring such practical training to be
               conducted at the Buyer's EASA - Part 145 (or equivalent) approved
               facilities, such training shall be subject to prior approval by
               the Seller of the facilities at which the training is to be

Clause 16 - 6/21

               conducted.

               The provision of an instructor by the Seller for the practical
               training shall be deducted from the trainee days allowance
               defined in Appendix A to this Clause 16, subject to the
               conditions detailed in Paragraph 3.2 thereof.

               The Buyer shall reimburse the expenses for said instructor(s) in
               accordance with Clause 16.6.2.

16.8.2         LINE MAINTENANCE INITIAL OPERATING EXPERIENCE TRAINING

               In order to assist the Buyer during the entry into service of the
               Aircraft, the Seller shall provide to the Buyer maintenance
               instructor(s) at the Buyer's base as defined in Appendix A to
               this Clause 16.

16.8.2.1       This line maintenance training shall cover training in handling
               and servicing of Aircraft, flight crew / maintenance
               coordination, use of Technical Data and any other activities that
               may be deemed necessary after Delivery of the first Aircraft.

16.8.2.2       The Buyer shall reimburse the expenses for said instructor(s) in
               accordance with Clause 16.6.2. Additional maintenance instructors
               can be provided at the Buyer's expense.

16.9           SUPPLIER AND PROPULSION SYSTEM MANUFACTURER TRAINING

                                        *

               Upon the Buyer's request, the Seller shall provide to the Buyer
               the list of the maintenance and overhaul training courses (the
               "Supplier Training Catalog") provided by major Suppliers and the
               applicable Engines Manufacturer on their products.

16.10          TRAINING AIDS FOR THE BUYER'S TRAINING ORGANISATION

16.10.1        The Seller shall provide to the Buyer training aids, including
               the AIRBUS COMPUTER BASED TRAINING (AIRBUS CBT), as used in the
               Seller's Training Centers, and the VIRTUAL AIRCRAFT (WALK AROUND
               AND COMPONENT LOCATION), free of charge as defined in Appendix A
               to this Clause 16.

               The Airbus CBT and training aids supplied to the Buyer shall be
               similar to those used in the Seller's Training Centers for the
               training provided for the Buyer. The Airbus CBT and Virtual
               Aircraft in use at the Seller's Training Centers are revised on a
               regular basis and such revision shall be provided to the Buyer
               during the period when training courses provided under Appendix A
               of this Clause 16 are performed for the Buyer or up to * after
               delivery of the Airbus CBT or the Virtual Aircraft to the Buyer
               under this Agreement, whichever first occurs.

16.10.2        DELIVERY

16.10.2.1      The Seller shall deliver to the Buyer the Airbus CBT and training
               aids, as defined in Appendix A to this Clause 16, at a date to be
               mutually agreed during the Training

Clause 16 - 7/21

               Conference.

16.10.2.2      The items supplied to the Buyer pursuant to Clause 16.10.1 shall
               be delivered FCA Toulouse, Blagnac Airport. Title to and risk of
               loss of said items shall pass to the Buyer upon delivery.

16.10.2.3      All costs related to transportation and insurance of said items
               from the FCA point to the Buyer's facilities shall be at the
               Buyer's expense.

16.10.3        INSTALLATION OF THE AIRBUS CBT

16.10.3.1.1    Before the initial delivery of the Airbus CBT, as defined in
               Appendix A hereto, the Seller shall provide to up to * trainees
               of the Buyer, at the Buyer's facilities, the Airbus CBT
               Administrator Course, as defined in Appendix C hereto.

               To conduct the course, the workstations and/or "Servers", as
               applicable, shall be ready for use and shall comply with the
               latest "Airbus CBT Workstation Technical Specification" or
               "Airbus CBT Server Technical Specification", as applicable
               (collectively "the Airbus CBT Technical Specification").

16.10.3.1.2    The Airbus CBT shall be installed by the Buyer's personnel, who
               shall have followed the Airbus CBT Administrator Course. The
               Seller shall be held harmless from any injury to person and/or
               damage to property caused by or in any way connected with the
               handling and/or installation of the Airbus CBT by the Buyer's
               personnel.

16.10.3.2      Upon the Buyer's request and subject to conditions to be quoted
               by the Seller, the Seller may assist the Buyer with the initial
               installation of the Airbus CBT at the Buyer's facilities. Such
               assistance shall follow notification in writing that the various
               components, which shall be in accordance with the specifications
               defined in the Airbus CBT Technical Specification, are ready for
               installation and available at the Buyer's facilities.

16.10.3.3      The Buyer shall reimburse the expenses in accordance with Clause
               16.6.2, for the Seller's personnel required at the Buyer's
               facilities to conduct the Airbus CBT Administrator Course and/or
               provide installation assistance.

16.10.4        LICENCES

16.10.4.1      AIRBUS CBT LICENSE

16.10.4.1.1    The Seller shall grant the Buyer a Licence to use the Airbus CBT,
               under conditions defined in Appendix C to this Clause 16.

16.10.4.1.2    Supply of sets of CBT Courseware, as defined in Appendix C, and
               additional to those indicated in Appendix A, as well as any
               extension to the Licence of such CBT Courseware, shall be subject
               to terms and conditions to be mutually agreed.

16.10.4.2      VIRTUAL AIRCRAFT LICENSE

16.10.4.2.1    The Seller shall grant the Buyer a Licence to use the Virtual
               Aircraft, under conditions defined in Appendix C to this Clause
               16. For the purpose of such Licence, the term "Airbus CBT" as
               used in such License shall mean the "Virtual

Clause 16 - 8/21

               Aircraft".

16.10.4.2.2    Supply of sets of Virtual Aircraft Software, as defined in
               Appendix C, and additional to those indicated in Appendix A, as
               well as any extension to the Licence of such Virtual Aircraft
               Software, shall be subject to terms arid conditions to be
               mutually agreed.

16.10.5        The Seller shall not be responsible for and hereby disclaims any
               and all liabilities resulting from or in connection with the use
               by the Buyer of the Airbus CBT, the Virtual Aircraft and any
               other training aids provided under this Clause 16.10.

16.11          PROPRIETARY RIGHTS

               The Seller's training data and documentation, Airbus CBT, Virtual
               Aircraft and training aids are proprietary to the Seller and/or
               its Affiliates and/or its suppliers and the Buyer agrees not to
               disclose the content of the courseware or any information or
               documentation provided by the Seller in relation to training, in
               whole or in part, to any third party without the prior written
               consent of the Seller.

16.12          INDEMNITIES AND INSURANCE

               INDEMNIFICATION PROVISIONS AND INSURANCE REQUIREMENTS APPLICABLE
               TO THIS CLAUSE 16 ARE AS SET FORTH IN CLAUSE 19.

               THE BUYER WILL PROVIDE THE SELLER WITH AN ADEQUATE INSURANCE
               CERTIFICATE PRIOR TO ANY TRAINING ON AIRCRAFT.

Clause 16 - 9/21

APPENDIX A TO CLAUSE 16

APPENDIX "A" TO CLAUSE 16

TRAINING ALLOWANCE

For the avoidance of doubt, all quantities indicated below are the total quantities granted for the whole of the Buyer's fleet of ten (10) Aircraft, unless otherwise specified.

1. FLIGHT OPERATIONS TRAINING

1.1            FLIGHT CREW TRAINING (STANDARD TRANSITION COURSE OR CROSS CREW
               QUALIFICATION (CCQ) AS APPLICABLE)

               The Seller shall provide flight crew training (standard
               transition course or CCQ as applicable) free of charge for * of
               the Buyer's flight crews per firmly ordered Aircraft,

                                        *

1.2            FLIGHT CREW LINE INITIAL OPERATING EXPERIENCE

               The Seller shall provide to the Buyer pilot instructor(s) free of
               charge for a period of * pilot instructor months.

1.2.1          The maximum number of pilot instructors present at any one time
               shall be limited to * pilot instructors.

1.3            INSTRUCTOR CABIN ATTENDANTS' FAMILIARIZATION COURSE

               The Seller shall provide to the Buyer instructor cabin
               attendants' training free of charge for * of the Buyer's
               instructor cabin attendants.

1.4            PERFORMANCE / OPERATIONS COURSE(S)

1.4.1          The Seller shall provide to the Buyer * trainee days of
               performance / operations training free of charge for the Buyer's
               personnel.

1.4.2          The above trainee days shall be used solely for the
               performance/operations training courses as defined in the
               Seller's applicable Training Course Catalog.

1.5            TRANSITION TYPE RATING INSTRUCTOR (TRI) COURSE

               The Seller shall provide to the Buyer transition type rating
               instructor training (transition or CCQ, as applicable) free of
               charge for * of the Buyer's flight instructors.

Clause 16 - 10/21

                                                         APPENDIX A TO CLAUSE 16

2              MAINTENANCE TRAINING

2.1            MAINTENANCE TRAINING COURSES

2.1.1          The Seller shall provide to the Buyer * trainee days of
               maintenance training free of charge for the Buyer's personnel.

2.1.2          The above trainee days shall be used solely for the Maintenance
               training courses as defined in the Seller's applicable Training
               Courses Catalog.

2.1.3          Within the trainee days allowance in Paragraph 2.1.1 above, the
               number of Engine Run-up courses shall be limited to one (1)
               course for * trainees per firmly ordered Aircraft and to a
               maximum of * courses in total.

2.2            LINE MAINTENANCE INITIAL OPERATING EXPERIENCE TRAINING

               The Seller shall provide to the Buyer * maintenance instructor(s)
               at the Buyer's base free of charge for * period(s) of * week(s)
               each, up to the "A" check.

3              TRAINEE DAYS ACCOUNTING

               Trainee days are counted as follows:

3.1            For instruction at the Seller's Training Centers or Affiliated
               Training Centers: one (1) day of instruction for one (1) trainee
               equals one (1) trainee day. The number of trainees originally
               registered at the beginning of the course shall be counted as the
               number of trainees to have taken the course.

3.2            For instruction outside of the Seller's Training Centers or
               Affiliated Training Centers: one (1) day of instruction by one
               (1) Seller instructor equals the actual number of trainees
               attending the course or a minimum of twelve (12) trainee days.

3.3            For practical training, one (1) day of instruction by one (1)
               Seller instructor equals the actual number of trainees attending
               the course or a minimum of six (6) trainee days.

3.4            In the event of training being provided outside of the Seller's
               Training Centers or Affiliated Training Centers specifically at
               the Seller's request, Paragraph 3.1 hereabove shall be applicable
               to the trainee days accounting for such training.

Clause 16 - 11/21

                                                         APPENDIX A TO CLAUSE 16

4              TRAINING AIDS FOR BUYER'S TRAINING ORGANISATION

               The Seller shall provide to the Buyer free of charge:

               -    * Airbus CBT (flight and/or maintenance) related to the
                    Aircraft type(s) as covered by this Agreement (including *
                    of CBT Courseware and * of CBT Software for flight and * of
                    CBT Courseware and * of CBT Software for maintenance, as
                    applicable). The detailed description of the Airbus CBT
                    shall be provided to the Buyer at the Training Conference;

               -    * Virtual Aircraft (Walk around and Component Location)
                    related to the aircraft type (s) as covered in this
                    Agreement.

- * of training documentation on CD-ROM;

- * CD-ROM of cockpit panels for training.

Clause 16 - 12/21

APPENDIX B TO CLAUSE 16

APPENDIX "B" TO CLAUSE 16

MINIMUM RECOMMENDED QUALIFICATION

IN RELATION TO TRAINING REQUIREMENTS

The prerequisites listed below are the minimum recommended requirements specified for Airbus training. If the appropriate Aviation Authorities or the specific airline policy of the trainee demand greater or additional requirements, they shall apply as prerequisites.

FLIGHT CREW STANDARD TRANSITION COURSES

CAPTAIN PREREQUISITES:

- Previously qualified on JAR/FAR/CS 25 aircraft and commercial operations

- Valid and Current Airline Transport Pilot License (ATPLY)

- Previous command experience

- Fluency in English (able to write, read and communicate at an adequately understandable level in English language)

- Jet experience

- Flight time:

- 1,500 hours as pilot

- 1,000 hours on JAR/FAR/CS 25 aircraft

- 200 hours experience as airline, corporate or military transport pilot

FIRST OFFICER PREREQUISITES:

- Previously qualified on JAR/FAR/CS 25 aircraft and commercial operations

- Aircraft and commercial operations valid and current CPL (Commercial pilot license) with Instrument rating,

- Fluency in English (able to write, read and communicate at an adequately understandable level in English language)

- Jet experience

- Flight time:

- 500 hours as pilot

- 300 hours on JAR/FAR/CS 25 aircraft

- 200 hours experience as airline, corporate or military transport pilot

If the Trainee does not speak English or is not fluent enough to follow the Standard Transition course, he shall follow the Adapted language transition and provide a translator as indicated by the Seller.

If no Jet experience, both CAPTAIN and/or FIRST OFFICER must follow before entering the transition course, a dedicated "Jet Familiarization entry level course". Such course(s), if required, shall be at the Buyer's expense.

Clause 16 - 13/21

APPENDIX B TO CLAUSE 16

FIRST TYPE RATING COURSE

This course is designed for Ab initio pilots who do not hold an aircraft type rating on their pilot license

PILOT PREREQUISITES

- Valid and current CPL (commercial pilot license)

- Valid and current Instrument Rating on multi engine aircraft

- APTLY written examination

- Fluency in English (able to write, read and communicate at an adequately understandable level in English language)

- Flight experience:

- 220 hours as pilot

- 100 hours as pilot in command (PIC)

- 25 hours on multi engine aircraft (up to 10 hours can be completed in a simulator)

In addition to the above conditions and in accordance to the JAR Flight Crew Licensing (FCL) and the Airbus Training Policy, a pilot applying for a first type rating must have followed either an approved JAR Multi Crew Cooperation
(MCC) program or regulatory equivalent or the "Airbus Entry Level Training (ELT)
program" (combined MCC and Jet familiarization course). Such course, if required, shall be at the Buyer's expense.

CCQ ADDITIONAL PREREQUISITES

In addition to the prerequisites set forth for the Flight Crew Standard Transition Course, both CAPTAIN and FIRST OFFICER must:

- be qualified and current on the base aircraft type

- have 150 hours minimum and 3 months minimum of operations on the base aircraft type.

TRI COURSE ADDITIONAL PREREQUISITES

In addition to the prerequisites set forth for the Right Crew Standard Transition Course, it is the responsibility of the Buyer to:

- select instructor candidate(s) with airmanship and behaviour corresponding to the role and responsibility of an airline instructor

- designate instructor candidate(s) with the Airbus prerequisite, which corresponds to the JAR requirements (ref JAR - FCL 1 - Requirements/ Subparts H - Instructor rating (Aeroplane)

Clause 16 - 14/21

APPENDIX B TO CLAUSE 16

PERFORMANCE AND OPERATIONS PERSONNEL PREREQUISITES

The Buyer's performance and operations personnel shall be fluent in English (able to write, read and communicate at an adequately understandable level in English language).

All further detailed prerequisites shall be provided by the Seller to the Buyer during the Training Conference, depending on the type of training course(s) selected by the Buyer.

MAINTENANCE PERSONNEL PREREQUISITES

- Fluency in English (understanding of English (able to write, read and communicate at an adequately understandable level in English language) adequate to be able to follow the training (If this is not the case, the Buyer shall assign a minimum of one (1) translator for eight (8) trainees).

- Technical experience in the line or/and base maintenance activity of commercial jet aircraft

Additional prerequisites for Aircraft Rigging Course

Qualification as line or line and base mechanic on one type of Airbus aircraft family

Additional prerequisites for Maintenance Initial Operating Experience

Qualification as line or line and base mechanic on the concerned Airbus aircraft type (for Course)

MAINTENANCE TRAINING DIFFERENCE COURSES ADDITIONAL PREREQUISITES

In addition to the prerequisites set forth for Maintenance Personnel, the personnel shall be current and operating on the base aircraft

Clause 16 - 15/21

APPENDIX C TO CLAUSE 16

LICENCE FOR USE OF AIRBUS COMPUTER BASED TRAINING

CLAUSE 16 - 16/21

APPENDIX C TO CLAUSE 16

LICENCE FOR USE OF AIRBUS COMPUTER BASED TRAINTNG (AIRBUS CBT)

1              DEFINITIONS

1.1            For the purpose of this Appendix C to Clause 16, the following
               definitions shall apply:

1.1.1          "AIRBUS CBT means the combination of the Airbus CBT Software and
               the Airbus CBT Courseware.

1.1.2          "AIRBUS CBT COURSEWARE" means the programmed instructions that
               provide flight crew and maintenance training.

1.1.3          "AIRBUS CBT SOFTWARE" means the system software that permits the
               use of the Airbus CBT Courseware.

1.1.4          "STUDENT / INSTRUCTOR MODE" means the mode that allows the Buyer
               to run the Airbus CBT Courseware.

1.1.5          "AIRBUS CBT ADMINISTRATOR COURSE" means the training enabling the
               Buyer to load and use the Airbus CBT either on stand-alone
               workstations or in a Server mode.

1.1.6          "NETWORK" means the group of the Buyer's computers connected to
               each other through cables and allowing the transmission of data
               and instructions, which can be used by all of the Buyer's
               computers so linked.

1.1.7          "SERVER" means the computer dedicated to the administration of a
               Network and on which the Airbus CBT is installed and can be
               reached through the Network.

1.1.8          "TECHNICAL SPECIFICATION" means either the "Airbus CBT
               Workstation Technical Specification" or the "Airbus CBT Server
               Technical Specification", as applicable.

1.1.9          "INTRANET" means the Buyer's private and local Network using the
               same technical protocols as internet but which is not open to
               public connection.

1.1.10         "EXTRANET" means the network constituted of an external Intranet,
               allowing communication between the Buyer and certain defined
               external entities.

1.1.11         "USER GUIDE" means the documentation, which may be in electronic
               format, designed to assist the Buyer to use the Airbus CBT.

1.2            Capitalised terms used herein and not otherwise defined in this
               Airbus CBT Licence shall have the meaning assigned thereto in the
               Agreement.

1.3            Any and all hardware required for the operation of the Airbus CBT
               is not part of the Airbus CBT and shall be procured under the
               sole responsibility of the Buyer. The Seller shall not be
               responsible for any incompatibility of such hardware with the
               Airbus CBT.

2              GRANT

Clause 16 - 17/21

APPENDIX C TO CLAUSE 16

               The Seller grants the Buyer the right, pursuant to the terms and
               conditions herein, to use the Airbus CBT for the Term of this
               licence ("AIRBUS CBT LICENCE").

3              COPIES

               Use of the Airbus CBT is limited to the number of copies
               delivered by the Seller to the Buyer and to the medium on which
               the Airbus CBT is delivered. No reproduction shall be made
               without the prior written consent of the Seller. Notwithstanding
               the above, specific rights as detailed hereafter shall be granted
               for respectively the Airbus CBT Software and the Airbus CBT
               Courseware.

3.1            AIRBUS CBT SOFTWARE

               The Buyer shall be permitted to copy the Airbus CBT Software for
               back-up and archiving purposes and for loading of the Airbus CBT
               Software exclusively on the Buyer's workstations or Server, as
               applicable. In such cases, the Buyer shall advise the Seller in
               writing of the number of any copies made. Any other copy for any
               other purpose is strictly prohibited.

3.2            AIRBUS CBT COURSEWARE

               The Buyer shall be permitted to copy the Airbus CBT Courseware
               for the sole purpose of internal training of the Buyer's
               personnel, explicitly such copies shall be used by the Buyer's
               employees only on their laptops for training purposes.

               In such cases, the Buyer shall advise the Seller in writing of
               the number of copies made and shall cause its employees to
               strictly comply with the conditions of use and the
               confidentiality provisions of this Airbus CBT Licence. In
               particular, the Buyer's employees shall agree to use such copy
               for training purposes only and to make no additional copy. The
               Buyer shall further ensure that any copy provided to an employee
               is returned to the Buyer either upon request by the Buyer or upon
               termination of the employment of the employee. Any other copy for
               any other purpose is strictly prohibited.

3.3            Any copy made by the Buyer shall be performed under the sole
               responsibility of the Buyer The Buyer agrees to reproduce the
               copyright and other notices as they appear on or within the
               original media on any copies that the Buyer makes of the Airbus
               CBT Software or the Airbus CBT Courseware. The Seller shall not
               provide revision service for any copies made.

4              TERM

               The rights under this Airbus CBT Licence shall be granted to the
               Buyer for as long as the Buyer operates the Seller's Aircraft
               model to which the Airbus CBT Software and the Airbus CBT
               Courseware apply ("the Term"). At the end of the Term, the Buyer
               shall return the Airbus CBT and any copies thereof to the Seller,
               accompanied by a note certifying that the Buyer has returned all
               existing copies.

Clause 16 - 18/21

                                                         APPENDIX C TO CLAUSE 16

5              PERSONAL ON-SITE LICENCE

               The sole right granted to the Buyer under this Airbus CBT Licence
               is the right to use the Airbus CBT. The Airbus CBT Licence is
               personal to the Buyer, for its own internal use, and is
               non-transferable and non-exclusive.

6              CONDITIONS OF USE

6.1            The Buyer shall:

               -    * maintain the Airbus CBT and the relating documentation in
                    good working condition, in order to ensure the correct
                    operation thereof;

               -    use the Airbus CBT in accordance with such documentation and
                    the User Guide, and ensure that the staff using the Airbus
                    CBT have received the appropriate training;

               -    use the Airbus CBT exclusively in the technical environment
                    defined in the Technical Specification, except as otherwise
                    agreed in writing between the parties;

               -    use the Airbus CBT for its own internal needs and on its
                    Network (except if the Seller has consented to other
                    usages), when technically possible, only and exclusively on
                    the machine referenced and the site declared;

               -    not transmit the Airbus CBT electronically by any means, nor
                    use the Airbus CBT on either the internet. Intranet or
                    Extranet;

               -    not alter, reverse engineer, modify or adapt the Airbus CBT,
                    or integrate all or part of the Airbus CBT in any manner
                    whatsoever into another software product;

               -    not correct the Airbus CBT, except that such correction
                    right may exceptionally be granted to the Buyer by the
                    Seller in writing;

               -    not translate, disassemble or decompile the Airbus CBT
                    Software or create a software product derived from the
                    Airbus CBT Software;

               -    not attempt to or authorise a third party to discover or
                    re-write the Airbus CBT source codes in any manner
                    whatsoever;

               -    not delete any identification or declaration relative to the
                    intellectual property rights, trademarks or any other
                    information related to ownership or intellectual property
                    rights provided in the Airbus CBT by the Seller;

               -    not pledge, sell, distribute, grant, sub-license, lease,
                    lend, whether on a free-of-charge basis or against payment,
                    or permit access on a time-sharing basis or any other
                    utilisation of the Airbus CBT, whether in whole or in part,
                    for the benefit of a third party;

               -    not permit any third party to use the Airbus CBT in any
                    manner, including but not limited to, any outsourcing, loan,
                    commercialisation of the Airbus CBT or commercialisation by
                    merging the Airbus CBT into another software or adapting the
                    Airbus CBT, without prior written consent from the Seller.

               The Seller shall be entitled, *, subject to providing reasonable
               prior written notice thereof to the Buyer and provided the same
               will not interfere with the Buyer's commercial operations, to
               come and verify in the Buyer's facilities whether the conditions
               specified in this Airbus CBT License are respected. This shall
               not however commit the responsibility of the Seller in any way
               whatsoever.

Clause 16 - 19/21

                                                         APPENDIX C TO CLAUSE 16

6.2            USE OF THE AIRBUS CBT SOFTWARE

               Notwithstanding Clause 6.1 above, the Buyer shall use the Airbus
               CBT Software for the exclusive purpose of, for the student
               delivery mode:

               (i)  rostering students for one or several courses syllabi in
                    order to follow students' progression,

               (ii) rearranging courses syllabi or creating new ones using
                    available courseware modules.

               However, the Seller disclaims any responsibility regarding any
               course(s) that may be modified or rearranged by the Buyer.

6.3            USE OF THE AIRBUS CBT COURSEWARE

               Notwithstanding Clause 5 above, the Buyer shall use the Airbus
               CBT Courseware for the exclusive purpose of performing training
               of its personnel, or of third party personnel contracted to
               perform maintenance work on the Buyer's Aircraft on behalf of the
               Buyer. Such training shall be performed exclusively at the
               Buyer's facility.

7              PROPRIETARY RIGHTS AND NON DISCLOSURE

               The Airbus CBT Software and Airbus CBT Courseware, the
               copyright and any and all other author rights, intellectual,
               commercial or industrial proprietary rights of whatever nature in
               the Airbus CBT Software and Airbus CBT Courseware are and shall
               remain with the Seller and/or its Affiliates or suppliers, as the
               case may be. The Airbus CBT Software and Airbus CBT Courseware
               and their contents are designated as confidential. The Buyer
               shall not take any commercial advantage by copy or presentation
               to third parties of the Airbus CBT Software, the documentation,
               the Airbus CBT Courseware, and/or any rearrangement, modification
               or copy thereof.

               The Buyer acknowledges the Seller's proprietary rights in the
               Airbus CBT and undertakes not to disclose the Airbus CBT Software
               or Airbus CBT Courseware or parts thereof or their contents to
               any third party without the prior written consent of the Seller.
               Insofar as it is necessary to disclose aspects of the Airbus CBT
               Software and Airbus CBT Courseware to the Buyer's personnel, such
               disclosure is permitted only for the purpose for which the Airbus
               CBT Software and Airbus CBT Courseware are supplied to the Buyer
               under the present Airbus CBT Licence.

8              WARRANTY

8.1            The Seller warrants that the Airbus CBT is prepared in accordance
               with the state of art at the date of its conception. Should the
               Airbus CBT be found to contain any non-conformity or defect, the
               Buyer shall promptly notify the Seller thereof and the sole and
               exclusive liability of the Seller under this Clause 8.1 shall be
               to correct the same at its own expense.

Clause 16 - 20/21

                                                         APPENDIX C TO CLAUSE 16

8.2            THE WARRANTIES, OBLIGATIONS AND LIABILITIES OF THE SELLER AND/OR
               ITS SUPPLIERS AND REMEDIES OF THE BUYER SET FORTH IN THE AIRBUS
               CBT LICENCE ARE EXCLUSIVE AND IN SUBSTITUTION FOR, AND THE BUYER
               HEREBY WAIVES, RELEASES AND RENOUNCES ALL OTHER WARRANTIES,
               OBLIGATIONS AND LIABILITIES OF THE SELLER AND/OR ITS SUPPLIERS
               AND RIGHTS, CLAIMS AND REMEDIES OF THE BUYER AGAINST THE SELLER,
               ITS SUPPLIERS AND/OR THEIR INSURERS, EXPRESS OR IMPLIED, ARISING
               BY LAW OR OTHERWISE WITH RESPECT TO ANY NON-CONFORMITY OR DEFECT
               IN THE AIRBUS CBT DELIVERED UNDER THIS AGREEMENT INCLUDING BUT
               NOT LIMITED TO:

               (A)  ANY WARRANTY AGAINST HIDDEN DEFECTS (GARANTIE DES VICES
                    CACHES);

               (B)  ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS;

               (C)  ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE,
                    COURSE OF DEALING OR USAGE OF TRADE;

               (D)  ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY, WHETHER
                    CONTRACTUAL OR DELICTUAL AND WHETHER OR NOT ARISING FROM THE
                    SELLER'S AND/OR ITS SUPPLIERS" NEGLIGENCE, ACTUAL OR
                    IMPUTED; AND

               (E)  ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS
                    OF OR DAMAGE TO ANY AIRCRAFT, COMPONENT, EQUIPMENT,
                    ACCESSORY OR PART THEREOF OR THE AIRBUS CBT DELIVERED
                    HEREUNDER.

               THE SELLER AND/OR ITS SUPPLIERS SHALL HAVE NO OBLIGATION OR
               LIABILITY, HOWSOEVER ARISING, FOR LOSS OF USE, REVENUE OR PROFIT
               OR FOR ANY OTHER DIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES
               WITH RESPECT TO ANY NONCONFORMITY OR DEFECT IN THE AIRBUS CBT
               DELIVERED UNDER THIS AGREEMENT.

               FOR THE PURPOSES OF THIS CLAUSE 8.2, "THE SELLER" SHALL INCLUDE
               THE SELLER, ITS AFFILIATES AND ANY OF THEIR RESPECTIVE INSURERS.

Clause 16 - 21/21

17             EQUIPMENT SUPPLIER PRODUCT SUPPORT

17.1           EQUIPMENT SUPPLIER PRODUCT SUPPORT AGREEMENTS

17.1.1         The Seller has obtained enforceable and transferable product
               support agreements from Suppliers of Seller Furnished Equipment
               listed in the Specification.

17.1.2         These agreements are based on the "World Airlines Suppliers
               Guide" and include Supplier commitments as contained in the
               "SUPPLIER PRODUCT SUPPORT AGREEMENTS" which include the following
               provisions:

17.1.2.1       Technical data and manuals required to operate, maintain, service
               and overhaul the Supplier Parts. Such technical data and manuals
               shall be prepared in accordance with the applicable provisions of
               ATA Specification including revision service and be published in
               the English language. The Seller shall recommend that software
               data, where applicable, be supplied in the form of an appendix to
               the Component Maintenance Manual, such data shall be provided h
               compliance with the applicable ATA Specification.

17.1.2.2       Warranties and guarantees including standard warranties. In
               addition, landing gear Suppliers shall provide service life
               policies for selected structural landing gear elements.

17.1.2.3       Training to ensure efficient operation, maintenance and overhaul
               of the Supplier Parts for the Buyer's instructors, shop and line
               service personnel.

17.1.2.4       Spares data in compliance with ATA 200/2000 Specification,
               initial provisioning recommendations, spare parts and logistic
               service including routine and expedited deliveries.

17.1.2.5       Technical service to assist the Buyer with maintenance, overhaul,
               repair, operation and inspection of Supplier Parts as well as
               required tooling and spares provisioning.

17.2           SUPPLIER COMPLIANCE

               The Seller shall monitor Supplier compliance with support
               commitments defined in the Supplier Product Support Agreements
               and shall take remedial action together with the Buyer if
               necessary.

Clause 17 - 1/1

18             BUYER FURNISHED EQUIPMENT

18.1           ADMINISTRATION

18.1.1         Without additional charge, the Seller shall provide for the
               installation of those items of equipment which are identified in
               the Specification as being furnished by the Buyer ("BUYER
               FURNISHED EQUIPMENT" or "BFE"), provided that they are referred
               to in the Airbus BFE Catalog of Approved Suppliers by Products
               valid at time of ordering of the concerned BFE.

               The Seller shall advise the Buyer of the dates by which, in the
               planned release of engineering for the Aircraft, the Seller
               requires a written detailed engineering definition including the
               description of the dimensions and weight of BFE, the information
               related to its certification and information necessary for the
               installation and operation thereof. The Buyer shall furnish such
               detailed description and information by the dates so specified.
               Such information, dimensions and weights shall not thereafter be
               revised unless authorised by a Specification Change Notice.

               The Seller shall also furnish in due time to the Buyer a schedule
               of dates and indication of shipping addresses for delivery of BFE
               and, where requested by the Seller, additional spare BFE to
               permit installation in the Aircraft and delivery of the Aircraft
               in accordance with the delivery schedule. The Buyer shall provide
               such equipment by such dates in a serviceable condition, in order
               to allow performance of any assembly, test, or acceptance process
               in accordance with the industrial schedule.

               The Buyer shall also provide, when requested by the Seller, at
               AIRBUS FRANCE S.A.S. works in TOULOUSE (FRANCE) and/or at AIRBUS
               DEUTSCHLAND GmbH, Division Hamburger Flugzeugbau Works in HAMBURG
               (FEDERAL REPUBLIC OF GERMANY) adequate field service including
               support from BFE suppliers to act in a technical advisory
               capacity to the Seller in the installation, calibration and
               possible repair of any BFE.

18.1.2         The Seller shall be entitled to refuse any item of BFE which it
               considers incompatible with the Specification, the above
               mentioned engineering definition or the certification
               requirements, and shall promptly notify the Buyer of such
               refusal.

18.1.3         The BFE shall be imported into FRANCE or into the FEDERAL
               REPUBLIC OF GERMANY by the Buyer under a suspensive customs
               system ("Regime de I'entrepot industriel pour fabrication
               coordonnee" or "Zollverschluss") without application of any
               French or German tax or customs duty, and shall be Delivered Duty
               Unpaid (DDU) according to the Incoterms definition.

               Shipping Addresses:

               AIRBUS FRANCE S.A.S.
               316 Route de Bayonne
               31300 TOULOUSE
               FRANCE

               or

Clause 18 - Page 1/3

AIRBUS DEUTSCHLAND GmbH
Division Hamburger Flugzeugbau

Kreetslag 10
21129 HAMBURG

FEDERAL REPUBLIC OF GERMANY

               as provided in Clause 18.1.

18.1.4         If the Buyer requests the Seller to supply directly certain items
               which are considered as BFE according to the Specification and if
               such request is notified to the Seller in due time in order not
               to affect the Scheduled Delivery Month of the Aircraft, the
               Seller may agree to order such items subject to the execution of
               a Specification Change Notice reflecting the effect on price,
               escalation adjustment, and any other conditions of the Agreement.
               In such a case the Seller shall be entitled to the payment of a
               reasonable handling charge, * and shall bear no liability in
               respect of delay and product support commitments for such items
               which shall be the subject of separate arrangements between the
               Buyer and the relevant supplier.

18.2           AVIATION AUTHORITIES' REQUIREMENTS

               The Buyer is responsible for, at its expense, and warrants that
               BFE shall be manufactured by a qualified supplier, shall meet the
               requirements of the applicable Specification, shall comply with
               applicable requirements incorporated by reference to the Type
               Certificate and listed in the Type Certificate Data Sheet, shall
               be approved by the Aviation Authorities delivering the Export
               Certificate of Airworthiness and by the Buyer's Aviation
               Authority for installation and use on the Aircraft at the time of
               Delivery of such Aircraft.

18.3           BUYER'S OBLIGATION AND SELLER'S REMEDIES

18.3.1         Any delay or failure in complying with the foregoing warranty or
               in providing the descriptive information or service
               representatives mentioned in Clause 18.1 or in furnishing the BFE
               in serviceable condition at the requested delivery date or in
               obtaining any required approval for such equipment under the
               above mentioned Aviation Authorities regulations may delay the
               performance of any act to be performed by the Seller, and cause
               the Final Price of the Aircraft to be adjusted in accordance with
               the updated delivery schedule and to include in particular the
               amount of the Seller's * additional costs, directly attributable
               to such delay or failure such as storage, taxes, insurance and
               costs of out-of sequence installation. *

18.3.2         Further, in any such event, the Seller may:

               (i)  select, purchase and install an equipment similar to the
                    involved one, in which event the Final Price of the affected
                    Aircraft shall also be increased by the purchase price of
                    such equipment plus reasonable costs and expenses incurred
                    by the Seller for handling charges, transportation,
                    insurance, packaging and if so required and not already
                    provided for in the price of the Aircraft for adjustment and
                    calibration; or

               (ii) if the BFE shall be so delayed by more than * days, or
                    unapproved within * days deliver the Aircraft without the
                    installation of such equipment, notwithstanding the terms of
                    Clause 7 insofar as it may otherwise have applied, and the
                    Seller shall thereupon be relieved of all obligations to

Clause 18 - Page 2/3

                    install such equipment. The Buyer may also elect to have the
                    Aircraft so delivered, provided it is in the condition
                    otherwise required by this Agreement.

18.4           TITLE AND RISK OF LOSS

               Title to and risk of loss of any BFE shall at all times remain
               with the Buyer except that risk of loss (limited to cost of
               replacement of said BFE and excluding in particular loss of use)
               shall be with the Seller for as long as such BFE shall be under
               the care, custody and control of the Seller.

Clause 18 - Page 3/3

19             INDEMNIFICATION AND INSURANCE

19.1           INDEMNITIES RELATING TO INSPECTION, TECHNICAL ACCEPTANCE PROCESS
               AND GROUND TRAINING

19.1.1         The Seller shall, except in case of gross negligence or wilful
               misconduct of the Buyer, its Affiliates, their respective
               directors, officers, agents or employees, be solely liable for
               and shall indemnify and hold harmless the Buyer, its directors,
               officers, agents and employees, its Affiliates and their
               respective insurers from and against all liabilities, claims,
               damages, costs and expenses (including legal expenses and
               attorney fees) in respect of loss of or damage to the Seller's
               property and/or injury to or death of the directors, officers,
               agents or employees of the Seller and/or from and against all
               liabilities, claims, damages, costs and expenses (including legal
               expenses and attorney fees) for any damage caused by the Seller
               to third parties arising out of or in any way connected with any
               ground check, check or controls under Clause 6 or Clause 8 of
               this Agreement and/or Ground Training Services and for any damage
               caused by the Buyer and/or the Seller to third parties arising
               out of or in any way connected with technical acceptance flights
               under Clause 8 of this Agreement.

19.1.2         The Buyer shall, except in case of gross negligence or wilful
               misconduct of the Seller, its Affiliates, Suppliers, their
               respective directors, officers, agents or employees, be solely
               liable for and shall indemnify and hold harmless the Seller, its
               Affiliates, its Suppliers and their respective insurers from and
               against all liabilities, claims, damages, costs and expenses
               (including legal expenses and attorney fees) in respect of loss
               of or damage to the Buyer's property and/or injury to or death of
               the directors, officers, agents or employees of the Buyer and/or
               from and against all liabilities, claims, damages, costs and
               expenses (including legal expenses and attorney fees) for any
               damage caused by the Buyer to third parties, arising out of or in
               any way connected with any ground check, check or controls under
               Clause 6 or Clause 8 of this Agreement and/or Ground Training
               Services.

19.2           INDEMNITIES RELATING TO TRAINING ON AIRCRAFT AFTER DELIVERY

19.2.1         The Buyer shall, except in the case of gross negligence or wilful
               misconduct of the Seller, its Affiliates, Suppliers, their
               respective directors, officers, agents and employees, be solely
               liable for and shall indemnify and hold harmless the Seller, its
               Affiliates, its Suppliers and their respective insurers from and
               against all liabilities, claims, damages, costs and expenses
               (including legal expenses and attorney fees) incident thereto or
               incident to successfully establishing the right to
               indemnification, for injury to or death of any person (including
               any of the Buyer's directors, officers, agents and employees
               utilising such training services, but not directors, officers,
               agents and employees of the Seller) and/or for loss of or damage
               to any property and/or for loss of use thereof arising (including
               the aircraft on which the training services are performed),
               arising out of or in any way connected to the performance of any
               Aircraft Training Services.

19.2.2         The foregoing indemnity shall not apply with respect to the
               Seller's legal liability towards any person other than the Buyer,
               its directors, officers, agents or employees arising out of an
               accident caused solely by a product defect in the Aircraft
               delivered to and accepted by the Buyer hereunder.

Clause 19 - Page 1/3

19.3           INDEMNITIES RELATING TO SELLER REPRESENTATIVES SERVICES

19.3.1         The Buyer shall, except in case of gross negligence or wilful
               misconduct of the Seller, its Affiliates, subcontractors,
               Suppliers, their respective directors, officers, agents or
               employees, be solely liable for and shall indemnify and hold
               harmless the Seller, its Affiliates, its Suppliers and their
               respective insurers from and against all liabilities, claims,
               damages, costs and expenses (including legal expenses and
               attorney fees) for all injuries to or death of persons (excepting
               injuries to or death of the Seller's Representatives) and for
               loss of or damage to property and/or loss of use thereof
               howsoever arising out of or in connection with the Seller's
               Representatives' Services.

19.3.2         The Seller shall, except in case of gross negligence or wilful
               misconduct of the Buyer, its Affiliates, their respective
               directors, officers, agents or employees, be solely liable for
               and shall indemnify and hold harmless the Buyer, its directors,
               officers, agents and employees, its Affiliates and their
               respective insurers from and against all liabilities, claims,
               damages, costs and expenses (including legal expenses and
               attorney fees) for all injuries to or death of the Seller's
               Representatives in connection with the Seller's Representatives'
               Services.

19.4           INSURANCES

               For all training periods on aircraft, the Buyer shall cause the
               Seller, as defined in Clause 19.5 hereof, its Affiliates, its
               Suppliers and their respective insurers to be named as additional
               insureds under the Buyer's Comprehensive Aviation Legal Liability
               insurance policies, including War Risks and Allied Perils, to the
               extent of the Buyer's undertaking set forth in Clause 19.2.1.
               With respect to the Buyer's Hull All Risks and Hull War Risks
               insurances and Allied Perils, the Buyer shall cause the insurers
               of the Buyer's hull insurance policies to waive ail rights of
               subrogation against the Seller, as defined in Clause 19.5 hereof,
               its Affiliates, its Suppliers and their respective insurers to
               the extent of the Buyer's undertaking set forth in Clause 19.2.1.

               Any applicable deductible shall be borne by the Buyer. With
               respect to the above policies, the Buyer shall furnish to the
               Seller, not less than seven (7) working days prior to the start
               of any such training period, certificates of insurance, in
               English, evidencing the limit of liability cover and period of
               insurance in a form acceptable to the Seller from the Buyer's
               insurance broker(s) certifying that such policies have been
               endorsed as follows:

               (i)  under the Comprehensive Aviation Legal Liability Insurances,
                    the Buyer's policies are primary and non-contributory to any
                    insurance maintained by the Seller;

               (ii) such insurance can only be cancelled or materially altered
                    by the giving of not less than thirty (30) days (but seven
                    (7) days or such lesser period as may be customarily
                    available in respect of War Risks and Allied Perils) prior
                    written notice thereof to the Seller; and

               (iii) under any such cover, all rights of subrogation against the
                    Seller, its Affiliates, its Suppliers and their respective
                    insurers, have been waived to the extent of the Buyer's
                    undertaking and specifically referring to Clause 19.2.1 and
                    to this Clause 19.4.

Clause 19 - Page 2/3

19.5           SELLER AND AFFILIATES

               For the purposes of this Clause 19, "the Seller and its
               Affiliates" include the Seller, its subsidiaries, Airbus North
               America Customer Services, Hua-Ou Airbus - CASC Aviation Training
               Center, its shareholders, each of the sub-contractors, the
               assignees of each of the foregoing, and their respective
               directors, officers, agents and employees.

19.6           NOTICE OF CLAIMS

               If any claim is made or suit is brought against either party (or
               its respective directors, officers, agents or employees) for
               damages for which liability has been assumed by the other party
               in accordance with the provisions of this Agreement, the party
               against which a claim is so made or suit is so brought shall
               promptly give notice to the other party, and the latter shall
               (unless otherwise requested by the former party against which a
               claim is so made or suit is so brought, in which case the other
               party nevertheless shall have the right to) assume and conduct
               the defence thereof, or effect any settlement which it, in its
               opinion, deems proper.

Clause 19 - Page 3/3

20             TERMINATION

20.1           TERMINATION FOR INSOLVENCY

               In the event that either the Seller or the Buyer

               (a)  makes a general assignment for the benefit of creditors or
                    becomes insolvent;

               (b)  files a voluntary petition in bankruptcy;

               (c)  petitions for or acquiesces in the appointment of any
                    receiver, trustee or similar officer to liquidate or
                    conserve its business or any substantial part of its assets;

               (d)  commences under the laws of any competent jurisdiction any
                    proceeding involving its insolvency, bankruptcy,
                    readjustment of debt, liquidation or any other similar
                    proceeding for the relief of financially distressed debtors;

               (e)  becomes the object of any proceeding or action of the type
                    described in (c) or (d) above and such proceeding or action
                    remains undismissed or unstayed for a period of at least
                    sixty (60) days; or

               (f)  is divested of a substantial part of its assets for a period
                    of at least sixty (60) consecutive days,

               then the other party may, to the full extent permitted by law, by
               written notice, terminate all or part of this Agreement.

20.2           TERMINATION FOR NON-PAYMENT OF PREDELIVERY PAYMENTS

               If for any Aircraft the Buyer fails to make any Predelivery
               Payments at the time, in the manner and in the amount specified
               in Clause 5.3, * the Seller may, by written notice, terminate all
               or part of this Agreement with respect to undelivered Aircraft.

                                       *

20.3           TERMINATION FOR FAILURE TO TAKE DELIVERY

               If the Buyer fails to comply with its obligations as set forth
               under Clause 8 and/or Clause 9, or fails to pay the Final Price
               of the Aircraft, the Seller shall have the right to put the Buyer
               on notice to do so within a period of * after the date of such
               notification.

               If the Buyer has not cured such default within such period, the
               Seller may, by written notice, terminate all or part of this
               Agreement with respect to undelivered Aircraft.

               All costs referred to in Clause 9.2.3 and relating to the period
               between the notified date of delivery (as referred to in Clause
               9.2.3) and the date of termination of all or part of this
               Agreement shall be borne by the Buyer.

Clause 20 - Page 1/2

20.4           TERMINATION FOR DEFAULT UNDER OTHER AGREEMENTS

               If the Buyer or any of its Affiliates fails to perform or comply
               with any material obligation expressed to be assumed by it under
               any * agreement between the Buyer or any of its Affiliates and
               the Seller or any of its Affiliates (the "Other Agreement"): *
               then the Seller may, by written notice, terminate all or part of
               this Agreement.

20.5           GENERAL

20.5.1         To the full extent permitted by law, the termination of all or
               part of this Agreement pursuant to Clauses 20.1, 20.2, 20.3 and
               20.4 shall become effective immediately upon receipt by the
               relevant party of the notice of termination sent by the other
               party without it being necessary for either party to take any
               further action or to seek any consent from the other party or any
               court having jurisdiction.

20.5.2         The right for either party under Clause 20.1 and for the Seller
               under Clauses 20.2, 20.3, and 20.4 to terminate all or part of
               this Agreement shall be without prejudice to any other rights and
               remedies available to such party to seek termination of all or
               part of this Agreement before any court having jurisdiction
               pursuant to any failure by the other party to perform its
               obligations under this Agreement.

20.5.3         If the party taking the initiative of terminating this Agreement
               decides to terminate part of it only, the notice sent to the
               other party shall specify those provisions of this Agreement
               which shall be terminated.

20.5.4         In the event of termination of this Agreement following a default
               from the Buyer, including but not limited to a default under
               Clauses 20.1, 20.2, 20.3 and 20.4, the Seller without prejudice
               to any other rights and remedies available under this Agreement
               or by law, shall retain all predelivery payments, commitment
               fees, option fees and any other monies paid by the Buyer to the
               Seller under this Agreement and corresponding to the Aircraft,
               services, data and other items covered by such termination.

Clause 20 - Page 2/2

21             ASSIGNMENTS AND TRANSFERS

21.1           ASSIGNMENTS BY BUYER

               Except as hereinafter provided, the Buyer may not sell, assign,
               novate or transfer its rights and obligations under this
               Agreement to any person without the prior written consent of the
               Seller, which shall not unreasonably be withheld.

21.1.1         ASSIGNMENTS FOR PREDELIVERY FINANCING

               The Buyer shall be entitled to assign its rights under this
               Agreement at any time in order to provide security for the
               financing of any Predelivery Payments subject to such assignment
               being in form and substance reasonably acceptable to the Seller,
               taking into account then applicable market practice.

21.1.2         ASSIGNMENTS FOR DELIVERY FINANCING

               The Buyer shall be entitled to assign its rights under this
               Agreement at any time in connection with the financing of its
               obligation to pay the Final Price subject to such assignment
               being in form and substance reasonably acceptable to the Seller,
               taking into account the then applicable market practice.

21.2           ASSIGNMENTS BY SELLER

               The Seller may at any time, with the prior written consent of the
               Buyer, which shall not be unreasonably withheld, sell, assign,
               novate or transfer its rights and obligations under this
               Agreement to any person, provided such sale, assignment or
               transfer be notified to Buyer and shall not have a material
               adverse effect on any of Buyer's rights and obligations under
               this Agreement.

21.2.1         TRANSFER OF RIGHTS AND OBLIGATIONS UPON RESTRUCTURING

               In the event that the Seller is subject to a corporate
               restructuring having as its object the transfer of, or succession
               by operation of law in, all or a substantial part of its assets
               and liabilities, rights and obligations, including those existing
               under this Agreement, to a person ("the SUCCESSOR") under the
               control of the ultimate controlling shareholders of the Seller at
               the time of that restructuring, for the purpose of the Successor
               carrying on the business carried on by the Seller at the time of
               the restructuring, such restructuring shall be completed without
               consent of the Buyer following notification by the Seller to the;
               Buyer in writing. The Buyer recognises that succession of the
               Successor to the Agreement by operation of law, which is valid
               under the law pursuant to which that succession occurs, shall be
               binding upon the Buyer.

Clause 21 - Page 1/1

22             MISCELLANEOUS PROVISIONS

22.1           DATA RETRIEVAL

               The Buyer shall provide the Seller, as the Seller may reasonably
               request, with all the necessary data as customarily compiled by
               the Buyer and pertaining to the operation of the Aircraft to
               assist the Seller in making efficient and coordinated survey of
               all reliability, maintainability, operational and cost data with
               a view to improving the safety, availability and operational
               costs of the Aircraft.

22.2           NOTICES

               All notices and requests required or authorized hereunder shall
               be given in writing either by personal delivery to an authorized
               representative of the party to whom the same is given or by
               registered mail (return receipt requested), express mail
               (tracking receipt requested) or by facsimile, to be confirmed by
               subsequent registered mail, and the date upon which any such
               notice or request is so personally delivered or if such notice or
               request is given by registered mail, the date upon which it is
               received by the addressee or, if given by facsimile, the date
               upon which it is sent with a correct confirmation printout,
               provided that if such date of receipt is not a business day
               notice shall be deemed to have been received on the first
               following business day, shall be deemed to be the effective date
               of such notice or request.

               Seller's address for notices is:

               AIRBUS
               Attn. To V. P. Contracts
               1 Rond-Point Maurice Bellonte
               31707 Blagnac Cedex
               France

               Buyer's address for notices is:

               TAM - LINHAS AEREAS S.A.
               Attn. Contracts Director
               Avenida Jurandir, 856, 40 andar, Lote 4,
               CEP 04072 - 000, Jardim CECI,
               SAO PAULO-SP.
               BRAZIL

               or such other address or such other person as the party receiving
               the notice or request may reasonably designate from time to time.

22.3           WAIVER

               The failure of either party to enforce at any time any of the
               provisions of this Agreement, or to exercise any right herein
               provided, or to require at any time performance by the other
               party of any of the provisions hereof, shall in no way be
               construed to be a present or future waiver of such provisions nor
               in any way to affect the validity of this Agreement or any part
               thereof or the right of the other party thereafter to enforce
               each and every such provision. The express waiver (whether made
               one (1) or several times) by either party of any provision,
               condition or requirement of this Agreement shall not constitute a
               waiver of any future obligation to comply with such provision,
               condition or requirement.

Clause 22 - Page 1/4

22.4           LAW AND JURISDICTION

22.4.1         This Agreement shall be governed by and construed in accordance
               with the laws of France.

22.4.2         Any dispute arising out of or in connection with this Agreement
               shall be within the exclusive jurisdiction of the Tribunal de
               Commerce of Paris.

22.5           INTERNATIONAL SUPPLY CONTRACT

               The Buyer and the Seller recognise that this Agreement is an
               international supply contract which has been the subject of
               discussion and negotiation, that all its terms and conditions are
               fully understood by the parties, and that the Specification and
               price of the Aircraft and the other mutual agreements of the
               parties set forth herein were arrived at in consideration of,
               inter alia, all the provisions hereof specifically including all
               waivers, releases and renunciations by the Buyer set out herein.

               The Buyer and the Seller hereby also agree that the United
               Nations Convention on Contracts for the International Sale of
               Goods will not apply to this transaction.

22.6           SEVERABILITY

               In the event that any provision of this Agreement should for any
               reason be held ineffective, the remainder of this Agreement shall
               remain in full force and effect. To the extent permitted by
               applicable law, each party hereto hereby waives any provision of
               law which renders any provision of this Agreement prohibited or
               unenforceable in any respect.

22.7           ALTERATIONS TO CONTRACT

               This Agreement contains the entire agreement between the parties
               with respect to the subject matter hereof and supersedes any
               previous understandings, commitments or representations
               whatsoever oral or written in respect thereto. This Agreement
               shall not be varied except by an instrument in writing of date
               even herewith or subsequent hereto executed by both parties or by
               their duly authorised representatives.

22.8           LANGUAGE

               All correspondence, documents and any other written matters in
               connection with this Agreement shall be in English.

Clause 22 - Page 2/4

22.9           COUNTERPARTS

               This Agreement has been executed in two (2) original copies.

               Notwithstanding the above, this Agreement may be executed by the
               parties in separate counterparts, each of which when so executed
               and delivered shall be an original, but all such counterparts
               shall together constitute one and the same Agreement.

22.10          CONFIDENTIALITY

               This Agreement including any Exhibits, other documents or data
               exchanged between the Buyer and the Seller for the fulfilment of
               their respective obligations under the Agreement shall be treated
               by both parties as confidential and shall not be released in
               whole or in part to any third party except as may be required by
               law, or to professional advisors for the purpose of
               implementation hereof.

               In particular, both parties agree:

               -    not to make any press release concerning the whole or any
                    part of the contents and/or subject matter hereof or of any
                    future addendum hereto without the prior written consent of
                    the other party hereto.

               -    that any and all terms and conditions of the transaction
                    contemplated in this Agreement are strictly personal and
                    exclusive to the Buyer, including in particular, but not
                    limited to, the Aircraft pricing (the "Personal
                    Information"). The Buyer therefore agrees to notify the
                    Seller reasonably in advance of any required disclosure of
                    Personal Information to financial institutions, including
                    operating lessors, investment banks and their agents or
                    other relevant institutions for aircraft sale and leaseback
                    or any other Aircraft or Predelivery Payment financing
                    purposes (the "Receiving Party"), and if requested by the
                    Seller, to consult with the Seller for a reasonable period
                    of time in relation thereto.

               Without prejudice to the foregoing, any disclosure of Personal
               Information to a Receiving Party shall be subject to written
               agreement between the Buyer and the Seller, including in
               particular, but not limited to:

               (i)  the contact details of the Receiving Party,

               (ii) the extent of the Personal Information subject to
                    disclosure,

               (iii) the Aircraft pricing to be provided to the Receiving Party.

               Furthermore, the Buyer and the Seller shall use their best
               reasonable efforts to limit the disclosure of the contents of
               this Agreement to the extent legally permissible in any filing
               required to be made by the Buyer and the Seller with any
               governmental or regulatory agency. The Buyer and the Seller agree
               that prior to any such disclosure or filing, the Seller and the
               Buyer shall jointly review and agree on the terms and conditions
               of the document to be filed or disclosed.

               The provisions of this Clause 22.10 shall survive any termination
               of this Agreement for a period of five (5) years.

Clause 22 - Page 3/4

IN WITNESS WHEREOF this Agreement was entered into the day and year first above written.

For and on behalf of                    For and on behalf of

TAM - LINHAS AEREAS S.A.                AIRBUS S.A.S.


/s/ Marco Antonio Bologna               /s/ Christian Scherer
-------------------------------------   ----------------------------------------
Name: Marco Antonio Bologna             Name: Christian Scherer
Title: Chief Executive Officer          Title: Head of Transactions and Control
                                               Deputy Head of Commercial


/s/ Jose Zaidan Maluf
-------------------------------------
Name: Jose Zaidan Maluf
Title: Director


WITNESS                                 WITNESS


/s/ Vanessa Alvarenga                   /s/ Michel Clanet
-------------------------------------   ----------------------------------------
Name: Vanessa Alvarenga                 Name: Michel Clanet
Title: Legal Counsel                    Title: Regional Sales Director

Clause 22 - Page 4/4

EXHIBIT A

SPECIFICATION

The A350-900 and A350-800 Standard Specifications are contained in a separate
CD-ROM.

- Exhibit A - Page 1/1

APPENDIX I TO EXHIBIT A

TAM A35O-800 SCN DEFINITION

APPENDIX I TO EXHIBIT A

TAM A350-800 SCN DEFINITION

Option list Issue 1

APPENDIX II TO EXHIBIT A

TAM A350-900 SCN DEFINITION

Page l of 2

APPENDIX II TO EXHIBIT A

TAM A350-900 SCN DEFINITION

Option list Issue 1

Page 2 of 2

EXHIBIT B

FORM OF
SPECIFICATION CHANGE NOTICE

- Exhibit B - Page 1/1

                  AIRBUS                TAM - LINHAS AERAS

(LOGO) SPECIFICATION CHANGE NOTICE

                  (SCN)                 SCN Number _____________________________

                                        Issue __________________________________

                                        Dated __________________________________

                                        Page ___________________________________

TITLE: _________________________________________________________________________

DESCRIPTION ___________________________________________________________________

EFFECT ON WEIGHT

Manufacturer's Weight Empty Change: _________________________________________

Operational Weight Empty Change: ____________________________________________

Allowable Payload Change: ___________________________________________________

REMARKS / REFERENCES

RFC ... _____________________________________________________________________

SPECIFICATION CHANGED BY THIS SCN
A350-900 Aircraft Standard Specification Reference No G 000 09000 Issue B dated 30-June-2005

THIS SCN REQUIRES PRIOR OR CONCURRENT ACCEPTANCE OF THE FOLLOWING SCN (S):

PRICE PER AIRCRAFT

US DOLLARS: ____________________________________________________________________

AT DELIVERY CONDITIONS: ________________________________________________________

This change will be effective on ________ AIRCRAFT No ________ and subsequent. Provided approval is received by ________

BUYER APPROVAL                          SELLER APPROVAL


By:                                     By:
    ---------------------------------       ------------------------------------

Date:                                   Date:
      -------------------------------         ----------------------------------

                  AIRBUS                TAM - LINHAS AERAS

(LOGO) SPECIFICATION CHANGE NOTICE

                  (SCN)                 SCN Number _____________________________

                                        Issue __________________________________

                                        Dated __________________________________

                                        Page ___________________________________

SPECIFICATION REPERCUSSION:
After contractual agreement with respect to weight, performance, delivery, etc, the indicated part of the specification wording will read as follows:

                  AIRBUS                TAM - LINHAS AERAS

(LOGO) SPECIFICATION CHANGE NOTICE

                  (SCN)                 SCN Number _____________________________

                                        Issue __________________________________

                                        Dated __________________________________

                                        Page ___________________________________

SCOPE OF CHANGE (FOR INFORMATION ONLY)

EXHIBIT C

AIRCRAFT PRICE REVISION FORMULA

1 BASIC PRICE

The Aircraft Basic Price quoted in Clause 3.1 of the Agreement is subject to adjustment for changes in economic conditions as measured by data obtained from the US Department of Labor, Bureau of Labor Statistics, and in accordance with the provisions hereof.

2 BASE PERIOD

The Aircraft Basic Price has been established in accordance with the average economic conditions prevailing in December 2002, January 2003, February 2003 and corresponding to a theoretical delivery in January 2004 as defined by "EClb" and "ICb" index values indicated hereafter.

"EClb" and "ICb" index values indicated herein shall not be subject to any revision.

3 INDEXES

Labor Index: "Employment Cost Index for Workers in Aerospace manufacturing" hereinafter referred to as "ECI SIC 3721W", quarterly published by the US Department of Labor, Bureau of Labor Statistics, in "NEWS", and found in Table 6, "WAGES and SALARIES (not seasonally adjusted): Employment Cost Indexes for Wages and Salaries for private industry workers by industry and occupational group", or such other name that may be from time to time used for the publication title and/or table, (Aircraft manufacturing, standard industrial classification code SIC 3721, base month and year June 1989 = 100).

The quarterly value released for a certain month (March, June, September and December) shall be the one deemed to apply for the two preceding months.

Index code for access on the Web site of the US Bureau of Labor Statistics:
ECU28102L

Index code for access on the Web site of the US Bureau of Labor Statistics:
WPU03THRU15.

- Exhibit C - Page 1/3

EXHIBIT C

AIRCRAFT PRICE REVISION FORMULA

4 REVISION FORMULA

Pn      = (Pb + F) x [(0.75 x ECIn / ECIb) + (0.25 x lCn/ICb)]

Where   :

Pn      : Aircraft Basic Price as revised as of the Delivery Date of the
          Aircraft

Pb      : Aircraft Basic Price at economic conditions December 2002,
          January 2003, February 2003 averaged (January 2004 delivery
          conditions)

F       : (0.005 x N x Pb)

          where N = the calendar year of delivery of the Aircraft minus
          2004

ECln    : the arithmetic average of the latest published values of the ECl
          SIC 3721W-lndex available at the Delivery Date of the Aircraft
          for the 11th, 12*(1) and 13th month prior to the month of
          Aircraft Delivery

EClb    : ECl SIC 3721 W-lndex for December 2002, January 2003, February
          2003 averaged (=165.0)

ICn     : the arithmetic average of the latest published values of the
          IC-Index available at the Delivery Date of the Aircraft for the
          11th, 12th and 13th month prior to the month of Aircraft Delivery

ICb     : IC-Index for December 2002, January 2003, February 2003, averaged
          (= 136.8)

- Exhibit C - Page 2/3

EXHIBIT C

AIRCRAFT PRICE REVISION FORMULA

5 GENERAL PROVISIONS

5.1 Roundings

Each quotient (ECln/ECIb) and (ICn/ICb) shall be rounded to the nearest ten-thousandth (4 decimals). If the next succeeding place is five
(5) or more, the preceding decimal place shall be raised to the next higher figure.

The final factor shall be rounded to the nearest ten-thousandth (4 decimals).

The final price shall be rounded to the nearest whole number (0.5 or more rounded to 1).

5.2 Substitution of Indexes for Aircraft Price Revision Formula

If;

(i) the United States Department of Labor substantially revises the methodology of calculation of the Labor Index or the Material Index as used in the Aircraft Price Revision Formula, or

(ii) the United States Department of Labor discontinues, either temporarily or permanently, such Labor Index or such Material Index, or

(iii) the data samples used to calculate such Labor Index or such Material Index are substantially changed;

the Seller shall select a substitute index for inclusion in the Aircraft Price Revision Formula (the "Substitute Index").

The Substitute Index shall reflect as closely as possible the actual variance of the Labor Costs or of the material costs used in the calculation of the original Labor Index or Material Index as the case may be.

As a result of the selection of the Substitute Index, the Seller shall make an appropriate adjustment to the Aircraft Price Revision Formula to combine the successive utilisation of the original Labor Index or Material Index (as the case may be) and of the Substitute Index.

5.3 Final Index Values

The Index values as defined in Clause 4 above shall be considered final and no further adjustment to the basic prices as revised at Delivery of the Aircraft shall be made after Aircraft Delivery for any subsequent changes in the published Index values.

- Exhibit C - Page 3/3

EXHIBIT D

CERTIFICATE OF ACCEPTANCE

In accordance with the terms of the A350-900 purchase agreement dated __th ____ 2005 and made between TAM - LINHAS AEREAS S.A. and AIRBUS S.A.S., as amended (the "PURCHASE AGREEMENT"), the acceptance tests relating to the A350-900 aircraft, Manufacturer's Serial Number: [______], Registration Marks: [______] (the "AIRCRAFT"), have taken place at [______] or [______] on the [_____] day of
[____________].

In view of said tests having been carried out with satisfactory results, TAM Linhas Aereas S.A. hereby approves the Aircraft as being in conformity with the provisions of the Purchase Agreement.

Said acceptance does not impair the rights that may be derived from the warranties relating to the Aircraft set forth in the Purchase Agreement.

Any right at law or otherwise to revoke this acceptance of the Aircraft is hereby waived.

The [______] day of [____________]

TAM - LINHAS AEREAS S.A.

By:
Its:

Page 1/1

EXHIBIT E

BILL OF SALE

Know all men by these presents that Airbus S.A.S. (the "SELLER"), "societe par actions simplifiee" existing under French law and whose address is 1 rond-point Maurice Bellonte, 31707 Blagnac Cedex, FRANCE, is, this [________], the owner of the title to the following airframe (the "AIRFRAME"), the engines as specified (the "ENGINES") and all appliances, components, parts, instruments, accessories, furnishings, modules and other equipment of any nature, excluding Buyer Furnished Equipment ("BFE"), incorporated therein, installed thereon or attached thereto on the date hereof (the "PARTS"):

AIRFRAME:                         ENGINES:

AIRBUS Model A350-900             General Electric Model Genex 72 A

MANUFACTURER'S                    ENGINE SERIAL NUMBERS:

SERIAL NUMBER: [_________]        LH: [_________]

RH: [_________]

REGISTRATION MARKS: [_________]

[and has such title to the BFE as was acquired by it from TAM Linhas Aereas S.A. by a Bill of Sale dated [____________] (the "BFE Bill of Sale").]

The Airframe, Engines and Parts are hereafter together referred to as the Aircraft (the "AIRCRAFT").

The Seller does hereby on this [______] day of [____________] sell, transfer and deliver all of its above described rights, title and interest to the Aircraft to the following company and to its successors and assigns forever, said Aircraft
[and the BFE] to be the property thereof:

TAM - LINHAS AEREAS S.A.
(the "BUYER")

The Seller hereby warrants to the Buyer, its successors and assigns that it has good and lawful right to sell, deliver and transfer title to the Aircraft to the Buyer and that there is hereby conveyed to the Buyer good, legal and valid title to the Aircraft, free and clear of all liens, claims, charges, encumbrances and rights of others and that the Seller will warrant and defend such title forever against all claims and demands whatsoever [and such title to the BFE as the Seller has acquired pursuant to the BFE Bill of Sale.]

This Bill of Sale shall be governed by and construed in accordance with the laws of France.

IN WITNESS WHEREOF, the undersigned has caused this instrument to be executed by its duly authorized representative this ______ day of [____________]

AIRBUS S.A.S.

By:
Title:

Signature:

- Exhibit E - Page 1/1

EXHIBIT F

SERVICE LIFE POLICY

ITEMS OF PRIMARY STRUCTURE

Exhibit F - 1/4

EXHIBIT F

SELLER SERVICE LIFE POLICY

1         The Items covered by the Service Life Policy pursuant to Clause 12.2
          are those Seller Items of primary and auxiliary structure described
          hereunder.

2         WINGS - CENTER AND OUTER WING BOX (LEFT AND RIGHT)

2.1       WING STRUCTURE

2.1.1     Spars

2.1.2     Ribs and stringers inside the wing box

2.1.3     Upper and lower wing skin panels of the wing box

2.2       FITTINGS

2.2.1     Support structure and attachment fittings for the flap structure

2.2.2     Support structure and attachment fitting for the engine pylons

2.2.3     Support structure and attachment fitting for the main landing gear

2.2.4     Support structure and attachment fitting for the center wing box

2.3       AUXILIARY SUPPORT STRUCTURE

2.3.1     For the slats:

2.3.1.1   Ribs supporting the track rollers on wing box structure

2.3.1.2   Ribs supporting the actuators on wing box structure

2.3.2     For the ailerons:

2.3.2.1   Hinge brackets and ribs on wing box rear spar or shroud box

2.3.2.2   Actuator fittings on wing box rear spar or shroud box

2.3.3     For airbrakes, spoilers, lift dumpers:

2.3.3.1   Hinge brackets and ribs on wing box rear spar or shroud box

2.3.3.2   Actuator fittings on wing box rear spar or shroud box

Exhibit F - 2/4

EXHIBIT F

2.4 PYLON

2.4.1     For the Pylon Main Structural Box

2.4.1.1   Spars

2.4.1.2   Ribs

2.4.1.3   Skin, doublers and stiffeners

2.4.1.4   Support structure and attachment fitting for engine supports

3         FUSELAGE

3.1       FUSELAGE STRUCTURE

3.1.1     Fore and aft bulkheads

3.1.2     Pressurized floors and bulkheads surrounding the main and nose gear
          wheel well and center wing box

3.1.3     Skins with doublers, stringers and frames from the forward pressure
          bulkheads to the frame supporting the rear attachment of horizontal
          stabilizer

3.1.4     Window and windscreen attachment structure but excluding
          transparencies

3.1.5     Passenger and cargo doors internal structure

3.1.6     Sills, excluding scuff plates, and upper beams surrounding passenger
          and cargo door apertures

3.1.7     Cockpit floor structure and passenger cabin floor beams excluding
          floor panels and seat rails

3.1.8     Keel beam structure

3.2       FITTINGS

3.2.1     Landing gear support structure and attachment fitting

3.2.2     Support structure and attachment fittings for the vertical and
          horizontal stabilizers

3.2.3     Support structure and attachment fitting for the APU

Exhibit F - 3/4

                                                                       EXHIBIT F

4         STABILIZERS

4.1       HORIZONTAL STABILIZER MAIN STRUCTURAL BOX

4.1.1     Spars

4.1.2     Ribs

4.1.3     Upper and lower skins and stringers

4.1.4     Support structure and attachment fitting to fuselage and trim screw
          actuator

4.1.5     Elevator support structure

4.1.5.1   Hinge bracket

4.1.5.2   Servocontrol attachment brackets

4.2       VERTICAL STABILIZER MAIN STRUCTURAL BOX

4.2.1     Spars

4.2.2     Ribs

4.2.3     Skins and stringers

4.2.4     Support structure and attachment fitting to fuselage

4.2.5     Rudder support structure

4.2.5.1   Hinge brackets

4.2.5.2   Servocontrol attachment brackets

5         EXCLUSIONS

          Bearing and roller assemblies, bearing surfaces, bushings, fittings
          other than those listed above, access and inspection doors, including
          manhole doors, latching mechanisms, all system components, commercial
          interior parts, insulation and related installation and connecting
          devices are excluded from this Seller Service Life Policy.

Exhibit F - 4/4

EXHIBIT G

TECHNICAL DATA INDEX

Exhibit G - 1/16

EXHIBIT G

TECHNICAL DATA INDEX

Where applicable, data will be established in general compliance with ATA Specification 2200 (iSpec2200), Information Standards for Aviation Maintenance (Revision 2003).

The following index identifies the Technical Data provided in support of the Aircraft.

The explanation of the table is as follows:

NOMENCLATURE                            Self-explanatory.

ABBREVIATED DESIGNATION (Abbr)          Self-explanatory.

AVAILABILITY (Avail)

Technical Data can be available:

-    ON-LINE (ON) through the relevant Service on Airbus Customer Portal

and / or

- OFF-LINE (OFF) through the most suitable means applicable to the size of the concerned document (e.g CD or DVD).

FORMAT (Form)

Following formats can be used:

- SGML - Standard Generalized Mark-up Language, which allows further data processing by the Buyer.

- XML - Evolution of the SGML format to cope with WEB technology requirements.

- PDF (PDF) - Portable Document Format allowing data consultation.

- Advanced Consultation Tool, which comes with the relevant consultation and navigation system.

- Advanced Customization Tool - FOSP (Flight Operations Standard Package) is the advanced customization tool to be used by the Buyer to browse a manual, customize a manual in accordance with its own operational or regulatory requirements and/or publish a manual in OIS format.

Exhibit G - 2/16

EXHIBIT G

TYPE   C   CUSTOMIZED. Refers to manuals that are applicable to an individual
           Airbus customer/operator fleet or aircraft.

       G   GENERIC. Refers to manuals that are applicable for all Airbus
           aircraft types/models/series.

       E   ENVELOPE. Refers to manuals that are applicable to a whole group of
           Airbus customers for a specific aircraft type/model/series.

QUANTITY (Qty)     Self-explanatory for physical media.

DELIVERY (Deliv)   Delivery refers to scheduled delivery dates and is expressed
                   in either the number of corresponding days prior to first
                   Aircraft Delivery, or nil (0) corresponding to the first
                   Delivery day.

                   The number of days indicated shall be rounded up to the next
                   regular revision release date.

Exhibit G - 3/16

EXHIBIT G

         NOMENCLATURE            ABBR   AVAIL       FORM      TYPE     DELIV                   COMMENTS
         ------------            ----   -----       ----      ----     -----                   --------
OPERATIONAL MANUALS AND DATA

Flight Crew Operating Manual /  FCOM     OFF      Advanced      C        90
Quick Reference Leaflet (QRL)                  Customization
                                                    Tool
                                FCOM      ON      Advanced      C        90
                                               Customization
                                                    Tool
                                FCOM      ON        XML         C        90
                                FCOM     OFF        XML         C        90
                                FCOM     OFF      PAPER(**)     C        90   (**) NOTE: This Manual will be provided
                                                                                   only if it's still produced in this
                                                                                   format by the Seller, at the time of
                                                                                   the delivery date.
                                QRL      OFF        Paper       C        90   *    Two per Aircraft at Delivery + 20
                                                                                   copies per Aircraft
                                QRL       ON         XML        C   *    90
                                QRL      OFF         XML        C        90

Flight Crew Training Manual     FCTM      ON      Advanced      C        90
                                               Customization
                                                    Tool
                                FCTM     OFF      Advanced      C        90
                                               Customization
                                                    Tool
                                FCTM      ON        XML         C        90
                                FCTM     OFF        XML         C        90

Cabin Crew Operating Manual     CCOM     OFF     Advanced       C        90
                                               Customization
                                                    Tool
                                CCOM      ON      Advanced      C        90
                                               Customization
                                                    Tool
                                CCOM      ON        XML         C        90
                                CCOM     OFF        XML         C        90

Exhibit G - 4/16

EXHIBIT G

Flight Manual / Configuration   FM/CDL   OFF       (PDF*)       C         0   (*)  plus one copy per Aircraft at
Deviation List                                                                     Delivery under PDF or securised
                                                                                   format, as agreed with the
                                                                                   Airworthiness Authorities
                                FM/CDL    ON      Advanced      C         0
                                               Customization
                                                    Tool
                                FM/CDL    ON        XML         C   *     0
                                FM/CDL   OFF        XML         C         0
                                FM/CDL   OFF     PAPER (**)     C             (**) NOTE: This Manual will be provided
                                                                                   only, If it's still produced in this
                                                                                   format by the Seller, at the time of
                                                                                   the delivery date.

Exhibit G - 5/16

EXHIBIT G

         NOMENCLATURE            ABBR  AVAIL       FORM      TYPE     DELIV                    COMMENTS
         ------------            ----  -----       ----      ----     -----                    --------
OPERATIONAL MANUALS AND DATA (CONT'D)

Master Minimum Equipment List    MMEL   OFF      (PDF *)       C         0   (*)  plus one copy per Aircraft at Delivery
                                                                                  under PDF or securised format, as
                                                                                  agreed with the Airworthiness
                                                                                  Authorities
                                 MMEL   OFF      Advanced      C       180
                                              Customization
                                                   Tool
                                 MMEL    ON      Advanced      C       180
                                              Customization
                                                   Tool
                                 MMEL    ON        XML         C       180
                                 MMEL   OFF        XML         C       180
                                 MMEL   OFF     PAPER (**)     C       180   (**) NOTE: This Manual will be provided,
                                                                                  only if it's still produced in this
                                                                                  format by the Seller, at the time of
                                                                                  the delivery date.

Trim Sheet                       TS     OFF      WordDoc       C         0   Office Automation format (.doc) for further
                                 TS      ON      WordDoc       C   *     0   processing by the Buyer

Weight and Balance Manual        WBM    OFF      (PDF *)       C         0   (*)  plus one copy per Aircraft at Delivery
                                                                                  under PDF or securised format, as
                                                                                  agreed with the Airworthiness
                                                                                  Authorities
                                 WBM    OFF      Advanced      C        90
                                              Customization
                                                   Tool
                                 WBM     ON      Advanced      C        90
                                              Customization
                                                   Tool
                                 WBM     ON        XML         C        90
                                 WBM    OFF        XML         C        90
                                 WBM    OFF     PAPER (**)     C        90   (**) NOTE: This Manual will be provided,
                                                                                  only if it's still produced in this
                                                                                  format by the Seller, at the time of
                                                                                  the delivery date.

Exhibit G - 6/16

EXHIBIT G

         NOMENCLATURE            ABBR  AVAIL       FORM      TYPE     DELIV                    COMMENTS
         ------------            ----  -----       ----      ----     -----                    --------
OPERATIONAL MANUALS AND DATA (CONT'D)

Performance Engineer's Programs  PEP    OFF      Advanced      C        90
                                               Consultation
                                                   Tool
                                 PEP     ON      Advanced      C        90
                                               Consultation
                                                   Tool            *

Performance Programs Manual      PPM    OFF      Advanced      C        90
                                               Consultation
                                                   Tool
                                 PPM     ON      Advanced      C        90
                                               Consultation
                                                   Tool

Exhibit G - 7/16

EXHIBIT G

             NOMENCLATURE                   ABBR     AVAIL      FORM      TYPE     DELIV                COMMENTS
             ------------                   ----     -----      ----      ----     -----                --------
MAINTENANCE AND ASSOCIATED MANUALS

Air N@v / MAINTENANCE, including:       AirN@v         ON     Advanced      C        90
Aircraft Maintenance Manual             Maintenance         Consultation
Illustrated Parts Catalog (Airframe)                            Tool
Illustrated Parts Catalog (Powerplant)  AirN@v        OFF     Advanced      C        90   Recommended basic delivery quantity
Trouble Shooting Manual                 Maintenance         Consultation
Aircraft Schematics Manual                                   Tool on DVD
Aircraft Wiring Lists
Aircraft Wiring Manual
Electrical Standard Practices Manual

AirN@v / Associated Data
Consumable Material List
Standards Manual

                                                                                *

Aircraft Maintenance Manual             AMM            ON       SGML        C        90
                                        AMM           OFF       SGML        C        90   If selected by the Buyer, SGML
                                                                                          format will not be automatically
                                                                                          supplied. Effective delivery will
                                                                                          only take place upon explicit
                                                                                          request from the Buyer

                                        AMM           OFF    CD PDF (**)    C        90   (**) NOTE: This Manual will be
                                                                                               provided, only if it's still
                                                                                               produced in this format by the
                                                                                               Seller, at the time of the
                                                                                               delivery date.

Aircraft Schematics Manual              ASM            ON       SGML        C        90
                                        ASM           OFF       SGML        C        90   See comments under AMM SGML
                                        ASM           OFF    CD PDF (**)    C        90   (**) NOTE: This Manual will be
                                                                                               provided, only if it's still
                                                                                               produced in this format by the
                                                                                               Seller, at the time of the
                                                                                               delivery date.
Aircraft Wiring Lists                   AWL            ON       SGML        C        90
                                        AWL           OFF       SGML        C        90   See comments under AMM SGML
                                        AWL           OFF    CD PDF (**)    C        90   (**) NOTE: This Manual will be
                                                                                               provided, only if it's still
                                                                                               produced in this format by the
                                                                                               Seller, at the time of the
                                                                                               delivery date.

Aircraft Wiring Manual                  AWM            ON       SGML        C        90

Exhibit G - 8/16

EXHIBIT G

                                        AWM           OFF       SGML        C        90   See comments under AMM SGML

Consumable Material List                CML            ON       SGML        G   *   180
                                        CML           OFF       SGML        G       180   See comments under AMM SGML

Exhibit G - 9/16

EXHIBIT G

            NOMENCLATURE                  ABBR     AVAIL      FORM      TYPE     DELIV                 COMMENTS
            ------------                  ----     -----      ----      ----     -----                 --------
MAINTENANCE AND ASSOCIATED MANUALS (CONT'D)

AirN@v/ENGINEERING, including         Engineering    ON     Advanced      C        90
Airworthiness Directives / AD         Technical           Consultation
Consignes de Navigabilite/CN          Data                    Tool
(French DGAC)                         Service
All Operator Telex / AOT
Operator Information Telex / OIT      AirN@v        OFF     Advanced      C        90   AirN@v Engineering is an "Engineering
Flight Operator Telex / FOT                               Consultation                  Documentation Combined Index"
Modification / MOD                                            Tool                      providing an access to some
Modification Proposal / MP                                                              Engineering document indexes and
Service Bulletin / SB                                                                   contents and providing
Service Information Letter / SIL                                                        cross-references between such
Technical Follow-Up / TFU                                                               documents through advanced search
Vendor Service Bulletin / VSB                                                           functions.

Electrical Load Analysis              ELA           OFF     PDF/RTF/      C       +30   One ELA supplied for each Aircraft,
                                                               XLS                      delivered one month after Aircraft
                                                                                        Delivery
                                                                              *         PDF File + Office automation format
                                                                                        RTF & Excel file delivered on one
                                                                                        single CD for ELA updating by the
                                                                                        Buyer

Electrical Standard Practices Manual  ESPM           ON       SGML        G        90
                                      ESPM          OFF       SGML        G        90   See comments under AMM SGML
                                      ESPM           ON        PDF        G        90
                                      ESPM          OFF       CD-P        G        90

Electrical Standard Practices         ESP           OFF        P2*        G        90   *    Refers to a two-side printed
booklet                                                                                      document

Illustrated Parts Catalog (Airframe)  IPC            ON       SGML        C        90
                                      IPC           OFF       SGML        C        90   See comments under AMM SGML
                                      IPC           OFF    CD PDF (**)    C        90   (**) NOTE: This Manual will be
                                                                                             provided, only if it's still
                                                                                             produced in this format by the
                                                                                             Seller, at the time of the
                                                                                             delivery date.

Illustrated Parts Catalog             PIPC           ON       SGML        C        90
(Powerplant)                          PIPC          OFF       SGML        C        90   See comments under AMM SGML

Exhibit G - 10/16

EXHIBIT G

            NOMENCLATURE                  ABBR     AVAIL      FORM      TYPE     DELIV                 COMMENTS
            ------------                  ----     -----      ----      ----     -----                 --------
MAINTENANCE AND ASSOCIATED MANUALS (CONT'D)

AirN@v / PLANNING, including:         AirN@v         ON     Advanced      E        90*  With first AMM issue
Maintenance Planning Document         Planning            Consultation
                                                              Tool
                                      AirN@v        OFF      Advanced     E        90*  Upon Customer's request, the MPD may
                                      Planning            Consultation                  also be supplied in PDF / Refer
                                                           Tool on DVD                  below.

Maintenance Planning Document         MPD            ON       SGML        E        90
                                      MPD           OFF       SGML        E        90   See comments under AMM SGML
                                      MPD           OFF        PDF        E       360   *   Supplied upon Buyer's request
                                                                                            only
                                                                                        Contains PDF, Excel File and TSDF /
                                                                                        Task Structured Data File for further
                                                                                        processing

Maintenance Review Board Report       MRBR           ON        PDF        E       360   MRB Report ocument includes the
                                      MRBR          OFF       CD-P        E   *   360   Certification Maintenance
                                                                                        Requirements (CMR) and Airworthiness
                                                                                        Limitation Items (ALI) documents.

Support Equipment Summary             SES            ON        PDF        G       360
                                      SES           OFF*      CD-P        G       360   *   Contained on one single CD with
                                                                                            TEI/TEM

Tool and Equipment Drawings           TED            ON     Advanced      E       360   On-line Consultation from Engineering
                                                          Consultation                  Drawings Service
                                                              Tool

Tool and Equipment index              TEI            ON        PDF        E       360
                                      TEI           OFF*      CD-P        E       360   *   Contained on one single CD with
                                                                                            TEM & SES

Illustrated Tool and Equipment        TEM            ON        PDF        E       360
Manual
                                      TEM           OFF*      CD-P        E       360   *   Contained on one single CD with
                                                                                            TEI & SES

Trouble Shooting Manual               TSM            ON       SGML        C        90
                                      TSM           OFF       SGML        C        90   See comments under AMM SGML

Exhibit G - 11/16

EXHIBIT G

            NOMENCLATURE               ABBR   AVAIL      FORM      TYPE     DELIV                 COMMENTS
            ------------               ----   -----      ----      ----     -----                 --------
STRUCTURAL MANUALS

AirN@v / REPAIR, Including:           AirN@v    ON      Advance      E       90.
Structural Repair Manual              Repair         Consultation
                                                         Tool

Nacelle Structural Repair Manual      AirN@v   OFF      Advance      E       90.
(Integrated in Airbus SRM)            Repair         Consultation
Non Destructive Testing Manual +                      Tool On DVD
AirN@v / Associated Data >                                                         * Recommended basic delivery quantity
Consumable Material List
Standards Manual

                                                                         *
Structural Repair Manual              SRM       ON       SGML        E       90
                                      SRM      OFF       SGML        E       90    If selected by the Buyer, SGML format
                                                                                   will not be automatically supplied.
                                                                                   Effective delivery will only take place
                                                                                   upon explicit request from the Buyer

Nacelle Structural Repair Manual      NSRM      ON       SGML        E       90
(integrated in  Airbus SRM)           NSRM     OFF       SGML        E       90    See comments under SRM SGML

Nondestructive Testing Manual         NTM       ON       SGML        E       90
                                      NTM      OFF       SGML        E       90    If selected by the Buyer, SGML format
                                                                                   will not be automatically supplied.
                                                                                   Effective delivery will only take place
                                                                                   upon explicit request from the Buyer

Exhibit G - 12/16

EXHIBIT G

            NOMENCLATURE                ABBR    AVAIL      FORM      TYPE     DELIV                 COMMENTS
            ------------                ----    -----      ----      ----     -----                 --------
OVERHAUL DATA

AirN@v / WORKSHOP. including:         AirN@v      ON      Advance      E       180
Component Maintenance Manual -        Workshop         Consultation
Manufacturer Duct & Fuel Pipe Repair                       Tool
Manual + AirNOv / Associated Data >   AirN@v     OFF      Advance      E
Consumable Material List              Workshop         Consultation
Standards Manual                                        Tool On DVD

Component Maintenance Manual -        CMMM        ON        PDF        E       180
Manufacturer                          CMMM       OFF       CD-P        E       180   Supplied upon Buyer's request

Component Maintenance Manual -        CMMM        ON       SGML        E       180
Manufacturer                          CMMM       OFF       SGML        E       180   If selected by the Buyer, SGML format
                                                                                     will not be automatically supplied.
                                                                                     Effective delivery will on]y take place
                                                                                     upon, explicit request from the Buyer

Duct & Fuel Pipe Repair Manual        DFPRM       ON        PDF        E   *   180
                                      DFPRM      OFF       CD-P        E       180   Supplied upon Buyer's request

Duct & Fuel Pipe Repair Manual        DFPRM       ON       SGML        E       180
                                      DFPRM      OFF       SGML        E       180   If selected by the Buyer, SGML format
                                                                                     will not be automatically supplied.
                                                                                     Effective delivery will only take place
                                                                                     upon explicit request from the Buyer

Component Maintenance Manual -        CMMV        ON        PDF        E       180   Consultation from the Supplier Technical
Vendor                                                                               Data On-Line Service on Airbus Customer
                                                                                     Portal
                                      CMMV       OFF       CD-P        E       180   Supplied by Vendors

Component Documentation Status        CDS         ON     Advanced      C       180   Revised until 180 days after Aircraft
                                                       Consultation                  Delivery
                                                           Tool
                                      CDS        OFF     Advanced      C       180
                                                       Consultation
                                                           Tool

Component Evolution List              CEL         ON        PDF        G        --   Delivered as follow-up to CDS
                                      CEL        OFF       CD-P        G        --

Exhibit G - 13/16

EXHIBIT G

            NOMENCLATURE              ABBR  AVAIL      FORM      TYPE     DELIV                 COMMENTS
            ------------              ----  -----      ----      ----     -----                 --------
ENGINEERING DOCUMENTS

Mechanical Drawings                   MD      ON     Advanced      C         0   On-line Consultation from Engineering
                                                   Consultation                  Drawings Service
                                                       Tool

Parts Usage (Effectivity)             PU      ON     Advanced      C         0   On-line Consultation from Engineering
                                                   Consultation                  Drawings Service
                                                       Tool

Parts List                            PL      ON     Advanced      C   *     0   On-line Consultation from Engineering
                                                   Consultation                  Drawings Service
                                                       Tool

Standards Manual                      SM      ON       SGML        E        90
                                      SM     OFF       SGML        E        90   If selected by the Buyer, SGML format
                                                                                 will not be automatically supplied.
                                                                                 Effective delivery will only take place
                                                                                 upon explicit request from the Buyer

Process and Material Specification    PMS     ON        PDF        G         0
                                      PMS    OFF       CD-P        G         0

Exhibit G - 14/16

EXHIBIT G

              NOMENCLATURE                  ABBR   AVAIL      FORM      TYPE     DELIV                 COMMENTS
              ------------                  ----   -----      ----      ----     -----                 --------
MISCELLANEOUS PUBLICATIONS

Aircraft Characteristics for Airport      AC/MFP     ON        PDF        E       360
and Maintenance Facility Planning

ATA 100 Breakdown Index                   ATAB       ON        PDF        E       360   6 Digits ATA 100 Breakdown Index

C@DETS (Technical Data Training Tool)     C@DETS    OFF     Advanced      G       360   Training Tool applicable to major
                                                          Consultation                  technical Data (AMM/TSM/ IPC/ WDM/
                                                           Tool on CD                   SRM / NTM) and to associated Data.
                                          C@DETS     ON        PDF        G       360

Aircraft Recovery Manual                  ARM        ON        PDF        E        90
                                          ARM       OFF       CD-P        E        90

Aircraft Rescue & Firefighting Chart      ARFC       ON        PDF        E       180
                                          ARFC      OFF        P1*        E       180   *    Refers to a one-side printed
                                                                                             document

List of Effective Technical Data          LETD       ON        PDF        C        90

List of Radioactive and Hazardous         LRE        ON        PDF        G   *    90
Elements
                                          LRE       OFF       CD-P        G        90

Live Animal Transportation Calculation    LATC       ON     Advanced      E        90
Tool                                                      Consultation
                                                              Tool
                                          LATC      OFF     Advanced      E        90
                                                          Consultation
                                                               Tool

Service Bulletins                         SB         ON     Advanced      C         0
                                                          Consultation
                                                              Tool
                                          SB         ON       SGML        C         0
                                          SB        OFF       SGML        C         0
                                          SB         ON     PDF (**)      C         0   (**) NOTE: This Manual will be
                                                                                             provided, only if it's still
                                                                                             produced in this format by the
                                                                                             Seller, at the time of the
                                                                                             delivery date.
                                          SB        OFF       CD-P        C         0

Exhibit G - 15/16

EXHIBIT G

              NOMENCLATURE                  ABBR   AVAIL      FORM      TYPE     DELIV                 COMMENTS
              ------------                  ----   -----      ----      ----     -----                 --------
Supplier Product Support Agreements 2000  SPSA       ON        PDF        G       360   Based on General Conditions of
                                                                                        Purchase (GCP) 2000 Issue 5
                                          SPSA      OFF       CD-P        G       360

Transportability Manual                   TM         ON        PDF        E       180
                                          TM        OFF       CD-P        E       180

Vendor Information Manual                 VIM        ON     Advanced      G   *   360
                                                          Consultation
                                                              Tool
                                          VIM       OFF     Advanced      G       360
                                                          Consultation
                                                              Tool
                                          VIM/GSE    ON     Advanced      G       360
                                                          Consultation
                                                              Tool

Exhibit G - 16/16

EXHIBIT "H"

MATERIAL

SUPPLY AND SERVICES

Exhibit H - 1/24

                                                                     EXHIBIT "H"

1              GENERAL

1.1            This Exhibit defines the terms and conditions for the material
               support services offered by the Seller to the Buyer in the

following areas:

- Initial provisioning of data and material

- Replenishment of material

- Lease of certain Seller Parts

1.1.1          Capitalized terms used herein and not otherwise defined in this
               Exhibit "H" shall have the same meanings assigned thereto in the
               Agreement.

1.1.2          References made to Clauses or sub-Clauses shall refer to Clauses
               or sub-Clauses of this Exhibit "H" unless otherwise specified.

1.2            SCOPE OF MATERIAL SUPPORT

               Material is classified into the following categories (hereinafter
               referred to as "MATERIAL"):

               (i)  Seller Parts (Seller's proprietary Material bearing an
                    official part number of the Seller or Material for which the
                    Seller has the exclusive sales rights);

               (ii) Supplier Parts classified as Repairable Line Maintenance
                    Parts in accordance with SPEC 2000;

               (iii) Supplier Parts classified as Expendable Line Maintenance
                    Parts in accordance with SPEC 2000;

               (iv) Ground Support Equipment and Specific (To Type) Tools.

1.2.1          Certain Seller Parts listed in Appendix A of Clause 6 of Exhibit
               H are available for lease by the Seller to the Buyer.

1.2.2          The Material support to be provided hereunder by the Seller
               covers items classified as Material in sub-Clauses 1.2 (i) thru
               (iv) both for initial provisioning as described in Clause 2
               ("INITIAL PROVISIONING") and for replenishment as described in
               Clause 3.

               Repairable Line Maintenance Parts as specified in sub-Clauses 1.2
               (i) and 1.2 (ii) above having less than fifty (50) flight-hours
               are considered as new.

1.2.3          Engines, quick engine change kit accessories and parts, including
               associated parts, are not covered under this Exhibit "H" and
               shall be subject to direct agreements between the Buyer and the
               relevant Engines Manufacturer. The Seller shall use its
               reasonable efforts to assist the Buyer in case of any
               difficulties with availability of Engines and associated spare
               parts.

1.2.4          During a period commencing on the date hereof and continuing for
               as long as at least five (5) aircraft of (each of) the model(s)
               covered under this Agreement are operated in commercial air
               transport service (the "TERM"), the Seller shall maintain or have
               maintained such stock of Seller Parts as is deemed reasonable by
               the Seller and shall

Exhibit H - 2/24

EXHIBIT "H"

               furnish at reasonable prices Seller Parts adequate to meet the
               Buyer's needs for maintenance of the Aircraft.

               The Seller shall use its reasonable efforts to obtain a similar
               service from all Suppliers of parts which are originally
               installed on the Aircraft and not manufactured by the Seller.

1.3            AIRBUS SPARES SUPPORT AND SERVICES HEADQUARTER

1.3.1          The Seller has established its Airbus Spares Support Centre in
               HAMBURG, FEDERAL REPUBLIC OF GERMANY ("AIRBUS SPARES SUPPORT
               CENTRE") and shall maintain or cause to be maintained during the
               Term a central store of Seller Parts.

1.3.2          The Airbus Spares Support Centre is operated twenty-four (24)
               hours/day and seven (7) days/week.

1.3.3          The Seller reserves the right to effect deliveries from
               distribution centres other than Airbus Spares Support Centre or
               from any designated production or Suppliers' facilities.

               For efficient and convenient deliveries, the Seller and its
               Affiliate companies operate regional satellite stores.

1.4            AGREEMENTS OF THE BUYER

1.4.1          The Buyer agrees to purchase from the Seller or its licensee(s)
               ("the Licensees") the Seller Parts required for the Buyer's own
               needs during the Term, provided that the provisions of this
               Clause 1.4 shall not in any way prevent the Buyer from resorting
               to the Seller Parts stocks of other operators using the same
               Aircraft or from purchasing Seller Parts from said operators or
               from distributors, provided said Seller Parts have been designed
               by the Seller and manufactured by the Seller or its Licensee(s).

1.4.2          The Buyer may manufacture or have manufactured for its own use
               without paying any license fee to the Seller parts equivalent to
               Seller Parts:

1.4.2.1        after expiration of the Term if at such time the Seller Parts are
               out of stock,

1.4.2.2        at any time, to the extent Seller Parts are needed to effect
               aircraft on ground ("AOG") repairs upon any Aircraft delivered
               under the Agreement and are not available from the Seller or its
               Licensees within a lead time shorter than or equal to the time in
               which the Buyer can procure such Seller Parts, and provided the
               Buyer shall not sell such Seller Parts,

1.4.2.3        in the event that the Seller fails to fulfil its obligations with
               respect to any Seller Parts pursuant to Clause 1.2 within a
               reasonable time after written notice thereof from the Buyer,

1.4.2.4        in those instances where a Seller Part is identified as "Local
               Manufacture" in the Illustrated Parts Catalog (IPC).

Exhibit H - 3/24

EXHIBIT "H"

1.4.3.         The rights granted to the Buyer in Clause 1.4.2 shall not in any
               way be construed as a license, nor shall they in any way obligate
               the Buyer to the payment of any license fee or royalty, nor shall
               they in any way be construed to affect the rights of third
               parties.

1.4.4          Furthermore, in the event of the Buyer manufacturing or having
               manufactured any parts, subject to the conditions of Clause
               1.4.2, such manufacturing and any use made of the manufactured
               part shall be under the sole liability of the Buyer and the
               consent given by the Seller shall not be construed as express or
               implicit approval howsoever either of the Buyer or of the
               manufactured parts.

               It shall further be the Buyer's responsibility to ensure that
               such manufacturing is performed in accordance with the relevant
               procedures and Aviation Authority requirements.

1.4.5          The Buyer shall allocate or cause to be allocated its own
               partnumber to any part manufactured or caused to be manufactured
               subject to Clause 1.4.2 above. The Buyer shall not be allowed to
               use or cause to be used the Airbus Partnumber of the Seller Part
               to which such manufactured part is equivalent.

1.4.6          Notwithstanding any right provided to the Buyer under Clause
               1.4.2, the Buyer shall not be entitled under any circumstances to
               sell any part manufactured or caused to be manufactured under
               Clause 1.4.2 to any third party.

Exhibit H - 4/24

                                                                     EXHIBIT "H"

2              INITIAL PROVISIONING

2.1            INITIAL PROVISIONING PERIOD

               The INITIAL PROVISIONING PERIOD is defined as the period up to
               and expiring on the ninetieth (90th) day after Delivery of the
               last Aircraft subject to firm order under the Agreement.

2.2            PRE-PROVISIONING MEETING

2.2.1          The Seller shall organize a pre-provisioning meeting
               ("PRE-PROVISIONING MEETING") at its Airbus Spares Support Centre
               for the purpose of formulating an acceptable schedule and working
               procedure to accomplish the initial provisioning of Material.

2.2.2          The date of the meeting shall be mutually agreed upon by the
               Buyer and the Seller, allowing a minimum preparation time of
               eight (8) weeks for the Initial Provisioning Conference referred
               to in Clause 2.4 below.

2.3            INITIAL PROVISIONING TRAINING

               Upon the request of the Buyer, the Seller shall provide Initial
               Provisioning training for the Buyer's provisioning and purchasing
               personnel: *

               The following areas shall be covered:

               (i)  The Seller during the Pre-Provisioning Meeting shall
                    familiarize the Buyer with the provisioning documents.

               (ii) The technical function as well as the necessary technical
                    and commercial Initial Provisioning Data shall be explained
                    during or prior to the Initial Provisioning Conference.

               (iii) A familiarization with the Seller's purchase order
                    administration system shall be conducted during the Initial
                    Provisioning Conference.

2.4            INITIAL PROVISIONING CONFERENCE

               The Seller shall organize an Initial Provisioning conference
               ("INITIAL PROVISIONING CONFERENCE") at the Airbus Spares Support
               Centre, including participation of major Suppliers, which Initial
               Provisioning Conference shall take place on the date mutually
               agreed upon during the Pre-Provisioning Meeting.

               Such conference shall not take place earlier than eight (8) weeks
               after Manufacturer Serial Number allocation, Buyer Furnished
               Equipment selection or Contractual Definition Freeze of the first
               Aircraft, whichever is the latest.

Exhibit H - 5/24

                                                                     EXHIBIT "H"

2.5            SELLER-SUPPLIED DATA

               The Seller shall prepare and supply to the Buyer the data set
               forth hereunder.

2.5.1          INITIAL PROVISIONING DATA

               Initial Provisioning data elements generally in accordance with
               SPEC 2000, Chapter 1, ("INITIAL PROVISIONING DATA") shall be
               supplied by the Seller to the Buyer in a form, format and a
               time-scale to be mutually agreed upon during the Pre-Provisioning
               Meeting.

2.5.1.1        Revision service shall be provided every ninety (90) days, up to
               the end of the Initial Provisioning Period.

2.5.1.2        In any event, the Seller shall ensure that Initial Provisioning
               Data is released to the Buyer in due time to give the Buyer
               sufficient time to perform any necessary evaluation and allow the
               on-time delivery of any ordered Material.

2.5.2          SUPPLEMENTARY DATA

               The Seller shall provide the Buyer with supplementary data to the
               Initial Provisioning Data, including Local Manufacture Tables
               (X-File) and Ground Support Equipment and Specific (To-Type)
               Tools (W-File) in accordance with SPEC 2000, Chapter 1.

2.5.3          DATA FOR STANDARD HARDWARE

               The Initial Provisioning Data provided to the Buyer shall include
               data for hardware and standard material.

2.6            SUPPLIER-SUPPLIED DATA

2.6.1          GENERAL

               The Seller shall obtain from Suppliers agreements to prepare and
               issue for their own products as per Clause 1.2 (ii)
               repair/overhaul Initial Provisioning Data in the English
               language, for those components for which the Buyer has elected to
               receive data.

               Said data (initial issue and revisions) shall be transmitted to
               the Buyer through the Suppliers and/or the Seller. The Seller
               shall not be responsible for the substance of such data.

               In any event, the Seller shall exert its reasonable efforts to
               supply such Data to the Buyer in due time to give the Buyer
               sufficient time to perform any necessary evaluation and allow
               on-time deliveries.

Exhibit H - 6/24

                                                                     EXHIBIT "H"

2.6.2          INITIAL PROVISIONING DATA

               Initial Provisioning Data elements for Supplier Parts as per
               sub-Clause 1.2 (ii) generally in accordance with SPEC 2000,
               Chapter 1, shall be furnished as mutually agreed upon during a
               Pre-Provisioning Meeting with revision service assured up to the
               end of the Initial Provisioning period.

2.7            INITIAL PROVISIONING DATA COMPLIANCE

2.7.1          Initial Provisioning Data generated by the Seller and supplied to
               the Buyer shall comply with the latest configuration of the
               Aircraft to which such data relate as known three (3) months
               before the date of issue. Said data shall enable the Buyer to
               order Material conforming to its Aircraft as required for
               maintenance and overhaul.

This provision shall not cover:

- Buyer modifications not known to the Seller,

- modifications not agreed to by the Seller.

2.8            COMMERCIAL OFFER

2.8.1          At the end of the Initial Provisioning Conference, the Seller
               shall, at the Buyer's request, submit a commercial offer for all
               Material as defined in Clauses 1.2 (i) thru 1.2 (iv) mutually
               agreed as being Initial Provisioning based on the Seller's sales
               prices valid at the time of finalization of the Initial
               Provisioning Conference. This commercial offer shall be valid for
               a period to be mutually agreed upon, irrespective of any price
               changes for Seller Parts during this period, except for
               significant error and/or price alterations due to part number
               changes and/or Supplier price changes.

2.8.2          During the Initial Provisioning Period the Seller shall supply
               Material, as defined in Clause 1.2 and ordered from the Seller,
               which shall be in conformity with the configuration standard of
               the concerned Aircraft and with the Initial Provisioning Data
               transmitted by the Seller.

2.8.3          The Seller shall in addition use its reasonable efforts to cause
               Suppliers to provide a similar service for their items.

2.9            DELIVERY OF INITIAL PROVISIONING MATERIAL

2.9.1          To cover the requirements in Material for entry into service of
               the Aircraft, the Seller shall use its reasonable efforts to
               deliver Material ordered during the Initial Provisioning Period
               against the Buyer's orders and according to a mutually agreed
               schedule. Such deliveries shall cover the Material requirements
               in line with the Aircraft fleet build up, only up to that portion
               of the ordered quantity that is recommended for the number of
               Aircraft operated during the Initial Provisioning Period.

               The Seller shall in addition use its reasonable efforts to cause
               Suppliers to provide to the Buyer a similar service for their
               items.

Exhibit H - 7/24

EXHIBIT "H"

2.9.2          The Buyer may, subject to the Seller's agreement, cancel or
               modify Initial Provisioning orders placed with the Seller, with
               no cancellation charge, not later than the quoted lead-time
               before scheduled delivery of said Material.

2.9.3          In the event of the Buyer cancelling or modifying (without any
               liability of the Seller for the cancellation or modification) any
               orders for Material outside the time limits defined in Clause
               2.9.2, the Buyer shall reimburse the Seller for any costs
               incurred in connection therewith.

2.9.4          All transportation costs for the return of Material under this
               Clause 2, including any insurance, customs and duties applicable
               or other related expenditures, shall be borne by the Buyer.

2.10           INITIAL PROVISIONING DATA FOR EXERCISED OPTIONS

2.10.1         All Aircraft for which the Buyer exercises its option shall be
               included into the revision of the provisioning data that is
               issued after execution of the relevant amendment to the Agreement
               if such revision is not scheduled to be issued within four (4)
               weeks from the date of execution. If the execution date does not
               allow four (4) weeks preparation time for the Seller, the
               concerned Aircraft shall be included in the subsequent revision
               as may be mutually agreed upon.

2.10.2         The Seller shall, from the date of execution of the relevant
               amendment to the Agreement until three (3) months after Delivery
               of each Aircraft, submit to the Buyer details of particular
               Supplier components being installed on each Aircraft, with
               recommendations regarding order quantity. A list of such
               components shall be supplied at the time of the provisioning data
               revision as specified above.

2.10.3         The data concerning Material shall at the time of each Aircraft
               Delivery at least cover such Aircraft's technical configuration
               as it existed six (6) months prior to Aircraft Delivery and shall
               be updated to reflect the final status of the concerned Aircraft
               once manufactured. Such update shall be included in the data
               revisions issued three (3) months after Delivery of such
               Aircraft.

Exhibit H - 8/24

                                                                     EXHIBIT "H"

3              REPLENISHMENT AND DELIVERY

3.1            GENERAL

               Buyer's purchase orders are administered in accordance with SPEC
               2000, Chapter 3.

               For the purpose of clarification it is expressly stated that the
               provisions of Clause 3.2 do not apply to Initial Provisioning
               Data and Material as described in Clause 2.

3.2            LEAD TIMES

               In general, lead times are in accordance with the provisions of
               the "World Airlines and Suppliers' Guide" (Latest Edition).

3.2.1          Seller Parts as per sub-Clause 1.2 (i) listed in the Seller's
               Spare Parts Price Catalog can be dispatched within the lead times
               defined in the Spare Parts Price Catalog.

               Lead times for Seller Parts, which are not published in the
               Seller's Spare Parts Price Catalog, are quoted upon request.

3.2.2          Material of sub-Clauses 1.2 (ii) thru 1.2 (iv) can be dispatched
               within the Supplier's lead-time augmented by the Seller's own
               order and delivery processing time.

3.2.3          EXPEDITE SERVICE

               The Seller shall provide a twenty-four (24) hours-a-day, seven
               (7) days-a-week expedite service to provide for the supply of the
               relevant Seller Parts available in the Seller's stock, workshops
               and assembly line including long lead time spare parts, to the
               international airport nearest to the location of such part
               ("EXPEDITE SERVICE").

3.2.3.1        The Expedite Service is operated in accordance with the "World
               Airlines and Suppliers' Guide", and the Seller shall notify the

Buyer of the action taken to satisfy the expedite within:

- four (4) hours after receipt of an AOG Order,

- twenty-four (24) hours after receipt of a Critical Order (imminent AOG or work stoppage).

- seven (7) days after receipt of an Expedite Order from the

                    Buyer.

3.2.3.2        The Seller shall deliver Seller Parts requested on an Expedite
               basis against normal orders placed by the Buyer, or upon
               telephone or telex requests by the Buyer's representatives. Such
               telephone or telex requests shall be confirmed by subsequent
               Buyer's orders for such Seller Parts within a reasonable time.

Exhibit H - 9/24

                                                                     EXHIBIT "H"

3.3            DELIVERY STATUS

               The Seller shall make available to the Buyer on the Airbus Spares
               Portal the status of supplies against orders.

3.4            EXCUSABLE DELAY

               Clause 10.1 of the Agreement shall apply to the Material support.

3.5            SHORTAGES, OVERSHIPMENTS, NON-CONFORMITY IN ORDERS

3.5.1          The Buyer shall immediately and not later than thirty (30) days
               after receipt of Material delivered pursuant to a purchase order
               advise the Seller.

               a)   of any alleged shortages or overshipments with respect to
                    such order,

               b)   of all non-conformities to specification of parts in such
                    order subjected to inspections by the Buyer.

               In the event of the Buyer not having advised the Seller of any
               such alleged shortages, overshipments or non-conformity within
               the above defined period, the Buyer shall be deemed to have
               accepted the deliveries.

3.5.2          In the event of the Buyer reporting overshipments or
               non-conformity to the specifications within the period defined in
               Clause 3.5.1 the Seller shall, if the Seller accepts such
               overshipment or non-conformity, either replace the concerned
               Material or credit the Buyer for the returned Material. In such
               case, transportation costs shall be borne by the Seller.

               The Buyer shall endeavour to minimize such costs, particularly
               through the use of its own airfreight system for transportation
               at no charge to the Seller.

3.6            PACKAGING

               All Material shall be packaged in accordance with ATA 300
               Specification, Category III for consumable/expendable material
               and Category II for rotables. Category I containers shall be used
               if requested by the Buyer and the difference between Category I
               and Category II packaging costs shall be paid by the Buyer
               together with payment for the respective Material.

3.7            CESSATION OF DELIVERIES

               The Seller reserves the right to restrict, stop or otherwise
               suspend deliveries if the Buyer fails to meet its obligations
               defined in Clauses 4.2 thru 4.4.

Exhibit H - 10/24

                                                                     EXHIBIT "H"

4              COMMERCIAL CONDITIONS

4.1            PRICE

4.1.1          The Material prices shall be:

               -    Free Carrier (FCA) the Airbus Spares Support Centre for
                    deliveries from the Airbus Spares Support Centre.

               -    Free Carrier (FCA) place specified by the Seller for
                    deliveries from other Seller or Supplier facilities as the
                    term Free Carrier (FCA) is defined by the publication
                    No 560 of the International Chamber of Commerce published
                    in January 2000.

4.1.2          Prices shall be the Seller's sales prices in effect on the date
               of receipt of the order (subject to reasonable quantities and
               delivery time) and shall be expressed in US-Dollars.

4.1.3          Prices of Seller Parts shall be in accordance with the current
               Seller's Spare Parts Price Catalog. Prices shall be firm for each
               calendar year. The Seller, however, reserves the right to revise
               the prices of said parts during the course of the calendar year

in the following cases:

- significant revision in manufacturing costs,

- significant revision in manufacturer's purchase price of parts or materials (including significant variation of exchange rates),

- significant error in estimation or expression of any price.

4.1.4          Prices of Material as defined in sub-Clauses 1.2 (ii) thru 1.2
               (iv) shall be the valid list prices of the Supplier augmented by
               the Seller's handling charge. The percentage of the handling
               charge shall vary with the Material's value and shall be
               determined item by item.

4.2            PAYMENT PROCEDURES AND CONDITIONS

4.2.1          Payment shall be made in immediately available funds in the
               quoted currency. In case of payment in any other free convertible
               currency, the exchange rate valid on the day of actual money
               transfer shall be applied for conversion.

4.2.2          Payment shall be made by the Buyer to the Seller within thirty
               (30) days from date of the invoice to the effect that the value
               date of the credit to the Seller's account of the payment falls
               within this thirty (30) day period.

Exhibit H - 11/24

EXHIB1T "H"

4.2.3          The Buyer shall make all payments hereunder to the Seller's
               account with:

               VEREINS & WESTBANK AG-20457 Hamburg-Germany

               Account: 910 057 777

               Swift Address: VUWB DE HH,

               using international IBAN Code: DE61 200 300 000 910 057 777

               or as otherwise directed by the Seller.

4.2.4          All payments due to the Seller hereunder shall be made in full
               without set-off, counterclaim, deduction or withholding of any
               kind. Consequently, the Buyer shall procure that the sums
               received by the Seller under this Exhibit "H" shall be equal to
               the full amounts expressed to be due to the Seller hereunder,
               without deduction or withholding on account of and free from any
               and all taxes, levies, imposts, dues or charges of whatever
               nature except that if the Buyer is compelled by law to make any
               such deduction or withholding the Buyer shall pay such additional
               amounts as may be necessary in order that the net amount received
               by the Seller after such deduction or withholding shall equal the
               amounts which would have been received in the absence of such
               deduction or withholding.

4.2.5          If any payment due to the Seller is not received in accordance
               with the timescale provided in Clause 4.2.2, without prejudice to
               the Seller's other rights under this Exhibit "H", the Seller
               shall be entitled to interest for late payment calculated on the
               amount due from and including the due date of payment up to and
               including the date when the payment is received by the Seller at
               a rate equal to the London Interbank Offered Rate (LIBOR) for *
               months deposits in US Dollars (as published in the Financial
               Times on the due date) plus * per year (part year to be
               prorated).

4.3            *

4.4            TITLE

               Title to any Material purchased under this Exhibit "H" remains
               with the Seller until full payment of the invoices and any
               interest thereon has been received by the Seller.

               The Buyer shall undertake that Material, title to which has not
               passed to the Buyer, shall be kept free from any debenture or
               mortgage or any similar charge or claim in favour of any third
               party.

4.5            BUY-BACK

4.5.1          BUY-BACK OF OBSOLETE MATERIAL

               The Seller agrees to buy back unused Seller Parts which may
               become obsolete up to * months after Delivery of the first
               Aircraft to the Buyer as a result of mandatory modifications
               required by the Buyer's or the Seller's Aviation Authorities,

Exhibit H - 12/24

EXHIBIT "H"

               subject to the following:

4.5.1.1        The Seller Parts involved shall be those, which the Buyer is
               directed by the Seller to scrap or dispose of and which cannot be
               reworked or repaired to satisfy the revised standard.

4.5.1.2        The Seller shall credit to the Buyer the purchase price paid by
               the Buyer for any such obsolete parts, provided that the Seller's
               liability in this respect does not extend to quantities in
               excess of the Seller's Initial Provisioning recommendation.

4.5.1.3        The Seller shall use its reasonable efforts to obtain for the
               Buyer the same protection from Suppliers.

4.5.2          BUY-BACK OF INITIAL PROVISIONING SURPLUS MATERIAL

4.5.2.1        The Seller agrees that at any time after * and within * after
               Delivery of the first Aircraft to the Buyer, the Buyer shall have
               the right to return to the Seller, at a credit of * of the
               original purchase price paid by the Buyer, unused and undamaged
               Material as per sub-Clause 1.2 (i) and at a credit of * of the
               original Supplier list price, unused and undamaged Material as
               per sub-clause 1.2 (ii) originally purchased from the Seller
               under the terms hereof, provided that the selected protection
               level does not exceed * with a transit time of * and said
               Material was recommended for the Buyer's purchase in the Seller's
               Initial Provisioning recommendations to the Buyer and does not
               exceed the provisioning quantities recommended by the Seller, and
               is not shelflife limited, or does not contain any shelflife
               limited components with less than * shelflife remaining when
               returned to the Seller and provided that the Material is returned
               with the Seller's original documentation (tag, certificates).

4.5.2.2        In the event of the Buyer electing to procure Material in excess
               of the Seller's recommendation, the Buyer shall notify the Seller
               thereof in writing, with due reference to the present Clause. The
               Seller's agreement in writing is necessary before any Material in
               excess of the Seller's recommendation shall be considered for
               buy-back.

4.5.2.3        It is expressly understood and agreed that the rights granted to
               the Buyer under this Clause 4.5.2 shall not apply to Material
               which may become surplus to requirements due to obsolescence at
               any time or for any reason other than those set forth in Clause
               4.5.1 above.

4.5.2.4        Further, it is expressly understood and agreed that all credits
               described in this Clause 4.5.2 shall be provided by the Seller to
               the Buyer exclusively by means of credit notes to be entered into
               the Buyer's spares account with the Seller.

4.5.3          All transportation costs for the return of obsolete or surplus
               Material under this Clause 4, including any insurance and customs
               duties applicable or other related expenditures, shall be borne
               by the Buyer.

4.6            INVENTORY USAGE DATA

               The Buyer undertakes to provide periodically to the Seller a
               quantitative list of the

Exhibit H - 13/24

EXHIBIT "H"

parts used for maintenance and overhaul of the Aircraft. The range and contents of this list shall be established according to SPEC 2000, Chapter 5, or as mutually agreed between the Seller and the Buyer.

Exhibit H - 14/24

                                                                    EXHIBIT "H"

5.             WARRANTIES

5.1            SELLER PARTS

               Subject to the limitations and conditions as hereinafter
               provided, the Seller warrants to the Buyer that all Seller Parts
               in sub-Clause 1.2 (i) shall at delivery to the Buyer:

               (i)  be free from defects in material.

               (ii) be free from defects in workmanship, including without
                    limitation processes of manufacture,

               (iii) be free from defects arising from failure to conform to
                    the applicable specification for such part.

5.2            WARRANTY PERIOD

5.2.1          The standard warranty period for new Seller Parts is * months
               after delivery of such parts to the Buyer.

5.2.2          The standard warranty period for used Seller Parts delivered by
               and/or repaired, modified, overhauled or exchanged by the Seller
               is * after delivery of such parts to the Buyer.

5.3            BUYER'S REMEDY AND SELLER'S OBLIGATION

               The Buyer's remedy and Seller's obligation and liability under
               this Clause 5 are limited to the repair, replacement or
               correction, at the Seller's expenses and option, of any Seller
               Part which is defective.

               The Seller may equally at its option furnish a credit to the
               Buyer for the future purchase of Seller Parts equal to the price
               at which the Buyer is then entitled to acquire a replacement for
               the defective Seller Parts.

               The provisions of Clauses 12.1.5 thru 12.1.10 of the Agreement
               shall apply to this Clause 5 of this Exhibit "H".

Exhibit H - 15/24

                                                                     EXHIBIT "H"

5.4            WAIVER, RELEASE AND RENUNCIATION

               THE WARRANTIES, OBLIGATIONS AND LIABILITIES OF THE SELLER AND/OR
               ITS SUPPLIERS AND REMEDIES OF THE BUYER SET FORTH IN THIS CLAUSE
               5 ARE EXCLUSIVE AND IN SUBSTITUTION FOR, AND THE BUYER HEREBY
               WAIVES, RELEASES AND RENOUNCES, ALL OTHER WARRANTIES, OBLIGATIONS
               AND LIABILITIES OF THE SELLER AND/OR ITS SUPPLIERS AND RIGHTS,
               CLAIMS AND REMEDIES OF THE BUYER AGAINST THE SELLER, ITS
               SUPPLIERS AND/OR THEIR INSURERS EXPRESS OR IMPLIED, ARISING BY
               LAW OR OTHERWISE WITH RESPECT TO ANY NON-CONFORMITY OR DEFECT IN
               ANY MATERIAL DELIVERED UNDER THIS AGREEMENT INCLUDING BUT NOT
               LIMITED TO:

               (A)  ANY WARRANTY AGAINST HIDDEN DEFECTS (GARANTIE DES VICES
                    CACHES);

               (B)  ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS;

               (C)  ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE,
                    COURSE OF DEALING OR USAGE OF TRADE;

               (D)  ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY, WHETHER
                    CONTRACTUAL OR DELICTUAL AND WHETHER OR NOT ARISING FROM THE
                    SELLER'S AND/OR ITS SUPPLIERS' NEGLIGENCE, ACTUAL OR
                    IMPUTED; AND

               (E)  ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS
                    OR DAMAGE TO ANY AIRCRAFT, COMPONENT, EQUIPMENT, ACCESSORY
                    OR PART THEREOF OR MATERIAL DELIVERED HEREUNDER.

               THE SELLER AND/OR ITS SUPPLIERS SHALL HAVE NO OBLIGATION OR
               LIABILITY, HOWSOEVER ARISING, FOR LOSS OF USE, REVENUE OR PROFIT
               OR FOR ANY OTHER DIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES
               WITH RESPECT TO ANY NON-CONFORMITY OR DEFECT IN ANY MATERIAL
               DELIVERED UNDER THIS AGREEMENT.

               FOR THE PURPOSES OF THIS CLAUSE 5.4, "THE SELLER" SHALL INCLUDE
               THE SELLER, ITS AFFILIATES AND ANY OF THEIR RESPECTIVE INSURERS.

Exhibit H - 16/24

                                                                     EXHIBIT "H"
6              SELLER PARTS LEASING

6.1            GENERAL

               The terms and conditions of this Clause 6 shall apply for the
               leasing of Seller Parts listed in Appendix A to this Clause 6,
               hereinafter "LEASED PARTS" or a "LEASED PART", and shall form a
               part of each lease of Seller Parts by the Buyer from the Seller.

6.1.1          The terms and conditions of this Clause 6 shall prevail over all
               other terms and conditions appearing on any order form or other
               document pertaining to Leased Parts. The Seller's current
               proprietary parts Repair Guide shall be provided to the Buyer and
               shall be used, along with this Agreement, as the basis for Seller
               Parts lease transactions between the Buyer and the Seller. In
               case of discrepancy, this Agreement shall prevail.

6.1.2          For the purposes of this Clause 6, the term "LESSOR" refers to
               the Seller and the term "LESSEE" refers to the Buyer.

6.1.3          Parts not included in Appendix A to this Clause 6 shall be the
               subject of a separate lease agreement supplied by the Seller at
               the Buyer's request.

6.2            LEASING PROCEDURE

               Upon the Lessee's request by telephone (to be confirmed promptly
               in writing), facsimile, cable, SITA, letter or other written
               instrument, the Lessor shall lease such Leased Parts, which shall
               be made available in accordance with Clause 3.2.3 for the purpose
               of being substituted for a part removed from an Aircraft for
               repair or overhaul. * Each lease of Leased Parts shall be
               evidenced by a lease document (hereinafter "LEASE") issued by the
               Lessor to the Lessee not later than seven (7) days after delivery
               of the Leased Part.

6.3            LEASE PERIOD

6.3.1          The total term of the Lease (hereinafter "LEASE PERIOD") shall be
               counted from inclusively the day the Leased Part is delivered
               Free Carrier (FCA) up to inclusively the day of receipt of the
               Leased Part back at the Lessor or at any other address indicated
               by the Lessor.

6.3.2          If a Leased Part is not returned by the Lessee within * days, the
               Lease shall be converted into a sale. Should the Lessee not
               return the Leased Part to the Lessor within * days and if the
               Lessor so elects, by giving prompt written notice to the Lessee,
               such non return shall be deemed to be an election by the Lessee
               to purchase the Leased Part and, upon the happening of such
               event, the Lessee shall pay the Lessor all amounts due under
               Clauses 6.4 and 6.8 for the Leased Part for the Lease Period of *
               days plus the current sales price of the Leased Part at the
               moment of the conversion of the Lease.

Exhibit H - 17/24

EXHIBIT "H"

6.3.3          Notwithstanding the foregoing, the Lease Period shall end in the
               event of, and upon the date that, the Lessee acquiring title to a
               Leased Part as a result of exercise of the Lessee's option to
               purchase the Leased Part, as provided for herein.

6.3.4          The chargeable period to lease a part is a minimum of * days. If
               the shipment of the Leased Part has been arranged and the Lessee
               cancels the lease order, the minimum chargeable period of * shall
               apply.

6.4            LEASE CHARGES AND TAXES

               The Lessee shall pay the Lessor:

               (i)  a Lease fee per day of the Lease Period amounting to one
                    three hundred and sixty fifth (1/365th) of the part's sales
                    price as set forth in the Seller's Spare Parts Price Catalog
                    in effect on the date of the commencement of the Lease
                    Period;

               (ii) any reasonable additional costs which may be incurred by the
                    Lessor as a direct result of such Lease, such as
                    recertification, inspection, test, repair, overhaul, removal
                    of paint and/or repackaging costs as required to place the
                    Leased Part in a satisfactory condition for lease to a
                    subsequent customer;

               (iii) all transportation and insurance charges; and

               (iv) any taxes, charges or custom duties imposed upon the Lessor
                    or its property as a result of the Lease, sale, delivery,
                    storage or transfer of any Leased Part. All payments due
                    hereunder shall be made in accordance with Clause 4.

6.5            RISK OF LOSS, MAINTENANCE, STORING AND REPAIR OF THE LEASED PART

               (i)  The Lessee shall be liable for maintaining and storing the
                    Leased Part in accordance with all applicable rules of the
                    relevant aviation authorities and the technical
                    documentation and other instructions issued by the Lessor.

               (ii) Except for normal wear and tear, each Leased Part shall be
                    returned to the Lessor in the same condition as when
                    delivered to the Lessee.

               (iii) The Leased Part shall be repaired solely at repair stations
                    approved by the Lessor. If during the Lease Period any
                    inspection, maintenance, rework and/or repair is carried out
                    to maintain the Leased Part serviceable, in accordance with
                    the standards of the Lessor, the Lessee shall provide
                    details and documentation about the scope of the work
                    performed, including respective inspection, work and test
                    reports.

               (iv) All documentation shall include, but not be limited to,
                    evidence of incidents such as hard landings, abnormalities
                    of operation and corrective action taken by the Lessee as a
                    result of such incidents.

               (v)  The Leased Part must not be lent to a third party.

               (vi) Risk of loss or damage to each Leased Part shall remain with
                    the Lessee until

Exhibit H - 18/24

EXHIBIT "H"

               such Leased Part is redelivered to the Lessor at the return
               location specified in the applicable Lease. If a Leased Part is
               lost, damaged beyond economical repair or damaged unrepairable,
               the Lessee shall be deemed to have exercised its option to
               purchase said Leased Part in accordance with Clause 6.8 as of the
               date of such loss or damage.

6.6            TITLE

               Title to each Leased Part shall remain with the Lessor at all
               times unless the Lessee exercises its option to purchase in
               accordance with Clause 6.8, in which case title shall pass to the
               Lessee upon receipt by the Lessor of the payment for the
               purchased Leased Part.

6.7            RETURN OF LEASED PART

6.7.1          The Lessee shall return the Leased Part at the end of the Lease
               Period to the address indicated on the individual lease document
               provided by the Lessor at the start of each Lease transaction.

6.7.2          The return shipping document shall indicate the reference of the
               Lease document and the removal data, such as:

               (i)  aircraft manufacturer serial number

               (ii) removal date

               (iii) total flight hours and flight cycles for the period the
                    Leased Part was installed on the aircraft

               (iv) documentation in accordance with Clause 6.5.

               If the Lessee cannot provide the above mentioned data and
               documentation for the Leased Part to be returned from Lease,
               lease charges of: * of the Lessor's current sales price for a new
               part plus * of the accumulated Lease fees shall be invoiced.
               According to the Lessors quality standards, parts are not
               serviceable without the maintenance history data outlined above
               and have to be scrapped on site.

6.7.3          The unserviceable or serviceable tag issued by the Lessee and the
               original Lessor certification documents must be attached to the
               Leased Part.

6.7.4          Except for normal wear and tear, each Leased Part shall be
               returned to the Lessor in the same condition as when delivered to
               the Lessee. The Leased Part shall be returned with the same
               painting as when delivered (Airbus grey or primary paint). If the
               Lessee is not in a position to return the Leased Part in the same
               serviceable condition, the Lessee has to contact the Lessor for
               instructions.

6.7.5          The Leased Part is to be returned in the same shipping container
               as that delivered by the Lessor. The container must be in a
               serviceable condition, normal wear and tear excepted.

6.7.6          The return of an equivalent part different from the Leased Part
               delivered by the Lessor is not allowed without previous written
               agreement of the Lessor.

Exhibit H - 19/24

                                                                     EXHIBIT "H"

6.8            OPTION TO PURCHASE

6.8.1          The Lessee may at its option, exercisable by written notice given
               to the Lessor during the Lease Period, elect to purchase the
               Leased Part, in which case the then current sales price for such
               Leased Part as set forth in the Seller's Spare Parts Price
               Catalog shall be paid by the Lessee to the Lessor. Should the
               Lessee exercise such option, * of the Lease rental charges due
               pursuant to sub-Clause 6.4 (i) shall be credited to the Lessee
               against said purchase price of the Leased Part.

6.8.2          In the event of purchase, the Leased Part shall be warranted in
               accordance with Clause 5 as though such Leased Part were a Seller
               Part, but the warranty period shall be deemed to have commenced
               on the date such part was first installed on any Aircraft;
               provided, however, that in no event shall such warranty period be
               less than six (6) months from the date of purchase of such Leased
               Part. A warranty granted under this Clause 6.8.2 shall be in
               substitution for the warranty granted under Clause 6.9 at the
               commencement of the Lease Period.

6.9            WARRANTIES

6.9.1          The Lessor warrants that each Leased Part shall at the time of
               delivery be free from defects in material and workmanship which
               could materially impair the utility of the Leased Part.

6.9.2          WARRANTY AND NOTICE PERIODS

               The Lessee's remedy and the Lessor's obligation and liability
               under this Clause 6.9, with respect to each defect, are
               conditioned upon:

               (i)  the defect having become apparent to the Lessee within the
                    Lease Period and

               (ii) the return by the Lessee as soon as practicable to the
                    return location specified in the applicable Lease, or such
                    other place as may be mutually agreed upon, of the Leased
                    Part claimed to be defective and

               (iii) the Lessor's warranty administrator having received written
                    notice of the defect from the Lessee within thirty (30) days
                    after the defect becomes apparent to the Lessee, with
                    reasonable proof that the claimed defect is due to a matter
                    embraced within the Lessor's warranty under this Clause 6.9
                    and that such defect did not result from any act or omission
                    of the Lessee, including but not limited to any failure to
                    operate or maintain the Leased Part claimed to be defective
                    or the Aircraft in which it was installed in accordance with
                    applicable governmental regulations and the Lessor's
                    applicable written instructions.

6.9.3          REMEDIES

               The Lessee's remedy and the Lessor's obligation and liability
               under this Clause 6.9 with respect to each defect are limited to
               the repair of such defect in the Leased Part in which the defect
               appears, or, as mutually agreed, to the replacement of such
               Leased Part with a similar part free from defect.

Exhibit H - 20/24

EXHIBIT "H"

               Any replacement part furnished under this Clause 6.9.3 shall be
               deemed to be the Leased Part so replaced.

6.9.4          SUSPENSION AND TRANSPORTATION COSTS

6.9.4.1        If a Leased Part is found to be defective and covered by this
               warranty, the Lease Period and the Lessee's obligation to pay
               rental charges as provided for in sub-Clause 6.4 (i) shall be
               suspended from the date on which the Lessee notifies the Lessor
               of such defect until the date upon which the Lessor has repaired,
               corrected or replaced the defective Leased Part, provided,
               however, that the Lessee has, promptly after giving such notice
               to the Lessor, withdrawn such defective Leased Part from use. If
               the defective Leased Part is replaced, such replaced part shall
               be deemed to no longer be a Leased Part under the Lease as of the
               date upon which such part was received by the Lessor at the
               return location specified in the applicable Lease.

               If a Leased Part is found to be defective upon first use by the
               Lessee and is covered by this warranty, no rental charges as
               provided in sub-Clause 6.4 (i) shall accrue and be payable by the
               Lessee until the date on which the Lessor has repaired, corrected
               or replaced the defective Leased Part.

6.9.4.2        All transportation and insurance costs of returning the defective
               Leased Part and returning the repaired, corrected or replacement
               part to the Lessee shall be borne by the Lessor.

6.9.5          WEAR AND TEAR

               Normal wear and tear and the need for regular maintenance and
               overhaul shall not constitute a defect or non-conformance under
               this Clause 6.9.

6.9.6          WAIVER, RELEASE AND RENUNCIATION

               THE WARRANTIES, OBLIGATIONS AND LIABILITIES OF THE LESSOR AND/OR
               ITS SUPPLIERS AND REMEDIES OF THE LESSEE SET FORTH IN THIS CLAUSE
               6 ARE EXCLUSIVE AND IN SUBSTITUTION FOR, AND THE LESSEE HEREBY
               WAIVES, RELEASES AND RENOUNCES, ALL OTHER WARRANTIES, OBLIGATIONS
               AND LIABILITIES OF THE LESSOR AND/OR ITS SUPPLIERS AND RIGHTS,
               CLAIMS AND REMEDIES OF THE LESSEE AGAINST THE LESSOR, ITS
               SUPPLIERS AND/OR THEIR INSURERS EXPRESS OR IMPLIED, ARISING BY
               LAW OR OTHERWISE WITH RESPECT TO ANY NONCONFORMITY OR DEFECT IN
               ANY LEASED PART DELIVERED UNDER THESE LEASING CONDITIONS
               INCLUDING BUT NOT LIMITED TO:

               (A)  ANY WARRANTY AGAINST HIDDEN DEFECTS (GARANTIE DES VICES
                    CACHES);

               (B)  ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS;

               (C)  ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE,
                    COURSE OF DEALING OR USAGE OF TRADE;

               (D)  ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY, WHETHER
                    CONTRACTUAL OR DELICTUAL AND WHETHER OR NOT ARISING FROM THE
                    LESSOR'S OR ITS SUPPLIERS' NEGLIGENCE, ACTUAL OR

Exhibit H - 21/24

EXHIBIT "H"

IMPUTED; AND

(E) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS OR DAMAGE TO ANY AIRCRAFT, COMPONENT, EQUIPMENT, ACCESSORY OR PART THEREOF OR ANY LEASED PART DELIVERED HEREUNDER.

THE LESSOR AND/OR ITS SUPPLIERS SHALL HAVE NO OBLIGATION OR LIABILITY, HOWSOEVER ARISING, FOR LOSS OF USE, REVENUE OR PROFIT OR FOR ANY OTHER DIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES WITH RESPECT TO ANY NON-CONFORMITY OR DEFECT IN ANY LEASED PART DELIVERED UNDER THESE LEASING CONDITIONS.

FOR THE PURPOSES OF THIS CLAUSE 6.9.6, "THE LESSOR" SHALL INCLUDE
THE LESSOR, ITS AFFILIATES AND ANY OF THEIR RESPECTIVE INSURERS.

Exhibit H - 22/24

EXHIBIT "H"

APPENDIX "A" TO CLAUSE 6 OF EXHIBIT "H"

SELLER PARTS AVAILABLE FOR LEASING

AILERONS

APU DOORS

CARGO DOORS

PASSENGER DOORS

ELEVATORS

FLAPS

LANDING GEAR DOORS

RUDDER

TAIL CONE

SLATS

SPOILERS

AIRBRAKES

WING TIPS

WINGLETS

Exhibit H - 23/24

                                                                     EXHIBIT "H"

7              TERMINATION OF SPARES PROCUREMENT COMMITMENTS

7.1            In the event of the Agreement being terminated with respect to
               any Aircraft due to causes provided for in Clauses 10, 11 or 20
               of the Agreement, such termination may also affect the terms of
               this Exhibit "H" to the extent set forth in Clause 7.2 below.

7.2            Any termination under Clauses 10, 11 or 20 of the Agreement shall
               discharge all obligations and liabilities of the parties
               hereunder with respect to such undelivered spare parts, services,
               data or other items to be purchased hereunder which are
               applicable to those Aircraft for which the Agreement has been
               terminated. Unused spare parts in excess of the Buyer's
               requirements due to such Aircraft cancellation shall be
               repurchased by the Seller as provided for in Clause 4.5.2.

Exhibit H - 24/24

LETTER AGREEMENTS - CONTENTS

CONTENTS

LETTERS AGREEMENTS
------------------
Letter Agreement No 1:    *

Letter Agreement No 2:    *

Letter Agreement No 3:    OPTIONS

Letter Agreement No 4:    *

Letter Agreement No 5A:   A350-900 PERFORMANCE, GUARANTEE (75,000 lbs Thrust)
Letter Agreement No 5B:   *
Letter Agreement No 5C:   *

Letter Agreement No 6A:   *
Letter Agreement No 6B:   *

Letter Agreement No 7:    *

Letter Agreement No 8:    *

Letter Agreement No 9:    *

Letter Agreement No 10:   MISCELLANEOUS

Letter Agreement No 11:   *

LETTER AGREEMENT NO 1

TAM - LINHAS AEREAS S.A.
Avenida Jurandir, 856, 20 andar, Lote 4, CEP 04072 - 000, Jardim CECI,
SAO PAULO - SP,
BRAZIL

Subject: *

TAM - LINHAS AEREAS S.A. ("the Buyer") and AIRBUS S.A.S. ("the Seller") have entered into an A350-900 Purchase Agreement ("the Agreement") dated as of even date herewith which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the A350-900 Aircraft as described in the Agreement.

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

- Letter Agreement No 1 - Page 1/5

[Three pages redacted]

LETTER AGREEMENT NO 1

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted                     Agreed and Accepted

For and on behalf of                    For and on behalf of

TAM - LINHAS AEREAS S.A.                AIRBUS S.A.S.


/s/ Marco Antonio Bologna               /s/ Christian Scherer
-------------------------------------   ----------------------------------------
Name: Marco Antonio Bologna             Name: Christian Scherer
Title: Chief Executive Officer          Title: Head of Transactions and Control
                                               Deputy Head of Commercial

Date: December 20th, 2005               Date: December 20th, 2005


/s/ Jose Zaidan Maluf
-------------------------------------
Name: Jose Zaidan Maluf
Title: Director

Date: December 20th, 2005


WITNESS                                 WITNESS


/s/ Vanessa Alvarenga                   /s/ Michel Clanet
-------------------------------------   ----------------------------------------
Name: Vanessa Alvarenga                 Name: Michel Clanet
Title: Legal Counsel                    Title: Regional Sales Director

Date: December 20th, 2005               Date: December 20th, 2005

- Letter Agreement No 1 - Page 5/5

LETTER AGREEMENT NO 2

TAM - LINHAS AEREAS S.A.
Avenida Jurandir, 856, 20 andar, Lote 4, CEP 04072 - 000, Jardim CECI,
SAO PAULO - SP,
BRAZIL

Subject: *

TAM - LINHAS AEREAS S.A. (the "Buyer") and AIRBUS S.A.S. (the "Seller") have entered into an A350-900 Purchase Agreement (the "Agreement") dated as of even date herewith which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the A350-900 Aircraft as described in the Agreement.

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

- Letter Agreement No 2 - Page 1/6

[4 pages redacted]

LETTER AGREEMENT NO 2

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted                     Agreed and Accepted

For and on behalf of                    For and on behalf of

TAM - LINHAS AEREAS S.A.                AIRBUS S.A.S.


/s/ Marco Antonio Bologna               /s/ Christian Scherer
-------------------------------------   ----------------------------------------
Name:  Marco Antonio Bologna            Name: Christian Scherer
Title: Chief Executive Officer          Title: Head of Transactions and Control
                                               Deputy Head of Commercial

Date: December 20th, 2005               Date: December 20th, 2005


/s/ Jose Zaidan Maluf
-------------------------------------
Name: Jose Zaidan Maluf
Title: Director

Date: December 20th, 2005


WITNESS                                 WITNESS


/s/ Vanessa Alvarenga                   /s/ Michel Clanet
-------------------------------------   ----------------------------------------
Name: Vanessa Alvarenga                 Name: Michel Clanet
Title: Legal Counsel                    Title: Regional Sales Director
Date: December 20th, 2005               Date: December 20th, 2005

- Letter Agreement No 2 - Page 6/6

LETTER AGREEMENT NO 3

TAM - LINHAS AEREAS S.A.
Avenida Jurandir, 856, 20 andar, Lote 4, CEP 04072 - 000, Jardim CECI,
SAO PAULO - SP,
BRAZIL

Subject: OPTION RIGHTS

TAM - LINHAS AEREAS S.A. ("the Buyer") and AIRBUS S.A.S. ("the Seller") have entered into an A350-900 Purchase Agreement (The Agreement") dated as of even date herewith which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the A350-900 Aircraft as described in the Agreement.

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

Both parties agree that this Letter Agreement, upon execution thereof, shall constitute an integral, non severable part of said Agreement and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement.

- Letter Agreement No 3 - Page 1/4

LETTER AGREEMENT NO 3

1         GENERAL

          The Seller hereby grants to the Buyer the right to purchase up to 5
          additional A350-900 (or A350-800) Aircraft (hereinafter "the Option
          Aircraft").

          The Option Aircraft shall be manufactured in accordance with the
          Aicraft Specification set out in Clause 2 of the Agreement

* and including any development changes which may be incorporated by the Seller prior to the delivery of the Option Aircraft.

                                        *

                                        *

                                        *

2         OPTION AIRCRAFT PRICE

                                        *

3         OPTION EXERCISE AND DELIVERY DATE

                                        *

                                        *

                                        *

                                        *

4         VALIDITY

                                        *

- Letter Agreement No 3 - Page 2/4

LETTER AGREEMENT NO 3

                                        *

                                        *

                                        *

8         ASSIGNMENT

          The Option Aircraft are personal to the Buyer and cannot be assigned
          to any third party without the Seller's prior written consent.

- Letter Agreement No 3 - Page 3/4

LETTER AGREEMENT NO 3

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted                     Agreed and Accepted
For and on behalf of                    For and on behalf of

TAM - LINHAS AEREAS S.A.                AIRBUS S.A.S.


/s/ Marco Antonio Bologna               /s/ Christian Scherer
-------------------------------------   ----------------------------------------
Name: Marco Antonio Bologna             Name: Christian Scherer
Title: Chief Executive Officer          Title: Head of Transactions and Control
                                               Deputy Head of Commercial

Date: December 20th, 2005               Date: December 20th, 2005


/s/ Jose Zaidan Maluf
-------------------------------------
Name: Jose Zaidan Maluf
Title: Director

Date: December 20th, 2005


WITNESS                                 WITNESS


/s/ Vanessa Alvarenga                   /s/ Michel Clanet
-------------------------------------   ----------------------------------------
Name: Vanessa Alvarenga                 Name: Michel Clanet
Title: Legal Counsel                    Title: Regional Sales Director
Date: December 20th, 2005               Date: December 20th, 2005

- Letter Agreement No 3 - Page 4/4

LETTER AGREEMENT NO 4

TAM - UNHAS AEREAS S.A.
Avenida Jurandir, 856, 20 andar, Lote 4, CEP 04072 - 000, Jardim CECI,
SAO PAULO - SP,
BRAZIL

Subject: *

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

- Letter Agreement No 4 - Page 1/5

[Three pages Redacted]

LETTER AGREEMENT NO 4

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted                     Agreed and Accepted
For and on behalf of                    For and on behalf of

TAM - LINHAS AEREAS S.A.                 AIRBUS S.A.S.


/s/ Marco Antonio Bologna               /s/ Christian Scherer
-------------------------------------   ----------------------------------------
Name: Marco Antonio Bologna             Name: Christian Scherer
Title: Chief Executive Officer          Title: Head of Transactions and Control
                                               Deputy Head of Commercial
Date: December 20th, 2005               Date: December 20th, 2005


/s/ Jose Zaidan Maluf
-------------------------------------
Name: Jose Zaidan Maluf
Title: Director
Date: December 20th, 2005


WITNESS                                 WITNESS


/s/ Vanessa Alvarenga                   /s/ Michel Clanet
-------------------------------------   ----------------------------------------
Name: Vanessa Alvarenga                 Name: Michel Clanet
Title: Legal Counsel                    Title: Regional Sales Director

Date: December 20th, 2005               Date: December 20th, 2005

- Letter Agreement No 4 - Page 5/5

LETTER AGREEMENT No 5A

TAM - LINHAS AEREAS S.A.
Avenida Jurandir, 856, 20 andar, Lote 4, CEP 04072 - 000, Jardim CECI,
SAO PAULO - SP,
BRAZIL

Subject: A350-900 PERFORMANCES GUARANTEE *

TAM - LINHAS AEREAS S.A. ("the Buyer*) and AIRBUS S.A.S. ("the Seller") have entered into an A350-900 Purchase Agreement ("the Agreement") dated as of even date herewith which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the A350-900 Aircraft as described in the Agreement.

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

- Letter Agreement No 5A - Page 1/19

LETTER AGREEMENT NO 5A

1. AIRCRAFT CONFIGURATION.

The guarantees, defined below ("the Guarantees") are applicable to the A350-900 Aircraft as described in the Standard Specification referenced G 000 09000 Issue B dated 30 June 2005 amended by a Specification Change Notice ("SCN") for installation of General Electric GEnx-1A75 engines, hereinafter referred to as the Specification",

- Letter Agreement No 5A - Page 2/19

[15 pages redacted]

LETTER AGREEMENT NO 5A

If the foregoing correctly sets forth our understanding, please execute two(2) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted                     Agreed and Accepted

For and on behalf of                    For and on behalf of

TAM - LINHAS AEREAS S.A.                AIRBUS S.A.S.


/s/ Marco Antonio Bologna               /s/ Christian Scherer
-------------------------------------   ----------------------------------------
Name: Marco Antonio Bologna             Name: Christian Scherer
Title: Chief Executive Officer          Title: Head of Transactions and Control
                                               Deputy Head of Commercial

Date: December 20th, 2005               Date: December 20th, 2005


/s/ Jose Zaidan Maluf
-------------------------------------
Name: Jose Zaidan Maluf
Title: Director

Date: December 20th, 2005


WITNESS                                 WITNESS


/s/ Vanessa Alvarenga                   /s/ Michel Clanet
-------------------------------------   ----------------------------------------
Name: Vanessa Alvarenga                 Name: Michel Clanet
Title: Legal Counsel                    Title: Regional Sales Director

Date: December 20th, 2005               Date: December 20th, 2005

- Letter Agreement No 5A - Page 18/18

[one page redacted]

LETTER AGREEMENT NO 5B

TAM - LINHAS AEREAS S.A.
Avenida Jurandir, 856, 20 andar, Lote 4, CEP 04072 - 000, Jardim CECI,
SAO PAULO -SP,
BRAZIL

Subject: A 350-900 PERFORMANCES GUARANTEE *

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

- Letter Agreement No 5B - Page 1/20

[17 pages redacted]

LETTER AGREEMENT NO 5B

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted                     Agreed and Accepted

For and on behalf of                    For and on behalf of

TAM - LINHAS AEREAS S.A.                AIRBUS S.A.S.


/s/ Marco Antonio Bologna               /s/ Christian Scherer
-------------------------------------   ----------------------------------------
Name: Marco Antonio Bologna             Name: Christian Scherer
Title: Chief Executive Officer          Title: Head of Transactions and Control
                                               Deputy Head of Commercial

Date: December 20th, 2005               Date: December 20th, 2005


/s/ Jose Zaidan Maluf
-------------------------------------
Name: Jose Zaidan Maluf
Title: Director

Date: December 20th, 2005

WITNESS                                 WITNESS


/s/ Vanessa Alvarenga                   /s/ Michel Clanet
-------------------------------------   ----------------------------------------
Name: Vanessa Alvarenga                 Name: Michel Clanet
Title: Legal Counsel                    Title: Regional Sales Director

Date: December 20th, 2005               Date: December 20th, 2005

- Letter Agreement No 5B - Page 19/19

[one page redacted]

LETTER AGREEMENT NO 5C

TAM - LINHAS AEREAS S.A.
Avenida Jurandir, 856, 20 andar, Lote 4, CEP 04072 - 000, Jardim CECI,
SAO PAULO -SP,
BRAZIL

Subject

TAM - LINHAS AEREAS S.A. ("the Buyer") and AIRBUS S.A.S. ("the Seller") have entered into an A350-800 Purchase Agreement ("the Agreement") dated as of even date herewith which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the A350-800 Aircraft as described in the Agreement.

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

Both parties agree that this Letter Agreement upon execution thereof, shall constitute an integral, nonseverable part of said Agreement and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement.

- Letter Agreement No 5C - Page 1/19

[16 pages redacted]

LETTER AGREEMENT No 5C

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted                     Agreed and Accepted

For and on behalf of                    For and on behalf of

TAM - LINHAS AEREAS S.A.                AIRBUS S.A.S.


/s/ Marco Antonio Bologna               /s/ Christian Scherer
-------------------------------------   ----------------------------------------
Name: Marco Antonio Bologna             Name: Christian Scherer
Title: Chief Executive Officer          Title: Head of Transactions and Control
                                               Deputy Head of Commercial

Date: December 20th, 2005               Date: December 20th, 2005


/s/ Jose Zaidan Maluf
-------------------------------------
Name: Jose Zaidan Maluf
Title: Director
Date: December 20th, 2005

WITNESS                                 WITNESS


/s/ Vanessa Alvarenga                   /s/ Michel Clanet
-------------------------------------   ----------------------------------------
Name: Vanessa Alvarenga                 Name: Michel Clanet
Title: Legal Counsel                    Title: Regional Sales Director

Date: December 20th, 2005               Date: December 20th, 2005

- Letter Agreement No 5C - Page 18/18

[One page redacted]

LETTER AGREEMENT NO 6A

TAM - LINHAS AEREAS S.A.
Avenida Jurandir, 856, 20 andar, Lote 4, CEP 04072 - 000, Jardim CECl,
SAO PAULO - SP,
BRAZIL

Subject: *

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

Both parties agree that this Letter Agreement, upon execution thereof, shall constitute an integral, no severable part of said Agreement and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement.

- Letter Agreement No 6A - Page 1/15

Pages 2 to 14 redacted

LETTER AGREEMENT NO 6A

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted                     Agreed and Accepted

For and on behalf of                    For and on behalf of

TAM - LINHAS AEREAS S.A.                AIRBUS S.A.S.


/s/ Marco Antonio Bologna               /s/ Christian Scherer
-------------------------------------   ----------------------------------------
Name: Marco Antonio Bologna             Name: Christian Scherer
Title: Chief Executive Officer          Title: Head of Transactions and Control
                                               Deputy Head of Commercial

Date: December 20th, 2005               Date: December 20th, 2005


-------------------------------------
Name: Jose Zaidan Maluf
Title: Director
Date: December 20th, 2005


WITNESS                                 WITNESS


/s/ Vanessa Alvarenga                   /s/ Michel Clanet
-------------------------------------   ----------------------------------------
Name: Vanessa Alvarenga                 Name: Michel Clanet
Title: Legal Counsel                    Title: Regional Sales Director

Date: December 20th, 2005               Date: December 20th, 2005

- Letter Agreement No 6A - Page 15/15

LETTER AGREEMENT NO 6B

TAM - LINHAS AEREAS S.A.
Avenida Jurandir, 856, 20 andar, Lote 4, CEP 04072 - 000, Jardim CECI,
SAO PAULO - SP,
BRAZIL

Subject: *

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

- Letter Agreement No 6B - Page 1/16

Pages 2 to 15 redacted

LETTER AGREEMENT NO 6B

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted                     Agreed and Accepted

For and on behalf of                    For and on behalf of

TAM - LINHAS AEREAS S.A.                AIRBUS S.A.S.


/s/ Marco Antonio Bologna               /s/ Christian Scherer
-------------------------------------   ----------------------------------------
Name: Marco Antonio Bologna             Name: Christian Scherer
Title: Chief Executive Officer          Title: Head of Transactions and Control
                                               Deputy Head of Commercial

Date: December 20th, 2005               Date: December 20th, 2005


/s/ Jose Zaidan Maluf
-------------------------------------
Name: Jose Zaidan Maluf
Title: Director

Date: December 20th, 2005


WITNESS                                 WITNESS


/s/ Vanessa Alvarenga                   /s/ Michel Clanet
-------------------------------------   ----------------------------------------
Name: Vanessa Alvarenga                 Name: Michel Clanet
Title: Legal Counsel                    Title: Regional Sales Director

Date: December 20th, 2005               Date:  December 20th, 2005

- Letter Agreement No 6B - Page 16/16

LETTER AGREEMENT NO 7

TAM - LINHAS AEREAS S.A.
Avenida Jurandir, 856, 20 andar, Lote 4, CEP 04072 - 000, Jardim CECI,
SAO PAULO - SP,
BRAZIL

Subject: *

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

- Letter Agreement No 7 - Page 1/3

LETTER AGREEMENT NO 7

- Letter Agreement No 7 - Page 2/3

LETTER AGREEMENT NO 7

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted                     Agreed and Accepted

For and on behalf of                    For and on behalf of

TAM - LINHAS AEREAS S.A.                AIRBUS S.A.S.


/s/ Marco Antonio Bologna               /s/ Christian Scherer
-------------------------------------   ----------------------------------------
Name: Marco Antonio Bologna             Name: Christian Scherer
Title: Chief Executive Officer          Title: Head of Transactions and Control
                                               Deputy Head of Commercial

Date: December 20th, 2005               Date: December 20th, 2005


/s/ Jose Zaidan Maluf
-------------------------------------
Name: Jose Zaidan Maluf
Title: Director

Date: December 20th, 2005


WITNESS                                 WITNESS


/s/ Vanessa Alvarenga                   /s/ Michel Clanet
-------------------------------------   ----------------------------------------
Name: Vanessa Alvarenga                 Name: Michel Clanet
Title: Legal Counsel                    Title: Regional Sales Director

Date: December 20th, 2005               Date: December 20th, 2005

- Letter Agreement No 7 - Page 3/3

LETTER AGREEMENT NO 8

TAM - LINHAS AEREAS S.A.
Avenida Jurandir, 856, 20 andar, Lote 4, CEP 04072 - 000, Jardim CECI,
SAO PAULO - SP,
BRAZIL

Subject: *

TAM - LINHAS AEREAS S.A. (the "Buyer") and AIRBUS S.A.S. (the "Seller") have a entered into an A350-900 Purchase Agreement (the "Agreement") dated as of even date herewith which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the A350-900 Aircraft as described in the Agreement.

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

- Letter Agreement No 8 - Page 1/5

Pages 2 to 4 redacted

LETTER AGREEMENT NO 8

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted                     Agreed and Accepted

For and on behalf of                    For and on behalf of

TAM - LINHAS AEREAS S.A.                AIRBUS S.A.S.


/s/ Marco Antonio Bologna               /s/ Christian Scherer
-------------------------------------   ----------------------------------------
Name: Marco Antonio Bologna             Name: Christian Scherer
Title: Chief Executive Officer          Title: Head of Transactions and Control
                                               Deputy Head of Commercial

Date: December 20th, 2005               Date: December 20th, 2005


/s/ Jose Zaidan Maluf
-------------------------------------
Name: Jose Zaidan Maluf
Title: Director
Date: December 20th, 2005


WITNESS                                 WITNESS


/s/ Vanessa Alvarenga                   /s/ Michel Clanet
-------------------------------------   ----------------------------------------
Name: Vanessa Alvarenga                 Name: Michel Clanet
Title: Legal Counsel                    Title: Regional Sales Director

Date: December 20th, 2005               Date: December 20th, 2005

- Letter Agreement No 8 - Page 5/5

LETTER AGREEMENT NO 9

TAM - LINHAS AEREAS S.A.
Avenida Jurandir, 856,20 andar, Lote 4,
CEP 04072 - 000, Jardim CECI,
SAO PAULO-SP,
BRAZIL

Subject: *

TAM - LINHAS AEREAS S.A. ("the Buyer") and AIRBUS S.A.S. ("the Seller") have entered into an A350-900 Purchase Agreement (the "Agreement") dated as of even date herewith which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the A350-900 Aircraft as described in the Agreement.

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

- Letter Agreement No 9 - Page 1/15

Page 2 to 4 redacted

LETTER AGREEMENT NO 9

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted                     Agreed and Accepted

For and on behalf of                    For and on behalf of

TAM - LINHAS AEREAS S.A.                AIRBUS S.A.S.


/s/ Marco Antonio Bologna               /s/ Christian Scherer
-------------------------------------   ----------------------------------------
Name: Marco Antonio Bologna             Name: Christian Scherer
Title: Chief Executive Officer          Title: Head of Transactions and Control
                                        Deputy Head of Commercial

Date: December 20th, 2005               Date: December 20th, 2005


/s/ Jose Zaidan Maluf
-------------------------------------
Name: Jose Zaidan Maluf
Title: Director

Date: December 20th, 2005


WITNESS                                 WITNESS


/s/ Vanessa Alvarenga                   /s/ Michel Clanet
-------------------------------------   ----------------------------------------
Name: Vanessa Alvarenga                 Name: Michel Clanet
Title: Legal Counsel                    Title: Regional Sales Director
Date: December 20th, 2005               Date: December 20th, 2005

- Letter Agreement No 9 - Page 5/15

Pages 6 to 15 redacted

LETTER AGREEMENT NO 10

TAM - LINHAS AEREAS S.A.
Avenida Jurandir, 856, 20 andar, Lote 4, CEP 04072 - 000, Jardim CECI,
SAO PAULO -SP,
BRAZIL

Subject: MISCELLANEOUS

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

- Letter Agreement No 10 - Page 1/4

Pages 2 to 3 redacted

LETTER AGREEMENT NO 10

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted                     Agreed and Accepted

For and on behalf of                    For and on behalf of

TAM - LINHAS AEREAS S.A.                AIRBUS S.A.S.


/s/ Marco Antonio Bologna               /s/ Christian Scherer
-------------------------------------   ----------------------------------------
Name: Marco Antonio Bologna             Name: Christian Scherer
Title: Chief Executive Officer          Title: Head of Transactions and Control
                                               Deputy Head of Commercial

Date: December 20th, 2005               Date: December 20th, 2005


/s/ Jose Zaidan Maluf
-------------------------------------
Name: Jose Zaidan Maluf
Title: Director

Date: December 20th, 2005


WITNESS                                 WITNESS


/s/ Vanessa Alvarenga                   /s/ Michel Clanet
-------------------------------------   ----------------------------------------
Name: Vanessa Alvarenga                 Name: Michel Clanet
Title: Legal Counsel                    Title: Regional Sales Director

Date: December 20th, 2005               Date: December 20th, 2005

- Letter Agreement No 10 - Page 4/4

LETTER AGREEMENT NO 11

TAM - LINHAS AEREAS S.A.
Avenida Jurandir, 856, 20 andar, Lote 4, CEP 04072 - 000, Jardim CECI,
SAO PAULO-SP,
BRAZIL

Subject: *

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

- Letter Agreement No 11 - Page 1/3

LETTER AGREEMENT NO 11

- Letter Agreement No 11 - Page 2/3

LETTER AGREEMENT NO 11

If the foregoing correctly sets forth our understanding, please execute two (2) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted                     Agreed and Accepted

For and on behalf of                    For and on behalf of

TAM - LINHAS AEREAS S.A.                AIRBUS S.A.S.


/s/ Marco Antonio Bologna               /s/ Christian Scherer
-------------------------------------   ----------------------------------------
Name: Marco Antonio Bologna             Name: Christian Scherer
Title: Chief Executive Officer          Title: Head of Transactions and Control
                                               Deputy Head of Commercial

Date: December 20th, 2005               Date: December 20th, 2005


/s/ Jose Zaidan Maluf
-------------------------------------
Name: Jose Zaidan Maluf
Title: Director

Date: December 20th, 2005


WITNESS                                 WITNESS


/s/ Vanessa Alvarenga                   /s/ Michel Clanet
-------------------------------------   ----------------------------------------
Name: Vanessa Alvarenga                 Name: Michel Clanet
Title: Legal Counsel                    Title: Regional Sales Director

Date: December 20th, 2005               Date: December 20th, 2005

- Letter Agreement No 11 - Page 3/3

Exhibit 10.3

TAY ENGINE MAINTENANCE AGREEMENT

dated September 14, 2000

between

TAM - Transportes Aereos Regionais S.A.
Av. Jurandir, 856
Aeroporte - CEP 04072-000 Sao Paulo
Brazil

acting for and on behalf of itself or any other subsidiary or affiliate of TAM - Transportes Aereos Regionais

- hereinafter collectively referred to as "Operator" -

and

MTU Motoren- und Turbinen-Union Munchen GmbH Dachauer Strasse 665
80995 Munchen
Germany

- hereinafter referred to as "MTU-M" -

- Operator and MTU-M hereinafter collectively referred to as the "Parties" -

Page 2

TABLE OF CONTENTS

RECITAL

Clause 1      DEFINITIONS
Clause 2      SCOPE OF SERVICES
Clause 3      RECORDS AND STANDARDS
Clause 4      DELIVERY
Clause 5      TURNAROUND TIMES AND EXCUSABLE DELAY
Clause 6      ORDER PROCESSING
Clause 7      REJECTED PARTS
Clause 8      CHARGES
Clause 9      PAYMENT
Clause 10     TAXES, DUTIES AND CUSTOMS FEES
Clause 11     SUBCONTRACTING
Clause 12     WARRANTY
Clause 13     LIABILITY
Clause 14     MISCELLANEOUS
Clause 15     DURATION AND TERMINATION
Clause 16     REPRESENTATIONS AND WARRANTIES
Clause 17     LAW AND ARBITRATION
Clause 18     NOTICES
Appendix Al   ENGINE(S)
Appendix A2   ACCESSORIES
Appendix B    CHARGES
Appendix C    ESCALATION FORMULAE
Appendix D    AIRWORTHINESS AUTHORITIES APPROVALS
Appendix E    PARENT COMPANY GUARANTEE

Page 3

RECITAL

WHEREAS       Operator requires maintenance, refurbishment, repair and
              modification services with respect to Engines (as hereinafter
              defined).

WHEREAS       MTU-M acknowledges and agrees that any subsidiary or affiliate of
              TAM - Transportes Aereos Regionais S.A. may from time to time
              operate the Engines and may therefore utilise the services
              specified in this Agreement, in its own name.

WHEREAS       MTU-M is willing to perform or cause to be performed such services
              based upon a staggering and removal plan for the Engines to be
              mutually agreed between the Parties and taking into account
              MTU-M's recommendations.

WHEREAS       Operator and MTU-M intend to meet in reasonable intervals
              (approximately twice per year) to consult on the technical and
              organizational aspects of this Agreement.

WHEREAS       Operator will * place purchase orders for Services on the Engines
              with MTU-M and MTU-M will accept the same, in each case, subject
              to the terms and conditions of this Agreement.

NOW THEREFORE, in consideration thereof and reliance on the mutual promises given herein, the Parties hereto agree as follows:

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CLAUSE 1  DEFINITIONS

          Within the scope of this Agreement, unless otherwise individually
          stipulated, the following definitions shall apply:

     1.1  Accessories

          The Engine related components listed in Appendix A2.

     1.2  AOG

          "Aircraft on Ground" indicates that an aircraft is unable to continue
          or be returned to revenue service until appropriate corrective action
          is taken.

     1.3  CSLV

          The number of cycles an item of Supplies has completed since last Shop
          Visit.

     1.4  CSN

          The number of cycles an item of Supplies has completed since
          manufacture.

     1.5  DAC Brasil

          The Brasilian airworthiness authority, or any successor organization
          thereof.

     1.6  Days

          Any calendar days.

     1.7  Domestic Object Damage or DOD

          Damage to any portion of the Engine by a domestic object from the
          Engine, such as bolts, brackets, airfoils etc.

     1.8  Effective Date

          Shall have the meaning set forth in Clause 15.1.

     1.9  Engine(s)

          Each TAY650-15 engine listed in Appendix A, subject to additions or
          deletions as may be specified by Operator and notified in writing to
          MTU-M from time to time.

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1.10 Engine Flight Hour (EFH)

The cumulative number of airborne hours in operation of an Engine computed from the time an aircraft leaves the ground until it touches the ground at the end of the flight.

1.11 Fixed Prices

The fixed prices relating to the performance of the Services as set out in Appendix B.

1.12 Flight Cycle

A completed Engine thermal cycle including the application of take off power.

1.13 Foreign Object Damage or FOD

Damage to any portion of the Engine caused by any object other than an integral part of the Engine including but not limited to an impact or ingestion of birds, stones, hail and/or runway, taxiway or apron gravel and for the avoidance of doubt excluding DOD.

1.14 Incoterms

Incoterms 2000 plus later amendments as published by the I.C.C. Paris valid at the time of conclusion of this Agreement.

1.15 Life Limited Part

Any Part which is admitted by the manufacturer for a defined service life.

1.16 Line Maintenance

Routine checks, inspections and rectification of malfunctions performed en route and at base stations during transit, turnaround or night stop.

1.17 Module

"Major Engine Build Group" as specified in ATA Chapter 72 of the OEM's illustrated parts catalogue.

1.18 MTU-M

Shall also mean any company of the MTU group of companies.

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1.19 Operator

Shall also mean any affiliate or subsidiary of TAM - Regionais S.A. from time to time.

1.20 Operator Owned Part/Module

Any Operator owned Repair Part or Module used during Work in order to expedite the Turnaround Time.

1.21 Original Equipment Manufacturer (OEM)

Rolls-Royce plc (P.O. Box 31, Derby DE24 8BJ, England), or any successor thereof.

1.22 Part

Any part of an Engine.

1.23 Pool Parts/Modules

All Parts/Modules required in replacement of Parts/Modules for which the Repair time exceeds the applicable Turnaround Time.

1.24 Purchase Order

An order stating that it is subject to the terms and conditions of this Agreement issued by Operator to MTU-M and including:

a) The Purchase Order number to be referenced to in all invoices and other correspondence related to the Work under such Purchase Order;

b) A statement of or reference to the applicable Work Statement;

c) Return delivery instructions, including packaging and shipping.

1.25 Rejected Part

Any item removed by MTU-M from a Module or Engine and consequently replaced by a Part.

1.26 Repair Part

Any Part which is repaired to serviceable condition.

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1.27   Services

       All Work in:

       - Maintenance          Those actions required for restoring or
                              maintaining Supplies in serviceable
                              condition, including servicing, repair,
                              modification, overhaul, inspection and
                              determination of condition.

       - Modification         Services agreed upon between MTU-M and
                              Operator, which are based upon a
                              manufacturer's Service Bulletin.

       - Testing              As defined in the applicable Engine
                              manufacturer's Overhaul and Repair manual as
                              well as additional Testing if required by the
                              MTU-M test procedures.

       - Overhaul             The Work necessary to return Modules or Parts
                              to the highest standard specified in the
                              relevant manual.

       - Refurbishment        The Work necessary to restore an Engine or
         (Engine, Module)     Module to ensure that cost effective
                              operation will be achieved.

       - Repair               To make an Engine or Modules serviceable by
                              replacing or processing failed or damaged
                              Parts.

       - Restoration          The Work (on/off the aircraft) necessary to
                              restore Modules or Parts to a specific
                              standard.

       - Rework               To carry out Work on uninstalled Modules or
                              Parts.

       - Replacement          The action whereby a Module or Part is
                              removed and another Module or Part is
                              installed in its place for any reason.

       - Inspection           An examination of Supplies against a specific
                              standard.

       - Midlife Inspection   The Work necessary to restore an Engine at
                              approximately 12,000 Flight Cycles since new
                              or last Overhaul, as applicable, with the
                              objective to enable the Engine to be released
                              for uninterrupted service until the next
                              Overhaul.

                                                                     page 8


1.28   Service Bulletin (SB)

Any document issued by the OEM to notify Operator and MTU-M of recommended Modifications, substitution of Parts, special Inspections/checks, reduction of existing life limits or establishment of first time life limits and conversion from one Module to another.

1.29 Shop Handling Guide

The shop handling guide agreed by the Parties pursuant to Clause 2.3 (iii).

1.30 Shop Visit

The performance of Services at MTU-M's facilities or the facilities of any subcontractor on an Engine or Module which entails either the separation of pairs of major mating engine flanges or the removal of a disc, hub, or spool.

1.31 Supplies

Engines, Modules, Parts or any other items of associated equipment delivered to MTU-M.

1.32 TSLV

The time expressed in operation hours an item of Supplies has completed since last Shop Visit.

1.33 TSN

The time expressed in operation hours an item of supplies has completed since manufacture.

1.34 Turnaround Time (TAT)

The agreed time of performance of Services in respect of an Engine by MTU-M. Unless otherwise agreed and subject to the provisions of Clause 5 of this Agreement, the TAT shall commence the Day after receipt of an Engine or Module by MTU Maintenance do Brasil Ltda. ("MTU Brasil") and ends upon redelivery of such Engine or Module according to Clause 4. For purposes of TAT an Engine shall be deemed delivered on the Scheduled Delivery Date (as defined in Clause 5.2) if such Engine is removed from wing, mounted to a transportation stand ready to be shipped from Operator's facility together with the documentation to be furnished to MTU-M pursuant to Clause 3.3.

1.35 Work

The performance of Services according to the terms and conditions of

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this Agreement.

1.36 Work Statement

Statement or statements being part of the Purchase Order which include(s) the Work requirements applicable to Engines, Modules or Parts. The Work Statement(s) shall include details relating to:

- reason for Shop Visit

- disassembly and re-assembly requirements

- Inspection requirements

- Repairs to be accomplished

- Modification standard to be accomplished

- Testing,

and any other information notified by MTU-M to Operator with five
(5) Days prior notice from time to time.

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Clause 2 SCOPE OF CONTRACT

2.1       During the term of this Agreement, Operator agrees to place *
          purchase orders for off-wing services required on all Engines,
          Modules and Parts owned or operated by it * on MTU-M subject to
          the provisions of Clauses 5.7 and 15.3.

2.2       MTU-M agrees to accept all Purchase Orders and will perform, or
          cause to be performed, all Services on Engines, Modules and Parts
          subject to the terms and conditions of this Agreement.

2.3       All Services will be performed in accordance with

          (i)  the airworthiness requirements of the FAA and shall comply
               with applicable requirements of the DAC Brasil from time to
               time;

          (ii) the Engine manufacturer's overhaul and repair manuals as
               supplemented by MTU-M's/MTU-M's subcontractors' procedures
               which procedures shall be agreed and approved by Operator;
               and

          (iii) a shop handling guide to be mutually agreed between the
               Parties within four (4) weeks following an initial meeting
               between Operator and MTU-M to be scheduled within ten (10)
               Days of signature of this Agreement by the Parties.

          Within one (1) year of the Effective Date, all Services will also
          be performed in accordance with the airworthiness requirements of
          the Joint Aviation Authorities (the "JAA").

2.4       Scope of Services

2.4.1.    Services covered by the * shall be limited to the following
          services:

2.4.1.1   Disassembly, cleaning, Inspection and rebuilding of Engines;

2.4.1.2   Rework of Engines, Modules and Parts which have become
          unserviceable due to normal wear and tear to a serviceable
          condition;

2.4.1.3   Engine Testing according to the specifications of the OEM, or
          other relevant manufacturer and MTU-M;

2.4.1.4   Technical support including Engineering Services when requested
          by Operator, provided the following Engine documentation is made

available to MTU-M:

- Log book or equivalent

- Life of all Life Limited Parts

- In-flight readings of all parameters of the Engine;

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2.4.1.5   Replacement of Life Limited Parts upon expiration of the approved
          Life Limit as outlined in Appendix B;

2.4.1.6   Administration of warranty claims on Engines, Modules, principle
          maintenance assemblies and Parts on behalf of Operator upon
          receipt of proper documentation from Operator;

2.4.1.7   Services necessary to render Engines serviceable, when damaged by
          FOD up to a maximum amount of *

2.4.1.8   Repair Services on Accessories listed in Appendix A2 during Shop
          Visit and installed on the Engine at the time of delivery of such
          Engine to MTU-M's facility; and

2.4.1.9   *

2.4.2.    * ("Additional Services"):

2.4.2.1   Performance of Modifications,

          *

2.4.2.2   Incorporation of Modifications other than those specified in the
          Shop Handling Guide, if specifically requested by Operator;

2.4.2.3   Performance of Services related to campaign changes and / or AD -
          Notes;

2.4.2.4   Repairs (i) caused by Operator's failure to comply with the
          instructions given in the applicable operation and maintenance
          manuals, (ii) otherwise caused by Operator's negligence, or (iii)
          necessitated by accident or catastrophic failure;

2.4.2.5   Repairs on Accessories not listed in Appendix A2 as well as
          Accessories not installed on the Engine at the time of delivery
          of such Engine to MTU-M's facility;

                                                                    page 12


2.4.2.6   (i) Any replacement material for material scrapped or rejected
          during any Repair, Midlife Inspection or Overhaul event, not
          resulting from normal wear and tear, (ii) services related to a
          modification standard deviating from the standards required per
          the mutually agreed Shop Handling Guide, or (iii) any replacement
          material for material scrapped or rejected in consequence of OEM
          design deficiencies on either original equipment or replacement
          Parts, incorporated as per OEM specifications and requirements
          per the applicable manual, modifications, service bulletins and
          AD Notes; and

2.4.2.7   Services necessary to render Engines serviceable, when damaged by
          FOD, exceeding an amount of * Only the FOD related Services in
          excess of * will be charged.

2.5       Operator's Responsibility

2.5.1     In case of defects or deficiencies in the design or manufacture
          of the Supplies by the OEM Operator agrees to exercise all
          commercially reasonable endeavours to assist and allow MTU-M to
          recover from the OEM all cost and expenses associated with any
          measure taken by MTU-M to rectify or repair such defects and
          deficiencies.

2.5.2     Operator shall use all commercially reasonable endeavours to
          increase the on-wing time of the Engines under consideration of
          reliability and costs in cooperation with MTU-M. Moreover,
          Operator agrees to cooperate with MTU-M with respect to the
          determination of the optimum removal date for each eligible
          Engine. For the avoidance of doubt it is expressly agreed by the
          Parties that nothing contained herein shall limit or shall be
          construed as limiting Operator's airworthiness responsibilities
          (which shall be paramount).

2.5.3     Operator will report to MTU-M by the tenth (10th) day of each
          month the Engine Flight Hours (EFH) of the preceding month for
          each Engine.

2.5.4     Operator will report to MTU-M each month the Engine on-wing data
          in order to allow MTU-M to evaluate those data by MTU-M's
          engineering personnel.

2.5.5     Operator agrees to assign all assignable and unexpired
          maintenance related guarantees, warranties or other remedies
          specified in the general terms agreement between Operator and the
          OEM regarding the sale of the Engines, in particular any of the

following:

- New Engine Guarantee

- Shop Visit Rate Guarantee

- EGT Guarantee

- Campaign Change Allowance

- New Part Warranty

- FOD Guarantee

- Spare Parts Warranty

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- Spare Engine Availability

- Hot/Cold Section Guarantee

- TAY630-15 Maintenance Cost Guarantee

          Operator agrees to use all commercially reasonable endeavours to
          support MTU-M in the enforcement of any assigned rights as
          described above.

          If these guarantees, warranties or other remedies cannot be
          assigned, Operator shall raise claims under said non-assigned
          guarantees, warranties or other remedies and shall to the extent
          recovered under the relevant warranties/guarantees transfer the
          economic benefit to MTU-M.

2.5.6     Operator shall maintain a spare engine level of * of its
          operating Engines *

2.6       Should it become necessary for the proper performance to carry
          out Services substantially different from those specified in the
          Work Statement, MTU-M will promptly notify Operator (in
          sufficient detail) of the nature and extent of such Services and

seek Operator's authorization to carry out such different Services. Operator shall respond in writing (to include telex and telefax) to such request within * hours. The Turnaround Time will be increased by the additional time that is needed and verified by MTU-M due to the delay in question. Any impact on the agreed TAT resulting from such delay will be promptly advised by MTU-M (with supporting evidence if requested).

In the event Operator withholds the authorization or direction for the necessary alteration of the Work Statement for a period exceeding *, MTU-M may remove the Engine, Module or Part from the production line.

2.7 In recognition of Operator's and MTU-M's desire to stabilize the financial expectations resulting from this Agreement, the Parties agree to meet annually to discuss and reconcile the overall technical and business aspects of this Agreement.

2.8 Operator acknowledges that MTU-M may perform its obligations under this Agreement by contracting a third party sub-contractor to undertake any Work requested to be performed. Operator shall provide commercially reasonable assistance to MTU-M at the cost and expense of MTU-M during an initiation period of * months following the Effective Date to have the Work required under this Agreement performed by other qualified parties as subcontractors to MTU-M.

2.9 Operator agrees that it will use reasonable commercial efforts to assist MTU-M in purchasing spare parts for Operator's Engines from the

page 14

OEM and that such spare parts will be supplied by the OEM to MTU-M on MTU-M's account.

2.10 Operator agrees that it will provide MTU-M with all information and technical data, and any other assistance which may be reasonably requested by MTU-M.

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CLAUSE 3 RECORDS AND STANDARDS

3.1 MTU-M will maintain or cause to be maintained throughout the duration of this Agreement a service organization and facilities for Services on Engines, Modules, Parts and Accessories in accordance with the respective manufacturer's manuals and other applicable documentation. These facilities shall be approved and/or accepted by the FAA and the DAC Brasil. Within one (1) year of the Effective Date, these facilities shall also be approved and/or accepted by the JAA.

3.2 Operator shall provide to MTU-M its General Maintenance Manual and all pertinent parts of its Maintenance Policy and Procedure Manual. Moreover, Operator shall either itself furnish to MTU-M, or cause the OEM to furnish to MTU-M the following technical information and documentation regarding the Repair, Overhaul and Maintenance of the Engines, as well as any revisions thereto, and all other means required to enable MTU-M to maintain, repair and overhaul Operators Engines and Accessories.

- Illustrated Parts Catalogue

- Inspection Manual

- Maintenance Manual (TNSM)/Engine Manual

- Power Plant Build Up Manuals of the relevant aircraft Engine application

- Component Maintenance Manuals

- Tooling and Facility Catalogue.

- NDT Manual

- Service Bulletins

- All Engine related aperture cards

- Blue prints if necessary and as permitted

- Proprietary OEM information as permitted.

3.3      In respect of individual Engines or Modules, Operator shall
         provide to MTU-M all documents and supply all information within
         Operator's possession or control necessary to establish the
         extent of Services required. This includes:

3.3.1    The technical documentation (or any other applicable
         documentation):

3.3.2    Any required variations to the applicable standard Work
         specification including Modifications which are required to be
         embodied in the Engine or Module during the performance of Work.
         Further variations to any specific Work on an Engine or Module
         will be agreed between MTU-M and Operator;

3.3.3    Any further information concerning the condition of the Engine or
         Module;

                                                                   page 16


3.3.4    Life of all Life Limited and/or time tracking Parts, Life Limited
         Parts list;

3.3.5    Module tracking list;

3.3.6    AD-Note status;

3.3.7    Service Bulletin status and Service Bulletin requirements (may be
         included in workscope);

3.3.8    Operator's special requirements;

3.3.9    Removal reason;

3.3.10   Installed powerplant accessory component sheet, a listing by
         nomenclature of each accessory component, Part number, quantity,
         time and cycles and serial number (EBU List Accessory
         List/Accessory Life List);

3.3.11   Log book or equivalent and Part (Module) cards;

3.3.12   Engine/Part installation data records;

3.3.13   Purchase Order; and

3.3.14   Trend Monitoring and In-flight readings (as mutually agreed upon)
         of all Engine parameters on that specific Engine from its last
         flight prior to removal.

3.4      MTU-M will ensure that the record system will include
         documentation of all Services performed, Rework operations
         required and disposition of all Parts replaced. MTU-M agrees to
         keep all records herein described in form and detail sufficient
         for accurate and expeditious administration of the Agreement and
         shall furnish to Operator the following records and reports, as
         applicable for each Shop Visit:

3.4.1    Engine, Module, Part or accessory serial numbers;

         The general exterior condition of the Engine, Module or Part and
         shipping conveyance;

         List of the missing and/or damaged external Parts; and
         Borescope/chamberscope results, as applicable.

3.4.2    The following information for each cycle controlled and Life
         Limited Part installed during a Shop Visit:

         a) Nomenclature;

         b) Part number;

         c) Serial number;

         d) Total operating cycles and hours accumulated to date;

         e) Total cycles remaining;

         f) Major maintenance events (date, TSN, CSN) if available.

                                                                   page 17


3.4.3    A list of all Life Limited Parts determined to be scrap
         identified by Module installed, Part number, quantity and reason
         for scrappage.

3.4.4    A list by nomenclature of each accessory component, Part number,
         quantity, Part time and serial number.

3.4.5    One (1) copy of the applicable engine and/or accessory test logs.

3.4.6    A report summarizing condition detected subsequent to Engine
         disassembly.

3.5      MTU-M shall be required to complete and properly execute, or
         cause to be completed and properly executed, Federal Aviation
         Administration (FAA) Form 8130-3, and for major repairs FAA Form
         337, or its equivalent for Supplies repaired, modified and/or
         tested by MTU-M or its subcontractors under this Agreement.

         MTU-M undertakes to store all records provided to it by Operator
         hereunder safely as the property of Operator and to return the
         same to Operator upon request or expiry of this Agreement (in
         respect of an Engine).

         Upon the request from Operator accident and damage reports,
         including pictures and laboratory investigation results will be
         issued by MTU-M.

Clause 4 DELIVERY

4.1 MTU-M shall appoint MTU Brasil to handle on behalf of Operator relevant import/export procedures related to the transactions contemplated in this Agreement, except for the payment of any Taxes (as defined in Clause 10) due upon such import/export transactions, which shall subject to the provisions of Clause 10 be the entire and sole responsibility of Operator. In this regard, the parties agree and acknowledge that Operator itself shall be the importer/exporter of record of all Engines, Modules, Parts and other items imported into/exported from Brasil under this Agreement. Operator agrees that, upon request of MTU-M or MTU Brasil, Operator will timely do, execute, acknowledge and/or deliver and/or to cause to be done, executed, acknowledged and/or delivered, all such acts and documents as may be required to allow MTU Brasil to conduct all relevant imports/exports for and on behalf of Operator. Delivery of Engines, Modules, Parts and other items requiring Work to MTU Brasil shall be the obligation of Operator.

4.2 Operator shall advise MTU-M of its intention to deliver Engines, Modules, Parts and other items no less than * prior to their dispatch.

4.3 No less than two (2) Days prior to each such dispatch of an Engine, MTU-M shall advise Operator of the sub-contractor where each such Engine will be serviced. If there is no sub-contractor willing to perform the Work, MTU-M may at its option either (i) provide Operator, subject to Clause 2.5.6, with a leased engine in case Operator is in zero spare situation for as long as the relevant Engine is repaired, or (ii) allow Operator to have the Work performed by the closest DAC approved OEM maintenance facility able to perform such Work within no less than the Turnaround time set forth herein. In case MTU-M elects to supply a leased engine, (a) such lease shall be subject to a separate lease agreement, and (b) MTU-M shall bear the cost of providing such lease engine (including, for the avoidance of doubt, any cost incurred in delivering or re-delivering such leased engine) except that any maintenance reserves for such leased engines shall be borne by Operator. In case MTU-M elects to allow Operator to have the Work performed by the closest DAC approved OEM maintenance facility able to perform the Work, MTU-M will bear the cost of any such Work performed by such OEM maintenance facility (including, for the avoidance of doubt, transportation cost, taxes and fees) that exceed US Dollars * as may be escalated by MTU-M in accordance with Appendix C hereof, per Engine Flight Hour since last scheduled Shop Visit (Midlife Inspection or Overhaul, as applicable) as follows:

MTU-M shall bear the cost exceeding * (as escalated in accordance with item 3 of Appendix C) with respect to a Midlife Inspection,

and the cost of an Overhaul exceeding the amount determined in accordance with the following formula:

Engine Flight Hours operated since last Overhaul (or, in case of new engines, since manufacture) multiplied by * as escalated in accordance with item 3 of Appendix C less * for the Midlife Inspection (as escalated in accordance with item 3 of Appendix C) preceding the current Overhaul Shop Visit.

Such additional costs shall be paid to Operator without deductions on or prior to the date Operator is required to settle the invoice of the OEM maintenance facility in respect of such Work. Notwithstanding anything herein to the contrary, the obligations of MTU-M contained in this Clause 4.3 shall terminate three (3) years after the Effective Date (i.e. on July 1, 2003).

4.4 Risk of loss or damage shall be borne by Operator until arrival at MTU Brasil.

4.5 Upon receipt of Engines, Modules or Parts to MTU Brasil (as evidenced by signature of an acknowledgement of delivery) risk of loss or damage shall pass to MTU-M.

4.6 After completion of Work, MTU-M shall be obliged to redeliver Engines, Modules, Parts and other items to Operator at MTU Brasil and give notice to Operator of such redelivery in due course of time. Risk of loss or damage shall remain with MTU-M until the relevant Engines, Parts or Modules are received by Operator at ist facility as evidenced by signature of an acknowledgement of receipt by Operator.

CLAUSE 5 TURNAROUND TIME (TAT) AND EXCUSABLE DELAY

5.1 Prior to delivery of an Engine, Module, Part or other item to MTU-M and after inspection by MTU-M, MTU-M and Operator shall agree on a reasonable TAT for such Engine, Module or Part and upon delivery of an Engine to MTU-M and after Inspection by MTU-M, MTU-M shall perform its Services within the following TAT:

MTU-M will use commercially reasonable efforts to Derform Work on a complete Engine within a TAT of * If a shorter TAT will have to be met on certain occasions upon request of Operator, MTU-M will use commercially reasonable efforts to try to comply with such request and shall keep Operator informed, if requested by Operator, of the TAT.

5.2 Compliance with an agreed TAT requires * advance notification by Operator that an Engine or Module is being or will be shipped for Services ("Scheduled Delivery Date"). In the event that MTU-M does not receive such advance notification (e.g. in the event of an unscheduled Engine removal), the TAT shall commence with the start of Services on the Engine or Module but not later than * after receiving the Engine or Module at MTU-M including the documentation listed in Clause 3.3.

5.3 Any technical requests from MTU-M to Operator which will affect the TAT have to be answered by Operator within * provided always that if such a request is received by Operator later than 4 p.m. (Sao Paulo time) on a Friday, Operator's response shall be received by MTU-M no later than 6 p.m. (Sao Paulo time) of the following Monday. If no replies are received within that time, the TAT will be increased by the additional time which is needed and verified by MTU-M due to the delay in question. Any impact on the TAT resulting from this decision will be advised by MTU-M together with supporting evidence of any delay in the TAT.

5.4 MTU-M shall not be liable for exceeding the TAT due to reasons contained in Clause 5.7 - Excusable Delays.

5.5 MTU-M shall promptly notify Operator when Excusable Delays occur or impending delays are likely to occur and shall continue to advise Operator of new shipping schedules and/or changes thereto.

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5.6 If the actual TAT in respect of an Engine exceeds the TAT referred to in this Clause 5 (as such period maybe extended pursuant to this Agreement) and if Operator is in, or during such event of delay enters into, a zero spare engine situation, Operator may as its sole remedy for such delay (i) require MTU-M to have a spare engine delivered to Operator (at Operator's facility in Sao Paulo) within * of MTU-M being notified of such zero spare engine situation, or failing which (ii) claim damages from MTU-M in an amount not exceeding the cost of leasing an engine until such time as the delayed Engine is delivered to Operator (including, for the avoidance of doubt, any cost incurred in delivering or re-delivering such leased engine). Any maintenance reserves * to be paid for such leased engine shall be borne by Operator. Such claim is only permitted
(i) if Operator has maintained an appropriate quantity of spare Engines as specified in Clause 2.5.6, and (ii) is furthermore limited to the costs of a lease Engine until the Engine so delayed is redelivered to Operator. In the event MTU-M provides a lease Engine, such lease shall be subject to a separate lease agreement.

5.7 The party actually performing Services hereunder (the "Service Provider"), i.e. MTU-M (if performing Services) or MTU-M's subcontractors (if performing Services), shall not be charged with any liability for delay or non-delivery when due to any of the following events ("Excusable Delays")

(i) delays of Operator, single source suppliers of the Service Provider, or the OEM;

(ii) acts of God or the public enemy, fires, riots;

(iii) compliance in good faith with any applicable foreign or domestic governmental regulations or order whether or not it proves to be valid or invalid provided that compliance with any governmental or domestic regulations or orders in Germany, Brazil (or where the Services are to be provided by a subcontractor, the jurisdiction of such subcontractor) which the Service Provider ought reasonably to have been aware of and ought reasonably to have complied with shall not constitute an Excusable Delay;

(iv) labor disputes at companies other than MTU-M or any of its affiliates;

(v) unusually severe weather or

(vi) any other cause beyond the control of the Service Provider which could not reasonably be foreseen.

To the extent the occurrence of an Excusable Delay causes actual delay to the Turnaround Time or renders them in part or whole impossible, the time for the performance shall be extended for as many Days beyond the agreed TAT as is required to obtain removal of such causes.

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This provision shall, however, not relieve MTU-M from using its best efforts to avoid or remove such causes and to continue performance with reasonable dispatch whenever such causes are removed. In case that upon occurrence of an Excusable Delay it is evident that the resulting impact on the Service Provider is such as to delay the performance of Services on the Engines, Modules and Parts then undergoing Services at the Service Provider (hereinafter the "Affected Items") for more than * Operator shall have the right to either (i) terminate the Purchase Order relating to the Services for the Affected Items to the extent the Services cannot be completed by the Service Provider due to such Excusable Delay and take possession of the Affected Items in the possession of the Service Provider or shipping agents and cause such Services to be completed by another maintenance provider without any obligation on the Service Provider's part for any Services so performed by another maintenance provider, or (ii) cause MTU-M to have the Services provided by another Service Provider not afected by the Excusable Delay.

For the avoidance of doubt it is expressly agreed that once such impact on MTU-M is removed, Operator will continue to send all Engines, Modules and Parts needing Services to MTU-M.

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CLAUSE 6 ORDER PROCESSING

6.1 Operator will provide MTU-M with a Purchase Order number before commencement of Services.

6.2 In the event that Operator delivers an incomplete Engine or Module, MTU-M will promptly following discovery of any such deficiency inform Operator in writing of the missing Parts. In case Operator does not react within 1 * upon such information, the TAT may be increased accordingly. Should Operator promptly request to add the missing Parts, MTU-M will use commercially reasonable efforts to deliver the requested Parts together with the Engine or Module.

Requested accessories which are not available at the date of redelivery of an Engine or Module will be sent separately to Operator when such accessories become available.

6.3 In case of Reworks MTU-M shall not perform uneconomical Rework,
i.e. when the costs for the Rework of a Part exceed * of the then current list price for the respective new Part. In such case MTU-M shall replace the removed Part by a new one and charge the price for it according to Appendix B.

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CLAUSE 7 REJECTED PARTS

All Parts removed during Work and determined by MTU-M as rejected shall become MTU-M's property.

All Parts removed during Work and determined by MTU-M as scrap will be held for Operator's review and disposition. Such disposition by Operator shall occur twice per calendar year. If such disposition for any such Parts is delayed for any reason whatsoever for more than *, it shall be conclusively deemed that Operator has transferred title to any such Parts to MTU-M, and MTU-M may dispose of such Parts at its sole discretion.

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CLAUSE 8 CHARGES

For all Services Operator shall pay the sums charged in accordance with Appendix B subject to the Escalation Formula contained in Appendix C. Engines delivered for the performance of Services in a given year shall be invoiced at the charges applicable to such year.

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CLAUSE 9 PAYMENT

9.1.1   For Services' * stipulated in Appendix B, MTU-M will render
        invoices * following redelivery of an Engine in accordance with
        Clause 4.6.

9.1.2   For Services * stipulated in Appendix B, MTU-M shall render an
        initial invoice within * after completion of Work. The final
        invoice shall be issued not later than * after completion of Work.

9.2     Invoices shall be issued in US-Dollars and promptly forwarded to
        Operator in duplicate.

9.3     Unless otherwise provided herein, all invoices shall be
        payable(within * (the due date) after date of issue) all payments
        shall be made in * in US-Dollars on MTU-M's bank account with *
        Operator shall promptly furnish copies of the documents evidencing
        wire transfer of all such payments to the attention of the
        Financial Director, MTU-M.

9.4     In case of Excusable Delays, MTU-M shall be entitled to payment of
        an adequate and reasonable partial payment for Services already
        rendered as may be agreed by MTU-M and Operator on a case by case
        basis.

9.5     If Operator is in default of any payment obligation, MTU-M is
        without reminder and prejudice to any other rights entitled to
        charge interest at * any outstanding sum, starting from the due
        date of payment until the date payment is received.

9.6     If Operator is in default of any payment obligation, MTU-M may
        postpone the performance of its own obligations under this
        Agreement until such payment is made.

9.7     Operator is not entitled to withhold payments or to make any
        deductions whatsoever unless accepted by MTU-M or affirmed by an
        arbitral ruling under Clause 16 or a judgment of a court of
        competent jurisdiction.

9.9 MTU-M shall be entitled to a general lien on any of the Supplies delivered by Operator which are in the care, custody and control of MTU-M under this Agreement together with any amounts due to MTU-M from Operator which have arisen with respect to respect to other or previous Services performed by MTU-M for Operator. Such provision shall also apply if any Supply owned or leased by Operator passes into the hands of MTU-M at a later date and MTU-M has claims out of the business relationship at the time the lien is claimed.

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CLAUSE 10 TAXES, DUTIES AND CUSTOMS FEES

10.1 MTU-M shall pay all Taxes (as defined below) levied on either Party by authorities in the Federal Republic of Germany.

10.2 Any and all Taxes levied by any authority in Brazil on MTU-M or Operator, including, but not limited to, the Import Duty (ID) and Tax on Industrialized Products (IPI) levied on the importation of goods into Brazil, shall be borne by Operator, except for (a) the Income Tax Withholding (Imposto de Renda na Fonte - "Current Income Tax"), which shall be withheld by Operator from amounts due to MTU-M under this Agreement, if thus required by Brazilian law; and (b) the Tax on Transactions Related to the Circulation of Goods and Interstate and Intermunicipal Transport and Communication Services ("ICMS"), if any, due upon the importation of new Engines, Modules and Parts into Brazil in connection with MTU-M's performance of its obligations under this Agreement. In this regard, MTU-M shall grant Operator a rebate on the charges due by Operator under this Agreement in the exact amount of the ICMS actually paid by Operator (if any) upon importation by Operator of relevant Engines, Modules and Parts into Brazil, provided
(i) Operator evidences actual payment of such ICMS in a form satisfactory to MTU-M; (ii) the rate at which the ICMS is paid by Operator is not higher than 4%; (iii) Operator does not fail to benefit from any ICMS benefit (including ICMS reduction or exemption) that may be available; (iv) Operator is unable to and actually does not offset such ICMS against any Taxes due by Operator, nor directly or indirectly recover such ICMS in any form whatsoever; and (v) if so allowed by applicable regulations, upon written request of MTU-M, Operator promptly assigns, transfers or makes in any form available to MTU-M and/or any company indicated by MTU-M the ICMS credits earned by Operator upon the abovementioned imports. If any of the conditions set forth in items (i) and (iii) through (v) above is not met, MTU-M's obligation set forth in the immediately preceding sentence (i.e. to grant Operator a rebate at a rate of 4%) shall not apply.

The Parties hereby acknowledge and agree that (i) the compensation due by Operator to MTU-M under this Agreement, was established assuming that (i) invoices issued hereunder will be issued by MTU Motoren- und Turbinen-Union Munchen GmbH, and (ii) the only Taxes that will levy in Brazil on payments by Operator to MTU Motoren- und Turbinen-Union Munchen GmbH in connection with the transactions contemplated in this Agreement are Current Income Tax and ICMS; (ii) in the event (a) the Current Income Tax and/or the ICMS become due at a rate higher than its current rate; (b) it is later determined that other Taxes are also due in Brazil on payments made by Operator to MTU-M in connection with MTU-M's performance of its obligations under this Agreement; and/or
(c) new Taxes are Created and become due in Brazil on payments due by Operator to MTU-M in connection with MTU-M's performance of its obligations under this

page 29

For purposes of this Agreement, the term "Tax" or "Taxes" shall mean all federal, state, or municipal taxes, charges, fees, levies, imposts, duties (including import duties), tariffs, surcharges, or other assessments, including, without limitation, sales, use, transfer, gross receipts, excise, withholding or any similar charges or assessments and all taxes, charges, fees, levies, imposts, duties, tariffs, surcharges, or other assessments placed by, or replacing, any of the above, or other tax or governmental fee of any kind whatsoever directly or indirectly imposed by any governmental authority, including any interest or penalties or additions thereto, whether disputed or not.

Taxes imposed in any other jurisdiction shall be borne by the relevant Party on whom such taxes are levied, provided that TAM shall not be responsible for any Taxes due in any jurisdiction other than Brazil in connection with the performance by MTU-M of its obligations under this Agreement.

In the event that any Party shall be held responsible by any taxing authority for the collection or payment of Taxes to be borne by the other Party and shall be required to pay the same to such authority, such other Party shall reimburse the first Party the full amount of such payment and any expenses connected therewith upon the first Party's first demand therefor.

10.3 Operator reserves the right to use its commercially reasonable efforts to negotiate and enter into an arrangement with the Brazilian taxing authorities for an exemption for the assessment and payment of import duties, tariffs or similar taxes imposed on any and all goods, material or services imported to Brazil under this Agreement.

10.4 *

page 30

page 31

CLAUSE 11 SUBCONTRACTING

Notwithstanding anything contained herein to the contrary, MTU-M may subcontract all or part of the Work to be performed by MTU-M hereunder to the OEM or to another qualified party to perform the type of Work subcontracted to it by MTU-M.

Any subcontracting shall not release MTU-M from its obligations under this Agreement and MTU-M shall remain liable to Operator for the performance of Services under this Agreement by any subcontractor as if such Services were performed by MTU-M. MTU-M shall use best endeavours to ensure that all Work subcontracted is undertaken by reputable Maintenance facilities appropriately certified by all relevant authorities and able to perform the Services to the standard required of MTU-M pursuant to this Agreement. Nothing in this Clause will cause MTU-M to be liable for any default by a subcontractor where MTU-M or another subcontractor remedies that default.

Operator shall if requested by MTU-M assist MTU-M at no cost to Operator in securing appropriate subcontractors for all or part of the Work covered under this Agreement without in any way warranting the ability of such third parties to perform the Services or warranting the quality of such Services.

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CLAUSE 12 WARRANTY

12.1 MTU-M warrants that at the time of delivery of serviced Engines the Services will have been performed in a skilled and workmanlike manner in accordance with best industry practice and in accordance with the requirements of this Agreement. This warranty is limited to MTU-M's correcting at its facilities within a reasonably prompt period of time and at its own cost and expense such Services as are shown to MTU-M's reasonable satisfaction to be defective, provided that the defect has arisen within * following delivery to Operator or the * following delivery whichever shall first occur, provided further that written notice of the defect is received by MTU-M within: * after discovery by Operator. Transportation charges for return of defective Engines to MTU-M and their reshipment will be borne by MTU-M, subject to Clause 12.7 herebelow. In the event of a justified warranty claim hereunder the warranty period shall be extended by the time required to carry out the work.

12.2 Non-compliance of an Engine with the specified performance and consumption rates can only be determined and demonstrated by a test run at MTU-M's facilities or any test cell agreed between both Parties.

12.3 MTU-M's warranty shall not apply if after redelivery by MTU-M Operator, its servants, agents, subcontractors or third parties have abused, altered or repaired the Engine or Module or have not operated the Engine or Module in accordance with the manufacturer's operating instructions or recommendations.

12.4 If an Engine defect was caused due to the failure of a new Part properly installed by MTU-M, MTU-M will assign to the fullest extent possible the warranty granted by the manufacturer of such new part to Operator. In the event that the warranty related to such new Part cannot be assigned, MTU-M will administer and enforce the warranty claim against the manufacturer on behalf of Operator and pass the respective remedies on to Operator. In any event MTU-M's liability shall be limited to the extent outlined in this Clause 12 and Clause 13 herebelow and shall apply if all attempts at judicial actions against the manufacturer have failed.

12.5 MTU-M assumes no warranty for Parts supplied by Operator and properly installed by MTU-M.

12.6 Within two (2) months after notification by Operator MTU-M will use its reasonable efforts to determine if a warranty claim can be accepted.

12.7 In case Operator asserts a warranty claim according to this Clause 12 and as a result of the investigation it is established that MTU-M is not liable for the defects claimed, the reasonable and properly incurred costs of investigation as well as any other reasonable and properly

page 33

incurred costs and expenses connected with such claim shall be borne by Operator and due and payable upon receipt of the respective invoice.

12.8 MTU-M acknowledges and agrees that it shall bear responsibility in accordance with this Clause 12 for any Engine defect caused due to Work performed by any of MTU-M's subcontractors and that Operator shall not be required to take any action against such subcontractor. The Operator agrees that the provisions of Clause 12.4 above will apply where the defect is caused by a new Part installed by a subcontractor.

12.9 EXCLUSIVE WARRANTIES AND REMEDIES

THE FOREGOING WARRANTIES ARE EXCLUSIVE AND ARE GIVEN AND ACCEPTED IN LIEU OF (i) ANY AND ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE; AND (ii) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN CONTRACT, TORT OR STRICT LIABILITY, WHETHER OR NOT ARISING FROM MTU-M's NEGLIGENCE, ACTUAL OR IMPUTED. THE REMEDIES OF THE OPERATOR SHALL BE LIMITED TO THOSE PROVIDED IN THIS AGREEMENT TO THE EXCLUSION OF ANY AND ALL OTHER REMEDIES, INCLUDING WITHOUT LIMITATION, INCIDENTAL OR CONSEQUENTIAL DAMAGES. NO AGREEMENT VARYING OR EXTENDING THE FOREGOING WARRANTY, REMEDIES OR THIS LIMITATION WILL BE BINDNG UPON MTU-M UNLESS IN WRITING, SIGNED BY TWO DULY AUTHORIZED OFFICERS OF
MTU-M.

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CLAUSE 13 LIABILITY

13.1 MTU-M, its officers, directors, employees, agents and subcontractors (collectively herein "the Indemnified Parties") shall not be liable for any damage to or loss of the aircraft and other properties owned or operated by Operator or injury or death or any other damage sustained by Operator, its personnel or third parties due to or in connection with or in consequence of the performance or non-performance of Services under this Agreement unless caused by willful misconduct or negligence of an Indemnified Party.

13.2 In cases of negligence any liability of the Indemnified Parties shall be limited for any and all claims which might arise under or out of this Agreement to * per occurrence or in the aggregate per year.

Throughout the term of this Agreement, MTU-M shall maintain in full force, at its expense, appropriate aviation products third party liability insurances in respect of the liabilities specified in Clause 13.2 in accordance with current aviation insurance practice. MTU-M shall provide evidence of such insurances to Operator from time to time.

13.3 Except for the Indemnified Parties' liability outlined in Clauses 13.1 and 13.2 above, Operator shall indemnify and hold harmless the Indemnified Parties from any and all liability claims including costs and expenses incident thereto. The obligation by TAM to indemnify pursuant to this Clause 13 shall, however, exclude (i) MTU-M's officers, directors and employees, (ii) MTU-M's property, and (iii) the property of third parties in the care custody and control of MTU-M.

13.4 Throughout the term of this Agreement, Operator shall maintain in full force, at its expense, the following insurance:

a) Comprehensive aircraft third party, passenger (including personal injury), baggage (checked or unchecked), cargo and mail legal liability insurance for a combined single limit of
* per occurrence. Such insurance shall name the Indemnified Parties as additional insured.

b) Hull All Risks, Hull War and Allied Perils insurances covering Operator's aircraft against loss or damage. Such Hull insurances shall contain a waiver of recourse in favour of the Indemnified Parties, except in cases of the Indemnified Parties' liability outlined above in this Clause 13.

Upon MTU-M's request Operator shall have its insurers provide certificates of insurance evidencing the coverages required under a) and b) above. Each insurance certificate shall provide for at least fourteen (14) days' written notice to MTU prior to any premature termination

page 35

or reduction of coverages or limits. Any deductibles shall be the sole responsibility of Operator.

13.5 For the purposes of this Clause 13, the term "Indemnified Parties" shall also include the companies of the MTU group of companies (MTU Maintenance Hannover GmbH etc.).

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CLAUSE 14 MISCELLANEOUS

14.1 Interpretation

The rule of construction that ambiguities or inconsistencies are to be resolved against the drafting Party shall not be employed in the interpretation of this Agreement to favour any Party against the other. Ambiguities or inconsistencies shall be resolved by applying the most reasonable interpretation under the circumstances, giving full consideration to the intentions of the Parties at the time of conclusion of this Agreement.

14.2 Order of Precedence

In the event that there are any conflicts of inconsistencies between the provisions of this Agreement and the appendices hereto, the provisions of this Agreement shall prevail.

14.3 Merger of Negotiations

The terms and provisions contained herein constitute the entire agreement between the Parties and the Parties agree that neither of them has placed any reliance whatsoever on any representations, agreements, statements or understandings made prior to the signature of this Agreement whether orally or in writing relating to the scope of this Agreement other than those expressly incorporated in this Agreement which has been negotiated on the basis that its provisions represent their entire agreement relating to the subject matter hereof and shall supersede all such representations, agreements, statements and understandings.

14.4 Property and Risk

The risk in respect of loss of or damage to the Supplies shall pass to MTU-M on delivery to MTU-M in accordance with Clause 4 hereof and shall remain with MTU-M until redelivered in accordance with Clause 4 hereof.

MTU-M shall maintain and shall procure that any subcontractor performing services also maintains insurance coverage in an amount of not less than thirty million US Dollars (30,000,000 US $) against loss of or damage to the Supplies while they are in its or any of its subcontractor's care, custody and control in accordance with current aviation insurance practice. MTU-M shall provide evidence of such insurances if requested by Operator, from time to time.

Should any item of Supplies delivered to MTU-M or any of its subcontractors according to Clause 4 above while being in MTU-M's or any of its subcontractor's care, custody and control be damaged, howsoever, MTU-M as its sole responsibility and as Operator's sole

page 37

remedy with regard thereto, will either (as MTU-M may in its discretion decide) provide an adequate replacement or pay to Operator the actual replacement cost of such item of Supplies.

MTU-M shall at all times ensure that Supplies in its care, custody and control or in the care, custody and control of any subcontractor do not by its or its subcontractor's act or omission become the subject of any lien, tax, charge, duty or encumbrance and MTU-M shall indemnify Operator against all costs, expenses and damages which Operator may incur or suffer by reason of MTU-M failing to carry out its obligations under this Clause.

14.5 Lien

Except as otherwise provided in this Agreement, MTU-M shall ensure that the Engines remain free and clear of all liens other than liens arising by operation of the law.

14.6 Title to Parts

MTU-M shall ensure that full legal and beneficial title to Parts incorporated into Engines during Services shall pass to the owner of such Engines free and clear of all liens and encumbrances upon re-delivery of such Engines to Operator.

14.7 Title to Exchanged Parts

Operator and MTU-M each represent and warrant that they will accomplish transfer of the full legal title of any item exchanged hereunder free and clear of all charges, liens and encumbrances. Operator warrants the authorization of the owner of such items to effect such exchange of title. Either Party will only with the prior written consent of the other enter into any arrangement or agreement which might prejudice or impair its ability to perform its obligations under this Clause.

14.8 Assignment

Neither Party hereto may assign any of its rights or obligations hereunder without prior written consent of the other Party except that MTU-M may assign claims for monies due hereunder to a bank or to a bank or other financial institution. Any assignment by MTU-M as aforementioned shall be on terms that Operator's obligations hereunder shall not be increased as a result of such assignments. MTU-M shall remain liable for the performance of all its obligations hereunder, notwithstanding any such assignment. Any assignment made in violation of this Clause shall be null and void.

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     14.9    Alterations and Amendments

             This Agreement shall not be altered or amended in any way other
             than by agreement in writing (to include telex) entered into by the
             Parties after the date of this Agreement, which is expressly stated
             to amend or alter this Agreement.

     14.10   Negation of Waiver

             Failure of either Party at any time to enforce any of the
             provisions of this Agreement shall not be construed as a waiver or
             forbearance by such Party of such provisions or in any way affect
             the validity of this Agreement or part thereof.

     14.11   Partial Invalidity

             In case one or more of the provisions contained in this Agreement
             should be or become fully or in part invalid, illegal or
             unenforceable, the validity, legality or enforceability of the
             remaining provisions contained in this agreement shall not be
             affected in any way or impaired thereby, and the Parties shall to
             the extent possible replace such invalid, illegal or unenforceable
             provision(s) by another clause or clauses considering the economic
             intention of the Parties.

     14.12   Precedent

             None of the provisions of this Agreement shall be considered by
             either Party as precedent for any further agreements between the
             Parties which relate to the same subject matter hereof.

     14.13   Representative

             Operator shall have the right to appoint a representative at MTU-M
             to consult with MTU-M during performance of Services. All costs
             connected with such appointment shall be borne by Operator.

             If requested by Operator, MTU-M will appoint a representative in
             Brasil to consult with Operator during performance of Services. All
             costs associated with such appointment shall be borne by MTU-M.

     14.14   Communication and Accommodation

             MTU-M shall provide Operator's representative with reasonable
             office space and adequate telephone access at MTU-M's expense.

                                                                         page 39


     14.15   Inspection

             The appropriate airworthiness authorities and Operator's
             representatives may at all reasonable times, upon advance notice,
             inspect the performance of Services. Any such inspection shall not
             constitute an acceptance of Services.

                                                                         Page 40


CLAUSE 15   DURATION AND TERMINATION

     15.1   Subject to Clause 15.4 below, this Agreement shall become effective
            on July 1st, 2000 regardless of the date this Agreement is signed by
            both Parties (the "Effective Date"), and it shall automatically
            terminate and become null and void on June 30th, 2015. For any
            Purchase Orders placed prior to the date of expiration or
            termination this Agreement shall continue to be valid until
            fulfillment of all obligations of the Parties thereunder.

     15.2   The rights and obligations of the Parties under the following
            clauses shall survive any termination or expiration of this
            Agreement:

            Clause 12 (WARRANTY)
            Clause 13 (LIABILITY)
            Clause 17 (APPLICABLE LAW AND ARBITRATION).

     15.3   Termination

            If either Operator or MTU-M makes an agreement with creditors
            compounding debts, enters into liquidation whether compulsory or
            voluntary (otherwise than for the purpose of amalgamation or
            reconstruction), becomes insolvent, suffers a receiver of the whole
            or parts of its assets to be appointed, or commits a breach of any
            of its obligations under this Agreement (hereinafter collectively"
            Termination Events"), the defaulting Party shall have thirty (30)
            Days upon notification by the non-defaulting Party to remedy any
            such Termination Event or provide an acceptable plan for the remedy
            otherwise the non-defaulting Party shall have the right without
            prejudice to its other rights or remedies under applicable laws
            which rights or remedies shall be cumulative and not exclusive:

            a)   to terminate this Agreement or any Purchase Order hereunder by
                 written notice (to include telex), and

            b)   to stop any Work already commenced and to refuse to commence
                 any further Work.

            For the avoidance of doubt, it is expressly agreed between the
            Parties that Purchase Orders placed by Operator with MTU-H on or
            before the effective date of termination shall continue to be
            subject to the provisions of this Agreement.

                                                                         page 41


     15.4   Conditions Precedent

            The Agreement and its Annexes shall become effective subject to the
            following conditions precedent being fullfilled:

            a)   signature of the V2500-A5 Maintenance Agreement between the
                 Parties relating to the performance of Services by MTU
                 Maintenance Hannover GmbH for Operator's V2500-A5 engine fleet,

            b)   signature of the Sale and Purchase Agreement relating to the
                 sale of up to twelve (12) V2500-A5 engines from Operator to MTU
                 Maintenance Hannover GmbH, and

            c)   signature of the lease agreement between the Parties relating
                 to the lease of six (6) V2500-A5 engines from MTU Maintenance
                 Hannover GmbH to Operator.

                                                                         Page 42


CLAUSE 16   REPRESENTATIONS AND WARRANTIES

            Each of the Parties hereby represents and warrants that:

     16.1   It is a limited liability company duly constituted and validly
            existing under the laws of its country of incorporation, its
            obligations under and pursuant to this Agreement constitute its
            legal, valid, binding and enforceable obligations (save to the
            extent that enforcement may be limited by applicable bankruptcy,
            insolvency, moratorium or other laws for the protection of creditors
            and debtors generally and general principles of equity) and that
            this Agreement has been duly executed by it;

     16.2   The execution and delivery by it of this Agreement, the consummation
            by it of any of the transactions contemplated hereby and compliance
            by it with any of the terms and conditions hereof do not require any
            consent of any trustee or holder of any indebtedness or other
            obligation of it, violate any term or condition of its constitutive
            documents, contravene any provision of or constitute or will
            constitute a default under or pursuant to or result in any breach of
            or the creation of any lien (other than as contemplated under this
            Agreement) on or over any of its assets or any other agreement or
            instrument to which it is a party or by which it is bound;

     16.3   No consent of, giving of notice to, registration with or taking of
            any other action in respect of any government entity in its country
            of incorporation is required for the execution by it of this
            Agreement.

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CLAUSE 17 LAW AND ARBITRATION

This Agreement shall be governed by and construed in accordance with the laws of the State of New York, United States of America, but without giving effect to the principles of conflicts of laws thereof. The United Nations Convention on Contracts for the International Sale of Goods shall not govern this Agreement or the rights and obligations of the Parties hereunder. Any and all disputes arising out of or in connection with this Agreement between the Parties shall be finally settled under the rules of the American Arbitration Association by three (3) arbitrators. Each Party shall name one (1) arbitrator within thirty (30) Days following notification by the other Party; the two
(2) arbitrators so chosen shall then select a third arbitrator as chairman. Should one (1) Party delay nomination of its arbitrator or if an arbitrator does not take up his office or if he is prevented from taking up his office at the correct time for any other reason, or if the two (2) arbitrators cannot agree within thirty (30) Days as to the choice of the chairman, the President of the American Arbitration Association shall be asked to appoint such arbitrator. The Rules of Conciliation and Arbitration of the American Arbitration Association shall apply for the arbitration proceedings. The place of arbitration shall be New York, New York, United States of America. All arbitration filings and proceedings shall be in the English language. A Party entitled under an award by the arbitrators to receive an amount of money shall be entitled to recover its costs, including reasonable attorneys' fees, incurred in preparing for and participating in the arbitration proceeding and any ancillary proceedings, including proceedings to compel or enjoin arbitration or to request, confirm or set aside an award, in the same ratio as the total amount of money ultimately awarded to such Party divided by the amount claimed by such Party.

page 44

CLAUSE 18 NOTICES

Any notice or communication to be served pursuant to this Agreement shall be sent by registered mail, telefax, telex or delivered personally (and a copy - which shall not constitute notice hereunder- shall also be promptly transmitted by e-mail to the other Party) and shall be deemed to have been duly given when received by the addressees under the following address:

For Operator:

TAM - Transportes Aereos Regionais S.A.
Av. Jurandir, 856 - Lote 4 - Hangar VII

Attn. Mr. Jose Maluf
Contracts Director
Aeroporte - CEP 04072-000 Sao Paulo Brasil
Phone: +55-11-5582-8675
Fax: +55-11-5581-9167
E-mail: maluf@tam.com.br

For MTU-M:

MTU Motoren- und Turbinen-Union Munchen GmbH

Attn: General Counsel
Dachauer Strasse 665
80995 Munchen
Germany

Phone: +49-89-1489 3815
Fax: +49-89-1489 5814
E-mail: Michael.Weber@muc.mtu.de

copy to:

MTU Maintenance Hannover GmbH
Attn: General Counsel
Munchner Strasse 31
30855 Langenhagen
Germany

Phone: +49-511-78 06-388
Fax: +49-511-78 06-100
E-mail:Andreas. Brosig@haj.mtu.de

or such other place of business as may be notified in writing by the other Party to this Agreement from time to time.

All notices, reports, certificates, data and communications pertaining to this Agreement shall be in the English language. The giving of any notice

page 45

required hereunder may be waived in writing by the Party entitled to receive such notice.

IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to be executed and delivered on its behalf by its duly authorized representative(s) as of the Effective Date.

TAM - Transportes Aereos                MTU Motoren- and Turbinen-Union
Regionais S.A.                          Munchen GmbH


By /s/                                  By /s/
   ----------------------------------      -------------------------------------
Title                                   Title EXEC. V.P. SALES AND CUST. S


By /s/                                  By /s/
   ----------------------------------      -------------------------------------
Title Contracts Director                Title Attorney

                                        (STAMP)
                                        (SEAL)

OLVAN ODALVO BOARO JR
ESCREVENTE AUTORIZADO

(STAMP)

(SEAL)

OLVAN ODALVO BOARO JR
ESCREVENTE AUTORIZADO

APPENDIX A(1)

TO THE TAY MAINTENANCE SERVICE AGREEMENT
BETWEEN TAM TRANSPORTES AEREOS REGIONAIS S.A.
AND MTU MAINTENANCE HANNOVER GMBH

DATED SEPTEMBER 14, 2000

LIST OF ENGINES: TAY 650-15

RUNNING
 NUMBER    S/N
-------   -----
    1     17235
    2     17236
    3     17238
    4     17247
    5     17249
    6     17250
    7     17258
    8     17259
    9     17267
   10     17268
   11     17271
   12     17272
   13     17292
   14     17293
   15     17302
   16     17303
   17     17306
   18     17307
   19     17311
   20     17320
   21     17321
   22     17322
   23     17326
   24     17328
   25     17331
   26     17336
   27     17348
   28     17352
   29     17358
   30     17359
   31     17360
   32     17363
   33     17366
   34     17367
   35     17370
   36     17371
   37     17372
   38     17373
   39     17411
   40     17413
   41     17438
   42     17444
   43     17446
   44     17460
   45     17470
   46     17473
   47     17474
   48     17475
   49     17490
   50     17491
   51     17517
   52     17518
   53     17520
   54     17521
   55     17522
   56     17533
   57     17534
   58     17535
   59     17536
   60     17537
   61     17538
   62     17557
   63     17558
   64     17559
   65     17560
   66     17561
   67     17564
   68     17589
   69     17590
   70     17619
   71     17635
   72     17637
   73     17663
   74     17664
   75     17671
   76     17676
   77     17677
   78     17684
   79     17688
   80     17689
   81     17697
   82     17705
   83     17711
   84     17712
   85     17722
   86     17723
   87     17724
   88     17727
   89     17728
   90     17729
   91     17730
   92     17734
   93     17735
   94     17736
   95     17737
   96     17738
   97     17739
   98     17740
   99     17741
  100     17742
  101     17748
  102     17752
  103     17801
  104     17803
  105     17804

page 1 of 1

APPENDIX A2

The following TAY650-15 Accessories are covered by the Agreement, when removed during a shop visit:

PART NUMBER/ IPC
REFERENCE          DESCRIPTION                                ATA CHAPTER
----------------   -----------                                -----------
B36110104          HP BLEED VALVE SENSING SWITCH,
                   7th/12th STAGE AIR BLEED                   36-11-01
B715001 *ALL       LT ELECTRICAL HARNESS                      71-50-01
JR32500A           LP/IP ONCE PER REVOLUTION PROBE            72-35-43
EU51936            MAGNETIC CHIP DETECTORS AND HOUSINGS       72-61-10
775C62NWR          FUEL DRAIN VALVE ASSEMBLY                  73-11-03
QA03198            LP FUEL FILTER ELEMENT                     73-11-03
GD501              HP FUEL PUMP                               73-11-05
B73110601          FUEL SPRAY NOZZLES                         73-11-06
SC503              HP FUEL SHUT OFF VALVE                     73-11-07
EJP101             FUEL DRAINS EJECTOR PUMP                   73-11-08
LPG500             LP SHAFT GOVERNOR                          73-21-02
SV500              APPROACH IDLE SOLENOID                     73-21-06
05407              FUEL FILTER PRESSURE DIFFERENTIAL SWITCH   73-33-01
1453PGCP115        FUEL LOW PRESSURE WARNING SWITCH           73-34-01
44302              HE IGNITION UNIT                           74-11-01
CI650091           HE IGNITION LEADS                          74-21-02
Y183-6             HE IGNITION PLUGS                          74-21-03
17343-83-860       LP COOLING AIR OUTLET SWITCH               77-22-01
JR31762A           EPR PROBES                                 77-41-01
T3K12-21-41PN      EPR TRIM PLUG                              77-41-03
S110-50-911        FUEL TEMPERATURE TRANSMITTER               77-42-02
3002KGA-1          LP AND HP TACHO GENERATORS                 77-43-01
S684-8-34          TGT THERMOCOUPLES                          77-45-01
B77450202          TGT THERMOCOUPLE HARNESS                   77-45-02
LK83996            TGT THERMOCOUPLE JUNCTION                  77-45-03
R18-8xx            TGT BALLAST RESISTOR                       77-45-03
R20-871            TGT TRIMMING RESISTOR                      77-45-03
APTE65RT175G       OIL PRESSURE TRANSMITTER                   77-47-01
APTE128RT175G      OIL TEMPERATURE TRANSMITTER                77-47-02
OMP2506-9          OIL PRESSURE FILLER                        79-10-01
9201000-272        OIL TANK CONTENTS TRANSMITTER              79-10-01
MPA30502           OIL FILTER ELEMENT                         79-10-01
JR31848A           FUEL COOLED OIL COOLER                     79-22-01
1138PGCP115        OIL LOW PRESSURE WARNING SWITCH            79-32-01
QA05167            OIL FILTER DIFFERENTIAL PRESSURE SWITCH    79-32-01
3214684-5          AIR START CONTROL VALVE                    80-11-02

page 1 of 1

APPENDIX B

CHARGES

Operator shall pay for services rendered the amounts invoiced in accordance with the following:

1 SERVICES COVERED BY THE FIXED PRICES AS SET FORTH IN CLAUSE 2.4.1

1.1 The Fixed Price for Midlife Inspection shall be US$ *

1.2 The Fixed Price for Overhaul shall be determined in accordance with the following formula:

Engine Flight Hours operated since last Overhaul (or, in case of new engines, since manufacture) multiplied by * US Dollars * as escalated in accordance with item 3 of Appendix C less the fixed price for the Midlife Inspection set forth in item 1 of this Appendix B (as escalated in accordance with item 3 of Appendix C) preceding the current Overhaul Shop Visit provided that the Fixed Price for Overhaul shall (i) not be less than
* as escalated in accordance with item 3 of Appendix C, and (ii) shall not exceed * as escalated in accordance with item 3 of Appendix C.

(Price basis January 01, 2000)

1.3 The Fixed Prices are valid and binding until December 31st, 2000, and shall be subject to escalation in accordance with item 3 of Appendix C to this Agreement.

MTU-M reserves the right to make appropriate adjustments to the Fixed Prices, *

The Fixed Prices shall become payable in accordance with Clause 9 of this Agreement for Midlife Inspection or Overhaul events of Engines as follows:

- Midlife Inspection Shop Visit:
to be performed upon approximately 12,000 Flight Cycles since new or, as applicable, since previous Overhaul, as per

page 1 of 2

APPENDIX B

Shop Handling Guide, aiming at the refurbishment of an Engine's high pressure turbine.

- Overhaul Shop Visit, incl. of Replacement of Life Limited Parts to be performed upon expiration of time limits on Life Limited Parts.

2 SERVICES NOT COVERED BY THE FIXED PRICES AS SET FORTH IN CLAUSE 2.4.2

Operator shall pay to MTU-M the costs invoiced as per the actual invoice of MTU-M's authorized subcontractor.

In addition, MTU-M shall invoice to Operator a three percent (3%) handling fee on any such invoice, provided that such handling fee shall be limited to US$ 30,000 plus travel expenses, and Operator shall pay MTU-M such handling fee in accordance with Clause 9 of this Agreement.

page 2 of 2

APPENDIX C

ESCALATION FORMULAE

1. Labor Rate Escalation

The Labor rate will be adjusted * using the cumulated adjustment factor for labor costs as published * MTU-H will inform the Operator or the of the factor for the next The change in the factor will reflect the actual effects of labor costs incurred by MTU-H.

The Labor rate shall not be adjusted before * and escalation shall thereafter not exceed *

2. Material Price Escalation

Material prices * will be adjusted * using the * average material price increase according to *

3.1 Fixed Price Escalation

The Fixed Prices stipulated in Appendix B shall be subject to * escalation in accordance with the following formula.

3.2 Limitation of Fixed Price Escalation

Based on the assumptions specified in Appendix B the Fixed Prices stipulated in Appendix B will result in Engine maintenance cost per Engine Flight Hour of * . Such Fixed Prices shall be escalated as specified in Clause 3.1 above (hereinafter the "Escalated Fixed Price").

In consideration of a similar fixed price offer received by Operator from a party other than MTU-H, which fixed price offer results in Engine maintenance cost per Engine Flight Hour of US$ 102.00 / EFH (Price Basis 2000), (such offer hereinafter the "Comparison Offer"), and which Comparison Offer shall be subject to a fixed escalation of 2,6% per year starting as of January 01, 2001, the following shall apply with regard to the Escalated Fixed Price:

MTU-H shall make all commercially reasonable efforts in order to keep the applicable maintenance cost below such Comparison Offer.

In the event that the Escalated Fixed Price exceeds the Comparison Offer escalated as specified above and during the same escalation period, MTU-H and TAM will share the amount to which the Escalated Fixed Price exceeds the escalated Comparison Offer in a ratio of one third (1/3) to be borne by TAM and two thirds (2/3) to be borne by MTU-H.

Such cost sharing of the amount to which the Escalated Fixed Price may exceed the escalated Comparison Offer shall become effective and first be applied with the escalation to be performed on January 1st, 2004, provided however, that the actual cost indeed exceed the escalated cost per the comparison offer, as illustrated for reference purposes in the table set out below.

4. Price adjustment according to the above escalation formulae shall be performed * and shall be applicable to Services performed between

APPENDIX D

TO THE TAY ENGINE MAINTENANCE AGREEMENT TAM / MTU

[Intentionally left blank]

APPENDIX E

TO THE TAY ENGINE MAINTENANCE AGREEMENT TAM / MTU

GUARANTY

GUARANTY, dated ____________________, 2000, made by TAM-Compania De Investimentos Em Transportes S.A., a company (sociedade por acoes) organized and existing under the laws of Brazil (the "GUARANTOR"), in favor of MTU Motoren- und Turbinen-Union Munchen GmbH ("MTU").

PRELIMINARY STATEMENTS:

WHEREAS, MTU desires to enter into that certain TAY Engine Maintenance Agreement dated as of September 14, 2000 (said Agreement, as it may hereafter be amended or otherwise modified from time to time, being the "MAINTENANCE AGREEMENT", the terms defined therein and not otherwise defined herein being used herein as therein defined) with TAM-Transportes Aereos Regionais S.A., a corporation organized and existing under the laws of Brazil ("TAM").

NOW, THEREFORE, in consideration of the premises and in order to induce MTU to enter into the Maintenance Agreement, the Guarantor hereby agrees as follows:

SECTION 1.01. GUARANTY.

The Guarantor hereby unconditionally guarantees the punctual payment when due and the punctual performance of all obligations of TAM now or hereafter existing under the Maintenance Agreement (such obligations being the "OBLIGATIONS"), and agrees to pay any and all expenses (including counsel fees and expenses) reasonably incurred by MTU in enforcing any rights under this Guaranty within five business days of receipt of a written demand notice under this Guaranty. Without limiting the generality of the foregoing, the Guarantor's liability shall extend to all amounts which constitute part of the Obligations and would be owed by TAM under the Maintenance Agreement but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization, or similar proceeding involving TAM.

SECTION 1.02. GUARANTY ABSOLUTE.

The Guarantor guarantees that the Obligations will be paid or performed, respectively, strictly in accordance with the terms of the Maintenance Agreement, regardless of any law, regulation, or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of MTU with respect thereto. The obligations of the Guarantor under this Guaranty are independent of the Obligations, and a separate action or actions may be brought and prosecuted against the Guarantor to enforce this Guaranty, irrespective of whether any action is brought

App E / TAY

page 2 of 4

against TAM or whether TAM is joined in any such action or actions. The liability of the Guarantor under this Guaranty shall be absolute and unconditional irrespective of:

(i) any lack of validity or enforceability of the Maintenance Agreement;

(ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to departure from the Maintenance Agreement, including, without limitation, any increase in the Obligations resulting from the extension of additional services or forbearance to TAM or any of its subsidiaries or otherwise;

(iii) any taking, exchange, release, or non-perfection of any collateral, or any taking, release, or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Obligations;

(iv) any manner of application of collateral, or proceeds thereof, to all or any of the Obligations, or any manner of sale or other disposition of any collateral for all or any of the Obligations or any other assets of TAM or any of its affiliates;

(v) any change, restructuring, or termination of the corporate structure or existence of TAM; or

(vi) any other circumstance which might otherwise constitute a defense available to, or a discharge of, TAM or a guarantor.

(vii) this Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment or performance of any of the Obligations is rescinded or must otherwise be returned by MTU upon the insolvency, bankruptcy, or reorganization of TAM or otherwise, all as though such payment had not been made.

SECTION 1.03. WAIVER.

The Guarantor hereby waives promptness, diligence, notice of acceptance, and any other notice with respect to any of the Obligations and any requirement that MTU protect, secure, perfect, or insure any security interest or lien or any property subject thereto or exhaust any right or take any action against TAM or any other person or entity or any collateral.

SECTION 1.04. SUBROGATION.

The Guarantor will not exercise any right which it may acquire by way of subrogation under this Guaranty, by any payment made hereunder or otherwise, until all the Obligations and all other amounts payable under this Guaranty shall have been paid or performed in full and MTU shall cease to be obligated under the Maintenance Agreement for any reason ("MTU'S COMMITMENT"). If any amount shall be paid to the Guarantor on account of such subrogation rights at any time prior to the later of (x) the payment or performance in full of the Obligations and payment in full of all other amounts payable under this Guaranty or (y) the expiration or termination of MTU's Commitment, such amount shall be held in trust for the benefit of MTU and shall forthwith be paid to MTU to be credited and applied upon the Obligations, whether

App E / TAY

page 3 of 4

matured or unmatured, in accordance with the terms of the Maintenance Agreement or to be held by MTU as collateral security for any Obligation thereafter existing. If (i) the Guarantor shall make payment to MTU, or fulfill, of all or any part of the Obligations, (ii) all the Obligations shall be paid or performed in full and all other amounts payable under this Guaranty shall be paid in full, and (iii) the Commitment shall have expired or terminated, MTU will, at the Guarantor's request, execute, and deliver to the Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to the Guarantor of an interest in the Obligation resulting from such payment by the Guarantor.

SECTION 1.05. CONSENT TO JURISDICTION; WAIVER OF IMMUNITIES.

(a) The Guarantor hereby irrevocably submits to the jurisdiction of any New York State or Federal court sitting in New York City, Borough of Manhattan and any appellate court from any thereof in any action or proceeding arising out of or relating to this Guaranty, and the Guarantor hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such New York State court or in such Federal court. The Guarantor hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. The Guarantor hereby irrevocably appoints___________________(the "PROCESS AGENT"), with an office on the date hereof at _______________, New York, New York 100______________, United States, as its agent to receive on behalf of the Guarantor and its property service of copies of the summons and complaint and any other process which may be served in any such action or proceeding. Such service may be made by mailing or delivering a copy of such process to the Guarantor in care of the Process Agent at the Process Agent's above address, and the Guarantor hereby irrevocably authorizes and directs the Process Agent to accept such service on its behalf. As an alternative method of service, the Guarantor also irrevocably consents to the service of any and all process in any such action or proceeding by the mailing of copies of such process to the Guarantor at its address specified in Section 1.07. The Guarantor agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(b) Nothing in this Section shall affect the right of MTU to serve legal process in any other manner permitted by law or affect the right of MTU to bring any action or proceeding against the Guarantor or its property in the courts of any other jurisdictions.

(c) To the extent that the Guarantor has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution, or otherwise) with respect to itself or its property, the Guarantor hereby irrevocably waives such immunity in respect of its obligations under this Guaranty and, without limiting the generality of the foregoing, agrees that the waivers set forth in this subsection (c) shall have the fullest scope permitted under the Foreign Sovereign Immunities Act of 1976 of the United States and are intended to be irrevocable for purposes of such Act.

App E / TAY

page 4 of 4

SECTION 1.06. AMENDMENTS, ETC.

No amendment or waiver of any provision of this Guaranty, and no consent to any departure by the Guarantor herefrom, shall in any event be effective unless the same shall be in writing and signed by MTU, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

SECTION 1.07. ADDRESSES FOR NOTICES.

All notices and other communications provided for hereunder shall be in writing (including telecopier) and mailed, telecopied, or delivered to it, if to the Guarantor, at its address at TAM - Transportes Aereos Regionais S.A., Av. Jurandir, 856 - Lote 4 - Hangar VII, Attn. Mr. Jose Maluf, Contracts Director, Aeroporte - CEP 04072-000 Sao Paulo, Brasil, Phone: +55 - 11 - 5582-8675, Fax:
+55 - 11 - 5581-9167, E-mail: maluf@tam.com.br, and if to MTU, at its address specified in the Maintenance Agreement, or, as to either party, at such other address as shall be designated by such party in a written notice to the other party. All such notices and other communications shall, when mailed or telecopied, be effective on the day following the day when deposited in the mails or telecopied (and OK transmission receipt is obtained), respectively.

SECTION 1.08. NO WAIVER; REMEDIES.

No failure on the part of MTU to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

SECTION 1.09. GOVERNING LAW.

This Guaranty shall be governed by, and construed in accordance with, the laws of the State of New York without regard to the provisions on conflict of laws thereof.

SECTION 1.10. ASSIGNMENT.

MTU may not assign any of its rights hereunder without prior written consent of the Guarantor. Any assignment made in violation of this Section shall be null and void.

IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.

TAM-Compania De Investimentos Em Transportes S.A.

By:
Name:
Title:

Exhibit 10.4

V2500 ENGINE MAINTENANCE AGREEMENT

dated September 14, 2000

between

TAM - Transportes Aereos Regionais S.A.
Av. Jurandir, 856
Aeroporte - CEP 04072-000 Sao Paulo
Brazil

acting for and on behalf of itself or any other subsidiary or affiliate of TAM
- Transportes Aereos Regionais

- hereinafter collectively referred to as "Operator" -

and

MTU Maintenance Hannover GmbH
Munchner Strasse 31
30855 Langenhagen
Germany

- hereinafter referred to as "MTU" -

- Operator and MTU hereinafter collectively referred to as the "Parties" -

page 2 of 40

TABLE OF CONTENTS

RECITAL
Clause 1          DEFINITIONS

Clause 2          SCOPE OF SERVICES

Clause 3          RECORDS AND STANDARDS

Clause 4          DELIVERY

Clause 5          TURNAROUND TIMES AND EXCUSABLE DELAY

Clause 6          ORDER PROCESSING

Clause 7          REJECTED PARTS

Clause 8          CHARGES

Clause 9          PAYMENT

Clause 10         TAXES, DUTIES AND CUSTOMS FEES

Clause 11         SUBCONTRACTING

Clause 12         WARRANTY

Clause 13         LIABILITY

Clause 14         MISCELLANEOUS

Clause 15         DURATION AND TERMINATION

Clause 16         REPRESENTATIONS AND WARRANTIES

Clause 17         LAW AND ARBITRATION

Clause 18         NOTICES

Appendix A (1)    ENGINE(S)
Appendix A (2)    AIRCRAFT/ENGINE DELIVERY SCHEDULE
Appendix B        CHARGES
Appendix C        ESCALATION FORMULAE
Appendix D        AIRWORTHINESS AUTHORITIES APPROVALS
Appendix E (1)    MAINTENANCE COST GUARANTEE
Appendix E (2)    MAINTENANCE COST GUARANTEE
Appendix F        ADJUSTMENT OF GUARANTEED MAINTENANCE COST PER
                  FLIGHT HOUR FOR ACHIEVED CYCLE RATIO
Appendix G        PARENT COMPANY GUARANTEE

page 3 of 40

RECITAL
WHEREAS               Operator requires maintenance, refurbishment, repair
                      and modification services with respect to Engines (as
                      hereinafter defined).

WHEREAS               MTU acknowledges and agrees that any subsidiary or
                      affiliate of TAM - Transportes Aereos Regionais S.A.
                      may from time to time operate the Engines and may
                      therefore utilise the services specified in this
                      Agreement, in its own name.

WHEREAS               MTU has the facilities, expertise and experience and is
                      willing and prepared to provide such services according
                      to MTU's standards, procedures and valid airworthiness
                      authority regulations as provided in Appendix D.

WHEREAS               MTU shall perform such services based on rates as
                      provided in Appendix B.

WHEREAS               Operator and MTU intend to meet in reasonable intervals
                      (approximately twice per year) to consult on the technical
                      and organizational aspects of this Agreement.

WHEREAS               Operator will * place purchase orders for Services on
                      Engines on MTU and MTU will accept the same, in each
                      case, subject to the terms and conditions of this
                      Agreement.

NOW THEREFORE,        in consideration thereof and reliance on the mutual
                      promises given herein, the Parties hereto agree as follows:

page 4 of 40

CLAUSE 1    DEFINITIONS

            Within the scope of this Agreement, unless otherwise individually
            stipulated, the following definitions shall apply:

       1.1  AOG

            "Aircraft on Ground" indicates that an aircraft is unable to
            continue or be returned to revenue service until appropriate
            corrective action is taken.

       1.2  CSLV

            The number of cycles an item of Supplies has completed since last
            Shop Visit.

       1.3  CSN

            The number of cycles an item of Supplies has completed since
            manufacture.

       1.4  DAC Brasil

            The Brasilian airworthiness authority, or any successor organization
            thereof.

       1.5  Days

            Any calendar days.

       1.6  Effective Date

            Shall have the meaning set forth in Clause 15.1.

       1.7  Engine(s)

            Each V2500-A5 engine listed in Appendix A (1), subject to additions
            or deletions as may be specified by Operator and notified in writing
            to MTU from time to time provided, however, that the application of
            Appendices E1 and E2 to any additional engine shall require the
            written consent of MTU.

       1.8  Engine Flight Hour (EFH)

            The cumulative number of airborne hours in operation of an Engine
            computed from the time an aircraft leaves the ground until it
            touches the ground at the end of the flight.

                                                                    page 5 of 40

      1.9   Engine Lease Agreement

            The Engine lease agreement to be entered into between MTU and
            Operator pursuant to Clause 15.4 on the basis of which MTU acting as
            lessor will lease to Operator and Operator acting as lessee will
            lease from MTU up to six (6) V 2500-A5 spare Engines.

      1.10  Engine Sale and Purchase Agreement

            The Engine sale and purchase agreement to be entered into between
            MTU and Operator pursuant to Clause 15.4 on the basis of which MTU
            acting as purchaser will purchase from Operator and Operator acting
            as seller will sell to MTU up to twelve (12) V2500-A5 aircraft
            engines.

      1.11  Flight Cycle

            A completed Engine thermal cycle including the application of take
            off power.

      1.12  Foreign Object Damage or FOD

            Damage to any portion of the Engine caused by any object other than
            an integral part of the Engine including but not limited to an
            impact or ingestion of birds, stones, hail and/or runway, taxiway or
            apron gravel and for the avoidance of doubt excluding DOD.

      1.13  Incoterms

            Incoterms 2000 plus later amendments as published by the I.C.C.
            Paris valid at the time of conclusion of this Agreement.

      1.14  Life Limited Part

            Any Part which is admitted by the manufacturer for a defined service
            life.

      1.15  Line Maintenance

            Routine checks, inspections and rectification of malfunctions
            performed en route and at base stations during transit, turnaround
            or night stop.

      1.16  Module

            "Major Engine Build Group" as specified in ATA Chapter 72 of the
            OEM's illustrated parts catalogue.

                                                                    page 6 of 40

      1.17  MTU

            Shall also mean any company of the MTU Maintenance group of
            companies.

      1.18  Operator

            Shall also mean any affiliate or subsidiary of TAM - Regionais S.A.
            from time to time.

      1.19  Operator Owned Part/Module

            Any Operator owned Repair Part or Module used during Work in order
            to expedite the Turnaround Time.

      1.20  Original Equipment Manufacturer (OEM)

            IAE International Aero Engines AG, East Hartford, CT 06108, USA.

      1.21  Part

            Any part of an Engine.

      1.22  Pool Parts/Modules

            All Parts/Modules required in replacement of Parts/Modules for which
            the Repair time exceeds the applicable Turnaround Time.

      1.23  Purchase Order

            An order stating that it is subject to the terms and conditions of
            this Agreement issued by Operator to MTU and includes:

            a)    The Purchase Order number to be referenced to in all invoices
                  and other correspondence related to the Work under such
                  Purchase Order;

b) A statement of or reference to the applicable Work Statement;

c) Return delivery instructions, including packaging and shipping.

1.24 Rejected Part

Any item removed by MTU from a Module or Engine and consequently replaced by a Part.

1.25 Repair Part

Any Part which is repaired to serviceable condition.

page 7 of 40

1.26 Services

All Work in:

- Maintenance Those actions required for restoring or maintaining Supplies in serviceable condition, including servicing, repair, modification, overhaul, inspection and determination of condition.

-     Modification      Services agreed upon between MTU and
                        Operator, which are based upon a
                        manufacturer's Service Bulletin.

-     Testing           As defined in the applicable Engine
                        manufacturer's Overhaul and Repair manual
                        as well as additional Testing if required
                        by the MTU test procedures.

-     Reconditioning    The Work necessary to return Modules or
      (Overhaul)        Parts to  the highest standard specified in
                        the relevant manual.

-     Refurbishment     The Work necessary to restore an Engine or
      (Engine,          Module to ensure that cost effective
       Module)          operation will be achieved.

-     Repair            To make an Engine or Modules serviceable by
                        replacing or processing failed or damaged
                        Parts.

-     Restoration       The Work (on/off the aircraft) necessary to
                        restore Modules or Parts to a specific
                        standard.

-     Rework            To carry out Work on uninstalled Modules or
                        Parts.

-     Replacement       The action whereby a Module or Part is
                        removed and another Module or Part is
                        installed in its place for any reason.

-     Inspection        An examination of Supplies against a
                        specific standard.

1.27 Service Bulletin (SB)

Any document issued by the OEM to notify Operator and MTU of recommended Modifications, substitution of Parts, special Inspections/checks, reduction of existing life limits or establishment of first time life limits and conversion from one Module to another.

page 8 of 40

1.28 Shop Handling Guide

The shop handling guide agreed by the Parties pursuant to Clause 2.3 (iii).

1.29 Shop Visit

The performance of Services at MTU's facilities or the facilities of any subcontractor on an Engine or Module which entails either the separation of pairs of major mating engine flanges or the removal of a disc, hub, or spool.

1.30 Supplies

Engines, Modules, Parts or any other items of associated equipment delivered to MTU.

1.31 TSLV

The time expressed in operation hours an item of Supplies has completed since last Shop Visit.

1.31 TSN

The time expressed in operation hours an item of supplies has completed since manufacture.

1.32 Turnaround Time (TAT)

The agreed time of performance of Services in respect of an Engine by MTU. Unless otherwise agreed and subject to the provisions of Clause 5 of this Agreement, the TAT shall commence the Day after receipt of an Engine or Module by MTU Maintenance do Brasil Ltda. ("MTU Brasil") and ends upon redelivery of such Engine or Module according to Clause 4. For purposes of TAT an Engine shall be deemed delivered on the Scheduled Delivery Date (as defined in Clause 5.3) if such Engine is removed from wing, mounted to a transportation stand ready to be shipped from Operator's facility together with the documentation to be furnished to MTU pursuant to Clause 3.2.

1.33 Work

The performance of Services according to the terms and conditions of this Agreement.

1.34 Work Statement

Statement or statements being part of the Purchase Order which include(s) the Work requirements applicable to Engines, Modules or Parts. The Work Statement(s) shall include details relating to:

page 9 of 40

- reason for Shop Visit
- disassembly and re-assembly requirements
- Inspection requirements
- Repairs to be accomplished
- Modification standard to be accomplished
- Testing,

and any other information notified by MTU to Operator with five (5) Days prior written notice from time to time.

page 10 of 40

CLAUSE 2          SCOPE OF CONTRACT

       2.1        During the term of this Agreement, Operator agrees to place
                  any and all purchase orders for off-wing services required on
                  all Engines, Modules and Parts owned or operated by it * on
                  MTU subject to the provisions of Clauses 5.8 and 15.3.

       2.2        MTU agrees to accept all Purchase Orders and will perform all
                  Services on Engines, Modules and Parts subject to the terms
                  and conditions of this Agreement.

       2.3        All Services will be performed in accordance with

                  (i)   the airworthiness requirements of the FAA and JAA, and
                        shall comply with applicable requirements of the DAC
                        Brasil from time to time;

                  (ii)  the Engine manufacturer's overhaul and repair manuals as
                        supplemented by MTU's/MTU's subcontractors' procedures
                        which procedures shall be agreed and approved by
                        Operator; and

                  (iii) a shop handling guide to be mutually agreed between the
                        Parties within four (4) weeks following an initial
                        meeting between Operator and MTU to be scheduled within
                        ten (10) Days of signature of this Agreement.

       2.4        The Services will include but not be limited to the following:

       2.4.1      Disassembly, cleaning, Inspection and rebuilding of Engines;

       2.4.2      Exchange of Parts;

       2.4.3      Rework of Engines, Modules and Parts to a serviceable
                  condition;

       2.4.4      Engine Testing according to the specifications of the Original
                  Equipment Manufacturer, or other relevant manufacturer and
                  MTU;

       2.4.5      Parts Management

                  Incorporation of Modifications such as prescribed or advised
                  from the Original Equipment Manufacturer or other relevant
                  manufacturer, MTU and/or Operator.

                  Technical support including Engineering services when
                  requested by Operator, provided the following Engine

documentation is made available to MTU:

- Log book or equivalent
- Life of all Life Limited Parts
- In-flight readings of all parameters of the Engine;

page 11 of 40

2.4.6 Replacement of Life Limited Parts.

2.5 Operator's Responsibility

2.5.1 In case of defects or deficiencies in the design or manufacture of the Supplies by the OEM Operator agrees to exercise all commercially reasonable endeavours to assist and allow MTU to recover from the OEM all cost and expenses associated with any measure taken by MTU to rectify or repair such defects and deficiencies.

2.5.2 Operator shall use all commercially reasonable endeavours to

       increase the on-wing time of the Engines under consideration
       of reliability and costs in cooperation with MTU. Moreover,
       the Operator agrees to cooperate with MTU with respect to the
       determination of the optimum removal date for each eligible
       Engine. For the avoidance of doubt it is expressly agreed by
       the Parties that nothing contained herein shall limit or shall
       be construed as limiting Operator's airworthiness
       responsibilities (which shall be paramount).

2.5.3  Operator will report to MTU by the tenth (10th) day of each
       month the Engine Flight Hours (EFH) of the preceding month for
       each Engine.

2.5.4 Operator will report to MTU each month the Engine on-wing data in order to allow MTU to evaluate those data by MTU's engineering personnel.

2.5.5 Operator agrees that MTU shall perform, at no additional charge, for and on behalf of Operator the administration of maintenance related guarantees, warranties or other remedies specified in the general terms agreement between Operator and the OEM regarding the sale of the Engines, in particular any of the following:

- New Engine Guarantee
- Shop Visit Rate Guarantee
- EGT Guarantee
- Campaign Change Allowance
- New Part Warranty
- FOD Guarantee
- Spare Parts Warranty
- Spare Engine Availability
- Hot/Cold Section Guarantee
- V2500 Maintenance Cost Guarantee

Operator agrees to use all commercially reasonable endeavours to support MTU in the administration of such warranties and guarantees, in particular their enforcement.

page 12 of 40

2.5.6 Operator shall maintain the following V2500-A5 spare Engine level:

                 quantity          quantity          quantity
  year          of Aircraft       of installed       of spare
                                    Engines          Engines
---------       -----------       ------------       --------

 2000                10                20                2
 2001                17                34                3
 2002                22                44                4
 2003                29                58                5
 2004                34                68                6
 2005                38                76                6

2.6 Should it become necessary for the proper performance to carry out Services substantially different from those specified in the Work Statement, MTU will promptly notify Operator (in sufficient detail) of the nature and extent of such Services and seek Operator's authorization to carry out such different Services. Operator shall respond in writing (to include telex and telefax) to such request within forty-eight (48) hours. The Turnaround Time will be increased by the additional time that is needed and verified by MTU due to the delay in question. Any impact on the agreed TAT resulting from such delay will be promptly advised by MTU (with supporting evidence if requested).

In the event Operator withholds the authorization or direction for the necessary alteration of the Work Statement for a period exceeding ten (10) Days, MTU may remove the Engine, Module or Part from the production line.

2.7 In recognition of Operator's and MTU's desire to stabilize the financial expectations resulting from this Agreement, the Parties agree to meet annually to discuss and reconcile the overall technical and business aspects of this Agreement.

                                                                   page 13 of 40
CLAUSE     3      RECORDS AND STANDARDS

           3.1    MTU will prior to commencement of Services establish and shall
                  maintain throughout the duration of this Agreement a service
                  organization and facilities for Services on Engines, Modules,
                  Parts and Accessories in accordance with the respective
                  manufacturer's manuals and other applicable documentation.
                  These facilities shall be approved by the FAA/JAA and/or
                  accepted by the DAC Brasil.

           3.2    In respect of individual Engines or Modules, Operator shall
                  provide to MTU all documents and supply all information within
                  Operator's possession or control necessary to establish the
                  extent of Services required. This includes:

           3.2.1  The technical documentation (or any other applicable
                  documentation):

           3.2.2  Any required variations to the applicable standard Work
                  specification including Modifications which are required to be
                  embodied in the Engine or Module during the performance of
                  Work. Further variations to any specific Work on an Engine or
                  Module will be agreed between MTU and Operator;

           3.2.3  Any further information concerning the condition of the
                  Engine or Module;

           3.2.4  Life of all Life Limited and/or time tracking Parts, Life
                  Limited Parts list;

           3.2.5  Module tracking list;

           3.2.6  AD-Note status;

           3.2.7  Service Bulletin status and Service Bulletin requirements (may
                  be included in workscope);

           3.2.8  Operator's special requirements;

           3.2.9  Removal reason;

3.2.10 Installed powerplant accessory component sheet, a listing by nomenclature of each accessory component, Part number, quantity, time and cycles and serial number (EBU List Accessory List/Accessory Life List);

3.2.11 Log book or equivalent and Part (Module) cards;

3.2.12 Engine/Part installation data records;

3.2.13 Purchase Order; and

page 14 of 40

3.2.14 Trend monitoring and in-flight readings (as mutually agreed upon) of all Engine parameters on that specific Engine from its last flight prior to removal.

3.3 The MTU record system will include documentation of all Services performed, Rework operations required and disposition of all Parts replaced. MTU agrees to keep all records herein described in form and detail sufficient for accurate and expeditious administration of the Agreement and shall furnish to Operator the following records and reports, as applicable for each Shop Visit:

3.3.1 Engine, Module, Part or accessory serial numbers; The general exterior condition of the Engine, Module or Part and shipping conveyance; List of the missing and/or damaged external Parts; and Borescope/chamberscope results, as applicable.

3.3.2 The following information for each cycle controlled and Life Limited Part installed during a Shop Visit:

a) Nomenclature;
b) Part number;
c) Serial number;
d) Total operating cycles and hours accumulated to date;
e) Total cycles remaining;
f) Major maintenance events (date, TSN, CSN) if available.

3.3.3 A list of all Life Limited Parts determined to be scrap identified by Module installed, Part number, quantity and reason for scrappage.

3.3.4 A list by nomenclature of each accessory component, Part number, quantity, Part time and serial number.

3.3.5 One (1) copy of the applicable engine and/or accessory test logs.

3.3.6 A report summarizing condition detected subsequent to Engine disassembly.

3.4 MTU shall be required to complete and properly execute Federal Aviation Administration (FAA) Form 8130-3, and for major repairs FAA Form 337, or its equivalent for Supplies repaired, modified and/or tested by MTU under this Agreement.

MTU undertakes to store all records provided to it by Operator hereunder safely as the property of Operator and to return the same to Operator upon request or expiry of this Agreement (in respect of an Engine).

Upon the request from Operator accident and damage reports, including pictures and laboratory investigation results will be issued by MTU.

                                                                   page 15 of 40
CLAUSE   4        DELIVERY

            4.1   MTU shall appoint MTU Brasil to handle on behalf of Operator
                  relevant import/export procedures related to the transactions
                  contemplated in this Agreement, except for the payment of any
                  Taxes (as defined in Clause 10) due upon such import/export
                  transactions, which shall subject to the provisions of Clause
                  10 be the entire and sole responsibility of Operator. In this
                  regard, the parties agree and acknowledge that Operator
                  itself shall be the importer/exporter of record of all
                  Engines, Modules, Parts and other items imported into/exported
                  from Brasil under this Agreement. Operator agrees that, upon
                  request of MTU or MTU Brasil, Operator will timely do,
                  execute, acknowledge and/or deliver and/or to cause to be
                  done, executed, acknowledged and/or delivered, all such acts
                  and documents as may be required to allow MTU Brasil to
                  conduct all relevant imports/exports for and on behalf of
                  Operator. Delivery of Engines, Modules, Parts and other items
                  requiring Work to MTU Brasil shall be the obligation of
                  Operator.

            4.2   Operator shall advise MTU of its intention to deliver Engines,
                  Modules, Parts and other items no less than * Days prior to
                  their dispatch.

            4.3   Risk of loss or damage shall be borne by Operator until
                  arrival at MTU Brasil.

            4.4   Upon receipt of Engines, Modules or Parts to MTU Brasil (as
                  evidenced by signature of an acknowledgement of delivery) risk
                  of loss or damage shall pass to MTU.

            4.5   After completion of Work, MTU shall be obliged to redeliver
                  Engines, Modules, Parts and other items to Operator at
                  Operator's facility and give notice to Operator of such
                  redelivery in due course of time. Risk of loss or damage shall
                  remain with MTU until the relevant Engines, Parts or Modules
                  are received by Operator's evidenced by signature of an
                  acknowledgement of receipt by Operator.

                                                                   page 16 of 40

CLAUSE   5        TURNAROUND TIME (TAT) AND EXCUSABLE DELAY


            5.1   Prior to delivery of an Engine, Module, Part or other item to
                  MTU and after inspection by MTU, MTU and Operator shall agree
                  on a reasonable TAT for such Engine, Module or Part and upon
                  delivery of an Engine to MTU and after Inspection by MTU, MTU
                  shall perform its Services within the following TAT:

                  The TAT for a complete Engine shall be * Days * .
                              If a shorter TAT will have to be met on certain
                  occasions upon requirement of Operator, MTU will use
                  commercially reasonable efforts to try to comply with such
                  request and shall keep Operator informed, if requested by
                  Operator, of the TAT.

            5.2   TAT shall start the Day after receipt of an Engine, Module,
                  Part or other item by MTU, provided all documents according to
                  Clause 3 are made available to MTU.

            5.3   Compliance with an agreed TAT requires * advance notification
                  by Operator that an Engine or Module is being or will be
                  shipped for Services ("Scheduled Delivery Date"). In the event
                  that MTU does not receive such advance notification (e.g. in
                  the event of an unscheduled Engine removal), the TAT shall
                  commence with the start of Services on the Engine or Module
                  but not later than * after receiving the Engine or Module at
                  MTU including the documentation listed in Clause 3.3.

            5.4   Any technical requests from MTU to Operator which will affect
                  the TAT have to be answered by Operator within * provided
                  always that if such a request is received by Operator later
                  than 4 p.m. (Sao Paulo time) on a Friday, Operator's response
                  shall be received by MTU no later than 6 p.m. (Sao Paulo time)
                  of the following Monday. If no replies are received within
                  that time, the TAT will be increased by the additional time
                  which is needed and verified by MTU due to the delay in
                  question. Any impact on the TAT resulting from this decision
                  will be advised by MTU together with supporting evidence of
                  any delay in the TAT.

            5.5   MTU shall not be liable for exceeding the TAT due to reasons
                  contained in Clause 5.8 - Excusable Delays.

            5.6   MTU shall promptly notify Operator when Excusable Delays
                  occur or impending delays are likely to occur and shall
                  continue to advise Operator of new shipping schedules and/or
                  changes thereto.

            5.7   If the actual TAT in respect of an Engine exceeds the TAT
                  referred to in this Clause 5 (as such period may be extended
                  pursuant to this Agreement) and if Operator is in, or during
                  such event of delay enters into, a zero spare engine
                  situation, Operator may as its sole remedy for such delay (i)
                  require MTU to have a spare engine delivered to

                                                                   page 17 of 40

                  Operator (at Operator's facility in Sao Paulo) within  * of
                  MTU being notified of such zero spare engine situation, or
                  failing which (ii) claim damages from MTU in an amount not
                  exceeding the cost of leasing an engine until such time as the
                  delayed Engine is delivered to Operator (including, for the
                  avoidance of doubt, any costs incurred in delivering or
                  re-delivering such leased engine). Any maintenance reserves to
                  be paid for such leased engine shall be borne by Operator.
                  Such claim is only permitted (i) if Operator has maintained an
                  appropriate quantity of spare Engines as specified in Clause
                  2.5.6, and (ii) is furthermore limited to the costs of a
                  leased Engine until the Engine so delayed is redelivered to
                  Operator. In the event MTU provides a lease Engine, such lease
                  shall be subject to a separate lease agreement.

            5.8   The party actually performing Services hereunder (the "Service
                  Provider"), i.e. MTU (if performing Services), or MTU's
                  subcontractors (if performing Services) shall not be charged
                  with any liability for delay or non-delivery when due to any
                  of the following events ("Excusable Delays")

                  (i)   delays of Operator, single source suppliers of the
                        Service Provider, or the OEM;
                  (ii)  acts of God or the public enemy, fires, riots;
                  (iii) compliance in good faith with any applicable foreign or
                        domestic governmental regulations or order whether or
                        not it proves to be valid or invalid provided that
                        compliance with any governmental or domestic regulations
                        or orders in Germany, Brazil (or where the Services are
                        to be provided by a subcontractor, the jurisdiction of
                        such subcontractor) which the Service Provider ought
                        reasonably to have been aware of and ought reasonably to
                        have complied with shall not constitute an Excusable
                        Delay;
                  (iv)  labor disputes;
                  (v)   unusually severe weather or
                  (vi)  any other cause beyond the control of the Service
                        Provider which could not be reasonably foreseen.

                  To the extent the occurrence of an Excusable Delay causes
                  actual delay to the Turnaround Times or renders them in part
                  or whole impossible, the time for the performance shall be
                  extended for as many Days beyond the agreed TAT as is required
                  to obtain removal of such causes.

                  This provision shall, however, not relieve the Service
                  Provider from using its best efforts to avoid or remove such
                  causes and to continue performance with reasonable dispatch
                  whenever such causes are removed. In case that upon occurrence
                  of an Excusable Delay it is evident that the resulting impact
                  on the Service Provider is such as to delay the performance of
                  Services on the Engines, Modules and Parts then undergoing
                  Services at the Service Provider (hereinafter the "Affected
                  Items") for more than three weeks, Operator shall have the

                                                                   page 18 of 40

                  right to either (i) terminate the Purchase Order relating to
                  the Services for the Affected Items to the extent the Services
                  can not be completed by the Service Provider due to such
                  Excusable Delay and take possession of the Affected Items in
                  the possession of the Service Provider or shipping agents and
                  cause such Services to be completed by another maintenance
                  provider without any obligation on the Service Provider's part
                  for any Services so performed by another maintenance provider,
                  or (ii) cause MTU to have the Services provided by another
                  Service Provider not affected by the Excusable Delay.

                  For the avoidance of doubt it is expressly agreed that once
                  such impact on MTU is removed, Operator will continue to send
                  all Engines, Modules and Parts needing Services to MTU.

                                                                   page 19 of 40

CLAUSE      6     ORDER PROCESSING

            6.1   Operator will provide MTU with a Purchase Order number before
                  commencement of Services.

            6.2   In the event that Operator delivers an incomplete Engine or
                  Module, MTU will promptly following discovery of any such
                  deficiency inform Operator in writing of the missing Parts. In
                  case Operator does not react within * Days upon such
                  information, the TAT may be increased accordingly. Should
                  Operator promptly request to add the missing Parts, MTU will
                  use reasonable efforts to deliver the requested Parts together
                  with the Engine or Module.

                  Requested accessories which are not available at the date of
                  redelivery of an Engine or Module will be separately sent to
                  Operator when such accessories become available.

            6.3   In case of Reworks MTU shall not perform uneconomical Rework,
                  i.e. when the costs for the Rework of a Part exceed * of the
                  then current list price for the respective new Part. In such
                  case MTU shall replace the removed Part by a new one and
                  charge the price for it according to Appendix B.

                                                                   page 20 of 40
CLAUSE     7      REJECTED PARTS

                  All Parts removed during Work and determined by MTU as
                  rejected shall become Mt.'s property and shall be disposed of
                  locally by MTU.

                  All Parts removed during Work and determined by MTU as scrap
                  will be held for Operator's review and disposition. Such
                  disposition by Operator shall occur twice per calendar year.
                  If such disposition for any such Parts is delayed for any
                  reason whatsoever for more than * months, following written
                  notice to Operator, it shall be conclusively deemed that
                  Operator has transferred title to any such Parts to MTU, and
                  MTU may dispose of such Parts at its sole discretion.

                                                                   page 21 of 40

CLAUSE 8    CHARGES

            For all Services Operator shall pay the sums charged in accordance
            with Appendix B subject to the Escalation Formulae contained in
            Appendix C. Engines delivered for the performance of Services in a
            given year shall be invoiced at the charges applicable to such year.

                                                                   page 22 of 40

CLAUSE 9    PAYMENT

      9.1   MTU shall render an initial invoice at least * after completion of
            Work. The final invoice shall be issued not later than * after
            completion of Work.

      9.2   Invoices shall be issued in US-Dollars and promptly forwarded to
            Operator in duplicate.

      9.3   Unless otherwise provided herein, all invoices shall be payable *
            (the due date) after date of issue; all payments shall be made *  -
            in US-Dollars on MTU's bank account with

                                       *

            Operator shall promptly furnish copies of the documents evidencing
            wire transfer of all such payments to the attention of the Financial
            Director, MTU.

      9.4   In case of Excusable Delays, MTU shall be entitled to payment of an
            adequate and reasonable partial payment for Services already
            rendered as may be agreed by MTU and Operator on a case by case
            basis.

      9.5   If sums due are received by MTU within * after issuance of an
            invoice, MTU may credit * of the respective invoiced amount.

      9.6   If Operator is in default of any payment obligation, MTU is without
            reminder and prejudice to any other rights entitled to charge
            interest at a rate of * for any outstanding sum, starting from the
            due date of payment until the date payment is received.

      9.7   If Operator is in default of any payment obligation, MTU may
            postpone the performance of its own obligations under this Agreement
            until such payment is made.

      9.8   Operator is not entitled to withhold payments or to make any
            deductions whatsoever unless accepted by MTU or affirmed by an
            arbitral ruling under Clause 16 or a judgment of a court of
            competent jurisdiction.

                                                                   page 23 of 40

      9.9

                                     *

      9.10  MTU shall be entitled to a general lien on any of the Supplies
            delivered by Operator which are in the care, custody and control of
            MTU under this Agreement together with any amounts due to MTU from
            Operator which have arisen with respect to respect to other or
            previous Services performed by MTU for Operator. Such provision
            shall also apply if any Supply owned or leased by Operator passes
            into the hands of MTU at a later date and MTU has claims out of the
            business relationship at the time the lien is claimed.

                                                                   page 24 of 40

CLAUSE 10   TAXES, DUTIES AND CUSTOMS FEES

      10.1  MTU shall pay all Taxes (as defined below) levied on either Party by
            authorities in the Federal Republic of Germany.

      10.2  Any and all Taxes levied by any authority in Brazil on MTU or
            Operator, including, but not limited to, the Import Duty (ID) and
            Tax on Industrialized Products (IPI) levied on the importation of
            goods into Brazil, shall be borne by Operator, except for (a) the
            Income Tax Withholding (Imposto de Renda na Fonte - "Current Income
            Tax"), which shall be withheld by Operator from amounts due to MTU
            under this Agreement, if thus required by Brazilian law; and (b) the
            Tax on Transactions Related to the Circulation of Goods and
            Interstate and Intermunicipal Transport and Communication Services
            ("ICMS"), if any, due upon the importation of new Engines, Modules;
            and Parts into Brazil in connection with MTU's performance of its
            obligations under this Agreement. In this regard, MTU shall grant
            Operator a rebate on the charges due by Operator under this
            Agreement in the exact amount of the ICMS actually paid by Operator
            (if any) upon importation by Operator of relevant Engines, Modules
            and Parts into Brazil, provided (i) Operator evidences actual
            payment of such ICMS in a form satisfactory to MTU; (ii) the rate at
            which the ICMS is paid by Operator is not higher than 4%; (iii)
            Operator does not fail to benefit from any ICMS benefit (including
            ICMS reduction or exemption) that may be available; (iv) Operator is
            unable to and actually does not offset such ICMS against any Taxes
            due by Operator, nor directly or indirectly recover such ICMS in any
            form whatsoever; AND (v) if so allowed by applicable regulations,
            upon written request of MTU, Operator promptly assigns, transfers or
            makes in any form available to MTU and/or any company indicated by
            MTU the ICMS credits earned by Operator upon the above mentioned
            imports. If any of the conditions set forth in items (i) and (iii)
            through (v) above is not met, MTU's obligation set forth in the
            immediately preceding sentence (i.e. to grant Operator a rebate at a
            rate of 4%) shall not apply.

            The Parties hereby acknowledge and agree that (i) the compensation
            due by Operator to MTU under this Agreement, was established
            assuming that (i) invoices issued hereunder will be issued by MTU
            Maintenance Hannover GmbH, and (ii) the only Taxes that will levy in
            Brazil on payments by Operator to MTU Maintenance Hannover GmbH in
            connection with the transactions contemplated in this Agreement are
            Current Income Tax and ICMS; (ii) in the event (a) the Current
            Income Tax and/or the ICMS become due at a rate higher than its
            current rate; (b) it is later determined that other Taxes are also
            due in Brazil on payments made by Operator to MTU in connection with
            MTU's performance of its obligations under this Agreement; and/or
            (c) new Taxes are created and become due in Brazil on payments due
            by Operator to MTU in connection with MTU's performance of its
            obligations under this Agreement, MTU shall be entitled to, upon
            written notice to TAM, increase the compensation due by Operator to

                                                                   page 25 of 40

                                               *

            For purposes of this Agreement, the term "Tax" or "Taxes" shall mean
            all federal, state, or municipal taxes, charges, fees, levies,
            imposts, duties (including import duties), tariffs, surcharges, or
            other assessments, including, without limitation, sales, use,
            transfer, gross receipts, excise, withholding or any similar charges
            or assessments and all taxes, charges, fees, levies, imposts,
            duties, tariffs, surcharges, or other assessments placed by, or
            replacing, any of the above, or other tax or governmental fee of any
            kind whatsoever directly or indirectly imposed by any governmental
            authority, including any interest or penalties or additions thereto,
            whether disputed or not.

            Taxes imposed in any other jurisdiction shall be borne by the
            relevant Party on whom such taxes are levied, provided that TAM
            shall not be responsible for any Taxes due in any jurisdiction other
            than Brazil in connection with the performance by MTU of its
            obligations under this Agreement.

            In the event that any Party shall be held responsible by any taxing
            authority for the collection or payment of Taxes to be borne by the
            other Party and shall be required to pay the same to such authority,
            such other Party shall reimburse the first Party the full amount of
            such payment and any expenses connected therewith upon the first
            Party's first demand therefor.

      10.3  Operator reserves the right to use its commercially reasonable
            efforts to negotiate and enter into an arrangement with the
            Brazilian taxing authorities for an exemption for the assessment
            and payment of import duties, tariffs or similar taxes imposed on
            any and all goods, material or services imported to Brazil under
            this Agreement.

      10.4                              *

                                                                   page 26 of 40

CLAUSE 11   SUBCONTRACTING

            MTU may subcontract any Services upon prior approval by Operator.
            Such approval may not be unreasonably withheld.

            Any subcontracting shall not release MTU from its obligations under
            this Agreement and MTU shall remain liable to Operator for the
            performance of Services under this Agreement by any subcontractor as
            if such Services were performed by MTU. MTU shall use best
            endeavours to ensure that all Work subcontracted is undertaken by
            reputable Maintenance facilities appropriately certified by all
            relevant authorities and able to perform the Services to the
            standard required of MTU pursuant to this Agreement. Nothing in this
            Clause will cause MTU to be liable for any default by a
            subcontractor where MTU or another subcontractor remedies that
            default.

                                                                   page 27 of 40

CLAUSE 12   WARRANTY

      12.1  MTU warrants that at the time of delivery of serviced Engines the
            Services will have been performed in a skilled and workmanlike
            manner in accordance with best industry practice and in accordance
            with the requirements of this Agreement. This warranty is limited to
            MTU's correcting at its facilities within a reasonably prompt period
            of time and at its own cost and expense such Services as are shown
            to MTU's reasonable satisfaction to be defective, provided that the
            defect has arisen within * months after installation by Operator or
            the * following delivery or within * after the date of delivery
            whichever shall first occur, provided further that written notice of
            the defect is received by MTU within * after discovery by Operator.
            Transportation charges for return of defective Engines to MTU and
            their reshipment will be borne by MTU, subject to Clause 12.7
            herebelow. In the event of a justified warranty claim hereunder the
            warranty period shall be extended by the time required to carry out
            the work.

      12.2  Non-compliance of an Engine with the specified performance and
            consumption rates can only be determined and demonstrated by a test
            run at MTU's facilities or any test cell agreed between both
            Parties.

      12.3  MTU's warranty shall not apply if after redelivery by MTU Operator,
            its servants, agents, subcontractors or third parties have abused,
            altered or repaired the Engine or Module or have not operated the
            Engine or Module in accordance with the manufacturer's operating
            instructions or recommendations.

      12.4  If an Engine defect was caused due to the failure of a new Part
            properly installed by MTU, MTU will assign to the fullest extent
            possible the warranty granted by the manufacturer of such new part
            to Operator. In the event that the warranty related to such new Part
            cannot be assigned, MTU will administer and enforce the warranty
            claim against the manufacturer on behalf of Operator and pass the
            respective remedies on to Operator. In any event MTU's liability
            shall be limited to the extent outlined in this Clause 12 and Clause
            13 herebelow and shall apply if all attempts at judicial actions
            against the manufacturer have failed.

      12.5  MTU assumes no warranty for Parts supplied by Operator and properly
            installed by MTU.

      12.6  Within * after notification by Operator MTU will use its reasonable
            efforts to determine if a warranty claim can be accepted.

                                                                   page 28 of 40

      12.7  In case Operator asserts a warranty claim according to this Clause
            12 and as a result of the investigation it is established that MTU
            is not liable for the defects claimed, the reasonable and properly
            incurred costs of investigation as well as any other reasonable and
            properly incurred costs and expenses connected with such claim shall
            be borne by Operator and due and payable upon receipt of the
            respective invoice.

      12.8  MTU acknowledges and agrees that it shall bear responsibility in
            accordance with this Clause 12 for any Engine defect caused due to
            Work performed by any of MTU's subcontractors and that Operator
            shall not be required to take any action against such subcontractor.
            Operator agrees that the provisions of Clause 12.4 above will apply
            where the defect is caused by a new Part installed by a
            subcontractor.

      12.9  EXCLUSIVE WARRANTIES AND REMEDIES

            THE FOREGOING WARRANTIES ARE EXCLUSIVE AND ARE GIVEN AND ACCEPTED IN
            LIEU OF (i) ANY AND ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED,
            INCLUDING WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF
            MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE; AND (ii) ANY
            OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN CONTRACT, TORT OR
            STRICT LIABILITY, WHETHER OR NOT ARISING FROM MTU'S NEGLIGENCE,
            ACTUAL OR IMPUTED. THE REMEDIES OF OPERATOR SHALL BE LIMITED TO
            THOSE PROVIDED IN THIS AGREEMENT TO THE EXCLUSION OF ANY AND ALL
            OTHER REMEDIES, INCLUDING WITHOUT LIMITATION, INCIDENTAL OR
            CONSEQUENTIAL DAMAGES. NO AGREEMENT VARYING OR EXTENDING THE
            FOREGOING WARRANTY, REMEDIES OR THIS LIMITATION WILL BE BINDNG UPON
            MTU UNLESS IN WRITING, SIGNED BY TWO DULY AUTHORIZED OFFICERS OF
            MTU.

                                                                   page 29 of 40

CLAUSE 13   LIABILITY

      13.1  MTU, its officers, directors, employees, agents and subcontractors
            (collectively herein "the Indemnified Parties") shall not be liable
            for any damage to or loss of the aircraft and other properties owned
            or operated by Operator or injury or death or any other damage
            sustained by Operator, its personnel or third parties due to or in
            connection with or in consequence of the performance or
            non-performance of Services under this Agreement unless caused by
            willful misconduct or negligence of an Indemnified Party.

      13.2  In cases of negligence any liability of the Indemnified Parties
            shall be limited for any and all claims which might arise under or
            out of this Agreement to * per occurrence or in the aggregate per
            year.

            Throughout the term of this Agreement, MTU shall maintain in full
            force, at its expense, appropriate aviation products third party
            liability insurances in respect of the liabilities specified in
            Clause 13.2 in accordance with current aviation insurance practice.
            MTU shall provide evidence of such insurances to Operator from time
            to time.

      13.3  Except for the Indemnified Parties' liability outlined in Clauses
            13.1 and 13.2 above, Operator shall indemnify and hold harmless the
            Indemnified Parties from any and all liability claims including
            costs and expenses incident thereto. The obligation by TAM to
            indemnify pursuant to this Clause 13 shall, however, exclude (i)
            MTU's officers, directors and employees, (ii) MTU's property, and
            (iii) the property of third parties in the care custody and control
            of MTU.

      13.4  Throughout the term of this Agreement, Operator shall maintain in
            full force, at its expense, the following insurance:

            a)    Comprehensive aircraft third party, passenger (including
                  personal injury), baggage (checked or unchecked), cargo and
                  mail legal liability insurance for a combined single limit of

* per occurrence. Such insurance shall name the Indemnified Parties as additional insured.

Upon MTU's request Operator shall have its insurers provide certificates of insurance evidencing the coverages required under a) and b) above. Each insurance certificate shall provide for at least fourteen (14) days' written notice to MTU prior to any premature

page 30 of 40

termination or reduction of coverages or limits. Any deductibles shall be the sole responsibility of Operator.

13.5 For the purposes of this Clause 13, the term "Indemnified Parties" shall also include the companies of the MTU group of companies (MTU Motoren- und Turbinen-Union Munchen GmbH etc.).

page 31 of 40

CLAUSE 14   MISCELLANEOUS

      14.1  Interpretation

            The rule of construction that ambiguities or inconsistencies are to
            be resolved against the drafting Party shall not be employed in the
            interpretation of this Agreement to favour any Party against the
            other. Ambiguities or inconsistencies shall be resolved by applying
            the most reasonable interpretation under the circumstances, giving
            full consideration to the intentions of the Parties at the time of
            conclusion of this Agreement.

      14.2  Order of Precedence

            In the event that there are any conflicts of inconsistencies between
            the provisions of this Agreement and the appendices hereto, the
            provisions of this Agreement shall prevail.

      14.3  Merger of Negotiations

            The terms and provisions contained herein constitute the entire
            agreement between the Parties with respect to the subject matter
            hereof and the Parties agree that neither of them has placed any
            reliance whatsoever on any representations, agreements, statements
            or understandings made prior to the signature of this Agreement
            whether orally or in writing relating to the scope of this Agreement
            other than those expressly incorporated in this Agreement which has
            been negotiated on the basis that its provisions represent their
            entire agreement relating to the subject matter hereof and shall
            supersede all such representations, agreements, statements and
            understandings, provided, however, this provision is not intended to
            abrogate any other written agreement between the Parties executed
            with or after this Agreement, including without limitation the
            Engine Purchase Agreement and the Engine Lease Agreement.

      14.4  Property and Risk

            The risk in respect of loss of or damage to the Supplies shall pass
            to MTU on delivery to MTU in accordance with Clause 4 hereof and
            shall remain with MTU until redelivered in accordance with Clause 4
            hereof.

            MTU shall maintain and shall procure that any subcontractor
            performing services also maintains insurance coverage in an amount
            of not less than * against loss of or damage to the Supplies
            while they are in its or any of its subcontractor's care,
            custody and control in accordance with current aviation insurance
            practice. MTU shall provide evidence of such insurances if requested
            by Operator, from time to time.

                                                                   page 32 of 40

            Should any item of Supplies delivered to MTU or any of its
            subcontractors according to Clause 4 above while being in MTU's or
            any of its subcontractor's care, custody and control be damaged,
            howsoever, MTU as its sole responsibility and as Operator's sole
            remedy with regard thereto, will either (as MTU may in its
            discretion decide) provide an adequate replacement or pay to
            Operator the actual replacement cost of such item of Supplies.

            MTU shall at all times ensure that Supplies in its care, custody and
            control or in the care, custody and control of any subcontractor do
            not by its or its subcontractor's act or omission become the subject
            of any lien, tax, charge, duty or encumbrance and MTU shall
            indemnify Operator against all costs, expenses and damages which
            Operator may incur or suffer by reason of MTU failing to carry out
            its obligations under this Clause.

      14.5  Lien

            Except as otherwise provided in this Agreement, MTU shall ensure
            that the Engines remain free and clear of all liens other than liens
            arising by operation of the law.

      14.6  Title to Parts

            MTU shall ensure that full legal and beneficial title to Parts
            incorporated into Engines during Services shall pass to the owner of
            such Engines free and clear of all liens and encumbrances upon
            re-delivery of such Engines to Operator.

      14.7  Title to Exchanged Parts

            Operator and MTU each represent and warrant that they will
            accomplish transfer of the full legal title of any item exchanged
            hereunder free and clear of all charges, liens and encumbrances.
            Operator warrants the authorization of the owner of such items to
            effect such exchange of title. Either Party will only with the prior
            written consent of the other enter into any arrangement or
            agreement which might prejudice or impair its ability to perform
            its obligations under this Clause.

      14.8  Assignment

            Neither Party hereto may assign any of its rights or obligations
            hereunder without prior written consent of the other Party except
            that MTU may assign claims for monies due hereunder to a bank or to
            a bank or other financial institution. Any assignment by MTU as
            aforementioned shall be on terms that Operator's obligations
            hereunder shall not be increased as a result of such assignments.
            MTU shall remain liable for the performance of all its obligations
            hereunder, notwithstanding any such assignment. Any assignment made
            in

                                                                   page 33 of 40

            violation of this Clause shall be null and void.

      14.9  Alterations and Amendments


            This Agreement shall not be altered or amended in any way other than
            by agreement in writing (to include telex) entered into by the
            Parties after the date of this Agreement, which is expressly stated
            to amend or alter this Agreement.

14.10 Negation of Waiver

Failure of either Party at any time to enforce any of the provisions of this Agreement shall not be construed as a waiver or forbearance by such Party of such provisions or in any way affect the validity of this Agreement or part thereof.

14.11 Partial Invalidity

In case one or more of the provisions contained in this Agreement should be or become fully or in part invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions contained in this agreement shall not be affected in any way or impaired thereby, and the Parties shall to the extent possible replace such invalid, illegal or unenforceable provision(s) by another clause or clauses considering the economic intention of the Parties.

14.12 Precedent

None of the provisions of this Agreement shall be considered by either Party as precedent for any further agreements between the Parties which relate to the same subject matter hereof.

14.13 Representative

Operator shall have the right to appoint a representative at MTU to consult with MTU during performance of Services. All costs connected with such appointment shall be borne by Operator.

If requested by Operator, MTU will appoint a representative in Brasil to consult with Operator during performance of Services. All costs associated with such appointment shall be borne by MTU.

14.14 Communication and Accommodation

MTU shall provide Operator's representative with reasonable office space and adequate telephone access at MTU's expense.

page 34 of 40

14.15 Inspection

The appropriate airworthiness authorities and Operator's representatives may at all reasonable times, upon advance notice, inspect the performance of Services. Any such inspection shall not constitute an acceptance of Services.

14.16 Training

MTU will provide training (class room and / or on site) for Operator's personnel on the V2500 engine type on request of Operator. *

14.17 Maintenance Cost Guarantees

Appendices E (1) and E (2) each contain the maintenance costs guarantees granted by MTU to Operator in accordance with the terms and conditions stated therein. In no event shall the maintenance cost guarantees contained in Appendices E(l) or E(2) be applicable unless the application of Appendix E(2) is more favorable to Operator than is the application of Appendix E(l) in which event Appendix E(2) shall become applicable for the differential (i.e. the amount that Appendix E(2) is more favorable to Operator than Appendix E(l)).

page 35 of 40

CLAUSE 15   DURATION AND TERMINATION

      15.1  Subject to Clause 15.4 below, this Agreement shall become effective
            on July 1, 1999 regardless of the date this Agreement is signed by
            both Parties, and it shall automatically terminate and become null
            and void on June 30, 2014. For any Purchase Orders placed prior to
            the date of expiration or termination this Agreement shall continue
            to be valid until fulfillment of all obligations of the Parties
            thereunder.

      15.2  The rights and obligations of the Parties under the following
            clauses shall survive any termination or expiration of this
            Agreement:

            Clause 12 (WARRANTY)
            Clause 13 (LIABILITY)
            Clause 17 (APPLICABLE LAW AND ARBITRATION).

      15.3  Termination

            If either Operator or MTU makes an agreement with creditors
            compounding debts, enters into liquidation whether compulsory or
            voluntary (otherwise than for the purpose of amalgamation or
            reconstruction), becomes insolvent, suffers a receiver of the whole
            or parts of its assets to be appointed, or commits a breach of any
            of its obligations under this Agreement (hereinafter collectively
            "Termination Events"), the defaulting Party shall have thirty (30)
            Days upon notification by the non-defaulting Party to remedy any
            such Termination Event or provide an acceptable plan for the remedy
            otherwise the non-defaulting Party shall have the right without
            prejudice to its other rights or remedies under applicable laws
            which rights or remedies shall be cumulative and not exclusive:

            a)    to terminate this Agreement or any Purchase Order hereunder by
                  written notice (to include telex), and

            b)    to stop any Work already commenced and to refuse to commence
                  any further Work.

            For the avoidance of doubt, it is expressly agreed between the
            Parties that Purchase Orders placed by Operator with MTU on or
            before the effective date of termination shall continue to be
            subject to the provisions of this Agreement.

                                                                   page 36 of 40

15.4  Condition Precedent

      The Agreement and its Annexes shall become effective subject to the
      following conditions precedent being fulfilled:

      a)    MTU, not later than thirty (30) Days of execution of the Agreement
            by the Parties, receives approval by its Board of Management to
            enter into this transaction,

      b)    signature of the Engine Sale and Purchase Agreement relating to the
            sale of up to twelve (12) V2500-A5 engines from Operator to MTU, and

      c)    signature of the Engine Lease Agreement between the Parties relating
            to the lease of six (6) V2500-A5 engines from MTU to Operator.

                                                                   page 37 of 40

CLAUSE 16   REPRESENTATIONS AND WARRANTIES

            Each of the Parties hereby represents and warrants that:

      16.1  It is a limited liability company duly constituted and validly
            existing under the laws of its country of incorporation, its
            obligations under and pursuant to this Agreement constitute its
            legal, valid, binding and enforceable obligations (save to the
            extent that enforcement may be limited by applicable bankruptcy,
            insolvency, moratorium or other laws for the protection of creditors
            and debtors generally and general principles of equity) and that
            this Agreement has been duly executed by it;

      16.2  The execution and delivery by it of this Agreement, the consummation
            by it of any of the transactions contemplated hereby and compliance
            by it with any of the terms and conditions hereof do not require any
            consent of any trustee or holder of any indebtedness or other
            obligation of it, violate any term or condition of its constitutive
            documents, contravene any provision of or constitute or will
            constitute a default under or pursuant to or result in any breach of
            or the creation of any lien (other than as contemplated under this
            Agreement) on or over any of its assets or any other agreement or
            instrument to which it is party or by which it is bound;

      16.3  No consent of, giving of notice to, registration with or taking of
            any other action in respect of any government entity in its country
            of incorporation is required for the execution by it of this
            Agreement.

                                                                   page 38 of 40

CLAUSE 17   LAW AND ARBITRATION

            This Agreement shall be governed by and construed in accordance with
            the laws of the State of New York, United States of America, but
            without giving effect to the principles of conflicts of laws
            thereof. The United Nations Convention on Contracts for the
            International Sale of Goods shall not govern this Agreement or the
            rights and obligations of the Parties hereunder. Any and all
            disputes arising out of or in connection with this Agreement between
            the Parties shall be finally settled under the rules of the American
            Arbitration Association by three (3) arbitrators. Each Party shall
            name one (1) arbitrator within thirty (30) Days following
            notification by the other Party; the two (2) arbitrators so chosen
            shall then select a third arbitrator as chairman. Should one (1)
            Party delay nomination of its arbitrator or if an arbitrator does
            not take up his office or if he is prevented from taking up his
            office at the correct time for any other reason, or if the two (2)
            arbitrators cannot agree within thirty (30) Days as to the choice of
            the chairman, the President of the American Arbitration Association
            shall be asked to appoint such arbitrator. The Rules of Conciliation
            and Arbitration of the American Arbitration Association shall apply
            for the arbitration proceedings. The place of arbitration shall be
            New York, New York, United States of America. All arbitration
            filings and proceedings shall be in the English language.

            A Party entitled under an award by the arbitrators to receive an
            amount of money shall be entitled to recover its costs, including
            reasonable attorneys' fees, incurred in preparing for and
            participating in the arbitration proceeding and any ancillary
            proceedings, including proceedings to compel or enjoin arbitration
            or to request, confirm or set aside an award, in the same ratio as
            the total amount of money ultimately awarded to such Party divided
            by the amount claimed by such Party.

                                                                   page 39 of 40

CLAUSE 18   NOTICES

            Any notice or communication to be served pursuant to this Agreement
            shall be sent by registered mail, telefax, telex or delivered
            personally (and a copy - which shall not constitute notice hereunder
            - shall also be promptly transmitted by e-mail to the other Party)
            and shall be deemed to have been duly given when received by the
            addressees under the following address:

            For Operator:

            TAM - Transportes Aereos Regionais S.A.
            Av. Jurandir, 856 - Lote 4 - Hangar VII
            Attn. Mr. Jose Maluf
            Contracts Director
            Aeroporte - CEP 04072-000 Sao Paulo
            Brasil
            Phone: +55-11-5582-8675
            Fax: +55-11-5581-9167
            E-mail: maluf@tam.com.br

            For MTU:

            MTU Maintenance Hannover GmbH
            Attn: General Counsel
            Munchner Strasse 31
            30855 Langenhagen
            Germany

            Phone: +49-511-7806-388
            Fax: +49-511-7806-100
            E-mail: Andreas. Brosig@haj.mtu.de

            or such other place of business as may be notified in writing by the
            other Party to this Agreement from time to time.

            All notices, reports, certificates, data and communications
            pertaining to this Agreement shall be in the English language. The
            giving of any notice required hereunder may be waived in writing by
            the Party entitled to receive such notice.

                                                                   page 40 of 40

            IN WITNESS WHEREOF, each of the Parties hereto has caused this
            Agreement to be executed and delivered on its behalf by its
            duly authorized representative(s) as of the Effective Date.

            TAM - Transportes Aereos         MTU Maintenance Hannover
            Regionais S.A.                   GmbH

            By                               By
                  ------------------               ----------------------------

            Title V. P.                      Title

            By                               By
                  ------------------               ----------------------------

            Title Contracts Director         Title General Counsel
                                                   ----------------------------

APPENDIX A (1)

[this page is intentionally blank]

APPENDIX A (2)

[this page is intentionally blank]

APPENDIX B

CHARGES

For Services the Operator shall pay the amounts invoiced in accordance with the provisions hereunder:

1     Hourly Rate for Engine/Module Repair Work                               *

2     Fixed Price for test run, incl. fuel and oil                            *

3     Price of Spare Parts

All Parts supplied by MTU during Repair will be charged for prices at the date as indicated in MTU's delivery note as follows:

      3.1
      Replacement Parts out of MTU' stock (if original Parts are determined
      rejected)

      -     Parts according to the Manufacturer's Spare Parts Price List      *
       with  a mark-up of limited to * per piece Part and * per line item

      3.2

      Used material supplied by MTU for the Service shall be charged at*
      the Manufacturer's list price without surcharge

      3.3

      For all serviceable Parts supplied by MTU on a    *                     *
      exchange basis an exchange fee of on the current Manufacturer's list
      prices shall be charged to the Operator limited to * per piece Part
      and * per line item

4     In case of subcontracting the Operator will be charged a handling       *
      fee of on all vendor cost (outside vendor charges, transportation cost
      (including all risks transportation insurance) of the applicable Part or
      component)

5     The storage of a mutually agreed amount of Operator owned Parts at MTU's

facilities and maintaining a current inventory of those Parts will be free of charge to the Operator. F.O.C.

6 Life Cycle Adjustment

For life cycle adjustment the following formula shall apply:

Cycles New - Cycles Used X Then Current Spare Parts Price Cycles New x 0,9

[ILLEGIBLE]

page 1 of 2

7     The charges for technical services provided at Operator's                *
      facilities are for a working day plus actual travel, hotel accommodation
      and transfer costs.

8     All prices shall be valid  * For each following calendar year the prices
      will be adjusted in accordance with the escalation formulae contained in
      Appendix C. Escalation for hourly rate is limited to *

page 2 of 2

APPENDIX C

ESCALATION FORMULAE

1. Labor Rate Escalation

The Labor rate will be adjusted [ * ] using the cumulated adjustment factor for labor costs as published in [ * ]. MTU will inform the Operator of the [ * ] variation of the factor for financial year in April of the previous year. The change in the factor will reflect the actual effects of labor costs incurred by MTU.

Escalation for hourly rate is limited to [ * ]

2. Material Price Escalation

Material prices [ * ] will be adjusted [ * ] using the [ * ]

page 1 of 1

page 1 of 8

BUNDESREPUBLIK DEUTSCHLAND

LUFTFAHRT-BUNDESAMT

[LOGO]

Mitglied der
a member of the

JOINT AVIATION AUTHORITIES

GENEHMIGUNGSURKUNDE

APPROVAL CERTIFICATE

GENEHMIGUNGSZEICHEN: LBA. 000

GemaB den zur Zeit gultigen Rechtsvorschriften und abhangig von der Einhaltung der nachfolgend aufgefuhrten Bedingungen genehmigt das Luftfahrt-Bundesamt

Pursuant to the National Regulations for the time being in force and subject to the conditions specified below, the Luftfahrt-Bundesamt hereby Certifies

MTU Maintenance Gmbh

als JAR-145 Instandhaltungsbetrieb fur die Instandhaltung der Luftfahrtgerate, die in dem anliegenden Anhang zur Genehmigung aufgefuhrt sind, und fur die Erteilung der zugehorigen Freigabebescheinigungen unter dem vorgenannten Genehmigungszeichen.

as a JAR-145 maintenance organisation approved to maintain the products listed in the attached approval schedule and issue related certificates of release to service using the above reference.

Bedingungen:
Conditions:

1. Diese Genehmigung ist beschrankt auf die im Abschnitt "Umfang der Genehmigung" des genehmigten JAR-145 Instandhaltungbetriebshandbuches aufgefuhrte Instandhaltung und This approval is limited to that specified in the scope of approval section of the jar-145 approved maintenance organisation exposition, and

2. Diese Genehmigung erfordert die Einhaltung der Verfahren, die in dem genehmigten JAR-143 Instandhaltungsbe-triebshandbuch festgelegt sind, und This approval requires compliance with the procedures specified in the jar-145 approved maintenance organisation exposition, and

3. Diese Genehmigung ist gultig, solange der genehmigte JAR-145 Instandhaltungsbetrieb die Vorschriften der JAR-145 erfullt. This approval is valid whilst the jar-145 approved maintenance organisation remains in compliance with jar-145.

Abhangig von der Erfullung der vorstehenden Bedingungen bleibt diese Genehmigung bis zum im Anhang zur Genehmigung genannten Datum gultig, es sei denn, sie wird vorzeitig zuruckgegeben, einstweilig aubetaer Kraft gesetzt oder widerrufen. Subject to compliance with foregoing conditions, this approval shall remain valid until the date of expiry specified in the approval schedule unless the approval has been surrendered, suspended or revoked.

Braunschweig,    14. Mai 1993                               Luftfahrt-Bundesamt
                                                                Im Auftrag

                                                                     page 2 of 8
                             Anhang zur Genehmigung
                                Approval Schedule

                Firmenbezeichnung:         MTU Maintenance Hannover
                Company:                   Munchner StraBe 31
                                           30855 Langenhagen

Genehmigungszeichen: LBA.0008 Approval reference:
Diese Genehmigung wird erteilt fur folgende Standorte:
This approval is limited for following locations:

MTU Maintenance Hannover Airport Hannover
Munchner StraBe 31
30855 Langenhagen

Luftfahrt-Bundesamt
Im Auftrag

 /s/ Gohlke
-------------------
Gohlke                                                            SEITE 1 VON 4

Page 1 of 4

Revision 06

page 3 of 8

             Anhang zur Genehmigung
                Approval Schedule

Firmenbezeichnung:                      MTU Maintenance Hannover
company:                                Munchner StraBe 31
                                        30855 Langenhagen

Klasse                Berechtigung                  Einschrankung
Class                 Rating                        Limitation
Flugmotoren           B1 Turbinenflugmotoren
                                                    - General Electric
Engines               Turbine Engines                 -CF 6 series
                                                      -CFM-56 series
                                                    - Pratt & Whitney
                                                      -PW 2000 series
                                                    - International Aero Engines
                                                      -V2500 series
                                                    - Rolls Royce
                                                      - RB 211 series

Luftfahrt-Bundesamt
Im Auftrag

 /s/ Gohlke
------------------
Gohlke                                                            SEITE 2 VON 4

Page 2 of 4

Revision 06

page 4 of 8

             Anhang zur Genehmigung
                Approval Schedule

Firmenbezeichnung:         MTU Maintenance Hannover
company:                   Munchner StraBe 31
                           30855 Langenhagen

Klasse                          Berechtigung             Einschrankung
Class                           Rating                   Limitalion
Bauteile ausgenommen            C7 Flugmotoren und       Baugruppen und
vollstandige Flugmotoren        Hilfskraftanlagen        Komponenten gem.
und Hilfskraftanlagen                                    MTU-H Cap. List Nr.
                                                         PHF 5040 D.
Components other than complete  Engine and APUs          Moduls and components
engines or APUs                                          according to MTU-H Cap.
                                                         List Nr.  PHF 5040 D.

Luftfahrt-Bundesamt
Im Auftrag

 /s/ Gohlke
-------------------
Gohlke                                                            SEITE 3 VON 4

Page 3 of 4

Revision 06

page 5 of 8

                 Anhang zur Genehmigung
                    Approval Schedule

Firmenbezeichnung:               MTU Maintenance Hannover
company:                         Munchner StraBe 31
                                 D-30855 Langenhagen

Klasse                  Berechtigung             Einschrankung
Class                   Rating                   Limitation
Besondere Prozesse      D1 Zerstorungsfreie
                        Prufungen                -Ultraschallprufung
                                                  ultrasonic inspection
                                                  MIL-STD 2154
Specialised Services    Non destructive          -Durchstahlungsprufung
                        Inspection                radiographic inspection
                                                  ASTM-E-1742
                                                 -Magnetpulverprufung
                                                  magnetic particle inspection
                                                  per DIN 54130/ASTM-E-1444
                                                 -Eindringprufung
                                                  penetrant inspection
                                                  per DIN54152/ASTM-E-1417
                                                 -Wirbelstromprufung
                                                  eddy current inspection
                                                  MIL-STD 1537

Dieser Anhang zur Genehmigung ist beschrankt auf die Luftfahrtgerate und Arbeiten, die im genehmigten JAR-145 Instandhaltungsbetriebshandbuch LBA.0008 aufgefuhrt sind.

This approval schedule is limited to those products and activities  specified in
the  scope  of  approval  section  contained  in  JAR-145  approved  maintenance
organisation exposition LBA.0008.

Gultigkeitszeitraum der Genehmigung: 03. Marz 1999 bis 02. Marz 2001 Approval validity period:

Ausstellungsdatum:                     23. Februar 1999
Date of issue:

Luftfahrt-Bundesamt
Im Auftrag
 /s/ Gohlke
-------------------
Gohlke                                                            SEITE 4 VON 4
                                                                  Page 4 of 4
                                                                  Revision 06

                                                                     page 6 of 8

                            UNITED STATES OF AMERICA
                          DEPARTMENT_OF TRANSPORTATION
                         FEDERAL AVIATION ADMINISTRATION

Air Agency Certificate

Number CQ5Y788M

This certificate is issued to

MTU-MAINTENANCE HANNOVER GMBH
whose business, address is
MUNCHNER STRASSE 31
30855 LANGENHAGEN, GERMANY

upon finding that its organization complies in all respects with the requirements of the Federal Aviation Regulations relating to the establishment of an Air Agency; and is empowered to operate an approved REPAIR STATION

with the following ratings:

LIMITED ENGINE (5/27/99)
LIMITED NONDESTRUCTIVE TESTING & INSPECTION (5/27/99))

This certificate; unless canceled suspended; or revoked shall continue in effect UNTIL MARCH 2, 2001

Date issued: MAY 27,1999            /s/  William E. Adams
                                    --------------------------------------------
MARCH 2,1984                        WILLIAM E. ADAMS
------------------------            --------------------------------------------
ORIGINAL ISSUE DATE                 ACTING MANAGER, INTERNATIONAL FIELD OFFICE

This Certificate is not Transferable, AND ANY MAJOR CHANGE IN THE BASIC
FACILITIES, OR IN THE LOCATION THE REOF, SHALL BE IMMEDIATELY REPORTED TO THE APPROPRIATE REGIONAL OFFICE OF THE FEDERAL AVIATION ADMINISTRATION

FAA Form 8000-4 (1-67) SUPERSEDES FAA FORM 390.

page 7 of 8

UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
FEDERAL AVIATION ADMINISTRATION

Repair Station Operations Specifications

(Continuation)

Limitations                                                          PAGE 1 OF 2
The rating (s) set forth are Air Agency Certificate Number  CQ5Y788M  is/are
the following:                                                        limited to

MTU-MAINTENANCE HANNOVER GMBH IS PERFORMING MAINTENANCE AND/OR ALTERATIONS OF
AERONAUTICAL PRODUCTS TO BE INSTALLED ON U.S. REGISTERED AIRCRAFT UNDER THE
TERMS AND CONDITIONS OF A BILATERAL AVIATION SAFETY AGREEMENT AND ASSOCIATED
MAINTENANCE IMPLEMENTATION PROCEDURES AGREEMENT BETWEEN THE UNITED STATES AND
THE FEDERAL REPUBLIC OF GERMANY.

LIMITED RATINGS:

   ENGINE

      GENERAL ELECTRIC                  -MODEL CF6 SERIES.

      PRATT & WHITNEY                   -MODEL PW2000 SERIES.

      INTERNATIONAL AERO ENGINES        -MODEL V2500 SERIES.

      CFM INTERNATIONAL S.A.            -MODEL CFM 56-7 SERIES (NOTE 1)

NOTE1: MINOR MAINTENANCE AND REMOVAL AND REPLACEMENT OF MIDULES ONLY. NO
OVERHAUL OF MODULES.

NONDESTRUCTIVE TESTING
& INSPECTION                            RADIOGRAPHIC
                                        ULTRASONIC

Delegated authorities:                                   NONE

Date issued or                          For the Administration

                                        /s/ JEROME J. SCHILLER
                                        ---------------------------------------
MAY 27, 1999                            JEROME J. SCHILLER
                                        AVIATION SAFETY INSPECTOR

FAA Form 8000 -- 4 -- FORMERLY FAA FORM 390.1 PAGE 2

page 8 of 8

UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
FEDERAL AVIATION ADMINISTRATION

Repair Station Operations Specifications

(Continuation)

Limitations:

PAGE 2 OF 2

The rating(s) set forth one Air Agency Certificate Number CQ5Y788M is/are

the following:                                                        limited to

LIMITED RATINGS: (CONT.)

   NONDESTRUCTIVE TESTING     (CONT.)
   & INSPECTION                         MAGNETIC PARTICLE
                                        DYE PENETRANT
                                        EDDY CURRENT

ALL NONDESTRUCTIVE TESTING PERSONNEL QUALIFICATION AND CERTIFICATION TO BE
IN ACCORDANCE WITH NAS-AIA-410 OR FAA APPROVED EQUIVALENT CERTIFICATION.

EXEMPTION: MTU - MAINTENANCE GMBH IS AUTHORIZED TO CONTRACT OUT THE MAINTENANCE AND REPAIR OF ENGINE COMPONENTS ON INTERNATIONAL AERO ENGINES AG (IAE) MODEL V2500 TURBINE ENGINES TO FACILITIES THAT ARE NOT CERTIFICATED REPAIR STATIONS, U.S. ORIGINAL EQUIPMENT LICENSEES FOR SUCH ENGINES, IN ACCORDANCE WITH FAA EXEMPTION NO 5337C, VALID UNTIL AUGUST 31, 2000.

Delegated authorities:           NONE

Date issued or                          For the Administrator:
                                        /S/ JEROME J. SCHILLER
                                        ----------------------------------------
                                        JEROME J. SCHILLER
                                        AVIATION SAFETY INSPECTOR

FAA Form 8000- FORMERLY FAA FORM 390.l PAGE 2

APPENDIX E (1)

V2500 MAINTENANCE COST GUARANTEE

I INTRODUCTION

MTU assures Operator that upon expiration of this Agreement commencing with Operator's first commercial operation of Aircraft powered by V2500 Engines, the cumulative cost of Eligible Maintenance for Engines will not, subject to escalation, exceed a Guaranteed Cost Rate per Engine Flight Hour. Operator has a choice of either $39.00 (1/97) per Engine Flight Hour for Parts Costs and Outside Service Costs plus an average of 1800 Manhours per Eligible Shop Visit for Labor with an MTU sharing of 75% of excess costs, or $ 40.00 (1/97) per Engine Flight Hour for Parts Costs and Outside Service Costs plus an average of 1800 Manhours per Eligible Shop Visit for Labor with an MTU sharing of 100% of excess costs. Under this Guarantee, if the cumulative cost per Engine Flight Hour for Eligible Maintenance of Operator's Engines over the period of this Guarantee exceeds the escalated Guaranteed Cost Rate, MTU will credit Operator's account with MTU the appropriate amount of the excess.

II GUARANTEE

A. Period of Guarantee

The Period of Guarantee will start on the date Operator initiates commercial operation on its first Aircraft powered by Engines and will terminate upon expiration of this Agreement on June 30, 2014.

B. Eligible Maintenance

Eligible Maintenance shall comprise maintenance of Engines or Parts thereof required for the following reasons:

1. a Failure of a Part in such Engines;

2. foreign object damage caused by the ingestion of birds, hailstones or runway gravel;

3. an Airworthiness Directive issued by the applicable Certification Authority; and

4. maintenance as specified in the Shop Handling Guide or as otherwise recommended by MTU or the OEM.

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C. Eligible Maintenance Costs

Eligible Maintenance Costs shall comprise:

i) Parts Costs which shall comprise the costs of Operator of all Parts removed from Engines during Eligible Maintenance which are unfit for further service except Parts removed upon expiry of their Limited Life and vendor proprietary accessories and parts therein;

ii) Labor Costs which shall comprise direct shop labor man hours actually incurred during Eligible Maintenance valued at the labor rate established by MTU for Operator (which labor rate shall be nondiscriminatory based on general industry practices and standards); and

iii) Outside Services Costs which shall comprise costs invoiced to Operator for Eligible Proprietary Repair Maintenance undertaken by outside contractors approved by MTU (approval not to be unreasonably withheld).

D. Net Maintenance Cost

Within thirty (30) days following to each anniversary of the commencement of the Period of Guarantee, Operator will report to MTU the Eligible Maintenance Costs incurred by Operator during the preceding year together with a statement of any contributions received from MTU, the OEM or other third parties towards such Eligible Maintenance Costs. Within the following sixty (60) days, MTU and Operator will jointly calculate the Net Maintenance Cost for that year making appropriate reductions for contributions received by Operator from the OEM and third parties and for disallowed costs incurred by Operator on maintenance undertaken contrary to OEM or MTU recommendations or otherwise excluded from this Guarantee.

E. Guaranteed Maintenance Cost

Within thirty (30) days following each anniversary of the commencement of the Period of Guarantee, Operator will report to MTU the Flight Hours of Engines operated by Operator in the preceding year. Within the following sixty (60) days, MTU and Operator will jointly calculate the Guaranteed Maintenance Cost for Operator for that year using the following formula:

GMC = A x Escalated GCR

where:

A is the flight hours of Engines operated by Operator in that year;

page 2 of 8

Escalated GCR is the Escalated Guaranteed Cost Rate for that year;

and the Escalated Guaranteed Cost Rate for any year is calculated by determining the arithmetic average of the Guaranteed Cost Rates calculated for each month of that year using the escalation formula set forth in Article VII below for the base month of January 1997.

F. Annual Settlement

Within one hundred and twenty (120) days following the second and each subsequent anniversary of the commencement of the Period of Guarantee, MTU will credit Operator's account with MTU an amount equal to either 75% or 100% (based on Operator's plan selection) of the difference between the sum of the Net Maintenance Costs for each preceding year and the sum of the Guaranteed Maintenance Costs for each preceding year. If subsequent annual calculations show that on a cumulative basis, a previous interim credit (or portion thereof) was excessive, such excess amount shall be subject to repayment which will be effected by MTU issuing a debit against Operator's account with MTU.

III DEFINITIONS

A. CAMPAIGN CHANGE is an IAE International Aero Engines AG program, so designated in writing, for the Reoperation, replacement, addition or deletion of Part(s) and is characterized by the granting of certain Credit Allowances to the Operator when such program recommendations are complied with by the Operator.

B. COMMERCIAL AVIATION USE is the operation of Engines in Aircraft used for commercial, corporate or private transport purposes.

C. DIRECT DAMAGE is the damage suffered by a Part itself upon its Failure.

D. ECONOMICALLY REPAIRABLE shall generally mean that the cost of the repair as determined by MTU, exclusive of modification and transportation costs, will be equal to or less than sixty-five percent (65%) of the MTU commercial price of the Part at the time the repair is considered, or, shall be otherwise reasonably determined by MTU.

E. ENGINE OR MODULE TIME is the total number of flight hours of operation of an Engine or a Module.

F. EXPENDABLE PARTS means those nonreusable Parts, as determined by MTU, which are required to be replaced during inspection or Reconditioning, regardless of the condition of the Part.

G. FAILURE (FAILED) is the breakage, injury, or malfunction of a Part rendering it unserviceable and incapable of continued operation without corrective action.

H. MODULEC(S) means any one or more of the following assemblies of Parts:

page 3 of 8

Fan Assembly and Low Pressure Compressor Assembly High Pressure Compressor Assembly High Pressure Turbine Assembly Low Pressure Turbine Assembly Main gearbox
Any other Assembly of Parts so designated by MTU.

I. PARTS CYCLE(S) means the aggregate total number of times a Part completes an Aircraft takeoff and landing cycle, whether or not thrust reverse is used on landing. As pilot training will involve extra throttle transients such a touch and go landings and takeoffs, MTU shall evaluate such transients for Parts Cycle determination.

J. PARTS LIFE LIMIT is the maximum allowable total Parts Time or total Parts Cycles for specific Parts, including Reoperation if applicable, as established by MTU or by the United States Federal Aviation Administration. Parts Life Limits are published in the Time Limits Section (Chapter 05) of the applicable V2500 Series Engine Manual.

K. PARTS REPAIR means the MTU designated restoration of Failed Parts to functional serviceable status, excluding repair of normal wear and tear, as determined by MTU.

L. PARTS TIME is the total number of flight hours of operation of a Part.

M. REOPERATION is the alteration to or modification of a Part.

N. RESULTANT DAMAGE is the damage suffered by a Part because of the Failure of another Part within the same Engine.

O. SCRAPPED PARTS (SCRAP, SCRAPPED, SCRAPPAGE) shall mean those Parts determined by MTU to be unserviceable and not Economically Repairable. The Operator shall cause such Parts to be mutilated or disposed of in such a manner as to preclude any possible further use as an Engine Part.

page 4 of 8

IV GENERAL CONDITIONS

Engines and Engine Maintenance excluded by the General Conditions contained in this Article IV shall be excluded from this Guarantee except that Engine Maintenance resulting from ingestion of birds, hailstones or runway gravel shall be included as Eligible under this Guarantee.

The following general conditions govern the application of this Guarantee:

A. Records and Audit

The Operator shall maintain adequate records for the administration of this Guarantee and shall permit MTU to audit such records at reasonable intervals.

B. Exclusions from Guarantee

This Guarantee will not apply to any Engine, Module or Part if it has been determined to the reasonable satisfaction of MTU that said Engine, Module or Part has Failed because it:

1. Has not be properly installed or maintained in accordance with OEM and/or MTU recommendations unless such improper installation or maintenance was performed by MTU, or

2. Has been used contrary to the operating and maintenance instructions or recommendation authorized or issued by the OEM and/or MTU and current at the time, or

3. Has been repaired or altered other than by an FAA certified V2500 Repair Station in such a way as to impair its safety, operation or efficiency, or

4. Has been subjected to:

a. Misuse, neglect, or accident, or

b. Ingestion of foreign material, or

5. Has been affected in any way by a part not defined as a Part herein, or

6. Has been affected in any way by occurrences not associated with ordinary use, such as, but not limited to, acts of war, rebellion, seizure or other belligerent acts.

C. Assignment of Guarantee

This Guarantee shall not be assigned, either in whole or in part, by either Party.

page 5 of 8

V SPECIFIC CONDITIONS

A. The Guaranteed Cost Rate is predicated on the use by Operator of:

1. An average flight cycle of no less than 1.4 hours for the A319 Aircraft and 2.0 hours for the A320 Aircraft;

2. Thrust levels which are derated an average of ten percent (10%) for Takeoff relative to full Takeoff ratings;

3. An Average Aircraft utilization equal to or less than 2,700 flight hours per year for the A319 Aircraft and 3,000 flight hours per year for the A320 Aircraft;

4. An Aircraft and Engine delivery schedule in respect of thirty eight (38) aircraft as set out in Appendix A(2) and eight (8) spare engines, and

5. An average ambient temperature at Takeoff which is no greater than ISA + 4 degrees C.

B. MTU reserves the right to make appropriate adjustments to the Guaranteed Rate if there is, during the Period of Guarantee, (a) a variation from the Specific Conditions upon which the Guaranteed Rate is predicated (including, but not limited to Operator's acquisition of additional option Aircraft and/or additional spare Engines), or (b) a discontinuation of operation by TAM of any Engine or any V2500 powered Aircraft subsequent to delivery to TAM. Appendix F contains an adjustment chart to allow for adjustment by MTU of the Guaranteed Cost Rate if the actual Flight Hour/Flight Cycle ratio deviates from the ratios contained in paragraph A. 1. above.

C. In the event credits are issued under Section II above, such credits will first to the extent reasonably required be dedicated to the procurement of Parts identified within a reasonable time aimed at correction of the situations contributing to excess Engine Maintenance Costs. Accordingly, Operator and MTU will establish jointly the modifications or Parts to be selected, and Operator will incorporate the changes into Engines. Otherwise, such credits may be used to procure Supplies or Services from MTU.

D. Upon signing of this Agreement, TAM shall advise MTU in writing of its selection of either the 75 % of excess cost option or the 100% of excess cost option.

E. Operator may only select this guarantee or a Fleet Hour Agreement with MTU. This Guarantee does not apply if Operator elects a Fly-by-Hour Agreement with MTU.

page 6 of 8

VI EXCLUSION OF BENEFITS

The intent of this Guarantee is to provide specified benefits to Operator as a result of the failure of Engines to achieve the maintenance cost level stipulated in the Guarantee. It is not the intent, however, to duplicate benefits provided to Operator by MTU, the OEM or any other third party under any other applicable guarantee, sales warranty, service policy, or any special benefit of any kind as a result of the same failure. Therefore, the terms and conditions of this Guarantee notwithstanding, if the terms of this Guarantee should make duplicate benefits available to Operator from MTU, the OEM or any other third party, Operator may elect to receive the benefits under this Guarantee or under any of the other benefits described above, but not both.

VII ESCALATION FORMULA

1. The Basic Guaranteed Cost Rate expressed to be subject to escalation from a base month to a month of delivery or other date of determination will be subject to adjustment in accordance with the following formula:

P = Pb (0.60 L + 0.30 M + 0.10 E)

Lo Mo Eo

Where:

P = The escalated Guaranteed Cost Rate.

Pb = The Basic Guaranteed Cost Rate value.

Lo = The "Average Hourly Earnings of Aircraft Engine and Engine

      Parts Production Workers" SIC Code 3724 published by the
      Bureau of Labor Statistics in the U.S. Department of Labor for
      the month preceding the Base Month by four months.

L  =  The "Average Hourly Earnings of Aircraft Engine and Engine
      Parts Production Workers" SIC Code 3724 for the month
      preceding the month of delivery or other date of determination
      by four months.

Mo =  The "Producer Price Index, Code 10, For Metals and Metal
      Products" published by the Bureau of Labor Statistics in the
      U.S. Department of Labor for the month preceding the Base
      Month by four months.

M  =  The "Producer Price Index, Code 10, For Metals and Metal
      Products" for the month preceding the month of delivery or
      other date of determination by four months.

Eo =  The "Producer price Index, Code 5, For Fuel and Related
      Products and Power" published by the Bureau of Labor
      Statistics in the U.S. Department of Labor for the month
      preceding the Base Month by four months.

                                                         page 7 of 8

E  =  The "Producer Price Index, Code 5, For Fuel and Related
      Products and Power" for the month preceding the month of
      delivery or other date of determination by four months.

2. The values of the factors 0.60 L and 0.30 M and 0.10 E

Lo Mo Eo

respectively, shall be determined to the nearest forth decimal place. If the fifth decimal is five or more, the forth decimal place shall be raised to the next higher number.

3. If the U.S. Department of Labor ceases to publish the above statistics or modifies the basis of their calculation, then MTU may substitute any officially recognized and substantially equivalent statistics.

4. The Basic Guaranteed Cost Rate contained in this Appendix E is subject to escalation from a Base Month of January 1997 to the month of delivery using Lo, Mo and Eo values for September 1996.

5. If the application of the formula contained in this Appendix E results in a Cost Rate which is lower than the Basic Guaranteed Cost Rate, the Basic Guaranteed Cost Rate will be deemed to be the Guaranteed Cost Rate.

6. For greater clarity, the escalation formula contained in this Article VII shall only apply for purposes of this Guarantee.

page 8 of 8

APPENDIX E (2)

V2500 MAINTENANCE COST GUARANTEE

I INTRODUCTION

MTU assures Operator that upon expiration of this Agreement commencing with Operator's first commercial operation of Aircraft powered by V2500 Engines, the cumulative cost of Eligible Maintenance for Engines will not, subject to escalation, exceed a Guaranteed Cost Rate per Engine Flight Hour. Operator has a choice of either $38.70 (1/97) per Engine Flight Hour for Parts Costs and Outside Service Costs plus an average of 1800 Manhours per Eligible Shop Visit for Labor with an MTU sharing of 75% of excess costs, or $ 39.70 (1/97) per Engine Flight Hour for Parts Costs and Outside Service Costs plus an average of 1800 Manhours per Eligible Shop Visit for Labor with an MTU sharing of 100% of excess costs. Under this Guarantee, if the cumulative cost per Engine Flight Hour for Eligible Maintenance of Operator's Engines over the period of this Guarantee exceeds the escalated Guaranteed Cost Rate, MTU will credit Operator's account with MTU the appropriate amount of the excess.

II GUARANTEE

A. Period of Guarantee

The Period of Guarantee will start on the date Operator initiates commercial operation on its first Aircraft powered by Engines and will terminate upon expiration of this Agreement on June 30, 2014.

B. Eligible Maintenance

Eligible Maintenance shall comprise maintenance of Engines or Parts thereof required for the following reasons:

1. a Failure of a Part in such Engines;

2. foreign object damage caused by the ingestion of birds, hailstones or runway gravel;

3. an Airworthiness Directive issued by the applicable Certification Authority; and

4. maintenance as specified in the Shop Handling Guide or as otherwise recommended by MTU.

C. Eligible Maintenance Costs

Eligible Maintenance Costs shall comprise:

page 1 of 8

Outside Services Costs which shall comprise costs invoiced to Operator for Eligible Proprietary Repair Maintenance undertaken by outside contractors approved by MTU (approval not to be unreasonably withheld).

D. Net Maintenance Cost

Within thirty (30) days following to each anniversary of the commencement of the Period of Guarantee, Operator will report to MTU the Eligible Maintenance Costs incurred by Operator during the preceding year together with a statement of any contributions received from MTU, the OEM or other third parties towards such Eligible Maintenance Costs. Within the following sixty (60) days, MTU and Operator will jointly calculate the Net Maintenance Cost for that year making appropriate reductions for contributions received by Operator from MTU and third parties and for disallowed costs incurred by Operator on maintenance undertaken contrary to MTU recommendations or otherwise excluded from this Guarantee.

E. Guaranteed Maintenance Cost

GMC = A x Escalated GCR

where:

A is the flight hours of Engines operated by Operator in that year;

Escalated GCR is the Escalated Guaranteed Cost Rate for that year;

page 2 of 8

F. Annual Settlement

III DEFINITIONS

B. COMMERCIAL AVIATION USE is the operation of Engines in Aircraft used for commercial, corporate or private transport purposes.

C. DIRECT DAMAGE is the damage suffered by a Part itself upon its Failure.

E. ENGINE OR MODULE TIME is the total number of flight hours of operation of an Engine or a Module.

F. EXPENDABLE PARTS means those nonreusable Parts, as determined by MTU, which are required to be replaced during inspection or Reconditioning, regardless of the condition of the Part.

G. FAILURE (FAILED) is the breakage, injury, or malfunction of a Part rendering it unserviceable and incapable of continued operation without corrective action.

H. MODULE(S) means any one or more of the following assemblies of Parts:

Fan Assembly and Low Pressure Compressor Assembly High Pressure Compressor Assembly High Pressure Turbine Assembly Low Pressure Turbine Assembly Main gearbox

page 3 of 8

Any other Assembly of Parts so designated by MTU.

K. PARTS REPAIR means the MTU designated restoration of Failed Parts to functional serviceable status, excluding repair of normal wear and tear, as determined by MTU.

L. PARTS TIME is the total number of flight hours of operation of a Part.

M. REOPERATION is the alteration to or modification of a Part.

N. RESULTANT DAMAGE is the damage suffered by a Part because of the Failure of another Part within the same Engine.

page 4 of 8

IV GENERAL CONDITIONS

The following general conditions govern the application of this Guarantee:

A. Records and Audit

The Operator shall maintain adequate records for the administration of this Guarantee and shall permit MTU to audit such records at reasonable intervals.

B. Exclusions from Guarantee

This Guarantee will not apply to any Engine, Module or Part if it has been determined to the reasonable satisfaction of MTU that said Engine, Module or Part has Failed because it:

1. Has not be properly installed or maintained in accordance with OEM and/or MTU recommendations unless such improper installation or maintenance was performed by MTU, or

2. Has been used contrary to the operating and maintenance instructions or recommendation authorized or issued by the OEM and/or MTU and current at the time, or

3. Has been repaired or altered other than by an FAA certified V2500 Repair Station in such a way as to impair its safety, operation or efficiency, or

4. Has been subjected to:

a. Misuse, neglect, or accident, or

b. Ingestion of foreign material, or

5. Has been affected in any way by a part not defined as a Part herein, or

6. Has been affected in any way by occurrences not associated with ordinary use, such as, but not limited to, acts of war, rebellion, seizure or other belligerent acts.

C. Assignment of Guarantee

This Guarantee shall not be assigned, either in whole or in part, by either Party.

page 5 of 8

V SPECIFIC CONDITIONS

A. The Guaranteed Cost Rate is predicated on the use by Operator of:

1. An average flight cycle of no less than 1.4 hours for the A319 Aircraft and 2.0 hours for the A320 Aircraft;

2. Thrust levels which are derated an average of ten percent (10%) for Takeoff relative to full Takeoff ratings;

3. An Average Aircraft utilization equal to or less than 2,700 flight hours per year for the A319 Aircraft and 3,000 flight hours per year for the A320 Aircraft;

4. An Aircraft and Engine delivery schedule in respect of thirty eight (38) aircraft as set out in Appendix A (2) and eight (8) spare engines, and;

5. An average ambient temperature at Takeoff which is no greater than ISA +4(degree) C.

B. MTU reserves the right to make appropriate adjustments to the Guaranteed Rate if there is, during the Period of Guarantee, a variation from the Specific Conditions upon which the Guaranteed Rate is predicated (including, but not limited to Operator's acquisition of additional option Aircraft and/or additional spare Engines). Appendix F contains an adjustment chart to allow for adjustment by MTU of the Guaranteed Cost Rate if the actual Flight Hour/Flight Cycle ratio deviates from the ratios contained in paragraph A. 1. above. Otherwise, such credits may be used to procure Supplies or Services from MTU.

D. Upon signing of this Agreement, TAM shall advise MTU in writing of its selection of either the 75 % of excess cost option or the 100% of excess cost option.

E. Operator may only select this guarantee or a Fleet Hour Agreement with MTU. This Guarantee does not apply if Operator elects a Fly-by-Hour Agreement with MTU.

page 6 of 8

VI EXCLUSION OF BENEFITS

VII ESCALATION FORMULA

P1 = P0 (0,10 x A + 0,90) x M1)

Where:

P(1) = The effective Flat Rate per EFH after adjustment

P0 = The basis Flat Rate per EFH.

A Yearly adjusted according to the increased gross hourly wage taken from Federal Republic of Germany as published by "Verband der Metallindustriellen Niedersachsen e.V."

M0 = Price niveau of the IAE Spare Parts Price Catalogue of the previous year 1/1997 e.g. 100).

M(1) = New Material Rate like M0 but adjusted with the yearly average material price increase according to IAE Spare Parts Price Catalogue based on the 100 top price purchased Pats used for Operator's Engine Shop Visits in the previous year.

2. Labor Rate

Yearly adjusted according to the increased gross hourly wage taken from Federal Republic of Germany as published by "Verband der Metallindustriellen Niedersachsen e.V.". Escalation for hourly rate is limited to 3% p.a. until 2004.

page 7 of 8

3. Material

Material adjusted with the yearly material price increase according to IAE Parts Price Catalogue at the date of IAE price change.

4. For greater clarity, the escalation formular contained in this Article VII shall only apply for purposes of this Guarantee.

page 8 of 8

APPENDIX F

FLIGHT HOUR/FLIGHT CYCLE RATIO ADJUSTMENT

GRAPH

page 1 of 1

APPENDIX G

TO THE V2500 ENGINE MAINTENANCE AGREEMENT TAM / MTU

GUARANTY

GUARANTY, dated________________________, 2000, made by TAM-Compania De Investimentos Em Transportes S.A., a company (sociedade por acoes), a corporation organised and existing under the laws of Brazil (the "GUARANTOR"), in favor of MTU Maintenance Hannover GmbH ("MTU").

PRELIMINARY STATEMENTS:

WHEREAS, MTU desires to enter into that certain V2500 Engine Maintenance Agreement dated as of September 14, 2000 (said Agreement, as it may hereafter be amended or otherwise modified from time to time, being the "MAINTENANCE Agreement", the terms defined therein and not otherwise defined herein being used herein as therein defined) with TAM-Transportes Aereos Regionais S.A., a corporation organized and existing under the laws of Brazil ("TAM").

NOW, THEREFORE, in consideration of the premises and in order to induce MTU to enter into the Maintenance Agreement, the Guarantor hereby agrees as follows:

SECTION 1.01. GUARANTY.

SECTION 1.02. GUARANTY ABSOLUTE.

APPG/V2500

Page 2 of 4

against TAM or whether TAM is joined in any such action or actions. The liability of the Guarantor under this Guaranty shall be absolute and unconditional irrespective of:

(i) any lack of validity or enforceability of the Maintenance Agreement;

(v) any change, restructuring, or termination of the corporate structure or existence of TAM; or

(vi) any other circumstance which might otherwise constitute a defense available to, or a discharge of, TAM or a guarantor.

SECTION 1.03. WAIVER.

SECTION 1.04. SUBROGATION.

APPG/V2500

page 3 of 4

SECTION 1.05. CONSENT TO JURISDICTION; WAIVER OF IMMUNITIES.

(a) The Guarantor hereby irrevocably submits to the jurisdiction of any New York State or Federal court sitting in New York City, Borough of Manhattan and any appellate court from any thereof in any action or proceeding arising out of or relating to this Guaranty, and the Guarantor hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such New York State court or in such Federal court. The Guarantor hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. The Guarantor hereby irrevocably appoints__________________(the "PROCESS AGENT"), with an office on the date hereof at __________________, New York, New York 100_________, United States, as its agent to receive on behalf of the Guarantor and its property service of copies of the summons .and complaint and any other process which may be served in any such action or proceeding. Such service may be made by mailing or delivering a copy of such process to the Guarantor in care of the Process Agent at the Process Agent's above address, and the Guarantor hereby irrevocably authorizes and directs the Process Agent to accept such service on its behalf. As an alternative method of service, the Guarantor also irrevocably consents to the service of any and all process in any such action or proceeding by the mailing of copies of such process to the Guarantor at its address specified in Section 1.07. The Guarantor agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

APPG/V2500

page 4 of 4

SECTION 1.06. AMENDMENTS, ETC.

SECTION 1.07. ADDRESSES FOR NOTICES.

SECTION 1.08. NO WAIVER; REMEDIES.

SECTION 1.09. GOVERNING LAW.

This Guaranty shall be governed by, and construed in accordance with, the laws of the State of New York without regard to the provisions on conflict of laws thereof.

SECTION 1.10. ASSIGNMENT.

MTU may not assign any of its rights hereunder without prior written consent of the Guarantor. Any assignment made in violation of this Section shall be null and void.

IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.

TAM-Compania De Investimentos Em Transportes S.A.

By -----------------
Name:
Title:

UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
FEDERAL AVIATION ADMINISTRATION

AIR AGENCY CERTIFICATE

- NZQY006J

This certificate is issued to
UNIVERSAL MAINTENANCE CENTER OF PT NTP

whose business address is

JALAN PANANARAN 154, BANDUNG,40174 INDONESIA

finding that its organigation complies in all respects with the of the Federal Aviation Regulations Relating to the establishment of an Air Agency and is empowered to operate an approved REPAIR STATION

with the following ratings;

LIMITED POWERPLANT(11-03-2000))
LIMITED ACCESSORY(10-18-1999)
LIMITED NON DESTRUCTIVE INSPECTION(07-15-1999)
LIMITED SPECIALIZED SERVICE(08-07-2000)

This certificate unless canceled suspended or shall continued in effect UNTILL AUGUST 31, 2001

Date issued :

                                                     /s/ DAVID E.
                                                     -----------------------
JANUARY 19, 1993                                        DAVID E.

REISSUED : NOVEMBER 3, 2000 MANAGER SIN-IFO

                                                 PT. NUSANTARA TURBIN & PROPULSI
[NTP LOGO]                                          Universal Maintenance Center

================================================================================
                                                       Bandung, 24 November 2000

Nomor       :
            :
Lamplran    :

                                                         Kepada :

                                                         Pimpinan 'BANK MANDIRI'
                                                         Cabang Bandung IPTN
                                                         II. Pajajaran 154
                                  [SEAL]
Dengan Hormat,


Kepada    :        DEPARTMENTO DE AVIACAO CIVIL

Data Bank :        BANCO DO BRASIL,3602-I BRANCH
                   Agencia Ministerio da            ,             dos
                   [ILLEGIBLE] - Loco P-Terreo
                   Plano Piloto - Brasilis- D.F. 70048-900

                   A/C: 170 500-8 Identification Code: 120033/12901/053-6

Jumlah    :        USD 6800,00    (Enam             delaplan ratus Dollar USA)

Catatan   :        - Unluck Pemb. PO Nomor 1552F-011

                   - Pembebanan biaya transfer beban Rekening diatas

Denikian                         bantuannya diucapkan terima kasih.

                                     PT. NTP.

BY:                                                            By:
    ------------                                                   -------------

Ir. SUBIAKTO, MBA                                             DANANG WS, SF.

Tembusan:
---------
V.P & GM UMC Aero Engine Services         [SEAL]
Manager Procurement.

UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
FEDERAL AVIATION ADMINISTRATION

REPAIR STATION OPERATIONS SPECIFICATIONS

SPECIALIZED SERVICE

WELDING - TUNGSTEN INERT GAS - IN ACCORDANCE WITH

PLATING:

COPPER - IN ACCORDANCE WITH AMS 2418 (AS REVISED)
NICKEL - IN ACCORDANCE WITH AMS 2414 (AS REVISED)
HARD CHROME - IN ACCORDANCE WITH AMS 2406 (AS REVISED)
NICKEL CADMIUM - IN ACCORDANCE WITH AMS 2414 (AS REVISED)
ELECTROLESS NICKEL - IN ACCORDANCE WITH AMS 2404 (AS REVISED)
SILVER - IN ACCORDANCE WITH AMS [ILLEGIBLE] (AS REVISED)
TIN - IN ACCORDANCE WITH AMS [ILLEGIBLE](AS REVISED)
CADMIUM - IN ACCORDANCE WITH AMS 2411 (AS REVISED)
CHROMATE TREATMENT - IN ACCORDANCE WITH AMS M-3171 (AS REVISED)
BLACK            - IN ACCORDANCE WITH AMS 2405 (AS REVISED)
ALOOINE - IN ACCORDANCE WITH AMS 2473 (AS REVISED)

HEAT TREATMENT OF STEEL - IN ACCORDANCE WITH AMS-H -            (AS REVISED)

THERMAL SPRAY - IN ACCORDANCE WITH AMS 2437 & MIL - STD-           (AS REVISED)

NONE

                                          By: /s/ Edward L. Ortiz
                                          -----------------------------------
AUGUST 7,2000                                      EDWARD L. ORTIZ
                                          PRINCIPAL MAINTENANCE INSPECTOR

UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
FEDERAL AVIATION ADMINISTRATION

REPAIR STATION OPERATIONS SPECIFICATIONS

Limitations:

NON DESTRUCTIVE INSPECTIONS

CURRENT INSPECTION IN ACCORDANCE WITH ASTM B244,ASTM B499 AND COMPONENT MAINTENANCE MANUAL(AS REVISED)

FLUORESCENT PARTICLE INSPECTION IN ACCORDANCE WITH ASTM E,1417,AMS 2644 AND COMPONENT MAINTENANCE MANUAL(AS REVISED)

MAGNETIC PARTICLE INSPECTION IN ACCORDANCE WITH ASTM AND COMPONENT MAINTENANCE MANUAL ( AS REVISED)

RADIOGRAPHIC INSPECTION IN ACCORDANCE WITH ASTM E94, ASTM E-1742, AND COMPONENT MAINTENANCE MANUAL ( AS REVISED)

ULTRASONIC INSPECTION IN ACCORDANCE WITH ASTM E, ASTM E 164 AND COMPONENT MAINTENANCE MANUAL ( AS REVISED)

NON DESTRUCTIVE TESTING PERSONNEL MUST MEET THE QUALIFICATION & CERTIFICATION REQUIREMENTS CONTAINED INNAS 410

NONE

                              By: /s/ Edward L. Ortiz
                              --------------------------------
JULY 15,1999                          EDWARD L. ORTIZ
                              PRINCIPAL MAINTENANCE INSPECTOR

UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
FEDERAL AVIATION ADMINISTRATION

REPAIR STATION OPERATIONS SPECIFICATIONS

LIMITATIONS:

NON DESTRUCTIVE INSPECTIONS

CURRENT INSPECTION IN ACCORDANCE WITH ASTM B244,ASTM B499 AND

COMPONENT MAINTENANCE MANUAL(AS REVISED)

FLUORESCENT PARTICLE INSPECTION IN ACCORDANCE WITH ASTM B,1417,AMS 2644 AND COMPONENT MAINTENANCE MANUAL(AS REVISED)

MAGNETIC PARTICLE INSPECTION IN ACCORDANCE WITH ASTM AND COMPONENT
MAINTENANCE MANUAL ( AS REVISED)

RADIOGRAPHIC INSPECTION IN ACCORDANCE WITH ASTM B94,ASTM E-1742, AND COMPONENT MAINTENANCE MANUAL ( AS REVISED)

ULTRASONIC INSPECTION IN ACCORDANCE WITH ASTM AND COMPONENT
MAINTENANCE MANUAL ( AS REVISED)

NON DESTRUCTIVE TESTING PERSONNEL MUST MEET THE QUALIFICATION & CERTIFICATION REQUIREMENTS CONTAINED NAS 410

DELIGATED

NONE

JULY 15,1999            EDWARD L. ORTIZ             By: /s/ Edward L. Ortiz
                 PRINCIPAL MAINTENANCE INSPECTOR

UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
FEDERAL AVIATION ADMINISTRATION

REPAIR STATION OPERATIONS SPECIFICATIONS

LIMITATIONS:

PAGE 1 of

LIMITED RATINGS

POWERPLANT

GENERAL ELECTRIC MODEL CT-7, SERIES
OARRETT MODEL TPE-, SERIES
PRATT & WHITNEY MODEL JT&D, SERIES
ROLLS ROYCE MODEL DART 520 SERIES & 530, SERIES ROLLS ROYCE MODEL TAY 650-15,MODULES 1,2,3,4 & 5 ROLLS ROYCE MODEL TAY 650-, REMOVAL,REPLACEMENT, & INSTALLATION OF ALL MODULES

ACCESSORY

LIMITED TO THOSE ACCESSORIES INSTALLED ON GENERAL ELECTRIC CT-7 SERIES, PRATT & WHITNEY SERIES, GARRETT SERIES, & ROLLS ROYCE DART
520 SERIES AND 530 SERIES ENGINES

NONE

NOVEMBER 3, 2000          EDWARD L. ORTIZ             By: /s/ Edward L. Ortiz
                     PRINCIPAL MAINTENANCE INSPECTOR

Exhibit 10.5

PW4168A ENGINE

MAINTENANCE SERVICE AGREEMENT

BETWEEN

TRANSPORTES AEREOS MERIDIONAIS S.A.

AND

UNITED TECHNOLOGIES INTERNATIONAL, INC.,
PRATT & WHITNEY DIVISION

This document contains proprietary information of United Technologies International, Inc., Pratt & Whitney Division ("Pratt & Whitney") and may not be disclosed to other parties. The terms contained in this document are offered and delivered on the express condition that this document not be disclosed or reproduced in whole or in part without the express prior written consent of Pratt & Whitney. Neither receipt nor possession of this document alone, from any source, constitutes such permission. Possession, use, copying or disclosure by anyone without Pratt & Whitney's express prior written permission is not authorized and may result in criminal and/or civil liability.

Table of Contents

                                                                            PAGE
                                                                            ----
                                TABLE OF CONTENTS

ARTICLE 1  - DEFINITIONS.................................................     2
ARTICLE 2  - DESCRIPTION OF SERVICES.....................................     4
ARTICLE 3  - REQUIREMENTS/SPECIFICATIONS.................................     4
ARTICLE 4  - MATERIAL SUPPORT............................................     5
ARTICLE 5  - ENGINEERING SUPPORT/MAINTENANCE MANAGEMENT..................     7
ARTICLE 6  - MAINTENANCE SERVICES........................................     8
ARTICLE 7  - TURNAROUND TIMES............................................    10
ARTICLE 8  - CHARGES FOR SERVICES........................................    11
ARTICLE 9  - INVOICING AND PAYMENT.......................................    12
ARTICLE 10 - APPLICABLE TERMS AND CONDITIONS.............................    13
ARTICLE 11 - TITLE, DELIVERY, AND RISK OF LOSS...........................    13
ARTICLE 12 - INSPECTION..................................................    14
ARTICLE 13 - WARRANTIES, REMEDIES, AND LIMITATIONS.......................    14
ARTICLE 14 - EXCUSABLE DELAYS............................................    17
ARTICLE 15 - CHANGES/ASSIGNMENT..........................................    18
ARTICLE 16 - TAXES.......................................................    19
ARTICLE 17 - COMPLIANCE WITH FAIR LABOR STANDARDS ACT....................    19
ARTICLE 18 - MATERIAL DISPOSITION........................................    19
ARTICLE 19 - LIABILITY LIMITATION........................................    19
ARTICLE 20 - SELLER'S INSURANCE..........................................    20

-i-

Table of Contents
(Continued)

                                                                            PAGE
                                                                            ----
ARTICLE 21 - TERM AND TERMINATION........................................    20
ARTICLE 22 - APPLICABLE LAWS/CAPTIONS/ORDER OF PRECEDENCE................    21
REFERENCES...............................................................    II

LIST OF ATTACHMENTS

ATTACHMENT I - FIXED PRICES AND CHARGES FOR SERVICES

APPENDIX A - PRATT & WHITNEY MAINTENANCE WORK SPECIFICATIONS FOR TAM

APPENDIX B - PW4000 KIT AND BIN PARTS FIXED PRICE LISTING

ATTACHMENT II - ENGINE SHOP VISIT DATA REQUIREMENTS

REFERENCES

Pratt & Whitney, CHESHIRE, CONNECTICUT PW4000 STANDARD ENGINE WORKSCOPE SPECIFICATION AND PREFACE - the then-current documents shall be on file at Pratt & Whitney and TAM for the period of this Agreement.

-ii-

September 14,2000

PW4168A ENGINE

MAINTENANCE SERVICE AGREEMENT

BETWEEN

TRANSPORTES AEREOS MERIDIONAIS S.A.

AND

UNITED TECHNOLOGIES INTERNATIONAL, INC.,
PRATT & WHITNEY DIVISION

THIS AGREEMENT is made by and between TRANSPORTES AEREOS MERIDIONAIS S.A. having an office and place of business at Sao Paulo, Brazil ("TAM"), and UNITED TECHNOLOGIES INTERNATIONAL, INC., Pratt & Whitney Division, at Cheshire, Connecticut ("Pratt & Whitney"), a corporation organized and existing under the laws of the Territory of Guam, having an office and place of business at East Hartford, Connecticut, USA.

WITNESSETH:

WHEREAS, TAM desires to use Pratt & Whitney * to perform maintenance, modification and/or overhaul of PW4168A engines, engine Modules, and the parts and components thereof owned or operated by TAM; and

WHEREAS, Pratt & Whitney desires to perform required Maintenance Services on such Equipment at its facilities or through qualified vendors or Subcontractors of Pratt & Whitney, under the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of these mutual covenants and the recitals set forth above, the parties do hereby agree as follows.

Pratt & Whitney Proprietary - Subject to the Restrictions on the Front Page

PW4168A Engine Maintenance Service Agreement between Transportes Aereos Meridionais S.A. and
United Technologies International, Inc., (Continued) Page 2

ARTICLE 1 -- DEFINITIONS

1.1 "Delivered Duty Paid" or "DDP" shall have the meaning set forth in Incoterms 2000. The party delivering goods hereunder shall have the relevant obligations applicable under such term to a seller and the party receiving goods hereunder shall have the relevant obligations applicable under such term to a buyer.

1.2 "Engine Build-Up Unit" (("EBU") also referred to as Quick Engine Change ("QEC")) shall mean engine system related mounted hardware required to interface the engine to a specific airframe. The following systems are typically included in an EBU (also referred to as Quick Engine Change) (QEC): Fuel, Hydraulic, Pneumatic, Fire Detection, Electrical, Integrated Drive Generator System ("IDGS"), Cooling, Engine Control, Nacelle Drain and Vent, Starter, Nacelle and Engine Instrumentation, Inlet Anti-Icing, Engine Pressure Ratio, Engine Mounts and engine Vibration Monitoring.

1.3 "Equipment" shall mean PW4168A engines, and/or engine Modules, and/or parts and/or components, and/or QEC/EBU thereof, owned or operated by TAM.

1.4 "Exchange Parts" shall mean TAM's parts or Modules which require repair and/or modification in accordance with the applicable Pratt & Whitney Engine Manual and approved technical data, including the incorporation of applicable Service Bulletins, and whose repair/modification turnaround time is in excess of the allocated shop repair times and will be replaced with Rotable Material Service ("RMS") Parts, at which time title for title transfer shall occur, subject to certain exceptions explained in more detail herein, such as Paragraph 4.1.2. If such TAM parts or Modules are found unacceptable or declared scrap by Pratt & Whitney, any replacement parts or Modules supplied by TAM are also included under this definition.

1.5 "Ex Works" shall have the meaning set forth in Incoterms 2000. The party delivering goods hereunder shall have the relevant obligations applicable under such term to a seller and the party receiving goods hereunder shall have the relevant obligations applicable under such term to a buyer.

1.6 "Focused Parts Repair Unit" shall mean an independent profit and loss center within the United States operations of Pratt and Whitney, exclusive of foreign subsidiaries, responsible for the repair of designated groups of engine parts.

1.7 "Maintenance Services" shall mean a workscope as applicable to the repair, maintenance, modification, and/or overhaul of TAM's Equipment.

1.8 "Modules" shall mean the following major serialized portions of the Equipment that, unless otherwise indicated herein, are originally sold by Pratt & Whitney as a data plated assembly:

Pratt & Whitney Proprietary - Subject to the Restrictions on the Front Page

PW4168A Engine Maintenance Service Agreement between Transportes Aereos Meridionais S.A. and
United Technologies International, Inc., (Continued) Page 3

Low Pressure Compressor ("LPC") High Pressure Compressor ("HPC") High Pressure Turbine ("HPT")
Low Pressure Turbine ("LPT")
Angle Gearbox ("AGB") (Not data plated for the PW4168A) Main Gearbox ("MGB")

1.9 "Operating and Maintenance History" shall mean data relative to the Equipment's modification level, total time, total cycles, time since overhaul, time since shop repair, the date of removal and reason for removal. (Reference Paragraph 3.3 and Attachment II).

1.10 "Pratt & Whitney" means the Pratt & Whitney Division of United Technologies Corporation.

1.11 "Purchase Order" shall mean a document, issued by TAM pursuant to this Agreement for Equipment sent to Pratt & Whitney, that authorizes Pratt & Whitney to perform Maintenance Services in accordance with this Agreement. The Purchase Order shall state that it is subject to the terms of this Agreement and shall be numbered, or otherwise identified, for purposes of identification and billing. It may also contain a statement of, or reference to, the applicable work specification, if not transmitted separately, and should contain return delivery instructions.

1.12 "QEC" shall mean Quick Engine Change and similar engine mounted hardware required to interface the engine to a specific airframe (also referred to as EBU).

1.13 "RMS Parts" (Rotable Material Service Parts), shall mean those Pratt & Whitney parts and Modules, which are compatible with TAM's Equipment and are either new or serviceable in accordance with the applicable Pratt & Whitney Engine Manual and/or approved technical data including the incorporation of applicable Service Bulletins, which are exchanged for TAM's Exchange Parts, at which time a title for title transfer shall occur, subject to certain exceptions explained in more detail herein, such as Paragraph 4.1.2.

1.14 "SMS Parts" shall mean used serviceable parts inventoried by Pratt & Whitney for direct sale at less than new part price.

1.15 "Subcontractor" shall mean any entity which is approved by Pratt & Whitney to perform any work under this Agreement, including United Technologies Corporation joint venture partners or subsidiaries and other Pratt & Whitney entities outside of Pratt & Whitney, but shall not include Pratt & Whitney Focused Parts Repair Units.

1.16 "Type Certificate Holder" or "TCH" shall mean an entity holding a type certificate issued under the authority of the United States Federal Aviation Regulation, Part 21.

Pratt & Whitney Proprietary - Subject to the Restrictions on the Front Page

PW4168A Engine Maintenance Service Agreement between Transportes Aereos Meridionais S.A. and
United Technologies International, Inc., (Continued) Page 4

ARTICLE 2 - DESCRIPTION OF SERVICES

2.1 Except as otherwise stated herein, during the term hereof, TAM shall use Pratt & Whitney, and only Pratt & Whitney, to perform Maintenance Services for all Equipment owned or operated by TAM.

2.2 Upon receipt of TAM's Equipment and an acceptable Purchase Order issued pursuant to this Agreement, Pratt & Whitney shall furnish required Maintenance Services subject to the terms, conditions and charges set forth herein.

2.3 TAM shall pay Pratt & Whitney for all Maintenance Services provided by Pratt & Whitney or its Subcontractors in accordance with the rates and charges set forth in Attachment I.

ARTICLE 3 - REQUIREMENTS/SPECIFICATIONS

3.1 TAM shall maintain the Equipment in accordance with the requirements of the applicable Airworthiness Regulatory Agency Production Approval Holders' ("PAH") instructions for continued airworthiness, engine and/or component maintenance manuals, approved current technical data, service bulletins, applicable Airworthiness Directives, and TAM's Continuous Airworthiness Maintenance Plan ("Plan"). The Plan shall substantially conform to the PAH data and include the Pratt & Whitney workscopes referenced herein. The Plan shall be approved by all regulatory agencies with proper jurisdiction. In addition, the Plan shall incorporate all Airworthiness Regulatory Agency procedures/requirements then in effect and applicable to TAM. TAM shall provide Pratt & Whitney with copies of its customized Powerplant Buildup Manuals, Maintenance Manuals, wiring diagrams, and all revisions thereto to assure that the Equipment's external configuration conforms to TAM's requirements and specifications.

3.2 TAM shall provide to Pratt & Whitney, before maintenance release and shipment of the Equipment by Pratt & Whitney, written engineering authority in accordance with governmental airworthiness regulations for continued use of parts in TAM's engines, Modules and components that are found at inspection or during repair to embody repairs or modifications authorized previously under other than the Type Certificate Holder's ("TCH") technical data. Parts containing such peculiar repair(s) will not be considered candidates for exchange as provided in Article 4, Paragraph 4.1.2. TAM will replace such parts with acceptable parts within thirty (30) days. In the event TAM is unable to deliver an acceptable part within thirty (30) days, Pratt & Whitney will charge TAM for a replacement new or used serviceable part in accordance with the pricing terms of this Agreement.

3.3 In order for Pratt & Whitney to process Equipment in accordance with the time schedules set forth herein, TAM shall, within two (2) weeks prior to shipping

Pratt & Whitney Proprietary - Subject to the Restrictions on the Front Page

PW4168A Engine Maintenance Service Agreement between Transportes Aereos Meridionais S.A. and
United Technologies International, Inc., (Continued) Page 5

Equipment for Maintenance Services hereunder, provide by facsimile, SITA or other electronic communication, the applicable Operating and Maintenance History in the format provided in Attachment II hereto. In addition, TAM will provide to Pratt & Whitney a six (6) month nonbinding forecast of the Equipment's scheduled maintenance and modification requirements and will notify Pratt & Whitney monthly as to any known changes in the forecast.

3.4 TAM hereby warrants that, to the best of its knowledge and belief, unless otherwise disclosed to Pratt & Whitney in writing, all Equipment delivered for Maintenance Services, including Exchange Parts and TAM supplied parts:
(i) are of proper configuration, (ii) were produced in compliance with applicable United States of America Federal Aviation Regulations ("FAR"), including without limitation FAR 21.303, 21.305 and other applicable production approval requirements, and (iii) have not been involved in an accident, extreme environmental conditions, or other abnormal operating conditions, exposed to abnormally high rotor speeds or turbine temperatures, or otherwise operated outside the certification basis for the type certificated product(s) on which they are eligible for installation as prescribed in the TCH's Maintenance Manual or other approved technical data. TAM further warrants that, to the best of its knowledge and belief, there is no reason that such goods may not be repairable based upon the TCH's approved technical data. With respect to goods delivered for Maintenance Services, TAM warrants that, unless otherwise disclosed to Pratt & Whitney in writing, parts do not contain any prior repairs or modifications not performed in full compliance with applicable regulatory requirements. With respect to goods eligible for exchange, TAM warrants to the best of its knowledge and belief, such goods do not contain any parts not manufactured by the TCH or an authorized supplier thereof, nor any repairs or modifications not based upon the TCH's approved technical data and performed by a repair source approved by the United States Federal Aviation Administration. TAM agrees to indemnify and save Pratt & Whitney harmless from any loss or damage but not any incidental or consequential damage (including attorneys' fees) resulting to Pratt & Whitney from the warranties made by TAM set forth herein being untrue in any respect.

ARTICLE 4 - MATERIAL SUPPORT

4.1 The material sources listed below shall be used to support Maintenance Services for TAM's Equipment.

4.1.1 New Parts

New parts may be used to replace scrap, superseded and, in some instances, long lead time repair/modification material subject to charges specified in Attachment I.

Pratt & Whitney Proprietary - Subject to the Restrictions on the Front Page

PW4168A Engine Maintenance Service Agreement between Transportes Aereos Meridionais S.A. and
United Technologies International, Inc., (Continued) Page 6

4.1.2 Pratt & Whitney RMS Parts

When Rotable Material Service ("RMS") Parts are used, and Exchange Parts are accepted by Pratt & Whitney as set forth below, title for title exchanges result and TAM's repaired Equipment is returned to the RMS inventory. TAM warrants that it will deliver good title to Exchange Parts at time of Acceptance, as defined below.

If Pratt & Whitney determines (reasonably and in good faith) that TAM's previously supplied Exchange Parts are unrepairable, it shall so notify TAM and TAM shall, following TAM's receipt of such notice, deliver Exchange Parts DDP Pratt & Whitney's facility, transportation prepaid, not later than * after delivery by Pratt & Whitney of corresponding RMS Parts. Pratt & Whitney reserves the right to impose a service charge on Exchange Parts which are not delivered by TAM within *. The service charge will be * of the current new part price for each *, or portion thereof, beyond the * period allowed for delivery of TAM supplied Exchange Parts. If there is no current new part price for such Exchange Parts, Pratt & Whitney shall, in its sole discretion, determine a price based on the current price of comparable parts or the last listed price escalated to the current date.

Title to the Exchange Part vests, and risk of loss passes, only upon Acceptance. Acceptance by Pratt & Whitney ("Acceptance") occurs at the earlier of:

- notice by Pratt & Whitney to Tam that it has approved the TAM supplied or Exchange Part; or

- the expiration of the Inspection Period (the sixty (60) day period following receipt of TAM's Exchange Parts), provided that Pratt & Whitney has not required a replacement part or scrapped the part. Title to the Exchange Part vests, and risk of loss passes, only upon Acceptance.

4.1.3 TAM Supplied Parts

Pratt & Whitney's inventory will be the primary source for material support; however, if TAM ships certain used serviceable parts to Pratt & Whitney for use in specific TAM Equipment or for retention in a segregated support inventory, such parts must be accompanied by appropriate serviceability documents (maintenance release as defined by FAR 43) and in accordance with regulatory agency approved technical data, or undergo Pratt & Whitney inspection at TAM's expense.

Pratt & Whitney Proprietary - Subject to the Restrictions on the Front Page

PW4168A Engine Maintenance Service Agreement between Transportes Aereos Meridionais S.A. and
United Technologies International, Inc., (Continued) Page 7

4.1.4 Pratt & Whitney SMS Parts

If available, SMS Parts will be used in the same manner as the new parts described in Paragraph 4.1.1 above, unless TAM specifies in writing to the contrary. SMS Parts are subject to the terms and conditions hereof and charges set forth in Attachment I.

4.2 All TAM parts supplied to Pratt & Whitney under Paragraphs 4.1.2 or 4.1.3, must be accompanied by (life limited) parts records, if applicable. In addition, TAM shall provide maintenance records to Pratt & Whitney upon request, confirming compliance with the requirements and specifications of this Agreement.

4.3 Unless otherwise specified by TAM, Pratt & Whitney will install new or SMS Parts to meet turnaround time when RMS or TAM parts are not available to replace long lead-time repair/modification parts. TAM will pay the charges associated with the installed parts and the charges for repair of the original parts which shall, on completion, be placed in the TAM inventory as described in Paragraph 4.1.3, above.

4.4 *

4.5 If TAM is unable to convey good title to Exchange Parts, or if Exchange Parts or TAM supplied parts and records do not meet the requirements of this Agreement, Pratt & Whitney shall, within sixty (60) days after receipt thereof or notice of title defect, notify TAM of such condition. In the event such notification and determination are made by Pratt & Whitney, the act of Acceptance, the passage of title and the transfer of risk of loss to Pratt & Whitney, as applicable, shall be deemed not to have occurred. In such event, Pratt & Whitney shall have the right, at its option, to require that TAM replace such Exchange Parts, with acceptable Exchange Parts, which will be shipped by TAM within thirty (30) days of notification, or to adjust the invoice as Pratt & Whitney determines necessary.

TAM will reimburse Pratt & Whitney for all labor costs associated with the subject part, up until the date that Pratt & Whitney rejects the TAM supplied or Exchange Part.

ARTICLE 5 - ENGINEERING SUPPORT/MAINTENANCE MANAGEMENT

5.1 As part of its engineering support and maintenance management services under this Agreement, Pratt & Whitney shall:

5.1.1 Communicate with TAM regarding work in process or Equipment in transit hereunder;

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PW4168A Engine Maintenance Service Agreement between Transportes Aereos Meridionais S.A. and
United Technologies International, Inc., (Continued) Page 8

5.1.2 Provide specific operational/maintenance recommendations based on data collected from Equipment received hereunder;

5.1.3 In coordination with TAM, determine applicable Service Bulletin incorporation schedules with the objective of increasing Equipment reliability, durability, and maintainability; and

5.1.4 Provide the documentation identified below:

5.1.4.1 A major damage or non-typical repair report including technical conclusions as to the cause of such damage or repair requirements;

5.1.4.2 A Major Repair and Alterations Form FAA-337;

5.1.4.3 Significant Historical Data (QEC and Component) Report;

5.1.4.4 A Major Parts Record Change List ("MARS") (engines and Modules) within thirty (30) days of engine shipment;

5.1.4.5 Engine Test Logs (as applicable);

5.1.4.6 Airworthiness Directive Status;

5.1.4.7 Service Bulletin Compliance;

5.1.4.8 Status of Life Limited Parts; and

5.1.4.9 Maintenance Release, Form FAA 8130-3.

5.2 From time to time, upon request, Pratt & Whitney may, during the period of the Agreement, dispatch to the site designated by TAM qualified personnel to perform limited workscope maintenance, provided that material, tools, and an appropriate work site are available. In certain instances, as shall be established on a case-by-case basis, Pratt & Whitney will supply tools and material. Services performed and/or Pratt & Whitney materials incorporated on-site by Pratt & Whitney will be invoiced in accordance with the rates and charges for on-site work appearing in Attachment I hereto.

ARTICLE 6 - MAINTENANCE SERVICES

6.1 When Equipment is shipped to Pratt & Whitney for maintenance hereunder, its Operating and Maintenance History, as provided to Pratt & Whitney in accordance

Pratt & Whitney Proprietary - Subject to the Restrictions on the Front Page

PW4168A Engine Maintenance Service Agreement between Transportes Aereos Meridionais S.A. and
United Technologies International, Inc., (Continued) Page 9

with Paragraph 3.3, will be considered in determining the Maintenance Services to be performed subject to the specifications of Article 3.

6.2 Pratt & Whitney may, after reviewing the Equipment's actual condition and history, seek TAM's written concurrence to modify the workscope. Pratt & Whitney's review shall include, but not be limited to:

6.2.1 operating time since the last shop visit;

6.2.2 present parts condition;

6.2.3 the number of hours planned for the next shop visit interval or as determined by life-limited parts;

6.2.4 any scheduled interval for engine Hot Section Inspection;

6.2.5 the review of recommended Pratt & Whitney Service Bulletins, as defined in Article 5, Paragraph 5.1.3;

6.2.6 the instructions given on TAM's Purchase Orders and/or Work Specifications;

6.2.7 the reason for an unscheduled removal or shop visit;

6.2.8 TAM supplied report of any accident/abnormal operational circumstance involving the Equipment being inducted, (reference: Pratt & Whitney Overhaul Standard Practices Manual, P.N. 585005); and

6.2.9 Any regulatory requirements other than the United States FAA as specified by TAM.

6.3 For the purpose of calculating the Basic Engine Labor man-hours described in the PW4168A Engine Shop Visit Labor Guarantee Plan provided in the PW4168A Propulsion System contract between Pratt & Whitney and TAM dated October 1, 1997 (the "PW4168A Contract"), Pratt &Whitney will provide the number of Basic Engine Labor man-hours utilized to perform the Maintenance Services on each of the final invoices.

Pratt & Whitney Proprietary - Subject to the Restrictions on the Front Page

PW4168A Engine Maintenance Service Agreement between Transportes Aereos Meridionais S.A. and
United Technologies International, Inc., (Continued) Page 10

ARTICLE 7 - TURNAROUND TIMES

7.1 Except as set forth in Article 14, Pratt & Whitney shall turnaround TAM's Equipment within the following turnaround times:

                                  Calendar Days
                                  -------------
Hot Section Maintenance                 *
Gas Path Repair and Maintenance         *
Heavy Maintenance                       *

The turnaround times for miscellaneous shop visits shall be established by mutual agreement between TAM and Pratt & Whitney.

7.2 Turnaround time shall commence on the date of induction, following receipt by Pratt & Whitney of TAM's Equipment and a proper Purchase Order and/or Work Specification which accurately defines the work to be accomplished. Turnaround time shall end the day Equipment is ready for shipment Ex Works, Pratt & Whitney's designated facility. Turnaround times exclude published Pratt & Whitney holidays and scheduled plant shutdowns.

7.3 Turnaround times are based on Pratt & Whitney's discretionary use of the inventories defined in Article 4 including a RMS High Pressure Compressor ("HPC") and Low Pressure Compressor ("LPC") Module and upon TAM's timely compliance with Pratt & Whitney requests and recommendations. Any delays of more than * due to TAM's response time or specific inventory requirements will result in a commensurate extension to the turnaround time. In the event of multiple, simultaneous receipts, Pratt & Whitney reserves the right to stagger Equipment inductions by a maximum of * , in which case turnaround time begins on the day of Equipment input into the shop.

7.4 In the event that (i) the engine turnaround times listed in Paragraph 7.1 are exceeded, and (ii) and such delay is solely attributable to Pratt & Whitney, and (iii) all TAM's PW4168A engines are being overhauled at the Pratt & Whitney designated facility; then Pratt & Whitney shall provide a remedy in accordance with the following provisions.

7.4.1 Pratt & Whitney shall (i) use commercially reasonable best efforts to assist TAM in obtaining a Pratt & Whitney PW4168A lease engine; or
(ii) if no PW4168A lease engine is available from Pratt & Whitney, then Pratt & Whitney will provide TAM with a credit that may only be applied to invoices

Pratt & Whitney Proprietary - Subject to the Restrictions on the Front Page

PW4168A Engine Maintenance Service Agreement between Transportes Aereos Meridionais S.A. and
United Technologies International, Inc., (Continued) Page 11

issued by Pratt & Whitney to TAM under this Agreement in the amount of
* for each day the turnaround time is exceeded, provided that the maximum amount credited hereunder for any shop visit shall be *

7.4.2 If Pratt & Whitney leases a PW4168A engine to TAM pursuant to Section 7.4.1, Pratt & Whitney will waive the daily lease fee for such engine. Such waiver shall be deemed to be a credit subject to the caps specified in Article 7.4.1. In this event, any hourly or cyclic usage charges associated with such lease shall be the responsibility of, and paid by, TAM. These usage charges will be competitive with the lease market.

7.4.3 Pratt & Whitney's obligation to provide a Pratt & Whitney lease engine is subject to the terms and conditions set forth in the General Engine Lease Agreement dated February 10, 1999 by and between United Technologies International and TAM. Pratt & Whitney's obligation to provide a Pratt & Whitney lease engine shall commence on the date such transaction is authorized by Pratt & Whitney and such lease engine is delivered to TAM by Pratt & Whitney and shall terminate * following the redelivery of a TAM PW4168A engine, Ex Works Pratt & Whitney's Cheshire, Connecticut, facility. The maximum amount of daily lease fees waived or credited by Pratt & Whitney pursuant to this Article 7 in respect of any shop visit shall be the same as the maximum amount credited in respect of any shop visit pursuant to Section 7.4.1. [*

7.5 TAM's sole remedies, and Pratt & Whitney's maximum liability for the inability of Pratt & Whitney to meet the specified turnaround times shall be as stated in this Article 7.

ARTICLE 8 - CHARGES FOR SERVICES

8.1 Pratt & Whitney's prices for the term of this Agreement are set forth in Attachment I hereto. These prices are subject to escalation as described in Attachment I. For TAM's convenience of reference Pratt & Whitney will provide TAM, on an annual basis, with a pricing letter indicating the escalated price for the then-current calendar year.

8.2 Subject to the provisions of Articles 14 or 21 hereof, during the term of this Agreement, should TAM obtain Maintenance Services from a facility other than Pratt & Whitney, without Pratt & Whitney's written consent, and such action substantially contravenes the intent of Paragraphs 8.2.1 and 8.2.2 below, in addition to any other remedies available to Pratt & Whitney, all work done during the term of this Agreement will be charged at Pratt & Whitney's standard rates and charges in effect at the time the Maintenance Services were performed (including services previously billed at the discounted rates and charges). TAM shall pay any required adjustment.

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Pratt & Whitney, without Pratt & Whitney's prior written consent, and such action substantially contravenes the intent of Paragraphs 8.2.1 and 8.2.2 below, in addition to any other remedies available to Pratt & Whitney, all work done during the term of this Agreement will be charged at Pratt & Whitney's standard rates and charges in effect at the time the Maintenance Services were performed (including services previously billed at the discounted rates and charges). TAM shall pay any required adjustment.

8.2.1   Engines and Modules are the primary focus of this limited
        exclusivity provision and must always be sent to Pratt & Whitney
        unless an exception is agreed to in writing by Pratt & Whitney or
        the provisions of Articles 14 or 21 are applicable. Subject to the
        provisions of Articles 14 and 21 hereof, sending an engine or
        Module to another facility without Pratt & Whitney's express
        written consent will invoke the pricing provisions of Paragraph
        8.2. Pratt & Whitney Focused Repair Parts (those parts listed in
        Pratt & Whitney's then-current Part Repair Capability Index) are a
        secondary focus and isolated instances of sending such parts to
        another facility will not invoke the pricing adjustment provided
        for in Paragraph 8.2; however, repeated actions will invoke the
        pricing provisions of Paragraph 8.2. Pratt & Whitney reserves the
        right to increase the number and type of Focused Repair Parts
        during the term of this Agreement.

8.2.2   The parties acknowledge that this limited exclusivity is based on
        performance substantially in accordance with this Agreement. For so
        long as Pratt & Whitney's performance constitutes less than full
        compliance, but not constituting material breach, and should TAM be
        substantively and adversely impacted, the parties agree to meet and
        discuss improvements which may result in specific work to be sent
        to other sources provided that in the absence of such agreed upon
        improvements, TAM may exercise the remedies available to it under
        Article 14 hereof.

ARTICLE 9 - INVOICING AND PAYMENT

9.1 Invoices will usually be rendered within * following Equipment delivery from Pratt & Whitney. These invoices will normally be final for parts and partial for engines and Modules.

Partial invoices will include the charges for work performed to date and the estimated charges for residual work on Exchange Parts. *

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9.2 In order to expedite the final invoice process, Pratt & Whitney shall have the right to convert residual repair charges to a reasonable fixed price, based upon historical experience or stated fixed prices. Such conversion of residual repair charges shall be based upon the fixed price or the labor rate in effect at the time of Equipment receipt and manufacturer's prices in effect at the time of part assignment to the Equipment.

9.3 * All invoices shall be transmitted to TAM by facsimile or mutually agreed means within * hours of invoice date. If payment is not received within * days of invoice date, the invoice amount will be subject to interest at a rate of * per month, accruing from the date of invoice until the date payment is received. Pratt and Whitney may adjust this interest rate from time to time based on customer's late payment practices, but shall not charge more than the maximum rate of interest allowed by applicable law.

In the event TAM has a reasonable dispute on any portion of an invoice, TAM will be required to pay the undisputed portion immediately, and interest on the disputed portion only will be waived until the dispute is resolved.

9.4 Notwithstanding the payment terms set forth above, if Pratt & Whitney determines in good faith that TAM's financial condition has materially and adversely deteriorated, Pratt & Whitney shall so notify TAM and shall have the right to seek reasonable assurances from TAM with respect to payment and, in the absence of Pratt & Whitney's receipt of such assurances as are reasonably acceptable to Pratt & Whitney, Pratt & Whitney shall have the right to specify reasonable alternative payment terms which shall, upon Pratt & Whitney giving written notice thereof to TAM, supersede the payment terms herein specified while such adverse material financial condition remains in effect with respect to TAM following which the original payment terms shall be automatically reinstated.

ARTICLE 10 - APPLICABLE TERMS AND CONDITIONS

Only the terms and conditions of this Agreement shall apply. Printed terms or conditions (other than those acknowledging or affirming application of this Agreement) appearing on or attached to TAM Purchase Orders shall not apply.

ARTICLE 11 - TITLE, DELIVERY, AND RISK OF LOSS

11.1 TAM shall furnish proper and serviceable shipping stands or containers for Equipment shipped to Pratt & Whitney for Maintenance Services under this Agreement. Pratt & Whitney shall, upon completion of work, reinstall the Equipment into TAM's stands or containers for reshipment. If any repairs are necessary to make TAM's stands or containers useable for reshipment, Pratt & Whitney may perform them on a time and material basis.

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11.2 The DDP point for Equipment shipped and delivered by TAM under this Agreement shall be Pratt & Whitney's facilities or the facilities of Pratt & Whitney designated Subcontractors. Ex Works redelivery of Equipment by Pratt & Whitney shall be to an agent of TAM, including a common carrier, flyaway, or warehouse as hereinafter provided. Thereafter, TAM shall have all risk of loss for such Equipment, including parts incorporated therein by Pratt & Whitney. Wherever transportation rates and carrier's liability for damage depend upon the value of the shipment as declared by shipper, TAM shall specify in writing such value and pay the applicable transportation rates. In the absence of such specifications, Pratt & Whitney will declare such value as it determines as will entitle TAM to have Equipment shipped at the lowest permissible transportation rates. TAM will furnish written shipping instructions for all Equipment as promptly as possible. In the absence of such instructions, Pratt & Whitney may, at any time beginning ten (10) days after forwarding notice to TAM by mail or otherwise that the Equipment is ready for shipment, do either of the following for the account and at the expense and risk of TAM: arrange for shipment of Equipment by a carrier of Pratt & Whitney's selection to TAM's place of business or other destination reasonably believed to be suitable; or warehouse the Equipment. TAM will not hold Pratt & Whitney liable for loss or damage attributed to negligence, either in selection of the carrier or the warehouse or in agreeing with either of them to contract terms on TAM's behalf.

11.3 Equipment from TAM shall be shipped *. Equipment shipped by Pratt & Whitney to TAM shall be shipped *.

ARTICLE 12 - INSPECTION

If any Equipment appears to TAM not to have been serviced in accordance with this Agreement, TAM shall, within * after receipt thereof, notify Pratt & Whitney of such condition and afford Pratt & Whitney a reasonable opportunity to inspect the Equipment and make an appropriate adjustment or replacement which is reasonably acceptable to TAM. The remedies afforded TAM under Article 13 entitled "Warranties, Remedies and Limitations" shall be exclusive for defects discovered upon inspection. TAM shall not delay payment for repaired or Exchange Parts pending such inspection.

ARTICLE 13 - WARRANTIES, REMEDIES, AND LIMITATIONS

13.1 Services

Pratt & Whitney warrants to TAM that at the time of delivery of the Equipment, the services hereunder will have been performed in a workman-like manner. Pratt & Whitney's liability and TAM's remedy under this warranty are limited to Pratt & Whitney correcting at its facility, or at a facility of Pratt & Whitney's designation, such services as are shown to Pratt & Whitney's reasonable satisfaction to have been defective, provided that such Equipment has been preserved, protected and/or

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operated in accordance with the applicable manuals and that TAM has provided Pratt & Whitney with written notice of the defect:

(i) within * after first operation or use of the Equipment; or

(ii) within * after the date of delivery of such Equipment by Pratt & Whitney, whichever shall first occur.

However, notwithstanding subparagraphs (i) and (ii) of this Article 13.1, in the event TAM does not use or operate an item of Equipment within * after the date of delivery of such Equipment by Pratt & Whitney, and provided such Equipment has been preserved and/or protected in accordance with the applicable manuals, the provisions of this Article 13.1 shall apply (subject to all the requirements and qualifications stated in this Article 13.1) on the conditions that (a) TAM has provided Pratt & Whitney with written notice of the defect within * and (b) such Equipment is operated or used no later than * Pratt & Whitney expressly disclaims responsibility for the technical integrity/reliability of repairs and modifications previously or subsequently performed to data other than the TCH's technical data, or performed by a non-Pratt & Whitney approved source or for the special requirements related thereto. In addition, Pratt & Whitney disclaims all responsibility for loss or damage related to such repairs or modifications. This clause is not intended to disclaim responsibility for work performed by Pratt & Whitney or one of its selected vendors which are still under an applicable warranty.

13.2 Parts

The warranties and remedies for parts incorporated under this Agreement shall be as set forth below:

13.2.1 Defects

Pratt & Whitney warrants to TAM that at the time of delivery of the overhauled or repaired Equipment, any Pratt & Whitney provided parts (including parts provided to TAM under this Agreement by Pratt & Whitney through a Pratt & Whitney vendor or subcontractor) will be free from defects in material and manufacture and will conform substantially to Pratt & Whitney's applicable specifications as stipulated in Article 3. Pratt & Whitney's liability and TAM's remedy under this warranty are limited to the repair or replacement, at Pratt & Whitney's election, of Pratt & Whitney provided parts or components returned to Pratt & Whitney which are shown to Pratt & Whitney's reasonable satisfaction to have been defective; provided

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that such Equipment has been preserved, protected, and/or operated in accordance with the applicable manuals and that TAM has provided Pratt & Whitney with written notice of the defect Pratt & Whitney within * after first operation or use of the Equipment; or within * after the date of delivery of such Equipment by Pratt & Whitney, whichever shall first occur.

13.2.2 Title

Pratt & Whitney warrants to TAM that it conveys good title to parts sold hereunder. Pratt & Whitney's liability and TAM's remedy under this warranty are limited to the removal of any title defect or, at the election of Pratt & Whitney, to the replacement of the parts or components thereof which are defective in title; provided, however, that the rights and remedies of the parties with respect to patent infringement shall be limited to the provisions of Paragraph 13.2.3, below.

13.2.3 Patent Infringement

Pratt & Whitney represents and warrants to TAM that all parts provided under or pursuant to this Agreement shall not infringe any patent or patent right of any person or entity, provided that in the event of any such infringement, or any breach of this representation and warranty, TAM's exclusive remedy and Pratt & Whitney's sole liability shall be that contained in this Section 13.2.3. Pratt & Whitney shall defend, indemnify and hold TAM harmless from any and all claims, suits or actions and all damages, losses, costs, expenses, settlements or judgments from or relating to any assertion that any parts provided pursuant to this Agreement infringes any patent or patent claim of any person or entity, subject to the conditions stated in this Section 13.2.3. Pratt & Whitney shall have the right to conduct, at its own expense, the entire defense of any claim, suit or action alleging that, without further combination, the use or resale by TAM or any subsequent purchaser or user of the parts delivered hereunder directly infringes any United States patent, but only on the conditions that (1) Pratt & Whitney receives prompt written notice of such claim, suit or action and full opportunity and authority to assume the sole defense thereof, including settlement and appeals, and all information available to TAM for such defense; (2) said parts are made according to a specification or design furnished by Pratt & Whitney or any other unit of United Technologies Corporation or, if a process patent is involved, the process performed with such parts is recommended in writing by Pratt & Whitney; and (3) the claim, suit or action is brought against TAM. Provided all of the foregoing conditions have been met, Pratt & Whitney shall, at its own expense, either settle said claim, suit or action or shall pay all damages, excluding indirect, incidental or consequential damages, and costs awarded by the court therein. If the use or resale of such parts by TAM is temporarily or permanently enjoined, Pratt & Whitney shall, at Pratt & Whitney's option, (i) procure for defendant the right to use or resell the parts, (ii) replace them

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with equivalent noninfringing parts, or (iii) modify them so they become noninfringing but equivalent. If a claim, suit or action is based on a design or specification furnished by TAM or on the performance of a process not recommended in writing by Pratt & Whitney, or on the use or sale of the parts delivered hereunder in combination with other parts not delivered to TAM by Pratt & Whitney, TAM shall defend, indemnify, and hold Pratt & Whitney and United Technologies Corporation harmless from any and all claims, suits or actions and all costs, expenses, damages, losses, settlements or judgments arising from or relating thereto on the same terms and basis and to the same extent that Pratt & Whitney would defend, indemnify and hold TAM harmless from such claims, suits and actions involving Pratt & Whitney parts pursuant to the foregoing provisions of this
Section 13.2.3. Either party shall have the right to bring a legal proceeding against the other to enforce its rights under this Section 13.2.3.

13.3 Transportation charges for the return of defectively serviced Equipment to Pratt & Whitney and its reshipment to TAM and risk of loss during transportation will be borne by TAM. Pratt & Whitney shall reimburse TAM for all reasonable round trip freight costs Ex Works Pratt & Whitney for all parts or Equipment found by Pratt & Whitney to be defective.

13.4 EXCLUSIVE WARRANTIES AND REMEDIES- THE FOREGOING WARRANTIES ARE EXCLUSIVE AND ARE GIVEN AND ACCEPTED IN LIEU OF (i) ANY AND ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE; AND (ii) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN CONTRACT, TORT OR STRICT LIABILITY AGAINST PRATT & WHITNEY OR UNITED TECHNOLOGIES CORPORATION, WHETHER OR NOT ARISING FROM THE NEGLIGENCE, ACTUAL OR IMPUTED, OF PRATT & WHITNEY OR UNITED TECHNOLOGIES CORPORATION. PRATT & WHITNEY DOES NOT WARRANT ANY PARTS, WHETHER SUPPLIED BY TAM OR NOT, THAT WERE NOT ORIGINALLY SOLD BY PRATT & WHITNEY. THE REMEDIES OF TAM SHALL BE LIMITED TO THOSE PROVIDED HEREIN TO THE EXCLUSION OF ANY AND ALL OTHER REMEDIES INCLUDING, WITHOUT LIMITATION, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES. NO AGREEMENT VARYING OR EXTENDING THE FOREGOING WARRANTIES, REMEDIES OR THIS LIMITATION WILL BE BINDING UPON PRATT & WHITNEY UNLESS IN WRITING, SIGNED BY A DULY AUTHORIZED OFFICER OF PRATT & WHITNEY.

ARTICLE 14 - EXCUSABLE DELAYS

TAM acknowledges that the turnaround times set forth in Article 7 are provided on the condition that there will be no delay due to causes beyond the reasonable control of Pratt &

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Whitney. Pratt & Whitney shall not be charged with any liability for delay or nondelivery when due to delays of suppliers, acts of God or the public enemy, compliance in good faith with any applicable foreign or domestic governmental regulation or order, whether or not it proves to be invalid, fires, riots, labor disputes, unusually severe weather or any other cause beyond the reasonable control of Pratt & Whitney (delays resulting from the foregoing causes are hereinafter referred to collectively as "Excusable Delays"). To the extent that such Excusable Delays actually delay deliveries on the part of Pratt & Whitney, the time for the performance shall be extended for as many days beyond the delivery date as is required to obtain removal of the causes of such Excusable Delays,

ARTICLE 15 - CHANGES/ASSIGNMENT

15.1 No modification of this Agreement shall be binding unless agreed to in writing and signed by authorized representatives of both TAM and Pratt & Whitney. Unless TAM expressly provides to the contrary in writing Pratt & Whitney may, within forty-eight (48) hours notice to TAM, proceed with all work necessary to repair, overhaul or modify the Equipment furnished by TAM, notwithstanding that TAM's Purchase Order(s) may, through error or oversight, (1) erroneously identify the Equipment to be serviced, or (2) fail to specify all service work necessary in Pratt & Whitney's opinion which is required to put the Equipment in usable condition.

15.2 Neither party may assign or delegate this Agreement nor any interest herein unless both Parties agree in writing to such assignment or delegation, except that Pratt & Whitney may assign or delegate, without recourse to Pratt & Whitney or United Technologies Corporation, its interest, rights and obligations in this Agreement to any subsidiary or affiliate succeeding in interest to the commercial engine overhaul, component repair, leasing, part supply or tool support business of United Technologies Corporation, or in connection with the merger, consolidation, reorganization or voluntary sale or transfer of its assets and except that TAM may assign its rights hereunder to any affiliate or subsidiary of TAM (provided TAM remains obligated hereunder) or in connection with any merger, consolidation, reorganization or voluntary sale or transfer of TAM's assets (provided TAM and the transferee remain or become obligated hereunder).

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ARTICLE 16 - TAXES

In addition to the price for Equipment processed hereunder, TAM shall pay Pratt & Whitney for any and all taxes (not including any income or excess profit taxes) which may be imposed by any taxing authority, arising from the sale, delivery or use of Pratt & Whitney's products and for which Pratt & Whitney may be held responsible for collection or payment, either on its own behalf or that of TAM. TAM shall be responsible for any and all interest and penalties relating to nonpayment or late payment of taxes due in any jurisdiction which interest and penalties arise from TAM's failure to pay such taxes when due after notification thereof by Pratt & Whitney to TAM.

ARTICLE 17 - COMPLIANCE WITH FAIR LABOR STANDARDS ACT

Pratt & Whitney hereby certifies that all services performed and all parts produced or manufactured in the United States of America and used in overhaul or repair work hereunder are performed, produced or manufactured, as the case may be, in compliance with the Fair Labor Standards Act of 1938, as amended (29 United States Code 201-219). All requirements as to the certificate contemplated in the October 26, 1949, amendment to the Fair Labor Standards Act of 1938 shall be considered satisfied by this certification.

ARTICLE 18 - MATERIAL DISPOSITION

18.1 Unless TAM has notified Pratt & Whitney to the contrary, Equipment or parts thereof received from TAM, which in the opinion of Pratt & Whitney have no value other than as scrap because they cannot be repaired to a serviceable condition, will be disposed of by Pratt & Whitney, and no accountability or liability for such parts will be imposed on Pratt & Whitney by TAM. Pratt & Whitney agrees, however, to return to TAM, at TAM's expense, parts which are either scrap, superseded or uneconomical to repair if so indicated on the face of TAM's Purchase Order or supplement thereto.

18.2 Parts for which there are currently no repair procedures and which, in the opinion of Pratt & Whitney/Cheshire Engineering, have potential to be repaired to a serviceable condition sometime in the future, will be returned to TAM at TAM's expense.

ARTICLE 19 - LIABILITY LIMITATION

The price allocable under this Agreement to any product or service alleged to be the cause, or in any way arising from or related to the cause, of any loss or damage to TAM shall be the ceiling limit on Pratt & Whitney's liability to TAM arising under this Agreement, whether

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founded in contract, tort (including negligence) or strict liability, arising out of or resulting from (i) this Agreement or the performance or breach thereof, (ii) the design, manufacture, delivery, sale, overhaul, repair, or replacement of any Equipment, or (iii) the use of any such product or the furnishing of any such service. In no event shall Pratt & Whitney have any liability to TAM for any indirect, incidental or consequential damages. The foregoing provisions of this Article 19 limit Pratt and Whitney's liability to TAM arising under this Agreement but shall not in any manner apply to or limit Pratt & Whitney's liability to TAM arising under any other agreement between TAM and Pratt & Whitney and shall not in any manner apply to or limit Pratt & Whitney's liability to any third party.

ARTICLE 20 - SELLER'S INSURANCE

Except as otherwise set forth herein, Pratt & Whitney agrees that TAM's Equipment will, while in the care, custody and control of Pratt & Whitney, be adequately protected from loss, damage or destruction under the terms of Pratt & Whitney's insurance. Such protection will commence upon Equipment receipt by Pratt & Whitney or by Subcontractors of Pratt & Whitney, DDP Pratt & Whitney's Connecticut facilities or the facilities of Pratt & Whitney's Subcontractors, and will remain until Equipment is redelivered to TAM, Ex Works Pratt & Whitney's Connecticut facilities or the facilities of Pratt & Whitney's Subcontractor.

ARTICLE 21 - TERM AND TERMINATION

21.1 This Agreement shall become effective on the date of its acceptance by TAM and remain in effect for ten (10) consecutive years thereafter. Any renewal, as may be requested by TAM, and agreed to by Pratt & Whitney, will be subject to the terms, conditions and price schedule then in effect at Pratt & Whitney.

21.2 If (A) either party fails to perform any of its material obligations under this Agreement in any material respect and the non-defaulting party notifies the defaulting party of such failure and the defaulting party fails to cure the specified nonperformance under this Agreement within ninety (90) days after the date of its receipt of such notice, or (B) either party fails to pay the other party any amount due hereunder and the non-defaulting party notifies the defaulting party of such failure and the defaulting party fails to cure the specified nonperformance under this Agreement within ninety (90) days after the date of its receipt of such notice, or (C) a receiver or trustee is appointed for any of a party's property, or a party is adjudicated as bankrupt under the United States Bankruptcy Code or other applicable bankruptcy laws of any jurisdiction, or an application for reorganization under the Bankruptcy Code or other applicable bankruptcy laws of any jurisdiction is filed by or against a party which shall not be dismissed within sixty (60) days, or if a party becomes insolvent or makes an assignment for the benefit of creditors, or takes or attempts to take the benefit of any insolvency acts, or an execution is issued pursuant to a judgment rendered against such party, the non-defaulting party may, at its option, in any of such events, immediately terminate this Agreement by written notice to the

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defaulting party, provided that the non-defaulting party delivers such notice of termination before the defaulting party has cured the specified nonperformance. The parties agree that continuous delays by TAM in making the payments by TAM due under this Agreement to Pratt & Whitney within the time specified in Paragraph 9.3 above shall be cause for termination of this Agreement. In the event of any of the foregoing failures or act of bankruptcy or similar act described in clauses (A), (B) or (C) of this
Section 21.2, the non-defaulting party shall have all remedies provided by law in addition to the remedies provided hereunder. The defaulting party shall reimburse the non-defaulting party for all costs and expenses in connection with the non-defaulting party's exercise of any remedies under or terminating this Agreement including any cost and expense of TAM, if TAM is the non-defaulting party, of obtaining substitute performance for Pratt & Whitney's obligations hereunder. If permitted by applicable law, if Pratt & Whitney is the non-defaulting party, Pratt & Whitney shall, upon not less than thirty (30) days prior written notice to TAM, be entitled to sell, in a commercially reasonable manner, any Equipment in Pratt & Whitney's possession or control to satisfy any obligation of TAM for services rendered or parts provided by Pratt & Whitney to TAM under this Agreement.

ARTICLE 22 - APPLICABLE LAWS/CAPTIONS/ORDER OF PRECEDENCE

22.1 This Agreement shall be interpreted in accordance with, and the construction thereof shall be governed by, the laws of the State of Connecticut, USA without reference to choice of laws provisions, excluding the United Nations Convention on Contracts for the International Sale of Goods. Captions as used in these terms and conditions are for convenience of reference only and shall not be deemed or construed as in any way limiting or extending the language of the provisions to which such captions may refer.

22.2 TAM and Pratt & Whitney agree to the exclusive jurisdiction of the courts of general jurisdiction of the State of Connecticut and the United States District Court for the District of Connecticut for purposes of any suit or other proceeding arising out of this Agreement and agree not to commence any suit or proceeding relating hereto except in such courts. If TAM or Pratt & Whitney or any of its property is entitled to any immunity from legal action on the grounds of sovereignty or otherwise, TAM and Pratt & Whitney hereby waive and agree not to plead such immunity in any legal action arising out of this Agreement or any purchase order hereunder.

22.3 In the event that any conflicts or inconsistencies exist between the provisions of this Agreement, the applicable Engine and Engine Parts Service Policy or the attachments hereto or any Purchase Order, the provisions of this Agreement shall govern.

22.4 This Agreement does not change or modify any special programs or guarantees which may be in effect between United Technologies Corporation, or its subsidiaries, and TAM.

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22.5 This Agreement and the Attachments referred to herein contain the entire understanding between the parties with respect to the subject matter hereof and shall supersede all previous communications, representations and agreements, either oral or written, between the parties hereto with respect to the subject matter hereof.

22.6 Pratt & Whitney shall notify TAM in the event that the pricing provided for under Attachment I, Section 1.a. of this Agreement, as determined by Pratt & Whitney at three year intervals during the term of this Agreement, is [*] or more of the then current pricing provided by Pratt & Whitney to its customers (1) of substantially similar fleet size; (2) for substantially similar products and services; and (3) under an exclusive agreement of substantially similar size, scope and duration. For purposes of this provision, customers shall not include foreign or domestic government entities or entities in which United Technologies International, Inc. and/or United Technologies Corporation have an ownership interest. After notification, Pratt & Whitney and TAM will discuss such pricing under this Agreement in good faith to reach a reasonable adjustment in such pricing for the remaining term of this Agreement in order that such pricing shall be competitive with Pratt & Whitney's pricing to its customers identified above. Pratt & Whitney's records shall remain proprietary and confidential to Pratt & Whitney and shall not be subject to access or review by TAM.

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IN WITNESS WHEREOF, the parties hereto have hereunto caused their names to be set hereto and to a duplicate this ________________ day of September 2000.

Witness:                                TRANSPORTES AEREOS MERIDIONAIS S.A.


                                        By: /s/
-------------------------------------       ------------------------------------
                                        Typed Name:
                                        Title:
-------------------------------------          ---------------------------------


                                        By: /s/
                                            ------------------------------------
                                        Typed Name:
                                        Title:
                                               ---------------------------------


                                        UNITED TECHNOLOGIES INTERNATIONAL, INC.
Witness:                                Pratt & Whitney Division


                                        By: /s/
                                            ------------------------------------
                                        Typed Name:
                                        Title:
                                               ---------------------------------


/s/                                         By: /s/ Daniel E. Webb
-------------------------------------       ------------------------------------
                                        Typed Name: Daniel E. Webb
                                        Title: Senior Vice President - The
                                               Americas


/s/
-------------------------------------

                                        (STAMP)
                                        (SEAL)

OIVAN ODALVO BOARO JR
ESCREVENTE AUTORIZADO

(STAMP)

(SEAL)

OIVAN ODALVO BOARO JR
ESCREVENTE AUTORIZADO

Pratt & Whitney Proprietary - Subject to the Restrictions on the Front Page

August 20, 2000

ATTACHMENT I

FIXED PRICES AND CHARGES FOR SERVICES

The following fixed prices for basic labor, fixed price workscopes, and engine test will be charged for PW4168A engines (100 inch fan) engines received during the term of the Agreement.

- The fixed prices listed for Hot Section Maintenance, Heavy Maintenance, Gas Path Repair and Maintenance, and Test and other fixed price workscopes will be escalated in accordance with the procedure defined in Section 6 of this Attachment I.

- Kit and Bin prices are subject to escalation from January 1, 1999. These fixed prices will be escalated the same percentage as the increase in Pratt & Whitney spare parts prices over the same period.

Charges for nuts, bolts, washers, packings, gaskets, and similar parts that are details of a part assembly are not included in the Kit & Bin fixed prices listed below and will be invoiced as applicable. It should be noted that the part number for such a part might be the same as a Kit & Bin part used in the final assembly of engines, modules and major engine assemblies/build groups listed below. However, the consumption of these parts used in the subassembly process have not been included in the prices listed below.

1. Fixed Prices

a. Fixed Prices For Basic Labor and Kit & Bin Materials Associated with Hot Section Maintenance, Heavy Maintenance, Gas Path Repair and Maintenance, and Test

The fixed prices listed in Section 1 include all work as described, which is necessary to accomplish the maintenance action required for the Equipment in accordance with the terms of this Agreement, except as otherwise stated, regardless of the condition of the Equipment, excluding engines that have been involved in an accident, extreme environmental conditions, or other abnormal operating conditions, and those subjected to occurrences not associated with ordinary use, such as, but not limited to, acts of war, rebellion, seizure, military, paramilitary, or other belligerent acts. There are no other charges for basic labor, except as stated. Kit items are replaced on a 100 percent basis while Bin items are replaced as necessary. There are no other

Pratt & Whitney Proprietary - Subject to the Restrictions on the Front Page

Attachment I Fixed Prices and Charges for Services (Continued) Page 2

charges for Kit and Bin parts in this Section 1, except for a Material Handling Charge which will be applied to Kit and Bin parts per Section 2 of this Attachment.

(i) Hot Section Maintenance

Engine and QEC basic labor, material handling charges, RMS fees, vendor fees, Kit and Bin, and engine test required to perform the hot section maintenance workscope defined in attached Appendix A.

              Year 1 - 5*   Year 6 - 10*
              -----------   ------------
Fixed Price     $304,100      $292,200

* Measured from the effective date of this Agreement.

(ii) Gas Path Repair And Maintenance Workscope

Engine and QEC basic labor, material handling charges, RMS fees, vendor fees, Kit & Bin and engine test required to perform the gas path repair and maintenance workscope defined in attached Appendix A.

              Year 1 - 5*   Year 6 - 10*
              -----------   ------------
Fixed Price     $659,800      $626,700

* Measured from the effective date of this Agreement.

(iii) Heavy Maintenance Workscope

Engine and QEC basic labor, material handling charges, RMS fees, vendor fees, Kit & Bin and engine test required to perform the heavy maintenance workscope defined in attached Appendix A.

              Year 1 - 5*   Year 6 - 10*
              -----------   ------------
Fixed Price     $741,100      $693,700

* Measured from the effective date of this Agreement.

NOTE: Workscopes for engines will be defined at the time of induction, and fixed price in accordance with Section 1., Paragraphs A(i), A(ii), or A(iii). If it is determined, subsequent to teardown, that

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Attachment I Fixed Prices and Charges for Services (Continued) Page 3

additional work is required, Pratt & Whitney will notify TAM) accordingly, and then TAM will be invoiced for the appropriate fixed price, plus incremental costs (for such additional work) in accordance with the rates and charges listed in Section 2 of this Attachment I.

(iv) Module Basic Labor Associated with Heavy Maintenance

Low Pressure Compressor

Labor required to disassemble the low pressure compressor, clean, non-destructive test, visually and dimensionally inspect detail parts and subassemblies as applicable, dimensionally inspect for blade tip clearance, dynamic balance, reassemble the compressor, and final inspect. Minor blending is included where required.

Labor $16,870.00   Kit & Bin $1,403.00

High Pressure Compressor

Labor required to disassemble the high pressure compressor, clean, non-destructive test, visually and dimensionally inspect removed details and subassemblies as applicable, dynamic balance, dimensionally inspect for blade tip clearance, reassemble the compressor module, and final inspect. Minor blending is included where required.

Labor $38,506.00   Kit & Bin $23,399.00

High Pressure Turbine

Labor required to disassemble the high pressure turbine, clean, non-destructive test, visually and dimensionally inspect removed details and subassemblies as applicable, static balance each disk and blade assembly, dynamic balance HPT rotor assembly, disassemble case and duct assembly, inspect and reassemble, reassemble the turbine module, and final inspect. Minor blending is included where required.

Labor $14,928.00   Kit & Bin $8,335.00

Low Pressure Turbine

Labor required to disassemble the low pressure turbine to remove disk and blade assemblies and nozzle guide vanes, clean, non-destructive test, visually

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Attachment I Fixed Prices and Charges for Services (Continued) Page 4

and dimensionally inspect removed details and subassemblies as applicable, balance rotating parts, reassemble and dynamic balance LPT module, install shaft and airseal, dynamic balance assembly, and final inspect. Minor blending is included where required.

Labor $27,551.00   Kit & Bin $11,850.00

Turbine Exhaust Case

Labor required to disassemble the exhaust case assembly to remove detail parts as necessary, clean (to include drain hole reoperation and detail removal), non-destructive test, visually and dimensionally inspect removed details, reassemble the case, prepare for reinstallation, and final inspect.

Labor $3,277.00   Kit & Bin $992.00

Diffuser/Combustor

Labor required to disassemble the diffuser case section, including the removal of the outer combustion chamber and fuel nozzle and support assemblies, clean, non-destructive test, visually and dimensionally inspect details, reassemble for reinstallation on the engine. (Does not include fuel nozzle and support assembly inspection/rework.)

Labor $12,257.00   Kit & Bin $5,786.00

1st Turbine Nozzle Group

Labor required to disassemble the first stage turbine nozzle group including the inner combustion chamber, first stage turbine NGV's, cooling duct (TOBI), plates and support, clean, non-destructive test, visually and dimensionally inspect details as applicable, reassemble, final inspect, and prepare for reinstallation on the engine. Minor blending is included where required.

Labor $6,189.00   Kit & Bin $629.00

Main Accessory Gearbox

Labor required to disassemble, clean, non-destructive test, visually and dimensionally inspect details, reassemble, final inspect, and prepare for engine reinstallation.

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Attachment I Fixed Prices and Charges for Services (Continued) Page 5

Labor $6,763.00   Kit & Bin $548.00

Angle Gearbox

Labor required to disassemble, clean, non-destructive test, visually and dimensionally inspect details, reassemble, final inspect, and prepare for engine reinstallation.

Labor $2,399.00   Kit & Bin $356.00

Fan Cases

Labor required to disassemble fan cases as necessary to visually and dimensionally inspect, disassemble 2.5 bleed assembly, local NDT as required, reassemble, and final inspect. Minor blending is included where required.

Labor $8,070.00   Kit & Bin $1,322.00

Intermediate Case Assembly

Labor required to disassemble the intermediate case to remove detail parts as necessary, clean, non-destructive test, visually and dimensionally inspect removed details and subassemblies as applicable, reassemble for reinstallation onto the engine, and final inspect. Minor blending is included where required.

Labor $8,616.00   Kit & Bin $454.00

(v) Engine Test Applicable To Shop Visits Not Covered By Fixed Priced Workscopes (Reference A(l) Through A(3)

Test Cell Charge

Includes labor for the test cell operator, fuel, and oil. Two (2) hours of labor for troubleshooting and repair in conjunction with shop visit services are also included.

Labor, Fuel and Oil..   $10,311.00

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Attachment I Fixed Prices and Charges for Services (Continued) Page 6

Preparation and Check After Test

Labor required to prepare and dress engine for test, strip and checks after test, and prepare engine for shipment.

Labor................   $7,833.00

Any labor and/or testing expended for troubleshooting and rectification of components or parts not normally repaired or checked during the performance of a hot section inspection or engine repair workscope will be over and above the test fixed price and will be charged on a time and material basis.

(vi) QEC

Labor required to remove QEC as required for engine repair. Clean, inspect, reinstall, and final inspect QEC on the engine. Minor blending is included as required.

Labor $23,515.00   Kit & Bin See Appendix B

b. Fixed Prices For Repair Of Parts

(i) Fixed prices for Focused Repair Parts will be charged for certain parts repaired by Pratt & Whitney and Pratt & Whitney may increase the number of such fixed price repairs during this Agreement. When Pratt & Whitney has established a fixed price for parts listed in its then-current Part Repair Capability Index, that will be deemed to be the fixed price except when Pratt & Whitney's Cheshire facility has negotiated a lower price with a Focused Parts Repair Unit.

(ii) Pratt & Whitney's Cheshire facility has determined that the fixed prices charged by Pratt & Whitney's Focused Parts Repair Units are competitive within the industry and, on the whole, the use of these fixed prices provide an advantage to TAM. Unlike vendor repairs, no subcontractor fees shall be applied to these charges.

(iii) If after receipt and payment of an invoice, TAM believes that one or more such fixed prices are not competitive, TAM may take the following actions for subsequent engines, Modules, or parts, where the applicable part is not already in the repair cycle.

TAM will provide to Pratt & Whitney a valid quotation for the repair, which quotation shall be addressed to Pratt & Whitney for the part or parts to be repaired. The quoted workscope must be the same as the

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Attachment I Fixed Prices and Charges for Services (Continued) Page 7

Pratt & Whitney workscope. The quote must be from an FAA approved source which is a Pratt & Whitney qualified source, if required for the particular repair process, and the source must be approved by Pratt & Whitney. If the source is not approved by Pratt & Whitney, TAM or the repair source must agree to pay for all Pratt & Whitney charges to qualify the shop, if Pratt & Whitney determines that it is willing to qualify the shop; Pratt & Whitney shall have no affirmative obligation to qualify any shop. Pratt & Whitney will evaluate the quotation, including turnaround time and quality requirements. If the turnaround time and quality are substantially equivalent to Pratt & Whitney's and the net price (repair price plus subcontractor fee) is lower than the Pratt & Whitney fixed price, Pratt & Whitney shall either match the net price or subcontract the work. TAM shall not refuse to pay any invoice for work accomplished while TAM seeks any competitive quotations described herein.

Charges for work over and above the fixed price work statements set forth in this Attachment I, Section 1 will be invoiced in accordance with the rates and charges appearing in Section 2 hereof.

2. Standard Pricing Schedule

Except as provided in Section 1 above, the pricing schedule is presented below.

The labor rate in Paragraph a below will be adjusted annually as described in Section 6 below.

a. Pratt & Whitney Labor Rate

For all labor performed and not covered
by fixed prices..........................   $69.00 Per Hour

The labor rate for work not covered by fixed prices will be applied to "hands on" labor hours performed by personnel actually engaged in the direct performance of work required. "Hands on" labor shall not include any labor performed by support or supervisory type personnel, such as, but not limited to: timekeepers, payroll clerks, purchasing, material handling, storing and issuing personnel and truck drivers.

b. Material Prices - New Parts

New parts, except Kit and Bin for engines and Modules, will be charged at the then-current manufacturer's list price. Kit and Bin parts for complete engine and Module reconditioning will be charged on a fixed price basis in accordance with Section 1 to this Attachment I. Kit and Bin parts for

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Attachment I Fixed Prices and Charges for Services (Continued) Page 8

miscellaneous workscopes will be charged on a fixed price basis in accordance with Appendix B to this Attachment I.

c. Material Prices - Used Serviceable Parts

Used serviceable material sold under the Serviceable Material Sales (SMS) Program shall be priced as follows:

(i) Life limited parts will be provided on a pro rata cycle remaining basis.

          Example:

   SMS Part Remaining Life           Then - Current
------------------------------ X
P & W Engine Manual Life Limit   Manufacturer's List Price

(ii) All other parts will be provided at eighty percent (80%) of the then- current manufacturer's new part list price.

d. Material Handling Charges

Material handling charges will be applied to Pratt & Whitney furnished new or serviceable parts, including Kit and Bin fixed prices, and customer furnished parts required to accomplish maintenance hereunder. These charges are expressed below as a percentage of the applicable part price up to the maximum part or extended line item prices.

(i)  Pratt & Whitney furnished

     Any part with an extended line item
     value of $74,078.00 and under......    15.0 Percent

     Any part with an extended line item
     value of $74,078.01 and over.......   $   11,112.00

(ii) Customer furnished

     Any part with an extended line item
     value of $74,078.00 and under......    10.0 Percent

     Any part with an extended line item
     value of $74,078.01 and over.......   $    7,408.00

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Attachment I Fixed Prices and Charges for Services (Continued) Page 9

These extended line item values will be adjusted annually relative to the & Pratt & Whitney Commercial Parts Support (CPS) prices. The adjustment will be based on the percent change in the announced Pratt & Whitney spare parts prices for the effective year of the adjustment.

3. Exchange Material

Material exchanged under the RMS Parts (Rotable Material Service) program will be charged a fee equal to seven percent (7%) of the then-current manufacturer's list price of a new part or its superseding equivalent and either the actual repair charge or, at the discretion of Pratt & Whitney, an estimated repair price based on returning the part to a condition and configuration equivalent to that provided by Pratt & Whitney.

Adjustments for warranty benefits and any differential residual value for life limited parts as designated by the manufacturer will also be provided.

Example:

           ( Removed Part )   (Installed Part)
  Credit   (Remaining Life) - (Remaining Life)           Then-Current
         = -----------------------------------  X
or Debit      P & W Engine Manual Life Limit      Manufacturer's List Price

4. Subcontract Charges

For any individual part subcontracted to a vendor, the charge shall be the actual vendor submitted invoice plus a fifteen percent (15%) fee, which includes transportation and packaging costs.

5. Rates And Charges For On-Site Work

The daily and hourly rates for each Pratt & Whitney employee engaged in the performance of on-site work will be escalated in accordance with the procedure defined in Section 6 of this Attachment I and are as follows:

                                                  Each
                             Minimum Rate   Additional Hour
                             ------------   ---------------
Regular Workday (8 Hours)       $742.00         $107.00
Saturdays (4-Hour Minimum)      $428.00         $107.00
Sundays (4-Hour Minimum)        S483.00         $121.00

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Attachment I Fixed Prices and Charges for Services (Continued) Page 10

The above rates are predicated upon a portal-to-portal basis and apply to days or portions of days spent in transit. Subsistence costs (meals, hotel and ground transportation when applicable), as well as air fare charges, shall be in addition to the on-site rates presented above and charged to TAM at Pratt & Whitney's actual cost.

Tools, when available, shall, upon request, be provided by Pratt & Whitney for Pratt & Whitney's use in the performance of on-site work. Charges to TAM for tools, when used by Pratt & Whitney personnel, shall be limited to transportation, insurance, packaging costs and any customs fees.

RMS Parts which may be required by TAM at its maintenance facility shall, pending prior commitments, be delivered by Pratt & Whitney upon request, subject to the terms and conditions of the Agreement and the charges for such exchange set forth in this Attachment I.

6. Escalation Of The Fixed Price Workscopes, Basic Labor Fixed Prices, Labor Rate, Test Charges and On-Site Charges

The charges described above will be adjusted annually for periods after December 31, 1999.

- Fixed prices for basic labor for heavy maintenance, heavy maintenance, hot section maintenance, gas path repair and maintenance, engine test, Module maintenance, and QEC maintenance

- Pratt & Whitney Labor Rate

- On-Site

These rates and charges will be escalated as described in Section 7 below to reflect changes in the Pratt & Whitney Composite Price Index described below.

a. Composite Price Index Description

The Composite Price Index (CPI) is the sum of 60 percent of the Labor Ratio, 30 percent of the Material Ratio and 10 percent of the Energy Ratio, with that sum rounded to the nearest ten-thousandth.

CPI = 0.60(L) + 0.30(M) + 0.10(E)

Where:

L = Labor Ratio defined below

M = Material Ratio defined below

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Attachment I Fixed Prices and Charges for Services (Continued) Page 11

E = Energy Ratio defined below

The Labor Ratio is the "Hourly Earnings of Aircraft Engines and Engine Parts Production Workers, Standard Industrial Code (SIC) 3724", published by the Bureau of Labor Statistics, United States Department of Labor (for the applicable period of calculation) divided by the value of Standard Industrial Code (SIC) 3724 for the base month of December 1991, which is set at Sixteen Dollars and Four Cents ($16.04), rounded to the nearest ten-thousandth.

The Material Ratio is the "Producer Price Indexes Code 10, Metals and Metal Products", published by the Bureau of Labor Statistics, United States Department of Labor (for the applicable period of calculation), divided by the value for Metals and Metal Products for the base month of December 1991, which is set at 118.7, rounded to the nearest ten-thousandth.

The Energy Ratio is the "Producer Price Indexes Code 05, Fuels and Related Products and Power", published by the Bureau of Labor Statistics, United States Department of Labor (for the applicable period of calculation) divided by the value for Fuels and Related Products and Power for the base month of December 1991, which is set at 79.1, rounded to the nearest ten-thousandth.

7. Rates and Charges Escalation

For each annual period beginning January 1, 2000 the escalation factor to be applied to the rates and charges (RC) listed in Attachment I will be the ratio of the CPI for each annual calculation period to the CPI for the base month.

The CPI for the annual calculation period is the arithmetical average of the CPI values published for each of the calendar months. The CPI for the base month is the value of CPI for January 1999. The rates and charges will be escalated using the escalation formula provided below for the annual period in which the plan begins and for each applicable annual period thereafter.

( CPI(a) )

RC(e) = RC ( ------ )

( CPI(b) )

Where:

     RC(e)  = Escalated 1999 rates and charges listed in
              Attachment I (January 1999 dollars)

CPI(a) = CPI for the Calculation Period

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Attachment I Fixed Prices and Charges for Services (Continued) Page 12

CPI(b) = CPI for Base Month

In no event shall the applicable escalation rates and charges escalation process result in a reduction of the rates and charges expressed in Attachment I, as updated annually.

The final monthly indexes reported by the United States Department of Labor are published five (5) months after the applicable month's end, therefore, the actual average index for each annual period cannot be calculated until five (5) months subsequent to the end of each period. An estimated calculation will be utilized to escalate the base period RC for invoicing purposes. As soon as the final published indexes are available, a final calculation will be performed for each annual period of the Agreement, and an invoice will be issued to adjust the invoices which utilized the estimated rates.

ALL RATES, CHARGES, AND PRICES ARE EXPRESSED IN UNITED STATES DOLLARS

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August 20, 2000

ATTACHMENT I, APPENDIX A

MAINTENANCE WORKSCOPES FOR TAM

Reference: Pratt & Whitney, Cheshire, Connecticut PW4000 Standard Engine Workscope Specification

                                                       HEAVY       HOT
               SECTION                     GAS PATH    MAINT     SECTION
     -----------------------------------   --------   -------   ---------
 1.0 ENGINE GENERAL                         L/H(l.l)  L/H(l.l)    L/H(l.l)
 2.0 LOW PRESSURE COMPRESSOR (LPC) GRP      L(2.1.2)    H(2.2)  L/H(2.1.1)
 3.0 TURBINE COUPLING GROUP                 L(3.1.2)    H(3.2)    L(3.1.1)
 4.0 FAN CASE GROUP                         L(4.1.1)    H(4.2)    L(4.1.1)
 5.0 INTERMEDIATE CASE GROUP                L(5.1.2)    H(5.2)    L(5.1.1)
 6.0 HIGH PRESSURE COMPRESSOR (HPC) GRP    GP(6.1.3)    H(6.2)    L(6.1.1)
 7.0 DIFFUSER AND COMBUSTOR GROUP           L(7.1.3)    H(7.2)    L(7.1.2)
 8.0 TURBINE NOZZLE GROUP                   L(8.1.2)    H(8.2)      H(8.2)
 9.0 HIGH PRESSURE TURBINE (HPT) GROUP        H(9.2)    H(9.2)      H(9.2)
10.0 LOW PRESSURE TURBINE (LPT) GROUP      L(10.1.2)   H(10.2)   L(10.1.2)
11.0 TURBINE EXHAUST CASE (TEC) GROUP      L(ll.l.l)   H(11.2)   L(ll.l.l)
12.0 MAIN GEARBOX ASSEMBLY                 L(12.1.1)   H(12.2)   L(12.1.1)
13.0 ANGLE GEARBOX ASSEMBLY                  L(13.1)   H(13.2)     L(13.1)

L = Light Maintenance
H = Heavy Maintenance
GP = Gas Path Repair and Maintenance

Abbreviations listed above are included in the referenced paragraphs of the then current referenced workscope specification documents, which shall be on file at Pratt & Whitney and TAM for the period of this Agreement.

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August 20, 2000

ATTACHMENT I, APPENDIX B

PW4000

KIT AND BIN PARTS

FIXED PRICE LISTING

With the exception of engine model conversions, the following fixed prices will be charged for Kit & Bin parts used to reassemble PW4168A engines (100 Inch Fan) and modules effective January 1, 1999. These fixed prices will be escalated the same percent as the increase in Pratt & Whitney spare parts prices when the Commercial Parts Support Price List price increases occur. For the purpose of this Appendix 1, Kit & Bin parts shall mean those parts such as O'rings, gaskets, packings, seals, nuts, bolts, washers and external clips and clamps required for reassembly. Prices are based on average consumption and include minor modifications. Engine model conversions will be charged on a part by part basis.

Modules                                         Kit & Bin Parts Fixed Price
-------                                         ---------------------------
Low Pressure Compressor (LPC)                            $ 1,403.00
High Pressure Compressor (HPC)                           $23,399.00
High Pressure Turbine (HPT)                              $ 8,335.00
Low Pressure Turbine (LPT)                               $11,850.00
Gearboxes (Main)                                         $   548.00
Gearboxes (Angle)                                        $   356.00

Non-Modular Subassembly

Assemble Intermediate Case package                       $   454.00

Assemble Diffuser/Burner. Assemble and
install Fuel Nozzle and Support Assemblies.
Install Fifteenth Stage Stator, No. 3 Bearing
and No. 3 Bearing Front Seal Assembly                    $ 5,786.00

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Attachment I, Appendix B PW4000
Kit and Bin Parts Fixed Price Listing(Continued) Page 2

Assemble First Stage Turbine Nozzle Guide Vanes
and Support Assembly                                   $   629.00

Assemble Fan Case Package                              $ 1,322.00

Assemble Turbine Exhaust Case and install
Number 4 Bearing                                       $   992.00

Assemble Intermediate Case to Fan Case pkg.            $ 1,549.00

Assemble Intermediate Case and Fourth Stage
Stator to HPC                                          $ 1,362.00

Assemble HPC, and Number 3 Rear Seal Assembly
to the Diffuser Case. Install Bellcrank                $ 2,984.00

Assemble First Stage Turbine Nozzle Guide
Vane package to Diffuser Case                          $    46.00

Assemble HPT to First Stage Turbine Nozzle
Guide Vane package                                     $   467.00

Assemble Turbine Exhaust Case to LPT                   $   246.00

Assemble LPT to LPC Shaft                              $ 1,142.00

Engine Final Assembly

Install LPC, Number 1, 1.5 and 2 Main Bearings
and Fan Blades. Install external plumbing, hardware
and oil tank. Assemble and install accessories.
Replace Kit & Bin, as required, after engine test.     $ 7,769.00

Total Kit & Bin for Complete Engine Overhaul           $70,639.00

OEC Installation

During Cold Section visit requiring removal
of the HPC                                             $ 7,114.00

During Hot Section Maintenance                         $   910.00

ALL PRICES ARE EXPRESSED IN UNITED STATES DOLLARS

Pratt & Whitney Proprietary - Subject to the Restrictions on the Front Page

August 20, 2000

ATTACHMENT II

PW4168A ENGINE MAINTENANCE SERVICE AGREEMENT

ENGINE SHOP VISIT DATA REQUIREMENTS

A. BASIC ENGINE DATA

1. Serial Number ________________________________________________________

2. Model ________________________________________________________________

3. TAM/Owner ____________________________________________________________

4. Installation Arrangement No. _________________________________________

5. Shipped Configuration _________________________ Bare/

_________________________ QEC/ _________________________ Partial QEC

B. REMOVAL DATA

1. Reason for Removal ___________________________________________________

2. Removal Date _________________________________________________________

3. Troubleshooting/Maintenance Actions Performed, (If

available/Applicable): _______________________________________________

4. Inflight Trend Data (If available/Applicable): _______________________

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Attachment II PW4168A Engine Maintenance Service Agreement Engine Shop Visit Data Requirements (Continued) Page 2

C. TIME/CYCLE DATA

             TT/TC   TSO/CSO   TSLV/CSLV
             -----   -------   ---------
1.  Engine   _____    _____      _____

2.    LPC    _____    _____      _____

3.    HPC    _____    _____      _____

4.    HPT    _____    _____      _____

5.    LPT    _____    _____      _____

6.    AGB    _____    _____      _____

7.    MGB    _____    _____      _____

KEY TO ABBREVIATIONS

LPC = Low Pressure Compressor    LPT = Low Pressure Turbine
HPC = High Pressure Compressor   AGB = Angle Gearbox
HPT = High Pressure Turbine      MGB = Main Gearbox

TT/TC = Total Time (Hours)/Total Cycles
TSO/CSO = Time Since Overhaul/Cycles Since Overhaul TSLV/CSLV = Time Since Last Visit/Cycles Since Last Visit

D. MAINTENANCE DATA/MODIFICATION STATUS

1. Date/Location of Last Shop Visit _____________________________________

2. Last Shop Visit Workscope Summary ____________________________________

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Attachment II PW4168A Engine Maintenance Service Agreement Engine Shop Visit Data Requirements (Continued) Page 3

3. Current Airworthiness Directive (AD)/Alert Service Bulletin Compliance Status:

4. Known Disk Changeout Requirements: ___________________________________

5. Life Limited Parts and/or Industry Item List (Attached)

6. List of Modifications Previously Incorporated (Attached)

E. SHOP VISIT REQUIREMENTS

1. Basic Workscope ______________________________________________________

2. Modification Requirements to include Mandatory Modifications _________

3. Special Checks/Inspections/Test Requirements _________________________

4. Engine Oil Requirement _______________________________________________

5. Minimum Module Life Remaining Requirements (Disk & Airseal Minimum Hour and Cycle Remaining):

           HOURS             CYCLES
           -----             ------
LPC   _______________   _______________
HPC

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Attachment II PW4168A Engine Maintenance Service Agreement Engine Shop Visit Data Requirements (Continued) Page 4

           HOURS             CYCLES
           -----             ------
HPT   _______________   _______________
LPT

6. TAM anticipated operating time before next scheduled shop visit.

____________________________ Hours ____________________________ Cycles

7. Type of next scheduled shop visit ____________________________________

F. MISCELLANEOUS DATA

1. Known LRU/QEC shortages at time of shipment:

____________________     ____________________     ____________________

____________________     ____________________     ____________________

____________________     ____________________     ____________________

2. Report of any accident/abnormal operational circumstance involving the Equipment as referenced by the Pratt & Whitney Overhaul Standard Practices Manual, P.N. 585005.

G. TAM CONTACT

Name ______________________________

Position __________________________

Telephone _________________________

Fax _______________________________   SITA ________________________________

                                      IBM E-Mail ID _______________________

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Exhibit 10.6

Page 1 of 12

* Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designiated as "*". A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

Novation and Amendment Agreement

between

Rolls-Royce Brazil Ltda.

and

MTU Aero Engines GmbH

and

TAM Linhas Aereas S.A.

Page 2 of 12

THIS NOVATION AND AMENDMENT AGREEMENT (the "Agreement") is made the 8th day of November 2001

BETWEEN:

A. MTU Aero Engines GmbH (formerly: MTU Motoren- und Turbinen-Union Munchen GmbH) of Dachauer Strasse 665, 80995 Muenchen, Germany ("MTU");

B. Rolls-Royce Brazil Ltda. of Rua Dr. Cincinato Braga 47, Sao Bernarda do Campo, Brazil ("Rolls Royce Brazil"); and

C. TAM Linhas Aereas S.A. (as successor to TAM - Transportes Aereos Regionais S.A.) of Av Jurandir 856, Jardim Ceci, Sao Paolo - SP - CEP 04072-000 Sao Paulo, Brazil ("TAM");

hereinafter individually referred to as a "Party" and collectively as the "Parties"

1 Recitals

1.1 This novation and amendment agreement is supplemental both to an agreement dated 14 September 2000 and made between MTU and TAM (the "Contract") a copy of which is set out in Exhibit 1 to this Agreement and to an agreement of even date herewith between MTU and Rolls-Royce plc for the transfer of MTU's business as set out in the Contract to Rolls Royce Brazil.

1.2 MTU has subcontracted some or all of the Services (as defined in the Contract) to third parties including Rolls Royce Brazil.

1.3 MTU wishes to be released and discharged from the Contract and TAM has agreed to release and discharge MTU upon Rolls Royce Brazil's undertaking to perform the Contract and to be bound by the terms of the Contract in place of MTU and the provisions of this Agreement.

1.4 Certain Services are presently being performed pursuant to the Contract by MTU and/or its subcontractors. As a result certain Engines, Modules or Parts are at the date hereof in the custody of Rolls Royce Brazil pursuant to subcontract arrangements between MTU and Rolls Royce Brazil. That state of affairs is expected to remain the case on the Effective Date.

1.5 The Parties do not wish accrued rights, obligations and liabilities under the Contract immediately prior to the Effective Date to be affected by the present novation and amendment but wish Rolls Royce Brazil effectively to assume the obligations of MTU (subject to the amendments provided herein) for the purposes of Services commenced on or after the Effective Date.

NOW IT IS AGREED as follows:

Page 3 of 12

1 Effective Date

This Agreement shall become effective immediately upon the satisfaction of the conditions referred to in Exhibit 3 (the "Effective Date"). Promptly after the occurrence of the Effective Date, MTU shall notify in writing each of the Parties to this Agreement of such occurrence.

2 Novation

In consideration of the sum of US$1.00 paid by each of Rolls Royce Brazil and MTU to TAM, the receipt whereof is hereby acknowledged, and for other good and valuable consideration (the receipt and adequacy of which is hereby acknowledged), each of the Parties agrees that with effect from the Effective Date:

(a) Rolls Royce Brazil agrees to be substituted for MTU as a party to the Contract and in that capacity to perform all future obligations and to assume all future duties and liabilities of MTU under the Contract (as amended pursuant to Clause 3 below (the "Amended Contract")) subject to the terms and conditions of this Agreement;

(b) MTU hereby agrees to transfer to Rolls Royce Brazil all its future rights and obligations in, to and under the Amended Contract subject to the terms and conditions of this Agreement;

(c) subject to Clauses 4 and 5 below, MTU releases and discharges TAM from all its obligations, duties and liabilities to MTU under the Amended Contract;

(d) subject to Clauses 4 and 5 below, TAM hereby releases and discharges MTU from all its obligations, duties and liabilities to TAM under the Amended Contract;

(e) TAM hereby agrees to perform in favour of Rolls Royce Brazil all of its obligations, and assume all of its duties and liabilities under the Amended Contract on and after the Effective Date and to perform and assume those obligations, duties and liabilities of "the Operator" under the Amended Contract; and

(f) TAM consents to and accepts the assumption by Rolls Royce Brazil of MTU's future rights and obligations, duties and liabilities under the Amended Contract and its agreement to perform the obligations of "MTU-M", "MTU-H" and "MTU" under the Amended Contract.

3. Amendment

With effect from the Effective Date the Contract will be amended as set out in Exhibit 2 to this Agreement and the Parties confirm the terms of the Amended Contract for the purposes of Services to be commenced on or after the Effective

Page 4 of 12

Date. Except as expressly set out in this Agreement, the Contract shall remain in full force and effect in accordance with its terms for the purposes of Services performed in whole or in part prior to the Effective Date.

4. Simultaneous Events

Each of the events described in Clauses 2 and 3 above shall occur simultaneously.

5. Preservation of existing rights and liabilities

Notwithstanding the provisions of this Agreement and of Clause 2.1 in particular, the respective rights, obligations and liabilities of TAM and MTU as against each other under the Contract immediately prior to the Effective Date in respect of any Services (as defined in the Contract) whether previously performed and invoiced or in progress at the Effective Date shall not be affected by this Agreement or the occurrence of the Effective Date. The rights, duties and obligations of TAM and MTU with respect to Services performed in whole or in part prior to the Effective Date remain governed by the Contract until completion of all such Services.

Neither Rolls Royce Brazil nor any member of the Rolls-Royce plc group of companies assumes any liability under the Contract or under the Amended Contract for any Services performed in whole or in part prior to the Effective Date, or for any default, neglect or failure in the performance or purported performance of such Services, whether or not apparent at the Effective Date, or for breach of any other obligation associated with the Contract including without limitation the payment of any sums due or the return of Supplies (as defined in the Contract) or any other property upon completion of any such Services. This Clause operates without prejudice to any right any party may have to seek relief, recourse or indemnity against any other party under any existing contractual or sub-contractual arrangement or under the general law.

6. Representations and Warranties

Each of the Parties acknowledges that the other parties have entered into this Agreement in full reliance on representations by it in the following terms and it now warrants to each of the other Parties that the following statements are, at the date hereof, true and accurate:

(a) It is a limited liability company duly constituted and validly existing under the laws of its country of incorporation, its obligations under and pursuant to this Agreement constitute its legal, valid, binding and enforceable obligations (save to the extent that enforcement may be limited by applicable bankruptcy, insolvency, moratorium or other laws for the protection of creditors and debtors generally and general principles of equity) and that this Agreement has been duly executed by it;

(b) The execution and delivery by it of this Agreement, the consummation by it of any of the transactions contemplated hereby compliance by it with any of

Page 5 of 12

the terms and conditions hereof do not require any consent of any trustee or holder of any indebtedness or other obligation of it, violate any term or condition of its constitutive documents, contravene any provision of or constitute or will constitute a default under or pursuant to or result in any breach of or the creation of any lien (other than as contemplated under this Agreement) on or over any of its assets or any other agreement or instrument to which it is a party or by which it is bound;

(c) No consent of, giving of notice to, registration with or taking of any other action in respect of any government entity in its country of incorporation is required for the execution by it of this Agreement.

7. Acknowledgement

Rolls Royce Brazil acknowledges and agrees for the benefit of TAM that the transfer and novation contemplated by this Agreement shall not diminish any rights of TAM under the Amended Contract (as novated hereunder) and TAM shall not be under any greater financial obligation under the Amended Contract (as novated hereunder) than, on the basis of law and regulation in effect on the Effective Date, it would have been under had the transfer and novation contemplated herein not taken place.

8. Expenses

MTU agrees with TAM that MTU shall pay or reimburse TAM for all reasonable legal costs and expenses incurred by TAM with Clifford Chance in London in connection with the negotiation and execution of this Agreement and in taking any action required pursuant to this Agreement.

9. Miscellaneous

9.1 Severability, Amendment, Construction and Applicable Law. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. No term or provision of this Agreement may be changed, waived, discharged or terminated orally, but only by a written instrument signed by the party against which the enforcement of the change, waiver, discharge or termination is sought. The captions in this Agreement are for convenience of reference only and shall not define or limit any of the terms or provisions hereof.

9.2 Governing Law. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH. THE LAWS OF ENGLAND INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.

Page 6 of 12

9.3 Notices. Each notice, request, direction or other communication under this Agreement shall:

(a) be in writing delivered personally or by first-class prepaid letter (airmail if available) or facsimile;

(b) be deemed to have been given:

(i) in the case of a facsimile, on confirmation by the recipient of actual receipt or, if earlier, on actual or deemed receipt by the recipient of a confirmation letter; and

(ii) in the case of a letter when delivered personally or upon actual receipt if sent by post; and

(i) to MTU:

MTU Aero Engines GmbH

Attn: General Counsel
Dachauer Strasse 665
80995 Munchen
Germany

Tel: +49-89-1489 3815
Fax: +49-89-1489 5814
Attn: Michael Weber

With copy to:

MTU Maintenance Hannover GmbH Attn: General Counsel
Munchner Strasse 31
30855 Langenhagen
Germany

Tel: +49-511-7806-388
Fax: +49-511-78-06-100
Attn: Andreas Brosig

(ii) to Rolls Royce Brazil:

Rolls-Royce Brasil

Rua Dr. Cincinato Braga 47, Sao Bernarda do Campo,
Brazil
Tel: 55 11 4390-4804
Fax: 55 11 4341-7683
Attn: Customer Business Director

Page 7 of 12

(iii) to TAM:

TAM-Linhas Aereas S.A.
Avenida Jurandir 856
4o Andar, Lote 4
CEP 04072-000

Jardim Ceci
Sao Paulo-SP
Brazil
Tel: +55 11 5582 8675
Fax: +55 11 5581 9167
Attn: Jose Zaidan Maluf, Contracts Director

or to such other address or facsimile number for a party as is notified from time to time by such party hereto to the other Parties hereto.

All communications and documents must be in English.

9.4 Counterparts. At least four counterparts of this Agreement have been executed by the Parties hereto, each of which shall be deemed to be an original but all of which take together shall constitute a single agreement.

9.5 Submission to Jurisdiction; Waiver of Immunities; Service of Process.

(a) The courts of England are to have jurisdiction to settle any disputes (including claims for set-off and counterclaims) which may arise in connection with the legal relationships established by this Agreement or otherwise arising in connection with this Agreement. Rolls Royce Brazil and MTU shall not be prevented from taking proceedings relating to any dispute as aforesaid in any courts with jurisdiction including, without limitation, the courts of any jurisdiction where TAM maintains its headquarters (City of Sao Paulo, State of Sao Paulo, Central Courthouse).

(b) All parties irrevocably waive any objection on the grounds of venue or forum non conveniens, lis alibi pendens or similar grounds, and consent to service of process by mail or in any other manner permitted by applicable law.

(i) agrees that if any other party brings legal proceedings against it or its assets in relation to this Agreement, no immunity from such legal proceedings (which will be deemed to include, without limitation, suit, attachment prior to judgment, other attachment, the obtaining of judgment, execution or other enforcement) will be claimed by or on behalf of itself or with respect to its assets;

Page 8 of 12

(ii) waives any such right of immunity which it or its assets now has or may in the future acquire; and

(iii) submits to the jurisdiction of the English Courts for any matter relating to this Agreement.

(d) MTU and TAM shall at all times maintain an agent for service of process in England. Such agent shall be, in the case of MTU, C & C Legal Services Limited of 20 Upper Ground London SE1 9QT (any such process to be marked for the attention of Jeremy Thomas and/or Andrew Murray) and shall be, in the case of TAM, Clifford Chance Secretaries Limited currently at 200 Aldersgate Street, London EC1A 4JJ, England. Rolls Royce Brazil hereby irrevocably agrees that any writ, judgment or other notice of legal process shall be sufficiently served on Rolls Royce Brazil if delivered to the registered office for the time being of Rolls Royce plc and marked for the attention of the Company Secretary and with copy to Rolls Royce Brazil, for the attention of the Customer Business Director, at Rua Dr. Cincinato Braga, 47, Sao Bernardo do Campo - SP, 09890-900 Brazil. Any writ, judgment or other notice of legal process shall be sufficiently served on MTU or, as the case may be, TAM if delivered to its agent specified above at its address for the time being. MTU and TAM undertake not to revoke the authority of their agent specified above and if for any reason such agent no longer serves as its agent to receive service of process, that party shall promptly appoint another such agent and advice the other parties thereof.

9.6 Further Assurances. Each party hereto shall promptly and duly execute and deliver to the other parties such further documents and promptly take such further action not inconsistent with the terms hereof as any other party may from time to time reasonably request in order to more effectively carry out the intent and purpose of this Agreement or to perfect and protect the rights created or intended to be created hereunder.

9.7 Successors. This Agreement shall be binding on and shall inure to the benefit Rolls Royce Brazil, MTU and TAM and their respective successors and permitted assigns.

9.8 Language. While this Agreement may be translated into another language, the English language version shall govern in all respects.

9.9 Third Parties. Nothing in this Agreement is intended to confer on any person any right to enforce any term of this Agreement which that person would not have had but for the Contract (Rights of Third Parties) Act 1999.

IN WITNESS whereof the parties, acting through their duly authorised representatives, have caused this Agreement to be signed in their respective names on the date first written above.

Exhibit 1 to Schedule A / page 1 of 1

EXHIBIT 1

TAY ENGINE MAINTENANCE AGREEMENT DATED 14 SEPTEMBER 2000

EXHIBIT 2

AMENDED CONTRACT

With effect from the Effective Date the Contract as set out in Exhibit 1 above is amended as follows in respect of Services commenced on or after the Effective Date:

1. any reference therein in whatever terms to the Contract shall be construed as a reference to the Contract as novated and amended by this Agreement;

2. any references therein to "MTU-M", "MTU-H", "MTU Maintenance do Brasil Ltda." or "MTU Brasil" shall be construed as a reference to "Rolls-Royce Brazil Ltda.", otherwise abbreviated to "RRB";

3. any references therein to "TAM-Transportes Aereos Regionais S.A." or "TAM- Regionais S.A." shall be construed as a reference to "TAM-Linhas Aereas S.A.";

4. the second sentence of Clause 2.8 shall be deleted in its entirety;

5. Clause 2.9 shall be deleted in its entirety and shall be replaced by the words "Intentionally Left Blank";

6. Clause 4.1 shall be deleted in its entirety and replaced with the following:

"4.1 Rolls Royce Brazil shall at its own cost and expense be the importer/exporter of record of all Engines, Modules, Parts and other items imported into/exported from Brazil under this Agreement subject to the adjustments specified in Clause 10.2. Delivery of Engines, Modules, Parts and other items requiring Work to Rolls Royce Brazil shall be the obligation of the Operator."

7. reference in Clause 5.7(iii) to "Germany" shall be deleted and replaced by the words "United Kingdom";

8. In Clause 9.2 the words "US Dollars" shall be deleted and replaced with "Brazilian national currency (Reais)";

9. At Clause 9.3, the bank account details are deleted and replaced by;

Bank: *
Branch office number: *
Current Account number: *
City: *

10. the fourth paragraph of Clause 9.3 commencing "Operator shall promptly furnish..." shall be deleted and replaced with the following:

"Operator shall promptly furnish copies of the documents evidencing wire transfer of all such payments to the attention of Director of Finance and Administration."

11. A new Clause 9.3.1 shall be inserted at the end of Clause 9.3 as follows:

"9.3.1 The currency exchange rate applicable to the invoice preparation shall be the rate at the *

12. Clause 10.1 shall be deleted, and replaced with the words "Intentionally left blank".

13. The first two paragraphs of Clause 10.2 shall be deleted in their entirety and shall be replaced with the following:

"10.2.1  Each of the Operator and Rolls Royce Brazil agree and
         acknowledge that the Fixed Price for Midlife Inspection and
         the Fixed Price for Overhaul specified in Appendix B are
         calculated on the basis of * per Flight Hour which *

In circumstances where:

10.2.2   (a)  new taxes (other than the Relevant Taxes) are imposed in
              Brazil after November 2001, in respect of the
              performance of the Services by Rolls Royce Brazil; or

         (b)  the rate at which any of the Relevant Taxes are imposed,
              increases after November 2001; or

         (c)  the rate at which any of the Relevant Taxes are imposed,
              is reduced after November 2001;

then each of the Operator and Rolls Royce Brazil agree that the rate of * shall:

(i) in the case of Clause 10.2.2 (a) or (b), be increased with effect from the date of imposition such new tax or increased tax rate to reflect the increased tax liability of Rolls Royce Brazil as a consequence thereof; and

(ii) in the case of Clause 10.2.2 (c), be reduced with effect from the date of the reduction of such tax rate, to reflect the reduced tax liability of Rolls Royce Brazil as a consequence thereof.

14. Clause 10.4 shall be deleted in its entirety.

15. Clause 13.5 shall be deleted in its entirety and shall be replaced by the following:

"For the purposes of this Clause 13, the term "Indemnified Parties" shall also include the companies of the Rolls-Royce plc group of companies";

16. Clause 15.4 shall be deleted in its entirety;

17. paragraphs 3 and 4 of Clause 18 shall be deleted and shall be replaced by the following:

"For Rolls-Royce Brazil Ltda.:

Rolls-Royce Brazil Ltda.

Attn:    Customer Business Director
Address: Rolls Royce Brazil
         Rua Dr. Cincinato Braga 47
         Sao Bernarda do Campo
         Brazil
Phone:   + 55 11 4390-4804
Fax:     + 55 11 4341 7683
E-mail:  [____________________]"

18. The second paragraph of Clause 1.3 of Appendix B shall be amended by adding the following sentence at the end of each such paragraph:

19. The first paragraph of Clause 2 of Appendix B shall be deleted. The second paragraph of Clause 2 of Appendix shall be deleted in its entirety and shall be replaced with the following:

*"RRB shall invoice to the Operator (in addition to the Fixed Price for Overhaul) in respect of each Engine sent by the Operator to RRB for the performance of an Overhaul (but not in respect of Midlife Inspections) *

20. *In Appendix C "Escalation Formulae", paragraphs 2 (Material Price Escalation) and 3.1, "Fixed Price Escalation" (in the definition of the term M1), references to [ * ] are deleted and replaced by [ * ]

EXHIBIT 3

CONDITIONS PRECEDENT

1. Confirmation in writing from each of TAM and Rolls Royce Brazil that the lease terms in respect of 8 engine finance leases entered into between TAM and Rolls Royce Partners Finance Limited have been extended for a period of three years.

2. Execution of the Assignment, Assumption and Amendment Agreement relating to certain spare engine lease agreements to be entered into between MTU, TAM and Rolls Royce Leasing Limited.

3. Execution of the Agreement for Sale of Engine Maintenance Contract to be entered into between MTU and Rolls-Royce plc.

This Agreement contains information specifically developed for TAM Linhas Aereas, SA, by GE. Accordingly, TAM Linhas Aereas, SA. will not disclose all or any part of this Agreement to any Third Party except as permitted by Article XIII.E.

THIS GENERAL TERMS AGREEMENT NO. GE-00-0059 (hereinafter referred to as this "Agreement"), dated as of the ________ day of __________________, 2001, by and between General Electric Company, a corporation organized under the law of the State of New York, U.S A., (including it's successors and assigns), acting through its GE Aircraft Engine Group located in Evendale, Ohio, U.S.A. (hereinafter referred to as "GE"), GE Engine Services Distribution, L.L.C., a Delaware limited liability company having its principal office at One Neumann Way MD 111, Cincinnati, Ohio 45215 (hereinafter referred to as "GE-LLC") and TAM Linhas Aereas, SA, a corporation organized under the law of Brazil (hereinafter referred to as "Airline"). GE, GE-LLC and Airline are also referred to in this Agreement as the "Parties" or individually as a "Party".

WITNESSETH

WHEREAS, Airline has acquired, or is in the process of acquiring a certain number of wide-body aircraft equipped with installed GE Engines, and

WHEREAS, GE and Airline desire to enter into appropriate Sections of this Agreement for (i) a standing offer by GE to sell and a continuing opportunity for Airline to purchase from GE, Spare Engines and support equipment for such installed and Spare Engines and (ii) Product Services to be supplied by GE in support of such installed and Spare Engines, and

WHEREAS, GE-LLC and Airline desire to enter into appropriate Sections of this Agreement for a standing offer by GE-LLC to sell and a continuing opportunity for Airline to purchase from GE-LLC, Spare Parts for such installed and Spare Engines.

FURTHER, the parties agree that GE-LLC is a 100% owned subsidiary of GE.

NOW, THEREFORE, in consideration of the mutual covenants herein contained, the respective Parties hereto agree as follows to the respective Sections of this Agreement. Capitalized terms used herein that are otherwise undefined shall have the meanings ascribed to them in Section I ("Definitions") of Exhibit B, unless the context requires otherwise.

SECTION I - GE AS SELLER
ARTICLE I - GE PRODUCTS

Airline may purchase and GE shall sell under the terms and subject to the conditions hereinafter set forth, the items identified as GE Products in the attached Exhibit A, (hereinafter referred to as "GE Product(s)"), GE shall also provide certain Product services as described in Exhibit B.

ARTICLE II - GE PRODUCT PRICES

A. In General. The selling price of GE Products will be the respective prices which are both (i) quoted by GE for such items in procurement data issued in accordance with Air Transport Association of America ("ATA") Specification 2000 (as the same may be revised or superseded from time to time, the "Procurement Data") or GE's written quotation or proposal from time to time and (ii) confirmed in a purchase order placed by Airline and accepted by GE. GE shall quote such prices in U.S. Dollars and Airline shall pay for GE Products in U.S. Dollars. All GE Product prices include the cost of GE's standard tests, inspection and

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GE PROPRIETARY INFORMATION

commercial packaging. Transportation costs and costs resulting from special inspection, packaging, testing or other special requirements, requested by Airline, will be paid for by Airline.

B. Other. Spare Engine prices will be quoted as Base Prices, subject to escalation using the appropriate GE Engine escalation provisions then in effect. The selling price for a Spare Engine is established at the time of Delivery. A copy of GE's current escalation formula is set forth in Exhibit C hereto. No change to such escalation provisions will apply to Airline until GE provides Airline at least ninety days prior written notice.

ARTICLE III - GE PRODUCT ORDER PLACEMENT

A. Applicable Sections of this Agreement shall constitute the terms and conditions applicable to all purchase orders which may hereafter be placed by Airline and accepted by GE for GE Products in lieu of all printed terms and conditions appearing on Airline's purchase orders; except, that, the description of GE Products, price, quantity, delivery dates and shipping instructions shall be as set forth on each purchase order accepted by GE.

B. Airline shall place purchase orders for GE Products quoted by GE, in accordance with GE's quotation for said GE Products.

C. GE's acknowledgment of each purchase order shall constitute acceptance thereof.

ARTICLE IV - DELIVERY, TITLE, TRANSPORTATION, RISK OF LOSS PACKAGING OF GE PRODUCTS

A. GE shall supply GE Products under each purchase order placed by Airline and accepted by GE, on a mutually agreed upon schedule consistent with GE lead times and set forth in each purchase order. Shipment of such GE Products shall be from Evendale, Ohio, U.S.A. and/or Durham, North Carolina, U.S.A, as appropriate. Shipment dates are subject to (1) prompt receipt by GE of all information necessary to permit GE to proceed with work immediately and without interruption, and (2) Airline's compliance with the payment terms set forth herein.

B. Delivery of all GE Products shall be as follows (hereinafter "Delivery"):

(i) (a) if such Products are shipped via ocean freight, delivery shall be to Airline immediately after such time as the Products first leave the territorial waters of the United States of America; (b) if such Products are shipped via air freight, delivery shall be to Airline immediately after such time as the Products first leave the overlying air space of the United States of America; and (c) if such Products are shipped via ground transport, delivery shall be to Airline immediately after such time as the Products first cross the United States of America border and enter into a foreign country. If such Products are shipped via a combination of ocean freight, air freight and/or ground transport, delivery shall be to Airline immediately after such time as the Products first leave the territorial waters of the United States of America, or leave the overlying air space of the United States of America, or cross the United States of America border and enter into a foreign country, whichever shall first occur; or

(ii) in the event shipment cannot be made for reasons set forth in Paragraph F of this Article IV, delivery shall be to storage.

Upon Delivery, title to GE Products as we11 as risk of loss thereof or damage thereto shall pass to Airline. Airline shall be responsible for all risk and expense in obtaining ail import licenses and carrying out all customs formalities for the importation of goods.

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GE PROPRIETARY INFORMATION

C. Notwithstanding that Delivery of GE Products shall be as set forth in Paragraph B of this Article IV, Airline shall arrange for transportation on behalf of GE of such GE Products from the point of shipment described in Paragraph A of this Article IV until Delivery in accordance with paragraph B of this Article IV. Further notwithstanding that Airline is responsible for arranging transportation of all GE Products that it purchases from GE, GE agrees to contact Airline's freight forwarder prior to shipment in order to facilitate the transportation activity. For shipment of major items such as spare engines which (i) require that the ground transportation carrier enter GE's facilities and (ii) necessitate GE's assistance in placing such GE Products into the hands of the carrier, GE agrees to contact the carrier directly to arrange the carrier's scheduled arrival at GE's facility, Also, GE agrees, unless otherwise directed by Airline or Airline's freight forwarder, to select a carrier who will act as Airline's agent to transport GE products on the initial leg of ground transportation. GE will insure against the risk of loss or damage to each such GE Products until GE relinquishes physical control thereof to the carrier at point of shipment. The Airline shall be the exporter of record, and shall agree to comply, and shall be responsible for complying with the applicable US export control laws and all US government licensing and reporting requirements as covered by the Bureau of Export Administration Regulations and the US Census Bureau.

D. During the period of transportation of GE Products from the point of shipment as described in Paragraph A of this Article IV until Delivery in accordance with Paragraph B of this Article IV, GE shall likewise bear the risk of loss and ensure that, in the event of loss of or damage to such GE Products, it is fully insured against any carrier having custody of the GE Products at the time of the loss or damage, whether transportation is arranged on Airline's own aircraft or otherwise. Upon Delivery, risk of loss shall, as stated above, pass to Airline and Airline shall thereafter take measures it deems appropriate with respect thereto.

E. Airline shall pay the cost of the transportation of the GE Products from the point of shipment as described in Paragraph A of this Article IV until Delivery in accordance with Paragraph B of this Article IV and GE shall pay the cost of insuring such GE Products against the risk of loss or damage during such transportation.

F. If the GE Product cannot be shipped when ready due to any cause specified in Article IV of Section III - Excusable Delay, GE may place such GE Product in storage. In such event, all expenses incurred by GE for activities such as, but not limited to, preparation for and placement into storage and handling, storage, inspection, preservation and insurance shall be paid by Airline upon presentation of GE's invoices. If shipment cannot be made due to causes beyond Airline's control, placement of such GE Product into storage shall be at no charge to Airline.

G. Unless otherwise instructed by Airline, GE shall ship each GE Product packaged in accordance with GE's normal standards for domestic shipment or export shipment, as applicable. Any special boxing or preparation for shipment specified by Airline shall be for Airline's account and responsibility. The cost of any re-shipping stand or container is not included in the price of the GE Product. In the event any such GE owned items are not returned by Airline to the original point of shipment, in re-usable condition within one hundred twenty (120) days after shipment, Airline will pay GE the price of such items upon presentation of GE's invoice.

H. Airline's order number shall be indicated on all shipments, packing sheets, bills of lading and invoices.

I. Notwithstanding the distinctions set forth in this Article VI as to when shipment of a GE Product occurs as opposed to when Delivery of such GE Product occurs, for all other purposes of the Agreement (including but not limited to (i) escalation of base price per Article II of Section I, (ii) dates to be provided in Airline's purchase orders under Article III of
Section I, (iii) payment in accordance with Article V of Section I and (iv)
Section II (Warranties and Guarantees) of Exhibit B) the terms "deliver" or "delivery" with respect to a GE Product shall be deemed to mean the shipment of that GE Product. However, use of the terms "delivery" or "deliver" and "shipment" or "ship" shall not be construed so that any acts will pass title or risk of loss or damage with respect to the GE Products to Airline prior to the time specified in Paragraph B of this Article IV.

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GE PROPRIETORY INFORMATION

ARTICLE V - PAYMENT FOR GE PRODUCTS

Airline shall pay GE with respect to GE Products purchased hereunder as set forth in the attached Exhibit D.

SECTION II - GE-LLC AS SELLER

ARTICLE I - GE-LLC PRODUCTS

Airline may purchase and GE-LLC shall sell under the terms and subject to the conditions hereafter set forth, the items identified as GE-LLC Products in the attached Exhibit A-1, (hereinafter referred to as "GE-LLC Product(R)").

ARTICLE II - GE-LLC PRICES

A. In General. The selling price of all GE-LLC Products will be the respective prices which are both (i) quoted in GE-LLC's Spare Parts Price Catalog, as revised from time to time (the "Spare Parts Catalog" or "Catalog") or in Procurement Data and (ii) confirmed in a purchase order placed by Airline and accepted by GE-LLC. GE-LLC shall quote such prices in U.S. Dollars, and Airline shall pay for GE-LLC Products in U.S. Dollars Transportation costs and costs resulting from special inspection, packaging, testing or other special requirements requested by Airline, will be paid for by Airline.

B. Spare Parts Available Through Catalog. The selling price of Spare Parts will be set forth in the most current Catalog or in Procurement Data. The price of a new Spare Part which is first listed in Procurement Data may be changed in subsequent Procurement Data revisions until such time as the Spare Part is included in the Catalog. GE-LLC will advise Airline in writing ninety (90) days in advance of any changes in prices affecting a significant portion of the prices in the Catalog. During such ninety (90) day period, GE-LLC shall not be obligated to accept Airline purchase orders for quantities of Spare Parts in excess of up to ninety (90) days of Airline's normal usage beyond the effective date of the announced price change.

ARTICLE III - GE-LLC PRODUCT ORDER PLACEMENT

A. Applicable Sections of this Agreement shall constitute the terms and conditions applicable to all purchase orders which may hereafter be placed by Airline and accepted by GE-LLC for GE-LLC Products in lieu of all printed terms and conditions appearing on Airline's purchase orders; except that, the description of GE-LLC Products, price, quantity, delivery dates and shipping instructions shall be as set forth on each purchase order accepted by GE-LLC.

B. Airline shall place purchase orders for GE-LLC Products quoted by GE-LLC, in accordance with GE-LLC's quotation for said GE-LLC Products.

C. Airline may place purchase orders for Spare Parts using any of the following methods: telephone, facsimile transmission, ARNC or SITA utilizing ATA Specification 2000 (chapter 3 format) or Airline purchase order as prescribed in the Spare Parts Catalog or GE-LLC's quotation.

D. Airline shall place purchase orders for initial provisioning quantities of Spare Parts as provided in the attached Exhibit B within one hundred eighty days (180) following receipt from GE-LLC of initial Provisioning Data relating thereto.

E. GE-LLC's acknowledgment of each purchase order shall constitute acceptance thereof.

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GE PROPRIETARY INFORMATION

ARTICLE IV - DELIVERY, TITLE, TRANSPORTATION, RISK OF LOSS PACKAGING OF GE-LLC PRODUCTS

A. GE-LLC shall supply GE-LLC Products under each purchase order placed by Airline and accepted by GE-LLC, on a mutually agreed upon schedule consistent with GE-LLC lead times and set forth in each purchase order. Shipment of such GE-LLC Products shall be from Erlanger, Kentucky, U.S.A. or point of drop shipment, at GE-LLC's option. Shipment dates are subject to (1) prompt receipt by GE-LLC of all information necessary to permit GE-LLC to proceed with work immediately and without interruption, and (2) Airline's compliance with the payment terms set forth herein.

B. Delivery of all GE-LLC Products shall be as follows (hereinafter "Delivery"):

(ii) in the event shipment cannot be made for reasons set forth in Paragraph F of this Article IV, delivery shall be to storage.

Upon Delivery, title to GE-LLC Products as well as risk of loss thereof or damage thereto shall pass to Airline. Airline shall be responsible for all risk and expense in obtaining all import licenses and carrying out all customs formalities for the importation of goods.

C. Notwithstanding that Delivery of GE-LLC Products shall be as set forth in Paragraph B of this Article IV, Airline shall arrange for transportation on behalf of GE-LLC of such GE-LLC Products from the point of shipment described in Paragraph A of this Article IV until delivery in accordance with Paragraph B of this Article IV. Further notwithstanding that Airline is responsible for arranging transportation of all GE-LLC Products that it purchases from GE-LLC, GE-LLC agrees to contact Airline's freight forwarder prior to shipment in order to facilitate the transportation activity. The Airline shall be the exporter of record, and shall agree to comply, and shall be responsible for complying with the applicable US export control laws and all US government licensing and reporting requirements as covered by the Bureau of Export Administration Regulations and the US Census Bureau.

D. During the period of transportation of GE-LLC Products from the point of shipment as described in Paragraph A of this Article IV until Delivery in accordance with Paragraph B of this Article IV, GE-LLC shall likewise bear the risk of loss and ensure that, in the event of loss of or damage to such GE-LLC Products, it is fully insured against any carrier having custody of the GE-LLC Products at the time of the loss or damage, whether transportation is arranged on Airline's own aircraft or otherwise. Upon delivery, risk of loss shall, as stated above, pass to Airline and Airline shall thereafter take measures it deems appropriate with respect thereto.

E. Airline shall pay the cost of the transportation of the GE-LLC Products from the point of shipment as described in Paragraph A of this Article IV until Delivery in accordance with Paragraph B of this Article IV and GE-LLC shall pay the cost of insuring such GE-LLC Products against the risk of loss or damage during such transportation.

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GE PROPRIETARY INFORMATION

F. If the GE-LLC Product cannot be shipped when ready due to any cause specified in Article IV of Section III - Excusable Delay, GE-LLC may place such GE-LLC Product in storage. In such event, all expenses incurred by GE-LLC for activities such as, but not limited to, preparation for and placement into storage and handling, storage, inspection, preservation and insurance shall be paid by Airline upon presentation of GE's invoices. If shipment cannot be made due to causes beyond Airline's control, placement of such GE-LLC Product into storage shall be at no charge to Airline.

G. GE-LLC shall ship GE-LLC Products packaged and labeled in accordance with ATA Specification No. 300, Revision 17, or to a revision mutually agreed in writing between GE-LLC and Airline. GE-LLC shall notify Airline, where applicable, that certain GE-LLC Products are packed in unit package quantities (UPQ's) or multiples thereof.

H. Airline's order number shall be indicated on all shipments, packing sheets, bills of lading and invoices.

I. Notwithstanding the distinctions set forth in this Article VI as to when shipment of a GE-LLC Product occurs as opposed to when Delivery of such GE-LLC Product occurs, for all other purposes of the Agreement (including but not limited to (i) dates to be provided in Airline's purchase orders under Article III of Section II, (ii) payment in accordance with Article V of Section II and (iii) Section II (Warranties and Guarantees) of Exhibit
B) the terms "deliver" or "delivery" with respect to a GE-LLC Product shall be deemed to mean the shipment of that GE-LLC Product. However, use of the terms "delivery" or "deliver" and "shipment" or "ship" shall not be construed so that any acts will pass title or risk of loss or damage with respect to the GE-LLC Products to Airline prior to the time specified in Paragraph B of this Article IV.

ARTICLE V - PAYMENT FOR GE-LLC PRODUCTS

Airline shall pay GE-LLC with respect to GE-LLC Products purchased hereunder as set forth in the attached Exhibit D-1.

SECTION III - GE AND GE-LLC AS SELLER

ARTICLE I - GENERAL

Solely for purposes of this Section III of the Agreement, the abbreviation "Seller" shall refer to both GE and GE-LLC since each entity will be subject to these terms. In addition, again solely for purposes of this Section III of the Agreement, the term "Product(s)" shall refer to both GE Products) and GE-LLC Product(s).

ARTICLE II - TAXES

A. The Airline shall be responsible for the payment of any taxes (including without limitation, sales, use, ad valorem, excise, turnover or value added taxes), duties, fees, charges, imposts, tariffs, or assessments of any nature (but excluding income taxes imposed by any Government other than the Government of Brazil+) ("Taxes"), legally assessed or levied by any Governmental authority against Seller or its employees as a result of any sale, delivery, transfer, use, export, import, or possession of Product, or otherwise in connection with this Agreement.

B. If claim is made against Seller for any such Taxes, Seller shall immediately notify Airline and, if requested by Airline, Seller shall not pay except under protest, and if payment is made, Seller, if requested by Airline, shall use all reasonable efforts to obtain a refund thereof. If all or any part of any such Taxes are refunded, Seller shall repay to Airline such part thereof as Airline shall have paid. Airline shall pay to Seller, upon demand, all expenses (including penalties, interest and attorney's fees) incurred by Seller in protesting payment and in endeavoring to obtain such refund.

+ The General Electric Company excluding its subsidiaries does not have a taxable ___ in Brazil.

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C. All payments by Airline to Seller under this Agreement shall be free of all withholdings of any nature whatsoever except to the extent otherwise required by law, and if any such withholding is so required, Airline shall pay an additional amount such that after the deduction of all amounts required to be withheld, the net amount received by Seller shall equal the amount that Seller would have received if such withholding had not been required

ARTICLE III - WARRANTY AND CF6-80E1 PRODUCT SUPPORT PLAN

Notwithstanding the distinction between GE Products and GE-LLC Products, applicable warranties relating to all Products, either purchased by Airline directly from GE or GE-LLC or installed on Airline's aircraft as original equipment, are as set forth in Section II of Exhibit B (the Product Support Plan) to this Agreement and are exclusively offered and administered by GE. Sections I and X of Exhibit B respectively set forth definitions and conditions applicable to such warranties.

Likewise, traditional product support activities designed for the Products are set forth in Sections III through IX of Exhibit B and are the responsibility of GE.

ARTICLE IV - EXCUSABLE DELAY

Seller shall not be liable for delays in delivery or failure to perform due to
(1) causes beyond its reasonable control, or (2) acts of God, acts of Airline, acts of civil or military authority, fires, strikes, floods, epidemics, war, civil disorder, riot, delays in transportation, or (3) inability due to causes beyond its reasonable control to obtain necessary labor, material, or components. In the event of any such delay, the date of delivery shall be extended for a period equal to the time lost by reason of the delay. This provision shall not, however, relieve Seller from using reasonable efforts to continue performance whenever such causes are removed. Seller shall promptly notify Airline when such delays occur or impending delays are likely to occur and shall continue to advise it of new shipping schedules and changes thereto. In the event an excusable delay continues for a period of six months or more beyond the scheduled delivery date, Airline or Seller may, upon thirty days written notice to the other, cancel the part of any purchase order so delayed and Seller shall return to Airline all payments relative to the canceled part of the order and Airline shall pay Seller its reasonable cancellation charges.

ARTICLE V - PATENTS

A. Seller shall handle all claims and defend any suit or proceeding brought against Airline insofar as based on a claim that without further combination, any Product furnished under this Agreement constitutes an infringement of any patent of the United States or of any patent of any other country that is signatory to Article 27 of the Convention on International Civil Aviation signed by the United States at Chicago on December 7, 1944, in which Airline is authorized to operate or in which another airline pursuant to lawful interchange, lease or similar arrangement, operates aircraft of Airline. This paragraph shall apply only to Products manufactured to Seller's design.

B. Seller's liability hereunder is conditioned upon Airline promptly notifying Seller in writing and giving Seller authority, information and assistance (at Seller's expense) for the defense of any suit or proceeding. In case such Product is held in such suit or proceeding to constitute infringement and the use of said Product is enjoined, Seller shall expeditiously, at its own expense and at its option, either (1) procure for Airline the right to continue using said Product; (2) replace same with satisfactory and noninfringing Product; or (3) modify same so it becomes satisfactory and noninfringing. Seller shall not be responsible to Airline or to said other airline, for incidental or consequential damage, including, but not limited to, costs, expenses, liabilities and loss of profits resulting from loss of use under this Article V.

C. The remedies described in paragraphs (A) and (B) above do not apply to any Product or Part (1) not purchased by Airline from Seller (except for Products or Parts installed as Original Equipment on aircraft owned, leased or

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GE PROPRIETARY INFORMATION

operated by Airline); (2) that was changed, modified, or not used for its intended purpose; or (3) that was manufactured by Seller to Airline's unique specifications or directions. Seller assumes no liability for patent infringement as to such items.

The obligations recited in this Article V shall constitute the sole and exclusive remedies of Airline (and any other operator of Airline's GE-powered aircraft) and the sole and exclusive liability of Seller for actual and alleged patent infringement.

ARTICLE VI - INFORMATION AND DATA

A. All information and data, including, but not limited to, all repair processes and procedures, manuals, designs, drawings, blueprints, tracings, plans, models, layouts, specifications, and memoranda, (the 'Information and Data") which may be furnished or made available to Airline, directly or indirectly, as the result of this Agreement shall remain the property of Seller. All Information and Data is proprietary to Seller and shall neither be used by Airline nor furnished by Airline to any other person, firm or corporation for any purpose nor permitted out of Airline's possession, nor divulged to any other person, firm or corporation, without GE's express written consent, which consent shall not be unreasonably withheld (particularly with regard to reasonable disclosures to the Centra Tecnico Aerospacial ("CTA"), as required by the CTA, that are necessary for Airline's normal operation or use of the Products). However, notwithstanding the foregoing, Airline may use such Information and Data for modification, overhaul, or maintenance work performed by Airline on Airline's Products; except that all repairs or repair processes that require substantiation (including, but not limited to, high technology repairs) will be the subject of a separate license and substantiated repair agreement between Seller and Airline. Airline shall take all steps reasonably necessary to insure compliance by its employees, agents, and subcontractors with this Article VI.

B. Nothing in this Agreement shall convey to Airline the right to reproduce or cause the reproduction of any Product of a design identical or similar to that of the Product purchased hereunder or give to Airline a license under any patents or rights owned or controlled by Seller.

C. Airline acquires no ownership rights in any of the computer software that may be provided to Airline by Seller under this Agreement. Airline shall only be licensed to use such computer software under the terms and conditions of separate written agreements between the Airline and the appropriate owner of such software.

ARTICLE VII - FAA CERTIFICATION REQUIREMENTS

A. All Products, when required by the U.S. Government, shall, at time of delivery:

1. Conform to a Type Certificate issued by the FAA.

2. Conform to applicable regulations issued by the FAA, provided such regulations are promulgated prior to the date of Airline's purchase order issued under this Agreement for such Products.

B. If, subsequent to the date of acceptance of the purchase order for such Products but prior to their delivery by Seller to Airline, the FAA issues changes in regulations covering Products sold under this Agreement and such changes in regulations are promulgated after the date of Airline purchase orders for such Products, then all costs associated with any Product modifications necessitated thereby will be shared equally by Seller and Airline; provided however, that costs associated with any modifications to the airframe required by such Product modifications shall not be borne by Seller.

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GE PROPRIETARY INFORMATION

C. Any delay occasioned by complying with such regulations set forth in Paragraph B above shall be deemed an Excusable Delay under Article IV of
Section III hereof, and, in addition, appropriate adjustments shall be made in the specifications to reflect the effect of compliance with such regulations.

ARTICLE VIII - TERMINATION FOR INSOLVENCY

A. Upon the commencement of any bankruptcy or reorganization proceeding by or against any party hereto (the "Defaulting Party"), the other Parties hereto may, upon written notice to the Defaulting Party, cease to perform any and all of its obligations under this Agreement and the purchase orders hereunder (including, without limitation, continuing work in progress and making deliveries or progress payments or down payments) unless the Defaulting Party shall provide adequate assurance, in the opinion of the other Parties hereto, that the Defaulting Party will continue to perform all of its obligations under this Agreement and the purchase orders hereunder in accordance with the terms hereof, and will promptly compensate the other Parties hereto for any actual pecuniary loss resulting from the Defaulting Party being unable to perform in full its obligations hereunder and under the purchase orders. If the Defaulting Party or the trustee thereof shall fail to promptly provide such adequate assurance, upon notice to the Defaulting Party by the other Parties hereto, this Agreement and all purchase orders hereunder shall be canceled. Notwithstanding the preceding two sentences, in the event that GE-LLC is the Defaulting Party. Airline shall give GE the opportunity to perform any of GE-LLC's obligations under this Agreement prior to Airline ceasing to perform any of its obligations.

B. Any Party, at its option, may cancel this Agreement or any purchase order hereunder with respect to any or all of the Products to be furnished hereunder which are undelivered or not furnished on the effective date of such cancellation by giving the other Parties written notice, as hereinafter provided, at any time after a receiver of the other's assets is appointed on account of insolvency, or the other makes a general assignment for the benefit of its creditors and such appointment of a receiver shall remain in force undismissed, unvacated or unstayed for a period of sixty days thereafter. Such notice of cancellation shall be given thirty days prior to the effective date of cancellation, except that, in the case of a voluntary General assignment for the benefit of creditors, such notice need not precede the effective date of cancellation.

ARTICLE IX - LIMITATION OF LIABILITY

The liability of Seller to Airline arising out of, connected with, or resulting from the manufacture, sale, possession, use or handling of any Product (including Engines installed on Airline's owned or leased aircraft as Original Equipment) or furnishing of services, whether in contract, tort (including, without limitation, negligence) or otherwise, shall be as set forth in the Product Support Plan included in Exhibit B hereof, and shall not in any event exceed the purchase price of the Product, service or other thing giving rise to Airline's claim. The foregoing shall constitute the sole remedy of Airline and the sole liability of Seller. In no event shall Seller be liable for special, incidental or consequential damages, including but not limited to, damage to, or loss of use, revenue or profit with respect to any aircraft, engine, or part thereof. THE WARRANTIES AND GUARANTEES SET FORTH IN SECTION II OF EXHIBIT B (THE "CF6-80E1 PRODUCT SUPPORT PLAN") TO THIS AGREEMENT ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES AND GUARANTEES WHETHER WRITTEN, STATUTORY, ORAL, OR IMPLIED (INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY IMPLIED WARRANTY ARISING FROM COURSE OF DEALING COURSE OF PERFORMANCE, OR USAGE OF TRADE).

For the purpose of this Article IX, the term "Seller" means General Electric Company, its subsidiaries (including but not limited to GE Engine Services Distribution, L.L.C.), assigns, subcontractors, suppliers, Product co-producers, and the respective directors, officers, employees, and Agents of each.

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GE PROPRIETARY INFORMATION

ARTICLE X - EXPORT SHIPMENT

If Seller agrees in writing upon Airline's written request, to assist Airline to arrange for export shipment of Products, Airline shall pay Seller for all fees and expenses including, but not limited to, those covering preparation of consular invoices, freight, storage, and warehouse to warehouse (including war risk) insurance, upon submission of Seller's invoices. In such event, Seller will assist Airline in applying for any required export license and in preparing consular documents according to Airline's instructions or in the absence thereof, according to its best judgment but without liability for error or incorrect declarations including, but not limited to, liability for fines or other charges.

ARTICLE XI - GOVERNMENTAL AUTHORIZATION

Airline shall be responsible for obtaining any required authorization such as export licenses, import licenses, exchange permits or any other required governmental authorization. Airline shall restrict disclosure of all information and data furnished thereto under this Agreement and shall ship the direct product of such information and data to only those destinations which are authorized by the U.S. Government. At the request of Airline, Seller will provide Airline with a list of such authorized destinations. Seller shall not be liable if any authorization is delayed, denied, revoked, restricted or not renewed and Airline shall not be relieved of its obligation to pay Seller hereunder.

ARTICLE XII - NOTICES

Any notices under this Agreement shall become effective upon except and shall be in writing and be delivered or sent by mail or electronic transmission to the respective parties at the following addresses, which may be changed by written notice:

If to: TAM Linhas Aereas, SA            If to: General Electric Company
       Av. Jurandir 856 -                      GE Aircraft Engines
       Lote 4 - 4o. andar,                     One Neumann Way - F17
       Jardim Ceci, Aeroporto                  Cincinnati, Ohio 45215-1988 USA
       Sao Paulo, Brazil 04355-O40

Attn:                                   Attn:  Director, Commercial Contracts
       Facsimile Number _____________          Facsimile Number: (513) 243-9762
       Telephone Number _____________          Telephone Number: (513) 243-3569

                                        If to: GE Engine Services Distribution,
                                               L.L.C.
                                               One Neumann Way, MD 111
                                               Cincinnati, OH 45215-6301

                                        Attn:  President
                                               Facsimile Number: (513) 552-2144
                                               Telephone Number: (513) 552-2278

Notice sent by the U.S. mail, postage prepaid, shall be deemed received within seven days after deposit.

ARTICLE XIII - MISCELLANEOUS

A. Assignment of Agreement. This Agreement may not be assigned, in whole or in part, by either Party without the prior written consent of the other Party; except, that, Airline's consent shall not be required for the assignment by Seller of all or a portion of the Agreement to a subsidiary of Seller, provided that Seller shall remain primarily liable for such performance.

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GE PROPRIETARY INFORMATION

B. Exclusivity of Agreement. Except as otherwise expressly provided to the contrary, the rights herein granted and this Agreement are for the benefit of the Parties hereto and are not for the benefit of any Third Person, firm or corporation, and noting herein contained shall be construed to create any fights in any Third Party under, as the result of, or in connection with this Agreement.

C. Applicable Law; Venue. All aspects of this Agreement and the obligations arising hereunder will be governed in accordance with the law of the State of New York, U.S.A. except, that New York conflict of law rules will not apply if the result would be the application of the laws of another jurisdiction. The United Nations Convention on Contracts for the International Sale of Goods shall not apply to this Agreement. In the event of an unresolved dispute, each of the Parties hereby irrevocably agree to submit to the non-exclusive jurisdiction of the state and federal courts (as appropriate) of New York, U.S.A. The Parties hereby waive any objection that such courts lack personal jurisdiction or are an inconvenient forum.

D. Entire Agreement; Modification. This Agreement contains the entire and only agreement between the parties, and it supersedes all pre-existing agreements between such parties, respecting the subject matter hereof; and any representation, promise or condition in connection therewith not incorporated herein shall not be binding upon either Party. No modification, renewal, extension, waiver, or termination of this Agreement or any of the provisions herein contained shall be binding upon the Party against whom enforcement of such modification, renewal, extension, waiver or termination (except as provided in Article VIII of Section III hereof) is sought, unless it is made in writing and signed on behalf of Seller and Airline by duly authorized executives.

E. Confidentiality of Information. This Agreement contains information specifically for Airline, GE and GE-LLC and nothing herein contained shall be divulged by Airline, GE or GE-LLC to any third person, firm or corporation, without the prior written consent of the other Parties, which consent shall not be unreasonably withheld; except, that, consent shall not be required for disclosure to the respective insurers and professional advisors of the Parties who must likewise agree to be bound by this confidentiality clause, Airline's consent shall not be required for GE or GE-LLC to divulge to their partners information from, or with respect to this Agreement, it being understood that each such partner will also be bound by the provisions of Paragraph E of this Article XIII. Additionally, neither GE nor GE-LLC's consent shall be required for Airline to divulge to the necessary representatives of the Brazillian Government (as may be required by the laws and/or regulations of Brazil) information from, or with respect to this Agreement, it being understood that Airline shall ensure that each such representative will also comply with and be bound by the provisions of this Paragraph E of this Article XIII.

F. Duration of Agreement. This Agreement shall remain in full force and effect until (1) Airline ceases to operate at least one aircraft powered by Products set forth herein, (2) less than five aircraft powered by such Products are in commercial airline service, (3) this Agreement is terminated in whole or in part under either the provisions of Article IV of
Section III. - Excusable Delay or Article VIII of Section III. - Termination for Insolvency hereof, or (4) by mutual consent of the parties, whichever occurs first. Nothing herein shall affect the rights and obligations and limitations set forth in this Agreement as to Products ordered for delivery and work performed prior to termination of this Agreement.

G. Survival Of Certain Clauses. The rights and obligations of the Parties under the following Articles of Section III, as amended, and related Exhibits shall survive the expiration, termination, completion or cancellation of this Agreement:

Article II Taxes
Article VI Information and Data Article IX Limitation of Liability Article XI Governmental Authorization Article XIII Miscellaneous, paragraphs C. and E.

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GE PROPRIETARY INFORMATION

In addition, the rights and obligations of the parties under Section I Article V - Payment, and the rights and obligations of the parties under
Section II Article V - Payment shall survive the expiration, termination, completion or cancellation of this Agreement.

H. General Rules of Contract Interpretation. Article and paragraph headings contained in this Agreement are inserted for convenience of reference only and do not limit or restrict the interpretation of this Agreement. Words used in the singular shall have a comparable meaning when used in the plural and vice versa, unless the contrary intention appears. Words such as "hereunder", "hereof and "herein" and other words beginning with "here" refer to the whole of this Agreement, including Amendments, and not to any particular Article. References to Articles, Sections, Paragraphs, Attachments or Exhibits will refer to the specified Article, Section, Paragraph, Attachment or Exhibit of this Agreement unless otherwise specified.

I. Language. This Agreement, order, Data, notices, shipping invoices, correspondence and other writings furnished hereunder shall be in the English language.

J. Severability. The invalidity or unenforceability of any part of this Agreement or the invalidity of its application to a specific situation or circumstance shall not effect the validity of the remainder of this Agreement, or its application to other situations or circumstances. In addition, if a part of this Agreement becomes invalid, the Parties will endeavor in good faith to reach agreement on a replacement provision which will reflect, as nearly as possible, the intent of the original provision.

K Waiver. The failure at any time of any Party to enforce any of the provisions of this Agreement or to require performance by the other Parties of any of its provisions shall in no way affect the validity of this Agreement or the right of the other Parties thereafter to enforce each and every such provision. The express waiver by any Party of any provision, condition, or requirement of this Agreement, shall not constitute a waiver of any subsequent obligation to comply with such provision, condition, or requirement

L. Guarantee. General Electric Company hereby guarantees unconditionally the obligations of Seller-LLC as set forth in this Agreement. In the event that Seller-LLC fails to perform any obligation under this Agreement and Seller-LLC does not remedy such failure within ten (10) days (or such longer period authorized in writing by Airline) after having received written notice from Airline requesting it to do so, the General Electric Company undertakes to perform Seller-LLC's obligations, or remedy or have remedied such failure for Airline, without cost to Airline.

Counterparts: This Agreement may be signed by the Parties in separate counterparts, and any single counterpart or set of counterparts, when signed and delivered to the other Parties shall together constitute one and the same document and be an original Agreement for all purposes.

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IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement as of the day and the year first above written.

TAM LINHAS AEREAS, SA                   GENERAL ELECTRIC COMPANY


By: /s/                                     By: /s/ ROGER N. SEAGER
    ---------------------------------       ------------------------------------
Typed Name:                             Typed Name: ROGER N. SEAGER
Title: Contracts Director               Title: GEN. MGR. - CFL
Date: May 9, 2001                       Date: MAY 7, 2001


                                        GE ENGINE SERVICES DISTRIBUTION, LL.C.


                                        By: /s/
                                            ------------------------------------
                                        Typed Name:
                                        Title: AUTHORIZED REPRESENTATIVE
                                        Date: MAY 11, 2001

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EXHIBIT A

CF6-80E1A3 SERIES PRODUCTS APPLICABLE TO
AIRLINE'S TYPE A330-200 AIRCRAFT

GE Products Shall Include:

I. Model CF6-80E1A3 Turbofan Engines as certified by the U.S. Federal Aviation Administration ("FAA") and as specified in the applicable purchase order or in any letter agreement hereto.

II. Related optional equipment for the above Engines.

III. Other CF6 Products as may be offered for sale by GE from time to time.

IV. Technical Data, training or other thing furnished by GE under this Agreement.

***

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GE PROPRIETARY INFORMATION

Exhibit 10.7

EXHIBIT A-1

CF6-80E1A3 SERIES PRODUCTS APPLICABLE TO
AIRLINE'S TYPE A330-200 AIRCRAFT

GE-LLC PRODUCTS SHALL INCLUDE:

I. Spare Parts.

II. Engine Modules:

A. Fan Module
B. Core Module (HPC - Combustor - 1st Stage HPT Nozzle)
C. High Pressure Turbine ("HPT") Module
D. Low Pressure Turbine ("LPT") Module
E. Accessory Gearbox

III. Other GE-LLC Products as may be offered for sale by GE-LLC from time to time.

***

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GE PROPRIETARY INFORMATION

EXHIBIT B
CF6-8OEI PRODUCT SUPPORT PLAN

GENERAL

Solely for purposes of this Exhibit, the abbreviation "GE" shall refer to both General Electric Company and GE Engine Services Distribution, L.L.C., as the case may be, since each entity will be subject to these terms.

SECTION I - DEFINITIONS

These definitions shall apply for all purposes of this Agreement, unless the context requires otherwise. The meanings shall be equally applicable to both the singular and the plural forms of the terms defined, unless the context requires otherwise.

1. "Agreement" means the General Terms Agreement between GE, GE-LLC and Airline to which this Exhibit B is attached.

2. "Article" means an Article of this Agreement.

3. "ATA" means the Air Transport Association of America.

4. "Base Price" means the price established in the GE proposal, quotation or purchase order (as applicable) for a specific GE Product which corresponds to an appropriate Base Composite Price Index in such proposal, quotation or purchase order (as applicable).

5. "Base Composite Price Index" means the index stated in the published prices announced by GE from time to time which corresponds to the Base Price.

6. "Catalog" means GE-LLC's most recent Engine Spare Parts Price Catalog for the appropriate engine model which describes the selling price and delivery lead time for identified Spare Parts.

7. "Data" includes, but is not limited to, GE and GE-LLC Product information in any form or medium, such as technical information, technology, printed or computer aided designs, drawings, blueprints, tracings, plans, models, movies, pictures, layouts, specifications, Product manufacturing or Product repair procedures or techniques, reports, financial information, technical data furnished in accordance with Section IV of Exhibit B to this Agreement, and other Product related Information or memoranda furnished under this Agreement.

8. "Engine" means the Engine described in Exhibit A.

9. "Ex Works" has the meaning accorded thereto in Incoterms, 2000 Edition.

10. "Exhibit" means an exhibit to this Agreement, including all modifications and amendments thereto.

11. "Expendable Parts" means those Parts which must routinely be replaced during Inspection, repair, or maintenance, whether or not such Parts have been damaged and other Parts which are customarily replaced at each such inspection and maintenance period such as filter inserts and other short-lived items which are not dependent on wear out but replaced at predetermined intervals.

(12) "FAA" means the Federal Aviation Administration of the Department of Transportation of the United States, and any successor agency thereof.

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GE PROPRIETARY INFORMATION

13. "Failed Parts" means those Parts and Expendable Parts suffering a Failure or mutually determined to have caused the Engine to be unserviceable and incapable of continued operation without requiring corrective action and shall include any Part or Expendable Part with a defect in material or workmanship discovered prior to the initial use of a Part or Expendable Part.

14. "Failure" means the breakage of a Part, malfunction of a Part, or injury to a Part, rendering it unserviceable for any reason within GE's or GE-LLC's control. Failure shall also include any defect in material or workmanship discovered prior to the initial use of a Part. Failure does not include normal wear and tear and deterioration which can be restored by overhaul or repair.

15. "Flight Cycle" means the complete running of an Engine from start through any condition of flight and ending at Engine shutdown. A "touch and go landing" used during pilot training shall be considered as a "Flight Cycle."

16. "Flight Hours" means the cumulative number of airborne hours in operation of each Engine computed from the time an aircraft leaves the ground until it touches the ground at the end of a flight.

17. "Foreign Object Damage" means any damage to the Engine caused by objects which are not part of the Engine and Engine Optional Equipment.

18. "Incoterms" means International Chamber of Commerce Incoterms, 2000 Edition.

19. "Inspection" means an observation of an Engine or Parts thereof, through disassembly or other means, for the purpose of determining serviceability.

20. "Labor Allowance" means a GE credit calculated by multiplying the established labor rate by man-hours allowed for disassembly, reassembly (when applicable), and for Parts repair. If a Labor Allowance is granted for a repair, it shall not exceed the credit which would have been quoted if the Part had not been repairable.

21. "Module" means a the appropriate major serialized subassembly of the Engine described on Exhibit A of this Agreement.

22. "Original Equipment" means the installed Engines or GE-LLC Products supplied to Airline through the aircraft manufacturer as part of Airline's new Aircraft.

23. "Part" means only those Engine and Module Parts which have been sold originally to Airline by GE or GE-LLC for commercial use. The term excludes parts which were furnished on new Engines and Modules but are procured directly from vendors. Such parts are covered by the Vendor Warranty and the General Electric "Vendor Warranty Back Up" described in Section II of Exhibit B of this Agreement. Also excluded are Expendable Parts and customary short-lived items such as filter inserts.

24. "Part Time" means the total number of Flight Hours flown by a Part since delivery to Airline.

25. "Parts Credit Allowance" means the credit granted by GE or GE-LLC to Airline in connection with the Failure of a Part based on the price of a replacement part at the time the part is removed. This credit may take the form of a replacement Part at GE's or GE-LLC's option.

26. "Parts Cycles" means the total number of Flight Cycles accumulated by a Part since its delivery to Airline.

27. "Parts Repair" means the GE recommended rework or restoration of Failed Parts to a serviceable condition, excluding repair of normal wear and tear and deterioration.

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28. "Scheduled Inspection" means the Inspection of an Engine conducted when an Engine has approximately completed a planned operating interval.

29. "Scrapped Parts" means those Parts determined to be unserviceable and not repairable by virtue of reliability, performance or repair costs. Such Parts shall be disposed of by Airline unless requested by GE for engineering analysis, in which event any handling and shipping shall be at GE's expense.

30. "Spare Engine" means an Engine, except installed Engines, which is purchased by Airline from GE for commercial use.

31. "Spare Parts" - see Part.

32. "Ultimate Life" of a Part means the approved limitation on use of a Part, in cumulative Flight Hours or Flight Cycles, which either GE or a U.S. Government authority establishes as the maximum period of allowed operational time for such Parts in Airline service, with periodic repair and restoration. The term does not include individual Failure from wear and tear or other cause not related to the total usage capability of all such Parts in Airline service.

33. "Third Party" means any individual, firm, company, corporation, partnership, joint venture, association, trust, unincorporated organization or body, or any country, state, jurisdiction or government, or any agency, authority, instrumentality or political subdivision thereof, in each case whether having a distinct legal personality or not, other than GE, GE-LLC and Airline.

SECTION II - WARRANTIES

A. New Engine Warranty

1 GE warrants each new Engine and Module against Failure for * as follows:

a. Parts Credit Allowance will be granted for any Failed Parts.

b. Labor Allowance for disassembly, reassembly, test and Parts Repair of any new Engine part will be granted for replacement of Failed Parts.

c Such Parts Credit Allowance, test and Labor Allowance will be:
* from new to * and decreasing pro rata from *

2. As an alternative to the above allowances, GE shall upon request of Airline:

a. Arrange to have failed Engines and Modules repaired as appropriate, at a facility designated by GE at no charge to Airline for * and at a charge to Airline increasing pro rata from *

b. Transportation to and from the designated facility shall be at Airline's expense.

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GE PROPRIETARY INFORMATION

B. New Parts Warranty

In addition to the warranty granted for new Engines and Modules GE warrants new Engine and Module Parts as follows;

1. During the * for such Parts and Expendable Parts, GE will grant * Parts Credit Allowance or Labor Allowance for repair labor for failed Parts.

2. GE will grant a pro rata Parts Credit Allowance for Scrapped Parts decreasing from * at the applicable hours designated in Table 1.

C. Ultimate Life Warranty

1. GE warrants Ultimate Life limits on the following parts:

a. Fan and Compressor Disks/Spools

b. Fan and Compressor Shafts

c. Turbine Disks/Shafts

d. Turbine Spacer and Impeller

e. Compressor Discharge Pressure (CDP) Seal and support

f. HPT Rotor Diffuser

2. GE will grant a * Parts Credit Allowance of, * when * and a credit allowance decreasing * from * Credit will be granted only when such Parts are permanently removed from service by a GE or U.S. Government imposed Ultimate Life Limitation of less than *

D. Campaign Change Warranty

1. A campaign change will be declared by GE when a new Part design introduction, Part modification, Part Inspection, or premature replacement of an Engine or Module is required by a time compliance GE Service Bulletin or FAA Airworthiness Directive. Campaign change may also be declared for GE Service Bulletins requesting new Part introduction no later than the next Engine or Module shop visit GE will grant the following Parts Credit Allowances:

Engines and Modules

(i) * for Parts in inventory or removed from service when *

(ii) Pro rata for Parts in inventory or removed from service decreasing *

(iii) * for Parts in inventory or removed from service with * regardless of warranty status.

2. Labor Allowance - GE will grant * Labor Allowance for disassembly, reassembly, modification, testing, or Inspection of GE-supplied Engines, Modules or Parts therefor when such action is required to comply with a mandatory time compliance GE Service Bulletin or FAA Airworthiness Directive. A Labor Allowance will be granted by GE for other GE issued Service Bulletins if so specified in such Service Bulletins.

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3. Life Controlled Rotating Parts retired by Ultimate Life limits including FAA Airworthiness Directive, are excluded from Campaign Change Warrant.

E. Warranty Pass-On

If requested by Airline and agreed to by GE in writing, GE will extend warranty support for Engines sold by Airline to commercial airline operators, or to other aircraft operators. Such warranty support will be limited to the New Engine Warranty, New Parts Warranty, Ultimate Life Warranty and Campaign Change Warranty and will require such operator(s) to agree in writing to be bound by and comply with all the terms and conditions, including the limitations, applicable to such warranties as set forth in this Agreement.

F. Vendor Back-Up Warranty

1. GE controls and accessories vendors provide a warranty on their products used on GE Engines. This warranty applies to controls and accessories sold to GE for delivery on installed or spare Engines and controls and accessories sold by the vendor to the airlines on a direct purchase basis. In the event the controls and accessories suffer a failure during the vendor's warranty period, Airline will submit a claim directly to the vendor in accordance with the terms and conditions of the vendor's warranty.

2. In the event a controls and accessories vendor fails to provide a warranty at least as favorable as the GE New Engine Warranty (for complete controls and accessories) or New Parts Warranty (for components thereof), or if provided, rejects a proper claim from Airline, GE will intercede on behalf of Airline to resolve the claim with the vendor. In the event GE is unable to resolve a proper claim with the vendor, GE will honor a claim from Airline under the provisions and subject to the limitations of GE's New Engine or New Parts Warranty, as applicable. Settlements under Vendor Back-Up Warranty will exclude credits for resultant damage to or from controls and accessories procured directly by Airline from vendors.

G. Vendor Interface Warranty

Should any CF6 control or accessory, for which GE is responsible, develop a problem due to its environment or interface with other controls and accessories or with an Engine, Module or equipment supplied by the aircraft manufacturer, GE will be responsible for initialing corrective action. If the vendor disclaims warranty responsibility for Parts requiring replacement, GE will apply the provisions of its New Parts Warranty to such Part whether it was purchased originally from GE or directly from the vendor.

H. Condition Monitoring Warranty

1. GE warrants CF6 Condition Monitoring Equipment, installed on new Engines, in accordance with the provisions of its New Engine Warranty as heretofore set forth, except that no Labor Allowance will be granted for disassembly and reassembly of any new Engine component due to inoperative or malfunctioning Condition Monitoring Equipment.

2. GE warrants CF6 condition monitoring equipment, purchased as Spare Parts, in accordance with the provisions of its New Parts Warranty as heretofore set forth.

I. Special Tools and Test Equipment Warranty

1. GE warrants to Airline that the special tools and test equipment sold hereunder will, at the time of delivery, be free from defects in material, workmanship and title.

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2. If it appears within * from the date of shipment by GE that any special tool or test equipment delivered hereunder does not meet the warranties specified in Paragraph 1 above and the Airline so notifies GE in writing prior to the expiration of * after the end of that * period, GE shall, at its option upon Airline's satisfactory demonstration that such special tool or test equipment was defective at the time of delivery, correct any such defects either by repairing the defective item or by making available a repair or replacement item, Ex Works, GE's plant, or by refunding the purchase price of such item. At the request of GE, Airline, at its expense, shall ship the defective item to a location on the Airline's system designated by GE.

3. GE reserves the right to make changes in design and add improvements without incurring any obligation to make, at GEs expense, the same on other special tools or test equipment previously sold by GE.

4. This Special Tools and Test Equipment Warranty is applicable only if the special tools and test equipment are operated, handled, used, maintained, and repaired in accordance with GE's then-current recommendations as stated in its manuals, bulletins, or other written instructions.

J. Special Guarantees

In addition to the Warranties specified above, GE offers the following special guarantees to Airline to provide assurance of effective performance, high reliability and economical operation of the Engine. These guarantees are subject to the conditions set forth in Attachment A hereto. These guarantees apply to Airline's CF6-80E1A3 powered A330 aircraft.

1. Extended New Engine Warranty

GE guarantees that Airline's new Engines and Engine Modules will operate without Failure requiring removal for the first * Engine Right Hours ("EFH").

Should an Engine or Engine Module be removed due to a Failure covered by this guarantee, GE will provide * Parts Credit Allowance and Labor Allowance necessary to repair the Engine or Engine Module during the first * EFH. In no event will GE pay Airline for the same occurrence or event under this guarantee and the New Engine Warranty.

2. Performance Retention Guarantee

GE guarantees that the cumulative fleet average Engine cruise fuel consumption of new Engines will not, due to Engine deterioration, increase by more than * for the CF6-80E1A3 Engine during the first
* of Airline's Engine following delivery of the first Aircraft. Attachment D hereto describes the method to be used to determine the baseline and subsequent performance levels of fuel consumption.

If the actual cumulative fleet average Engine cruise fuel consumption increase due to Engine deterioration exceeds the guarantee at any time during the guarantee period, GE will reimburse Airline for the excess fuel consumed for that portion of the guarantee period during which the guarantee is exceeded, computed at Airline's average monthly cost of fuel. Reimbursement will be in the form of a credit against purchases from GE.

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3. Exhaust Gas Temperature ("EGT") Guarantee

GE guarantees that each new Engine will operate for the first * EFH without removal from the Aircraft due to exceeding the certified maximum takeoff EGT limit.

If during the applicable guarantee period an Engine is removed from an Aircraft solely for exceeding such takeoff EGT limit, GE will issue a credit in the amount of * for each qualifying removal.

For an Engine which has experienced a Module change prior to such a removal, this guarantee will apply to such Engine until the highest-time Module in the Engine reaches the total applicable number of EFH under the guarantee. Coverage under this guarantee does not include EGT deterioration due to mechanical failure, as distinct from normal wear

4. Aerodynamic Stall Guarantee

GE guarantees that Airline will have no Aerodynamic Stalls (Engine Surges) due to the Engine from any start of take-off roll to end of landing run) during the first * of Airline's Engine following the delivery of the first Aircraft. If during the guarantee period the guarantee is not met, GE will provide Airline a credit against purchases from GE in the amount of * for each such event.

Aerodynamic Stalls (Engine Surges) due to Engine maintenance or operational error or which are the result of (i) a mechanical Failure of a Part or (ii) FOD, are excluded from this guarantee.

5. * Minutes Extended Twin Operations (ETOPS) Guarantee

GE guarantees that, during the * years following delivery of Airline's first CF6-80E1A3 powered aircraft, the CF6-S0E1A3 engine hardware sold by GE to the aircraft manufacturer for installation on Airline's aircraft, as well as the spare CF6-80E1A3 Engines and Parts purchased by Airline from GE, will not be the sole cause of preventing Airline's aircraft from obtaining, or maintaining, approval for * minutes ETOPS operation within the prescribed time and reliability limitations set by the FAA for operation of such aircraft.

If at any time during the term of the guarantee the CF6-80E1A3 powered aircraft loses ETOPS certification, and such loss is the direct and sole caused of the CF6-80E1A3 Engine, GE will issue a credit to Airline for the incremental fuel costs incurred by Airline as a result of having to operate the CF6-80E1A3 powered aircraft on non-ETOPS flight paths.

This guarantee does not extend to ETOPS related requirements imposed upon Airline while operating the aircraft which specifically relate to the operation and maintenance performance of Airline.

In no event shall GE's compensation to Airline for fuel resulting from a failure to meet this guarantee exceed * per Aircraft.

6. Shop Visit Rate Guarantee

GE guarantees that Airline's * year cumulative Engine shop visit rate will not exceed *. If at the end of the * year period the guaranteed rate is exceeded, GE will provide Airline a credit against purchases from GE in the amount of * for each Qualifying Shop Visit in excess of the guaranteed rate.

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Criteria for a "Qualifying Shop Visit" is listed in an Attachment C hereto. Shop visits for which Airline is otherwise reimbursed shall be excluded from this guarantee. Also, Airline's compliance with GE's workscope recommendations shall be a condition of this guarantee.

7. In-Flight Shut Down ("IFSD") Rate Guarantee

GE guarantees that Airline's * cumulative Engine caused IFSD rate will not exceed * per * If at the end of the guarantee period the guaranteed rate is exceeded, GE will provide Airline a credit against purchases from GE in the amount of * for each IFSD in excess of the guaranteed rate.

For purposes of this guarantee, an "IFSD" is defined as (i) when an Engine Part Fails or malfunctions causing an Engine-imposed shutdown during flight or (ii) subject to investigation to verify compliance with the Flight Crew Operating Manual, when the flight crew elects to shut off fuel to the Engine during flight solely due to an Engine Part Failure or malfunction.

8. Delay and Cancellations("D&C") Rate Guarantee

GE guarantees that Airline's * cumulative Engine-caused Delay (in excess of 15 minutes) and Cancellation rate will not exceed * per * scheduled departures. If at the end of the guarantee period the guaranteed rate is exceeded, GE will provide Airline a credit against purchases from GE in the amount of * for each Engine-caused Cancellation in excess of the guaranteed rate.

"Delays and Cancellations" are defined in Attachment B hereto.

9. Remote Site Removal Rate Guarantee

GE guarantees that Airline's Engine Remote Site Removal rate during the first * of its Engine revenue service will not exceed * per * EFH. If at the end of the guarantee period the guaranteed rate is exceeded, GE will provide Airline a credit against purchases from GE in the amount of * for each removal in excess of the guaranteed rate.

For purposes of this guarantee, "Remote Site Removal" is defined as an Engine-caused Failure requiring Engine removal from the aircraft at any location except Airline's main base or where a spare Engine is available.

10. Maintenenance Cost Guarantee

Provided (i) Airline utilizes a remote diagnostics service satisfactory to GE for fleet trending and troubleshooting; (ii) the Engines are maintained in accordance with GE's Workscope Planning Guide and (iii) the overhaul of the Engines is performed at a repair facility satisfactory to GE, GE guarantees that Airline's Cumulative Net Engine Maintenance Cost for the CF6-80E1A3 Engines during the Initial * of such operation will not exceed * per * for material plus the equivalent of maintenance man-hours of labor per EFH at the warranty labor rate agreed to between GE and Airline to perform shop maintenance on such Engines during such period.

For purposes of this guarantee, Airline's "Cumulative Net Engine Maintenance Cost" for such Engines shall be defined as (i) the actual price of Engine Parts purchased by Airline through GE Spare Parts Catalog sales to replace CF6-80E1A3 Engine Parts scrapped during the guarantee period, less (i) any material credits issued under warranty, another guarantee, or other program considerations, (ii)

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GE PROPRIETARY INFORMATION

Ultimate Life Parts, (iii) material handling charges or surcharges by repair agencies, outside services (except for high technology repairs as stated below), transportation charges, taxes, duties, insurance, as well as (iv) parts (no) sold by GE required to repair QEC, Reversers, exhaust nozzles and Nacelies plus (II) the actual total cost to Airline for high-tech repairs to Engine Parts performed outside Airline's shop plus (III) the above described cost of shop labor. However, the cost of such outside high-tech repairs will only be included under the guarantee up to the amount otherwise charged by GE for such repair. Also, Engine line maintenance labor is not covered by this guarantee.

The above described * per' * guaranteed rate for material cost will be adjusted annually for escalation in accordance with the appropriate provisions of Attachment E hereto, using a Base Composite Price Index (B1) of GE (January 2000).

If at the end of the guarantee period the guarantee level is exceeded, GE will provide Airline, in the form of a credit against subsequent purchases from GE of goods and /or services, an amount equal to * of a cumulative combination of excess Cumulative Net Engine Maintenance Cost, Engine Parts scrapped due to service bulletin compliance will be included in the material portion of the guarantee at a mutually agreeable rate provided that the service bulletins are agreed to by Airline and GE. In cases where a Parts Repair procedure is required and is not available from GE within * months from receipt of Airline's request for such repair procedure, the Part awaiting repair may, unless GE and Airline agree otherwise, be Scrapped and the replacement purchase from GE will be covered by this guarantee.

K. THE WARRANTIES AND SPECIAL GUARANTEES SET FORTH IN THIS PRODUCT SUPPORT PLAN OR ANY LETTER AGREEMENT HERETO ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES AND GUARANTEES, WHETHER WRITTEN, STATUTORY, ORAL, OR IMPLIED (INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY IMPLIED WARRANTY ARISING FROM COURSE OF DEALING, COURSE OF PERFORMANCE, OR USAGE OF TRADE). THESE WARRANTIES AND REMEDIES ARE SUBJECT TO THE GENERAL CONDITIONS SET FORTH IN SECTION X OF THIS EXHIBIT B.

SECTION III - SPARE PARTS PROVISIONING

A. Provisioning Data

1. In connection with Airline's initial provisioning of Spare Parts, GE or GE-LLC shall furnish Airline with data in accordance with ATA Specification 200 using Revision No.20, or a revision mutually agreed to in writing by GE and Airline.

2. It is the intention of the parties hereto to comply with the requirements of the ATA Specification 200 and any future changes thereto, except that neither party shall deny the other the right to negotiate reasonable changes in the procedures or requirements of the Specification which procedures or requirements, if complied with exactly, would result in an undue operating burden or unnecessary economic penalty.

The data to be provided by GE or GE-LLC to Airline shall encompass all Parts listed in GE-LLC's Illustrated Parts Catalogs. GE-LLC further agrees to become total supplier of Initial Provisioning Data for all vendor Spare Parts in accordance with Paragraph 1. above.

3. Beginning on a dale no earlier than eighteen (18) months and no later than twelve (12) months prior to delivery of Airline's first aircraft, or as mutually agreed, GE-LLC shall provide to Airline a complete set of Initial Provisioning Data and shall progressively revise this data until ninety (90) days after delivery of the first aircraft or as mutually agreed. A status report will be issued periodically. Provisioning data will

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be reinstituted for subsequent spare Engines reflecting the latest modification status. GE-LLC will make available a list of major suppliers as requested by Airline. GE-LLC will provide, or cause to be provided on behalf of its vendors, the same service detailed in this clause.

B. Pre-Provisioning Conference

A pre-provisioning conference, attended by the GE-LLC and Airline personnel directly responsible for initial provisioning of Spare Parts hereunder, will be held at a mutually agreed time and place prior to the placing by Airline of initial provisioning orders. The purpose of this conference is to discuss systems, procedures and documents available to the Airline for the initial provisioning cycle of the Products.

C. Changes

GE-LLC shall have the right to make corrections and changes in the Initial Provisioning Data in accordance with Chapter 2 (Initial Provisioning) of ATA 200 Specification entitled "Integrated Data Processing Supply" using Revision No. 20, or a revision mutually agreed to in writing by GE-LLC and Airline. So long as Airline operates one (1) aircraft powered by CF6 Engines and there are five (5) such aircraft powered by CF6 Engines in commercial airline service, GE-LLC will progressively revise Airline's Procurement Data tape in accordance with Chapter 3 (Order Administration) of ATA Specification 200 entitled "Integrated Data Processing Supply" using Revision No. 20, or a revision mutually agreed to in writing by GE-LLC and Airline.

D. Return Of Parts

Airline shall have the right to return to GE-LLC, at GE-LLC's expense, any new or unused Part which has been shipped in excess of the quantity ordered or which is not the part number ordered or which is in a discrepant condition except for damage in transit.

E. Parts Buy-Back

Within the first * after delivery of the first aircraft to Airline, GE-LLC will agree (i) to repurchase at the invoiced price, any initially provisioned Spare Parts purchased from GE-LLC which GE-LLC recommended that Airline purchase, in the event such Parts are found to be surplus to Airline's needs; or (ii) to exchange with Airline the equivalent value thereof in other Spare Parts. Such Parts must be new and unused, in original GE packaging, and shall meet GE Inspection requirements. Parts which become surplus to Airline's needs by reason of Airline's decision to upgrade or dispose of Products are excluded from this provision. Shipping costs for Parts returned will be paid by Airline.

F. Parts of Modified Design

1. GE-LLC shall have the right to make modifications to design or changes in the Spare Parts sold to Airline hereunder.

2. GE-LLC will from time to time inform Airline in accordance with the means set forth in ATA Specification 2000, when such Spare Parts of modified design become available for shipment hereunder.

3. Spare Parts of the modified design will be supplied unless Airline advises GE-LLC in writing of its contrary desire within ninety (90) days of the issuance of the Service Bulletin specifying the change to the modified Parts. In such event, Airline may negotiate for the continued supply of Spare Parts of the premodified design at a rate of delivery and price to be agreed upon.

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GE PROPRIETARY INFORMATION

G. Spare Parts Availability

1. GE-LLC will ship reasonable quantities (three months normal usage) of Spare Parts which are included in GE-LLC's Spare Parts Catalog within * day lead time of IV. Spare Parts for I. above which are manufactured by GE or supplied by GE-LLC for commercial use as components of a new Engine or purchased from GE-LLC for commercial use as replacement (spare) parts. Following receipt of an acceptable purchase order from Airline:

Lead time for Spare Parts and other material which are not included in GE-LLC's Spare Parts Catalog will be shipped as quoted by GE-LLC.

2. GE-LLC will maintain a stock of Spare Parts to cover Airline's emergency needs. For purposes of this Paragraph, emergency is understood by GE-LLC and Airline to mean the occurrence of any one of the following conditions.

AOG        -   Aircraft on Ground
Critical   -   Imminent AOG or Work Stoppage
Expedite   -   Less than Normal Lead Time

Airline will order Spare Parts according to lead time as provided in Paragraph 1. above, but should Airline's Spare Parts requirements arise as a result of an emergency. Airline can draw such Spare Parts from GE-LLC's stock. A 24-hour telephone service is available to Airline for this purpose. If an emergency does exist, GE-LLC will use its best efforts to ship required Spare Part(s) within the time period set forth below following receipt of an acceptable purchase order from Airline.

AOG        -   *
Critical   -   *
Expedite   -   *

SECTION IV - TECHNICAL DATA

A. GE shall make available to Airline the technical data, including revisions thereof, at no charge, in the quantities as specified in Exhibit E and at a time and to a location as mutually agreed.

Such technical data shall be prepared by GE in accordance with the applicable provisions of ATA Specification * (including necessary deviations) as the same may be revised from time to time.

If Airline requires GE to furnish the technical data in a form different from that normally furnished by GE pursuant to ATA Specification *, or in quantities greater than those specified in Exhibit E, GE will, upon written request from Airline, furnish Airline with a written quotation for furnishing such technical data.

Revisions to the above technical data shall be furnished by GE to Airline at no charge for quantities equivalent to the quantities specified in Exhibit E for as long as Airline operates * CF6-80E1 powered aircraft and there is a total of * CF6-80E1 powered aircraft in commercial airline service. Such quantities of revisions may be mutually modified in order to reflect any change in Airline's CF6-80E1 operation.

GE shall incorporate in the Engine Illustrated Parts Catalog and Engine Shop Manual all appropriate GE service bulletins for as long as Airline receives revisions to technical data. Premodified and postmodified configurations shall be included by GE unless Airline informs GE that a configuration is no longer required.

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GE PROPREITARY INFORMATION

GE shall incorporate in the Engine Illustrated Parts Catalog and the Engine Manual all appropriate GE Service Bulletins for as long as Airline receives revisions to technical information or data. Premodified and postmodified configurations shall be included by GE unless Airline informs GE that a configuration is no longer required.

B. GE will require each vendor to furnish technical data consisting of copies of a component maintenance manual and service bulletins. Such vendor publications shall be furnished by GE to Airline in accordance with and subject to the same provisions as those set forth in Paragraph A. above.

C. GE will also require its ground support equipment vendors, where appropriate, to furnish to Airline, at no charge, technical data determined by GE to be necessary for Airline to maintain, overhaul and calibrate special tools and test equipment. Such vendor-furnished technical data shall be furnished in accordance with and subject to the same provisions as those set forth in Paragraph A. above, except that the technical data shall be prepared in accordance with the applicable provisions of ATA 101 Specification, as the same may be revised from time to time.

D. The following technical data, not covered by ATA Specifications, shall be furnished by GE to Airline in the quantities and at a time and to a location as mutually agreed:

- Installation Manual (if required)

- General Facility Study

- Parts serialization records

E. Where applicable, technical data as described in the above Paragraphs A., B. and D., furnished by GE or by GE vendors to Airline hereunder, shall be printed in the simplified English language.

F. All technical data furnished herein by GE to Airline shall be subject to the provisions of Article X, "Information and Data", of this Agreement.

SECTION V - TECHNICAL TRAINING

A. General

This general provision describes the current maintenance training to be provided by GE at GE's training facilities in Springdale, Ohio. GE will provide, at no charge to Airline, except as otherwise provided herein, a number of student days" for maintenance training as defined hereunder:

- 100 Student Days" for the first CF6-80E1 powered aircraft delivered to Airline

- 20 additional Student Days" for any such additional aircraft

"Student Days = number of students X number of class days

Such days will be applied against courses selected from the list set forth in paragraph C (Standard Maintenance Training) listed on the next page. Any additional training beyond this threshold shall be at Airline's cost. It is necessary for Airline to use such maintenance training days prior to delivery of the first aircraft, unless the parties have otherwise agreed in writing.

All instruction, examinations and materials shall be prepared and presented in the English language and in the units of measure used by GE. Airline will provide interpreters, if required, for Airline's personnel.

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GE PROPRIETARY INFORMATION

D. The following technical data, not covered by ATA Specifications, shall be furnished by GE to Airline in the quantities and at a time and to a location as mutually agreed:

- Installation Manual (if required)

- General Facility Study

- Parts serialization records

E. Where applicable, technical data as described in the above Paragraphs A, B, and D., furnished by GE or by GE vendors to Airline hereunder, shall be printed in the simplified English language.

F. All technical data furnished herein by GE to Airline shall be subject to the provisions of Article X, "Information and Data", of this Agreement.

SECTION V - TECHNICAL TRAINING

A. General

- 100 Student Days* for the first CF6-80E1 powered aircraft delivered to Airline

- 20 additional Student Days* for any such additional aircraft '

* Student Days = number of students X number of class days

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GE PROPRIETARY INFORMATION

Airline will be responsible for the living and medical expenses of Airline's personnel during maintenance training. For maintenance training provided at Springdale, Ohio, GE will assist Airline's personnel in making arrangements for hotels and transportation between selected lodging and the training facility.

B. Maintenance Training Conference

No later than twelve months prior to delivery of Airline's first CF6-80E1-powered aircraft, GE and Airline will conduct a maintenance training conference call in order to schedule and discuss the maintenance training. Alternatively, Airline is welcome to visit GE's training facilities and discuss such training. During such maintenance conference call or visit, Airline will indicate the courses selected and arrange a mutually acceptable schedule.

C. Standard Maintenance Training

Standard maintenance training will consist of computer-based training in classroom presentations supported by training materials and, when applicable, hands-on practice. Training material will be based on ATA Specification 104 guidelines.

ATA104-Level I - General Familiarization

ATA104-Level II  -   Ramp and Transit
ATA104-Level III -   Line and Base Maintenance
ATA104-level IV  -   Specialized Training:
                        Borescope Inspection
                        Fan Trim Balance
                        Major Module Replacement
                        Module Replacement

D. Optional Maintenance Training

Non-standard maintenance training courses are described in the current GE Training Course Syllabus and GE will provide a quote upon request.

E. Training at a Facility Other Than GE's Facilities

If requested prior to the conclusion of the maintenance training planning conference call or visit, GE will conduct the classroom training described in paragraph C (Standard Maintenance Training) at a mutually acceptable alternate training site, subject to the following conditions:

1. Airline will be responsible for providing acceptable classroom space and training equipment required to present the GE courseware.

2. Airline will pay GE's travel and living charges for each GE instructor for each day, or fraction thereof, that such instructor is away from Springdale, Ohio, including travel time.

3. Airline will reimburse GE for round-trip transportation for GE's instructors and training materials between Springdale, Ohio, and such alternate training site.

4. Those portions of the training that require use of GE's training devices shall be conducted at GE designated facilities.

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GE PROPRIETARY INFORMATION

F. Supplier Training

The standard maintenance training includes sufficient information on the location, operation and servicing of Engine equipment, accessories and parts provided by suppliers to support line maintenance functions.

If Airline requires additional maintenance training with respect to any supplier-provided equipment, accessories or parts, Airline will schedule such training directly with the supplier.

G. Student Training Material

1. Manuals. When required, GE will provide at the beginning of each maintenance training course, one set of training manuals, or equivalent, for each student attending such course.

2. Line Maintenance.

GE will provide one set of the following training material, per course, as applicable:

2.1 Video Tapes - GE will loan to Airline a set of video tapes on 3/4 inch U-matic or 1/2 inch VHS cassettes in NTSC, PAL or SECAM standard, as selected by Airline.

2.2 Computer-Based Training (CBT) - GE will provide CBT courseware and instructions for courseware installation and operation.

3. Courses Other Than Line Maintenance

GE will provide one set of the following training material, per course, as applicable.

3.1 Video Tapes - GE will loan to Airline a set of video tapes on 3/4 inch U-matic or 1/2 inch VHS cassettes in NTSC, PAL or SECAM standard, as selected by Airline.

3.2 Computer-Based Training (CBT) - GE will provide CBT courseware and instructions for courseware installation and operation.

SECTION VI - CUSTOMER FACTORY AND FIELD SUPPORT

GE shall make available to Airline on an as-required basis, at no charge, a field service representative as GE's representative at Airline's main base. These specialists will assist Airline in areas of unscheduled maintenance action and Product scrap approval and will provide rapid communication between Airline's maintenance base and GE's factory personnel.

SECTION VII - PRODUCT SUPPORT ENGINEERING

Factory based engineers who are specialized in powerplant engineering problems will make visits to Airline, at no charge to Airline, when problems are encountered. These engineers will coordinate with the CF6 Engine design engineers and Airline's powerplant engineering group. Where specific design problems require a better understanding of Airline's experience, design engineers will work directly with Airline's powerplant engineering personnel to solve the problem.

B-14
GE PROPRIETARY INFORMATION

SECTION VIII - OPERATIONS ENGINEERING

Flight operations engineering personnel will be available, at no charge to Airline, for consultation with respect to recommended operating practices to enhance Engine reliability, safety, and operations costs. Consultations may be in the form of teleconference messages, or on-site seminars and surveys.

SECTION IX - GROUND SUPPORT EQUIPMENT

Upon Airline's specific request, GE will provide to Airline, at no charge, assembly drawings related to Engine maintenance and repair tooling GE has designed for the Engine, including complete specifications for the special test equipment which is developed, Engine maintenance tooling, lifting devices, transportation devices, and accessory or component stands will be offered for sale to Airline if Airline does not elect to purchase this equipment from GE licensed vendors.

SECTION X - GENERAL CONDITIONS - CF6-80E1 PRODUCT SUPPORT PLAN

A. Airline will maintain adequate operational and maintenance records and make these available for GE inspection.

B. The warranty and guarantee provisions of this CF6-80E1 Product Support Plan will not apply to any Product if it has been reasonably determined by GE that the Engine, Module or any Parts thereof:

- Has not been properly installed or maintained; or

- Has been operated contrary to applicable GE recommendations as contained in its Manuals, Bulletins, or other written instructions; or

- Has been repaired or altered outside of GE facilities in such a way as to impair its safety of operation or efficiency; or

- Has been subjected to misuse, neglect or accident; or

- Has been subjected to Foreign Object Damage; or

- Has been subjected to any other defect or cause not within the control of GE; or

- Has been subjected to the control or use of another engine manufacturer; or

- Has not been sold originally by GE to Airline for commercial use.

C. The express provisions of this CF6-80E1 Product Support Plan set forth the maximum liability of GE with respect to claims of any kind, including, without limitation, negligence arising out of the manufacture, sale, possession, use or handling of the Products or Parts thereof or therefor, and in no case shall GE's liability to Airline exceed the purchase price of the Product giving rise to Airline's claim. In no event shall GE be liable for incidental or consequential damages. For the purpose of this Section X, the term "GE" means General Electric Company, its subsidiaries, assigns, subcontractors, suppliers, Product co-producers, and the respective directors, officers, employees, and agents of each.

D. Except as provided in the Vendor Back-up Warranty provisions in Paragraph F. of Section II hereof, no Parts Credit Allowance will be granted and no claim for loss or liability will be recognized by GE for Parts of the Engine, whether original, repair, replacement, or otherwise, unless sold originally by GE to Airline for commercial use.

E. Airline shall apprise GE of any Failure subject to the conditions of this CF6 Product Support Plan within sixty (60) days after the discovery of such Failure. Any Part for which a Parts Credit Allowance is requested by Airline shall be returned to GE upon specific request by GE. Upon return to GE, such Part shall become the property of GE unless GE directs otherwise. Transportation expenses shall be borne by GE.

B-15
GE PROPRIETARY INFORMATION

F. The warranty applicable to a replacement Part provided under the terms of the New Engine Warranty or New Parts Warranty shall be the same as the warranty on the original Part. The unexpired portion of the applicable warranty will apply to Parts repaired under the terms of such warranty.

G. Airline will cooperate with GE in the development of Engine operating practices, repair procedures, and the like with the objective of improving Engine operating costs.

H. Except as provided in the Warranty Pass-On provisions in Paragraph E. of
Section II hereof, this Product Support Plan applies only to the original purchaser of the CF6-80E1 Engine except that installed Engines supplied to Airline through the aircraft manufacturer or aircraft lessor shall be considered as original Airline purchases covered by this Product Support Plan.

I. Airline will provide GE a report identifying serialized rotating parts which have been scrapped by Airline. Format and frequency of reporting will be mutually agreed to by Airline and GE.

B-16
GE PROPRIETARY INFORMATION

TABLE 1
CF6-80E1 WARRANTY PARTS LIST

B-17
GE PROPRIETARY INFORMATION

TABLE 1
CF6-80E1 WARRANTY PARTS LIST
CONTINUED

B-18
GE PROPRIETARY INFORMATION

FADEC ENGINE

TABLE 1
CF6-80E1 WARRANTY PARTS LIST
CONTINUED

B-19
GE PROPRIETARY INFORMATION

ATTACHMENT A
BASIS AND CONDITIONS FOR SPECIAL GUARANTEES

A. General Conditions

The Special Guarantees offered herein have been developed specifically for Airline's five (5) leased Aircraft equipped with CF6-80E1A3 engines and two(2) CF6-80E1A3 spare engines (hereinafter referred to as the "Engine(s)") as identified in Letter Agreement No. 1 to this Agreement. They are offered to Airline contingent upon:

1. Airline accepting delivery of the five (5) leased CF6-80E1A3 powered A330 aircraft in the time period described in Letter Agreement No. 1 (hereinafter referred to as the "Aircraft");

2. Airline procuring (through lease from GE Capital Aviation Services or purchase from GE) two (2) CF6-60E1A3 spare engines and the GE recommended number of Engine Modules;

3. Airline's Engines being identified and maintained separately from other operators' engines at the repair agency;

4. Agreement between Airline and GE regarding administration of the guarantees;

5. Airline operating Aircraft (i) an average aircraft flight leg of 6.0 hours or greater, (ii) an average engine takeoff thrust derate of 15 percent or greater and (iii) an average annual Aircraft utilization of 4,700 hours per year maximum. A change in Aircraft or Engine quantity, Aircraft or Engine model, Aircraft delivery schedule from that described in the proposal, or flight operations resulting in more severe operating conditions than described above will require adjustment of the guaranteed values to reflect such different conditions, using GE's operational severity criteria;

6. Airline and GE agreement upon the Engine restoration workscope necessary during each shop visit;

7. Available on-wing maintenance and performance restoration procedures being used to avoid unnecessary shop visits; and

8. Service bulletins agreed to between Airline and GE being incorporated in a timely manner.

B. Exclusions

The guarantees shall not apply (i) to repairs that are due to negligence, accidents, improper operation and/or improper maintenance or (ii) if the Engines are employed in power-back Aircraft operation.

Except for the Shop Visit Rate Guarantee, events and costs resulting from FOD are excluded from the guarantees.

C. Term and Administration

1. The guarantees commence with delivery of Airline's first Aircraft and end 10 years thereafter. The guarantees are not assignable without the written consent of GE.

2. GE will, with Airline's assistance, conduct an accounting at least annually to determine the status of each guarantee. If compensation becomes available to Airline under more than one specific guarantee, warranty or other engine program consideration, Airline will not receive duplicate compensation but will

B-20
GE PROPRIETARY INFORMATION

receive the compensation most beneficial to Airline under a single guarantee, warranty or other program consideration. Unless otherwise stated, the guarantee compensation will be in the form of credits to be used by Airline against the purchase from GE of Spare Engines, Spare Parts, and/or Engine services.

3. The guarantees identified in Paragraphs J.6-J.10 of Section II of Exhibit B will be settled on an annual basis. If an annual settlement determines that a particular guarantee rate has been exceeded, Airline shall be entitled to the applicable credit identified in Paragraphs J.6-J.10 of Section II of Exhibit B. However if a subsequent annual settlement determines that a guarantee under which the Airline has previously been granted a credit does not exceeded the guarantee rate, Airline shall reimburse GE the full amount of the credit with 30 days of such annual settlement.

D. Miscellaneous

The General Conditions described in Exhibit B (Product Support Plan) of the General Terms Agreement between GE and Airline apply to the guarantees.

B-21
GE PROPRIETARY INFORMATION

ATTACHMENT B
DELAY AND CANCELLATION DEFINITIONS FOR GUARANTEE

Delay

Technical delays occur when the malfunctioning of an item, the checking of same, or necessary corrective action causes the final departure to be delayed more than a specified time (fifteen minutes) after the programmed departure time in any of the following instances:

1. An originating flight departs later than the scheduled departure time.

2. A through service or turnaround flight remains on the ground longer than the allowable ground time.

3. The aircraft is released late from maintenance.

NOTE:

A cancellation supersedes a delay (i.e., a flight which is canceled after having been delayed is considered to be a cancellation only - not a delay and a cancellation).

Cancellation

Elimination of a scheduled trip because of a known or reasonably suspected malfunction and/or defect.

NOTE:

Cancellation of any or all of the flight legs of multi-leg trip constitutes only one cancellation.

B-22
GE PROPRIETARY INFORMATION

ATTACHMENT C
SHOP VISIT RATE GUARANTEE - QUALIFYING SHOP VISITS

Engine shop visits will qualify under the Shop Visit Rate Guarantee if the shop visit meets any of the following criteria:

1. The shop visit was necessary to correct an Engine-caused Failure. Shop visits for work that could have been performed on-wing, but was performed in the shop for convenience, do not qualify.

2. The shop visit was necessary to comply with an Airworthiness Directive issued by FAA or recommendations contained in GE's mandatory compliance service bulletins requiring compliance within a specified number of Flight Hours or Cycles.

3. The shop visit was necessary to comply with a GE written recommendation to perform scheduled maintenance.

4. Shop visits to correct Failures caused by normal Foreign Object Damage ("FOD") will qualify under the guarantee provided the FOD was the result of birds weighing less than 2.5 pounds or hail and correction of the Failure could not be performed on-wing. Qualifying shop visits due to FOD are limited to a maximum of 10% of the guaranteed shop visits.

B-23
GE PROPRIETARY INFORMATION

ATTACHMENT D
PERFORMANCE RETENTION GUARANTEE CALCULATION

1. Fleet average base point for the Engine fuel consumption guarantee shall be an average of the first 20 revenue flight cruise points of all Engines covered by the guarantee. For a valid base, the standard deviation of the calculated fuel flow deltas must not exceed 1.0%.

2. The period covered by the guarantee starts from the first revenue flight of the first Aircraft.

3. The minimum data required after the base point is established is twenty revenue flight cruise points every 90 days for each installed Engine. GE also requests copies of any form of performance trending chosen by Airline to be submitted on a monthly basis.

4. Cruise data reported quarterly must include the following:

Aircraft Number; Engine Serial Number (ESN); Date; Flight Number; Engine Position; Altitude; Mach Number; Total Air Temperature (TAT); and the following at Cruise Point: N(1) (Fan Speed); EGT; N2 (Core Speed); Fuel Flow; and Bleed Configuration.

5. Increase of fleet average cruise fuel consumption or trends suggesting that the fuel consumption guarantee level is approaching may lead to the following:

a. GE Flight Audits.

b. Test cell confirmation runs on specific Engines. The altitude guarantee will be translated to sea level conditions plus nominal installation loss for comparison purposes.

6. If, as a result of incorporation of service bulletins or other Engine modifications, the initially established relationship of Engine fuel flow, thrust and fan speed (N(1)) is altered, the measured, calibrated fuel consumption shall be suitably corrected to give effect to this change.

7. Airline is to maintain records of total fuel purchased and monthly cost thereof (price per gallon) during the period of this guarantee in substantiation of any claim hereunder.

B-24
GE PROPRIETARY INFORMATION

ATTACHMENT E
MAINTENANCE COST GUARANTEE ADJUSTMENT FOR ESCALATION

For purposes of determining the Maintenance Cost Guarantee adjusted for escalation, the following formula will apply:

* where:

On = Adjusted Maintenance Cost Guarantee for any annual period.

Ob = Base Maintenance Cost Guarantee.

CPI = Weighted Average Composite Price Index for annual period for which On is being calculated, i.e.

65% Labor (L)
35% Industrial Commodities (IC)

The Weighted Average Composite Price Index shall be the 12-month arithmetic average of the composite index calculated for each month of the period using the final value for each index as published by the Bureau of Labor Statistics for each such month. The individual indices are the same indices as defined in detail in Attachment J except for the Labor Index (L) which shall be the "Hourly Earnings of Aircraft Engine and Engine Parts Production Workers" SIC 3724 (Base year 1982 = 100).

BI = Base Composite Price Index quoted for the Base Maintenance Cost Guarantee. This base index is calculated using the same percentages of the same indices listed under CPI above, and using the final published values of each index for the quoted base month.

B-25
GE PROPRIETARY INFORMATION

EXHIBIT C
ESCALATION

I. The base price for Products purchased hereunder shall be adjusted pursuant to the provisions of this Exhibit.

II. For the purpose of this adjustment:

C-1
GE PROPRIETARY INFORMATION

EXHIBIT C
ESCALATION
(CONTINUED)

C-2
GE PROPRIETARY INFORMATION

EXHIBIT C
ESCALATION
(CONTINUED)

C-3
GE PROPRIETARY INFORMATION

EXHIBIT D
GE PAYMENT TERMS

A. Airline shall pay GE with respect to each purchase order hereunder, the following amounts in United States Dollars and in immediately available funds. Payment will be effective upon receipt hereof.

1. For all GE Products other than special tools and test equipment:

2. For special tools and test equipment, payment of the selling price shall be made *

B. All invoicing and payments (including payment details) hereunder shall be transmitted electronically to GE's bank account as notified by GE on its invoices.

C. If delivery hereunder is delayed by Airline, payment shall be made based on the delivery schedule set forth in the purchase order as accepted by GE.

D. Other terms of payment may be required from time to time based upon such matters as the value of the order, delivery requirements, availability of foreign exchange, and the existing financial situation. In such event, GE will establish payment terms to meet these requirements.

E. If Airline fails to make any of the foregoing payments when due, Airline will also pay to GE, without prejudice to any other rights available to GE under this Agreement, interest on any late payment, calculated from the payment due date to the date of actual remittance. Interest will be computed * over the prime floating interest rate per annum as announced from time to time by Chase Manhattan Bank, N.A., New York, New York, USA (or its successor) for twelve month U.S. Dollar deposits, but in no event will the rate of interest be greater than the highest interest rate then permitted under applicable law.

D-1
GE PROPRIETARY INFORMATION

EXHIBIT D-1
GE-LLC PAYMENT TERMS

A. Airline shall pay GE-LLC fee selling price of each GE-LLC Product at time of delivery thereof.

B. All invoicing and payments (including payment details) hereunder shall be transmitted electronically to GE-LLC's bank account as notified by GE-LLC on its invoices.

C. If delivery hereunder delayed by Airline, payment shall be made based on the delivery schedule set forth in the purchase order as accepted by GE-LLC.

D. Other terms of payment may be required from time to time based upon such matters as the value of the order, delivery requirements, availability of foreign exchange, and the existing financial situation. In such event, GE-LLC will establish payment terms to meet these requirements.

E. If Airline fails to make any of the payments when due, Airline will also pay to GE-LLC, without prejudice to any other rights available to GE-LLC under this Agreement, interest on any late payment, calculated from the payment due date to the date of actual remittance. Interest will be computed * over the prime floating interest rate per annum as announced from time to time by Chase Manhattan Bank, N A., New York, New York, U.S.A. (or its successor) for twelve month U.S. Dollar deposits, but in no event will the rate of interest be greater than the highest interest rate then permitted under applicable law.

D-2

GE PROPRIETARY INFORMATION

EXHIBIT E
TECHNICAL DATA

ITEM                 NAME                              FORMAT
----                 ----                              ------
 1     Engine Illustrated Parts Catalog     Printed 2 sides
                                                   OR
                                            One Side Copy
                                            Microfilm (16mm)
                                                   OR
                                            Microfilm (Silver Halide)
2      Engine Shop Manual                   Printed 2 sides             *
                                                   OR
                                            One Side Copy
                                            Microfilm (16 mm)
                                                   OR
                                            Microfilm (Silver Halide)
3      Component Maintenance Manuals        Printed 2 sides
                                            Microfilm (16 mm)
4      Illustrated Tool and                 Printed 2 sides
       Equipment Manual                     Microfilm (16 mm)
5      Ground Support Equipment             Printed 2 sides
6      Non-Destructive Testing Manuals      Printed 2 sides
                                            Microfilm (16 mm)
7      Specific Operating Instruction       Printed 2 sides
                                            Microfilm (16 mm)
8      Service Bulletins                    Printed 2 sides
                                            Microfilm (16 mm) Initial Dot.
                                            & yearly revision only
9      Service Bulletins Index              Printed 2 sides
                                            Microfilm (16 mm) Initial Dot.
                                            & yearly revision only
10     Standard Practices Manual            Printed 2 sides
                                            Microfilm (16 mm)
11     Consumable Products Manual           Printed 2 sides
                                            Microfilm (16 mm)
12     Technical Manual Index               Printed 2 sides
13     I.P.C, E.S.M., I.T.E.M., N.D.T.M,    CD-ROM
       S.B., C.P.M.

E-1

GE PROPRIETARY INFORMATION

(G ENGINES LOGO)                                                     GE AIRCRAFT

                                                       One Neumann Way
                                                       Cincinnati, OH 45215-1988

LETTER AGREEMENT NO. 1

TAM Linhas Aereas, S.A.

Gentlemen:

General Electric Company ("GE") and TAM Linhas Aereas, SA, ("Airline") have entered into General Terms Agreement No. GE-00-0059 dated ________, 2001. (the "Agreement"). This Agreement contains applicable terms and conditions governing the sale by GE and the purchase by Airline from GE of CF6 series engines and associated equipment in support of Airline's acquisition of new aircraft.

In consideration of Airline's agreement to take delivery of five (5) new firm CF6-80E1A3 powered A330-200 aircraft ("Aircraft") and two CF6-80E1A3 spare engines ("Spares") leased directly from GE Capital Aviation Services ("GECAS") according to the delivery schedule set forth in Attachment A hereto (hereinafter referred to as "Delivery Schedule"), the parties agree as follows:

I. Prices

Base prices for CF6-80E1A3 spare engines and associated equipment delivered through December 31, 2003 in support of the current firm Aircraft, are set forth in Attachment B hereto.

II. Special Introductory Allowances

To facilitate the introduction of a new A330 fleet powered by CF6-80E1 Engines, GE will provide Airline with the following special introductory allowances. These allowances are subject to the conditions set forth in Attachment C hereto

LA NO 1 PAGE - 1
GE PROPRIETARY INFORMATION

The obligations set forth in the Letter Agreement No. 1 are in addition to the obligations set forth in General Terms Agreement No. GE-00-0059.

Please indicate your agreement with the forgoing by signing the original and one
(1) copy in the space provided below.

                                        Very truly yours,

TAM UNHAS AEREAS, S.A.                  GENERAL ELECTRIC COMPANY


BY: /s/                                 BY: /s/ ROGOR N. SEAGOR
    ---------------------------------       ------------------------------------
Printed Name:                           Printed Name: ROGOR N. SEAGOR
Title: Contracts Director               Title:

Date: May 3, 2001                       Date: May 11, 2001

LA NO 1 PAGE - 2
GE PROPRIETARY INFORMATION

ATTACHMENT A

AIRCRAFT/SPARE DELIVERY SCHEDULE

AIRCRAFT   ENGINE MODEL    MONTH/YEAR    QUANTITY OF AIRCRAFT
--------   ------------   ------------   --------------------
A330-200    CF6-80E1A3     April/2002           2 Firm
A330-200    CF6-80E1A3     Sept./2002           1 Firm
A330-200    CF6-80E1A3      Nov./2002           1 Firm
A330-200    CF6-80E1A3      June/2003           1 Firm

Two (2) CF6-80E1A3 spare engines to be delivered to Airline no later than June 2003.

LA NO 1 PAGE - 3
GE PROPRIETARY INFORMATION

ATTACHMENT B

BASE PRICES FOR
SPARE ENGINES AND ASSOCIATED EQUIPMENT

Prices Applicable to Deliveries through December 31, 2003

A33O-2O0 Aircraft

                                                Base Price
                                           July 1999 US Dollars
                  Item                          CPI=153.75
----------------------------------------   --------------------
1.   Basic Engine inc. FAOEC- CF6-80E1A3             *

A. Base prices are effective for firm orders received by GE within quoted lead time for basic spare Engines (including associated equipment and maximum climb thrust increase) for delivery to TAM Linhas Aereas, SA by GE on or before December 31. 2003. The base prices are

B. The selling price of CF6-80E1A3 basic scare Engines ordered for delivery after the period set forth in Paragraph A above shall be the * as set forth in each purchase order as accepted by GE, which base price shall be subject to adjustment for escalation in accordance with GE's then-current escalation provisions.

LA No 1 Page 4
GE PROPERIETARY INFORMATION

ATTACHMENT C

CONDITIONS FOR SPECIAL ALLOWANCE

1. ALLOWANCE FOR INITIAL AIRCRAFT ONLY

Any allowance described in this Letter Agreement No. 1 applies only to the five (5) new A330-200 aircraft (together or individually the "Aircraft") equipped with new CF6-80E1A3 engines (together or individually the "Engines") leased by the Airline directly from GE Capital Aviation Services ("GECAS") in accordance with the delivery schedule set forth in Attachment A.

2. ALLOWANCE NOT PAID

Allowances described in this Letter Agreement No. 1 will become unearned and will not be paid if for any reason, Airline's lease agreement with GECAS is terminated, canceled or revoked, or if due to a delivery rescheduling request by Airline or due to a default by Airline (collectively "Airline Fault") delivery of the Aircraft will be prevented or delayed for more than * beyond the delivery period described in Attachment A (such period, after giving effect to such additional * being referred to herein as the "Delivery Period").

3. ADJUSTMENT OF ALLOWANCES

The total allowances, of any nature, described in this Letter Agreement No. 1 are contingent upon Airline accepting delivery of all five (5) leased CF6-80E1A3 powered A330 Aircraft identified in this Letter Agreement No. 1 ("Minimum Number of Aircraft") for delivery during the Delivery Period. Pro-rata Adjustment of special allowances may be made by GE prospectively to take into account Aircraft delays and/or cancellations.

4. ASSIGNABILITY OF ALLOWANCE

Any allowance described herein is exclusively for the benefit of Airline and is not assignable and is considered a proprietary arrangement between GE and Airline and as such shall not be disclosed to a third party without prior written agreement of Airline and GE written consent.

5. SET OFF FOR OUTSTANDING BALANCE

GE shall be entitled, at all times, to set off any outstanding obligation and amounts that are due and owing from Airline to GE for GE or GE Aircraft Engines goods or services (whether or not in connection with this Letter Agreement No. 1 and/or Agreement), against any amount payable by GE to Airline in connection with this Letter Agreement No. 1 and/or Agreement.

6. CANCELLATION OF AIRCRAFT

CANCELLATION CHARGE

Airline recognizes that harm or damage will be sustained by GE if Airline places a purchase order for Aircraft equipped with installed Engines and subsequently cancels or fails to accept delivery of the Aircraft and such failure is caused by acts, or failure to act, of Airline. Within * of any such cancellation or failure to accept delivery occurs, Airline shall remit to GE a minimum cancellation charge to * of the Engine price, determined as of the date of scheduled Aircraft delivery to Airline.

The parties acknowledge such minimum cancellation charge to be a reasonable estimate of the minimum harm or damage to GE in such circumstances. If written notice of any such cancellation or failure to accept delivery is given by Airline at least * prior to scheduled delivery, such minimum cancellation charge shall be deemed liquidated damages in full satisfaction of such harm or damage. If any such cancellation or failure

LA No. 1 Page - 5
GE PROPRIETARY INFORMATION

occurs with less than such * prior written notice, GE shall also retain all remedies in law and equity available to GE for damages in excess of such minimum cancellation charge.

7. Delay Charge for Installed or Spare Engines

In the event Airline delays or causes the delay of the scheduled delivery date of an Aircraft, for which GE has received a purchase order from the aircraft manufacturer or GECAS, as appropriate, for a period, or cumulative period, of more that *, such delay shall be considered a cancellation and the applicable provisions hereof regarding the effect of cancellation shall apply.

8. Aircraft Substitution Rights

Airline shall have no aircraft "substitution rights" unless such rights are granted in writing by GE. GE agrees not to unreasonably deny any request by Airline for such rights or to unreasonably condition the grant of any such rights. If attempts to replace any of the Aircraft which are the subject of this Agreement with another aircraft type, and the replacement aircraft is not equipped with Engines of the type that are the subject of this Agreement, and as a result such substitution the net profit to GE from the transaction is materially reduced, such event shall also be considered a cancellation and the cancellation provisions described in subparagraph 6 above shall apply.

LA No 1 Page 6
GE PROPERIETARY INFORMATION

Exhibit 10.8

Confidential

GENERAL SERVICES AGREEMENT

THIS GENERAL SERVICES AGREEMENT (the "Agreement"), dated as of October 3, 2003 (the "Effective Date") documents the business relationship between SABRE TRAVEL INTERNATIONAL LIMITED ("SABRE") and TAM LINHAS AEREAS S.A., A BRAZILIAN CORPORATION ("TAM"), and describes the terms and conditions under which Sabre will provide to TAM certain services, resources and deliverables. The obligations of Sabre set forth in this Agreement will be performed by Sabre itself and through its direct and indirect wholly-owned subsidiaries and/or Affiliates. All references to Sabre and TAM in this Agreement will be deemed to include all of their respective subsidiaries and Affiliates. As used herein with respect to a Party, an "Affiliate" means any individual, corporation, partnership or other entity recognized by law that controls, is controlled by or is under the common control of that Party. TAM and Sabre may be referred to in this Agreement individually as a "Party" and together as the "Parties".

1. TERM. The term of this Agreement will begin on the Effective Date, and, unless earlier terminated as provided in this Agreement, will continue for a period of ten (10) years. In addition, if one or more Work Orders (as defined below) are outstanding when this Agreement expires (whether after the original term or otherwise), this Agreement will remain in full force and effect solely for purposes of allowing the activities covered by such Work Orders to be completed. On the eighth anniversary of this Agreement, the Parties shall enter into good faith negotiations for the extension of the Agreement beyond the initial ten-year term.

Additionally, this Agreement shall be governed by two other dates, the "Implementation Date" and the "Suspension Date", each as defined in the applicable Work Order.

2. SABRE SERVICES.

(a) ENTRY OF SUBLICENSE AGREEMENT. TAM will enter into an agreement with Sabre authorizing Sabre to enter into sublicense agreements with third parties as set forth in the Sublicense Agreement attached as Exhibit B.

(b) WORK ORDERS FOR SERVICES. During the term of this Agreement, TAM may request Sabre to provide TAM with such services, resources and deliverables as are mutually agreed upon from time to time by TAM and Sabre and confirmed in a mutually acceptable written work order substantially in the form attached hereto as Exhibit A (the "Work Order"). This Agreement establishes the standard provisions that will apply to each Work Order. Each Work Order will include, at a minimum, (a) a description of the services, resources and deliverables that Sabre will provide thereunder, (b) TAM's role, if any, in connection with such services, resources and deliverables and (c) a description of the charges to be paid by TAM to Sabre in consideration for such services, resources and deliverables. Each Work Order will be numbered sequentially beginning with the number one and, when executed by the Parties, will be attached hereto and made a part hereof for all purposes. In the event of any express conflict or inconsistency between the provisions of a Work Order and the provisions of this Agreement, the provisions of the Work Order will govern and control with respect to the interpretation of the conflicting clause of the Work Order; provided, however, that the provisions of the Work Order will be so construed to give effect to the applicable provisions of this Agreement to the fullest extent possible. The work to be performed by Sabre under this Agreement, as set forth in the Work Orders, is collectively referred to herein as the "Sabre Services". From time to time Sabre may request certain products, services and resources from TAM and in any such event, those requests will be made pursuant to this Agreement and this
Section 2(b) and are collectively referred to as "TAM Services". The services to be provided by TAM under the Sublicense Agreement and the TAM Products as defined in said Sublicense Agreement attached on Exhibit B will not be deemed a TAM Service for the purposes of this
Section 2(b). In any such event, a Work Order with specific terms mutually agreed by the Parties substantially in the form as attached in Exhibit A will be used, modified as appropriate for such requests from Sabre to TAM. Unless otherwise provided in a Work Order, the provisions of Paragraphs 2(b), 2(c), 2(d), 5(a), 5(b), 5(c), 5(d),
5(e), 5(f), 5(g), 6, 8 ,9 ,10(a), 12(a), 12(b), 12(f)(i), 12(f)(ii),
12 (f) (iii), 18, 19, will be included in the Work Order

Confidential

as if TAM were Sabre and Sabre were TAM, as well as an appropriate indemnity by Sabre for use of the TAM Services (in lieu of Paragraph
13(c)) and an appropriate limitation of liability (in lieu of Paragraph 15(a)) in favor of TAM for the TAM Services. The provisions contained in Paragraphs 12(e), 13(c), 13(d) and 14(b) will not be reciprocal clauses in a Work Order for TAM Services.

(c) DELIVERY. For Work Orders that include licensing of software, Sabre will use reasonable efforts to provide TAM with the applicable software in accordance with the project schedule set forth in the Work Order. Sabre will notify TAM in writing when Sabre believes the development of the software is complete and will deliver the software to TAM for installation. TAM will perform all preparatory work as specified in the applicable Work Order. For any software systems and databases hosted for TAM from a Data Center operated by or on behalf of Sabre and remotely accessed by TAM through telecommunications links (the "Hosted Software"), Sabre will provide TAM with access to the Hosted Software at TAM's site and will implement the Hosted Software at the above referenced Sabre Data Center for TAM's use in accordance with the applicable Work Order.

(d) ACCEPTANCE TESTING. Sabre will conduct such tests as are practicable to confirm that the applicable software system is available and functional upon delivery to TAM and that implementation thereof shall take place with as little disruptionas may be practicable under the circumstances. Immediately following delivery to TAM, the Parties will schedule a time for TAM to test the software to determine if it substantially conforms to the functionality description contained in the applicable Work Order ("Acceptance Test"). A detailed Acceptance testing procedure (i.e., test scripts, identification of testers, test sites, etc.) will be established jointly and agreed upon in writing by both Parties ten
(10) business days prior to the commencement of such Acceptance Test. TAM shall notify Sabre in writing immediately of any material non-conformities between the delivered software system and the functionality described in the applicable Work Order. TAM's initial remedy for any such material non-conformity shall be to require Sabre to make corrections in the non-conformities so that the software substantially complies with the functionality and to resubmit such non-conforming portion for retesting within a mutually agreed period of time (the "Follow-up Acceptance Test"). If the product is re-submitted and corrections are not reasonably provided, TAM may terminate the use of the non-conforming portion and Sabre will refund TAM for the amount paid by TAM to Sabre for such product in addition other available remedies under this Agreement. "Acceptance" shall be deemed to take place upon the earlier of (i) the thirtieth (30th) business day after completion of the Acceptance Test, unless TAM notifies Sabre in writing of material non-conformities on or before that date; (ii) the thirtieth (30th) business day after completion of the Follow-up Acceptance Test, unless TAM notifies Sabre in writing of material non-conformities on or before that date; or (iii) the date TAM or its customers commence use of the software for productive purposes.

(e) WORK ORDER CHANGE REQUESTS. Either Party may, from time to time, submit to the other Party a Work Order Change Request. If, in the receiving Party's reasonable judgment, the Change Request can be implemented without requiring additional time or resources of the receiving Party, increasing receiving Party's liability, or affecting the receiving Party's ability to maintain a project schedule, the receiving Party will implement the change at no additional cost to the requesting Party. Otherwise, the receiving Party will provide the requesting Party with a Change Order Proposal, in the form attached hereto as Exhibit D including: (i) price change, (ii) estimated impact on project schedule, and (iii) revised description of Services, including additional terms, conditions, or duties of the requesting Party, if any. The requesting Party may, at its discretion, accept or reject the receiving Party's Change Order Proposal. Change Order Proposals shall be considered effective upon written consent of both Parties and will be governed by the terms and conditions of this Agreement. Each Party shall use all reasonable efforts to respond as expeditiously as possible to Change Requests and Change Order Proposals.

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(f) THIRD PARTY REQUESTS. Third party requests for changes impacting any products or services to be provided pursuant to this Agreement will be directed to the applicable Party and will be generally addressed in the manner described in such requests. Any third party requests that the Parties mutually agree should be accommodated, in whole or in part will be subject to the development, agreement and execution of a separate Work Order, which shall be attached to this Agreement.

3. REPRESENTATIVES. During the term of this Agreement, TAM and Sabre will each maintain a dedicated representative (hereinafter, the "TAM Account Manager" and the "Sabre Account Manager") who will be its primary point of contact in dealing with the other Party under this Agreement and will have the authority and power to make decisions with respect to actions to be taken by it under this Agreement. Either Party may change its representative by giving notice to the other of the new representative and the date upon which such change will become effective. At the Effective Date, and each time a change of representative occurs from either Party, the other Party shall have the right to reasonably object prior to the candidate's appointment. In performing its obligations under this Agreement, each Party will be entitled to rely upon any routine instructions, authorizations, approvals or other information provided to it by the designated representative of the other Party or, as to areas of competency specifically identified by such representative, by any other personnel identified by a Party's representative, from time to time, as having authority to provide the same on behalf of the Party in such person's area of competency. Unless a Party knew of any error, incorrectness or inaccuracy in such instructions, authorizations, approvals or other information given by the other Party's representative, a Party will incur no liability or responsibility of any kind in relying on or complying with any such instructions, authorizations, approvals or other information provided the relying Party had a good faith belief that such instructions, authorizations, approvals or information were consistent with the terms and provisions of this Agreement. Nothing set forth in this Section 3 shall be deemed to constitute authority of either Party to alter, amend or modify the terms of this Agreement or any Work Order except by mutually acceptable written agreement.

4. STEERING COMMITTEE. The Parties agree to establish a steering committee (the "Steering Committee") to be composed of from Sabre, the Sabre Account Manager, the Divisional Vice- President, the Technical Delivery Executive and the Airline Solution Executive and from TAM, the Vice President of Information Technology, a Senior Manager from the Information Technology department, a Senior Manager from the Commercial department and the TAM Account Manager. The Steering Committee will be responsible for: (a) generally overseeing the performance of each Party's obligations under this Agreement and (b) making and providing continuity for strategic decisions with respect to the establishment, prioritization, budgeting and implementation of the Technology Solution, as "Technology Solution" is defined in Section 2 of Work Order 1 of this Agreement. Either Party may change any of its members in the Steering Committee from time to time through written notice to the other and the Parties may mutually agree to decrease or increase the size, purpose, composition of the Steering Committee or create sub committees. Subject to any provisions to the contrary in this Agreement or in a Work Order, each Party will bear the costs of participation in such meetings.

The Steering Committee will determine: (a) an appropriate set of periodic meetings to be held by them and procedures to be followed for such meetings, including the preparation of agenda and minutes and (b) an appropriate set of periodic reports to be issued by TAM and Sabre in connection with such meetings. At a minimum, there will be two annual Steering Committee meetings to discuss, among other things, the strategic objectives of the Parties and engage in long range planning.

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5. CHARGES AND TAXES.

(a) PAYMENT OF FEES AND TAXES. In consideration for the performance of the Sabre Services, TAM will pay to Sabre fees and charges ("Fees" and "Charges") set forth in the applicable Work Order in the manner indicated therein. In addition, TAM will pay or reimburse Sabre for any and all present or future sales, use, excise, value added or similar transfer taxes, fees or charges (including any related penalties, unless the imposition of such penalties are directly attributable to the acts or omissions of Sabre), additions to tax, and interest however designated, levied, assessed, or imposed, which are in the nature of a transaction tax, fee or charge or otherwise imposed on the sale of Sabre Services, or this Agreement if required to be collected by Sabre. Nothing herein will be construed to require TAM to pay taxes measured on the gross or net income of Sabre. TAM will directly remit any and all present or future sales, use, excise, value added or similar transfer taxes, fees or charges (including any related penalties), additions to tax, and interest however designated, levied, assessed, or imposed, which are in the nature of a transaction tax, fee or charge or otherwise imposed on the sale of Sabre Services, or this Agreement if such tax is required to be self-assessed by TAM. All payments for fees will be due and payable within * days after receipt of an invoice from Sabre. Each invoice will itemize the fees contained therein and will be accompanied by reasonable detail. All payments due to Sabre under this Agreement will be made in United States Dollars and free and clear of any withholdings for present or future taxes.

(b) WITHHOLDING TAXES. If TAM is required by applicable laws to make any deduction or withholding of taxes from any payment due to Sabre, then: (a) Sabre shall submit an invoice increased by the amount of such withholding taxes, as advised by TAM and; (b) TAM will effect such deduction or withholding, and remit such taxes to the appropriate taxing authorities and remit a net amount after deduction for withholding taxes to Sabre which equals the amount Sabre would have been paid in the absence of such deduction or withholding for taxes. Nothing herein will be construed to require TAM to pay taxes measured on the net income of Sabre after allowance for deductions.

(c) ANNUAL ADJUSTMENT. Unless otherwise specified in an applicable Work Order, the fees or components thereof designated in any Work Order hereto shall be increased not more than once a year in an amount equal to the then current Fee multiplied by the percentage increase in the most recently published United States Consumer Price Index for All Urban Consumers (CPI-U) for Dallas, Texas, United States, Other Goods and Services (as published by the Department of Labor), measured from the later of the Effective Date or the date that the then current fee was last adjusted. Prior to the implementation of the any such increase the Party increasing the fees will supply the other Party with the adjustment factor and the calculated increase in any rates charged under any Work Order subject to such annual adjustments.

(d) MANNER OF PAYMENT. All payments will be made through IATA or another airline clearing house or at Sabre's option by wire transfer to a bank account designated by Sabre and in accordance with any applicable laws.

(e) DISPUTED INVOICES. If any portion of an invoice is subject to a bona fide dispute, TAM will pay to Sabre on or before the due date
(i) all undisputed amounts due and (ii)* percent ( * %) of any disputed amount of such invoice. To dispute an invoice, TAM must notify Sabre of its specific bona fide dispute (which notice must fully document and describe in detail TAM's position) before the due date of the invoice being disputed. Within * days of Sabre's receipt of such notice, Sabre and TAM will negotiate in good faith to resolve such dispute. Upon resolution of the dispute, any portion of the unpaid amount due Sabre and determined to be owing to Sabre will be paid to Sabre immediately. If the dispute regarding payment is not resolved within ten days unless extended by mutual agreement, it shall be resolved pursuant to the dispute resolution procedure set forth in Section 11 of this Agreement.

(f) LATE PAYMENTS. Interest on any late payments shall accrue at the rate of * percent ( * %) per month from the date such amount became due until finally paid.

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(g) CURRENCY CONVERSION. A Party will pay the other Party in the same currency as invoiced by the Party submitting the invoice. If as result of any governmental rule, regulation or law, it becomes necessary to convert into any other currency (the "Foreign Currency") an amount due in United States Dollars under this Agreement, then the conversion shall be made at the rate of exchange prevailing on the business day before the day on which payment is due and/or an award for damages is finally given. If there is a change in the rate of exchange prevailing between the business day before the day on which payment is due and/or an awardis given and the date of actual payment of the amount due, the Party responsible for payment will pay such additional amounts (if any) as may be necessary to ensure that the amount paid in the Foreign Currency, when converted at the rate of exchange prevailing on the date of payment, will produce the amount then due under this Agreement in Dollars. The term "rate of exchange" in this Section means the spot rate at which Sabre, in accordance with prudent commercial practices, is able, on the relevant date, to purchase Dollars with the Foreign Currency and includes any premium and costs of exchange payable, irrespective of any official rate of exchange published by governmental monetary authorities.

(h) INCLUSIVENESS OF FEES AND CHARGES. The Fees and Charges associated with this Agreement and all applicable work orders, sub-license agreements, exhibits, and attachments, both current and in the future, however designated, are inclusive of all Fees and Charges defined hereunder. No additional Fees and Charges other than those defined within the agreement and all applicable work orders, sub-license agreements, exhibits, and attachments, both current and in the future, however designated, shall be payable by either Party unless a suitable agreement in writing is executed by the Parties thereof.

(i) GDS CHARGES RESULTING FROM THE PORTAL. There shall be no GDS charges levied for bookings that are generated by the Portal Solution and result in a charge to TAM for a Revenue Ticket Coupon.

6. EMPLOYEES. The Sabre personnel performing the Sabre Services will be and remain the employees of Sabre and Sabre will provide for and pay the compensation and other benefits of such employees, including salary, health, accident and workers' compensation benefits and all taxes and contributions which an employer is required to pay relating to the employment of employees. The TAM personnel involved in the performance of the Sabre Services will be and remain the employees of TAM and TAM will provide for and pay the compensation and other benefits of such employees, including salary, health, accident and workers' compensation benefits and all taxes and contributions which an employer is required to pay relating to the employment of employees.

7. CONFIDENTIALITY. As between the Parties, the Confidential Information of each Party will remain its sole property. Confidential Information will be used by the recipient Party only for purposes of this Agreement. Each Party will hold the Confidential Information of the other Party in strict confidence and protect such Confidential Information from disclosure using the same care it uses to protect its own confidential information of like importance, but not less than reasonable care. No Confidential Information will be disclosed to any third party by the recipient Party without the prior written consent of the disclosing Party, except that each Party may disclose this Agreement and the other Party's Confidential Information to its directors, employees, attorneys, agents, auditors, insurers and subcontractors who require access to such information in connection with their employment or engagement and who are obligated to keep such information confidential in a manner no less restrictive than set forth in this Section 7. As used herein Confidential Information means (i) all information identified by a Party as confidential to which the other Party has access in connection with the performance of this Agreement, whether before or after the Effective Date, (ii) information relating to a Party's business, customers, financial condition, or operations, (iii) a Party's intellectual property, including proprietary software and all intellectual property contained in any report or other deliverable, but in all cases excluding information and intellectual property rights independently developed by or on behalf of the recipient Party without use of or reference to the disclosing Party's Confidential Information

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(a) EXCEPTIONS. This Agreement does not prevent or restrict use or disclosure by the recipient Party of Confidential Information of the disclosing Party that (i) was in the public domain when communicated to the recipient Party, (ii) enters the public domain through no fault of the recipient Party, (iii) was in recipient Party's possession free of any obligation of confidence when communicated to the recipient Party, (iv) was rightfully communicated to the recipient Party by a third Party free of any obligation of confidence to the disclosing Party, or (v) was independently developed by the recipient Party, without use of or reference to any of the Confidential Information. If Confidential Information is required to be disclosed by Law or a Governmental Authority, including pursuant to a subpoena or court order, such Confidential Information may be disclosed, provided that the Party required to disclose the Confidential Information (i) promptly notifies the disclosing Party of the disclosure requirement, (ii) cooperates with the disclosing Party's reasonable efforts to resist or narrow the disclosure and to obtain an order or other reliable assurance that confidential treatment will be accorded the disclosing Party's Confidential Information, and (iii) furnishes only Confidential Information that the Party is legally compelled to disclose according to advice of its legal counsel. Upon written request at the expiration or termination of this Agreement, all documented Confidential Information (and all copies thereof) owned by the requesting Party will be returned to it or destroyed by the recipient Party, with written certification thereof.

(b) RESIDUAL KNOWLEDGE. Each Party acknowledges that the other may, as a result of its receipt of or exposure to the disclosing Party's Confidential Information, increase or enhance the knowledge and experience retained in the unaided memories of its directors, employees, agents or contractors. A Party and its directors, employees, agents or contractors may use and disclose such knowledge and experience in such Party's business or other business endeavors, so long as such use and disclosure does not involve Confidential Information received from the disclosing Party.

(c) TAM DATA. As used herein, "TAM Data" means (i) all information relating to the TAM's business, including information relating to financial condition or operations provided by TAM to Sabre in connection with the Sabre Services, (ii) all data provided by or on behalf of TAM to Sabre in connection with the Sabre Services, and
(iii) all data that is produced in the Sabre Services using data in clauses (i) and (ii), but in all cases excluding Sabre intellectual property. The TAM Data will remain the sole property of TAM. The TAM Data does not include the TAM Solution as defined in the Sublicense Agreement, attached as Exhibit "B". Subject to TAM's proprietary rights, Sabre may access and use the TAM Data and the TAM Solution as needed to perform the Sabre Services under this Agreement. Upon expiration or termination of this Agreement the following will apply:

(i) In the event of expiration of the Agreement with the mutual agreement of the Parties not to renew it, Sabre will, after reaching a mutual agreement on a standard format and media, and at a TAM's and Sabre's equally shared expense, return to TAM all the TAM Data in Sabre's possession in 10 business days, or

(ii) In the event of a termination by TAM either for a breach by Sabre or for Sabre's own decision not to renew this Agreement, Sabre will, after reaching a mutual agreement on a standard format and media, and at Sabre's expense, return to TAM all the TAM Data in Sabre's possession in 10 business days, or

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(iii) In the event of a termination by Sabre either for a breach by TAM or for TAM's own decision not to renew this agreement, Sabre will, after reaching a mutual agreement on a standard format and media, and at TAM's expense, return to TAM all the TAM Data in Sabre's possession in 10 business days.

In any event, the cost of the TAM Data transfer will be determined according to reasonable industry practices at the time of the transfer. In any event, Sabre will not use the TAM Data for any purpose other than providing the Sabre Services under this Agreement.

(d) TAM BOOKING DATA. Notwithstanding anything to the contrary herein, Sabre may use the TAM Booking Data collected from "Sabre Subscribers" (as such term is defined in Work Order No. 1) using the Agency Solution (as such term is defined in Work Order No.l, and is also currently known as the "Turbo Sabre Agency Tool"), and subject to applicable laws, for the purpose of determining, using and distributing aggregate statistical and marketing information from which the identity of TAM's customers cannot be determined through the use of reasonable effort. Sabre shall refrain from selling, distributing, or deploying, however designated, the aggregate data collected and described above to any company entity based in Brazil and any such sale or distribution will be made subject to the provision that the TAM Booking Data is confidential information. Sabre will obtain from any third party recipient an agreement that such recipient will not publish, duplicate, or reproduce in any manner, electronic or otherwise, in whole or in part, nor utilize, disclose or sell to any other third party the TAM Booking Data. "TAM Booking Data" means data including but not limited to pseudo city code, ARC/IATA number (where applicable), Sabre Subscriber name, airline code, board/off cities, class of service, flight number, passenger count, departure date, booking date, agency city, state, country and postal code.

(e) SAFEGUARDING. Sabre will employ substantially the same safeguards it uses for data of its other customers, but not less than reasonable safeguards, in protecting the TAM Data against accidental or unauthorized deletion, destruction or alteration. Sabre personnel having access to the TAM Data will be informed of their duties to maintain its confidentiality and to use it only for purposes permitted hereunder. TAM may establish backup security for the TAM Data and retain backup data files if it so chooses. Sabre will have access to such backup data files as is reasonably required by Sabre.

8. AUDIT RIGHTS.

(a) GENERAL. Auditors designated by Sabre will be provided with reasonable access to the TAM site(s) to enable them to audit the operations, books and records of TAM for the sole purpose of verifying that TAM is in compliance with its obligations in accordance with this Agreement and any Work Orders hereto. Sabre shall pay the cost of such audit unless the audit discloses TAM has underpaid Sabre for charges due under the applicable Work Order by more than * percent ( * %) in which case the cost of the auditors shall be paid by TAM within thirty days of presentation of the invoice for the audit.

(b) PROCEDURES. Such audits may be conducted no more than once each calendar year during reasonable business hours unless Sabre has reasonable cause to request an out of term audit. Sabre will provide TAM with reasonable prior written notice of an audit. TAM will cooperate with the audit, will make the information reasonably required to conduct the audit available on a timely basis and will assist the designated employees of Sabre's auditors as reasonably necessary. TAM will not be required to provide access to the proprietary data of TAM except to the extent such access is necessary to conduct the audit and only if Sabre and Sabre's auditors agree to treat any such information as Confidential Information and to bind any third parties gaining access to such information during the term of the audit to similar confidentiality restrictions. All information learned or exchanged in connection with an audit, as well as the results of any audit, is Confidential Information will be treated by Sabre as TAM's Confidential Information except to the extent Sabre must rely and disclose such audit results in

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order to protects its rights under this Agreement and any related Work Order including, but not limited to, seeking an injunction or arbitration.

(c) RESULTS. Sabre will provide TAM copies and results of each audit. The Parties will review the results of an audit, will identify all relevant audit issues and will determine (i) what, if any, actions will be taken in response to such audit issues, and
(ii) which Party will be responsible for the cost of taking the actions necessary to resolve such issues.

(d) RECORDS RETENTION. For the first * ( * ) years during the term of this Agreement, TAM will retain books and records that are reasonably required to verify that they are in compliance with this Agreement and any Work Order hereto. Commencing with the fourth anniversary and proceeding until two years after the termination or expiration of this Agreement, TAM shall maintain the most recent four years of books and records that are reasonably required to verify that they are in compliance with this Agreement and any Work Orders hereto.

9. WARRANTIES. Unless otherwise specified in a Work Order or in the Sublicense Agreement, the Parties agree to the following warranties:

(a) LICENSED SOFTWARE. Subject to the proper installation in accordance with Sabre's instructions, Sabre warrants that any existing and future software applications owned or licensed by Sabre that are licensed to TAM from time to time (the "Licensed Software") will substantially meet the functional requirements as identified in the applicable Work Order and in the standard user documentation issued by Sabre to its customers. Considering the current state of the art, it is not possible to exclude technical software problems, to manufacture faultless software or to cure all defects. Sabre does not warrant the absence of any defects in the Licensed Software, or that the Licensed Software will operate without any interruption or the possibility of combining the Licensed Software with other software programs.

(b) SERVICES. Sabre warrants that any Sabre Services provided hereunder will be provided by qualified professionals in their respective disciplines in a manner that is equivalent to the standard performed by Sabre for other similarly situated clients.

(c) WARRANTY PERIOD. The warranties contained in Sections 9 (a) and
(b) above shall, (i) as to each Licensed Software, be valid from Acceptance and continue for the warranty period specified in the applicable Work Order, or, if not specified in the Work Order, then for a period of * days following Acceptance of the relevant Licensed Software system as defined in Section 2(d), and (ii) as to any Sabre Services, continue for a warranty period of * from the date on which such Sabre Services were performed by Sabre.

(d) EXCLUSIONS FROM WARRANTY. The warranties contained in this
Section 9 shall not apply (i) to problems arising from any products, equipment, data, service or software other than those provided by Sabre hereunder, including inoperability of such items with the Licensed Software or each other; (ii) if TAM fails to use the Licensed Software in accordance with reasonable instructions from Sabre; (iii) if TAM has modified any products, equipment, software or environment or used the Licensed Software in any manner other than as reasonably instructed by Sabre, or instructed in manuals or written instructions; or (iv) to any error, loss or damage which is caused in whole or in part by TAM, other third parties or other cause beyond the control of Sabre. No warranties shall be provided for any Hosted Software or Equipment provided by Sabre to TAM (except for pass through warranties from third party providers). As used in this Agreement, "Equipment" means computers, telecommunication terminals, terminal controllers, printers and modems, including any software protocols that modify the operation of such software used by TAM in connection with the Sabre Services.

(e) WARRANTY NOTICE. If TAM believes that a Licensed Software contains a reproducible failure to perform in all material respects in accordance with its functional requirements (hereinafter an "Error") or that the warranty provided in Section 9(a) has been breached, the TAM Account Manager will notify the Sabre Account Manager by written notice during the

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term of the warranty specified in Section 9(c). All documents reasonably required for Error identification must be attached. At Sabre's request, additional Error-related information, reasonably available to TAM, will be promptly provided by TAM.

(f) REMEDY. Provided that Sabre is able to reproduce the error in the Licensed Software, as TAM's initial remedy, Sabre will use its reasonable efforts to correct the error in the Licensed Software, supply a modified or improved Licensed Software system version suited for the contractually contemplated purpose, or make available a by-pass solution, at no additional charge to TAM. With respect to a breach of the warranty in Section 9(b). Sabre will re-perform any defective Services at no additional charge to TAM. If foregoing remedies do not successfully cure the non-conformance within the Licensed Software, then in addition to any other remedies available to TAM under this Agreement, TAM may terminate the use of the non-conforming portion of the Licensed Software and Sabre will refund TAM for the amount paid by TAM to Sabre for such non-conforming portion of the product.

(g) ACCURACY OF INFORMATION. TAM represents and warrants that any information furnished to Sabre upon which Sabre based the description of any services and fees to TAM is accurate and complete in all material respects.

(h) PASS-THROUGH WARRANTIES AND INDEMNITIES. To the extent permissible, each Party will pass through to the other any rights it obtains under warranties and indemnities given by its third party licensors, subcontractors or suppliers in connection with any services, software, Equipment or other assets provided by such Party pursuant to this Agreement. In the event of a third party software or Equipment nonconformance, or nonperformance or inadequate performance by any third party vendor, the Party who has the relationship with the Third Party vendor will coordinate with, and be the point of contact for resolution of the problem through, the applicable vendor. Upon becoming aware of a problem, such Party will notify such vendor and will use commercially reasonable efforts to cause such vendor to promptly repair or replace the nonconforming item or remedy the nonperformance or inadequate performance in accordance with such vendor's obligations. If any warranties or indemnities may not be passed through, each Party will, upon the other's request, take commercially reasonable action to enforce any applicable warranty or indemnity which is enforceable by such Party in its own name. Neither Party, however, shall be obligated to resort to litigation or other formal dispute resolution procedures to enforce any such warranty or indemnity and the Party requesting such enforcement will reimburse the other Party for all costs and expenses incurred in connection therewith, including reasonable attorneys' fees and expenses.

DISCLAIMER OF WARRANTIES. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, OR ANY WORK ORDER, NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING ANY MATTER, INCLUDING THE MERCHANTABILITY, SUITABILITY, ORIGINALITY, FITNESS FOR A PARTICULAR USE OR PURPOSE, TITLE, NONINFRINGEMENT OR RESULTS TO BE DERIVED FROM THE USE OF ANY HOSTED SOFTWARE AS DEFINED IN SECTION 2(C) OF THE AGREEMENT, LICENSED SOFTWARE, SERVICE, EQUIPMENT, DELIVERABLES OR OTHER MATERIALS PROVIDED UNDER THIS AGREEMENT OR ANY WORK ORDER. NO REPRESENTATION OR OTHER AFFIRMATION OF FACT, INCLUDING, WITHOUT LIMITATION, STATEMENTS REGARDING CAPACITY, SUITABILITY FOR USE, OR PERFORMANCE OF THE HOSTED SOFTWARE, LICENSED SOFTWARE, SERVICE, EQUIPMENT, DELIVERABLES OR OTHER MATERIALS PROVIDED UNDER THIS AGREEMENT OR ANY WORK ORDER SHALL BE DEEMED A WARRANTY FOR ANY PURPOSE OR GIVE RISE TO ANY LIABILITY OF SABRE OR TAM AS THE CASE MAY BE WHATSOEVER. THE PARTIES ACKNOWLEDGE THAT THEY HAVE NOT RELIED UPON ANY WARRANTIES OTHER THAN THE EXPRESS WARRANTIES IN THIS AGREEMENT.

10. INTELLECTUAL PROPERTY RIGHTS. Each Party will retain all rights in any software, ideas, concepts, know-how, development tools, techniques or any other proprietary material or information that it owned or developed prior to the Effective Date of this Agreement, or acquired or developed after the date of this Agreement

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without reference to or use of the Confidential Information or intellectual property of the other Party. All software that is licensed by a Party from a third party vendor will be and remain the property of such vendor.

(a) LICENSES. Specific licenses required in connection with this Agreement will be as provided in the Sublicense Agreement and the applicable Work Order. Subject to the foregoing and to any third party rights or restrictions, Sabre will own all intellectual property rights in or related to all deliverables that are developed and delivered by Sabre under a Work Order (the "Deliverables"). However, upon payment therefore in accordance with such Work Order, TAM will have the right and license to use the copy of the Deliverables (including any Sabre Tools, as defined below, that are used in producing the Deliverables and become, and remain, embedded therein) in accordance with the terms of any such Work Order provided by Sabre to TAM under such Work Order. Such copy, if the Deliverable is software, will be in object code form, and the related right and license to use will consist of TAM being able to load, execute, display, store and otherwise use such object code copy. The right and license granted to TAM in this Section 10 will be perpetual (subject to compliance by TAM with this sentence), royalty-free, nontransferable and nonexclusive and will be limited to TAM's internal use and exploitation or for the use of third parties designated by TAM exclusively for the purposes specified in this Agreement and any of its Work Orders. The Deliverables are confidential and will be subject to Section 7.

(b) RESERVATION OF SABRE RIGHTS. Notwithstanding anything to the contrary in this Agreement, Sabre (i) will retain all right, title and interest in and to all know-how, intellectual property, methodologies, processes, technologies, algorithms, software or development tools used in performing the Sabre Services which are based on trade secrets or proprietary information of Sabre, are developed or created by or on behalf of Sabre without reference to or use of the intellectual property of TAM or are otherwise owned or licensed by Sabre (collectively, "Sabre Tools") and (ii) will retain ownership of any Sabre-owned software or Tools that are used in producing the Deliverables and become embedded in the Deliverables.

(c) RESERVATION OF TAM RIGHTS. Notwithstanding anything to the contrary in this Agreement TAM (i) will retain all right, title and interest in and to all know-how, intellectual property, methodologies, processes, technologies, algorithms, software or development tools used in performing the TAM Services or any services pursuant to the Sublicense Agreement which are based on trade secrets or proprietary information of TAM, are developed or created by TAM without reference to or use of the intellectual property of Sabre or are otherwise owned or licensed by TAM (collectively, "TAM Tools") and (ii) will retain ownership of any TAM-owned software or Tools that are used in producing the TAM Services or the services under the Sublicense Agreement and become embedded in any deliverables pursuant to such services.

(d) No licenses will be deemed to have been granted by either Party to any of its patents, trade secrets, trademarks or copyrights, except as otherwise expressly provided in this Agreement, the Sublicense Agreement, or any related Work Orders. Nothing in this Agreement will require either Party to violate the proprietary rights of any third party in any software or otherwise.

The provisions of this Section 10 will survive the expiration or termination of this Agreement, the Sublicense Agreement and each Work Order for any reason.

11. MEDIATION; ARBITRATION. Any dispute, controversy or claim arising under, out of, in connection with or in relation to this Agreement, or any Work Order, or the breach, termination, validity or enforceability of any provision hereof or thereof (a "Dispute") will be resolved as follows:

(a) PROCEDURE. The Parties shall first discuss in good faith all disputes at a mutually convenient location in order to try and find an amicable solution. If the Parties are unable to resolve the Dispute within * days after receipt of notice from a Party that a Dispute exists, it shall be resolved by arbitration pursuant to the terms set forth below.

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(b) ARBITRATION. The Dispute shall be resolved and decided by binding arbitration, pursuant to the International Arbitration Rules of the American Arbitration Association ("AAA") and the United States Federal Rules of Civil Procedure and United States Federal Rules of Evidence with regard to the taking of any evidence therein. The arbitration panel shall have the exclusive right to determine the arbitrability of any disputes. In the event of any conflict between the rules of the AAA and any provisions of this Agreement, this Agreement shall govern.

The arbitration shall be conducted in English in Miami, Florida. Unless otherwise agreed to by the Parties there shall be a panel of three arbitrators for all disputes. The claimant party shall appoint an arbitrator in the arbitration petition and the respondent party shall appoint an arbitrator in its response. If within thirty
(30)days after the arbitration petition, the respondent has not appointed an arbitrator; such arbitrator shall be appointed by the AAA. Within thirty (30) days of their appointment, the two arbitrators so appointed shall appoint a third arbitrator who shall preside over the arbitration panel. If the two arbitrators cannot agree on a third arbitrator within such thirty (30) day period, the third arbitrator shall be appointed by the AAA.

The arbitration panel shall award the prevailing Party its attorneys fees and costs, arbitration administrative fees, panel member fees and costs, and any other costs associated with the arbitration. The Parties agree that notifications of any proceedings, reports, communications or any other document shall be sent as set forth in
Section 21 of this Agreement. The arbitration panel shall interpret the agreement in accordance with its terms and render decisions thereon and shall only award damages as provided under the terms of this Agreement. The arbitrators shall have the authority to award specific performance or an injunction to the prevailing Party, or to make an award of direct damages but shall have no right to grant special, punitive or exemplary damages, or indirect or consequential damages (including lost profit, or losses due to a prospective business opportunity).

(c) SOLE REMEDY. Except as provided in Section 15(f), the Parties agree that the award of the arbitration shall be the sole and exclusive remedy between the Parties regarding any claims, counterclaims, issues or accounting presented or pled to the arbitrators; that the award must be consistent with the terms and conditions of this Agreement; that it shall be made and shall be payable in accordance with the award in U.S. Dollars free of any tax, deduction or offset; and that any costs, fees or taxes incident to enforcing the award shall, to the maximum extent permitted by law, be charged against the Party resisting such enforcement.

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12. TERMINATION.

(a) TERMINATION FOR CAUSE. If either Party materially defaults in the performance of any of its duties or obligations under this Agreement or any Work Order (except for a default in payments to Sabre which will be governed by Section 12(b)). which default has a material and adverse effect on the other Party and such default is not substantially cured within sixty (60) days after written notice is given to the defaulting Party specifying such default, the non-defaulting Party, in addition to all other available remedies, may terminate this Agreement and any Work Orders.

(b) TERMINATION FOR NONPAYMENT. If TAM defaults in the payment when due of any undisputed amount due to Sabre pursuant to this Agreement or any Work Order, and does not cure such default within * days after being given written notice of such default Sabre may, by giving written notice thereof to TAM, (a) terminate, in the case of Work Order No. 2, only such Work Order, or (b) in the case of Work Order No. 1, terminate this Agreement, Work Order No. 1 and the Sublicense Agreement, in either case as, of the date of receipt by TAM of such notice or as of a future date specified in such notice of termination. With respect to any Work Order entered into by the Parties after the date of this Agreement, and in the case where payment is not made when due the nondefaulting party may only terminate said Work Order unless otherwise provided therein.

(c) TERMINATION FOR BANKRUPTCY AND RELATED EVENTS. Subject to applicable bankruptcy laws, if either Party becomes or is declared insolvent or bankrupt, is the subject of any proceedings relating to its liquidation, insolvency or for the appointment of a receiver or similar officer for it, makes an assignment for the benefit of all or substantially all of its creditors or enters into an agreement for the composition, extension or readjustment of all or substantially all of its obligations, then the other Party may, by giving written notice thereof to such Party, terminate this Agreement and all outstanding Work Orders as of a date specified in such notice of termination.

(d) TERMINATION FOR CONVENIENCE. Neither Parry will have the right to terminate this Agreement or a Work Order for its convenience prior to the * of the Effective Date of this Agreement, unless the termination of the Work Order is expressly allowed in such Work Order. Any such termination for convenience will only be effective upon one year advanced written notice, which may be given prior to the fifth anniversary of the Effective Date and after all payments related to any service provided under this Agreement are fully paid by the terminating Party.

(e) OTHER TERMINATION. If as a result of Brazilian government action, regulator)'constraints or other third party action the Portal Solution (as defined in Work Order No.l), is prohibited from use, this Agreement shall be deemed to be terminated or if as a result of any of the foregoing reasons the Agreement is terminated, the following will apply. The Multihost Agreement will be reinstated with all of its Work Orders, attachments, and exhibits, and (i) the termination clause of the Multihost Agreement will be modified to provide that either Party may terminate the Multihost Agreement for convenience after the first anniversary of its reinstatement and
(ii) Section 12(f)(iv) below will be included into the Multihost Agreement. The Parties will meet within * days after the termination described in this Section 12(e) to commence on going, good faith negations for a mutually agreed replacement for the Multihost Agreement and this Agreement. In the event of a termination as described in this Section 12(e), Sabre will pay (or credit TAM for amounts owed by TAM to Sabre) any outstanding amounts owed TAM by Sabre in connection with the TAM Services and TAM will pay Sabre any outstanding amounts owed Sabre by TAM in connection with Sabre Services.

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(f) EFFECT OF EXPIRATION OR TERMINATION.

(i) EXPIRATION OR TERMINATION OF WORK ORDER ONLY. On expiration or termination of a Work Order, but not this Agreement, Sabre will cease to perform the Sabre Services covered thereby, and TAM will pay to Sabre (1) all undisputed amounts due to Sabre under such Work Order for all Sabre Services performed and expenses incurred (including those expenses that, instead of being concurrently billed, have been included in future payments to be made by TAM) through the effective date of such expiration or termination, and (2) all license rights granted pursuant to the Work Order, as applicable, will cease to exist and TAM will immediately discontinue the use of the applicable Hosted Software or Licensed Software, erase all copies of the applicable Licensed Software systems from its computers, return to Sabre all applicable Sabre Confidential Information, and certify to Sabre in writing that it has fully complied with these requirements. Sabre will create records of the TAM database used for the Hosted Software and will deliver them to TAM based on the terms described in
Section 7(c). Expiration or termination of a Work Order will not affect any other Work Orders the performance of which by either or both of the Parties remains outstanding, unless the Parties otherwise agree in writing.

(ii) EXPIRATION OF AGREEMENT WITH NO OUTSTANDING WORK ORDERS OR TERMINATION OF AGREEMENT. Subject to the provisions of Section 12(f)(iv) hereof, upon expiration of this Agreement at a time when no Work Orders are outstanding or on termination of this Agreement (and all outstanding Work Orders) by TAM in accordance with this Section
12(f)(ii), Sabre will cease to perform the Sabre Services covered hereby and thereby, and TAM will pay to Sabre all amounts due to Sabre hereunder and thereunder for all Sabre Services performed and expenses incurred (including those expenses that, instead of being concurrently billed, have been included in future payments to be made to Sabre) through the effective date of such expiration or termination.

(iii) EXPIRATION OF AGREEMENT WITH OUTSTANDING WORK ORDERS. Upon expiration of this Agreement when one or more Work Orders are outstanding, this Agreement will remain in full force and effect solely for purposes of allowing the activities covered thereby to be completed. Thereafter, Sabre will cease to perform the Sabre Services covered hereby, and TAM will pay to Sabre (1) all amounts due to Sabre hereunder and thereunder for all Sabre Services performed and expenses incurred (including those expenses that, instead of being concurrently billed, have been included in future payments to be made by TAM) through the effective date of such expiration or termination and (2) any termination fees, as described in Section 12(e), if appropriate.

(iv) TERMINATION ASSISTANCE. In the event of expiration or termination of all or any part of a Work Order for any reason, the Parties will cooperate in good faith for an orderly wind-down or transition of the Sabre Services or any services then being provided by TAM to Sabre. The transaction rate as specified in the agreement being terminated or reinstated, as applicable, will apply. Subject to Section 7(c) above, and in any such event the Parties will pay to the other, its then current reasonable labor rates for any services requested for wind-down or transition of the Sabre Services or of any services provided Sabre by TAM.

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13. INDEMNITIES

(a) PERSONAL INJURY, EMPLOYEES AND PROPERTY DAMAGE. Sabre and TAM will each indemnify, defend and hold harmless the other and their Affiliates from and against all Losses arising out of, under or in connection with (i) bodily or other personal injury to, or death of, any agent, employee, customer, business invitee or business visitor of the indemnitee or (ii) damage to or destruction of any tangible property, in each case referred to in (i) and (ii) herein, resulting from, or arising out of, under or in connection with, the gross negligence or willful misconduct of the indemnitor; or (iii) its respective obligations arising from local labor laws and regulations, as well as other legal or contractual obligations regarding its employees. Notwithstanding the foregoing, Sabre will have no indemnification obligation with respect to Losses arising out of, under or in connection with any incident for which it is entitled to indemnification under Sections 13(c) and 13(d). As used herein "Losses" means all judgments, claims, settlements, losses, damages, fees, liens, taxes, penalties, obligations and expenses (including reasonable attorneys fees) and including sanctions imposed by any governmental entity such as fines, penalties and equitable relief such as injunctions and temporary restraining orders.

(b) INFRINGEMENT.

(i) GENERAL. Sabre will indemnify, defend and hold harmless TAM and its Affiliates against any action or cause of action based on a claim that any Sabre Intellectual Property (excluding portions owned by third parties) directly (A) infringes a copyright, (B) infringes a patent granted under United States or Brazilian laws (C) infringes a trademark granted under United States or Brazilian laws, or (D) constitutes an unlawful disclosure, use or misappropriation of a third party's trade secrets. TAM will indemnify, defend and hold harmless Sabre and its Affiliates against any action or cause of action based on a claim that any TAM Intellectual Property (excluding portions owned by third parties) (W) infringes a copyright, (X) infringes a patent granted under United States or Brazilian laws, (Y) infringes a trademark granted under United States or Brazilian laws, or (Z) constitutes an unlawful disclosure, use or misappropriation of a third party's trade secrets. The indemnitor will bear the expense of such defense and pay any damages and attorneys' fees that are attributable to such claim finally awarded by a court of competent jurisdiction. Notwithstanding the foregoing, neither Party will be liable to the other for claims of indirect or contributory infringement, including claims based on use of intellectual property rights with Equipment or software not agreed to by the indemnitor or in a manner for which such rights are not designed or indemnitee's modifications to intellectual property rights (other than those made at the indemnitor's request).

(ii) ADDITIONAL REMEDY. If the intellectual property rights of Sabre ("Sabre IP") or the intellectual property rights of TAM ("TAM IP") becomes the subject of a claim under this Section 13(b) which is meritorious in the indemnitor's reasonable opinion or is likely to become the subject of a meritorious claim, then, in addition to defending the claim and paying any damages and attorneys' fees as required above, the indemnitor will either (A) replace or modify the Sabre IP or TAM IP, as applicable, to make it non infringing or cure any claimed misuse of a third party's trade secret or (B) procure for the indemnitee the right to continue using the Sabre IP or TAM IP, as applicable. Any costs associated with either alternative will be borne by the indemnitor. If neither option is available to the indemnitor through the use of commercially reasonable efforts, (Y) the indemnitee will return such Sabre IP or TAM IP, as applicable, to the indemnitor and (Z) if requested by the indemnitee in good faith, the Parties will negotiate in good faith (but subject to Section 15)

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reach a written agreement on what, if any, monetary damages (in addition to the indemnitor's obligations under this Section 13(b) are reasonably owed by the indemnitor to the indemnitee. As used herein, the term "intellectual property rights" means any (i) any patent, patent application, trademark (whether registered or unregistered), trademark application, trade name, service mark (whether registered or unregistered), service mark application, copyright (whether registered or unregistered), copyright application, trade secret, Confidential Information, know-how, process, technology, development tool, ideas, concepts, design right, moral right, data base right, methodology, algorithm or invention, (ii) any right to use or exploit any of the foregoing, and (iii) any other proprietary right or intangible asset (including software).

(c) PROVISION OF SERVICES. TAM will indemnify, defend and hold harmless Sabre and its Affiliates from and against all Losses arising out of or in connection with any claims made by third parties arising out of or related to TAM's use of any Hosted Software, Licensed Software, Equipment, or Sabre Services based on
(i) TAM's negligence, gross negligence, or misuse of the Sabre Services, (ii) the failure of any Equipment, products or services provided by TAM, (iii) any act or omission of any third party furnishing products, Equipment, software or any other items or services which are required by TAM to use the Hosted Software, Licensed Software, Equipment or Sabre Services, (iv) unauthorized modifications, alterations, tampering, adjustment or repair of the Hosted Software, Licensed Software, Equipment or Sabre Services caused by TAM or any third party permitted access to or use thereof by TAM, (v) TAM's provision of incidental services to its code-share airlines or provision of customary ground handling services for another airline, (vi) use of the Hosted Software, Licensed Software, Equipment or Sabre Services in combination with, or in addition to, any Equipment or computer programs not licensed or recommended by Sabre, or (vii) any Airline Incident. As used herein "Airline Incident" means an occurrence of personal injury, death, or property damage in connection with the operation of any TAM's or its codeshare airline's operations.

(d) OTHER THIRD PARTY CLAIMS INDEMNITY. TAM agrees to indemnify and defend Sabre from any and all Losses incurred by Sabre for claims filed by any third parties, whether private parties or public entities of any kind, against Sabre with respect to any claims related to TAM's decision to cease utilizing GDS systems and entering this Agreement as a means for distributing its airline flight services to its customers.

(e) PROCEDURES FOR THIRD PARTY CLAIMS. The indemnification obligations set forth in this Section will not apply unless the party claiming indemnification: (a) notifies the other promptly in writing of any matters in respect of which the indemnity may apply and of which the notifying party has knowledge, in order to allow the indemnitor the opportunity to investigate and defend the matter; provided, however, that the failure to so notify will only relieve the indemnitor of its obligations under this Section 13 if and to the extent that the indemnitor is prejudiced thereby; and (b) gives the other party full opportunity to control the response thereto and the defense thereof, including any agreement relating to the settlement thereof; unless such settlement would result in a finding or admission that the indemnitee violated any applicable law, rule or regulation, in which case the indemnitee's approval will be required and provided, however, that the indemnitee will have the right to participate in any legal proceeding to contest and defend a claim for indemnification involving a third party and to be represented by legal counsel of its choosing, all at the indemnitee's cost and expense. However, if the indemnitor fails to promptly assume the defense of the claim, the Party entitled to indemnification may assume the defense at the indemnitor's cost and expense. The indemnitor will not be responsible for any settlement or compromise made without its consent, unless the indemnitee has tendered notice and the indemnitor has then refused to assume and defend the claim and it is later determined that the indemnitor was liable to assume and defend the claim. The indemnitee agrees to cooperate in good faith with the indemnitor at the request and expense of the indemnitor.

(f) NEGLIGENCE. The ordinary negligence of any indemnittee will not preclude such indemnittee from receiving the benefits under this
Section 13.

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14. INSURANCE.

(a) GENERAL. Each Party will have and maintain in force insurance coverage, including worker's compensation insurance and general liability insurance, adequate for it to perform its obligations under this Agreement. Sabre shall cause its insurers to name TAM as an additional insured party in its general liability insurance with liability coverage of at least $ * (which amount can be constituted, in part, with coverage from an umbrella policy).

(b) AVIATION INSURANCE. TAM shall cause its aviation insurers to name Sabre as an additional insured party in its aviation insurance policies. TAM's insurers will also provide written waivers of subrogation in favor of Sabre in both its airline liability and airline hull policies. Such aviation policies will also include contractual liability coverage specifically insuring the indemnification obligations of such Party pursuant to Section 13. Upon request, TAM will provide Sabre with evidence of such insurance within 60 days of the Effective Date and will cause the insurers under such insurance policies not to cancel, amend or make any material adverse change affecting the coverage under any such policies without at least thirty (30) days prior written notice to Sabre.

(c) RISK OF LOSS. Each Party will be responsible for risk of loss of, and damage to, any Equipment, software or other materials in its possession or under its control.

15. LIABILITY.

(a) GENERAL LIMITATION. The liability of Sabre to TAM, for all damages and other Losses arising from or related to this Agreement, regardless of the form of action, whether in contract, equity, negligence, tort or otherwise will not exceed, under any circumstances, the lesser of (i) * or(ii) * . TAM acknowledges that * reflect the allocation of risk set forth in this Agreement and that Sabre would not enter into this Agreement without these limitations on its liability.

(b) LIMITATION ON OTHER DAMAGES. In no event will the measure of damages payable by either Party hereunder include, nor will a Party be liable for, any amounts for loss of income, profit or savings or indirect, incidental, consequential, exemplary, punitive or special damages of any Party, including third parties, even if such Party has been advised of the possibility of such damages in advance, and all such damages are expressly disclaimed. Nothing in this Section 15(b) will be deemed to limit a Party's payment obligation to the other Party for services rendered pursuant to this Agreement or a Work Order.

(c) EXCEPTIONS TO LIMITATIONS. The limitations, waivers and disclaimers set forth in Sections 15(a) and 15(b) do not apply to the liability of a Party resulting from that Party's breach of its obligations concerning restrictions on the use of the other Party's Confidential Information as defined in an applicable Work Order or
Section 7. The limitations, waivers and disclaimers set forth in
Section 15(a) and 15(b) do not apply to the liability of a Party resulting from that Party's indemnification obligations under
Section 13 in respect of Losses arising out of, under or in connection with third Party claims, actions or causes of action

(d) CONTRACTUAL STATUTE OF LIMITATIONS. No claim, demand for mediation or arbitration or cause of action which arose out of an event or events which occurred more than three years prior to the filing of a demand for mediation or arbitration or suit alleging a claim or cause of action may be asserted by either Party against the other.

(e) ACKNOWLEDGEMENT. The Parties expressly acknowledge that the limitations and exclusions set forth in this Section 15 have been the subject of active and complete negotiation between the Parties and represent the Parties' agreement taking into account each Party's level of risk associated with the performance or nonperformance of its obligations under this Agreement and the payments and other benefits to be derived by each Party pursuant to this Agreement. The

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provisions of this Section 15 will survive the expiration or termination of this Agreement and each Work Order for any reason.

(f) INJUNCTIVE RELIEF. Each of the Parties acknowledge that, in the event it breaches its obligations concerning restrictions on the use of the other Party's Confidential Information as defined in ,
Section 7, the Sublicense Agreement or in any applicable Work Order, the non-breaching Party will be irreparably harmed. In such a circumstance, the non-breaching Party may proceed directly to court. If a court of competent jurisdiction should find that the breaching Party has breached any such obligations, the breaching Party agrees that without any additional findings of irreparable injury or other conditions to injunctive relief, it will not oppose the entry of an appropriate order compelling performance by the breaching Party and restraining it from any further breaches.

16. EXCUSED PERFORMANCE. Neither Party will be deemed to be in default hereunder, or will be liable to the other, for failure to perform any of its non-monetary obligations under this Agreement or any Work Order to the extent that such failure results from any event or circumstance beyond that Party's reasonable control, including acts or omissions of the other Party or third parties, natural disasters, riots, war, civil disorder, acts of terrorism, court orders, acts or regulations of governmental bodies, and which it could not have prevented by reasonable precautions or could not have remedied by the exercise of reasonable efforts (collectively, "Force Majeure"). If either Party is precluded from performing all or substantially all of the services hereunder for an event covered by this Section 16 for * consecutive days, then the other Party will have the right to terminate this Agreement and/or the Work Order, as applicable, upon written notice to the other. Subject to the foregoing right of termination, if there is an event of Force Majeure in connection with Sabre Services which materially and substantially impacts TAM's business operations or an event of Force Majeure which materially and substantially impacts Sabre's rights to market and sublicense the TAM Products pursuant to the Sublicense Agreement, then the affected Party may seek substitute services from a third party for the period of time that the Force Majeure exists.

17. EXPORT REGULATIONS. This Agreement and each Work Order is expressly made subject to any United States government laws, regulations, orders or other restrictions regarding export from the United States of computer hardware, software, technical data or derivatives of such hardware, software or technical data. Notwithstanding anything to the contrary in this Agreement or any Work Order, if precluded by any United States government laws, regulations, orders or other restrictions, Sabre will not directly or indirectly export (or re-export) any computer hardware, software, technical data or derivatives of such hardware, software or technical data, or permit the shipment of same: (a) into (or to a national or resident of) Cuba, North Korea, Iran, Iraq, Libya, Syria or any other country to which the United States has embargoed goods; (b) to anyone on the U.S. Treasury Department's List of Specially Designated Nationals, List of Specially Designated Terrorists or List of Specially Designated Narcotics Traffickers, or the U.S. Commerce Department's Denied Parties List; or (c) to any country or destination for which the United States government or a United States governmental agency requires an export license or other approval for export without first having obtained such license or other approval. Each Party will reasonably cooperate with the other and will provide to the other promptly upon request any end-user certificates, affidavits regarding re-export or other certificates or documents as are reasonably requested to obtain approvals, consents, licenses and/or permits required for any payment or any export or import of products or services under this Agreement or any Work Order. The provisions of this Section 17 will survive the expiration or termination of this Agreement and each Work Order for any reason.

18. USE OF SUBCONTRACTORS. Sabre may subcontract any portion of the Sabre Services to any Affiliate or third parties provided no such subcontracting of duties or services shall relieve Sabre of its obligations to TAM under this Agreement or any Work Order and TAM need not pursue any remedies provided for in this Agreement or in any Work Order against any subcontractor retained or selected by Sabre but may proceed directly against Sabre. Sabre will not disclose any of TAM's Confidential Information to any subcontractor unless it has agreed in writing to protect the confidentiality of such Confidential Information in a manner no less restrictive than required under Section 7. and to use such information only as needed to perform subcontracted Sabre Services.

19. MANAGEMENT OF TELECOMMUNICATIONS SERVICES. TAM acknowledges that Sabre is not a licensed provider

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of Telecommunications services. Sabre will arrange for and manage the provision of Telecommunications services for TAM where required in the applicable Work Order. Subject to TAM's approval, Sabre will select a third party provider that is licensed to provide such services. Sabre will monitor such provider's performance of its obligation to provide and maintain the Telecommunications services, will work with such provider and with TAM to resolve problems with the Telecommunications services, and will take all reasonable actions to cause such provider to perform such obligation. Sabre will not be responsible for a failure of a third party Telecommunications provider to provide Telecommunications services, or for any degradation of the provision of such Telecommunications services by the third party provider. As used herein, "Telecommunications" includes any remote communication or connection between Customer and Sabre. For example, such connections may be by way of a direct communication link, radio, microwave or satellite link or by way of the Internet or World Wide Web.

20. MANAGEMENT OF OTHER THIRD PARTIES. The Parties acknowledge that the Sabre Services may include Sabre's management or procurement of various services and products provided by third parties at the request of TAM. TAM agrees that this arrangement would not constitute Sabre's subcontracting of some portions of the Sabre Services for purposes of this Agreement, and that Sabre would not be responsible or liable for the performance, inadequate performance or non-performance of such third party Sabre Services or products. The remedies for any such third party service or product problems to the extent attributable to nonperformance or inadequate performance by any such third party provider or nonconformance of any such third party product will be the remedies set forth in the applicable agreement with the provider of such third party service or product.

21. NOTICES. All notices under this Agreement and each Work Order will be in writing and will be deemed to have been duly given if delivered personally or by a nationally recognized courier service, to the Parties at the addresses set forth herein. Either Party may change its address or designee for notification purposes by giving notice to the other of the new address or designee and the date upon which such change will become effective.

If to Sabre for technical matters and matters of an urgent nature:

Sabre Inc.                           With cc to TAM Account Manager
3150 Sabre Drive                     Sabre Brazil
Southlake, TX 76092-2129             Avenida Paulista 1106 1 degrees Andar
Attn: Technical Delivery Executive   Sao Paulo, SP
Email: tracy.cooper@sabre.com        email: luiz.ambar@sabre.com
Fax: 817 264-2307                    Fax: +55 11 3146-1450
Telephone: 817 264-7880              Telephone: +55 11 3146-1501

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If to TAM for technical matters or matters of an urgent nature:

TAM Linhas Aereas, S.A.                      with cc to IT Vice President

Avenida Jurandir 856                         Avenida Jurandir 856
Lote 4, Hangar 7, 3 degrees Andar            Lote 4, Hangar 7, 3 degrees Andar
Jardim Ceci, Sao Paulo, SP, Brasil           Jardim Ceci, Sao Paulo, SP, Brasil
CEP: 04072-000                               CEP: 04072-000
Attn: Antonio A. Faco                        Attn: Gelson Pizzirani
Email: Antonio.faco@tam.com.br               email: gelson.pizzirani@tam. com.br
Fax: +55 11 55826134                         Fax: +55 11 5582-6134
Telephone: + 55 11 5582-9348                 Telephone: +55 11 5582-8998

 For all other matters to Sabre
including legal notices:                     with cc to General Counsel:

Sabre Travel International Ltd.              Sabre Inc.
12 Lower Leeson Street                       3150 Sabre Drive
Third Floor, Ormonde House                   MD 9105, First Floor
Dublin, 2 Ireland                            Southlake, TX 76092-2129
Attn: Director                               Attn: General Counsel

                                             And:

                                             Sabre Inc.
                                             3150 Sabre Drive
                                             Southlake, TX 76092-2129
                                             Attn: President, Airline Solutions

For all other matters to TAM
Including legal notices:                     with cc to General Counsel

TAM Linhas Aereas, S.A.                      TAM Linhas Aereas, S.A.
Avenida Jurandir 856                         Avenida Jurandir 856
Lote 4, Hangar 7, 5 degrees Andar            Lote 4, Hangar 7, 5 degrees Andar
Jardim Ceci, Sao Paulo, SP, Brasil           Jardim Ceci, Sao Paulo, SP, Brasil
CEP: 04072-000                               CEP: 04072-000
Attn:Presidente                              Attn:General Counsel

22. PUBLIC RELATIONS AND MARKETING REFERENCES. Each Party will coordinate with the other regarding any media release, public announcement or similar disclosure relating to this Agreement or any Work Order or its subject matter and will give the other Party a reasonable opportunity to review and comment on the content of such release, announcement or disclosure prior to its release. This provision does not alter the restrictions on the disclosure of Confidential Information set forth in Section 7 and subject to Section 7. will not be construed so as to delay or restrict either Party from disclosing any information required to be disclosed in order to comply with any applicable laws, rules or regulations. Notwithstanding the foregoing but subject to any applicable laws, rules or regulations, each Party will have the right to list the name of the other Party, to make general references to the basic nature of the relationship between the Parties under this Agreement and to describe generally the type of services being provided by Sabre to TAM and TAM to Sabre under this Agreement and each Work Order in such Party's promotional and marketing materials, in such Party's oral or visual presentations to third parties, in interviews conducted by the news media or securities analysts and in or through any other available media channels, including print, internet, radio, cable and broadcast mediums.

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23. TRADEMARKS. Sabre grants TAM for the term of this Agreement a non-exclusive and non-transferable license to use Sabre's tradenames and trademarks for the Licensed Software in accordance with the terms outlined in Exhibit C (the "Trademark Policy"); provided, however, no use of Sabre's tradenames or trademarks shall be made without the prior written approval of Sabre, which approval shall not be unreasonably withheld or delayed. Sabre will provide TAM its current graphic standard guidelines and will inform TAM in writing of any changes in the Trademark Policy.

24. HIRING OF EMPLOYEES. Unless mutually agreed, during the term of this Agreement and for a period of 12 months thereafter, neither Party will solicit, directly or indirectly, for employment or employ any employee of the other who is or was involved in the performance of any of the services pursuant to this Agreement without the prior written consent of the other. An unsolicited inquiry for employment from an employee or a response to a job posting in a general solicitation by one of the Parties (for example, a job opportunity listed in a Party's web site or solicitations in job fairs, newspaper or trade magazine listings) shall not be considered a violation of this Section 24.

25. REQUIRED DOCUMENTATION. The Parties shall be responsible for providing reasonable assistance to each other in obtaining all necessary work visas and any other documentation required for individuals to provide Services on behalf of the Parties under this Agreement or any Work Order.

26. RIGHT TO ENGAGE IN OTHER ACTIVITIES. Sabre and its Affiliates may provide data processing and other information technology services for other parties at any Sabre facility that Sabre uses to perform Sabre Services or to provide access to the Hosted Software. Subject to TAM's proprietary rights in its data and Sabre's confidentiality obligations contained in
Section 7, nothing in this Agreement will impair Sabre's right to acquire, license, market, distribute, develop for itself or others or have others develop for Sabre similar technology performing similar functions as the technology and Sabre Services contemplated by this Agreement.

27. LEGAL AUTHORITY TO CONTRACT. Each Party represents and warrants that as of the Effective Date: (i) such Party is a corporation in good standing under the laws of its jurisdiction of formation and has the authority to carry on its business as now conducted; (ii) it has the legal authority to execute deliver and perform its obligations under this Agreement and any Work Order (iii) the obligations under this Agreement have been duly authorized by all necessary corporate action; (iv) this Agreement has been executed by duly authorized officers of such Party; (v) that the Agreement constitutes a valid and legally binding obligation of the Party enforceable in accordance with its terms, and (vi) and no consent or approval of stockholders or any other person or consent or approval of, notice to, or filing with, any public authorities is required as a condition to the validity of this Agreement.

28. SABRE PORTFOLIO ACCESS. From time to time during the term of the Agreement and as the Parties may agree, Sabre will provide TAM with information, including descriptions of basic uses and applications, concerning Sabre products, services and/or enhancements thereto which may be applicable for TAM's operations. This information will be provided free of charge for TAM's consideration for use in their operations.

29. BETA TESTING. Sabre from time to time develops new software/hardware products or services along with supporting documentation (the "Beta Products") for use by its clients. The Parties believe it is mutually beneficial to allow TAM to utilize the Beta Products for purposes of testing, analysis, and evaluation under the conditions of TAM's business and environment (the "Beta Tests"). Whenever Sabre has a Beta Product suitable for Beta Tests by an airline, or has a product for another market segment that Sabre thinks may benefit from testing by TAM, Sabre will notify TAM of such product. Subject to TAM's agreement to test, the Parties will mutually develop a plan for such testing prior to the commencement of each Beta Test. TAM, in the exercise of its sole discretion may not agree to participate in any Beta Test. The Beta Products are a pre-release test version and may have defects or deficiencies that cannot or may not be corrected by Sabre. Sabre makes no warranties, express or implied, including, but not limited to, warranties of merchantability, satisfactory quality and fitness for a particular purpose, with respect to the Beta Products, their use or support. TAM will actively use the Beta Products subject to the Parties testing plan free of charge during the Beta Tests. TAM will make available to Sabre copies of data connected with its use of the Beta Products including, but not limited

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to, test results, corrections, deficiency information, and actual or suggested improvements to the Beta Product and agrees to consult with Sabre in the review and analysis of the same. All reports, designs, specifications and other materials and all rights in all media made and/or developed during the Beta Test for enhancement of the Beta Products, whether prepared by Sabre or TAM, will be the sole and exclusive property of Sabre and its Affiliates; and all such reports, designs, specifications or other materials and all media shall be kept confidential by TAM. All right, title and interest throughout the world to any invention relating to enhancement of the Beta Products, whether or not patentable, conceived in or made in the course of or as a result of TAM's Beta Test shall be the sole and exclusive property of Sabre and its Affiliates, provided that in no event will Sabre disclose to any third party any proprietary TAM data or information. Subject to TAM's approval, TAM agrees to provide an endorsement statement that Sabre can use in advertisement and sales materials for the Beta Products. If TAM desires to continue using the Beta Product after the expiration of the Beta Test, or contracts with Sabre for the production version of the Beta Product within * months, the Parties will negotiate an appropriate charge for such product, including any credits for TAM for the use of TAM Equipment, software and/or services in connection with the Beta Test.

30. RIGHT OF RESPONSE. In consideration of access to Sabre portfolio and the right to act as a Beta Product testing site as provided in Sections 28 and 29, TAM agrees to give Sabre the right of response in connection with any requirements TAM may have related to airline products and services of the variety offered by Sabre. Concurrently with discussing with any other provider of such airline products and services, TAM will notify Sabre of its interest in obtaining such products and services. TAM will discuss in good faith with Sabre the provision of such products or services from Sabre to TAM, and will be allowed the same opportunity, conditions and time to formulate a response as TAM provides to any third party. If Sabre's response is not accepted by TAM, TAM will be free to negotiate and enter into an agreement with any third party for any such airline products and services at its discretion and without interference by Sabre. Sabre will make no claim against any such third party as a result of their selection by TAM for such airline products and services.

31. OTHER. Where agreement, approval, acceptance or consent of either Party is required by this Agreement or any Work Order, such action will not be unreasonably withheld or delayed. The Parties are independent contractors, and neither this Agreement nor any Work Order will be construed as constituting either Party as partner, joint venturer or fiduciary of the other. If any provision (other than a provision relating to any payment obligation) of this Agreement or any Work Order or the application hereof or thereof to any persons or circumstances is, to any extent, held invalid or unenforceable, the remainder of this Agreement and each Work Order or the application of such provision to persons or circumstances other than those as to which it is invalid or unenforceable will not be affected thereby, and each provision of this Agreement and each Work Order will be valid and enforceable to the extent permitted by law. Nothing in this Agreement or any Work Order may be relied upon or will benefit any Party other than TAM and Sabre and their respective Affiliates. Any provision of this Agreement which contemplates performance or observance subsequent to any termination or expiration of this Agreement will survive any termination or expiration of this Agreement and continue in full force and effect. This Agreement and each Work Order (a) will be governed by the substantive laws of the State of New York, United States of America (without giving effect to any choice-of-law rules that may require the application of the laws of another jurisdiction), (b) will be binding on the Parties and their successors and permitted assigns, (c) may not be assigned by either Party without the prior written consent of the other (except that Sabre will have the right to perform the Sabre Services itself and through its Affiliates, to assign this Agreement and each Work Order to such Affiliates, provided no such assignment shall relieve Sabre of any of its obligations under this Agreement or any Work Order and in the event of any such assignment by Sabre, Sabre and its affiliate will be jointly and severally liable to TAM for any damages as provided for in this Agreement and any Work Order) and (d) may not be changed or modified orally or through a course of dealing, but only by a written amendment or revision signed by the Parties. This Agreement and each Work Order (including any exhibits or attachments referred to herein or therein and attached hereto or thereto, each of which is incorporated herein or therein, as applicable, by this reference for all purposes) constitute, as of the effective date of this Agreement or that Work Order, as applicable, the full and complete statement of the agreement of the Parties with respect to the subject matter hereof and thereof and supersede any previous or contemporaneous agreements, understandings or communications, whether written or oral, relating to such subject matter.

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IN WITNESS WHEREOF, the Parties have duly executed and delivered this Agreement by their duly authorized representatives as of the date first set forth above.

SABRE TRAVEL INTERNATIONAL LTD. (No. 272493) TAM LINHAS AEREAS S.A.,

By:                                          By:
     --------------------------------           --------------------------------
Name:    Margaret Lewis                      Name:    Gelson Pizzirani
Title:   Director                            Title:   Vice President
Date:    October 3, 2003                     Date:    October 3, 2003

                                             By:
                                                --------------------------------
                                             Name:    Ruy Antonio Mendes Amparo
                                             Title:   Vice President
                                             Date:    Octobers 3, 2003

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                                      D-1

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WORK ORDER 1

THIS WORK ORDER NUMBER 1 ("WO1") will confirm the mutual understanding and agreement of each of Sabre Travel International Ltd. ("Sabre"), and TAM Linhas Aereas S.A., a Brazilian corporation ("TAM") as to the terms and conditions pursuant to which Sabre itself and through its direct and indirect wholly-owned subsidiaries or Affiliates, will perform the services and produce the deliverables described in this WO1. All references to Sabre and TAM in this WO1 will be deemed to include all respective Parties subsidiaries and Affiliates, and TAM and Sabre may be referred to herein individually as a "Party" and together as the "Parties". The terms and conditions of this WO1 are as follows:

1. This WO1 is entered into by the Parties under the provisions of the General Services Agreement, and Exhibits thereto, dated as of October 3, 2003, between Sabre and TAM (the "Agreement"), and, except as otherwise provided in this WO1, all provisions of the Agreement are applicable to this WO1. If there is a conflict between the terms of this WO1 and the Agreement, the terms of this WO1 will be controlling.

1.1 The term of this WO1 will begin on October 3, 2003, and, unless earlier terminated as provided in the Agreement, will continue through October 3, 2013 (the "Term of this WO1"). The Term of this WO1 may be extended by mutual written agreement of the Parties.

2. THE TECHNOLOGY SOLUTION. The technology solution ("Technology Solution") envisioned as Sabre Services by the Agreement is described in two specific parts; 1) the "Multihost Solution" which encompasses products and services including host-based reservations provided and supported by Sabre and 2) the "Portal Solution", a web-based tool provided and supported by Sabre which integrates the TAM Solution defined in Attachment 1 of this WO1 under Section 1, with the Multihost Solution. In addition, TAM will have certain obligations in connection with the Technology Solution described in this WO1 as TAM Solution obligations.

2.1 DETERMINATION OF APPLICABLE DATES. The terms of this WO1 shall be governed by three mutually agreed dates which are defined as follows:

2.1.1 EFFECTIVE DATE. The "Effective Date" of this WO1 shall be defined as the date upon which this WO1 is duly executed by both Parties.

2.1.2 IMPLEMENTATION DATE. The "Implementation Date" of the Technology Solution shall be the date by which Acceptance is deemed to have occurred pursuant to Section 2(d) of the Agreement.

2.1.3 SUSPENSION DATE. The "Suspension Date" shall be defined as the earlier of (i) the date upon which TAM discontinues participation in all Global Distribution Systems ("GDS") within Brazil or (ii) (a) * days following the date upon which Sabre Subscriber locations within Brazil which generated * % of TAM ticket sales revenue generated by Sabre Subscribers for the preceding * months prior to the Effective Date of the Agreement have had Infrastructure preparation completed as described in Section 7.4 and (b) Brazilian travel agents and other related producers (e.g. tour operators, consolidators, etc.) who produced * % of TAM's domestic point of sale passenger revenue in the preceding * months prior to the Effective Date of the Agreement have had access to training on the Technology Solution or (iii) the * Brazilian travel agencies, including * % of their branches, or related producers, who produced the most revenue for TAM in the preceding * months (a) have had access to training on the Technology Solution and (b) of these * top producers, all Sabre Subscribers have had Infrastructure preparation completed as described in Section 7.4.

2.1.4 PRE-EXISTING MULTIHOST AGREEMENT. TAM's Multihost Agreement with Sabre dated February 18, 1993 shall remain in full force and effect until the Effective Date and shall be put into abeyance on the Effective Date until the earlier of (i) the expiration of this WO1 at which time

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the Multihost Agreement will automatically terminate or (ii) termination in accordance with Section 12 (e) of the Agreement, at which time the Multihost Agreement will be reinstated in accordance with Section 12 (e) of the Agreement.

3. THE MULTIHOST SOLUTION. Throughout the Term of this WO1, Sabre will provide TAM with certain Multihost Services including but not limited to hosted computer services ("Hosted Services"), maintenance of Multihost software and databases ("Maintenance Services"), and management of telecommunication services ("Telecommunication Services") as described more thoroughly below.

3.1 DESCRIPTION OF MULTIHOST SOFTWARE. Sabre shall provide or cause to be provided to TAM access to the Multihost Software, in accordance with Attachment 1 to this WO1 under the Section 2.1 "Description of Multihost Software". As used herein, the term "Multihost Software" means the Sabre proprietary computerized reservations system used in relation to the provision of air transportation services as described in Section 2 of Attachment 1 of this WO1.

3.2 DESCRIPTION OF MULTIHOST MAINTENANCE SERVICES. Sabre shall provide or cause to be provided to TAM certain Multihost Maintenance Services, as described in Sections 3.4(a)(ii), 3.4(b)(vii), 3.4(d) and 3.4(e) of this WO1.

3.3 DESCRIPTION OF MULTIHOST TELECOMMUNICATIONS SERVICES. Except as otherwise agreed in a separate agreement, TAM shall be responsible for obtaining communications facilities, at its own expense, necessary to communicate with the Multihost Software. Sabre shall cooperate with TAM to facilitate the connection of such communication facilities.

3.4 MULTIHOST SOFTWARE AND DATABASE SUPPORT.

(a) TAM DATABASE SUPPORT.

i) TAM DATABASE. Sabre acknowledges that the TAM database (consisting of all TAM information, data and records residing in the TAM partition of the Sabre Multihost computer ("TAM Database") contains information proprietary to TAM. The TAM Database shall be and will remain the sole property of TAM and only Equipment (as defined in Section 9(d) of the Agreement) specified by TAM may be used to access the TAM Database; provided, however, that Sabre and its subcontractors' data processing personnel shall have access to the TAM Database to ensure the integrity and performance of the Multihost Software. Sabre and its subcontractor's personnel having access to the TAM Database shall be made aware of their duty to maintain the confidentiality of the TAM Database and of their duty to use such access only for purposes contemplated by the Agreement. The location of the TAM Database may or may not be physically separate from the databases of Other Customers of Sabre. As used herein "Other Customers" means any other carrier which obtains Multihost Software or Multihost Services from Sabre.

ii) SABRE TO MAINTAIN TAM DATABASE. Sabre shall maintain, or cause to be maintained, the TAM Database, and shall make backup archival copies of the TAM Database at least once in each twenty-four hours (but not less frequently than for any Other Customer) so that if the TAM Database is for any reason erased or destroyed, Sabre shall promptly restore the archival copy. If the TAM Database is erased or destroyed for (i) causes within Sabre's sole control, Sabre will restore the archival copy at no additional charge and, in the invoice following the erasure or destruction of the TAM Database, Sabre will credit TAM * % of the previous month's invoice for services provided by Sabre to TAM pursuant to this WO1, prorated to reflect the number of hours and minutes of the outage resulting from the erasure or destruction of the TAM Database. (ii) if, alternatively, the TAM Database is erased or destroyed for causes within TAM's sole control, TAM will pay Sabre for all labor incurred in restoring the archival copy at Sabre's then current labor rates, (iii) for any TAM Database erasure or destruction that is outside of TAM's sole control and Sabre's sole control, TAM shall pay Sabre half of Sabre's standard applicable

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labor cost incurred in restoring the archival copy. Any incident pursuant to this Section 3.4(a)(ii) for which a credit is issued will not be eligible for a credit under any other section of this WO1.

iii) ACCESS TO THE MULTIHOST SOFTWARE RESTRICTED. Sabre will restrict access to data contained within the Multihost Software by functional identification ("Duty Codes") to facilitate data security. TAM agrees that the Duty Codes used by TAM, unless otherwise agreed to by Sabre, will be identical to those used by Sabre. Sabre shall use the same security procedures to protect the TAM Database from unauthorized access as it uses for Other Customers. Sabre shall protect the confidentiality of the TAM Database using the same care it uses to protect its own confidential information of like importance, but not less than reasonable care. Sabre reserves the right to modify its regulations and procedures from time to time to improve such protection.

iv) SABRE DATABASE SUPPLIERS. Use of the TAM Database is, or may be, subject to certain restrictions and covenants set forth in agreements with database application software suppliers ("Database Suppliers"). TAM agrees to comply with such restrictions and covenants provided that copies of the agreements in which they are contained are provided to TAM within fifteen (15) days prior to the effective date of any such restriction or covenants that are imposed on Sabre hereafter and provided further that Sabre will exercise care that such restriction does not impair TAM's rights under the agreement and this WO1. In providing copies of such agreements to TAM, Sabre may delete pricing or other commercially sensitive information. To the extent that information from such Database Suppliers becomes unavailable or third party software is not supported, Sabre is relieved of its obligation to provide such data to TAM; however, Sabre will use reasonable efforts to supply replacement data.

(b) MULTIHOST SOFTWARE PERFORMANCE.

i) PERFORMANCE STANDARDS. Subject to the provisions of Sections 3.4(b)(ii) and (iii). Sabre will maintain, or to cause to be maintained, the Multihost Software's availability twenty-four hours per day, seven days per week, subject to Downtime. As used herein, "Downtime" means the time when the Multihost Software is not available for productive use at the Sabre Data Center or at such other location as Sabre may designate Data Center. As used herein, "Data Center" means the Data Center operated by or on behalf of Sabre and currently located in Tulsa, Oklahoma, United States or such other location as Sabre may designate.

ii) AVAILABILITY. Except as may be otherwise provided in an applicable Work Order, Sabre will provide Uptime for the Multihost Software at least * of the time during the Term of this WO1. As used herein "Uptime" means the time when the Multihost Software is available for productive use at the Data Center (excluding Downtime), measured during a calendar month, and calculated as (i) the number of minutes of availability during such measurement period, divided by (ii) the total minutes during such measurement period minus the Downtime minutes referred to in Sections 3.4(b)(v) and (vi). No exception will be made in the case that Uptime as calculated herein is not met solely because of the failure of Multihost Software as defined in Section 2(c) the Agreement. If, Sabre fails to provide Uptime for the Multihost Software for at least * of the time as specified above during any calendar month, Sabre will issue TAM a credit on its next invoice in an amount equal to * of the previous month's invoice. Any incident pursuant to this Section 3.4(b)(ii) for which a credit is issued (the "first incident") will be eligible for an additional credit under this WO1, if but only if, the cause of such other incident is not directly related to the cause of the first incident.

iii) LIMITATIONS ON SECTIONS 3.4 (B) (I) AND (II). Sabre shall not be in default of the service levels or service level goals under this Agreement to the extent such failure is wholly or partly due to any one of the following reasons: (i) TAM's failure to perform its

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obligations under the Agreement that affects the performance of the respective Multihost Software system; (ii) Force Majeure Events; (iii) the performance of a third party (including but not limited to Telecommunications provider(s));
(iv) changes made in accordance with the procedures set forth in Section 3.4(c)(ii) below, (v) unforeseen capacity increases based on changes in TAM's business processes or methodology for generating Messages;(vi) TAM's internal software other than the "Licensed Software," as defined in the Agreement; and
(vii) performance of third party software or hardware. As performance of the Multihost Software is dependent on performance of local area and wide area networks, and software and hardware of Third Parties and TAM, Sabre shall not be responsible for problems or delays due to technical matters beyond its control. As used herein, the term "Messages" means a grouping of characters transmitted to the Sabre Multihost TAM reservation partition at the Data Center whether such transmission is made manually or automated. Each such transmission constitutes one Message.

iv) SOLE AND EXCLUSIVE REMEDY FOR OUTAGES. In the event of an outage, Sabre will restore the Multihost Software as soon as reasonably practicable using the same degree of effort accorded a similar problem for Other Customers. Except as may be provided in an applicable Work Order, if Uptime is not at least * for any * consecutive day period during the Term of this WO1, Sabre's sole liability and TAM's sole and exclusive remedy shall be for TAM to terminate this WO1 and the Agreement.

v) ROUTINE DOWNTIME. Sabre may from time to time perform routine Downtime for system maintenance of and software modifications to the Multihost Software. Except for operational necessity, routine Downtime shall occur between 2100 and 0200 United States Central Time ("CT"). Sabre will endeavor to give TAM at least hour written advance notice of Routine Downtime and its anticipated duration.

vi) EXTENDED DOWNTIME. The Multihost Software may also be unavailable for longer periods for hardware upgrades, facility modification, TAM requested reorganization of the TAM Database, and similar reasons. Sabre will use reasonable efforts to limit such Downtime to no more than * hours, occurring between the hours of 2000 and 0400 CT if on weekdays, and 1900 and 0300 CT if on weekends or on a United States holiday. To the extent practicable, Sabre shall consult with TAM in scheduling such Downtime and shall endeavor to accommodate TAM with respect to scheduling. Although Sabre shall avoid unscheduled Downtime and to maintain Uptime at an industry-competitive level, such Downtime may occur despite such efforts. Unscheduled Downtime shall be included in the calculation of Downtime.

vii) ERRORS AND PROBLEMS. After receiving notice from TAM of any Errors or problems with the Multihost Software, Sabre will commence efforts to correct promptly the Error or problem. As used herein, the term "Error" means a reproducible failure of a software system to perform in all material respects in accordance with its functionality. Sabre will accord to TAM the same priority, speed of response, and degree of effort that it accords or would accord to any Other Customer for a similar Error or problem. In the case of a "Level 1 Error" as defined in Section 3.4(d) of this WO1, Sabre will guarantee service restoration within * hours for * % of cases, and (ii) in the case of a "Level 2 Error" as defined in Section 3.4(d) of this WO1, Sabre will guarantee service restoration within * hours for * % of cases. If Sabre fails to restore service within the timeframes described in (i) and (ii) above, Sabre will issue TAM a credit on its next invoice in an amount equal to * % of the previous month's invoice. Any incident pursuant to this Section 3.4(a)(vii) for which a credit is issued (the "first incident") will be eligible for an additional credit under this WO1, if, but only if, the cause of such other incident is not directly related to the cause of the first incident. Sabre shall have no obligation to fix Errors for any version of a Software system other than the most current version and the immediately preceding version of such Multihost Software system. If a Level 2 Error is not corrected within * days after receiving written notice of such Level 2 Error, TAM's Chief Executive Officer may give written notice to Sabre's Chief

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Executive Officer that the Level 2 Error has not been corrected and if such Level 2 Error has not been corrected within * days from the date of such notice, TAM may terminate the Agreement and this WO1, and seek damages as otherwise provided for in the Agreement.

viii) PERFORMANCE RELATED TO TELECOMMUNICATIONS AND EQUIPMENT FACILITIES. If any unusual or unforeseen growth in TAM's operations occurs, Sabre will consult with TAM and subject to the parties mutual agreement, TAM will pay for all Equipment and Telecommunications facilities and necessary interfaces and related installation costs that may be required by such unusual or unforeseen growth. Additional fees may also apply as may be set forth below. The Parties acknowledge that the incorporation of another Brazilian carrier within the scope of this WO1 will not be deemed unusual or unforeseen growth with respect to Equipment and Telecommunications facilities as provided herein by them.

i) SABRE CHANGES TO MULTIHOST SOFTWARE. From time to time, the functionality of a Multihost Software system may be modified by Sabre creating enhancements and adding new functions. If Sabre offers these enhancements or new functions without charge to TAM, then TAM agrees to accept them for use with the applicable Multihost Software system provided TAM is not required to pay for any related upgrades or later implemented related upgrades.

ii) TAM CHANGE REQUESTS. TAM may submit a Change Request to Sabre for enhancements and new functions, provided that the cost of developing such enhancements or new functions may, at Sabre's discretion, be charged to TAM for such development cost at a rate of USD$ * per hour during the first * months after the Implementation Date. Subsequently TAM shall pay Sabre for such services at Sabre's then prevailing labor rates per hour or another rate mutually agreed by the Parties. Any such change shall be subject to the Change Request procedure referred to in Section 2(e) of the Agreement. Should Sabre exercise its discretion to charge TAM for the requested change, Sabre will retain full rights to the change but will not offer this functionality to any third party if TAM has requested the product be exclusively TAM's for a maximum period of * months after such change is in production. If the product is made available to any third parties, with TAM's consent, Sabre will pay TAM a prorated amount for the remaining exclusivity period, but not exceeding the amount charged by Sabre to TAM for the change.

iii) ENHANCEMENT AND NEW FUNCTION IMPLEMENTATION. Sabre will provide TAM with reasonable prior notice of the scheduled implementation of enhancements and new functions. Such notice shall be provided to TAM in the same manner and at the same time as such notice is provided to Other Customers. Sabre shall provide training materials to TAM with respect to such enhancements and new functions. The training materials delivered to TAM shall be the latest versions that Sabre provides to Other Customers except in cases where customized documentation is prepared for an Other Customer.

iv) SABRE TEST OF ENHANCEMENTS AND NEW FUNCTIONS. Except when precluded by operational emergencies, Sabre shall test all Multihost Software capabilities, including without limitation, enhancements and new functions, under an internal test environment. TAM acknowledges that despite such internal testing, conditions may develop that lead to error conditions, malfunctions, or a breakdown in the operation of a Multihost Software system. Should any of the foregoing occur, Sabre shall correct any such condition with the same degree of effort afforded a similar problem affecting Other Customers.

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(D) SABRE HELP DESK SUPPORT. TAM will have access to a Sabre help desk twenty-four (24) hours a day, seven (7) days a week for the Multihost Software. All calls to the Sabre help desk will be coordinated through a central processing group at TAM, which group will be responsible for the initial line of support for the Multihost Software (the "TAM Processing Group"). If TAM's Processing Group is unable to answer the question or resolve an issue with the Multihost Software, it will then contact the Sabre help desk. The Sabre help desk will be responsible for facilitating resolution of the question or issue. A Sabre help desk coordinator will be responsible for logging and tracking Errors after they have been reported by TAM through a problem report, contacting the TAM Technical Coordinator, as defined in Section 3.4(e). to confirm receipt of a problem report and jointly determining the priority level of the Error. Priority levels will be determined as follows:

Level "1" Errors. These are problems with the Multihost Software's functionality that renders it inoperable. TAM will be advised at least every twenty-four(24) hours by the help desk as to the status of efforts to resolve the Level 1 Error. One or more members of Sabre senior management will be informed on a daily basis of all Level 1 Errors.

Level "2" Errors. These are problems with the Multihost Software's functionality that are significant to the productive use of the Multihost Software but the Multihost Software can continue to operate in a restricted fashion. These problems will be addressed in a reasonable time after any Level 1 Error has been resolved.

Level "3" Errors. These are problems with the Multihost Software for which Sabre has provided an acceptable work around solution and do not have a material impact on TAM's productivity and customer service.

(E) TAM'S ERROR REPORTING OBLIGATIONS. TAM shall have following obligations with regard to the reporting and resolution of Errors and problems:

(i) During normal business hours provide an on-site TAM Technical Coordinator;

(ii) Log each incident of a problem or Error, completely describing the specific event and documenting all aspects of the incident (users involved, data inputs, completed description of the incident, etc.);

(iii) The Technical Coordinator will coordinate with the software user, hardware/operating system vendors, and the qualified LAN administrator to confirm problems originating in the software;

(iv) Promptly communicate to Sabre all problem reports;

(v) Notify Sabre in writing of any modifications made by TAM to hardware or operating software configuration which may impact the operation of the Multihost Software;

(vi) Promptly install, or assist in installing, solutions sent by Sabre to remedy malfunctions;

(vii) Be responsible for maintaining a procedure for reconstruction of lost or altered files, data, or programs, and for actually reconstructing any lost or altered files, data or programs;

(viii) Reasonably cooperate with Sabre in the resolution of any problem or Error with the Multihost Software.

3.5 MULTIHOST ACCESS AND USE RIGHTS. Following Acceptance and for so long as TAM is in compliance with all of its obligations herein, Sabre grants to TAM and TAM accepts from Sabre, for the Term, a limited, non-exclusive and non-transferable (except as provided herein) right for TAM and its employees to access the Multihost Software and use the executable code of the Licensed Software and accompanying documentation solely for TAM's internal airline operations. The documentation may be provided in paper, computer disk, over the web or via online help in the Multihost Software or Licensed Software, as applicable.

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3.6 CODE SHARING ARRANGEMENTS. If authorized by an applicable Work Order, TAM's internal airline operations shall include use of the Licensed Software or the Multihost Software by TAM in connection with TAM's code sharing arrangements with other air carriers, so long as all of the following conditions are met:

(a) Any code sharing arrangements are disclosed in writing to Sabre as and when they are entered into by TAM;

(b) TAM pays Sabre fees for all code share flights and otherwise as set forth and described in Section 9.9(a) of this WO1;

(c) TAM shall restrict access to the Licensed Software or Multihost Software to its employees using the Licensed Software or Multihost Software in connection with the code sharing arrangement with TAM;

(d) TAM's use of the Licensed Software or Multihost Software in connection with TAM's code sharing arrangement with other carriers shall be limited solely to processing data in respect of TAM's inventory of flights operated by such code sharing carriers; and

(e) TAM shall remain responsible for all payments to Sabre under this Agreement arising out of use of the Licensed Software or the Multihost Software with TAM's carrier code in connection with any code-sharing carriers.

3.7 COPIES. Any Multihost Software shall be resident on equipment operated by Sabre at the Data Center, and TAM will not receive a copy thereof (TAM's rights being limited to the access and use of the Multihost Software resident at the Data Center). Unless otherwise provided in another Work Order or the Agreement, TAM shall receive only one copy of any Licensed Software, and one copy of the accompanying documentation therefore. TAM may make three (3) copies of each Licensed Software system and unlimited copies of the TAM Data, as well as accompanying documentation solely for the permitted use identified herein and for back-up purposes. TAM shall reproduce and include on each copy and on each partial copy any copyright notice and proprietary rights legend contained in the Licensed Software system and accompanying documentation, as such notice and legend appear in or on the original.

3.8 EXPRESS RESTRICTIONS ON SOFTWARE USE. The Multihost Software and the Licensed Software and their structure, organization and source code constitute valuable trade secrets of Sabre. Accordingly, TAM agrees it will not (a) modify, adapt, alter, translate, or create derivative works from any Multihost Software or Licensed Software system; (b) merge any Multihost Software or Licensed Software with any other software unless agreed in advance with Sabre; (c) sublicense, lease, rent or loan the Multihost Software or Licensed Software to any third party, (d) reverse engineer, disassemble, compile, reverse compile, or decompile the Multihost Software or Licensed Software; or (e) otherwise use or copy the Multihost Software or Licensed Software except as expressly allowed in this Agreement. TAM will also restrict access to and use of the Licensed Software, Multihost Software and other components of IT systems operated by Sabre to perform the Services to its own employees who require access and use in performing their duties.

4. THE PORTAL SOLUTION. Throughout the Term of this WO1, Sabre will provide TAM with certain Portal Services including but not limited to hosted internet integration services through the Sabre Multihost environment ("Portal Services"), maintenance of portal software ("Portal Maintenance Services"), and portal telecommunication services ("Portal Telecommunication Services") as described more thoroughly below (collectively the "Portal Solution"). In connection with the Portal Services, TAM will have the TAM Solution Obligations described in
Section 5 of this WO1.

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4.1 DESCRIPTION OF PORTAL SOFTWARE. Sabre shall provide or cause to be provided to TAM access to certain Portal Software, a description of which is contained in Attachment 1 to this WO1 under the Section 3.1, "Description of Portal Software". From the Effective Date until * TAM may request and Sabre will provide at Sabre's sole cost * hours of Portal Software development, for the purpose of developing additional functionality, which hours must be utilized by * . Any unused hours remaining after * will be lost and Sabre will have no further obligation to TAM under this Section 4.1. Any additional functionality that results from Sabre Portal Software development using these * hours will be deemed to be included in the definition of Portal Software. These software development hours are not included within the hours specified in
Section 11.4 hereof.

4.2 DESCRIPTION OF PORTAL MAINTENANCE SERVICES. Sabre shall provide or cause to be provided to TAM certain Portal Maintenance Services, as described in Sections 4.4(a) (vii), 4.4(c), 4.4(d) of this WO1.

4.3 DESCRIPTION OF PORTAL TELECOMMUNICATIONS SERVICES. Sabre shall provide or cause to be provided to TAM connectivity consisting of two circuits from Sao Paulo to the Data Center. These circuits will be utilized by TAM for this project exclusively.

4.4 PORTAL SOFTWARE SUPPORT.

(a) PORTAL SOFTWARE PERFORMANCE.

i) PERFORMANCE STANDARDS. Subject to the provisions of Section 4.4(a)(ii) and (iii), Sabre shall maintain, or to cause to be maintained, the Portal Software's availability twenty-four hours per day, seven days per week, subject to Portal Software Downtime. As used herein, "Portal Software Downtime" means the time when the Portal Software is not available for productive use at the Data Center.

ii) AVAILABILITY. Except as may be otherwise provided in an applicable Work Order, Sabre will provide Portal Software Uptime for the Portal Software at least * % commencing on the Implementation Date and * % commencing * days after the Suspension Date. As used herein "Portal Software Uptime" means the time when the Portal Software is available for productive use at the Data Center (excluding Portal Software Downtime), measured during a calendar month, and calculated as (i) the number of minutes of availability during such measurement period, divided by (ii) the total minutes during such measurement period minus the Portal Software Downtime minutes referred to in Sections 4.4(a)(v) and (vi). If, * days after the Suspension Date, Sabre fails to provide Uptime for the Portal Software for at least * % of the time as specified above during any calendar month, Sabre will issue TAM a credit on its next invoice in an amount equal to * % of the previous month's invoice. Any incident pursuant to this Section 4.4(a)(ii) for which a credit is issued (the "first incident") will be eligible for an additional credit under this WO1, if, but only if, the cause of such other incident is not directly related to the cause of the first incident.

iii) LIMITATIONS ON SECTIONS 4.4 (a) (i) AND (ii). Sabre shall not be in default of the service levels or service level goals under this Agreement to the extent such failure is wholly or partly due to any one of the following reasons: (i) TAM's failure to perform its obligations under the Agreement and this WO1 that affects the performance of the Portal Software system; (ii) Force Majeure events; (iii) the performance of a third party (including but not limited to Telecommunications provider(s)) unless selected by Sabre; (iv) unforeseen capacity increases based on changes in TAM's business processes or methodology; (v) TAM's internal software other than the Licensed Software and the Portal Software; and (vi) performance of third party software or hardware. As performance of the Portal Software is dependent on performance of local area and wide area networks, and software and hardware of third parties and TAM, Sabre shall not be responsible for problems or delays due to technical matters beyond its control.

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iv) SOLE AND EXCLUSIVE REMEDY FOR OUTAGE. In the event of an outage, Sabre shall restore the Portal Software as soon as reasonably practicable using the same degree of effort accorded a similar problem for Other Customers. Commencing * days after the Suspension Date, if the Portal Software Uptime is not at least * %) for any * consecutive day period during the Term of this WO1, Sabre's sole liability and TAM's sole and exclusive remedy shall be for TAM to terminate this WO1 and the Agreement.

v) ROUTINE PORTAL SOFTWARE DOWNTIME. Sabre may from time to time perform routine Portal Software Downtime for system maintenance of and software modifications to the Portal Software. Except for operational necessity, routine Portal Software Downtime shall occur between 2100 and 0400 Brasilia Time. Sabre will endeavor to give TAM at least hour advance notice of Routine Portal Software Downtime and its anticipated duration.

vi) EXTENDED PORTAL SOFTWARE DOWNTIME. The Portal Software may also be unavailable for longer periods for hardware upgrades, facility modification, TAM requested alterations to the Portal Software, and similar reasons. Sabre will use reasonable efforts to limit such Portal Software Downtime to no more than
* hours, occurring between the hours of 2100 and 0500 Brasilia Time. To the extent practicable, Sabre shall consult with TAM in scheduling such Portal Software Downtime and shall endeavor to accommodate TAM with respect to scheduling. During the period of extended Portal Software Downtime, the Portal Solution provided by Sabre may be unavailable.

vii) ERRORS AND PROBLEMS. After receiving notice from TAM of any material Errors or problems with the Portal Software or material inconsistencies with described functionality (collectively, "Error"), Sabre will commence efforts to correct such Errors or problems. Sabre will accord to TAM the same priority, speed of response, and degree of effort that it accords or would accord to any Other Customer for a similar Error or problem. In the case of a "Level 1 Error" as defined in Section 4.4(c) of this WO1, Sabre will guarantee service restoration within * hours for * % of cases, and (ii) in the case of a "Level 2 Error" as defined in Section 4.4(c) of this WO1, Sabre will guarantee service restoration within * hours for * % of cases. If Sabre fails to restore service within the timeframes described in (i) and (ii) above, Sabre will issue TAM a credit on its next invoice in an amount equal to * % of the previous month's invoice. Any incident pursuant to this
Section 4.4(a)(vii) for which a credit is issued (the "first incident") will be eligible for an additional credit under this WO1, if, but only if, the cause of such other incident is not directly related to the cause of the first incident. Sabre shall have no obligation to fix Errors for any version of the Portal Software other than the most current version and the immediately preceding version of such Portal Software. If a Level 2 Error is not corrected within * days after receiving written notice of such Level 2 Error, TAM's Chief Executive Officer may give written notice to Sabre's Chief Executive Officer that the Level 2 Error has not been corrected and if such Level 2 Error has not been corrected within * days from the date of such notice, TAM may terminate the Agreement and this WO1, and seek damages as otherwise provided for in the Agreement.

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(b) ENHANCEMENTS, NEW FUNCTIONS AND MODIFICATIONS.

i) NON-TAM REQUESTED FUNCTIONALITY. From time to time, the functionality of a Portal Software system may be modified by Sabre creating enhancements and adding new functions that were not requested by TAM. Sabre shall notify TAM of any material new functions or material modifications implemented during the term of this WO1. During the period that Sabre has exclusive marketing rights of the TAM Products as described in Exhibit B of the Agreement, Sabre shall provide TAM access to this non-TAM requested functionality at no charge. During any period where Sabre does not have exclusive marketing rights to the TAM Products as described in Exhibit B of the Agreement, such non-TAM requested functionality may be offered to TAM for a charge to be solely determined by Sabre. If Sabre offers these enhancements or new functions without charge to TAM then TAM agrees to accept them for use with the applicable Portal Software system provided TAM is not required to pay for any related upgrades or later implemented related upgrades.

ii) TAM CHANGES REQUESTS. TAM may submit a Change Request to Sabre for enhancements and new functions which are not included in Attachment 1 of WO1 under Section 3.1. provided that the cost of developing such enhancements or new functions may, at Sabre's discretion, be charged to TAM for such development cost at a rate of USD$ * per hour during the first * months after the Implementation Date. Subsequently TAM shall pay Sabre for such services at Sabre's then prevailing labor rates per hour or another rate mutually agreed by the Parties. Any such change shall be subject to the Change Request procedure referred to in Section 2(e) of the Agreement, and will include consideration of its impact on Sabre service level commitments. Should Sabre exercise its discretion to charge TAM for the requested change, Sabre will retain full rights to the change but will not offer this functionality to any third party if TAM has requested the product be exclusively TAM's for a maximum period of * months after such change is in production. If the product is made available to any third parties, with TAM's consent, Sabre will pay TAM a prorated amount for the remaining exclusivity period, but not exceeding the amount charged by Sabre to TAM for the change.

iii) ENHANCEMENT AND NEW FUNCTION IMPLEMENTATION. Sabre will provide TAM with prior notice of the scheduled implementation of enhancements and new functions. Such notice shall be provided to TAM in the same manner and at the same time as such notice is provided to Other Customers. Sabre shall provide training materials to TAM with respect to such enhancements and new functions. The training materials shall be substantially similar to those that Sabre provides to Other Customers.

iv) SABRE TEST OF ENHANCEMENTS AND NEW FUNCTIONS. Except when precluded by operational emergencies, Sabre shall test all Portal Software capabilities, including without limitation, enhancements and new functions, under an internal test environment. TAM acknowledges that despite such internal testing, conditions may develop that lead to error conditions, malfunctions, or a breakdown in the operation of a Portal Software system. Should any of the foregoing occur, Sabre shall use reasonable efforts to correct any such condition with the same degree of effort afforded a similar problem affecting any Other Customers.

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(c) SABRE HELP DESK SUPPORT. TAM will have access to a Sabre help desk twenty-four (24) hours a day, seven (7) days a week for the Portal Software. All calls to the Sabre help desk will be coordinated through a central processing group at TAM, which group will be responsible for the initial line of support for the Portal Software (the "TAM Processing Group"). If TAM's Processing Group is unable to answer the question or resolve an issue with the Portal Software, it will then contact the Sabre help desk. The Sabre help desk will be responsible for facilitating resolution of the question or issue. A Sabre help desk coordinator will be responsible for logging and tracking Errors after they have been reported by TAM through a problem report, contacting the TAM Technical Coordinator to confirm receipt of a problem report and jointly determining the priority level of the Error. Priority levels will be determined as follows:

Level "1" Errors. These are problems with the Portal Software's functionality that renders it inoperable. TAM will be advised at least every twenty-four (24) hours by the help dusk as to the status of efforts to resolve the Level 1 Error. One or more members of Sabre senior management will be informed on a daily basis of all Level 1 Errors.

Level "2" Errors. These are problems with the Portal Software's functionality that are significant to the productive use of the Portal Software but the Portal Software can continue to operate in a restricted fashion. These problems will be addressed in a reasonable time after any Level 1 Error has been resolved.

Level "3" Errors. These are problems with the Portal Software for which Sabre has provided an acceptable work around solution and do not have a material impact on TAM's productivity and customer service.

(d) TAM'S ERROR REPORTING OBLIGATIONS. TAM shall have following obligations with regard to the reporting and resolution of Errors and problems:

(i) During normal business hours provide an on-site TAM Technical Coordinator;

(iii) The Technical Coordinator will coordinate with the software user, hardware/operating system vendors, and the qualified LAN administrator to confirm problems originating in the software;

(iv) Promptly communicate to Sabre all problem reports;

(v) Notify Sabre in writing of any modifications made by TAM to hardware or operating software configuration which may impact the operation of the Multihost Software;

(vi) Promptly install, or assist in installing, solutions sent by Sabre to remedy malfunctions;

(vii) Be responsible for maintaining a procedure for reconstruction of lost or altered files, data, or programs, and for actually reconstructing any lost or altered files, data or programs;

(viii) Reasonably cooperate with Sabre in the resolution of any problem or Error with the Multihost Software.

4.5 PORTAL ACCESS AND USE RIGHTS. Following Acceptance and for so long as TAM is in compliance with all of its obligations herein, Sabre grants to TAM and TAM accepts from Sabre, for the Term of this WO1, a limited, non-exclusive and non-transferable (except as provided herein) right for TAM and its employees, and agreed third-parties to access the Portal Software to support TAM's airline operations. The documentation may be provided in paper, computer disk, over the web or via online help in the Portal Software or Licensed Software, as applicable.

4.6 COPIES. Any Portal Software shall be resident on equipment operated by Sabre at the Data Center, and TAM will not receive a copy thereof. TAM's rights will be limited to the access and use of the Portal Software resident at the Data Center). Sabre shall escrow the source code for the Portal Software, including all future maintenance releases as they become commercially available, together with the related documentation and any tools or data required to assemble and compile the source code, pursuant to mutually agreed conditions. In the event of (i) a breach by Sabre of the Agreement or this WO1 that frustrates Sabre's ability to provide the Technology Solution (ii) an event of Force Majeure that frustrates Sabre's ability to provide the Technology Solution, or (iii) the Termination of the Agreement, or this WO1

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other than for a breach by TAM, TAM shall have the right to access and modify the source code and use the Portal Software to meet its needs. In any event, TAM shall ensure that such parties modifying the Portal Software are under a nondisclosure agreement with TAM. Sabre shall own any such modifications that do not include any TAM owned technology or any technology provided by TAM from a third party. TAM will have a license to use the modifications, exclusively for the earlier of (i) such period as TAM has not obtained a substitute provider of technology similar to the Portal Software or (ii) thirty six (36) months from the time access is first granted to the source code as provided for herein. Nothing herein shall be construed to permit TAM to provide access to the source code to the Portal Software to any third party.

4.7 EXPRESS RESTRICTIONS ON PORTAL SOFTWARE USE. The Portal Software and its structure, organization and source code constitute valuable trade secrets of Sabre. Subject to the provisions Section 4.6, TAM agrees it will not (a) modify, adapt, alter, translate, or create derivative works from the Sabre Portal Software without the express written consent of Sabre; (b) merge the Portal Software with any other software without the express written permission of Sabre; (c) sublicense, lease, rent or loan the Portal Software to any third party, (d) reverse engineer, disassemble, compile, reverse compile, or decompile the Portal Software; or (e) otherwise use or copy the Portal Software except as expressly allowed in this Agreement.

4.8 PORTAL SOFTWARE USE BY NON-BRAZILIAN TRAVEL AGENCIES. The Parties shall use commercially reasonable efforts to implement the Technology Solution at non-Sabre travel agencies outside Brazil, on a case-by-case basis, when both TAM and Sabre agree that such implementation would be mutually beneficial Sabre shall be excused from its obligations under this WO1 for providing training and Infrastructure preparation to any such travel agency. Sabre Services, including modifications or enhancements that are required for software associated with the Portal Solution to adequately function outside Brazil are outside of the scope of this WO1.

4.9 COMPATIBILITY. Sabre will not alter or modify the Portal Solution product interfaces in any way as part of a release or upgrade which knowingly affects its compatibility with TAM software without advance notice to TAM.

5. THE TAM SOLUTION OBLIGATIONS. Throughout the Term of this WO1, TAM will have certain obligations with regard to the Portal Services of the Sabre Services including but not limited to permitting Sabre access to certain of TAM's proprietary software ("TAM Software"), maintenance of TAM's software ("TAM Software Maintenance"), and maintenance and access to TAM's internal databases ("TAM Database Services") as described more thoroughly below.

5.1 DESCRIPTION OF TAM SOFTWARE. TAM shall provide or cause to be provided to Sabre access to certain TAM Software, a description of which is contained in Attachment 1 to this WO1 under Section 1.

5.2 DESCRIPTION OF TAM SOFTWARE MAINTENANCE. TAM shall provide or cause to be provided to Sabre certain TAM Software Maintenance Services, as described in Sections 5.4(b) (vii) of this WO1.

5.3 DESCRIPTION OF TAM DATABASE OBLIGATIONS. The description of the TAM Database Obligations is described in Section 5.4 below.

5.4 TAM SOFTWARE AND DATABASE SUPPORT.

(a) TAM DATABASE OBLIGATIONS

i) TAM TO MAINTAIN TAM INTERNAL DATABASE. TAM shall maintain, or cause to be maintained, the TAM Internal Database, and shall make backup archival copies of the TAM Internal Database at least once in each twenty-four hours so that if the TAM Internal Database is for any reason erased or destroyed, TAM shall, at its own expense, promptly restore the archival copy. Sabre shall be under no liability in the event that the TAM

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internal database is erased or destroyed, unless through
Sabre's negligence or willful misconduct.

ii) ACCESS TO THE TAM SOLUTION SOFTWARE RESTRICTED. TAM will restrict access to data contained within the TAM Solution by functional identification ("Duty Codes") to facilitate data security. TAM will provide its own security to the TAM Solution and shall allow Sabre access through this system in accordance with the terms of this Agreement and any applicable confidentiality agreement. TAM reserves the right to modify its regulations and procedures from time to time to improve such protection.

(b) TAM SOFTWARE PERFORMANCE.

i) PERFORMANCE STANDARDS. TAM will maintain, or to cause to be maintained, the TAM Software's availability * hours per day, * days per week, subject to TAM Software Downtime. As used herein, "TAM Software Downtime" means the time when the TAM Software is not available for productive use at the Customer data processing facility currently located in Sao Paulo, SP, Brazil, herein referred to as the "TAM Data Center" or at such other location Customer may designate.

ii) AVAILABILITY. Except as may be otherwise provided in an applicable Work Order, TAM will provide TAM Software Uptime for the TAM Software at least * % of the time beginning * days after the Suspension Date. As used herein "TAM Software Uptime" means the time when the TAM Software is available for productive use at the TAM Data Center (excluding TAM Software Downtime), measured during a calendar month, and calculated as (i) the number of minutes of availability during such measurement period, divided by (ii) the total minutes during such measurement period minus the TAM Software Downtime minutes referred to in Sections 5.4(b)(v) and (vi).

iii) LIMITATIONS ON SECTIONS 5.4(b) (i) AND (ii). TAM shall not be in default of the service levels or service level goals under this Agreement to the extent such failure is wholly or partly due to any one of the following reasons: (i) Sabre's failure to perform its obligations under the Agreement that affects the performance of the TAM Solution; (ii) Force Majeure Events; (iii) the performance of a third party (including but not limited to Telecommunications provider(s); (iv) unforeseen capacity increases based on changes in Sabre's business processes or methodology for generating Messages; (v) Sabre's internal software; and (vi) performance of third party software or hardware. As performance of the TAM Software is dependent on performance of local area and wide area networks, and software and hardware of third parties and Sabre, TAM shall not be responsible for problems or delays due to technical matters beyond its control.

iv) SOLE AND EXCLUSIVE REMEDY. In the event of an outage, TAM will use commercially reasonable efforts to restore the TAM Software as soon as reasonably practicable. Except as may be provided in an applicable Work Order or the Sublicense Agreement, commencing * days after the Suspension Date, if TAM Software Uptime is not at least
* percent ( * %) for any * consecutive day period during the Term of this WO1, TAM's sole liability and Sabre's sole and exclusive remedy shall be for Sabre to terminate this WO1 or the Agreement.

v) ROUTINE TAM SOFTWARE DOWNTIME. TAM may from time to time perform routine TAM Software Downtime for system maintenance of and software modifications to the TAM Software. Except for operational necessity, routine TAM Software Downtime shall occur between 2100 and 0700 Brasilia Time. TAM will endeavor to give Sabre at least twenty-four (24) hour advance notice of Routine TAM Software Downtime and its anticipated duration. During the period of Routine TAM Software Downtime, the Portal Solution provided by Sabre may be unavailable.

vi) EXTENDED DOWNTIME. The TAM Software may also be unavailable for longer periods for

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hardware upgrades, facility modification, TAM required reorganization of the TAM Internal Database, and similar reasons. TAM will use reasonable efforts to limit such TAM Software Downtime to no more than * hours, occurring between the hours of 2100 and 0700 Brasilia Time, if on weekdays, and 1900 and 0700 Brasilia time, if on weekends or on a Brazilian holiday. To the extent practicable, TAM shall consult with Sabre in scheduling such TAM Software Downtime and shall endeavor to accommodate Sabre with respect to scheduling. During the period of Extended TAM Software Downtime, the Portal Solution provided by Sabre may be unavailable.

VII) ERRORS AND PROBLEMS. After receiving notice from Sabre of any problems with the TAM Software, TAM will commence efforts to correct the problem as soon as reasonably possible.

i) TAM CHANGES TO TAM SOFTWARE. From time to time, the Functionality of a TAM Software system may be modified by TAM creating Enhancements and adding New Functions. If TAM offers these enhancement or new functions without charge to Sabre, then Sabre agrees to accept them for use with the applicable TAM Software system. TAM will provide these Enhancements or New Functions without charge to Sabre.

ii) ENHANCEMENT AND NEW FUNCTION IMPLEMENTATION. TAM will provide Sabre with prior notice of the scheduled implementation of Enhancements and New Functions. TAM shall provide training and technical materials to Sabre with respect to such Enhancements and New Functions. The training and technical materials shall be substantially similar to those which Sabre provides to TAM.

iii) TAM TEST OF ENHANCEMENTS AND NEW FUNCTIONS. Except when precluded by operational emergencies, TAM shall test all TAM Software capabilities, including without limitation, Enhancements and New Functions, under an internal test environment. Sabre acknowledges that despite such internal testing, conditions may develop that lead to error conditions, malfunctions, or a breakdown in the operation of a TAM Software system. Should any of the foregoing occur, TAM shall use reasonable efforts to correct any such condition.

5.5 COMPATIBILITY. TAM will not alter or modify the TAM Solution product interfaces in any way as part of a release or upgrade which knowingly affects its compatibility with Sabre software without advance notice to Sabre.

6. THE AGENCY SOLUTION. Throughout the Term of this WO1, TAM acknowledges that Sabre will provide, at Sabre's discretion, Sabre Subscribers in Brazil with integration of the Portal Solution with the Sabre Subscriber's existing desktop GDS functionality (known as Turbo Sabre)(hereinafter the "Agency Solution"). To the extent Sabre provides the Agency Solution, it will do so in a manner that will not interfere with or impair the Sabre Subscriber's productive use of Portal Solution. Sabre will use reasonable efforts to provide TAM with prior notice of the scheduled implementation of enhancements and new functions of the Agency Solution. The use of the Agency Solution shall not impose any costs on TAM that are not otherwise contemplated by this WO1, unless such use is requested by TAM.

6.1 DESCRIPTION OF AGENCY SOFTWARE. Sabre shall provide or cause to be provided to TAM and Sabre Subscribers in Brazil access to certain Agency Software, a description of which is contained in Attachment 1 to this WO1 under the Section 4 "Description of Agency Software".

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6.2 DESCRIPTION OF AGENCY SOLUTION SUPPORT

(a) SABRE HELP DESK SUPPORT. Upon the introduction of the Agency Solution, TAM will have access to a Sabre Help Desk twenty-four (24) hours a day, seven (7) days a week for the Agency Solution for problems related to the integrated functionalities of the Agency Solution with the Portal Solution. Sabre Help Desk will be responsible for facilitating resolution of any questions or issues. A Sabre Help Desk coordinator will be responsible for logging and tracking Errors after they have been reported by TAM through a problem report, contacting the TAM Technical Coordinator to confirm receipt of a problem report and jointly determining the priority level of the Error. Priority levels will be determined as follows:

Level "1" Errors. These are problems with the Agency Solution functionality that renders the Portal Solution inoperable at Sabre Subscribers collectively or individually that represent more than * % of the TAM's revenue. TAM will be advised at least every twenty-four (24) hours by the Help Desk as to the status of efforts to resolve the Level 1 Error. One or more members of Sabre's senior management will be informed on a daily basis of all Level 1 Errors.

Level "2" Errors. These are problems with the Agency Solution functionality that concurrently affect Sabre Subscribers that collectively or individually represent more than * % of TAM's revenue and are significant to the productive use of the Agency Solution but the Agency Solution can continue to operate in a restricted fashion. These problems will be addressed in a reasonable time after any Level 1 Error has been resolved.

Level "3" Errors. These are problems with the Agency Solution functionality for which Sabre has provided an acceptable work around solution and do not have a material impact on TAM's productivity and customer service.

(b) ERRORS AND PROBLEMS. Upon the implementation of the Agency Solution at a Sabre Subscriber in Brazil, after receiving notice from TAM of any Errors or problems with the Agency Solution, Sabre will commence efforts to correct such Errors or problems. Sabre will accord to TAM the same priority, speed of response, and degree of effort that it accords or would accord to itself for a similar Error or problem. In the case of a "Level 1 Error" as defined in Section 6.2(a) of this WO1, Sabre will guarantee to rectify the Error or problem within
* hours for * % of cases, and (ii) in the case of a "Level 2 Error" as defined in Section 6.2(a) of this WO1, Sabre will guarantee rectify the Error or problem within * hours for * % of cases. If Sabre fails to restore service within the timeframes described in (i) and (ii) above, Sabre will issue TAM a credit on its next invoice in an amount equal to * % of the previous month's invoice. Any incident pursuant to this Section 6.2(b) for which a credit is issued (the "first incident") will be eligible for an additional credit under this WO1, if, but only if, the cause of such other incident is not directly related to the cause of the first incident. Sabre shall have no obligation to fix Errors for any version of the Agency Solution other than the most current version and the immediately preceding version of such Agency Solution. If a Level 1 Error is not corrected within * hours after receiving written notice of such Level l Error, TAM's Chief Executive Officer may give written notice to Sabre's Chief Executive Officer that the Level 1 Error has not been corrected and if such Level 1 Error has not been corrected within * hours from the date of such notice, TAM may terminate the Agreement and this WO1, and seek damages as otherwise provided for in the Agreement. If this remedy has not previously been exercised by TAM, its right to terminate the Agreement under these conditions shall expire 30 days following the correction of the Level 1 Error as described herein.

6.3 COMPATIBILITY. Sabre will not alter or modify the Agency Solution in any way as part of a release or upgrade which knowingly affects its compatibility with Portal Software.

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7. AGENCY INFRASTRUCTURE COST SHARING.

(a) Beginning with the Implementation Date and for the Term of this WO1, TAM will pay to Sabre the cost of travel agency infrastructure (hardware and communications) for Sabre Subscribers using infrastructure provided and paid for by Sabre within Brazil based on TAM's Passenger Share (as defined in Section 7.2. below) within Brazil. As used herein, "Sabre Subscriber" means any entity operating in Brazil which has executed a Sabre Subscriber Agreement. Sabre will invoice TAM and TAM will pay Sabre for charges described under this Section 7 in accordance with Section 5 of the Agreement.

(b) During the shorter of (i) the time period between the Implementation Date and the Suspension Date, or (ii) the six month period following the Implementation Date, rather than billing TAM the full amount of infrastructure cost based upon the procedure described in Section 7.2 of this WO1 , Sabre will bill TAM for such Infrastructure Preparation costs by the amount determined by multiplying the amount otherwise due Sabre times the percentage of the bookings processed through the Portal Solution by Sabre Subscribers in Brazil, and all Sabre GDS and Portal Solution bookings by Sabre Subscribers in Brazil, and TAM will pay such amount. The six month period described in (ii) above will be extended until Sabre has completed all Infrastructure Preparation as defined in Section 7.4 below to the level described in Section 2.1.3(ii)(a).

7.1. COST OF INFRASTRUCTURE.

(a) The cost of agency infrastructure shall be paid to Sabre by TAM and based on vendor invoices. The data within such vendor invoices (e.g. volumes, pricing, etc.) will be considered Confidential Information, and TAM will not disclose it to third parties. Sabre shall bill TAM only for those charges which relate to Sabre Subscriber hardware and communications. Sabre Subscriber hardware charges ("Hardware Charges") include: (1) hardware and peripheral lease and purchase,
(2) hardware maintenance, (3) hardware refurbishment, and (4) related activity and event fees including; (i) device installation and swap, (ii) site surveys, (iii) trip fees, (iv) software loads, and (vi) warehouse lease. Sabre Subscriber telecommunication charges ("Telecom Charges") include: (1) communication lease and access charges, and (2) communication line installation and initiation fees. Hardware Charges and Telecom Charges shall be collectively termed "Infrastructure Charges". Such billing shall begin for Infrastructure Charges invoiced to Sabre by its third party vendors on or after the Implementation Date, subject to Section 7.4. "Infrastructure Preparation" below. Any vendor fee directly related to Sabre employees and/or Sabre internal offices shall be Sabre's responsibility and will not be charged to TAM. TAM shall have the right to review and audit vendor invoices which support Sabre's charges to TAM in accordance with this Section 7.1 and to audit such charges in accordance with Section 8 of the Agreement.

(b) If the Implementation Date does not occur on the 1st day of a month, Infrastructure Charges billable to TAM related to the calendar month of the Implementation Date shall be prorated based on the number of days remaining in the month after the Implementation Date according to the provisions of Section 7.

(c) TAM will not be responsible for any costs related to Section 7.1 (a) that result from misuse of the item either by a Sabre Subscriber or Sabre.

7.2 CALCULATION OF PASSENGER SHARE. Every quarter after the Effective Date, Sabre will calculate TAM's passenger share during the preceding twelve-month period (or the most recent available twelve-month period), and TAM will pay to Sabre that percentage of the Infrastructure Charges during the subsequent quarter on a monthly basis and in accordance with
Section 7.5 Cost Reductions below. TAM's passenger share ("Passenger Share") will be computed using data from the Comando da Aeronautica Departamento de Aviacao Civil ("DAC"), for revenue passengers boarded in Brazil. In the event TAM merges with another airline and once the bookings from the other airline merged with TAM begin to be processed in the

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Multihost Software and Portal Solution, the Passenger Share will be immediately recalculated to include the passenger volumes of both carriers for the preceding twelve months.

7.3 SABRE SUBSCRIBER LINES OF CREDIT. In the event that both parties agree in writing that it would be more desirable for Sabre to pay a line of credit to a Sabre Subscriber as reimbursement for charges relating to Infrastructure, rather than having such Infrastructure provided by Sabre or its vendors, then TAM shall pay to Sabre a percentage of such line of credit based upon Passenger Share. These instances will be addressed on a case-by-case basis and decisions on Sabre Subscriber lines of credit will not be unreasonably withheld by either Party.

7.4 INFRASTRUCTURE PREPARATION. In preparation for the implementation of the Technology Solution, the Parties acknowledge that Infrastructure upgrade activities may occur prior to the Implementation Date. Prior to commencing the Infrastructure preparation, the Parties will agree on the specific requirements and conditions under which to conduct the Infrastructure preparation. The parties further agree that upgrading agencies to the minimum Infrastructure will require the outlay of expenditures. TAM will be responsible for paying its Passenger Share of the cost of such agreed upon Infrastructure upgrade. In the event this Agreement is terminated as result of TAM's breach or TAM decides not to implement the Technology Solution TAM shall remain responsible to Sabre for paying its Passenger Share of the Infrastructure upgrade costs and * % of the third party software costs and hardware costs to launch the Portal incurred by Sabre as previously agreed. Should TAM pay the costs as described in the sentence above, then Sabre shall deliver or cause to deliver to TAM one-half of the related software and hardware provided TAM shall pay for the shipping of any such hardware or reimbursing Sabre for such shipping costs.

7.5 COST REDUCTION EFFORTS. Sabre shall reduce Hardware Costs by * % per year starting with the first anniversary following the Suspension Date or six months after the Implementation Date, whichever comes first, ("Hardware Date") in the following manner: (1) On or about the Hardware Date Sabre shall provide to TAM all Hardware Charges and associated vendor invoices in order to support these Hardware Charges, (2) The amount of these Hardware Charges shall be mutually agreed and entered into an Exhibit of the Agreement and shall be signed by both Parties ("Full Hardware Charges"), (3) on the first anniversary of the Hardware Date Sabre shall lower the Hardware Charges to a maximum of * % of the Full Hardware Charges, (4) on the second anniversary of the Hardware Date Sabre shall lower the Hardware Charges to a maximum of * % of the Full Hardware Charges, (5) on the third anniversary of the Hardware Date Sabre shall lower the Hardware Charges to a maximum of * % of the Full Hardware Charges, (6) on the fourth anniversary of the Hardware Date Sabre shall lower the Hardware Charges to a maximum of * % of the Full Hardware Charges, (7) beginning on the * anniversary of the Hardware Date and throughout the term of the Agreement, Sabre shall not charge TAM any Hardware Charges unless mutually agreed by the Parties. Sabre will work with TAM's support to implement a mutually agreed plan to reduce Telecom Charges in Brazil. The Parties shall agree upon this cost reduction plan no later than the Hardware Date. Among the strategies of the cost reduction plan, are the following: (1) Sabre and TAM will attempt to reduce applicable unit costs from Sabre Infrastructure vendor contracts as they expire, (2) Sabre and TAM will create value-added commercial packages, including, but not limited to special pricing and alternative compensation packages, to offer to Sabre Subscribers to encourage Sabre Subscribers to provide their own telecommunication lines, (3) approval for reasonable cost reductions shall not be unreasonably withheld by either party, (4) if an approval for a reasonable cost reduction is withheld for any reason other than a technical reason, the proposing Party's Telecom Charges shall be adjusted so that proposing Party shall receive the benefit of cost reduction as if the proposal was accepted, (5) TAM and Sabre shall agree on a letter to be signed by Sabre Subscribers authorizing Sabre to remove their communication lines due to an agreement between TAM and the Sabre Subscriber, and (6) if signed letters, as defined in item 5 above, are obtained by TAM from the Sabre Subscriber and copies are delivered to Sabre, and Sabre does not remove these communication lines within * days, the number of these letters times the average monthly cost per Sabre Subscriber shall be removed from the Telecom Charges prior to the calculation of TAM's Passenger Share of the Telecom Charges. TAM will be responsible for its Passenger Share portion of any cancellation fees that may result from the removal of communication lines provided, however, that the amount of these cancellation fees are informed in writing to TAM by Sabre prior to the disconnection of the communication lines. If the Infrastructure Charge cost reduction commitments are not met in accordance with the terms of Section 7.5,

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TAM may terminate the Agreement and this WO1 provided such failure was not attributable solely to TAM.

7.6 AUTOMATION LEVELS. During the Term of this WO1, Sabre will not exceed the Sabre Subscriber Infrastructure levels existing as of the Effective Date of the Agreement, based on GDS industry practices and historical Sabre Subscriber automation levels in Brazil. Sabre will maintain Infrastructure at such level ("Infrastructure Level"), or less expensive levels, for all Sabre Subscribers in Brazil in total, and both Parties shall deem such level of Infrastructure acceptable. As of the Effective Date of the Agreement, the Infrastructure Level is as described in Sections 7.6(a) through (d) inclusive, and will be measured on a quarterly basis, beginning three months after the Suspension Effective Date, based on a rolling twelve-month period:

(a) RATIO OF TA'S TO SABRE PROVIDED COMPUTERS. The Infrastructure Level shall not exceed at least half of Sabre Subscriber Terminal Addresses in Brazil use agency-owned computers rather than computers leased from Sabre. As used herein, "Terminal Address" or "TA" means an assigned communication session between a Sabre Subscriber and the data processing facilities of the Sabre GDS currently located in Tulsa, Oklahoma (the "Sabre GDS System"), allowing a Sabre Subscriber access to the Sabre GDS System for the purpose of making Sabre GDS bookings.

(b) COMPUTER PRODUCTIVITY. The Infrastructure Level shall not exceed, at an aggregate level, the average number of TAM travel agency ticketed revenue segments from Brazil agency points of sale per computer that Sabre leases to Brazilian subscribers is at least 64 per month.

(i). If TAM's Passenger Share drops below * %, then the requirement for * segments per computer shall be revised downward proportionately.

(ii). If total airline industry total revenue passengers boarded in Brazil, as reported by DAC, drops below * during any twelve-month period, then the requirement for * segments per computer shall be revised downward proportionately. As a point of reference, DAC reported the aforementioned * total revenue passengers boarded in Brazil during 2002.

(iii). In the event both conditions associated with Section 7.6.(b)(i) and (ii) occur, the downward adjustments to the requirement for * segments per computer shall be cumulative.

(c) PRINTER TO TA RATIO. The Infrastructure Level shall not exceed, at an aggregate level, for Sabre Subscribers in Brazil be no more than * invoice and itinerary printer leased from Sabre per * Terminal Addresses. As of the Effective Date, there are * ticket printers used by Sabre Subscribers in Brazil and TAM shall not be responsible for the cost of any ticket printers above this number of printers after the Effective Date.

(d) AGENCY DATA COMMUNICATIONS. The Infrastructure Level shall not exceed, at an aggregate level, at least * % of Sabre Subscriber locations in Brazil shall have communication links provided by the Sabre Subscriber rather than by Sabre.

(e) NON-COMPLIANCE WITH AUTOMATION LEVEL. If Sabre fails to manage agency Infrastructure within the Infrastructure Level described in this Section 7.6, the amount that Sabre would have otherwise billed TAM for that component of the agency Infrastructure Charges during the subsequent quarter shall be reduced proportionately by the level by which Sabre fell below the required automation level.

7.7. LOCAL VENDORS. If a vendor bills Sabre or its affiliates for Infrastructure Charges in Brazil in Brazilian Reais, then TAM will pay its portion of such vendor invoice in Reais directly to the Sabre affiliate which received such vendor invoice. All other fees and charges otherwise due to Sabre under the Agreement and this WO1 not specifically described in this Section 7.7 shall be payable in USD, in accordance with Section 5 of the Agreement.

7.8. SABRE SUBSCRIBER AGREEMENT. Throughout the Term of this WO1, and consistent with applicable law, TAM shall refrain from providing Infrastructure to Sabre Subscribers, unless TAM has received a

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written release from Sabre to provide such Infrastructure. Such notification of release from Sabre will be provided within * days of TAM's request, should Sabre choose, with its sole discretion, to provide such release. Travel agencies must sign a GDS Subscriber Agreement with Sabre prior to receiving Infrastructure from Sabre, and prior to receiving access to the Sabre System.

7.9 CONTINUED INFRASTRUCTURE USE FOLLOWING TERMINATION. In the event of the early termination of the Agreement (except for default on the part of TAM), Sabre will allow Sabre Subscribers to use Sabre-provided Infrastructure to access TAM Solution for purposes of booking TAM flights and other TAM services, provided that (i) TAM is current on all its obligations to Sabre and its affiliates, and (ii) TAM continues to reimburse Sabre under the cost-sharing terms described in this Section 7. In the event of any such termination as described in this Section 7.9, the adjustments described in Section
7.6(e) "Non-Compliance With Automation Levels" shall not apply and Sabre will be free to manage Sabre Subscriber Infrastructure levels at its own discretion.

8. IMPLEMENTATION TIMELINE. The expected Implementation Date is scheduled to be * . The ability of Sabre to complete the defined Technology Solution will be contingent upon the cooperation of TAM throughout the performance of this WO1. The Parties will acknowledge in writing the actual Implementation Date.

8.1 AGREEMENT ON IMPLEMENTATION DATES. TAM and Sabre shall jointly develop a project implementation plan that will include milestones for product delivery, user acceptance testing, infrastructure upgrades and market introduction. Sabre and TAM will provide the necessary resources and expend commercially reasonable efforts to meet the project implementation timeline. Material variances to the plan, if any, shall be reported to the project steering committee as defined in the Agreement.

9. FEES AND CHARGES. Sabre shall invoice TAM and TAM shall pay Sabre for fees and charges associated with the delivery of the Sabre Services according to the terms set forth below.

9.1 DEFINITION OF REVENUE TICKET COUPON. Sabre shall charge TAM monthly for each Revenue Ticket Coupon flown during the previous calendar month. For purposes of this WO1, a "Revenue Ticket Coupon" shall be defined as those passengers who pay at least * % of the applicable normal fare flown according to the definition of IATA in "FORMULARIO ESTADISTICO DE IATA FORM 1 ESTADISTICAS DE OPERACIONES (AOS) - Definiciones e Instrucciones", who is boarded on any TAM flight or on any flight operated under TAM's airline designator code. For the purposes of calculating the number of Revenue Ticket Coupons, charter flights are not included unless the charter flights generate Revenue Ticket Coupons issued by TAM or in connection with the conduct of any such charter flights Multihost Services are utilized. A Revenue Ticket Coupon on a direct flight that makes one or more intermediate stops without a change of flight number, whether or not including a change of equipment, shall be counted as one Revenue Ticket Coupon. A passenger traveling on a "Funnel Flight" shall be regarded as at least two Revenue Ticket Coupons if the boarded passenger must have at least two boarding passes. A passenger making a connection at an intermediate point by deplaning from one flight and boarding another flight shall be considered as more than one Revenue Ticket Coupon. If the DAC revenue passenger boarded counts are more than * % greater than the Revenue Ticket Coupon counts provided by TAM in a given month, then the Parties will meet to investigate the source of the discrepancy. TAM will inform Sabre every month, after the 20th day of the month, the number of Revenue Ticket Coupons flown calculated in accordance with the Section 9.1 during the prior month so that Sabre can properly invoice TAM. Revenue Ticket Coupon counts are subject to the Audit rights described in Section 8 of the Agreement.

9.2 FEE PER REVENUE TICKET COUPON. Beginning on the Implementation Date and throughout the Term of this WO1, TAM shall pay an amount equal to USD$ * for each Revenue Ticket Coupon other than those described in Section 9.3. However, during the time period between the Effective Date and the Suspension Date in lieu of said fee, TAM shall pay solely USD$ * for each Revenue Ticket Coupon generated at its internal offices, (e.g. ATOs, CTOs, call center, website,etc.). In the event such time period lasts longer than six months through no breach of the obligations of Sabre hereunder,

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then at the six month anniversary of the Implementation Date, Revenue Ticket Coupons generated at TAM's internal offices will be billable at the rate of USD$ *.

9.3 FEES FOR GDS-DRIVEN REVENUE TICKET COUPONS. Beginning on the Effective Date and throughout the Term of this WO1, for each Revenue Ticket Coupon that is booked by a travel agency via a GDS, Sabre will bill and TAM will pay USD$ * . Such charges shall be in addition to any other fees that may be payable to Sabre, including, but not limited to, GDS booking and cancellation fees. If the data needed to determine the number of GDS-generated Revenue Ticket Coupons is not available for a given month, the Parties will estimate the number of such GDS-generated Revenue Ticket Coupons in a mutually acceptable manner.

9.4. POST SUSPENSION DATE BILLING ILLUSTRATION. For sake of clarity, and for illustrative purposes only, billing per Revenue Ticket Coupon after the Suspension Date and prior to the first inflation adjustment and prior to Message adjustment, if any, will be: (1) Brazilian travel agency transaction via portal: $ *, (2) travel agency GDS booking, from any geographic point (assumed to be outside of Brazil) of sale: $ * (plus booking fees and cancel fees based upon the applicable GDS contract in place at that time), (3) internal TAM booking (CTO, ATO, call center, website, etc.) from any geographic point of sale: $*.

9.5 MONTHLY FEES FOR EXCESSIVE MESSAGE COUNT. The Parties will measure Message volumes in the TAM Multihost partition beginning the first day of the calendar month, nine months after the Implementation Date to the last day of said calendar month in order to establish a stable average number of Messages per Revenue Ticket Coupon ("Baseline"). In any subsequent calendar month for the remainder of the term of the Agreement TAM will pay Sabre for the average number of Messages per Revenue Ticket Coupon for that month in excess of the Baseline based upon the rate of USD$ * for each set of five Messages (in addition to the fee per Revenue Passenger Coupon), or in the case of a partial set of Messages, a proportional amount thereof. This fee for additional Messages would only be activated if the number of messages exceeds * % above the Baseline. If the number of monthly Messages does not exceed the Baseline by more than * %, then no additional charges for Messages will be paid by TAM. If, during a calendar month, the total number of messages exceeds * % above the Baseline, TAM would only pay for the extra messages up to the * % in excess of the Baseline. If, however, the total number of messages exceeds * % for three consecutive calendar months, or the monthly average in any six month period exceeds the Baseline by more than * %, then a new Baseline and fees per Revenue Ticket Coupon would be calculated and mutually agreed to by the Parties. In any subsequent calendar month following the calculation of the Baseline, if the average number of Messages per Revenue Ticket Coupon is less than the Baseline by more than * %, then TAM would receive a credit equal to USD$ * for each set of * Messages, or in the case of a partial set of Messages, a proportional amount thereof, provided, however, that the fee paid to Sabre per Revenue Ticket Coupon would never fall below USD$ * for bookings made through the Portal and USD$ * for bookings made outside of the Portal, or the then applicable rates per Revenue Ticket Coupon after any annual adjustment as permitted by Section 5(c) of the Agreement. The credit to TAM for reduced Message volume will not accrue beyond a * % reduction in Message volume below the Baseline. If however, the total number of Messages is more than * % lower than the Baseline for three consecutive calendar months or the monthly average in any six month period is lower than the Baseline by more than * %, then a new Baseline and fees per Revenue Ticket Coupon would be calculated and mutually agreed to by the Parties.

At the time of the Acceptance of the Technology Solution, the average number of Messages generated by the application shall be measured in a manner that is mutually agreed to by the Parties. The average number of Messages generated by TAM in the previous calendar month to the Acceptance of the Technology Solution shall be subtracted from the number of Messages generated by the Technology Solution and this number shall be designated as the number of messages generated by the Portal ("Portal Messages"). If the Portal Messages is a number calculated to be less than *, then the Portal Messages shall be deemed to be *. If the Baseline, as calculated in accordance with the prior paragraph is more than * plus the Portal Messages, the Parties will negotiate in good faith to reach an agreement as to an appropriate

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sharing of Sabre's costs for such extra messages taking into account any additional functionality beyond that defined as the Portal Software in Section 4.1. TAM acknowledges that Sabre will use the standard matrix formula of USD$ * for each set of * Messages or in the case of a partial set of Messages, a proportional amount thereof, as Sabre's internal cost in connection with such negotiations.

The Parties will work together in good faith and make commercially reasonable efforts to reduce the number of Messages per Revenue Ticket Coupon during the * measurement period and thereafter.

9.6 FARE-LED SHOPPING. Sabre shall ensure that the FlightFinder transaction ("JA Entry") is deactivated in the Portal Solution upon delivery to TAM. Should TAM, at some future date, request Sabre to reactivate the FlightFinder functionality, TAM shall pay a fee of USD$ * for each FlightFinder transaction, or any other fee subject to mutual agreement of the Parties.

9.7 PRICING CONDITION. *

9.8 INFLATION ADJUSTMENT. All fees described in this Section 9 will increase annually, at the anniversary of the Implementation Date of the Agreement, by a maximum amount equal to the inflation rate (CPI-U) for Dallas, Texas, and such adjustment shall be cumulative over the Term of this WO 1. Prior to the implementation of the any such increase Sabre will provide TAM with the adjustment factor and the calculated increase in any rates charged hereunder subject to such annual adjustments.

9.9 PCA AND OTHER CHARGES. The charges in this Section 9 are in addition to other fees and charges described elsewhere in this Agreement, and within other agreements between the Parties, such as the PCA. Additional Sabre products or functionality (e.g., AirMax, AirFlite, Databahn, QIK, bargain finder plus and migration of merged or acquired airlines into the TAM Multihost partition) would entail additional charges to be negotiated by the Parties. Sabre will offer a minimum * % discount, after any inflation adjustment on the license fee of the PC Airflite product, if TAM chooses to purchase such product.

(a). CODESHARE. TAM shall pay a maintenance fee of USD$ * per month plus monthly fees of USD$ * for every published Codeshare flight during the month. Codeshare flight count is collected from the carrier's KSIF (Codeshare Foreground Table) table. As additional Codeshare flights are added to the KSIF table, the USD$ * fee will be assessed. The monthly fees of USD$ * per flight will not apply for Codeshare flights with *. No implementation charge shall apply for the Varig Codeshare flights, but the monthly fees of USD$ * for every Codeshare flight shall apply for Varig Codeshare flights.

(b). SITA FARES DATABASE. Sabre will prorate the SITA Fares Database charges directly to TAM and TAM will be responsible for paying Sabre. As of the Effective Date, such charge is approximately USD$ * per month.

(c). TRAVEL INFORMATION MANUAL ("TIMATIC"). TAM will pay Sabre an annual access fee of USD$ * for TIMATIC.

9.10 HOURLY PROGRAMMING FEES PAID TO TAM. In the event that Sabre requests alterations to the TAM Solution following the Implementation Date, other than alterations designed to repair errors found in the code of the TAM Solution, Sabre shall pay TAM an amount of USD$ * per hour for the alterations to be performed during the first * months after the Implementation Date. Subsequently Sabre shall pay TAM for such services at TAM's then prevailing labor rates per hour or another rate mutually agreed by the Parties.

9.11 HOURLY PROGRAMMING FEES PAID TO SABRE. In the event that TAM requests alterations from Sabre, following the Implementation Date, associated with any portions of the Technology Solution, other

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than alterations designed to repair errors found in the Sabre-provided code, TAM shall pay Sabre an amount per hour equal to USD$ * during the first * months after the Implementation Date. Subsequently TAM shall pay Sabre for such services at Sabre's then prevailing labor rates per hour or another rate mutually agreed by the Parties.

10. OTHER MUTUAL OBLIGATIONS. The following obligations shall be the mutual responsibilities of the Parties.

10.1 DEVELOPMENT COSTS, PRODUCT ACCEPTANCE, AND ONGOING IMPROVEMENTS. The developing Party shall, at no cost to the other Party, fund the initial development required to implement the Technology Solution, subject to Section 7.4. Each party commits to maintenance of its technology on a going- forward basis, but enhancements, customization, and/or functionality changes will be handled via Work Orders to be negotiated separately at the hourly rates defined in Sections 9.10 and 9.11 above. However, each Party, at its own expense, shall allocate an annual pool of development hours, in * -hour increments, not to exceed * hours annually, in order to quickly respond to minor requests for enhancements or alterations.

10.2 COMMUNICATION COST SHARING AND DATABASE REPLICATION. TAM will pay * of the cost of a Frame Relay connection, as described in Attachment 1 to this WO1 under the Section 3.3 "Description of Portal Telecommunication Services," between Sao Paulo, Brazil and the Portal Solution server site, wherever it may reside, as required by mutually agreed-upon solution architecture and solution providers. Sabre shall be responsible for the remaining half of the charges above. TAM will pay * of any Oracle server replication costs, if this is mutually deemed necessary after usability testing. TAM will continue to pay * % of the telecommunications charges related to Multihost, as referenced in Section 3.3, including the OFEP data connection (a Frame Relay connection between Sao Paulo, Brazil and the Sabre host in Tulsa) used for Multihost (Reservations). Sabre and TAM will continue their current business practice of aggressively seeking cost reductions with regards to communication and server infrastructure.

10.3 CONTENT PROVISION. TAM will provide travel content to the Technology Solution that will only be available within the Technology Solution envisioned within this WO1. Sabre agrees to make available to TAM through the Technology Solution, all travel content provided by Sabre that it provides to any portal or distribution media owned by another airline customer in the Brazilian market.

10.4 OTHER GDS AGENCY INTEGRATION SOLUTION. Nothing herein shall be construed to prohibit any third party, including but not limited to other GDS's, from independently creating and implementing an integration tool to the Technology Solution that is similar to the Agency Solution.

11. OTHER RESPONSIBILITIES OF SABRE. The following responsibilities shall be the obligation of Sabre to perform at not additional cost to TAM with regards to this Agreement.

11.1 GLOBAL ACCOUNTS PLAN. Sabre will work with TAM to develop a mutually acceptable plan for the marketing and implementation of the Technology Solution to Sabre Subscribers in Brazil having a worldwide Sabre Subscriber Agreement, subject to Section 12.1 "Transition Program".

11.2 RESELLING OF THE TECHNOLOGY SOLUTION. Sabre shall market the Technology Solution to third parties in accordance with the rights and obligations contained in the Sublicense Agreement, attached as Exhibit B of the Agreement.

11.4 RESPONSIBILITY FOR ONGOING SUPPORT. From the period starting with the Implementation Date until the termination of this WO1, Sabre shall allocate a minimum of * hours annually for the purposes of maintaining the portal portion of the Technology Solution, inclusive of any development hours to be provided by Sabre under Section 10.1 of this WO1. Such allocation of hours shall be delivered by Sabre at no additional cost to TAM.

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11.5 SABRE'S ADHERENCE TO TAM'S SECURITY STANDARDS. If Sabre adheres to TAM's security procedures, there shall be a presumption that Sabre has satisfied its obligation to protect the confidentiality of the TAM Internal Database.

12. OTHER RESPONSIBILITIES OF TAM. The following responsibilities shall be the obligation of TAM.

12.1 TRANSITION PROGRAM. Transactions processed through the Technology Solution will not be considered GDS bookings. Subject to applicable laws, TAM will create a transition program, for a reasonable period of time, to support Sabre Subscribers' move from the GDS environment to the Technology Solution. TAM will also include in its relationship with all Sabre Subscribers a confirmation that Sabre Subscribers understand that transactions originating through the Technology Solution are not GDS bookings.

12.2 FLIGHT BENEFITS. TAM will provide flight benefits for Sabre employees under the categories, procedures and restrictions outlined below. All travel under this provision will follow TAM's non-revenue displacement policies.

(a) BUSINESS DIRECTLY RELATED TO THE AGREEMENT. For Sabre employees traveling specifically for business purposes related to the Agreement, including Brazil-based Account Executives soliciting the sale of the Portal Solution. TAM will provide, subject to its authorization, and at no charge from TAM, confirmed space international tickets and space-available domestic tickets. Sabre employees at the level of Director, Senior Principal, or higher, shall be accommodated in Business cabin and Sabre employees below the above mentioned levels shall be accommodated in Economy cabin.

(b) SABRE BUSINESS TRAVEL. Sabre employees traveling on business not covered under Section 12.2(a) can obtain space available tickets from TAM at a rate equal to * % of the first published fare below full economy or * % of the full Business Class fare, as applicable.

(c) TRAVEL AGENTS. For travel agents traveling for training specifically related to the Technology Solution under this Agreement, TAM will provide, at no charge from TAM, space available tickets.

(d) TAXES AND OTHER SURCHARGES. For all travel under this Section
12.3. Sabre and its employees will be responsible for paying all taxes, airport fees, and other surcharges outside of the base fare of the ticket.

(e) COMPETITOR EXCLUSION. Sabre and its affiliates will never use the TAM flight benefits and TAM is not obligated to provide to Sabre or any of its affiliates TAM flight benefits for travel directly or indirectly related to TAM's Brazilian airline competitors.

(f) VIOLATION OF RESTRICTIONS. Any violation of the Flight Benefits restrictions can lead to cancellation of all flight benefits described herein at TAM's discretion, or full-fare reimbursement.

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13. PERFORMANCE OF PARTIES OBLIGATIONS. Neither Party will not be responsible to the other Party for the failure to perform its obligations to the extent such failure is the result of the other Parties failure to perform its obligations under this WO1.

IN WITNESS WHEREOF, the Parties have duly executed and delivered this WO1 by their duly authorized representatives as of October 3, 2003.

SABRE TRAVEL INTERNATIONAL LTD. (NO. 272493)    TAM LINHAS AEREAS S.A.

By: ____________________________________        By: ___________________________
Name:  Margaret Lewis                           Name:  Gelson Pizzirani
Title: Director                                 Title: Vice President
Date:  October 3, 2003                          Date:  October 3, 2003

                                                By: ___________________________
                                                Name:  Ruy Antonio Mendes Amparo
                                                Title: Vice President
                                                Date:  October 3, 2003

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ATTACHMENT 1 OF WORK ORDER #1

[26 Pages Redacted]

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the use in this Registration Statement on Form F-1 of our reports dated February 14, 2006, relating to the consolidated financial statements of Tam S.A., which appear in such Registration Statement. We also consent to the references to us under the heading "Experts" in such Registration Statement.

/s/ PricewaterhouseCoopers
    Auditores Independentes

Sao Paulo, Brazil
March 2, 2006


	in 2004), causing our domestic market share, according to DAC, to reach 43.5% in 2005, compared to 35.8% in 2004 and

•	an increase in domestic demand, which grew 19.4% in 2005, compared to 2004, causing our load factor to increase from 66.0% to an average load factor of 70.6% in 2005.


	1209, Wilmington, New Castle, Delaware, 19801. Brazilian Equity Investments III LLC is co-managed by Credit Suisse Investment Bank (Bahamas) Limited (Credit Suisse Bahamas) and Bassini Playfair Wright Advisors Inc. Voting power over investments, divestments and other strategic matters is exercised by the investment committee of Brazilian Equity Investments III Ltd. (which is the sole shareholder of Brazilian Equity Investments III LLC). Brazilian Equity Investments III Ltd.’s investment committee is made up of the following four persons: Mauro Bergstein and Nilson Teixeira (who were appointed by Credit Suisse Bahamas) and Emilio Bassini and Piers Playfair (who were appointed by Bassini Playfair Wright LLC).

⁽⁵⁾	Latin America Capital Partners PIV LLC is a limited liability company organised under the laws of the State of Delaware, and has its principal offices at 1209 Orange Street, Wilmington, Delaware 19801. Latin America Capital Partners PIV LLC is managed by Bassini Playfair Wright Advisors Inc. Voting power over investments, divestments and other strategic matters is exercised by Emilio Bassini, Piers Playfair and Roger Wright.

⁽⁶⁾	Brasil Private Equity Fundo de Investimento em Participações is a private equity fund incorporated in Brasil managed by Credit Suisse (Brasil) Distribuidora de Títulos e Valores Mobiliários S.A. (Credit Suisse DTVM), and has its principal offices at Avenida Brigadeiro Faria Lima, 3064, 13th Floor, São Paulo, SP, Brazil. Brasil Private Equity Fundo de Investimento em Participações is managed by Credit Suisse DTVM. Voting power over investments, divestments and other strategic matters is exercised by Brasil Private Equity Fundo de Investimento Participações’ investment committee, which is made up of the following five persons: Antonio Carlos Quintella, Mauro Bergstein and Teodoro Lima (who were appointed by Credit Suisse DTVM) and Roberto Bulhões Pedreira and Gustavo Pinheiro Gonçalves (who were appointed by BNDES and Fundação Petrobras de Seguridade Social — PETROS (a pension fund for employees of Petróleo Brasileiro — PETROBRAS), respectively).

⁽⁷⁾	Latin America Capital Partners II LLC is a limited liability company organised under the laws of the State of Delaware, and has its principal offices at 1209 Orange Street, Wilmington, Delaware, 19801. Latin America Capital Partners II LLC is managed by Bassini Playfair Wright Advisors Inc. Voting power over investments, divestments and other strategic matters is exercised by Emilio Bassini, Piers Playfair and Roger Wright.

⁽⁸⁾	Brazilian Equity LLC is a limited liability company organized under the laws of the State of Delaware, and has its principal offices c/o The Corporation Trust Company, Orange Street, 1209, Wilmington, New Castle, Delaware, 19801. Brazilian Equity LLC is co-managed by Credit Suisse Bahamas and Bassini Playfair Wright. Voting power over managed investments, divestments and other strategic matters is exercised by the investment committee of Brazilian Equity Ltd. (which is the sole shareholder of Brazilian Equity LLC). Brazilian Equity Ltd.’s investment committee is made up of the following four persons: Mauro Bergstein and Nilson Teixeira (who were appointed by Credit Suisse Bahamas) and Emilio Bassini and Piers Playfair (who were appointed by Bassini Playfair Wright LLC).


		the United States by such means as the Depositary may determine to the extent that it determines that such transfer may be made on a reasonable basis, (3) obtaining any approval or license of any governmental authority required for such conversion or transfer, which is obtainable at a reasonable cost and within a reasonable time and (4) making any sale by public or private means in any commercially reasonable manner. If this conversion is not possible or if any approval from the Brazilian government is needed and cannot be obtained, the deposit agreement allows the depositary to distribute reais only to those ADR holders to whom it is possible to do so. It will hold the reais it cannot convert for the account of the ADR holders who have not been paid. It will not invest the reais on behalf of the ADR holders and it will not be liable for the interest. Before making a distribution, any withholding taxes that must be paid under Brazilian law will be deducted. If exchange rates fluctuate during a time when the depositary cannot convert a foreign currency, you may lose some or all of the value of the distribution.

	•	Shares. In the case of a distribution in shares, the depositary will issue additional ADRs to evidence the number of ADSs representing such shares. Only whole ADSs will be issued. Any shares which would result in fractional ADSs will be sold and the net proceeds will be distributed in the same manner as cash to the ADR holders entitled thereto.

	•	Rights to receive additional shares. In the case of a distribution of rights to subscribe for additional shares or other rights, if we provide satisfactory evidence that the depositary may lawfully distribute such rights, the depositary will distribute warrants or other instruments representing such rights. However, if we do not furnish such evidence, the depositary may: